UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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)
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|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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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ______________________________________________
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FRANKLIN STREET PROPERTIES CORP.
401 Edgewater Place, Suite 200
Wakefield, Massachusetts 01880
Notice of Annual Meeting of Stockholders to be Held
on Friday, May 12, 2006
The Annual Meeting of Stockholders of Franklin Street Properties Corp.
(the "Company") will be held at the offices of Wilmer Cutler Pickering Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts on Friday, May 12 at 11:00
a.m., local time, to consider and act upon the following matters:
(1) To elect three Class II 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 March 17, 2006 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
/s/ Barbara J. Fournier
Barbara J. Fournier, Secretary
Wakefield, Massachusetts
March 22, 2006
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 12, 2006
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 12,
2006, 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, 2005 is
being mailed to stockholders with the mailing of these proxy materials on or
about April 3, 2006.
Quorum Requirement
At the close of business on March 17, 2006, 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 59,794,608
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 all 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.
3
Beneficial Ownership of Voting Stock
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 17, 2006 by each director or nominee for director, by
each of the executive officers named in the Summary Compensation Table set forth
below (the "Named Executive Officers") and 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
Company's Common Stock.
Number of
Shares Percentage of
Beneficially Outstanding
Owned (1) Common Stock (2)
--------- ----------------
Barry Silverstein (3) .................... 5,821,380.50 9.74%
Dennis J. McGillicuddy (4) ............... 3,269,997 5.47
George J. Carter (5) ..................... 810,531 1.36
R. Scott MacPhee (6) ..................... 386,451 *
William W. Gribbell (7) .................. 129,761 *
Barbara J. Fournier (8) .................. 28,934 *
Janet P. Notopoulos (9) .................. 14,985 *
John G. Demeritt ......................... 6,750 *
John N. Burke ............................ 1,044.3102 *
Georgia Murray ........................... 0 *
All current directors and executive
officers as a group (10 persons) ......... 10,469,833.81 17.51%
---------------
* Less than 1%.
(1) The Company does not have any outstanding stock options or other
securities convertible into the Company's 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 59,794,608 shares outstanding as of March 17, 2006.
(3) Comprised of (i) 4,090,580 shares held by Silverstein Investments Limited
Partnership III ("SILP III"), (ii) 450,548 shares held by JMB Family
Limited Partnership Irrevocable Trust of 2003 ("JMB Trust 2003"), (iii)
673,439 shares held by MSTB Family Limited Partnership 2003 Irrevocable
Trust ("MSTB Trust 2003"), (iv) 71,144 shares held by Silverstein Family
Limited Partnership 2002, LTD Irrevocable Trust of 2003 ("SFLP"), (v)
505,084.50 shares held by Silverstein Investments Limited Partnership II
("SILP II") and (vi) 30,585 shares held by the Trudy Silverstein
Irrevocable Trust of 2003 for the benefit of Mr. Silverstein's spouse. Mr.
Silverstein disclaims beneficial ownership of the shares held by SILP II
and the shares held for the benefit of his spouse. Mr. Silverstein is the
General Partner of JMB Trust 2003, MSTB Trust 2003, and SFLP and has
voting power over the shares held by these entities. Mr. Silverstein is a
limited partner of SILP III and does not have voting power over the shares
held by SILP III.
4
(4) Comprised of (i) 2,237,891 shares held by McGillicuddy Investments Limited
Partnership III ("MILP III"), (ii) 12,991 shares held by the Graciela
McGillicuddy Irrevocable Trust of 2003 for the benefit of Mr.
McGillicuddy's spouse, (iii) 8,946 shares held by various trusts for Mr.
McGillicuddy's grandchildren, of which Mr. McGillicuddy's spouse is a
trustee, and (iv) 1,010,169 shares held by SILP II, of which Mr.
McGillicuddy is trustee. Mr. McGillicuddy disclaims beneficial ownership
of those shares held for the benefit of his spouse, those held by trusts
for his grandchildren and those held by SILP II. Mr. McGillicuddy and his
wife own all of the limited partnership interest in MILP III. Mr.
McGillicuddy has shared investment power and no voting power over the
shares held by SILP II. Excludes 404,499 shares held by the McGillicuddy
FLP Irrevocable Trust of 2003, of which Mr. McGillicuddy's son is trustee
and has sole investment and voting power over the shares.
