SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party Other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
Franklin Street Properties Corp.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
____________________________________________________________________
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(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 Statement No.: ______________________
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(4) Date Filed: ________________________________________________________
FRANKLIN STREET PROPERTIES CORP.
401 Edgewater Place, Suite 200
Wakefield, Massachusetts 01880
Notice of Annual Meeting of Stockholders to be Held
on Friday, May 7, 2004
The Annual Meeting of Stockholders of Franklin Street Properties Corp.
(the "Company") will be held at the Courtyard by Marriott, 700 Unicorn Park
Drive, Woburn, Massachusetts on Friday, May 7, 2004 at 11:00 a.m., local time,
to consider and act upon the following matters:
(1) To elect two Class I Directors for a term of three years.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on April 1, 2004 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
Barbara J. Corinha, Secretary
Wakefield, Massachusetts
April 5, 2004
Whether or not you expect to attend the Annual Meeting, please complete,
date and sign the enclosed proxy and mail it promptly in the enclosed envelope
in order to ensure representation of your shares. No postage need be affixed if
the proxy is mailed in the United States.
FRANKLIN STREET PROPERTIES CORP.
401 Edgewater Place, Suite 200
Wakefield, Massachusetts 01880
PROXY STATEMENT
For the Annual Meeting of Stockholders on May 7, 2004
INTRODUCTION
General Information
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Franklin Street Properties Corp. (the
"Company") for use at the Annual Meeting of Stockholders to be held on May 7,
2004, and at any adjournment of that meeting. All proxies will be voted in
accordance with the stockholders' instructions, and, if no choice is specified,
the proxies will be voted in favor of the matters set forth in the accompanying
Notice of Meeting. Any proxy may be revoked by a stockholder at any time before
its exercise by delivery of written revocation or a subsequently dated proxy to
the Secretary of the Company or by voting in person at the Annual Meeting.
The Company's Annual Report for the fiscal year ended December 31, 2003 is
being mailed to stockholders with the mailing of these proxy materials on or
about April 5, 2004.
Quorum Requirement
At the close of business on April 1, 2004, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding and entitled to vote an aggregate of 49,630,338
shares of Common Stock of the Company, constituting all of the outstanding
voting stock of the Company. Holders of Common Stock are entitled to one vote
per share.
The holders of a majority of the number of shares of Common Stock issued,
outstanding and entitled to vote at the Annual Meeting will constitute a quorum
for the transaction of business at the Annual Meeting. Shares of Common Stock
represented in person or by proxy (including shares that abstain or otherwise do
not vote with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum is
present at the Annual Meeting.
Votes Required
The affirmative vote of the holders of a plurality of the votes cast by
the holders of Common Stock is required for the election of directors.
Shares that abstain from voting as to a particular matter, and shares held
in "street name" by a broker or nominee that indicates on a proxy that it does
not have discretionary authority to vote as to a particular matter, will not be
voted in favor of such matter, and also will not be counted as shares voting on
such matter. Accordingly, abstentions and "broker non-votes" will have no effect
on the voting on a matter that requires the affirmative vote of a certain
percentage of the votes cast or the shares voting on that matter.
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Beneficial Ownership of Voting Stock
The following table sets forth the beneficial ownership of the Company's
Common Stock as of April 1, 2004 (1) by each director, (2) by each of the
executive officers named in the Summary Compensation Table set forth below (the
"Named Executive Officers") and (3) by all current directors and executive
officers as a group. To the Company's knowledge, no person or group, other than
as set forth below, beneficially owns more than five percent of the Common
Stock.
Number of
Shares Percentage of
Beneficially Outstanding
Owned (1) Common Stock (2)
------------ ----------------
Barry Silverstein(3) .......................... 4,294,089.01 8.65%
Dennis J. McGillicuddy(4)...................... 3,593,662.58 7.24
George J. Carter(5)............................ 775,531.33 1.56
Richard R. Norris(6)........................... 258,087.62 *
R. Scott MacPhee(7)............................ 372,452.08 *
William W. Gribbell(8)......................... 129,762.33 *
Barbara J. Corinha............................. 27,934.44 *
Janet P. Notopoulos(9)......................... 14,986.32 *
All current directors and executive
officers as a group (8 persons)................ 9,466,505.71 19.07%
---------------
* Less than 1%.
(1) The Company does not have any outstanding stock options or other
securities convertible into the Company Common Stock. Each person has sole
investment and voting power with respect to the shares indicated as
beneficially owned, except as otherwise noted. The inclusion herein of
shares as beneficially owned does not constitute an admission of
beneficial ownership.
(2) Based upon approximately 49,630,338 shares outstanding as of April 1,
2004.
(3) Comprised of (i) 3,128,206.86 shares held by Silverstein Investments
Limited Partnership III, (ii) 429,628.97 shares held by JMB Family Limited
Partnership, (iii) 643,589.38 shares held by MSTB Family Limited
Partnership, (iv) 68,245.40 shares held by Silverstein Family Limited
Partnership 2002, LTD., and (v) 24,418.40 shares held by Mr. Silverstein's
spouse, beneficial ownership of which is disclaimed by Mr. Silverstein.
Mr. Silverstein is the General Partner of JMB Family Limited Partnership,
MSTB Family Limited Partnership and Silverstein Family Limited Partnership
2002, LTD. Mr. Silverstein has power to vote all shares held by these
entities. Mr. Silverstein is a limited partner of Silverstein Investments
Limited Partnership III
(4) Comprised of (i) 2,163,224.04 shares held by McGillicuddy Investments
Limited Partnership III, (ii) 404,499 shares held by McGillicuddy Family
Limited Partnership, (iii) 6,824.54 shares held by Mr. McGillicuddy's
spouse, (iv) 8,946 shares held by various trusts for Mr. McGillicuddy's
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grandchildren, of which Mr. McGillicuddy's spouse is a trustee, and (v)
1,010,169 shares held by Silverstein Investments Limited Partnership II
("SILP II") whose limited partners consist of various trusts for the
benefit of Mr. Silverstein's children, of which Mr. McGillicuddy is
trustee, (Mr. McGillicuddy has shared dispositive power and no power to
vote the shares held by the partnership). Mr. McGillicuddy and his wife
own all of the limited partnership interest in McGuillicuddy Investments
Limited Partnership III. Mr. McGillicuddy is the General Partner of
McGillicuddy Family Limited Partnership and has power to vote all shares
held by this entity. Mr. McGillicuddy disclaims beneficial ownership of
those shares held by his spouse, those held by trusts for his
grandchildren, those held by SILP II, and 80,899.80 of those held by the
McGillicuddy Family Limited Partnership, which are beneficially owned by
trusts for the benefit of his adult children.
(5) Comprised of shares held by Mr. Carter and his spouse, Judith I. Carter,
with whom Mr. Carter shares investment and voting power.
