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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Boston Properties, Inc.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[BOSTON PROPERTIES LOGO APPEARS HERE]
March 31, 2000
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Boston Properties, Inc. This year's meeting will be held on Wednesday, May 3,
2000 at 11:00 a.m., local time, at 780 Third Avenue, 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 1999 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
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[Boston Properties logo]
BOSTON PROPERTIES, INC.
800 BOYLSTON STREET
SUITE 400
BOSTON, MA 02199-8001
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 3, 2000
----------------
The 2000 annual meeting of stockholders of Boston Properties, Inc. will be
held on Wednesday, May 3, 2000 at 11:00 a.m., local time, at 780 Third Avenue,
New York, New York. At the meeting, stockholders will vote upon the following
proposals:
1. To elect two Class III directors, each to serve for a three-year term.
2. To consider and act upon one proposal to approve the Boston Properties,
Inc. amended and restated 1997 Stock Option and Incentive Plan (the "1997
Stock Plan"). The full text of the 1997 Stock Plan is attached to this proxy
statement as Exhibit A.
3. To consider and act upon one stockholder proposal concerning annual
election of directors.
4. To ratify the selection of PricewaterhouseCoopers LLP as Boston
Properties' independent accountants for the fiscal year ending December 31,
2000.
5. To consider and act upon any other matters that may properly be brought
before the annual meeting and at any adjournments or postponements.
You may vote if you are a stockholder of record as of the close of business
on March 13, 2000. If you do not plan to attend the meeting and vote your
common shares in person, please vote in one of the following ways:
. Use the toll-free telephone number shown on your proxy card (this call
is free in the U.S. and Canada);
. Go to the Website address shown on your proxy card and vote via the
Internet; or
. Mark, sign, date and promptly return the enclosed proxy card in the
postage-paid envelope.
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 31, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROXY STATEMENT........................................................... 1
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING............................ 1
What is the purpose of the annual meeting?.............................. 1
Who is entitled to vote?................................................ 1
Can I attend the meeting?............................................... 1
What constitutes a quorum?.............................................. 1
How do I vote?.......................................................... 2
Will other matters be voted on at the annual meeting?................... 2
Can I revoke my proxy instructions?..................................... 2
What other information should I review before voting?................... 2
PROPOSAL 1: ELECTION OF DIRECTORS......................................... 3
Introduction............................................................ 3
Vote Required........................................................... 3
Recommendation.......................................................... 3
Information Regarding the Nominees, Other Directors and Executive
Officers............................................................... 3
The Board of Directors and Its Committees............................... 7
PROPOSAL 2: APPROVAL OF THE 1997 STOCK OPTION AND INCENTIVE PLAN, AS
AMENDED AND RESTATED................................................... 8
Proposal................................................................ 8
Reasons for Amendments.................................................. 8
Summary of the 1997 Stock Plan.......................................... 9
New 1997 Stock Plan Benefits............................................ 12
Tax Aspects Under the U.S. Internal Revenue Code........................ 12
Vote Required........................................................... 13
Recommendation.......................................................... 13
PROPOSAL 3: STOCKHOLDER PROPOSAL.......................................... 13
Annual Election of Directors............................................ 13
Boston Properties' Statement in Opposition.............................. 14
Vote Required........................................................... 14
Recommendation.......................................................... 14
PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS.......... 15
Recommendation.......................................................... 15
PRINCIPAL AND MANAGEMENT STOCKHOLDERS..................................... 16
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS.......................... 19
Director Compensation................................................... 19
Executive Compensation.................................................. 19
Summary Compensation Table.............................................. 19
Option Grants for Fiscal Year 1999...................................... 22
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values.. 23
Employment and Noncompetition Agreements................................ 23
Severance Agreements.................................................... 24
Stock Performance Graph................................................. 25
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION................... 26
Compensation Committee Interlocks and Insider Participation............. 28
Section 16(a) Beneficial Ownership Reporting Compliance................. 29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 29
Times Square Acquisition and Development................................ 29
Embarcadero Center Acquisition.......................................... 30
Sumner Square Transaction............................................... 31
111 Huntington Avenue Development....................................... 32
Carnegie Center Acquisitions and Development............................ 32
Secured Lending Transactions............................................ 33
Indebtedness of Management.............................................. 33
OTHER MATTERS............................................................. 33
Expenses of Solicitation................................................ 33
Stockholder Proposals for Annual Meetings............................... 34
</TABLE>
i
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[BOSTON PROPERTIES LOGO APPEARS HERE]
March 31, 2000
BOSTON PROPERTIES, INC.
800 BOYLSTON STREET
SUITE 400
BOSTON, MA 02199-8001
----------------
PROXY STATEMENT
----------------
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Boston Properties, Inc. for use at the
2000 annual meeting of stockholders of Boston Properties to be held on
Wednesday, May 3, 2000 at 11:00 a.m., local time, at 780 Third Avenue, 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,
approval of the amended and restated Boston Properties, Inc. 1997 Stock Option
and Incentive Plan ("1997 Stock Plan"), consideration of one stockholder
proposal concerning annual election of directors and ratification of the
selection of our independent accountants.
WHO IS ENTITLED TO VOTE?
If our records show that you are a stockholder as of the close of business
on March 13, 2000, 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.
CAN I ATTEND THE MEETING?
All stockholders of record of Boston 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's
license or passport.
WHAT CONSTITUTES A QUORUM?
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 67,954,225 shares of common stock
outstanding and entitled to vote at the annual meeting. Shares that reflect
abstentions or "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.
<PAGE>
HOW DO I VOTE?
Voting by Proxy Holders for Shares Registered Directly in the Name of the
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.
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"), you will receive instructions from your
nominee which you must follow in order to have your common shares voted.
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 2, 2000. 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 May 2, 2000. 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. "Street name"
stockholders who wish to vote at the meeting will need to obtain a proxy form
from the broker, bank or other nominee that holds their common shares of
record.
WILL OTHER MATTERS BE VOTED ON AT THE ANNUAL MEETING?
We are now not 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:
. filing a written revocation with the Secretary of Boston Properties at
the address set forth below;
. filing a duly executed proxy bearing a later date; or
. appearing in person and voting by ballot at the annual meeting.
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 1999 annual report, including financial statements for
the fiscal year ended December 31, 1999, is being mailed to stockholders
concurrently with this proxy statement. The annual report,
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however, is not part of the proxy solicitation material. For your further
review, a copy of our annual report filed with the Securities and Exchange
Commission (the "SEC") on Form 10-K, including the financial statements and
the financial statement schedule, may be obtained without charge by writing to
the Secretary of Boston Properties at the following address: 800 Boylston
Street, Suite 400, Boston, Massachusetts 02199-8001.
PROPOSAL 1: ELECTION OF DIRECTORS
INTRODUCTION
Our Board of Directors currently consists of seven members who are divided
into three classes. At the annual meeting, two Class III directors will be
elected to serve until the 2003 annual meeting or until their respective
successors are duly elected and qualified.
Our Board of Directors has nominated Edward H. Linde and Ivan G. Seidenberg
to serve as the Class III directors. The nominees are currently serving as
directors of Boston Properties. 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.
VOTE REQUIRED
Directors must be elected by a plurality of the votes of the shares of
common stock present in person or represented by proxy and entitled to vote on
the issue at the annual meeting. Votes may be cast for or withheld from each
nominee. Votes cast for the nominees will count as "yes votes;" votes that are
withheld from the nominees will be excluded entirely from the vote and will
have no effect.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THEIR NOMINEES,
EDWARD H. LINDE AND IVAN G. SEIDENBERG. PROXIES SOLICITED BY THE BOARD WILL BE
VOTED FOR 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 two nominees for re-election as Class III 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 15, 2000.
Nominees for Election as Directors--Term Expiring 2003
EDWARD H. LINDE. Mr. Edward H. Linde serves as President, Chief Executive
Officer 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 trustee 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 and Homeruns.com. Mr. Linde received a BS in
Civil Engineering from MIT in 1962 and a MBA from Harvard Business School,
where he was a Baker Scholar, in 1964. His son, Douglas T. Linde, serves as
the Senior Vice President of Financial and Capital Markets for Boston
Properties. He is 58 years old.
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IVAN G. SEIDENBERG. Mr. Ivan G. Seidenberg has been a director since June
23, 1997. Mr. Seidenberg has served as the Chairman and Chief Executive
Officer for Bell Atlantic since 1998. From 1997 through December 1998, Mr.
Seidenberg served as the Vice Chairman, President and Chief Operating Officer
of Bell Atlantic. Prior to the merger of Bell Atlantic and NYNEX, from 1995 to
1997, Mr. Seidenberg served as the Chairman and Chief Executive Officer of
NYNEX where he held various positions since 1991. As a chief executive, he has
led efforts during two of the largest mergers in business history--Bell
Atlantic's merger with NYNEX in August 1997 and the pending merger with GTE.
Mr. Seidenberg is a member of the Board of Directors of Honeywell
International, Inc., American Home Products Corp., Bell Atlantic, The
Conference Board, CVS Corp., Pace University, The Museum of Television and
Radio, The National Urban League, The New York Hall of Science, The New York
Hospital, and Viacom Inc. He is a member of the Council on Foreign Relations.
Mr. Seidenberg received a BA in mathematics from City University of New York
and a MBA from Pace University. He is 53 years old.
Incumbent Directors--Term Expiring 2001
MORTIMER B. ZUCKERMAN. Mr. Mortimer B. Zuckerman serves as Chairman of the
Board of Directors 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. Mr. Zuckerman serves as a trustee of New York
University, a trustee of Memorial Sloan-Kettering Cancer Institute, a trustee
of the Institute for Advanced Studies at Princeton and a member of the Council
on Foreign Relations and the International Institute for Strategic Studies. He
is also Chairman and Editor-in-Chief of U.S. News & World Report, Chairman and
Co-Publisher of the New York Daily News and Chairman of the Board of Applied
Graphics Technologies and a member of the Board of Directors of Snyder
Communications, Chase Manhattan Corporation National Advisory Board, and Loews
Cineplex. Mr. Zuckerman is a graduate of McGill University in Montreal where
he received an undergraduate degree in 1957 and a degree in law in 1961. He
received a MBA with distinction from the Wharton School, University of
Pennsylvania in 1961 and a LLM from Harvard University in 1962. He has also
received three honorary degrees. He is 62 years old.
ALAN B. 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 is the developer of
Carnegie Center located in Princeton, New Jersey. Since 1967, Mr. Landis has
held various positions with The Landis Group or its predecessors. He has
served as the Co-Chairman 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 57 years old. Mr. Landis
was appointed to the Board of Directors pursuant to a directorship agreement
in connection with Boston Properties' acquisition of a portfolio of properties
in New Jersey. Boston Properties has agreed that the Board of Directors will
nominate Mr. Landis for re-election as a director at each Boston Properties
annual meeting of stockholders in a year in which his term expired as long as
Mr. Landis (and related parties) continue to beneficially own at least one
percent (1%) of the aggregate number of outstanding shares of common stock and
units of limited partnership interest in Boston Properties Limited
Partnership. Additionally, Mr. Landis must comply with the policies of the
Board of Directors and attend a certain number of the meetings of the Board of
Directors.
RICHARD E. SALOMON. Mr. Richard E. Salomon has been a director since
November 12, 1998. He is a Managing Director of Spears, Benzak, Salomon &
Farrell, an investment advisory firm. Mr. Salomon has been with Spears,
Benzak, Salomon & Farrell since 1982. Mr. Salomon serves as Senior Advisor to
Mr. David Rockefeller. He represented Rockefeller interests on the Executive
Committee of Embarcadero Center from
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1977-98. In addition, he is Chairman of the Advisory Board of Blackstone
Alternative Asset Management. He is a director of Cousins Properties, Inc.,
Rockefeller & Associates Realty, Rockefeller Center and Strategic Hotel
Capital, Inc. He is a trustee of the Museum of Modern Art, The New York Public
Library and Rockefeller University. 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 Sloan Foundation. He received a BA
from Yale University in 1964 and a MBA from Columbia University Graduate
School of Business in 1967. Mr. Salomon is 57 years old.
Incumbent Directors--Term Expiring 2002
ALAN J. PATRICOF. Mr. Alan J. Patricof has been a director since June 23,
1997. Mr. Patricof is Chairman of the Board of Directors of Patricof & Co.
Ventures, Inc., the company that he founded in 1969. He serves as a director
of CoreComm Incorporated, Johnny Rockets Group, Inc., Medscape, Inc., and NTL,
Inc. In addition, he has served as Chairman of the White House Commission on
Small Business and a member of the Blue Ribbon Commission of the National
Association of Corporate Directors. Mr. Patricof received a BS in finance from
Ohio State University and a MBA from Columbia University Graduate School of
Business. He is 65 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's Law School. He is 58 years old.
Executive Officers Who Are Not Directors
ROBERT E. BURKE. Mr. Robert E. Burke serves as Executive Vice President for
Operations, with responsibility for administrative policy and day-to-day
control of operations for Boston Properties. Prior to his appointment in April
1998 to such position, he served for 12 years as Senior Vice President and Co-
Manager of the Washington, D.C. office. He joined Boston Properties in 1979 to
open its Washington 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 development of the John Fitzgerald
Kennedy Library Corporation. 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 62 years old.
RAYMOND A. RITCHEY. Mr. Raymond A. Ritchey serves as Executive Vice
President and National Director of Acquisitions and Development for Boston
Properties. He also is principal in charge of the Washington, D.C. office.
Prior to his appointment in April 1998 to such position, he served as Senior
Vice President and Co-Manager of the Washington, D.C. office of Boston
Properties. 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 for Boston Properties on a national basis. Mr. Ritchey joined
Boston Properties in 1980, leading its expansion to become one of the dominant
real estate firms in the Washington, D.C. metropolitan area. For four years
prior to joining Boston Properties, 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 49 years
old.
DAVID G. GAW. Mr. David G. Gaw serves as Senior Vice President and Chief
Financial Officer, where he oversees an 80 person accounting, control and
financial management department. He joined Boston Properties
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in 1982 and has been involved in its financial operations since then,
including administering the Boston Properties' financing and banking
relationships. From 1978 to 1982 he served as Vice President for the Norwood
Group. Mr. Gaw received a BSBA in 1973 and a MBA in 1983 from Suffolk
University. He is 48 years old.
BRYAN J. KOOP. Mr. Bryan J. Koop serves as Senior Vice President and
Regional Manager of the Boston office. Mr. Koop is responsible for overseeing
the operation of Boston Properties' existing assets and development
activities. His responsibilities further include identifying, seizing and
capitalizing on new business opportunities. Mr. Koop joined Boston Properties
in 1999 after serving as Managing Director and City Leader of the New England
commercial and retail division of the Trammel Crow Company from 1982 to 1999.
Mr. Koop received a BBA in 1980 and a MBA in 1982 from Texas Christian
University. He is 41 years old.
DOUGLAS T. LINDE. Mr. Douglas T. Linde serves as Senior Vice President for
Financial and Capital Markets. Mr. Linde is responsible for all capital
raising for Boston Properties. His responsibilities further include financial
strategy, planning and acquisitions. In addition, Mr. Linde has played a key
role in Boston Properties' acquisition program, including the purchase and
financing of the Prudential Center in Boston, Embarcadero Center in San
Francisco, the Carnegie Center Portfolio in Princeton, New Jersey, University
Place in Cambridge, Massachusetts and Reservoir Place in Waltham,
Massachusetts. He joined Boston Properties in January 1997 as Vice President
of Acquisitions and New Business to help identify and execute acquisitions and
new business opportunities. Prior to joining 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. He began his career in
the real estate industry with Salomon Brothers Real Estate Finance Group. Mr.
Linde received a BA from Wesleyan University and a MBA from Harvard Business
School. Mr. Linde is on the Board of Overseers for the Beth Israel Deaconess
Medical Center. Mr. Linde is the son of Edward H. Linde, who serves as the
President, Chief Executive Officer and a director of Boston Properties. He is
36 years old.
E. MITCHELL NORVILLE. Mr. E. Mitchell Norville serves as Senior Vice
President and Operations Manager of the 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
the Washington D.C. office, with a staff of more than 200 people. From 1994 to
1998, he served as Senior Vice President and Senior Project Manager of the
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. Prior to joining
Boston Properties in 1984, Mr. Norville worked as a process engineer with the
EXXON Corporation in Baytown, Texas. He received a BS in Mechanical
Engineering from Clemson University in 1980 and a MBA from the University of
Virginia in 1984. He is 41 years old.
