As filed with the Securities and Exchange Commission on March 31, 1998
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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:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
------------------
Berkshire Realty Company, Inc.
(Name of Registrant as Specified in its Charter)
------------------
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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
================================================================================
<PAGE>
[LOGO]
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BERKSHIRE REALTY COMPANY, INC. (NYSE - BRI)
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March 31, 1998
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Berkshire Realty Company, Inc. to be held on Thursday, May 21, 1998 at the
Boston Harbor Hotel, 70 Rowes Wharf, Boston, Massachusetts 02110 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; and
(2) approval of the Company's Amended and Restated Stock Option Plan.
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,
/s/ David F. Marshall
----------------------------------
David F. Marshall
President and Chief Executive Officer
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Harbor Plaza, 470 Atlantic Avenue
Boston, Massachusetts 02210
Telephone: 888-867-0100
<PAGE>
<PAGE>
BERKSHIRE REALTY COMPANY, INC.
470 Atlantic Avenue
Boston, Massachusetts 02210
-------------------------------------
-------------------------------------
Notice of Annual Meeting
of Shareholders
To be Held on May 21, 1998
-------------------------------------
-------------------------------------
TO THE SHAREHOLDERS OF BERKSHIRE REALTY COMPANY, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Berkshire
Realty Company, Inc. (the "Company") will be held on Thursday, May 21, 1998 at
the Boston Harbor Hotel, 70 Rowes Wharf, Boston, Massachusetts 02110 at 9:00
a.m. (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 the Company's Amended and Restated Stock Option Plan.
3. 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 1997 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 March 23, 1998 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.
/s/ Scott D. Spelfogel
----------------------------
Scott D. Spelfogel
Secretary
March 31, 1998
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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>
<PAGE>
PROXY STATEMENT DATED MARCH 31, 1998
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 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, May 21,
1998 at the Boston Harbor Hotel, 70 Rowes Wharf, Boston, Massachusetts 02110, 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 March 31, 1998.
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
March 23, 1998 ( the "Record Date") will be entitled to vote at the Meeting. As
of March 2, 1998 there were 36,656,925 shares of the Company's common stock
("Common Stock") outstanding and 2,737,000 shares of the Company's Series 1997-A
Convertible Preferred Stock (the "Preferred Stock") outstanding. Each share of
Common Stock is entitled to one vote. Holders of the Preferred Stock are
entitled to vote on an "as converted basis", together with the holders of Common
Stock as one class on all matters on which the holders of Common Stock are
entitled to vote. Each share of the Preferred Stock is convertible, subject to
the terms of the Certificate of Designation with respect thereto, into 2.0756
shares of Common Stock based on a conversion price of $12.04. Accordingly, as of
March 2, 1998, each share of Preferred Stock was entitled to 2.0756 votes. The
conversion price (and thus the ratio) was effective as of March 2, 1998 and
therefore is subject to future adjustment under certain circumstances. This
number of votes will be adjusted on the Record Date in the event of an
adjustment to the conversion price of the Preferred Stock on or prior to the
Record Date. No Shareholder has cumulative voting rights. The holders of a
majority of the aggregate of the Company's outstanding common stock and the
outstanding Preferred Stock, on an "as-converted" basis, 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. Holders of the Preferred Stock, voting
as a separate class, are entitled to elect one director (the "Series 1997-A
Preferred Director") to the Board of Directors. The Series 1997-A Preferred
Director is a Class 3 Director whose term expires in the year 1999. For purposes
of Proposal No. 1 (Election of 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 the
Company's Amended and Restated Stock Option Plan) 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 or Proposal No. 2.
1
<PAGE>
The following table sets forth certain information with respect to the
beneficial ownership of certain voting securities of the Company by all persons
known by the Company to own beneficially more than 5% of the shares of any class
of the Company's stock, each of the Company's Directors, the named executive
officers and by all Directors and executive officers as a group, as of March 2,
1998:
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percentage
Title of Class of Beneficial Owner(1) Beneficial Interest(2) of Class(3)
- ----------------- -------------------------------------- ------------------------ ------------
<S> <C> <C> <C>
PREFERRED STOCK
- -----------------
Preferred Stock Cudd & Co. 188,552 Shares 6.9%
599 Lexington Avenue
New York, NY 10022
Preferred Stock Paul D. Kazilionis 2,337,000 Shares(4)(5) 85.4%
Preferred Stock Westbrook Berkshire 254,117 Shares 9.3%
Co-Holdings, L.L.C.
599 Lexington Avenue
New York, NY 10022
Preferred Stock Westbrook Berkshire 2,082,883 Shares(5) 76.1%
Holdings, L.L.C.
599 Lexington Avenue
New York, NY 10022
Preferred Stock All Directors and Executive
Officers as a group 2,337,000 Shares 85.4%
COMMON STOCK
- -----------------
Common Stock Terrance Ahern 0 (6)
Common Stock David M. deWilde 16,800 Shares(7) (6)
Common Stock Paul Finnegan 16,000 Shares(8) (6)
Common Stock Ridge Frew 78,838 Shares(9) (6)
Common Stock Laurence Gerber 215,000 Shares(10) (6)
Common Stock Charles Goldberg 14,000 Shares(11) (6)
Common Stock Paul Kazilionis 0 (6)
Common Stock Douglas Krupp 5,682,319 Shares(12) 13.6%
Common Stock David Marshall 297,147 Shares(13) (6)
Common Stock David Olney 90,335 Shares(14) (6)
Common Stock Marianne Pritchard 91,228 Shares(15) (6)
Common Stock E. Robert Roskind 28,000 Shares(16) (6)
Common Stock Arthur Solomon 0 (6)
Common Stock Dennis Suarez 46,735 Shares(17) (6)
Common Stock All Directors and Executive Officers 6,769,762 Shares(18) 15.9%
as a group
</TABLE>
(1)The address of each person, except as noted, is c/o Berkshire Realty Company,
Inc., 470 Atlantic Avenue, Boston, Massachusetts 02210.
(2)Information relating to beneficial ownership is based upon information
furnished by each person (except for Cudd & Co., Westbrook Berkshire Holdings,
L.L.C., and Westbrook Berkshire Co-Holdings, L.L.C) using "beneficial ownership"
concepts set forth in rules of the Securities and Exchange Commission (the
"SEC") under Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Under those rules, a person is deemed to be a "beneficial
owner" of a security if that person has or shares "voting power" which includes
the power to vote or to direct the voting of such security, or "investment
power," which includes the power to dispose or to direct the disposition of such
security. The person is also deemed to be a beneficial owner of any security of
which that person has a right to acquire beneficial ownership (such as by
exercise of options) within 60 days. Under such rules, more than one person may
be deemed to be a beneficial owner of the same securities, and a person may be
deemed to be a beneficial owner of securities as to which he or she may disclaim
any beneficial interest. Except as indicated in other notes to this table,
directors and executive officers possessed sole voting and investment power with
respect to all shares of Common Stock referred to in the table. Information with
respect
2
<PAGE>
to Cudd & Co., Westbrook Berkshire Holdings, L.L.C. and Westbrook Berkshire
Co-Holdings, L.L.C. is based on the Company's stock ledger records.
(3)Any Common Stock not outstanding which is subject to options or conversion
privileges which the beneficial owner had the right to exercise as of March 2,
1998 or within 60 days thereof shall be deemed outstanding for purposes of
computing the percentage of Common Stock owned by such beneficial owner but
shall not be deemed to be outstanding for the purpose of computing the
percentage of outstanding Common Stock owned by any other beneficial owner.
However, for purposes of determining the percentage of Common Stock owned by the
Directors and Officers as a group, any Common Stock not outstanding which is
subject to options or conversion privileges which a member of the group had the
right to exercise as of March 2, 1998 or within 60 days thereafter shall be
deemed outstanding for purposes of computing the percentage of ownership of the
group.
(4)Mr. Kazilionis is an indirect beneficial owner of the 2,082,883 shares of
Preferred Stock held by Westbrook Berkshire Holdings, L.L.C. and the 254,117
shares of Preferred Stock held by Westbrook Berkshire Co-Holdings, L.L.C., by
virtue of being the managing principal of Westbrook Real Estate Partners,
L.L.C., an affiliate of Westbrook Berkshire Holdings, L.L.C. and Westbrook
Berkshire Co-Holdings, L.L.C. Mr. Kazilionis has shared voting and investment
powers for these shares.
(5)As described above, holders of the Preferred Stock are entitled to vote on an
"as converted basis" together with the holders of the Common Stock
(collectively, the "Voting Securities"). The following beneficial owners of
Preferred Stock held greater than 5% of the Voting Securities outstanding as of
March 2, 1998: Paul Kazilionis indirectly held 11.5 % of the Voting Securities,
and Westbrook Berkshire Holdings, L.L.C. held 10.2% of the Voting Securities.
(6)The amount owned does not exceed one percent of the Common Stock of the
Company outstanding as of March 2, 1998.
(7)Mr. deWilde directly owns 2,800 shares of Common Stock. In addition, Mr.
deWilde has the right to acquire 14,000 shares of Common Stock pursuant to
Options.
(8)Mr. Finnegan directly owns 700 shares of Common Stock. He disclaims
beneficial ownership of 300 shares of Common Stock owned by his wife. In
addition, Mr. Finnegan has the right to acquire 15,000 shares of Common Stock
pursuant to Options.
(9)Mr. Frew directly owns 42,838 shares of Common Stock. In addition, Mr. Frew
has the right to acquire 36,000 shares of Common Stock pursuant to Options.
(10)Mr. Gerber resigned as the Chief Executive Officer as of February 28, 1997.
He directly owns 15,000 shares of Common Stock and he has the right to acquire
200,000 shares of Common Stock pursuant to Options.
(11)Mr. Goldberg owns no shares directly. Mr. Goldberg has the right to acquire
14,000 shares of Common Stock pursuant to Options.
(12)Mr. Krupp directly owns 10,100 shares of Common Stock and is an indirect
beneficial owner of the 512,203 shares of Common Stock 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. Mr. Krupp disclaims beneficial ownership of 15,950
shares of Common Stock owned by various members of his family. Further, Mr.
Krupp, is an indirect beneficial owner of 5,344,066 units ("Operating
Partnership Units") in BRI OP Limited Partnership ("BRI OP"), the operating
partnership of which the Company is a special limited partner. Typically,
holders of Operating Partnership Units acquire conversion rights one year and
ten days from the date of issuance whereupon the Operating Partnership Units are
redeemable on a one-for-one basis for shares of Common Stock or at the Company's
election, for cash. Of the Operating Partnership Units referred to above,
5,144,066 have acquired conversion rights as of March 2, 1998 or will acquire
such rights within 60 days thereafter. In the case where Mr. Krupp is a
beneficial owner (but not a direct owner) of shares, he has shared voting and
investment powers.