(6) Includes 241,596.12 shares of Common Stock owned by the Richard R. Norris
Living Trust and 10,682.01 shares of Common Stock owned by the Karen C.
Norris Living Trust, which Mr. Norris may be deemed to beneficially own.
Also includes 5,809.49 shares of Common Stock owned by Gretchen D. Norris
as to which Mr. Norris has power of attorney but as to which Mr. Norris
disclaims beneficial ownership. Mr. Norris has power to vote all shares
other than 10,682.01 shares of Common Stock held by the Karen C. Norris
Living Trust.
(7) Includes 145.99 shares held by Mr. MacPhee's spouse. Mr. MacPhee disclaims
beneficial ownership of such shares.
(8) Includes 145.99 shares held by Mr. Gribbell's spouse. Mr. Gribbell
disclaims beneficial ownership of such shares.
(9) Includes 145.99 shares held by Ms. Notopoulos' spouse. Ms. Notopoulos
disclaims beneficial ownership of such shares.
ELECTION OF DIRECTORS
Members of the Board of Directors
The Company's Board of Directors is divided into three classes, with
members of each class holding office for staggered three-year terms. There are
currently two Class I Directors, whose terms expire at this Annual Meeting of
Stockholders; two Class II Directors, whose terms expire at the 2006 Annual
Meeting of Stockholders; and two Class III Directors, whose terms expire at the
2005 Annual Meeting of Stockholders (in all cases subject to the election and
qualification of their successors or to their earlier death, resignation or
removal).
The persons named in the enclosed proxy will vote to elect each of Dennis
J. McGillicuddy and Janet Prier Notopoulos as Class I Directors, unless
authority to vote for the election of the nominees is withheld by marking the
proxy to that effect. Each of the nominees is currently a Class I Director of
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the Company. Each of Mr. McGillicuddy and Ms. Notopoulos has indicated his or
her willingness to serve, if elected, but if either of them should be unable or
unwilling to stand for election, the persons named in the enclosed proxy may
vote for election of a substitute nominee designated by the Board of Directors.
Proxies may not be voted for a greater number of persons than the number of
nominees named herein.
Set forth below are the names and certain information with respect to each
director of the Company, including the nominees for election as Class I
Directors.
Class I Directors (holding office for a term expiring at this Annual
Meeting; each nominated for a term expiring at the 2007 Annual Meeting):
Dennis J. McGillicuddy, age 62, has been a director of the Company and the
Chairman of the Compensation Committee since May 2002. Mr. McGillicuddy
graduated from the University of Florida with a B.A. degree and in 1966 he
graduated from the University of Florida Law School with a J.D. degree. In 1968,
Mr. McGillicuddy joined Barry Silverstein in founding Coaxial Communication of
Southern Ohio, a cable television company. Initially operating in small, rural
communities in the southeast, Coaxial expanded its operations to Columbus, Ohio,
the suburbs of Cincinnati, Ohio, and St. Paul, Minnesota, as well as smaller
systems in West Virginia, Kentucky and Illinois. In 1998 and 1999, Coaxial sold
its cable systems, and Mr. McGillicuddy retired from the cable television
business after serving as President of Coaxial from August 1998 through December
2000. Since January 2001, Mr. McGillicuddy has served as a manager of BDS
Management LLC, a management services company. Mr. McGillicuddy has served on
the boards of various charitable organizations. He is currently president of the
Board of Trustees of Florida Studio Theater, a professional non-profit theater
organization. Also, Mr. McGillicuddy is an officer and board member of The
Florida Winefest and Auction Inc., a Sarasota-based charity, which provides
funding for programs of local charities that deal with disadvantaged children
and their families.
Janet Prier Notopoulos, age 56, has been a director of the Company since
it was formed in October 2001. She is also a Vice President of the Company and
President of FSP Property Management LLC and has as her primary responsibility
the oversight of the management of the real estate assets of the Company, its
affiliates and real estate investment trusts that the Company sponsors, which
are typically syndicated through private placements exempt from registration
under the Securities Act of 1933, as amended (the "Sponsored REITs"). Prior to
the merger (the "Merger") of Franklin Street Partners Limited Partnership (the
"Partnership") into the Company, Ms. Notopoulos was a Vice President of the
former general partner (the "General Partner") of the Partnership. Prior to
joining the Company in 1997, Ms. Notopoulos was a real estate and marketing
consultant for various clients. From 1975 to 1983, she was Vice President of
North Coast Properties, Inc., a Boston real estate investment company. Between
1969 and 1973, she was a real estate paralegal at Goodwin, Procter & Hoar. Ms.
Notopoulos is a graduate of Wellesley College (B.A.) and the Harvard School of
Business Administration (M.B.A).
Class II Directors (holding office for a term expiring at the 2006 Annual
Meeting):
Barbara J. Corinha, age 48, has been a director of the Company since it
was formed in October 2001. She is also the Vice President, Chief Operating
Officer, Treasurer and Secretary of the Company. In addition, Ms. Corinha has as
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her primary responsibility, together with Mr. Carter, the management of all
operating business affairs of the Company and its affiliates. Prior to the
Merger, Ms. Corinha was the Vice President, Chief Operating Officer, Treasurer
and Secretary of the General Partner. From 1993 through 1996, she was Director
of Operations for the private placement division of Boston Financial. Prior to
joining Boston Financial, Ms. Corinha served as Director of Operations for
Schuparra Securities Corp. and as the Sales Administrator for Weston Financial
Group. From 1979 through 1986, Ms. Corinha worked at First Winthrop Corporation
in administrative and management capacities, including Office Manager,
Securities Operations and Partnership Administration. Ms. Corinha attended
Northeastern University and the New York Institute of Finance. Ms. Corinha is a
NASD General Securities Principal (Series 24). She also holds other NASD
supervisory licenses including Series 4 and Series 53, and a NASD Series 7
general securities license.
Barry Silverstein, age 71, has been a director of the Company and a member
of the Compensation Committee since May 2002. Mr. Silverstein took his law
degree from Yale University in 1957 and subsequently held positions as
attorney/officer/director of various privately-held manufacturing companies in
Chicago, Illinois. After selling those interests in 1964, he moved to Florida to
manage his own portfolio and to teach at the University of Florida Law School.
In 1968, Mr. Silverstein became the principal founder and shareholder in Coaxial
Communication of Southern Ohio, a cable television company. Initially operating
in small, rural communities in the southeast, Coaxial expanded its operations to
Columbus, Ohio, the suburbs of Cincinnati, Ohio, and St. Paul, Minnesota, as
well as smaller systems in West Virginia, Kentucky and Illinois. In 1998 and
1999, Coaxial sold its cable systems, and Mr. Silverstein retired from the cable
television business as of December 2000. Since January 2001, Mr. Silverstein has
served as a member of BDS Management LLC, a management services company.
