Name I. | EXECUTIVE SUMMARY
Title | Owen D. Thomas | | Chief Executive Officer | Douglas T. Linde | | President | Raymond A. Ritchey | | Senior Executive Vice President | Michael E. LaBelle | | Executive Vice President, Chief Financial Officer & Treasurer | Bryan J. Koop | | Executive Vice President, Boston Region |
IntroductionI. EXECUTIVE OVERVIEW
We are the largest publicly-traded developer and owner of Class A office properties in the United States, concentrated in Boston, Los Angeles, New York, San Francisco and Washington, DC. We have a demonstrated history of creating long-term stockholder value in large part because we take on complex, technically challenging development and redevelopment projects, leveraging the skills of our management team to successfully develop and reposition properties that other organizations may not have the expertise, capacity or resources to pursue. Some of our most successful development projects have taken longer than a decade to acquire, obtain permits, construct andlease-up to stabilization. In addition, we seek to sign long-term leases with creditworthy tenants, and we generally seek long-term, fixed-rate financing in order to fix our interest expense and proactively manage our debt maturities. We recognize that our business is thus long-term in nature, and our success requires that we make business decisions with a focus on our long-term objectives, even if they have short-term negative implications.
As a result, our Committee strives to make compensation decisions that reward management for executing our strategy and promoting the best interests of the Company and its stockholders over the long term. Our market focus and strategy for creating long-term value for investors differ from many of our competitors in the office REIT segment, which makes direct comparisons in performance and compensation difficult. We therefore do not rely on a strict formulaic framework for measuring performance against short-term goals to determine compensation awards for a particular year, but instead aim for a balanced quantitative and qualitative approach, as outlined below, that our Committee believes is appropriate to ensure our continued success.
Process for Determining Executive Compensation
For the third year in a row, we received more than 90% stockholder supportfor our“Say-on-Pay” advisory vote at our annual meeting of stockholders. As a result of this continued support, and based on the overall positive feedback we received in our communications with investors throughout the year, our Committee followed the same general process when setting executive compensation program covering our NEOs is designed to attract and retain critical executive talent, motivate behaviors that align with stockholders’ interests and pay for 2018 as in recent years, which includes:
using the median (50th percentile) ofperformance. To ensure that pay is competitive with market ranges, we review a peer group of 16 REITs that are constituents of the S&P 500 Index (the “Benchmarking Peer Group”) as the beginning reference point and as an indicator of competitive market trends;
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I. EXECUTIVE SUMMARY
considering anbenchmarking analysis prepared by FPL Associates L.P. (“FPL”), the Committee’s independent compensation consultant, that benchmarks each executive officer, and the NEOs as a group, against the Benchmarking Peer Group to determine their relative placement with respect to compensation for the prior year;
assessing performance not only against our ownpre-established corporate goals, but also against the same performance metrics for six publicly-traded office REITs that we consider our most directly comparable peers (the “Office Peers”);
considering total NEO compensation over time, both on an awarded basis and on a realized basis after forfeitures;
considering projections for compensation increases and decreases among our peers and the market generally, and other input received from FPL; and
based on the foregoing,year when establishing a dollar amount for total compensation for each NEO and then allocating it among base salary, cash bonusannual incentive target opportunities and long-term incentive (“LTI”) target opportunities. More than 90% of our NEOs’ pay is variable and contingent on performance with approximately two-thirds paid in the form of LTI equity awards (including time- basedcompensation. Although target incentive opportunities are set by reference to market, the terms of our incentive plans provide for actual payouts to be above or below target levels depending upon actual performance against pre-determined goals.
When we established the target compensation levels for each component of our NEOs’ compensation in early 2020, our Committee did not foresee the widespread, negative impact that the COVID-19 pandemic would have on our business and our stockholders. The unprecedented issues Boston Properties faced due to the global health crisis created a remarkably challenging year for our NEOs. In addition to the global pandemic, in 2020, major social-justice movements and demonstrations highlighted the racial injustices and economic inequities plaguing our society and called for companies to act. There was also a heightened focus on the importance of environmental and sustainability issues. Despite the sudden and significant impacts of the pandemic on our business, the Committee did not modify the components or the target compensation levels of our executive compensation program. The Committee also did not modify the 2020 Annual Incentive Plan, including any of its three categories (FFO, leasing, and business and individual goals) or the specific targets within each category established in early 2020. In deciding not to change the program, the Committee prioritized strong alignment with Boston Properties’ investors and their experiences during the pandemic. As the year progressed and the severity of the pandemic became clearer, the Committee supplemented the business and individual goals with additional goals that guided the NEOs in responding thoughtfully and responsibly to the global health crisis and important social and environmental issues. Our NEOs showed exceptional leadership in addressing all of the significant challenges and issues presented to them in 2020, but with business conditions dominated by the pandemic, they were unable to achieve their FFO and leasing targets under the 2020 Annual Incentive Plan. Our NEOs did not earn any payout under the FFO per share category and only one NEO earned a portion of the target payout for the leasing category; for the third category of the 2020 Annual Incentive Plan, the business and individual goals, each NEO exceeded his goals. As a result, the Committee awarded final bonus payments to our NEOs that ranged from 50% to 75% of target. While these same challenging business conditions had a severe, negative impact on office REITs generally, leading to negative absolute total stockholder returns (“TSR”) across the sector in 2020, the Committee noted that Boston Properties’ TSR for the one-year and three-year periods ending December 31, 2020 placed it at the 80th percentile, or third, among its most directly comparable office peers for both periods. (For a list of these peers, see “– II. Executive Compensation Program – LTI awards and performance-based LTI awards that useEquity Compensation – 2021 MYLTIP” below.) Although the Committee did not base its decisions on BXP’s relative TSR over overlapping three-year measurement periodsrankings, the Committee believes they validated the appropriateness of the final bonus payments to our NEOs. | | | | | | | | | | | | 2021 Proxy Statement | | 51 |
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | I. EXECUTIVE OVERVIEW |
The Committee remains proud of the extraordinary leadership demonstrated by our NEOs and their efforts in protecting our tenants’ and employees’ health and safety and preserving our properties, financial condition, culture of excellence and ultimately the Boston Properties’ brand in 2020. ›2020 COMPENSATION DECISIONS As described in detail later in this CD&A, below are the key actions that our Compensation Committee took with respect to our NEOs’ 2020 compensation and the impact of those decisions on 2020 compensation. | 2020 COMPENSATION DECISION HIGHLIGHTS | Ø No change in base salary for any of the NEOs Ø No change to Annual Incentive Plan categories, weightings or goal targets set in January 2020 resulting in bonus payments ranging from 50% to 75% of target › Supplemented Business and Individual goals to add pandemic-related goals Ø No change to any outstanding equity plans or awards, including MYLTIP awards granted in 2020 Ø LTI equity compensation as a percentage of total compensation increased to 81% for our CEO and 74% for all of the NEOs as a group (from 72% and 64%, respectively, in 2019) Ø Granted LTI equity compensation for 2020 performance below target for CEO Ø Below - target payout of 29% for CEO under 2018 MYLTIP (covering Feb. 2018 – Feb. 2020); CEO realized 36% of aggregate amount reported and expensed for that award |
| | | | | | | | | | | | | | | | | | | | % Variable Pay(1) | | % Paid in Equity(1) | | Cash Bonus as % of Target | | 2018 MYLTIP Payout as % of Target(2) | | 93% | | 74% | | 50% | | 29% |
| | | | | | | | | | | % Variable Pay(1) | | % Paid in Equity(1) | | Cash Bonus as % of Target | | 2018 MYLTIP Payout as % of Target(2) | | 91% | | 66% | | 57% | | 29% |
| (1) | Percentages based on 2020 target total direct compensation. |
| (2) | On February 5, 2021, the three-year performance period for the Company’s 2018 MYLTIP awards ended and the final payout was 29% of target, representing only 36% of the reported pay for each of the CEO and the NEOs as a group. |
›2020 SAY-ON-PAY VOTE & STOCKHOLDER OUTREACH Say-on-Pay Vote At our 2020 annual meeting of stockholders, approximately 89% of the votes cast supported our “Say-on-Pay” advisory vote. These results reflect continued investor support for our executive compensation program, including the changes our Committee made in 2019 to our executive compensation program based on investor feedback. The 2020 compensation year is the first year in which the changes made in 2019 were effective, and although COVID-19 unpredictably and unprecedentedly impacted our business and financial results, the Committee determined not to modify any of the key changes from 2019 to our executive compensation. In doing so, our Committee opted to remain within the original framework of the 2020 Annual Incentive Plan when determining 2020 compensation. We believe this demonstrates the Committee’s commitment to the changes it made in response to investor feedback. | | | | | | | | | 52 | | | | | 2021 Proxy Statement |
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | I. EXECUTIVE OVERVIEW |
Investor Outreach & Feedback We are firmly committed to learning investors’ perspectives and believe that proactive engagement is an effective means to solicit and receive valuable feedback. This feedback has helped shape our policies and practices. We conduct outreach throughout the year to ensure that management and the Board understand the issues of importance to our investors and address them appropriately. The Board regularly reviews shareholder feedback, which informs Board discussions on a wide range of topics, including our approaches to corporate governance, ESG, human capital management, diversity, equity and inclusion and executive compensation. In 2020, we engaged directly with our investors in various forums and through different media (including in-person meetings prior to the pandemic and virtual meetings during the pandemic) as the performance metric, to further align management’s objectives with the interestspart of our investors).outreach program. In addition to discussions in the ordinary course of business, we: hosted three investor outreach series to meet with existing investors, potential investors in Europe and one dedicated to ESG matters; Rather than relying on a strict formulaic framework, the Committee combines a quantitative and a qualitative assessment againstpre-established goals because this approach allows it to:
| • | | evaluate management’s performance annually while taking into account our focus on value creation over the long-termheld more than 400 one-on-one meetings with investors at various REIT conferences, including Nareit REITWeek and REITWorld conferences, Citi 2020 Global, Evercore ISI and Bank of America Merrill Lynch 2020 Global Real Estate conferences and the difficulty of making precise comparisons to peers with different investment objectives and different strategies (see “–III. Assessing Performance – Focus on Long-Term Value Creation”);NYSE Real Estate Investor Day;
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strikeheld one-on-one meetings at four non-REIT conferences: the appropriate balance between short-term objectivesMorgan Stanley Sustainable Futures conference, the Stifel Cross-Sector conference, BofA Financial Futures conference and long-term strategies;the Goldman Sachs Financials conference; and
properly emphasize quantitative results whileheld meetings at other ESG-focused engagements, including numerous one-on-one meetings with ESG-dedicated funds and an investor webinar focused on our efforts related to ESG matters.
In total, we engaged directly with representatives of more than 200 firms, including approximately 50 U.S. and international institutional investors who own, in the aggregate, approximately 45% of the total number of outstanding shares of BXP common stock and approximately 80% of the total number of outstanding shares of BXP common stock held by actively managed funds. The topics discussed at these meetings varied, but generally focused on the impacts of the pandemic and our responses thereto. Among other things, we heard questions about the long-term impact of the hybrid or partial “work-from-home” trend on demand for office space, the impact of new sublease space on overall supply and rental rates and the financial strength of various industries and sectors (including co-working, retail stores, restaurants, theaters and fitness clubs). We also considering qualitative factors when assessing management’s performance. Investor Outreach and Engagement
We value our relationships with our stockholders and believe it is important to maintain an ongoing dialoguediscussed with them throughout the year on a wide rangedetails of topics, including our financial and operating performance, compensation practices and ESG. EngagingHealth Security Plan for repopulating our buildings. The questions expressed in dialogue with our investors helpswere echoed by REIT analysts and even the media, and they helped guide us to understand how they view usin establishing the pandemic-related goals.
In 2020, our Investor Relations team was ranked by Institutional Investor Magazine as #1 among Office REITs and #3 among all REITs in three categories: Best IR program, Best IR Team and Best IR Professional. We believe our Investor Relations team excelled in leading and coordinating these atypical outreach efforts, and the topics they deem important. In 2018, we undertook a review of our entire approach to our investor relations efforts. This included a review of the department’s needs, asrecognition it received is well as those of our investors and analysts. We retained Rivel Research Group to conduct and present to our Board the results of a stockholder perception study.
We hired a new Vice President, Investor Relations to lead our efforts. This is the first time that our head of Investor Relations has held an officer title, which demonstrates the importance management and our Board place on this function. Led by our new Vice President, Investor Relations, we refreshed our overall investor relations approach and substantially increased our efforts to connect with a more diverse range of investors (includingnon-dedicated real estate investment fund managers and foreign investors).
We understand the importance of direct and regular access to our executive team. In total, in 2018, our senior management team met with more than 180 actively managed institutional investment firms, including approximately 92 existing stockholders representing almost 50%
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I. EXECUTIVE SUMMARYdeserved.
| of our total shares outstanding (excluding holdings of passive investors such as index funds), and more than 70 new or prospective investors. These meetings occur at various locations and events, which, in 2018, included:
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| Ø | | five industry conferences;
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| Ø | | 37 property tours with investors across our five regions; and
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| Ø | | an investor-analyst event at our new Salesforce Tower building in San Francisco during Nareit’s REITWorld conference.
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2018 Performance Highlights
In addition to management meeting or exceeding the set of corporate goals established at the beginning of the year, as detailed in “– III. Assessing Performance–2018 Corporate Goals” below, highlights of our 2018 performance include the following:
| | | | | | | Ø | | leased approximately 7.2 million square feet, the second largest annual total in our history, including 2.0 million square feet for development properties; | | | | | | 2021 Proxy Statement | | 53 |
COMPENSATION DISCUSSION AND ANALYSISGOVERNANCE I. EXECUTIVE SUMMARY
| | | | | | | Ø | | completed the sale of a total of sixnon-core assets and assets with lower growth profiles for an aggregate sale price of approximately $492.0 million, including the sale of the ongoing TSA development project in Springfield, Virginia that reduced our future capital needs by an additional $215.6 million, resulting in approximately $708 million of total consideration from dispositions in 2018; | | | | | | | | Ø | | ranked in the top 8% of 874 worldwide participants earning a “Green Star” recognition from the Global Real Estate Sustainability Benchmark for the seventh consecutive year; and | | | | | | | | Ø | | ranked #5 out of 83 U.S. REITs in Green Street Advisors’ 2018 Corporate Governance rankings. |
Highlights of 2018 Compensation Decisions
The Committee concluded that the Company had a very strong year in 2018, noting, in particular, our achievements in leasing, growth in FFO per share, new investments, development activity and dispositions. (See “–III. Assessing Performance–2018 Corporate Goals.”) In light of the quantitative and qualitative assessments of performance relative to the corporate goals, performance against our Office Peers and individual performance, and reported and realized NEO compensation, the Committee determined to award 2018 total compensation for the NEOs, as a group, at a level that, based on advice from FPL, the Committee expects will result in the total compensation awarded to our NEOs ranking at approximately the 60th percentile of our Benchmarking Peer Group.
As part of its benchmarking review, FPL analyzed the allocation between performance-based and time- based LTI equity awards and, for 2018, the Committee determined that it would be advisable to maintain the 50% – 50% mix of performance-based and time-based LTI equity awards that is widely accepted in the market and prevalent among our peers. The precise allocation may vary among different NEOs and from year to year based on circumstances. (See “–V. Alignment of Pay with Performance” beginning on page 58.)
The following are highlights of 2018 compensation:
| | | | | | | | 2018 Pay Highlights | CEO: | 0% | | 93% | | 70% | | 50% | Change in base salary between 2016 - 2018 | | Amount of pay that is variable and not guaranteed | | Amount paid in equity with remaining 30% paid in cash | | Amount of total equity awarded asTSR-based performance equity | All NEOs (as a group): | 0% | | 91% | | 62% | | 50% | Change in base salary between 2016 - 2018 | | Amount of pay that is variable and not guaranteed | | Amount paid in equity with remaining 38% paid in cash | | Amount of total equity awarded as TSR-based performance equity |
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COMPENSATION DISCUSSION AND ANALYSIS
II. | COMPENSATION GOVERNANCE
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The objectives of our executive compensation program are to attract, retain and rewardmotivate executives who have the motivation, experience and skills to lead the Company and continue our long-term track record of profitability, growth and TSR. The following are thetable highlights key features of our executive compensation program:program that demonstrate the Company’s ongoing commitment to promoting stockholder interests through sound compensation governance practices. | | | | | | | | | WHAT WE DO | ✓ | | We use the median (50th percentile) of the Benchmarking Peer Group as the beginning reference point and the Committee then adjusts compensation based on a quantitative and qualitative review of corporate and individual performance.WHAT WE DON’T DO | | | | | ✓ | | Variable pay is 93% of our CEO’s total target compensation. The vast majority of total compensation (for 2018, more than 91%) is variable pay (i.e., not guaranteed) and; salaries comprise a small portion of each NEO’s total compensation opportunity. | | | ✓ | | Variable pay is based on an assessment of annual performance compared toNo tax pre-establishedgross-ups. goals, as well as a comparison of performance against other office-focused REITs in key metrics. | | | ✓ | | We align our NEOs with our long-term investors by awarding a significant percentage (approximately 50% in 2018) of equity compensation in the form of multi-year, performance-based equity awards that use relative TSR as the metric. | | | ✓ | | We enhance executive officer retention with time-based, multi-year vesting schedules for equity incentive awards granted for prior-year performance. | | | ✓ | | We have “double-trigger” vesting for time-based equity incentive awards following a change of control. | | | ✓ | | We have a clawback policy that allows for the recovery of previously paid incentive compensation in the event of a financial restatement. | | | ✓ | | We have stock ownership guidelines for our executives and directors. | | | ✓ | | We engage an independent compensation consultant to advise the Committee. |
| | | | | WHAT WE DON’T DO | | | Ð | | We do not directly target compensation above the market median (50th percentile) of the Benchmarking Peer Group. | | | Ð | | We do not provide any new executive with taxgross-ups with respect to payments made in connection with a change of control. | | | | | Ð | | Bonus pay linked to pre-established goals. Annual cash bonuses for our NEOs are linked to performance against goals in three categories, and each NEO has target and maximum bonus opportunities. | | | | No hedging, pledging or short-sales. We do not allow hedging, pledging or pledgingshort-sales of Company securities. | | | | | Ð | | Two-thirds of target compensation paid in equity. We align our NEOs with our long-term investors by awarding in 2/3rds of our NEOs’ total target compensation in the form of equity, more than 1/2 of which is in the form of multi-year, performance-based equity awards. | | | | Risk mitigation factors in compensation policies and procedures. We do not encourage unnecessary or excessive risk taking as a result of our compensation policies; incentive compensation is not based on a single performance metric and we do not have guaranteed minimum payouts. | | | | | Ð | | Capped bonus and LTI awards. We have caps on annual and long-term incentives. | | | | No stock option repricing. We do not allow for repricing of stock options. | | | | | Ð | | Clawback policy. We do not relyhave a clawback policy that allows for the recovery of previously paid incentive compensation in the event of a financial restatement. | | | | No full dividends on a strict formulaic frameworkunearned performance-based LTI awards. Recipients of performance-based LTI equity awards receive only 10% of full dividend unless and until earned. | | | | | | | Stock ownership guidelines for measuring annual performance against goalsall executives. We have robust stock ownership guidelines for our executives (for our CEO, 6.0x base salary). | | | | | | | | | | | Independent compensation consultant. We engage an independent compensation consultant to determine compensation.advise the Committee. | | | | |
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| | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | II. EXECUTIVE COMPENSATION PROGRAM |
Business Strategy
The core elements of our business strategy are:
to maintain a keen focus on select markets that exhibit the strongest economic growth and investment characteristics over time – currently Boston, Los Angeles, New York, San Francisco and Washington, DC;
to invest in the highest quality buildings (primarily office) with unique amenities and locations that are able to maintain high occupancy, achieve premium rental rates through economic cycles and that advance our commitment to sustainable development and operations;
in our core markets, to maintain scale and a full-service real estate capability (development, construction, leasing and property management) to ensure we (1) see all relevant investment deal flow, (2) maintain an ability to execute on all types of real estate opportunities, such as development, repositioning, acquisitions and dispositions, throughout the real estate investment cycle and (3) provide superior service to our tenants;
to be astute in market timing for investment decisions by developing into economic growth, acquiring properties in times of opportunity and selling assets at attractive prices, resulting in continuous portfolio refreshment;
to ensure a strong balance sheet to maintain consistent access to capital and the resultant ability to make opportunistic investments; and
to foster a culture and reputation of integrity, excellence and purposefulness, making us the employer of choice for talented real estate professionals and the counterparty of choice for tenants and real estate industry participants.
Focus on Long-Term Value Creation
Execution of our strategy spans multiple markets with different economic drivers over long periods. Development projects, which are particularly important to our strategy, take time to identify, acquire, permit, construct, lease and stabilize. This strategy of creating value for investors is multifaceted and differs from that of many of our competitors in the office REIT segment, which makes direct comparisons difficult and underlies our less formulaic approach to assessing performance, as contrasted with a purely quantitative “actual versus target” framework.
We manage every aspect of our business with a focus on the long-term, including, among others, developments, redevelopments, leasing, balance sheet management and our employees. To cite one recent example among many, we fully placedin-service our Salesforce Tower development project in San Francisco in the fourth quarter of 2018. Salesforce Tower is an approximately 1,400,000 square foot Class A office skyscraper in the South of Market district of downtown San Francisco, and as of December 31, 2018, was 100% leased (including leases with future commencement dates). Our involvement in the project began with the formation of a joint venture with Hines in 2012, and as of April 1, 2019, we now own 100% of Salesforce Tower. We expect the income from Salesforce Tower to have a significant impact on our results of operations in 2019, which is seven years after our initial involvement; Hines had been involved in the project since 2007. Other successful development projects have taken even longer. For example, it took more than 20 years to acquire, design, permit, construct andlease-up to stabilization 888 Boylston Street in Boston.
Redevelopment and repositioning of existing properties are also important components of maintaining and enhancing the overall quality and long-term value of our portfolio. However, redevelopment and repositioning activities often have a short-term dilutive impact. When we remove from service all or a portion of a property for redevelopment or repositioning, we typically recognize less rental revenue
II. EXECUTIVE COMPENSATION PROGRAM BOSTON PROPERTIES, INC. |› 2019 Proxy Statement 43
COMPONENTS OF EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS III. ASSESSING PERFORMANCE
while the space is vacant. For example, our repositioning activity at One Five Nine East 53rd Street in New York City required that we pay some tenants to terminate their leases. Among other things, this can have a material negative impact on a comparison of our results of operations and funds from operations. However, we absorb the short-term negative impact because we believe investing in our assets to maintain and enhance the quality of our portfolio is in the best interest of stockholders. In addition to maintaining a full-service real estate platform and providing superior service to our tenants, our focus on long-term performance involves management of capital and liquidity, leverage ratios, interest-rate risk, capital commitments and debt maturities to reduce the impact of capital market volatility and provide us with the flexibility to take advantage of opportunities as they arise.
For all these reasons, we look at performance not only for the latest year and on a year-over-year basis, but also with a view to managing compensation to appropriately compensate, incentivize and retain our executives.
Performance Metrics
We focus on key drivers of value creation such as leasing, development activity, new investments, dispositions, growth in FFO per share, same property net operating income (NOI) growth and balance sheet management. While the Committee is aware that different companies may calculate relevant performance metrics differently, particularlynon-GAAP financial measures, the Committee finds it useful to compare our performance to what the Office Peers disclose for similar measures, even though information is not always directly comparable among companies.
The Committee believes that internal and external data are important tools in the design and implementation of optimal compensation programs and that benchmarking against peers provides the Committee with a market check of its compensation awards. Different sections of this CD&A discuss in detail the data on which the Committee relied to make sure that different elements of compensation align with our performance. In addition, the Committee utilizes its collective experiences and judgment when establishing the appropriate types and amounts of compensation.
The Committee’s evaluation of our NEOs places strong emphasis on their contributions to overall Company performance because the Committee believes that the NEOs share responsibility for achieving the goals of the Company as a whole, and the goals are set with a view towards how they help achieve the overall long-term strategy by the Board. We also value and seek to reward performance that develops talent at all levels of our organization, promotes our culture of excellence, enhances our reputation and extends our track record of profitability and growth.
Direct Peer Competitors
In addition to assessing our performance against ourpre-established internal goals, the Committee also reviews our performance against metrics from other companies to assess our performance relative to our peers’ performance and to ensure the goals are sufficiently challenging. Given our scale, national focus and development skills, we do not have a directly comparable peer in the public market. We often compete with larger, privately-owned and, in some cases, global office development companies for which performance data is not publicly available. In the public market where operating data is available, we assess our specific performance relative to the following six Office Peers (with their total capitalizations as of December 31, 2018 shown in parentheses), some of which we compete with in a single market and some of which do not have development capabilities or pursue significant development strategies.
Douglas Emmett, Inc. ($10.9 billion)
JBG Smith Properties ($6.9 billion)
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Kilroy Realty Corporation ($9.6 billion)
Paramount Group, Inc. ($7.3 billion)
SL Green Realty Corp. ($13.1 billion)
Vornado Realty Trust ($24.0 billion)
Boston Properties’ total capitalization as of the same date was $32.3 billion (see “– VII. Benchmarking Peer Group and Compensation Advisor’s Role”).
2018 Corporate Goals
In early 2018, the Committee established for management a rigorous set of operational, capital and management goals that the Committee believed challenged management to perform for our investors. We do not have a strictly formulaic framework for measuring annual performance against goals to determine compensation. (See “–III. Assessing Performance” above.) The Committee believes that:
the focus should be on performance over a time span that is consistent with the different core elements of our long-term strategy for creating value;
excessive reliance on short-term goals could have negative implications for the execution of our strategy;
business conditions and unforeseen developments during the year that lead our Board and management to make decisions that impact actual performance against the goals as originally established must be taken into account; and
calculations that formulaically determine the amount of compensation paid based on performance versus goals may have unintended results.
