UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(AMENDMENT NO.
(Amendment No.)
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| x | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
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BOSTON PROPERTIES, INC.
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[BOSTON PROPERTIES LOGO APPEARS HERE]
March 29, 2002
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April 4, 2003
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of Boston Properties, Inc. This year'syear’s meeting will be held on Wednesday, May 1,
20027, 2003 at 11:00 a.m., local time, at 599 Lexington Avenue, Conference Room 2E, New York, New York.
The attached proxy statement, with formal notice of the meeting on the first page, describes the matters expected to be acted upon at the meeting. We urge you to review these materials carefully and to use this opportunity to take part in the affairs of Boston Properties by voting on the matters described in this proxy statement. We hope that you will be able to attend the meeting. At the meeting we will review our operations, report on 20012002 financial results and discuss our plans for the future. Our directors and management team will be available to answer questions.
Your vote is important. Whether you plan to attend the meeting or not, please complete the enclosed proxy card and return it as promptly as possible or vote by calling the toll-free telephone number or via the Internet. The enclosed proxy card contains instructions regarding all three methods of voting. If you attend the meeting, you may continue to have your shares voted as instructed in the proxy or you may withdraw your proxy at the meeting and vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
/s/
Mortimer B. Zuckerman
Mortimer B. Zuckerman
Chairman of the Board
/s/
Edward H. Linde
Edward H. Linde
President and Chief Executive Officer
[BOSTON PROPERTIES LOGO APPEARS HERE]
BOSTON PROPERTIES, INC.
111 Huntington Avenue
Suite 300
Boston, MA 02199-7610
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 1, 2002
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7, 2003
The 20022003 annual meeting of stockholders of Boston Properties, Inc. will be held on Wednesday, May 1, 20027, 2003 at 11:00 a.m., local time, at 599 Lexington Avenue, Conference Room 2E, New York, New York. At the annual meeting, stockholders will vote upon the following proposals:
1. To elect two Class II directors, each to serve for a three-year term.
2. To ratify the selection of PricewaterhouseCoopers LLP as our independent
accountants for the fiscal year ending December 31, 2002.
3. To consider and act upon one stockholder proposal concerning the annual
election of directors.
4. To consider and act upon one stockholder proposal concerning the repeal
of our shareholder rights plan.
5. To consider and act upon one stockholder proposal concerning non-audit
activities of independent accountants.
6. To consider and act upon any other matters that may properly be brought
before the annual meeting and at any adjournments or postponements
thereof.
| 1. | To elect one Class II director, to serve for a two-year term, and three Class III directors, each to serve for a three-year term. |
| 2. | To ratify the selection of PricewaterhouseCoopers LLP as our independent accountants for the fiscal year ending December 31, 2003. |
| 3. | To consider and act upon any other matters that may properly be brought before the annual meeting and at any adjournments or postponements thereof. |
You may vote if you were a stockholder of record as of the close of business on March 13, 2002.12, 2003. If you do not plan to attend the meeting and vote your common shares in person, please vote in one of the following ways:
.
Any proxy may be revoked at any time prior to its exercise at the annual meeting.
By Order of the Board of Directors
/s/ William J. Wedge
WILLIAM J. WEDGE, ESQ.
Secretary
March 29, 2002
April 4, 2003
i
April 4, 2003
BOSTON PROPERTIES, INC.
111 Huntington Avenue
Suite 300
Boston, MA 02199-7610
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PROXY STATEMENT
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This proxy statement and the enclosed proxy card are being mailed to stockholders on or about March 29, 2002April 4, 2003 and are furnished in connection with the solicitation of proxies by the Board of Directors of Boston Properties, Inc. for use at the 20022003 annual meeting of stockholders of Boston Properties to be held on Wednesday, May 1, 20027, 2003 at 11:00 a.m., local time, at 599 Lexington Avenue, Conference Room 2E, New York, New York, and at any adjournments or postponements thereof.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
What is the purpose of the annual meeting?
At the annual meeting, stockholders will act upon the matters set forth in the accompanying notice of meeting, including the election of directors and ratification of the selection of our independent accountants, and consideration
of three stockholder proposals, one concerning the annual election of
directors, one concerning the repeal of our shareholder rights plan and one
concerning non-audit activities of independent accountants.
If our records show that you were a stockholder as of the close of business on March 13, 2002,12, 2003, which is referred to as the record date, you are entitled to receive notice of the annual meeting and to vote the shares of common stock that you held on the record date. Each outstanding share of common stock entitles its holder to cast one vote for each matter to be voted upon.
All stockholders of record of Boston Properties'Properties’ shares of common stock at the close of business on the record date, or their designated proxies, are authorized to attend the annual meeting. Each stockholder or proxy will be asked to present a form of valid picture identification, such as a driver'sdriver’s license or passport.
The presence, in person or by proxy, of holders of at least a majority of the total number of outstanding shares of common stock entitled to vote is necessary to constitute a quorum for the transaction of business at the annual meeting. As of the record date, there were 91,117,57195,921,961 shares of common stock outstanding and entitled to vote at the annual meeting. Shares that reflect votes withheld for director nominees, abstentions or "broker non-votes"“broker non-votes” (i.e., shares represented at the meeting held by brokers or nominees as to which instructions have not been received from the beneficial owners or persons entitled to vote such shares and the broker or nominee does not have discretionary voting power to vote such shares) will be counted for purposes of determining whether a quorum is present for the transaction of business at the annual meeting.
Voting by Proxy Holders for Shares Registered Directly in the Name of the Stockholder.Stockholder. If you hold your shares in your own name as a holder of record, you may instruct the proxy holders named in the enclosed proxy card how to vote your common shares by using the toll-free telephone number, the Internet Website listed on the proxy card or by signing, dating and mailing the proxy card in the postage-paid envelope that has been provided to you by Boston Properties.
. Vote by Telephone. If you hold your common shares in your own name as a
holder of record, you may vote by telephone by calling the toll-free
number listed on the accompanying proxy card. Telephone voting is
available 24 hours a day until 11:59 p.m. on April 30, 2002. When you call
you will receive a series of voice instructions which will allow you to
vote your common shares. A control number, located above the registration
line of your proxy card, verifies your identity as a stockholder and
allows you to vote your common shares and confirm that your voting
instructions have been recorded properly. IF YOU VOTE BY TELEPHONE, YOU DO
NOT NEED TO RETURN YOUR PROXY CARD.
. Vote by Internet. You also have the option to vote via the Internet. The
Website for Internet voting is printed on your proxy card. Internet voting
is available 24 hours a day until 11:59 p.m. on April 30, 2002. As with
telephone voting, you will be given the opportunity to confirm that your
instructions have been properly recorded. IF YOU VOTE VIA THE INTERNET,
YOU DO NOT NEED TO RETURN YOUR PROXY CARD.
. Vote by Mail. If you would like to vote by mail, mark your proxy card,
sign and date it, and return it to EquiServe in the postage-paid envelope
provided.
. Vote in Person. If you are a registered stockholder and attend the annual
meeting, you may deliver your completed proxy card in person.
| • | Vote by Telephone. If you hold your common shares in your own name as a holder of record, you may vote by telephone by calling the toll-free number listed on the accompanying proxy card. Telephone voting is available 24 hours a day until 11:59 p.m. on May 6, 2003. When you call you will receive a series of voice instructions which will allow you to vote your common shares. A control number, located above the voting instructions of your proxy card, verifies your identity as a stockholder and allows you to vote your common shares and confirm that your voting instructions have been recorded properly.IF YOU VOTE BY TELEPHONE, YOU DO NOT NEED TO RETURN YOUR PROXY CARD. |
| • | Vote by Internet. You also have the option to vote via the Internet. The Website for Internet voting is printed on your proxy card. Internet voting is available 24 hours a day until 11:59 p.m. on May 6, 2003. As with telephone voting, you will be given the opportunity to confirm that your instructions have been properly recorded.IF YOU VOTE VIA THE INTERNET, YOU DO NOT NEED TO RETURN YOUR PROXY CARD. |
| • | Vote by Mail. If you would like to vote by mail, mark your proxy card, sign and date it, and return it to EquiServe in the postage-paid envelope provided. |
| • | Vote in Person. If you are a registered stockholder and attend the annual meeting, you vote in person at the meeting. |
Voting by Proxy Holders for Shares Registered in the Name of a Brokerage Firm or Bank. If your common shares are held by a broker, bank or other nominee (i.e., in "street name"“street name”), you will receive instructions from your nominee which you must follow in order to have your common shares voted. "Street name"“Street name” stockholders who wish to vote in person at the meeting will need to obtain a proxy form from the broker, bank or other nominee that holds their common shares of record.
The Securities and Exchange Commission (the “SEC”) rules allow for the delivery of a single copy of an annual report and proxy statement to any household at which two or more stockholders reside, if it is believed that the stockholders are members of the same family. Duplicate mailings can be eliminated by allowing stockholders to consent to such elimination, or through implied consent if a stockholder does not request continuation of duplicate mailings. Depending upon the practices of your broker, bank or other nominee, you may need to contact them directly to discontinue duplicate mailings to your household. If you wish to revoke your consent to householding, you must contact your broker, bank or other nominee. If you own shares of our common stock in your own name as a holder of record, householding will not apply to your shares.
If you wish to request extra copies free of charge of any annual report or proxy statement, please send your request to Boston Properties, Inc., 111 Huntington Avenue, Suite 300, Boston, Massachusetts 02199-7610, Attention: Secretary; call us with your request at (617) 236-3300; or visit our Website at www.bostonproperties.com.
Will other matters be voted on at the annual meeting?
We are not now aware of any other matters to be presented at the annual meeting other than those described in this proxy statement. If any other matters not described in the proxy statement are properly presented at the meeting, proxies will be voted in accordance with the best judgment of the proxy holders.
Can I revoke my proxy instructions?
You may revoke your proxy at any time before it has been exercised by:
.
Any stockholder of record as of the record date attending the annual meeting may vote in person whether or not a proxy has been previously given, but the presence (without further action) of a stockholder at the annual meeting will not constitute revocation of a previously given proxy.
What other information should I review before voting?
For your review, our 20012002 annual report, including a copy of our annual report filed with the Securities and Exchange Commission (the "SEC")SEC on Form 10-K, and financial statements for the fiscal year ended December 31, 2001,2002, is being mailed to stockholders concurrently with this proxy statement. The annual report, however, is not part of the proxy solicitation material.
PROPOSAL 1: ELECTION OF DIRECTORS
In November 2002, our Board of Directors currently consistsreached a determination that it would be appropriate to expand the Board and created an Interim Nominating Committee charged with the responsibility of seven members who are divided
into three classes. identifying and recommending to the Board nominees for election as directors. Two nominees needed to be selected to fill two new Board seats created to achieve such expansion of the Board, and a third nominee needed to be selected as a result of the decision by Mr. Ivan G. Seidenberg not to stand for re-election as a director of Boston Properties due to his commitments as President and Chief Executive Officer of Verizon Communications. Mr. Seidenberg has served on our Board of Directors since our initial public offering in June 1997. We would like to thank Mr. Seidenberg for his dedication to the interests of our stockholders and his invaluable contribution to Boston Properties over the past six years.
At the annual meeting, twoone Class II directorsdirector will be elected to serve until the 2005 annual meeting or until his successor is duly elected and qualified and three Class III directors will be elected to serve until the 2006 annual meeting or until their respective successors are duly elected and qualified. OurFollowing the recommendation of the Interim Nominating Committee, our Board of Directors has nominated Alan J. Patricof and Martin TurchinLawrence S. Bacow to serve as thea Class II director and William M. Daley, Edward H. Linde and David A. Twardock to serve as Class III directors. The nominees areMr. Linde is currently serving as directorsa director of Boston Properties. Messrs. Bacow, Daley and Twardock are new candidates for election. In making its recommendations, the Interim Nominating Committee considered a number of factors, including the independence and qualifications of the candidate and the current composition of our Board of Directors. Our Board of Directors anticipates that the nominees will serve, if elected, as directors. However, if any persons nominated by our Board of Directors is unable to accept election, the proxies will be voted for the election of such other person or persons as our Board of Directors may recommend. Our Board of Directors will consider a nominee for election to our Board of Directors recommended by a stockholder of record if the stockholder submits the nomination in compliance with the requirements of our by-laws.
Directors must be elected by a plurality of the votes cast on account of the shares of common stock present in person or represented by proxy and entitled to vote on the election of directors at the annual meeting. Votes may be cast for or withheld from each nominee. Votes cast for the nominees will count as "yes"“yes” votes; votes that
are withheld from the nominees will not be voted with respect to the director or directors indicated, although they will be counted when determining whether there is a quorum.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THEIR NOMINEES, ALAN J. PATRICOFLAWRENCE S. BACOW, WILLIAM M. DALEY, EDWARD H. LINDE AND MARTIN TURCHIN.DAVID A. TWARDOCK. PROXIES SOLICITED BY THE BOARD WILL BE VOTEDFOR EACH OF THE NOMINEES UNLESS INSTRUCTIONS TO WITHHOLD OR TO THE CONTRARY ARE GIVEN.
Information Regarding the Nominees, Other Directors and Executive Officers
The following biographical descriptions set forth certain information with respect to the twonominee for election as a Class II director and the nominees for re-electionelection as Class IIIII directors at the annual meeting, each director who is not up for election and the executive officers who are not directors, based on information furnished to Boston Properties by each director and executive officer. The following information is correct as of February 1, 2002.
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Nominees2003.
Nominee for Election as Directors--TermClass II Director—Term Expiring 2002
Alan J. Patricof.2005
Lawrence S. Bacow. Mr. Alan J. Patricof has been a directorLawrence S. Bacow currently serves as President of Tufts University. Prior to his appointment to this position, Mr. Bacow served in various capacities at the Massachusetts Institute of Technology, including his most recent position as Chancellor since June 23,
1997.August 1998. During his 24 year tenure at the Massachusetts Institute of Technology, Mr. Patricof isBacow was the Lee and Geraldine Martin Professor of Environmental Studies in the Department of Urban Studies and Planning and he also served as the Director of the MIT Center for Real Estate Development, the Chair of the MIT Council on the Environment and the Chairman of the BoardFaculty of Directorsthe Massachusetts Institute of Apax Partners,
Inc.--formerly Patricof & Co. Ventures, the company he founded in 1969. He alsoTechnology. Mr. Bacow serves as a director of CoreComm Limited, Johnny Rockets Group and NTL. In
addition, he currently serves on The Board of Trustees of ColumbiaTufts University, Graduate School of Business, Continuum Health Partners, East Hampton Historical
SocietyHebrew College, Wheaton College and the Drama School Board of Governors ofJewish Community Housing for the Actors Studio Division
of New York University.Elderly. He is a member of the Council on Foreign Relations and
the New York Administrative Committee of Fleet National Bank. Mr. Patricof received a BS in financeEconomics from Ohio Statethe Massachusetts Institute of Technology and a Ph.D., an M.P.P. and a J.D. from Harvard University. He is 51 years old.
Nominees for Election as Class III Directors—Terms Expiring 2006
William M. Daley. Mr. William M. Daley is President of SBC Communications, Inc. Prior to his appointment in December of 2001 to this position, Mr. Daley served as Vice Chairman of Evercore Capital Partners L.P., a private equity investment firm. He also served as United States Secretary of Commerce from January 1997 to July 2000 and as Chairman of the 2000 presidential election campaign of Vice President Al Gore. Mr. Daley serves as a director of Merck & Company, The Joffrey Ballet of Chicago, Loyola University and The Committee on US-China Foreign Relations. He received a BA from Loyola University and an MBALLB from Columbia
University Graduate School of Business. He is 67 years old.