Class III Directors (holding office for a term expiring at the 2005 Annual
Meeting):
George J. Carter, age 55, has been a director of the Company since it was
formed in October 2001. He is also President and Chief Executive Officer of the
Company and is responsible for all aspects of the business of the Company and
its affiliates, with special emphasis on the evaluation, acquisition and
structuring of real estate investments. Prior to the Merger, he was President of
the General Partner and was responsible for all aspects of the business of the
Partnership and its affiliates. From 1992 through 1996 he was President of
Boston Financial Securities, Inc. ("Boston Financial"). Prior to joining Boston
Financial, Mr. Carter was owner and developer of Gloucester Dry Dock, a
commercial shipyard in Gloucester, Massachusetts. From 1979 to 1988, Mr. Carter
served as Managing Director in charge of marketing of First Winthrop
Corporation, a national real estate and investment banking firm headquartered in
Boston, Massachusetts. Prior to that, he held a number of positions in the
brokerage industry including those with Merrill Lynch & Co. and Loeb Rhodes &
Co. Mr. Carter is a graduate of the University of Miami (B.S.). Mr. Carter is a
NASD General Securities Principal (Series 24) and holds a NASD Series 7 general
securities license.
Richard R. Norris, age 60, has been a director of the Company since it was
formed in October 2001. He is also an Executive Vice President of the Company
and has as his primary responsibility the direct equity placement of the
Sponsored REITs. Prior to the Merger, Mr. Norris was an Executive Vice President
of the General Partner. From 1993 through 1996 he was an executive officer of
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Boston Financial. From 1983 to 1993 Mr. Norris worked at Winthrop Financial
Associates. Prior to that, he worked at Arthur Young & Company (subsequently
named Ernst & Young through a merger). Mr. Norris is a graduate of Bowdoin
College (B.A.) and Northeastern University (M.S.). Mr. Norris holds a NASD
Series 7 general securities license.
Board and Committee Meetings
The Company's Board of Directors held eight meetings during 2003, and
acted on one occasion by unanimous written consent. Each of the directors
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board of Directors and (ii) the total number of meetings held by all
committees of the Board on which he or she served, in each case during the
period that he or she served. The Board has an informal policy that all
directors are expected to attend the annual meeting of stockholders. All
directors attended the 2003 annual meeting of stockholders.
The Company has a standing Audit Committee of the Board of Directors,
which was formed in January 2002. The Audit Committee is responsible for
reviewing financial reports, accounting procedures and the scope and results of
the annual audit of the Company's financial statements. The current members of
the Audit Committee are Ms. Corinha and Ms. Notopoulos. The members of the Audit
Committee are not "independent" under the listing standards of the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market. The
Company does not have an "audit committee financial expert," as defined in Item
401(h) of Regulation S-K, serving on the Audit Committee or the Board of
Directors. The Company believes that Messrs. McGillicuddy and Silverstein
possess the financial knowledge and expertise necessary to aid the Board of
Directors in effectively assessing and evaluating financial issues and concerns
as such issues and concerns may affect the Company's financial reports and
related financial disclosure. The Company's Board also concluded that the
ability of the Audit Committee to perform its duties is not impaired by the
absence of an "an audit committee financial expert." The members of the Audit
Committee met six times in 2003.
The Company has a standing Compensation Committee of the Board of
Directors, which was formed in July 2002. The Compensation Committee is
responsible for reviewing compensation issues and making decisions concerning
the compensation of the Company's executive officers. The current members of the
Compensation Committee are Messrs. McGillicuddy and Silverstein and Ms. Corinha.
The members of the Compensation Committee met once in 2003.
The Company does not have a standing nominating committee. The Board of
Directors has determined that it is appropriate for the Company not to have a
nominating committee because all of the matters which a nominating committee
would be responsible for are presently considered by all the members of the
Board of Directors. Each member of the Board of Directors participates in the
consideration of director nominees.
8
Director Candidates
The process followed by the Board of Directors to identify and evaluate
director candidates includes requests to Board members and others for
recommendations, meetings from time to time to evaluate biographical information
and background material relating to potential candidates and interviews of
selected candidates by members of the Board.
In considering whether to recommend any particular candidate for inclusion
in its slate of recommended director nominees, the Board of Directors applies
criteria including the candidate's integrity, business acumen, knowledge of the
Company's business and industry, age, experience, diligence, conflicts of
interest and the ability to act in the interests of all stockholders. The Board
does not assign specific weights to particular criteria and no particular
criterion is a prerequisite for each prospective nominee. The Board believes
that the backgrounds and qualifications of its directors, considered as a group,
should provide a composite mix of experience, knowledge and abilities that will
allow the Board to fulfill its responsibilities.
Stockholders may recommend individuals to the Board for consideration as
potential director candidates by submitting their names, together with
appropriate biographical information and background materials. Assuming that
appropriate biographical and background material has been provided on a timely
basis, the Committee will evaluate stockholder-recommended candidates by
following substantially the same process, and applying substantially the same
criteria, as it follows for candidates submitted by others.
Stockholders also have the right under the Company's bylaws to directly
nominate director candidates, without any action or recommendation on the part
of the Board, by following the procedures set forth under "Stockholder
Proposals." If the Board determines to nominate a stockholder-recommended
candidate and recommends his or her election, then his or her name will be
included in the Company's proxy card for the next annual meeting.
Communicating with the Board of Directors
The Board will give appropriate attention to written communications that
are submitted by stockholders, and will respond if and as appropriate. The
Secretary of the Company is primarily responsible for monitoring communications
from stockholders and for providing copies or summaries to the other directors
as he or she considers appropriate.
Communications are forwarded to all directors if they relate to important
substantive matters and include suggestions or comments that the Secretary
considers to be important for the directors to know. In general, communications
relating to corporate governance and long-term corporate strategy are more
likely to be forwarded than communications relating to ordinary business
affairs, personal grievances and matters as to which the Company tends to
receive repetitive or duplicative communications.
Stockholders who wish to send communications on any topic to the Board
should address such communications to Board of Directors, Franklin Street
Properties Corp., 401 Edgewater Place, Suite 200, Wakefield, Massachusetts
01880, Attn: Barbara J. Corinha, Secretary.
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Compensation of Directors
None of the Company's directors receives compensation for his or her
services as a director. The Company reimburses Messrs. McGillicuddy and
Silverstein for expenses incurred by them in connection with attendance at Board
meetings.
EXECUTIVE COMPENSATION
Summary Compensation
The following Summary Compensation Table sets forth certain information
concerning the compensation for each of the last three fiscal years of (1) the
Chief Executive Officer (the "CEO") of FSP Corp. and (2) the four most highly
compensated executive officers (other than the CEO) whose total annual salary
and bonus exceeded $100,000 and who were serving as executive officers at the
end of 2003 (collectively, the "Named Executive Officers").