(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 145 shares held by Mr. MacPhee's spouse. Mr. MacPhee disclaims
beneficial ownership of such shares.
(7) Includes 145 shares held by Mr. Gribbell's spouse. Mr. Gribbell disclaims
beneficial ownership of such shares.
(8) Includes 500 shares held by Ms. Fournier's spouse. Ms. Fournier disclaims
beneficial ownership of such shares.
(9) Includes 145 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 III Directors, whose terms expire at the 2008 Annual Meeting
of Stockholders, two Class I Directors, whose terms expire at the 2007 Annual
Meeting of Stockholders, and three Class II Directors, whose terms expire at
this 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 John N.
Burke, Barbara J. Fournier and Barry Silverstein as Class II 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 II Director of
the Company. Each of Mr. Burke, Ms. Fournier and Mr. Silverstein has indicated
his or her willingness to serve, if elected, but if any 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.
5
Set forth below are the names and certain information with respect to each
director of the Company, including the nominees for election as Class II
Directors.
Nominees for Class II Directors (to be elected to hold office for a term
expiring at the 2009 Annual Meeting):
John N. Burke, age 44, has been a director of the Company and Chairman of
the Audit Committee since June 2004 and a member of the Compensation Committee
since April 2005. Prior to staring his own accounting, tax and consulting firm
in January 2003, he was an Assurance Partner in the Boston office of BDO
Seidman, LLP, an international accounting and consulting firm. From 1987 to
2003, Mr. Burke served several private and publicly traded real estate clients
at BDO Seidman, LLP and assisted companies with initial public offerings,
private equity and debt financings and merger and acquisition transactions. Mr.
Burke's consulting experience includes SEC reporting matters, compliance with
Sarbanes-Oxley, tax and business planning and evaluation of internal controls
and management information systems. Mr. Burke is a Certified Public Accountant
and a member of the American Institute of Certified Public Accountants. Mr.
Burke holds a Master's of Science in Taxation and studied undergraduate
accounting and finance at Bentley College.
Barbara J. Fournier, age 50, has been a director of the Company since it
was formed in October 2001 and was a member of the Compensation Committee until
April 2005. She is also Vice President, Chief Operating Officer, Treasurer and
Secretary of the Company. In addition, Ms. Fournier has as her primary
responsibility, together with Mr. Carter, the management of all operating
business affairs of the Company and its affiliates. Prior to the conversion (the
"Conversion") of Franklin Street Partners Limited Partnership (the
"Partnership") into the Company, Ms. Fournier was the Vice President, Chief
Operating Officer, Treasurer and Secretary of the former general partner (the
"General Partner") of the Partnership. From 1993 through 1996, she was Director
of Operations for the private placement division of Boston Financial Securities,
Inc. ("Boston Financial"). Prior to joining Boston Financial, Ms. Fournier
served as Director of Operations for Schuparra Securities Corp. and as the Sales
Administrator for Weston Financial Group. From 1979 through 1986, Ms. Fournier
worked at First Winthrop Corporation in administrative and management
capacities, including Office Manager, Securities Operations and Partnership
Administration. Ms. Fournier attended Northeastern University and the New York
Institute of Finance. Ms. Fournier 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 73, has been a director of the Company since May
2002. Mr. Silverstein is a member of the Audit Committee and the Compensation
Committee. 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. 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, a cable television company. In 1998 and
1999, Coaxial sold its cable systems. Since January 2001, Mr. Silverstein has
been a private investor.
6
Class III Directors (holding office for a term expiring at the 2008 Annual
Meeting):
George J. Carter, age 57, 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 Conversion, 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. 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.
Georgia Murray, age 55, has been a director of the Company since April
2005. She is also a member of the Audit Committee and the Compensation
Committee. Ms. Murray is retired from Lend Lease Real Estate Investments, Inc.,
where she served as a Principal from November 1999 until May 2000. From 1987
through October 1999, Ms. Murray served as Senior Vice President and Director of
The Boston Financial Group, Inc. She is a member of the Urban Land Institute and
a past president of the Multifamily Housing Institute. She currently serves on
the Board of Directors of the Capital Crossing Bank, Boston, Massachusetts and
is a member of the Audit Committee and Compensation Committee. She also serves
on the boards of numerous non-profit entities. Ms. Murray is a graduate of
Newton College.