Martin Turchin. Mr. Martin Turchin has been a director since June 23, 1997.
Since 1985, Mr. Turchin has served as Vice-Chairman of Insignia/ESG, Inc., a
subsidiary of Insignia Financial Group, one of the nation's largest commercial
real estate brokerage, consulting and management firms. Prior to joining
Insignia/ESG, Inc., he spent 14 years with Kenneth E. Laub & Company, Inc.
where he was involved in real estate acquisition, financing, leasing and
consulting. Mr. Turchin has more than 30 years experience as a commercial real
estate broker, consultant and advisor and has been involved in some of the
largest real estate transactions in the United States. During his career, he
has orchestrated more than 50 million square feet of real estate transactions.
Mr. Turchin is a three time recipient of the Real Estate Board of New York's
"Most Ingenious Deal of the Year Award" and a recipient of the "Robert T.
Lawrence Award." Mr. Turchin holds a BS from City College of the University of
New York and a JD from St. John'sJohn Marshall Law School. He is 6054 years old.
Incumbent Directors--Term Expiring 2003
Edward H. Linde.Linde. Mr. Edward H. Linde serves as President and Chief Executive Officer of Boston Properties and has been a director since June 23, 1997. Mr. Linde co-founded Boston Properties in 1970 after spending five years at Cabot, Cabot & Forbes, where he became Vice President and Senior Project Manager. Mr. Linde serves as a trusteeVice Chairman of the Board of Trustees of the Boston Symphony Orchestra and a director of Jobs for Massachusetts. He is also a member of the Board of Directors of the John Hancock Life Insurance Company.Financial Services, Inc. Mr. Linde serves as second vice chair of the National Association of Real Estate Investment Trusts. Mr. Linde received a BS in Civil Engineering from MIT in 1962 and an MBA from Harvard Business School, where he was a Baker
Scholar, in 1964. He is 60 years old.School. His son, Douglas T. Linde, serves as our Senior Vice President, Chief Financial Officer and Treasurer. Ivan G. Seidenberg. Mr. Ivan G. Seidenberg has been a director since June
23, 1997.Linde is 61 years old.
David A. Twardock. Mr. Seidenberg serves asDavid A. Twardock is the President and Chief Executive Officer of Verizon Communications.Prudential Mortgage Capital Company, LLC, the real estate finance affiliate of Prudential Financial, Inc. Since 1982, Mr. Seidenberg also servedTwardock has held numerous positions relating to real estate equity and debt with Prudential, including his position from 1996 to November 1998 as PresidentSenior Managing Director of Prudential Realty Group. Mr. Twardock is a member of the Urban Land Institute, International Council of Shopping Centers, the Economics Club of Chicago, and Co-Chief
Executive Officer from August 2000 until March 31, 2002.the Real Estate Roundtable where he is Vice Chairman of the Real Estate Capital Policy Advisory Committee. Mr. Seidenberg servedTwardock serves as the Chairmana director of Prudential Mortgage Capital Holdings Corp. and Chief Executive Officer for Bell Atlantic since 1998. Mr.
Seidenbergits various subsidiaries, Prudential Asset Resources, Inc., and Prudential Realty Securities, Inc., and he is a member of the Board of DirectorsManagers of Honeywell International,
Wyeth, CVS, Pace University, The Museum of Television and Radio, The National
Urban League, The New York Hall of Science, The New York Hospital, Verizon
Communications and Viacom. Mr. SeidenbergStrategic Hotel Capital, LLC. He received a BABS in mathematicsCivil Engineering from Citythe University of New YorkIllinois and an MBA in Finance and Behavioral Science from Pace University.the University of Chicago. He is 5545 years old.
Incumbent Directors--TermClass I Directors—Terms Expiring 2004
Mortimer B. Zuckerman.Zuckerman. Mr. Mortimer B. Zuckerman serves as Chairman of ourthe Board of Directors of Boston Properties and has been a director since June 23, 1997. Mr. Zuckerman co-founded Boston Properties in 1970 after spending seven years at Cabot, Cabot & Forbes where he rose to the position of Senior Vice President and Chief Financial Officer. He is also Chairman and Editor-in-Chief of U.S. News & World Report and Chairman and Publisher of the New York Daily News. Mr. Zuckerman serves as a trustee for New York University, a trustee of Memorial Sloan-Kettering Cancer Institute and a member of the Council on Foreign Relations, and the International Institute for Strategic Studies and the Washington Institute for Near East Studies. He serves on the Advisory Board of the Graduate School of Journalism at the University of California, Berkeley. He is currently serving as Chairman of the Conference of Presidents of Major American Jewish Organizations. He is also Chairman and Editor-in-Chief of U.S. News & World Report and Chairman and
Publisher of the New York Daily News. He is a member of the J.P. Morgan National Advisory Board, and a member of the Board of Directors of Applied Graphics Technologies Loews Cineplex and the Center for
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L'OrdreL’Ordre des Arts et des Lettres by the government of France. He is 6465 years old.
Alan B. Landis.Landis. Mr. Alan B. Landis has been a director since June 30, 1998. He also serves as the Chief Executive Officer of The Landis Group, a real estate development and management organization which was the developer of the Carnegie Center. Since 1967, Mr. Landis has held various positions with The Landis Group or its predecessors. He has served as the Co-Chairman and Trustee of the Foundation Fighting Blindness Celebrity Golf Classic since 1988 and has been appointed to the Advisory Board to Prevent Child Abuse. He was named a trustee to the Hun School at Princeton in 1988. Mr. Landis has been the recipient of several awards, including The Urban Land Institute Award for Excellence, The American and National Planning Association Awards, The American Institute of Architects Award for Precedent Setting Achievements in Land Use and Development, The American Society of Landscape Architects Environmental Enhancement Award, The National Association of Industrial Office Parks Impact Award/Developer of the Year Award, the MSM Community Development Award and the Israel Peace Medal. He received a BS in Accounting from New York University in 1965. He is 58 years old. Mr. Landis was appointed to the Board of Directors pursuant to a directorship agreement in connection with our acquisition of a portfolio of properties in New Jersey. We agreed that the Board of Directors will nominate Mr. Landis for re-election as a director at each annual meeting of stockholders in a year in which his term expired as long as Mr. Landis (together with parties related to him) continue to beneficially own at least one percent of the aggregate number of outstanding shares of common stock of Boston Properties and units of limited partnership interest in Boston Properties Limited Partnership. Additionally, Mr. Landis must comply with the policies of our Board of Directors and attend a certain number of the meetings of our Board of Directors. Mr. Landis'Landis’ brother, Mitchell S. Landis, serves as Senior Vice President and Manager of our Princeton office. Mr. Landis is 60 years old.
Richard E. Salomon.Salomon. Mr. Richard E. Salomon has been a director since November 12, 1998. He is President of Mecox Ventures, a private investment company. Mr. Salomon was an officerPresident and Managing Director of the investment advisory firm, Spears, Benzak, Salomon & Farrell from 1982 until 2000. Mr. Salomon serves as Senior Advisor to Mr. David Rockefeller. He represented Rockefeller interests on the Executive Committee of Embarcadero Center from 1977 until 1998. In addition, he is Chairman of the Advisory Board of Blackstone Alternative Asset Management.Management and a member of the Advisory Board of the Geoeconomic Center at The Council on Foreign Relations. He is a director of Strategic Hotel Capital. He is a trustee of the Museum of Modern Art, The New York Public Library, Rockefeller University and Rockefeller University.the Alfred P. Sloan Foundation. Mr. Salomon serves as the Chairman of the Investment Committee of Rockefeller University and is a member of the Investment Committee at The Council of Foreign Relations, The New York Public Library, the Museum of Modern Art and the Alfred P. Sloan Foundation. He received a BA from Yale University in 1964 and an MBA from Columbia University Graduate School of Business in 1967. He is 5960 years old.
Incumbent Class II Directors—Terms Expiring 2005
Alan J. Patricof. Mr. Alan J. Patricof has been a director since June 23, 1997. Mr. Patricof is Vice Chairman of the Board of Directors of Apax Partners, Inc. – formerly Patricof & Co. Ventures, the company he founded in 1969. He also serves as a director of ATX Communications, Inc., Johnny Rocket Group, Zinio Systems, Inc. and 7th OnLine Inc. In addition, he currently serves on The Board of Trustees of Columbia University Graduate School of Business, Continuum Health Partners, East Hampton Historical Society, the Drama School Board of Governors of the Actors Studio Division of New School University and Trickle Up Program. He is a member of the Council on Foreign Relations and the New York Administrative Committee of Fleet National Bank. Mr. Patricof received a BS in finance from Ohio State University and an MBA from Columbia University Graduate School of Business. He is 68 years old.
Martin Turchin. Mr. Martin Turchin has been a director since June 23, 1997. Since 1985, Mr. Turchin has served as Vice-Chairman of Insignia/ESG, Inc., a subsidiary of Insignia Financial Group, one of the nation’s largest commercial real estate brokerage, consulting and management firms. Prior to joining Insignia/ESG, Inc., he spent 14 years with Kenneth E. Laub & Company, Inc. where he was involved in real estate acquisition, financing, leasing and consulting. Mr. Turchin has more than 30 years experience as a commercial real estate broker, consultant and advisor and has been involved in some of the largest real estate transactions in the United States. During his career, he has orchestrated more than 50 million square feet of real estate transactions. Mr. Turchin is a three time recipient of the Real Estate Board of New York’s “Most Ingenious Deal of the Year Award” and a two time recipient of the “Robert T. Lawrence Award.” Mr. Turchin holds a BS from City College of the University of New York and a JD from St. John’s Law School. He is 61 years old.
Executive Officers Who Are Notwho are not Directors
Robert E. Burke.Burke. Mr. Robert E. Burke serves as Executive Vice President, for
Operations,Chief Operating Officer, with responsibility for administrative policy and day-to-day control of our operations. Prior to his appointment in April 1998 to this position, he served for 12 years as Senior Vice President and Co-Manager of our Washington, D.C. office. He joined us in 1979 to open our Washington, D.C. area office, serving as General Manager in charge of operations of that office until 1998. Prior to 1979, Mr. Burke spent over seven years as General Manager of the John Fitzgerald Kennedy Library Corporation where he directed the development of the John Fitzgerald Kennedy Library Corporation.and Museum. He has also held engineering and management positions with General Electric Company, SCM Corporation and Harvard University. He received dual degrees in 1960 when he earned a BS from Bates College and a Bachelor of Civil Engineering degree from Rensselaer Polytechnic Institute. He is 6465 years old.
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Raymond A. Ritchey.Ritchey. Mr. Raymond A. Ritchey serves as Executive Vice President, Head of our Washington, D.C. office and National Director of Acquisitions and Development. Prior to his appointment in April 1998 to this position, he served as Senior Vice President and Co-Manager of our Washington, D.C. office. In his current position, Mr. Ritchey is responsible for
all business development, leasing and marketing as well as new opportunity origination in the Washington, D.C. area. He also directly oversees similar activities on a national basis. Mr. Ritchey joined us in 1980, leading our expansion to become one of the dominant real estate firms in the Washington, D.C. metropolitan area. For four years prior to joining us, Mr. Ritchey was one of the leading commercial real estate brokers in the Washington, D.C. area with Coldwell Banker. He is a 1972 graduate of the U.S. Naval Academy and a 1973 graduate of the U.S. Naval Post Graduate School in Monterey, California. He is 5152 years old.
Douglas T. Linde.Linde. Mr. Douglas T. Linde serves as Senior Vice President, Chief Financial Officer and Treasurer. He previously served as Senior Vice President for Financial and Capital Markets. Mr. Linde oversees the accounting, control and financial management departments and is also responsible for capital raising, financial strategy, planning and acquisitions. In addition, Mr. Linde has played a key role in our acquisition program, including the purchase and financing of the Prudential Center in Boston, the Embarcadero Center in San Francisco, the Carnegie Center Portfolio in Princeton, New Jersey, University Placethe Times Square development in Cambridge, Massachusetts, Reservoir Place in
Waltham,New York City, 111 Huntington Avenue, Boston, Massachusetts and most recently the development of 5 Times Square399 Park Avenue in New York City and 111 Huntington Avenue, Boston, Massachusetts.City. He joined usBoston Properties in January 1997 as Vice President of Acquisitions and New Business to help identify and execute acquisitions and to develop new business opportunities. Prior to joining us,Boston Properties, Mr. Linde served from 1993 to 1997 as President of Capstone Investments, a Boston real estate investment company. From 1989 to 1993, he served as Project Manager and Assistant to the Chief Financial Officer of Wright Runstad and Company, a private real estate developer in Seattle, Washington.WA. He began his career in the real estate industry with Salomon Brothers'Brothers’ Real Estate Finance Group. Mr. Linde received a BA from Wesleyan University in 1985 and an MBA from Harvard Business School in 1989. Mr. Linde is on the Board of Overseers for the Beth Israel Deaconess Medical Center and serves on the Finance Committee and is a director of the Boston Municipal Research Bureau. He is 38 years old. Mr. Linde'sLinde’s father, Edward H. Linde, serves as our President, Chief Executive Officer and a director. Mr. Linde is 39 years old.
Bryan J. Koop.Koop. Mr. Bryan J. Koop serves as Senior Vice President and Manager of our Boston office. Mr. Koop is responsible for overseeing the operation of our existing regional portfolio in the Boston area, which includes the Prudential Center and Cambridge Center. He is also responsible for developing new business opportunities in the area. Prior to joining us in 1999, Mr. Koop served at Trammell Crow Company from 1982-19991982 to 1999 where his career covered high rise office building leasing and the development of commercial office buildings and shopping centers. From 1993 to 1999 his position was Managing Director and Regional Leader for Trammell Crow Company'sCompany’s New England region, which included all commercial office and shopping center operations. Mr. Koop is a member of the Board of Directors for the Massachusetts Chapter of NAIOP (National Association of Industrial and Office Parks). Mr. Koop received a BBA in 1980 and an MBA in 1982 from Texas Christian University. He is 4344 years old.
Mitchell S. Landis.Landis. Mr. Mitchell S. Landis serves as Senior Vice President and Manager of our Princeton office. Prior to his appointment in February 2001 to this position, he served as Vice President and Manager of our Princeton office. He is responsible for overseeing development, leasing and management for the Carnegie Center and Tower Center assets and for the pursuit of new business opportunities in the region. Mr. Landis joined Boston Properties in June 1998 when the assets of The Landis Group, for whom he was Chief Operating Officer, were acquired. For 19 years prior to that, he owned and operated Landis Food Services, a restaurant franchisorfranchiser and owner in the Northeast United States and Canada. Mr. Landis received a BS degree in Economics from New York University in 1973 and completed coursework fortoward a masters degree in Economics in 1975. He is 51 years old. Mr. Landis'Landis’ brother, Alan B. Landis, serves as a member of our Board of Directors. 6
E. Mitchell Norville.Norville. Mr. E. Mitchell Norville serves as Senior Vice President and Manager of our Washington, D.C. office. He is in charge of all development activities as well as being responsible for all administrative, project, construction and property management activities for our Washington D.C. office, with a staff of more thanapproximately 200 people. From 1994 to 1998, he served as Senior Vice President and Senior Project Manager of our Washington, D.C. office, with responsibilities for various project developments. Mr. Norville has been directly responsible for over four million square feet of new development and renovation projects. He
received a BS in Mechanical Engineering from Clemson University in 1980 and an MBA from the University of Virginia in 1984. He is 4344 years old.