(13)Mr. Marshall directly owns 90,804 shares of Common Stock. He disclaims
beneficial ownership of 6,343 shares of Common Stock owned by various members
of his family. In addition Mr. Marshall has the right to acquire 200,000 shares
of Common Stock pursuant to Options.
3
<PAGE>
(14)Mr. Olney directly owns 45,335 shares of Common Stock. In addition, Mr.
Olney has the right to acquire 45,000 shares of Common Stock pursuant to
Options.
(15)Ms. Pritchard directly owns 44,228 shares of Common Stock. In addition, Ms.
Pritchard has the right to acquire 47,000 shares of Common Stock pursuant to
Options.
(16)Mr. Roskind directly owns 15,000 shares of Common Stock. In addition, Mr.
Roskind has the right to acquire 13,000 shares of Common Stock pursuant to
Options.
(17)Mr. Suarez directly owns 3,235 shares of Common Stock. In addition, Mr.
Suarez has the right to acquire 43,500 shares of Common Stock pursuant to
Options.
(18)All Directors and Executive Officers as a group directly or indirectly own
944,196 shares of Common Stock. In addition, all Directors and Officers as a
group have the right to acquire shares of Common Stock pursuant to 681,500
Options. All Directors and Executive Officers as a group, directly or indirectly
own 5,344,066 Operating Partnership Units in BRI OP. Typically, holders of
Operating Partnership Units acquire conversion rights one year and ten days from
the date of issuance whereupon the Operating Partnership Units are redeemable on
a one-for-one basis for shares of Common Stock or at the Company's election, for
cash. 5,144,066 of these Operating Partnership Units have acquired conversion
rights as of March 2, 1998 or will acquire such rights within 60 days
thereafter.
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, 1997 except for the late filing by the Company of two
Form 4 reports with respect to two transactions for David deWilde.
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 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. One Class 3 Director (the Series 1997-A Preferred Director) is
elected solely by the holders of the Series 1997-A Preferred Stock. In 1998, the
Class 2 Directors must be elected; the Company currently has three Class 2
Directors, all of whom have been nominated for reelection by the Board of
Directors for a term expiring in the year 2001. 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:
4
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<TABLE>
<CAPTION>
No. of Years
Name and Principal Offices with the Company Age Class Term Expires Director
- --------------------------------------------- ----- ------- -------------- -------------
NOMINEES:
<S> <C> <C> <C> <C>
Terrance R. Ahern, Director(1) 42 2 1998 0(2)
E. Robert Roskind, Director(1,3) 53 2 1998 8
Arthur P. Solomon, Director 58 2 1998 0(2)
</TABLE>
<TABLE>
<CAPTION>
No. of Years
Name and Principal Offices with the Company Age Class Term Expires Director
- --------------------------------------------- ----- ------- -------------- -------------
DIRECTORS NOT STANDING FOR ELECTION IN 1998:
<S> <C> <C> <C> <C>
Charles N. Goldberg, Director(1) 56 3 1999 8
Paul D. Kazilionis, Series 1997-A Preferred
Director 40 3 1999 0(2)
Douglas Krupp, Chairman of the Board,
Director 51 3 1999 2
David M. deWilde, Director(1,3) 57 1 2000 5
J. Paul Finnegan, Director(1,3) 73 1 2000 8
David F. Marshall, Director, President and 1
Chief Executive Officer 50 1 2000
</TABLE>
(1)Member of the Audit Committee
(2)Elected October 9, 1997 to fill vacancy
(3)Member of the Compensation Committee
Terrance R. Ahern is a co-founder and principal of The Townsend Group, an
institutional real estate consulting firm which represents primarily tax-exempt
clients such as public and private pension plans, endowment, foundation and
multi-manager investments. Mr. Ahern is a member of the Board of Directors of
the Pension Real Estate Association (PREA). He was formerly a member of the
Board of Governors of the National Association of Real Estate Investment Trusts
(NAREIT). Prior to founding The Townsend Group, Mr. Ahern was a Vice President
of a New York based real estate investment firm and was engaged in the private
practice of law. Mr. Ahern received a B.A. and J.D. from Cleveland State
University.
E. Robert Roskind is the Chairman and Co-Chief Executive Officer of
Lexington Corporate Properties, a self-administered REIT, the shares of which
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, the predecessor of
which he co-founded in 1974. He currently serves as a trustee of Krupp
Government Income Trust and Krupp Government Income Trust II. He holds a B.A.
degree from the University of Pennsylvania and a J.D. degree from Columbia Law
School. He has been a member of the New York Bar since 1970.
Arthur P. Solomon is a Managing Director of Lazard Freres & Co. LLC and
head of the firm's Real Estate Group. Previously, Mr. Solomon was a Partner and
head of real estate investment banking at Drexel Burnham Lambert. Before that,
he was Chief Executive Officer of the predecessor of The Berkshire Group during
1983 to 1985 and, from 1982 to 1983, Executive Vice President and Chief
Financial Officer of the Federal National Mortgage Association. Prior to that,
Mr. Solomon was Senior Vice President/Chief Planning Officer for Sears Roebuck &
Company. He also was a tenured faculty member at Massachusetts Institute of
Technology specializing in urban economics, housing and finance, and at the same
time served as the Executive Director of the Harvard-MIT Joint Center for Urban
Studies. He served on the President's Task Force on Domestic and
Intergovernmental Affairs during the Johnson Administration. He holds a B.A.
from Brown University, an M.A. from Trinity College and a Ph.D. in Economics
from Harvard University.
Charles N. Goldberg is of counsel to the law firm of Broocks, Baker &
Lange, L.L.P. Prior to joining Broocks, Baker & Lange, L.L.P., Mr. Goldberg was
a partner in the law firm of Hirsch & Westheimer from March of 1996 to December
of 1997. Prior to Hirsch & Westheimer, he was the Managing Partner of Goldberg
Brown, Attorneys at Law from 1980 to March of 1996. He currently serves as a
Trustee of Krupp Government Income Trust and Krupp Government Income Trust II.
He received a B.B.A. degree and a J.D. degree from the University of Texas. He
is a member of the State Bar of Texas and is admitted to practice before the
U.S. Court of Appeals, Fifth Circuit and U.S. District Court, Southern District
of Texas.
5
<PAGE>
Paul D. Kazilionis is a managing principal and a co-founder of Westbrook
Partners, L.L.C., an investment advisor to institutional investors. Prior to
co-founding Westbrook, Mr. Kazilionis spent 12 years at Morgan Stanley
ultimately serving as Managing Director of Morgan Stanley Realty and President
of the general partner of the Morgan Stanley Real Estate Fund responsible for
Morgan Stanley principal investing in real estate. Mr. Kazilionis received a
B.A. degree from Colby College in 1979 and a M.B.A. degree from the Amos Tuck
School of Business Administration in 1982.
Douglas Krupp co-founded and serves as Chairman and Chief Executive Officer
of The Berkshire Group, an integrated real estate financial services firm
engaged in real estate acquisition and property management, mortgage banking,
health care facility ownership and financial management. Mr. Krupp is a Director
of Harborside Healthcare Corporation, a Trustee of Krupp Government Income Trust
and Krupp Government Income Trust II, and a member of the Board of Trustees at
Brigham & Women's Hospital. He is a graduate of Bryant College where he received
an honorary Doctor of Science in Business Administration in 1989 and was elected
trustee in 1990.
David M. deWilde has been a Managing Partner of LAI, an executive search
firm headquartered in New York City, since January 1998. Prior to that he was
Chief Executive Officer of Chartwell Partners International, Inc., an executive
search firm headquartered in San Francisco, which was founded by Mr. deWilde in
1989. Previously, Mr. deWilde was Managing Director of Boyden International,
Inc. Mr. deWilde is 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., and legal experience. He holds an A.B. degree
from Dartmouth College, a L.L.B. degree from the University of Virginia and a
M.S. degree in Management from Stanford University. He is a member of the Bars
of the State of New York and Washington, D.C.
J. Paul Finnegan retired as a partner of Coopers & Lybrand, LLP in 1987.
Since then, he has been engaged in business as a consultant, a director and
arbitrator. Mr. Finnegan holds a B.A. degree from Harvard College, a J.D.
degree from Boston College Law School and an A.S.A. degree from Bentley
College. 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. Mr. Finnegan is a
Certified Public Accountant and an attorney.
David Marshall was elected President of the Company on March 1, 1996 and
Chief Executive Officer on February 28, 1997. He was previously President of
Berkshire Realty Affiliates, the former advisor to the Company and a member of
The Berkshire Group. Before joining The Berkshire Group in 1986, Mr. Marshall
was President of Resource Savings Association. 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 a M.B.A. degree from the University of
Michigan.
The Board of Directors of the Company recommends a vote for election of the
three nominees.
PROPOSAL NO. 2
APPROVAL OF THE
BERKSHIRE REALTY COMPANY, INC.
AMENDED AND RESTATED
STOCK OPTION PLAN
The Berkshire Realty Company, Inc. 1996 Stock Option Plan (the "Plan") was
adopted by the Board of Directors on February 8, 1996 and became effective upon
approval of the shareholders on May 2, 1996 (the "Original Effective Date").
Pursuant to the Plan, The Compensation Committee (the "Committee") may grant
stock options to key employees and consultants; and stock options are granted to
non-employee directors of the Company. References herein to the "Company" shall
include Berkshire Realty Company, Inc.; its operating partnership, BRI OP
Limited Partnership, a Delaware limited partnership; and their respective
subsidiaries.
6
<PAGE>
In February, 1998, subject to shareholder approval at the Meeting, the
Board of Directors of the Company amended and restated the Plan as the
"Berkshire Realty Company, Inc. Amended and Restated Stock Option Plan" (the
"Amended Stock Plan") principally in order to increase the number of shares of
common stock ("Shares") available for awards from 1,500,000 to 3,350,000, and to
reflect recent changes in the rules promulgated under Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act"). The text of the Amended
Stock Plan is set forth in the Appendix to this Proxy Statement. The following
is a summary of the material features of the Amended Stock Plan, and does not
purport to be a complete statement of the Amended Stock Plan's terms. It is
subject to and qualified in its entirety by reference to the Appendix.
Purpose
The purpose of the Amended Stock Plan is to stimulate the efforts of key
employees and consultants on behalf of the Company, to heighten the desire of
such key employees to continue in employment with the Company, to assist the
Company in competing effectively with other enterprises for the services of new
employees and consultants necessary for the continued improvement of the
Company's operations, and to attract and retain the best available personnel for
service as directors of the Company.
There are 3,350,000 shares of Common Stock authorized for non-qualified and
incentive stock option grants under the Amended Stock Plan, which are subject to
adjustment in the event of stock splits, stock dividends and other situations.