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III. ASSESSING PERFORMANCE
The table below lists the principal operational and capital goals for 2018 and the Committee’s overall assessment of management’s performance with respect to each denoting whether a goal was “exceeded,” “met” or “not met.” The Committee attributes greater relative importance to certain goals based on what the Committee deems most important in the execution of our strategy in that year. For 2018, the Committee categorized the goals as follows:
| | | 2018 Goals COMPONENT | | Overall AssessmentWHY WE PAY IT | Primary Goals: | | Base Salary | | Provide a fixed, competitive level of cash compensation that reflects the NEO’s leadership role and the relative market rate for the executive’s experience and responsibilities | | | Annual Cash Incentive | | Reward NEOs for achievement of annual financial and strategic goals that drive stockholder value, thereby aligning our NEOs’ interests with those of our stockholders • Annual cash bonuses for each NEO are linked to performance against goals in three weighted categories and each NEO has target and maximum bonus opportunities | | | Performance-Based Equity (MYLTIP) | | Align the interests of our NEOs with those of our stockholders Motivate, retain and reward NEOs to achieve multi-year strategic business objectives that drive both relative and absolute TSR out-performance • Create a direct link between executive pay and relative and absolute TSR performance • Enhance executive officer retention with 100% vesting after completion of three-year performance period (i.e., “cliff vesting”), with one additional year of post-vesting transfer restrictions | | | Time-Based Equity | | Align the interests of our NEOs with those of our stockholders Motivate, retain and reward NEOs to achieve multi-year strategic business objectives that drive absolute TSR out-performance • Create a direct link between executive pay and absolute TSR performance • Enhance executive officer retention with time-based, multi-year vesting schedules for equity incentive awards |
›2020 ANNUAL TARGET COMPENSATION In the first quarter of each year, the Committee establishes annual target total compensation for each NEO by considering competitive benchmarking data, executive position and level of responsibility and, for executives other than our CEO, our CEO’s recommendation. Targets are reviewed annually and adjusted if determined to be appropriate by the Committee. The Committee may also adjust target compensation to reflect changes in or new responsibilities. | | | | | | | | | | | | 2021 Proxy Statement | | 55 |
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | II. EXECUTIVE COMPENSATION PROGRAM |
Variable pay, consisting of annual cash bonuses and LTI equity awards, constitutes the vast majority of our executive compensation. We believe that having a significant portion of our executives’ compensation at risk more closely aligns their interests with our long-term interests and those of our stockholders. For our CEO and NEOs as a group, variable pay for 2020 was 92.8% and 90.5%, respectively, of target total compensation. This emphasis on variable pay allows the Committee to reward good performance and penalize poor performance. For 2020, the targeted mix of total direct compensation was as follows: | | | CEO TARGET PAY MIX | | ALL NEOs TARGET PAY MIX | | | | | |
The total target direct compensation for each NEO was as follows: | | | | | | | | | | | | | | | | | Name | | Salary | | | Target Bonus | | | Target LTI Equity | | | Total Target Compensation | | Owen D. Thomas | | | $ 900,000 | | | | $ 2,350,000 | | | | $ 9,250,000 | | | | $ 12,500,000 | | Douglas T. Linde | | | $ 750,000 | | | | $ 1,900,000 | | | | $ 5,850,000 | | | | $ 8,500,000 | | Raymond A. Ritchey | | | $ 740,000 | | | | $ 1,650,000 | | | | $ 4,410,000 | | | | $ 6,800,000 | | Michael E. LaBelle | | | $ 510,000 | | | | $ 1,250,000 | | | | $ 1,990,000 | | | | $ 3,750,000 | | Bryan J. Koop | | | $ 410,000 | | | | $ 1,250,000 | | | | $ 1,490,000 | | | | $ 3,150,000 | |
›CASH COMPENSATION Base Salary The base salary for each NEO is determined by the Committee and is intended to provide a fixed level of compensation that reflects the NEO’s leadership role and the relative market rate for similarly situated executives in the NEO’s position. The Committee determines whether to adjust base salaries based on a range of factors, including benchmark versus peers and changes in individual duties and responsibilities. Any increases to base salaries are generally determined in January of the compensation year and become effective in February of the compensation year. | | | | | | | | | 56 | | | | | 2021 Proxy Statement |
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The Committee did not increase the base salary of any NEO for 2021 and has not changed the base salary for any NEO since 2019. | | | | | | | | | Name | | 2020 Salary | | 2019 Salary | | % Change | | Owen D. Thomas | | $900,000 | | $900,000 | | | — | | Douglas T. Linde | | $750,000 | | $750,000 | | | — | | Raymond A. Ritchey | | $740,000 | | $740,000 | | | — | | Michael E. LaBelle | | $510,000 | | $510,000 | | | — | | Bryan J. Koop | | $410,000 | | $410,000 | | | — | | | | | | Total | | $3,310,000 | | $3,310,000 | | | — | |
2020 Annual Incentive Plan Program Design and Structure In January 2020, based largely on feedback received from our investors in 2019, the Committee established the 2020 Annual Incentive Plan under which annual cash bonuses payable to our executive officers are directly linked to the achievement of specific, pre-established goals. Under the plan, each NEO has a target bonus opportunity expressed in a fixed dollar amount. Actual earned amounts may range from zero (0) to 150% of target, depending on performance versus the annual goals in each category, with payout interpolated for performance between levels. | | | Performance Level for Each Category | | Payout (% of Target) | >= Maximum | | 150% | Target | | 100% | Threshold | | 50% | <Threshold | | 0 |
We use a “scorecard” approach for our bonus determinations. This approach is intended to reflect a comprehensive analysis by the Committee of corporate, regional and individual performance based on performance in three categories: (1) FFO per Share, (2) Leasing and (3) Business and Individual goals. FFO per Share. FFO per share was selected as a key financial metric for the 2020 Annual Incentive Plan because it is the earnings metric most commonly used by investors and analysts to evaluate our performance on an absolute basis and relative to other REITs. As such, the Committee considers this to be the corporate component of the scorecard as it is an objective, company-wide performance metric that drives near-term business strategies. The FFO per share goal is subject to adjustment for acquisitions, dispositions, financings, lease terminations and similar transactions and circumstances. Leasing. The Committee established specific leasing goals, starting at the property level, rolling up by region and then aggregating to corporate leasing goals, as the second component. The leasing goals were then categorized as short-term leasing and total leasing goals to encourage the executives to focus on current addressable vacancies and near-term roll-over, and to avoid scenarios in which leasing goals are met solely due to unexpected early renewals. The Committee selected this category because it links objective measures of corporate, regional and individual performance by formula to the amounts paid. Business & Individual Goals. Business goals include milestone-oriented objectives related to management of capital expenditures and G&A expense, acquisitions, dispositions, delivering development and construction projects on time and budget and achieving the desired returns on cost, joint ventures, securing entitlements, and/or launching new developments. Business goals are based on regional priorities for the regional EVPs. For the CEO and President, business goals include a relevant subset of those regional goals, as well as goals related to executive management of the Company. For the CFO, business goals relate to balance sheet management, capital raising, and other finance department priorities. Individual goals include leadership and professional development goals, diversity initiatives, succession planning and other ESG priorities for each executive. The Compensation Committee considers absolute and/or relative performance outcomes against Company and Business and Individual goals and objectives, as well as the context in which they were achieved (including, e.g., degree of difficulty, importance to BXP, headwinds and tailwinds during the year and other similar factors). | | | | | | | | | | | | 2021 Proxy Statement | | 57 |
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For the 2020 compensation year, the Committee set the weighting of each category equally for all NEOs except for Mr. LaBelle. The following table summarizes the performance measurement categories and weightings under the Annual Incentive Plan for 2020. | | | | | | | | | | | | | | | | | | | | | | | Weightings | | Annual Incentive Performance Measures | | Thomas | | | Linde | | | LaBelle(1) | | | Ritchey | | | Koop | | FFO per Share | | | 33.3 | % | | | 33.3 | % | | | 33.3 | % | | | 33.3 | % | | | 33.3 | % | Leasing (Short-Term and Total) | | | | | | | | | | | | | | | | | | | | | Overall BXP | | | 33.3 | % | | | 33.3 | % | | | 16.7 | % | | | | | | | | | DC Region(2) | | | | | | | | | | | | | | | 24.8 | % | | | | | LA Region(2) | | | | | | | | | | | | | | | 8.5 | % | | | | | Boston Region | | | | | | | | | | | | | | | | | | | 33.3 | % | Business & Individual Goals | | | | | | | | | | | | | | | | | | | | | Overall BXP | | | 33.3 | % | | | 33.3 | % | | | | | | | | | | | | | Finance | | | | | | | | | | | 50.0 | % | | | | | | | | | DC Region + LA Region | | | | | | | | | | | | | | | 33.3 | % | | | | | Boston Region | | | | | | | | | | | | | | | | | | | 33.3 | % | Total | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % |
(1) | For all NEOs except Mr. LaBelle, the weighting of each category is equal (33.3% for each of FFO per Share, Leasing and Business and Individual goals). For Mr. LaBelle, the weightings are 33.3% for FFO per share, 16.7% for leasing and 50% for business & individual goals. In determining Mr. LaBelle’s weightings for each category, the Committee considered, among other things, his reduced role in leasing relative to Messrs. Thomas and Linde and his direct role in and responsibility for the Finance Department of the Company. |
(2) | Mr. Ritchey’s leasing goal (weighted 33.3% in total) is evenly split between short-term and total leasing (16.7% each) and further bifurcated between the Washington, DC and Los Angeles regions based on the square footage of each region’s portfolio as follows: short-term: 70% Washington, DC / 30% Los Angeles; total: 79% Washington, DC / 21% Los Angeles. |
NEOs’ Response to the World Health Crisis and Important Social and Environmental Issues At the time we filed our 2020 proxy statement, the COVID-19 pandemic was in its infancy and, in light of the rapidly changing business environment and fluid nature of the potential implications on the Company’s business, the Committee reserved its right to re-evaluate the categories and targets, as appropriate, in light of the pandemic’s actual impact on Boston Properties. Soon thereafter, Americans witnessed the social movements that spotlighted racial and social injustices that plague society that called for action, and we experienced a much-heightened awareness of the importance of environmental and sustainability issues. Despite the sudden and significant impact of the global pandemic on our business, the Committee prioritized maintaining a strong alignment with our shareholders’ interests and decided not to modify any aspects of the executive compensation program despite the unexpected and unprecedented economic and social conditions. In deciding not to change the 2020 Annual Incentive Plan, the Committee considered (1) the importance of demonstrating its commitment to the more formulaic bonus plan in its first year, (2) whether doing so would disrupt the alignment of interests between our NEOs and investors and (3) whether choosing not to do so would negatively impact retention and incentives. As a result, our NEOs earned no payout under the FFO per share category and only one NEO earned a portion of the potential payout for the leasing category and it was below target. For the third performance category under the 2020 Annual Incentive Plan, the Committee established Business and Individual goals for each NEO in January 2020. This category represented 33.3% of the potential payout opportunity for each NEO other than Mr. LaBelle (for whom it represented 50%). As it became clear that the pandemic was causing severe strain on the economy, our tenants and our business, the Board shifted its priorities for management and the Committee appended to each NEO’s Business and Individual goals a set of pandemic-related goals intended to assess and reward the NEOs for their success in meeting those priorities. | | | | | | | | | 58 | | | | | 2021 Proxy Statement |
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In determining that our NEOs exceeded their pandemic-related goals, the Committee noted the following achievements: although physical occupancy was low, all office properties throughout the Boston Properties portfolio remained open for tenants, in early April 2020, we formed a Health Security Task Force comprised of Boston Properties’ employees, as well as outside experts in health care, industrial hygiene, cleaning and security, in May 2020, the Heath Security Task Force issued a Heath Security Plan for repopulating the workplace, which provided a framework for health security at BXP’s office properties, including enhanced cleaning and disinfection, air and water quality protocols, physical distancing, screening and personal protective equipment (PPE) requirements, following the release of the Health Security Plan in early May, our NEOs and management teams conducted town halls and one-on-one sessions with tenants across BXP’s regions to support their office repopulation processes, which slowly began in June in Boston, our NEOs demonstrated remarkable discipline and flexibility in maximizing rent collections while concurrently addressing tenants’ needs: | › | for the month of April 2020, the first full month of COVID-19 restrictions, we collected approximately 97% of the total rent due April 1 from office tenants, and collections among all tenants were approximately 93% |
| › | by the fourth quarter of 2020, collections from office tenants had improved to a strong 99.7%, and collections from all tenants were 99.1%, |
when appropriate, our NEOs worked with our tenants (primarily in retail businesses) that were in financial distress to modify lease agreements and otherwise provide relief in light of the economic downturn. During 2020, these lease modification agreements covered approximately 4.7 million square feet | › | although some of the lease modifications were deferrals under which we expect the tenant will pay us in full primarily in 2021, the majority of the lease modifications involved extending the lease term (in some cases for a year or more) or providing for a period of time where the tenant will only pay percentage rent |
| › | as a result of the lease modification agreements that extended the lease terms, we expect to see an increase in the cash rent we will receive in the future, |
in elevating our focus on diversity and equity, we constituted our Diversity and Inclusion Committee in early 2020. Our NEOs demonstrated strong commitment to fostering its success and supported the D&I Committee in promoting diversity both within BXP and in the communities in which we operate | › | the D&I Committee set its focus on (1) recruitment and development, (2) Company policies and (3) community outreach |
| › | the D&I Committee has met and expects to meet regularly with our full Board of Directors, and |
| › | in early May 2020, we issued $1.25 billion of 3.250% senior unsecured notes that mature in 2031, and we used the net proceeds to repay amounts borrowed under our revolving line of credit and to bolster our liquidity. |
Although it was not a factor in assessing our NEOs’ performance against their pandemic-related goals, the Committee noted that Boston Properties and its NEOs were ranked #1 among all office REITs by Institutional Investors Magazine in 2020 in the category “Crisis Management amid COVID-19.” They also ranked #1 in the following categories: Overall All-American Executive Team, Despite the severe, negative impacts of the pandemic on office REITs generally, which led to negative absolute total stockholder returns across the sector in 2020, the Committee also noted that Boston Properties’ TSR for the one-year and three-year periods ending December 31, 2020 placed it at the 80th percentile, or third, among its most directly comparable office peers for both periods. (For a list of these peers, see “– LTI Equity Compensation – 2021 MYLTIP” below.) Although the Committee did not base its decisions on BXP’s relative TSR rankings, the Committee believes they validated the appropriateness of the final bonus payments to our NEOs. | | | | | | | | | | | | 2021 Proxy Statement | | 59 |
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Set forth in the following tables is a summary of each NEO’s performance measures and weightings, with specific threshold, targets and maximum goals for each of the FFO per share and leasing performance measures, and the principal business, individual and pandemic-related goals, along with each NEO’s performance results for 2020. | | | | | | | | | | | | | | | | | | Owen D. Thomas | Performance Category | | Weighting | | Payout (% of target) | | | Threshold 50% | | Target 100% | | Maximum 150% | | 2020 Results | | Category Payout % | | | | | | | | | FFO per Share | | | | | | | | $7.35 | | $7.55 | | $7.75 | | $6.29(1) | | 0% | Leasing (in million square feet) | | | | | Short-term | | | 3.2 | | 3.6 | | 4.4 | | 1.7 | | 0% | | | Total | | | 5.0 | | 5.6 | | 6.9 | | 3.7 | Business & Individual Goals | | | |
| The Committee assessed Mr. Thomas’ performance against his business, individual and pandemic-related goals and determined that he exceeded his goals and earned the maximum award for this category. | | 150.0% |
| | | | | | | | Business goals included: • Execute capital raising strategy to fund future investments • Manage G&A, capital expenditures and credit ratings • Complete identified transactions • Deliver identified development projects in-service | | Individual goals included: • Make contributions to increase workforce diversity • Increase employee engagement • Oversee and manage employees, including the execution of succession plans | | Pandemic-related goals included: • Demonstrate strong leadership during pandemic and demands of remote work • Ensure health security of BXP employees and customers • Maximize rent collections • Optimize leasing outcomes • Ensure active development projects remain on schedule and on budget | | | TOTAL ANNUAL INCENTIVE PAYOUT AS A % OF TARGET = 50.0% |
(1) | For all NEOs, represents Diluted FFO per share. For disclosures required by Regulation G, refer to pages 101 through 104 of our 2020 Annual Report on Form 10-K. |
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| | | | | | | | | | | | | | | | | | Douglas T. Linde | Performance Category | | Weighting | | Payout (% of target) | | | Threshold 50% | | Target 100% | | Maximum 150% | | 2020 Results | | Category Payout % | | | | | | | | | FFO per Share | | | | | | | | $7.35 | | $7.55 | | $7.75 | | $6.29 | | 0% | Leasing (in million square feet) | | | | | Short-term | | | 3.2 | | 3.6 | | 4.4 | | 1.7 | | 0% | | | Total | | | 5.0 | | 5.6 | | 6.9 | | 3.7 | Business & Individual Goals | | | |
| The Committee assessed Mr. Linde’s performance against his business, individual and pandemic-related goals and determined that he exceeded his goals and earned the maximum award for this category. | | 150.0% |
| | | | | | | | Business goals included: • Execute capital raising strategy to fund future investments • Manage G&A, capital expenditures and credit ratings • Complete identified transactions • Deliver identified development projects in-service | | Individual goals included: • Make contributions to increase workforce diversity • Manage Information Technology department’s execution of target objectives • Increase employee engagement | | Pandemic-related goals included: • Demonstrate strong leadership during the pandemic and demands of remote work • Ensure health security of BXP employees and customers • Maximize rent collections • Optimize leasing outcomes • Ensure active development projects remain on schedule and on budget | | | TOTAL ANNUAL INCENTIVE PAYOUT AS A % OF TARGET = 50.0% |
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| | | | | | | | | | | | | | | | | | Raymond A. Ritchey | Performance Category | | Weighting | | Payout (% of target) | | | Threshold 50% | | Target 100% | | Maximum 150% | | 2020 Results | | Category Payout % | | | | | | | | | FFO per Share | | | | | | | | $7.35 | | $7.55 | | $7.75 | | $6.29 | | 0% | Leasing (in million square feet) | | | | | Short-term | * | | | | | | | | | | | | | DC: | | | 1.1 | | 1.3 | | 1.6 | | 1.2 | | DC: 65.6% | | | LA: | | | 0.5 | | 0.6 | | 0.7 | | 0.1 | | LA: 0% | | | Total | * | | | | | | | | | | | | | DC: | | | 1.8 | | 2.0 | | 2.5 | | 1.9 | | DC: 70.1% | | | LA: | | | 0.5 | | 0.6 | | 0.7 | | 0.1 | | LA: 0% | | * For more detail on the weightings for Mr. Ritchey’s leasing goal, see page 58. | | | | | Business & Individual Goals | | | |
| The Committee assessed Mr. Ritchey’s performance against his business, individual and pandemic-related goals and determined that he exceeded his goals and earned the maximum award for this category. | | 150.0% |
| | | | | | | | Business goals included: • Assess new development and business opportunities in the DC and LA regions • Complete identified transactions | | Individual goals included: • Make contributions to increase workforce diversity • Expand focus on strategy and building and maintaining relationships • Maintain mentoring and leadership roles | | Pandemic-related goals included: • Demonstrate strong leadership during the pandemic and demands of remote work • Ensure health security of BXP employees and customers • Maximize rent collections • Optimize leasing outcomes • Ensure active development projects remain on schedule and on budget | | | TOTAL ANNUAL INCENTIVE PAYOUT AS A % OF TARGET = 66.9% |
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| | | | | | | | | | | | | | | | | | Michael E. LaBelle | Performance Category | | Weighting | | Payout (% of target) | | | Threshold 50% | | Target 100% | | Maximum 150% | | 2020 Results | | Category Payout % | | | | | | | | | FFO per Share | | | | | | | | $7.35 | | $7.55 | | $7.75 | | $6.29 | | 0% | Leasing* (in million square feet) | | | | | Short-term | | | 3.2 | | 3.6 | | 4.4 | | 1.7 | | 0% | | | Total | | | 5.0 | | 5.6 | | 6.9 | | 3.7 | | | * Mr. LaBelle’s leasing goal (weighted 16.7% in total) is evenly split between short-term and total leasing (8.35% each). | | | Business & Individual Goals | | | |
| The Committee assessed Mr. LaBelle’s performance against his business, individual and pandemic-related goals and determined that he exceeded his goals and earned the maximum award for this category. | | 150.0% |
| | | | | | | | Business goals included: • Execute capital raising strategy to fund future investments • Manage credit ratings • Develop strategy for 2021 debt maturities • Complete identified transactions • Enhance ESG disclosures in SEC filings and Sustainability Report | | Individual goals included: • Make contributions to increase workforce diversity • Manage and maintain effectiveness and productivity of Finance Department • Advance employee succession plans through mentoring | | Pandemic-related goals included: • Demonstrate strong leadership during the pandemic and demands of remote work • Ensure health security of BXP employees and customers • Manage operating expenses tightly • Support tenant collection and pandemic-related restructuring activities from financial perspective | | | TOTAL ANNUAL INCENTIVE PAYOUT AS A % OF TARGET = 75.0% |
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| | | | | | | | | | | | | | | | | | Bryan J. Koop | Performance Category | | Weighting | | Payout (% of target) | | | Threshold 50% | | Target 100% | | Maximum 150% | | 2020 Results | | Category Payout % | | | | | | | | | FFO per Share | | | | | | | | $7.35 | | $7.55 | | $7.75 | | $6.29 | | 0% | Leasing (in million square feet) | | | | | Short-term | | | 0.5 | | 0.6 | | 0.8 | | 0.08 | | 0% | | | Total | | | 1.1 | | 1.3 | | 1.5 | | 0.8 | Business & Individual Goals | | | |
| The Committee assessed Mr. Koop’s performance against his business, individual and pandemic-related goals and determined that he exceeded his goals and earned the maximum award for this category. | | 150.0% |
| | | | | | | | Leasing | | Exceeded | GrowthBusiness goals included: • Deliver identified projects in Diluted FFO per Share | | Exceeded | New Investments | | Exceeded | Key Leasing NOI Drivers | | Met | Development Starts | | Exceeded | Development Economics | | Met | Secondary Goals: | | | Dispositions | | Exceeded | Balance Sheet Management/Financings | | Exceeded | Development Deliveries | | Exceeded | Growththe Boston region• Maintain schedule and budget for development projects in Same Property NOI | �� | Met | Growth in Same Property NOI – Cash | | Met | General & Administrative Expense | | Met | Capital Expenditures & Repositioning | | Met | Redevelopment | | Met | Entitlements | | Met | Additional Management Goals: | | | Strategic Review | | Met | Board Initiatives | | Met | Investor Relations | | Exceeded | New Markets | | Met | ResidentialBoston region
| | MetIndividual goals included: • Make contributions to increase workforce diversity • Exhibit strong management skills and refine new business initiatives within region • Provide consultation support to other regions related to retail activities | | Pandemic-related goals included: • Demonstrate strong leadership during the COVID-19 pandemic and demands of remote work • Ensure health security of BXP employees and customers • Maximize rent collections • Optimize leasing outcomes • Ensure active development projects remain on schedule and on budget | | | TOTAL ANNUAL INCENTIVE PAYOUT AS A % OF TARGET = 50.0% |
Primary GoalsBased on the foregoing, the Committee awarded annual cash bonuses to the NEOs for 2020 as follows:
| | | | | | | Name | | 2020 Actual Annual Incentive | | 2020 Target Annual Incentive | | 2020 Actual as % of Target | Owen D. Thomas | | $1,175,000 | | $2,350,000 | | 50.0% | Douglas T. Linde | | $950,000 | | $1,900,000 | | 50.0% | Raymond A. Ritchey | | $1,103,850 | | $1,650,000 | | 66.9% | Michael E. LaBelle | | $937,500 | | $1,250,000 | | 75.0% | Bryan J. Koop | | $625,000 | | $1,250,000 | | 50.0% |
Ø | | | | | | | | | Leasing64
| | | | | 2021 Proxy Statement |
Why it is important:We generate revenue and cash primarily by leasing our operating and development properties. When making leasing decisions, we consider, among other things, the creditworthiness of the tenant, the term of the lease, the rental rate to be paid at inception and throughout the lease term, the costs of tenant improvements and other landlord concessions, current and anticipated operating expenses, real estate taxes, overall vacancy, anticipated rollover and expected future demand for the space, the impact of any expansion rights and general economic factors.
Goal:Following our successful leasing activity in 2016 and 2017, we set an even more aggressive leasing goal for 2018 of 6.3 million square feet (of which 4.8 million square feet were in ourin-service portfolio and 1.5 million square feet were in our development properties). In addition, we set a goal of achieving 90% - 92% occupancy for ourin-service portfolio and proactively managing future lease rollover.
46 BOSTON PROPERTIES, INC. |2019 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
III. ASSESSING PERFORMANCE
Quantitative Assessment:We exceeded the goal by leasing a total of 7.2 million square feet, or 14.6% of the total square footage in our total portfolio (excluding our residential and hotel properties). Of the total 7.2 million square feet, 5.2 million square feet were leased in ourin-service portfolio and 2.0 million square feet were leased in our development portfolio. Also, of the total 7.2 million square feet, 1.8 million square feet of leasing was completed in our New York region, including approximately 529,000 square feet at 399 Park Avenue. The total number of square feet leased at ourin-service and development properties was greater than all six of our Office Peers and the total as a percentage of our total portfolio was greater than three of the six Office Peers.
We also met our goal of achieving 90% - 92% occupancy for ourin-service portfolio and proactively managed future lease rollover. We accomplished this goal by increasing ourin-service occupancy by 70 basis points since December 31, 2017 to 91.4%, which was a greater percentage than three of the six Office Peers. Excluding Salesforce Tower in San Francisco, which was added to ourin-service portfolio in the fourth quarter of 2018 at 69.9% occupancy, the occupancy for ourin-service portfolio would have been 92.1%, which would have exceeded our occupancy goal. Salesforce Tower is 100% leased (including leases with future commencement dates), and we expect all office tenants to occupy the building by the second half of 2019.
Overall Assessment:Goal exceeded.
| | | 7Ø› | | Growth in Diluted FFO per Share COMPENSATION DISCUSSION AND ANALYSIS | | | II. EXECUTIVE COMPENSATION PROGRAM |
Why it is important:FFO is anon-GAAP financial measure that, when combined with the presentation of required GAAP financial measures, has improved the understanding of operating results of REITs among the investing public and has helped make comparisons of REIT operating results more meaningful. Management generally considers FFO and FFO per share to be useful measures for understanding and comparing our operating results because, by excluding real estate-related depreciation and amortization (which can differ across owners of similar assets in similar condition based on historical cost accounting and useful life estimates), impairment losses on depreciable real estate and gains or losses associated with disposition activities, FFO and FFO per share can help investors compare the operating performance of a company’s real estate across reporting periods and to the operating performance of other companies. Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current Nareit definition or that interpret the current Nareit definition differently.
Goal: Our goal was to exceed the midpoint of our guidance range for 2018 for diluted FFO per share of $6.20 to $6.36 (assuming no acquisitions and dispositions). This target range equated to projected growth of 0%-2.3% over 2017.
Quantitative Assessment:Our actual 2018 diluted FFO per share was $6.30, representing 1.3% year-over-year growth in diluted FFO per share, which was greater than one of the five Office Peers that reported year-over-year results. The sixth Office Peer, JBG Smith Properties, did not exist as a public company untilmid-2017 and, therefore, year-over-year results are not available. (Refer to pages 100 through 105 of our Annual Report on Form10-K for information relating to the calculation of FFO and diluted FFO.)
Qualitative Assessment:Our 2018 diluted FFO per share of $6.30 included the unbudgeted loss on extinguishment of debt of $0.10 per share resulting from the early redemption in December 2018 of $700 million of 5.875% unsecured senior notes that were scheduled to mature in October 2019. Excluding this loss and the impact of unbudgeted acquisitions and dispositions, our diluted FFO per share would have been $6.44, or $0.08 greater than the high end of the guidance range set at the beginning of the year, and would have equated to growth of 3.5% over 2017.
BOSTON PROPERTIES, INC. |2019 Proxy Statement 47
COMPENSATION DISCUSSION AND ANALYSISChanges for 2021 Annual Incentive Plan
III. ASSESSING PERFORMANCE
Overall Assessment:Goal exceeded.
Why it is important:Active participation in new investments sustains our market-leading position and growth prospects, and new partnerships provide additional sources of capital and validate our strong reputation as a preeminent owner and developer.
Goal:Our goal was to:
complete the procurement of anchor tenants for office developments in Reston, Virginia;
secure at least one anchor tenant at certain office developments or buildings in Boston, Cambridge and Washington, DC;
make select acquisitions depending on market conditions, with a focus on opportunities in the Los Angeles and San Francisco markets; and
form a joint venture strategy for certain New York City investments.
Quantitative Assessment:In 2018, management completed each componentAs part of the goal, successfully securing anchor tenants for four of the Company’s office developments aggregating more than 2.1 million square feet ofpre-leasing (subject to certain escrow conditions), consisting of:
850,000 square feet leased to Fannie Mae in Reston, Virginia;
440,000 square feet leased to Verizon Communications, Inc. at 100 Causeway Street in Boston, Massachusetts;
276,000 square feet leased to Leidos Holdings, Inc. in Reston, Virginia; and
an aggregate of 638,000 square feet leased to Google, LLC in Kendall Center in Cambridge, Massachusetts (which lease is currently in escrow pending satisfaction of certain conditions).
In addition, we significantly grew our footprint in Los Angeles with the acquisition of a 55% interest in Santa Monica Business Park and in the Bay Area with the execution of a65-year ground lease for land totaling approximately 5.6 acres (with an option to purchase commencing in February 2020) branded as Platform 16 in San Jose, California. In New York City, we established a new partnership through the acquisition of a 25% interest in a development project that could accommodate up to 2.0 million square feet located at 3 Hudson Boulevard, and we entered into a cost-sharing arrangement with an existing joint venture partner for the Metropolitan Transportation Authority (MTA) development project. Overall, for 2018, we invested a greater percentage of our gross asset value than five of the six Office Peers.
Overall Assessment:Goal exceeded.
Why it is important:Our current strategy to drive future growth is to invest primarily in higher yielding new development properties with significantpre-leasing commitments and in redevelopment opportunities, rather than lower yielding acquisitions of stabilized assets for which demand and pricing remain aggressive. Consistent with this strategy, beginning in 2015 we removed all or portions of some of our properties from service for redevelopment or repositioning, despite the near-term dilutive impact. In light of the significant amount of development and redevelopment projects, and the loss of occupancy and the dilutive impact of removing properties from service, management outlined for investors our plan to achieve incremental growth of approximately $366 million (including $256 million from development
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properties and $110 million from other key assets) in our share of annualized NOI by 2020. The Key NOI Drivers goal is the primary manner by whichCommittee’s annual executive compensation process, the Committee assesses progress againstreviewed and reassessed the “bridge” in the years leading up to 2020.
Goal:In addition to the overall leasing goal discussed above, we set specific goals to lease an aggregate of approximately 1.4 million square feet at sevenin-service properties and an aggregate of approximately 270,000 square feet at two existing development projects in 2018.
Quantitative Assessment:As of December 31, 2018, we had signed leases for an aggregate of approximately 2.3 million square feet at the sevenin-service properties,annual cash incentive program, including more than 740,000 square feet at our Reston Town Center property in Reston, Virginia and approximately 529,000 square feet at 399 Park Avenue in New York City. The 529,000 square feet of leasing at 399 Park Avenue was twice the amount of the goal. Of the sevenin-service properties, management only failed to achieve the specific goal for one property and only by approximately 23,000 square feet, but overall, management exceeded the totalin-service leasing goal of 1.4 million square feet by 0.9 million square feet.
As of December 31, 2018, we had signed a lease for an aggregate of approximately 195,000 square feet at our One Five Nine East 53rd Street (the low rise portion of 601 Lexington Avenue) in New York City, meeting one of the two existing development projects targeted in the goal. We did not complete any new leasing at the Brooklyn Navy Yard development project in 2018.
Qualitative Assessment:Despite failing to achieve the leasing goals at two of the nine assets targeted by management, the Committee concludedits structure. Based on that taken as a whole, management successfully met this goal by leasing an aggregate of 2.3 million square feet at the nine assets, exceeding the goal by 0.9 million square feet, or 64%.
Overall Assessment:Goal met.
Why it is important:Development starts are a useful indicator of future external growth, and they help us assess our ability to identify, underwrite and acquire new land parcels and air rights or redevelop existing properties, secure anchor tenants with significantpre-leasing commitments, obtain financing and/or joint venture partners, and commence construction of the building. Our investments in new developments and redevelopments are a product of the execution of our strategy to drive future growth, and the commencement of these projects substantiates our reputation and expertise in this area.
Goal:Our goal was to commence development of 17Fifty Presidents Street, a 276,000 square foot office development, and Reston Gateway, a 1.1 million square foot development, both located in Reston, Virginia.
Quantitative Assessment:We met the goal by commencing the developments of 17Fifty Presidents Street in the first quarter of 2018 and Reston Gateway in the third quarter of 2018. The aggregate budget for both projects is approximately $858.2 million. In addition, management successfully secured Verizon Communications, Inc. as the anchor tenant at 100 Causeway Street in Boston, Massachusetts, the office component of The Hub on Causeway development project that we own in a joint venture with Delaware North Companies, Inc., and commenced development in the third quarter of 2018.
When delivered, we expect these properties will total approximately 2.0 million square feet, which is approximately 0.7 million square feet more than the goal set for 2018. As of December 31, 2018, these three office development projects were 80%pre-leased. Our three development starts have
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COMPENSATION DISCUSSION AND ANALYSIS
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an aggregate development budget (our share) of approximately $1.1 billion and represent approximately 4.5% of our gross asset value, which percentage is greater than five of the Office Peers.
Overall Assessment:Goal exceeded.
Why it is important:The success of our development projects and realization of our plans for growth depend on the stabilized unleveraged cash yields we generate.
Goal: Our goal was to deliver three development/redevelopment projects – 191 Spring Street in Lexington, Massachusetts, Proto Kendall Square in Cambridge, Massachusetts and Signature at Reston in Reston, Virginia – on or below budget, which was an aggregate of approximately $429 million.
Quantitative Assessment:The actual cost for all three projects totaled approximately $429 million. Thecash-on-cash return for 191 Spring Street was approximately 6.4%, performing in line with management’s expectations. The other two projects – Proto Kendall Square and Signature at Reston – are residential development projects that were 56% and 50% leased, respectively, as of December 31, 2018. Upon stabilization, we expect these residential properties to deliver unleveragedcash-on-cash returns of approximately 5.4% and 6.7%, respectively, both of which are slightly greater than management’s projected returns prior to project commencement. In addition to the three development/redevelopment projects targeted by management, we also fully placedin-service Salesforce Tower in the fourth quarter of 2018, which was 100% leased at December 31, 2018 (including leases with future commencement dates) and also exceeded management’s projectedcash-on-cash return for the project.
Overall Assessment:Goal met.
Secondary Goals
Why it is important:The disposition ofnon-core assets and assets with lower growth profiles helps to enhance the performance of our remaining portfolio through higher portfolio occupancy and revenue growth. In addition, older buildings require relatively greater operating costs and capital expenditures than new buildings, so we believe a consistent review, of the properties in our portfolio and their future growth opportunities is an important component of our overall strategy.
Goal: Our goal was to sell an aggregate of at least $200 million in assets, depending on market conditions, and to specifically sell three of sixnon-core assets identified by management at the beginning of the year and at least one other asset not identified. The sale of additional assets or development projects to raise capital as needed was also included in the goal.
Quantitative Assessment:During 2018, we completed approximately $492.0 million in sales of sixnon-core assets or assets with lower growth profiles, including our development project for the TSA in Springfield, Virginia. We sold the TSA development project for approximately $98.1 million, and the buyer assumed the future funding needs to complete the construction. The estimated total project costs, including the land, are approximately $313.7 million. Therefore, the sale of the TSA development project resulted in a significant reduction in our near-term capital needs of approximately $215.6 million. Including this reduction, dispositions in 2018 totaled approximately $708 million of consideration, which represents approximately 2.8% of our gross asset value, and this percentage was greater than two of the six Office Peers.
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Overall Assessment: Goal exceeded.
Ø | | Balance Sheet Management/Financings
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Why it is important:A strong balance sheet and superior access to capital help us minimize debt financing costs, enable us to act quickly on opportunistic investments and better manage our debt maturities to reduce the impact of capital market volatility.
Goal:Our goal was to manage near-term debt maturities and maintain a conservative balance sheet by:
financing the Hub on Causeway – Residential development project;
developing a strategy and begin marketing for construction financing for our Marriott Headquarters development project;
refinancing the loan collateralized by 540 Madison Avenue;
developing a strategy for refinancing our revolving facility to fund projected development costs;
evaluating the use and replacement for our delayed draw term loan;
completing awork-out arrangement with our partner in the Annapolis Junction Building One property; and
developing a strategy for refinancing the $700 million of our 5.875% unsecured senior notes maturing in October 2019.
Quantitative Assessment:In 2018, management executed our strategy to manage near-term debt maturities and maintain a conservative balance sheet by accomplishing all of the components in this goal. For example, in December 2018, we completed a public “green bond” offering of $1.0 billion in aggregate principal amount of 4.500% unsecured senior notes due 2028. The proceeds of the green bond issuance were initially used to redeem $700 million in aggregate principal amount of our 5.875% unsecured senior notes scheduled to mature in October 2019 and to repay amounts outstanding under our revolving credit facility. This had the effect of reducing our borrowing costs and extending our debt maturities. Also, in 2018, our50%-50% joint venture that owned Annapolis Junction Building One modified a mortgage loan that was in default and distributed 100% of the interest in the property to our partner, including the assumption by our partner of the mortgage loan. We no longer have an ownership interest in this property.
In addition, we completed significant financings for two of our joint venture properties. In April 2018, a joint venture in which we have a 50% interest obtained construction financing with a total commitment of $180.0 million collateralized by its Hub on Causeway – Residential development project in Boston, bearing interest at a variable rate equal to LIBOR plus 2.00% per annum and maturing in April 2022. Also in April 2018, a joint venture in which we own a 60% interest refinanced a loan secured by interests in 540 Madison Avenue in New York City totaling $120.0 million, bearing interest at a variable rate equal to LIBOR plus 1.10% per annum and maturing in June 2023.
Overall Assessment:Goal exceeded.
Why it is important:Development deliveries measure our ability to execute our development pipeline on time and within budget.
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Goal:Our goal was to deliver three development/redevelopment projects – 191 Spring Street, Proto Kendall Square and Signature at Reston – totaling approximately 839,000 square feet with an aggregate development budget of $429 million, which represents 1.8% of our gross asset value.
Quantitative Assessment:We met the goal by fully placingin-service all three development projects on budget and for an aggregate of approximately 855,000 square feet. In addition, we fully placedin-service our Salesforce Tower development project consisting of approximately 1.4 million square feet in San Francisco in the fourth quarter of 2018. In total, the four development projects delivered in 2018 represent an aggregate of 2.3 million square feet, which is greater than all six Office Peers, and 6.0% of our gross asset value, a greater percentage than four of the six Office Peers.
Overall Assessment:Goal exceeded.
Ø | | Growth in Same Property NOI
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Why it is important:Same Property NOI (excluding termination income) reflects the combined impact of trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective on the performance of our Same Property portfolio across fiscal periods which are not immediately apparent from net income.
Goal:Our goal for year-over-year growth in our share of Same Property NOI (excluding termination income) was a 0.5% - 2.5% increase.
Quantitative Assessment: We met the goal with a 1.5% increase. The growth in our share of Same Property NOI (excluding termination income) was greater than two of the Office Peers. (Refer toAppendix A to this proxy statement for reconciliations and other information regarding our share of Same Property NOI (excluding termination income) for the fiscal years ended December 31, 2018 and 2017.)
Overall Assessment:Goal met.
Ø | | Growth in Same Property NOI – Cash
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Why it is important:Same Property NOI – Cash (excluding termination income) allows investors to compare the performance of our Same Property portfolio across periods without taking into account the effects of straight-lining rent, fair value lease revenue, straight-lined ground rent expense and certain lease transaction costs that qualify as rent inducements.
Goal:Our goal for year-over-year growth in our share of Same Property NOI (excluding termination income) – Cash was a 0.5% - 2.5% increase.
Quantitative Assessment:Management achieved the goal with year-over-year growth of 1.3% compared to 2017, which was less than five of the Office Peers that reported year-over-year results for this metric. The sixth Office Peer, JBG Smith Properties did not exist as a public company untilmid-2017 and, therefore, year-over-year results for this metric are not available. (Refer toAppendix A to this proxy statement for reconciliations and other information regarding our share of Same Property NOI – Cash (excluding termination income) for the fiscal years ended December 31, 2018 and 2017.)
Overall Assessment:Goal met.
Ø | | General and Administrative Expense
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Why it is important:To understand our expense base, of which executive compensation is a meaningful line item, our Committee assesses our management of G&A expense by targeting an absolute dollar amount for G&A expense as a percentage of total revenue.
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Goal:Our goal was to manage G&A expense (excluding transaction expenses) to an aggregate spend of approximately $117 million, including compensation, benefits and other expenses.
Quantitative Assessment:Our actual 2018 G&A expense was approximately $121.7 million, which represents approximately 4.5% of our total revenue for 2018. This is a smaller percentage of total revenue than five of the six Office Peers.
Overall Assessment:Goal met.
Ø | | Capital Expenditures and Repositioning
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Why it is important:Consistent with our strategy to create long-term value, we reinvest in our existing properties through capital expenditures to maintain and enhance the overall high quality and value of our assets. This strategy includes thoughtful deliberations by management in selecting certain properties within our portfolio for repositioning to improve the assets’ value and better position them for competition.
Goal:Our goal was to make capital expenditures of up to $166 million, which includes approximately $51 million for repositioning projects.
Quantitative Assessment:Our actual capital expenditures in 2018 were approximately $142 million, representing approximately 0.6% of our gross asset value for 2018, which is a greater percentage of gross asset value than four of the six Office Peers, and $3.16 per square foot, which is greater than three of the six Office Peers.
Overall Assessment:Goal met.
Why it is important:Redevelopment of existing properties is important in maintaining the overall high quality of our portfolio of assets, and repositioning properties –e.g., to add amenities, incorporate technology,re-imagine interior spaces or upgrade infrastructure., etc., can better position specific properties to attract certain types of tenants and their workers.
Goal:Our goal was to:
finalize redevelopment plans for two of our assets;
commence lobby renovations at Embarcadero Center in San Francisco, California; and
complete the renovations and redevelopments of three assets.
Quantitative Assessment:In 2018, we finalized redevelopment plans for the two properties identified, which resulted in the commencement of renovations at Embarcadero Center and the sale of 1333 New Hampshire Avenue in Washington, DC. We also completed renovations at two of the three identified assets: 399 Park Avenue in New York City and 100 Federal Street Plaza in Boston, Massachusetts. The other property identified for completion of renovations remains ongoing as the tenant continues to perform tenant work and anticipates opening in early 2019.
Overall Assessment:Goal met.
Why it is important:Obtaining the necessary entitlements and permits is an essential component to the execution of our development and redevelopment pipeline.
Goal: Our goals were to (1) obtain the remaining entitlements and/or complete the development plans for five projects and (2) advance the development plans for three projects.
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Quantitative Assessment:We obtained the necessary entitlements for four of the five projects, including Back Bay Station in Boston, Massachusetts, 2100 Pennsylvania Avenue in Washington, DC, Reston Gateway in Reston, Virginia and 7750 Wisconsin Avenue (Marriott Headquarters) in Bethesda, Maryland, which has commenced development. We did not receive the entitlements for the fifth property – Weston Corporate Center – because the town proposed a new development scheme. In addition, we advanced our development plans at each of the three properties that comprised the goal: Fourth and Harrison in San Francisco, MTA in New York City and 3625-3635 Peterson Way in Santa Clara.