Robert E. Pester.Pester. Mr. Robert E. Pester serves as Senior Vice President and Manager of our San Francisco office, with responsibility for all of our activities on the West Coast. Mr. Pester is responsible for overseeing existing operations at the Embarcadero Center and the Gateway Center in South San Francisco and developing new business opportunities in the area. Prior to joining us in 1998, he served as Executive Vice President and Chief Investment Officer of Bedford Property Investors, a real estate investment trust in Lafayette, California,CA, where he led the acquisitions and development program. Prior to 1994, he was President of Bedford Property Development, a private West Coast development concern that held more than $2 billion in real estate assets. From 1980 to 1989, he was a leading commercial real estate broker with Cushman & Wakefield in northern California, where he last served as Vice President. He is a 1979 graduate of the University of California at Santa Barbara with a BA in economics and political science. He is 4546 years old.
Robert E. Selsam.Selsam. Mr. Robert E. Selsam serves as Senior Vice President and Manager of our New York office. He oversees all aspects of our New York activities, including development, acquisitions, leasing and building operations. He joined us as a Vice President in 1984, prior to which he was Director of Planning for the Metropolitan Transportation Authority of the State of New York. Mr. Selsam is a member of the Board of Governors of the Real Estate Board of New York. HeYork and is a board member of the New York Building Congress,Congress. He is also Executive Vice President and past Co-Chairman of the Associated Builders and Owners of Greater New York, Treasurer of the East Midtown Business
Improvement District, and a trustee of Phipps Houses, andPresident of the Salvadori Center.Center and a member of the Advisory Board of Goldman Family Enterprises. He received a BA from the University of Pennsylvania in 1968 and an MS in Urban Planning from the Columbia University School of Architecture in 1970. He is 5556 years old.
The Board of Directors and Its Committees
Board of Directors. Boston Properties is currently managed by a seven member Board of Directors. If the nominees are elected at the annual meeting, Boston Properties iswill be managed by a sevennine member Board of Directors, a majority of whom arewill be independent of our management. Our Board of Directors is divided into three classes, and the members of each class of directors serve for staggered three-year terms. OurFollowing the election of the nominees at the annual meeting, our Board of Directors iswill be composed of three Class I directors (Messrs. Zuckerman, Landis and Salomon), twothree Class II directors (Messrs. Bacow, Patricof and Turchin) and twothree Class III directors (Messrs. Daley, E. Linde and Seidenberg)Twardock). The terms of the Class IIII, Class II and Class IIII directors will expire upon the election and qualification of directors at the annual meetings of stockholders held in 20032004, 2005 and 2004,2006, respectively. At each annual meeting of stockholders, directors will be re-elected or elected for a full term of three years to succeed those directors whose terms are expiring.
Our Board of Directors met fiveeight times in 2001.2002. Each of the current directors attended at least 75% of the aggregate of (i) the total number of meetings of our Board of Directors and (ii) the total number of meetings of all committees of our Board of Directors on which the director served. Our Board of Directors periodically holds meetings without the Chairman of the Board and the President and Chief Executive Officer present.
Audit Committee.Committee. Our Board of Directors has established an Audit Committee currently consisting of Messrs. Patricof (Chairman), Salomon and Seidenberg. The Audit Committee makes recommendations concerning the engagement of independent public accountants, reviews with the independent public accountants the scope 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 our internal accounting controls. Each member of the audit committee is "independent"“independent” as that term is defined in the rules of the Securities and Exchange CommissionSEC and the applicable listing standards of the New York Stock Exchange. The Audit Committee met sixfive times during 2001.
7
Compensation Committee.Committee. Our Board of Directors has established a Compensation Committee currently consisting of Messrs. Seidenberg (Chairman), Patricof and Turchin.Salomon, all of whom are independent members of
our Board of Directors. The Compensation Committee exercises all powers of our Board of Directors in connection with compensation matters, including incentive compensation and benefit plans. The Compensation Committee also has authority to grant awards under the 1997 Stock Option and Incentive Plan, as amended (the "1997“1997 Stock Plan"Plan”). The Compensation Committee met three times during 2001.
2002.
Interim Nominating Committee. Our Board of Directors has established an Interim Nominating Committee, currently consisting of Messrs. Salomon (Chairman), Patricof and Seidenberg, all of whom are independent members of our Board of Directors. The Interim Nominating Committee reviews and recommends to our Board of Directors nominees for election as directors. The Interim Nominating Committee considers factors such as the independence and qualifications of a candidate and the current size and composition of our Board of Directors. It is currently expected that during 2003, the Interim Nominating Committee will complete its mandate from the Board, at which time a permanent Nominating and Corporate Governance Committee is expected to be established by our Board of Directors. The Interim Nominating Committee was created in November 2002 and did not hold its first official meeting until 2003.
Our Board of Directors has also established (1) a Special Transactions Committee, the members of which currently are Messrs. Zuckerman and E. Linde, which may approve acquisitions, dispositions, financings and refinancings below $25 million and may approve refinancings over $25 million if the existing debt is increasing by less than $25 million, and (2) a Significant Transactions Committee, the members of which currently are Messrs. Zuckerman, E. Linde and Turchin, which may approve acquisitions, dispositions, financings and refinancings equal to $25 million or greater but less than $200 million and may approve refinancings over $200 million if the existing debt is increasing by less than $200 million. The Special Transactions Committee did not meet but took action by written consent twelvethree times in 2001.2002. The Significant Transactions Committee did not meet but took action by written consent two times in 2001.
Boston Properties does not have a standing nominating committee. Our full
Board of Directors performs the function of such a committee.
2002.
Our Board of Directors may from time to time establish other special or standing committees to facilitate the management of Boston Properties or to discharge specific duties delegated to the committee by the full Board of Directors.
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
Our Board of Directors, upon the recommendation of the Audit Committee, has selected the accounting firm of PricewaterhouseCoopers LLP to serve as independent accountants of Boston Properties for the fiscal year ending December 31, 2002.2003. PricewaterhouseCoopers LLP has served as our independent accountants since our initial public offering of common stock in June 1997 and is considered by management of Boston Properties to be well qualified. We have been advised by that firm that neither it nor any member thereof has any financial interest, direct or indirect, in Boston Properties or any of its subsidiaries in any capacity. A representative of PricewaterhouseCoopers LLP will be present at the annual meeting, will be given the opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions.
Although Boston Properties is not required to submit the ratification and approval of the selection of our independent accountants to a vote of stockholders, our Board of Directors believes that it is sound policy to do so. In the event that the vote of the majority of shares present and entitled to vote on the proposal are against the selection of PricewaterhouseCoopers LLP, the directors will consider the vote and the reasons therefore in future decisions on the selection of independent accountants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THIS PROPOSAL.
8
PROPOSAL 3: STOCKHOLDER PROPOSAL
Annual Election of Directors
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, D.C. 20037, record holder of 100 shares of common stock
of Boston Properties, has given formal notice that she will introduce the
following resolution at the forthcoming annual meeting and has furnished the
following statements in support of her proposal:
RESOLVED: "That the stockholders of Boston Properties recommend that the
Board of Directors take the necessary steps to instate the election of
directors ANNUALLY, instead of the stagger system which was recently adopted."
REASONS: "The great majority of New York Stock Exchange listed corporations
elect all their directors each year."
"This insures that ALL directors will be more accountable to ALL
shareholders each year and to a certain extent prevents the self-perpetuation
of the Board."
"Last year the owners of 40,580,594 shares, representing approximately 61.8%
of shares voting, voted FOR this proposal."
"If you AGREE, please mark your proxy FOR this resolution."
Boston Properties' Statement in Opposition
Identical proposals were considered by the stockholders at the 2000 annual
meeting of stockholders and at the 2001 annual meeting of stockholders. At the
2000 annual meeting, the proposal received the affirmative vote of 50.43% of
the total votes cast, which represented 34.7% of the outstanding shares
entitled to vote. At last year's annual meeting, the proposal received the
affirmative vote of 62% of the total votes cast, which represented 45.2% of the
outstanding shares entitled to vote. The proposals were recommendations that
the Board of Directors take the necessary steps to instate the annual election
of directors. The steps necessary to eliminate the classified board are: (i)
adoption of an amendment to our Certificate of Incorporation by the Board of
Directors; and (ii) approval of the amendment by the affirmative vote of not
less than 75% of the outstanding shares entitled to vote. The Board of
Directors carefully considered whether to begin the process to amend the
Certificate of Incorporation, but for the reasons noted below, decided that it
was not in the best interests of Boston Properties or our stockholders to do so.
The Board of Directors continues to believe that the staggered system of
electing directors provides important benefits to Boston Properties:
. The staggered system provides continuity and stability of experienced
directors on our Board of Directors since a majority of the directors will
always have prior experience as directors of Boston Properties and will be
familiar with our business strategies and operations.
. In the event of any unfriendly or unsolicited proposal to take over or
restructure Boston Properties, the staggered system would enhance
management's ability to negotiate in the best interests of all
stockholders by affording Boston Properties time to negotiate with the
sponsor, to consider alternative proposals, and to assure that stockholder
value is maximized.
In addition, the Board of Directors believes that directors who are elected
to three-year terms are just as accountable to stockholders as directors who
are elected on an annual basis. Under applicable law, the directors owe to the
stockholders fiduciary duties which do not depend on how often they are
elected. The Board of Directors believes that this proposal is not in the best
interest of Boston Properties or its stockholders.
9
Vote Required
The affirmative vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote on this proposal is
required for adoption of this resolution. Abstentions shall be included in
determining the number of shares present and entitled to vote on the proposal,
thus having the effect of a vote against the proposal. Broker non-votes are not
counted in determining the number of shares present and entitled to vote and
will therefore have no effect on the outcome.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED AGAINST THIS PROPOSAL UNLESS
INSTRUCTIONS TO THE CONTRARY ARE GIVEN.
PROPOSAL 4: STOCKHOLDER PROPOSAL
Shareholder Rights Plan
The Service Employees International Union ("SEIU"), 1313 L Street, N.W.,
Washington D.C., 20005, record holder of 89 shares of common stock of Boston
Properties, has given formal notice that it will introduce the following
resolution at the forthcoming annual meeting and has furnished the following
statements in support of their proposal:
RESOLVED: "The shareholders of Boston Properties, Inc. request the Board of
Directors redeem the shareholder rights issued in June 1997 unless such
issuance is approved by the affirmative vote of the outstanding shareholders,
to be held as soon as is practicable."
SUPPORTING STATEMENT: "On June 16, 1997, the Board of Directors of Boston
Properties, Inc. issued, without shareholder approval, certain shareholder
rights pursuant to a Shareholder Rights Plan. These rights are a type of
anti-takeover device, commonly referred to as a 'poison pill,' which injure
shareholders by reducing management accountability and adversely affecting
shareholder value.
While management and the Board of Directors should have the appropriate
tools to ensure that all shareholders benefit from any proposal to acquire the
Company, the future possibility of takeover does not justify the unilateral
imposition of a poison pill. As Nell Minow and Robert Monks note in their book
Power and Accountability, poison pills 'amount to major de facto shifts of
voting rights away from shareholders to management, on matters pertaining to
the sale of the corporation. They give target boards of directors absolute veto
power over any proposed business combination, no matter how beneficial it might
be for the shareholders.'
Rights plans like ours have become increasingly unpopular in recent years.
Last year, a majority of shareholders at Boston Properties, Airborne,
Burlington Northern Santa Fe, Maytag, Pitney Bowes, Inc., and McDermott
International, Inc. among others, voted in favor of proposals asking management
to redeem or repeal poison pills. In addition, the Council of Institutional
Investors-an organization of large corporate and public pension plans-calls for
shareholder approval of all poison pills in its Shareholder Bill of Rights.
To assure shareholders that management and Board of Directors respect the
right of shareholders to participate in the fundamental decisions that affect
the Company's governance and performance, we urge the Company to redeem the
Shareholder Rights Plan or subject it to a vote as soon as may be practical."
Boston Properties' Statement in Opposition
Last year, an identical proposal was considered by the stockholders and
received the affirmative vote of 71% of the total votes cast, which represented
52% of the outstanding shares entitled to vote. Last year's proposal was a
recommendation that the Board of Directors take the necessary steps to redeem
the shareholder rights. The Board of Directors carefully considered whether to
redeem the shareholder rights and terminate the
10
Shareholder Rights Agreement, but for the reasons noted below, decided that it
was not in the best interests of Boston Properties or our stockholders to do so.
The Shareholder Rights Agreement was adopted at the time of our initial
public offering to provide our stockholders with the opportunity to benefit
from our long-term prospects and value and to ensure that our stockholders
receive fair and equal treatment in the event of any proposed takeover of
Boston Properties. The adoption of the Shareholder Rights Agreement by the
Board of Directors fulfilled the Board's responsibility under Delaware law to
manage and direct the business and affairs of Boston Properties and, as a legal
matter, did not require stockholder approval.
The Shareholder Rights Agreement is designed to encourage a potential
acquiror to negotiate directly with our Board, which we believe is in the best
position to negotiate on behalf of all stockholders. The Shareholder Rights
Agreement does not change the fiduciary standards to be followed by the Board
in responding to a takeover bid. The Board must continue to evaluate a proposal
for its merits and determine whether, in the Board's business judgment, the bid
is in the best interests of all the stockholders and consistent with our
long-term business plan and strategy. The Shareholder Rights Agreement is not
intended to prevent a takeover of Boston Properties; it is intended to provide
protection from abusive and coercive tactics that frequently occur in takeover
attempts. The Shareholder Rights Agreement is designed to ensure that our
stockholders receive fair and equal treatment in the event of an unsolicited
bid and to guard against partial tender offers and other abusive takeover
tactics designed to gain control without paying fair value. The Shareholder
Rights Agreement induces a bidder for Boston Properties to negotiate with the
Board of Directors and thus strengthens the Board's bargaining power on behalf
of all stockholders.
The benefits of a shareholder rights plan were validated in a November, 1997
study prepared by Georgeson & Company, Inc., a leading investor relations firm.
In relevant part, the Georgeson study concluded:
. premiums paid to acquire companies with shareholder rights plans were on
average eight percentage points higher than premiums paid for target
companies without rights plans;
. rights plans contributed an additional $13 billion in shareholder value
during the last five years and shareholders of acquired companies without
rights plans give up $14.5 billion in potential premiums;
. the presence of a rights plan did not increase the likelihood of
withdrawal of a friendly takeover bid nor the defeat of a hostile one; and
. rights plans did not reduce the likelihood of a company becoming a
takeover target.
As described above, the Shareholder Rights Agreement is a powerful tool to
protect the interests of all stockholders. Our Board of Directors continues to
believe that the Shareholder Rights Agreement is a very effective device to
ensure that our Board, not a potential bidder, controls the timing of the
consideration of a takeover bid and empirical evidence suggests that
shareholder rights plans like ours better position boards of directors to
negotiate the best price for all stockholders.