ROBERT E. PESTER. Mr. Robert E. Pester serves as the Senior Vice President
and Regional Manager of the the San Francisco Bay Area, with responsibility
for all of Boston Properties' activities on the West Coast. Mr. Pester is
responsible for overseeing existing operations at Embarcadero Center and the
Gateway Center in South San Francisco and developing new business
opportunities in the region. Prior to joining Boston Properties in 1998, he
served as Executive Vice President and Chief Investment Officer of Bedford
Property Investors Inc., a real estate investment trust in Lafayette,
California, where he led the acquisitions and development program. Prior to
1994, he was President of Bedford Property Development Company, 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 graduate of the University of California at Santa Barbara
with a BA in economics and political science. He is 43 years old.
ROBERT E. SELSAM. Mr. Robert E. Selsam serves as Senior Vice President and
Manager of the New York office. He oversees all aspects of Boston Properties'
New York activities, including development, acquisitions,
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leasing and building operations. He joined Boston Properties 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
serves as a member of the Board of Governors and Chairman of the
Transportation Committee of the Real Estate Board of New York, a board member
of the New York Building Congress, is Executive Vice President and past Co-
Chairman of the Associated Builders and Owners of Greater New York, a member
of the Executive Committee of the Association for a Better New York and a
trustee of the Salvadori Center. He received a BA from the University of
Pennsylvania in 1968 and a MS in Urban Planning from the Columbia University
School of Architecture in 1970. He is 53 years old.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Board of Directors. Boston Properties is managed by a seven member Board of
Directors, a majority of whom are 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. Our Board of Directors is
composed of three Class I directors (Messrs. Zuckerman, Landis and Salomon),
two Class II directors (Messrs. Patricof and Turchin) and two Class III
directors (Messrs. Linde and Seidenberg). The terms of the Class I and Class
II directors will expire upon the election and qualification of directors at
the annual meetings of stockholders held in 2001 and 2002, 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 six times in 1999. Each of the directors attended
at least 75% of the aggregate of (i) the total number of meetings of our Board
of Directors (held during the period for which such directors served on the
Board of Directors) and (ii) the total number of meetings of all committees of
our Board of Directors on which the director served (during the periods for
which the director served on such committee or committees).
Audit Committee. Our Board of Directors has established an Audit Committee
consisting of Messrs. Patricof, Seidenberg and Turchin. 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. The Audit
Committee met twice during 1999.
Compensation Committee. Our Board of Directors has established a
Compensation Committee consisting of Messrs. Patricof, Seidenberg and Turchin.
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 Plan. The Compensation Committee met three times during
1999.
Our Board of Directors has also established (1) a Special Acquisitions and
Finance Committee, which may authorize an acquisition, financing or
refinancing arrangement up to $25 million, the members of which are Messrs.
Zuckerman and Linde, and (2) a Significant Investments Committee, the members
of which are Messrs. Zuckerman, Linde and Turchin (with each of Messrs.
Patricof and Seidenberg available as alternate committee members), which may
authorize, pursuant to a vote of a majority of the members that includes the
affirmative vote of a director who is not an employee of Boston Properties, an
acquisition, financing or refinancing arrangement up to $200 million. The
Special Acquisitions and Finance Committee did not meet but took action by
written consent one time in 1999. The Significant Investments Committee did
not meet but took action by written consent eight times in 1999.
Boston Properties does not have a standing nominating committee. Our full
Board of Directors performs the function of such a committee.
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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: APPROVAL OF THE 1997 STOCK OPTION AND INCENTIVE PLAN, AS AMENDED
AND RESTATED
PROPOSAL
In January 2000, our Board of Directors voted to amend and restate the 1997
Stock Plan effective as of January 24, 2000, and is recommending the amended
and restated 1997 Stock Plan to our stockholders for approval.
The amended and restated 1997 Stock Plan would authorize Boston Properties
to issue up to an additional 5,000,000 shares of common stock pursuant to
various stock incentive awards under the 1997 Stock Plan, bringing the total
reserved shares authorized to be issued under the 1997 Stock Plan (including
previously issued shares of restricted stock and shares issuable under
outstanding options) from 9,699,162 shares plus 9.5 percent of any net
increase in shares of outstanding common stock and all units of partnership
interest in Boston Properties Limited Partnership (the "Operating
Partnership") that are subject to redemption rights and converted into common
stock since the preceding calendar quarter to 14,699,162 shares plus 9.5
percent of any net increase in shares of outstanding common stock and all
units of partnership interest in the Operating Partnership that are subject to
redemption rights and converted into common stock since the preceding calendar
quarter. No more than 2,000,000 shares of common stock will be available for
grants in the form of awards other than options. The number of shares of
common stock reserved for issuance under the 1997 Stock Plan is subject to
adjustment for stock splits, stock dividends and similar events.
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "Code") generally would disallow a federal income
tax deduction to Boston Properties for compensation in excess of $1 million
paid in any year to any of those executive officers included in the summary
compensation table who are employed by Boston Properties on the last day of
the taxable year ("Covered Employees"). However, this limitation on
compensation expense does not apply to payments of "performance-based
compensation," the material terms of which have been approved by stockholders.
To satisfy the requirements of Section 162(m) of the Code, stock options with
respect to no more than 1,500,000 shares of common stock (subject to
adjustment for stock splits and similar events) may be granted to any one
individual during any one-calendar-year period.
Based solely on the closing price of common stock as reported on the New
York Stock Exchange on March 13, 2000 of $30 per share, the maximum aggregate
market value of the additional 5,000,000 shares of common stock reserved for
issuance under the amended and restated 1997 Stock Plan would be $150,000,000.
The amended and restated 1997 Stock Plan will become effective only if
Proposal 2 is approved by our stockholders.
REASONS FOR AMENDMENTS
Our Board of Directors believes that stock options and other stock-based
awards play an important role in the success of Boston Properties and that
this role must increase if we are to continue to attract, motivate and retain
the caliber of directors, officers and other employees necessary for our
future growth and success. The amended and restated 1997 Stock Plan is
necessary to provide for an adequate number of shares of common stock
available for grant under the 1997 Stock Plan.
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Our Board of Directors believes that adding more shares of common stock to
the 1997 Stock Plan will help us achieve our goals by keeping our incentive
compensation program competitive with those of other companies. Accordingly,
our Board of Directors has voted, subject to shareholder approval, to increase
the number of shares of common stock available under the 1997 Stock Plan by
5,000,000 shares.
SUMMARY OF THE 1997 STOCK PLAN
The following description of material terms of the amended and restated 1997
Stock Plan is intended to be a summary only. This summary is qualified in its
entirety by the full text of the amended and restated 1997 Stock Plan, which
is attached to this proxy statement as Exhibit A.
1997 Stock Plan Administration. The 1997 Stock Plan provides for
administration by a committee of not fewer than two non-employee directors
(the "Administrator"), as appointed by our Board of Directors from time to
time.
The Administrator has full power to select, from among the employees
eligible for awards, the individuals to whom awards will be granted, to make
any combination of awards to participants, and to determine the specific terms
and conditions of each award, subject to the provisions of the 1997 Stock
Plan. The Administrator may not reprice outstanding options, other than to
appropriately reflect changes in the capital structure of Boston Properties.
The Administrator may permit common stock, and other amounts payable pursuant
to an award, to be deferred. In such instances, the Administrator may permit
interest, dividend or deemed dividends to be credited to the amount of
deferrals.
Eligibility and Limitations on Grants. All officers, employees and directors
of Boston Properties are eligible to participate in the 1997 Stock Plan,
subject to the discretion of the Administrator. In no event may any one
participant receive options to purchase more than 1,500,000 shares of common
stock (subject to adjustment for stock splits and similar events) during any
one-calendar-year period, as stated above. In addition, as stated above, the
maximum award of restricted stock, performance shares or deferred stock (or
combination thereof) for any one individual that is intended to qualify as
"performance-based compensation" under Section 162(m) of the Code will not
exceed 1,500,000 shares of common stock (subject to adjustment for stock
splits and similar events) for any performance cycle.
Stock Options. Options granted under the 1997 Stock Plan may be either
Incentive Stock Options ("Incentive Options") (within the definition of
Section 422 of the Code) or Non-Qualified Stock Options ("Non-Qualified
Options"). Options granted under the 1997 Stock Plan will be Non-Qualified
Options if they (i) fail to meet such definition of Incentive Options, (ii)
are granted to a person not eligible to receive Incentive Options under the
Code, or (iii) otherwise so provide. Incentive Options may be granted only to
officers or other employees of Boston Properties. Non-Qualified Options may be
granted to persons eligible to receive Incentive Options and to non-employee
directors and other key persons.
Other Option Terms. The Administrator has authority to determine the terms
of options granted under the 1997 Stock Plan. Generally, all options are
granted with an exercise price that is not less than the fair market value of
the shares of common stock on the date of the option grant. The 1997 Stock
Plan provides that such fair market value will be deemed to be the last
reported sale price of the shares of common stock on the New York Stock
Exchange on the date of grant. The exercise price of an option may not be
reduced after the date of the option grant, other than to appropriately
reflect changes in the capital structure of Boston Properties.
The term of each option will be fixed by the Administrator and may not
exceed ten years from date of grant. The Administrator will determine at what
time or times each option may be exercised and, subject to the provisions of
the 1997 Stock Plan, the period of time, if any, after retirement, death,
disability or termination of employment during which options may be exercised.
Options may be made exercisable in installments, and the exercisability of
options may be accelerated by the Administrator. In general, unless otherwise
permitted by the Administrator, no option granted under the 1997 Stock Plan is
transferable by the optionee other than by will or
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by the laws of descent and distribution, and options may be exercised during
the optionee's lifetime only by the optionee, or by the optionee's legal
representative or guardian in the case of the optionee's incapacity.
Options granted under the 1997 Stock Plan may be exercised for cash or, if
permitted by the Administrator, by transfer to Boston Properties (either
actually or by attestation) of shares of common stock which are not then
subject to restrictions under any company stock plan, which have been held by
the optionee for at least six months or were purchased on the open market, and
which have a fair market value equivalent to the option exercise price of the
shares being purchased, or by compliance with certain provisions pursuant to
which a securities broker delivers the purchase price for the shares to Boston
Properties.
At the discretion of the Administrator, stock options granted under the 1997
Stock Plan may include a "re-load" feature pursuant to which an optionee
exercising an option by the delivery of shares of common stock would
automatically be granted an additional stock option (with an exercise price
equal to the fair market value of the common stock on the date the additional
stock option is granted) to purchase that number of shares of common stock
equal to the number delivered to exercise the original stock option. The
purpose of this feature is to enable participants to maintain any equity
interest in Boston Properties without dilution.
To qualify as Incentive Options, options must meet additional federal tax
requirements, including a $100,000 limit on the value of shares subject to
Incentive Options which first become exercisable in any one calendar year, and
a shorter term and higher minimum exercise price in the case of certain large
stockholders.
Stock Options Granted to Non-Employee Directors. The 1997 Stock Plan
provides for the automatic grant of Non-Qualified Options to non-employee
directors. Each non-employee director who is serving as a director of Boston
Properties on the fifth business day after each annual meeting of
stockholders, commencing with the annual meeting in 1998, will automatically
be granted on such day a Non-Qualified Option to acquire 5,000 shares of
common stock. In addition, each non-employee director on the effective date of
our initial public offering was granted a Non-Qualified Option to acquire
10,000 shares of common stock at an exercise price equal to the initial public
offering price as set forth in the final prospectus for our initial public
offering. Each non-employee director elected after the date of the initial
public offering was granted, on the fifth business day after his election, a
Non-Qualified Option to acquire 10,000 shares of common stock. Except as
stated above, the exercise price of each such Non-Qualified Option is the fair
market value of common stock on the date of grant. Each such Non-Qualified
Option is exercisable with respect to 50% of the underlying shares on the
first anniversary of the grant date and shall be exercisable with respect to
all of the underlying shares on the second anniversary of the grant date. Such
Non-Qualified Options will expire ten years from the date of grant. The
Administrator may also make discretionary grants of Non-Qualified Options to
non-employee directors.
Tax Withholding. Participants under the 1997 Stock Plan are responsible for
the payment of any federal, state or local taxes which Boston Properties is
required by law to withhold upon any option exercise or vesting of other
awards. Participants may elect to have the minimum tax withholding obligations
satisfied either by authorizing us to withhold shares of common stock to be
issued pursuant to an option exercise or other award, or by transferring to
Boston Properties shares of common stock having a value equal to the amount of
such taxes.
Restricted Stock Awards. The Administrator may grant shares (at par value or
for a higher purchase price determined by the Administrator) of common stock
to any participant subject to such conditions and restrictions as the
Administrator may determine. These conditions and restrictions may include the
achievement of pre-established performance goals and/or continued employment
with Boston Properties through a specified vesting period. The vesting period
shall be determined by the Administrator but shall be at least one year for
attainment of pre-established performance goals or at least three years for
other conditions and restrictions. The purchase price, if any, of shares of
restricted stock will be determined by the Administrator. If the applicable
performance goals and other restrictions are not attained, the participant
will forfeit his or her award of restricted stock.
Unrestricted Stock Awards. The Administrator may also grant shares (at par
value or for a higher purchase price determined by the Administrator) of
common stock which are free from any restrictions under
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the 1997 Stock Plan. Unrestricted stock may be granted to any participant in
recognition of past services or other valid consideration, and may be issued
in lieu of cash compensation due to such participant.
Dividend Equivalent Rights. The Administrator may grant dividend equivalent
rights which entitle the recipient to receive credits for dividends that would
be paid if the recipient had held specified shares of common stock. Dividend
equivalent rights may be granted as a component of another award or as a
freestanding award. Dividend equivalent rights credited under the 1997 Stock
Plan may be paid currently or be deemed to be reinvested in additional shares
of common stock, which may thereafter accrue additional dividend equivalent
rights at fair market value at the time of deemed reinvestment or on the terms
then governing the reinvestment of dividends under our dividend reinvestment
1997 Stock Plan, if any. Dividend equivalent rights may be settled in cash,
shares of common stock or a combination thereof, in a single installment or
installments, as specified in the award.
Deferred Stock Awards. The Administrator may also award phantom stock units
as deferred stock awards to participants. The deferred stock awards are
ultimately payable in the form of shares of common stock and may be subject to
such conditions and restrictions as the Administrator may determine. These
conditions and restrictions may include the achievement of certain performance
goals and/or continued employment with Boston Properties through a specified
vesting period. During the deferral period, subject to terms and conditions
imposed by the Administrator, the deferred stock awards may be credited with
dividend equivalent rights. Subject to the consent of the Administrator, a
participant may make an advance election to receive a portion of his or her
compensation or restricted stock award otherwise due in the form of a deferred
stock award.
Performance Share Awards. The Administrator may grant performance share
awards to any participant which entitle the recipient to receive shares of
common stock upon the achievement of individual or company performance goals
and such other conditions as the Administrator shall determine.
Other Stock-Based Awards. The Administrator may grant awards of capital
stock other than common stock and other awards that are valued in whole or in
part by reference to or are otherwise based on, common stock, including, for
example, convertible preferred stock, convertible debentures, exchangeable
securities, awards or options valued by reference to book value or subsidiary
performance. These awards may be subject to such conditions and restrictions
as the Administrator may determine. These conditions and restrictions may
include the achievement of certain performance goals and/or continued
employment with Boston Properties through a specified vesting period. If the
applicable performance goals and other restrictions are not attained, the
participant will forfeit his or her awards.
Change of Control Provisions. The 1997 Stock Plan provides that in the event
of a "change of control" as defined in the 1997 Stock Plan, all stock options
will automatically become fully exercisable. The restrictions and conditions
on all other awards will automatically be deemed waived.
Adjustments for Stock Dividends, Mergers, etc. The 1997 Stock Plan
authorizes the Administrator to make appropriate adjustments to the number of
shares of common stock that are subject to the 1997 Stock Plan and to any
outstanding stock options to reflect stock dividends, stock splits and similar
events. In the event of certain transactions, such as a merger, consolidation,
dissolution or liquidation of Boston Properties, our Board of Directors in its
discretion may provide for appropriate substitutions or adjustments of
outstanding stock options or awards. Alternatively, outstanding stock options
and awards will terminate; the option holder will receive a cash or in kind
payment equal to the excess of the fair market value per share over the
applicable exercise price, multiplied by the number of shares of common stock
covered by the stock option, and the award holder will receive a cash or in
kind payment of such appropriate consideration as determined by the
Administrator in its sole discretion after taking into account the
consideration payable per share of common stock pursuant to the business
combination.