Qualitative Assessment:Management made significant progress in 2018 by securing entitlements for four development projects totaling an aggregate of approximately 3.6 million square feet, and the Committee concluded that the failurecategories were appropriate, but that market practice among peers was that more weight should be given to obtain entitlements was the resultBusiness and Individual Goals. For 2021, the Committee changed the weighting of the process not being withincategories under the control of management. We remain focused on obtaining the remaining entitlementsAnnual Incentive Plan for Mr. LaBelle so that we have more control overit is the timing of when to commence construction of these projects. In lightsame for all five NEOs, and changed the weightings of the entitlements obtained in 2018, the Committee concluded that management met this goal.
Overall Assessment:Goal met.categories so they will be FFO per Share – 30%, Leasing – 30% and Business and Individual goals – 40%.
Additional Management Goals›LTI EQUITY COMPENSATION
Our executive officers were also given an additional setThe equity component of management goals in 2018, as shown on page 46. These additional management goals, by their nature, did not lend themselves to quantitative assessments. The Committee concluded that management satisfied these goals and they were considered as part of the overall qualitative assessment of performance for the year.
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COMPENSATION DISCUSSION AND ANALYSIS
IV. | PERFORMANCE-BASED EQUITY AWARDS; THREE-YEAR TSR DRIVES ACTUAL EARNED PAY
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Multi-Year Long-Term Incentive Program (MYLTIP)
Management’s performance against operational, capital and management goals drives the Committee’s annualour NEOs’ compensation awards. What our NEOs actually earn is driven to a significant extent by our TSR through LTI equity awards consisting of a mix of time-based and performance-based LTIP unit awards.
Time-Based Equity Awards The time-based LTI equity awards granted to the NEOs for 2020 performance consisted of LTIP units or restricted shares of our common stock that generally vest ratably over a four-year period (25% per year), subject to acceleration in certain circumstances (e.g., retirement, death or disability, and certain qualifying terminations following a change in control). See “– Potential Payments Upon Termination or Change in Control – Retirement Eligibility Provisions for LTI Equity Awards.” Performance-Based Equity Awards – Multi-Year Long-Term Incentive Program (MYLTIP) The performance-based portion of LTI equity awards are granted under a rigorous performance-based program (ourour Multi-Year Long-Term Incentive Program, or “MYLTIP”). MYLTIP awards incorporate“MYLTIP.” MYLTIPs are awarded to provide incentives for long-term performance and focus over a formulaic link to our relative TSR over three-year overlapping measurement periods. In 2018, the Committee, with the assistance of FPL, undertook a comprehensive reviewmulti-year period. The design of the MYLTIP plan design withawards links the objective of simplifyingultimate payouts directly by formula to our TSR over a three-year measurement period.
2020 MYLTIP Under the program while maintaining its integrity. Based on this review, the 2019 MYLTIP reflects three key changes as compared to the 20182020 MYLTIP: the Company’s relative TSR performance will beis measured against a single index – the FTSE Russell Nareit Office Index (the “Nareit Office Index”) (which is adjusted to include Vornado Realty Trust because it is a publicly-traded office REIT that we consider one of the six Office Peersour most directly comparable peers despite being categorized as a diversified REIT by FTSE Nareit). After receiving advice from FPL, including the lack of correlation between the Company and the multi-sector Cohen & Steers’ Realty Majors Index (“C&S Index”), the Committee felt that as apay-for-performance tool the Nareit Office Index is the benchmark that is most relevant to the Company as a measure of performance relative to peers and concluded it should remove the C&S Index as a benchmark index;; | • | | awards are denominated in LTIP units (see “IX. Other Compensation Policies – LTIP Units” on page 65) as the Committee felt that denominating awards in LTIP units allows the value of the awards to fluctuate with the price of the Company’s common stock, which builds further alignment with stockholders; and
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the awards are denominated in LTIP units; and relative TSR will beis the sole determinant of how many LTIP units are earned and eligible to vest. The Committee opted to simplifyvest; there are no absolute TSR modifiers that can increase or decrease the program by removing both upside and downside modifiers, keeping the focus on relative performance to motivate the Company’s management team. We will continue to analyze market trends in LTI plan design and may consider including modifiers in future years, if appropriate.final payout. For 20192020 MYLTIP awards, the number of LTIP units that can be earned, whether in whole, in part or not at all, is based on levels of payout opportunity ranging from zero to 100%200% of the target number of LTIP units initially issued, (with target at 50%) on a straight-line basis depending on relative TSR performance compared to the Nareit Office Index (as adjusted) as follows:
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IV. PERFORMANCE-BASED EQUITY AWARDS; THREE-YEAR TSR DRIVES ACTUAL EARNED PAY
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | II. EXECUTIVE COMPENSATION PROGRAM |
The Committee believes that the new 2019 MYLTIP design provides management with quantifiable incentives that (i) span an appropriate, symmetrical range of relative TSR performance aligned with historical volatility in the REIT sector compared to our actual performance, (ii) will keep our management motivated over the entire three-year measurement period and (iii) reward management within a rigorouspay-for-performance philosophy. Based on advice from FPL, the Committee believes that the 2019 MYLTIP design is competitive as compared with current market practice in the REIT industry for similar plans and provides an appropriate risk-rewardtrade-off.
Status of MYLTIP Awards
The following summarizes the performance periods and outcomes of our 2013-2016 MYLTIP plans, all of which have ended, and the interim valuations as of December 31, 2018 for our 2017-2018 MYLTIP plans, in each case, based on calculations prepared by Appraisal Economics, Inc., our valuation expert. As shown below, only one plan – the 2013 MYLTIP – ultimately paid out at or above target.
(1) | All percentages are rounded. The percentages shown for 2017 and 2018 are estimates as of December 31, 2018 based on interim valuations performed by a valuation expert (which could change up or down over the balance of the respective measurement periods).
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CEO Reported vs. Realized Pay The Committee is cognizant that a direct correlation does not exist between the successful execution of our long-term strategy, as demonstrated year after year through the achievement of goals set for management, and our TSR, particularly on a relative basis. This is particularly true when TSR is compared over a limited period of time. For example, for the most recently completed 2016 MYLTIP program, our NEOs, including our CEO, earned 69.5% of the target value for those awards. This result occurred despite management meeting or surpassing its goals.
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IV. PERFORMANCE-BASED EQUITY AWARDS; THREE-YEAR TSR DRIVES ACTUAL EARNED PAY
The following graph shows for our CEO (1) the reported valuevalues of the MYLTIP awards granted between 2015—2020 as of thetheir respective grant dates, (2) the maximum payout opportunity that could have been earned under each plan based primarily on relative TSR performance, and (3) the actual realized pay for each of the 2013-2016 MYLTIP awards granted between 2015—2018 for which the measurement periods have ended as well asand (3) the interim valuations as of December 31, 20182020 for the 20172019 and 20182020 MYLTIP awards:
| (1) | Interim Valuation amounts and Payout as % of Reported Pay percentages shown for the 2019 and 2020 MYLTIP are estimates as of December 31, 2020 based on interim valuations performed by our independent valuation consultant. Actual results could differ materially from the interim valuations. | |
2021 MYLTIP In 2020, the Committee, with the assistance of FW Cook, undertook a comprehensive review of all facets of the MYLTIP plan design to help ensure that it successfully links executive pay and long-term performance and is therefore effective in motivating, retaining and rewarding our NEOs. In its review, the Committee considered whether the peer group(s) against which the Company’s performance is assessed is comprised of the appropriate peers, particularly in light of the impact of COVID-19 on the office REIT sector, as well as the appropriate metric(s) on which to assess performance. After consideration, the Committee modified the design of the 2021 MYLTIP so that it now consists of two, equally weighted components, each of which provides a payout opportunity ranging from zero to 200% of a target number of LTIP units based on BOSTON PROPERTIES, INC. |2019 Proxy Statement 57
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| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | II. EXECUTIVE COMPENSATION PROGRAM |
COMPENSATION DISCUSSION AND ANALYSISBXP’s relative and absolute TSR performance over a three-year performance period. The objectives of the 2021 MYLTIP program are (1) retention (similar to time-based equity awards), (2) alignment with stockholders and (3) pay-for-performance. The Committee believes that, particularly in light of COVID-19, the performance targets are rigorous, but achievable, and challenge our executive team to achieve strong performance over time, on both an absolute and relative basis. The Committee added the second component, in part, to limit the scenarios in which our investors may suffer losses due to a decline in absolute TSR while our NEOs realize outsized payouts for relative TSR. As a result, BXP performance above the maximum goal under the Relative TSR component does not automatically result in a payout equal to the maximum 200% of target because the total payout would be offset, e.g., if performance is below target under the Absolute TSR component. The Committee concluded that this “offsetting” feature helps align our NEOs’ interests with our stockholders, while also providing incentives to outperform our peers.
V. | Ø | ALIGNMENT OF PAY WITH PERFORMANCERelative TSR Component
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Based on the goal assessments, FPL’s benchmarking analysis and projections for compensation increases and decreases among our peers and the market generally, and other input received from FPL, the Committee decided that 2018 total compensation for the NEOs, as a group, should be set at a level that will result in the total compensation awarded to our NEOs ranking at approximately the 60th percentile of our Benchmarking Peer Group, with a view towards retention and providing incentives aligned with the best long-term interestsThe first component of the Company and its stockholders.
2021 MYLTIP, which represents Variable Pay Mixone-half For each NEO, (50%) of the Committee approvestarget grant-date value, retains the appropriate level and mixbasic structure of paythe 2020 MYLTIP awards. The number of LTIP units that can be earned under this component ranges from zero to 200% of the target number of LTIP units, based on his role, responsibilities and performance. The Committee believes that our executive compensation is well- aligned with our stockholders’ interests and in line with the Benchmarking Peer Group. Variable pay, consisting of LTI equity awards and annual cash bonus, constitutes the vast majority of our executive compensation (for our CEO and NEOs as a group, variable pay increased modestly from 92.4% and 90.4%, respectively, in 2017 to 93.0% and 90.8%, respectively, in 2018). This allows the Committee to reward goodBXP’s annualized relative TSR (“rTSR”) performance and penalize poor performance. The following charts present the allocation of total pay among different components for our CEO and the weighted-average of each component for all NEOs as a group:
2018 Compensation
The following table presents the total direct compensation of our NEOs, inclusive of salary, bonus and LTI equity awards, but not other items required by SEC rules to be reported in the Summary Compensation Table presented under “Compensation of Executive Officers.” We believe that this table most accurately reflects the awards made by the Committee with respect to executive compensation for 2018 compared to 2017, including MYLTIP awards whose ultimate valuean index. Under this component, 100% of the target LTIP units will be earned if the Company’s TSR equals the index TSR; the maximum 200% of the target number of LTIP units will be earned if the Company’s rTSR is at least 1,000 basis points greater than the index; and no LTIP units will be earned if the Company’s rTSR is more than 1,000 basis points less than the index. For rTSR performance between -1,000 basis points and +1,000 basis points, the number of LTIP units earned will be determined over a forward three-year period based on ourusing linear interpolation.
For purposes of measuring relative TSR. To link annual awards of long-term equity incentive compensation to annual performance, the Committee, consistent with many other companies whose fiscal year ends on December 31, typically makes equity2021 MYLTIP awards forprovide that BXP’s TSR shall be compared to the TSR of a particular year in late January or early Februarycustom peer group index (the “Custom Index”) consisting of the following year. SEC rulesnine (9) office REITs: | | | Columbia Property Trust | | Douglas Emmett, Inc. | Empire State Realty Trust | | Hudson Pacific Properties, Inc. | JBG Smith Properties | | Kilroy Realty Corporation | Paramount Group, Inc. | | SL Green Realty Corp. | Vornado Realty Trust | | |
The purpose of using a peer group is to provide a mechanism for equity awards (unlikecomparing our relative performance against competitors, however, the Company does not have a directly comparable peer in the public market and often competes with larger, privately-capitalized companies for cash bonuses)which performance data is not readily available, if at all. The FTSE Nareit Office Index, which has been the comparative index used in recent years, includes more than 20 REITs, more than half of which are not direct competitors due to geographic regions, type of product (Central Business District vs. Suburban), asset quality or size. The Custom Index was selected to include only office REITs that are most similar to the Company in terms of asset type, asset quality, and having full-scale operations in one or more of the U.S. gateway markets in which the Company operates. For purposes of determining the TSR of the Custom Index, the weighting ascribed to each company in the Custom Index is fixed as of the grant date based on its relative market capitalization at that time; in contrast, the 2020 MYLTIP and prior programs determined the relative weight of each constituent annually and used the average of each constituent’s annual weightings over the performance period. In deciding to change the weighting methodology, the Committee considered that market practice is to fix the weightings at the plan inception. The Committee back-tested our performance versus the Custom Index. From February 6, 2018 through February 5, 2021, which was the performance period for the 2018 MYLTIP, our annualized TSR was 235 bps above the Custom Index, which would have resulted in payout of 123.5% of the target LTIP units. However, our absolute TSR was negative over that period. To align management with our stockholders and hold them more accountable for our absolute TSR, the 2021 MYLTIP includes an absolute TSR component, as described below. If the absolute TSR component had also been in effect, the resulting payout would have been reduced to approximately 87.7% of target. 58 BOSTON PROPERTIES, INC. |2019 Proxy Statement
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V. ALIGNMENT OF PAY WITH PERFORMANCE
require that they be presented as compensation for the year in which they were actually granted, and therefore equity awards shown in the Summary Compensation Table presented under “Compensation of Executive Officers” on page 70 lag a year (i.e., awards made in February 2019 to reward performance in 2018 are not reflected in this year’s Summary Compensation Table).
| | | | | | | | | | | | | | | | | | | | | | | | | | | Salary(1) | | | Cash Bonus | | Executive | | 2018 | | | 2017 | | | % Change | | | 2018 | | | 2017 | | | % Change | | Owen D. Thomas | | $ | 875,000 | | | $ | 875,000 | | | | 0% | | | $ | 2,875,000 | | | $ | 2,425,000 | | | | 18.6% | | Douglas T. Linde | | $ | 725,000 | | | $ | 725,000 | | | | 0% | | | $ | 2,180,000 | | | $ | 1,935,000 | | | | 12.7% | | Raymond A. Ritchey | | $ | 720,000 | | | $ | 720,000 | | | | 0% | | | $ | 2,080,000 | | | $ | 2,080,000 | | | | 0% | | Michael E. LaBelle | | $ | 500,000 | | | $ | 500,000 | | | | 0% | | | $ | 1,450,000 | | | $ | 1,325,000 | | | | 9.4% | | Bryan J. Koop | | $ | 400,000 | | | $ | 400,000 | | | | 0% | | | $ | 1,550,000 | | | $ | 1,280,000 | | | | 21.1% | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 3,220,000 | | | $ | 3,220,000 | | | | 0% | | | $ | 10,135,000 | | | $ | 9,045,000 | | | | 12.1% | | | | | | | LTI Equity Awards | | | Total Compensation | | Executive | | 2018 | | | 2017 | | | % Change | | | 2018 | | | 2017 | | | % Change | | Owen D. Thomas | | $ | 8,750,000 | | | $ | 8,189,000 | | | | 6.9% | | | $ | 12,500,000 | | | $ | 11,489,000 | | | | 8.8% | | Douglas T. Linde | | $ | 5,395,000 | | | $ | 5,331,000 | | | | 1.2% | | | $ | 8,300,000 | | | $ | 7,991,000 | | | | 3.9% | | Raymond A. Ritchey | | $ | 4,200,000 | | | $ | 4,509,000 | | | | (6.9)% | | | $ | 7,000,000 | | | $ | 7,309,000 | | | | (4.2)% | | Michael E. LaBelle | | $ | 1,950,000 | | | $ | 2,050,000 | | | | (4.9)% | | | $ | 3,900,000 | | | $ | 3,875,000 | | | | 0.6% | | Bryan J. Koop | | $ | 1,300,000 | | | $ | 1,308,000 | | | | (0.6)% | | | $ | 3,250,000 | | | $ | 2,988,000 | | | | 8.8% | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 21,595,000 | | | $ | 21,387,000 | | | | 1.0% | | | $ | 34,950,000 | | | $ | 33,652,000 | | | | 3.9% | |
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | II. EXECUTIVE COMPENSATION PROGRAM |
(1) | Ø | From 2016 to 2018, the Committee did not increase the base salaries of the NEOs. For 2019, the Committee approved base salaries for the NEOs as follows: Mr. Thomas – $900,000; Mr. Linde – $750,000; Mr. Ritchey – $740,000; Mr. LaBelle – $510,000; and Mr. Koop – $410,000.Absolute TSR Component
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The second component represents the remaining BOSTON PROPERTIES, INC. |one-half 2019 Proxy Statement 59(50%) of the target grant-date value of the 2021 MYLTIP. The number of LTIP units that can be earned under this component ranges from zero to 200% of the target number of LTIP units, based on BXP’s cumulative absolute TSR (“aTSR”) during the performance period. Under this component, 100% of the target LTIP units will be earned if the Company achieves an aTSR equal to +1,000 basis points; the maximum 200% of target LTIP units will be earned if the Company achieves an aTSR of +6,000 basis points or greater; and the threshold percentage to earn any LTIP units is an aTSR of greater than -4,000
basis points. If the Company’s aTSR is greater than COMPENSATION DISCUSSION AND ANALYSIS-4,000 basis points but less than +6,000 basis points, then the number of LTIP units earned will be determined using linear interpolation. VI. | Ø | ALLOCATION OF LTI EQUITY AWARDSOther Changes to MYLTIP Design
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Dividends. Consistent with previous MYLTIP programs, during the three-year performance period holders of 2021 MYLTIP Units are not entitled to receive full dividends on the 2021 MYLTIP Units. Instead, to support the units’ characterization as profits interests for tax purposes, the holders of the units are entitled to receive only a partial dividend on each unit equal to 10% of the dividend payable on a share of BXP common stock. Unlike prior MYLTIP programs, however, following the completion of the three-year performance period, BXP will also make a “catch-up” cash payment on the 2021 MYLTIP Units that are ultimately earned in an amount equal to the regular and special distributions, if any, declared during the performance period on BXP common stock, less the distributions actually paid to holders of 2021 MYLTIP Units during the performance period on all of the awarded 2021 MYLTIP Units. Post-vesting Transfer Restrictions. Subject to the provisions on “Qualified Retirement” and the other terms of the award agreement, after the completion of the three-year performance period all earned MYLTIP Units shall be deemed “vested“, but may not be converted, redeemed, sold or otherwise transferred for one additional year after the end of the performance measurement period. Therefore, 100% of earned awards, if any, shall vest as of February 1, 2024, but may not be monetized until February 1, 2025. Allocation of LTI Awards 2020 Performance Grants The Committee approved LTI equity awards to NEOs for 20182020 performance as a mix of performance-based MYLTIP awards and time-based, full-value equity awards. The MYLTIP awards were denominated in a fixed number of LTIP units as of February 2, 2021, the date of initial grant. AtThe Committee maintained the directionsame allocation of performance-based equity as a percentage of total LTI equity for our CEO as in 2019 for 2020, so his allocation remained 55% performance-based and 45% time-based. For the other NEOs, the Committee maintained the allocation at 50% performance-based and 50% time-based. In light of the Committee, FPL conducted a multi-year, backward-economic circumstances and forwarding-looking analysis of peer equity award pay mix withchallenges the objective of findingNEOs faced in 2020, including the appropriate allocation to maintain the focus and dedication of a talented management team, which,sudden shift in our case, has met or exceeded its goals as a whole. Based on the information received from FPL,priorities, the Committee determinedawarded the dollar values set forth below for performance-based and time-based equity awards to the NEOs in 2021 for performance in 2020. The Committee awarded Messrs. Thomas and Linde the same dollar value in LTI equity awards for 2020 as was awarded last year for 2019 performance, the result of which was an award of less than target for each, and awarded Mr. Ritchey his target LTI equity awards in acknowledgment of his continued leadership in the Washington, DC and Los Angeles regions. The Committee assessed Messrs. LaBelle and Koop’s performance in 2020 as strong and awarded each LTI equity that it would be advisable to maintain the allocationwas above target. | | | | | | | | | | | | | | | | | | | | | | | Executive | | Total LTI Equity Awards | | | Total LTI Equity Awards as % of Target | | Performance- Based LTI Equity Awards | | | % of Total Equity Awards | | | Time-Based LTI Equity Awards | | | % of Total Equity Awards | | Owen D. Thomas | | | $ 9,050,000 | | | 98% | | | $ 4,977,500 | | | | 55% | | | | $ 4,072,500 | | | | 45% | | Douglas T. Linde | | | $ 5,655,000 | | | 97% | | | $ 2,827,500 | | | | 50% | | | | $ 2,827,500 | | | | 50% | | Raymond A. Ritchey | | | $ 4,410,000 | | | 100% | | | $ 2,205,000 | | | | 50% | | | | $ 2,205,000 | | | | 50% | | Michael E. LaBelle | | | $ 2,189,000 | | | 110% | | | $ 1,094,500 | | | | 50% | | | | $ 1,094,500 | | | | 50% | | Bryan J. Koop | | | $ 1,788,000 | | | 120% | | | $ 894,000 | | | | 50% | | | | $ 894,000 | | | | 50% | | | | | | | | | Total | | | $23,092,000 | | | 100% | | | $11,998,500 | | | | 52% | | | | $11,093,500 | | | | 48% | |
| | | | | | | | | 68 | | | | | 2021 Proxy Statement |
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | II. EXECUTIVE COMPENSATION PROGRAM |
The performance-based portion of LTI equity awards for the NEOs of 50% performance-based and 50% time-based that is widely accepted2020 performance was granted in the marketform of 2021 MYLTIP awards, which have a three-year performance period (February 2, 2021 to February 1, 2024), and prevalent amongan additional year of post-vesting restrictions on transfer. The dollar values of the awards were converted into a fixed number of MYLTIP units on the initial grant date, and the number of units initially granted equals 200% of the target number of units, and it is the maximum number of units that may be earned. Following completion of the three-year performance period, the Committee will determine the final payout based on computations from our peers. independent valuation consultant for this plan, and if the number of units initially awarded exceeds the number of units ultimately earned, then the excess will be forfeited. The units determined to be earned shall vest 100% as of the final day of the performance period, but shall be subject to an additional one-year, no-sale holding period. Therefore, while the award of 2021 MYLTIP units is partially in recognition for performance in 2020, award recipients must continue to perform over the three-year term of the 2021 MYLTIP program in order to earn and vest in any of the MYLTIP units and must generally remain employed for the three years to earn the full amount. The aggregate target number of units for NEOs is approximately 137,688 LTIP units and an aggregate payout opportunity ranging from zero to a maximum of 275,376 LTIP units. The baseline share price for 2020 MYLTIP awards was $90.73 (the average closing price per share of our common stock on the NYSE for the five trading days prior to and including February 2, 2021). The 2021 MYLTIP awards are generally amortized into earnings over the three-year plan period under the graded vesting method, unless accelerated in certain circumstances such as a “Qualified Retirement” as defined under “– Potential Payments Upon Termination or Change in Control – Retirement Eligibility Provisions for LTI Equity Awards.” Under the Financial Accounting Standards Board’s Accounting Standards Codification 718 “Compensation – Stock Compensation” (“ASC Topic 718”), we expect that 2021 MYLTIP awards to NEOs will have an aggregate value of approximately $12.0 million. 2019 Performance Grants The following table sets forth the dollar values of the performance-based and time-based equity awards granted to NEOs in February 2020 for 2018:performance in 2019: | Executive | | Performance- Based LTI Equity Awards | | | Time-Based LTI Equity Awards | | | Total LTI Equity Awards | | | Total LTI Equity Awards as % of Total Compensation | | | Total LTI Equity Awards | | Performance-Based LTI Equity Awards | | % of Total Equity Awards | | Time-Based LTI Equity Awards | | % of Total Equity Awards | | Owen D. Thomas | | $ | 4,375,000 | | | $ | 4,375,000 | | | $ | 8,750,000 | | | | 70% | | | | $ 9,050,000 | | | | $ 4,977,500 | | | | 55% | | | | $ 4,072,500 | | | | 45% | | Douglas T. Linde | | $ | 2,697,500 | | | $ | 2,697,500 | | | $ | 5,395,000 | | | | 65% | | | | $ 5,655,000 | | | | $ 2,827,500 | | | | 50% | | | | $ 2,827,500 | | | | 50% | | Raymond A. Ritchey | | $ | 2,100,000 | | | $ | 2,100,000 | | | $ | 4,200,000 | | | | 60% | | | | $ 4,240,000 | | | | $ 2,120,000 | | | | 50% | | | | $ 2,120,000 | | | | 50% | | Michael E. LaBelle | | $ | 975,000 | | | $ | 975,000 | | | $ | 1,950,000 | | | | 50% | | | | $ 1,945,000 | | | | $ 972,500 | | | | 50% | | | | $ 972,500 | | | | 50% | | Bryan J. Koop | | $ | 650,000 | | | $ | 650,000 | | | $ | 1,300,000 | | | | 40% | | | | $ 1,370,000 | | | | $ 685,000 | | | | 50% | | | | $ 685,000 | | | | 50% | | | | | | | | | | | | | | | Total | | $ | 10,797,500 | | | $ | 10,797,500 | | | $ | 21,595,000 | | | | 62% | | | | $22,260,000 | | | | $11,582,500 | | | | 52% | | | | $10,677,500 | | | | 48% | |
The performance-based portion of LTI equity awards for 20182019 performance was made by granting 2019granted in the form of 2020 MYLTIP awards, which have a three-year performance period (February 5, 20194, 2020 to February 4, 2022)3, 2023), and an additional year of time-based vesting. The dollar values of the awards were converted into a fixed number of MYLTIP units on the initial grant date, and the number of units initially granted equals 200% of the target number of units, and it is the maximum number of units that may be earned and equals 200% of the target number of units.earned. Following completion of the three-year performance period, the Committee will determine the final payout based on computations from our appraisal expertindependent valuation consultant for this plan, AON plc, and if athe number of units initially awarded exceeds the number of units ultimately earned, then the excess will be forfeited. Therefore, while the award of 20192020 MYLTIP units iswas partially in recognition for performance in 2018,2019, award recipients must continue to perform over the three-year term of the 20192020 MYLTIP program in order to earn and vest in any of the MYLTIP units. The total target for NEOs was approximately 88,316 LTIP units and an aggregate payout opportunity ranging from zeromust generally remain employed for the four years to a maximum of 176,632 LTIP units. The baseline share priceearn the full amount. | | | | | | | | | | | | 2021 Proxy Statement | | 69 |
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | III. DETERMINING EXECUTIVE COMPENSATION |
III. DETERMINING EXECUTIVE COMPENSATION › PROCESS FOR DETERMINING EXECUTIVE COMPENSATION Starting in 2020, and in response to shareholder feedback, our Committee established target total direct compensation opportunities for 2019 MYLTIP awards was $131.60 (the average closing price per shareeach of our common stockNEOs consisting of base salary, target annual cash incentive, and target long-term incentive grant value. When establishing target total direct compensation levels, the Committee considered a variety of factors, including: industry and market conditions; the Company’s financial and strategic performance, on both an absolute basis and versus competitors; market compensation data among comparable companies; individual executive past performance, future potential, roles and responsibilities, experience, retention risk, and succession planning; total NEO compensation over time, both on an awarded basis and on a realized basis after forfeitures; and current and evolving practices and trends among our peers and the NYSEmarket generally, especially in light of the impact of the COVID-19 pandemic on global and national economies, and other input received from FW Cook. The Committee evaluated the pre-established performance goals under the Annual Incentive Plan to determine earned annual incentives for 2020 (refer to page 64). The Committee determined LTI equity grant values earned for 2020 (granted in 2021) with reference to the five trading days priortargets established at the beginning of the year (refer to and including February 5, 2019)page 68). Under the Financial Accounting Standards Board’s Accounting Standards Codification 718 “Compensation – Stock Compensation” (“ASC Topic 718”), we expect that 2019 MYLTIP awards to NEOs will have an aggregate The ultimate earned value of approximately $10.8 million, which amount will generally be amortized into earnings over the four-year plan period under the graded vesting method. 2019 MYLTIP awards were made in the form of LTIP units that are subject to forfeiture to the extent they are not earned or do not become vested.
The time-based portion of LTI equity awards granted for 2018 performance to the NEOs other than Mr. Ritchey consisted of LTIP units or restricted shares of our common stock that vest ratably over a four-year period (25% per year). In the case of Mr. Ritchey, the time-based portion of his 2018 LTI equity award was fully vested upon issuance because he had attained the retirement age of 65. In addition,these LTI equity awards will become vested upon a Qualified Retirement, which generally means the
60 BOSTON PROPERTIES, INC. |2019 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
VI. ALLOCATION OF LTI EQUITY AWARDS
termination of the grantee’s employment on or after the date on which the sum of years of service plus age equals or exceeds 70 (subject to certain conditions, including that the grantee is at least 58 years old on the date of termination of employment). Pursuant to our Equity Award Grant Policy discussed below, time-based full-value equity awards were issued as of the close of business on February 1, 2019be based on the closing price per shareperformance of our common stock, onas well as performance versus the NYSE on that date of $131.18.relative and absolute TSR components under the 2021 MYLTIP.
› COMPENSATION ADVISOR’S ROLE & BENCHMARKING PEER GROUP VII. | BENCHMARKING PEER GROUP AND COMPENSATION ADVISOR’S ROLE
Compensation Advisor’s Role |
The Committee monitors the effectiveness of our executive compensation program on an ongoing basis. For it to be effective, among other things, we believe it is necessary for compensation to be competitive with other large public real estate companies with which we compete for executive talent. The Committee uses industry peer group data as one tool in assessing and determining pay for our executive officers. Other REITs, however, both in the office sector and in other sectors, are not always comparable to us because of differences in underlying business fundamentals. Peer group data is intended to provide the Committee with insight across the peer group into overall market pay levels for each element of compensation and total target compensation of executive officers having similar titles and responsibilities to our NEOs, market trends, “best” governance practices, and overall industry performance. The median (50th percentile) serves as a reference point and indicator of competitive market trends and the Committee uses it as the starting point when setting our executive compensation. We believe this use of peer companyHowever, market data is consistent with how stockholders and proxy advisory firms use such data.one of many factors the Committee considers when setting target pay opportunities. TheIn 2020, the Committee hasagain retained FPLFW Cook to serve as its advisor since 2012independent, third-party compensation consultant. FW Cook reports directly to the Committee and every yearre-assesses andre-affirmsdoes not provide services to management that are not under the independenceCommittee’s purview. A representative of FPL in connection with renewalFW Cook attends meetings of the engagement. The Committee, directed FPLas requested, and communicates with the Committee Chair and management between meetings. Consistent with its charter and as required by SEC rules and NYSE listing standards, prior to amongretaining FW Cook as its consultant, the Committee considered all factors relevant to FW Cook’s independence from management. FW Cook advises the Committee on the reasonableness of executive compensation levels in comparison with those of other things: (1) benchmarksimilarly situated companies, consults on the structure of our executive compensation againstprogram to optimally support our peersbusiness objectives and assist in developingadvises the Committee on executive compensation objectives,trends among REITs and the broader market.
Benchmarking Peer Group FW Cook (1) advised the Committee that size, as measured by total capitalization, best depicts the scale, complexity and breadth of the Company’s operations, as well as the amount of capital and assets managed, and therefore is the most appropriate scope measure for peer company selection and (2) analyze trends in compensation inreviewed the marketplace generallypeer group for 2019 and among our peers specifically and (3) recommendrecommended that the components and amounts of compensation | | | | | | | | | 70 | | | | | 2021 Proxy Statement |
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | III. DETERMINING EXECUTIVE COMPENSATION |
Committee maintain the same peer group for our top executive officers. Following recommendations from FPL,2020. Based on that advice, the Committee selected the companies to be included in thesame peer group we use for benchmarking 2020 executive compensation. FPL’s recommendations were based on an annual review of the methodologies employed by sixteen of the REITs included in the S&P 500 Index. Based on these criteria, FPL recommended to the Committeecompensation that it update theused for 2019. That peer group used last year to remove three REITs – GGP, Inc., HCP, Inc. and The Macerich Company – and replace them with Essex Property Trust, Inc., Regency Centers Corporation, and UDR, Inc. FPL recommended the changes, and the Committee agreed, because FPL advisedconsists of sixteen publicly traded real estate companies that the three replacements are moreof comparable size to the Company in terms of total capitalization and assets, irrespective of property focus. In general, FPL felt that size, as measured by total capitalization rather than equity market capitalization, is the most relevant criterion because top executives are ultimately responsible for managing the entire organization and total capitalization best depicts scale, complexity and breadth of operations, as well as the amount of capital and assets managed. Notably, fourteen out of the sixteen members of this Benchmarking Peer Group also list uslisted Boston Properties as a peer company.