Vote Required
The affirmative vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote on this proposal is
required for adoption of this resolution. Abstentions shall be included in
determining the number of shares present and entitled to vote on the proposal,
thus having the effect of a vote against the proposal. Broker non-votes are not
counted in determining the number of shares present and entitled to vote and
will therefore have no effect on the outcome.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED AGAINST THIS PROPOSAL UNLESS
INSTRUCTIONS TO THE CONTRARY ARE GIVEN.
11
PROPOSAL 5: STOCKHOLDER PROPOSAL
Non-Audit Services of Independent Accountants
The Carpenters Pension and Annuity Fund of Philadelphia & Vicinity (the
"Carpenters"), 1803 Spring Garden Street, Philadelphia, Pennsylvania
19130-3998, record holder of 3,100 shares of common stock of Boston Properties,
has given formal notice that it will introduce the following resolution at the
forthcoming annual meeting and has furnished the following statements in
support of their proposal:
RESOLVED: "That the shareholders of Boston Properties, Inc. ("Company")
request that the Board of Directors adopt a policy stating that the public
accounting firm retained by our Company to provide audit services, or any
affiliated company, should not also be retained to provide non-audit services
to our Company."
STATEMENT OF SUPPORT: "The role of independent auditors in ensuring the
integrity of the financial statements of public corporations is fundamentally
important to the efficient and effective operation of the financial markets.
The U.S. Securities and Exchange Commission recently stated:
Independent auditors have an important public trust. Investors must
be able to rely on issuer's financial statements. It is the auditor's
opinion that furnishes investors with critical assurance that the
financial statements have been subjected to a rigorous examination by
an objective, impartial, and skilled professional, and that
investors, therefore, can rely on them. If investors do not believe
that an auditor is independent of a company, they will derive little
confidence from the auditor's opinion and will be far less likely to
invest in that public company's securities. (Division of Corporate
Finance, Staff Legal Bulletin #14, 7/13/01) ("Bulletin #14")
It is critically important to the integrity of the auditing process and the
confidence of investors that those firms performing audits for public
corporations avoid business relationships that might compromise their
independence or raise the perception of compromised judgment. At the heart of
the challenge to auditor independence is the growing level of business and
financial relationships developing between audit firms and their clients.
Bulletin #14 identifies these growing business relationship that threaten
auditor independence:
Accounting firms have woven an increasingly complex web of business
and financial relationships with their audit clients. The nature of
the non-audit services that accounting firms provide to their audit
clients has changed, and the revenues from these services have
dramatically increased.
The growth of non-audit revenues represents a trend that has been
accelerating dramatically in the last several years, with non-audit fees for
consulting or advisory services exceeding audit fees at many companies. Our
Company is in the category of companies that pays its audit firm more for
non-audit advisory services than it does for audit services. The Company's most
recent proxy statement indicated that for the fiscal year ended December 31,
2000, PricewaterhouseCoopers LLP billed $291,000 for audit services, while
billing $1,400,000 for non-audit services rendered.
We believe that this financial 'web of business and financial relationships'
may at a minimum create the perception of a conflict of interest that could
result in a lack of owner and investor confidence in the integrity of the
Company's financial statements. As long-term shareowners, we believe that the
best means of addressing this issue is to prohibit any audit firm retained by
our Company to perform audit services from receiving payment for any non-audit
services performed by the firm. We urge your support for this resolution
designed to protect the integrity of the Company's auditing and financial
reporting processes."
Boston Properties' Statement in Opposition
Our Board of Directors, and Audit Committee, are closely following the
ongoing debate on auditor independence to make sure that Boston Properties
takes all necessary action to maintain the confidence of our
12
stockholders and of the financial markets. However, the public debates have
often failed to distinguish between situations where outside auditors are
engaged to perform consulting services unrelated to auditing ("consulting
services"), from situations where outside auditors perform audit-related or
income tax compliance and related tax services ("audit-related services"). This
is a very important distinction. Boston Properties does not retain its outside
independent accountants PricewaterhouseCoopers LLP to perform consulting
services. We do, however, rely on them to perform a number of audit-related
services as follows:
2001 2000
---------- ----------
Audit Fees................................................................... $ 276,000 $ 291,000
Audit-Related Services
Audits required by lenders, joint venture agreements, tenants and employee
benefit plan requirements.................................................. 268,850 218,000
Accounting assistance for new accounting standards and potential transactions 278,047 229,843
Comfort letters, consents, Rule 3-14 audits (property acquisitions) and
assistance with documents filed with the SEC............................... 93,150 243,250
Assessment of internal controls and processes................................ -- 159,005
---------- ----------
Subtotal.................................................................. 640,047 850,098
---------- ----------
Income Tax Compliance and Related Tax Services
Review of tax returns........................................................ 129,850 81,725
Tax planning and research.................................................... 140,625 265,385
REIT and other compliance matters............................................ 43,950 21,810
Tax assistance for potential transactions.................................... 152,750 120,025
Sales and use tax examinations............................................... 88,850 63,127
---------- ----------
Subtotal.................................................................. 556,025 552,072
---------- ----------
Total........................................................................ $1,196,072 $1,402,170
========== ==========
Many of these services are so closely linked to the audit of our financial
statements that our independent accountants are best suited to provide them,
and are often the only service provider who can provide them. In addition, as a
REIT we must comply with the tax requirements of subchapter M (sections 856
through 860) of the Internal Revenue Code of 1986, as amended, involving
factual determinations with which our independent accountants are familiar. Our
REIT status is central to the integrity of our financial statements and to our
performance. Our auditors, management and stockholders must be assured at all
times of our compliance with REIT requirements. It is therefore both practical
and appropriate for us to engage our independent accountants with respect to
tax compliance and planning matters.
In February 2001, the SEC, in revising the standard of auditor independence,
identified nine specific non-audit activities which have the potential to
impair an auditor's independence. Boston Properties has not in the past
retained our independent accountants to perform any of these nine non-audit
services. In addition, to provide investors with all relevant information, the
SEC now requires companies to disclose "audit fees" and "all other fees" paid
to auditors. For purposes of this disclosure requirement the SEC adopted a very
narrow definition of "audit fees" and made no distinctions within the broad
category of "other fees." This disclosure framework has had two negative
side-effects: (i) it created a mistaken perception that most auditors earn
disproportionately large amounts from their audit clients for services
unrelated to auditing; and (ii) it caused an assumption that all non-audit fees
fall into the problematic category of payments for consulting services.
Anything that falls outside auditing falls within the broad category of "other
fees" regardless of whether paid for consulting engagements or for
audit-related tasks, such as tax compliance and planning or assistance with SEC
filings. We attempted to clarify our relationship with our independent
accountants by giving our stockholders detailed disclosure of the kinds of
services they perform and the fees we pay for each of those services.
Until this point, the stockholders of Boston Properties have put the
decisions regarding the use of independent accountants in the hands of
management and our Board of Directors. The determination how to best
13
allocate tasks among different accounting and other professional service
providers is an important component of our management's and Board of Directors'
responsibilities. We do not believe that the retention of discretion in this
area undermines our ability to monitor and ensure the independence of our
auditors. In its 2001 announcement on auditor independence, the SEC also
recognized it is appropriate to leave basic responsibility for maintaining
auditor independence to management and directors. Our management and Audit
Committee continually evaluate the performance of our independent accountants
in both its auditing and audit-related services, the fees paid for all such
services, and the compatibility of the audit-related services with the
maintenance of their independence. Additionally, our independent accountants
have internal control procedures in place to ensure that its audits are
conducted in an objective and impartial manner.
We believe it would not be in the interest of Boston Properties and our
stockholders to impose an absolute prohibition on our outside independent
accountants performing audit-related services.
Vote Required
The affirmative vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote on this proposal is
required for adoption of this resolution. Abstentions shall be included in
determining the number of shares present and entitled to vote on the proposal,
thus having the effect of a vote against the proposal. Broker non-votes are not
counted in determining the number of shares present and entitled to vote and
will therefore have no effect on the outcome.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED AGAINST THIS PROPOSAL UNLESS
INSTRUCTIONS TO THE CONTRARY ARE GIVEN.
14
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table shows the amount of common stock of Boston Properties, Inc. and units of partnership interest in the OperatingBoston Properties Limited Partnership (the “Operating Partnership”) beneficially owned as of February 1, 20022003 by:
.
On February 1, 2002,2003, there were 90,861,22295,865,559.63 shares of our common stock outstanding, 20,211,44020,474,240 common units of limited partnership interests in the Operating Partnership ("(“common units"units”) outstanding, each of which is redeemable for one share of Boston Properties'Properties’ common stock (if Boston Properties elects to issue common stock rather than pay cash upon such redemption), 2,478,1832,376,853 Series One preferred units of limited partnership interests in the Operating Partnership outstanding, each of which is currently convertible into 0.88889 common units (or a total of 2,112,680.60 common units) and 650,8765,400,661.53 Series ZTwo preferred units outstanding,of limited partnership interests in the Operating Partnership, each of which was subsequently convertedis currently convertible into an equal number ofapproximately 1.312336 common units on March 6, 2002.(or a total of 7,087,482.55 common units). The number of common shares "beneficially owned"“beneficially owned” by each stockholder is determined under rules issued by the SEC regarding the beneficial ownership of securities. This information is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership of common stock includes (i) any shares as to which the individual or entity has sole or shared voting power or investment power and (ii) any shares which could be purchased by the exercise of options at or within 60 days of February 1, 2002.2003. Boston Properties has opted to include in this proxy statement the beneficial ownership of common units, Series One preferred units and Series OneTwo preferred units even though ownership of such units does not constitute beneficial ownership of common stock under Rule 13d-3, because pursuant to section 8.6 of the limited partnership agreement of the Operating Partnership, the holder of the common units, Series One preferred units and Series OneTwo preferred units does not have the right to require Boston Properties to exchange the common units, Series One preferred units or Series OneTwo preferred units for shares of common stock.
Beneficial ownership does not include (i) our Series Two preferred units and
Series Three preferred units, which are not convertible into common units until
December 31, 2002, or (ii) our Series A preferred stock, which is not
convertible into common stock until December 31,
Name and Business Address Of Beneficial Owner* | Number of Shares and Units Beneficially Owned | Percentage of All Common Stock and Units (1) | Percent of All Common Stock(2) | |||||
Directors, Nominess for Director and Executive Officers | ||||||||
Mortimer B. Zuckerman(3) | 9,540,205.00 | 7.50 | % | 9.19 | % | |||
Lawrence S. Bacow | — | — |
| — |
| |||
William M. Daley | — | — |
| — |
| |||
Alan B. Landis(4) | 1,573,762.38 | 1.25 |
| 1.62 |
| |||
Edward H. Linde(5) | 12,037,629.00 | 9.40 |
| 11.46 |
| |||
Alan J. Patricof(6) | 32,500.00 | ** |
| ** |
| |||
Richard E. Salomon(7) | 191,559.23 | ** |
| ** |
| |||
Ivan G. Seidenberg(8) | 28,000.00 | ** |
| ** |
| |||
Martin Turchin(9) | 33,500.00 | ** |
| ** |
| |||
David A. Twardock | — | — |
| — |
| |||
Robert E. Burke(10) | 890,406.00 | ** |
| ** |
| |||
Raymond A. Ritchey(11) | 1,044,286.00 | ** |
| ** |
| |||
Douglas T. Linde(12) | 443,801.75 | ** |
| ** |
| |||
5 % Holders | ||||||||
David Rockefeller(13) | 5,659,179.00 | 4.51 | % | 5.90 | % | |||
Morgan Stanley(14) | 4,887,329.00 | 3.89 | % | 5.10 | % | |||
Cohen & Steers Capital Management, Inc.(15) | 7,521,460.00 | 5.99 | % | 7.85 | % | |||
Deutsche Bank AG(16) | 5,041,663.00 | 4.02 | % | 5.26 | % | |||
All directors and executive officers as group (18 persons) | 27,060,186.08 | 20.49 | % | 22.89 | % |
| * | Unless otherwise indicated, the address is c/o Boston Properties, Inc., 111 Huntington Avenue, Suite 300, Boston, Massachusetts 02199-7610. |
| ** | Less than 1% |
| (1) | Assumes that all common units, Series One preferred units (on an as converted basis) and Series Two preferred units (on an as converted basis) held by the person are presented (after conversion, if applicable) to Boston Properties for redemption and acquired by Boston Properties for shares of common stock, and that all of their exercisable options or options which become exercisable within 60 days of February 1, 2003 to acquire shares of common stock are exercised. The total number of shares used in calculating this percentage assumes that all of the common units, Series One preferred units (on an as converted basis) and Series Two preferred units (on an as converted basis) outstanding held by all persons other than Boston Properties are presented (after conversion, if applicable) to Boston Properties for redemption and acquired by Boston Properties for shares of common stock and assumes that only exercisable options or options which become exercisable within 60 days of February 1, 2003 held by such person to acquire shares of common stock are exercised. |
| (2) | Assumes that all the common units, Series One preferred units (on an as converted basis) and Series Two preferred units (on an as converted basis) held by the person are presented (after conversion, if applicable) to Boston Properties for redemption and acquired by Boston Properties for shares of common stock and that all of their exercisable options or options which become exercisable within 60 days of February 1, 2003 to acquire shares of common stock are exercised. The total number of shares of common stock outstanding used in calculating the percentage assumes that none of the common units, Series One preferred units (on an as converted basis) and Series Two preferred units (on an as converted basis) held by other persons are presented (after conversion, if applicable) to Boston Properties for redemption and acquired by Boston Properties for shares of common stock and assumes that only the exercisable options or options which become exercisable within 60 days of February 1, 2003 held by the person to acquire shares of common stock are exercised. |
| (3) | Includes 1,611,770 shares of common stock held directly, 6,215,294 common units held directly and 46,474 common units held by limited partnerships. Also includes 1,133,334 currently exercisable stock options and 533,333 shares of common stock issuable upon the exercise of stock options that will become exercisable within 60 days of February 1, 2003. Excludes 1,806,842 shares of common stock held by The MBZ Charitable Remainder Unitrust, of which Mr. Zuckerman is the grantor, and 1,405,392 common units held by The MBZ 1996 Trust, of which Mr. Zuckerman is the grantor. |
| (4) | Includes 278,962 Series One preferred units held directly, 1,187,244 Series One preferred units held by a partnership of which Mr. Landis is the general partner, various corporations of which Mr. Landis is the sole stockholder, and various family trusts and 22,500 currently exercisable stock options. Also includes 278,962 Series One preferred units held by Mr. Landis’ wife. Mr. Landis is deemed to own directly or indirectly an aggregate of 1,551,262.38 common units into which all Series One preferred units so held are convertible. Mr. Landis disclaims beneficial ownership of the Series One preferred units held by his wife. Excludes 4,861.86 deferred stock units which were awarded under the 1997 Stock Plan to non-employee directors who elected to receive such awards in lieu of director compensation fees and are to be settled in shares of common stock upon the holders’ retirement from our Board of Directors. |