Class I Directors (holding office for a term expiring at the 2007 Annual
Meeting):
Dennis J. McGillicuddy, age 64, has been a director of the Company since
May 2002 and is the Chairman of the Compensation Committee and a member of the
Audit Committee. Mr. McGillicuddy graduated from the University of Florida with
a B.A. degree and from the University of Florida Law School with a J.D. degree.
In 1968, Mr. McGillicuddy joined Barry Silverstein in founding Coaxial
Communication, a cable television company. In 1998 and 1999, Coaxial sold its
cable systems. 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 58, 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. Prior to
the Conversion, Ms. Notopoulos was a Vice President of the General Partner of
the Partnership. Prior to joining the Partnership 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).
7
Board and Committee Meetings
The Company's Board of Directors held seven meetings during 2005, and
acted on six occasions by unanimous written consent. Each of the directors
attended all of the (i) meetings of the Board of Directors and (ii) 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 2005 annual meeting of stockholders.
In November 2004, the Company applied to have its Common Stock listed on
the American Stock Exchange; the application was approved in early 2005, and the
Company's Common Stock began trading on the American Stock Exchange on June 2,
2005. Under American Stock Exchange rules, a director of the Company will only
qualify as "independent" if the Company's Board of Directors affirmatively
determines that the director does not have a material relationship with the
listed company that would interfere with the exercise of independent judgment.
The Company's Board of Directors has determined that none of Messrs. Burke,
McGillicuddy, or Silverstein or Ms. Murray has a material relationship with the
Company and that each of these directors is "independent" as determined under
Section 121 of the American Stock Exchange Company Guide.
The Company has a standing Audit Committee of the Board of Directors. The
Audit Committee is responsible for, among other things, reviewing financial
reports, accounting procedures and the scope and results of the annual audit of
the Company's financial statements and overseeing the qualifications and
independence of the Company's independent auditors. The current members of the
Audit Committee are Mr. Burke, who serves as Chairman, Mr. McGillicuddy, Mr.
Silverstein and Ms. Murray.
The Board of Directors has determined that all of the members of the Audit
Committee are "independent" under the listing standards of the American Stock
Exchange and as contemplated by Rule 10A-3 under the Securities Exchange Act.
The Board of Directors has determined that each member of the Audit Committee is
able to read and understand fundamental financial statements, including a
company's balance sheet, income statement, and cash flow statements, and that
Mr. Burke, the Chairman of the committee, is qualified as an "audit committee
financial expert" as the term is defined in Item 401(h) of Regulation S-K,
promulgated by the Securities and Exchange Commission. The members of the Audit
Committee met five times in 2005.
The Company has a standing Compensation Committee of the Board of
Directors. 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 Mr.
McGillicuddy, who serves as Chairman, Messrs. Silverstein and Burke and Ms.
Murray. The members of the Compensation Committee met twice in 2005, and acted
on two occasions by unanimous written consent.
8
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.
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 weight 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 to the Company at
its principal office, Attn: Barbara J. Fournier, Secretary. 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. 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.
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 below under "Stockholder
Proposals." Candidates nominated by stockholders in accordance with the
procedures set forth in the bylaws will not 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.
9
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. Fournier, Secretary.
Compensation of Directors
The Company compensates its non-management directors for their services as
directors in the annual amount of $55,000, plus an additional $10,000 annually
for the Chair of the Audit Committee. The Company also reimburses its
non-management directors for expenses incurred by them in connection with
attendance at Board meetings.
10
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 the Company as of December 31, 2005 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 2005 (collectively, the "Named Executive
Officers").