BOSTON PROPERTIES, INC. |2019 Proxy Statement 61
COMPENSATION DISCUSSION AND ANALYSIS
VII. BENCHMARKING PEER GROUP AND COMPENSATION ADVISOR’S ROLE
company in their 2020 proxy statements. The following table provides the names and key information for each peer company: | | | | | | | Number of Employees(1) | | UPREIT Market Capitalization (in millions)(2) | | Total Capitalization (in millions)(3) | | | Company | | | Sector | | Location | | | Total Capitalization (in millions)(1) | | Alexandria Real Estate Equities, Inc. | | Office | | Pasadena, CA | | 386 | | | $12,793 | | | $18,888 | | | Office | | | Pasadena, CA | | | $ | 33,988 | | American Tower Corporation (REIT) | | Specialty | | Boston, MA | | 5,026 | | | $69,771 | | | $92,499 | | | Specialty | | | Boston, MA | | | $ | 137,133 | | AvalonBay Communities, Inc. | | Multifamily | | Arlington, VA | | 3,087 | | | $24,109 | | | $31,169 | | | Multifamily | | | Arlington, VA | | | $ | 30,132 | | Digital Realty Trust, Inc. | | Specialty | | San Francisco, CA | | 1,530 | | | $23,122 | | | $35,797 | | | Specialty | | | Austin, TX | | | $ | 56,308 | | Equity Residential | | Multifamily | | Chicago, IL | | 2,700 | | | $25,302 | | | $34,155 | | | Multifamily | | | Chicago, IL | | | $ | 31,307 | | Essex Property Trust, Inc. | | Multifamily | | San Mateo, CA | | 1,826 | | | $16,722 | | | $22,490 | | | Multifamily | | | San Mateo, CA | | | $ | 22,547 | | Host Hotels & Resorts, Inc. | | Hotel | | Bethesda, MD | | 184 | | | $12,470 | | | $16,379 | | | Hotel | | | Bethesda, MD | | | $ | 16,583 | | Prologis, Inc. | | Industrial | | San Francisco, CA | | 1,617 | | | $38,149 | | | $52,145 | | | Industrial | | | San Francisco, CA | | | $ | 96,667 | | Public Storage | | Self-Storage | | Glendale, CA | | 5,600 | | | $35,293 | | | $40,755 | | | Self-Storage | | | Glendale, CA | | | $ | 47,025 | | Regency Centers Corporation | | Shopping Center | | Jacksonville, FL | | 446 | | | $9,873 | | | $13,630 | | | Shopping Center | | | Jacksonville, FL | | | $ | 11,952 | | Simon Property Group, Inc. | | Regional Mall | | Indianapolis, IN | | 4,150 | | | $59,775 | | | $83,358 | | | Regional Mall | | | Indianapolis, IN | | | $ | 59,516 | | SL Green Realty Corp. | | Office | | New York, NY | | 1,058 | | | $6,944 | | | $13,106 | | | Office | | | New York, NY | | | $ | 10,451 | | UDR, Inc. | | Multifamily | | Highlands Ranch, CO | | 1,418 | | | $11,890 | | | $15,570 | | | Multifamily | | | Highlands Ranch, CO | | | $ | 17,564 | | Ventas, Inc. | | Health Care | | Chicago, IL | | 500 | | | $21,067 | | | $31,870 | | | Health Care | | | Chicago, IL | | | $ | 30,811 | | Vornado Realty Trust | | Office | | New York, NY | | 3,928 | | | $12,557 | | | $23,962 | | | Office | | | New York, NY | | | $ | 17,144 | | Welltower Inc. | | Health Care | | Toledo, OH | | 384 | | | $26,631 | | | $42,025 | | | Health Care | | | Toledo, OH | | | $ | 42,188 | | Median | | | | | | | 1,574 | | | | $22,095 | | | | $31,520 | | | | | | | $ | 31,059 | | Average | | | | | | | 2,115 | | | | $25,404 | | | | $35,488 | | | | | | | $ | 41,332 | | Boston Properties, Inc. | | | | | | | 760 | | | | $19,385 | | | | $32,304 | | | | | | | $ | 31,782 | | Relative Percentile Rank | | | | | | | 30%-ile | | | | 44%-ile | | | | 55%-ile | | | | | | | | 55%-ile | |
Source: S&P Dow Jones Indices,Market Intelligence, a Division of S&P Global. Data as of December 31, 2018.2020. (1) | Represents the number of employees on a full-time equivalent basis.
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(2) | Represents market value of outstanding common stock. May include the value of OP units, where available.
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(3) | Total capitalization includes debt and the book value of any preferred stock. |
FPL’sThe benchmarking review was based, in part, on information disclosed in the peer companies’ proxy statements filed in 20182020 (the latest year for which comprehensive data iswere publicly available). FPL also reviewed the 2018 Nareit Compensation Survey (which FPL conducts) and additional proprietary real estate compensation surveys conducted throughout the year by FPL for additional context. FPL’s review compared our executive pay practices to cash and
non-cash› compensation awarded to executives in comparable positions at peer companies. FPL advised the Committee that the peer companies generally have compensation programs comparable to ours, with annual bonuses generally in the form of cash and annual long-term compensation generally in the form of equity with time-based vesting over three to five years with a combination of time-based and performance-based compensation.
62 BOSTON PROPERTIES, INC. |2019 Proxy Statement
ROLE OF MANAGEMENT IN COMPENSATION DISCUSSION AND ANALYSISDECISIONS VIII. | ROLE OF MANAGEMENT IN COMPENSATION DECISIONS
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Our CEO and President make recommendations to the Committee on the compensation of the other executive officers, and our CEO makes recommendations to the Committee on the compensation of our President, in each case, based on their assessment of achievement of the Company’s strategicperformance versus corporate and tactical plans, executives’ individual performancegoals and a variety of other factors (e.g., compensation history, tenure, responsibilities, market data for competitive positions and retention concerns). The Committee considers these recommendations together with input from FPL. All final executive compensation decisions are made by the Committee. IX. | | | | | | | | | | | | 2021 Proxy Statement | | 71 |
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | IV. OTHER COMPENSATION POLICIES |
Double-Trigger Acceleration of Vesting of Equity Awards Upon a Change of Control
Time-basedIV. OTHER COMPENSATION POLICIES
› DOUBLE-TRIGGER ACCELERATION OF VESTING OF EQUITY AWARDS UPON A CHANGE OF CONTROL All time-based equity awards made in 2015 or laterafter 2014 include “double-trigger” vesting, meaning that, if there is a “change of control” and the awards are not otherwise cancelled in connection with the change of control transaction, then they only become fully vested if, within 24 months after the change of control, the executive’s employment is terminated by the Company or its successor without “cause” or the executive resigns for “good reason.” We believe that this policy regarding acceleration of vesting upon a change of control is in line with current best practice while also continuing to remove potential disincentives for executives to pursue a change of control transaction that would benefit stockholders. Although not required, the Committee decided to make the policy applicable tocertain senior officers, including our Chief Executive Officer, whoCEO, were entitled to single-trigger vesting under their employment agreements, the Committee requested, and those executives voluntarily agreed, to the change. The Committee believes that this demonstrates its and management’s responsiveness to stockholders and that the policy addresses two key objectives: | • | | Aligning executives’ interests with stockholders’ interests:whenWhen a change of control may be imminent, it is important to ensure that executives have the same incentive asexecutives’ interests are aligned with stockholders to maximize stockholder value. |
| • | | Minimizing conflicts of interest:double-triggerDouble-trigger vesting in the context of a potential change of control (1) reduces distraction and the risk that executives would leave the Company before a transaction is completed while also preventingand (2) prevents executives from receiving a windfall by compensating thembecause executives’ time-based equity vests only if their employment is terminated. |
Clawback Policy›CLAWBACK POLICY
We have a formal “clawback” policy, which allows us to recoup from all executive officers and certain other specified officers’ incentive compensation paid on the basis of financial results that are subsequently restated. Under the policy, if we are required to prepare an accounting restatement due to materialnon-compliance with any financial reporting requirement, the Committee may require those officers to repay or forfeit “excess compensation,” which includes annual cash bonus and long-term incentive compensation in any form (including stock options, restricted stock and LTIP units, whether time-based or performance-based) received by them during the three-year period preceding the publication of the restated financial statements, that the Committee determines was in excess of the amount that they would have received had such compensation been determined based on the financial results reported in the restated financial statements. The Committee may take into account any factors it deems reasonable in determining (1) whether to seek recoupment of previously paid excess compensation, (2) the amount of excess compensation to recoup from each individual officer, which may reflect whether the Committee concluded that he or she engaged in wrongdoing or committed grossly negligent acts or omissions, and (3) the form of the compensation to be recouped. The Committee intends to periodically review this policy and, as BOSTON PROPERTIES, INC. |2019 Proxy Statement 63
COMPENSATION DISCUSSION AND ANALYSIS
IX. OTHER COMPENSATION POLICIES
appropriate, conform it to any applicable final rules adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. ›Gross-UpGROSS-UP for Excess Parachute PaymentsFOR EXCESS PARACHUTE PAYMENTS In January 2014, we adopted a formal “no taxgross-up” policy with respect to our senior executives. Pursuant to this policy, we will not make or promise to make any taxgross-up payment to any senior executive in the future, other than payments in accordance with obligations existing at the time of the policy’s adoption or pursuant to arrangements applicable to our management employees generally, such as a relocation policy. All of the employment agreements that we have entered into with new senior executives since 2013, including our original and newcurrent employment agreements with our CEO, Mr. Thomas, do not provide for taxgross-up payments and, accordingly,payments. Accordingly, this policy representsformalized the formalization of the Committee’spre-existing then-existing practice with respect to taxgross-ups. In addition, our Senior Executive Severance Plan and Executive Severance Plan provide that executives who become eligible to participate in these plans in the future will not be entitled to any taxgross-up payments under the plans. Policy Concerning Hedging and Pledging Transactions›POLICY CONCERNING HEDGING AND PLEDGING TRANSACTIONS
We have a policy prohibitingprohibit all employees, including our executive officers, and directors from engaging in short sales and derivative transactions, purchasing our securities on margin and pledging our securities as collateral for a loan. Transactions such as | | | | | | | | | 72 | | | | | 2021 Proxy Statement |
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | IV. OTHER COMPENSATION POLICIES |
purchases and sales of publicly traded put and call options, short sales, hedging transactions such as prepaid variable forwards, equity swaps and collars create a heightened compliance risk or could create the appearance of misalignment between management and stockholders. In addition, securities held in a margin account or pledged as collateral may be sold without consent if the owner fails to meet a margin call or defaults on the loan, thus creating the risk that a sale may occur at a time when an officeremployee or director is aware of material,non-public information or otherwise is not permitted to trade in Company securities. Our Board may grant a waiver from the policy on acase-by-case basis where an executive officer or director who wishes to pledge Company securities as collateral for a loan (not including margin debt) clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities. No such exceptions have ever been granted. Mandatory Minimum Equity Ownership Policy for Senior Executives›MANDATORY MINIMUM EQUITY OWNERSHIP POLICY FOR SENIOR EXECUTIVES
To align senior management with our stockholders and demonstrate to the investment community that our senior management is personally committed to our continued financial success, we have a policy that requires the following officer positions to maintain equity ownership equal to a multiple of their base salaries as follows: | | | | | Title | | Multiple of Base Salary | | Chief Executive Officer | | | 6.0x | | President | | | 5.0x | | Senior Executive Vice President | | | 5.0x | | Executive Vice President, Chief Financial Officer | | | 3.0x | | Executive Vice President, Regional Manager | | | 2.0x | | Senior Vice President | | 1.5x |
| | | | | | | | | | | | | | | | | CEO Mandatory Minimum | | | 1.5x | | | | | CEO Actual Stock Ownership | | | 6x Base Salary | | | | | | 35x Base Salary | | |
If an executive’s ownership falls below the applicable guideline due solely to a decline in the value of our common stock, the executive will not be required to acquire additional shares to meet the 64 BOSTON PROPERTIES, INC. |2019 Proxy Statement
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IX. OTHER COMPENSATION POLICIES
guideline, but he or she will be required to retain all shares then held (except for shares withheld to pay withholding taxes or the exercise price of options) until such time as the executive again attains the target multiple. Employees who are hired or promoted to senior management positions will have a five-year period beginning on January 1 of the year following their appointment to achieve this ownership requirement. Exceptions may be made for significant extenuating personal circumstances. The types of securities that will be counted toward the equity ownership requirement include shares of our common stock, common units and LTIP units (excluding performance-based LTIP units until and unless they have been earned), in each case both vested and unvested, as well as shares acquired and held through our stock purchase and dividend reinvestment plans. Stock options will not be counted. ›LTIP UnitsUNITS Since 2003, we have used a class of partnership interests in our Operating Partnership, called long termlong-term incentive units, or LTIP units, as a form of equity-based award for annual long-term incentive equity compensation. LTIP units are designed to qualify as “profits interests” in the Operating Partnership for federal income tax purposes, meaning that initially they are not economically equivalent in value to a share of our common stock, but over time can increase in value toone-for-one parity with common stock by operation of special tax rules applicable to profits interests. LTIP units are designed to offer executives a long-term incentive comparable to restricted stock, while allowing them to enjoy a more favorable income tax treatment. Each LTIP unit awarded is deemed equivalent to an award of one share of common stock reserved under our incentive equity plan. The key difference between LTIP units and restricted stock is that at the time of award, LTIP units do not have full economic parity with common units, but can achieve such parity over time upon the occurrence of specified events in accordance with partnership tax rules. Until and unless such parity is reached, the value that an executive will realize for a given number of vested LTIP units is less than the value of an equal number of shares of our common stock. | | | | | | | | | | | | 2021 Proxy Statement | | 73 |
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | IV. OTHER COMPENSATION POLICIES |
Under the 2017, 2018 and 2019 MYLTIP awards, during the performance period holders of LTIP units will receive distributions equal toone-tenth (1 / (1/10th) of the amount of regular quarterly distributions paid on a common unit, but will not receive any special distributions. After the end of the performance period, holders of earned LTIP units, both vested and unvested, will be entitled to receive distributions in an amount per LTIP unit equal to the distributions, both regular and special, payable on a common unit (which equal per share dividends (both regular and special) on our common stock). Beginning with the 2021 MYLTIP, following the completion of the three-year performance period, BXP will also make a “catch-up” cash payment on the 2021 MYLTIP Units that are ultimately earned in an amount equal to the regular and special distributions, if any, declared during the performance period on BXP common stock, less the distributions actually paid to holders of 2021 MYLTIP Units during the performance period on all of the awarded 2021 MYLTIP Units. LTIP units awarded with time-based vesting conditions only, both vested and unvested, are entitled to receive distributions in an amount per LTIP unit equal to the distributions, both regular and special, payable on a common unit. Employment Agreements› EMPLOYMENT AGREEMENTS
We have employment agreements with each of our NEOs. (See “Compensation of Executive Officers – Potential Payments Upon Termination or Change in ControlEmployment Agreements” beginning on page 80)) For NEOs other than Mr. Thomas, these agreements provide for a certain level of severance, generally the sum of base salary plus the prior year’s cash bonus, 12 additional months of vesting in equity-based awards and participation in our health plan for up to 12 months, in the event of a termination of employment by us without cause or by the executives for good reason. The employment agreement with Mr. Thomas provides for stipulated severance benefits in lieu of participation in severance plans for which other NEOs are eligible. In return, each executiveNEO agrees, during the term of employment and for one year thereafter, not to compete with us, solicit our tenants or employees or interfere with our relationship with our tenants, suppliers, contractors, lenders, employees or with any governmental agency. We BOSTON PROPERTIES, INC. |2019 Proxy Statement 65
COMPENSATION DISCUSSION AND ANALYSIS
IX. OTHER COMPENSATION POLICIES
believe that these agreements are fair to the executivesNEOs and to our stockholders and, because the severance benefits are negotiated at the time of the agreement, avoid the need for protracted negotiations in the event of termination. Change in Control Arrangements› CHANGE IN CONTROL ARRANGEMENTS
We have an employment agreement with Mr. Thomas that provides him with cash severance and certain benefits in the event of his termination under certain circumstances within 24 months following a change in control. Although Mr. Thomas was entitled to “single-trigger” vesting upon a change in control under his original employment agreement, he has agreed to be subject to the “double-trigger” vesting policy adopted for all time-based LTI equity awards made in 2015 or later.after 2014. We also have two change in control severance plans, one for our President, Senior Executive Vice President and Executive Vice Presidents, and the other for our Senior Vice Presidents and those Vice Presidents with ten (10) or more years of tenure with us. These plans also provide cash severance and certain benefits in the event of termination of employment under certain circumstances within 24 months following a change in control. The two change in control severance plans are “double trigger” arrangements, providing severance benefits only upon involuntary termination or constructive termination of the executive officer following a change in control. (See “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control” beginning on page 80)) Officers who became eligible under the two severance plans described above prior to their amendment in January 2014 upon adoption by the Committee of a formal “no taxgross-up” policy are entitled to agross-up payment in the event they become subject to the 20% golden parachute excise tax. This was market practice when these plans were adopted in 1998. Mr. Thomas is not entitled to a taxgross-up payment under his employment agreement. In our experience, change in control cash severance protection for executive officers is common in the REIT industry. Our Committee believes it is fair to provide severance protection in the event of an involuntary termination or constructive termination of employment following a change in control because very often senior manager positions are eliminated following a change in control. ByThe Committee believes that agreeing up frontin advance to provide severance benefits in the event of an involuntary termination or constructive termination of employment following a change in control the Committee believes we canhelps reinforce and encourage the continued attention and dedication of senior management to their assigned duties without distraction in the face of an actual or threatened change in control and helps ensure that management is motivated to negotiate the best consideration for our stockholders. For treatment of equity awards in the event of a change in control, please see“– Double-Trigger Acceleration of Vesting of Equity Awards upon a Change of Control”above. | | | | | | | | | 74 | | | | | 2021 Proxy Statement |
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | IV. OTHER COMPENSATION POLICIES |
Perquisites› PERQUISITES
We provide Messrs. Linde, Ritchey and Koop a monthly car allowance of $750 and we provide all of our executive officers a designated parking space. Mr. Thomas’ employment agreement provides that he is entitled to the use of a Company-owned or leased vehicle, but Mr. Thomas has declined this benefit at all times since 2013. Apart from these arrangements, we do not provide any other perquisites to our executive officers. Deferred Compensation Plan›DEFERRED COMPENSATION PLAN
We offer a deferred compensation plan that enablespermits our executives to defer up to 20% of their base salaries and bonuses. The amounts deferred are not included in the executive’s current taxable income and, therefore, are not currently deductible by us. The executives select from a limited number of mutual funds, which serve as measurement funds, and the deferred amounts are increased or 66 BOSTON PROPERTIES, INC. |2019 Proxy Statement
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IX. OTHER COMPENSATION POLICIES
decreased to correspond to the market value of the mutual fund investments. Because the measurement funds are publicly traded securities, we do not consider any of the earnings credited under the deferred compensation plan to be “above market.” We do not provide any matching contribution to any executive officer who participates in this plan, other than a limited amount to make up for any loss of matching contributions under our Section 401(k) plan. We have made this plan available to our executives in order to ensure that our benefits are competitive. See “Compensation of Executive Officers – Nonqualified Deferred Compensation in 2020.” beginning on page 77. Retirement and Health and Welfare Benefits›RETIREMENT AND HEALTH AND WELFARE BENEFITS
We have never had a traditional or defined benefit pension plan. We maintain a Section 401(k) retirement plan in which all salaried employees can participate, which provides a Company matching contribution of 200% of the first 3% of compensation contributed to the plan (utilizing earnings not in excess of an amount established by the Internal Revenue Service ($275,000285,000 in 2018)2020)). Other benefits, such as health and dental plans, group term life insurance, short- and long-term disability insurance and travel accident insurance, are also available generally to all of our salaried employees. Our executives participate in Company-sponsored benefit programs available broadly to generally all of our salaried employees, including our employee stock purchase plan and our Section 401(k) plan. Deductibility of Executive Compensation›DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee’s policy is to consider the tax treatment of compensation paid to our executive officers while simultaneously seeking to provide our executives with appropriate rewards for their performance. Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), a publicly-held corporation may not deduct compensation of more than $1 million paid to any “covered employee” unless certain exceptions are met primarily related to performance-based compensation. Substantially all of the services rendered by our executive officers were performed on behalf of our operating partnership or its subsidiaries. The Internal Revenue Service has issued a series of private letter rulings which indicate that compensation paid by an operating partnership to executive officers of a REIT that serves as its general partner is not subject to limitation under Section 162(m) to the extent such compensation is attributable to services rendered to the operating partnership. We have not obtained a ruling on this issue, but have no reason to believe that the same conclusion would not apply to us.employee.” To the extent that compensation paid to our executive officers is subject to and does not qualify for deduction under Section 162(m), our Committee is prepared to exceed the limit on deductibility under Section 162(m) to the extent necessary to establish compensation programs that we believe provide appropriate incentives and reward our executives relative to their performance. Because we qualify as a REIT under the Code, we generally distribute at least 100% of our net taxable income each year and therefore do not pay federal income tax. As a result, and based on the level of cash compensation paid to our executive officers, the possible loss of a federal tax deduction would not be expected to have a material impact on us. Accounting for Stock-Based Compensation›ACCOUNTING FOR STOCK-BASED COMPENSATION
We account for stock-based awards in accordance with the requirements of ASC Topic 718. BOSTON PROPERTIES, INC. |2019 Proxy Statement 67
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IX. OTHER COMPENSATION POLICIES
| | | 7› | | COMPENSATION DISCUSSION AND ANALYSIS | | | IV. OTHER COMPENSATION POLICIES |
Assessment of Compensation-Related Risks›ASSESSMENT OF COMPENSATION-RELATED RISKS
The Committee is responsible for overseeing the risks relating to compensation policies and practices affecting senior management on an ongoing basis. The Committee believes that, because of the following factors, there is a low likelihood that our compensation policies and practices would encourage excessive risk-taking: | • | | Risk Mitigation Factors | •our policies and programs are generally intended to encourage executives to focus on long- term objectives; | |
| • | | overall compensation is maintained at levels that are competitive with the market; | |
| • | | the mix of compensation rewards long-term performance with a significantat-risk component; | |
| • | | variable pay is based on the achievement of a variety of operational, capital annual cash bonuses for executives are linked to performance against goals in three categories with specific weightings and management goals with the Committee having discretion to determine how much each measure should impact pay, thereby mitigating the risk that any one measure can dominate the payouts based on a formula;executive has target and maximum bonus opportunities;
| |
| • | | except for those employees who satisfy the conditions for Qualified Retirement, all equity awards are subject to multi-year vesting (see “– Potential Payments Upon Termination or Change in Control – Time-BasedRetirement Eligibility Provisions for LTI Equity Awards Agreements – Qualified Retirement” on page 83)); | |
| • | | executive officers are subject to minimum stock ownership guidelines and limitations on trading in our securities, including prohibitions on hedging and pledging; and | |
| • | | a clawback policy permits the Company to recoup compensation paid on the basis of financial results that are subsequently restated. | |
Equity Award Grant Policy›EQUITY AWARD GRANT POLICY
We have a policy that annual grants to employees are approved by the Committee in late January or around the third or fourth weekearly February of January each year, with an effective grant date immediately following the closing of the NYSE on the second trading day after we publicly release financial results for the prior year. We believe this policy provides the necessary certainty and transparency for both employees and stockholders, while allowing the Committee desired flexibility. Our Committee approves equity awards in dollar values. To the extent these awards are paid in the form of full-value awards (either shares of restricted stock and/or LTIP units), the number of shares/units granted is calculated by dividing the dollar value of the approved awards by the closing market price on the NYSE of a share of our common stock on the effective date of grant. To the extent these awards are made in the form of stock options, the number of shares underlying option grants is determined by dividing the dollar value of the approved awards by the grant-date fair value of aten-yearthe option, with the exercise price equal to the closing market price on the NYSE of a share of our common stock on the effective date of grant, as calculated by an independent valuation expert in accordance with ASC Topic 718 using assumptions approved by the Committee.. The Equity Award Grant Policy does not apply to performance-based equity awards such as the MYLTIP awards because they are not “full-value” awards upon issuance and their value depends on our future TSR performance; accordingly,of the different considerations that apply to the granting of such awards. For example, consistent with our past practice for performance- basedwhen granting performance-based equity awards, the Committee determined that the 2021 MYLTIP baseline share price, from which TSR performance is measured, should be based on the average closing stock price for the five trading days prior to and including the effective date of grant. 68 BOSTON PROPERTIES, INC. |2019 Proxy Statement
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COMPENSATION COMMITTEE REPORT
The Compensation Committee of Boston Properties has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Submitted by the Compensation Committee:
Carol B. Einiger, Chair
Kelly A. Ayotte
Bruce W. Duncan
David A. Twardock
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BOSTON PROPERTIES, INC. |2019 Proxy Statement 69
COMPENSATION OF EXECUTIVE OFFICERS SUMMARY COMPENSATION TABLE The following table shows the compensation for each of our NEOs in accordance with Item 402(c) of RegulationS-K. | | Name and Principal Position | | Year | | Salary ($) | | Bonus ($)(1) | | Stock Awards ($)(2) | | All Other Compensation ($)(6) | | Total ($) | | | Year | | Salary ($) | | Bonus ($)(1) | | Stock Awards ($)(2) | | Non-Equity Incentive Plan Compensation ($)(6) | | All Other Compensation ($)(7) | | Total ($)(8) | | Owen D. Thomas Chief Executive Officer | | | 2018 | | | | 875,000 | | | | 2,875,000 | | | | 7,927,786 | (3) | | | 17,160 | | | | 11,694,946 | | | 2020 | | | 900,000 | | | | — | | | 8,644,379 | (3) | | 1,175,000 | | | 17,910 | | 10,737,289 | | |
| 2017
|
| |
| 875,000
|
| |
| 2,425,000
|
| |
| 6,745,617
| (4)
| |
| 16,680
|
| |
| 10,062,297
|
| | | 2019 | | | 898,077 | | | 2,550,000 | | | 8,452,063 | (4) | | | — | | | 17,460 | | 11,917,600 | | |
| 2016
|
| |
| 867,308
|
| |
| 2,558,333
|
| |
| 6,560,000
| (5)
| |
| 16,380
|
| |
| 10,002,021
|
| | | 2018 | | | 875,000 | | | 2,875,000 | | | 7,927,786 | (5) | | | — | | | 17,160 | | 11,694,946 | | Douglas T. Linde President | | | 2018 | | | | 725,000 | | | | 2,180,000 | | | | 5,163,416 | (3) | | | 34,380 | | | | 8,102,796 | | | 2020 | | | 750,000 | | | | — | | | 5,373,381 | (3) | | 950,000 | | | 35,310 | | 7,108,691 | | |
| 2017
|
| |
| 725,000
|
| |
| 1,935,000
|
| |
| 4,777,500
| (4)
| |
| 33,600
|
| |
| 7,471,100
|
| | | 2019 | | | 748,077 | | | 2,095,000 | | | 5,211,300 | (4) | | | — | | | 34,680 | | 8,089,057 | | |
| 2016
|
| |
| 724,231
|
| |
| 1,847,500
|
| |
| 4,605,120
| (5)
| |
| 33,300
|
| |
| 7,210,151
|
| | | 2018 | | | 725,000 | | | 2,180,000 | | | 5,163,416 | (5) | | | — | | | 34,380 | | 8,102,796 | | Raymond A. Ritchey Senior Executive Vice President | | | 2018 | | | | 720,000 | | | | 2,080,000 | | | | 4,278,466 | (3) | | | 33,576 | | | | 7,112,042 | | | 2020 | | | 740,000 | | | | — | | | 4,028,000 | (3) | | 1,103,850 | | | 34,326 | | 5,906,176 | | |
| 2017
|
| |
| 720,000
|
| |
| 2,080,000
|
| |
| 4,077,125
| (4)
| |
| 33,096
|
| |
| 6,910,221
|
| | | 2019 | | | 738,462 | | | 1,820,000 | | | 3,990,000 | (4) | | | — | | | 33,876 | | 6,582,338 | | |
| 2016
|
| |
| 719,231
|
| |
| 1,555,000
|
| |
| 3,915,844
| (5)
| |
| 32,796
|
| |
| 6,222,871
|
| | | 2018 | | | 720,000 | | | 2,080,000 | | | 4,278,466 | (5) | | | — | | | 33,576 | | 7,112,042 | | Michael E. LaBelle Executive Vice President, Chief Financial Officer and Treasurer | | | 2018 | | | | 500,000 | | | | 1,450,000 | | | | 1,973,150 | (3) | | | 25,380 | | | | 3,948,530 | | | 2020 | | | 510,000 | | | | — | | | 1,848,139 | (3) | | 937,500 | | | 26,310 | | 3,321,949 | | |
| 2017
|
| |
| 500,000
|
| |
| 1,325,000
|
| |
| 2,100,000
| (4)
| |
| 24,600
|
| |
| 3,949,600
|
| | | 2019 | | | 509,231 | | | 1,295,000 | | | 1,916,801 | (4) | | | — | | | 25,680 | | 3,746,712 | | |
| 2016
|
| |
| 499,231
|
| |
| 900,000
|
| |
| 1,929,312
| (5)
| |
| 24,300
|
| |
| 3,352,843
|
| | | 2018 | | | 500,000 | | | 1,450,000 | | | 1,973,150 | (5) | | | — | | | 25,380 | | 3,948,530 | | Bryan J. Koop Executive Vice President, Boston Region | | | 2018 | | | | 400,000 | | | | 1,550,000 | | | | 1,257,523 | (3) | | | 34,380 | | | | 3,241,903 | | | 2020 | | | 410,000 | | | | — | | | 1,301,500 | (3) | | 625,000 | | | 35,310 | | 2,371,810 | | |
| 2017
|
| |
| 400,000
|
| |
| 1,280,000
|
| |
| 1,316,874
| (4)
| |
| 33,600
|
| |
| 3,030,474
|
| | | 2019 | | | 409,231 | | | 1,370,000 | | | 1,235,000 | (4) | | | — | | | 34,680 | | 3,048,911 | | |
| 2016
|
| |
| 399,231
|
| |
| 835,000
|
| |
| 1,295,910
| (5)
| |
| 33,300
|
| |
| 2,563,441
|
| | | 2018 | | | 400,000 | | | 1,550,000 | | | 1,257,523 | (5) | | | — | | | 34,380 | | 3,241,903 | |
(1) | Represent cash bonuses paid to the NEOs in recognition of performance in the year reported. Such bonuses arewere paid in the subsequent year (e.g., the bonuses paid in recognition of performance in 20182019 were paid in 2019)2020). |
(2) | A discussion of the assumptions used in calculating these values can be found in Note 16 to our 20182020 audited financial statements beginning on page 175178 of our annual reportAnnual Report on Form10-K for the year ended December 31, 20182020 included in the annual report that accompanied this proxy statement. |
(3) | Represents the aggregate grant date fair value of time-based restricted common stock and LTIP unit awards and 20182020 MYLTIP awards granted in 2018,2020, determined in accordance with ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. The following table sets forth (a) the grant date fair values for the time-based restricted common stock and LTIP unit awards, are as follows: Mr. Thomas – $3,588,786; Mr. Linde – $2,302,416; Mr. Ritchey – $2,178,466; Mr. LaBelle – $1,060,650; and Mr. Koop – $697,523. The(b) the grant date fair values for the 20182020 MYLTIP awards based upon the probable outcome of the performance conditions as of the grant date for the awards are as follows: Mr. Thomas – $4,339,000; Mr. Linde – $2,861,000; Mr. Ritchey – $2,100,000; Mr. LaBelle – $912,500; and Mr. Koop – $560,000. The(c) the maximum values of the 20182020 MYLTIP awards as of the date of grant, assuming that the highest levellevels of performance conditions is achieved, are as follows: Mr. Thomas – $10,582,927; Mr. Linde – $6,978,049; Mr. Ritchey – $5,121,951; Mr. LaBelle – $2,225,610; and Mr. Koop – $1,365,854.achieved. To have value, the 20182020 MYLTIP awards require the Company to achieve relative total stockholder return thresholds (subject to limited absolute performance modifiers).thresholds. See“Compensation Discussion and Analysis – IV. Performance-BasedII. Executive Compensation Program – LTI Equity Awards; Three-Year TSR Drives Actual Earned Pay”Compensation” beginning on page 55.65. |
| | | | | | | | | | | | | NEO | | Time-Based Awards Grant Date Value | | | 2020 MYLTIP Awards Grant Date Value | | | 2020 MYLTIP Awards Maximum Value | | Mr. Thomas | | $ | 3,666,879 | | | $ | 4,977,500 | | | $ | 10,643,375 | | Mr. Linde | | $ | 2,545,881 | | | $ | 2,827,500 | | | $ | 6,046,077 | | Mr. Ritchey | | $ | 1,908,000 | | | $ | 2,120,000 | | | $ | 4,533,257 | | Mr. LaBelle | | $ | 875,639 | | | $ | 972,500 | | | $ | 2,079,496 | | Mr. Koop | | $ | 616,500 | | | $ | 685,000 | | | $ | 1,464,682 | |
(4) | Represents the grant date fair value of time-based restricted common stock and LTIP unit awards and 20172019 MYLTIP awards granted in 2017,2019, determined in accordance with ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. |
(5) | Represents the grant date fair value of time-based restricted common stock and LTIP unit awards and 20162018 MYLTIP awards granted in 2016,2018, determined in accordance with ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. |
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(6) | Represents amounts earned under the 2020 Annual Incentive Plan paid in 2021 for performance in 2020. See “Compensation Discussion and Analysis – II. Executive Compensation Program – Cash Compensation” beginning on page 56. |
(7) | The table below shows the components of “All Other Compensation” for 2018,2020, which include the life insurance premiums paid by usthe Company for group term life insurance, our match for each individual who made 401(k) contributions, the car allowances provided to Messrs. Linde, Ritchey and Koop and the costs to the Company of providing parking spaces to Messrs. Linde, Ritchey, LaBelle and Koop. The amounts shown for car allowances in the table below reflect the aggregate cost to the Company without deducting costs attributable to business use. The components of “All Other Compensation” for 20162018 and 20172019 for each of the NEOs were reported in our 20172019 and 20182020 proxy statements, respectively. |