Employee and Consultant Participants
Participants in the Amended Stock Plan are selected by the Committee and
consist of key employees and consultants (including, but not limited to, key
employees of companies providing services to the Company.) There are currently
approximately 75 persons in the class of key employees and there are currently
less than 20 persons in the class of consultants. No option may be granted to
any participant if immediately after the grant of such option such participant
would own stock, including stock subject to outstanding options held by him or
her, amounting to more than five percent (5%) of the total combined voting power
or value of all classes of stock of the Company or any subsidiary. In addition
prior to the approval of the Amended Stock Plan, no participant may be granted
in any one year options to purchase shares of Common Stock in excess of one (1%)
of the total number of shares of the Company's Common Stock outstanding on
January 1, 1996. After shareholder approval of the Amended Stock Plan, no
Participant may be granted in any one year options to purchase shares of Common
Stock in excess of one (1%) of the total number of shares of the Company's
Common Stock outstanding on January 1, 1998.
Non-Employee Director Formula Grants
The Amended Stock Plan also provides for formula grants for non-employee
directors that are designed to comply with the provisions of Rule 16b-3 under
the Exchange Act. There are currently seven non-employee directors comprising
this class. As of the effective date of the Berkshire Realty Company, Inc. 1996
Stock Option Plan, each of the four non-employee directors then serving on the
Board of Directors received an initial stock option grant of 12,000 shares.
Thereafter, each new non-employee director has received and additional new
non-employee directors will receive an initial stock option grant of 5,000
shares upon his or her appointment or election as a non-employee director. Each
non-employee director continuing in office in the past has received and each
non-employee director continuing in office in the future will receive an annual
stock option grant of 3,000 shares on the date of each annual shareholder
meeting. In addition as of the effective date of the Plan, each non-employee
director serving on the Audit Committee or the Compensation Committee of the
Board of Directors (or both) received an additional initial stock option grant
of 1,000 shares and has received and will continue to receive additional annual
stock option grants of 1,000 shares for each such committee served on. The chair
of each such committee received (in lieu of said 1,000 share grant) an
additional initial stock option grant of 2,000 shares and has received and will
continue to receive (in lieu of said 1,000 share grant) additional annual stock
option grants of 2,000 shares for each such committee chaired. Each new
non-employee director appointed to the Audit or Compensation Committee has
received and additional new non-employee directors appointed to the Audit or
Compensation Committee will receive an initial stock option grant of 1,000
shares for each such committee served on as of the date of the first meeting
that he or she serves as a committee member and further each such new
non-employee director will receive additional annual stock option grants of
1,000 shares, thereafter. Each non-employee director's option has a 10 year term
and becomes exercisable beginning one year from the date of the annual meeting
of shareholders on
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<PAGE>
which date the options were granted. If a non-employee director is elected or
appointed on a date not coincident with an annual meeting, his or her initial
grant becomes exercisable beginning one year from the date of the next occurring
annual meeting. If a non-employee director dies or becomes disabled, his or her
options become fully exercisable during the 12 months following the date of his
or her death or disablement. If a non-employee director retires from service as
a director at or after age 62, his or her options that are vested become
exercisable for a period of 12 months following retirement. In all other cases,
a non-employee director's options that are vested upon termination of service
remain exercisable for 90 days following the date of his or her termination of
service.
Administration
The Amended Stock Plan is administered by the Committee. Currently, the
Committee consists of three independent directors appointed by the Board of
Directors. The Board of Directors may fill vacancies and may from time to time
remove or add members. All members of the Committee are expected but not
required to be "Non-Employee Directors" (within the meaning of Rule 16b-3 of the
Exchange Act) and "Outside Directors" (within the meaning of Section 162 (m) of
the Internal Revenue Code of 1986 (the "Code")) to the extent that Rule 16b-3
and Code Section 162 (m), respectively, are applicable to the Company and the
Plan.
The Board of Directors may periodically adopt rules and regulations for
carrying out the Amended Stock Plan and amend the Amended Stock Plan as desired
without further action by the Company's stockholders except as required by
applicable law and provided further that any such amendment or termination that
would impair the rights of any participant or any holder or any beneficiary of
any option theretofore granted shall not to that extent be effective without the
consent of the affected participant.
Termination
The Amended Stock Plan will continue in effect until all shares of stock
available for grant have been acquired through exercise of options, or for a
term of five (5) years from the Original Effective Date, whichever is earlier.
The Amended Stock Plan may be terminated at such earlier time as the Board of
Directors may determine. Termination of the Plan does not affect the survival of
options then outstanding.
Terms of Stock Options
Awards under the Amended Stock Plan consist of non-qualified stock options
(NSOs) and incentive stock options (ISOs). Options granted pursuant to the
Amended Stock Plan to key employees and consultants who are not non-employee
directors need not be identical.
The purchase price under each option is established by the Committee but in
no event will the option price be less than 100% of the fair market value of the
Company's Common Stock on the date of grant. The option price must be paid in
full at the time of exercise. The price may be paid in cash or, as acceptable to
the Committee, by loan made by the Company to the participant, by arrangement
with a broker where payment of the option price is guaranteed by the broker, by
the surrender of shares of the Company owned by the participant exercising the
option and having a fair market value on the date of exercise equal to the
option price, or by any combination of the foregoing equal to the option price.
Options granted must expire within a period of not more than ten (10) years
from the grant date. Options for key employees and consultants who are not
non-employee directors will have such other terms and be exercisable in such
manner and at such times as the Committee may determine. An option agreement for
key employees and consultants who are not non-employee directors may provide for
accelerated exercisability in the event of the employee or consultant's death,
disablement or retirement or other events in accordance with policies
established by the Committee.
Subject to modification of the following terms in connection with the
entering into, extension or modification of an employment agreement, if the
Board of Directors determines that an employee or consultant other than a
non-employee director in the Amended Stock Plan has committed certain defined
acts of misconduct such as embezzlement, fraud, dishonesty, breach of fiduciary
duty or deliberate disregard of the Company's rules resulting in loss, damage or
injury to the Company, neither the participant nor his or her estate would be
entitled to exercise any option whatsoever.
Each option shall be exercisable only by the participant during the
participant's lifetime, or, if permissible under applicable law, by the
participant's guardian or legal representative and except as otherwise provided
in an applicable option agreement, no option may be assigned, alienated,
pledged,
8
<PAGE>
attached, sold or otherwise transferred or encumbered by a participant otherwise
than by will or by the laws of descent and distribution and any such purported
assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall
be void and unenforceable against the Company; provided that the designation of
a beneficiary shall not constitute an assignment, alienation, pledge,
attachment, sale, transfer or encumbrance. Notwithstanding the foregoing, the
Committee has the discretion under the Amended Stock Plan to provide that
options granted under the Amended Stock Plan that are not intended to qualify as
incentive stock options may be transferred without consideration to certain
family members or trusts, partnerships or limited liability companies whose only
beneficiaries or partners are the original grantee and/or such family members.
The Committee may, at any time prior to exercise and subject to consent of
the participant, amend, modify or cancel any option previously granted and may
or may not substitute in their place options at a different price and of a
different type under different terms or in different amounts.
Federal Income Tax Consequences
The following summary of the Federal income tax consequences of the grant
and exercise of non-qualified and incentive stock options awarded under the
Amended Stock Plan, and the disposition of Shares purchased pursuant to the
exercise of such stock options, is intended to reflect the current provisions of
the Code and the regulations thereunder. This summary is not intended to be a
complete statement of applicable law, nor does it address state and local tax
considerations.
No income will be realized by an optionee upon grant of a non-qualified
stock option. Upon exercise of a non-qualified stock option, the optionee will
recognize ordinary compensation income in an amount equal to the excess, if any,
of the fair market value of the underlying stock over the option exercise price
(the "Spread") at the time of exercise. The Spread will be deductible by the
Company for federal income tax purposes subject to the possible limitations on
deductibility under sections 280G and 162(m) of the Code of compensation paid to
executives designated in those sections. The optionee's tax basis in the
underlying shares acquired by exercise of a non-qualified stock option will
equal the exercise price plus the amount taxable as compensation to the
optionee. Upon sale of the shares received by the optionee upon exercise of the
non-qualified stock option, any gain or loss is generally long-term or
short-term capital gain or loss, depending on the holding period. The optionee's
holding period for shares acquired pursuant to the exercise of a non-qualified
stock option will begin on the date of exercise of such option.
Pursuant to currently applicable rules under section 16(b) of the Exchange
Act, the grant of an option (and not its exercise) to a person who is subject to
the reporting and short-swing profit provisions under section 16 of the Exchange
Act (a "Section 16 Person") begins the six-month period of potential short-swing
liability. The taxable event for the exercise of an option that has been
outstanding at least six months ordinarily will be the date of exercise. If an
option is exercised by a Section 16 Person within six months after the date of
grant, however, taxation ordinarily will be deferred until the date which is six
months after the date of grant, unless the person has filed a timely election
pursuant to section 83(b) of the Code to be taxed on the date of exercise. Under
current law, the six month period of potential short-swing liability may be
eliminated if the option grant (i) is approved in advance by the Company's Board
of Directors (or a committee composed solely of two or more non-employee
directors) or (ii) approved in advance, or subsequently ratified by the
Company's shareholders no later than the next annual meeting of shareholders.
Consequently, the taxable event for the exercise of an option that satisfies
either of the conditions described in clauses (i) or (ii) above will be the date
of exercise.
The payment by an optionee of the exercise price, in full or in part, with
previously acquired Shares will not affect the tax treatment of the exercise
described above. No gain or loss generally will be recognized by the optionee
upon the surrender of the previously acquired Shares to the Company, and Shares
received by the optionee, equal in number to the previously surrendered Shares,
will have the same tax basis as the Shares surrendered to the Company and will
have a holding period that includes the holding period of the Shares
surrendered. The value of Shares received by the optionee in excess of the
number of Shares surrendered to the Company will be taxable to the optionee.
Such additional Shares will have a tax basis equal to the fair market value of
such additional Shares as of the date ordinary income is recognized, and will
have a holding period that begins on the date ordinary income is recognized.
The Code requires that, for incentive stock option treatment, Shares
acquired through exercise of an incentive stock option cannot be disposed of
before two years from the date of grant and one year from the date of exercise.
