UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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Franklin Street Properties Corp.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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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 11, 2007
The Annual Meeting of Stockholders of Franklin Street Properties Corp. will be
held at the Courtyard by Marriott, 700 Unicorn Park Drive, Woburn, Massachusetts
on Friday, May 11, 2007 at 11:00 a.m., local time, to consider and act upon the
following matters:
(1) To elect two Class I Directors each 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 16, 2007 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 23, 2007
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.
You may also vote your proxy on line at www.voteproxy.com or from any touch-tone
telephone at 1-800-PROXIES (1-800-776-9437). Please have your proxy card
available when voting online or by telephone.
Table of Contents
Page
----
INTRODUCTION...................................................................1
General Information.........................................................1
Quorum Requirement..........................................................1
Votes Required..............................................................2
Beneficial Ownership of Voting Stock........................................2
ELECTION OF DIRECTORS..........................................................4
Members of the Board of Directors...........................................4
Board and Committee Meetings................................................6
Audit Committee.............................................................6
Compensation Committee......................................................7
Director Candidates.........................................................8
Communicating with the Board of Directors...................................9
Compensation of Directors...................................................9
EXECUTIVE COMPENSATION........................................................10
Compensation Discussion and Analysis.......................................10
Summary Compensation Table.................................................18
Potential Payments Upon Termination or Change in Control...................20
Compensation Committee Interlocks and Insider Participation................21
Compensation Committee Report..............................................21
SECURITIES AUTHORIZED FOR ISSUANCE
UNDER EQUITY COMPENSATION PLANS...............................................22
Equity Compensation Plan Information.......................................22
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.......................22
TRANSACTIONS WITH RELATED PERSONS.............................................23
Related Person Transaction Policy..........................................23
Transactions with Related Persons..........................................25
SELECTION OF ACCOUNTANTS......................................................27
Report of the Audit Committee of the Board of Directors....................28
Independent Auditor Fees and Other Matters.................................30
Pre-Approval Policy and Procedures.........................................30
OTHER MATTERS.................................................................31
Matters to be Considered at the Meeting....................................31
Solicitation of Proxies....................................................31
Stockholder Proposals......................................................31
Important Notice Regarding Delivery of Security Holder Documents...........31
FRANKLIN STREET PROPERTIES CORP.
401 Edgewater Place, Suite 200
Wakefield, Massachusetts 01880
PROXY STATEMENT
For the Annual Meeting of Stockholders on May 11, 2007
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., which we refer to
as the Company or FSP, for use at the Annual Meeting of Stockholders to be held
on May 11, 2007, 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 notice of meeting, this proxy statement, the enclosed proxy card and our
Annual Report on Form 10-K for the year ended December 31, 2006 are first being
mailed or given to stockholders on or about April 2, 2007. We will furnish, upon
written request of any stockholder and the payment of an appropriate processing
fee, copies of any exhibits that are missing from our Annual Report on Form
10-K. Please address all such requests to Franklin Street Properties Corp., 401
Edgewater Place, Suite 200, Wakefield, Massachusetts 01880, Attn: Barbara J.
Fournier, Secretary.
Quorum Requirement
At the close of business on March 16, 2007, 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 70,766,305
shares of common stock of the Company, which we refer to as Common Stock,
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.
1
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.
Beneficial Ownership of Voting Stock
The following table sets forth the beneficial ownership of our Common Stock as
of March 16, 2007 by each director or nominee for director, by each of the
executive officers named in the Summary Compensation Table set forth below, or
the Named Executive Officers, and by all current directors and executive
officers as a group. To our knowledge, no person or group, other than as set
forth below, beneficially owns more than five percent of our Common Stock.
Number of Shares Percentage of
Beneficially Outstanding
Owned (1) Common Stock (2)
--------- ----------------
Barry Silverstein (3).................... 6,352,373.50 8.98%
Dennis J. McGillicuddy (4)............... 3,437,396 4.86%
George J. Carter (5)..................... 831,531 1.18%
R. Scott MacPhee (6)..................... 393,116 *
William W. Gribbell (7).................. 131,212 *
Barbara J. Fournier (8).................. 30,000 *
Janet P. Notopoulos (9).................. 14,985 *
John G. Demeritt ........................ 14,000 *
Georgia Murray .......................... 15,400 *
John N. Burke ........................... 1,544.31 *
All current directors and executive
officers as a group (10 persons)......... 11,221,157.81 15.86%
---------------
* Less than 1%.
(1) We do not have any outstanding stock options or other securities
convertible into our 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 70,766,305 shares outstanding as of March 16, 2007.
2
(3) Consists of (i) 4,547,730 shares held by Silverstein Investments Limited
Partnership III, or SILP III, (ii) 472,856 shares held by JMB Family
Limited Partnership Irrevocable Trust of 2003, or JMB Trust 2003, (iii)
712,311 shares held by MSTB Family Limited Partnership 2003 Irrevocable
Trust, or MSTB Trust 2003, (iv) 75,299 shares held by Silverstein Family
Limited Partnership 2002, LTD Irrevocable Trust of 2003, or SFLP, (v)
509,437.50 shares held by Silverstein Investments Limited Partnership II,
or SILP II, and (vi) 34,740 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) Consists of (i) 2,395,484 shares held by McGillicuddy Investments Limited
Partnership III, or 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, (iv) 1,100 shares held by Mr. McGillicuddy's spouse and (v)
1,018,875 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. Mr. McGillicuddy has pledged 600,000 of
his shares of Common Stock as collateral.
(5) Consists 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. Mr. MacPhee has pledged 377,306 of
his shares of Common Stock as collateral.
(7) Includes 1,596 shares held by Mr. Gribbell's spouse. Mr. Gribbell
disclaims beneficial ownership of such shares. Mr. Gribbell has pledged
129,616 of his shares of Common Stock as collateral.
(8) Includes 860 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.
3
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
three Class II Directors, whose terms expire at the 2009 Annual Meeting of
Stockholders, two Class III Directors, whose terms expire at the 2008 Annual
Meeting of Stockholders, and two Class I 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 Dennis J.
McGillicuddy and Janet P. 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 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.
Nominees for Class I Directors (to be elected to hold office for a term expiring
at the 2010 Annual Meeting):
Dennis J. McGillicuddy, age 65, has been a director of the Company since May
2002. 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
Communications, 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, and he serves as
a Co-Chair, together with his wife, of Embracing Our Differences, an annual
month-long art exhibit that promotes the values of diversity and inclusion.