| Name | | Life Insurance ($) | | | 401(k) Company Match ($) | | | Car Allowance ($) | | | Parking ($) | | | Total ($) | | | NEO | | | Life Insurance | | | 401(k) Company Match | | | Car Allowance | | | Parking | | | Total | | Mr. Thomas | | | 660 | | | | 16,500 | | | | — | | | | — | | | | 17,160 | | | $ | 810 | | | $ | 17,100 | | | $ | — | | | $ | — | | | $ | 17,910 | | Mr. Linde | | | 660 | | | | 16,500 | | | | 9,000 | | | | 8,220 | | | | 34,380 | | | $ | 810 | | | $ | 17,100 | | | $ | 9,000 | | | $ | 8,400 | | | $ | 35,310 | | Mr. Ritchey | | | 660 | | | | 16,500 | | | | 9,000 | | | | 7,416 | | | | 33,576 | | | $ | 810 | | | $ | 17,100 | | | $ | 9,000 | | | $ | 7,416 | | | $ | 34,326 | | Mr. LaBelle | | | 660 | | | | 16,500 | | | | — | | | | 8,220 | | | | 25,380 | | | $ | 810 | | | $ | 17,100 | | | $ | — | | | $ | 8,400 | | | $ | 26,310 | | Mr. Koop | | | 660 | | | | 16,500 | | | | 9,000 | | | | 8,220 | | | | 34,380 | | | $ | 810 | | | $ | 17,100 | | | $ | 9,000 | | | $ | 8,400 | | | $ | 35,310 | |
(8) | The amount shown in the “Total” column for each NEO equals the sum of all columns of the Summary Compensation Table. |
BOSTON PROPERTIES, INC. |2019 Proxy Statement 71
COMPENSATION OF EXECUTIVE OFFICERS
2018 GRANTS OF PLAN-BASED AWARDS IN 2020
The following table provides information about the awards granted to our NEOs during the year ended December 31, 2018.2020. | | | | | | | | | | | | | | | | | | | | | Date of Compensation Committee Approval (1) | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(4) | | Grant Date Fair Value of Stock and Option Awards ($)(5) | | Name | | Grant Date | | Date of Compensation Committee Approval(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | | Grant Date Fair Value of Stock and Option Awards ($)(4) | | | Grant Date | | Threshold ($)(2) | | Target ($)(2) | | Maximum ($)(2) | | Threshold (#)(3) | | Target (#)(3) | | Maximum (#)(3) | | | Threshold ($)(2) | | Target ($)(2) | | Maximum ($)(2) | | | Owen D. Thomas | | | 2/2/2018 | | | | 1/22/2018 | | | | — | | | | — | | | | — | | | | 32,260 | | | | 3,588,786 | | | | — | | | 1/22/2020 | | | 1,175,000 | | | 2,350,000 | | | 3,525,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2/6/2018 | | | | 1/22/2018 | | | | 0 | | | | 5,291,463 | | | | 10,582,927 | | | | — | | | | 4,339,000 | | | | | | 1/31/2020 | | | 1/22/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 28,409 | | | 3,666,879 | | | | | 2/4/2020 | | | 1/22/2020 | | | | — | | | | — | | | | — | | | | — | | | 36,813 | | | 73,626 | | | | — | | | 4,977,500 | | Douglas T. Linde | | | 2/2/2018 | | | | 1/22/2018 | | | | — | | | | — | | | | — | | | | 20,697 | | | | 2,302,416 | | | | — | | | 1/22/2020 | | | 950,000 | | | 1,900,000 | | | 2,850,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2/6/2018 | | | | 1/22/2018 | | | | 0 | | | | 3,489,024 | | | | 6,978,049 | | | | — | | | | 2,861,000 | | | | | | 1/31/2020 | | | 1/22/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 19,724 | | | 2,545,881 | | | | | 2/4/2020 | | | 1/22/2020 | | | | — | | | | — | | | | — | | | | — | | | 20,912 | | | 41,824 | | | | — | | | 2,827,500 | | Raymond A. Ritchey | | | 2/2/2018 | | | | 1/22/2018 | | | | — | | | | — | | | | — | | | | 17,596 | | | | 1,889,982 | | | | — | | | 1/22/2020 | | | 825,000 | | | 1,650,000 | | | 2,475,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2/6/2018 | | | | 1/22/2018 | | | | 0 | | | | 2,560,976 | | | | 5,121,951 | | | | — | | | | 2,100,000 | | | | | 2/6/2018 | | | | 2/6/2018 | | | | — | | | | — | | | | — | | | | 2,679 | | | | 288,484 | | | | | | 1/31/2020 | | | 1/22/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 14,788 | | | 1,908,000 | | | | | 2/4/2020 | | | 1/22/2020 | | | | — | | | | — | | | | — | | | | — | | | 15,679 | | | 31,359 | | | | — | | | 2,120,000 | | Michael E. LaBelle | | | 2/2/2018 | | | | 1/22/2018 | | | | — | | | | — | | | | — | | | | 7,646 | | | | 850,589 | | | | — | | | 1/22/2020 | | | 625,000 | | | 1,250,000 | | | 1,875,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2/6/2018 | | | | 1/22/2018 | | | | 0 | | | | 1,112,805 | | | | 2,225,610 | | | | — | | | | 912,500 | | | | | 2/6/2018 | | | | 2/6/2018 | | | | | | | | | | 1,951 | | | | 210,061 | | | | | | 1/31/2020 | | | 1/22/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 6,784 | | | 875,639 | | | | | 2/4/2020 | | | 1/22/2020 | | | | — | | | | — | | | | — | | | | — | | | 7,192 | | | 14,385 | | | | — | | | 972,500 | | Bryan J. Koop | | | 2/2/2018 | | | | 1/22/2018 | | | | — | | | | — | | | | — | | | | 4,692 | | | | 522,005 | | | | — | | | 1/22/2020 | | | 625,000 | | | 1,250,000 | | | 1,875,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2/6/2018 | | | | 1/22/2018 | | | | 0 | | | | 682,927 | | | | 1,365,854 | | | | — | | | | 560,000 | | | | | 2/6/2018 | | | | 2/6/2018 | | | | — | | | | — | | | | — | | | | 1,630 | | | | 175,518 | | | | | | 1/31/2020 | | | 1/22/2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 4,778 | | | 616,500 | | | | | 2/4/2020 | | | 1/22/2020 | | | | — | | | | — | | | | — | | | | — | | | 5,066 | | | 10,132 | | | | — | | | 685,000 | |
(1) | For a discussion of the Company’s policy with respect to the effective grant dates for annual equity-based awards, see “Compensation Discussion and Analysis – IX.IV. Other Compensation Policies – Equity Award Grant Policy” beginning on page 68.76. |
(2) | Represents 2018the potential payout at threshold, target and maximum for 2020 performance under the 2020 Annual Incentive Plan, as described under “Compensation Discussion and Analysis – II. Executive Compensation Program – Cash Compensation.” The actual bonuses received under the 2020 Annual Incentive Plan by each NEO are reported in the Summary Compensation Table on page 77 in the column “Non-Equity Incentive Compensation.” |
(3) | Represents 2020 MYLTIP awards for each NEO. Performance-based vesting of 20182020 MYLTIP awards will be measured on the basis of ourBXP’s annualized, compounded TSR over a three-year measurement period ending February 5, 20213, 2023 relative to the annualized, compounded total return of (i) the C&S Index (50% weight) and (ii) theFTSE Nareit Office Index adjusted(adjusted to include Vornado Realty Trust (50% weight)Trust). Amounts ultimately earned under the 2018See “Compensation Discussion and Analysis – II. Executive Compensation Program – LTI Equity Compensation – 2020 MYLTIP awards may range from zero to the maximum amount set forth in the table depending on our TSR relative to the two indices. Levels of payout opportunity range from zero (for relative TSR performance that is 1,000 basis points or more below the index) to a maximum of 200% of target value (for relative TSR performance that is 1,000 basis points or more greater than the index), with linear interpolation between-1,000 and +1,000 basis points. Earned awards measured on the basis of relative TSR performance are subject to absolute TSR modifiers that (a) reduce the level of earned awards by 20% if our annualized TSR is less than 0%, and (b) cause awards to be earned at “threshold” (50% of target value) if our annualized TSR is greater than 12%, even if based on relative TSR alone no awards would be earned. Any 2018 MYLTIP awards ultimately earned based on performance will vest 50% on February 5, 2021 and 50% on February 5, 2022, subject to exceptions discussed under “– Potential Payments Upon Termination or Change in Control” beginning on page 80. Distributions payable on 2018 MYLTIP awards equalone-tenth (1/10th) of the regular quarterly distributions on common units of our Operating Partnership (and no amounts are payable on special distributions) prior to being earned..” |
(3) | | | | | | | | | 78 | | | | | 2021 Proxy Statement |
| | | 8› | | COMPENSATION OF EXECUTIVE OFFICERS |
(4) | Stock awards were made in the form of shares of restricted common stock and/or LTIP units at the election of each NEO. Each NEO elected to receive all LTIP units. LTIP units were awarded under the Boston Properties, Inc. 2012 Stock Option and Incentive Plan (the “2012 Plan”) by the Compensation Committee. Dividends are payable on restricted common stock and distributions are payable on the LTIP units to the same extent and on the same date that dividends and distributions are paid on Boston Properties common stock and common units of our Operating Partnership, respectively. Grantees of restricted common stock pay $0.01 per share and grantees of LTIP units pay $0.25 per unit. The awards generally are scheduled to vest over a four-year period with 25% vesting on January 15 of each year beginning January 15, 2019,2021, based on continued employment through such date, subject to acceleration under certain circumstances. When anAn employee attainswho had attained age 65 or attainsattained age 62 with 20 years of service with |
72 BOSTON PROPERTIES, INC. |2019 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS
| us the employee becomesprior to February 1, 2019 became fully vested in all time-based LTI equity awards granted on February 2, 2018. Awards granted on February 6, 2018 toJanuary 31, 2020. All other employees at age 65 or age 62 with 20 years of service as of February 6, 2018 vest over a two-year period with 50% vesting on January 15 of each year beginning January 15, 2019. Accordingly, in the case of Mr. Ritchey, because he previously attained the age of 65, all of his awards granted on February 2, 2018 werewill become fully vested upon grant and his awards granted on February 6, 2018 vest over a two-year period.“Qualified Retirement” as defined under “– Potential Payments Upon Termination or Change in Control – Retirement Eligibility Provisions for LTI Equity Awards” below. |
(4)(5) | The amounts included in this column represent the full grant date fair value of the, restricted common stock, LTIP unit awards and 20182020 MYLTIP awards computeddetermined in accordance with ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. A discussion of the assumptions used in calculating these values can be found in Note 16 to our 20182020 audited financial statements beginning on page 175178 of our annual reportAnnual Report on Form10-K for the year ended December 31, 20182020 included in the annual report that accompanied this proxy statement. |
BOSTON PROPERTIES, INC. |2019 Proxy Statement 73
COMPENSATION OF EXECUTIVE OFFICERS
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 20182020 FISCAL YEAR-END The following table sets forth information regarding outstanding equity awards held by our NEOs as of December 31, 20182020 pursuant to Item 402(f) of RegulationS-K. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards(1) | | | Stock Awards(1) | | | | | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | | | | | Owen D. Thomas | | | 54,282 | | | | — | | | | 95.69 | | | | 4/2/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,436 | (3) | | | 274,172 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,895 | (4) | | | 438,382 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,498 | (5) | | | 843,900 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 9,849 | (6) | | | 1,108,505 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 32,260 | (7) | | | 3,630,863 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 47,985 | (9) | | | 5,400,712 | (9) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 52,402 | (10) | | | 5,897,845 | (10) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 89,377 | (11) | | | 10,059,381 | (11) | | | | | Douglas T. Linde | | | 27,455 | | | | — | | | | 86.86 | | | | 1/28/2021 | | | | | | | | | | | | | | | | | | | | | | | | | 34,476 | | | | — | | | | 100.77 | | | | 2/3/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 41,092 | | | | — | | | | 98.46 | | | | 2/1/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,948 | (3) | | | 219,247 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,114 | (4) | | | 350,481 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,264 | (5) | | | 592,463 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,852 | (6) | | | 771,193 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 20,697 | (7) | | | 2,329,447 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 33,686 | (9) | | | 3,791,359 | (9) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 36,459 | (10) | | | 4,103,460 | (10) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 58,933 | (11) | | | 6,632,909 | (11) | | | | | Raymond A. Ritchey(12) | | | 24,739 | | | | — | | | | 86.86 | | | | 1/28/2021 | | | | | | | | | | | | | | | | | | | | | | | | | 32,120 | | | | — | | | | 100.77 | | | | 2/3/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 39,943 | | | | — | | | | 98.46 | | | | 2/1/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,461 | (4) | | | 276,986 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,679 | (8) | | | 301,521 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25,545 | (9) | | | 2,875,090 | (9) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 27,944 | (10) | | | 3,145,097 | (10) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 43,257 | (11) | | | 4,868,575 | (11) | | | | | Michael E. LaBelle | | | 7,749 | | | | — | | | | 100.77 | | | | 2/3/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 8,588 | | | | — | | | | 98.46 | | | | 2/1/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,358 | (3) | | | 152,843 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 723 | (4) | | | 81,374 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,563 | (5) | | | 401,016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,819 | (6) | | | 542,378 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,646 | (7) | | | 860,557 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,951 | (8) | | | 219,585 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 11,401 | (9) | | | 1,283,183 | (9) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 12,821 | (10) | | | 1,443,004 | (10) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,796 | (11) | | | 2,115,490 | (11) | | | | |
74 BOSTON PROPERTIES, INC. |2019 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS
| | | Option Awards(1) | | Stock Awards(1) | | | | | Option Awards(1) | | Stock Awards(1) | | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | | | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(2) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | | Owen D. Thomas | | | 54,282 | | | 95.69 | | | 4/2/2023 | | | 91,118 | | | 8,613,385 | | | 99,987 | | | 9,451,771 | | Douglas T. Linde | | | 34,476 | | | 100.77 | | | 2/3/2022 | | | 60,500 | | | 5,719,065 | | | 61,036 | | | 5,769,733 | | | | | 41,092 | | | 98.46 | | | 2/1/2023 | | | | — | | | | — | | | | — | | | | — | | Raymond A. Ritchey | | | | — | | | | — | | | | — | | | 9,749 | | | 921,573 | | | 46,111 | | | 4,358,873 | | Michael E. LaBelle | | | | — | | | | — | | | | — | | | 23,236 | | | 2,196,499 | | | 20,928 | | | 1,978,324 | | Bryan J. Koop | | 5,616 | | | | — | | | 86.86 | | | 1/28/2021 | | | | | | | | | | | | | 7,067 | | | 100.77 | | | 2/3/2022 | | | 10,918 | | | 1,032,079 | | | 13,918 | | | 1,315,669 | | | | 7,067 | | | | — | | | 100.77 | | | 2/3/2022 | | | | | | | | | | | | | 8,267 | | | 98.46 | | | 2/1/2023 | | | | — | | | | — | | | | — | | | | — | | | | 8,267 | | | | — | | | 98.46 | | | 2/1/2023 | | | | | | | | | | | | | | | | | | | | | | | 1,140 | (3) | | 128,307 | | | | | | | | | | | | | | | | | | | 607 | (4) | | 68,318 | | | | | | | | | | | | | | | | | | | 3,011 | (5) | | 338,888 | | | | | | | | | | | | | | | | | | | 3,916 | (6) | | 440,746 | | | | | | | | | | | | | | | | | | | 4,692 | (7) | | 528,085 | | | | | | | | | | | | | | | | | | | 1,630 | (8) | | 183,457 | | | | | | | | | | | | | | | | | | | | | | | 6,424 | (9) | | 723,021 | (9) | | | | | | | | | | | | | | | | | | 6,945 | (10) | | 781,660 | (10) | | | | | | | | | | | | | | | | | | 11,535 | (11) | | 1,298,264 | (11) | | | |
(1) | This table does not include LTIP unit and restricted common stock awards granted in January 2021 and 20192021 MYLTIP awards granted in February 2019 in recognition of performance in 2018 because they were not outstanding at the end of 2018.2021. Those grants are described above under “Compensation Discussion and Analysis.” Stock options have not been granted since 2013. All stock options were fully vested as of January 15, 2017. |
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| | | 8› | | COMPENSATION OF EXECUTIVE OFFICERS |
(2) | The market valuefollowing table sets forth the number of such holdings is based on the closing price of our common stock as reported on the NYSE on December 31, 2018 of $112.55 per share. |
(3) | On February 3, 2015, these NEOs received awards ofunvested time-based LTIP units and/or shares of restricted common stock, and unvested LTIP units earned under the 2012 Plan2017 MYLTIP plan, held by each NEO as follows: Mr. Thomas – 9,744 LTIP units; Mr. Linde – 7,789 shares of restricted common stock; Mr. LaBelle – 5,429 sharesDecember 31, 2020.
|
| | | | | | | | | | | | | | | | | | | | | Award/Grant Date(a) | | Mr. Thomas | | | Mr. Linde | | | Mr. Ritchey(d) | | | Mr. LaBelle | | | Mr. Koop(d) | | Time-Based Awards(b) | | | | | | | | | | | | | | | | | | | | | 2/3/2017 | | | 3,283 | | | | 2,284 | | | | — | | | | 1,607 | | | | — | | 2/2/2018 | | | 16,130 | | | | 10,349 | | | | — | | | | 3,823 | | | | — | | 2/6/2018 | | | — | | | | — | | | | — | | | | 975 | | | | — | | 2/1/2019 | | | 25,014 | | | | 15,423 | | | | — | | | | 5,574 | | | | 3,717 | | 1/31/2020 | | | 28,409 | | | | 19,724 | | | | — | | | | 6,784 | | | | 4,778 | | 2017 MYLTIP Award(c) | | | 18,282 | | | | 12,720 | | | | 9,749 | | | | 4,473 | | | | 2,423 | |
| (a) | The vesting of restricted common stock;time-based LTI equity awards and Mr. Koop – 4,557 LTIP units. These LTIP units and restricted common shares wereperformance-based LTI equity awards is subject to vestingacceleration under certain circumstances and other exceptions discussed below under “– Potential Payments Upon Termination or Change in Control”. |
| (b) | Time-based LTI equity awards are scheduled to vest ratably over four years, with 25% of the total award vesting on January 15 of each year beginning January 15 2016, subject to acceleration under certain circumstances.in the year following the grant, based on continued employment through such date. |
(4) | (c) | On February 5, 2015, these NEOs received 2015 MYLTIP awards. On February 4, 2018,6, 2020, the measurement period for the 20152017 MYLTIP awards ended and the Company’s TSR was sufficient for employees to earn and therefore become eligible to vest in a portion of the 20152017 MYLTIP awards. TheseFifty percent (50%) of these earned 20152017 MYLTIP awards vested 50% on February 4, 20186, 2020 and 50% vested on February 4,6, 2021. |
| (d) | All of Mr. Ritchey’s time-based LTI equity awards were fully vested as of December 31, 2020 and all of Mr. Koop’s time-based LTI equity awards granted prior to January 1, 2019 were fully vested as of December 31, 2020 because each satisfied the conditions for retirement eligibility for these awards. These policies are described below under “– Potential Payments Upon Termination or Change in Control – Retirement Eligibility Provisions for LTI Equity Awards”. |
(3) | The market value of these holdings is based on the closing price of our common stock as reported on the NYSE on December 31, 2020 of $94.53 per share. |
(4) | The following table sets forth the number of unearned performance-based LTI equity awards held by each NEO as of December 31, 2020. |
| | | | | | | | | | | | | | | | | | | | | Award(a) | | Mr. Thomas | | | Mr. Linde | | | Mr. Ritchey | | | Mr. LaBelle | | | Mr. Koop | | 2018 MYLTIP Award(b) | | | 27,390 | | | | 18,060 | | | | 13,256 | | | | 5,760 | | | | 3,535 | | 2019 MYLTIP Award(c) | | | 35,784 | | | | 22,064 | | | | 17,176 | | | | 7,975 | | | | 5,317 | | 2020 MYLTIP Award(d) | | | 36,813 | | | | 20,912 | | | | 15,679 | | | | 7,193 | | | | 5,066 | |
| (a) | The vesting of performance-based LTI equity awards is subject to exceptionsacceleration under certain circumstances discussed under “– Potential Payments Upon Termination or Change in Control” below. |
(5) | On February 8, 2016, these NEOs received awards of LTIP units under the 2012 Plan as follows: Mr. Thomas – 14,996 LTIP units; Mr. Linde – 10,527 LTIP units; Mr. LaBelle – 7,126 LTIP units; and Mr. Koop – 6,022 LTIP units. These LTIP units were subject to vesting ratably over four years, with 25% of the total award vesting on January 15 of each year beginning January 15, 2017, subject to acceleration under certain circumstances.
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(6) | On February 3, 2017, these NEOs received awards of LTIP units and/or restricted common stock under the 2012 Plan as follows: Mr. Thomas – 13,132 LTIP units; Mr. Linde – 9,136 shares of restricted common stock; Mr. LaBelle – 6,425 shares of restricted common stock; and Mr. Koop – 5,221 LTIP units. These LTIP units and restricted common shares were subject to vesting ratably over four years, with 25% of the total award vesting on January 15 of each year beginning January 15, 2018, subject to acceleration under certain circumstances.
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(7) | On February 2, 2018, these NEOs received awards of LTIP units under the 2012 Plan as follows: Mr. Thomas – 32,260 LTIP units; Mr. Linde – 20,697 LTIP units; Mr. LaBelle – 7,646 LTIP units; and Mr. Koop – 4,692 LTIP units. These LTIP units were subject to vesting ratably over four years, with 25% of the total award vesting on January 15 of each year beginning January 15, 2019, subject to acceleration under certain circumstances.
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(8)(b) | On February 6, 2018, these NEOs received 2018 MYLTIP awards. In accordance with SEC rules, the number of equity incentive plan awards of LTIP units underis based on achieving “threshold” performance goals. If our performance continued through the 2012 Plan as follows: Mr. Ritchey – 2,679 LTIP units; Mr. LaBelle – 1,951 LTIP units; and Mr. Koop – 1,630 LTIP units. Mr. Ritchey’s LTIP units were subject to vesting ratably over two years, with 50%end of the total award vesting on January 15 of each year |
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| performance period at the same rate as had occurred from the beginning January 15, 2019, subject to acceleration under certain circumstances. Messrs. LaBelle’s and Koop’s LTIP units were subject to vesting ratably over four years, with 25% of the total award vestingperformance period through December 31, 2020, our NEOs would have earned an amount below threshold. 2018 MYLTIP awards earned based on January 15performance are scheduled to vest 50% on February 5, 2021 and 50% on February 5, 2022, based on continued employment through such date. The measurement period for assessing performance ended on February 5, 2021. The annualized TSR for the same period for the FTSE Nareit Office Index (adjusted to include Vornado Realty) was -2.21%, for the Cohen & Steers Realty Majors Index was 8.31% and for the Company was -4.92%. As a result, the final valuation for the awards was determined to be 29.1773% of each year beginning January 15, 2019, subject to acceleration under certain circumstances.target, or an aggregate of approximately $3.8 million for the NEOs as a group. |
(9) | (c) | On February 10, 2016,5, 2019, these NEOs received 20162019 MYLTIP awards. The measurement period for assessing performance ends on February 4, 2022. In accordance with SEC rules, the number of equity incentive plan awards is based on achieving “target” performance goals. If our performance continued through the end of the performance period at the same rate as had occurred from the beginning of the performance period through December 31, 2020, our NEOs would earn an amount between threshold and target. 2019 MYLTIP awards earned based on performance are scheduled to vest 50% on February 4, 2022 and 50% on February 4, 2023, based on continued employment through such date. |
| (d) | On February 4, 2020, these NEOs received 2020 MYLTIP awards. The measurement period for assessing performance ends on February 3, 2023. In accordance with SEC rules, the number of equity incentive plan awards is based on achieving “target” performance goals. If our performance had continued through the end of the performance period at the same rate as had occurred from the beginning of the performance period through December 31, 2018, our NEOs would have earned an amount between threshold and target. Any earned 2016 MYLTIP awards vest 50% on February 9, 2019 and 50% on February 9, 2020, subject to exceptions discussed under “– Potential Payments Upon Termination or Change in Control ” below. The measurement period for assessing performance ended on February 9, 2019. The TSR for the same period for the Nareit Office Index, adjusted to include Vornado Realty and exclude Boston Properties, Inc. was 9.73%, for the C&S Index was 8.44% and for the Company was 6.84%. As a result, the final awards were determined to be 69.5% of target or an aggregate of approximately $10.3 million for the NEOs as a group. |
(10) | On February 7, 2017, these NEOs received 2017 MYLTIP awards. The measurement period for assessing performance ends on February 6, 2020. In accordance with SEC rules, the number of equity incentive plan awards is based on achieving “target” performance goals. If our performance had continued through the end of the performance period at the same rate as had occurred from the beginning of the performance period through December 31, 2018, our NEOs would earn an amount between threshold and target. 20172020 MYLTIP awards earned based on performance are scheduled to vest 50% on February 6, 20203, 2023 and 50% on February 6, 2021, subject to exceptions discussed under “– Potential Payments Upon Termination or Change in Control ” below.3, 2024, based on continued employment through such date.
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(11) | | | | | | | | | On February 6, 2018, these NEOs received 2018 MYLTIP awards. The measurement period for assessing performance ends on February 5, 2021. In accordance with SEC rules, the number of equity incentive plan awards is based on achieving “maximum” performance goals. If our performance had continued through the end of the performance period at the same rate as had occurred from the beginning of the performance period through December 31, 2018, our NEOs would earn an amount between target and maximum. 2018 MYLTIP awards earned based on performance vest 50% on February 5,80
| | | | | 2021 and 50% on February 5, 2022, subject to exceptions discussed under “– Potential Payments Upon Termination or Change in Control ” below.Proxy Statement |
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(12) | All of Mr. Ritchey’s shares of restricted common stock and LTIP units (other than LTIP units earned pursuant to the 2015 MYLTIP awards and LTIP units granted on February 6, 2018) were fully vested as of December 31, 2018 because he previously attained the age of 65.
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20182020 OPTION EXERCISES AND STOCK VESTED
The following table sets forth the aggregate number of options to purchase shares of our common stock exercised by our NEOs in 20182020 and the aggregate number of shares of common stock and LTIP units that vested in 2018.2020. The Value Realized on Exercise is the product of (1) the fair market value of a share of our common stock on the date of exercise minus the exercise price, multiplied by (2) the number of shares of common stock underlying the exercised options. The Value Realized on Vesting is the product of (1) the closing price on the NYSE of a share of our common stock on the vesting date (or, if the vesting date was not a trading day, the immediately preceding trading date), multiplied by (2) the number of shares/shares and LTIP units vesting. In each case, the value realized is before payment of any applicable taxes and brokerage commissions. | Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($) | | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting | | Owen D. Thomas | | | — | | | | — | | | | 28,149 | | | | 3,394,126 | | | | — | | | | — | | | | 57,198 | | | $ | 8,067,183 | | Douglas T. Linde | | | — | | | | — | | | | 22,823 | | | | 2,751,154 | | | | 27,455 | | | $ | 1,587,136 | | | | 38,819 | | | $ | 5,479,164 | | Raymond A. Ritchey | | | — | | | | — | | | | 29,526 | | | | 3,523,633 | | | | — | | | | — | | | | 34,119 | | | $ | 4,887,658 | | Michael E. LaBelle | | | — | | | | — | | | | 11,347 | | | | 1,373,093 | | | | 16,337 | | | $ | 617,061 | | | | 15,798 | | | $ | 2,220,867 | | Bryan J. Koop(1) | | | — | | | | — | | | | 9,216 | | | | 1,115,451 | | | | — | | | | — | | | | 14,592 | | | $ | 1,801,210 | |
(1) | Mr. Koop attained age 62 with 20 years of service on August 18, 2020. As a result, all of his unvested time-based LTI awards granted prior to January 1, 2019 automatically vested. |
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COMPENSATION OF EXECUTIVE OFFICERS
NONQUALIFIED DEFERRED COMPENSATION IN 2020 We provide our executives with the opportunity to defer up to 20% of their base salarysalaries and cash bonuses. Deferrals are credited with earnings or losses based upon the executive’s selection of one or more of 28 measurement funds, which are all publicly traded mutual funds. Executives may change their selection of measurement funds on a daily basis. The table below summarizes the annual rates of return for the year ended December 31, 20182020 for the 28 measurement funds: | | | | | | | | | | | Name of Fund | | 2018 Rate of Return (%) | | | Name of Fund | | 2018 Rate of Return (%) | | | | | | American Beacon Small Cap Value | | | -16.39 | | | T. Rowe Price Retirement 2025 | | | -6.21 | | | | | | Artisan Mid Cap | | | -4.35 | | | T. Rowe Price Retirement 2030 | | | -6.97 | | | | | | Dodge & Cox Income | | | -0.16 | | | T. Rowe Price Retirement 2035 | | | -7.60 | | | | | | Dodge & Cox International | | | -18.84 | | | T. Rowe Price Retirement 2040 | | | -8.10 | | | | | | Domini Impact Equity | | | -10.01 | | | T. Rowe Price Retirement 2045 | | | -8.36 | | | | | | Oakmark Equity & Income | | | -8.73 | | | T. Rowe Price Retirement 2050 | | | -8.35 | | | | | | PIMCO Low Duration Bond | | | 0.50 | | | T. Rowe Price Retirement 2055 | | | -8.44 | | | | | | T. Rowe Price Dividend Growth | | | -1.34 | | | T. Rowe Price Retirement 2060 | | | -8.41 | | | | | | T. Rowe Price Growth Stock | | | -2.32 | | | T. Rowe Price Retirement Balanced Fund | | | -3.61 | | | | | | T. Rowe PriceMid-Cap Value | | | -11.65 | | | VanguardSmall-Cap Index | | | -10.06 | | | | | | T. Rowe Price Retirement 2005 | | | -3.54 | | | Vanguard Total Bond Market Index | | | 0.24 | | | | | | T. Rowe Price Retirement 2010 | | | -3.93 | | | Vanguard Total International Stock Index | | | -15.35 | | | | | | T. Rowe Price Retirement 2015 | | | -4.62 | | | Vanguard Total Stock Market Index | | | -5.94 | | | | | | T. Rowe Price Retirement 2020 | | | -5.49 | | | Virtus Real Estate Securities A | | | -5.89 | |
| | | | | Name of Fund | | 2020 Rate of Return (%) | | American Beacon Small Cap Value Fund Class Institutional | | | 3.96 | | Artisan Mid Cap Fund Institutional Class | | | 57.05 | | Dodge & Cox Income Fund | | | 9.30 | | Dodge & Cox International Stock Fund | | | 0.92 | | Oakmark Equity And Income Fund Investor Class | | | 8.09 | | PIMCO Low Duration Fund Institutional Class | | | 3.29 | | T. Rowe Price Dividend Growth Fund | | | 13.30 | | T. Rowe Price Growth Stock Fund | | | 34.60 | | T. Rowe Price Mid-Cap Value Fund | | | 9.96 | | T. Rowe Price Retirement 2005 Fund | | | 10.83 | | T. Rowe Price Retirement 2010 Fund | | | 11.41 | | T. Rowe Price Retirement 2015 Fund | | | 12.03 | | T. Rowe Price Retirement 2020 Fund | | | 12.57 | | T. Rowe Price Retirement 2025 Fund | | | 13.92 | | T. Rowe Price Retirement 2030 Fund | | | 15.02 | | T. Rowe Price Retirement 2035 Fund | | | 16.13 | | T. Rowe Price Retirement 2040 Fund | | | 17.08 | |
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| | | | | Name of Fund | | 2020 Rate of Return (%) | | T. Rowe Price Retirement 2045 Fund | | | 17.64 | | T. Rowe Price Retirement 2050 Fund | | | 17.63 | | T. Rowe Price Retirement 2055 Fund | | | 17.51 | | T. Rowe Price Retirement 2060 Fund | | | 17.45 | | T. Rowe Price Retirement Balanced Fund | | | 11.00 | | Vanguard FTSE Social Index Fund Admiral | | | 21.59 | | Vanguard Small-Cap Index Fund Admiral Shares | | | 18.96 | | Vanguard Total Bond Market Index Fund Admiral Shares | | | 7.41 | | Vanguard Total International Stock Index Fund Admiral Shares | | | 10.21 | | Vanguard Total Stock Market Index Fund Institutional Shares | | | 20.08 | | Virtus Duff & Phelps Real Estate Securities Fund Class I | | | -0.13 | |
Benefits under the deferred compensation plan are generally paid in a lump sum upon the executive’s termination of employment prior to attainment of retirement age (age(as defined in the plan to be age 55 with five years of service) or the executive’s death, or in a lump sum or annual installments for a period of up to 15 years (as previously selected by the executive)executive at the time of deferral) upon the executive’s retirement. Payment will generally start or be made by January 15 following the year of termination or retirement, or six months after the executive’s termination or retirement, whichever is later. Executives may also at the time of deferral elect a fixed distribution date, which must be at least five years after the end of the calendar year in which amounts are deferred. The deferred compensation plan also permits anin-service withdrawal of the executive’s account balance attributable topre-2005 deferrals, subject to a withdrawal penalty equal to 10% of the amount withdrawn. BOSTON PROPERTIES, INC. |2019 Proxy Statement 77
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows deferrals made by our NEOs to the deferred compensation plan during the year ended December 31, 2018,2020, the earnings and withdrawals/distributions during the year, and the aggregate account balance of each NEO under the deferred compensation plan as of December 31, 2018.2020. | Name | | Executive Contributions in 2018 ($)(1)(2) | | | Registrant Contributions in 2018 ($) | | | Aggregate Earnings in 2018 ($) | | | Aggregate Withdrawals/ Distributions ($) | | | Aggregate Balance at 12/31/2018($)(3) | | | Executive Contributions in 2020(1)(2) | | | Registrant Contributions in 2020 | | | Aggregate Earnings in 2020 | | | Aggregate Withdrawals/ Distributions
| | | Aggregate Balance at 12/31/2020(3) | | | Owen D. Thomas | | | 175,000 | | | | — | | | | -63,884 | | | | — | | | | 909,491 | | | $ | 186,923 | | | | — | | | $ | 247,622 | | | | — | | | $ | 1,746,748 | | | Douglas T. Linde | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | Raymond A. Ritchey | | | 280,000 | | | | — | | | | -227,507 | | | | — | | | | 2,906,516 | | | | — | | | | — | | | $ | 629,566 | | | | — | | | $ | 4,674,386 | | | Michael E. LaBelle | | | — | | | | — | | | | -75,029 | | | | — | | | | 1,048,990 | | | | — | | | | — | | | $ | 253,923 | | | $ | 199,519 | | | $ | 1,220,377 | | | Bryan J. Koop | | | 176,000 | | | | — | | | | -95,013 | | | | — | | | | 1,286,369 | | | $ | 228,266 | | | | — | | | $ | 294,960 | | | | — | | | $ | 2,314,995 | |
(1) | These amounts do not include any contributions out of bonus payments that were made in February 20192021 in recognition of performance in 2018.2020. |
(2) | Of the amounts reported in the contributions column, (a) all of Mr. Thomas’ contributions $72,000 of Mr. Ritchey’s contributions and $48,000$63,866 of Mr. Koop’s contributions are also included in the Summary Compensation Table as salary for 20182020 and (b) $208,000 of Mr. Ritchey’s contributions and $128,000$164,400 of Mr. Koop’s contributions are also included in the Summary Compensation Table as bonus for 20172019 that was paid in 2018.2020. |
(3) | Of the amounts reported in the aggregate balance column, (a) $186,923 of Mr. Thomas’ aggregate balance and $63,866 of Mr. Koop’s aggregate balance are also included in the Summary Compensation Table as salary for 2020; (b) $179,615 of Mr. Thomas’ aggregate balance and $49,108 of Mr. Koop’s aggregate balance are also included in the Summary Compensation Table as salary for 2019, (c) $175,000 of Mr. Thomas’ aggregate balance, $72,000 of Mr. Ritchey’s aggregate balance and $48,000 of Mr. Koop’s aggregate balance are also included in the Summary Compensation Table as salary for 2017, (b) $208,000 of Mr. Ritchey’s contributions and $128,0002018, (d) $164,400 of Mr. Koop’s contributions are also included in the Summary Compensation Table as bonus for 20172019 that was paid in 2018, (c) $173,462 of Mr. Thomas’ aggregate balance, $71,9232020, and (e) $416,000 of Mr. Ritchey’s aggregate balance $24,962 of Mr. LaBelle’s aggregate balance and $47,908$186,000 of Mr. Koop’s aggregate balance are also included in the Summary Compensation Table as salary for 2016 and (d) $83,500 of Mr. Koop’s aggregate balance is also included in the Summary Compensation Table as bonus for 20162018 that was paid in 2017.2019. In each case, the amounts disclosed in this footnote are the amounts originally contributed and do not reflect subsequent gains/losses on investment after the date of contribution. |
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EMPLOYMENT AGREEMENTS We have employment agreements with each of our NEOs. The material terms of these agreements are summarized below. Summary of Owen› SUMMARY OF OWEN D. Thomas’ Employment AgreementTHOMAS’ EMPLOYMENT AGREEMENT
We originally hired Mr. Thomas to be our CEO effective April 2, 2013. The initial term of Mr. Thomas’ employment agreement was three years, with automaticone-year renewals commencing on the third and fourth anniversaries of the effective date unless prior written notice of termination was given. The term of Mr. Thomas’ original employment agreement expired on April 2, 2018 on which date we entered into a new employment agreement with him. The following is a summary of Mr. Thomas’ newcurrent employment agreement: Term.Term and Duties
April 2, 2018 through June 30, 2023.2023 Duties.