Annual Compensation
--------------------------------------------------
Other
Annual All Other
Name and Principal Position Fiscal Year Salary Bonus Compensation Compensation
--------------------------- ----------- ------ ----- ------------ ------------
George J. Carter 2005 $ 225,000 $300,000(1) -- $10,615(2)
President and Chief Executive Officer 2004 $ 225,000 -- -- $14,365(3)
2003 $ 225,000 $400,000(4) -- $12,865(5)
John G. Demeritt 2005 $ 163,750 $235,000(1) -- $ 5,675(6)
Chief Financial Officer 2004 $ 38,480 $ 25,000(7) -- --
2003 -- -- --
Barbara J. Fournier 2005 $ 175,000 $275,000(1) -- $ 9,810(6)
Vice President, Chief Operating 2004 $ 175,000 $191,673(7)(8) -- $ 9,000(6)
Officer, Treasurer and Secretary 2003 $ 175,000 $190,000(4) -- $ 8,000(6)
R. Scott MacPhee 2005 $1,275,215(9) -- -- $10,000(6)
Executive Vice President 2004 $1,992,600(9) -- -- $ 9,000(6)
2003 $1,600,850(9) -- -- $ 8,000(6)
William W. Gribbell 2005 $ 945,952(9) -- -- $10,000(6)
Executive Vice President 2004 $1,588,813(9) -- -- $ 9,000(6)
2003 $2,072,258(9) -- -- $ 8,000(6)
(1) Represents a bonus accrued in 2005 and paid in 2006.
(2) Consists of a $6,750 contribution to Simple IRA Plan and $3,865 of
life insurance.
(3) Consists of a $10,500 contribution to Simple IRA Plan and $3,865 of
life insurance.
(4) Represents a bonus accrued in 2003 and paid in 2004.
(5) Consists of a $9,000 contribution to a Simple IRA Plan and $3,865 of
life insurance.
(6) Represents a contribution to a Simple IRA plan.
(7) Represents a bonus accrued in 2004 and paid in 2005.
11
(8) Includes 2,412 shares of the Company's Common Stock, with an
aggregate fair market value of $39,673, based on the determination
of the Board of Directors.
(9) Consists of brokerage commissions paid by FSP Investments LLC in
respect of the sale of preferred stock in real estate investment
trusts syndicated in private placements ("Sponsored REITs").
Option and SAR Grants, Option Exercises and Holdings
No options or stock appreciation rights ("SARs") were granted to any of
the Named Executive Officers during 2005. The Company 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 during 2005.
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
December 31, 2005. The Company only has one equity compensation plan, the 2002
Stock Incentive Plan. The Company's stockholders approved this plan in May 2002.
(c)
Number of
Securities
(a) Available for
Number of (b) Future Issuance
Securities to be Weighted-Average Under Equity
Issued Upon Exercise Price of Compensation Plans
Exercise of Outstanding (Excluding
Outstanding Options, Securities
Plan Options, Warrants Warrants and Reflected in
Category and Rights(1)(2) Rights Column (a)(1)(2)
-------- ---------------- ------ ----------------
Equity Compensation
Plans Approved by
Security Holders None N/A 1,944,428
Equity Compensation
Plans Not Approved
by Security Holders None N/A N/A
---- --- ---------
Total None N/A 1,944,428
==== === =========
(1) The number of shares is subject to adjustments in the event0 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.
12
Employment Agreements
The Company is not a party to any employment agreement with any of the
Named Executive Officers.
Post-Employment Payments
On February 3, 2006, the Board approved a form of Retention Agreement to
be entered into from time to time by the Company, FSP Investments LLC and the
employees of FSP Investments LLC (the "Retention Agreement"). Under the terms of
the Retention Agreement, provided that any of the Chief Operating Officer, the
Chief Financial Officer or the President of FSP Property Management LLC is
employed by FSP Investments LLC on the closing date of a transaction
constituting a Change in Control of the Company (as defined in the Retention
Agreement), such executive officer will receive a lump-sum payment equal to (A)
the sum of (1) his or her annualized base salary at the time of such closing and
(2) such executive officer's bonus opportunity, (B) divided by twelve (12) and
(C) multiplied by thirty-six. The bonus opportunity is expressed as a percentage
of annual base salary and is 100% for the Chief Operating Officer, the Chief
Financial Officer and the President of FSP Property Management LLC.
On February 3, 2006, the Board also approved a Change in Control
Discretionary Plan of FSP Investments LLC (the "Plan"). Under the Plan,
immediately prior to a Change in Control of the Company (as defined in the
Plan), the Board may establish a discretionary pool of funds to be allocated to
the employees (including the Chief Operating Officer, the Chief Financial
Officer and the President of FSP Property Management LLC) of FSP Investments LLC
designated as participants of the Plan, equal to 1% of the market capitalization
of the Company immediately prior to a Change in Control, reduced by the payments
under the Retention Agreements.
