As filed with the Securities and Exchange Commission on June 9, 1997
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PRELIMINARY COPY
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
------------------
[X] Filed by Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
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Berkshire Realty Company, Inc.
(Name of Registrant as Specified in its Charter)
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
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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
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<PAGE>
[PRELIMINARY COPY]
[BRI LETTERHEAD]
June ___, 1997
Dear Fellow Shareholder:
You are cordially invited to attend the Special Meeting in Lieu of the
Annual Meeting of Shareholders of Berkshire Realty Company, Inc. to be held on
Thursday, August 14, 1997 at the Back Bay Hilton, 40 Dalton Street, Boston,
Massachusetts 02115 at 9:00 a.m. Coffee and refreshments will be available at
the meeting site beginning at 8:30 a.m.
The proxy statement that accompanies this letter describes the matters
which will be presented at the meeting: (1) The Election of Three Directors; (2)
Approval of Non-employee Directors Retainer Fee Plan; and (3) Granting of
Conversion Rights With Respect to All Operating Partnership Units-Authorization
to Issue Underlying Shares.
If you intend to attend the Annual Meeting or send a representative
please call us at the telephone number below so that we can be assured of having
sufficient space for all. We will be pleased to provide directions to anyone so
requesting. While we anticipate having the capacity to seat all who desire to
attend, if many Shareholders should attempt to attend without informing us we
must reserve the right to limit attendance, with those who have called to
reserve admission being assured of the right to admission.
Whether or not you plan to attend the meeting in person it is important
that your shares be voted at the meeting. THEREFORE, SHAREHOLDERS ARE URGED TO
FILL IN, DATE AND SIGN THE ENCLOSED PROXY CARD PROMPTLY AND RETURN IT IN THE
ENCLOSED ENVELOPE. Your vote is important, no matter how many shares you may
own.
Thank you for taking the time to review the enclosed materials.
Very truly yours,
David F. Marshall
President and Chief Executive Officer
<PAGE>
[PRELIMINARY COPY]
BERKSHIRE REALTY COMPANY, INC.
470 Atlantic Avenue
Boston, Massachusetts 02210
========================
NOTICE OF SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 14, 1997
========================
TO THE SHAREHOLDERS OF BERKSHIRE REALTY COMPANY, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting in lieu of the Annual
Meeting of the Shareholders of Berkshire Realty Company, Inc. (the "Company")
will be held on Thursday, August 14, 1997 at the Back Bay Hilton, 40 Dalton
Street, Boston, Massachusetts 02115 (the "Meeting"), for the purpose of
considering and acting upon the following matters, which are more fully
described in the attached proxy statement:
1. Election of Three Directors;
2. Approval of Non-employee Directors Retainer Fee Plan;
3. Granting of Conversion Rights With Respect to All Operating
Partnership Units-Authorization to Issue Underlying Shares; and
4. Such other business as may properly be brought before the
meeting. The Board of Directors at present knows of no other
formal business to be brought before the meeting.
Following the official business, there will be a review of the results of
operations for 1996 and management will review the Company's investments and
discuss the future outlook of the Company. The Directors and management will be
available for questions and discussion after the meeting.
The Board of Directors has fixed June 16, 1997 as the record date for the
determination of the shareholders who will be entitled to vote and receive
notice of such meeting or any adjournment or adjournments thereof. A list of
such shareholders will be open to the examination of such shareholders for any
purpose germane to the Meeting at the Meeting and during ordinary business hours
for a period of ten days prior to the Meeting at the office of the Company at
470 Atlantic Avenue, Boston, Massachusetts 02210.
------------------
Scott D. Spelfogel
Secretary
June ___, 1997
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PLEASE FILL IN, DATE AND SIGN THE ACCOMPANYING PROXY, WHICH IS SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY, AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID ENVELOPE. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE
MEETING.
<PAGE>
PRELIMINARY COPY
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PROXY STATEMENT DATED JUNE , 1997
---------------------------------
This Proxy Statement is submitted to the Shareholders of Berkshire Realty
Company, Inc. (the "Company") for solicitation of the accompanying proxy for use
at the Special Meeting in lieu of the Annual Meeting of the Shareholders of the
Company to be held, for the purposes set forth in this Proxy Statement, at 9:00
a.m. on Thursday, August 14, 1997 at the Back Bay Hilton, 40 Dalton Street,
Boston, Massachusetts 02115, or any adjournment or adjournments thereof (the
"Meeting"). The Company's principal executive offices are located at 470
Atlantic Avenue, Boston, Massachusetts 02210. This Proxy Statement, together
with a Proxy Form, will be mailed to Shareholders on or about June ___, 1997.
REVOCABILITY OF PROXY
The proxy is revocable by the Shareholders at any time before it is voted
by filing a later dated proxy, by filing a written notice of revocation with
Scott D. Spelfogel, Secretary of the Company, or by voting at the Meeting.
Unless so revoked, properly executed proxies will be voted, and where choices
are indicated on the proxy, they will be voted as specified, and if no choices
are indicated, the proxies will be voted in favor of the proposals on the proxy.
PERSONS MAKING THE SOLICITATION
The solicitation is made by the Board of Directors of the Company.
SOLICITATION
Solicitation of proxies is to be made by the use of the mails. In addition,
representatives of the Company may, under instructions from the Board of
Directors and acting only for the Company, solicit such proxies for the Board of
Directors in person or by means of telephone calls. The Company does not
currently intend to hire a proxy solicitation firm, but may do so in its
discretion if necessary to obtain a quorum for the Meeting. The anticipated cost
of engaging such a firm could exceed $100,000. The Company will pay all expenses
in connection with the solicitation of these proxies.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only Shareholders of the Company of record at the close of business on June
16, 1997 will be entitled to vote at the Meeting. As of June 1, 1997 there were
25,480,754 shares of the Company's common stock outstanding. No shares of the
Company's preferred stock were outstanding on that date. Each share is entitled
to one vote. The Shareholders do not have cumulative voting rights. The holders
of a majority of the Company's outstanding common stock represented in person or
by proxy, constitute a quorum at the Meeting, but if less than a quorum is
present, a majority in interest of those present or the presiding officer may
adjourn the Meeting. The Company's by-laws require that elections be by a
plurality and that matters be approved by a majority of the votes cast unless a
higher number is required for a particular proposal by the certificate of
incorporation, by-laws or applicable law. For purposes of Proposal No. 1
(Election of
<PAGE>
Directors) proxy cards marked to indicate an abstention will be counted in
determining the presence of a quorum, but will not be considered to be a vote
cast. For purposes of Proposal No. 2 (Approval of Non-employee Directors
Retainer Fee Plan) and Proposal No. 3 (Granting of Conversion Rights With
Respect to All Operating Partnership Units-Authorization to Issue Underlying
Shares) proxy cards marked to indicate an abstention will be counted in
determining a quorum, and will be considered to be "no" votes. Broker non-votes
(proxy cards returned unmarked as to a proposal by brokers) will be counted in
determining the presence of a quorum but will have no effect on the approval or
disapproval of any of the proposals. There are no rights of appraisal or similar
rights of dissenters with respect to Proposal No. 1, Proposal No. 2 or Proposal
No. 3.
There are no known beneficial owners of more than 5% of the shares of
any class of the Company's stock.
The following is a summary of the security ownership of management as
of June 1, 1997:
<TABLE>
<CAPTION>
TITLE OF CLASS NAME OF BENEFICIAL AMOUNT AND NATURE OF PERCENTAGE
OWNER BENEFICIAL INTEREST OF CLASS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Douglas Krupp 538,253 Shares(1) 2.11%(2)
Common Stock Laurence Gerber 517,203 Shares(3) 2.03%(2)
Common Stock E. Robert Roskind 10,000 Direct (4)
Common Stock Paul Finnegan 1000 Shares(5) (4)
Common Stock David M. deWilde 300 Direct (4)
Common Stock David Marshall 97,147 Shares(6) (4)
Common Stock Ridge Frew 395 Direct (4)
Common Stock Marianne Pritchard 1,000 Direct (4)
Common Stock Dennis Suarez 1,261 Direct (4)
Common Stock David Olney 2,552 Direct (4)
Common Stock All Directors and Officers 659,308 Shares(1,2,3) 2.60%(2)
as a group
</TABLE>
(1) Mr. Krupp directly owns 10,100 shares and is an indirect beneficial
owner of the 512,203 shares held by Berkshire Realty Advisors Limited
Partnership, the former advisor to the Company, by virtue of being a director of
BRF Corporation, the general partner of Berkshire Realty Advisors Limited
Partnership. In the case where Mr. Krupp is a beneficial owner (but not a direct
owner) of shares, he has shared voting and investment powers with Mr. Gerber,
who also beneficially owns such shares. Mr. Krupp disclaims beneficial ownership
of 15,950 shares owned by various members of his family.
(2) Mr. Gerber and Mr. Krupp, through affiliated companies, collectively
own or control units in the operating partnership of which the Company is
general partner ("Operating Partnership Units") totaling 16.34%, with the
Company owning 80.93% and unaffiliated individuals or entities owning the
remaining 2.73%. Together with the direct and beneficial ownership of the
Company's common stock shown above, and assuming all outstanding Operating
Partnership Units were converted into common stock, Mr. Gerber and Mr. Krupp
would directly or indirectly beneficially own common stock aggregating 13.22%
(in the case of Mr. Gerber) and 18.05% (in the case of Mr. Krupp) of all
outstanding common stock as of June 1, 1997. Assuming all outstanding Operating
Partnership Units were converted into common stock, the total amount of common
stock directly and indirectly beneficially owned by all directors and officers
would aggregate 18.4% of all outstanding common stock as of June 1, 1997.
2
<PAGE>
(3) Mr. Gerber directly owns 5,000 shares and is an indirect beneficial
owner of the 512,203 shares held by Berkshire Realty Advisors Limited
Partnership, the former advisor to the Company, by virtue of being a director of
BRF Corporation, the general partner of Berkshire Realty Advisors Limited
Partnership. In the case where Mr. Gerber is a beneficial owner (but not a
direct owner) of shares, he has shared voting and investment powers with Mr.