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 59, is a Vice President and a director 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 and its affiliates. Prior to the conversion (the "Conversion") of
Franklin Street Partners Limited Partnership (the "Partnership") into the
Company, Ms. Notopoulos was a Vice President of the general partner (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
4
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 2009 Annual
Meeting):
John N. Burke, age 45, has been a director of the Company and Chair of the audit
committee since June 2004. 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 an M.S. in Taxation and studied undergraduate
accounting and finance at Bentley College.
Barbara J. Fournier, age 51, is the Vice President, Chief Operating Officer,
Treasurer, Secretary and a director 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, Ms. Fournier 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
Securities, Inc., or 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 74, has been a director of the Company 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. 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 Communications, a cable television company. In 1998 and
1999, Coaxial sold its cable systems. Since January 2001, Mr. Silverstein has
been a private investor.
Class III Directors (holding office for a term expiring at the 2008 Annual
Meeting):
George J. Carter, age 58, is President, Chief Executive Officer and a director
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
5
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 56, has been a director of the Company since April 2005 and
Chair of the compensation committee since October 2006. 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.
Boston Financial was an affiliate 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 previously served on the Board of Directors of the
Capital Crossing Bank, Boston, Massachusetts. She serves on the boards of
numerous non-profit entities. Ms. Murray is a graduate of Newton College.
Board and Committee Meetings
Our Board of Directors held six meetings during 2006 in person or via
teleconference,and acted on five 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 2006 annual meeting of stockholders in
person or via video conference.
In November 2004, we applied to have its Common Stock listed on the American
Stock Exchange; the application was approved in early 2005, and our 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 in carrying out the
responsibilities of a director. Our Board of Directors has determined that none
of Messrs. Burke, McGillicuddy, or Silverstein or Ms. Murray has a material
relationship with the Company that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director and that
each of these directors is "independent" as defined in Section 121A of the
American Stock Exchange Company Guide.
Audit Committee
We have 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 our
financial statements, overseeing the qualifications and independence of our
independent auditors and reviewing and approving our policies and procedures for
reviewing and approving or ratifying related person transactions. The current
6
members of the audit committee are Mr. Burke, who is the Chair of the committee,
Mr. McGillicuddy, Mr. Silverstein and Ms. Murray. The audit committee acts under
a written charter that is available on our website at
www.franklinstreetproperties.com.
Our Board of Directors has determined that all of the members of the audit
committee are "independent" as defined in Section 121A of the American Stock
Exchange Company Guide. The Board of Directors has also determined that Mr.
Burke, the Chair of the audit committee, is qualified as an "audit committee
financial expert" as the term is defined in Item 407(d)(5) of Regulation S-K,
promulgated by the Securities and Exchange Commission. In addition, the audit
committee satisfies the additional independence requirements set forth in
Section 121B of the American Stock Exchange Company Guide. The members of the
audit committee held six meetings in 2006 in person or via teleconference.
Compensation Committee
We have 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 our executive officers. The
current members of the compensation committee are Ms. Murray, who replaced Mr.
McGillicuddy as the Chair of the committee in October 2006, and Messrs. Burke,
McGillicuddy and Silverstein. The Board of Directors has determined that all of
the members of the compensation committee are "independent" as defined in
Section 121A of the American Stock Exchange Company Guide. The members of the
compensation committee met one time in 2006 in person or via teleconference and
acted on one occasion by unanimous written consent. The compensation committee
acts under a written charter that is available on our website at
www.franklinstreetproperties.com.
The compensation committee is authorized to form and delegate its authority to
one or more subcommittees as it deems appropriate from time to time under the
circumstances. As of March 23, 2007, the compensation committee had not formed
any subcommittees. In addition, the compensation committee has the authority to
retain and terminate any compensation consultant to be used to assist in the
evaluation of executive officer compensation. The compensation committee has the
authority to approve the consultant's fees and other retention terms and pay the
compensation without further action by the Board. As of March 23, 2007, the
compensation committee had not retained any compensation consultants. The
compensation committee also has authority to commission compensation surveys or
studies as the need arises.
The compensation committee annually reviews and approves corporate goals and
objectives relevant to the compensation of our Chief Executive Officer,
evaluates the Chief Executive Officer's performance in light of those goals and
objectives and either determines and approves or recommends to the Board of
Directors for approval, the Chief Executive Officer's compensation based on this
evaluation. The Chief Executive Officer is not permitted to be present during
any such deliberations or voting. In addition, based upon the recommendations of
the Chief Executive Officer, the compensation committee annually oversees the
evaluation of our other executive officers and annually reviews and approves or
makes recommendations to the Board of Directors regarding their compensation.
The compensation committee is also responsible for director compensation,
periodically reviewing and making recommendations to
7
the Board of Directors with respect to incentive compensation and equity-based
plans and the administration of any such incentive compensation and equity-based
plans.
Director Candidates
We do not have a standing nominating committee. Instead, director nominations
are recommended for the Board's selection by a majority of our independent
directors in accordance with Section 804(a) of the American Stock Exchange
Company Guide. Once recommended, each member of the Board participates in the
consideration of director nominees. The Board of Directors has determined that
it is appropriate for us 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 or, when appropriate, the independent
directors only. Mr. Carter, Ms. Fournier and Ms. Notopoulos would not be deemed
to be "independent" under the listing standards of the American Stock Exchange.
The process followed by the Board 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 nominate any particular candidate who has been
recommended by a majority of our independent directors, the Board of Directors
applies criteria including the candidate's integrity, business acumen, knowledge
of our 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 our principal
office, Attn: Barbara J. Fournier, Secretary. Assuming that appropriate
biographical and background material has been provided on a timely basis, the
Board 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 our proxy card for the next annual
meeting.
Stockholders also have the right under our 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 our proxy card for the next annual
meeting.
8
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. Fournier, Secretary.
Compensation of Directors
2006 DIRECTOR COMPENSATION
------------------------------------------------------------------------------------------------------------------------
Change in
Pension
Fees Value and
earned Non-Equity Nonqualified
or paid Stock Option Incentive Plan Deferred All Other
in cash Awards Awards Compensation Compensation Compensation Total
Name ($) ($) ($) ($) Earnings ($) ($)
------------------------- ----------- ---------- ---------- ---------------- ------------------ --------------- --------
John N. Burke $65,000 N/A N/A N/A N/A N/A $65,000
------------------------- ----------- ---------- ---------- ---------------- ------------------ --------------- --------
Dennis J. McGillicuddy $55,000 N/A N/A N/A N/A N/A $55,000
------------------------- ----------- ---------- ---------- ---------------- ------------------ --------------- --------
Georgia Murray $55,000 N/A N/A N/A N/A N/A $55,000
------------------------- ----------- ---------- ---------- ---------------- ------------------ --------------- --------
Barry Silverstein $55,000 N/A N/A N/A N/A N/A $55,000
------------------------------------------------------------------------------------------------------------------------
We compensate our 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. We also reimburse our non-management directors for
expenses incurred by them in connection with attendance at Board meetings.