On February 23, 2006, the Board approved an amended form of Retention
Agreement to reflect changes in the treatment of persons who are both an
Investment Executive and an Executive Vice President of the Company. Provided
that an Investment Executive/Executive Vice President (as defined in the amended
Retention Agreement) is an employee of FSP Investments LLC on the closing date
of a transaction constituting a Change in Control (as defined in the amended
Retention Agreement), FSP Investments LLC will pay any such Investment
Executive/Executive Vice President a lump sum in an amount equal to the average
of the lump sum payments made by FSP Investments LLC to its Chief Financial
Officer and Chief Operating Officer, in each case, pursuant to the retention
agreement between such employee and FSP Investments LLC.
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, the Company believes that during 2005 all
filings required to be made by its reporting persons were timely made in
accordance with the requirements of the Exchange Act, except for John N. Burke,
who filed a late Form 4 to report that on August 30, 2005, he purchased 12.0206
shares at $17.47 per share and on November 22, 2005, he purchased 16.6878 shares
at $18.80 per share, in each case as a result of the reinvestment of dividends
paid on shares of our Common Stock. John N. Burke also filed a late Form 4 to
report that on February 22, 2006 he purchased 15.6018 shares at $20.44 per share
as a result of the reinvestment of dividends paid on our Common Stock.
13
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised of Messrs. McGillicuddy,
Silverstein and Burke and Ms. Murray. No executive officer of the Company has
served as a director or member of the compensation committee (or other committee
serving an equivalent function, or in the absence of any such committee, the
entire board of directors) of any other entity, that has one of its executive
officers serving or having served as a director or member of the Compensation
Committee of the Company.
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., Chief Executive Officer, Chief Operating Officer, Chief Financial
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.
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
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.
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.
14
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,
adjusted funds from operations, or AFFO, 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:
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.
15
Any increases in annual salaries and payment of bonus awards are 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,
AFFO 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.
In recommending that the Board approve the Retention Agreement and the
Plan, the Committee recognized that the Company is committed to the long-term
growth of its business and increasing the value of its stock for shareholders.
The Committee also recognized that since the Company's June 2, 2005 listing on
the American Stock Exchange, merger and consolidation activity within the real
estate/real estate investment trust industry has been significant. The Committee
was concerned about the Company's competitive ability to attract and retain
quality employees which, in turn, could interfere with the Company's achievement
of its core objectives. The Committee believes that the Retention Agreement is
comparable to other employee retention plans offered by competitors within the
larger real estate/real estate investment trust industry.
Mr. Carter's 2005 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, other than the Retention Plan, in which Mr. Carter has chosen not to
participate. Mr. Carter's base salary for 2005 was $225,000. The Committee
evaluated Mr. Carter's and the Company's performance during 2005. The Committee
believes 2005 was a significant "transition" year for the Company. The Company
transitioned to a publicly-traded company on the American Stock Exchange, and
made more meaningful use of its Real Estate/Balance Sheet Assets to drive
growth. The Committee believes that Mr. Carter's ability to anticipate and
respond to changes in larger capital/real estate market dynamics has positioned
the Company to be financially secure and competitive, in a variety of potential
economic and capital market conditions. Also, the Company achieved strong
financial results during 2005. The Committee determined that Mr. Carter
performed very well during this transitional year. His continued adherence to
16
established investment discipline allowed the Company to remain competitive in
an otherwise challenging commercial office/real estate environment. Mr. Carter's
overall performance was considered excellent by the Committee. The Committee
made a recommendation to the Board that the amount of $500,000 be paid to Mr.
Carter as cash bonus for 2005 performance. The Committee further recommended to
the Board that Mr. Carter's annual salary be increased to $375,000. The full
Board (with Mr. Carter abstaining) unanimously approved the Committee's
recommendations. Mr. Carter agreed to take $300,000 as cash bonus for 2005
performance and declined the salary increase. Mr. Carter was not awarded any
stock as compensation for his 2005 performance.
By the Compensation Committee of the Board of Directors of Franklin Street
Properties Corp.