Krupp, who also beneficially owns such shares.
(4) The amount owned does not exceed one percent of the common stock of the
Company outstanding as of June 1, 1997.
(5) Mr. Finnegan directly owns 700 shares. He disclaims beneficial
ownership of 300 shares owned by his wife.
(6) Mr. Marshall directly owns 90,804 shares. He disclaims beneficial
ownership of 6,343 shares owned by various members of his family.
No director, officer or affiliate of the Company or any associate of such
director, officer or affiliate is a party adverse to the Company (or any of its
subsidiaries) or has a material interest adverse to the Company (or any of its
subsidiaries) in any material proceedings.
A list of Shareholders as of the record date will be open to the
examination of such Shareholders for any purpose germane to the Meeting at the
Meeting and during ordinary business hours for a period of ten days prior to the
Meeting at the office of the Company at 470 Atlantic Avenue, Boston,
Massachusetts 02210.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires directors and executive officers of the Company, and
persons who own more than 10% of the issued and outstanding shares of Common
Stock, to file reports of beneficial ownership with the Securities and Exchange
Commission (the "Commission"). Directors, executive officers and greater than
10% stockholders are required by Commission regulation to furnish the Company
copies of all Section 16(a) forms they file.
Based on a review of the copies of the forms furnished to the Company or
representations by reporting persons, all of the filing requirements applicable
to its officers, directors and greater than 10% stockholders were met for the
year ended December 31, 1996.
DIRECTORS, EXECUTIVE OFFICERS AND PROPOSALS
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Pursuant to the Company's Restated Certificate of Incorporation, as
amended, and By-laws, the
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Directors (other than those who may be elected by the holders of any class
or series of stock having a preference as to dividends or upon liquidation) are
to be, and have been classified, with respect to the time for which they
severally hold office, into three classes, with one class to be elected
annually. In 1997, the Class 1 Directors must be elected; the Company currently
has three Class 1 Directors, all of whom have been nominated for reelection by
the Board of Directors for a term expiring in the year 2000. The election will
be decided by a plurality vote.
The following table sets forth the names and ages of each Director of the
Company and of the nominees for election as a Director, their offices with the
Company, their term of office as a Director and any periods during which they
have served as such:
NOMINEES:
<TABLE>
<CAPTION>
No. of Years
Name and Principal Offices with the Company Age Class Term Expires Director
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David M. deWilde, Director**,*** 56 1 1997 4
J. Paul Finnegan, Director**,*** 72 1 1997 7
David F. Marshall, Director, President and
Chief Executive Officer 49 1 1997 0*
DIRECTORS NOT STANDING FOR ELECTION IN 1997:
No. of Years
Name and Principal Offices with the Company Age Class Term Expires Director
- ----------------------------------------------------------------------------------------------------
Laurence Gerber, Director*** 40 2 1998 7
E. Robert Roskind, Director** 52 2 1998 7
Charles N. Goldberg, Director** 55 3 1999 7
Douglas Krupp, Chairman of the Board, Director 50 3 1999 1
</TABLE>
*Elected February 28, 1997 to fill vacancy
**Independent Directors and Members of the Audit Committee
***Members of the Compensation Committee
David M. deWilde has been Chief Executive Officer of Chartwell Partners
International Inc., an executive search firm headquartered in San Francisco,
since he founded it in 1989. Mr. deWilde entered the executive search field in
1984 as Managing Director of Boyden International, Inc., where he headed the San
Francisco office. His responsibilities in the executive search field have
included conducting a variety of senior level searches, primarily for clients in
financial services: investment banking, investment management, depositary
institutions, mortgage finance and real estate. Mr. deWilde is also currently on
the Board of Directors of Silicon Valley Bancshares. Mr. deWilde was Executive
Vice President for Policy and Planning of the Federal National Mortgage
Association from 1981 until 1983. His prior public service roles included
President of the Government National Mortgage Association, Deputy Commissioner
of the Federal Housing Administration and Deputy Assistant Secretary of the
Department of Housing and Urban Development. Mr. deWilde's private sector
background includes investment banking experience both as Managing Director of
Lepercq de Neuflize & Co. from 1977 until 1981, and with Lehman Brothers, Inc.,
in addition to prior legal experience. He has been a member of the New York and
Washington, D.C. Bars
4
<PAGE>
since 1968 and 1972, respectively. He holds an A.B. from Dartmouth College,
a L.L.B. from the University of Virginia and a M.S. in Management from Stanford
University. He previously served as a director from 1985 until 1989 of Strategic
Mortgage Investors, Glendale, California.
J. Paul Finnegan is a retired partner of Coopers & Lybrand where he
specialized in tax matters. He retired in September 1987 and since then has been
engaged in business as a consultant, a director and an arbitrator for the
American Arbitration Association and the National Association of Securities
Dealers, Inc. Mr. Finnegan is a graduate of Harvard College and Boston College
Law School and is a Certified Public Accountant. Mr. Finnegan currently serves
as a Trustee of Krupp Government Income Trust and as a Trustee of Krupp
Government Income Trust II. He is also currently a director at Scituate Federal
Savings Bank.
David Marshall was elected President of the Company on March 1, 1996 and
Chief Executive Officer and Director on February 28, 1997. He was previously
President of The Berkshire Group's Berkshire Realty Affiliates since 1991. His
duties at Berkshire Realty Affiliates consisted of overall management of The
Berkshire Group's realty companies. Prior to that, from July 1986, he served as
President of Berkshire Mortgage Finance where he was involved in the start-up
phase and ongoing operations of The Berkshire Group's mortgage companies. Before
joining The Berkshire Group in July 1986, Mr. Marshall was President of Resource
Savings Association and prior to that Mr. Marshall served as a Vice President
of Citicorp Real Estate, Inc. He holds a B.S. degree from Michigan State
University and an M.B.A. degree from the University of Michigan.
Laurence Gerber is the President and Chief Executive Officer of The
Berkshire Group, and was Chief Executive Officer of the Company until February
28, 1997. Prior to becoming President and Chief Executive Officer in 1991, Mr.
Gerber held various positions with The Berkshire Group which included overall
responsibility at various times for: strategic planning and product development,
real estate acquisitions, corporate finance, mortgage banking, syndication and
marketing. Before joining The Berkshire Group in 1984, he was a management
consultant with Bain & Company, a national consulting firm headquartered in
Boston. Prior to that, he was a senior tax accountant with Arthur Andersen &
Co., an international accounting and consulting firm. Mr. Gerber has a B.S.
degree in Economics from the University of Pennsylvania, Wharton School, and an
M.B.A. degree with high distinction from Harvard Business School. He is a
Certified Public Accountant. Mr. Gerber also serves as Director of Harborside
Healthcare Corporation.
E. Robert Roskind is the Chairman and Co-Chief Executive Officer of
Lexington Corporate Properties, a self-administered REIT which owns 23
properties, each net leased to a single corporate tenant, and whose shares are
listed on the NYSE. Mr. Roskind is also the Managing Partner of The LCP Group, a
real estate investment firm based in New York, which has acquired on behalf of
the partnerships sponsored by the firm over 400 properties throughout the United
States. Most of such properties have been net leased to major U.S. corporations.
The LCP Group is the successor to Lepercq Capital Partners and Lepercq Capital
Corporation. Mr. Roskind co-founded Lepercq Capital Corporation in 1974 and
served as its Chairman. Mr. Roskind is also Chairman of Net Lease Partners
Realty Advisors, a registered pension fund advisor, which advises pension funds
with respect to the acquisition and subsequent management of properties net
leased to major corporations. He is a graduate of the University of Pennsylvania
and Columbia Law School and has been a member of the New York Bar since 1970.
Charles N. Goldberg is a partner in the law firm of Hirsch & Westheimer,
P.C. Prior to joining Hirsch & Westheimer, P.C., Mr. Goldberg was the Managing
Partner of Goldberg Brown, Attorneys at Law
5
<PAGE>
from 1980 to March of 1997. He is a member of the State Bar of Texas. He
received a B.B.A. degree and J.D. degree from the University of Texas.
Douglas Krupp is Co-Chairman and Co-Founder of The Berkshire Group.
Established in 1969 as the Krupp Companies, this real estate-based firm expanded
over the years within its areas of expertise including investment program
sponsorship, property and asset management, mortgage banking, healthcare
facility ownership and the management of the Company. Today, The Berkshire Group
is an integrated real estate financial services firm which is headquartered in
Boston with regional offices throughout the country. A staff of 3,400 are
responsible for the more than $3 billion under management for institutional and
individual clients. Mr. Krupp is a graduate of Bryant College. In 1989 he
received an honorary Doctor of Science in Business Administration from this
institution and was elected trustee in 1990. Mr. Krupp also serves as a Director
of Harborside Healthcare Corporation.
The Board of Directors of the Company recommends a vote for election of the
three nominees.
PROPOSAL NO. 2
APPROVAL OF
NON-EMPLOYEE DIRECTORS RETAINER FEE PLAN
The Board of Directors has voted, subject to Shareholder approval at the
Meeting, to adopt the Berkshire Realty Company, Inc. Directors Retainer Fee Plan
(the "Fee Plan").
Background
The purpose of the Fee Plan is to promote the long-term growth and
financial success of the Company by attracting and retaining non-employee
directors of outstanding ability and to assist the Company in promoting a
greater identity of interest between the Company's non-employee directors and
its Shareholders. The Fee Plan allows non-employee directors of the Company to
elect to receive payment of all or part of their annual retainer in cash, or in
shares of Common Stock, and to defer payments, subject to certain restrictions
described below.
Summary of the Fee Plan
The following summary of the material terms of the Fee Plan is qualified in
its entirety by reference to the terms of the Fee Plan, a copy of which is
attached to this Proxy Statement as Appendix A. Undefined capitalized terms are
defined in Appendix A.