9
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview
As an investment firm that specializes in real estate, it is critical that
we be able to attract, motivate and retain highly talented individuals at
all levels of the organization. We believe that compensation levels should
be adequately competitive to attract and retain experienced and capable
leaders and motivate those individuals to achieve exceptional results and
reward them for being instrumental in reaching our strategic goals. At the
same time, we believe in simplicity and maintaining compensation at
responsible levels. For 2006, the compensation of executives consisted of
the same five components as were provided to all of our employees: (1)
base salary (or brokerage commissions in the case of employees who are
investment executives as further described below); (2) the potential for a
cash bonus (except in the case of investment executives and their sales
assistants and administrative staff); (3) the potential for an award of
common stock under our stock incentive plan; (4) matching for individual
401(k) plan contributions; and (5) the potential for a payment or payments
under our change-in-control program. We do not offer stock options,
restricted stock awards, deferred compensation, non-equity incentive plan
compensation or perquisites. In addition, none of our employees have
employment agreements and we do not require any of our employees to own
our common stock.
Our executive officers fall into two categories. The first category
comprises executive officers who make up the corporate management team.
Our corporate management team consists of our chief executive officer, our
chief operating officer, our chief financial officer and the president of
FSP Property Management LLC. The second category comprises executive
officers who are investment executives. Our investment executives are
engaged in the private placement of equity in single-purpose entities,
which we refer to as Sponsored REITs, that we organize to own real estate.
The Sponsored REITs are operated in a manner intended to qualify as real
estate investment trusts. The compensation of our investment executives
consists primarily of brokerage commissions.
The objectives of our compensation programs
o Our compensation committee bases its executive compensation programs
on the same core objectives that guide us in establishing all of our
compensation programs:
o Compensation should promote the achievement of our business goals
and maximize corporate performance and shareholder returns.
o Compensation should be based on the principles of competitive and
fair compensation and sustained performance.
o Compensation should be based on the level of job responsibility,
individual performance and FSP performance. As employees advance to
higher levels within the organization, an increasing proportion of
their compensation should be linked to FSP's performance and
maintaining shareholder value.
10
o Compensation should reflect the value of the job in the marketplace.
Compensation should be competitive with other employers that compete
with us for talent so that we continue to be able to attract and
retain highly talented employees.
o Compensation should reward performance. Our compensation programs
should deliver competitive compensation when individual and FSP
performance meet and/or exceed expectations. Similarly, our
compensation programs should deliver less compensation, including
the possibility of no cash bonus, in the event that individual
and/or FSP performance fall short of expectations.
o Compensation should be equitable. We strive to achieve equitable
distributions both for compensation of individual officers and
between officers and other employees throughout the organization.
o Compensation and benefit programs should be designed to attract,
motivate and retain highly talented employees who are interested in
building a career with us.
What the compensation programs are designed to reward and how FSP determines the
amount (and, where applicable, the formula) for each element to pay
With respect to executive officers who make up the corporate management
team, decisions regarding compensation are based on actual corporate and
individual performance against targeted company and individual performance
and various subjective performance criteria.
Our compensation committee has established a number of processes to assist
it in ensuring that our executive compensation program achieves its
objectives. Among those are:
o Consideration of various measures of corporate performance,
including reviewing the extent to which strategic and business plan
goals are met, levels of property acquisitions, performance of
properties in FSP's portfolio, gains or losses on property
dispositions, levels of equity sales and earnings, adjusted funds
from operations, or AFFO, dividends and maintaining shareholder
value. Our compensation committee does not apply a formula or assign
these performance measures relative weights. Instead, it makes a
subjective determination after considering such measures
collectively.
o Consideration of individual performance. The members of the
compensation committee meet with the chief executive officer
annually at the beginning of the year to agree upon performance
objectives (both individual and company objectives) for the year. At
the end of the year, the members of the compensation committee meet
to conduct a performance review of the chief executive officer based
on his achievement of the agreed-upon objectives, contribution to
company performance, the degree to which teamwork and company values
are fostered and other leadership accomplishments. This evaluation
is shared with the chief executive officer and is considered by the
compensation committee in establishing the chief executive officer's
compensation. With respect to the other named executive officers,
the members of the compensation
11
committee receive a performance assessment and compensation
recommendation from the chief executive officer. In establishing the
compensation for each of the other named executive officers, the
compensation committee considers the performance assessment and
compensation recommendation from the chief executive officer and
also exercises its own judgment based on its assessment of whether
the other named executive officers achieved their agreed-upon
objectives, their contributions to company performance, the degree
to which teamwork and company values were fostered and other
leadership accomplishments.
o Comparison of our executive compensation programs as a whole and
also a comparison of individual executive compensation with the
compensation practices of other companies in the real estate
industry. Historically, the compensation committee has used the
NAREIT Annual Compensation Survey for comparison purposes. To ensure
that total compensation is competitive, the compensation committee
uses the results of the comparison to establish compensation
guidelines.
As mentioned above, the compensation of our executive officers who are
investment executives consists primarily of brokerage commissions. 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 the
individual investment executive. An investment executive's ability to earn
commissions is limited only by the amount of equity available to be sold
and his or her individual ability to sell it. As a result, the
compensation committee does not set the level of compensation for
executive officers who are investment executives. The compensation
committee does determine the percentage of payout that is paid to the
investment executives. In order to ensure that the percentage of payout
that is paid to the investment executives is competitive, the compensation
committee periodically compares its commission practices with those of
other companies in the investment industry and sets its percentage of
payout based on this review. The compensation committee believes that the
percentage of payout is competitive within the investment industry.
Each element of compensation and why FSP chooses to pay each element
(a) Base Salary or Brokerage Commissions
Executive officers who make up the corporate management team are paid a
base salary. We believe that a competitive base salary provides an
important guaranteed element to compensation. We also believe that the
payment of a competitive base salary is consistent with the compensation
practices of other comparable companies.