Incentive stock option holders will generally incur no federal income tax
liabil-
9
<PAGE>
ity at the time of grant or upon exercise of such options. However, the Spread
will be an "item of tax preference" which may give rise to "alternative minimum
tax" liability at the time of exercise. If the optionee does not dispose of the
Shares before two years from the date of grant and one year from the date of
exercise, the difference between the exercise price and the amount realized upon
disposition of the Shares will constitute long-term capital gain or loss, as the
case may be. Assuming both the holding periods are satisfied, no deduction will
be allowable to the Company for federal income tax purposes in connection with
the grant or exercise of the option. If, within two years of the date of grant
or within one year from the date of exercise, the holder of shares acquired
through the exercise of an incentive stock option disposes of such Shares, the
optionee will generally realize ordinary taxable compensation at the time of
such disposition equal to the difference between the exercise price and the
lesser of the fair market value of the stock on the date of initial exercise or
the amount realized on the subsequent disposition, and such amount will
generally be deductible by the Company for federal income tax purposes, subject
to the possible limitations on deductibility under sections 280G and 162(m) of
the Code for compensation paid to executives designated in those sections.
New Plan Benefits
The Committee has full discretion to determine the number and amount of
options to be granted to key employees and consultants under the Amended Stock
Plan subject to an annual limitation on the total number of options that may be
granted to any key employee or consultant. Given the discretionary nature of the
Amended Stock Plan, the amount of shares represented by options to be received
by participants in the current and any future fiscal years is not determinable.
The grant of options to non-employee directors will be automatic under the
Amended Stock Plan, and may not be amended more frequently than once every six
months. With respect to the grant of options to non-employee directors under the
Amended Stock Plan (assuming stockholder approval ), 21,000 units shall be
allocated to the non-employee directors as a group on the date of the Annual
Meeting.
NEW PLAN BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Berkshire Realty Company, Inc. Amended and Restated Stock Option Plan
- --------------------------------------------------------------------------------
Name and Position Dollar Value Number of Units
- --------------------------------------------------------------------------------
Non-Employee Directors as a Group N/A 21,000*
*Non Qualified Stock Options
The affirmative vote of the holders of a majority of the Voting Securities
voting on this proposal is required to approve the Amended Stock Plan, provided
that the total vote cast on this proposal represents over fifty percent of the
Voting Securities.
The Board of Directors Recommends a Vote for Proposal No. 2.
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 50, is President and Chief Executive Officer. He was elected
President March 1, 1996, and Chief Executive Officer February 28, 1997.
Ridge Frew, age 49, is Executive Vice President and Chief Operating Officer.
Mr. Frew was Executive Vice President of Property Operations from February 28,
1997 until his promotion as of January 1, 1998.
Marianne Pritchard, age 48, is Executive Vice President and Chief Financial
Officer. Ms. Pritchard was Senior Vice President and Chief Financial Officer
from March 1, 1996 until her promotion as of January 1, 1998.
David Olney, age 37, is Executive Vice President and Chief Investment Officer.
Mr. Olney was Senior Vice President of Acquisitions from March 1, 1996 until
his promotion as of January 1, 1998.
Dennis Suarez, age 44, is Senior Vice President of Development. He was elected
March 1, 1996.
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Stephen M. Gorn, age 46, has been President of the Mid-Atlantic Division since
his election on November 14, 1997.
James Jackson, age 63, is Vice President of Human Resources. He was elected
February 28, 1997.
Kenneth Richard, age 42, is Senior Vice President of Finance and Accounting and
Chief Accounting Officer. Mr. Richard was Vice President of Finance and
Accounting following his election on May 13, 1997 until his promotion as of
January 1, 1998.
Scott D. Spelfogel, age 37, is Secretary. He was elected Assistant Secretary May
7, 1991, and Secretary May 2, 1996.
Information on Mr. Marshall appears above.
Ridge B. Frew is the Executive Vice President and Chief Operating Officer
for the Company and is responsible for the management of the Company's
multifamily property portfolio located primarily in the MidAtlantic and
Southeast regions of the United States, Florida and Texas. Prior to that, he was
a Divisional Vice President with Berkshire Property Management. Before joining
Berkshire Property Management, Mr. Frew was President and Chief Executive
Officer 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.
Marianne Pritchard is the Executive Vice President and Chief Financial
Officer of the Company. Prior to joining the Company, she was Senior Vice
President and Chief Financial Officer of Berkshire Realty Affiliates, the
advisor and property manager for the Company and several affiliated real estate
investment companies. Prior to that, she was Vice-President and Controller of
Liberty Real Estate Group, a subsidiary of Liberty Mutual Insurance Company from
July 1989 to August 1991. She received her B.B.A. degree in Accounting from the
University of Texas. She is a Certified Public Accountant.
David J. Olney is the Executive Vice President and Chief Investment Officer
with responsibility for all acquisitions, property sales, finance and other
asset management activities for the Company. Previously, he held a similar
position with The Berkshire Group and has held several positions within The
Berkshire Group since 1986. Mr. Olney received a B.S. degree from Bryant College
and a M.B.A. degree from Babson College.
Dennis Suarez has been Senior Vice President of Development since March 1,
1996. Prior to being elected to this position on March 1, 1996, he served in a
similar position with Berkshire Multifamily Development Corporation, a member of
The Berkshire Group, and was responsible for all development activities. Prior
to that, he was Vice President of Construction for Lane Management, Realty
Construction Corp. He earned Bachelor's degrees in Architecture and Building
Construction from the University of Florida, and a B.A. degree in Interior
Design from Southern College.
Stephen M. Gorn was elected President of the Mid-Atlantic Division of the
Company on November 14, 1997. He was previously President of The Questar and
Gorn Management Companies and is currently the President of Questar Builders,
Inc. and Questar Properties, Inc., developers, builders, owners and managers of
residential properties. Mr. Gorn has been a managing general partner of more
than 25 real estate partnerships owning various apartment communities and
commercial real estate. He holds a B.A. degree from the University of
Pennsylvania.
James Jackson has been the Vice President of Human Resources for the
Company since February 28, 1997. Prior to being elected to this position, he
held a similar position with The Berkshire Group since 1987. Prior to that, he
held the positions of Vice President of Human Resources for Helix Technology and
GSX Corporation. He received an A.B. degree from Brown University, a M.S. degree
from Union College, and a J.D. degree from Harvard University. He is admitted to
the bar in Illinois and Massachusetts.
Kenneth J. Richard is the Senior Vice President of Finance and Accounting
and Chief Accounting Officer for the Company. Prior to his joining the Company,
he was Vice President and Treasurer for The Beacon Companies, a developer,
owner and manager of commercial properties, from 1994 to 1997. Prior to joining
The Beacon Companies, Mr. Richard was Vice President and Chief Financial
Officer of The Codman Company, Inc., a real estate brokerage and management
firm in Boston, from 1991 to 1994. Mr. Richard holds a B.S. degree in Business
Administration from Northeastern University. Mr. Richard is a Certified Public
Accountant.
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Scott D. Spelfogel is the Secretary of the Company. He is also the Senior
Vice President and General Counsel to The Berkshire Group. Before joining The
Berkshire Group in November 1988, he was in private practice in Boston. He
received a B.S. degree in Business Administration from Boston University, a
J.D. degree from Syracuse University's College of Law, and a L.L.M. degree in
Taxation from Boston University Law School. He is admitted to the bar in
Massachusetts and New York.
There are no family relationships amongst the Executive Officers and
Directors.
Related Party Transactions
Mr. Krupp, by virtue of indirect ownership interests in The Berkshire
Companies Limited Partnership and its affiliates ("BCLP"), is deemed to have
direct or indirect material interests in certain transactions.
For the first two months of 1997, the Company had property management
agreements with BCLP for services as management agent to the Company's
multifamily properties. Such agreements provided for property management fees
payable monthly at the rate of 5% of the gross receipts from multifamily
properties under management. BCLP was also entitled to reimbursement for certain
expenses incurred in connection with the operation of the properties including
accounting, computer support, risk management, real estate tax services and
administration (the "Reimbursements").
On February 28, 1997, the Company acquired an assembled work force and
certain assets of BCLP for approximately 1.7 million Operating Partnership
Units, which had a value of approximately $17.6 million as of the pricing date
("Property Manager Transaction"). As a result of the Property Manager
Transaction, effective March 1, 1997, the Company no longer pays management fees
and the Reimbursements to BCLP for the management operations of its multifamily
portfolio. In addition, the Company receives management fees and reimbursements
associated with 22 third-party management contacts acquired. Those contracts are
primarily with partnerships affiliated with Mr. Krupp. The Company received
management fees and reimbursements of $2,763,000 related to affiliated
third-party management contracts for the year ended December 31, 1997.
Throughout 1997, the Company engaged BCLP to manage its retail assets for
fees payable at the rate of 6% of gross receipts. BCLP was also entitled to the
Reimbursements with respect to the operation of the commercial properties.
Subsequent to December 31, 1997, as a result of the sale of the Company's
remaining retail assets, the management contracts were terminated.
The Company entered into an Administrative Services Agreement with BCLP
whereby each party will provide certain administrative services to the other
party. Pursuant to this Agreement, BCLP provides services related to computer
systems support, legal services, investor records and office administration and
the Company provides human resources services, insurance and real estate tax
support.
In February of 1996, the Company became self-administered by acquiring the
assembled work force and other assets of BCLP which had previously provided
advisory and development services to the Company. On the date of the
transaction, BCLP received 1.3 million Operating Partnership Units which were
valued at $13 million. Pursuant to the transaction, additional Operating
Partnership Units are to be issued to BCLP if the Company's common stock is
equal to or greater than certain established benchmark prices within a six year
period from the date of the acquisition. The Company achieved share price
benchmarks on March 19, 1997 and October 9, 1997, and issued 109,091 and 100,000
Operating Partnership Units, respectively on those dates. The value of the
additional Operating Partnership Units issued during 1997 was $2.4 million.
In addition to the Units issued in connection with the Property Manager
Transaction and the Advisor Transaction, amounts paid or accrued to BCLP or its
affiliates during the year ending December 31, 1997 were as follows:
<TABLE>
<S> <C>
Property Management Fees $ 902,931
Cost reimbursements related to the operation of the Company's properties $ 254,615
Fees and reimbursements for administrative services, net $1,324,263
----------
Charged to Operations $2,481,809
</TABLE>
Mr. Gorn by virtue of his position as the President and Chief Executive
Officer of the Questar Companies is deemed to have direct or indirect material
interests in the transaction whereby the Company acquired eighteen apartment
communities from limited partnerships affiliated with the Questar Companies for
a total purchase price of $171.4 million (the "Questar Transaction"). The
purchase price was
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<PAGE>
funded through the assumption of $128.7 million in debt, the issuance of $19.9
million in Operating Partnership Units, $4.7 million in Common Stock and cash of
$18.1 million. The Company also entered into four separate agreements (the
"Development Contribution Agreements") to acquire four additional apartment
communities from Questar Builders, Inc. which were under development at the time
of the Questar Transaction for a total purchase price of $74.4 million. One of
the apartment communities was acquired on December 15, 1997 for $7.6 million.