General: Currently, non-employee directors of the Company receive a
Retainer of $25,000 annually for service as directors of the Company, which
Retainer is payable in cash on a quarterly basis. The amount of the Retainer,
and any Meeting Fees to be paid in the future is subject to increase or decrease
by a vote of the Board. There are presently four Eligible Directors. Pursuant to
the Fee Plan an Eligible Director may, subject to certain timing requirements
set forth in the Fee Plan, elect to receive payment of all or part of (i) the
Retainer and/or (ii) Meeting Fees, (a) in cash or in Shares issued at a price
per Share equal to 95%-100%
6
<PAGE>
of the Fair Market Value of a Share on the date on which such amounts become
payable and (b) to defer payments as described below. The discount, if any,
from the Fair Market Value will be determined by the Board, but shall equal the
discount in effect as the "Reinvested Dividend Discount" under the Company's
Dividend Reinvestment and Stock Purchase and Employee Stock Purchase Plans on
the date on which the Eligible Director becomes entitled to payment of the
Retainer or Meeting Fees.
Administration: The Fee Plan shall be administered by the Board of
Directors, which is authorized to interpret and construe the Fee Plan and to
make all determinations and take such actions as are necessary or advisable for
the administration of the Fee Plan.
Common Stock Subject to the Plan: The maximum number of Shares of Common
Stock that may be issued pursuant to the Fee Plan is 40,000. In the event of any
stock dividend, split, spin-off, split-up, distribution of securities or other
property by the Company, the number of Shares available for issuance pursuant to
the Fee Plan shall be appropriately adjusted as determined by the Board in its
sole discretion.
Payment of Shares: Each non-employee director who timely elects to receive
payment of all or part of his Retainer or Meeting Fees in Shares may also elect
to either receive the Shares currently without deferral, or to defer payment of
the Retainer or Meeting Fees into a Share Unit Account. At the time of the
deferral the Eligible Director must specify a distribution date, which may be:
(i) the first day of the month following the Eligible Director's death; (ii) the
first day of the month following the termination of service or retirement of an
Eligible Director as a member of the Board; (iii) the first day of a month
following an Eligible Director's Disability; (iv) a fixed date in the future at
least one year after the date of such deferral, provided that such date is
within the Eligible Director's life expectancy as determined at the time of
election; or (v) the earliest to occur of (i), (ii), (iii) or (iv).
Plan Amendments and Termination: The Board may suspend or terminate the Fee
Plan at any time and may amend it at any time and from time to time, provided
that no amendment or termination may adversely affect any rights of any Eligible
Director that have accrued prior to the date of such amendment or termination,
and provided further that if Shareholder approval of an amendment is required
for continued compliance with the requirements of Rule 16b-3 of the Exchange
Act, such amendment shall be subject to obtaining the required Shareholder
approval.
New Plan Benefits
As stated above, currently, non-employee directors of the Company receive a
Retainer of $25,000 annually for service as directors of the Company, which
Retainer is payable in cash on a quarterly basis. The benefits and amounts that
will be received by the Eligible Directors are not otherwise presently
determinable. No benefits will be received by any of the named executive
officers, the executive officers as a group or any other key employees under the
Fee Plan.
Shareholder Vote
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy, and entitled to vote at the Meeting is required
to approve the Fee Plan.
The Board of Directors Recommends a Vote for Proposal No. 2.
7
<PAGE>
PROPOSAL NO. 3
GRANTING OF CONVERSION RIGHTS WITH RESPECT
TO ALL OPERATING PARTNERSHIP UNITS
(AUTHORIZATION TO ISSUE UNDERLYING SHARES)
The Company seeks to grant conversion rights to those holders of limited
partnership interests ("Operating Partnership Units" or "OP Units") in BRI OP
Limited Partnership ("OP") who currently do not possess such rights. OP Units
with conversion rights may be converted by the holder thereof into either common
stock of the Company ("Common Stock") or cash, as selected by the Company. As
described below under "Shareholder Vote," the granting of conversion rights to
such holders requires the affirmative vote of the holders of a majority of the
Common Stock present, in person or by proxy, at the Meeting, provided that the
total vote cast on this proposal represents over fifty percent of the Common
Stock outstanding.
Background
The Company believes that its ability to issue Operating Partnership Units
in connection with its acquisition of real estate and other assets has played a
significant role in enabling it to acquire assets at attractive prices. The
Company has found that some owners of properties are motivated to exchange their
properties for OP Units, instead of Common Stock or cash, because in many cases
such exchange enables such owners to defer their recognition of a gain on the
sale of assets. Accordingly, utilizing OP Units as an alternative form of
consideration has, in the Company's view, enabled it to compete successfully for
assets from owners with special tax needs. In addition, because of the
conversion feature of the OP Units described below under "Convertibility of
Operating Partnership Units," upon conversion, the OP Units, at the Company's
election, may be converted into Common Stock. Thus, the issuance of OP Units by
the Company also may serve to increase the capitalization of the Company at an
attractive cost.
From May 1, 1995, the date of the restructuring of the Company into an
umbrella partnership real estate investment trust (commonly referred to as an
"UPREIT"), through December 31, 1996, the Company has issued an aggregate of
3,413,778 Operating Partnership Units which, if converted into Common Stock on
December 31, 1996 at the then current per share price of $9.875, represents
approximately $33.7 million in additional equity capital. Approximately 62% of
these OP Units were issued in connection with the acquisition of seven
multifamily communities, five of which were acquired from sellers unrelated to
the Company. From January 1, 1997 through June 1, 1997, the Company issued an
aggregate of 2,038,333 additional OP Units in connection with the acquisition of
a multifamily asset from an unrelated seller, and the acquisition of the
multifamily property management business of the entity that had been performing
property management services for the Company. It is the Company's intention to
continue to use Operating Partnership Units as a form of currency to grow the
asset base of the Company.
Convertibility of Operating Partnership Units
A significant feature of the OP Units is their convertibility. The
Amended and Restated Agreement of Limited Partnership of OP (the "OP Agreement")
provides that, subject to compliance with applicable securities laws, the
limited partners of OP are granted the right, but not the obligation, to convert
all or a portion of each such limited partner's OP Units into Common Stock or
cash, as determined by the Company
8
<PAGE>
in its discretion, upon the terms and conditions set forth in the OP Agreement.
Each OP Unit is convertible into one share of Common Stock, or the cash
equivalent thereof.
Under existing federal tax laws, the owner of real estate or other assets
who contributes such assets to OP in exchange for OP Units will not, in most
instances, recognize gain in connection with such contribution unless and until
such owner exercises his conversion option, or the underlying asset is sold or
refinanced. Thus, a real estate owner who contributes his assets to OP in
exchange for OP Units may defer his taxable gain at the federal level, while
receiving OP Units that are convertible into a liquid security. Although any
shares of Common Stock issued upon conversion will not automatically be
registered under the Securities Act of 1933, as amended, or listed on the New
York Stock Exchange, each OP partner is entitled to the benefits of a
Registration Rights Agreement which provides a mechanism for such registration
and listing to be accomplished at the Company's expense.
The OP Agreement provides that certain holders of OP Units shall not have
the right to convert such holder's OP Units unless and until specified
conditions are met. Specifically, the OP Agreement states that any partner who
is a "Related Person" with respect to the Company shall not have the right to
convert any OP Units which would, if converted, together with any other OP Units
issued to any other Related Person in connection with the same or a related
transaction, be converted into a number of shares of Common Stock that exceeds
1% of the outstanding shares immediately prior to the issuance of the OP Units.
A Related Person is defined in the OP Agreement as any director or officer of
the Company, or any other person that, directly or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control with
the Company. The foregoing conversion restriction was incorporated into the OP
Agreement to comply with the listing requirements of the New York Stock Exchange
and, consistent with those requirements, the conversion restriction will not
apply to a Related Person if the approval of Shareholders is obtained to issue
shares of Common Stock to such Related Person upon conversion of its or his OP
Units, or if the New York Stock Exchange no longer requires that such
Shareholder approval be obtained as a prerequisite to the listing of such Common
Stock.
OP Units Subject to Conversion Restriction; Interests of Certain Directors in
Proposal
In connection with the restructuring of the Company into an UPREIT and the
formation of OP, on May 1, 1995, an affiliate of Berkshire Realty Advisors
Limited Partnership, the Company's former investment advisor, contributed to OP
$5,000 and its interest in The River Oaks Apartments, a 17-story, 136-unit,
multifamily complex located in the exclusive River Oaks area of Houston, Texas,
which was valued at $10.5 million and was subject to mortgage debt of
approximately $5.4 million. The transferor received 534,975 OP Units (the "River
Oaks Units") in exchange for its contribution, having an aggregate value at the
time of the transaction of approximately $5.1 million. The transferor is a
Related Person with respect to the Company. This transaction (the "River Oaks
Transaction") was approved by the Board of Directors of the Company, acting upon
a recommendation of a Special Committee comprised of independent directors.
On March 1, 1996, the Company acquired the advisory and development
services business of The Berkshire Companies Limited Partnership, the then
investment advisor to the Company (the "Advisor Transaction"), in exchange for
1,300,000 OP Units (the "Base Units"). The Base Units were valued at $13 million
at the time of the transaction. Pursuant to the contribution agreement relating
to the Advisor Transaction, additional OP Units, up to a total of $7.2 million
in value, may be issued to the transferor during the six-year period following
the closing of the transaction if certain share price benchmarks are achieved
9
<PAGE>
(the "Additional Units" and, together with the Base Units, the "Advisor Units").
On March 19, 1997 the first share price benchmark was achieved and 109,091
additional OP Units, having an aggregate value of $1.2 million at the date of
issuance, were issued to the transferor. The Advisor Transaction enabled the
Company to assume the existing Advisory Services Agreement, as a result of which
the Company internalized the transferor's investment advisory services
capability, and fees that would otherwise have been incurred by the Company in
the future for asset management, acquisition and disposition functions were
eliminated. The transferor is a Related Person with respect to the Company. The
Advisor Transaction was approved by the Board of Directors of the Company,
acting upon a recommendation of a Special Committee comprised of independent
directors.