Executive officers who are investment executives are not paid a base
salary. Instead, they are paid brokerage commissions. 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. An investment executive's ability to earn
commissions is limited only by the amount of equity available to be sold
and his or her individual ability to sell it. We believe that this
commission structure provides a necessary monetary incentive that
encourages
12
increased sales. We also believe that the payment of brokerage commissions
is consistent with the compensation practices of other comparable
companies.
(b) Cash Bonus
Executive officers who make up the corporate management team are eligible
for a cash bonus based on actual company and individual performance
against targeted company and individual performance and various subjective
performance criteria. The payment of a cash bonus is purely discretionary
based upon overall performance and in some years there could be no cash
bonus payments. We believe that the opportunity to earn a competitive cash
bonus provides a monetary incentive that encourages both company and
individual performance. We also believe that the payment of a competitive
cash bonus is consistent with the compensation practices of other
comparable companies.
Executive officers who are investment executives, together with their
sales assistants and administrative staff, are not eligible for a cash
bonus.
(c) Award of Common Stock
Executive officers are eligible for awards of common stock under our 2002
stock incentive plan. On May 20, 2002, our stockholders approved the 2002
stock incentive plan, which had been previously adopted by our board on
February 8, 2002. The 2002 stock incentive plan permits the board to award
up to 2,000,000 shares of our common stock to eligible participants. Prior
to our listing on the American Stock Exchange in June 2005, our employees
were not able to purchase our common stock. We determined that it was
necessary and appropriate to be able to compensate our employees with
stock as a means of attracting, retaining and motivating key personnel and
to align the interests of management and all personnel with those of our
shareholders. All of our employees, officers and directors are eligible to
participate in the plan. As of March 23, 2007, 1,944,428 shares of our
common stock were available under the plan. There have been no awards of
common stock under the 2002 stock incentive plan since we listed our
common stock on the American Stock Exchange in June 2005, as employees are
now able to purchase common stock in the open market. In the future,
however, we may award stock under the plan in order to attract, retain, or
motivate our executives.
(d) 401(k) Matching
Executive officers are eligible to participate in our 401(k) plan. We
offer all employees a 401(k) plan that, in 2006, allowed for salary
deferrals of up to $15,000 per year (indexed for inflation). We matched up
to 3% of an employee's compensation (up to a cap of $200,000) for plan
year 2006 and will match up to 3% of employee compensation (up to a cap of
$225,000) for plan year 2007. Employees make their 401(k) contributions
through payroll deductions with pretax dollars. All employees are eligible
to participate in the plan after one year of service and completion of
1,000 hours of service. The plan allows for quarterly enrollment. The
employee's elective deferrals are immediately vested upon contribution to
the 401(k) plan, and the employee has sole decision making authority as to
the investment of funds. We believe that our 401(k) plan provides a
vehicle for our employees to plan for their long-term security and that
such a
13
plan ultimately leads to improved job performance. We also believe that
our 401(k) plan is consistent with the compensation practices of other
comparable companies.
(e) Change-in-Control Program
Except in the case of a change-in-control of FSP, we are not obligated to
pay severance or other enhanced benefits to named executive officers upon
termination of their employment.
In February 2006, we adopted a change-in-control program for all our
employees, including our executive officers. The program was adopted in
response to recent merger and consolidation activity within the real
estate/real estate investment trust industry and is intended to preserve
employee morale and productivity and encourage retention in the event of
an actual or rumored change-in-control of FSP. The program is also
intended to align employee and shareholder interests by enabling employees
to consider corporate transactions that are in the best interests of the
shareholders and other constituents of FSP without undue concern over
whether the transaction or transactions may jeopardize the employee's own
employment.
Although there are some differences in payment amounts depending on the
employee's job level, the basic elements of the program are comparable for
all employees:
o The program consists of two components: a fixed payment pursuant to
a retention agreement between the employee and FSP and the potential
for an additional discretionary payment pursuant to a discretionary
plan.
o The triggering event for both components is a change-in-control of
FSP. A change-in-control of FSP as defined in the plan generally
refers to a change in ownership or effective control of FSP or a
change in ownership of a substantial portion of the assets of FSP.
o Under the retention agreement component of the program, employees
would receive a payment as soon as practicable following the closing
of the change-in-control, but in no event more than thirty days
following the closing of the change-in-control. Executive officers
who make up the corporate management team would receive payments
equal to three years of their base salaries plus a bonus opportunity
payment equal to three years of their base salaries. Executive
officers who are investment executives would receive payments equal
to the average of the lump sum payments made to the chief financial
officer and the chief operating officer. For purposes of the
retention agreement component of the program, base salary refers to
the base salary of the employee in effect at the time of the closing
of the change-in-control.
o Under the discretionary plan component of the program, immediately
prior to the closing of the change-in-control, the board may (but is
not obligated to) establish a discretionary pool of funds equal to
1% of the market capitalization of FSP immediately prior to the
closing of the change-in-control less the total amount of payments
to all employees under the retention agreement component of the
program. The board would have complete discretion to award all, a
portion or none of the discretionary plan pool of funds to any
employees of FSP, including the executive officers.
14
Prior to adopting our change-in-control program, management reviewed plans
similar to our retention agreement component offered by approximately ten
other publicly-traded real estate investment trusts and concluded that our
triggering event was generally consistent with the peer group. Management
did not review any plans that were comparable to our discretionary plan
but concluded that, on balance, the total potential payout amounts under
our change-in-control program are generally consistent with the range
offered by the peer group.
Our chief executive officer has voluntarily elected not to participate in
the retention agreement component of our change-in-control program.
How each compensation element and FSP's decisions regarding that element fit
into FSP's overall compensation objectives and affect decisions regarding other
elements
Overview
From a historical perspective, we achieved very good financial results for
2006. The three components upon which our financial metrics are based:
rental income from operations; gains or losses on sales of properties; and
fee income from real estate investment banking activities, performed well.
Based upon its review of the compensation practices of other comparable
companies, the compensation committee believes that total compensation for
the executive officers is within the range of total compensation paid to
executive officers with comparable qualifications, experience and
responsibilities in the same or similar businesses and of comparable size
and success.
(a) Base Salary or Brokerage Commissions
In establishing base salaries for 2006, the members of the compensation
committee applied the principles described above under "What the
compensation programs are designed to reward and how FSP determines the
amount (and, where applicable, the formula) for each element to pay."