Annual Compensation (1)
-----------------------------------------
Other
Fiscal Annual All Other
Name and Principal Position Year Salary Bonus Compensation(2) Compensation(3)
--------------------------- ---- ------ ----- --------------- ---------------
George J. Carter........................ 2003 $225,000 $400,000(4) --- $ 12,865(5)
President and Chief Executive Officer 2002 $120,000 $255,000(6) --- $ 16,585(7)
2001 $120,000 $759,652(8) --- $815,585(9)
Richard R. Norris....................... 2003 --- --- $1,077,452 $ 9,000(10)
Executive Vice President 2002 --- --- $2,062,432 $ 7,500(10)
2001 --- $ 21,428 $2,298,737 $448,436(11)
R. Scott MacPhee........................ 2003 --- --- $1,750,850 $ 8,000(10)
Executive Vice President 2002 --- $ 13,640 $1,632,250 $611,100(12)
2001 --- $ 11,023 $2,298,483 $232,196(13)
William W. Gribbell..................... 2003 --- --- $2,192,258 $ 8,000(10)
Executive Vice President 2002 --- --- $1,331,975 $ 7,000(10)
2001 --- $ 7,021 $ 898,993 $152,274(14)
Barbara J. Corinha...................... 2003 $175,000 $190,000(4) --- $ 8,000(10)
Vice President, Chief Operating Officer, 2002 $ 75,000 $285,000(15) --- $ 7,000(10)
Treasurer and Secretary 2001 $ 60,000 $287,974(6) --- $ 66,500(16)
(1) Amounts reported for 2001 represent annual compensation paid to the Named
Executive Officers by the FSP Partnership, FSP Corp.'s predecessor.
(2) Consists of brokerage commissions paid by FSP Investments in respect of
the sale of securities of Sponsored REITs.
(3) The FSP Partnership issued FSP Units to all executive officers in July
2001, valued at $11.50 per FSP Unit, as part of their annual compensation.
The valuation of $11.50 per FSP Unit was determined in good faith by the
FSP General Partner, the general partner of the FSP Partnership, based on
the value ascribed to each FSP Unit in connection with certain mergers
that were effective October 1, 2000, in which the FSP Partnership acquired
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several of the limited partnerships whose offerings FSP Investments had
previously sponsored. No material changes in the financial condition or
results of the FSP Partnership had occurred between that date and July 1,
2001.
(4) Represents a bonus accrued in 2003 and paid in 2004.
(5) Includes a $9,000 contribution to a Simple IRA Plan and $3,865 of life
insurance.
(6) Represents a bonus accrued in 2001 and paid in 2002.
(7) Includes a $7,500 contribution to a Simple IRA Plan and $9,085 of life
insurance.
(8) Includes a bonus of $720,000 accrued in 2001 and paid in 2002.
(9) Includes $800,000 in FSP Units, a $6,500 FSP Partnership contribution to a
Simple IRA plan and $9,085 of life insurance.
(10) Represents a contribution to a Simple IRA plan.
(11) Includes $423,320 in FSP Units, a $6,500 FSP Partnership contribution to a
Simple IRA plan and $9,616 of life insurance.
(12) Includes $604,100 in FSP Common Stock and a $7,000 contribution to a
Simple IRA plan.
(13) Includes $222,400 in FSP Units, a $6,500 FSP Partnership contribution to a
Simple IRA plan and $3,296 of life insurance.
(14) Includes $145,280 in FSP Units, a $6,500 FSP Partnership contribution to a
Simple IRA plan and $494 of life insurance.
(15) Represents a bonus accrued in 2002 and paid in 2003.
(16) Includes $60,000 in FSP Units and a $6,500 FSP Partnership contribution to
a Simple IRA plan.
Option Grants, Option Exercises and Holdings
No options or stock appreciation rights ("SARs") were granted to any of
the Named Executive Officers during 2001, 2002 or 2003. FSP Corp does not have
any outstanding stock options or SARs, and therefore, there were no stock
options or SARs exercised by any of the Named Executive Officers.
11
Securities Authorized for Issuance Under Equity Compensation Plans
Equity Compensation Plan Information
The following table provides information about the Company's Common Stock
that may be issued under all of the Company's equity compensation plans as of
April 1, 2004. The Company only has one equity compensation plan, the 2002 Stock
Incentive Plan. The Company's stockholders approved this plan in May 2002.
(c)
(a) (b) Number of Securities
Number of Securities to be Weighted-Average Exercise Available for Future Issuance
Issued Upon Exercise of Price of Outstanding Under Equity Compensation
Outstanding Options, Options, Plans (Excluding Securities
Plan Category Warrants and Rights(1)(2) Warrants and Rights Reflected in Column (a)(1)(2)
------------- ------------------------- ------------------- -----------------------------
Equity Compensation Plans
Approved by Security Holders None N/A 1,946,178
Equity Compensation Plans Not
Approved by Security Holders None N/A N/A
------ ------ ---------
Total None N/A 1,946,178
====== ====== =========
(1) The number of shares is subject to adjustments in the event of stock
splits and other similar events.
(2) The 2002 Stock Incentive Plan provides for the granting of awards
consisting of shares of Common Stock without reference to vesting periods.
Employment Agreements
The Company is not a party to any employment agreement with any of the
Named Executive Officers.
Sections 16(a) Beneficial Ownership Reporting Compliance
Based solely on its review of copies of reports filed by the directors and
executive officers of the Company pursuant to Section 16(a) of the Exchange Act
or written representations from certain persons required to file reports under
Section 16(a) of the Exchange Act that no Form 5 filing was required for such
person, the Company believes that during 2003 all filings required to be made by
its Reporting Persons were timely made in accordance with the requirements of
the Exchange Act.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee comprises Messrs. McGillicuddy and Silverstein
and Ms. Corinha. No executive officer of the Company has served as a director or
member of the compensation committee (or other committee serving an equivalent
function) of any other entity, one of whose executive officers served as a
director or member of the Compensation Committee of the Company.
12
Report of the Compensation Committee on Executive Compensation
The Compensation Committee (the "Committee") is responsible for
determining the compensation package of each executive officer and establishes
compensation policies for the Company's Chief Executive Officer and the other
executive officers of the Company.
The Company's executive compensation program is designed to promote the
achievement of the Company's business goals and, thereby, to maximize corporate
performance and stockholder returns.
The executive officers of the Company fall into two categories. The first
category is comprised of executive officers who make up the corporate management
team (i.e., CEO, Chief Operating Officer, subsidiary president, etc.). The
second category is comprised of executive officers who are Investment Executives
and are engaged in the sale of equity interests in the Company's Sponsored
REITs.