On May 14, 1996, the Company acquired Berkshire Towers (formerly known as
The Point Apartments) (the "Point Property"), a 1,119-unit high-rise apartment
community located in Silver Spring, Maryland, from a partnership that is
majority-owned by certain directors and officers of the Company (the "Point
Transaction"). The Company acquired the Point Property, which was valued at
approximately $52.3 million, in exchange for (i) 1,600,000 million OP Units (the
"Point Units"), to be issued over a three-year period, and (ii) the assumption
of $35.5 million of non-recourse indebtedness on the Point Property. The
transferor is a Related Person with respect to the Company. The Point
Transaction was approved by the Board of Directors of the Company, acting upon a
recommendation of a Special Committee comprised of independent directors.
On March 1, 1997, the Company acquired the multifamily property management
business of the entity that had been performing such services for the Company
(the "Property Manager Transaction") from an affiliate of certain officers and
directors of the Company in exchange for 1,700,000 OP Units (the "Property
Manager Units"). The consideration paid by the Company in connection with the
Property Manager Transaction was valued, at the time of the transaction, at
approximately $17.6 million. The transferor is a Related Person with respect to
the Company. The Property Manager Transaction was approved by the Board of
Directors of the Company, acting upon a recommendation of a Special Committee
comprised of independent directors.
The River Oaks Units, the Advisor Units, the Point Units and the Property
Manager Units are collectively referred to as the "Restricted Units," and the
River Oaks Transaction, the Advisor Transaction, the Point Transaction and the
Property Manager Transaction are collectively referred to as the "Transactions."
The Restricted Units are owned by entities directly or indirectly controlled by
Douglas Krupp and/or Laurence Gerber, each of whom is a director of the Company
and accordingly has a direct or indirect interest in Proposal No. 3.
Reasons for the Transactions
The Transactions have resulted in a structural transition for the Company,
as it first restructured into an UPREIT in connection with the River Oaks
Transaction, then became self-administered in the Advisor Transaction and then
self-managed in the Property Management Transaction. The Company believes that
by becoming both self-administered and self-managed, it is now structurally on a
level playing field with other equity REITS, improving its ability to access the
capital markets and implement its growth strategy by virtue of its ability to
use OP Units to acquire assets.
At the time of each of the Transactions, the Company determined that it
was in the best interest of the Company not to delay the implementation of the
Transactions, and defer the benefits thereof, by then
10
<PAGE>
seeking Shareholder approval with respect to the listing on the New York Stock
Exchange ("NYSE") of the Common Stock issuable to the Related Persons upon
conversion of the Restricted Units. However, as part of the Advisor Transaction,
the Point Transaction and the Property Manager Transaction, the Company agreed
with the Related Persons that before the Restricted Units in those Transactions
could be converted into Common Stock either (a) Shareholder approval would be
obtained, or (b) the NYSE would have to eliminate its requirement for
Shareholder approval for listing. The Company also agreed to use all reasonable
efforts to hold a meeting of its Shareholders to approve the issuance of Common
Stock to the holders of Restricted Units who exercised their conversion rights.
No such agreement was made with respect to the River Oaks Transaction because,
at the time of such Transaction, the transferor had the right under the NYSE
rules to list the Common Stock it would receive upon the conversion of its
Restricted Units. The OP Agreement was subsequently amended in a manner that
resulted in that transferor also having to obtain Shareholder approval in order
to exercise its conversion rights. As part of the Point Transaction, the Company
also agreed that if the Company failed to obtain such Shareholder approval, and
the Point Property is sold by the Company at any time after April 2001, the
transferor of the Point Property may "put" its OP Units to the Company for an
amount of cash representing the then market value of the OP Units, determined on
an as-converted basis (the "Cash Put"). In accordance with the Company's
obligation, the Company is hereby soliciting the approval of its Shareholders
with respect to the issuance of shares of Common Stock to be listed on the NYSE
in connection with the exercise of conversion rights by the holders of
Restricted Units.
The Company believes that it is appropriate for all holders of OP Units to
have the benefit of the same convertibility rights. The Transactions in which
the Restricted Units were issued have enhanced the Company's asset base and, in
the Company's view, were instrumental in assisting the Company in positioning
itself as a more competitive equity REIT. The Company has been advised by the
Related Persons as well as the third parties who are transferors of the real
estate and other assets contributed to the Company that they all regard the
conversion feature as an important component of the consideration received by
them. Because of the importance of this feature, the Company agreed to solicit
approval of its Shareholders in order that it could grant conversion rights to
the transferors who are Related Persons. Further, with respect to the Point
Units, if the holder thereof is granted conversion rights, the Company will no
longer be subject to the Cash Put, which will enable the Company to sell the
Point Property without being subject to a potential cash payment obligation.
If conversion rights are granted with respect to the Restricted Units,
however, and if the holders thereof elected to immediately convert all of their
Restricted Units, such holders would directly and indirectly hold, together with
current share holdings, an aggregate of 18.05% of the Company's Common Stock
outstanding as of June 1, 1997 (assuming none of the Additional Units were
issued), and thus, subject to the Excess Shares provisions described below if
applicable, could be in a position to influence decisions on which Shareholders
may vote. This could have the effect of impeding or facilitating the completion
of a merger, tender offer or other takeover attempt, or make it more difficult
to change the composition of the Board of Directors. However, the Company's
Restated Certificate of Incorporation, as amended, provides that if any "person"
or "group acting in concert" (as defined therein), together with affiliates
thereof, becomes the direct or indirect beneficial owner of more than 9.8% of
the then outstanding shares of Common Stock (the "Excess Shares"), among other
things, such Excess Shares shall be deprived of voting rights, shall not be
included in any quorum count and any dividends and distributions on such shares
shall be paid into an escrow account payable to the holder of the Excess Shares
at the time they cease to be Excess Shares. Accordingly, if the existing holders
of the Restricted Units were granted conversion rights and exercised such rights
with respect to all of their Restricted Units, to the extent such holders were
deemed to be affiliated persons or a group acting in concert, such holders could
be subject to the foregoing Excess Shares provision. The Company has been
advised by the holders of the Restricted Units that they have no current
intention to convert their Restricted Units upon the grant of the conversion
rights (assuming such grant is approved by Shareholders).
11
<PAGE>
Securities to be Issued
If the Shareholders approve Proposal No. 3, and the holders of the
Restricted Units elect to convert all of their OP Units, up to 5,244,066 shares
of Common Stock (representing 17.10% of the outstanding Common Stock as of June
1, 1997, including the converted units), plus those shares represented by the
Additional Units not issued to date (up to $6 million in value, as described
above under "OP Units Subject to Conversion Restriction"), may be issued. All
such shares would be additional shares of the Company's outstanding Common Stock
and, subject to acceptance for listing thereon, would be listed on the New York
Stock Exchange.
Shareholder Vote
The affirmative vote of the holders of a majority of the shares present, in
person or represented by proxy, and entitled to vote at the Meeting is required
to authorize the grant of conversion rights with respect to the Restricted Units
and approve the issuance of Common Stock upon exercise of the holder's election
to convert such Restricted Units, provided that the total vote cast on this
proposal represents over fifty percent of the Common Stock outstanding.
The Board of Directors Recommends a Vote for Proposal No. 3.
EXECUTIVE OFFICERS
The following sets forth the names and ages of the Executive Officers of
the Company, their offices with the Company and the date such Executive Officers
were first elected to their respective offices. Each Executive Officer of the
Company is elected annually by the Board of Directors for the ensuing year or
until a successor is elected and qualified.
David Marshall, age 49, is President. He was elected President March 1, 1996,
and Chief Executive Officer February 28, 1997.
Ridge Frew, age 48, is Executive Vice President of Property Operations. He was
elected February 28, 1997.
Marianne Pritchard, age 47, is Senior Vice President/Chief Financial Officer.
She was elected March 1, 1996.
David Olney, age 37, is Senior Vice President of Acquisitions. He was elected
March 1, 1996.
Dennis Suarez, age 43, is Senior Vice President of Development. He was elected
March 1, 1996.
James Jackson, age 62, is Vice President of Human Resources. He was elected
February 28, 1997.
Richard Willingham, age 41, is Vice President. He was elected March 1, 1996.
Kenneth Richard, age 41, is Vice President of Finance and Accounting. He was
elected May 13, 1997.
Scott D. Spelfogel, age 36, is Secretary. He was elected Assistant Secretary May
7, 1991, and Secretary May 2, 1996.
Information on Mr. Marshall appears above.
Ridge Frew is the Executive Vice President of Property Operations for the
Company and is responsible for the management of 62 multifamily properties
located primarily in the southeast and Texas.
12
<PAGE>
He has been in the real estate industry for 28 years. Prior to being elected an
officer of the Company, he was a Divisional Vice President with Berkshire
Property Management since 1992. Before joining Berkshire Property Management Mr.
Frew was President and CEO of McKinley Properties, responsible for the
management and disposition of over 14,000 residential units and five million
square feet of commercial space located in 16 states. Prior to that he served as
Vice President of Olind Jenni Properties and Director of Property Management for
Nevada Savings and Loan. Mr. Frew received his B.A. degree from the University
of Nevada. He is a former President of the Nevada Apartment Association and a
former Western Region Vice President of the National Apartment Association.
Marianne Pritchard is the Senior Vice President and Chief Financial Officer
of the Company. Prior to being elected, she was Senior Vice President and Chief
Financial Officer of Berkshire Realty Affiliates. Prior to rejoining The
Berkshire Group, she was Vice-President and Controller from July 1989 to August
1991 for Liberty Real Estate Group, a subsidiary of Liberty Mutual Insurance
Company. Prior to Liberty, Ms. Pritchard held the position of
Controller/Treasurer of Berkshire Mortgage Finance from April 1987 to July 1989.