| (5) | Includes 1,070,171 shares of common stock held directly, 29,000 shares of common stock held through a trust, 3,929,657 common units held directly, 1,763,426 common units held through trusts, 46,474 common units held by limited partnerships, 1,453,334 currently exercisable stock options and 533,333 shares of common stock issuable upon the exercise of stock options that will become exercisable within 60 days of February 1, 2003. Also includes 1,806,842 shares of common stock held by The MBZ Charitable Remainder Unitrust, of which Mr. Linde serves as sole trustee, and 1,405,392 common units held by The MBZ 1996 Trust, of which Mr. Linde serves as sole trustee. |
| (6) | Includes 5,000 shares of common stock and 27,500 currently exercisable stock options. Excludes 6,605.53 deferred stock units which were awarded under the 1997 Stock Plan to non-employee directors who elected to receive such awards in lieu of director compensation fees and are to be settled in shares of common stock upon the holders’ retirement from our Board of Directors. |
| (7) | Includes 83,728.43 Series Two preferred units held directly and 45,094.70 Series Two preferred units held by trusts and an estate of which Mr. Salomon is a co-executor. Mr. Salomon is deemed to own directly or indirectly an aggregate of 169,059.23 common units into which all Series Two preferred units so held are convertible. Also includes 22,500 currently exercisable stock options, but excludes 4,824.18 deferred stock units which were awarded under the 1997 Stock Plan to non-employee directors who elected to receive such awards in lieu of director compensation fees and are to be settled in shares of common stock upon the holders’ retirement from our Board of Directors. |
| (8) | Includes 500 shares of common stock and 27,500 currently exercisable stock options. Excludes 6,453.90 deferred stock units which were awarded under the 1997 Stock Plan to non-employee directors who elected to receive such awards in lieu of director compensation fees and are to be settled in shares of common stock upon the holders’ retirement from our Board of Directors. |
| (9) | Includes 5,500 shares of common stock held directly, 500 shares of common stock held through a trust and 27,500 currently exercisable stock options. Excludes 5,929.56 deferred stock units which were awarded under the 1997 Stock Plan to non-employee directors who elected to receive such awards in lieu of director compensation fees and are to be settled in shares of common stock upon the holders’ retirement from our Board of Directors. |
| (2) | These options were granted under the 1997 Stock Plan by the Compensation Committee of our Board of Directors in recognition of services during fiscal year 2001. One-third of these options vest on each of the first, second and third anniversary of the date of grant, or upon the recipient turning 65 years old. The date of grant was January 17, 2002 and the exercise price is $37.70 per share, the fair market value of a share of common stock on the date of grant calculated using the closing market price of Boston Properties’ common stock on that date as reported on the New York Stock Exchange. |
| (3) | These options were granted under the 1997 Stock Plan by the Compensation Committee of our Board of Directors in recognition of services during fiscal year 2000. One-third of these options vest on each of the first, second and third anniversary of the date of grant, or upon the recipient turning 65 years old. The date of grant was January 18, 2001, and the exercise price is $40.75 per share, the fair market value of a share of common stock on the date of grant calculated using the closing market price of Boston Properties’ common stock on that date as reported on the New York Stock Exchange. |
| (4) | Restricted stock is awarded under the 1997 Stock Plan by the Compensation Committee of our Board of Directors. Restricted stock awards are reflected based on the fair market value of the shares of common stock awarded on the date of grant calculated using the closing market price of Boston Properties’ common stock on that date as reported on the New York Stock Exchange. Dividends are payable on the restricted stock to the same extent and on the same date as dividends are paid on Boston Properties’ common stock. |
| (5) | Mr. Burke received an award of 8,523 shares of restricted stock under the 1997 Stock Plan. The date of grant was January 24, 2003 and the fair market value of a share of common stock on the date of grant was $35.20. This grant was fully vested on the date of grant due to Mr. Burke being over the age of 65 on the date of grant. The value of the restricted stock as of December 31, 2002 was $314,158 based on the closing market price as reported on the New York Stock Exchange on December 31, 2002 of $36.86. |
| (6) | Mr. Burke received an award of 3,571 shares of restricted stock under the 1997 Stock Plan. The date of grant was January 17, 2002 and the fair market value of a share of common stock on the date of grant was $37.70. One-fifth of these shares were to vest on each of the first, second, third, fourth, and fifth anniversary of the award date, however, pursuant to the 1997 Stock Plan, the shares of restricted stock became fully vested upon Mr. Burke turning 65 years old on November 3, 2002. The value of the restricted stock as of December 31, 2001 was $135,698 based on the closing market price as reported on the New York Stock Exchange on December 31, 2001 of $38.00. |
| (7) | Mr. Burke received an award of 3,571 shares of restricted stock under the 1997 Stock Plan. The date of grant was January 18, 2001 and the fair market value of a share of common stock on the date of grant was $40.75. One-fifth of these shares were to vest on each of the first, second, third, fourth and fifth anniversary of the award date, however, the shares of restricted stock became fully vested upon Mr. Burke turning 65 years old on November 3, 2002. The value of the restricted stock as of December 29, 2000 was $155,338.50 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $43.50. |
| (8) | Mr. Ritchey received an award of 17,045 shares of restricted stock under the 1997 Stock Plan. The date of grant was January 24, 2003 and the fair market value of a share of common stock on the date of grant was $35.20. These shares of restricted stock vest over five years with no shares vesting in the first two years following the date of grant, 25% vesting on February 1, 2006, 35% vesting on February 1, 2007 and 40% vesting on February 1, 2008. The value of the restricted stock as of December 31, 2002 was $628,278.70 based on the closing market price as reported on the New York Stock Exchange on December 31, 2002 of $36.86. In connection with the adoption of a Long Term Incentive Plan (LTIP) described under the Compensation Committee Report on Executive Compensation in this proxy statement, Mr. Ritchey will be given an opportunity to tender back to Boston Properties these unvested restricted shares in exchange for a grant of an equal number of unvested LTIP units. See “Compensation Committee Report on Executive Compensation.” |
| (9) | Mr. Ritchey received an award of 5,357 shares of restricted stock under the 1997 Stock Plan. The date of grant was January 17, 2002 and the fair market value of a share of common stock on the date of grant was $37.70. One-fifth of these shares vest on each of the first, second, third, fourth, and fifth anniversary of the award date. The value of the restricted stock as of December 31, 2001 was $203,566 based on the closing market price as reported on the New York Stock Exchange on December 31, 2001 of $38.00. |
| (10) | Mr. Ritchey received an award of 5,357 shares of restricted stock under the 1997 Stock Plan. The date of grant was January 18, 2001 and the fair market value of a share of common stock on the date of grant was $40.75. One-fifth of these shares vest on each of the first, second, third, fourth and fifth anniversary of the award date. The value of the restricted stock as of December 29, 2000 was $233,029.50 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $43.50. |
| (11) | Mr. Douglas T. Linde received an award of 17,045 shares of restricted stock under the 1997 Stock Plan. The date of grant was January 24, 2003 and the fair market value of a share of common stock on the date of grant was $35.20. These shares of restricted stock vest over five years with no shares vesting in the first two years following the date of grant, 25% vesting on February 1, 2006, 35% vesting on February 1, 2007 and 40% vesting on February 1, 2008. The value of the restricted stock as of December 31, 2002 was $628,278.70 based on the closing market price as reported on the New York Stock Exchange on December 31, 2002 of $36.86. In connection with the adoption of a Long Term Incentive Plan (LTIP) described under the Compensation Committee Report on Executive Compensation in this proxy statement, Mr. D. Linde will |
be given an opportunity to tender back to Boston Properties these unvested restricted shares in exchange for a grant of an equal number of unvested LTIP units. See “Compensation Committee Report on Executive Compensation.”
| (12) | Mr. Douglas T. Linde received an award of 5,357 shares of restricted stock under the 1997 Stock Plan. The date of grant was January 17, 2002 and the fair market value of a share of common stock on the date of grant was $37.70. One-fifth of these shares vest on each of the first, second, third, fourth, and fifth anniversary of the award date. The value of the restricted stock as of December 31, 2001 was $203,566 based on the closing market price as reported on the New York Stock Exchange on December 31, 2001 of $38.00. |
| (13) | Mr. Douglas T. Linde received an award of 3,929 shares of restricted stock under the 1997 Stock Plan. The date of grant was January 18, 2001 and the fair market value of a share of common stock on the date of grant was $40.75. One-fifth of these shares vest on each of the first, second, third, fourth, and fifth anniversary of the award date. The value of the restricted stock as of December 29, 2000 was $170,911.50 based on the closing market price as reported on the New York Stock Exchange on December 29, 2000 of $43.50. |
| (14) | Includes Boston Properties’ matching contribution under its 401(k) plan (up to $12,000 per individual in 2002 and $10,200 per individual in 2001 and 2000, respectively), and the cost of term life insurance (approximately $376 per individual in 2002 and approximately $144 and $144 per individual in 2001 and 2000, respectively). No named executive officer received personal benefits or perquisites in excess of the lesser of $50,000 or 10% of his aggregate salary and bonus. |
| (15) | Excludes the cost of certain administrative personnel and related services made available to Mr. Zuckerman in the ordinary course of business in connection with his duties as Chairman of the Board. Only a portion of such costs are borne by Boston Properties and the balance is shared by Mr. Zuckerman’s other employers, including U.S. News & World Report and the New York Daily News. |
| (16) | Excludes the value of certain administrative services provided to Mr. E. Linde in the ordinary course of business in connection with his employment as President and Chief Executive Officer of Boston Properties. |
Option Grants for Fiscal Year 2001
Individual Grants
---------------------------------
Percent of
Total Options Exercise
Options Granted To or
Granted Employees in Base Price Expiration Grant Date
Name (#) Fiscal Year(1) ($/Sh) Date Valuation(2)
---- ------- -------------- ---------- ---------- ------------
Robert E. Burke... 75,000 5.37% $37.70 1/17/12 $320,925
Raymond A. Ritchey 112,500 8.05 37.70 1/17/12 481,388
Douglas T. Linde.. 112,500 8.05 37.70 1/17/12 481,388
- --------
(1) A total of 1,397,0002002
We did not grant any options were granted to employees of Boston Propertiesfor fiscal year 2002 (see “Compensation Committee Report on January 17, 2002.
(2) Calculated using the Black-Scholes pricing model. The assumptions usedExecutive Compensation—Equity-Based Incentive Compensation” in determining the present value of the option grant using this methodology
are as follows: expected option life of 6 years; risk-free interest rate of
4.97%; 20% volatility since our initial public offering; 6.31% dividend
yield; exercise price of $37.70 and a closing price of common stock on the
date of grant of $37.70. The actual value, if any, that the holders of
these options may realize will depend on the continued employment of the
holders of these options through the vesting period and the excess of the
market price over the exercise price on the date the option is exercised.
Therefore, there is no assurance that the value realized by a holder will
be at or near the value estimated by the Black-Scholes pricing model, which
is based on assumptions as to the variables of stock price volatility,
future dividend yield, interest rates and other factors.
proxy statement).
Aggregated Option Exercises in the Last Fiscal Year
and Fiscal Year-End Option Values
The following table sets forth the aggregated number of options to purchase shares of Boston Properties’ common stock exercised by the Chairman of the Board, the Chief Executive Officer and each of the three other named executive officers in 20012002 and the number of shares of common stock covered by the stock options held by each of these officers as of December 31, 2001.2002. The value of unexercised in-the-money options is based on the closing price of a share of common stock, as reported on the New York Stock Exchange, on December 31, 20012002 of $38.00,$36.86, minus the exercise price, multiplied by the number of shares underlying the options. An option is "in-the-money"“in-the-money” if the fair market value of the shares of common stock underlying the option exceeds the option exercise price.
Number of Securities Underlying Unexercised Options at Year-End(#) | Value of Unexercised in-the-Money Options at Year-End($) | ||||||||||||||
Name and Principal Position | Shares Acquired on Exercise(#) | Value Realized($) | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||
Mortimer B. Zuckerman Chairman | — | — | 1,453,334 | (1) | 866,666 | $ | 5,783,200.00 | $ | 497,000.00 | ||||||
Edward H. Linde President and Chief Executive Officer | — | — | 1,453,334 |
| 866,666 |
| 5,783,200.00 |
| 497,000.00 | ||||||
Robert E. Burke Executive Vice President and Chief Operating Officer | — | — | 585,000 |
| 0 |
| 2,976,287.50 |
| 0.00 | ||||||
Raymond A. Ritchey Executive Vice President | — | — | 612,500 |
| 225,000 |
| 3,749,187.50 |
| 240,843.75 | ||||||
Douglas T. Linde Senior Vice President, Chief Financial Officer and Treasurer | — | — | 270,000 |
| 186,250 |
| 1,565,268.75 |
| 120,421.88 | ||||||
| (1) | Includes 320,000 stock options exercised by Mr. Zuckerman on January 31, 2003. Mr. Zuckerman still retains beneficial ownership of |
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
Mr. Mortimer B. Zuckerman, as Chairman of the Board of Directors, and Mr. Edward H. Linde, as President and Chief Executive Officer, each has an employment and noncompetition agreement with Boston Properties.us. Pursuant to his
employmenteach agreement, during the term of thesuch agreement, Mr. Zuckerman will devote a majority of his business time, and Mr. E. Linde will devote substantially all of his business time, to theour business and affairs of Boston
Properties.affairs. The initial term of the employmenteach agreement is three years beginning on January 17, 2003, in the closingcase of our initial public offeringMr. Zuckerman, and November 29, 2002, in the case of Mr. E. Linde, with automatic one-year renewals thereaftercommencing on each anniversary date unless written notice of termination is given 3090 days prior to the end of
the initial term or renewal termsuch date by either Mr.party. Apart from base salaries, each of Messrs. Zuckerman and E. Linde or Boston Properties. Mr.
Linde receives an annual base salary of $500,000 and is eligible forto receive bonus compensation, including stock options,equity-based incentive compensation, to be determined in the discretion of the Compensation Committee of our Board of Directors. Mr. Linde's
Each of Messrs. Zuckerman’s and E. Linde’s employment with us may be terminated for "cause"“cause” by Boston Propertiesus for (1) gross negligence or willful misconduct, (2) an uncured breach of any of his material duties under the employment agreement, (3) fraud or other conduct against theour material best interests, of
Boston Properties, or (4) a convictionan indictment of a felony if such convictionindictment has a material adverse effect on Boston Properties. Mr.us. Each of Messrs. Zuckerman and E. Linde may terminate his employment for "good“good reason,"” which includes (1) a substantial adverse change in the nature or scope of his responsibilities and authority under his employment agreement, or (2) an uncured breach by Boston Propertiesus of any of itsour material obligations under his employment agreement.agreement or (3) an involuntary relocation of the office at which the employee is principally employed to a location more than 50 miles from such office, or the requirement that the employee be based at another office on an extended basis. If Mr. Linde'sthe employment of either of Messrs. Zuckerman or E. Linde is terminated by us "without cause"“without cause” or by Mr.either of Messrs. Zuckerman or E. Linde for "good“good reason,"” then Mr. Lindethe respective employee will be entitled to a severance amount payable over a 12-month period equal to the productsum of (x) his base salary plus prior year's bonus multiplied by (y) the numberamount of fullhis cash bonus received in respect of the immediately preceding year. Each of Messrs. Zuckerman and fractional years that the noncompetition agreement described
belowE. Linde is also entitled to an additional 12 months of vesting in effect (buthis stock-based awards and, subject to payment of premiums, may also participate in any event at least one year's base salary plus prior
year's bonus).
our health plan for up to 12 months.