Amendments and Termination. Our Board of Directors may at any time amend or
discontinue the 1997 Stock Plan and the Administrator may at any time amend or
cancel any outstanding award for the purpose of
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satisfying changes in law or for any other lawful purpose, but no such action
shall adversely affect the rights under any outstanding awards without the
holder's consent. To the extent required by the Code to ensure that options
granted under the amended and restated 1997 Stock Plan qualify as Incentive
Options or that compensation earned under stock options granted under the 1997
Stock Plan qualify as performance-based compensation under the Code, 1997
Stock Plan amendments shall be subject to approval by our stockholders.
NEW 1997 STOCK PLAN BENEFITS
No grants have been made with respect to the additional shares of common
stock reserved for issuance under the amended and restated 1997 Stock Plan.
The number of shares of common stock that may be granted to executive officers
and non-executive officers is indeterminable at this time, as such grants are
subject to the discretion of the Administrator.
TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE
The following is a summary of the principal federal income tax consequences
of transactions under the 1997 Stock Plan. It does not describe all federal
tax consequences under the 1997 Stock Plan, nor does it describe state or
local tax consequences.
Incentive Options. No taxable income is generally realized by the optionee
upon the grant or exercise of an Incentive Option. If shares of common stock
issued to an optionee pursuant to the exercise of an Incentive Option are sold
or transferred after two years from the date of grant and after one year from
the date of exercise, then (i) upon sale of such shares, any amount realized
in excess of the option price (the amount paid for the shares) will be taxed
to the optionee as a long-term capital gain, and any loss sustained will be a
long-term capital loss, and (ii) there will be no deduction for Boston
Properties for federal income tax purposes. The exercise of an Incentive
Option will give rise to an item of tax preference that may result in
alternative minimum tax liability for the optionee.
If shares of common stock acquired upon the exercise of an Incentive Option
are disposed of prior to the expiration of the two-year and one-year holding
periods described above (a "disqualifying disposition"), generally (i) the
optionee will realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares of common
stock at exercise (or, if less, the amount realized on a sale of such shares
of common stock) over the option price thereof, and (ii) Boston Properties
will be entitled to deduct such amount. Special rules will apply where all or
a portion of the exercise price of the Incentive Option is paid by tendering
shares of common stock.
If an Incentive Option is exercised at a time when it no longer qualifies
for the tax treatment described above, the option is treated as a Non-
Qualified Option. Generally, an Incentive Option will not be eligible for the
tax treatment described above if it is exercised more than three months
following termination of employment (or one year in the case of termination of
employment by reason of disability). In the case of termination of employment
by reason of death, the three-month rule does not apply.
Non-Qualified Options. With respect to Non-Qualified Options under the 1997
Stock Plan, no income is realized by the optionee at the time the option is
granted. Generally (i) at exercise, ordinary income is realized by the
optionee in an amount equal to the difference between the option price and the
fair market value of the shares of common stock on the date of exercise, and
Boston Properties receives a tax deduction for the same amount, and (ii) at
disposition, appreciation or depreciation after the date of exercise is
treated as either short-term or long-term capital gain or loss depending on
how long the shares of common stock have been held. Special rules will apply
where all or a portion of the exercise price of the Non-Qualified Option is
paid by tendering shares of common stock.
Parachute Payments. The vesting of any portion of any option or other award
that is accelerated due to the occurrence of a change of control may cause a
portion of the payments with respect to such accelerated
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awards to be treated as "parachute payments" as defined in the Code. Any such
parachute payments may be non-deductible to Boston Properties, in whole or in
part, and may subject the recipient to a non-deductible 20% federal excise tax
on all or a portion of such payment (in addition to other taxes ordinarily
payable).
Limitation on Boston Properties' Deductions. As a result of Section 162(m)
of the Code, Boston Properties' deduction for certain awards under the 1997
Stock Plan may be limited to the extent that a Covered Employee receives
compensation in excess of $1,000,000 in such taxable year of Boston Properties
(other than performance-based compensation that otherwise meets the
requirements of Section 162(m) of the Code).
VOTE REQUIRED
Under the Charter and By-Laws of Boston Properties, 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 the approval of
the amendment and restatement of the 1997 Stock Plan. 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.
In addition, the New York Stock Exchange requires the affirmative vote of a
majority of all of the votes cast on the proposal and further requires the
total number of votes cast on the proposal to represent more than 50% of all
of the shares entitled to vote and as votes cast. The New York Stock Exchange
treats abstentions as shares entitled to vote and as votes cast and broker
non-votes as shares not entitled to vote and therefore as votes not cast for
the purpose of determining the number of votes cast on this proposal.
RECOMMENDATION
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE
1997 STOCK PLAN, AS AMENDED AND RESTATED. PROXIES SOLICITED BY THE BOARD WILL
BE VOTED FOR THIS PROPOSAL UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN.
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 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."
"If you AGREE, please mark your proxy FOR this resolution."
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BOSTON PROPERTIES' STATEMENT IN OPPOSITION
When Boston Properties became publicly traded in 1997, its corporate charter
stated that the directors should be classified, with respect to the term for
which they severally hold office, into three classes, as nearly equal in
number as possible. Each director serves a three year term and directors from
one of the three classes are elected each year. Under applicable law, the
directors owe to the stockholders fiduciary duties. We firmly believe that
directors elected for three year staggered terms are just as accountable to
our stockholders as they would be if elected annually.
The classification of directors is intended to provide 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 the business strategies and operations.
With staggered elections, at least two annual stockholder meetings would be
required to change a majority of the members of our Board of Directors. One
benefit of this feature of our corporate charter is an enhancement of
management's ability to negotiate in the best interests of all stockholders
with a person seeking to gain control of the company through a proxy contest.
Boston Properties also believes that a classified board reduces our
vulnerability to certain potentially abusive takeover tactics. It encourages
potential acquirors to initiate takeover actions through arm's length
negotiations with our Board of Directors. The classified board does not
preclude unsolicited acquisition proposals, but by eliminating the threat of
imminent removal, it positions our Board of Directors to act to maximize the
value to all stockholders of a potential acquisition.
Because this proposal is only a recommendation, its approval by our
stockholders would not automatically repeal the classified board. Elimination
of the classified board would require the affirmative vote of more than 75% of
the directors then in office to recommend an amendment to our corporate
charter followed by the approval of the amendment by our stockholders.
For all of the reasons described above, our Board of Directors continues to
believe that the classified board has valid benefits and is in the best
interests of our 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
ACCORDINGLY, 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.
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PROPOSAL 4: 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, 2000. 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 therefor in future
decisions on the selection of independent accountants.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
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PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table shows the amount of common stock and units of
partnership interest in the Operating Partnership beneficially owned as of
February 1, 2000 by:
. each director;
. the Chairman of the Board, the Chief Executive Officer, and the five
most highly compensated executive officers of Boston Properties, each of
whose compensation exceeded $100,000 during the fiscal year ended
December 31, 1999 (the "named executive officers");
. all directors and executive officers of Boston Properties as a group;
and
. each person known by Boston Properties to hold more than 5% of our
outstanding common stock.
Beneficial ownership of common stock includes shares that are individually
or jointly owned, as well as shares of which the individual has sole or shared
investment or voting authority. Beneficial ownership of common stock also
includes (i) shares which could be purchased by the exercise of options at or
within 60 days of February 1, 1999, (ii) common units of limited partnership
interests in the Operating Partnership ("common units") which are exchangeable
into one share of Boston Properties' common stock and (iii) units of Series
One preferred units each of which is convertible into 0.88889 common units.
Beneficial ownership does not include (i) 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, 2002.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF ALL
SHARES COMMON PERCENT
AND UNITS STOCK OF ALL
NAME AND BUSINESS ADDRESS BENEFICIALLY AND COMMON
OF BENEFICIAL OWNER* OWNED UNITS(1) STOCK(2)
- ------------------------- ------------- ---------- --------
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Mortimer B. Zuckerman(3)..................... 9,358,930.00 9.92% 12.31%
Edward H. Linde(4)........................... 7,341,328.00 7.78 9.91
Alan B. Landis(5)............................ 1,556,262.38 1.66 2.24
Alan J. Patricof(6).......................... 17,500.00 ** **
Richard E. Salomon(7)........................ 5,000.00 ** **
Ivan G. Seidenberg(8)........................ 13,000.00 ** **
Martin Turchin(9)............................ 16,500.00 ** **
Robert E. Burke(10).......................... 389,741.00 ** **
Raymond A. Ritchey(11)....................... 441,527.00 ** **
Douglas T. Linde(12)......................... 125,063.54 ** **
Robert E. Pester(13)......................... 35,953.64 ** **
Robert E. Selsam(14)......................... 87,038.29 ** **
5% HOLDERS
Capital Growth Management L.P.(15)........... 6,439,000 6.85% 9.48%
Southeastern Asset Management, Inc.(16)...... 5,226,300 5.56 7.69
Capital Research and Management(17).......... 3,649,600 3.88 5.37
The Prudential Insurance Company of Ameri-
ca(18)...................................... 4,453,722 4.72 6.15
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A
GROUP (15 PERSONS).......................... 19,637,593.00 20.83% 26.48%
</TABLE>
- --------
* Unless otherwise indicated, the address is c/o Boston Properties, Inc.,
800 Boylston Street, Suite 400, Boston, Massachusetts 02199-8001.
** Less than 1%
(1) Assumes that all common units and Series One preferred units held by the
person are presented 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, 2000 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 and Series One preferred units outstanding held by
all persons other than Boston Properties are presented to Boston
Properties for redemption and acquired by
16
<PAGE>
Boston Properties for shares of common stock and assumes that only
exercisable options or options which become exercisable within 60 days of
February 1, 2000 held by such person to acquire shares of common stock are
exercised.
(2) Assumes that all the common units and Series One preferred units held by
the person are presented 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, 2000 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 and Series One preferred
units held by other persons are presented 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, 2000 held by the person to
acquire shares of common stock are exercised.
(3) Includes 1,291,770 shares of common stock, 5,777,848 common units held
directly, 1,889,312 common units held through trusts, 200,000 currently
exercisable options and 200,000 shares of common stock issuable upon the
exercise of stock options that will become exercisable within 60 days of
February 1, 2000.
(4) Includes 1,201,771 shares of common stock, 3,796,467 common units held
directly, 1,943,090 common units held through trusts, 200,000 currently
exercisable options and 200,000 shares of common stock issuable upon the
exercise of stock options that will become exercisable within 60 days of
February 1, 2000.
(5) Includes 189,512 Series One preferred units held directly and 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. The number of Series One preferred
units also includes 368,412 Series One preferred units held by Mr. Landis'
wife. The Series One preferred units represent preferred units of limited
partnership in the Operating Partnership which are convertible into
1,551,262.38 common units. As a result, Mr. Landis may be deemed to own
directly or indirectly the number of common units into which the Series
One preferred units so held are convertible. Mr. Landis disclaims
beneficial ownership of the Series One preferred units held by his wife.
Also includes 5,000 currently exercisable options. Excludes 1,507.46
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.
(6) Includes 5,000 shares of common stock and 12,500 currently exercisable
options. Excludes 2,267.40 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 5,000 currently exercisable options but excludes 83,728.43 Series
Two preferred units held directly and 40,826.08 Series Two preferred units
held by certain trusts. The Series Two preferred units represent preferred
units of limited partnership interest in the Operating Partnership which
are convertible into 163,457.36 common units beginning on December 31,
2002. Excludes 1,180.18 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 12,500 currently exercisable
options. Excludes 2,262.87 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 2,500 shares of common stock held directly, 1,000 shares of
common stock held through family trusts, 500 shares of common stock held
by Mr. Turchin's wife and 12,500 currently exercisable options. Excludes
2,307.30 deferred stock units presented to Boston Properties for
redemption and acquired by Boston Properties 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. Mr. Turchin disclaims beneficial ownership of the common stock
held by his wife.
(10)Includes 248,244 common units held directly, 37,547 common units held by
a limited liability company of which Mr. Burke is the managing member,
379 common units held by Mr. Burke's wife and 3,571 shares
17
<PAGE>
of restricted stock awarded under the 1997 Stock Plan that vest in five
equal annual installments beginning on January 24, 2001. The value of the
restricted stock awards as of December 31, 1999 is $111,147.38. Also
includes 33,333.33 currently exercisable options and 66,666.67 shares of
common stock issuable upon the exercise of stock options that will become
exercisable within 60 days of February 1, 2000. Mr. Burke disclaims
beneficial ownership of the common units held by his wife.
(11) Includes 250,570 common units held directly, 35,244 common units held by
a limited liability company of which Mr. Ritchey is the managing member,
356 common units held by Mr. Ritchey's wife and 5,357 shares of
restricted stock awarded under the 1997 Stock Plan that vest in five
equal annual installments beginning on January 24, 2001. The value of the
restricted stock awards as of December 31, 1999 is $166,736.63. Also
includes 50,000 currently exercisable options and 100,000 shares of
common stock issuable upon the exercise of stock options that will become
exercisable within 60 days of February 1, 2000. Mr. Ritchey disclaims
beneficial ownership of the common units held by his wife.
(12) Includes 1,087.87 shares of common stock, 2,100 shares of common stock
held through family trusts, 700 shares of common stock held by Mr.
Douglas T. Linde's wife, 56,830 common units held directly, and 2,679
shares of restricted stock awarded under the 1997 Stock Plan that vest in
five equal installments beginning on January 24, 2001. The value of the
restricted stock awards as of December 31, 1999 is $83,383.88. Also
includes 20,000 currently vested options and 41,666.67 shares of common
stock issuable upon the exercise of stock options that will become
exercisable within 60 days of February 1, 2000. Mr. Douglas T. Linde
disclaims beneficial ownership of the common stock held by his wife.
(13) Includes 7,382.64 shares of common stock and 3,571 shares of restricted
stock awarded under the 1997 Stock Plan that vest in five equal annual
installments beginning on January 24, 2001. The value of the restricted
stock awards as of December 31, 1999 is $111,147.38. Also includes 25,000
currently exercisable options.
(14) Includes 559.29 shares of common stock held directly and 800 shares of
common stock held by Mr. Selsam's children, 8,000 common units held
directly and 2,679 shares of restricted stock awarded under the 1997
Stock Plan that vest in five equal annual installments beginning on
January 24, 2001. The value of the restricted stock awards as of December
31, 1999 is $83,383.88. Also includes 25,000 currently exercisable
options and 50,000 shares of common stock issuable upon the exercise of
stock options that will become exercisable within 60 days of February 1,
2000. Mr. Selsam disclaims beneficial ownership of the common stock held
by his children.
(15) Information regarding Capital Growth Management Limited Partnership
("CGM") is based solely on a Schedule 13G filed by CGM with the SEC on
February 10, 2000. CGM's address is 1 International Place, Boston, MA
02110.
(16) Information regarding Southeastern Asset Management, Inc. ("SAM") is
based solely on a Schedule 13G filed by SAM with the SEC on February 9,
2000. SAM's address is 6075 Poplar Avenue, Suite 900, Memphis, TN 38119.
(17) Information regarding Capital Research and Management Company ("CRM") is
based solely on a Schedule 13G filed by CRM with the SEC on February 11,
2000. CRM's address is 333 South Hope Street, 55th Floor, Los Angeles, CA
90071.
(18) Includes 1,117,231 shares of common stock held through an investor
advisory agreement between The Prudential Investment Company, a wholly-
owned subsidiary of The Prudential Insurance Company of America
("Prudential"), and Strategic Value Investors, II, LLC; 343,077 shares of
common stock held in Prudential's general account and 2,993,414 common
units held in Prudential's general account. Excludes 17,054 shares of
common stock held through Prudential Securities Incorporated, an indirect
wholly-owned subsidiary of Prudential, whose client or management
controls the voting and disposition of the shares; 2,000,000 shares of
Series A preferred stock and 167,394 Series Three preferred units. The
Series A preferred stock is convertible into 2,624,671.92 shares of
common stock beginning December 31, 2002. The Series Three preferred
units represent preferred units of limited partnership interest in the
Operating Partnership which are convertible into 219,676 common units
beginning on December 31, 2002. Information regarding Prudential is based
on information provided by Prudential. Prudential's address is c/o
Prudential Real Estate Investors, 8 Campus Drive, Parsippany, New Jersey
07054.