Prior to that, Ms. Pritchard was Senior Audit Manager with Deloitte and Touche,
an international accounting and consulting firm. She is a Certified Public
Accountant and received her B.B.A. degree in Accounting from the University of
Texas.
David J. Olney is the Senior Vice President of Acquisitions with
responsibility for all acquisition, property sales, finance and other asset
management activities for the Company. He most recently held a similar position
with The Berkshire Group and has held several positions within The Berkshire
Group since joining the firm in 1986. Prior to joining The Berkshire Group, he
participated in a three-year financial management rotational program with
Sanders Associates in Nashua, New Hampshire. Mr. Olney received a B.S. from
Bryant College and an M.B.A. from Babson College.
Dennis Suarez is Senior Vice President of Development. Prior to being
elected on March 1, 1996 he served in a similar position with Berkshire
Multifamily Development Corporation, part of The Berkshire Group, since January
1994, with responsibility for all development activities. Prior to that he was
Vice President of Construction for Lane Management, Realty Construction Corp.
His work experience includes commercial high rise, multifamily and single family
construction. He earned Bachelor Degrees in Architecture and Building
Construction from the University of Florida, and a Bachelor of Arts in Interior
Design from Southern College.
James Jackson is the Vice President of Human Resources for the Company.
Prior to being elected on February 28, 1997 he held a similar position with The
Berkshire Group since 1987. After graduating law school, Mr. Jackson was Judge
Advocate with the U.S. Air Force serving in Korea and Japan. He joined General
Electric's Management Training Program and remained with them in various human
resource positions for 15 years. He then held the positions of Vice President
Human Resources for Helix Technology and GSX Corporation. He received an A.B.
from Brown University, M.S. from Union College, and J.D. from Harvard
University. He is admitted to the bar in Illinois and Massachusetts.
Richard Willingham is Vice President in charge of the Company's
Atlanta-based acquisitions office, with responsibility for acquisitions,
property sales, finance and other asset management activities. He previously
served as a Vice President of Acquisitions for The Berkshire Group, since 1989.
Before joining The Berkshire Group in 1989, Mr. Willingham was Vice President,
Property Sales, for Balcor Company, a national real estate investment firm,
where he was responsible for the disposition of over $200 million of real estate
held in either debt or equity oriented investment vehicles. He holds a B.S. from
the University of Tennessee and an M.B.A. from Wake Forest University.
13
<PAGE>
Kenneth Richard is Vice President of Finance and Accounting for the
Company. In this capacity he has responsibility for directing the accounting,
financial reporting and tax planning functions of the Company. Prior to being
elected on May 13, 1997 he was Vice President and Treasurer for The Beacon
Companies from 1994 to 1997. Prior to rejoining Beacon Mr. Richard was Vice
President and Chief Financial Officer of The Codman Company, Inc. in Boston from
1991 to 1994 and from 1988 to 1991, he served as Assistant Treasurer for The
Beacon Companies and from 1986 to 1988 he was Controller for The Trammell Crow
Residential Company in Boston. Mr. Richard is a Certified Public Accountant
having served as a senior auditor for Arthur Andersen & Co. and as an audit
manager for Price Waterhouse. Mr. Richard holds a B.S. degree in Business
Administration from Northeastern University.
Scott D. Spelfogel is the Senior Vice President and General Counsel to The
Berkshire Group. Before joining the firm in November 1988, he was a litigator in
private practice in Boston. He received a Bachelor of Science degree in Business
Administration from Boston University, a Juris Doctor Degree from Syracuse
University's College of Law, and a Master of Laws degree in Taxation from Boston
University Law School. He is admitted to practice law in Massachusetts and New
York and is a licensed real estate broker in Massachusetts.
There are no family relationships amongst the Executive Officers and
Directors.
Messrs. Gerber and Krupp, by virtue of indirect ownership interests in The
Berkshire Companies Limited Partnership, the former investment advisor of the
Company ("BCLP"), and in Mr. Krupp's case, in the transferor of the Berkshire
Towers apartments, are deemed to have direct or indirect material interests in
certain transactions. As discussed above under the caption "OP Units Subject to
Conversion Restriction; Interests of Certain Directors in Proposal" under
Proposal No. 3, on March 1, 1996 the Company acquired the advisory and
development services business of BCLP, and on May 14, 1996, the Company acquired
Berkshire Towers.
Prior to the Advisor Transaction, Messrs. Gerber and Krupp were deemed to
have direct or indirect material interests in amounts payable by the Company to
BCLP pursuant to the Advisory Services Agreement, which was in effect during the
first two months of 1996. During January and February, 1996 BCLP managed the
Company's day-to-day affairs pursuant to the Advisory Services Agreement, which
included responsibilities for the administration of the Company and the
selection, acquisition and disposition of investments. On March 1, 1996, the
Company acquired the advisory and development services business of BCLP and the
Company became self-advised. This acquisition enabled the Company to assume the
existing Advisory Services Agreement, as a result of which the Company
internalized BCLP's investment advisory services capability, and fees that would
otherwise have been incurred by the Company in the future for asset management,
acquisition and disposition functions were eliminated. In connection with the
Company becoming self-advised, the Company entered into an Administrative
Services Agreement pursuant to which BCLP and its affiliates will provide
certain administrative services to the Company, such as those relating to
shareholder relations, computer systems and support, and human resources.
For its services to the Company in the first two months of 1996, BCLP
received a prorated annual asset management fee equal to .75% of the "Purchase
Price" (as defined in the Advisory Services Agreement) of new properties or the
principal amount of any mortgage loan investments. There is no asset management
fee payable for mortgage backed securities or "Existing Properties" (properties
owned at the
14
<PAGE>
time of the Company's 1991 exchange offer between Krupp Cash Plus-III Limited
Partnership, Krupp Cash Plus-IV Limited Partnership and the Company
(the "Exchange Offer")).
Under the Advisory Services Agreement, BCLP was entitled to receive an
acquisition fee equal to 1% of the total Purchase Price of any new property and
.5% with respect to the acquisition of mortgage loan investments made by the
Company.
Under the Advisory Services Agreement, upon disposition of any property,
BCLP was entitled to receive a disposition fee. In the case of Existing
Properties, the disposition fee was to equal 10% of the amount by which the sale
price exceeded the higher of either the original Purchase Price or the appraised
value as disclosed in the prospectus relating to the Exchange Offer. In the case
of properties acquired subsequent to the Exchange Offer, the disposition fee was
to equal 10% of the amount by which the sale price exceeded the original
Purchase Price of the property.
In 1996 and the first two months of 1997, the Company had property
management agreements with an affiliate of BCLP for services as management agent
to the Company's properties. Such agreements provided for property management
fees payable monthly at the rate of 6% of gross receipts from office or
commercial properties and 5% of the gross receipts from residential properties
under management. By becoming self-managed as of February 28, 1997, the Company
will no longer be obligated to pay management fees or be liable for
reimbursements for multifamily assets, and will receive fees and reimbursements
of expenses for managing the assets of others.
During all or part of 1996, BCLP and its affiliates were also entitled to
be reimbursed for certain expenses incurred in connection with the operation of
the Company and its properties, including those relating to accounting,
computer, insurance, travel and payroll, as well as the preparation and mailing
of reports and other communications to the Shareholders. In addition, BCLP and
its affiliates were entitled to be reimbursed from the Company for costs
incurred in relation to acquisition, disposition and financing activities.
15
<PAGE>
In addition to the OP Units issued in connection with the Point Transaction
and the Advisor Transaction, amounts paid or accrued to BCLP or its affiliates
during the year ending December 31, 1996 were as follows:
1996
----
Property Management Fees $ 4,324,843
Asset Management Fee $ 392,636
Fees and reimbursements
for administrative Services $ 740,273
Cost reimbursements related to the operation
of the Company's properties $ 1,666,695
-----------
Charged to operations $ 7,124,447
Acquisition Fees $ -
Disposition Fees $ -
-----------
$ 7,124,447
The Company has an Audit Committee which was established in June, 1991 and
a Compensation Committee which was established in February, 1996. There is no
Nominating Committee, nor is there any committee performing similar functions.
The Audit Committee is comprised of Messrs. deWilde, Roskind, Goldberg and
Finnegan, the Independent Directors. Mr. Roskind was elected Chairman of the
Audit Committee for 1997; in 1996 Mr. Goldberg served as Chairman. The duties of
the Audit Committee include: (1) recommending independent auditors to the
Company; (2) reviewing with the independent auditors of the Company the scope of
the audit, audit fees and the audit report; (3) reviewing with management and
the independent auditors the financial statements for the year; (4) reviewing
and approving non-audit services by the independent auditors; and (5) consulting
with the independent auditors and, if necessary, with internal financial
personnel of BCLP, with regard to the adequacy of internal controls.
Additionally, the Audit Committee periodically reviews expense reimbursements
and compensation paid by the Company to BCLP and its Affiliates and approves
transactions, if any, between the Company and Affiliates of BCLP. The Audit
Committee, based upon its reviews, makes recommendations to the Board of
Directors that it believes are in the best interests of the Company and the
Shareholders. In 1996, the Compensation Committee was comprised of Messrs.
Finnegan and deWilde (Mr. Gerber was elected to the Committee on February 28,
1997.) Mr. Finnegan is Chairman. The duties of the Compensation Committee
include: establishing the general compensation policy of the Company
16
<PAGE>
and BRI OP Limited Partnership, fixing the compensation of the Chief Executive
Officer, and administering any stock option plan, and any other employee benefit
plans established by the Company or BRI OP Limited Partnership.
The Board of Directors have regularly scheduled quarterly meetings and
special meetings as required. During 1996, the Board of Directors met 5 times
and acted 6 times by unanimous written consent. The Audit Committee met 2 times.