Executive compensation for the corporate management team generally
consists of a combination of base salary, cash performance bonuses and the
potential for awards of stock through the Company's 2002 Stock Incentive Plan.
During 2002, the Committee reviewed the Company's compensation
levels/philosophies in order to be able to assess the need for compensation
adjustments where appropriate. The Committee expended a great deal of effort
collecting comparative compensation data for the Company's corporate management
team. Comparative data consisted of: (1) the NAREIT (National Association of
Real Estate Investment Trusts) 2002 Compensation & Benefits Survey; (2) the
NAIOP (National Association of Industrial and Office Properties) 2002-2003
Compensation Report; and (3) conversations with the Compensation Consulting
Group of Deloitte & Touche. Comparisons were made as to salary, cash bonus and
total compensation. As a result of that effort, the Compensation Committee
concluded that the total compensation for the CEO and other key management
officers (Chief Operating Officer, subsidiary president, director of
acquisitions), although competitive in total, was out of balance between salary
and cash bonus levels. The Committee determined that the salary amounts should
be adjusted upward to bring each officer's salary level into a range that would
be considered "market rate" compensation, while still keeping the total
compensation competitive with the appropriate offsetting bonus adjustments. The
Compensation Committee made its recommendations to the FSP Board in early
January 2003, and the Board approved the Committee's recommendations. As a
result, the CEO's and the other key management officers' salary levels were
adjusted to a competitive market rate as of January 1, 2003.
Executive compensation for the Company's executive officers who are
Investment Executives consists primarily of commissions earned on the sale of
interests in the Company's Sponsored REITs. As is standard practice in the
investment industry, Investment Executives earn as commission a percentage of
payout of the gross sales commission earned on each investment sale. The actual
13
amount of compensation earned as commissions is determined by the level of sales
conducted by each individual. An investment executive's ability to earn
commissions is limited only by the amount of equity available to be sold and his
individual ability to sell it. As such, the Committee does not set the level of
compensation for the executive officers who are Investment Executives. The
Committee does determine the percentage of payout that is paid to the Investment
Executives. As part of the compensation survey conducted in late 2002, the
Committee reviewed comparative compensation programs within the securities
industry. The Committee determined that the percentage of payout paid to the
Company's Investment Executives is competitive, and no adjustment was necessary.
The Committee considers stock incentives to be a critical component of an
executive's compensation package in order to help align executive interests with
stockholder interests.
Compensation Philosophy
The objectives of the executive compensation program are to align
compensation with business objectives and individual performance and to enable
the Company to attract, retain and reward executive officers who are expected to
contribute to the long-term success of the Company. The Company's executive
compensation philosophy is based on the principles of competitive and fair
compensation and sustained performance.
Competitive and Fair Compensation
The Committee is committed to providing an executive compensation program
that helps attract and retain highly qualified executives. To ensure that total
cash compensation (salary plus cash bonus) is competitive, the Committee
compares its compensation practices with those of other companies in the
industry and sets its compensation guidelines based on this review. The
Committee believes total cash compensation for its executive officers is within
the range of total cash compensation paid to executives with comparable
qualifications, experience and responsibilities in the same or similar business
and of comparable size and success. The Company also strives to achieve
equitable relationships both among the compensation of individual officers and
between the compensation of officers and other employees throughout the
organization.
Sustained Performance
Executive officers who are part of the corporate management team are
rewarded based upon corporate performance and individual performance. Corporate
performance is evaluated by reviewing the extent to which strategic and business
plan goals are met, including such factors as levels of property acquisitions,
performance of properties in the Company's portfolio, gains or losses on
property dispositions, levels of equity sales and the achievement of earnings,
cash available for distribution, or CAD, and dividend goals. Individual
performance is evaluated by reviewing the attainment of specified individual
objectives and the degree to which teamwork and Company values are fostered.
In evaluating each management executive's performance, the Company
generally conforms to the following process:
14
o Company and individual goals and objectives generally are set at the
beginning of the performance cycle (which is a calendar year).
o At the end of the performance cycle, the accomplishment of the
executive's goals and objectives and his/her contributions to the
Company are evaluated, and the results are communicated to the
executive.
o The comparative results, compared with comparative compensation
practices of other companies in the industry, are then used to
determine cash bonus and stock compensation levels, if any.
Any increases in annual salaries and payment of bonus awards is based on
actual corporate and individual performance against targeted performance and
various subjective performance criteria. Targeted performance criteria vary for
each executive based on his/her area of responsibility, and may include
achievement of specific acquisition goals, achievement of specific property
performance goals, continued innovation in development of the Company's
infrastructure, achievement of the operating budget for the Company as a whole
or of a business group of the Company, and achievement of specific earnings, CAD
and dividends goals. Subjective performance criteria include an executive's
ability to motivate others, develop the skills necessary to grow as the Company
matures, recognize and pursue new business opportunities and initiate programs
to enhance the Company's growth and success. The Committee does not use a
specific formula based on these targeted performance and subjective criteria,
but instead makes an evaluation of each executive officer's contribution in
light of all such criteria.
Compensation at the management executive level has also included the award
of stock in the Company. The stock award program is designed to promote the
identity of long-term interests between the Company's employees and its
stockholders. The size of the stock award is generally intended to reflect the
executive's position with the Company and his/her contribution to the Company,
including his/her success in achieving the individual performance criteria
described above.
Mr. Carter's 2003 Compensation
Mr. Carter is the CEO of the Company. Mr. Carter participates in the same
executive compensation plans available to the other executive officers of the
Company. Mr. Carter's base salary for 2003 was $225,000. Mr. Carter was also
paid $400,000 in cash bonus for his performance in 2003. The Committee
determined that Mr. Carter performed very well in an otherwise very difficult
commercial real estate environment. The major market in which the Company
operates, commercial real estate operations, continued to be in recession during
2003. However, the Company was still able to take advantage of an opportunity to
dispose of properties at profitable prices. The sale of these properties, along
with rental operations and investment banking business, allowed the Company to
raise the total dividends per share for the fifth year in a row, even though the
Company did not meet its stated goal for CAD for the year. Based upon numerous
performance measurements, the Board of Directors felt that the Company had a
successful year. Mr. Carter's cash bonus compensation for 2003 is reflective of
the Company's overall performance. Mr. Carter was not awarded any stock as
compensation for his 2003 performance. Mr. Carter's cash bonus for 2003 was paid
in 2004. Mr. Carter's 2003 salary and bonus were based upon a number of factors,
which included the Company:
15
o successfully completing the merger of 13 single-asset REITs with and
into the Company, thereby increasing the Company's value and further
reducing the risk due to a larger, diversified portfolio;
o obtaining an increase in the Company's line of credit from $50
million to $125 million;
o generating an increase of approximately 6.3% in net income/share
over the previous year;
o increasing total dividends paid to shareholders of the Company by
approximately 6% over the previous year;
o successfully completing the sale of two properties from the
Company's portfolio, both properties were sold at a profit;
o completing the acquisition of five new operating properties;
o completing five syndications of preferred stock on behalf of
Sponsored REITs totaling in excess of $230 million in equity, an
increase of 10% over the previous year; and
o generating operating results that produced an increase in estimated
market valuation of the Company's Common Stock of approximately
11.5% over the prior year's estimated valuation.