Based upon the recommendation of the chief executive officer, the
compensation committee approved base salary increases for each of the
other executive officers who make up the corporate management team. The
base salary levels for these positions had remained constant for the prior
three years (except for the chief financial officer whose last base salary
increase occurred in 2005 after being promoted to the position of chief
financial officer). The base salary increases were effective on February
1, 2006. With respect to the chief executive officer, the compensation
committee recommended to the board that Mr. Carter's base salary be
increased to $375,000. The full board (with Mr. Carter abstaining)
unanimously approved the compensation committee's recommendation. However,
Mr. Carter declined to accept the base salary increase.
Our base salary amounts are generally lower than industry standard levels.
No recommendation was made for base salary increases for 2007. Rather,
compensation of these positions will be weighted proportionately greater
towards year-end bonus amounts based upon corporate and individual
performance.
No recommendation was made to adjust our brokerage commission structure.
15
(b) Cash Bonus
In awarding cash bonuses for 2006, the members of the compensation
committee applied the principles described above under "What the
compensation programs are designed to reward and how FSP determines the
amount (and, where applicable, the formula) for each element to pay."
Based upon the recommendation of the chief executive officer, on February
2, 2007, the compensation committee approved cash bonuses for each of the
other executive officers who make up the corporate management team. In
making his recommendation, Mr. Carter noted, and the compensation
committee agreed, that each officer's area of responsibility and
accountability (i.e., business unit) contributed to our achieving our
business goals during 2006, as a result of each person's leadership and
direction. It was further noted that each of these individuals was
considered to be integral to the daily operations of FSP and of great
value to FSP and firmly committed to doing what is in the best interests
of our shareholders. The cash bonus amounts are higher than past years.
The compensation committee believes that the cash bonus amounts properly
reflect FSP's overall positive performance for 2006 and the belief that
the results were a direct consequence of the dedication and hard work of
these individuals and their staffs.
The compensation committee also reviewed and evaluated the performance of
Mr. Carter during 2006 by applying the principles described above under
"What the compensation programs are designed to reward and how FSP
determines the amount (and, where applicable, the formula) for each
element to pay." As previously stated, FSP achieved very good financial
results for 2006. The three components upon which our financial metrics
are based: rental income from operations; gains or losses on sales of
properties; and fee income from real estate investment banking activities,
performed well under the leadership, focus and discipline of Mr. Carter.
Based upon numerous performance measurements, the compensation committee
felt that FSP had a positive year. Mr. Carter's overall performance was
considered excellent by the compensation committee. However, at the
request of Mr. Carter, the compensation committee did not consider making
any recommendation to the board for a cash bonus for 2006 performance.
Although FSP's results during 2006 were outstanding, the price of our
common stock did not increase measurably over the course of the year. The
opening price per share on January 3, 2006 was $20.90 and the closing
price per share on December 29, 2006 was $21.05. Mr. Carter believes that
the chief executive officer has the ultimate responsibility for the stock
price and that, as part of that responsibility, the chief executive
officer's compensation should reflect the stock's relative performance in
the marketplace. The compensation committee determined that, based upon
the intrinsic financial performance of FSP and based upon Mr. Carter's
individual performance, Mr. Carter deserved a bonus. However, the
compensation committee decided to honor Mr. Carter's request that he not
be considered for a cash bonus.
(c) Award of Common Stock
Because FSP determined that it was able to adequately compensate the
executive officers who make up the corporate management team with salary
and cash bonuses in 2006, no proposal was made for the award of common
stock. In other years, the award of common stock could be utilized as a
compensation option.
16
(d) 401(k) Matching
Because our 401(k) was adopted in 2006, there were no proposals made to
further modify the plan.
(e) Change-in-Control Program
Because our change-in-control program was adopted in 2006, there were no
proposals made to further modify the program.
17
Summary Compensation Table
The following table sets forth information concerning total compensation for
services to FSP for the 2006 fiscal year, of (1) our principal executive
officer, (2) our principal financial officer, and (3) our other three most
highly compensated executive officers who were serving as executive officers as
of December 31, 2006 (collectively, our Named Executive Officers).
SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------------------------------------------------------------------
Change in
Pension Value
Non-Equity and
Incentive Nonqualified
Stock Option Plan Deferred All Other
Name and Awards Awards Compensation Compensation Compensation
Principal Position Year Salary ($) Bonus ($) ($) ($) ($) Earnings ($) (1) Total ($)
---------------------- ------- ------------- ---------- -------- -------- -------------- --------------- ------------- -----------
George J. Carter, 2006 $225,000 N/A(2) N/A N/A N/A N/A $6,000 $231,000
Chief Executive
Officer (PEO)
---------------------- ------- ------------- ---------- -------- -------- -------------- --------------- ------------- -----------
John G. Demeritt, 2006 $179,167 $335,000 N/A N/A N/A N/A $6,000 $520,167
Chief Financial
Officer (PFO)
---------------------- ------- ------------- ---------- -------- -------- -------------- --------------- ------------- -----------
Barbara J. Fournier, 2006 $197,917 $365,000 N/A N/A N/A N/A $6,000 $568,917
Vice President,
Chief Operating
Officer, Treasurer
and Secretary
---------------------- ------- ------------- ---------- -------- -------- -------------- --------------- ------------- -----------
R. Scott MacPhee, 2006 $1,296,143(3) N/A N/A N/A N/A N/A $6,000 $1,302,143
Executive Vice
President
---------------------- ------- ------------- ---------- -------- -------- -------------- --------------- ------------- -----------
William W. Gribbell, 2006 $1,107,286(3) N/A N/A N/A N/A N/A $6,000 $1,113,286
Executive Vice
President
----------------------------------------------------------------------------------------------------------------------------------
18
NOTES
(1) Consists of a 401(k) match from the Company. For additional information,
please refer to the discussion included above under the heading -
"Compensation Discussion and Analysis - Each element of compensation and
why the company chooses to pay each element - (d) 401(k) Matching."
(2) At Mr. Carter's request, he did not receive a bonus for 2006. For
additional information, please refer to the discussion included under the
heading - "Compensation Discussion and Analysis - How each compensation
element and the company's decisions regarding that element fit into the
company's overall compensation objectives and affect decisions regarding
other elements - (b) Cash Bonus."
(3) No base salary was paid. Consists of brokerage commissions paid by FSP
Investments LLC in respect of the sale of preferred stock in Sponsored
REITs. For additional information, please refer to the discussion included
under the heading "Compensation Discussion and Analysis - Each element of
compensation and why the company chooses to pay each element - (a) Base
Salary or Brokerage Commissions."