The Compensation Committee met 3 times and acted once by unanimous written
consent. No Director attended fewer than 75% of the total number of meetings of
the Board of Directors or committee on which such Director served.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION COMMITTEE ON
COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY
The following Report of the Compensation Committee and the performance
graphs included elsewhere in this proxy statement shall not be deemed soliciting
material or otherwise deemed filed and shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this proxy
statement into any other filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this Report or the performance graph by reference therein.
The Compensation Committee of the Board of Directors is responsible for the
establishment of all compensation and benefit programs. It sets policy for all
compensation decisions with regard to executive officers and determines and
approves the President's and Chief Executive Officer's compensation.
Executive Compensation Philosophy
The general philosophy of all compensation and benefit programs for all
employees is to attract, retain, and motivate employees to perform at a level
that enhances Shareholders' value. We believe employee and Shareholder interests
should be congruent. We encourage employees to become Shareholders. The
competition in the marketplace dictates the performance level needed as well as
requires payments to employees that are also competitive. Consistent with this
overall philosophy the executive compensation philosophy focuses on and rewards
individual performance on corporate objectives. Their compensation has three
components: Base Salary, Current Year Incentives, and Long-term Incentives.
These components are intended to provide the executives a total competitive
compensation reflecting results.
Base Salary
Base salary is generally determined annually to reflect competitive and
economic trends, performance of the individual, and overall financial
achievements of the Company through their efforts. In the case of Messrs. Gerber
and Marshall and Ms. Pritchard, salaries are paid pursuant to their employment
agreements. When an individual's responsibilities change in scope and/or
complexity, base
17
<PAGE>
salary is re-examined and appropriate action taken independently or in
conjunction with annual reviews. Executive officers are assigned base salaries
which are generally determined by comparing individual responsibilities with
industry survey data and internal executive job responsibilities. The objective
of the Compensation Committee is to maintain a competitive compensation
structure for Company executives, although percentiles vary from position to
position.
Current Year Incentives
The primary method of reward was established through the assistance of
outside consultants. The annual bonus process is not only competitive but tied
to corporate business plan objectives for the year. The primary approach used
for this group is to establish individual objective criteria for each year that
addresses the current key objectives with a range of results set in advance that
if achieved will result in specific awards. If not achieved, no awards are made
for those objectives. These goals are communicated to the individual each year
and measured after results are available. The Compensation Committee approves
all objectives established and all results to ensure compliance with the
process. The President's annual bonus plan is established by the Compensation
Committee (in 1996 the Chief Executive Officer was not eligible for a bonus).
The President establishes all others in accordance with the policies set by the
Compensation Committee. Those executives not on the annual bonus plan are on
commission plans that establish payment throughout the year on accomplishment of
the preset awards. Those on commissions do not participate in the annual bonus
plan. These are established by the President under guidelines provided by the
Compensation Committee.
Long-term Incentives
Executive officers participate in the stock option plan. This plan assists
us in further focusing participants' interest on those of the Shareholders. As
with all components of compensation, awards under the plan consider individual
contributions to results.
Chief Executive Officer Compensation
As Chief Executive Officer, Mr. Gerber was compensated during 1996 pursuant
to his employment agreement described below. Mr. Gerber's salary was based on
his role as part time Chief Executive Officer of the Company, and reflected the
Compensation Committee's estimate of an appropriate salary based upon the time
Mr. Gerber was expected to devote to the Company, his background and experience,
and the demands of the job, in addition to the general factors discussed above.
No bonus was paid to Mr. Gerber for 1996; the option grant was negotiated as
part of his original employment contract and included consideration of Mr.
Gerber's past and expected future contributions to the Company, and data from an
outside consultant.
COMPENSATION COMMITTEE
Paul Finnegan, Chairman
David M. deWilde
The following table provides compensation information for the Company's
Chief Executive Officer and the Company's four most highly compensated Executive
Officers other than the Chief Executive Officer (collectively, the "Named
Executive Officers"), whose total salary and bonus exceeded $100,000 for the
year ended December 31, 1996.
18
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation(1) Awards
---------------------- ------
Securities
Name and Underlying
Principal Position Year Salary($) Bonus($) Options(#)
- ------------------ ---- --------- -------- ------------
<S> <C> <C> <C> <C>
Laurence Gerber 1996 85,520 - 200,000
Chief Executive
Officer(2) and Director
David Marshall 1996 272,500 113,100 200,000
President(2)
Marianne Pritchard 1996 131,623 46,158 40,000
Senior Vice President
and Chief Financial
Officer
David Olney 1996 125,685 83,260 40,000
Senior Vice President
of Acquisitions
Dennis Suarez 1996 123,276 55,750 40,000
Senior Vice President
of Development
</TABLE>
(1) The Annual Compensation amounts reflect ten months of compensation due to
the Company becoming self-administered on March 1, 1996.
(2) Mr. Gerber resigned as Chief Executive Officer on February 28, 1997 and
Mr. Marshall was appointed to the position on that date.
The Company entered into employment agreements with Laurence Gerber, David
Marshall and Marianne Pritchard. Each agreement commenced on March 1, 1996 and
continues until December 31, 1998, except that Mr. Gerber's employment as an
officer terminated on February 28, 1997 upon his resignation. Mr. Gerber's
agreement provided for an annual base salary of not less than $100,000, while
their agreements provided for $325,000 for Mr. Marshall and $157,000 for Ms.
Pritchard. Such salaries may be increased at the sole discretion of the Board of
Directors. Bonuses, if any, are also at the sole discretion of the Board of
Directors. If any of the employment agreements are terminated by the Company
other than for cause, the employee is entitled to receive all accrued but unpaid
salary. In addition, certain termination payments are required. In the case of
Mr. Gerber, the agreement provided that he would be paid severance compensation
in twelve monthly installments (which Mr. Gerber waived upon his resignation).
Mr. Marshall's agreement provides for eighteen months of severance payments,
while Ms. Pritchard's provides for nine months at the same rate as the base
salary in effect at the date of termination.
19
<PAGE>
The following table provides option information for the Named Executive
Officers as of December 31, 1996. No options have been exercised by the Named
Executive Officers as of December 31, 1996.
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
Potential Realized
Value at Expiration
Date at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term (in thousands)(1)
-----------------------------------------------------------------------------------------
% of Total
Options
Number of Granted to
Securities Employees
Underlying in Fiscal Exercise Expiration
Name Options Year Price $/Sh Date 5%($) 10%($)
- ---- --------- ---------- ------------ ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Laurence Gerber 200,000 32% 9.75 2-28-06 1,226 3,108
David Marshall 200,000 32% 9.75 2-28-06 1,226 3,108
Marianne Pritchard 40,000 6% 9.75 2-28-06 245 622
David Olney 40,000 6% 10.25 5-1-06 258 653
Dennis Suarez 40,000 6% 10.25 5-1-06 258 653
</TABLE>
(1) Values calculated using 5% and 10% annual rates of appreciation of market
price over the option term less original exercise price.
AGGREGATED OPTION EXERCISES IN
FISCAL YEAR 1996 AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options at Options at
Fiscal Year- Fiscal Year-
Shares Value End (#) End ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Laurence Gerber 0 0 0/200,000 0/25,000
David Marshall 0 0 0/200,000 0/25,000
Marianne Pritchard 0 0 0/ 40,000 0/ 5,000
David Olney 0 0 0/ 40,000 0/0
Dennis Suarez 0 0 0/ 40,000 0/0
</TABLE>
During 1994, 1995 and the first two months of 1996 all of the Executive
Officers of the Company were employees of BCLP, which had been retained to
manage the Company's day-to-day affairs, subject
20
<PAGE>
to the Board's control and supervision. Employees of BCLP did not receive
directly any remuneration from the Company, including options, stock
appreciation rights, or rights under any long-term incentive plan (except that
one employee of BCLP was granted certain stock options in 1996). Such employees
were otherwise compensated for their services, including services relating to
the Company, by BCLP.
Director Compensation
Independent Directors shall be entitled to receive compensation from the
Company for serving as Directors at the rate of $25,000 per year, subject to
increase in future years with the prior approval of the Board of Directors.
During 1996 each independent director received $25,000 for his services. There
were no other arrangements for the Company to compensate any director during
1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. deWilde and Finnegan comprised the Compensation Committee in 1996.
Neither of these directors is or has been an officer or employee of the Company.
PERFORMANCE GRAPH
The Performance Graph set forth below compares the cumulative total
stockholder return on the Company's Common Stock from December 31, 1991 to
December 31, 1996, with the cumulative total return of the Standard & Poor's 500
Composite Stock Price Index and the NAREIT Equity REIT Total Return Index
securities (excluding health care) over the period. The comparison assumes $100
was invested on December 31, 1991 in the Company's Common Stock, in the Standard
& Poor's 500 Composite Stock Price Index and in the NAREIT Equity REIT Total
Return Index securities (excluding health care), and assumes reinvestment of
dividends, if any.
The NAREIT Equity REIT Total Return Index (excluding health care) is
published by the National Association of Real Estate Investment Trusts, Inc.
Index data reflect monthly reinvestment of dividends and are based upon the
monthly closing prices of shares of all tax-qualified equity REITs (real estate
investment trusts at least 75% of whose gross invested assets are invested in
real estate equities, excluding healthcare), including the Company, listed on
the NYSE and the American Stock Exchange and traded in NASDAQ National Market
System. At December 31, 1996, this Index included 159 equity REITs with a total
market capitalization of $73.59 billion.
[Tabular Representation of Performance Graph]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NAREIT EQUITY 100.0 114.59 137.11 141.46 163.06 220.56
S&P 500 100.0 107.67 118.43 119.97 164.88 202.79
BERKSHIRE 100.0 114.14 156.30 144.66 162.50 182.03
</TABLE>
21
<PAGE>
INDEPENDENT AUDITORS
Coopers & Lybrand has served as independent auditors to the Company since
its formation. The Audit Committee has recommended to the Board of Directors,
and the Board of Directors has approved, the selection of Coopers & Lybrand as
auditors for 1997.