As CEO, Mr. Thomas reports directly to the Board of Directors, and must devote substantially all of his working time and efforts to the performance of his duties. Board Membership.
Our Board willagreed to continue to nominate Mr. Thomas forre-election as a member ofto the Board of Directors whilefor so long as he remains CEO, and he has agreed to resign from the Board upon termination of employment. Outside Activities.
| • | | Mr. Thomas may participate as an officer or director of, or advisor to, any organization that is not engaged in commercial real estate activities (e.g., Nareit) and also engage in religious, charitable or other community activities, provided that they do not materially restrict his ability to fulfill his obligations to us as an officer. Mr. Thomas may also continue serving on the Board of Lehman Brothers Holdings Inc. and may engage in “Minority Interest Passive Investments,” which are defined as acquiring, holding and exercising the voting rights associated with an investment made through (1) a non-controlling, minority interest in an entity or (2) the lending of money, in either case with the purpose or intent of obtaining a return on such investment but without management of the property or business to which the investment directly or indirectly relates and without any business or strategic consultation by Mr. Thomas. |
Compensation and Benefits | • | | Annual base salary of $875,000, subject to annual review and may be increased but not decreased. Mr. Thomas’ current base annual salary is $900,000 (see “Compensation Discussion and Analysis – II. Executive Compensation Program – Cash Compensation” beginning on page 56). |
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in religious, charitable or other community activities provided that they do not materially restrict his abilityTarget annual bonus equal to fulfill his obligations to us as an officer. Mr. Thomas may also continue serving on the Board of Lehman Brothers Holdings Inc. and may engage in “Minority Interest Passive Investments,” which are defined as acquiring, holding and exercising the voting rights associated with an investment made through (1) anon-controlling, minority interest in an entity or (2) the lending of money, in either case with the purpose or intent of obtaining a return on such investment but without management of the property or business to which the investment directly or indirectly relates and without any business or strategic consultation by Mr. Thomas.
Base Salary. $875,000, subject to annual review and may be increased but not decreased. The Compensation Committee increased Mr. Thomas’ base salary to $900,000 for 2019 (see“V. Alignment of Pay with Performance - 2018 Compensation” on page 59 of this proxy statement).
Target Bonus.250% of his annual base salary, with the actual amount to be determined at the discretion of the Compensation Committee.
Incentive Equity. Theequity in an amount shall be determined at the discretion of the Compensation Committee based on Company and individual performance and competitive peer group information. LTI equity awards may be provided in the form of stock options, restricted stock, restricted stock units and/or LTIP units and may be subject to either time-based and/or performance-based vesting, or both, as determined by the Compensation Committee. Benefits.Mr. Thomas is entitled to participate
Participation in all of our employee benefit plans or programs as in effect from time to time for our senior executive employees, including medical/dental insurance, life insurance, disability insurance and deferred compensation plans, plus the use of a Company-owned or leased automobile. Severance Benefits and Retirement Eligibility No TaxGross-Ups.
| • | | Mr. Thomas’ employment with us is at-will, but his employment agreement provides for certain payments and benefits to him upon his separation from the Company in certain circumstances (see “– Potential Payments upon Termination or Change in Control” below). |
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| • | | Mr. Thomas’ employment agreement provides for the acceleration of vesting of equity awards granted after April 2, 2018 upon attainment of age 62 with 10 years of service (see “– Potential Payments upon Termination or Change in Control” below). |
Mr. Thomas is not entitled to participate in any of the Company’s change in control severance plans or programs. As such, Mr. Thomas is not entitled to receive any taxgross-up payments, but, inpayments. In the event that any payment or benefit to be paid or provided to Mr. Thomas would be subject to the golden parachute excise tax, the payments and benefits will be reduced to the extent necessary to avoid the imposition of the excise tax if doing so would result in a greaterafter-tax benefit to Mr. Thomas. Expiration of the Term.
The expiration of Mr. Thomas’ agreement on June 30, 2023 will not constitute or result in a termination of employment by the Company without cause, and the severance provisions (other than retirement eligibility)eligibility and related benefits) shall not apply. Restrictive Covenants Restrictive Covenants.
While he is an officer and foruntil the later of (1) one year thereafter (or longer as provided above with respect toafter the termination of his employment for any reason or (2) the latest date of full vesting of any performance-based LTI equity awards with performance-based vesting),award, Mr. Thomas is prohibited from: engaging, participating or assisting, directly or indirectly, in the acquisition, development, construction, operation, management, or leasing of any commercial real estate property of a type which is the subject of a significant portion of the Company’s business (measured as at least 10% of the Company’s revenues on a trailing12-month basis) at the time of termination of his employment;
| › | | engaging, participating or assisting, directly or indirectly, in the acquisition, development, construction, operation, management, or leasing of any commercial real estate property of a type which is the subject of a significant portion of the Company’s business (measured as at least 10% of the Company’s revenues on a trailing 12-month basis) at the time of termination of his employment; |
intentionally interfering with the Company’s relationships with its tenants, suppliers, contractors, lenders or employees or with any governmental agency; or
| › | | intentionally interfering with the Company’s relationships with its tenants, suppliers, contractors, lenders or employees or with any governmental agency; or |
| › | | competing for, soliciting or diverting the Company’s tenants or employees, either for himself or any other business, person or entity. |
competing for, soliciting or diverting the Company’s tenants or employees, either for himself or any other business, person or entity.
Mr. Thomas is also subject to confidentiality requirements and post-termination litigation and regulatory cooperation obligations. BOSTON PROPERTIES, INC. |2019 Proxy Statement 79
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In addition, thenon-competition provisioncovenant shall not apply if Mr. Thomas’ employment is terminated following a change in control (as defined in the Boston Properties, Inc. 2012 Stock Option and Incentive Plan, as amended from time to time)time (the ”2012 Plan”)). Attorneys’ Fees.› We have agreed to pay Mr. Thomas’ actual advisor fees (legal and tax) incurred in connection with the contemplation, preparation, negotiation and execution of his employment agreement up to a maximum of $25,000.
Retirement Eligibility.Mr. Thomas’ employment agreement provides for the acceleration of vesting of equity awards granted after April 2, 2018 upon attainment of age 62 with 10 or more years of service (see“– Potential Payments upon Termination or Change in Control”below).
As described below in“– Potential Payments upon Termination or Change in Control,” Mr. Thomas’ employment agreement also provides for and certain payments and benefits to him upon his separation from the Company in certain circumstances.
Summary of Employment Agreements with Messrs. Linde, Ritchey, LaBelle and Koop SUMMARY OF EMPLOYMENT AGREEMENTS WITH MESSRS. LINDE, RITCHEY, LABELLE AND KOOP
We also have employment agreements with ourthe other NEOs—NEOs – i.e.,Messrs. Linde, Ritchey, LaBelle and Koop – under which each has agreed to devote substantially all of his business time to our business and affairs. The initial term of each of these employment agreements was two years beginning November 29, 2002 (January 24, 2008 in the case of Mr. LaBelle), with automaticone-year renewals commencing on each anniversary date unless written notice of termination is given at least 90 days prior to such date by either party. The base salary for each of these NEOs is to be reviewed annually by the Compensation Committee and may be increased but not decreased in its discretion. Each NEO is also eligible to receive a cash bonus and equity-based compensation to be determined at the discretion of the Compensation Committee. Similar to Mr. Thomas’ employment agreement, the other NEOs’ employment agreements containnon-competition,non-interference andnon-solicitation restrictions (which shall not apply if the NEO’s employment is terminated following a change in control (as defined in the senior executive severance plan)) and permit them to participate as an officer or director of, or advisor to, any charitable or other tax exempt organization only and the scope of the noncompetition provision in each employment agreement is limited to our markets at the time of termination of their employment. The other NEO’sIn consideration for the benefits and protections afforded by the employment agreements, each of these NEOs agreed to confidentiality, non-competition, non-interference and non-solicitation covenants and to provide to the Company post-termination litigation and regulatory cooperation. These NEOs’ employment with us is at-will, but their employment agreements also provide for certain payments and benefits to the NEO’sthem upon separation from the Company in certain circumstances as described below in “–under “– Potential Payments upon Termination or Change in Control.Control” below. | | | | | | | | | 84 | | | | | 2021 Proxy Statement |
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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL Each NEO’s employment with us isat-will, but the employment agreements of each of Messrs. Thomas, Linde, Ritchey, LaBelle and Koop discussed under“– Employment Agreements” above provide themNEO has the right to receive severance and other benefits in the event of a termination of his employment under different circumstances pursuant to their employment agreements (discussed under “– Employment Agreements” above) and, except for Mr. Thomas, the Company’s Senior Executive Severance Plan. In addition, our LTI equity award agreements (including performance-based MYLTIP awards) provide for the vesting and forfeiture of LTI equity awards under different circumstances. The availability, nature and amount of severance and other benefits differ depending on whether the triggering event is: a termination by the Company without “cause” (as defined in the applicable employment agreement),agreement or plan) or by the NEO with “good reason” (as defined in the applicable employment agreement),agreement or upon the occurrence ofplan) prior to a change in control, a termination by the Company without “cause” or by the NEO with “good reason” within 24 months following a change in control, a change in control without termination, termination due to death or disability, or Upon a voluntary termination by the NEO, other than for “good reason” or a qualified retirement, or a termination by the Company with “cause,” the NEOs are not entitled to any additional or special payments under any plan, agreement or arrangement, and certain triggering events. All ofany unvested LTI equity awards will be immediately forfeited. › EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL SEVERANCE PLAN The following chart summarizes payments and benefits (1) our CEO is eligible to receive under his employment agreement and (2) the NEOs other than our CEO are eligible to receive under their respective employment agreements and our Senior Executive Severance Plan. NEOs other than our CEO participate in the Company’s change in control severance plan,our Senior Executive Severance Plan, whereas the severance and benefits to which our CEO is entitled following a termination within twenty-four (24) months after a change in control are provided in his employment agreement. In addition, our 2012 Plan | | | | | Scenario | | Component(1) | | | | Termination by the Company without “Cause” or by the NEO for “Good Reason” without a Change in Control(2) | | Bonus | | • All NEOs: Target bonus prorated for number of days employed in year of termination | | Cash Severance | | • Mr. Thomas: 2x the sum of base salary plus amount of cash bonus, if any, received or payable with respect to the preceding year (but, not less than his target bonus) | | | | • Other NEOs: 1x the sum of base salary plus amount of cash bonus, if any, received or payable with respect to the preceding year | | Time-Based LTI Equity Awards | | • Mr. Thomas: Additional 24 months of vesting | | • Other NEOs: Additional 12 months of vesting | | Health Benefits | | • Participation by the NEO, his spouse and dependents, subject to payment of premiums at active employees’ rate | | | | • Mr. Thomas: Up to 24 months • Other NEOs: Up to 12 months |
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| | | | | Scenario | | Component(1) | | | | Termination by the Company without “Cause” or by the NEO for “Good Reason” within 24 Months after a Change in Control | | Bonus | | • Mr. Thomas: Target bonus prorated for number of days employed in year of termination | | • Other NEOs: Not applicable | | Cash Severance | | • Mr. Thomas: Lump-sum equal to 3x the sum of (a) Mr. Thomas’ base salary plus (b) the amount of his average annual cash bonus (or his target bonus, if greater) with respect to the three calendar years preceding the change in control | | • Other NEOs: Lump-sum equal to 3x the sum of (a) the NEO’s base salary plus (b) the amount of his average annual cash bonus with respect to the three calendar years preceding the change in control | | Time-Based LTI Equity Awards | | • Full vesting for all NEOs | | Health Benefits | | • Participation by the NEO, his spouse and dependents for up to 36 months, subject to payment of premiums at active employees’ rate | | Other Benefits | | • Financial counseling, tax preparation assistance and outplacement counseling for up to 36 months | | Tax Gross-Up Payment | | • Mr. Thomas is not entitled to receive any tax gross-up payments from the Company. In the event that any payment or benefit would be subject to the golden parachute excise tax, the payments and benefits will be reduced to the extent necessary to avoid the imposition of such excise tax if the reduction would result in a greater after-tax benefit to Mr. Thomas. | | | | • Other NEOs are entitled to receive a tax gross-up payment in the event they become subject to the golden parachute excise tax (as discussed above under “Compensation Discussion and Analysis – IV. Other Compensation Policies – Gross-Up for Excess Parachute Payments” on page 72). | | | | Termination due to Death or Disability | | Bonus | | • Target bonus prorated for number of days employed in year of termination | | Time-Based LTI Equity Awards | | ��� Full vesting for all NEOs | | Health Benefits | | • Participation by the NEO, his spouse and dependents for up to 18 months, subject to payment of premiums at active employees’ rate |
(1) | Performance-based LTI equity awards are governed by the relevant award agreements. The treatment of these awards under certain termination scenarios, including a change in control, is described under “– Performance-Based LTI Equity Awards” and “– Retirement Eligibility Provisions for LTI Equity Awards” below. |
(2) | Receipt of these payments and benefits (other than the prorated target bonus) is subject to the NEO’s execution of a general release of claims with us. |
› DOUBLE-TRIGGER ACCELERATION OF VESTING OF EQUITY AWARDS UPON A CHANGE IN CONTROL Time-based LTI equity award agreements (including MYLTIP awards) provideinclude “double-trigger” vesting, meaning that, if there is a “change in control” (as defined in the 2012 Plan) and the awards are not otherwise cancelled in connection with the change in control transaction, then they only become fully vested if, within 24 months after the change in control, the NEO’s employment is terminated by the Company or its successor without “cause” or the NEO resigns for vesting or forfeiture“good reason.” | | | | | | | | | 86 | | | | | 2021 Proxy Statement |
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› PERFORMANCE-BASED LTI EQUITY AWARDS The treatment of performance-based LTI equity awards (e.g., MYLTIP awards) upon terminationcertain terminations of employment of our NEOs under different circumstances, including termination without “cause” or for “good reason,” in each case both prior to and following a change in control upon death or disability, and upon qualified retirement.is governed by the NEOs’ relevant award agreements. The material termsfollowing chart summarizes the treatment of these various arrangements are summarized below.awards under each scenario assuming it occurs prior to the end of the applicable three-year performance period. | | | Scenario | | Treatment of Award | | | 80 BOSTON PROPERTIES, INC. |2019 Proxy Statement
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Employment Agreement with Mr. Thomas
Termination by the Company without “Cause” or by the NEO for “Good Reason” without a Change in Control | | • The number of LTIP units the NEO will earn, if any, will be determined at the end of the applicable three-year performance period based on our performance and will then be prorated based on the portion of the three-year performance period during which the NEO was employed by us. • Any earned LTIP Units will not be subject to forfeiture but the NEO will not be permitted to transfer the LTIP units until they otherwise would have vested under the terms of the awards. | | | Termination due to Death or Disability | | • The number of LTIP units the NEO will earn, if any, will be determined at the end of the applicable three-year performance period based on our performance. • Any earned LTIP units will not be prorated due to service time and will be fully vested. | | | Change in Control Without Termination | | • The number of LTIP units the NEO will earn, if any, will be determined as of the date of the change in control based on our performance through such date. • Any earned LTIP units will not be prorated due to service time and will be fully vested. |
In the Company Without “Cause” or by Mr. Thomas for “Good Reason” Prior to a Change in Control Mr. Thomas will be entitledcase of each of the foregoing scenarios following the end of the applicable three-year performance period, any LTIP units that had been earned prior to the following payments and benefits upon adate of such termination by the Company without cause or by Mr. Thomas for good reason prior to a change in control:
target bonus prorated for the number of days employedcontrol will become fully vested, but, in the yearcase of termination;
cash severance equal to two times the sum of Mr. Thomas’ base salary plus the amount of his cash bonus, if any, received or payable in respect of the immediately preceding year (but, not less than his target bonus), payable over a24-month period;
additional 24 months of vesting of time-based LTI equity awards; and
participation by Mr. Thomas, his spouse and dependents in the Company’s health plan for up to 24 months, subject to payment of premiums at the active employees’ rate.
Receipt of these payments and benefits (other than the prorated target bonus) in connection with a termination without cause or for good reason is subject to Mr. Thomas’ execution of a general release of claims with us.
Termination Upon Death or Disability
Mr. Thomas or his beneficiary will be entitled to receive his target bonus prorated for the number of days employed in the year of termination, full vesting of time-based LTI equity awards and participation by Mr. Thomas, his spouse and dependents in the Company’s health plan for up to 18 months, subject to payment of premiums at the active employees’ rate.
Termination by the Company Without “Cause” or by Mr. Thomas for “Good Reason” within 24 Months after a Change in Control
Upon a termination by the Company without “cause” or by Mr. Thomasthe NEO for “good reason,” in either case within 24 months followingreason” without a change in control, Mr. Thomasthe NEO will not be entitledpermitted to transfer the following payments and benefits:LTIP units until they otherwise would have vested under the terms of the awards.
target bonus prorated for the number of days employed in the year of termination;
lump-sum› cash severance amount equal to three times the sum of (a) Mr. Thomas’ base salary plus (b) the amount of his average annual cash bonus with respect to the three calendar years preceding the change in control (or, his target bonus if greater);
full vesting of time-basedRETIREMENT ELIGIBILITY PROVISIONS FOR LTI equity awards;
financial counseling, tax preparation assistance and outplacement counseling for up to 36 months; and
participation by Mr. Thomas, his spouse and dependents in the Company’s health plan for up to 36 months, subject to payment of premiums at the active employees’ rate.
Retirement EligibilityEQUITY AWARDS
Retirement Provisions Mr. Thomas.Pursuant to Mr. Thomas’ employment agreement, his LTI equityall award agreements for LTI equity awards granted beginning in 2019after April 2, 2018 shall provide that if Mr. Thomas is employed by us when he attains age 62 and has completed at least ten (10) years of employment with us: he shall be deemed to satisfy the age and service requirements necessary for retirement eligibility;
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us, then his time-based LTI equity awards with time-based vesting shalland performance-based LTI equity awards that are earned will vest in full (without any proration of the award due tobased on service time);. The full number of LTIP units Mr. Thomas earns (if any) under any performance-based LTI equity awards for which the performance period has not ended will be determined in the same manner and | • | | regardless of whether he remains employed, the full number of LTIP units (and/or shares of common stock or other equity-based awards, if applicable) he earns (if any) under any LTI equity awards with performance-based vesting (e.g., a MYLTIP award) shall be determined in the same manner and at the same time as otherwise would have been the case if he had remained employed through the full vesting at the same time as otherwise would have been the case if he had remained employed through the full performance period for the applicable award, including without limitation with respect to performance hurdles and lapse of restrictions on transfer, without any proration of the award due to service time, and with all service-based vesting requirements deemed satisfied, so long as he agrees to be bound by the post-employment non-competition, non-interference and non-solicitation covenants (which are otherwise applicable until the later of (1) one (1) year following termination and (2) the latest date of full vesting of any performance-based LTI equity award).
NEOs other than Mr. Thomas. The agreements governing time-based LTI equity awards and performance-based LTI equity awards granted to NEOs other than Mr. Thomas provide that the time-based equity awards and performance-based equity awards that are earned will fully vest when the employee retires after the date on which the sum of the employee’s years of service plus age (which must be at least 58) equals or exceeds 70 (the so-called “Rule of 70”) (“Qualified Retirement”); provided that the NEO satisfies the other conditions of a “Qualified Retirement,” which require the employee to: (1) give prior written notice to the Company of his retirement (for NEOs, six (6) months’ notice is required), (2) enter into a separation agreement with the Company and (3) remain employed by the Company until the retirement date specified in such notice, unless employment is terminated by the Company without “cause” or by the employee for “good reason.” | | | | | | | | | | | | 2021 Proxy Statement | | 87 |
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If an NEO retires after satisfying the conditions for a Qualified Retirement, the number of LTIP units the NEO earns (if any) under performance-based LTI awards will be determined in the same manner and at the same time as otherwise would have been the case if he had remained employed through the entire performance period for the applicable award, including with respect to performance hurdles and lapse of restrictions on transfer, without any proration of the award due to service time, and with any service-based vesting requirements deemed satisfied over the relevant service- vesting schedule, so long as he agrees to be bound by the post-employmentnon-competition,non-interference andnon-solicitation covenants (which are otherwise applicable for one (1) year under the agreement) until the latest date of full vesting applicable to any performance-based award entitled to the foregoing benefits. |
Employment Agreements with Messrs. Linde, Ritchey, LaBelle and Koop (the “Other NEOs”)
Termination by the Company Without “Cause” or by the NEO for “Good Reason” Prior to a Change in Control
Each Other NEO is entitled to the following payments and benefits upon a termination by the Company without “cause” or by the Other NEO for “good reason” prior to a change in control:
target bonus prorated for the number of days employed in the year of termination;
cash severance equal to the sum of the NEO’s base salary plus the amount of his cash bonus, if any, received or payable in respect of the immediately preceding year, payable over a12-month period;
additional 12 months of vesting of time-based LTI equity awards; and
participation by the NEO, his spouse and dependent(s) in the Company’s health plan for up to 12 months, subject to payment of premiums at the active employees’ rate.
Receipt of these payments and benefits (other than the prorated target bonus) in connection with a termination without cause or for good reason is subject to the NEO’s execution of a general release of claims with us.
Termination Upon Death or Disability
Each Other NEO or his beneficiary will be entitled to receive his accrued and unpaid target bonus prorated for the number of days employed in the year of termination, full vesting of time-based LTI equity awards, and participation by each Other NEO, his spouse and dependents in the Company’s health plan for up to 18 months, subject to payment of premiums at the active employees’ rate.
Senior Executive Severance Plan
Each Other NEO is covered by our Senior Executive Severance Plan. Mr. Thomas does not participate in any of our severance plans; his payments are governed by his employment agreement (see“– Employment Agreement with Mr. Thomas”above). Under the Senior Executive Severance Plan, upon a termination by the Company without “cause” or by the NEO for “good reason,” in either case within 24 months following a change in control, each Other NEO will be entitled to the following payments and benefits:
lump-sum cash severance amount equal to three times the sum of (a) the NEO’s base salary plus (b) the amount of his average annual cash bonus with respect to the three calendar years preceding the change in control;
full vesting of time-based LTI equity awards;
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financial counseling, tax preparation assistance and outplacement counseling for up to 36 months; and
participation by each NEO, his spouse and dependents in the Company’s health and life insurance plans for up to 36 months, subject to payment of premiums at the active employees’ rate.
In addition, each Other NEO will be entitled to receive a taxgross-up payment in the event he becomes subject to the golden parachute excise tax (as discussed above under “Compensation Discussion and Analysis – IX. Other Compensation Policies –Gross-Up for Excess Parachute Payments”).
Time-Based LTI Equity Award Agreements
Change in Control Without Termination
Time-based LTI equity awards include “double-trigger” vesting, meaning that, if there is a “change of control” (as defined in the 2012 Plan) and the awards are not otherwise cancelled in connection with the change of control transaction, then they only become fully vested if, within 24 months after the change of control, the NEO’s employment is terminated by the Company or its successor without “cause” or the NEO resigns for “good reason.”
Qualified Retirement
Time-based LTI equity awards granted prior to 2019 (other than awards granted on February 6, 2018, which do not provide for acceleration of vesting upon attaining retirement eligibility age) provide that when an employee attains age 65, or attains age 62 and completes 20 years of service with us, the employee becomes fully vested in all time-based LTI equity awards (the“Pre-2019 Policy”).
Mr. Thomas’ time-based LTI equity awards granted beginning in 2019 are governed by his employment agreement (see “– Employment Agreement with Mr. Thomas” above).
Time-based LTI equity awards granted to the Other NEOs beginning in 2019, provide that when an employee terminates his or her employment after satisfying the conditions for a “Qualified Retirement,” the employee becomes fully vested in all time-based and performance-based LTI equity awards. The conditions for a Qualified Retirement are as follows:
| (1) | on the date of termination, the sum of the employee’s years of service plus age equals or exceeds 70 (theso-called “Rule of 70”);
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| (2) | the employee is at least 58 years old on the date of termination of employment;
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| (3) | the employee gives written notice to the Secretary of the Company of his or her retirement/termination of employment at least at least six (6) months prior to the effective date of termination;
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| (4) | the employee enters into a Separation Agreement (as defined in the applicable award agreement) with the Company; and
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| (5) | the employee remains employed by the Company until the retirement date specified in such notice, unless the employee’s employment is terminated by the employee for “good reason” or by the Company without “cause.”
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Time-based LTI awards made to employees who, on or prior to January 31, 2019, satisfied thePre-2019 Policy are “grandfathered” under thePre-2019 Policy such that subsequent time-based LTI awards will continue to be fully vested on the date of grant. As of December 31, 2018, Mr. Ritchey satisfied thePre-2019 Policy.
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Performance-Based LTI Equity Award Agreements
Termination by the Company Without “Cause” or by the NEO for “Good Reason” Prior to a Change in Control
In the event of a termination by the Company without “cause” or by the NEO for “good reason” prior to the end of the three-year performance period, the number of LTIP units the NEO will earn, if any, will be determined in the same manner, with respect to the performance hurdles, and at the same time as it otherwise would have been (i.e., as of the end of the performance period or upon a change in control) and will then bepro-rated based on the portion of the three-year performance period during which the NEO was employed by us. Any LTIP units earned will be fully vested. In the event of such a termination following the end of the three-year performance period, any LTIP units that had been earned prior to the date of such termination will become fully vested. In each case, the NEO will not be permitted to transfer any LTIP units that vest until they otherwise would have vested under the terms of the awards.
Termination Upon Death or Disability
In the event of a termination upon death or disability prior to the end of the three-year performance period, the number of LTIP units the NEO will earn, if any, will be determined in the same manner, with respect to the performance hurdles, and at the same time as it otherwise would have been (i.e., as of the end of the performance period or upon a change in control), without any proration of the award due to service time. Any LTIP units earned, will be fully vested. In the event of such a termination following the end of the three-year performance period, any LTIP units that had been earned prior to the date of such termination will become fully vested.
Change in Control
In the event of a change in control prior to the end of the three-year performance period, the number of LTIP units earned, if any, will be calculated as of the date of the change in control (without proration) based on our performance through such date. Any LTIP units earned will be fully vested. In the event of a change in control following the end of the three-year performance period, any LTIP units that had been earned prior to the date of the change in control will become fully vested.
Qualified Retirement
Awards Granted Prior to 2019
In the case of outstanding performance-based LTI equity awards for which the three-year performance period has ended and that have been earned (i.e., as of December 31, 2018, 2015 MYLTIP awards), if an employee retires after attaining age 65 or attaining age 62 with 20 years of service with us, then the unvested LTIP units will no longer be subject to forfeiture but the NEO will not be permitted to transfer the LTIP units until they otherwise would have vested under the terms of the awards.
Performance-basedPre-2019 Policy
Time-based LTI equity awards for which the three-year performance period has not ended (i.e., as of December 31, 2018, 2016-2018 MYLTIP awards) generallygranted prior to 2019 provide that: | • | | If an employee retires after (1) attaining age 62 withthat when an employee attains age 65, or attains age 62 and completes 20 years of service with us, or (2) attaining age 65 with less than 15 years of service with us, then the number of LTIP units the employee will earn will be determined in the same manner, with respect to the performance hurdles, and at the same time as it otherwise would have been (i.e., as of the end of the performance period or upon a change in control) and will then bepro-rated based on the number of days elapsed in the performance period plus 365 (i.e., one additional year).
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If an employee retires after (1) attaining age 65 with 15 years of service with us, then the number of LTIP units the employee will earn will be determined in the same manner, with
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| respect to the performance hurdles, and at the same time as it otherwise would have been (i.e., as of the end of the performance period or upon a change in control) and will then bepro-rated based on the number of days elapsed in the performance period plus 730 (i.e., two additional years).
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In both cases, any LTIP Units that are earned will not be subject to forfeiture but the employee will not be permitted to transfer the LTIP units until they otherwise would have vested under the terms of the awards.
Awards Granted in 2019
Mr. Thomas’ performance-based LTI equity awards granted in 2019 are governed by his employment agreement (see“– Employment Agreement with Mr. Thomas” above).
Performance-based LTI equity awards granted to the Other NEOs beginning in 2019 provide that when an employee terminates their employment after satisfying the conditions for a “Qualified Retirement,” which are the same as those set forth above under “– Time-Based LTI Equity Award Agreements – Qualified Retirement,” the employee becomes fully vested in all performance-basedtime-based LTI equity awards.