18
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
Directors of Boston Properties who are also employees receive no additional
compensation for their services as directors. During 1999, Boston Properties
paid its non-employee directors a quarterly director fee of $6,250 for their
services. In addition, non-employee directors receive a fee of $1,000 for each
Board of Directors meeting attended, an additional fee of $1,000 for each
committee meeting attended, unless the committee meeting is held on the day of
a meeting of the Board of Directors, and a fee of $250 for each telephonic
meeting attended. Each non-employee director has made an election, in
accordance with the 1997 Stock Plan and approved by the Board of Directors, to
receive in lieu of cash fees deferred stock units to be settled in shares of
common stock upon the holders' retirement from our Board of Directors. Non-
employee directors are also reimbursed for reasonable expenses incurred to
attend Board of Directors and committee meetings. The 1997 Stock Plan provides
that each new non-employee director will receive, upon initial election to our
Board of Directors, a non-qualified option to purchase 10,000 shares of common
stock. In addition, the 1997 Stock Plan provides that non-employee directors,
on the 5th day after each annual meeting of stockholders, will receive a non-
qualified option to purchase 5,000 shares of common stock. Pursuant to this
provision, on May 12, 1999, Messrs. Landis, Patricof, Salomon, Seidenberg and
Turchin received a non-qualified option to purchase 5,000 shares of common
stock. All such options become exercisable over the two-year period following
the date of grant.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the compensation
paid in 1997, 1998 and 1999 to the Chairman of the Board, the Chief Executive
Officer and each of the five named executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
-------------------- -------------------------
SECURITIES RESTRICTED
UNDERLYING STOCK ALL OTHER
NAME AND PRINCIPAL SALARY BONUS OPTIONS AWARDS COMPENSATION
POSITION YEAR ($) ($) (#) ($)(13) ($)(19)
------------------ ---- -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mortimer B. Zuckerman... 1999 $416,667 -- -- -- $ 144
Chairman............... 1998 -- -- 1,000,000(4) -- 144
1997 -- -- -- -- 144
Edward H. Linde......... 1999 $441,667 -- -- -- $ 144
President and Chief
Executive Officer..... 1998 150,000 -- 1,000,000(5) -- 144
1997 150,000(1) -- -- -- 144
Robert E. Burke......... 1999 $350,000 $262,500 75,000(6) $108,629(14) $4,144
Executive Vice
President............. 1998 311,667 235,000 100,000(7) -- 4,144
1997 250,000(1) 40,000 100,000(8) -- 4,144
Raymond A. Ritchey...... 1999 $342,500 $315,000 112,500(6) $163,054(15) $4,144
Executive Vice
President............. 1998 259,167 295,000 150,000(7) -- 4,144
1997 250,000(1) 55,000 150,000(9) -- 4,144
Douglas T. Linde........ 1999 $229,583 $207,000 56,250(6) $ 81,542(16) $4,144
Senior Vice President.. 1998 159,583 168,300 65,000(7) -- --
1997 110,000 45,000 60,000(10) -- --
Robert E. Pester........ 1999 $230,000 $207,000 75,000(6) $108,629(17) $4,144
Senior Vice President.. 1998 30,961(2) 30,000 75,000(11) -- --
1997 -- -- -- -- --
Robert E. Selsam........ 1999 $239,231 $180,000(3) 56,250(6) $ 81,542(18) $4,144
Senior Vice President.. 1998 229,183 170,000(3) 75,000(7) -- 4,144
1997 221,500(1) 55,000(3) 75,000(12) -- 4,144
</TABLE>
19
<PAGE>
- --------
(1) Represents rate of annual base salary for 1997 that was in effect
following the completion of our initial public offering (the "IPO") of
common stock on June 23, 1997.
(2) Represents portion of annual base salary received by Mr. Pester upon
initiation of employment with Boston Properties on November 12, 1998.
(3) Excludes consultation and management fees paid to Mr. Selsam pursuant to
an agreement dated August 10, 1995. See "Employment and Noncompetition
Agreements."
(4) Represents a special stock option grant in recognition of the absence of
cash compensation received by Mr. Zuckerman in fiscal years 1997 and 1998.
One fifth of these options vest on each of the first, second, third,
fourth and fifth anniversary of the date of grant. The date of grant was
March 24, 1998 and the exercise price was $34.375 per share, the fair
market value of a share of common stock on the date of grant. In addition,
on June 23, 1997, in connection with the consummation of the IPO, Mr.
Zuckerman was granted 320,000 options. One third of these options vest on
each of the third, fourth and fifth anniversary of the IPO. The date of
grant was June 23, 1997 and the exercise price was $25.00 per share, the
fair market value of a share of common stock on the date of grant.
(5) Represents a special stock option grant in recognition of the limited cash
compensation received by Mr. Edward H. Linde in fiscal years 1997 and
1998. One fifth of these options vest on each of the first, second, third,
fourth and fifth anniversary of the date of grant. The date of grant was
March 24, 1998 and the exercise price was $34.375 per share, the fair
market value of a share of common stock on the date of grant. In addition,
on June 23, 1997, in connection with the consummation of the IPO, Mr.
Edward H. Linde was granted 320,000 options. One third of these options
vest on each of the third, fourth and fifth anniversary of the IPO. The
date of grant was June 23, 1997 and the exercise price was $25.00 per
share, the fair market value of a share of common stock on the date of
grant.
(6) These options were granted in recognition of services during fiscal year
1999. One third of these options vest on each of the first, second and
third anniversary of the date of grant. The date of grant was January 24,
2000, and the exercise price was $30.4375 per share, the fair market value
of a share of common stock on the date of grant.
(7) These options were granted in recognition of services during fiscal year
1998. One third of these options vest on each of the first, second and
third anniversary of the date of grant. The date of grant was February 9,
1999, and the exercise price was $33.375 per share, the fair market value
of a share of common stock on the date of grant.
(8) These options were granted in recognition of services during fiscal year
1997. One third of these options vest on each of the first, second and
third anniversary of the date of grant. The date of grant was March 24,
1998 and the exercise price was $34.375 per share, the fair market value
of a share of common stock on the date of grant. In addition, on June 23,
1997, in connection with the consummation of the IPO, Mr. Burke was
granted 160,000 options. One third of these options vest on each of the
third, fourth and fifth anniversary of the IPO. The date of grant was June
23, 1997 and the exercise price was $25.00 per share, the fair market
value of a share of common stock on the date of grant.
(9) These options were granted in recognition of services during fiscal year
1997. One third of these options vest on each of the first, second and
third anniversary of the date of grant. The date of grant was March 24,
1998 and the exercise price was $34.375 per share, the fair market value
of a share of common stock on the date of grant. In addition, on June 23,
1997, in connection with the consummation of the IPO, Mr. Ritchey was
granted 200,000 options. One third of these options vest on each of the
third, fourth and fifth anniversary of the IPO. The date of grant was June
23, 1997 and the exercise price was $25.00 per share, the fair market
value of a share of common stock on the date of grant.
(10)These options were granted in recognition of services during fiscal year
1997. One third of these options vest on each of the first, second and
third anniversary of the date of grant. The date of grant was March 24,
1998 and the exercise price was $34.375 per share, the fair market value
of a share of common stock on the date of grant. In addition, on June 23,
2997, in connection with the consummation of the IPO, Mr. Douglas T.
Linde was granted 80,000 options. One third of these options vest on each
of the third, fourth and fifth anniversary of the IPO. The date of grant
was June 23, 1997 and the exercise price was $25.00 per share, the fair
market value of a share of common stock on the date of grant.
20
<PAGE>
(11) Represents options granted to Mr. Pester upon initiation of employment
with Boston Properties. One third of these options vest on each of the
first, second and third anniversary of the date of grant. The date of
grant was November 12, 1998 and the exercise price was $29.50 per share,
the fair market value of a share of common stock on the date of grant.
(12) These options were granted in recognition of services during fiscal year
1997. One third of these options vest on each of the first, second and
third anniversary of the date of grant. The date of grant was March 24,
1998 and the exercise price was $34.375 per share, the fair market value
of a share of common stock on the date of grant. In addition, on June 23,
1997, in connection with the consummation of the IPO, Mr. Selsam was
granted 80,000 options. One third of these options vest on each of the
third, fourth and fifth anniversary of the IPO. The date of grant was
June 23, 1997 and the exercise price was $25.00 per share, the fair
market value of a share of common stock on the date of grant.
(13) Restricted stock is awarded under the 1997 Stock Plan or by 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 our common stock on that
date as reported on the New York Stock Exchange. The date of grant was
January 24, 2000 and the fair market value of a share of common stock on
the date of grant was $30.4375. Dividends are payable on the restricted
stock to the same extent and on the same date as dividends are paid on
our common stock.
(14) Mr. Burke received an award of 3,571 shares of restricted stock under the
1997 Stock Plan. One fifth of these shares vest on each of the first,
second, third, fourth and fifth anniversary of the award date. The
closing market price of a share of common stock on the award date as
reported on the New York Stock Exchange was $30.4375. The value of the
restricted stock as of December 31, 1999 was $111,147.38 based on the
closing market price as reported on the New York Stock Exchange on
December 31, 1999 of $31.125.
(15) Mr. Ritchey received an award of 5,357 shares of restricted stock on
January 24, 2000 under the 1997 Stock Plan. One fifth of these shares
vest on each of the first, second, third, fourth and fifth anniversary of
the award date. The closing market price of a share of common stock on
the award date as reported on the New York Stock Exchange was $30.4375.
The value of the restricted stock as of December 31, 1999 was $166,737.63
based on the closing market price as reported on the New York Stock
Exchange on December 31, 1999 of $31.125.
(16) Mr. Douglas T. Linde received an award of 2,679 shares of restricted
stock under the 1997 Stock Plan. One fifth of these shares vest on each
of the first, second, third, fourth and fifth anniversary of the award
date. The closing market price of a share of common stock on the award
date as reported on the New York Stock Exchange was $30.4375. The value
of the restricted stock as of December 31, 1999 was $83,383.88 based on
the closing market price as reported on the New York Stock Exchange on
December 31, 1999 of $31.125.
(17) Mr. Pester received an award of 3,571 shares of restricted stock under
the 1997 Stock Plan. One fifth of these shares vest on each of the first,
second, third, fourth and fifth anniversary of the award date. The
closing market price of a share of common stock on the award date as
reported on the New York Stock Exchange was $30.4375. The value of the
restricted stock as of December 31, 1999 was $111,147.38 based on the
closing market price as reported on the New York Stock Exchange on
December 31, 1999 of $31.125.
(18) Mr. Selsam received an award of 2,679 shares of restricted stock under
the 1997 Stock Plan. One fifth of these shares vest on each of the first,
second, third, fourth and fifth anniversary of the award date. The
closing market price of a share of common stock on the award date as
reported on the New York Stock Exchange was $30.4375. The value of the
restricted stock as of December 31, 1999 was $83,383.88 based on the
closing market price as reported on the New York Stock Exchange on
December 31, 1999 of $31.125.
(19) Includes Boston Properties' matching contribution under our 401(k) plan
($4,000 per individual in 1999, 1998 and 1997) and our cost of term life
insurance (approximately $144, $144 and $144 per individual in 1999, 1998
and 1997, 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.
21
<PAGE>
Option Exercises and Year-End Holdings. The following table provides certain
information with respect to stock options granted by Boston Properties in
recognition of services rendered in fiscal year 1999 to the Chairman of the
Board, the Chief Executive Officer and each of the five named executive
officers pursuant to the 1997 Stock Plan. The closing price of the common
stock on the date of grant (January 24, 2000) was $30.4375. All stock options
were granted at an exercise price equal to the fair market value on the date
of grant. One third of these options vest on each of the first, second and
third anniversaries of the date of grant.
OPTION GRANTS FOR FISCAL YEAR 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------
PERCENT OF
TOTAL OPTIONS EXERCISE
OPTIONS GRANTED TO OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME (#) FISCAL YEAR(1)(2) ($/SH) DATE VALUATION (3)
---- --------- ----------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Mortimer B. Zuckerman... -- -- -- -- --
Edward H. Linde......... -- -- -- -- --
Robert E. Burke......... 75,000(2) 7.33% $30.4375 01/24/10 $295,500
Raymond A. Ritchey...... 112,500(2) 11.00% 30.4375 01/24/10 443,250
Douglas T. Linde........ 56,250(2) 5.50% 30.4375 01/24/10 221,625
Robert E. Pester........ 75,000(2) 7.33% 30.4375 01/24/10 295,500
Robert E. Selsam........ 56,250(2) 5.50% 30.4375 01/24/10 221,625
</TABLE>
- --------
(1) A total of 1,022,750 options were granted to employees of Boston
Properties on January 24, 2000, in recognition of services rendered in
fiscal year 1999.
(2) On February 9, 1999, a total of 1,662,308 options were granted to
employees of Boston Properties in recognition of services rendered in
fiscal year 1998. One third of these options vest on each of the first,
second and third anniversary of the date of grant. The exercise price was
$33.375 per share, the fair market value of a share of stock on February
9, 1999, the date of grant. None of these options were granted to Messrs.
Zuckerman, E. Linde or Pester. Of these options, 100,000 (6.02% of the
total), 150,000 (9.02% of the total), 65,000 (3.91% of the total) and
75,000 (4.51% of the total) were granted to Messrs. Burke, Ritchey, D.
Linde and Selsam, respectively.
(3) Calculated using the Black-Scholes pricing model. The assumptions used in
determining the present value of the option grant using this methodology
are as follows: expected option life of 6 years; risk-free rate of 6.73%;
20% volatility since the IPO; 6.8% dividend yield; exercise price of
$30.4375; and a closing price of common stock on the date of grant of
$30.4375. The actual value, if any, that the holders of these options may
realize will depend on the continued employment of the holders of the
options through its vesting period, and the excess of the market price
over the exercise price on the date the option is exercised, so that 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, etc.
22
<PAGE>
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
None of the Chairman of the Board, the Chief Executive Officer or the five
named executive officers exercised any of their stock options during the year
ended December 31, 1999. The following table sets forth the number of shares
of common stock covered by the stock options held by each of these officers as
of December 31, 1999. 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, 1999 of $31.125, minus the exercise price,
multiplied by the number of shares underlying the options. An option is "in-
the-money" if the fair market value of the shares of common stock underlying
the option exceeds the option exercise price.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT YEAR-END(#) OPTIONS AT YEAR-END($)
------------------------- -------------------------
NAME AND PRICIPAL POSITION EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mortimer B. Zuckerman...... 200,000 1,120,000 0 $1,960,000
Chairman..................
Edward H. Linde............ 200,000 1,120,000 0 1,960,000
President and Chief
Executive Officer........
Robert E. Burke............ 33,333 326,667 0 980,000
Executive Vice President..
Raymond A. Ritchey......... 50,000 450,000 0 1,225,000
Executive Vice President..
Douglas T. Linde........... 20,000 185,000 0 490,000
Senior Vice President.....
Robert E. Pester........... 25,000 50,000 $40,625 81,250
Senior Vice President.....
Robert E. Selsam........... 25,000 205,000 0 490,000
Senior Vice President.....
</TABLE>
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
Mr. Edward H. Linde, as President and Chief Executive Officer, has an
employment and noncompetition agreement with Boston Properties. Pursuant to
his employment agreement, during the term of the agreement, Mr. Linde will
devote substantially all of his business time to the business and affairs of
Boston Properties. The term of the employment agreement is three years
beginning on the closing of the IPO with automatic one-year renewals
thereafter unless notice of termination is given 30 days prior to the end of
the initial term or renewal term by either Mr. Linde or Boston Properties. Mr.
Linde receives an annual base salary of $500,000 and is eligible for bonus
compensation, including stock options, to be determined in the discretion of
our Board of Directors. Mr. Linde's employment with us may be terminated for
"cause" by Boston Properties 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 the material best interests of
Boston Properties, or (4) a conviction of a felony if such conviction has a
material adverse effect on Boston Properties. Mr. Linde may terminate his
employment for "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 Properties of any of
its material obligations under his employment agreement. If Mr. Linde's
employment is terminated by us "without cause" or by Mr. Linde for "good
reason," then Mr. Linde will be entitled to a severance amount equal to the
product of (x) his base salary plus prior year's bonus multiplied by (y) the
number of full and fractional years that the noncompetition agreement
described below is in effect (but in any event at least one year's base salary
plus prior year's bonus).
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The employment agreement prohibits Mr. Linde while he is a 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 its tenants, suppliers,
contractors, lenders or employees or with any governmental agency, or (3)
soliciting our tenants or employees. Pursuant to his employment agreement,
however, Mr. 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. Linde may participate as an
officer or director of any charitable organization. The period that this
noncompetition agreement is in effect may be terminated prematurely by Boston
Properties, which will reduce the severance amount payable to Mr. Linde. In
addition, his employment agreement provides that the noncompetition provision
shall not apply if Mr. 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 a change of control.