Dennis J. McGillicuddy, Chairman
Barry Silverstein
Georgia Murray (1)
John N. Burke (1)
(1) Appointed to the Compensation Committee in April 2005.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Carter, MacPhee and Gribbell and Mses. Fournier 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. Notopoulos serves as a director of certain of
the Sponsored REITs. None of such persons receives any remuneration from the
Sponsored REITs for such service.
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 $1,350,000 for the year ended December 31, 2005. As of March 14,
2006, there were no fees from Sponsored REITs during 2006. Sales commissions
earned from the sale of Sponsored REIT preferred shares amounted to
approximately $9,268,000 for the year ended December 31, 2005. As of March 14,
2006, there were no sales commissions from the sale of Sponsored REIT preferred
shares during 2006.
During 2005 and 2006, the Company provided interim financing for the
purchase of certain Sponsored REIT properties, and development services prior to
completion of the Sponsored REITs' private equity offerings. The Sponsored REITs
paid the Company financing commitment fees of approximately $6,425,000 and
development fees of approximately $1,637,000 for the year ended December 31,
2005. As of March 14, 2006, the Company had not received any financing
commitment fees from the Sponsored REITs during 2006. Interest income earned
from loans to the Sponsored REITs amounted to approximately $1,135,000 for the
year ended December 31, 2005. As of March 14, 2006, the interest income earned
from loans to the Sponsored REITs during 2006 amounted to approximately
$262,223. 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 2005 or 2006. In
addition, one loan made to a Sponsored REIT during 2006 was partially
outstanding as of March 14, 2006. The following table summarizes the interim
financing transactions from January 1, 2005 through March 14, 2006:
17
Total
Financing
Commitment
Original Fees Interest Income
Principal Average Earned by Earned by the Date of Amount
Date of Loan Amount of Note Interest Rate the Company Company Repayment Outstanding
------------ -------------- ------------- ----------- ------- --------- -----------
10/13/04 $68,500,000 5.58% $4,326,875 $1,088,239 8/08/05 $0
11/30/05 $22,512,379 7.03% $1,926,250 $ 46,636 12/22/05 $0
02/21/06 $74,500,000 5.63% $0 $ 262,223 n/a $74,500,000
Total asset management fee income paid by the Sponsored REITs to the
Company amounted to approximately $672,000 for the year ended December 31, 2005.
As of February 28, 2006, the total asset management fee income earned by the
Company during 2006 was approximately $111,632. Asset management fees are
approximately 1% of collected rents.
Aggregate fees charged to the Sponsored REITs by the Company amounted to
approximately $19,352,000 for the year ended December 31, 2005. As of March 14,
2006, the aggregate fees charged to the Sponsored REITs during 2006 by the
Company is approximately $128,807.
Mr. Carter's son, Jeffrey Carter, is Senior Vice President/Director of
Acquisitions of the Company. For the year ended December 31, 2005, he earned
total compensation of $323,987 (including salary, cash bonus paid during 2006
for 2005 performance and contribution to a simple IRA plan).
Mr. Carter's son, Scott Carter, is Senior Vice President/In-house Counsel
of the Company. He joined the Company on October 17, 2005. For the year ended
December 31, 2005, he earned total compensation of $50,375 (including salary and
cash bonus paid during 2006 for 2005 performance).
Mr. Silverstein, a director of the Company, purchased, on the same terms
as non-affiliated purchasers, investments in certain Sponsored REITs during
2005. Mr. Silverstein paid the Company an aggregate of $56,150 in brokerage
commissions related to these investments. Mr. Silverstein paid brokerage
commissions on the same terms as non-affiliated purchasers of shares in the
Sponsored REITs.
Mr. McGillicuddy, a director of the Company, purchased, on the same terms
as non-affiliated purchasers, investments in certain Sponsored REITs during
2005. Mr. McGillicuddy paid the Company an aggregate of $2,750 in brokerage
commissions related to these investments. Mr. McGillicuddy paid brokerage
commissions on the same terms as non-affiliated purchasers of shares in the
Sponsored REITs.