The employment agreement prohibits Mr.agreements prohibit each of Messrs. Zuckerman and E. Linde, while he is aour director or an
officer of Boston Properties and for one year thereafter, from (1) engaging, directly or indirectly, in the acquisition, development, construction, operation, management, or leasing of any commercial real estate property, (2) intentionally interfering with our relationships with ourits tenants, suppliers, contractors, lenders or employees or with any governmental agency, or (3) soliciting ourits tenants or employees. Pursuant to hiseach employment agreement, however, Mr.Messrs. Zuckerman and E. Linde may engage in minority interest passive investments which include the acquisition, holding, and exercise of voting rights associated with investments made through (1) the purchase of securities that represent a non-controlling, minority interest in an entity or (2) the lending of money, but without management of the property or business to which such investment directly or indirectly relates and without any business or strategic consultation with such entity. In addition, Mr.each of Messrs. Zuckerman and E. Linde may participate as an officer or director of any charitable organization. The periodorganization that this
noncompetition agreement is not engaged in effect may be terminated prematurely by Boston
Properties, which will reducereal estate activities provided that such activities do not materially restrict the severance amount payableindividual’s ability to Mr. Linde.fulfill his obligation to us as an employee or officer. In addition, hiseach employment agreement provides that the noncompetition provision shall not apply if Mr. Linde'sMessrs. Zuckerman’s or E. Linde’s employment is terminated following certain
changes of control of Boston Properties; in such event, the severance amount
payable to Mr. Linde will be determined by reference to the period of time that
the noncompetition provision would have been in effect in the absence of such aour change of control.
Messrs. Burke, Koop, M. Landis, D. Linde, Norville, Pester, Ritchey and Selsam have employment agreements with Boston Properties similar to that of Mr. E. Linde, except that the initial term of the employment agreements is two years instead of three years, and these employees are permitted to participate as an officer or director of charitable organizations. Additionally, the geographic scope of theirthe noncompetition provisions contained in the employment agreements is limited to theour markets of Boston Properties at the time of termination of their employment. In addition,the case of Mr. Zuckerman is a
partyPester’s agreement, in order to an agreementcomply with Boston PropertiesCalifornia law that contains noncompetition
provisions of the same scope and duration asgenerally prohibits restrictive covenants in employment agreements, the noncompetition provisionsprovision is limited to non-solicitation of Mr. Linde's employment agreement. Boston Propertiesemployees and non-interference of business relationships.
We will continue to be subject during the term of Mr. Selsam'sSelsam’s employment to an agreement dated August 10, 1995 pursuant to which (1) he is eligible to receive commissions of 33.33% of any leasing commission received by Boston Propertiesus in connection with the lease of 90 Church Street, New York, New York and (2) he is paid 5% of the management fees earned on the same property. Mr. Selsam did not receive any commissions, but did receive $17,423.10$17,763 in management fees for fiscal year 2001.
22
SEVERANCE AGREEMENTS
Boston Properties
We entered into severance agreements with each of Mr. Zuckerman and Mr. Edward H. Linde on July 30, 1998. The severance agreements provide for severance benefits to Mr.Messrs. Zuckerman and Mr.E. Linde in the event of their termination under certain circumstances within 24 months following a "change“change in control."” In the event a "terminating event"“terminating event” occurs within 24 months following a "change“change in control," Mr.” Messrs. Zuckerman and Mr.E. Linde
will receive a lump sum amount equal to $3,000,000 if the date of termination is in the year 1998, $3,300,000 if the date of termination is in the year 1999, and $3,630,000 if the date of termination is in year 2000 or later. Health, dental and life insurance benefits are provided for three (3) years following termination. Finally, the severance agreements provide for tax protection in the form of excise tax gross-up as well as financial counseling, tax preparation assistance and outplacement counseling.
We adopted the Boston Properties, Inc. Senior Executive Severance Plan (referred to as the senior plan) in order to reinforce and encourage the continued attention and dedication of the Executive Vice Presidents, the Chief Financial Officer and the Regional Office Heads. The senior plan provides for the payment of severance benefits to each such executive officer in the event of termination under certain circumstances within 24 months following a "change“change in control"control” of up to three (3) times such executive officers'officers’ annual base salary and three (3) times the amount of the average annual bonus earned by the executive officer with respect to the three (3) calendar years immediately prior to the "change“change in control."” Tax protection, financial counseling, tax preparation assistance, outplacement counseling and continuation of health, dental and life insurance isare the same as described above in the severance agreements.
We adopted the Boston Properties, Inc. Executive Severance Plan (referred to as the executive plan) in order to reinforce and encourage the continued attention and dedication of the Senior Vice Presidents and those Vice Presidents with ten (10) or more years of tenure with Boston Properties. The executive plan is the same as the senior plan except that each such senior officer will receive a payment of up to two (2) times such senior officers annual base salary and two (2) times the amount of the average annual bonus. Financial counseling, tax preparation assistance, outplacement counseling and continuation of health, dental and life insurance benefits isare provided for two (2) years following termination.
The following graph provides a comparison of cumulative total stockholder return for the period from June 23,December 31, 1997 (the date on which our common stock
was first publicly traded) through December 31, 2001,2002, among Boston Properties, the Standard & Poor's ("Poor’s (“S&P"&P”) 500 Index and the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"(“NAREIT”) Equity REIT Total Return Index (the "Equity“Equity REIT Index"Index”). The Equity REIT Index includes all tax qualified equity REITs listed on the New York Stock Exchange, the American Stock Exchange or the NASDAQ Stock Market. Equity REITs are defined as those with 75% or more of their gross invested book value of assets invested directly or indirectly in the equity ownership of real estate. Upon written request, Boston Properties will provide any stockholder with a list of the REITs included in the Equity REIT Index. The stock performance graph assumes an investment of $100 in each of Boston Properties and the two indices, and the reinvestment of any dividends. The historical information set forth below is not necessarily indicative of future performance. Data for the Equity REIT Index and the S&P 500 Index were provided to us by NAREIT. The data shown is based on the share prices or index values, as applicable, at the end of each month shown.
The stock performance graph shall not be deemed to be "soliciting material"
or to be "filed" with the SEC or subject to Regulations 14A or 14C or to the
liabilities of Section 18 of the Exchange Act, except to the extent that the
Company specifically requests that such information be treated as soliciting
material or specifically incorporates it by reference into a filing under the
Securities Act of 1933, as amended, or the Exchange Act.
23
[CHART]
The Company S&P 500 Equity REIT Index
June '97 $100.00 $100.00 $100.00
Dec. '97 $122.97 $110.58 $113.77
June '98 $129.42 $130.17 $108.05
Dec. '98 $119.34 $142.18 $ 93.86
June '99 $143.98 $159.78 $ 98.34
Dec. '99 $128.62 $172.09 $ 89.52
June '00 $164.17 $171.37 $101.32
Dec. '00 $189.41 $156.43 $113.13
June '01 $185.71 $145.95 $126.08
Dec. '01 $177.93 $137.83 $128.89
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Philosophy of Executive Compensation
Boston Properties'Properties’ executive compensation program is administered under the direction of the Compensation Committee of our Board of Directors. The current members of the Compensation Committee are Ivan G. Seidenberg (Chairman), Alan J. Patricof and Martin Turchin.Richard E. Salomon. None of the members of the Compensation Committee are employees of Boston Properties.Properties and each of them is independent for purposes of the requirements of the New York Stock Exchange. The philosophy of our executive compensation program is to:
.
Compensation Committee Procedures
In order to implement the above policy, the Compensation Committee exercises its independent discretion in reviewing and approving the executive compensation plan as a whole, as well as specific compensation levels for theeach executive officers.officer. Final aggregate compensation determinations for each fiscal year are generally made after the end of the fiscal year, after financial statements for such year become available. At that time, the Compensation Committee determines bonuses, if any, are determined for the past year'syear’s performance, sets base salaries for the following fiscal year, are
set and grantsmakes awards of options and/or stock,equity-based compensation, if any, are generally made. Withany. Mr. Edward H. Linde makes recommendations to the Compensation Committee with respect to the compensation of all executive officers. In addition to Mr. E. Linde’s recommendation, the Compensation Committee, particularly with respect to the compensation of Mr. Mortimer B. Zuckerman, Mr. E. Linde and Mr. Douglas T. Linde, bases its decisions on the most recent publicly available compensation data for executive chairmen, chief executive officers, chief financial officers and other than Mr. Zuckermansenior executives of comparable REITs, as well as various compensation studies and Mr. Edward H. Linde,surveys, to ensure that compensation packages are in line with our peer group and the real estate industry in general. In particular, the Compensation Committee reviews Mr. Edward H.
Linde's recommendationsthe compensation (including total compensation, as well as the individual components of base salary, annual incentive and long-term incentives) awarded to senior executives by a comparative peer group consisting of office REITs with regarda comparable market capitalization and geographic presence to Boston Properties. While benchmarks and comparative market data are valuable tools to assist the
Compensation Committee in setting reasonable and fair compensation for our Chairman, Chief Executive Officer, Chief Financial Officer and other executives, the stated philosophy of our executive compensation program is to recognize individual contributions to the appropriate compensation awards. performance of Boston Properties and to create a link between the performance of our stock and executive compensation.
The elements of our executive compensation package are primarily comprised of the following, with all three elements working together to satisfy the ultimate goal of enhancing stockholder value:
1.Base Salary.Salary. Base salaries are set for executive officers on the basis of assigned responsibilities and on an evaluation of appropriate compensation levels for such responsibilities based upon the recommendations set forth in the 2001 independent consultant report discussed above, as updated by the recently available public surveys referred to previously.
Individual base salaries are reviewed annually. The granting of salary increases within the established applicable salary range for each executive officer and the point within such range their salary will fall is based upon certain factors which include the overall financial performance of Boston Properties, the regional contribution to the overall financial performance of Boston Properties, if applicable, to such executive officer, and individual performance. Assessment of individual performance is based on previously established goals for each executive officer comprised of both subjective and objective elements. With respect to base salaries, the Compensation Committee generally intends to target base salary levels to be at approximately the 75th75th percentile for executives in comparable positions in comparable public real estate companies. Based on the Compensation Committee'sCommittee’s philosophy and the factors as stated above, the Compensation Committee approved 20022003 base salaries for the named executive officers other than Mr. Edward H. Linde and Mr.
Zuckerman as follows: Mr. Zuckerman, $600,000; Mr. E. Linde, $600,000; Mr. Robert E. Burke, $385,000,$395,000, Mr. Raymond A. Ritchey, $400,000,$410,000; and Mr. Douglas T.D. Linde, $300,000--the same base salaries that were approved in 2001.
$410,000.
2.Cash Bonuses.Bonuses. Boston Properties intends to provide annual performance awards to our executive officers in the form of cash bonuses based on favorable performance by both Boston Properties and the individual executive. The Compensation Committee intends that annual growth in funds from operations, or FFO, as measured against targets established at the beginning of each year and against the relative performance of Boston Properties in comparison to its peer group of companies, will be the principal overall performance measure that is used to determine the maximum bonus to which each executive officer will be entitled and the achievement of individual performance will be used to determine whether each executive officer will receive the maximum bonus or some lesser amount. The Compensation Committee sets forth the threshold, target and maximum levels
of FFO growth in advance of each year and sets an allocation between overall
performance of Boston Properties and individual performance for each officer.
Where appropriate for an executive officer, the Compensation Committee will factor in regional contribution to the overall performance of Boston Properties in determining the cash bonus for such executive officer. In determining cash bonuses for 2001,2002, the Compensation Committee noted that while fiscal year 20012002 was a year of solidsignificant achievements, in a deteriorating economy with declining real
estate markets,including the overall results were lower than projected:
25
. An 8%following:
The Compensation Committee intends that aggregate cash compensation (base salary plus bonus) will be at approximately the 75th percentile of cash compensation paid by comparable companies in the event that target performance is achieved. Reflecting the actual performance of Boston Properties as described above and the individual performance of each named executive officer, the Compensation Committee awarded cash bonuses to the named executive officers other than Mr. Zuckerman and Mr. Edward H. Linde for the year ended December 31, 20012002 as follows: Mr. Zuckerman, $1,000,000; Mr. E. Linde, $1,000,000; Mr. Burke, $211,750;$300,000; Mr. Ritchey, $220,000;$400,000; and Mr. Douglas T.D. Linde, $210,000.
$375,000.
3. Stock Options and Stock Grants.Equity-Based Incentive Compensation. While recognizing that cash bonus awards provide rewards for positive short-term performance, the Compensation Committee believes that awards of stock options or stock grantsequity interests provide long-term incentive compensation to executive officers that is aligned directly with the achievement of enhanced value for stockholders through an appreciating stock
price. Thestockholders. Historically, the Compensation Committee intends to granthas granted stock options and/orand restricted stock
grants annually on the basis of Boston Properties'Properties’ performance and regional and individual contributions to its success. Long before the successaccounting treatment of its performance.stock options and corporate governance considerations led many companies to rethink their use of stock options, publicly-traded REITs questioned stock options as an attractive form of equity-based incentive compensation for this sector because of the low volatility and high dividend yield associated with REIT stocks. Accordingly, beginning in 1999 the Compensation Committee began awarding a mix of restricted stock and stock options, and in 2003 made the decision to move to restricted stock for all equity-based incentive compensation awards. Based on the Compensation Committee'sCommittee’s review of Boston Properties'Properties’ overall performance, regional performance and individual performance for 2001,2002, on January 17, 2002,
the Compensation Committee granted Messrs. Burke, Ritchey, and D. Linde options
to purchase 75,000, 112,500, and 112,500 shares of common stock, respectively,
at the then market price of $37.70 per share. One-third of these options become
exercisable on each of the first, second and third anniversary of the date of
grant. In addition,24, 2003, the Compensation Committee granted restricted stock to Messrs. Burke, Ritchey and D. Linde of 3,571, 5,357,8,523, 17,045 and 5,35717,045 shares, respectively. One-fifthThe equity-based compensation of theMessrs. Zuckerman and E. Linde is discussed separately in this report. The shares of restricted stock will vest on each ofover five years, with no shares vesting in the first second, third, fourth and fifth anniversary oftwo years following the date of grant.grant, 25% vesting on February 1 in the third year following the date of grant, 35% vesting on February 1 in the fourth year following the date of grant, and 40% vesting on February 1 in the fifth year following the date of grant, or upon the recipient turning 65 years old. No stock options were granted for 2002. The Compensation Committee began makingcontinues to believe that restricted stock grants for fiscal year
1999 and has continued to make restricted stock grants to our executives
because the Compensation Committee is concerned about retaining our executive
talent. Restricted stock can deliver more value to our executives than options, and when combinedis a better program to reward performance due to the clearer value associated with a five-year vesting schedule,given award, can serve as a retention tool.
Compensationtool when combined with a back-loaded five-year vesting schedule, and in general serves the interests of our stockholders better than options. We account for restricted stock awards ratably over the vesting period by recording compensation expense in an amount equal to the value of the Chief Executive Officerrestricted stock measured as of the time of grant.