Messrs. Burke, Ritchey and Selsam have employment agreements with Boston
Properties similar to that of Mr. Linde, except that the geographic scope of
their noncompetition provisions is limited to the markets of Boston Properties
at the time of termination of their employment. In addition, Mr. Zuckerman is
a party to an agreement with Boston Properties that contains noncompetition
provisions of the same scope and duration as the noncompetition provisions of
Mr. Linde's employment agreement. Boston Properties will continue to be
subject during the term of Mr. Selsam'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 Properties 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 commission, but did receive $16,344.65 in management fees for fiscal year
1999.
SEVERANCE AGREEMENTS
Boston Properties 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. Zuckerman and Mr. Linde in the event of
their termination under certain circumstances within 24 months following a
"change in control." In the event a "terminating event" occurs within 24
months following a "change in control," Mr. Zuckerman and Mr. 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 in control" of up to three (3) times such executive 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 in control." Tax protection, financial
counseling, tax preparation assistance, outplacement counseling and
continuation of health, dental and life insurance is 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
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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 is provided for two
(2) years following termination.
STOCK PERFORMANCE GRAPH
The following graph provides a comparison of cumulative total stockholder
return for the period from June 23, 1997 (the date on which our common stock
was first publicly traded) through December 31, 1999, among Boston Properties,
the Standard & Poor's ("S&P") 500 Index and the National Association of Real
Estate Investment Trusts, Inc. ("NAREIT") Equity REIT Total Return Index (the
"Equity REIT 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 indexes, 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.
[BOSTON PROPERTIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NAREIT
Boston Equity
Properties, REIT
Inc. S&P 500 Index
------------------ ------- -------
<S> <C> <C> <C>
June 1997 $100.00 $100.00 $100.00
Sept. 1997 120.41 107.49 111.82
Dec. 1997 122.97 110.58 113.77
March 1998 132.36 126.00 113.24
June 1998 129.42 130.17 108.05
Sept. 1998 110.03 117.22 96.68
Dec. 1998 119.34 142.18 93.86
March 1999 125.42 149.26 89.33
June 1999 143.98 159.78 98.34
Sept. 1999 124.97 149.80 90.43
Dec. 1999 128.62 172.08 89.52
</TABLE>
25
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COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
Philosophy of Executive Compensation
Boston 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 Alan J. Patricof, Ivan G. Seidenberg
and Martin Turchin. None of the members of the Compensation Committee are
employees of Boston Properties. The philosophy of our executive compensation
program is to:
. Attract, retain and reward executives who have the motivation,
experience, and skills necessary to lead Boston Properties effectively
and continue our short-term and long-term profitability, growth and
return to stockholders.
. Create a link between the performance of our stock and executive
compensation.
. Base executive compensation levels on the overall financial and
operational performance of Boston Properties, the regional contribution
to the overall financial and operational performance and the individual
contribution of the executive officer to the success of Boston
Properties' financial performance.
. Position executive compensation levels to be competitive with other
similarly situated public companies including the real estate industry
in general and real estate investment trusts, or REITs, in particular,
with an emphasis on office REITs and REITs with a comparable market
capitalization. During 1997, the Compensation Committee engaged an
independent outside compensation consultant to review executive
compensation matters. The consultant prepared a survey of executive
compensation arrangements for executives at various levels provided by a
peer group of 30 REITs of similar size and makeup. The consultant's
report was the basis on which the Compensation Committee designed our
executive compensation program. Our overall philosophy is to provide
total compensation to our executives at a target level around the 75th
percentile for executives in comparable positions in our peer group.
Since 1997, the Compensation Committee has annually reviewed publicly
available executive compensation surveys of peer groups and the real
estate industry in general in order to ensure that our executive
compensation program remains comparable to executives in our peer group,
as well as the real estate industry in general.
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 well as specific compensation levels for the executive
officers. 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, bonuses, if any, are determined
for the past year's performance, base salaries for the following fiscal year
are set and grants of options and/or stock, if any, are generally made. With
respect to the compensation of the executive officers, other than Mr.
Zuckerman and Mr. Linde, the Compensation Committee reviews Mr. Linde's
recommendations with regard to the appropriate compensation awards. The
elements of compensation are primarily comprised of the following, with all
three elements working together to satisfy the ultimate goal of enhancing
stockholder value:
1. Base 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 1997 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
26
<PAGE>
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 75th
percentile for executives in comparable positions in comparable public real
estate companies. Based on the Compensation Committee's philosophy and the
factors as stated above, the Compensation Committee approved 2000 base
salaries for the named executive officers other than Mr. Edward H. Linde as
follows: Mr. Burke, $365,000; Mr. Ritchey, $365,000; Mr. Douglas T. Linde,
$240,000; Mr. Pester, $250,000; and Mr. Selsam, $250,000.
2. Cash 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, 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 1999, the Compensation
Committee noted that fiscal year 1999 was a year of significant achievements
including the following:
. Strong financial performance, with a 16% increase in total FFO over 1998
and a per-share FFO increase from $2.50 per share (diluted) in 1998 to
$2.89 per share (diluted) in 1999.
. Boston Properties' total return of 8% for fiscal year 1999 outperformed
the Morgan Stanley REIT index total return of 4.69%.
. Continued growth through $225 million in new acquisitions, $1.13 billion
in developments in progress and $172 million in developments placed in
service.
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. In recognition of the achievements 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. Edward H. Linde for the fiscal year ended
December 31, 1999 as follows: Mr. Burke, $262,500; Mr. Ritchey, $315,000; Mr.
Douglas T. Linde, $207,000; Mr. Pester, $207,000; and Mr. Selsam, $180,000.
3. Stock Options and Stock Grants. While recognizing that cash bonus awards
provide rewards for positive short-term performance, the Compensation
Committee believes that awards of stock options or stock grants 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. The Compensation Committee intends to grant stock
options and/or stock grants annually on the basis of Boston Properties'
performance and regional and individual contributions to the success of its
performance. Based on the Compensation Committee's review of Boston
Properties' overall performance, regional performance and individual
performance for 1999, on January 24, 2000, the Compensation Committee granted
Messrs. Burke, Ritchey, D. Linde, Pester and Selsam options to purchase
75,000, 112,500, 56,250, 75,000 and 56,250 shares of common stock,
respectively, at the then market price of $30.4375 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, the Compensation Committee
granted restricted stock to Messrs. Burke, Ritchey, D. Linde, Pester and
Selsam of 3,571, 5,357, 2,679, 3,571 and 2,679 shares, respectively. One fifth
of the restricted stock will vest on each of the first, second,
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<PAGE>
third, fourth and fifth anniversary of the date of grant. This is the first
year that the Compensation Committee has made 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 combined with a five-year vesting schedule, can serve
as a retention tool.
Compensation of the Chief Executive Officer and the Chairman of the Board
The Compensation Committee approved a base salary for 1999 of $500,000 for
each of Mr. Edward H. Linde and Mr. Zuckerman based upon information regarding
the base salary being paid to other presidents and chairmen of comparable
companies. Prior to 1999, Mr. Zuckerman received no salary and Mr. Linde
received a base salary of $150,000 which was significantly below competitive
levels. The Compensation Committee believes the base salary increase granted
to each of Mr. Zuckerman and Mr. Linde in 1999 was necessary in order to
ensure that Messrs. Zuckerman and Linde received salary compensation that was
fair and competitive as compared with salaries for similarly situated
executives in the real estate industry in general and among comparable REITs
and in order to recognize their individual contribution to the performance of
Boston Properties.
For the fiscal year ended December 31, 1999, no cash bonuses were awarded to
Mr. Zuckerman or Mr. Linde. Although the Compensation Committee strongly
believes that the overall financial performance of Boston Properties and the
individual performance of each of Mr. Zuckerman and Mr. Linde in fiscal year
1999 warranted bonus awards, each of Mr. Zuckerman and Mr. Linde offered, and
the Compensation Committee agreed, to waive any cash bonus for fiscal year
1999. Both have significant equity ownership in Boston Properties and, despite
Boston Properties' excellent operating performance, were willing to forego
bonuses in 1999 in order to enhance total return to stockholders. Each of Mr.
Zuckerman and Mr. Linde was awarded stock options in March 1998 to recognize
their contribution to the achievements of Boston Properties and to grant
incentives tied directly to the creation of value for stockholders. Each of
the grants was meant to serve as a multi-year grant. Due to the multi-year
nature of the grant, the Compensation Committee did not make stock awards to
Messrs. Zuckerman and Linde for fiscal year 1999 although the Compensation
Committee is of the view that their contribution to Boston Properties could
have warranted such awards.
Tax Deductibility of Compensation. Section 162(m) of the Code limits the
deductibility on Boston 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'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.
Boston Properties did not pay any compensation during 1999 which would be
subject to Section 162(m).
Submitted by the Compensation Committee:
Alan J. Patricof
Ivan G. Seidenberg
Martin Turchin
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Boston Properties has established a Compensation Committee consisting of
Messrs. Patricof, Seidenberg and Turchin. 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.
28
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the executive officers and directors of Boston Properties, and persons who own
more than ten percent of a registered class of Boston 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 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, 1999, all Section 16(a) filing requirements applicable
to our executive officers, directors and greater than ten percent beneficial
owners were satisfied.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TIMES SQUARE ACQUISITION AND DEVELOPMENT
On January 21, 1999, Boston Properties through certain of its subsidiaries,
entered into a series of binding agreements with Prudential and certain of its
affiliates (the "Prudential Parties") for the acquisition, at any time until
January 15, 2001 (subject to certain conditions and deadlines being met and
additional deposits being made, as discussed below) of the leasehold interests
in two development sites in the center of New York City's Times Square (the
"Sites"). The Sites are part of the 42nd Street development project, a
redevelopment project initiated in 1984 by the State and City of New York.
Along with the leasehold interests, Boston Properties would acquire the rights
to receive ground rents and other reimbursements (the "Credits") on the Sites.
A total purchase price of $312.25 million (the "Acquisition Price") is payable
to the Prudential Parties for both of the leasehold interests and the Credits.
The entire Acquisition Price is payable in cash, except that Prudential may
elect to have $1 million of the Acquisition Price attributable to each Site
payable in common units of the Operating Partnership. Prudential also retained
the right to become a 33.33% equity participant in the development of the
Sites by contributing, upon an election to participate, its proportionate
share of the total project equity.
The Sites, which are referred to as "Site 1" and "Site 4", are the last to
be sold of the four original sites included in the Times Square development
project. The Sites are located in the heart of Times Square directly across
from one another on the south side of 42nd Street. Site 1 is the full block
between Broadway and Seventh Avenue. Site 4 is at the corner of 42nd Street
and Seventh Avenue. The leases which are the subject of the leasehold
interests (the "Leases") and related project documents allow for the
development of an office building on each Site. On August 16, 1999, Boston
Properties acquired the leasehold interest and related Credits in Site 4 from
Prudential for approximately $152.5 million in cash, which was funded through
a draw down on our unsecured line of credit. Boston Properties has commenced
construction of an approximately 1.1 million square foot, 38 story, Class A
office tower at this site. The office space in the tower is currently 100%
pre-leased to Ernst & Young LLP. We are currently completing a design for a 48
story office building to be built on Site 1 which we expect will include
approximately 1,195,000 rentable square feet of office and retail space.
In connection with the signing of the agreements, Boston Properties
delivered a contract deposit of $15 million. The agreements provided for the
acquisition of the first Site (selected for acquisition by Boston Properties)
to be completed on or before January 14, 2000 and for the acquisition of the
remaining Site to be completed on or before January 15, 2001. As stated above,
Boston Properties acquired Site 4 on August 16, 1999. At the time of the
closing of the acquisition of Site 4, the contract deposit was increased from
$15 million to $20 million. Following the closing of the acquisition of Site
4, commencing January 15, 2000, unless Boston Properties elects to terminate
its remaining rights under the agreements, we must make additional monthly
contract deposits of $1.5 million until the closing of the acquisition of Site
1. For each month in which an increase in the contract deposit is required,
the Acquisition Price will also be increased by $250,000. Under the terms of
the agreements, Boston Properties will forfeit the total contract deposit
delivered if we elect to terminate our rights under the agreements, absent a
default or other breach by Prudential. Boston Properties will have no other
liability or obligation to Prudential if we elect not to acquire Site 1.
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Pursuant to the terms of the Site 1 agreement, Prudential has the right, but
not the obligation, to become an equity participant in the development venture
that will develop Site 1, with an interest of up to 33.33%, as elected by
Prudential. Prudential declined to become an equity participant in the Site 4
development venture. In order to become an equity participant in Site 1,
Prudential must make an election prior to the closing of our acquisition of
Site 1. Prudential's purchase price for an equity interest in the applicable
development venture will be calculated on the basis of (i) the percentage
interest elected by Prudential and (ii) the total equity previously
contributed to the development venture by Boston Properties plus a base return
of 8%. Prudential will pay for such interest through a cash contribution to
the venture. If Prudential becomes an equity participant, Boston Properties
will control the management of the development venture and Prudential, as a
non-managing member, will be obligated to contribute its proportionate share
of the total project equity on the same basis as Boston Properties. If
Prudential becomes an equity participant, the Site 1 agreement provides for a
mechanism for Prudential and Boston Properties to trigger buy-sell rights at
any time after the earlier of actual rent stabilization or five years after
the closing of the acquisition of that Site. The value of Prudential's equity
interest in the Site 1 development venture would be determined through an
appraisal process, subject to a minimum value equal to the capital contributed
by Prudential to the development venture. If Boston Properties elects to buy
Prudential's interest, the purchase price would be payable at our election in
cash or through the delivery of shares of common stock of Boston Properties
valued at 97.5% of the then current trading value of our common stock on the
New York Stock Exchange.
The Leases expire April 30, 2089, but the tenant under each lease has the
right to acquire the fee interest. The Sites are exempt from New York City
real property taxes during the term of each Lease, instead the tenants pay
base rent (and certain other payments specified in each Lease) which are
substantially below full real estate taxes for the first twenty years of the
term of each Lease. The Credits, which offset ground rent and other payments
required under each Lease or are paid directly by the landlord under the
Leases, are attributable as follows: (i) approximately $60.73 million of
Credits relate to Site 1, and will be acquired concurrently with the
acquisition of that Site; (ii) approximately $52.27 million of Credits relate
to Site 4, and were acquired concurrently with the acquisition of that Site;
and (iii) approximately $16.24 million of the Credits relate to another site
which is not being acquired and are allocated on a pro rata basis to Sites 1
and 4). After commencement of construction of an office building on each Site,
the Credits allocable to the Site begin accruing interest at an interest rate
equal to 110 basis points above the rate on 10-year U.S. Treasury notes until
fully repaid. Boston Properties estimates that it will take approximately 30
years from closing for the Credits to be exhausted.
EMBARCADERO CENTER ACQUISITION
On February 10, 1999, Boston Properties completed the second phase of the
two-phase acquisition of Embarcadero Center in San Francisco, California, from
Prudential and David Rockefeller & Associates ("Rockefeller"). Situated on 8.4
acres of waterfront property in the heart of the city's financial district,
Embarcadero Center is a six-building portfolio of Class A office space,
consisting of an aggregate of 3.66 million square feet of net rentable office
space, 354,000 square feet of retail space and 2,090 underground parking
spaces. Boston Properties acquired the entire Embarcadero Center portfolio for
approximately $1.2 billion, which was funded as follows: (i) the assumption or
incurrence of $730 million of mortgage financing having a weighted average
maturity of approximately 8.85 years and a weighted average fixed interest
rate of approximately 6.63%; (ii) a draw down of approximately $97.3 million
on our unsecured line of credit; (iii) the issuance of 6,045,737 Series Two
preferred units to Rockefeller and 167,394 Series Three preferred units to
Prudential (which Series Two and Series Three preferred units have an
aggregate liquidation preference of approximately $311 million and had an
aggregate value when issued of $286.4 million); and (iv) cash proceeds of $100
million from a separate transaction for the sale of 2,000,000 shares of Series
A preferred stock to Prudential. The Series A preferred stock was issued on
February 10, 1999 pursuant to a Stock Purchase Agreement dated September 28,
1998 between Boston Properties and Prudential.
In the initial phase of the acquisition, which closed November 12, 1998
("Phase One"), Boston Properties acquired both Prudential's and Rockefeller's
entire interest in the Old Federal Reserve Building and
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Embarcadero Center West Tower ("the Tower"), which was encumbered by $100
million of mortgage indebtedness. Boston Properties also acquired
Rockefeller's entire equity interest in the four general partnerships (the "EC
Partnerships") that owned the Embarcadero Centers 1, 2, 3 and 4 ("EC 1-4").