On April 30, 2005, the Company consummated the acquisition of four real
estate investment trusts (FSP Montague Business Center Corp., FSP Addison Circle
Corp., FSP Royal Ridge Corp. and FSP Collins Crossing Corp., collectively the
"Target REITs") pursuant to an Agreement and Plan of Merger dated as of August
13, 2004, as amended on March 10, 2005, by means of the merger of each Target
REIT with and into a wholly-subsidiary of the Company (the "Mergers"). In
connection with the Mergers, the preferred stock of each Target REIT (the
"Target Stock") was converted into shares of Common Stock of the Company.
18
George J. Carter, President, Chief Executive Officer, a director of the
Company and a member of the special committee of the Company's board charged
with evaluating the Mergers was also the President and a director of each Target
REIT. R. Scott MacPhee and William W. Gribbell, each an Executive Vice President
of the Company, were each also an Executive Vice President, a director of each
Target REIT and a member of the special committee of each Target REIT's board of
directors. Barbara J. Fournier, Vice President, Chief Operating Officer,
Treasurer, Secretary and director of the Company was also Vice President, Chief
Operating Officer, Treasurer, Secretary and a director of each Target REIT.
Janet P. Notopoulos, Vice President, a director of the Company and a member of
the special committee of the Company's board charged with evaluating the Mergers
was also Vice President of each Target REIT. In addition, Messrs. Silverstein
and McGillicuddy, each a director of the Company, owned an aggregate of 173 and
14 shares of Target Stock, respectively. These shares of Target Stock held by
Messrs. Silverstein and McGillicuddy converted into approximately 1,022,217 and
approximately 80,836 shares of Common Stock of the Company, respectively.
On March 15, 2006, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") to acquire five real estate investment trusts
(FSP Willow Bend Office Center Corp., FSP Innsbrook Corp., FSP 380 Interlocken
Corp., FSP Blue Lagoon Drive Corp. and FSP Eldridge Green Corp., collectively
the "2006 Target REITs") by means of the merger of each 2006 Target REIT with
and into a wholly-subsidiary of the Company (the "2006 Mergers"). In connection
with the 2006 Mergers, the preferred stock of each 2006 Target REIT would be
converted into shares of Common Stock of the Company and, in certain
circumstances, the holders of preferred stock in each 2006 Target REIT would
also receive cash consideration. The Company expects to consummate the 2006
Mergers on or about May 1, 2006. As preferred stockholders in certain of the
2006 Target REITs, Messrs. Silverstein and McGillicuddy will be entitled to
approximately $11,210,219 and $3,300,000 of merger consideration, respectively.
In addition, on March 10, 2006, as a result of negotiations between SILP III, an
affiliate of Mr. Silverstein, and FSP Eldridge Green Corp., FSP Eldridge Green
Corp. redeemed 10 shares of preferred stock held by SILP III for an aggregate
amount of $1,240,590.60, equal to the price per share of FSP Eldridge Green
Corp. set forth in the Merger Agreement plus the dividend that would have been
paid to SILP III in respect of the first quarter of 2006 had such shares not
been redeemed.
SELECTION OF ACCOUNTANTS
The Audit Committee of the Board of Directors has selected Ernst & Young
LLP as the Company's independent registered public accounting firm for fiscal
2006. Ernst & Young has served as the Company's independent registered public
accounting firm since May 2003.
19
Representatives of Ernst & Young LLP 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.
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. In October 2004, the
Audit Committee amended and restated its charter.
The Audit Committee reviewed the Company's audited consolidated financial
statements for the year ended December 31, 2005 and discussed these consolidated
financial statements with the Company's management and the Company's independent
registered public accounting firm. Management is responsible for the preparation
of the Company's consolidated financial statements, internal controls, and for
the appropriateness of accounting principles used by the Company. The Company's
independent registered public accounting firm is responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States) and issuing a report on those consolidated financial statements,
performing an independent audit in accordance with the standards of the Public
Company Accounting Oversights Board (United States) of Management's assessment
over the effectiveness of the Company's internal control over financial
reporting and performing an independent audit of the effectiveness of the
Company's internal control over financial reporting and issuing a report on the
results of their audits, and for reviewing the Company's unaudited interim
consolidated 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 registered public
accounting firm, the following:
o the plan for, and the independent registered public accountants'
report on, each audit of the Company's financial statements;
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 consolidated
financial statements and the matters required by Statement on Auditing Standards
61 (Communication with Audit Committees) with Ernst & Young LLP, the Company's
independent registered public accounting firm for the year ended December 31,
2005. SAS 61 requires the Company's independent registered public accounting
firm to discuss with the Company's Audit Committee, among other things, the
following:
20
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 registered public accounting firm 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 registered public accounting firm
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.