As a result of the Questar Transaction, the Company entered into a
Development Acquisition Agreement with Questar Builders, Inc. pursuant to which
the Company has an exclusive right to acquire all apartment communities
developed by Questar Builders, Inc. which meet the Company's acquisition and
development criteria. Questar Builders, Inc. will receive a development fee of
7% of the total development cost per property acquired by the Company.
Mr. Gorn by virtue of an indirect ownership interest in GGC, L.L.C. ("GGC")
is deemed to have direct or indirect material interests in the following
transaction. On November 14, 1997 ("Funding Date"), a non-negotiable promissory
note in the amount of $7,500,000 was issued by GGC to the Company. This note
requires interest payments at an annual rate of 11.39% commencing December 1,
1997, and continuing until the outstanding balance is paid in full. A principal
payment in the amount of $3,750,000, together with all accrued and unpaid
interest and other charges thereunder, will be due and payable on the third
anniversary of the Funding Date. A portion of the Units and Shares received by
the members of GGC as a result of the Questar Transaction have been pledged as
collateral for the promissory note. The remaining unpaid principal balance and
accrued and unpaid interest and other charges will be due and payable on the
fifth anniversary of the Funding Date. The Company recorded interest income of
approximately $112,000 related to the promissory note for the year ended
December 31, 1997.
Also as a result of the Questar Transaction, the Company executed a five
year lease with an affiliate of Mr. Gorn for 6,900 square feet of space at an
annual gross rent of approximately $140,000. The Company incurred approximately
$18,000 of rent expense related to the lease agreement for the year ended
December 31, 1997.
Pursuant to the Questar Transaction, the Company entered into separate
five-year employment agreements with Stephen Gorn, his brother-in-law, John
Colvin and his father, Morton Gorn. Each of these agreements commenced on
November 14, 1997 (the "Commencement Date") and provide for annual base salary
of $275,000, $125,000 and $50,000 respectively. Such salaries may be increased
at the sole discretion of the Board of Directors. Further, the agreements
provide for severance payments for each executive in the amount of the greater
of (i) five years pay reduced by any salary payments previously paid or (ii) six
months pay; provided that the executives are not entitled to these payments if
they are terminated for cause or if they voluntarily terminate their employment
prior to the later of (a) two years from the Commencement Date or (b) the last
date upon which either the closings occur under the Development Contribution
Agreements or such Development Contribution Agreements terminate in accordance
with their terms.
Mr. Kazilionis by virtue of his position as managing principal of Westbrook
Real Estate Partners, L.L.C. ("Westbrook") is deemed to have direct or indirect
material interests in the purchase of 2,337,000 shares of the Company's Series
1997-A Convertible Preferred Stock (the "Preferred Shares") at $25.00 per share
made by affiliates of Westbrook on September 25, 1997. Mr. Kazilionis was
elected as the Series 1997-A Preferred Director pursuant to the Certificate of
Designation which entitles the holders of the Preferred Stock, voting as a
class, to elect such a director.
Mr. Marshall is indebted to the Company pursuant to a $1 million Stock
Purchase Loan approved by the Board of Directors on February 28, 1997. On March
4, 1997, the loan proceeds were used to purchase 86,956 Shares of the Company's
common stock at $11.50 per Share. The terms of the loan provide for, among other
things, an interest rate of 7.8% per year payable quarterly and an annual
forgiveness feature of 5% of the original principal so long as Mr. Marshall is
employed by the Company. Additional annual forgiveness of up to another 5% may
be granted if certain Company performance measures are met. The maximum
forgiveness in one year is 10%. If Mr. Marshall terminates his employment, the
loan is due and payable six months from termination. However, in the event of
change of control of the Company, as defined in the loan agreement, any then
outstanding principal and interest due shall be forgiven. In 1997, $100,000 of
the principal amount of the loan was forgiven, resulting in an unpaid principal
balance of $900,000 as of December 31, 1997.
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Subsequent to December 31, 1997, the Board of Directors approved three
additional Stock Purchase Loans, each in the amount of $500,000 to Marianne
Pritchard, David Olney and Ridge Frew. The loan proceeds were used to purchase
126,984 shares of the Company's Common Stock. The terms of the loans are similar
to those of the President's Stock Purchase Loan.
Meetings of Board of Directors and Committees
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.
Throughout 1997, the Audit Committee was comprised of Messrs. deWilde, Roskind,
Finnegan and Goldberg, all Independent Directors. On November 13, 1997, Mr.
Ahern was appointed to the Audit Committee. Mr. deWilde was elected Chairman of
the Audit Committee for 1998; in 1997 Mr. Roskind 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 the Company, 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 approves transactions, if any,
between the Company and 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 1997, the Compensation Committee was comprised of Messrs. Finnegan and
deWilde for the full year. Mr. Gerber was elected to the Committee on February
28, 1997 and resigned from the Board on October 8, 1997. Mr. Roskind was
appointed to the Committee as of November 13, 1997. Mr. Finnegan was Chairman
throughout 1997 and continues as such in 1998. The duties of the Compensation
Committee include: establishing the general compensation policy of the Company
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 1997, the Board of Directors met 7 times
and acted 4 times by unanimous written consent. The Audit Committee met 2 times.
The Compensation Committee met 3 times and acted once by unanimous written
consent. Messrs. Kazilionis and Solomon attended fewer than 75% of the total
number of meetings of the Board of Directors held since their elections on
October 9, 1997. No other 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 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
14
<PAGE>
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.
Marshall, Olney, Suarez, Frew, and Gorn and Ms. Pritchard, salaries are paid
pursuant to their employment agreements and adjustments made thereto by the
Board of Directors. When an individual's responsibilities change in scope and/or
complexity, base 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 Chief Executive Officer's annual bonus plan is established by the
Compensation Committee. The Chief Executive Officer establishes all others in
accordance with the policies set by the Compensation Committee. The Annual Bonus
for Mr. Marshall is discussed below under "Chief Executive Officer
Compensation". The Annual Bonuses for Messrs. Frew, Gorn and Richard and Ms.
Pritchard are based on a matrix grid which establishes threshold, target and
maximum bonus rates (as a percentage of annual salary) which can be achieved by
an individual. In 1997, the Committee voted to give Mr. Frew, Mr. Richard and
Ms. Pritchard the maximum grid amounts for their bonuses as individual
performance goals were substantially achieved and the Committee believed the
Company's overall performance was extraordinary. Messrs. Olney and Suarez do not
participate in the annual bonus plan and instead participate in commission plans
that establish payment throughout the year on accomplishment of the preset
awards. The Chief Executive Officer establishes the terms of the commission
plans under guidelines provided by the Compensation Committee. Mr. Gorn was not
eligible for a bonus in 1997.
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.
Subsequent to year end, the Board of Directors approved three Stock
Purchase Loans to Mr. Frew, Mr. Olney and Ms. Pritchard, with terms similar to
the Stock Purchase Loan made to Mr. Marshall, which is described below under
"Chief Executive Officer Compensation". This form of incentive allows the
employee to acquire shares with the loan proceeds and receive the benefit of
certain loan forgiveness provisions as to the original principal amounts. Each
year that the employee is employed by the Company, a minimum of 5% of the
original principal amount is forgiven. Additional annual forgiveness of up to
another 5% may be granted if total shareholder return reaches certain
established levels. We feel this method of compensation further aligns the
interests of management with the interests of the shareholders.
Chief Executive Officer Compensation
As Chief Executive Officer for two months in 1997, Mr. Gerber was
compensated pursuant to his employment agreement described below. Mr. Gerber's
salary was based on his role as a part time Chief Executive Officer of the
Company, and reflected the Compensation Committee's estimate of an appropriate
salary based upon the time that 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
1997.
15
<PAGE>
Mr. Marshall was appointed Chief Executive Officer upon Mr. Gerber's
resignation on February 28, 1997, prior to which he served as President. Mr.
Marshall is compensated pursuant to his employment agreement. His compensation
has been determined by comparing the responsibilities of his position with
industry survey data and internal executive job responsibilities. Pursuant to
his employment agreement, the Company agreed to pay Mr. Marshall a base salary
of no less than $325,000. In conjunction with his appointment as Chief Executive
Officer, Mr. Marshall was granted a stock purchase loan which was to be used
solely to purchase shares of common stock of the Company. This loan contains
certain forgiveness provisions whereby each year certain percentages of the
principal amount will be forgiven in recognition of Mr. Marshall's continued
employment, and additional principal amounts shall be forgiven if total
shareholder return reaches certain levels at each fiscal year end. Mr. Marshall
was not granted any stock options in 1997 as the loan was the principal form of
long-term incentive awarded in 1997.
Mr. Marshall was eligible to receive a bonus payment set at a threshold
level of 20%, a target level of 40% and a maximum level of 60% for 1997. Based
upon the overall performance of the Company which resulted in a return of over
30% to the Shareholders in 1997, as well as Mr. Marshall's individual
performance, we awarded Mr. Marshall a bonus payment at the maximum level which
was 60% of his base salary.
COMPENSATION COMMITTEE
Paul Finnegan, Chairman
David M. deWilde
E. Robert Roskind
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 $100,000 for the
year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------------------------------------- -------------
Securities
Name and Other Annual Underlying
Principal Position Year(1) Salary($) Bonus($) Compensation(2)($) Options(#)
- ------------------------------- --------- ----------- ---------------- -------------------- -------------
<S> <C> <C> <C> <C> <C>
Laurence Gerber 1997 16,666 0 0 0
Chief Executive Officer(3) 1996 85,520 0 0 200,000
David Marshall 1997 325,000 198,120(4) 104,221(5) 0
President and Chief 1996 272,500 113,100 0 200,000
Executive Officer(3)
Marianne Pritchard 1997 160,804 81,000 1,000 21,000
Senior Vice President and 1996 131,623 46,158 0 40,000
Chief Financial Officer(6)
David Olney 1997 150,000 115,500 2,902 15,000
Senior Vice President 1996 125,685 83,260 0 40,000
of Acquisitions(6)
Dennis Suarez 1997 153,394 97,400 2,688 10,500
Senior Vice President 1996 123,276 55,750 0 40,000
of Development
Ridge Frew 1997 152,290 55,500 1,740 60,000
Executive Vice President 1996 N/A N/A N/A N/A
of Property Operations(6)(7)
</TABLE>
(1)The Annual Compensation amounts for 1996, for all officers other than Mr.
Frew, reflect ten months of compensation due to the Company becoming
self-administered on March 1, 1996. Prior to March 1, 1996, all of the Executive
Officers of the Company were employees of the Advisor and were compensated for
their services (including services provided to the Company) by the Advisor.
Therefore, the Executive Officers did not receive any direct remuneration from
the Company, including options, stock appreciation rights, or rights under any
long-term incentive plan. See Note 7, below, with respect to Mr. Frew.
16
<PAGE>
(2)Includes matching contributions made by the Company under its Supplemental
Executive Retirement Plan and 401(k) Plan.