After the acquisition of Rockefeller's interests in the EC Partnerships, (i)
Boston Properties, through affiliates, owned approximately a 49.98% interest
in Embarcadero Centers 1, 3 and 4 and approximately a 40.00% interest in
Embarcadero Center 2; (ii) the EC Partnerships, in the aggregate, had
approximately $420 million in non-property assets (consisting of investment
grade securities rated A+ by Standard & Poor's Corporation and A+ by Fitch
IBCA, Inc.); and (iii) the EC Partnerships had aggregate indebtedness of
approximately $1,050 million, consisting of unsecured indebtedness of
approximately $420 million and indebtedness of $630 million secured by
mortgages on EC 1-4. Prudential was a non-managing general partner of each of
the EC Partnerships. In the second phase of the transaction, which closed
February 10, 1999 ("Phase Two"), pursuant to redemption agreements entered
into as part of Phase One, Prudential's entire interests in all four EC
Partnerships were redeemed through the distribution to Prudential of non-
property partnership assets subject to debt having a net value of
approximately $328 million. As a result of the closing of Phase Two, Boston
Properties, through its affiliates, owns all of the interests in EC 1-4.
The Series Three preferred units and Series A preferred stock issued to
Prudential (collectively, the "Preferred Securities") have similar economic
terms. On and after December 31, 2002, the Preferred Securities will be
convertible, at the holder's election, into common stock of Boston Properties
(in the case of the Series A preferred stock) or common units of the Operating
Partnership (in the case of the Series Three preferred units) at a conversion
price of $38.10 per common share or unit. Dividends or distributions on the
Preferred Securities (the "Ordinary Preferred Dividend") are payable quarterly
and accrue at a rate of 5.0% per annum through March 31, 1999; 5.5% through
December 31, 1999; 5.625% through December 31, 2000; 6.0% through December 31,
2001; 6.5% through December 31, 2002; 7.0% until May 12, 2009; and 6.0%
thereafter. However, if at any time the quarterly dividends or distributions
on the common securities into which a Preferred Security may be converted (the
"Ratchet Dividend") are greater than the Ordinary Preferred Dividend due on
such Preferred Security, then each Preferred Security will receive, in respect
of that quarter, the Ratchet Dividend rather than the lower Ordinary Preferred
Dividend. The terms of the Preferred Securities provide that they may be
redeemed for cash in six annual tranches, beginning on May 12, 2009, at the
election of Boston Properties or the holders. In lieu of its right to require
an annual redemption of Preferred Securities, Boston Properties may elect to
convert a tranche of Preferred Securities into common stock (in the case of
the Series A preferred stock) or common units (in the case of the Series Three
preferred units), provided that at the time of such forced conversion the
weighted average of the closing price of Boston Properties' common stock
during the preceding ten day period exceeds 110% of the conversion price.
SUMNER SQUARE TRANSACTION
In forming Boston Properties at the time of the IPO, Sumner Square, an
office complex located in Washington, D.C. owned by 17M Associates, a limited
partnership ("17M"), was not contributed to Boston Properties as part of the
formation transactions due to the fact, as described below, that the property
was subject to non-recourse mortgage debt held by a lending group led by
Sumitomo Bank that exceeded the fair market value of the property. The general
partner of 17M was 17M-Boston Associates Limited Partnership ("17M-Boston")
with a 75% interest. The general partner of 17M-Boston was a general
partnership with an 85% interest, of which Mr. Mortimer B. Zuckerman and Mr.
Edward H. Linde, the Chairman and Chief Executive Officer of Boston
Properties, respectively, were the general partners, each with a 50% interest.
Mr. Robert E. Burke and Mr. Raymond A. Ritchey, executive officers of Boston
Properties, along with an unaffiliated estate, were limited partners of 17M-
Boston, with a 15% interest collectively. At the time of the IPO, 17M granted
Boston Properties an option to acquire the property at any time during the 10-
year period after the IPO for a cash price equal to the sum of $1.00 plus the
outstanding indebtedness of 17M on the option exercise date and any net cash
contributed by the partners of 17M after the IPO, with interest (plus certain
transaction expenses and transfer taxes). In addition, upon exercise of the
option, Boston Properties agreed to pay to the limited partners of 17M their
pro rata share of any value of the property above the option price, if any.
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Both before and since the IPO, Messrs. Zuckerman and Linde, on behalf of
17M, periodically held discussions with Sumitomo Bank proposing to restructure
the loan. Early in 1999, Sumitomo Bank indicated a willingness to sell the
loan for $32,500,000, plus legal costs of approximately $20,000, compared to a
total balance (including principal and unpaid interest) of approximately
$53,350,000. The loan was then in default for non-payment. Messrs. Zuckerman
and Linde had personally guaranteed the payment of interest only on the loan.
In light of the bank's willingness to sell the debt as described above, all
the directors of Boston Properties, other than Messrs. Zuckerman and Linde, in
accordance with the conflicts of interest policy adopted by Boston Properties
at the time of the IPO, unanimously approved a transaction in which the
partners of 17M contributed all of their partnership interests in 17M to the
Operating Partnership in exchange for common units with an aggregate value
when issued of $100,000. Upon the closing of this acquisition by the Operating
Partnership on March 26, 1999, Boston Properties provided $32,500,000 to 17M,
which 17M used to have its wholly-owned subsidiary purchase the loan. None of
the partners of 17M received any cash consideration in connection with this
transaction other than the nominal amount of common units described above.
111 HUNTINGTON AVENUE DEVELOPMENT
On May 25, 1999, Boston Properties acquired Prudential's 50% interest in the
development rights associated with the 111 Huntington Avenue development at
the Prudential Center in Boston, Massachusetts, giving Boston Properties a
100% interest in the development rights associated with the 111 Huntington
project. These rights were acquired for approximately $12.3 million which we
funded through the issuance of 343,077 shares of our common stock pursuant to
a previously negotiated option agreement. Prudential retains a 50% interest in
additional future development parcels located at the Prudential Center.
Construction of 111 Huntington Avenue at the Prudential Center commenced on
April 27, 1999.
Boston Properties originally acquired the commercial portion of the
Prudential Center property and the development rights associated with the
Prudential Center, including the 111 Huntington development rights, on July 2,
1998. The acquisition included (i) the 52 story office building known as the
"Prudential Tower" containing approximately 1.2 million net rentable square
feet; (ii) the 25 story office building known as "101 Huntington Avenue"
containing approximately 500,000 net rentable square feet; (iii) the "Shops at
Prudential" containing approximately 500,000 net rentable square feet for
retail purposes; (iv) a parking garage containing in excess of 2,500 parking
spaces; and (v) rights to expand the Prudential Center by approximately
991,000 square feet of office space, 263,000 square feet of retail and
community services space and 422,000 square feet of housing (the "Development
Rights"). The Development Rights (other than the 111 Huntington Avenue
development project, which is now 100% owned by Boston Properties) are owned
by BP Prucenter Development LLC, a limited liability company owned 50% by the
Operating Partnership and 50% by Prudential. The consideration originally paid
in July, 1998 by the Operating Partnership for the initial fifty percent
interest in all of the Development Rights was $27 million in cash.
CARNEGIE CENTER ACQUISITIONS AND DEVELOPMENT
On June 30, 1998, Boston Properties acquired from entities controlled by Mr.
Alan B. Landis a portfolio of properties known as the Carnegie Center
Portfolio and Tower One and related operations (collectively, the "Carnegie
Center Portfolio"). The Carnegie Center Portfolio then consisted of nine Class
A office buildings located in Princeton, New Jersey and East Brunswick, New
Jersey. In connection with the acquisition of the Carnegie Center Portfolio,
Mr. Landis became a director of Boston Properties, a position he continues to
hold. The properties in Princeton constituted a major portion of the Carnegie
Center office complex. Under the acquisition agreement Boston Properties had
the right to acquire three additional Class A buildings (the "500 Series
Buildings") located in the Carnegie Center office complex, following the
satisfaction of closing conditions principally related to third party
relationships, for aggregate consideration specified in the acquisition
agreement at $68,288,077, subject to closing adjustments. On March 1, 2000
Boston Properties acquired the Series 500 Buildings through the assumption of
approximately $49,040,204 of mortgage financing and the issuance of an
aggregate of 577,817 common units. The number of common units to be issued was
determined by dividing the total consideration owed, after adjustments, by the
weighted average of the closing prices per share of Boston
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Properties common stock, as reported on the New York Stock Exchange, for the
ten day period ended on February 25, 2000 ($30.23), as provided in the
original acquisition agreement entered into in 1998. Mr. Landis and his spouse
received 473,048 of the common units issued in consideration for the Series
500 Buildings. The closing adjustments included commissions of approximately
$500,000 owed to an affiliate of Mr. Landis in connection with new leases for
one of the 500 Series Buildings. This transaction was reviewed and approved by
a vote of the independent directors of Boston Properties.
In connection with the acquisition of the Carnegie Center Portfolio, the
Operating Partnership entered into a development agreement with an affiliate
of Mr. Landis providing for up to approximately 2,000,000 square feet of
development in or adjacent to the Carnegie Center office complex. An entity
controlled by Boston Properties (and in which Mr. Landis or an affiliate of
Mr. Landis will have an interest) will generally acquire the necessary land
parcel upon the commencement of each development project. Two parcels of land
located within the Carnegie Center office complex were acquired in 1999: 302
Carnegie Center for approximately $1,300,000 in cash and 502 Carnegie Center
for approximately $2,298,000 in cash. Each of these properties is under
contract for development. In each case the purchase price was calculated
pursuant to the development agreement on the basis of $20 per rentable square
foot proposed to be constructed on the land parcel. In addition, an affiliate
of Mr. Landis obtained a contingent interest in the project, if the developed
property achieves a stabilized return in excess of a target annual return
ranging between 10.5% and 11%. The development agreement also provided that
the Operating Partnership and an affiliate of Mr. Landis would form a
development company to provide development services for the Carnegie Center
developed projects at a total charge of five dollars ($5.00) 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
the right to receive compensation at a rate of $250,000 annually. During 1999
two development properties were completed under the development agreement and
conveyed to Boston Properties: 510 Carnegie Center, a 234,160 square-foot,
Class A office building, was acquired on April 30, 1999 for approximately
$48,000,000 funded through the assumption of debt of approximately
$28,400,000, the issuance of 57,778 Series One units valued at approximately
$2,000,000 and cash of approximately $17,600,000; and 206 Carnegie Center, a
161,763 square-foot, Class A office building, was acquired on July 9, 1999 for
approximately $27,000,000 in cash. Each of these transactions was reviewed and
approved by a vote of the directors of Boston Properties other than Mr.
Landis.
SECURED LENDING TRANSACTIONS
Prudential or its affiliates have provided us with secured financing on
customary terms and conditions comparable with transactions involving other
lenders.
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 ends on May 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. A final payment equal to the principal amount outstanding and all
accrued interest is due on May 31, 2001. As of February 1, 2000, the
outstanding principal amount of the loan was $150,000.
OTHER MATTERS
EXPENSES OF SOLICITATION
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, D.F. King & Co., Inc., a proxy solicitation firm,
has been engaged by Boston Properties to act as proxy solicitor and will
receive fees estimated at $7,500 plus reimbursement of out-of-pocket expenses.
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STOCKHOLDER PROPOSALS FOR ANNUAL MEETINGS
Any stockholder proposals submitted pursuant to Exchange Act Rule 14a-8 for
inclusion in Boston Properties' proxy statement and form of proxy for its 2001
annual meeting must be received by Boston Properties on or before December 2,
2000 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., 800 Boylston Street, Suite 400, Boston, MA 02199-
8001, Attn.: Secretary.
Stockholder proposals to be presented at its 2001 annual meeting, other than
stockholder proposals submitted pursuant to Exchange Act Rule 14a-8, must be
received in writing at the principal executive office of Boston Properties,
Inc., 800 Boylston Street, Suite 400, Boston, MA 02199-8001 not earlier than
January 4, 2001, nor later than February 18, 2001 unless its 2001 annual
meeting of stockholders is scheduled to take place before April 3, 2001 or
after July 2, 2001. 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'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"); 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'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., 800
Boylston Street, Suite 400, Boston, MA 02199-8001, Attn: Secretary.
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EXHIBIT A
BOSTON PROPERTIES, INC.
1997 STOCK OPTION AND INCENTIVE PLAN
AS AMENDED AND RESTATED ON JANUARY 24, 2000
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Boston Properties, Inc. 1997 Stock Option and
Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees, Independent Directors and other key persons of
Boston Properties, Inc. (the "Company"), and the employees and other key
persons of Boston Properties Limited Partnership (the "Operating Partnership")
and the Company's other Subsidiaries, upon whose judgment, initiative and
efforts the Company largely depends for the successful conduct of its business
to acquire a proprietary interest in the Company. It is anticipated that
providing such persons with a direct stake in the Company's welfare will
assure a closer identification of their interests with those of the Company,
thereby stimulating their efforts on the Company's behalf and strengthening
their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended from time to
time.
"Administrator" is defined in Section 2(a).
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified
Stock Options, Restricted Stock Awards, Deferred Stock Awards, Unrestricted
Stock Awards, Performance Share Awards, Dividend Equivalent Rights and Other
Stock-Based Awards.
"Board" means the Board of Directors of the Company as constituted from time
to time.
"Change of Control" is defined in Section 16.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor Code, and related rules, regulations and
interpretations.
"Committee" means the Committee of the Board referred to in Section 2.
"Company" means Boston Properties, Inc., a Delaware corporation, and any
successor thereto.
"Deferred Stock Award" means Awards granted pursuant to Section 7.
"Dividend Equivalent Right" means Awards granted pursuant to Section 10.
"Effective Date" means the date on which the Plan is initially approved by
stockholders as set forth in Section 18.
"Fair Market Value" on any given date means the last reported sale price at
which Stock is traded on such date or, if no Stock is traded on such date, the
next preceding date on which Stock was traded, as reflected on the principal
stock exchange or, if applicable, any other national stock exchange on which
the Stock is traded or admitted to trading. Notwithstanding the foregoing, the
Fair Market Value on the first day of the Company's initial public offering of
Stock shall be the initial public offering price as set forth in the final
prospectus for the Company's initial public offering.
"Incentive Stock Option" means any Stock Option that qualifies as and is
designated in writing in the related Option agreement as constituting an
"incentive stock option" as defined in Section 422 of the Code.
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"Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
"Non-Qualified Stock Option" means any Stock Option that is not an Incentive
Stock Option.
"Operating Partnership" means Boston Properties Limited Partnership, a
Delaware limited partnership, and any successor thereto.
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Other Stock-Based Award" means Awards granted pursuant to Section 11.
"Performance Share Award" means Awards granted pursuant to Section 9.
"Restricted Stock Award" means Awards granted pursuant to Section 6.
"Retirement" means the employee's termination of employment with the Company
and its Subsidiaries after attainment of the age and/or service requirements
to qualify for early or normal retirement under the Company's qualified
retirement plan.
"Stock" means the Common Stock, par value $.01 per share, of the Company,
subject to adjustments pursuant to Section 3.
"Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities beginning with the
Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50 percent or more of the economic interest or the total combined
voting power of all classes of stock or other interests in one of the other
corporations or entities in the chain.
"Unrestricted Stock Award" means any Award granted pursuant to Section 8.
SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT
PARTICIPANTS AND DETERMINE AWARDS
(a) Committee. The Plan shall be administered by either the Board or a
committee of not less than two Independent Directors (in either case, the
"Administrator"). Each member of the Committee shall be a "non-employee
director" within the meaning of Rule 16b-3(b)(3)(i) promulgated under the Act,
or any successor definition under said rule. Each member of the Committee
shall also be an "outside director" within the meaning of Section 162(m) of
the Code and the regulations promulgated thereunder.