awards (the “Pre-2019 Policy”). In the case of performance-basedaddition, time-based LTI awards made to employees who, on or prior to January 31, 2019, attained age 65 or attained age 62 with 20 years of service are “grandfathered” under the Pre-2019 Policy such that subsequent time-based LTI awards will continue to be fully vested on the date of grant. NEOs Eligible for which the three-year performance period has not ended, the numberRetirement as of LTIP units the employee will earn will be determined in the same manner,December 31, 2020 Based on their respective ages and tenure as of December 31, 2020: Each of Messrs. Ritchey and Koop is eligible for a Qualified Retirement with respect to awards granted in 2020 and subsequent thereto. Mr. Ritchey satisfied the performance hurdles,Pre-2019 Policy and at the same time as it otherwise would have been (i.e.,is grandfathered under such policy with respect to his time-based LTI equity awards. Therefore, all of Mr. Ritchey’s time-based equity awards were fully vested as of December 31, 2020 and subsequent awards will continue to vest on the end of the performance period or upon a change in control), without any proration of the award due to service time. Any LTIP Units that are earned will not be subject to forfeiture but the employee will not be permitted to transfer the LTIP units until they otherwise would have vested under the terms of the awards.grant date. Mr. Koop attained age 62 with 20 years of service on August 18, 2020, and as a result, all of Mr. Koop’s unvested time-based equity awards that were granted prior to January 1, 2019 fully vested on that date. BOSTON PROPERTIES, INC. |› 2019 Proxy Statement 85
COMPENSATION OF EXECUTIVE OFFICERS
Estimated Payments Upon Termination or Change in ControlESTIMATED PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following tables that follow show the potential payments and benefits that would have been provided to our NEOs assuming such eventseach scenario occurred on December 31, 2018.2020. | | | | | | | | | | | | | | | | | | | | | Payments Upon Termination | | Qualified Retirement ($) | | | Involuntary Not for Cause Termination/ Good Reason Termination ($) | | | Involuntary or Good Reason Termination Following Change in Control ($)(1) | | | Change in Control Without Termination ($)(1) | | | Death or Disability ($) | | Owen D. Thomas(2) | | | | | | | | | | | | | | | | | | | | | Bonus | | | — | | | | 2,187,500 | | | | 2,187,500 | | | | — | | | | 2,187,500 | | Severance | | | — | | | | 6,600,000 | | | | 10,166,666 | | | | — | | | | — | | Unvested Equity Awards(3)(4) | | | — | | | | 4,110,889 | | | | 6,295,822 | | | | — | | | | 6,295,822 | | 2016 MYLTIP awards(5) | | | — | | | | 3,330,257 | | | | 3,456,523 | | | | 3,456,523 | | | | 3,456,523 | | 2017 MYLTIP awards(5) | | | — | | | | 2,462,264 | | | | 3,892,654 | | | | 3,892,654 | | | | 3,892,654 | | 2018 MYLTIP awards(5) | | | — | | | | 1,597,014 | | | | 5,331,494 | | | | 5,331,494 | | | | 5,331,494 | | Benefits Continuation | | | — | | | | 44,000 | | | | 66,000 | | | | — | | | | 33,000 | | Other Benefits(6) | | | — | | | | — | | | | 150,000 | | | | — | | | | — | | Excise TaxGross-Up(7) | | | — | | | | — | | | | — | | | | — | | | | — | | Total | | | — | | | | 20,331,924 | | | | 31,546,659 | | | | 12,680,671 | | | | 21,196,993 | | Douglas T. Linde | | | | | | | | | | | | | | | | | | | | | Bonus | | | — | | | | 725,000 | | | | — | | | | — | | | | 725,000 | | Severance | | | — | | | | 2,660,000 | | | | 7,762,500 | | | | — | | | | — | | Unvested Equity Awards(3)(4) | | | — | | | | 1,705,358 | | | | 4,262,831 | | | | — | | | | 4,262,831 | | 2016 MYLTIP awards(5) | | | — | | | | 2,337,827 | | | | 2,426,465 | | | | 2,426,465 | | | | 2,426,465 | | 2017 MYLTIP awards(5) | | | — | | | | 1,713,105 | | | | 2,708,291 | | | | 2,708,291 | | | | 2,708,291 | | 2018 MYLTIP awards(5) | | | — | | | | 1,053,011 | | | | 3,515,387 | | | | 3,515,387 | | | | 3,515,387 | | Benefits Continuation | | | — | | | | 22,000 | | | | 68,000 | | | | — | | | | 33,000 | | Other Benefits(6) | | | — | | | | — | | | | 150,000 | | | | — | | | | — | | Excise TaxGross-Up | | | — | | | | — | | | | 8,037,380 | | | | — | | | | — | | Total | | | — | | | | 10,216,301 | | | | 28,930,854 | | | | 8,650,143 | | | | 13,670,974 | | Raymond A. Ritchey | | | | | | | | | | | | | | | | | | | | | Bonus | | | — | | | | 720,000 | | | | — | | | | — | | | | 720,000 | | Severance | | | — | | | | 2,800,000 | | | | 7,290,000 | | | | — | | | | — | | Unvested Equity Awards(3)(4)(8) | | | 276,986 | | | | 427,692 | | | | 578,507 | | | | — | | | | 578,507 | | 2016 MYLTIP awards(5) | | | 1,840,080 | | | | 1,772,862 | | | | 1,840,080 | | | | 1,840,080 | | | | 1,840,080 | | 2017 MYLTIP awards(5) | | | 2,075,760 | | | | 1,313,003 | | | | 2,075,760 | | | | 2,075,760 | | | | 2,075,760 | | 2018 MYLTIP awards(5) | | | 2,493,132 | | | | 772,918 | | | | 2,580,321 | | | | 2,580,321 | | | | 2,580,321 | | Benefits Continuation | | | — | | | | 20,000 | | | | 62,000 | | | | — | | | | 30,000 | | Other Benefits(6) | | | — | | | | — | | | | 150,000 | | | | — | | | | — | | Excise TaxGross-Up | | | — | | | | — | | | | 6,784,809 | | | | — | | | | — | | Total | | | 6,685,958 | | | | 7,826,475 | | | | 21,361,477 | | | | 6,496,161 | | | | 7,824,668 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scenario | | Payments and Benefits Upon Termination | | Owen D. Thomas | | | Douglas T. Linde | | | Raymond A. Ritchey | | | Michael E. LaBelle | | | Bryan J. Koop | | Involuntary Not for Cause or Good Reason Termination | | Bonus | | $ | 2,350,000 | | | $ | 1,900,000 | | | $ | 1,650,000 | | | $ | 1,250,000 | | | $ | 1,250,000 | | | Severance | | $ | 6,900,000 | | | $ | 2,845,000 | | | $ | 2,560,000 | | | $ | 1,805,000 | | | $ | 1,780,000 | | | Unvested Equity Awards(1)(2) | | $ | 6,482,395 | | | $ | 2,859,533 | | | $ | 921,573 | | | $ | 1,137,385 | | | $ | 459,038 | | | 2018 MYLTIP Awards(1)(3) | | $ | 1,652,730 | | | $ | 1,089,752 | | | $ | 799,853 | | | $ | 347,587 | | | $ | 213,288 | | | 2019 MYLTIP Awards(1)(3) | | $ | 708,522 | | | $ | 436,849 | | | $ | 340,071 | | | $ | 157,916 | | | $ | 105,237 | | | 2020 MYLTIP Awards(1)(3) | | $ | 84,153 | | | $ | 47,806 | | | $ | 35,833 | | | $ | 16,431 | | | $ | 11,573 | | | Benefits Continuation | | $ | 48,523 | | | $ | 24,261 | | | $ | 22,056 | | | $ | 24,261 | | | $ | 22,056 | | | Total | | $ | 18,226,323 | | | $ | 9,203,201 | | | $ | 6,329,386 | | | $ | 4,738,580 | | | $ | 3,841,192 | |
86 BOSTON PROPERTIES, INC. |2019 Proxy Statement
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COMPENSATION OF EXECUTIVE OFFICERS
| | | 8› | | COMPENSATION OF EXECUTIVE OFFICERS |
| | | | | | | | | | | | | | | | | | | | | Payments Upon Termination | | Qualified Retirement ($) | | | Involuntary Not for Cause Termination/ Good Reason Termination ($) | | | Involuntary or Good Reason Termination Following Change in Control ($)(1) | | | Change in Control Without Termination ($)(1) | | | Death or Disability ($) | | Michael E. LaBelle | | | | | | | | | | | | | | | | | | | | | Bonus | | | — | | | | 500,000 | | | | — | | | | — | | | | 500,000 | | Severance | | | — | | | | 1,825,000 | | | | 4,555,000 | | | | — | | | | — | | Unvested Equity Awards(3)(4) | | | — | | | | 885,431 | | | | 2,257,753 | | | | — | | | | 2,257,753 | | 2016 MYLTIP awards(5) | | | — | | | | 791,276 | | | | 821,277 | | | | 821,277 | | | | 821,277 | | 2017 MYLTIP awards(5) | | | — | | | | 602,431 | | | | 952,398 | | | | 952,398 | | | | 952,398 | | 2018 MYLTIP awards(5) | | | — | | | | 335,855 | | | | 1,121,223 | | | | 1,121,223 | | | | 1,121,223 | | Benefits Continuation | | | — | | | | 22,000 | | | | 68,000 | | | | — | | | | 33,000 | | Other Benefits(6) | | | — | | | | — | | | | 150,000 | | | | — | | | | — | | Excise TaxGross-Up | | | — | | | | — | | | | 3,771,028 | | | | — | | | | — | | Total | | | — | | | | 4,961,993 | | | | 13,696,679 | | | | 2,894,898 | | | | 5,685,651 | | Bryan J. Koop | | | | | | | | | | | | | | | | | | | | | Bonus | | | — | | | | 400,000 | | | | — | | | | — | | | | 400,000 | | Severance | | | — | | | | 1,680,000 | | | | 4,136,250 | | | | — | | | | — | | Unvested Equity Awards(3)(4) | | | — | | | | 690,832 | | | | 1,687,800 | | | | — | | | | 1,687,800 | | 2016 MYLTIP awards(5) | | | — | | | | 445,791 | | | | 462,693 | | | | 462,693 | | | | 462,693 | | 2017 MYLTIP awards(5) | | | — | | | | 326,275 | | | | 515,817 | | | | 515,817 | | | | 515,817 | | 2018 MYLTIP awards(5) | | | — | | | | 206,125 | | | | 688,131 | | | | 688,131 | | | | 688,131 | | Benefits Continuation | | | — | | | | 21,000 | | | | 62,200 | | | | — | | | | 30,150 | | Other Benefits(6) | | | — | | | | — | | | | 150,000 | | | | — | | | | — | | Excise TaxGross-Up | | | — | | | | — | | | | 2,986,428 | | | | — | | | | — | | Total | | | — | | | | 3,770,023 | | | | 10,689,319 | | | | 1,666,641 | | | | 3,784,591 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scenario | | Payments and Benefits Upon Termination | | Owen D. Thomas | | | Douglas T. Linde | | | Raymond A. Ritchey | | | Michael E. LaBelle | | | Bryan J. Koop | | Involuntary Not for Cause or Good Reason Termination Following Change in Control(4) | | Bonus | | $ | 2,350,000 | | | | — | | | | — | | | | — | | | | — | | | Severance | | $ | 10,550,000 | | | $ | 8,460,000 | | | $ | 8,200,000 | | | $ | 5,600,000 | | | $ | 5,430,000 | | | Unvested Equity Awards(1)(2) | | $ | 8,613,385 | | | $ | 5,719,065 | | | $ | 921,573 | | | $ | 2,196,499 | | | $ | 1,032,079 | | | 2018 MYLTIP Awards(1)(3) | | $ | 1,708,913 | | | $ | 1,126,798 | | | $ | 827,043 | | | $ | 359,403 | | | $ | 220,538 | | | 2019 MYLTIP Awards(1)(3) | | $ | 1,116,305 | | | $ | 688,273 | | | $ | 535,796 | | | $ | 248,803 | | | $ | 165,806 | | | 2020 MYLTIP Awards(1)(3) | | $ | 278,391 | | | $ | 158,149 | | | $ | 118,541 | | | $ | 54,355 | | | $ | 38,285 | | | Benefits Continuation | | $ | 72,784 | | | $ | 75,214 | | | $ | 68,598 | | | $ | 75,214 | | | $ | 68,598 | | | Other Benefits(5) | | $ | 150,000 | | | $ | 150,000 | | | $ | 150,000 | | | $ | 150,000 | | | $ | 150,000 | | | Excise Tax Gross-Up(6) | | | — | | | $ | 4,364,986 | | | $ | 3,865,898 | | | $ | 2,747,823 | | | $ | 2,647,611 | | | Total | | $ | 24,839,778 | | | $ | 20,742,485 | | | $ | 14,687,449 | | | $ | 11,432,097 | | | $ | 9,752,917 | | Change in Control Without Termination | | 2018 MYLTIP Awards(1)(3) | | $ | 1,708,913 | | | $ | 1,126,798 | | | $ | 827,043 | | | $ | 359,403 | | | $ | 220,538 | | | 2019 MYLTIP Awards(1)(3) | | $ | 1,116,305 | | | $ | 688,273 | | | $ | 535,796 | | | $ | 248,803 | | | $ | 165,806 | | | 2020 MYLTIP Awards(1)(3) | | $ | 278,391 | | | $ | 158,149 | | | $ | 118,541 | | | $ | 54,355 | | | $ | 38,285 | | | Total | | $ | 3,103,609 | | | $ | 1,973,220 | | | $ | 1,481,380 | | | $ | 662,561 | | | $ | 424,629 | | Death or Disability | | Bonus | | $ | 2,350,000 | | | $ | 1,900,000 | | | $ | 1,650,000 | | | $ | 1,250,000 | | | $ | 1,250,000 | | | Unvested Equity Awards(1)(2) | | $ | 8,613,385 | | | $ | 5,719,065 | | | $ | 921,573 | | | $ | 2,196,499 | | | $ | 1,032,079 | | | 2018 MYLTIP Awards(1)(3) | | $ | 1,708,913 | | | $ | 1,126,798 | | | $ | 827,043 | | | $ | 359,403 | | | $ | 220,538 | | | 2019 MYLTIP Awards(1)(3) | | $ | 1,116,305 | | | $ | 688,273 | | | $ | 535,796 | | | $ | 248,803 | | | $ | 165,806 | | | 2020 MYLTIP Awards(1)(3) | | $ | 278,391 | | | $ | 158,149 | | | $ | 118,541 | | | $ | 54,355 | | | $ | 38,285 | | | Benefits Continuation | | $ | 36,392 | | | $ | 36,392 | | | $ | 33,084 | | | $ | 36,392 | | | $ | 33,084 | | | Total | | $ | 14,103,386 | | | $ | 9,628,677 | | | $ | 4,086,037 | | | $ | 4,145,452 | | | $ | 2,739,792 | | Qualified Retirement | | Unvested Equity Awards(1)(2) | | | — | | | | — | | | $ | 921,573 | | | | — | | | $ | 1,032,079 | | | 2018 MYLTIP Awards(1)(3) | | | — | | | | — | | | $ | 827,043 | | | | — | | | $ | 220,538 | | | 2019 MYLTIP Awards(1)(3) | | | — | | | | — | | | $ | 535,796 | | | | — | | | $ | 165,806 | | | 2020 MYLTIP Awards(1)(3) | | | — | | | | — | | | $ | 118,541 | | | | — | | | $ | 38,285 | | | Total | | | — | | | | — | | | $ | 2,402,953 | | | | — | | | $ | 1,456,708 | |
(1) | Assumes termination occurs simultaneously with a change in control.
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(2) | We entered into a new employment agreement with Mr. Thomas on April 2, 2018.
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(3) | Restricted common stock, LTIP units and LTIP units that would have been earned pursuant to 20162018 MYLTIP awards, 20172019 MYLTIP awards and 20182020 MYLTIP awards are valued based on the closing price of the Company’s common stock on December 31, 2018,2020, which was $112.55$94.53 per share. |
(4)(2) | Includes the following unvested shares of restricted common stock and LTIP units (including outstanding performance-based LTI equity awards for which the three-year performance period has ended and that have been earned (i.e., 20152017 MYLTIP awards)) that would have vested upon the occurrence of each triggering event: |
| • | | Involuntary not for cause termination or a good reason termination prior to a change in control: Mr. Thomas – 36,525— 68,575 LTIP units; Mr. Linde –— an aggregate of 15,15230,250 LTIP units and shares of restricted common stock; Mr. Ritchey – 3,800— 9,749 LTIP units; Mr. LaBelle –— an aggregate of 7,86712,032 LTIP units and shares of restricted common stock; and Mr. Koop – 6,138— 4,856 LTIP units. |
| • | | Involuntary not for cause termination or a good reason termination within 24 months following a change in control and death or disability: Mr. Thomas – 55,938— 91,118 LTIP units; Mr. Linde –— an aggregate of 37,87560,500 LTIP units and shares of restricted common stock; Mr. Ritchey – 5,140— 9,749 LTIP units; Mr. LaBelle –— an aggregate of 20,06023,236 LTIP units and shares of restricted common stock; and Mr. Koop – 14,996— 10,918 LTIP units. |
BOSTON PROPERTIES, INC. |2019 Proxy Statement 87
COMPENSATION OF EXECUTIVE OFFICERS
| • | | Qualified retirement:Retirement: Mr. Ritchey – 2,461— 9,749 LTIP units and Mr. Koop — 10,918 LTIP units. |
(5)(3) | As of December 31, 2018,2020, the three-year performance periods had not ended for the 20162018 MYLTIP awards, 20172019 MYLTIP awards and 20182020 MYLTIP awards. The values set forth above relating to the number of LTIP units that would have been earned in the event of qualified retirement,a Qualified Retirement, involuntary not for cause termination/good reason termination, or death or disability assume our performance for the three-year performance period under the 20162018 MYLTIP awards, 20172019 MYLTIP awards and 20182020 MYLTIP awards continued at the same annualized rate as we experienced from the first day of the respective performance period through December 31, 20182020 with proration, as applicable, but are not discounted to reflect the fact that such LTIP units would not be earned until a later date and would be subject to continuing transfer restrictions in the case of qualified retirementQualified Retirement and involuntary termination prior to a change in control. |
(6) | | | | | | | | | | | | 2021 Proxy Statement | | 89 |
| | | 8› | | COMPENSATION OF EXECUTIVE OFFICERS |
(4) | Assumes termination occurs simultaneously with a change in control. |
(5) | Includes outplacement services valued at 15% of the sum of current base salary plus bonus with respect to the immediately preceding year up to a maximum of $75,000 paid in a lump sum, and financial counseling and tax preparation services valued at $25,000 per year for 36 months. |
(7)(6) | Under his employment agreement, Mr. Thomas is not entitled to receive taxgross-up payments in the event he becomes subject to the golden parachute excise tax. However, in the event thatInstead, if any payment or benefit to be paid or provided to Mr. Thomas would have beenbe subject to the golden parachute excise tax, the payments and benefits will be reduced to the extent necessary to avoid the imposition of such excise tax if such reduction would result in a greaterafter-tax benefit to Mr. Thomas. The amounts set forth in the table above have not been adjusted to reflect any such reduction that might be applicable. |
(8) | All of Mr. Ritchey’s shares of restricted common stock and LTIP units (other than LTIP units earned pursuant to the 2015 MYLTIP awards and LTIP units granted on February 6, 2018) were fully vested as of December 31, 2018 because he had previously attained age 65 (see Note 3 beginning on page 72).apply.
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The above discussion and the amounts shown in the above tables do not include payments and benefits to the extent they have been earned prior to the termination of employment or are provided on anon-discriminatory basis to salaried employees upon termination of employment. These include: accrued salary and vacation pay;
| • | | accrued salary and vacation pay; |
| • | | distribution of plan balances under our 401(k) plan and thenon-qualified deferred compensation plan (see “– Nonqualified Deferred Compensationin 2020” beginning on page 77 for the plan balances of each NEO under thenon-qualified deferred compensation plan); and |
life insurance proceeds in the event of death. PAY RATIO DISCLOSURE As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of RegulationS-K,SEC regulations, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Thomas, our CEO: For 2018,2020, our last completed fiscal year: the median of the annual total compensation of all employees of the Company (other than our CEO) was $109,173;$108,126; and the annual total compensation of our CEO, as reported in the Summary Compensation Table on page 70,77, was $11,694,946.$10,737,289. Based on this information, for 20182020, the ratio of the annual total compensation of Mr. Thomas to the median of the annual total compensation of all other employees was 10799 to 1. 88 BOSTON PROPERTIES, INC. |2019 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS1.
The median employee that was used for purposes of calculating the ratio of the annual total compensation of our CEO to the median of the total compensation of all employees is the same employee that was identified for purposes of our 2017 disclosure. The median employee works in Boston, Massachusetts. There has been no change in our employee population or employee compensation arrangement since that median employee was identified that we believe would significantly impact our pay ratio disclosure. We identified the median employee by totaling (1) cash compensation (i.e., wages, overtime and bonus) as reflected on our payroll records for 20172020 and (2) the value of LTI equity awards that were granted in 20172020 and subject to time-based vesting, for all individuals, excluding our CEO, who we employed on December 31, 20172020 (whether on a full-time, part-time, temporary or seasonal basis). In addition, we annualized the wages of full-time employees who were hired during 20172020 but did not work for us the entire fiscal year. We did not make any other assumptions, adjustments, or estimates with respect to total cash compensation or LTI compensation.
WeAfter identifying the median employee, we calculated annual total compensation for 20182020 for the median employee using the same methodology we use for our NEOs as set forth in the Summary Compensation Table.
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| | | 8› | | COMPENSATION OF EXECUTIVE OFFICERS |
As of December 31, 2018, our employee population consisted of 747 individuals2020, we employed 740 full-time and 10 part-time employees, all of whom are located in the United States. This population consisted of 732 full-time and 15 part-time employees. The average tenure of our employee population was 10.49.8 years. The average tenure of our officers andnon-officers was 18.118.2 years and 9.58.7 years, respectively. Our employees are organized into the following functions: Accounting (87), Accounting Operations (17), Administrative Management (18), Construction (45), Development (27), Executive Management (12), Finance & Capital Markets (27), Human Resources (10), Information Systems (26), Internal Audit (3), Leasing (31), Legal (36), Property Management (405), and Risk Management (3). In promulgating Item 402(u) of RegulationS-K, the
| | | | | | | Function | | Number of Employees | | Accounting | | | 96 | | Accounting Operations | | | 16 | | Administrative Management | | | 19 | | Construction | | | 46 | | Development | | | 25 | | Executive Management | | | 12 | | Finance & Capital Markets | | | 28 | | Human Resources | | | 11 | |
| | | | | | | Function | | Number of Employees | | Information Systems | | | 35 | | Internal Audit | | | 3 | | Leasing | | | 31 | | Legal | | | 37 | | Marketing | | | 24 | | Property Management | | | 373 | | Risk Management | | | 3 | |
SEC permitsregulations permit registrants to use reasonable estimates and certain prescribed alternative methodologies. As a result, our calculation of the CEO pay ratio may differ from the calculations used by other companies and therefore may not be comparable. COMPENSATION COMMITTEE REPORT The Compensation Committee of Boston Properties has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation BOSTON PROPERTIES, INC. |S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. 2019 Proxy StatementSubmitted by the Compensation Committee: 89
Kelly A. Ayotte, Chair Carol B. Einiger David A. Twardock William H. Walton, III | | | | | | | | | | | | 2021 Proxy Statement | | 91 |
| | | 9› | | PROPOSAL 2: ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION |
PROPOSAL 2: ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION PROPOSAL
Section 14A(a)(1) of the Exchange Act generally requires each public company to include in its proxy statement a separate resolution subject to anon-binding stockholder vote to approve the compensation of the Company’s NEOs, as disclosed in its proxy statement pursuant to Item 402 of RegulationS-K, not less frequently than once every three years. This is commonly known as a“Say-on-Pay” proposal or resolution. At our 2017 annual meeting of stockholders, our stockholders voted on, among other matters, a proposal regarding the frequency of holding anon-binding, advisory vote on the compensation of our NEOs. More than 85% of the votes cast on the frequency proposal were cast in favor of holding anon-binding, advisory vote on the compensation of the Company’s named executive officersNEOs every year, which was consistent with the recommendation of our Board of Directors. Our Board of Directors considered the voting results with respect to the frequency proposal and other factors, and the Board of Directors currently intends for the Company to hold anon-binding, advisory vote on the compensation of the Company’s NEOs every year until the next required advisory vote on the frequency of holding thenon-binding, advisory vote on the compensation of our NEOs, which will occur not later than the 2023 annual meeting of stockholders. Accordingly, we will ask our stockholders to vote “FOR” the following resolution at the 20192021 annual meeting: “RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in this proxy statement pursuant to the Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.” The vote is advisory, and therefore not binding on Boston Properties, the Compensation Committee or our Board of Directors.Directors or the Compensation Committee. However, our Board of Directors and our Compensation Committee value the opinions of our stockholders and intend to take into account the results of the vote when considering future compensation decisions for our named executive officers.NEOs. | The Board of Directors unanimously recommends a voteFOR the approval of the Company’s NEO compensation on an advisory basis. Properly authorized proxies solicited by the Board of Directors will be votedFORthis proposal unless instructions to the contrary are given.
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VOTE REQUIRED The affirmative vote of a majority of shares of common stock present in person or represented by proxy at the meeting and entitled to vote on this proposal is required for the approval of this proposal. Abstentions shall be included in determining the number of shares present and entitled to vote on the proposal, thus having the effect of a vote against the proposal. Brokernon-votes, if any, are not counted in determining the number of shares present and entitled to vote and will therefore have no effect on the outcome. 90 BOSTON PROPERTIES, INC. |2019 Proxy Statement
COMPENSATION OF DIRECTORS
Our directors who are also employees receive no additional compensation for their services as directors. During 2018, we paid ournon-employee directors the following cash compensation:
| | | | | Annual cash retainer for their services(1) | | $ | 67,500 | | Annual cash retainer to the lead independent director(1) | | $ | 15,000 | | Annual cash retainer to the Chair of each of the Audit Committee, Compensation Committee and NCG Committee(1) | | $ | 15,000 | | Fee for each Board meeting attended | | | $1,500 | | Fee for each Committee meeting attended | | | $1,500 | |
(1) | Payable in quarterly installments
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Committee attendance fees are received whether or not the committee meeting is held on the same day as a meeting of our Board of Directors.Non-employee directors also are reimbursed for reasonable expenses incurred to attend Board of Directors and committee meetings.
Non-employee directors may elect, in accordance with our 2012 Plan and our Amended and Restated Rules and Conditions for Directors’ Deferred Compensation Program (the “Directors’ Deferred Compensation Program”), to defer all cash retainer and meeting attendance fees payable to such director and to receive his or her deferred cash compensation in the form of our common stock or in cash following the director’s retirement from our Board of Directors. Each director is credited with the number of deferred stock units determined by dividing the amount of the cash compensation deferred during each calendar quarter by the closing market price of our common stock on the NYSE on the last trading day of the quarter. Hypothetical dividends on the deferred stock units are “reinvested” in additional deferred stock units based on the closing market price of the common stock on the cash dividend payment date. Payment of a director’s account may be made in either a lump sum of shares of our common stock equal to the number of deferred stock units in a director’s account or in ten annual installments following the director’s retirement from our Board of Directors. In addition, non-employee directors who elect a deferred payout following their retirement from the Board may elect to change their notional investment from our common stock to a deemed investment in one or more measurement funds. This election to convert may only be made after the director’s service on the Board ends, the election is irrevocable and the director must convert 100% of his or her deferred stock account if any is converted. Payment of a director’s account that has been converted to measurement funds will be in cash instead of shares of our common stock. The measurement funds available to directors are the same as those available to our executives under our Nonqualified Deferred Compensation Plan. See “Compensation of Executive Officers – Nonqualified Deferred Compensation” on page 77.
In 2018, each continuingnon-employee director was also entitled to receive, on the fifth business day after the annual meeting of stockholders, a number of shares of restricted common stock or, if elected by such director, LTIP units (or a combination of both) valued at $127,500. In addition, any newnon-employee director that is appointed to our Board of Directors other than at an annual meeting of stockholders would be entitled to receive, on the fifth business day after the appointment, a number of shares of restricted common stock (or, if offered by the Board of Directors and elected by such director, LTIP units) valued at $127,500 (prorated based on the number of months from the date the director is first appointed to our Board of Directors to the date of the Company’s next annual meeting of stockholders).
Annual and initial grants of restricted common stock or, if elected by the director, LTIP units (or a combination of both) are made pursuant to a policy adopted by the Board of Directors so that the equity compensation ofnon-employee directors will be determined by a formula. The actual number of
BOSTON PROPERTIES, INC. |2019 Proxy Statement 91
COMPENSATION OF DIRECTORS
shares of restricted common stock or LTIP units that we grant is determined by dividing the fixed value of the grant by the closing market price of our common stock on the NYSE on the grant date. Pursuant to this policy, on May 31, 2018, Mses. Ayotte, Einiger and Dykstra and Messrs. Duncan, Frenkel, Klein, Lustig, Turchin and Twardock each received 1,047 LTIP units, shares of restricted common stock or a combination of both. Annual and initial grants of LTIP units and restricted common stock will vest 100% on the earlier of (1) the first anniversary of the grant date and (2) the date of the next annual meeting of stockholders.
Historically, our Board of Directors has not chosen to review the compensation payable to ournon-employee directors on an annual basis; instead, it reviews the compensation every two or three years and when circumstances otherwise dictate. As a result, the current program has been in place since 2016.
In February 2019, our Board approved the Boston Properties, Inc.Non-Employee Director Compensation Plan, which sets forth the cash and equity compensation that is to be paid to ournon-employee directors in a specific, formulaic manner. This plan implements recommendations that our Compensation Committee made to the full Board based on a comprehensive review of the structure and amount of our existing compensation fornon-employee directors. For this review, our Compensation Committee engaged FW Cook.
When our Board of Directors approved the structure and amounts of the new compensation program, effective January 1, 2019, it believed that the new program is fair and in the best interest of all stockholder of the Company. Nevertheless, because of the interests that ournon-employee directors have in the establishment of the compensation they receive, our Board determined to seek stockholder approval for theNon-Employee Director Compensation Plan. Therefore, please see“Proposal 3 – Approval of the Boston Properties, Inc.Non-Employee Director Compensation Plan” beginning on page 95 of this proxy statement for more detail on the terms and conditions of the Boston Properties, Inc.Non-Employee Director Compensation Plan.
DIRECTOR COMPENSATION TABLE
The following table summarizes the compensation earned by ournon-employee directors during the year ended December 31, 2018.
| | | | | | | | | | | | | | | | | | | | | Name | | Fees Earned or Paid in Cash ($) (1) | | | Stock Awards ($)(2) | | | Option Awards ($) | | | All Other Compensation ($) | | | Total ($) | | Kelly A. Ayotte | | | 55,982 | | | | 114,750 | | | | — | | | | — | | | | 170,732 | | Bruce W. Duncan | | | 96,000 | | | | 114,750 | | | | — | | | | — | | | | 210,750 | | Karen E. Dykstra | | | 90,000 | | | | 127,500 | | | | — | | | | — | | | | 217,500 | | Carol B. Einiger | | | 105,000 | | | | 114,750 | | | | — | | | | — | | | | 219,750 | | Dr. Jacob A. Frenkel | | | 91,434 | | | | 114,750 | | | | — | | | | — | | | | 206,184 | | Joel I. Klein | | | 106,500 | | | | 114,750 | | | | — | | | | — | | | | 221,250 | | Matthew J. Lustig | | | 94,607 | | | | 114,750 | | | | — | | | | — | | | | 209,357 | | Alan J. Patricof | | | 40,203 | | | | 114,750 | | | | — | | | | — | | | | 154,953 | | Martin Turchin | | | 91,500 | | | | 114,750 | | | | — | | | | — | | | | 206,250 | | David A. Twardock | | | 120,000 | | | | 127,500 | | | | — | | | | — | | | | 247,500 | |
(1) | Ms. Einiger and Messrs. Klein, Lustig, Patricof and Twardock deferred their cash fees earned during 2018 and received in lieu thereof deferred stock units. The following table summarizes the deferred stock units credited to the director accounts during 2018.
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92 BOSTON PROPERTIES, INC. |2019 Proxy Statement
COMPENSATION OF DIRECTORS
| | | | | Name | | Deferred Stock
Units Earned
during 2018
(#) | | Carol B. Einiger ✓ | | | 882.83 | | Joel I. KleinTHE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE COMPENSATION PAID TO THE COMPANY’S NEOS AS DISCLOSED IN THIS PROXY STATEMENT. PROPERLY AUTHORIZED PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS PROPOSAL UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN.
| | | 882.38 | | Matthew J. Lustig
| | | 783.45 | | Alan J. Patricof(a)
| | | 329.09 | | David A. Twardock
| | | 1,008.82 | |
| (a) | On May 23, 2018, the date of Mr. Patricof’s retirement from our Board of Directors, the Company issued 36,835 shares of common stock to Mr. Patricof in settlement of his deferred stock award account.
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(2) | Represents the total fair value of common stock and LTIP unit awards granted tonon-employee directors in 2018, determined in accordance with ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. A discussion of the assumptions used in calculating these values can be found in Note 16 to our 2018 audited financial statements beginning on page 175 of our annual report on Form10-K for the year ended December 31, 2018 included in the annual report that accompanied this proxy statement.
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| | | | | | | | | Name | | LTIP Units
(#) | | | Common Stock
(#) | | Kelly A. Ayotte
| | | 1,047 | | | | — | | Bruce W. Duncan
| | | 1,047 | | | | — | | Karen E. Dykstra
| | | — | | | | 1,047 | | Carol B. Einiger
| | | 1,047 | | | | — | | Dr. Jacob A. Frenkel
| | | 1,047 | | | | — | | Joel I. Klein
| | | 1,047 | | | | — | | Matthew J. Lustig
| | | 1,047 | | | | — | | Martin Turchin
| | | 1,047 | | | | — | | David A. Twardock
| | | — | | | | 1,047 | |
DIRECTOR STOCK OWNERSHIP GUIDELINES
Our Board believes it is important to align the interests of the directors with those of the stockholders and for directors to hold equity ownership positions in Boston Properties. Accordingly, eachnon-employee director is expected to retain an aggregate number of shares of our common stock, our deferred stock units (and related dividend equivalent rights), and LTIP units and common units in our Operating Partnership, whether vested or not, equal to at least the aggregate number of such shares or units received by the director as annual retainers during the first three years following the later of: (a) our 2007 annual meeting of stockholders or (b) our annual meeting of stockholders at which the director was initially elected or, if earlier, the first annual meeting of stockholders following the initial appointment of the director. Compliance with these ownership guidelines will be measured as of the end of each fiscal year. Any director who is prohibited by law or by applicable regulation of his or her employer from owning equity in the Company shall be exempt from this requirement. The NCG Committee may consider whether exceptions should be made for any director on whom this requirement could impose a financial hardship.
Based on FW Cook’s recommendations, our Board also approved new stock ownership guidelines fornon-employee directors to better align their interests with those of the stockholders and conform to
BOSTON PROPERTIES, INC. |2019 Proxy Statement 93
COMPENSATION OF DIRECTORS
“best” practices. Under the new guidelines, eachnon-employee director is expected to retain an aggregate number of shares of common stock of the Company, deferred stock units (and related dividend equivalent rights) in the Company, and LTIP units, and common units in the Operating Partnership, whether vested or not, equal to at least five (5) times the value of the then current annual cash retainer paid tonon-employee directors for their service on the Board without respect to service on committees of the Board or as lead independent director or Chairman. Eachnon-employee director, until such director complies with the ownership guidelines set forth above, is expected to retain all equity awards granted by the Company or the Operating Partnership (less amounts sufficient to fund any taxes owed relating to such equity awards). The deferred stock units (and related dividend equivalent rights) in the Company and LTIP units and common units in the Operating Partnership shall be valued by reference to the market price of the number of shares of common stock of the Company issuable upon the settlement or exchange of such units assuming that all conditions necessary for such settlement or exchange have been met. For shares of common stock of the Company or equity valued by reference to common stock of the Company for purposes of these ownership guidelines, the market price of the common stock of the Company used to value such equity shall be the greater of (1) the market price on the date of purchase or grant of such equity or (2) the market price as of the date compliance with these ownership guidelines is measured.
The effectiveness of these new stock ownership guidelines is conditioned upon stockholder approval of the Boston Properties, Inc.Non-Employee Director Compensation Plan at the 2019 annual meeting of stockholders.
94 BOSTON PROPERTIES, INC. |2019 Proxy Statement
PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
PROPOSAL
On February 26, 2019, our Board of Directors approved the Boston Properties, Inc.Non-Employee Director Compensation Plan (the “Director Compensation Plan”), which sets forth the cash and equity compensation that is to be paid to ournon-employee directors in a specific, formulaic manner. Although we are not legally required to seek or receive stockholder approval for the Director Compensation Plan, we are submitting the plan to stockholders for approval. Our Compensation Committee and Board of Directors last reviewed ournon-employee director compensation in 2016, or three years ago.
The Director Compensation Plan implements recommendations that our Compensation Committee made to the full Board based on a comprehensive review of the structure and amounts of our existing compensation fornon-employee directors. For the 2019 review, our Compensation Committee engaged FW Cook to help ensure that ournon-employee director compensation remains competitive and is generally consistent with “best” practices. Our Compensation Committee also sought recommendations from FPL regarding compensation for the role ofnon-executive chairman.
The Director Compensation Plan does not reserve any additional shares of common stock for issuance; all equity grants made under the Director Compensation Plan must be made pursuant to the 2012 Plan or another separately approved equity plan.
When our Board of Directors approved the structure and amount of the new compensation program for ournon-employee directors, effective January 1, 2019, it believed that the new program is fair and in the best interests of all stockholders of the Company. Nevertheless, because of the interests that ournon-employee directors have in the establishment of the compensation they receive for their service as our directors, our Board of Directors also determined that it would be advisable to submit the Director Compensation Plan to stockholders for their approval. Our Board unanimously recommends that stockholders voteFOR the Director Compensation Plan.
BACKGROUND
Ournon-employee director compensation is intended to attract, retain and appropriately compensate highly qualified individuals to serve on our Board of Directors. Historically, our Compensation Committee and Board of Directors have not reviewed ournon-employee director compensation on an annual basis – instead choosing to review the compensation every two or three years – and the current compensation program has been in place since 2016. Because of this practice and the fact that our Compensation Committee targets compensation levels that are competitive with the median of the Benchmarking Peer Group, the total compensation payable to ournon-employee directors tends to fall below the median in years following our most recent review until the program is benchmarked again. This is consistent with FW Cook’s findings.
In determining the amount and type ofnon-employee director compensation that we pay, our Compensation Committee received a thorough comparative benchmarking analysis ofnon-employee director compensation within the same Benchmarking Peer Group used by our Compensation Committee when benchmarking executive compensation, and it received and evaluated detailed advice from FW Cook that was developed on the basis of a targeted competitive approach and FW Cook’s expertise in recent trends and developments innon-employee director compensation generally. In connection with this analysis and evaluation (1) FW Cook advised that the compensation currently paid to ournon-employee directors, on an individual basis, is below the 25th percentile of our
BOSTON PROPERTIES, INC. |2019 Proxy Statement 95
PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
Benchmarking Peer Group, and, on an aggregate basis, just slightly above the 25th percentile of our Benchmarking Peer Group; (2) our Compensation Committee sought to target compensation levels that would be competitive with the median of our Benchmarking Peer Group and the recommendations made by FW Cook were consistent with that goal; and (3) with respect to additional compensation payable to thenon-executive chairman, FW Cook and FPL advised our Compensation Committee that the compensation provided in the Director Compensation Plan is towards the lower end of the competitive range for similarly-situated board chairs based on role and responsibilities. Thenon-employee director compensation set forth in the Director Compensation Plan reflects changes to the current structure and amounts of ournon-employee director compensation that resulted from this detailed review.
Our Board of Directors believes the Director Compensation Plan provides appropriate compensation that is competitive with the median of our Benchmarking Peer Group and aligns the interests of ournon-employee directors and our stockholders in the future success of the Company, and recommends that our stockholders approve it.
SUMMARY OF THE DIRECTOR COMPENSATION PLAN
The following description of the Director Compensation Plan is a summary only and is qualified in its entirety by reference to the full text of the Director Compensation Plan that is attached hereto asAppendix B.
Compensation Payable under the Director Compensation Plan
The Director Compensation Plan provides that eachnon-employee director shall be entitled to the compensation described below while serving as a director. Our directors who are also employees are not entitled to receive compensation pursuant to the Director Compensation Plan. We currently have ninenon-employee directors.
Cash Compensation(1)
| | | | | Annual cash retainer for Board services
| | $ | 85,000 | | Annual cash retainer to the Chairman of the Board
| | $ | 100,000(2) | | Annual cash retainer to the Chair of the Audit Committee
| | $ | 20,000(3) | | Annual cash retainer to the members of the Audit Committee
| | $ | 15,000 | | Annual cash retainer to the Chair of other standing committees(4)
| | $ | 15,000(3) | | Annual cash retainer to the members of other standing committees
| | $ | 10,000 | |
(1) | The sum of all cash retainers are payable in quarterly installments in arrears, subject to proration for periods of service less than a full quarter in length.
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(2) | The retainer payable to the Chairman is in addition to all other retainers to which the Chairman may be entitled.