The Committee also considered that throughout the past year, Mr. Carter
maintained his focus and discipline on the Company's business plan and
investment philosophy and effectively and efficiently managed the Company's
resources.
By the Compensation Committee
Dennis J. McGillicuddy, Chairman
Barry Silverstein
Barbara J. Corinha
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Carter, MacPhee, Norris and Gribbell and Mses. Corinha and
Notopoulos, each of whom is an executive officer of the Company, serve, at the
request of the Company, as executive officers and, except for Ms. Notopoulos,
directors of each of the Sponsored REITs. Ms. Notopolous serves as a director of
certain of the Sponsored REITs. None of such persons receives any remuneration
from the Sponsored REITs for such service.
16
FSP Investments, a wholly owned subsidiary of the Company, provides
syndication and real estate acquisition advisory services for the Sponsored
REITs. Fees from Sponsored REITs for property acquisition services amounted to
approximately $3,083,000, $1,010,000 and $1,416,000 for the years ended December
31, 2001, 2002 and 2003, respectively. Sales commissions earned from the sale of
Sponsored REIT preferred shares amounted to approximately $13,000,000,
$13,720,000 and $14,631,000 for the years ended December 31, 2001, 2002 and
2003, respectively.
During 2001, 2002 and 2003, the Company provided interim financing for the
purchase of certain Sponsored REIT properties prior to completion of the
Sponsored REITs' private equity offerings. The Sponsored REITs paid the Company
financing commitment fees of approximately $9,618,000, $12,081,000 and
$13,329,000 for the years ended December 31, 2001, 2002 and 2003, respectively.
Interest income earned from loans to the Sponsored REITs amounted to
approximately $552,000, $429,000 and $636,000 for the years ended December 31,
2001, 2002 and 2003, respectively. The interest rate charged by the Company to
the Sponsored REITs is equal to the interest rate paid by the Company to
Citizens Bank for borrowings under its line of credit. Therefore, the Company
does not realize any significant profit from interest on the loans. All loans to
Sponsored REITs were evidenced by promissory notes and were paid in full upon
closing of the applicable Sponsored REIT's private equity offering during 2001,
2002 or 2003. In addition, one loan, which was made to a Sponsored REIT during
2003 and was partially outstanding at December 31, 2003, was paid in full during
2004. The following table summarizes these interim financing transactions:
Total
Financing Amount
Commitment Interest Income Outstanding as
Original Principal Average Fees Earned by Earned by the Date of of December
Date of Loan Amount of Note Interest Rate the Company Company Repayment 31, 2003
------------ -------------- ------------- ----------- ------- --------- --------
12/14/00 $16,500,000 8.93% $ 669,500 $ 56,116 02/01/01 $0
03/02/01 $21,000,000 8.42% $ 965,625 $ 76,758 03/30/01 $0
05/24/01 $42,150,000 6.57% $1,931,250 $128,362 06/28/01 $0
09/13/01 $16,000,000 6.58% $1,150,000 $ 15,665 09/17/01 $0
09/14/01 $39,000,000 6.22% $2,760,000 $227,227 11/01/01 $0
12/04/01 $30,150,000 5.56% $2,141,875 $ 44,806 12/14/01 $0
03/01/02 $20,360,000 4.75% $1,437,500 $ 8,059 03/06/02 $0
04/23/02 $17,000,000 4.75% $1,184,500 $ 18,371 05/01/02 $0
05/22/02 $32,250,000 4.75% $2,300,000 $ 96,960 06/27/02 $0
06/03/02 $22,300,000 4.75% $1,581,250 $ 78,123 08/01/02 $0
08/26/02 $26,000,000 4.75% $1,920,500 $ 28,886 09/03/02 $0
09/29/02 $51,500,000 4.50% $3,657,000 $240,445 12/23/02 $0
01/28/03 $24,250,000 4.40% $1,710,625 $ 20,371 02/18/03 $0
02/28/03 $45,175,000 4.25% $3,191,250 $252,798 06/09/03 $0
06/26/03 $38,122,000 4.15% $2,731,250 $ 88,444 08/08/03 $0
08/14/03 $36,100,000 3.61% $2,760,000 $ 92,826 09/09/03 $0
11/06/03 $40,000,000 4.00% $2,935,375 $181,897 01/30/04 $4,117,459
17
Total asset management fee income from the Sponsored REITs amounted to
approximately $412,000, $503,000 and $493,000 for the years ended December 31,
2001, 2002 and 2003, respectively. Asset management fees are approximately 1% of
collected rents for both periods.
Aggregate fees charged to the Sponsored REITs amounted to approximately
$26,113,000, $27,314,000 and $29,869,000 for the years ended December 31, 2001,
2002 and 2003, respectively.
Mr. Carter's son, Jeffrey B. Carter, is Director of Acquisitions for FSP
Investments and a Vice President of FSP Corp. For the year ended December 31,
2003, he received total compensation of $233,000 (including salary, cash bonus
and contribution to a simple IRA plan).
Mr. Norris's son, Adam R. Norris, is an Investment Executive for FSP
Investments. For the year ended December 31, 2003, he received total
compensation of $457,796 (including brokerage commissions and contribution to a
simple IRA plan).
Messrs. McGillicuddy and Silverstein, each a director of the Company,
purchased, on the same terms as non-affiliated purchasers, investments in
certain Sponsored REITs during 2003. Messrs. McGillicuddy and Silverstein each
paid the Company an aggregate of $15,500 and $296,875, respectively, in
brokerage commissions related to these investments. The Company, in turn, paid
Mr. Norris, also a director of the Company and an Investment Executive, an
aggregate of $156,187 of the total brokerage commissions paid by Messrs.
McGillicuddy and Silverstein for Mr. Norris' work as the Investment Executive
responsible for the sales of the related shares in the Sponsored REITs. Messrs.
McGillicuddy and Silverstein paid brokerage commissions on the same terms as
non-affiliated purchasers of shares in the Sponsored REITs.
On June 1, 2003, the Company completed the acquisition by merger of 13
real estate investment trusts, in which it issued approximately 25,000,091
shares of common stock to the holders of preferred stock in each of the acquired
REITs.