19
Potential Payments Upon Termination or Change in Control
In February 2006, we adopted a change-in-control program for all our employees,
including our executive officers. We adopted the program in response to recent
merger and consolidation activity within the real estate/real estate investment
trust industry, to preserve employee morale and productivity and to encourage
retention in the event of an actual or rumored change-in-control of the company.
The program is also intended to align employee and shareholder interests by
enabling employees to consider corporate transactions that are in the best
interests of the shareholders and other constituents of the company without
undue concern over whether the transaction or transactions may jeopardize the
employee's own employment. For an overview of our change-in-control program,
please refer to the discussion included under the heading "Compensation
Discussion and Analysis - Each element of compensation and why the company
chooses to pay each element - (e) Change-in-Control Program."
Assuming that the closing of a change-in-control occurred on December 29, 2006,
the last business day of our fiscal year, our named executive officers would be
entitled to payment of the following amounts under the retention agreement
component of our change-in-control program:
-------------------------------------------------------------------------------------------------------
Name and Principal Position Payment due under the Retention Agreement (1)
-------------------------------------------------------- ----------------------------------------------
George J. Carter, Chief Executive Officer (PEO) N/A(2)
-------------------------------------------------------- ----------------------------------------------
John G. Demeritt, Chief Financial Officer (PFO) $1,080,000
-------------------------------------------------------- ----------------------------------------------
Barbara J. Fournier, Vice President, Chief
Operating Officer, Treasurer and Secretary $1,200,000
-------------------------------------------------------- ----------------------------------------------
R. Scott MacPhee, Executive Vice President $1,140,000
-------------------------------------------------------- ----------------------------------------------
William W. Gribbell, Executive Vice President $1,140,000
-------------------------------------------------------- ----------------------------------------------
TOTAL $4,560,000
==========
-------------------------------------------------------------------------------------------------------
NOTES
(1) With respect to executive officers who make up the corporate management
team, these are lump-sum payments equal to three years of their base
salaries plus a bonus opportunity payment equal to three years of their
base salaries. With respect to executive officers who are investment
executives, these are lump-sum payments equal to the average of the lump
sum payments made to the chief financial officer and the chief operating
officer. In both cases, the payment amounts are subject to a possible
reduction, if any, after the tax consequences are determined.
(2) George J. Carter has voluntarily elected not to participate in the
retention agreement component of our change-in-control program.
Under the discretionary plan component of our change-in-control program, our
board of directors has the right, but not the obligation, to establish a
discretionary pool of funds equal to 1% of our market capitalization immediately
prior to the closing of the change-in-control. On December 29, 2006, there were
70,766,305 shares of our common stock outstanding, and the closing price
20
per share of our common stock on the American Stock Exchange was $21.05.
Accordingly, on December 29, 2006, our market capitalization was $1,489,630,720,
and 1% of our market capitalization equaled $14,896,307. This $14,896,307 amount
would then be reduced by the total amount of payments due and payable to all of
our employees (including our named executive officers) under the retention
agreement component of our change-in-control program. Our board of directors
would then have complete discretion to award all, a portion or none of the
remaining balance to any of our employees, including our named executive
officers. As is the case with the retention agreement component of our
change-in-control program, any payments under the discretionary plan component
are subject to a possible reduction, if any, after the tax consequences are
determined.
Compensation Committee Interlocks and Insider Participation
The compensation committee consists 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.
Compensation Committee Report
The compensation committee has reviewed and discussed with management the
Compensation Discussion and Analysis included in this proxy statement. Based on
this review and these discussions, we recommended to the Board of Directors that
the Compensation Discussion and Analysis be included in this proxy statement and
incorporated by reference into the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2006.
By the compensation committee of the Board of Directors of Franklin Street
Properties Corp.
Georgia Murray, Chair*
Dennis J. McGillicuddy
Barry Silverstein
John N. Burke
* Ms. Murray has served as Chair since October 2006, replacing Mr. McGillicuddy.
21
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, 2006. 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) Number of Securities
Number of Securities to be (b) Available for Future Issuance
Issued Upon Exercise of Weighted-Average Exercise Under Equity Compensation
Outstanding Options, Price of Outstanding Options, Plans (Excluding Securities
Plan Category Warrants and Rights(1) Warrants and Rights Reflected in Column (a)(1))
------------- ---------------------- ------------------- ---------------------------
Equity Compensation Plans
Approved by Security Holders None(2) N/A 1,944,428(2)
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 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.
SECTION 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 2006 all
filings required to be made by its reporting persons were timely made in
accordance with the requirements of the Exchange Act.
22
TRANSACTIONS WITH RELATED PERSONS
Related Person Transaction Policy
On February 2, 2007, our Board adopted written policies and procedures for the
review of any transaction, arrangement or relationship in which the Company is a
participant, the amount involved exceeds $120,000, and one of our executive
officers, directors, director nominees or 5% stockholders (or their immediate
family members), each of whom we refer to as a related person, has a direct or
indirect material interest.
If a related person proposes to enter into such a transaction, arrangement or
relationship, which we refer to as a related person transaction, the related
person must report the proposed related person transaction to our chief
operating officer or in-house counsel.
The policy calls for the proposed related person transaction to be reviewed and,
if deemed appropriate, approved by the audit committee of our Board. Whenever
practicable, the reporting, review and approval will occur prior to entry into
the transaction. If advance review and approval is not practicable, the audit
committee will review, and, in its discretion, may ratify the related person
transaction. The policy also permits the chairman of the audit committee to
review and, if deemed appropriate, approve proposed related person transactions
that arise between committee meetings, subject to ratification by the committee
at its next meeting. Any related person transactions that are ongoing in nature
will be reviewed annually.
A related person transaction reviewed under the policy will be considered
approved or ratified if it is authorized by the audit committee after full
disclosure of the related person's interest in the transaction. As appropriate
for the circumstances, the committee will review and consider:
o the related person's interest in the related person transaction;
o the approximate dollar value of the amount involved in the related
person transaction;
o the approximate dollar value of the amount of the related person's
interest in the transaction without regard to the amount of any
profit or loss;
o whether the transaction was undertaken in the ordinary course of our
business;
o whether the terms of the transaction are no less favorable to us
than terms that could have been reached with an unrelated third
party;
o the purpose of, and the potential benefits to us of, the
transaction; and
o any other information regarding the related person transaction or
the related person in the context of the proposed transaction that
would be material to investors in light of the circumstances of the
particular transaction.