Based on its discussions with management and the independent registered
public accounting firm, and its review of the representations and information
provided by management and the independent registered public accounting firm,
the Audit Committee recommended to the Company's Board of Directors that the
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2005.
By the Audit Committee of the Board of Directors of Franklin Street
Properties Corp.
John N. Burke, Chairman
Dennis J. McGillicuddy
Barry Silverstein
Georgia Murray (1)
(1) Ms. Murray was appointed to the Audit Committee in April 2005.
21
Independent Auditor Fees and Other Matters
The following tables summarize the aggregate fees billed by the Company's
independent registered public accounting firm, Ernst & Young LLP, 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.
Fee Category 2005 2004
------------ ---- ----
Audit Fees (1) $503,500 $674,500
Audit-Related Fees (2) -- --
Tax Fees (3) 173,500 55,000
All Other Fees (4) -- --
-------- --------
Total Fees $677,000 $729,500
======== ========
(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".
(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 $173,500 of the total tax
fees incurred in 2006, and accounted for $55,000 of the total tax
fees incurred in 2005.
(4) The Company was not billed by its independent registered public
accounting firm in 2005 or 2004 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 registered public accounting firm. This policy generally
provides that the Company will not engage its independent registered public
accounting firm 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
registered public accounting firm 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.
22
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 registered public accounting firm.
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 Company's Common Stock (or, prior to January 1, 2002, units ("FSP Units") of
the Partnership) between December 31, 2000 and December 31, 2005 with the
cumulative total return of (1) the NAREIT Equity Index, (2) the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500") and (3) the Russell 2000
Total Return Index over the same period. This graph assumes the investment of
$100.00 on December 31, 2000 in FSP Units of the Partnership's limited
partnership interests and assumes that any distributions are reinvested. Each
FSP Unit was converted into one share of Common Stock on January 1, 2002.
[PERFORMANCE GRAPH HERE IN THE PRINTED MATERIALS; DATA POINTS IN TABLE BELOW]
As of December 31,
---------------------------------------------------------
2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ----
FSP $ 100 $ 146 $ 169 $ 205 $ 236 $ 296
NAREIT Equity 100 114 118 162 213 239
S&P 500 100 88 69 88 98 103
Russell 2000 100 102 81 122 144 151
23
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, 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, and the
price set forth above for December 31, 2001 is the price ascribed to an
FSP Unit in the Conversion. 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 made a good faith determination of the price per share of Common
Stock as of December 31, 2002, December 31, 2003 and December 31, 2004 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.
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. 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 2007 Annual Meeting of Stockholders must be received by the
Company at its principal office not later than November 22, 2006. If a
stockholder who wishes to make a proposal at the 2007 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 4, 2006 and no later than January 3, 2007,
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.
24
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.
By Order of the Board of Directors,
/s/ Barbara J. Fournier
Barbara J. Fournier, Secretary
March 22, 2006
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
ANNUAL MEETING OF STOCKHOLDERS OF
FRANKLIN STREET PROPERTIES CORP.
May 12, 2006
Please date, sign and mail your proxy card in the
envelope provided as soon as possible.
Please detach along perforated line and mail in the envelope provided.
20300000000000000000 5 051206
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
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1. To elect the following individuals as Class II Directors:
NOMINEES:
|_| FOR ALL NOMINEES O John N. Burke
O Barbara J. Fournier
O Barry Silverstein
|_| WITHHOLD AUTHORITY
FOR ALL NOMINEES
|_| FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here:
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To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
|_|
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.
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.
Signature of Stockholder _______________________ Date: __________________
Signature of Stockholder _______________________ Date: __________________
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate
name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
PROXY PROXY
FRANKLIN STREET PROPERTIES CORP.
ANNUAL MEETING OF STOCKHOLDERS - MAY 12, 2006
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. Fournier, 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 12, 2006 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.
(Continued and to be signed on the reverse side)