In connection with this acquisition, the Company issued 1,586,343.29 and
4,130,961.11 shares of its common stock, respectively, to Messrs. McGillicuddy
and Silverstein, who owned an aggregate of 229 and 601.25 shares of stock in the
acquired REITs, respectively. In addition, Mr. Carter, President, Chief
Executive Officer and a director of the Company, was the President and a
director of each of the acquired REITs. Mr. Norris, Executive Vice President and
a director of the Company, was an Executive Vice President and a director of
each of the acquired REITS. Ms. Corinha, Vice President, Chief Operating
Officer, Treasurer and Secretary and a director of the Company, was the Chief
Operating Officer, Treasurer, Secretary and a director of each of the acquired
REITs. Ms. Notopoulos, Vice President and a director of the Company, was a Vice
President of each of the acquired REITs. Messrs. MacPhee and Gribbell, Executive
Vice Presidents of the Company, were each a director and an Executive Vice
President of each acquired REIT.
18
SELECTION OF ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent accountants for fiscal 2004. Ernst & Young LLP has served as the
Company's independent accountants since May 2003. PricewaterhouseCoopers served
as the Company's independent accountants from October 2001 to May 2003.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting and will have the opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions from stockholders.
On May 8, 2003, Pricewaterhouse Coopers LLP informed the Company that it
had elected not to stand for re-election as the Company's independent certified
public accountant. The reports of Pricewaterhouse Coopers LLP on the Company's
financial statements for the fiscal years ended December 31, 2001 and 2002 did
not contain an adverse opinion or a disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2002 and 2001 and any subsequent
interim period preceding the dismissal, there were (i) no disagreements with
Pricewaterhouse Coopers on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Pricewaterhouse Coopers,
would have caused it to make reference to the subject matter of the
disagreements in connection with its reports and (ii) no reportable events as
defined in Regulation S-K Item 304(a)(1)(iv).
The Company solicited proposals from various accounting firms and
following review of such proposals engaged Ernst & Young to act as the Company's
independent accountants effective May 8, 2003. During the fiscal year ended
December 31, 2002 and any subsequent interim period preceding the engagement,
the Company did not consult Ernst & Young regarding the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company's financial
statements, or any matter that was the subject of a disagreement or a reportable
event.
Report of the Audit Committee of the Board of Directors
The Audit Committee of the Company's Board of Directors acts under a
written charter first adopted and approved in January 2002. A copy of this
charter is attached to the proxy statement for the 2002 Annual Meeting of
Stockholders, filed with the Securities and Exchange Commission on April 5,
2002, and is available on the SEC's website at www.sec.gov.
The Audit Committee reviewed the Company's audited financial statements
for the fiscal year ended December 31, 2003 and discussed these financial
statements with the Company's management and the Company's independent auditors.
Management is responsible for the Company's internal controls and the financial
reporting process. The Company's independent accountants are responsible for
performing an independent audit of the Company's financial statements in
accordance with accounting principles generally accepted in the United States of
America and to issue a report on those financial statements. As appropriate, the
Audit Committee reviews and evaluates, and discusses with the Company's
management, internal accounting, financial and auditing personnel and the
independent auditors, the following:
o the plan for, and the independent auditors' report on, each audit of
the Company's financial statements;
19
o the Company's financial disclosure documents, including all
financial statements and reports filed with the Securities and
Exchange Commission or sent to stockholders;
o management's selection, application and disclosure of critical
accounting policies;
o changes in the Company's accounting practices, principles, controls
or methodologies;
o significant developments or changes in accounting rules applicable
to the Company; and
o the adequacy of the Company's internal controls and accounting,
financial and auditing personnel.
The Audit Committee also reviewed and discussed the audited financial
statements and the matters required by Statement on Auditing Standards 61
(Communication with Audit Committees) with Ernst & Young LLP, the Company's
independent auditors for the year ended 2003. SAS 61 requires the Company's
independent auditors to discuss with the Company's Audit Committee, among other
things, the following:
o methods to account for significant unusual transactions;
o the effect of significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance
or consensus;
o the process used by management in formulating particularly sensitive
accounting estimates and the basis for the auditors' conclusions
regarding the reasonableness of those estimates; and
o disagreements with management over the application of accounting
principles, the basis for management's accounting estimates and the
disclosures in the financial statements.
The Company's independent auditors also provided the Audit Committee with
the written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees). Independence
Standards Board Standard No. 1 requires auditors annually to disclose in writing
all relationships that in the auditor's professional opinion may reasonably be
thought to bear on independence, confirm their perceived independence and engage
in a discussion of independence. The Audit Committee discussed with the
independent auditors the matters disclosed in this letter and their independence
from the Company. The Audit Committee also considered whether the independent
auditors' provision of the other, non-audit related services which are referred
to under the heading "Independent Auditor Fees and Other Matters" is compatible
with maintaining such auditor's independence.
20
Based on its discussions with management and the independent auditors, and
its review of the representations and information provided by management and the
independent auditors, the Audit Committee recommended to the Company's Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2003.
By the Audit Committee of the Board of Directors of Franklin Street
Properties Corp.
Barbara J. Corinha
Janet P. Notopoulos
Independent Auditor's Fees
The following tables summarize the aggregate fees by the Company's
independent auditors for audit services for each of the last two fiscal years
and for other services rendered to the Company in each of the last two fiscal
years. In 2003 the Company engaged Ernst & Young LLP to replace
PricewaterhouseCoopers LLP.
Ernst & Young LLP
Fee Category 2003 2002
------------ -------- --------
Audit Fees (1) $161,000 $ --
Audit-Related Fees (2) 45,000 --
Tax Fees (3) 6,000 --
All Other Fees (4) -- --
-------- --------
Total Fees $212,000 $ --
======== ========
PricewaterhouseCoopers LLP
Fee Category 2003 2002
------------ -------- --------
Audit Fees (1) $ -- $140,000
Audit-Related Fees (2) 43,000 129,000
Tax Fees (3) 50,000 39,000
All Other Fees (4) -- --
-------- --------
Total Fees $ 93,000 $308,000
======== ========
(1) Audit fees consist of fees for the audit of our financial
statements, the review of the interim financial statements included
in our quarterly reports on Form 10-Q, and other professional
services provided in connection with statutory and regulatory
filings or engagements.
(2) Audit-related fees consist of fees for assurance and related
services that are reasonably related to the performance of the audit
and the review of our financial statements and which are not
reported under "Audit Fees". These services principally relate to
accounting consultations and related services in connection with the
mergers which occurred in June 2003.
(3) Tax fees consist of fees for tax compliance, tax advice and tax
planning services. Tax compliance services, which relate to the
preparation of tax returns, claims for refunds and tax
payment-planning services, accounted for $41,000 of the total tax
fees incurred in 2003. Fees incurred in 2002 related to tax planning
and other tax services.
21
(4) The Company was not billed by its independent auditors in 2002 or
2003 for any other fees.