23
The audit committee may approve or ratify the transaction only if the committee
determines that, under all of the circumstances, the transaction is in, or is
not inconsistent with, our best interests. The audit committee may impose any
conditions on the related person transaction that it deems appropriate.
In addition to the transactions that are excluded by the instructions to the
SEC's related person transaction disclosure rule, the Board has determined that
the following transactions do not create a material direct or indirect interest
on behalf of related persons and, therefore, are not related person transactions
for purposes of this policy:
o Interests arising only from the related person's position and
ownership level as a director of another corporation or organization
that is a party to the transaction;
o Interests arising only from the position and ownership level from
direct or indirect ownership by the related person and all other
related persons in the aggregate of less than a 10% equity interest
(other than a general partnership interest) in another entity which
is a party to the transaction;
o Interests arising solely from the ownership of a class of our equity
securities if all holders of that class of equity securities receive
the same benefit on a pro rata basis;
o A transaction that involves compensation to an executive officer if
the compensation has been approved, or recommended to the Board for
approval, by the compensation committee of the Board or a group of
independent directors of the Company performing a similar function;
o A transaction that involves compensation to a director for services
as a director of the Company if such compensation will be reported
pursuant to Item 402(k) of Regulation S-K;
o A transaction that is specifically contemplated by provisions of the
Company's charter or bylaws;
o Interests arising solely from indebtedness of a significant
shareholder or an immediate family member of a significant
shareholder to us;
o A transaction where the rates or charges involved in the transaction
are determined by competitive bids;
o A transaction that involves the rendering of services as a common or
contract carrier or public utility at rates or charges fixed in
conformity with law or governmental authority;
o A transaction that involves services as a bank depositary of funds,
transfer agent, registrar, trustee under a trust indenture, or
similar services;
o Interests arising as a result of a related person serving as an
officer and/or director of another company or a Sponsored REIT at
our request; or
24
o A transaction that involves the payment by a Sponsored REIT to the
Company (or any wholly-owned subsidiary thereof) of customary fees
including, without limitation, acquisition, syndication, sales
commissions, interim financing and asset management fees.
The policy provides that transactions involving compensation of executive
officers shall be reviewed and approved by the compensation committee in the
manner specified in its charter.
The policy is available on our website at www.franklinstreetproperties.com.
Transactions with Related Persons
Messrs. Carter, MacPhee and Gribbell and Mses. Fournier and Notopoulos, each of
whom is an executive officer of the Company, serve, at our request, as executive
officers and directors of each of the Sponsored REITs. None of such persons
receives any remuneration from the Sponsored REITs for such service. We are
involved in several transactions with the Sponsored REITs.
FSP Investments LLC, 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 $1,422,000 for the year ended December 31, 2006. As of March 14,
2007, the fees from Sponsored REITs amounted to approximately $87,000 during
2007. Sales commissions earned from the sale of Sponsored REIT preferred shares
amounted to approximately $10,693,000 for the year ended December 31, 2006. As
of March 14, 2007, sales commissions from the sale of Sponsored REIT preferred
shares amount to approximately $1,196,000 during 2007.
During 2006 and 2007, 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 $9,785,000 and development
fees of approximately $51,000 for the year ended December 31, 2006. As of March
14, 2007, the Sponsored REITs paid the Company financing commitment fees of
approximately $995,000 during 2007. Interest income earned from loans to the
Sponsored REITs amounted to approximately $2,050,000 for the year ended December
31, 2006. As of March 14, 2007, the interest income earned from loans to the
Sponsored REITs during 2007 amounted to approximately $2,085,000. The interest
rate charged by the Company to the Sponsored REITs is equal to, and generally
offset by, the interest rate paid by the Company to Citizens Bank for borrowings
under its line of credit, though from time-to-time the Company may use its own
cash to finance a portion of the loan from which it earns interest at the same
rate as the line of credit. Interest income earned by the Company from
investments of its own cash for the year ended December 31, 2006 was $305,000.
As of March 14, 2007, the interest income earned by the Company from investments
of its own cash amounted to approximately $388,000. All loans to Sponsored REITs
in 2006 were evidenced by promissory notes and were paid in full upon closing of
the applicable Sponsored REIT's private equity offering during 2006.
25
The following table summarizes the interim financing transactions from January
1, 2006 through March 14, 2007:
Total
Financing
Commitment Interest Income
Original Principal Average Fees Earned by Earned by the Date of Amount
Date of Loan Amount of Note Interest Rate the Company Company Repayment Outstanding
------------ -------------- ------------- ----------- ------- --------- -----------
2/21/06 $ 74,500,000 6.13% $ -- $1,078,373 8/22/06 $ --
11/6/06 $127,000,000 6.70% $5,761,500 $ 937,124 12/26/06 $ --
1/5/07 $167,000,000 6.57% $4,023,562 $1,953,881 N/A $153,773,216
Total asset management fee income paid by the Sponsored REITs to the Company
amounted to approximately $644,000 for the year ended December 31, 2006. As of
March 14, 2007, the total asset management fee income earned by the Company
during 2007 was approximately $103,000. Asset management fees are approximately
1% of collected rents.
Aggregate fees charged to the Sponsored REITs by the Company amounted to
approximately $22,595,000 for the year ended December 31, 2006. As of March 14,
2007, the aggregate fees charged to the Sponsored REITs during 2007 by the
Company is approximately $2,381,000.
In addition to the transactions listed above, Mr. Carter's son, Jeffrey Carter,
is Senior Vice President/Director of Acquisitions of the Company. For the year
ended December 31, 2006, he earned total compensation of $454,551 (including
salary, cash bonus paid during 2007 for 2006 performance and 401(k) matching
contributions).
Mr. Carter's son, Scott Carter, is Senior Vice President/In-house Counsel of the
Company. For the year ended December 31, 2006, he earned total compensation of
$366,300 (including salary and cash bonus paid during 2007 for 2006 performance
and 401(k) matching contributions).
Mr. Silverstein, a director of the Company, purchased, on the same terms as
non-affiliated purchasers, investments in certain Sponsored REITs during 2006.
Mr. Silverstein paid the Company an aggregate of $78,375 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.