(b) Powers of Administrator. The Administrator shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the individuals to whom Awards may from time to time be
granted;
(ii) to determine the time or times of grant, and the extent, if any, of
Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock
Awards, Deferred Stock Awards, Unrestricted Stock Awards, Performance Share
Awards, Dividend Equivalent Rights and Other Stock-Based Awards, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of shares of Stock to be covered by any
Award;
(iv) to determine and modify from time to time the terms and conditions,
including restrictions, not inconsistent with the terms of the Plan, of any
Award, which terms and conditions may differ among individual Awards and
participants, and to approve the form of written instruments evidencing the
Awards;
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provided, however, that except as otherwise provided in Section 3(b) or
3(c), the Administrator is not permitted to reduce the exercise price of
stock options or effect repricing through cancellation and re-grants;
(v) to accelerate at any time the exercisability or vesting of all or any
portion of any Award in circumstances involving a Change of Control or the
death, disability or termination of employment of a Plan participant;
(vi) subject to the provisions of Section 5(a)(iii), to extend at any
time the post-termination period in which Stock Options may be exercised;
(vii) to determine at any time whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or credit
amounts constituting deemed interest (at rates determined by the
Administrator) or dividends or deemed dividends on such deferrals; and
(viii) at any time to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Administrator shall be made in the
Administrator's sole and absolute discretion and shall be final and binding on
all persons, including the Company and Plan participants.
(c) Delegation of Authority to Grant Awards. The Administrator, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Administrator's authority and duties with respect to Awards,
including the granting thereof, to individuals who are not subject to the
reporting and other provisions of Section 16 of the Act or "covered employees"
within the meaning of Section 162(m) of the Code. Any such delegation by the
Administrator shall include a limitation as to the amount of Awards that may
be awarded during the period of the delegation and shall contain guidelines as
to the determination of the exercise price of any Option, the conversion ratio
or price of other Awards and the vesting criteria. The Administrator may
revoke or amend the terms of a delegation at any time but such action shall
not invalidate any prior actions of the Administrator's delegate or delegates
that were consistent with the terms of the Plan.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; RECAPITALIZATIONS; MERGERS;
SUBSTITUTE AWARDS
(a) Stock Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be increased from 9,699,162 shares
to 14,699,162 shares as of the date of this restatement, an increase of
5,000,000 shares; plus (ii) as of the first day of each calendar quarter after
January 1, 2000, 9.5 percent of any net increase since the first day of the
preceding calendar quarter in the total number of shares of Stock actually
outstanding (assuming all units of partnership interests in the Operating
Partnership that are subject to redemption rights are converted into Stock).
Notwithstanding the foregoing, the maximum number of shares of Stock for which
Awards other than Options may be granted under the Plan shall not exceed
2,000,000 shares in the aggregate. The foregoing limitation shall apply to
shares available for issuance under the Plan prior to this restatement as well
as shares added to the Plan as a result of this restatement. For purposes of
the limitations of this Section 3(a), if any portion of an Award is forfeited,
cancelled, reacquired by the Company, satisfied without the issuance of Stock
or otherwise terminated, the shares of Stock underlying such portion of the
Award shall be added back to the shares of Stock available for issuance under
the Plan. With respect to grants made or compensation earned under the Plan,
Stock Options with respect to no more than 1,500,000 shares of Stock may be
granted to any one individual participant during any one calendar year period.
The shares available for issuance under the Plan may be authorized but
unissued shares of Stock or shares of Stock reacquired by the Company.
(b) Recapitalizations. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock
split,
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reverse stock split or other similar transaction, the outstanding shares of
Stock are increased or decreased or are exchanged for a different number or
kind of shares or other securities of the Company, or additional shares or new
or different shares or other securities of the Company or other non-cash
assets are distributed with respect to such shares of Stock or other
securities, the Administrator may make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for issuance under the
Plan, (ii) the number of Stock Options that can be granted to any one
individual participant, (iii) the number and kind of shares or other
securities subject to any then outstanding Awards under the Plan, and (iv) the
price for each share subject to any then outstanding Stock Options under the
Plan, without changing the aggregate exercise price (i.e., the exercise price
multiplied by the number of Stock Options) as to which such Stock Options
remain exercisable. The adjustment by the Administrator shall be final,
binding and conclusive. No fractional shares of Stock shall be issued under
the Plan resulting from any such adjustment, but the Administrator in its
discretion may make a cash payment in lieu of fractional shares.
(c) Mergers. In contemplation of and subject to the consummation of a
consolidation or merger or sale of all or substantially all of the assets of
the Company in which outstanding shares of Stock are exchanged for securities,
cash or other property of an unrelated corporation or business entity or in
the event of a liquidation of the Company (in each case, a "Transaction"), the
Board, or the board of directors of any corporation assuming the obligations
of the Company, may, in its discretion, take any one or more of the following
actions, as to outstanding Awards: (i) provide that such Awards shall be
assumed or equivalent awards shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), and/or (ii) upon written
notice to the participants, provide that all Awards will terminate immediately
prior to the consummation of the Transaction. In the event that, pursuant to
clause (ii) above, Awards will terminate immediately prior to the consummation
of the Transaction, all vested Awards, other than Options, shall be fully
settled in cash or in kind at such appropriate consideration as determined by
the Administrator in its sole discretion after taking into account the
consideration payable per share of Stock pursuant to the business combination
(the "Merger Price") and all Stock Options shall be fully settled, in cash or
in kind, in an amount equal to the difference between (A) the Merger Price
times the number of shares of Stock subject to such outstanding Stock Options
(to the extent then exercisable at prices not in excess of the Merger Price)
and (B) the aggregate exercise price of all such outstanding Stock Options;
provided, however, that each participant shall be permitted, within a
specified period determined by the Administrator prior to the consummation of
the Transaction, to exercise all outstanding Stock Options, including those
that are not then exercisable, subject to the consummation of the Transaction.
(d) Substitute Awards. The Administrator may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result
of a merger or consolidation of the employing corporation with the Company or
a Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Administrator may direct that the
substitute awards be granted on such terms and conditions as the Administrator
considers appropriate in the circumstances.
SECTION 4. ELIGIBILITY
Participants in the Plan will be such full or part-time officers and other
employees, Independent Directors and key persons of the Company, the Operating
Partnership and the Company's other Subsidiaries who are responsible for or
contribute to the management, growth or profitability of the Company, the
Operating Partnership and the Company's other Subsidiaries as are selected
from time to time by the Administrator in its sole discretion.
SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.
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Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code. To the extent that any
Option does not qualify as an Incentive Stock Option, it shall be deemed a
Non-Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after January 24,
2010.
(a) Stock Options Granted to Employees and Key Persons. The Administrator in
its discretion may grant Stock Options to eligible employees and key persons
of the Company or any Subsidiary. Stock Options granted pursuant to this
Section 5(a) shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms
of the Plan, as the Administrator shall deem desirable. If the Administrator
so determines, Stock Options may be granted in lieu of cash compensation at
the participant's election, subject to such terms and conditions as the
Administrator may establish, as well as in addition to other compensation.
(i) Exercise Price. The exercise price per share for the Stock covered by
a Stock Option granted pursuant to this Section 5(a) shall be determined by
the Administrator at the time of grant but shall not be less than 100
percent of the Fair Market Value on the date of grant (other than options
granted in lieu of cash compensation). If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more
than 10 percent of the combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation and an Incentive Stock
Option is granted to such employee, the option price of such Incentive
Stock Option shall be not less than 110 percent of the Fair Market Value on
the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Administrator, but no Option shall be exercisable more than ten years after
the date the option is granted. If an employee owns or is deemed to own (by
reason of the attribution rules of Section 424(d) of the Code) more than 10
percent of the combined voting power of all classes of stock of the Company
or any parent or subsidiary corporation and an Incentive Stock Option is
granted to such employee, the term of such option shall be no more than
five years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall become
exercisable at such time or times, whether or not in installments, as shall
be determined by the Administrator at or after the grant date; provided,
however, that Stock Options granted in lieu of compensation shall be
exercisable in full as of the grant date unless the Administrator otherwise
provides in the Award agreement; provided further, however, that an
optionee's Stock Options, other than those held by Mortimer B. Zuckerman
and Edward H. Linde, shall be exercisable in full upon and after such
optionee's attainment of age 65. The Administrator may at any time
accelerate the exercisability of all or any portion of any Stock Option. An
optionee shall have the rights of a stockholder only as to shares acquired
upon the exercise of a Stock Option and not as to unexercised Stock
Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or in
part, by giving written notice of exercise to the Company, specifying the
number of shares to be purchased. Payment of the purchase price may be made
by one or more of the following methods to the extent provided in the
Option Award agreement:
(A) In cash, by certified or bank check or other instrument
acceptable to the Administrator;
(B) Through the delivery (or attestation to the ownership) of shares
of Stock that are not then subject to restrictions under any Company
plan and that have been beneficially owned by the optionee for at least
six months, if permitted by the Administrator in its discretion. Such
surrendered shares shall be valued at Fair Market Value on the exercise
date;
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the purchase price; provided that in the event
the optionee chooses
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to pay the purchase price as so provided, the optionee and the broker
shall comply with such procedures and enter into such agreements of
indemnity and other agreements as the Administrator shall prescribe as
a condition of such payment procedure; or
(D) By the optionee delivering to the Company a promissory note if
the Administrator has expressly authorized the loan of funds to the
optionee for the purpose of enabling or assisting the optionee to
effect the exercise of his Stock Option; provided that at least so much
of the exercise price as represents the par value of the Stock shall be
paid other than with a promissory note.
Payment instruments will be received subject to collection. The delivery of
certificates representing the shares of Stock to be purchased pursuant to
the exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of laws. In the event an optionee
chooses to pay the purchase price by previously-owned shares of Stock
through the attestation method, the number of shares of Stock transferred
to the optionee upon the exercise of the Stock Option shall be net of the
shares attested to.
(v) Annual Limit on Incentive Stock Options. To the extent required for
"incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its parent and subsidiary
corporations become exercisable for the first time by an optionee during
any calendar year shall not exceed $100,000. To the extent that any Stock
Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.
(b) Reload Options. At the discretion of the Administrator and subject to
such restrictions, terms and conditions as the Administrator may establish,
Options granted under the Plan may include a "reload" feature pursuant to
which an optionee exercising an option by the delivery of a number of shares
of Stock in accordance with Section 5(a)(iv)(B) hereof would automatically be
granted an additional Option (with an exercise price equal to the Fair Market
Value of the Stock on the date the additional Option is granted and with such
other terms as the Administrator may provide) to purchase that number of
shares of Stock equal to the number delivered to exercise the original Option
with an Option term equal to the remainder of the original Option term unless
the Administrator otherwise determines in the Award agreement for the original
Option grant.
(c) Stock Options Granted to Independent Directors.
(i) Automatic Grant of Options.
(A) Each person who was an Independent Director on the effective date
of the Company's initial public offering was granted on such date a
Non-Qualified Stock Option to acquire 10,000 shares of Stock. The
exercise price per share for the Stock covered by such Non-Qualified
Stock Option shall be the initial public offering price as set forth in
the final prospectus for the Company's initial public offering.
(B) Each Independent Director who is first elected to serve as a
Director after the effective date of the Company's initial public
offering shall be granted, on the fifth business day after his
election, a Non-Qualified Stock Option to acquire 10,000 shares of
Stock.
(C) Each Independent Director who is serving as Director of the
Company on the fifth business day after each annual meeting of
shareholders, beginning with the 1998 annual meeting, shall
automatically be granted on such day a Non-Qualified Stock Option to
acquire 5,000 shares of Stock.
(D) The exercise price per share for the Stock covered by a Stock
Option granted under this Section 5(c)(i)(B) and (C) shall be equal to
the Fair Market Value of the Stock on the date the Stock Option is
granted.
(E) The Board, in its discretion, may grant additional Non-Qualified
Stock Options to Independent Directors. Any such grant may vary among
individual Independent Directors.
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(ii) Exercise; Termination.
(A) Unless otherwise determined by the Administrator, an Option
granted under Section 5(c)(i)(A), (B) or (C) shall be exercisable with
respect to 50 percent of the underlying shares on the first anniversary
of the grant date and shall be exercisable with respect to all of the
underlying shares on the second anniversary of the grant date. An
Option granted under Section 5(c)(i)(E) shall be subject to such
vesting and exercisability provisions as the Board may provide at the
time of grant. An Option issued under this Section 5(c) shall not be
exercisable after the expiration of ten years from the date of grant.
(B) Options granted under this Section 5(c) may be exercised only by
written notice to the Company specifying the number of shares to be
purchased. Payment of the full purchase price of the shares to be
purchased may be made by one or more of the methods specified in
Section 5(a)(iv). An optionee shall have the rights of a stockholder
only as to shares acquired upon the exercise of a Stock Option and not
as to unexercised Stock Options.
(d) Non-transferability of Options. No Stock Option shall be transferable by
the optionee otherwise than by will or by the laws of descent and distribution
and all Stock Options shall be exercisable, during the optionee's lifetime,
only by the optionee. Notwithstanding the foregoing, the Administrator, in its
sole discretion, may provide in the Award agreement regarding a given Option
that the optionee may transfer, without consideration for the transfer, his
Non-Qualified Stock Options to members of his family, to trusts for the
benefit of such family members, or to partnerships in which such family
members are the only partners, provided that the transferee agrees in writing
with the Company to be bound by all of the terms and conditions of this Plan
and the applicable option agreement.
(e) Termination.
(i) Except as may otherwise be provided by the Administrator either in
the Award agreement, or subject to Section 14 below, in writing after the
Award agreement is issued, an optionee's rights in all Stock Options shall
automatically terminate upon the participant's termination of employment
(or cessation of business relationship) with the Company and its
Subsidiaries for any reason, except by reason of Retirement.
(ii) Any Stock Option held by an optionee, other than Mortimer B.
Zuckerman and Edward H. Linde, whose employment by the Company and its
Subsidiaries is terminated by reason of Retirement may thereafter be
exercised, to the extent it was exercisable at the time of such
termination, for a period of 24 months (or such other period as the
Administrator shall specify at any time) from the date of such termination
of employment by reason of Retirement, or until the expiration of the
stated term of the Stock Option, if earlier.
SECTION 6. RESTRICTED STOCK AWARDS
(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an Award
entitling the recipient to acquire, at par value or such other higher purchase
price determined by the Administrator, shares of Stock subject to such
restrictions and conditions as the Administrator may determine at the time of
grant ("Restricted Stock"). Conditions may be based on continuing employment
(or other business relationship) and/or achievement of pre-established
performance goals and objectives. The grant of a Restricted Stock Award is
contingent on the participant executing the Restricted Stock Award agreement.
The terms and conditions of each such agreement shall be determined by the
Administrator, and such terms and conditions may differ among individual
Awards and participants.
(b) Rights as a Stockholder. Upon execution of the Restricted Stock Award
agreement and paying any applicable purchase price, a participant shall have
the rights of a stockholder with respect to the voting of the Restricted
Stock, subject to such terms and conditions as may be contained in the
Restricted Stock Award agreement. Unless the Administrator shall otherwise
determine, certificates evidencing the Restricted Stock shall remain in the
possession of the Company until such Restricted Stock is vested as provided in
Section 6(d) below,
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and the participant shall be required, as a condition of the grant, to deliver
to the Company a stock power endorsed in blank.
(c) Restrictions. Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the Restricted Stock Award agreement. If a participant's
employment (or other business relationship) with the Company and its
Subsidiaries terminates for any reason, the Company shall have the right to
repurchase Restricted Stock that has not vested at the time of termination at
its original purchase price, from the participant or the participant's legal
representative.
(d) Vesting of Restricted Stock. The Administrator at the time of grant
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the non-
transferability of the Restricted Stock and the Company's right of repurchase
or forfeiture shall lapse. Subsequent to such date or dates and/or the
attainment of such pre-established performance goals, objectives and other
conditions, the shares on which all restrictions have lapsed shall no longer
be Restricted Stock and shall be deemed "vested." The vesting period of a
Restricted Stock Award shall be at least three years, except that in the case
of a Restricted Stock Award that may become transferable and no longer subject
to forfeiture upon the attainment of pre-established performance goals, the
vesting period shall be at least one year. Except as may otherwise be provided
by the Administrator either in the Award agreement or, subject to Section 14
below, in writing after the Award agreement is issued, a participant's rights
in any shares of Restricted Stock that have not vested shall automatically
terminate upon the participant's termination of employment (or other business
relationship) with the Company and its Subsidiaries and such shares shall be
subject to the Company's right of repurchase as provided in Section 6(c)
above.
(e) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock
Award agreement may require or permit the immediate payment, waiver, deferral
or reinvestment (in the form of additional Restricted Stock) of dividends paid
on the Restricted Stock.