During 2002 the Compensation Committee began evaluating a new program designed to offer executives the same long-term incentive as restricted stock, while allowing them to enjoy more favorable income tax treatment. This program was ultimately approved by the Board on March 4, 2003 as the Boston Properties Long Term Incentive Plan or LTIP. The LTIP uses a new class of partnership interests in the Operating Partnership, called LTIP units. Grants of LTIP units will constitute “Other Stock-Based Awards” coupled with “Dividend Equivalent Rights” under the 1997 Stock Plan. Each LTIP unit awarded will be deemed equivalent to an award of one share of our common stock reserved under the 1997 Stock Plan, reducing availability for other equity awards on a one-for-one basis. Beginning with equity-based compensation awards for 2003 performance (expected to be made in early 2004), all officers, employees and non-employee directors of Boston Properties eligible to receive awards under the 1997 Stock Plan are also eligible to participate in the LTIP, and the general terms of the 1997 Stock Plan apply to the program.
Under the LTIP, vesting is expected to be the same as under our current restricted stock program, subject to the Compensation Committee’s discretion to make changes in the future as permitted by the 1997 Stock Plan. LTIP units, whether vested or not, will receive the same quarterly per unit distributions as common units of the Operating Partnership, which equal per share dividends on our common stock. This treatment with respect to quarterly distributions is similar to the current treatment of restricted stock, which receives full dividends, whether vested or not. Initially, LTIP units will not have full parity with common units with respect to liquidating distributions. Upon the occurrence of specified events LTIP units will over time achieve full parity with common units of the Operating Partnership for all purposes, and therefore accrete to an economic value for executives equivalent to our common stock on a one-for-one basis. If such parity is reached, vested LTIP units may be converted into an equal number of common units at any time, and thereafter enjoy all the rights of common units. However, there are circumstances under which such parity would not be reached. Until and unless such parity is reached, the value that an executive will realize for a given number of vested LTIP units will be less than the value of an equal number of shares of our common stock.
The LTIP was established under the 1997 Stock Plan as an alternative to our current restricted stock program. Its establishment required neither an amendment to the plan nor an increase in the number of shares of
common stock reserved under the plan. One key disadvantage of restricted stock is that executives are generally taxed on the full market value of a grant at the time of vesting, even if they choose to hold the stock; as a result executives often need to sell a portion of their vested shares every year to pay taxes on their restricted stock awards from prior years. This tax treatment therefore may limit an executive’s ability to increase his or her ownership in Boston Properties over the long term. Conversely under the LTIP, an executive would generally be taxed only when he or she chooses to liquidate his or her LTIP units, rather than at the time of vesting. Therefore, an executive who wishes to hold his or her equity awards for the long term could do so more efficiently under the LTIP and ultimately enjoy a significantly greater after-tax return when he or she chooses to sell. The Compensation Committee conditioned its approval of the LTIP upon receipt of a ruling from the Internal Revenue Service with respect to the federal income tax treatment of the LTIP. Boston Properties’ request for a private letter ruling was approved by the IRS on February 21, 2003. On March 4, 2003, the Compensation Committee recommended the LTIP for approval to the entire Board, and the Board approved it.
The Compensation Committee believes that the LTIP will (1) serve the objectives of Boston Properties by increasing the after-tax value of a given award of equity interests, and therefore enhance our equity-based compensation package for executives as a whole, (2) advance the separate goal of promoting long-term equity ownership in Boston Properties by executives (see “Stock Ownership Requirement” below), (3) have no adverse impact on dilution, (4) not increase the economic cost to Boston Properties of equity-based compensation awards as compared with our current restricted stock program, (5) further align the interests of executives with the interests of stockholders, and (6) be accounted for consistently with our current restricted stock program to reflect the full compensation costs incurred by Boston Properties. Accordingly, beginning in 2004 we intend to offer eligible officers and employees, as well as non-employee directors the ability to elect between restricted stock and LTIP units on a one-for-one basis. This election will also be made available to a group of senior executives with respect to their recent restricted stock awards for 2002 performance, in the form of a one-time offer to tender back to us their 2003 unvested shares in exchange for a grant of an equal number of LTIP units. As part of its analysis, the Compensation Committee considered the small impact on our stockholders as a group of the loss at the corporate level of the tax deduction for compensation expense paid from a shift to LTIP units from restricted stock.
Mandatory Minimum Equity Ownership Policy for Senior Executives
The Compensation Committee has always believed that it is important to align the interests of those in senior management positions with those of our stockholders, and this belief has been reinforced by the events of the past few years across corporate America. As one concrete step to ensure such alignment, on January 16, 2003, the Compensation Committee adopted a mandatory stock ownership requirement for senior management. Under this policy, all executive vice presidents must achieve minimum equity ownership equal to three times their annual base salary and all senior vice presidents minimum equity ownership equal two times their annual base salary, and then maintain such ownership during their continuing employment. Current senior executives have until January 1, 2008 to achieve this ownership requirement, while those who may be hired or promoted to senior management positions in the future will have a five year period beginning on January 1 of the year following their appointment. Exceptions can be made for significant extenuating personal circumstances. The types of securities that will be counted toward the equity ownership requirement include shares of our common stock, units of limited partnership interest of our Operating Partnership, restricted stock and LTIP units, in each case both vested and unvested, and shares held in our stock purchase and dividend reinvestment plans. Stock options will not be counted. The Compensation Committee believes that this stock ownership requirement will send a powerful message to our stockholders and the investment community that our senior management is personally committed to the financial success of Boston Properties.
Compensation of the Chairman of the Board In 2000, an outside compensation consultant was engaged to collect and review data regarding the total compensation awarded toPresident and Chief Executive Officer
Based on the chairmenbenchmarks and chief
executive officers of Boston Properties and four comparative peer companies.
The consultant compared both the total compensation, as well as the individual
components of base salary, annual incentive and long-term incentives, received
by such executives. The comparative peer group consisted of office REITs with a
comparable market capitalization and geographic presence to Boston Properties.
While comparative market data is valuablediscussed earlier in providing assurance of reasonable
and fair compensation for our Chairman and Chief Executive Officer, the stated
philosophy of our executive compensation program to recognize individual
contributions to the performance of Boston Properties and to create a link
between the performance of our stock and executive compensation is also
emphasized.
Based on the comparative peer survey from 2000, the previously referenced
2001 surveythis report and Boston Properties'Properties’ financial performance in 2001,2002, the Compensation Committee approved a base salary for 20022003 of $500,000$600,000 for each of Mr. Zuckerman and Mr. Edward H. Linde. This is the sameE. Linde, an increase from their 2001 and 2002 base salary paid to Mr.
Linde and Mr. Zuckerman for 2000 and 2001.of
$500,000. Prior to 1999, Mr. Zuckerman received no salary and Mr. E. Linde received a base salary of $150,000 which was significantly below competitive levels. Mr. Zuckerman and Mr. E. Linde each received cash bonuses for the fiscal year ended December 31, 2002 in the amount of $1,000,000. They did not receive cash bonuses for the fiscal year ended December 31, 2001.
Because the Compensation Committee believes it is important to provide long-term incentive compensation that is tied directly to the creation of value for stockholders, to reward Messrs. Zuckerman and Edward H.E. Linde for their past efforts, and their contribution to the performance of Boston Properties, and as incentive to continue their efforts in the future, as previously reported, each of Mr. Zuckerman and Mr. E. Linde were awarded stock options on February 2, 2001. The amount of these awards is the same as the previous stock option awards granted to Messrs. Zuckerman and E. Linde in 1998. These awards are meant to serve as three-year grants and vest in three
26
stock optionsequity-based incentive compensation for the fiscal year ended December 31, 2001.
2002.
Tax Deductibility of Compensation.Compensation. Section 162(m) of the Code limits the deductibility on Boston Properties'Properties’ tax return of compensation over $1 million to any of the named executive officers unless, in general, the compensation is paid pursuant to a plan which is performance-related, non-discretionary and has been approved by our stockholders. The Compensation Committee'sCommittee’s policy with respect to Section 162(m) is to make every reasonable effort to ensure that compensation is deductible to the extent permitted while simultaneously providing our executives with appropriate rewards for their performance. In the appropriate circumstances, however, the Compensation Committee is prepared to exceed the limit on deductibility under Section 162(m) to the extent necessary to insure executive officers are compensated in a manner consistent with Boston Properties’ best interests and those of our stockholders.
Submitted by the Compensation Committee:
Ivan G. Seidenberg, Chairman
Alan J. Patricof
Martin Turchin
Richard E. Salomon
Compensation Committee Interlocks and Insider Participation
Boston Properties has established a Compensation Committee consisting of Messrs. Seidenberg, Patricof and Turchin.Salomon. None of them has served as an officer or employee of Boston Properties or has any other business relationship or affiliation with Boston Properties, except his service as a director. None of these persons had any relationships with Boston Properties requiring disclosure under applicable rules and regulations.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the executive officers and directors of Boston Properties, and persons who own more than ten percent of a registered class of Boston Properties'Properties’ equity securities, to file reports of ownership and changes in ownership with the SEC and the New York Stock Exchange. Officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish Boston Properties with copies of all Section 16(a) forms they file. To our knowledge, based solely on our review of the copies of such reports furnished to us and written representations that no other reports were required during the fiscal year ended December 31, 2001,2002, all Section 16(a) filing requirements applicable to our executive officers, directors and greater than ten percent beneficial owners were satisfied, except that Mr. Mitchell Landis, a SeniorBurke, an Executive Vice President, failed to timely report two
transactions.
a change in beneficial ownership.
The undersigned members of the Audit Committee of the Board of Directors of Boston Properties submit this report in connection with the committee'scommittee’s review of the financial reports for the fiscal year ended December 31, 20012002 as follows:
1. The Audit Committee has reviewed and discussed with management the
audited financial statements for Boston Properties for the fiscal year
ended December 31, 2001.
2. The Audit Committee has discussed with representatives of
PricewaterhouseCoopers LLP the matters which are required to be
discussed with them under the provisions of SAS 61. That Statement of
Accounting Standards requires the auditors to ensure that the Audit
Committee received information regarding the scope and results of the
audit.
3. The Audit Committee has discussed with PricewaterhouseCoopers LLP the
auditors' independence from management and Boston Properties including
the written disclosures and the letter from the independent auditors
required by the Independence Standards Board, Standard No. 1. In
addition, the Audit Committee considered whether the provision of
certain non-audit services by PricewaterhouseCoopers LLP is compatible
with maintaining its independence.
27
| 1. | The Audit Committee has reviewed and discussed with management the audited financial statements for Boston Properties for the fiscal year ended December 31, 2002 and the related disclosure controls and procedures. |
| 2. | The Audit Committee has discussed with representatives of PricewaterhouseCoopers LLP the matters which are required to be discussed with them under the provisions of SAS 61. That Statement of Accounting Standards requires the auditors to ensure that the Audit Committee received information regarding the scope and results of the audit. |
| 3. | The Audit Committee has discussed with PricewaterhouseCoopers LLP the auditors’ independence from management and Boston Properties including the written disclosures and the letter from the independent auditors required by the Independence Standards Board, Standard No. 1. In addition, the Audit Committee considered whether the provision of certain non-audit services by PricewaterhouseCoopers LLP is compatible with maintaining its independence and pre-approved certain non-audit services to be performed by PricewaterhouseCoopers LLP during 2003. |
| 4. | The Audit Committee received a report from the Disclosure Committee, established by Boston Properties to comply with the requirements of the Sarbanes-Oxley Act of 2002, with respect to the Disclosure Committee’s review process for our annual report on Form 10-K and the results of such review. |
In reliance on the reviews, discussions and discussionsreport referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Boston Properties Annual Report on Form 10-K for the fiscal year ended December 31, 20012002 for filing with the SEC.
The Audit Committee operates pursuant to a charter that was re-approved by our Board of Directors on February 22, 2002. Pursuant to the requirements of the Sarbanes-Oxley Act of 2002, the New York Stock Exchange is in the process of formulating new rules regarding the role and responsibilities of public company audit committees. Members of our management team have apprised the Audit Committee of legal developments and Boston Properties’ enhanced policies and procedures in response thereto, particularly with respect to disclosure controls and procedures. The Audit Committee is monitoring this process and intends to amend its charter in conformity with the requirements of the new rules once they are finalized and effective.
Submitted by the Audit Committee:
Alan J. Patricof, Chairman
Richard E. Salomon
Ivan G. Seidenberg
INFORMATION ABOUT OUR INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP served as our independent accountants for the fiscal year ended December 31, 20012002 and has reported on our 20012002 consolidated financial statements.
Audit Fees Aggregate fees for professional services rendered by PricewaterhouseCoopers LLP in connection with its audit of consolidated financial statements of Boston
Properties as of and for the years ended December 31, 2002 and 2001 and 2000 and its
limited reviews of our unaudited condensed consolidated interim financial
statements were $276,000 and $291,000, respectively.
as follows:
2002 | 2001 | |||||
Audit Fees | ||||||
Recurring audit(1) | $ | 305,000 | $ | 276,000 | ||
Comfort letters, consents, Rule 3-14 audits (property acquisitions) and assistance with documents filed with the SEC |
| 272,081 |
| 93,150 | ||
Subtotal |
| 577,081 |
| 369,150 | ||
Audit Related Services | ||||||
Audits required by lenders, joint venture agreements, tenants and employee benefit plan requirements |
| 295,305 |
| 268,850 | ||
Accounting assistance for new accounting standards and potential transactions |
| 104,675 |
| 278,047 | ||
Subtotal |
| 399,980 |
| 546,897 | ||
Income Tax Compliance and Related Tax Services | ||||||
Recurring tax compliance(2) |
| 83,525 |
| 129,850 | ||
Tax planning and research |
| 185,945 |
| 140,625 | ||
REIT and other compliance matters |
| 85,795 |
| 43,950 | ||
Tax assistance for potential transactions |
| 67,120 |
| 152,750 | ||
Sales and use tax examinations |
| 28,280 |
| 88,850 | ||
Subtotal |
| 450,665 |
| 556,025 | ||
All Other Fees |
| 23,802 |
| — | ||
Total | $ | 1,451,528 | $ | 1,472,072 | ||
| (1) | Includes annual audit of the Company’s financial statements on Form 10-K and interim reviews of the Company’s financial statements on Form 10-Q. |
| (2) | Includes income tax compliance for the Company and affiliated entities for the tax years ended December 31, 2002 and 2001, respectively. |
Financial Information Systems Design and Implementation Fees
During the years ended December 31, 20012002 and 2000,2001, PricewaterhouseCoopers LLP rendered no professional services to Boston Properties in connection with the design and implementation of financial information systems.
All Other Fees
In addition to the fees described above, aggregate fees of $1,196,072 and
$1,402,170 were billed by PricewaterhouseCoopers LLP during the years ended
December 31, 2001 and 2000, respectively, primarily for the following
professional services:
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The MBZ Charitable Remainder Trust Purchase of Shares from Prudential
On February 21, 2001, The MBZ Charitable Remainder Unitrust, a charitable
trust of which Mr. Zuckerman is the grantor and Mr. Linde is the sole trustee,
purchased from The Prudential Insurance Company of America ("Prudential")
1,806,842 shares of our common stock at an agreed upon purchase price of $39.90
per share. In a separate transaction, Prudential sold 855,872 shares of our
common stock to unrelated parties on the same date and at the same price.
As of February 21, 2001, Prudential owned 2,000,000 shares of our Series A
preferred stock, 167,394 Series Three preferred units and 50,000 common units.
In addition, affiliates of Prudential continue to manage in the aggregate
2,944,038 shares of our common stock, although Prudential is not the beneficial
owner of these investments.
Secured Lending Transactions
Prudential or its affiliates have provided us with secured financing on
customary terms and conditions comparable with transactions involving other
lenders.