(3)Mr. Gerber resigned as Chief Executive Officer on February 28, 1997 and Mr.
Marshall was appointed to the position on that date.
(4)Includes $3,120 representing a bonus payment in lieu of payment of term life
insurance premiums.
(5)Includes $100,000 representing forgiveness of the principal amount of the
Stock Purchase Loan made to Mr. Marshall on February 28, 1997. See the Chief
Executive Officer Compensation and Related Party Transactions sections for
additional information. Also includes $596 representing the amount paid for
split-dollar life insurance premiums.
(6)As of January 1, 1998, the following officer's titles were changed to reflect
their promotions: Marianne Pritchard is Executive Vice President and Chief
Financial Officer, David Olney is the Executive Vice President and Chief
Investment Officer, and Ridge Frew is Executive Vice President and Chief
Operating Officer.
(7)Mr. Frew's compensation only reflects the period from March 1, 1997 through
December 31, 1997 as Mr. Frew was previously an employee of the Property Manager
and was compensated for his services (including services provided to the
Company) by the Property Manager. Therefore, Mr. Frew did not receive any direct
remuneration from the Company, including options, stock appreciation rights, or
rights under any long-term incentive plan.
The Company entered into employment agreements with The Chief Executive
Officer and the named executive officers as stated below.
Employment Agreements for Messrs. Marshall and Gerber and Ms. Pritchard
commenced on March 1, 1996 and continue 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
$100,000, while Mr. Marshall's and Ms. Pritchard's agreements provide for an
initial annual base salary of $325,000 and $157,000, respectively. Such salaries
may be increased 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 at the
same rate as the base salary in effect at the date of termination, and Ms.
Pritchard's agreement provides for nine months of severance payments at the same
rate as the base salary in effect at the date of termination. In the event of
termination due to a change of control of ownership of the Company, Ms.
Pritchard's agreement provides for fifteen months of severance payments at the
same rate as the base salary in effect at the date of termination.
The Company entered into employment agreements with Messrs. Olney, Frew,
and Suarez commencing on March 1, 1997 and continuing through December 31, 1998.
Pursuant to these agreements Messrs. Olney, Frew, and Suarez received an initial
annual base salary of not less than $150,000, $185,000, and $150,000
respectively. Such salaries may be increased by the Board of Directors in its
sole discretion. 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. Each
agreement provides for severance compensation for nine months at the same rate
as the base salary in effect at the date of termination. In the event of
termination due to a change of control of ownership of the Company, each
agreement provides for fifteen months of severance payments at the same rate as
the base salary in effect at the date of termination.
The Company implemented a defined contribution plan in 1996 pursuant to
Section 401(k) of the Internal Revenue Code ("401(k) Plan") which covers all
employees' contributions up to a maximum of 3% of each employee's compensation
(not to exceed $1,000) for employees with one year or greater of service.
The Company established a Supplemental Executive Retirement Plan ("SERP")
as of March 1, 1997 to provide benefits for key employees of the Company.
Participants may defer up to 25% of their salary and bonus compensation by
making contributions to the SERP. Amounts deferred by the Participants are
credited to their accounts and are always fully vested. The Company matches 100%
of the first $1,000 of deferred compensation, and matches 10% of the remaining
deferred compensation (up to an amount equal to 25% of base salary). All Company
matches are 100% vested at the time the match is made.
17
<PAGE>
The following table provides option information for the Named Executive
Officers as of December 31, 1997. No options have been exercised by the Named
Executive Officers as of December 31, 1997.
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
Potential Realized
Value at
Expiration
Date at Assumed
Annual Rates of
Stock
Price Appreciation
for
Option Term (in
Individual Grants thousands)(1)
---------------------------------------------------------- -----------------
% of Total
Number of Options
Securities Granted to
Underlying Employees in Exercise Expiration
Name Options Fiscal Year Price $/Sh Date 5%($) 10%($)
- -------------------- ------------ -------------- ------------ ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Laurence Gerber(2) 0 N/A N/A N/A N/A N/A
David Marshall 0 N/A N/A N/A N/A N/A
Marianne Pritchard 21,000 4% 11.00 3-01-07 145 368
David Olney 15,000 3% 11.00 3-01-07 104 263
Dennis Suarez 10,500 2% 11.00 3-01-07 73 184
Ridge Frew 60,000 11% 11.00 3-01-07 415 1,051
</TABLE>
(1)Values calculated using 5% and 10% annual rates of appreciation of market
price over the option term less original exercise price.
(2)Laurence Gerber resigned as Chief Executive Officer as of February 28, 1997.
AGGREGATED OPTION EXERCISES IN
FISCAL YEAR 1997 AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Unexercised Options in-the-Money
at Fiscal Options at
Year-end (#) Fiscal Year-End ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- -------------------- ----------------- ---------------- ----------------------- --------------------
<S> <C> <C> <C> <C>
Laurence Gerber(1) 0 0 200,000/0 450,000/0
David Marshall 0 0 200,000/0 450,000/0
Marianne Pritchard 0 0 40,000/21,000 90,000/21,000
David Olney 0 0 40,000/15,000 70,000/15,000
Dennis Suarez 0 0 40,000/10,500 70,000/10,500
Ridge Frew 0 0 24,000/36,000 24,000/36,000
</TABLE>
(1)Laurence Gerber resigned as Chief Executive Officer as of February 28, 1997.
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 1997, Directors deWilde, Roskind, Finnegan, and Goldberg, each received
$25,000 for their services. Directors Ahern, Kazilionis and Solomon received
$6,250 for their services as they were elected on October 9, 1997 and therefore,
did not serve a full year on the Board. On August 14, 1997, the Shareholders
approved the adoption of the Berkshire Realty Company, Inc. Directors Retainer
Fee Plan (the "Fee Plan") which allows non-employee directors of the Company to
elect to receive all or part of their annual retainer in cash, or in shares of
Common Stock, and to defer payments. The maximum number of shares of common
stock that can be issued pursuant to the Fee Plan is 40,000. In 1997, all
non-employee directors received their annual retainer fee in cash on a quarterly
basis.
Pursuant to the Berkshire Realty Company Inc. 1996 Stock Option Plan (the
"Original Plan") and continuing under the proposed Berkshire Realty Company,
Inc. Amended and Restated Stock Option Plan (the "Amended Stock Plan"), each
non-employee director receives initial and annual stock option grants in rec-
18
<PAGE>
ognition of their service as a director and if applicable, as the chair or a
member of a committee of the Board. For specific information on such grants, see
the Amended Stock Plan in Appendix A.
On May 13, 1997, Messrs. DeWilde, Finnegan, Goldberg and Roskind were
granted stock options in share amounts of 5,000, 6,000, 4,000, and 5,000,
respectively. On November 13, 1997, Messrs. Ahern, Kazilionis and Solomon were
granted stock options in the share amounts of 6,000, 5,000, and 5,000,
respectively.
There were no other arrangements for the Company to compensate any director
during 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. deWilde and Finnegan comprised the Compensation Committee
throughout 1997 and Mr. Roskind was elected to the Committee as of November 13,
1997. Mr. Gerber served on the Compensation Committee from February 28, 1997
until his resignation from the Board on October 8, 1997. Prior to his
appointment to the Compensation Committee, Mr. Gerber was the Chief Executive
Officer of the Company. He resigned from that position on February 28, 1997,
the date that he was appointed to the Committee. None of the other directors on
the Compensation Committee were or have been officers or employees 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, 1992 to
December 31, 1997, with the cumulative total return of the Standard & Poor's 500
Composite Stock Price Index and the NAREIT Equity REIT Total Return Index
securities over the period. The comparison assumes $100 was invested on December
31, 1992 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,
and assumes reinvestment of dividends, if any.
The NAREIT Equity REIT Total Return Index 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),
including the Company, listed on the NYSE and the American Stock Exchange and
traded in NASDAQ National Market System. At December 31, 1997, this Index
included 176 equity REITs with a total market capitalization of $127.8 billion.
[GRAPHIC OF TRANSMITTAL OF LINE CHART]
1992 1993 1994 1995 1996 1997
---- ----- ---- ---- ---- ----
NAREIT EQUITY 100.00 119.65 123.45 142.30 194.49 231.49
S&P 500 100.00 109.99 111.42 153.13 188.34 251.18
BERKSHIRE 100.00 137.14 126.93 142.59 159.72 211.13
19
<PAGE>
INDEPENDENT AUDITORS
Coopers & Lybrand, LLP 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, LLP as auditors for 1998.
A representative of Coopers & Lybrand, LLP 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, 1997, is enclosed.
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
/s/ Scott D. Spelfogel
------------------------
Scott D. Spelfogel
Secretary
SHAREHOLDERS' PROPOSAL
If any Shareholder wishes to submit a proposal to be voted on at the 1999
Meeting of Shareholders, the Shareholder must submit the Proposal to the Company
on or before December 1, 1998.
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.
20
<PAGE>
APPENDIX A
==========
BERKSHIRE REALTY COMPANY, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
FEBRUARY 12, 1998
-------------------------------------
1. Purpose
The purpose of this Berkshire Realty Company, Inc. Amended and Restated
Stock Option Plan (the "Plan") is to advance the interests of Berkshire Realty
Company, Inc., a Delaware corporation ("Berkshire Realty"); its Operating
Partnership, BRI OP Limited Partnership, a Delaware limited partnership; and
their respective subsidiaries (hereinafter collectively "BRI" or the "Company"),
by stimulating the efforts of key employees and consultants on behalf of BRI,
heightening the desire of key employees to continue in employment with BRI,
assisting BRI in competing effectively with other enterprises for the service of
new employees and consultants necessary for the continued improvement of the
Company's operations, and to attract and retain the best available personnel for
service as directors of Berkshire Realty. This Plan permits the grant of
Incentive Stock Options as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), as well as Options which are not Incentive
Stock Options pursuant to Code Section 422.
2. Definitions
(a) "Board of Directors" means the Board of Directors of Berkshire Realty.
(b) "Committee" means the Compensation Committee appointed by the Board of
Directors from amongst its members.
(c) "Disablement" means a physical condition arising from an illness or
injury which renders an individual incapable of performing work. The
determination of the Committee as to an individual's Disablement shall be
made in accordance with the standards and procedures of the Company's
then-current Long Term Disability Plan and shall be conclusive on all
parties.
(d) "Exchange Act" means the Securities Act of 1934, as amended.
(e) "Fair Market Value" for a particular day means the closing price of
Berkshire Realty stock on the immediately prior trading day.
(f) "Incentive Stock Option" means a right to purchase Shares from the
Company that is granted under the Plan and that is intended to meet the
requirements of Section 422 of the Code or any successor provision
thereto.
(g) "Non-Employee Director" shall have the meaning as defined by Rule
16b-3.