SECTION 7. DEFERRED STOCK AWARDS
(a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award of
phantom stock units to a participant, subject to restrictions and conditions
as the Administrator may determine at the time of grant. Conditions may be
based on continuing employment (or other business relationship) and/or
achievement of pre-established performance goals and objectives. Except in the
case of Deferred Stock Awards granted pursuant to Section 7(b) below, the
vesting period of a Deferred Stock Award shall be at least three years, except
that in the case of a Deferred Stock Award that may become transferable and no
longer subject to forfeiture upon the attainment of pre-established
performance goals, the vesting period shall be at least one year. The grant of
a Deferred Stock Award is contingent on the participant executing the Deferred
Stock Award agreement. The terms and conditions of each such agreement shall
be determined by the Administrator, and such terms and conditions may differ
among individual Awards and participants. At the end of the deferral period,
the Deferred Stock Award, to the extent vested, shall be paid to the
participant in the form of shares of Stock.
(b) Election to Receive Deferred Stock Awards in Lieu of Compensation. The
Administrator may, in its sole discretion, permit a participant to elect to
receive a portion of the cash compensation or Restricted Stock Award otherwise
due to such participant in the form of a Deferred Stock Award. Any such
election shall be made in writing and shall be delivered to the Company no
later than the date specified by the Administrator and in accordance with
rules and procedures established by the Administrator. The Administrator shall
have the sole right to determine whether and under what circumstances to
permit such elections and to impose such limitations and other terms and
conditions thereon as the Administrator deems appropriate.
(c) Rights as a Stockholder. During the deferral period, a participant shall
have no rights as a stockholder; provided, however, that the participant may
be credited with Dividend Equivalent Rights with respect to the phantom stock
units underlying his Deferred Stock Award, subject to such terms and
conditions as the Administrator may determine.
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(d) Restrictions. A Deferred Stock Award may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of during the
deferral period.
(e) Termination. Except as may otherwise be provided by the Administrator
either in the Award agreement or, subject to Section 14 below, in writing
after the Award agreement is issued, a participant's right in all Deferred
Stock Awards that have not vested shall automatically terminate upon the
participant's termination of employment (or cessation of business
relationship) with the Company and its Subsidiaries for any reason.
SECTION 8. UNRESTRICTED STOCK AWARDS
Grant or Sale of Unrestricted Stock. The Administrator may, in its sole
discretion, grant (or sell at par value or such other higher purchase price
determined by the Administrator) an Unrestricted Stock Award to any
participant pursuant to which such participant may receive shares of Stock
free of any restrictions ("Unrestricted Stock") under the Plan. Unrestricted
Stock Awards may be granted or sold as described in the preceding sentence in
respect of past services or other valid consideration, or in lieu of any cash
compensation due to such participant.
SECTION 9. PERFORMANCE SHARE AWARDS
(a) Nature of Performance Share Awards. A Performance Share Award is an
Award entitling the recipient to acquire shares of Stock upon the attainment
of specified performance goals. The Administrator may make Performance Share
Awards independent of or in connection with the granting of any other Award
under the Plan. The Administrator in its sole discretion shall determine
whether and to whom Performance Share Awards shall be made, the performance
goals applicable under each such Award, the periods during which performance
is to be measured, and all other limitations and conditions applicable to the
awarded Performance Shares; provided, however, that the Administrator may rely
on the performance goals and other standards applicable to other performance
unit plans of the Company in setting the standards for Performance Share
Awards under the Plan.
(b) Rights as a Stockholder. A participant receiving a Performance Share
Award shall have the rights of a stockholder only as to shares actually
received by the participant under the Plan and not with respect to shares
subject to the Award but not actually received by the participant. A
participant shall be entitled to receive a stock certificate evidencing the
acquisition of shares of Stock under a Performance Share Award only upon
satisfaction of all conditions specified in the written instrument evidencing
the Performance Share Award (or in a performance plan adopted by the
Administrator).
(c) Termination. Except as may otherwise be provided by the Administrator
either in the Award agreement or, subject to Section 14 below, in writing
after the Award agreement is issued, a participant's rights in all Performance
Share Awards shall automatically terminate upon the participant's termination
of employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
(d) Acceleration, Waiver, Etc. At any time prior to the participant's
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Administrator may in its sole discretion accelerate,
waive or, subject to Section 14, amend any or all of the goals, restrictions
or conditions imposed under any Performance Share Award.
SECTION 10. DIVIDEND EQUIVALENT RIGHTS
(a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award
entitling the recipient to receive credits based on cash dividends that would
have been paid on the shares of Stock specified in the Dividend Equivalent
Right (or other award to which it relates) if such shares had been issued to
and held by the recipient. A Dividend Equivalent Right may be granted
hereunder to any participant as a component of another Award or as a
freestanding award. The terms and conditions of Dividend Equivalent Rights
shall be specified in
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the grant. Dividend equivalents credited to the holder of a Dividend
Equivalent Right may be paid currently or may be deemed to be reinvested in
additional shares of Stock, which may thereafter accrue additional
equivalents. Any such reinvestment shall be at Fair Market Value on the date
of reinvestment. Dividend Equivalent Rights may be settled in cash or shares
of Stock or a combination thereof, in a single installment or installments. A
Dividend Equivalent Right granted as a component of another Award may provide
that such Dividend Equivalent Right shall be settled upon exercise,
settlement, or payment of, or lapse of restrictions on, such other award, and
that such Dividend Equivalent Right shall expire or be forfeited or annulled
under the same conditions as such other award. A Dividend Equivalent Right
granted as a component of another Award may also contain terms and conditions
different from such other award.
(b) Interest Equivalents. Any Award under this Plan that is settled in whole
or in part in cash on a deferred basis may provide in the grant for interest
equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
(c) Termination. Except as may otherwise be provided by the Administrator
either in the Award agreement or, subject to Section 14 below, in writing
after the Award agreement is issued, a participant's rights in all Dividend
Equivalent Rights or interest equivalents shall automatically terminate upon
the participant's termination of employment (or cessation of business
relationship) with the Company and its Subsidiaries for any reason.
SECTION 11. OTHER STOCK-BASED AWARDS
(a) Nature of Other Stock-Based Awards. An Other Stock-Based Award includes
other Awards of Stock and other Awards that are valued in whole or in part by
reference to, or are otherwise based on, Stock, including without limitation,
convertible preferred stock, convertible debentures, exchangeable securities
and Awards valued by reference to book value or subsidiary performance. An
Other Stock-Based Award may be granted to any participant either along side or
in addition to or in tandem with Stock Options, Restricted Stock or Deferred
Stock granted under the Plan and/or cash awards made outside of the Plan.
Stock (including securities convertible into Stock) issued on a bonus basis
under this Section 11 may be issued for no cash consideration. Stock
(including securities convertible into Stock) purchased with a purchase right
awarded under this Section 11 shall be priced at least 25 percent of the Fair
Market Value of the Stock on the date of grant. The grant of an Other Stock-
Based Award may be subject to restrictions and conditions as the Administrator
may determine at the time of grant, including conditions based on continuing
employment (or other business relationship) and/or achievement of pre-
established performance goals and objectives. The grant of an Other Stock-
Based Award is contingent on the participant executing the Award agreement.
The terms and conditions of each such agreement shall be determined by the
Administrator, and such terms and conditions may differ among individual
Awards and participants.
(b) Rights as a Stockholder. Until such time as an Other Stock-Based Award
is actually paid out in shares of Stock, a participant shall have no rights as
a holder of Stock.
(c) Restrictions. An Other Stock-Based Award may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the Award agreement.
(d) Termination. Except as may otherwise be provided by the Administrator in
the Award agreement or, subject to Section 14 below, in writing after the
Award agreement is issued, a participant's right in his Other Stock-Based
Awards that have not vested shall automatically terminate upon the
participant's termination of employment (or cessation of business
relationship) with the Company and its Subsidiaries for any reason.
SECTION 12. TAX WITHHOLDING
(a) Payment by Participant. Each participant shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the
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participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to such income. The Company and its Subsidiaries shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the participant. The Company's obligation to deliver
stock certificates to any participant is subject to and conditioned on tax
obligations being satisfied by the participant.
(b) Payment in Stock. Subject to approval by the Administrator, a
participant may elect to have the minimum tax withholding obligation
satisfied, in whole or in part, by (i) authorizing the Company to withhold
from shares of Stock to be issued pursuant to any Award a number of shares
with an aggregate Fair Market Value (as of the date the withholding is
effected) that would satisfy the minimum withholding amount due, or (ii)
transferring to the Company shares of Stock owned by the participant with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the minimum withholding amount due, or (iii) any combination of
(i) and (ii).
SECTION 13. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another Subsidiary;
or
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to re-
employment is guaranteed either by a statute or by contract or under the
written policy pursuant to which the leave of absence was granted or if the
Administrator otherwise so provides in writing.
SECTION 14. AMENDMENTS AND TERMINATION
The Administrator may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's written consent. Except as provided in Section 3(b) or 3(c), in
no event may the Administrator exercise its discretion to reduce the exercise
price of outstanding Stock Options or effect repricing through cancellation
and re-grants. If and to the extent determined by the Administrator to be
required by the Code to ensure that Incentive Stock Options granted under the
Plan are qualified under Section 422 of the Code or ensure that compensation
earned under Stock Options granted under the Plan qualifies as performance-
based compensation under Section 162(m) of the Code, if and to the extent
intended to so qualify, Plan amendments shall be subject to approval by the
Company stockholders entitled to vote at a meeting of stockholders. Nothing in
this Section 14 shall limit the Board's authority to take any action permitted
pursuant to Section 3(c).
SECTION 15. STATUS OF PLAN
Unless the Administrator shall otherwise expressly determine in writing,
with respect to the portion of any Award which has not been exercised and any
payments in cash, Stock or other consideration not received by a participant,
a participant shall have no rights greater than those of a general creditor of
the Company. In its sole discretion, the Administrator may authorize the
creation of trusts or other arrangements to meet the Company's obligations to
deliver Stock or make payments with respect to Awards hereunder, provided that
the existence of such trusts or other arrangements is consistent with the
foregoing sentence.
SECTION 16. CHANGE OF CONTROL PROVISIONS
(a) Upon the occurrence of a Change of Control as defined in this Section
16, all outstanding Options shall become immediately exercisable in full, and
all other Awards under the Plan shall become fully vested.
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(b) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of the
Act (other than the Company, any of its Subsidiaries, Mortimer B.
Zuckerman, Edward H. Linde, any "affiliate" or "associate" (as such terms
are defined in Rule 12b-2 under the Act) of Mortimer B. Zuckerman or Edward
H. Linde, or any trustee, fiduciary or other person or entity holding
securities under any employee benefit plan or trust of the Company or any
of its Subsidiaries), together with all "affiliates" and "associates" (as
such terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Company representing
25 percent or more of the combined voting power of the Company's then
outstanding securities having the right to vote in an election of the
Company's Board of Directors ("Voting Securities") (other than as a result
of an acquisition of securities directly from the Company); provided that
for purposes of determining the "beneficial ownership" (as such term is
defined in Rule 13d-3 under the Act) of any "group" of which Mortimer B.
Zuckerman, Edward H. Linde or any of their affiliates or associates is a
member (each such entity or individual, a "Related Party"), there shall not
be attributed to the "beneficial ownership" (as such term is defined in
Rule 13d-3 under the Act) of such group any shares beneficially owned by
any Related Party; or
(ii) persons who, as of the effective date of the Company's initial
public offering of Stock, constitute the Company's Board of Directors (the
"Incumbent Directors") cease for any reason, including, without limitation,
as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that
any person becoming a director of the Company subsequent to such date shall
be considered an Incumbent Director if such person's election was approved
by or such person was nominated for election by either (A) a vote of at
least two-thirds of the Incumbent Directors or (B) a vote of at least a
majority of the Incumbent Directors who are members of a nominating
committee comprised, in the majority, of Incumbent Directors; or
(iii) the stockholders of the Company shall approve (A) any consolidation
or merger of the Company where the stockholders of the Company, immediately
prior to the consolidation or merger, would not, immediately after the
consolidation or merger, "beneficially own" (as such term is defined in
Rule 13d-3 under the Act), directly or indirectly, shares representing in
the aggregate 60 percent or more of the voting shares of the corporation
issuing cash or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (B) any sale, lease, exchange or
other transfer to an unrelated party (in one transaction or a series of
transactions contemplated or arranged by any party as a single plan) of all
or substantially all of the assets of the Company or (C) any plan or
proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Voting Securities outstanding, increases the proportionate number of
shares of Voting Securities beneficially owned by any person (as defined in
the foregoing clause (i)) to 25 percent or more of the combined voting power
of all then outstanding Voting Securities; provided, however, that if such
person shall thereafter become the beneficial owner of any additional shares
of Voting Securities (other than pursuant to a stock split, stock dividend, or
similar transaction or as a result of an acquisition of securities directly
from the Company), then a "Change of Control" shall be deemed to have occurred
for purposes of the foregoing clause (i).
SECTION 17. GENERAL PROVISIONS
(a) No Distribution; Compliance with Legal Requirements. The Administrator
may require each person acquiring Stock pursuant to an Award to represent to
and agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all applicable
securities law and other legal and stock exchange or similar requirements have
been satisfied. The Administrator may require the placing of such stop-orders
and restrictive legends on certificates for Stock and Awards as it deems
appropriate.
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(b) Delivery of Stock Certificates. Stock certificates to be delivered to
participants under this Plan shall be deemed delivered for all purposes when
the Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing contained
in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of this Plan and the grant of Awards shall not confer upon any employee any
right to continued employment with the Company or any Subsidiary and shall not
interfere in any way with the right of the Company or any Subsidiary to
terminate the employment of any of its employees at any time.
(d) Trading Policy Restrictions. Option exercises and other Awards under the
Plan shall be subject to such Company insider-trading-policy-related
restrictions, terms and conditions as may be established by the Administrator,
or in accordance with policies set by the Administrator, from time to time.
SECTION 18. EFFECTIVE DATE OF PLAN
This Plan became effective on June 11, 1997.
SECTION 19. GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be governed by,
and construed in accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.
DATE OF APPROVAL OF INITIAL PLAN BY BOARD OF DIRECTORS: June 11, 1997
DATE OF APPROVAL BY STOCKHOLDERS: June 11, 1997
DATE OF APPROVAL OF AMENDED AND RESTATED PLAN BY COMPENSATION COMMITTEE OF THE
BOARD: January 24, 2000
DATE OF APPROVAL OF AMENDED AND RESTATED PLAN BY SHAREHOLDERS: May , 2000.
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DETACH HERE
PROXY
BOSTON PROPERTIES, INC.
800 BOYLSTON STREET
SUITE 400
BOSTON, MA 02199-8001
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Edward H. Linde, David G. Gaw 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. (the "Company") held of record by the
undersigned on March 13, 2000 at the Annual Meeting of Stockholders to be held
on May 3, 2000 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's vote will be cast in accordance with the 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.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
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BOSTON PROPERTIES, INC.
C/O EQUISERVE
P.O. BOX 8040
BOSTON, MA 02266-8040
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VOTE BY TELEPHONE VOTE BY INTERNET
It's fast, convenient, and immediate! Call toll-free on a It's fast, convenient, and your vote is immediately
touch-tone phone 1-877-PRX-VOTE (1-877-779-8683) confirmed and posted.
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy Statement and Proxy Card. 1. Read the accompanying Proxy Statement and Proxy Card.
2. Call the toll-free number 1-877-PRX-VOTE (1-877-779-8683). 2. Go to the Website.
http://www.eproxyvote.com/bxp
3. Enter your 14-digit Voter Control Number located on your Proxy
Card above your name. 3. Enter your 14-digit Voter Control Number located on
your Proxy Card above your name.
4. Follow the recorded instructions.
4. Follow the instructions provided.
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
CALL 1-877-PRX-VOTE ANYTIME! Go to http://www.eproxyvote.com/bxp anytime!
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DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET.
DETACH HERE
[X] Please mark
votes as in this
example.
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<S> <C> <C> <C> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
1. Proposal to elect the following persons 2. Approve the amended and restated 1997 Stock [_] [_] [_]
as Class III Directors: Option and Incentive Plan.
Nominees: 3. Act upon one stockholder proposal concerning [_] [_] [_]
(01) Edward H. Linde and (2) Ivan G. Seidenberg the annual election of directors.
4. Ratify the appointment of PricewaterhouseCoopers [_] [_] [_]
FOR [_] [_] WITHHELD LLP as independent auditors.
BOTH FROM
BOTH 5. In their discretion, the proxies are authorized
to vote upon any other matters that may properly
come before the meeting or any adjournments or
postponements thereof.
[_]______________________________________
WITHHELD AS TO THE NOMINEE NOTED ABOVE
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
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Please Sign exactly as your 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:__________