Pre-Approval Policy and Procedures
The Audit Committee has adopted policies and procedures relating to the
approval of all audit and non-audit services that are to be performed by the
Company's independent auditor. This policy generally provides that the Company
will not engage its independent auditor to render audit or non-audit services
unless the service is specifically approved in advance by the Audit Committee or
the engagement is entered into pursuant to one of the pre-approval procedures
described below.
From time to time, the Audit Committee may pre-approve specified types of
services that are expected to be provided to the Company by its independent
auditor during the next 12 months. Any such pre-approval is detailed as to the
particular service or type of services to be provided and is also generally
subject to a maximum dollar amount.
The Audit Committee has also delegated to each individual member of the
Audit Committee the authority to approve any audit or non-audit services to be
provided to the Company by its independent auditor. Any approval of services by
a member of the Audit Committee pursuant to this delegated authority is reported
on at the next meeting of the Audit Committee.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the FSP Units of limited partnership interests of the Partnership between
December 31, 1999 and the Company's Common Stock as of December 31, 2003 with
the cumulative total return of (1) the Russell 2000 Total Return Index, (2) the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500") and (3) the Morgan
Stanley REIT Index over the same period. This graph assumes the investment of
$100.00 on December 31, 1999 in FSP Units of the Partnership's limited
partnership interests and assumes any distributions are reinvested. Pursuant to
the Merger, each FSP Unit was converted into one share of Common Stock.
22
[PERFORMANCE GRAPH IS HERE IN THE PRINTED MATERIALS]
As of December 31,
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
Franklin Street Properties $100 $106 $134 $195 $227 $275
Morgan Stanley REIT Index $100 $95 $121 $137 $142 $194
S&P 500 Index $100 $121 $110 $97 $76 $97
Russell 2000 Index $100 $121 $118 $121 $96 $141
Notes to Graph:
(1) Because there was no market for FSP Units, the price per FSP Unit used in
the calculations set forth above for December 31, 1999 and December 31,
2000 is the price ascribed to an FSP Unit in equity-for-equity mergers
consummated by the Partnership on January 1, 2000, and October 1, 2000,
respectively. The price ascribed to the FSP Units for the mergers took
into account, among other factors, the lack of a trading market.
(2) Because there was no market for the Company's Common Stock, the Board of
Directors has made a good faith determination of the price per share of
Common Stock as of December 31, 2001, December 31, 2002 and December 31,
2003 for purposes of the calculations set forth above. In order to make
the Common Stock price more comparable to publicly traded indices, the
Board of Directors has not applied any discount to reflect the lack of a
trading market.
23
OTHER MATTERS
Matters to be Considered at the Meeting
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly presented
to the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
Solicitation of Proxies
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews, and the Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and, as required by law, the Company will
reimburse them for their out-of-pocket expenses in this regard.
Stockholder Proposals
Proposals of stockholders intended to be included in the Company's proxy
statement for the 2005 Annual Meeting of Stockholders must be received by the
Company at its principal office not later than January 11, 2005.
If a stockholder who wishes to make a proposal at the 2005 Annual
Meeting--other than one that will be included in the Company's proxy
materials--does not notify the Company by no earlier than December 6, 2004 and
no later than January 5, 2005, the proxies that management solicits for the
meeting will have discretionary authority to vote on the stockholder's proposal
if it is properly brought before the meeting.
Important Notice Regarding Delivery of Security Holder Documents
The Company participates in the practice of "householding" proxy
statements and annual reports, meaning that the Company delivers a single proxy
or information statement to a household, even though two or more stockholders
live under the same roof or a stockholder has shares registered in multiple
accounts, unless the Company has received an instruction to the contrary from
one or more of the stockholders. This practice enables the Company to reduce the
expense of printing and mailing associated with proxy statements and reduces the
amount of duplicative information a stockholder may currently receive.
The Company will promptly deliver a separate copy of either document to a
stockholder if a stockholder calls or writes to the Company at the following
address or phone number: Franklin Street Properties Corp., 401 Edgewater Place,
Suite 200, Wakefield, Massachusetts 01880, (781) 557-1300. If a stockholder
wants to receive separate copies of the annual report and proxy statement in the
future, or if the stockholder is receiving multiple copies and would like to
receive only one copy for his or her household, said stockholder should contact
the Company at the above address and phone number.
24
By Order of the Board of Directors,
Barbara J. Corinha, Secretary
April 5, 2004
The Board of Directors hopes that stockholders will attend the meeting.
Whether or not you plan to attend, you are urged to complete, date, sign and
return the enclosed Proxy in the accompanying envelope. Prompt response will
greatly facilitate arrangements for the meeting and your cooperation will be
appreciated. Stockholders who attend the meeting may vote their stock personally
even though they have sent in their proxies.
25
PROXY PROXY
FRANKLIN STREET PROPERTIES CORP.
ANNUAL MEETING OF STOCKHOLDERS - MAY 7, 2004
This Proxy is solicited by the Board of Directors of the Company
The undersigned, having received notice of the Annual Meeting and
management's Proxy Statement therefor, and revoking all prior proxies, hereby
appoint(s) George J. Carter and Barbara J. Corinha, and each of them (with full
power of substitution), as proxies of the undersigned to attend the Annual
Meeting of Stockholders of Franklin Street Properties Corp. (the "Company") to
be held on Friday, May 7, 2004 and any adjourned sessions thereof, and there to
vote and act upon the following matters in respect of all shares of Common Stock
of the Company which the undersigned would be entitled to vote or act upon, with
all powers the undersigned would possess if personally present.
Attendance of the undersigned at the meeting or at any adjourned session
thereof will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate thereat the intention of the undersigned to vote said
shares in person. If the undersigned hold(s) any of the shares of the Company in
a fiduciary, custodial or joint capacity or capacities, this proxy is signed by
the undersigned in every such capacity as well as individually.
In their discretion, the named Proxies are authorized to vote upon such
other matters as may properly come before the meeting, or any adjournment
thereof.
1. To elect the following individuals as Class I Directors:
Nominees: Dennis J. McGillicuddy
Janet Prier Notopoulos
FOR [ ] WITHHOLD AUTHORITY [ ]
FOR, except vote withheld from the following nominee(s):
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THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY ELECTION TO OFFICE OR
PROPOSAL SPECIFIED ABOVE, THIS PROXY WILL BE VOTED FOR SUCH ELECTION TO OFFICE
OR PROPOSAL.
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Signature(s)
_________________________
Printed Name(s)
_________________________
Date
Important: Please sign name(s) exactly as appearing hereon. When signing
as attorney, executor, administrator or other fiduciary, please give your full
title as such. Joint owners should each sign personally. If a corporation, sign
in full corporate name, by authorized officer. If a partnership, please sign in
partnership name, by authorized person.