A representative of Coopers & Lybrand is expected to be present at the
Meeting to respond to appropriate questions and to make a statement should he or
she desire to do so.
The Company's By-laws do not require that Shareholders approve the
appointment of independent auditors.
ANNUAL REPORT
The Annual Report of the Company, including financial statements for the
fiscal year ended December 31, 1996, was forwarded to each stockholder on or
about March 31, 1997.
OTHER MATTERS
The Board of Directors is not aware of any other formal matters to be
presented at the meeting. Pursuant to the By-laws, only such business shall be
conducted, and only such proposals shall be acted upon, as shall be properly
brought before the Meeting, either by the Board of Directors, or by any
Shareholder of the Company who timely complies with the notice procedures set
forth in the By-laws of the Company.
By order of the Board
of Directors
------------------
Scott D. Spelfogel
Secretary
SHAREHOLDERS' PROPOSALS
If any Shareholder wishes to submit a proposal to be voted on at the 1998
Meeting of Shareholders, the Shareholder must submit the Proposal to the Company
on or before December 1, 1997.
22
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
(File No. 1-10660) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1996; and
(b) Quarterly Report on Form 10-Q for the three month period ended March 31,
1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 subsequent to the date of this
Proxy Statement and prior to the date of the Meeting of Shareholders to which
this Proxy Statement relates shall be incorporated by reference in this Proxy
Statement and made a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement to the extent that a statement contained herein or in any
other document subsequently filed with the Commission which also is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement.
The Company will provide without charge to each person to whom this Proxy
Statement is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference herein (not including
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to: Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Scott D. Spelfogel, Telephone (617) 556-8100.
IMPORTANT
PLEASE FILL IN, DATE AND SIGN THE ACCOMPANYING PROXY, WHICH IS SOLICITED BY
THE BOARD OF DIRECTORS OF THE COMPANY, AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID ENVELOPE. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE
MEETING.
23
<PAGE>
APPENDIX A
BERKSHIRE REALTY COMPANY, INC.
DIRECTORS RETAINER FEE PLAN
JANUARY 1, 1997
1. Purpose. Berkshire Realty Company, Inc., a Delaware corporation (the
"Company"), hereby adopts this Directors Retainer Fee Plan (the "Plan") to
promote the long-term growth and financial success of the Company by attracting
and retaining non-employee directors of outstanding ability and assisting the
Company in promoting a greater identity of interest between the Company's
non-employee directors and its stockholders.
The Plan is intended to allow directors participating in the Plan to
qualify for exemption from Section 16(b) of the Securities Exchange Act of 1934,
as amended, by complying with the requirements of Rule 16b-3 with respect to
fees deferred hereunder.
2. Administration.
(a) The Plan shall be administered by the Board of Directors ("Board").
(b) The Board shall have the authority (i) to exercise all of the powers
granted to it under the Plan, (ii) to construe, interpret and implement the Plan
and all documents executed pursuant to the Plan (including all Election Forms),
(iii) to prescribe, amend and rescind rules relating to the Plan, (iv) to make
any determination necessary or advisable in administering the Plan, and (v) to
correct any defect, supply any omission and reconcile any inconsistency in the
Plan.
(c) The determination of the Board on all matters relating to the Plan or
any document executed pursuant to the Plan shall be conclusive.
(d) No member of the Board shall be liable for any action or determination
made in good faith with respect to the Plan.
3. Eligibility. Only directors of the Company who are not employees of the
Company or any affiliate of the Company ("Eligible Directors") shall participate
in the Plan.
4. Common Shares Subject to the Plan.
4.1 Shares. For purposes of the Plan, "Shares" shall mean shares of common
stock, par value $.01 per share, of the Company and any other stock into which
such common stock shall thereafter be changed by reason of any merger,
reorganization, recapitalization, consolidation, split-up, combination of shares
or similar event as set forth in and in accordance with this Section 4.
4.2 Shares Available for Awards. Subject to Section 4.3 (relating to
adjustments upon changes in capitalization), as of any date, the total number of
Shares issuable under the Plan shall be 40,000. Shares that shall be issuable
pursuant to the Plan shall be authorized and unissued Shares, treasury Shares or
Shares purchased by or on behalf of the Company in open-market transactions.
24
<PAGE>
4.3 Adjustments. In the event of any merger, reorganization,
recapitalization, consolidation, sale or other distribution of all or
substantially all of the assets of the Company, any stock dividend, split,
spin-off, split-up, split-off, distribution of securities or other property by
the Company, or other change in the Company's corporate structure affecting the
Shares, the number of Shares issuable under the Plan and the Share Units (as
defined in Section 5.3) then credited pursuant to Section 5.3 shall be
appropriately adjusted as determined by the Board in its sole discretion.
5. Payment of Retainer and Meeting Fees.
5.1 In General. Subject to timing requirements set forth in Sections 5.2
and 5.3 below, commencing on the effective date of the Plan, each Eligible
Director may elect to receive payment of all or part of (i) the annual cash
retainer payable to such Director for services as a member of the Board and its
committees (the "Retainer") and/or (ii) fees payable to such Director for
meetings of the Board or committees of the Board ("Meeting Fees"), (a) in cash
or in Shares issued at a price per Share equal to 95%-100% of the Fair Market
Value of a Share on the date on which such amounts become payable and (b) to
defer payments in accordance with the provisions of Section 5.3. The discount,
if any, from the Fair Market Value at which Shares are issued under the Plan
will be determined from time to time by the Board in its sole discretion. The
amount of said discount shall equal the discount in effect as the "Reinvested
Dividend Discount" under the Company's Dividend Reinvestment and Stock Purchase
and Employee Stock Purchase Plans on the date on which the Eligible Director
becomes entitled to payment of the Retainer or Meeting Fees, as the case may be.
The discounted price per Share shall be referred to herein as the "Discounted
Fair Market Value." In the absence of any Current Payment Election or Deferred
Payment Election made pursuant to Sections 5.2 and 5.3, respectively, all
payments of Retainer and Meeting Fees shall be paid to the Eligible Directors in
cash within sixty (60) days after such amount becomes payable.
5.2 Election To Receive Shares Without Deferral. An Eligible Director may
elect to receive payment of all or part of Retainer and/or Meeting Fees in
Shares by submitting an election form ("Current Payment Election Form") to the
Company prior to the date when such Retainer or Meeting Fees are payable,
indicating the percentage of the Retainer and/or Meeting Fees that are to be
paid in Shares. A Current Payment Election Form shall be effective only with
respect to Retainer and Meeting Fees that become payable after the date such
Current Payment Election Form is submitted to the Company and shall not be
effective unless and until the election made therein to acquire Shares is
approved by the Board. Any election made under this Section 5.2 shall continue
in full force and effect until revoked by notice to the Company, until
superseded by a new Current Payment Election Form or unless no longer permitted
by law or regulations (including Rule 16b-3).
5.3 Elective Deferrals. An Eligible Director may elect to defer the payment
of Retainer and/or Meeting Fees into a Share Unit Account (as described in
Section 5.4 below) by submitting an election form (a "Deferred Payment Election
Form") to the Company prior to the year of service with respect to which such
Retainer or Meeting Fees are to be paid to the Eligible Director indicating: (i)
the percentage of the Retainer and/or Meeting Fees that are to be deferred and
(ii) the date on which the commencement of payments of deferred amounts (the
"Distribution Date") should begin, as contemplated by Section 5.5(a). A Deferred
Payment Election Form shall become effective with respect to the Eligible
Director's Retainer and Meeting Fees becoming payable with respect to services
performed in the calendar year following the calendar year in which such
Deferred Payment Election Form is submitted to the Company. An election
25
<PAGE>
under this Section 5.3 shall continue in effect until revoked by notice in
writing to the Company, until superseded by a new Deferred Payment Election Form
or unless no longer permitted by law or regulation (including under Rule 16b-3),
provided, however, that no revocation of a Deferred Payment Election Form or
supersession of such form by submission of a new Deferred Payment Election Form
shall be effective to make any change with respect to amounts deferred pursuant
to previously filed Deferred Payment Election Forms or shall be effective with
respect to Retainer Fees and Meeting Fees to be paid to the Eligible Director in
respect of services in the calendar year in which such revocation or
supersession occurs. An Eligible Director may designate, in a Deferred Payment
Election Form, one or more beneficiaries to receive any distributions under the
Plan upon the death of the Eligible Director, and such designation may be
changed at any time by submitting a new designation to the Company, which shall
become effective immediately upon receipt by the Company.
5.4 Share Unit Account. An Eligible Director may elect to have the portion
of the Retainer and Meeting Fees deferred by such Eligible Director pursuant to
a properly completed Deferred Payment Election Form under Section 5.3 (the
"Deferred Amount") credited to an account (a "Share Unit Account") in units
which are equivalent in value to Shares ("Share Units"). The Deferred Amount
allocated to the Share Unit Account shall be credited to the Share Unit Account
as of the first business day following the date on which the Eligible Director
becomes entitled to payment of the Retainer or Meeting Fees, as the case may be,
and the number of Share Units credited to such Share Unit Account shall be an
amount equal to the results obtained by dividing (i) the Deferred Amount
allocated to the Share Unit Account by (ii) the Discounted Fair Market Value of
a Share on the first business day following the date on which the Eligible
Director becomes entitled to payment of the Retainer or Meeting Fees, as the
case may be. If Share Units exist in an Eligible Director's Share Unit Account
on a dividend record date for the Company's Shares, the Share Unit Account shall
be credited, on the dividend payment date, with an additional number of Share
Units equal to (i) the cash dividend paid on one Share, times (ii) the number of
Share Units in the Share Unit Account on the dividend record date, divided by
(iii) the Discounted Fair Market Value of a Share on the dividend payment date.