On April 30, 2006, the Company consummated the acquisition of 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) pursuant to an Agreement and Plan of Merger
dated as of March 15, 2006, or the Merger Agreement, by means of the merger of
each 2006 Target REIT with and into a wholly-owned subsidiary of the Company, or
the 2006 Mergers. In connection with the 2006 Mergers, the preferred stock of
each 2006 Target REIT, or the Target Stock, was converted into shares of Common
Stock of the Company with total consideration for the preferred stockholders of
approximately $230,000,000. The Company did not receive any consideration for
the one share of common stock it held in each Target REIT or for the 49.25
shares of preferred stock it held in FSP Blue Lagoon Drive Corp.
26
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 2006 Mergers was also the President and a director of each 2006
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 2006 Target REIT and a member of the special committee of each 2006
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 2006 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 2006 Mergers was also Vice President of each 2006 Target
REIT and a director of FSP Blue Lagoon Drive Corp. and FSP Eldridge Green Corp.
Messrs. Silverstein and McGillicuddy, each a director of the Company, owned an
aggregate of 102.5 and 33 shares of 2006 Target Stock, respectively. Messrs.
Silverstein and McGillicuddy each purchased their shares in the original
offerings of 2006 Target Stock and on the same terms as other stockholders of
such 2006 Target REITs. These shares of 2006 Target Stock held by Messrs.
Silverstein and McGillicuddy converted into approximately 535,349 and
approximately 157,593 shares of the Company's Common Stock, respectively. In
addition, on March 10, 2006, as a result of negotiations between an affiliate of
Mr. Silverstein and FSP Eldridge Green Corp., FSP Eldridge Green Corp. redeemed
10 shares of preferred stock held by the affiliate of Mr. Silverstein 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 the affiliate of Mr. Silverstein in respect of the first quarter of
2006 had such shares not been redeemed.
The spouse of Mr. Gribbell owned 0.25 shares of 2006 Target Stock in FSP
Eldridge Green Corp. Mr. Gribbell's spouse purchased her partial share of 2006
Target Stock in FSP Eldridge Green Corp. in the original offering and, except
for not paying a sales commission, on the same terms as other stockholders of
FSP Eldridge Green Corp. This partial share of 2006 Target Stock held by Mr.
Gribbell's spouse converted into approximately 1,451 shares of our Common Stock.
The properties formerly owned by the 2006 Target REITs continue to be managed by
FSP Property Management LLC, a wholly-owned subsidiary of the Company, pursuant
to management services agreements under which the Company previously received
certain fees from each 2006 Target REIT for its management services.
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 2007.
Ernst & Young has served as the Company's independent registered public
accounting firm since May 2003.
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.
27
Report of the Audit Committee of the Board of Directors
The audit committee reviewed the Company's audited consolidated financial
statements for the year ended December 31, 2006 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 Oversight 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,
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 accounting
firm's 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 to be discussed by the Statement
on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1,
AU section 380), as adopted by the Public Company Accounting Oversight Board in
Rule 3200T, with Ernst & Young LLP, the Company's independent registered public
accounting firm for the year ended December 31, 2006. SAS 61 requires the
Company's independent registered public accounting firm to discuss with the
Company's audit committee, among other things, the following:
o methods to account for significant unusual transactions;
28
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), as adopted by the Public Company Accounting Oversight Board in Rule
3600T. 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 auditor's 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 referred to
above, 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, 2006.
By the Audit Committee of the Board of Directors of Franklin Street Properties
Corp.
John N. Burke, Chair
Dennis J. McGillicuddy
Barry Silverstein
Georgia Murray
29
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 2006 2005
------------- -------- --------
Audit Fees (1) $556,000 $503,500
Audit-Related Fees (2) -- --
Tax Fees (3) -- 173,500
All Other Fees (4) -- --
-------- --------
Total Fees $556,000 $677,000
======== ========
(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".
(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, were not
incurred in 2006 and accounted for $173,500 of the total tax fees incurred
in 2005.
(4) The Company was not billed by its independent registered public accounting
firm in 2006 or 2005 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.
30
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.
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, internet,
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
In accordance with Rule 14a-8 of the Exchange Act, proposals of stockholders
intended to be included in the Company's proxy statement for the 2008 Annual
Meeting of Stockholders must be received by the Company at its principal office
not later than December 4, 2007. In accordance with our bylaws, if a stockholder
who wishes to make a proposal at the 2008 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, 2007 and no later than January 3, 2008, 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.
31
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 23, 2007
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. You may also vote your proxy on
line at www.voteproxy.com or from any touch-tone telephone at 1-800-PROXIES
(1-800-776-9437). Please have your proxy card available when voting online or by
telephone. 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.
32
ANNUAL MEETING OF STOCKHOLDERS OF
FRANKLIN STREET PROPERTIES CORP.
May 11, 2007
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.
--------------------------------------------------------------------------------
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
1. To elect the following individuals as Class I Directors:
NOMINEES:
|_| FOR ALL NOMINEES |_| Dennis J. McGillicuddy
|_| Janet P. Notopoulos
|_| 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: |X|
________________________________________________________________________________
To change the address on your account, please check the box at right and |X|
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 11, 2007
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 11, 2007 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)
14475
ANNUAL MEETING OF STOCKHOLDERS OF
FRANKLIN STREET PROPERTIES CORP.
May 11, 2007
-------------------------
PROXY VOTING INSTRUCTIONS
-------------------------
MAIL - Date, sign and mail your proxy card in the envelope provided as soon as
possible.
- OR -
TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) from any touch-tone
telephone and follow the instructions. Have your proxy card available when you
call.
- OR -
INTERNET - Access "www.voteproxy.com" and follow the on-screen instructions.
Have your proxy card available when you access the web page.
- OR -
IN PERSON - You may vote your shares in person by attending the Annual Meeting.
----------------------------------- --------------------------------
COMPANY NUMBER
----------------------------------- --------------------------------
ACCOUNT NUMBER
----------------------------------- --------------------------------
----------------------------------- --------------------------------
----------------------------------------------------------------
You may enter your voting instructions at 1-800-PROXIES or
www.voteproxy.com up until 11:59 PM Eastern Time the day before
the cut-off or meeting date.
----------------------------------------------------------------
Please detach along perforated line and mail in the envelope provided
IF you are not voting via telephone or the Internet.
--------------------------------------------------------------------------------
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
1. To elect the following individuals as Class I Directors:
NOMINEES:
|_| FOR ALL NOMINEES |_| Dennis J. McGillicuddy
|_| Janet P. Notopoulos
|_| 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: |X|
________________________________________________________________________________
To change the address on your account, please check the box at right and |X|
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.