(h) "Non-Qualified Option" means a right to purchase Shares from the Company
that is granted under the Plan and that is not intended to be an
Incentive Stock Option.
(i) "Option" means an Incentive Stock Option or a Non-Qualified Option.
(j) "Option Agreement" means any written agreement, contract or other
instrument or document evidencing any grant of Options, which may, but
need not, be executed or acknowledged by a Participant.
(k) "Outside Director" shall have the meaning as defined in Code section 162
(m).
(l) "Plan" means the Berkshire Realty Company, Inc. Amended and Restated
Stock Option Plan, as herein set forth.
(m) "Retirement" means retirement from active employment with the Company at
or after age 62. The determination of the Committee as to an individual's
Retirement shall be conclusive on all parties.
(n) "Rule 16b-3" means Rule 16b-3 as promulgated and interpreted by the SEC
under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
A-1
<PAGE>
(o) "Shares" means the common shares of the Company, $.01 par value, or the
number and kind of shares of stock or other securities which shall be
substituted or adjusted for such shares.
(p) "Subsidiary" means any corporation (other than Berkshire Realty) in an
unbroken chain of corporations beginning with Berkshire Realty where each
of the corporations in the unbroken chain other than the last corporation
owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in
such chain.
3. Participants
"Participants" in the Plan shall be those key BRI employees and those
consultants (including, but not limited to, key employees of companies providing
services to BRI) to whom Options may be granted from time to time by the
Committee. Participants shall also include Non-Employee Directors of Berkshire
Realty to whom Options are granted in accordance with Section 6. No Option shall
be granted to any person if immediately after the grant of such Option such
person would own stock, including stock subject to outstanding Options held by
him or her, amounting to more than five percent (5%) of the total combined
voting power or value of all classes of stock of the Company or any Subsidiary.
4. Effective Date and Termination of the Plan
The Berkshire Realty Company, Inc. 1996 Stock Option Plan (the "Original
Plan") was adopted by the Board of Directors on February 8, 1996 and became
effective upon approval of the shareholders on May 2, 1996 (the "Original
Effective Date"). On February 12, 1998, the Berkshire Realty Company, Inc.
Amended and Restated Stock Option Plan (the "Plan") was approved by the Board of
Directors for submission to the shareholders to replace the Original Plan in its
entirety and the Plan is effective upon shareholder approval. The Plan shall
terminate when all Shares of stock subject to Options granted under this Plan
shall have been acquired through exercise of such Options or on May 1, 2001,
whichever is earlier, or at such earlier time as the Board of Directors may
determine. Termination of the Plan will not affect the rights and obligations
arising under Options theretofore granted and then in effect.
5. Shares Subject to the Plan and to Options
The stock subject to Options authorized to be granted under the Plan shall
consist of 3,350,000 Shares of Berkshire Realty's common stock, $.01 par value,
or the number and kind of Shares of stock or other securities which shall be
substituted or adjusted for such Shares as provided in Section 7. Such Shares
may be authorized and unissued Shares of Berkshire Realty's common stock. All or
any Shares of stock subject to an Option which for any reason terminates
unexercised may again be made subject to an Option under the Plan.
6. Grant, Terms and Conditions of Options
Options may be granted at any time and from time to time prior to the
termination of the Plan to those key employees of BRI and those consultants
(including, but not limited to, key employees of companies providing services to
BRI) who, in the Committee's judgment, are largely responsible through their
judgment, interest, ability and special efforts for the successful conduct of
BRI's business. However, prior to the adoption of the Amended Stock Plan, no
Participant shall be granted Options in any one year to purchase a number of
Berkshire Realty's common stock in excess of one percent (1%) of the number of
Shares of Berkshire Realty's common stock outstanding on January 1, 1996.
Following approval of the Amended Stock Plan, no participant shall be granted
Options in any one year to purchase a number of Berkshire Realty's common stock
in excess of one percent (1%) of the number of Shares of Berkshire Realty's
common stock outstanding on January 1, 1998.
Options will be granted to Non-Employee Directors as follows: As of the
effective date of this plan each of the four Non-Employee Directors then serving
on the Board of Directors received an initial stock option grant of 12,000
Shares. Thereafter, each new Non-Employee Director has received and additional
new Non-Employee Directors will receive an initial stock option grant of 5,000
Shares at the time of his or her appointment or election to the position of
director; and each Non-Employee Director continuing in office in the past has
received and each Non-Employee Director continuing in office in the future will
receive an annual stock option grant of 3,000 Shares on the date of each annual
shareholder meeting of Berkshire Realty. In addition as of the effective date of
the Original Plan, each Non-Employee Director serving on the Audit Committee or
the Compensation Committee of the Board of Directors (or both) received an
additional initial stock option grant of 1,000 Shares and has received and will
continue to receive additional annual stock option grants of 1,000 Shares for
each such committee served on. The
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chair of each such committee received (in lieu of said 1,000 Share grant) an
additional initial stock option grant of 2,000 Shares and has received and will
continue to receive (in lieu of said 1,000 Share grant) additional annual grants
of 2,000 Shares for each such committee chaired. Each new non-employee director
appointed to the Audit or Compensation Committee has received and additional new
non-employee directors will receive an initial stock option grant of 1,000
shares for each such committee served on as of the date of the first meeting
that he or she serves as a committee member and further each such new
non-employee director will receive additional annual stock option grants of
1,000 shares, thereafter. The Committee will have no discretion to select which
Non-Employee Directors will be granted Options or to determine the number of
Option Shares, price, vesting schedule or any other term of the Options granted
to Non-Employee Directors. All Options granted to Non-Employee Directors will be
Non-Qualified Options.
No Participant shall have any rights as a stockholder with respect to any
Shares of stock subject to Option hereunder until said Shares have been issued.
Each Option shall be evidenced by an Option Agreement which will expressly
identify the Option as an Incentive Stock Option or as a Non-Qualified Stock
Option. Furthermore, the grant of an Incentive Stock Option pursuant to this
Plan shall in no way be construed as an alternative to the right of an optionee
to purchase stock pursuant to any present or future grant of a Non-Qualified
Option under any of BRI's current or future stock plans. Options granted
pursuant to the Plan need not be identical, but each Option is subject to the
Plan and must contain and be subject to the following terms and conditions:
(a)Price: The purchase price under each Option granted to employees shall be
established by the Committee. In no event will the Option price be less
than 100% of the Fair Market Value of the stock on the date of the grant.
For purposes of the Plan, Fair Market Value on a particular date means the
closing price of Berkshire Realty's stock on the immediately prior trading
day. The Option price must be paid in full at the time of the exercise.
The price may be paid in cash; cash equivalents or secured notes
acceptable to the Committee; subject to such rules as may be established
by the Committee by arrangement with a broker where payment of the Option
price is made pursuant to an irrevocable direction to the broker to
deliver all or part of the proceeds from the sale of the Option Shares to
the Company; by the surrender of Shares of common stock owned by the
optionee exercising the Option and having a Fair Market Value on the date
of the exercise equal to the Option price; or, in any combination of the
foregoing.
(b)Duration and Exercise or Termination of Option: Each Option granted to an
employee or consultant shall be exercisable in such manner and at such
times as the Committee shall determine. Each Option granted must expire
within a period of ten (10) years from the grant date. An employee's
Option Agreement may provide for accelerated exercisability in the event
of the employee's death, Disablement or Retirement or other events in
accordance with policies established by the Committee and may provide for
expiration prior to the end of its terms in the event of the termination
of the employee's service. A consultant's Option Agreement may provide for
accelerated exercisability in the event of the consultant's death,
Disablement, retirement from employment at or after age 62 or other events
in accordance with policies established by the Committee and may provide
for expiration prior to the end of its terms in the event of the
termination of the consultant's service.
Wherever in this Plan or any Option Agreement, a Participant is permitted
to pay the exercise price of an Option or taxes relating to the exercise
of an Option by delivering Shares, the Participant may, subject to
procedures satisfactory to the Committee, satisfy such delivery
requirement by presenting proof of beneficial ownership of such Shares, in
which case the Company shall treat the Option as exercised without further
payment and shall withhold such number of Shares from the Shares acquired
by the exercise of the Option.
Each initial 12,000 or 5,000 Share Option and each subsequent 3,000 Share
Option granted to a Non-Employee Director, and each 2,000 or 1,000 Share
Option granted to a Non- Employee Director by virtue of his or her
committee chairmanship or membership will become exercisable beginning one
year from the date of the annual meeting of the shareholders on which date
the Options were granted. If a Non-Employee Director is appointed by the
Board of Directors to begin serving as a director or committee member or
chair on a date not coincident with an annual meeting date, the director
will be granted the initial Share Options as of the date of the first
meeting at which
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he or she serves as director, committee member or committee chair, as the
case may be; however, his or her Options will become first exercisable
beginning one year from the date of the next occurring annual meeting and
he or she will not receive an additional grant of Options on the date of
such next occurring annual meeting.
(c)Suspension or Termination of Option: Unless the following provisions are
waived or modified by the Committee in connection with the entering into,
extension or modification of an employment agreement, each Option shall
provide that if the Chief Executive Officer of Berkshire Realty or his
designee reasonably believes that a Participant other than a Non-Employee
Director has committed an act of misconduct as described in this Section,
the Chief Executive Officer may suspend the Participant's right to
exercise any Option pending a determination by the Board of Directors. If
the Board of Directors determines a Participant other than a Non-Employee
Director has committed an act of embezzlement, fraud, dishonesty,
nonpayment of any obligation to the Company , breach of fiduciary duty or
deliberate disregard of BRI rules resulting in loss, damage or injury to
the Company, or if a Participant makes an unauthorized disclosure of any
BRI trade secret or confidential information, or engages in any conduct
constituting unfair competition, neither Participant nor his estate shall
be entitled to exercise any Option whatsoever. In making such
determination, the Board of Directors shall act fairly and shall give the
Participant an opportunity to appear and present evidence on his or her
behalf at a hearing before a committee of the Board of Directors. For any
Participant who is an "executive officer" for purposes of Section 16 of
the Securities Exchange Act of 1934, the determination of the Board of
Directors shall be subject to the approval of the Committee.
(d)Termination of Non-Employee Director's Service: Subject to Section 6(b),
upon the termination of the Participant's service as a Non-Employee
Director, his or her rights to exercise an Option then held shall be only
as follows:
(1)Death. Upon the death of a Non-Employee Director while in service as a
Non- Employee Director of Berkshire Realty, the Non-Employee Director's
rights will be exercisable by his or her estate or beneficiary at any
time within twelve (12) months next succeeding the date of death. The
number of Shares exercisable by the estate or beneficiary will be the
total number of unexercised Options under the Non-Employee Director's
Option on the date of his or her death. If a Non-Employee Director shall
die within thirty (30) days of his or her termination of service as a
Non-Employee Director with Berkshire Realty, an Option will be
exercisable by his or her estate or beneficiary at any time during that
twelve (12) months succeeding the date of termination, but only to the
extent the number of Shares to which such Option was exercisable as of
the date of such termination. A Non-Employee Director's estate shall
mean his or her legal representative of other person who so acquires the
right to exercise the Option.