Carnegie Center Acquisitions and Development
On June 30, 1998, Boston Propertieswe acquired from entities controlled by Mr. Alan B. Landis a portfolio of properties known as the Carnegie Center Portfolio and Tower Center One and related operations and development rights (collectively, the "Carnegie“Carnegie Center Portfolio"Portfolio”) and Mr. Landis became a director of Boston Properties. In connection with the acquisitionsacquisition of the Carnegie Center Portfolio, the Operating Partnership entered into a development agreement with an affiliateaffiliates of Mr. Landis providing for up to approximately 2,000,000 square feet of development in or adjacent to the Carnegie Center office complex. TheOne affiliate of Mr. Landis is entitled to a purchase price for each parcel developed under the development agreement calculated on the basis of $20 per rentable square foot of each property developed, as well asdeveloped. Another affiliate of Mr. Landis could earn a contingent interest inpayment for each such developed property that achieves a stabilized return in excess of a target annual return ranging between 10.5% and 11%. The development agreement also providedprovides that the Operating Partnershipupon negotiated terms and an affiliate ofconditions, we and Mr. Landis would form a development company to provide development services for the Carnegie
Centerthese development projects atand would share the expenses and profits, if any, of this new company.
A joint venture in which we have a total charge50% interest as of five dollars per rentable
square foot actually constructed. Revenues and expenses of the development
company are shared equally by the Operating Partnership and the affiliate of
Mr. Landis. Pursuant to the development agreement, Mr. Landis, personally, has
under certain circumstances the right to receive compensation at a rate of
$250,000 annually.
Indebtedness of Management
Mr. Robert E. Burke received a personal loan from Boston Properties in the
principal amount of $500,000. The term of the loan commenced on May 26, 1998
and ended on MayDecember 31, 2001. The loan bears interest at a rate of seven percent
(7%) per annum. Interest only payments are due yearly beginning on June 1,
1999. The final payment equal to the principal amount outstanding and all
accrued interest was paid on or before May 31, 2001, the date the loan came due.
Leasing Commissions
We2002, paid aggregate leasing commissions in 20012002 of approximately $600,000 to a firm controlled by Mr. Raymond A. Ritchey'sRitchey’s brother. Mr. Ritchey is an Executive Vice President of Boston Properties. The terms of the related agreement are moreat least as favorable to Boston Properties than comparableus as arrangements with other brokers in comparable markets.
29
Mr. Martin Turchin, a director of Boston Properties, is a non-executive/non-director Vice Chairman of Insignia/ESG, Inc. Through an arrangement with Insignia that has been in place since 1985, Turchin & Associates, an affiliate of Mr. Turchin, participates in brokerage activities for which Insignia is retained as leasing agent, some of which involve leases for space within buildings owned by us. During the period from the date Mr. Turchin became a member of our Board of Directors in 1997 through December 31, 2002, Turchin & Associates has advised us that it has received an aggregate of $2.3 million from Insignia attributable to properties owned by us. Of this amount, $0.7 million (or approximately 30%) is in conjunction with funds we owed to Insignia related to the acquisition of 280 Park Avenue. The total amount that was paid to Turchin & Associates, excluding amounts paid related to obligations assumed in connection with the acquisition of 280 Park Avenue, represents approximately 4.83% of the total amount we have paid to Insignia since the date Mr. Turchin became a director of Boston Properties in 1997. Pursuant to its arrangement with Insignia, Turchin & Associates has confirmed to us that it is paid on the same basis with respect to properties owned by us as it is with respect to properties owned by other clients of Insignia. Mr. Turchin does not participate in any discussions or other activities relating to our contractual arrangements with Insignia either in his capacity as a member of our Board of Directors or as a Vice Chairman of Insignia.
Mr. David A. Twardock, a nominee for director, is the President and Chief Executive Officer of Prudential Mortgage Capital Company, LLC, an affiliate of Prudential Financial, Inc. (collectively, “Prudential”). Prudential is one of our lenders and we have obtained financing from them on customary terms and conditions comparable with transactions involving other lenders. The total principal amount of loans from Prudential represented less than 2.5% of our total debt as of December 31, 2002. Prudential is also a tenant at various buildings that we own, but such leases in the aggregate represent less than one percent (approximately 0.35%) of our total in-service rentable square feet of office space. The leases are on customary conditions and terms comparable with transactions involving other lessees. On July 9, 2002, at the request of certain security holders, we offered Prudential, and all other holders of our Series A preferred stock and Series Two and Series Three preferred units (collectively, the “Preferred Securities”) the opportunity to convert such Preferred Securities in advance of December 31, 2002, the date on which our Preferred Securities would otherwise have become convertible. Prudential took part in this early conversion relating to its 2,000,000 shares of Series A preferred stock, which constitutes all of the Series A preferred stock outstanding, and its 167,394 Series Three preferred units. In connection with the conversion of the Series A preferred stock, Prudential received 2,624,671 shares of our common stock and in connection with the conversion of the Series Three preferred units, Prudential received 219,676 common units of the Operating Partnership.
We paid Applied Printing Technologies, a printing company affiliated with Mr. Mortimer B. Zuckerman, Chairman of our Board of Directors, approximately $80,000 for printing services provided in 2002, principally relating to the printing of our annual report to stockholders. The selection of Applied Printing Technologies as the printer for our annual report to stockholders was made through a bidding process open to multiple printing companies. Mr. Zuckerman has substantial business interests and relationships outside of his interest in Boston Properties, and such relationships are occasionally with entities that have business relationships or engage in commercial transactions in the ordinary course of business directly with Boston Properties. Mr. Zuckerman may have an indirect interest in such transactions by reason of his position or relationship with one or more of these parties.
In the six-month period ending March 25, 2003, we completed six sales of assets using Internal Revenue Code Section 1031’s Like Kind Exchange (LKE) technique. The acquisition of 399 Park Avenue on September 25, 2002 for cash consideration of $1.06 billion presented Boston Properties with a unique opportunity; it allowed us to use it as a replacement property for asset sales aggregating up to $1.06 billion and to potentially sell assets which were encumbered by “no sale” clauses or other types of contractual tax protection
for former owners of specific assets. In September, the Company publicly announced that it intended to strategically sell several assets and to use the net sale proceeds to retire the interim financing on 399 Park Avenue so as not to increase our balance sheet leverage on apro forma basis. 399 Park Avenue was “purchased” pursuant to a Section 1031 LKE to facilitate the execution of this strategy. A number of potential sale properties were identified. Within the six-month statutory period, we sold six assets totaling approximately $895 million: 875 Third Avenue (New York), One and Two Independence Square (D.C.), 2391 West Winston Avenue (California), a land parcel at New Dominion Technology Park (Virginia), Candler Building (Maryland), and 2300 N Street, (D.C.). There were no federal or state income tax consequences from these sales because of our reliance on the LKE structure, which allowed us to maximize the amount of net proceeds we could use to reduce debt. Persons who had formerly owned interests in the sale properties before their original acquisition by the Operating Partnership, including Mortimer B. Zuckerman, Edward H. Linde, Raymond A. Ritchey, Robert E. Burke and other owners of partnership units of the Operating Partnership, also deferred recognition of taxable gain as a result of our use of the LKE structure. In the case of 875 Third Avenue, One and Two Independence Square and 2300 N Street we could not have sold the assets other than through an LKE because each property was encumbered by a “no sale” clause as part of its original acquisition by the Operating Partnership, and taxable sales would have triggered contract damages or required third party consents. 2391 West Winton Avenue did not have any restrictions on sale; however, if we had sold it in a taxable sale, there would have been adverse tax consequences to both Boston Properties and Mr. Zuckerman as the former owner. The independent members of Boston Properties’ Board of Directors determined that it was in the best interests of Boston Properties to effect the sale as an LKE. The Candler Building was sold using the LKE structure to avoid adverse federal tax consequences to Boston Properties emanating from the way we acquired this asset and no third parties benefited from the LKE structure. The benefits of an LKE for the sale of the Virginia property also inured to us only. As discussed above, some of our executive officers are among the prior owners of the disposed assets who derived an indirect benefit from our use of the LKE structure. If all of the assets we have sold since September 25, 2002 had been sold in taxable transactions, approximately 35% of the aggregate taxable gains recognized would have been allocated to those executive officers. No third parties, including executives, received any portion of the net proceeds from these sales.
The cost of solicitation of proxies will be borne by Boston Properties. In an effort to have as large a representation at the annual meeting as possible, special solicitation of proxies may, in certain instances, be made personally or by telephone, telegraph or mail by one or more employees of Boston Properties. We also may reimburse brokers, banks, nominees and other fiduciaries for postage and reasonable clerical expenses of forwarding the proxy material to their principals who are beneficial owners of shares of our common stock. In addition, MacKenzie Partners, Inc. a proxy solicitation firm,
has been engaged by Boston Properties to act as proxy solicitor and will
receive fees estimated at $10,000 plus reimbursement of out-of-pocket expenses.
Stockholder Proposals for Annual Meetings
Any stockholder proposals submitted pursuant to Exchange Act Rule 14a-8 for inclusion in Boston Properties'Properties’ proxy statement and form of proxy for its 20032004 annual meeting must be received by Boston Properties on or before November 29, 20022003 in order to be considered for inclusion in its proxy statement and form of proxy. Such proposals must also comply with the requirements as to form and substance established by the SEC if such proposals are to be included in the proxy statement and form of proxy. Any such proposal should be mailed to: Boston Properties, Inc., 111 Huntington Avenue, Suite 300, Boston, Massachusetts 02199-7610, Attn.: Secretary.
Stockholder proposals to be presented at Boston Properties' 2003Properties’ 2004 annual meeting, other than stockholder proposals submitted pursuant to Exchange Act Rule 14a-8 for inclusion in Boston Properties'Properties’ proxy statement and form of proxy for its 20032004 annual meeting, must be received in writing at theour principal executive office of Boston Properties, Inc., 111 Huntington Avenue, Suite 300,
Boston, Massachusetts 02199-7610 not
earlier than January 1, 2003,8, 2004, nor later than February 15, 200322, 2004, unless its 2003our 2004 annual meeting of stockholders is scheduled to take place before April 1, 20032004 or after June 30, 2003.2004. Our by-laws state that the stockholder must provide timely written notice of such nomination or proposal and supporting documentation as well as be present at such meeting, either in person or by a representative. A stockholder'sstockholder’s notice shall be timely received by Boston Properties at its principal executive office not less than seventy-five (75) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting (the "Anniversary Date"“Anniversary Date”); provided, however, that in the event the annual meeting is scheduled to be held on a date more than thirty (30) days before the Anniversary Date or more than sixty (60) days after the Anniversary Date, a stockholder'sstockholder’s notice shall be timely if received by Boston Properties at its principal executive office not later than the close of business on the later of (1) the seventy-fifth (75th) day prior to the scheduled date of such annual meeting or (2) the fifteenth (15th) day following the day on which public announcement of the date of such annual meeting is first made by Boston Properties. Proxies solicited by our Board of Directors will confer discretionary voting authority with respect to these proposals, subject to SEC rules and regulations governing the exercise of this authority. Any such proposals shall be mailed to: Boston Properties, Inc., 111 Huntington Avenue, Suite 300, Boston, Massachusetts 02199-7610, Attn: Secretary.
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DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
PROXY
BOSTON PROPERTIES, INC.
111 Huntington Avenue
Suite 300
Boston, Massachusetts 02199-7610
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Douglas T. Linde and William J. Wedge, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side, all shares of common stock of Boston Properties, Inc. held of record by the undersigned on March 13,
2002,12, 2003, at the Annual Meeting of Stockholders to be held on May 1, 20027, 2003 and any adjournments or postponements thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS. The undersigned'sundersigned’s vote will be cast in accordance with the proxies'proxies’ discretion on such other business as may properly come before the meeting or at any adjournments or postponements thereof.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
- ----------------------
CONTINUED AND TO BE SIGNED -------------------------
SEE REVERSE ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- --------------------- -------------------------
SEE REVERSE SIDE | SEE REVERSE SIDE |
BOSTON PROPERTIES, INC.
c/o Equiserve
C/O EQUISERVE TRUST COMPANY N.A.
P.O. Box 43068
Providence, RI 02940
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1. Log on to the Internet and go to http://www.eproxyvote.com/bxp 2. Enter your Voter Control Number listed above and follow the easy steps outlined on the secured website. | OR | 1. Call toll free 1-877-PRX-VOTE (1-877-779-8683) 2. Enter your Voter Control Number listed above and follow the easy recorded instructions. |
If you vote over the accompanying Proxy 1. Read the accompanying Proxy
Statement and Proxy Card. Statement and Proxy Card.
2. Call the toll-free number 2. Go the Website
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3. EnterInternet or by telephone, please do not mail your Voter Control Number 3. Enter your Voter Control Number
located on your Proxy Card above located on your ProxyCard above
your name. your name.
4. Follow the recorded instructions. 4. Follow the instructions provided.
- ------------------------------------- ------------------------------------
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Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/bxp
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DETACH HERE
[X]card.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL | ZBPR21 |
Please mark
x votes as in
this example
The Board of Directors recommends a vote "FOR" all the nominees.
1. Proposal to elect the following persons as Class II Directors:
Nominees: (01) Alan J. Patricof and (02) Martin Turchin.
FOR ALL [ ] WITHHELD FROM ALL [ ]
[ ] _________________________________________
WITHHELD AS TO THE NOMINEE(S) NOTED ABOVE
The Board of Directors recommends a vote "FOR" Proposal 2.
FOR AGAINST ABSTAIN
2. Ratify the appointment of PricewaterhouseCoopers LLP [ ] [ ] [ ]
as independent accountants.
The Board of Directors recommends a vote "AGAINST" Proposals 3, 4 and 5.
FOR AGAINST ABSTAIN
3. Act upon one stockholder proposal concerning the [ ] [ ] [ ]
annual election of directors.
4. Act upon one stockholder proposal concerning our [ ] [ ] [ ]
shareholder rights plan.
5. Act upon one stockholder proposal concerning [ ] [ ] [ ]
non-audit activities of independent accountants.
6. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or any adjournments or
postponements thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians or other fiduciaries should give
full title as such. If signing for a corporation, please sign in full corporate
name by a duly authorized officer.
example.
The Board of Directors recommends a vote “FOR” all the nominees. | The Board of Directors recommends a vote “FOR” Proposal 2. | |
1. Proposal to elect one Class II Director and three Class III Directors: Class II Nominees: (01) Lawrence S. Bacow Class III Nominees: (02) William M. Daley (03) Edward H. Linde and (04) David A. Twardock FOR ¨¨ WITHHELD ALL FROM ALL ¨ WITHHELD AS TO THE NOMINEE(S) NOTED ABOVE | 2. Ratify the appointment of FOR AGAINST ABSTAIN PricewaterhouseCoopers ¨¨¨ LLP as independent accountants. 3. In their discretion, the proxies are authorized to vote upon any other business that may properly come before the meeting or any adjournments or postponements thereof. MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT ¨ Please sign exactly as name appears hereon. Joint owners should each sign. Executors, administrators, trustees, guardians or other fiduciaries should give full title as such. If signing for a corporation, please sign in full corporate name by a duly authorized officer. |
Signature: _________________________________________ Date: __________________ Signature: _________________________________________ Date: __________________