5.5 Distributions.
(a) Distribution Date. Each Eligible Director shall designate on a Deferred
Payment Election Form one of the following dates as a Distribution Date with
respect to the Deferred Amount credited to the Eligible Director's Account
thereafter: (i) the first day of the month following the Eligible Director's
death; (ii) the first day of the month following the termination of service or
retirement of an Eligible Director as a member of the Board; (iii) the first day
of a month following an Eligible Director's Disability (as defined in Section
7); (iv) a fixed date in the future at least one year after the date of such
deferral as specified by the Eligible Director on a Deferred Payment Election
Form, provided that such date is within the Eligible Director's life expectancy
determined at the time of the election; or (v) the earliest to occur of (i),
(ii), (iii) or (iv).
(b) Distribution Method. Distributions shall be made from the Eligible
Director's Share Unit Account in a single payment in the form of whole Shares,
valued at their Fair Market Value on the date as of which distributions are
made, and cash representing any fractional interest in a Share.
26
<PAGE>
6. Fair Market Value. "Fair Market Value" shall mean, with respect to each
Share for any day:
(a) the mean between the high and low sales prices of the Shares as
reported on the composite tape for securities traded on the New York Stock
Exchange for the immediately preceding trading date (or if not then trading on
the New York Stock Exchange, the mean between the high and low sales prices of
the Shares on the stock exchange or over-the-counter market on which the Shares
are principally trading on such date), or, if there were no sales on such date,
on the closest preceding date on which there were sales of Shares; or
(b) if there shall be no public market for the Shares on such date, the
Fair Market Value of the Shares as determined in good faith by the Board based
upon a valuation of an independent appraiser.
7. Definition of Disability. "Disability" shall mean any condition which
causes an Eligible Director to be unable to substantially perform his services
as a member of the Board for a period of three consecutive months or for an
aggregate of five months within any 12-month period.
8. Issuance of Certificates.
8.1 Restrictions on Transferability. All Shares delivered under the Plan
shall be subject to such stop-transfer orders and other restrictions as the
Company may deem advisable or legally necessary under any laws, rules,
regulations and other legal requirements, including, without limitation, those
of any stock exchange upon which the Shares are then listed and any applicable
federal, state or foreign securities law.
8.2 Compliance with Laws. Anything to the contrary herein notwithstanding,
the Company shall not be required to issue any Shares under the Plan if, in the
opinion of the Company's legal counsel, the issuance and delivery of such Shares
would constitute a violation by the Eligible Director or the Company of any
applicable law or regulation of any governmental authority, including, without
limitation, federal and state securities laws and the rules of any stock
exchange on which the Company's securities may then be listed. If and to the
extent that the Board determines that it would be illegal, impracticable or
inadvisable to issue Shares under the Plan, or to the extent Shares are
unavailable, the Board shall make any distribution of Shares otherwise required
under the Plan in cash or such other property as may be reasonably acceptable to
the distributee.
9. Withholding and Other Obligations. The Company shall require as a
condition of delivery of any Shares to an Eligible Director that such Director
remit an amount sufficient to satisfy any foreign, federal, state, local and
other governmental withholding tax requirements relating thereto and any
indebtedness or other obligation of the Eligible Director to the Company.
10. Plan Amendments and Termination. The Board may suspend or terminate the
Plan at any time and may amend it at any time and from time to time, in whole or
in part, provided that no amendment or termination may adversely affect any
rights of any Eligible Director that have accrued prior to the date of such
amendment or termination, and provided, further, (a) that any amendment for
which shareholder approval is required by law or in order to maintain continued
qualification of the Plan under Rule 16b-3 shall not be effective until such
approval has been obtained, and (b) that the Plan shall not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the rules
thereunder.
27
<PAGE>
11. Listing, Registration and Legal Compliance. If the Board shall at any
time determine that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the granting of any award
under the Plan, the issuance of Shares or other rights hereunder or the taking
of any other action hereunder (each such action being hereinafter referred to as
a "Plan Action"), then such Plan Action shall not be taken, in whole or in part,
unless and until such Consent shall have been effected or obtained. The term
"Consent" as used herein with respect to any Plan Action means (i) the listing,
registration or qualification of any Shares issued under the Plan on any
securities exchange or under any foreign, federal, state or local law, rule or
regulation, (ii) any and all consents, clearances and approvals in respect of a
Plan Action by any governmental or other regulatory bodies, or (iii) any and all
written agreements and representations by an Eligible Director with respect to
the disposition of Shares or with respect to any other matter which the Board
shall deem necessary or desirable in order to comply with the terms of any such
listing, registration or qualification or to obtain an exemption from the
requirement that any such listing, qualification or registration be made.
12. Right of Discharge Reserved. Nothing in the Plan shall confer upon any
Eligible Director the right to continue in the service of the Company or affect
any right that the Company may have to terminate the service of such Eligible
Director.
13. Other Payments or Awards. Nothing contained in the Plan shall be deemed
in any way to limit or restrict the Company, any affiliate or the Board from
making any award or payment to any person under any other plan, arrangement or
understanding, whether now existing or hereafter in effect.
14. Rights Not Transferable or Subject to Alienation. No rights granted to
an Eligible Director under this Plan may be sold, assigned or otherwise
transferred by the Eligible Director other than by will or the laws of descent
or distribution; all rights granted to an Eligible Director under this Plan may
be exercised during the Eligible Director's lifetime only by such Eligible
Director. An Eligible Director's rights to payments under the Plan are not
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment or garnishment by his creditors or his
beneficiaries.
15. Rights as a Shareholder. An Eligible Director shall have no rights as a
shareholder of the Company with respect to any Shares issuable under the Plan
until such Shares have been delivered to the Eligible Director.
16. Unfunded Plan. The Plan shall be unfunded and shall not create (or be
construed to create) a trust or separate fund. The Plan shall not establish any
fiduciary relationship between the Company and any Eligible Director or other
person and shall constitute a mere promise by the Company to make payments in
the future. The Company may, in its sole discretion, establish a separate trust
to hold assets set aside to provide benefits under the Plan, provided that no
Eligible Director shall have an interest in the assets of any such trust, and
the assets of such trust shall be available to pay claims of the Company's
general creditors on such terms and conditions as the trust may provide. To the
extent any person holds any rights by virtue of a pending deferral under the
Plan, such rights shall be no greater than the rights of an unsecured general
creditor of the Company.
17. Governing Law. The Plan shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts.
18. Severability. If any portion of the Plan is declared by any court or
governmental authority to be invalid, such invalidity shall not affect any
portion not declared to be invalid. Any portion so declared to be invalid shall,
if possible, be construed in a manner which will give effect to the terms of
such portion to the fullest extent possible while remaining valid.
28
<PAGE>
19. Notices. All notices and other communications hereunder shall be given
in writing and shall be personally delivered against or sent by registered or
certified mail, return receipt requested or by reputable overnight delivery
service. Any notice shall be deemed given on the date of delivery or mailing,
and if mailed, shall be addressed (a) to the Company, at 470 Atlantic Avenue,
Boston, Massachusetts 02210, Attention: Board of Directors, and (b) to an
Eligible Director, at the Eligible Director's principal residential address last
furnished to the Company. Either party may, by notice, change the address to
which notice to such party is to be given.
20. Section Headings. The Section headings contained herein are for
convenience only and are not intended to define or limit the contents of said
Sections.
21. Effective Date. This Plan shall become effective as of January 1, 1997
upon approval by the Directors subject to ratification by the holders of the
Company's Common Stock at the next annual meeting of shareholders.
22. Exculpation. It is understood that the obligations incurred by the
Company with respect to this Plan do not constitute personal obligations of the
Directors, officers, employees or shareholders and shall not create or involve
any claim against, or personal liability on the part of, them or any of them.
The Eligible Directors agree not to seek recourse against any such Directors,
officers, employees or shareholders, or any of them or any of their personal
assets for satisfaction of any liability under or with respect to the Plan.
29
<PAGE>
DETACH HERE BRC F
BERKSHIRE REALTY COMPANY, INC.
PROXY
The undersigned hereby appoints Laurence Gerber and David F. Marshall, and each
of them, as proxies, with full power of substitution in each, to vote all the
shares of Berkshire Realty Company, Inc. of the undersigned at the Special
Meeting in lieu of the Annual Meeting of the Shareholders to be held Thursday,
August 14, 1997 at 9:00 a.m. at The Back Bay Hilton, 40 Dalton Street, Boston,
Massachusetts 02115 and any adjournment thereof as specified on the reverse
side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
|-----------|
|SEE REVERSE|
| SIDE |
|-----------|
<PAGE>
DETACH HERE BRC F
[X] Please mark
votes as in
this example.
This proxy is solicited by the Board of Directors and may be revoked prior to
exercise. This proxy, when properly executed, will be voted as directed herein
by the undersigned shareholder. In the absence of direction, this proxy will be
voted FOR Items 1, 2 and 3.
1. Election of Directors
Nominees: David M. deWilde, J. Paul Finnegan and David F. Marshall
FOR [ ] AUTHORITY WITHHELD [ ]
[ ]___________________________
Instruction: To withhold authority for one of the above nominees,
write that nominee's name on line above.
2. Approval of the Company's Non-Employee Directors Retainer Fee Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Granting of Conversion Rights with Respect to All Operating Partnership Units
(Authorization to Issue Underlying Shares)
4. Other Business.
In their discretion, the proxies are authorized to vote upon such other
business as may properly be brought before the meeting. The Board of Directors
at present knows of no other formal business to be brought before the meeting.
IF YOU PLAN MARK HERE
TO ATTEND FOR ADDRESS
THE MEETING [ ] CHANGE AND [ ]
INDICATE NUMBER NOTE AT LEFT
OF ATTENDEES
IN THE BOX
Important: Please sign exactly as name appears hereon. Executors,
Administrators, Guardians. Attorneys or any other representative should give
full title. Corporate stockholders sign with full corporate name by a duly
authorized officer. If a partnership, sign in partnership name by authorized
person.
Signature:_____________________ Date:_______ Signature: __________ Date:________