(2)Disablement. Upon the Disablement of a Non-Employee Director, any
Option which he or she holds, whether or not then exercisable, may be
exercised after the date of the Disablement within twelve (12) months.
(3)Retirement. Upon the Retirement of a Non-Employee Director, the
Non-Employee Director's rights to Non-Qualified Options may be exercised
for a period of twelve months after Retirement.
(4)Other Reasons. Upon the termination of a Non-Employee Director's
service as a Non-Employee Director for any reason other than those
stated above, the Non- Employee Director may, within ninety (90) days
following such termination, exercise the Option to the extent such
Option was exercisable on the date of termination.
(e)Transferability of Option: No Option may be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a Participant
otherwise than by will or by the laws of descent and distribution, and any
such purported assignment, alienation, pledge, attachment, sale, transfer
or encumbrance shall be void and unenforceable against the Company;
provided that the designation of a beneficiary shall not constitute an
assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
Notwithstanding the foregoing, the Committee may in the applicable Option
Agreement evidencing an Option granted under the Plan or at any time
thereafter in an amendment to an Option Agreement provide that Options
granted hereunder which are not intended to qualify as Incen-
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tive Stock Options may be transferred by the Participant to whom such
Option was granted (the "Grantee") without consideration, subject to such
rules as the Committee may adopt to preserve the purposes of the Plan, to:
(1) the Grantee's spouse, children or grandchildren (including adopted
and stepchildren and grandchildren) (collectively, the "Immediate
Family");
(2) a trust solely for the benefit of the Grantee and his or her
Immediate Family; or
(3) a partnership or limited liability company whose only partners or
shareholders are the Grantee and his or her Immediate Family members;
(each transferee described in clauses (1), (2) and (3) above is hereinafter
referred to as a "Permitted Transferee"); provided that the Grantee gives
the Committee advance written notice describing the terms and conditions
of the proposed transfer and the Committee notifies the grantee in writing
that such a transfer would comply with the requirements of the Plan and
any applicable Option Agreement evidencing the Option.
The terms of any Option transferred in accordance with the immediately
preceding sentence shall apply to the Permitted Transferee and any
reference in the Plan or in an Option Agreement to an optionee, Grantee or
Participant shall be deemed to refer to the Permitted Transferee, except
that (a) Permitted Transferees shall not be entitled to transfer any
Options, other than by will or the laws of descent and distribution; (b)
Permitted Transferees shall not be entitled to exercise any transferred
Options unless there shall be in effect a registration statement on an
appropriate form covering the Shares to be acquired pursuant to the
exercise of such Option if the Committee determines that such a
registration statement is necessary or appropriate, (c) the Committee or
the Company shall not be required to provide any notice to a Permitted
Transferee, whether or not such notice is or would otherwise have been
required to be given to the Grantee under the Plan or otherwise and (d)
the consequences of termination of the Grantee's employment by, or
services to, the Company under the terms of the Plan and the applicable
Option Agreement shall continue to be applied with respect to the Grantee,
following which the Options shall be exercisable by the Permitted
Transferee only to the extent, and for the periods, specified in the Plan
and the applicable Option Agreement.
(f)Modification or Assumption of Options: The Committee may modify, extend
or assume outstanding Options (whether granted by BRI or by another
issuer) in return for the grant of new Options for the same or a different
number of Shares and at the same or a different exercise price.
(g)Other Terms and Conditions: Options may also contain such other
provisions, which shall not be inconsistent with any of the foregoing
terms, as the Committee shall deem appropriate. No Option, however, nor
anything contained in the Plan shall confer upon any Participant any right
to continue in BRI's employ or service nor limit in any way BRI's right to
terminate his or her employment or service at any time.
7. Adjustment of and Changes in the Stock
(a)Notwithstanding any provisions of the Plan to the contrary, in the event
that the Shares of common stock of Berkshire Realty shall be changed into
or exchanged for a different number or kind of Shares of stock or other
securities of Berkshire Realty or of another corporation (whether by
reason of merger, consolidation, recapitalization, reclassification,
split-up, combination of Shares, or otherwise), or if the number of Shares
of common stock of Berkshire Realty shall be increased through a stock
split or the payment of a stock dividend, then there shall be substituted
for or added to each Share of common stock theretofore appropriated or
thereafter subject or which may become subject to an option under the
Plan, the number and kind of Shares of stock or other securities into
which each outstanding Share of common stock of Berkshire Realty shall so
be changed, or for which each such Share shall be exchanged, or to which
each such Share shall be entitled, as the case may be. Outstanding Options
shall also be amended as to any price or other terms if necessary to
reflect the foregoing events. In the event there shall be any other change
in the number or kind of the outstanding Shares of common stock of
Berkshire Realty, or any other stock or other securities into which such
common stock shall have been changed, or for which it shall have been
exchanged, then if the Committee shall, in its sole discretion, determine
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that such change equitably requires an adjustment in any Option
theretofore granted under the Plan, such adjustment shall be made in
accordance with such determination.
(b)No right to purchase fractional Shares shall result from any adjustment
in Options pursuant to this Section 7. In case of any such adjustment, the
Shares subject to the Option shall be rounded down to the nearest whole
Share. Notice of any adjustment shall be given by the Company to each
Participant who shall have been so adjusted and such adjustment (whether
or not notice is given) shall be effective and binding for all purposes of
the Plan.
(c)Any other provision hereof to the contrary notwithstanding (except
Section 6(b)) in the event Berkshire Realty is a party to a merger or
other reorganization, outstanding Options shall be subject to the
agreement of merger or reorganization. Such agreement may provide, without
limitation, for the assumption of outstanding Options by the surviving
corporation or its parent, for their continuation by Berkshire Realty (if
Berkshire Realty is a surviving corporation), for accelerated vesting and
accelerated expiration, or for settlement in cash.
8. Listing or Qualification of Stock
In the event the Board of Directors determines in its discretion that the
listing or qualification of the Plan Shares on any securities exchange or under
any applicable law or governmental regulation is necessary as a condition to the
issuance of such Shares under the Option, the Option may not be exercised in
whole or in part unless such listing, qualification, consent or approval has
been unconditionally obtained.
9. Administration and Amendment of the Plan
The Plan shall be administered by the Committee. The Committee shall
consist of two or more directors of Berkshire Realty, who shall be appointed by
the Board of Directors, and who are expected, but not required to be
"Non-Employee Directors" (within the meaning of Rule 16b-3) and "Outside
Directors" (within the meaning of Code Section 162(m)) to the extent that Rule
16b-3 and Code Section 162(m), respectively, are applicable to the Company and
the Plan. The Board shall fill vacancies and may from time to time remove or add
members. If at any time such a Committee has not been so designated, the Board
shall constitute the Committee.
The mere fact that an Committee member shall fail to qualify as a
Non-Employee Director or Outside Director within the meaning of Rule 16b-3 and
Code Section 162(m), respectively, shall not invalidate any Option granted by
the Committee which Option is otherwise validly granted under the Plan.
The Board of Directors may also appoint one or more separate committees of
the Board of Directors, each composed of one or more directors of Berkshire
Realty who need not be disinterested, who may administer the Plan with respect
to employees or consultants who are not executive officers or directors of BRI,
may grant Options to such employees or consultants and may determine all of the
terms of such Options. Notwithstanding the foregoing, the Committee may delegate
to one or more officers of the Company, the authority to grant awards to
Participants who are not officers or directors of the Company subject to Section
16 of the Exchange Act or "covered employees" within the meaning of Section
162(m) of the Code.
The Board of Directors may amend or terminate the Plan as desired, without
further action by Berkshire Realty's shareholders except to the extent required
by applicable law and provided further that any such amendment or termination
that would impair the rights of any Participant or any holder or any beneficiary
of any Option theretofore granted shall not to that extent be effective without
the consent of the affected Participant, holder or beneficiary.
Notwithstanding the above, the provisions of Section 6 relating to
Non-Employee Directors may not be amended more than once every six months,
except to comply with changes to the Code or the rules thereunder.
10. Time of Granting Options
The effective date of each Option granted hereunder shall be the date on
which the grant was made. Within a reasonable time thereafter, Berkshire Realty
will execute and deliver an Option Agreement to the Participant.
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11. Withholding
To the extent required by applicable federal, state, local or foreign law,
a Participant shall make arrangements satisfactory to the Company for the
satisfaction of any withholding tax obligations that arise by reason of an
Option exercise or any sale of Shares. Berkshire Realty shall not be required to
issue Shares until such obligations are satisfied. The Committee may permit
these obligations to be satisfied in whole or in part by delivery of Shares
owned by the Participant (which are not subject to any pledge or other security
interest and which have been owned by the Participant for at least 6 months)
with a Fair Market Value equal to such withholding liability or by having the
Company withhold from the number of Shares otherwise issuable pursuant to the
exercise of the Option a number of Shares with a Fair Market Value equal to such
withholding liability.
Notwithstanding any provision of this Plan to the contrary, in connection
with the transfer of an Option to a Permitted Transferee pursuant to Section
6(e) of the Plan, the Grantee shall remain liable for any withholding taxes
required to be withheld upon the exercise of such Option by the Permitted
Transferee.
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Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
BERKSHIRE REALTY COMPANY, INC.
MAY 21, 1998
[X] Please mark your votes as indicated in this sample
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 and 2.
1. Election of Directors
Nominees: Terrance R. Ahern, E. Robert Roskind and Arthur Solomon
FOR AUTHORITY WITHHELD
[ ] [ ]
[ ] _________________________________________________________________
Instruction: To withhold authority for one of the above nominees, write the
nominee's name on line above.
2. Approval of the Company's Amended FOR AGAINST ABSTAIN
and Restated Stock Option Plan. [ ] [ ] [ ]
3. 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 TO ATTEND MARK HERE FOR
THE MEETING INDICATE ADDRESS CHANGE
NUMBER OF ATTENDEES AND NOTE AT LEFT [ ]
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 ___________________________ Signature ___________________________
Date ___________________________ Date ___________________________
<PAGE>
PROXY
BERKSHIRE REALTY COMPANY, INC.
The undersigned hereby appoints David F. Marshall, Douglas Krupp and Scott
D. Spelfogel, 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 Annual Meeting of the Shareholders to be held Thursday, May
21, 1998 at 9:00 a.m. at the Boston Harbor Hotel, 70 Rowes Wharf, Boston,
Massachusetts 02110, and any adjournment thereof as specified on the reverse
side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