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(3) | The retainer payable to each committee chair is in addition to the retainer payable to all members of the committee.
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(4) | The term “other standing committees” includes the Compensation and NCG Committees, as well as other committees that may be constituted from time to time.
|
Under the Director Compensation Plan,non-employee directors will not receive meeting attendance fees for any meeting of our Board of Directors or a committee thereof that he or she attends.
96 BOSTON PROPERTIES, INC. |2019 Proxy Statement
PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
Equity Compensation
Each continuingnon-employee director is entitled to receive, on the fifth business day after each annual meeting of stockholders, a number of shares of restricted common stock or, if elected by such director, LTIP units (or a combination of both) valued at $150,000, which grant will vest on the earlier of (1) the first anniversary of the grant date and (2) the date of the next annual meeting of stockholders, in each case subject to potential acceleration as set forth in the 2012 Plan or the applicable award agreement.
In addition, any newnon-employee director that is appointed to our Board of Directors other than at an annual meeting of stockholders would be entitled to receive, on the fifth business day after the appointment, a number of shares of restricted common stock or, if elected by such director, LTIP units (or a combination of both) valued at $150,000 (prorated based on the number of months from the date the director is first appointed to our Board of Directors to the first anniversary of the Company’s most recently held annual meeting of stockholders), which grant will vest on the earlier of (1) the first anniversary of the grant date and (2) the date of the next annual meeting of stockholders, in each case subject to potential acceleration as set forth in the 2012 Plan or the applicable award agreement.
Annual and initial grants of restricted common stock or, if elected by the director, LTIP units (or a combination of both) under the Director Compensation Plan are determined by a formula. The actual number of shares of restricted common stock or LTIP units that we grant is determined by dividing (1) the fixed value of the grant by (2) the closing market price of our common stock on the NYSE on the grant date. The closing price of our common stock on the NYSE on March 29, 2019 was $133.88.
All equity grants made under the Director Compensation Plan will be made pursuant to the 2012 Plan or another separately approved equity plan. The Director Compensation Plan does not increase the number of available shares of our common stock reserved for issuance under the 2012 Plan or any other plan.
Deferral of Compensation
Eachnon-employee directors may elect to defer all cash retainers payable to them in accordance with the 2012 Plan and our Directors’ Deferred Compensation Program. For a description of the current terms of this deferral program, see“Compensation of Directors” beginning on page 91 of this proxy statement.
Amendments and Termination
Our Board of Directors reserves the right to amend or terminate the Director Compensation Plan at any time in its sole discretion.
Non-Exclusivity
The Director Compensation Plan is not intended to be exclusive and will not prevent our Board of Directors from adopting other or additional compensation arrangements with respect to anynon-employee director(s).
Plan Administration
The Director Compensation Plan will be administered by the Compensation Committee.
BOSTON PROPERTIES, INC. |2019 Proxy Statement 97
PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
NEW PLAN BENEFITS
No cash or equity compensation has yet been issued under the Director Compensation Plan. For a discussion regarding current director compensation and director compensation for 2018, see“Compensation of Directors” beginning on page 91 of this proxy statement.
The following table discloses the benefits that would have been allocated to ournon-employee directors as a group during 2018 if the Director Compensation Plan had been in place at that time. No one other thannon-employee directors is eligible to participate in the Director Compensation Plan.
| | | | | | | | | 92 | | | | | 2021 Proxy Statement |
| | | 10› | | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN On March 18, 2021, following the recommendation of the Compensation Committee, our Board of Directors approved the Boston Properties, Inc. 2021 Stock Incentive Plan (the “2021 Plan”), subject to the approval of our stockholders. The 2021 Plan will become effective if and when it is approved by our stockholders, and it will replace the Company’s existing equity plan, originally adopted in 2012 (the “Prior Plan”). From and after the effective date of the 2021 Plan, no further awards will be made under the Prior Plan. We believe that having an equity incentive plan in place is critical to our ability to attract, retain and motivate employees in a highly competitive marketplace and to ensure that the Company’s compensation program is structured in a manner that aligns employee interests with the success of the Company. By adopting the 2021 Plan, we will be able to continue using equity awards to attract, retain and motivate employees. The following highlights key reasons why we believe stockholders should approve the 2021 Plan: › Reasonable Plan Cost We requested a reasonable number of shares of common stock – 5,400,000 shares less one (1) share for every one (1) share that was granted after March 4, 2021 under the Prior Plan. Following the effective date of the 2021 Plan, no awards may be granted under the Prior Plan. Awards would not have a substantially dilutive effect (issuance of all shares is 3.1% the sum of the number of shares of common stock and common units of partnership interest in our Operating Partnership of outstanding as of the record date). › Stockholder-Friendly Plan Features Liberal share recycling shall be limited to full-value awards; shares of stock tendered or withheld upon the exercise of a stock option or stock appreciation right for tax withholding, net settlement or exercise payment shall not be added back. No evergreen feature providing for automatic increases. | • | | We may not reprice stock options, nor exchange “underwater” stock options (i.e., options for which the exercise price is greater than the market value of the underlying common stock) for another award or cash, without stockholder approval. |
No liberal change in control definition. › Responsible Grant Practices by the Company Our Compensation Committee designs our executive compensation program to be competitive with our peers. Low three-year average burn rate Performance-based equity awards (in the form of LTIP units) for executive officers are tied to performance metrics, such as TSR, over three-year, overlapping measurement periods. 55% of our Chief Executive Officer’s LTI equity awards (and 50% of our other NEO’s LTI equity awards) for 2020 consisted of performance-based MYLTIP awards earned based on TSR performance over a three-year performance period. Time-based restricted stock and LTIP unit awards generally vest ratably over four years for all executive officers. Robust stock ownership requirements for our executive officers. “Double-trigger” acceleration of vesting upon change in control, which requires a qualified termination of employment following a change in control before vesting of time-based equity awards is accelerated for executive officers. Our clawback policy applies to equity awards granted to executive officers and certain other specified officers. | | | | | | | | | | | | 2021 Proxy Statement | | 93 |
| | | 10› | | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
| | | | | ✓ | | Non-Employee Director Compensation PlanTHE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN. PROPERLY AUTHORIZED PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS PROPOSAL UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN.
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Shares Available for Issuance and Outstanding Awards Under the 2021 Plan, the number of shares of common stock to be available for issuance for new awards will be 5,400,000 shares less one (1) share for every one (1) share that was granted after March 4, 2021 under the Prior Plan. Following the effective date of the 2021 Plan, no awards may be granted under the Prior Plan. › Overhang as of March 4, 2021 The following table sets forth, as of March 4, 2021: all outstanding stock options granted pursuant to our equity compensation plans (including the weighted average exercise price and weighted average remaining term), the number of shares of common stock subject to all outstanding unvested full value awards granted pursuant to our equity compensation plans, the number of shares of common stock to be available for issuance of new awards under the 2021 Plan, and the total number of outstanding shares of common stock and common units in our Operating Partnership (other than common units held by Boston Properties). | | | | | Name and Position Overhang Detail | | Dollar
Value ($) | | | Number Status as of UnitsMarch 4, 2021 | | Non-Employee Director Group (9 directors)Stock options outstanding
| | | 2,390,000297,558 | (1)(2) | Weighted-average exercise price | | | —$98.80 | | Weighted-average remaining term | | | 0.86 years | | Unvested full value shares outstanding(1) | | | 1,329,611 | | Proposed shares reserved under 2021 Plan(2) | | | 5,400,000 | | Total Common Stock and Common Units outstanding(3) | | | 171,916,558 | |
(1) | The “Dollar Value ($)” column includes equity awards valued at $150,000 pernon-employee director, totaling $1,350,000 in the aggregate. The number ofIncludes (x) 486,716 LTIP units and 67,680 restricted shares of common stock that remain subject to vesting based solely on continued employment or service and (y) 775,215 LTIP Units issued would have been determinedunits granted pursuant to 2019, 2020 and 2021 MYLTIP Awards, which remain subject to performance-based vesting conditions in addition to vesting conditions based on the closing price of the common stock on the NYSE on the fifth business day after our annual meeting of stockholders. The “Dollar Value ($)” column also includes the amount of cash compensation that would have been deferred in accordance with elections made by ournon-employee directors pursuant to the 2012 Plan and our Directors’ Deferred Compensation Program.continued employment or service.
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(2) | Assumes that Mr. Klein served as ChairmanProposed share reserve is subject to reduction for any awards granted under the Prior Plan after March 4, 2021. Upon stockholder approval of our Board of Directors during all of 2018.the 2021 Plan, no awards may be granted under the Prior Plan.
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(3) | Includes 155,858,332 shares of common stock and 16,058,226 common units in our Operating Partnership outstanding as of March 4, 2021. Excludes 1,576,297 LTIP units outstanding as of March 4, 2021 and common units in our Operating Partnership held by Boston Properties. | The Board of Directors unanimously recommends a voteFOR the approval of the Boston Properties, Inc.Non-Employee Director Compensation Plan. Properly authorized proxies solicited by the Board of Directors will be votedFORthis proposal unless instructions to the contrary are given.
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Other than the foregoing and vested LTIP units (or common units into which they were converted) and vested deferred stock units that were outstanding but not yet settled or exchanged for shares of common stock, no other awards pursuant to which shares of common stock were issuable under any of our existing or prior equity compensation plans, including the Prior Plan, were outstanding as of March 4, 2021. | | | | | | | | | 94 | | | | | 2021 Proxy Statement |
| | | 10› | | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
VOTE REQUIREDBurn Rate
The following table sets forth information regarding historical awards granted during 2018, 2019 and 2020, and the corresponding “burn rate,” which is defined as the number of stock options and time-based, full value shares/units granted plus the number of performance-based, full-value shares/units earned in a year divided by the weighted-average number of shares of common stock and common units outstanding for that year, for each of the last three fiscal years: › Burn Rate Detail: 2018-2020 | | | | | | | | | | | | | Award Type | | 2018 | | | 2019 | | | 2020 | | Stock options granted (A) | | | 0 | | | | 0 | | | | 0 | | Time-based, full-value shares/units granted(1) (B) | | | 232,481 | | | | 216,998 | | | | 249,101 | | Performance-based, full-value shares/units earned(2) (C) | | | 28,771 | | | | 106,599 | | | | 123,979 | | Total (A+B+C) | | | 261,252 | | | | 323,597 | | | | 373,080 | | Weighted-average common shares + units(3) (D) | | | 171,912,377 | | | | 172,199,852 | | | | 172,642,577 | | Burn Rate ((A+B+C)/D) | | | 0.15% | | | | 0.19% | | | | 0.22% | |
(1) | Time-based, full-value shares/units granted consists of all restricted stock awards, deferred stock units and LTIP units granted during the applicable year that, upon grant, either were vested or were subject to vesting based solely on continued employment or service. |
(2) | Performance-based, full-value shares/units earned consists of all LTIP units for which performance-based vesting occurred with respect to a performance period that ended during such year even if the LTIP units remained subject to vesting based on continued employment or service. All performance-based, full-value awards granted or earned during 2018 – 2020 were LTIP unit awards. 2018 performance-based, full-value shares/units earned reflects LTIP units earned from the 2015 MYLTIP awards. 2019 performance-based, full-value share/units earned reflects LTIP units earned from the 2016 MYLTIP awards. 2020 performance-based full-value share/units earned reflects LTIP units earned from the 2017 MYLTIP awards. The following table provides further detail regarding performance-based, full-value awards that were granted, earned, forfeited and outstanding during 2018, 2019 and 2020: |
| | | | | | | | | | | | | | | 2018 | | | 2019 | | | 2020 | | Unearned at beginning of period(a)(b) | | | 1,239,978 | | | | 1,211,816 | | | | 951,850 | | Units granted(b) | | | 342,659 | | | | 220,734 | | | | 203,278 | | Units earned | | | 28,771 | | | | 106,599 | | | | 123,979 | | Units forfeited(c) | | | 342,050 | | | | 374,101 | | | | 271,760 | | Unearned at end of period(a)(b) | | | 1,211,816 | | | | 951,850 | | | | 759,389 | |
| (a) | Includes the outstanding number of LTIP units subject to performance-based vesting. |
| (b) | For performance-based LTIP unit awards granted prior to 2019, the number of LTIP units that could be earned was based on a dollar amount earned divided by an average of the closing prices of our common stock measured at the end of the performance period. As a result, the number of LTIP units issued was an estimate of the maximum number of LTIP units that could be earned based on certain assumptions. The number of units granted and unearned is based on the number of LTIP units actually issued and outstanding, respectively. |
| (c) | Represents LTIP units forfeited (based on the number initially issued, which, for awards granted prior to 2019, was an estimate of the maximum number of LTIP units that could be earned based on certain assumptions) upon determination of performance-based vesting or due to termination of employment or service relationship. |
(3) | For each applicable year, represents the weighted-average number of shares of common stock of the Company and common units in our Operating Partnership (other than common units held by Boston Properties) outstanding during the year. Because the Company is a REIT that conducts substantially all of its operations through the Operating Partnership, both shares of common stock of the Company and common units in our Operating Partnership not owned by Boston Properties are included for purposes of calculating our burn rate. Each common unit in our Operating Partnership is exchangeable into shares of common stock on a one-for-one basis, subject to certain conditions. |
| | | | | | | | | | | | 2021 Proxy Statement | | 95 |
| | | 10› | | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
Summary of 2021 Plan The following description of certain material features of the 2021 Plan is intended to be a summary only. This summary is qualified in its entirety by the full text of the 2021 Plan that is attached hereto as Appendix A. Shares of Common Stock Available. The maximum number of shares of common stock to be available for issuance for new awards will be 5,400,000 shares less one (1) share for every one (1) share that was granted after March 4,2021 under the Prior Plan. Following the effective date of the 2021 Plan, no awards may be granted under the Prior Plan. Based solely on the closing price of our common stock as reported on the NYSE on March 24, 2021, the maximum aggregate market value of the 5,400,000 shares that could potentially be issued under the 2021 Plan is $554,850,000. Shares of common stock underlying awards granted under the 2021 Plan or the Prior Plan that are forfeited, canceled or otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2021 Plan. Additionally, with respect to full-value awards under the 2021 Plan or the Prior Plan (i.e., an award other than a stock option, stock appreciation right or partnership unit with an economic structure similar to that of a stock option or stock appreciation right), shares tendered, held back or otherwise reacquired to cover tax withholding and shares previously reserved for issuance pursuant to such an award to the extent that such shares are not issued and are no longer issuable pursuant to such an award (e.g., in the event that a full-value award that may be settled in cash or by issuance of shares of Stock is settled in cash) will be added back to the shares available for issuance under the 2021 Plan. Shares of common stock tendered or held back for taxes or to cover the exercise price of an option or stock appreciation right will not be added back to the reserved pool under the 2021 Plan. Upon the exercise of a stock appreciation right that is settled in shares of common stock, the full number of shares of common stock underlying the award will be charged to the reserved pool. In the event we repurchase shares of common stock on the open market, the shares shall not be added to the shares of common stock available for issuance under the 2021 Plan. In addition, in connection with the acquisition of another company, the Company may assume outstanding awards granted by another company as if they had been granted under the 2021 Plan or grant awards under the 2021 Plan in substitution of such outstanding awards, in each case, to the extent the applicable award recipient is eligible to be granted such an award under the 2021 Plan. Any shares of common stock issued pursuant to such assumed or substituted awards will not reduce the number of shares authorized for grant under the 2021 Plan. Plan Administration. The 2021 Plan will be administered by either the Compensation Committee, the Board or by such other committee of the Board performing the functions of the Compensation Committee (in either case, the “Administrator”). The Administrator has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, to determine the specific terms and conditions of each award, subject to the provisions of the 2021 Plan, to accelerate the exercisability or vesting of any award, to interpret the 2021 Plan and awards granted thereunder, and to otherwise administer the 2021 Plan and the awards granted thereunder. Subject to applicable law, the Administrator, in its sole discretion, may delegate to our Chief Executive Officer, all or part of the Administrator’s authority and duties with respect to the granting of awards to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act, subject to certain limitations. Types of Awards. The types of awards permitted under the 2021 Plan include stock options, stock appreciation rights, restricted stock unit awards, restricted stock awards, unrestricted stock awards, dividend equivalent rights, cash-based awards and other equity-based awards. Subject to the overall limit on the number of shares that may be issued under the 2021 Plan, shares of common stock may be issued up to such maximum number pursuant to any type of award; provided that no more than 5,400,000 shares of common stock (plus, to the extent permitted by the Code, any shares added back to the 2021 Plan as described above) may be issued in the form of incentive stock options. Eligibility. All officers, employees, non-employee directors, consultants and advisors of the Company and its subsidiaries will be eligible to receive awards under the 2021 Plan. Persons eligible to participate in the 2021 Plan will be those officers, employees, non-employee directors, consultants and advisors of the Company and its subsidiaries as selected from time to time by the Administrator, as well as such other persons selected from time to time by the Administrator to whom issuances of shares | | | | | | | | | 96 | | | | | 2021 Proxy Statement |
| | | 10› | | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
under the 2021 Plan may be registered and permitted under applicable securities laws. As of March 24, 2021, approximately 700 individuals would have been eligible to participate in the 2021 Plan had it been effective on such date. All persons who are eligible to receive awards form a single class under the 2021 Plan, as awards are made on a discretionary basis and the terms of the 2021 Plan do not distinguish among various eligible persons. Adjustments for Stock Dividends, Stock Splits, Etc. The 2021 Plan requires the Administrator to make appropriate equitable adjustments to the number and kind of shares of common stock that are subject to issuance under the 2021 Plan, to certain limits in the 2021 Plan, and to any outstanding awards under the 2021 Plan, as well as equitable adjustments to the purchase price or exercise price, as applicable, of outstanding awards under the 2021 Plan, to reflect any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or similar change in the Company’s capital stock, including as a result of any merger or consolidation or sale of all or substantially all of the assets of the Company. Treatment of Awards in Certain Transactions. In the event of a “Transaction,” as defined in the 2021 Plan, the Board or the board of directors of any corporation assuming the obligations of the Company, may, in its discretion, take any one or more of the following actions as to outstanding awards under the 2021 Plan: provide that the awards may be assumed or substituted, or upon written notice to participants provide that all awards will terminate upon consummation of the Transaction. In the event that awards are not assumed or substituted, except as otherwise provided by the Compensation Committee in the award agreement or other agreement between the holder of an award and the Company, upon the effective time of the Transaction, all awards will become vested and exercisable and vested awards, other than stock options, shall be fully settled in cash or in kind at such appropriate consideration as determined by the Compensation Committee in its sole discretion after taking into account the consideration payable per share pursuant to the Transaction, or the “merger price”, and all stock options shall be fully settled in cash or in kind in an amount equal to the difference between the merger price and the exercise price of the options; provided that each participant may be permitted to exercise all outstanding options within a specified period determined by the Compensation Committee prior to the Transaction. Term. No awards may be granted under the 2021 Plan ten years or more after the date of stockholder approval, and no incentive stock options may be granted after the tenth anniversary of the date the 2021 Plan is approved by the Board. Repricing. The Administrator may not, without stockholder approval, reduce the exercise price of outstanding stock options or stock appreciation rights or effect repricing through cancellation and re-grants or cancellation of stock options or stock appreciation rights in exchange for cash or other awards, other than as a result of a proportionate adjustment made in connection with a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar event. Stock Options. The 2021 Plan permits the granting of (1) options intended to qualify as incentive stock options under Section 422 of the Code and (2) options that do not so qualify. Options granted under the 2021 Plan will be non-qualified stock options if they fail to qualify as incentive stock options or exceed the annual limit on incentive stock options. Non-qualified stock options may be granted to any persons eligible to receive incentive stock options and to non-employee directors, consultants and advisors. Incentive stock options may be granted only to employees of the Company or any subsidiary. To qualify as incentive stock options, options must meet additional federal tax requirements, including a $100,000 limit on the value of shares of common stock subject to incentive stock options that first become exercisable by a participant in any one calendar year. The exercise price of each option will be determined by the Administrator but may not be less than 100% of the fair market value of our shares of common stock on the date of grant, subject to certain exceptions set forth in the 2021 Plan. The term of each option will be fixed by the Administrator and may not exceed ten years from the date of grant. The Administrator will determine at what time or times each option may be exercised. Options may be made exercisable in installments and the exercisability of options may be accelerated by the Administrator. Options may be exercised in whole or in part by giving written or electronic notice to the Company. Upon exercise of options, the option exercise price must be paid in full either in cash, by certified or bank check or other instrument acceptable to the Administrator or by delivery (or attestation to the ownership following such procedures as we may prescribe) of shares of common stock that are not subject to restrictions under any Company plan. Subject to applicable law, the exercise price may also be delivered to the Company by a broker pursuant to irrevocable instructions to the broker from the optionee. In addition, the Administrator may permit non-qualified stock options to be exercised using a net exercise feature which reduces the number of shares of common stock issued to the optionee by the number of shares of common stock with a fair market value equal to the exercise price. | | | | | | | | | | | | 2021 Proxy Statement | | 97 |
| | | 10› | | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
Stock Appreciation Rights. The Administrator may award stock appreciation rights to participants subject to such conditions and restrictions as the Administrator may determine, provided that the exercise price may not be less than 100% of the fair market value of our shares of common stock on the date of grant, subject to certain exceptions set forth in the 2021 Plan. Stock appreciation rights are settled in cash or shares of common stock. In addition, no stock appreciation right shall be exercisable more than ten years after the date the stock appreciation right is granted. Restricted Stock Units. Restricted stock unit awards are payable in the form of shares of common stock (or cash, to the extent explicitly provided in the award agreement) and may be subject to such conditions and restrictions as the Administrator may determine. These conditions and restrictions may be based on, among other things, the achievement of certain performance goals and/or continued employment or service with the Company through a specified vesting period. To the extent permitted by the Administrator, restricted stock units may be deferred to one or more dates specified in the applicable award certificate or elected by the grantee. Restricted stock unit awards with a deferred settlement date may be referred to as “deferred stock unit awards.” In addition, in the Administrator’s sole discretion, and subject to the participant’s compliance with the procedures established by the Administrator, it may permit a participant to make an advance election to receive cash compensation otherwise due in the form of a restricted stock unit award. Restricted Stock. The Administrator may award shares of common stock to participants subject to such conditions and restrictions as the Administrator may determine. These conditions and restrictions may include the achievement of certain pre-established performance goals and/or continued employment or service through a specified restriction period. If the lapse of restrictions with respect to the shares of common stock is tied to attainment of vesting conditions, any cash dividends paid by the Company during the vesting period will be retained by, or repaid by the grantee to, the Company until and to the extent the vesting conditions are met with respect to the award; provided, that to the extent provided for in the applicable award agreement or by the Administrator, an amount equal to such cash dividends retained or repaid by the grantee may be paid by the grantee upon the lapsing of such restrictions. Unrestricted Stock. The 2021 Plan gives the Administrator discretion to grant stock awards free of any restrictions. Unrestricted stock may be granted to any participant in recognition of past services or other valid consideration and may be issued in lieu of cash compensation due to such participant. Dividend Equivalent Rights. Dividend equivalent rights are awards entitling the grantee to current or deferred payments equal to cash dividends on a specified number of shares of common stock. Dividend equivalent rights may be settled in cash or stock and are subject to other conditions as the Administrator shall determine. Dividend equivalent rights may be granted to any grantee as a component of an award or as a freestanding award. Unless provided by the Administrator, dividend equivalent rights may be paid currently, be deemed reinvested in additional shares of stock, which may thereafter accrue additional dividend equivalents, or may otherwise accrue. Other Equity-Based Awards. The Administrator may grant units in the Company’s Operating Partnership or other units or any other membership or ownership interests (which may be expressed as units or otherwise) in a subsidiary, with any stock being issued in connection with the conversion of (or other distribution on account of) an interest granted under the provisions of the 2021 Plan. Cash-Based Awards. The Administrator may grant cash-based awards, such as annual cash bonuses, under the 2021 Plan. The cash-based awards may be subject to the achievement of one or more performance criteria selected by the Administrator, including those specifically referenced in the definition of Performance Criteria in the 2021 Plan. Cash-based awards may be paid in cash or shares of common stock. Cash-based awards that are only payable or actually paid in cash are not subject to and will have no impact on the number of shares of common stock available for issuance under the 2021 Plan. Tax Withholding. Participants in the 2021 Plan are responsible for the payment of any federal, state or local taxes that we are required by law to withhold upon any exercise, vesting or settlement of awards, as applicable. Subject to approval by the Administrator, participants may elect to have the tax withholding obligations satisfied by authorizing the Company to withhold shares of common stock to be issued (or, in the case of a restricted stock award, to reacquire shares previously issued pursuant to such award). Additionally, the Administrator may provide for mandatory share withholding up to the required withholding amount. The Administrator may also require tax withholding obligations to be satisfied by an arrangement where shares issued pursuant to an award are immediately sold and proceeds from such sale are remitted to the Company in an amount to satisfy such tax withholding obligations. | | | | | | | | | 98 | | | | | 2021 Proxy Statement |
| | | 10› | | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
Amendments and Termination. Generally, under current NYSE rules, all material amendments to the 2021 Plan, including those that materially increase the number of shares of common stock available (other than an increase solely to reflect a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or similar change), expand the types of awards available or the persons eligible to receive awards, extend the term of the 2021 Plan, change the method of determining the exercise price of options or delete or limit any provision prohibiting the repricing of options, must be approved by our common stockholders. The Board may determine to make amendments subject to the approval of the common stockholders for purposes of complying with the rules of the NYSE or to preserve the qualified status of incentive stock options. Otherwise, our Board may amend or discontinue the 2021 Plan at any time, provided that no such action will materially and adversely affect the rights under any outstanding awards without the holder’s consent. United States Federal Income Tax Consequences – Options and Stock Appreciation Rights The following is a summary of the principal federal income tax consequences of certain transactions under the 2021 Plan relating to options and stock appreciation rights. It does not describe all federal tax consequences under the 2021 Plan, nor does it describe state or local tax consequences. Incentive Stock Options. No taxable income is generally realized by the optionee upon the grant or exercise of an incentive stock option. If shares of common stock issued to an optionee pursuant to the exercise of an incentive stock option are sold or transferred after two years from the date of grant and after one year from the date of exercise, then (1) upon sale of such shares of common stock, any amount realized in excess of the option price (the amount paid for the shares of common stock) will be taxed to the optionee as a long-term capital gain, and any loss sustained will be a long-term capital loss, and (2) we will not be entitled to any deduction for federal income tax purposes. The exercise of an incentive stock option will give rise to an item of tax preference that may result in alternative minimum tax liability for the optionee. If shares of common stock acquired upon the exercise of an incentive stock option are disposed of prior to the expiration of the two-year and one-year holding periods described above, generally: (1) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares of common stock at exercise (or, if less, the amount realized on a sale of such shares of common stock) over the option price thereof; and (2) we will be entitled to deduct such amount. Special rules will apply where all or a portion of the exercise price of the incentive stock option is paid by tendering shares of common stock. If an incentive option is exercised at a time when it no longer qualifies for the tax treatment described above, the option is treated as a non-qualified option. Generally, an incentive option will not be eligible for the tax treatment described above if it is exercised more than three months following termination of employment (or one year in the case of termination of employment by reason of disability). In the case of termination of employment by reason of death, the three-month rule does not apply. Non-Qualified Stock Options. No taxable income is generally realized by the optionee upon the grant of a non-qualified stock option. Generally: (1) at exercise, ordinary income is realized by the optionee in an amount equal to the difference between the option exercise price and the fair market value of the shares of common stock on the date of exercise, and we receive a tax deduction for the same amount; and (2) at disposition, appreciation or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares of common stock have been held. Special rules will apply where all or a portion of the exercise price of the non-qualified stock option is paid by tendering shares of common stock. Upon exercise, the optionee will also be subject to Social Security taxes on the excess of the fair market value over the exercise price of the option. Stock Appreciation Rights. No income will be recognized by a recipient upon the grant of either tandem or freestanding stock appreciation rights. For the year in which the stock appreciation right is exercised, the recipient will generally be taxed at ordinary income rates on the amount equal to the cash received plus the fair market value of any unrestricted shares received on the exercise. | | | | | | | | | | | | 2021 Proxy Statement | | 99 |
| | | 10› | | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
Parachute Payments. The vesting of any portion of an option or stock appreciation right that is accelerated due to the occurrence of a change in control may cause a portion of the payments with respect to such accelerated awards to be treated as “parachute payments,” as defined in the Code. Any such parachute payments may be non-deductible to us, in whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable). Limitation on Deductions. Under Section 162(m) of the Code, the Company’s deduction for awards under the 2021 Plan may be limited to the extent that any “covered employee” (as defined in Section 162(m) of the Code) receives compensation in excess of $1 million a year. New Plan Benefits Because the grant of awards under the 2021 Plan is within the discretion of the Administrator, we cannot determine the dollar value or number of shares of common stock that will in the future be received by or allocated to any participant in the 2021 Plan. Vote Required Under our Charter and By-laws, the affirmative vote of a majority of shares of common stock present in person or represented by proxy at the meeting and entitled to vote on this proposal is required for the approval of the Director Compensation2021 Plan. Abstentions shall be included in determining the number of shares present and entitled to vote on the proposal, thus having the effect of a vote against the proposal. Brokernon-votes if any, are not counted in determining the number of shares present and entitled to vote and will therefore have no effect on the outcome. Our Board of Directors has approved the compensation for ournon-employee directors set forth above effective January 1, 2019, with Mr. Klein recusing himself with respect to the consideration and approval of the annual retainer payable to thenon-executive Chairman, subject to stockholder approval of the Director Compensation Plan. In the event that the DirectorEquity Compensation Plan is not approved by stockholders, our existingnon-employee director compensation will remain in effect. Our Board of Directors and our Compensation Committee value the opinions of our stockholders and, if the Director Compensation Plan is not approved, then we will take into account the results of the vote and views expressed by our stockholders in determining future compensation for ournon-employee directors, and we may engage in additional, specific outreach to our stockholders on the topic.
98 BOSTON PROPERTIES, INC. |2019 Proxy Statement
EQUITY COMPENSATION PLAN INFORMATION
Information The following table summarizes Boston Properties, Inc.’sthe Company’s equity compensation plans as of December 31, 2018.2020. | Plan category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | Weighted- average exercise price of outstanding options, warrants and rights (b) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted-average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | | | | (a) | | (b) | | (c) | Equity compensation plans approved by security holders (1) | | | 4,111,534 | (2) | | $ | 96.35 | (2) | | 8,578,885(3) | | | | | 3,886,774 | (2) | | $ | 96.97 | (2) | | | 8,069,531 | (3) | Equity compensation plans not approved by security holders(4) | | | N/A | | | N/A | | | 91,209 | | | | | N/A | | | | N/A | | | | 78,152 | | Total | | | 4,111,534 | | | $ | 96.35 | | | 8,670,094 | | | | | 3,886,774 | | | $ | 96.97 | | | | 8,147,683 | |
(1) | Includes information related to the Boston Properties, Inc. 1997 Stock Option and Incentive Plan and the 2012Prior Plan. |
(2) | Includes (a) 540,441351,561 shares of common stock issuable upon the exercise of outstanding options (all of which are vested and exercisable), (b) 991,5771,336,115 LTIP units (682,077(914,572 of which are vested) that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to the Operating Partnership for redemption and acquired by the Companyus for shares of itsour common stock, (c) 1,292,7341,366,743 common units issued upon conversion of LTIP units, which may be presented to the Operating Partnership for redemption and acquired by the Companyus for shares of itsour common stock (all of which are vested), (d) 471,579 2016 MYLTIP awards that, upon336,195 LTIP units issued in the satisfactionform of certain conditions, are convertible into common units, which may be presented to the Operating Partnership for redemption and acquired by the Company for shares of its common stock, (e) 398,871 2017 MYLTIP awards that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to the Operating Partnership for redemption and acquired by the Company for shares of its common stock, (f) 341,366 2018 MYLTIP awards that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to the Operating Partnership for redemption and acquired by the Companyus for shares of itsour common stock, (e) 219,916 LTIP units issued in the form of 2019 MYLTIP awards that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to the Operating Partnership for redemption and acquired by us for shares of our common stock, (f) 203,278 LTIP units issued in the form of 2020 MYLTIP awards that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to the Operating Partnership for redemption and acquired by us for shares of our common stock and (g) 74,96672,966 deferred stock units (all of which are vested) which were granted pursuant to elections by certain of the Company’sour non-employee directors to defer all cash compensation to be paid to such directors and to receive their deferred cash compensation in shares of the Company’sour common stock upon their retirement from our Board of Directors. |
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| | | 10› | | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
| Does not include 50,14255,616 shares of restricted stock, as they have been reflected in the Company’sour total shares outstanding. Because there is no exercise price associated with LTIP units, common units, 20162018 MYLTIP awards, 20172019 MYLTIP awards, 20182020 MYLTIP awards or deferred stock units, such sharesawards are not included in the weighed-average exercise price calculation. |
(3) | Represents awards available for issuance under the 2012Prior Plan. “Full-value” awards (i.e.,, awards other than stock options) are multiplied by a 2.32 conversion ratio to calculate the number of shares available under the 2012 Plan that are used for each full-value award (and thus the number that remains available) under the Prior Plan, as opposed to a 1.0 conversion ratio for each stock option awarded under the 2012Prior Plan. |
(4) | Includes information related to the Boston Properties, Inc. 1999Non-Qualified Employee Stock Purchase Plan (the “ESPP”)(ESPP). The ESPP was adopted by our Board of Directors on October 29, 1998. The ESPP has not been approved by the Company’sour stockholders. The ESPP is available to allAll of our employees that are employed oneligible to participate in the first day of the purchase period.ESPP. Under the ESPP, each eligible employee may purchase shares of our common stock at semi-annual intervals each year at a purchase price equal to 85% of the average closing prices of our common stock on the New York Stock ExchangeNYSE during the last ten business days of the purchase period. Each eligible employee may contribute no more than $10,000 per year to purchase our common stock under the ESPP. |
BOSTON PROPERTIES, INC. |2019 Proxy Statement 99
| | | | | | | | | | | | 2021 Proxy Statement | | 101 |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
| | | 11› | | PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
The current members of the Compensation Committee are Mses. Ayotte and Einiger and Messrs. Duncan and Twardock. None of these persons has served as an officer or employee of Boston Properties. None of these persons had any relationships with Boston Properties requiring disclosure under Item 404 of Regulation S-K. None of Boston Properties’ executive officers served as a director or a member of a compensation committee (or other committee serving a similar function) of any other entity, an executive officer of which served as a director of Boston Properties or a member of the Compensation Committee during 2018.
100 BOSTON PROPERTIES, INC. |2019 Proxy Statement
PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PROPOSAL
The Audit Committee of the Board of Directors is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our consolidated financial statements. The Audit Committee has selected and appointed PricewaterhouseCoopers LLP as our independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31, 2019.2021. PricewaterhouseCoopers LLP has audited our consolidated financial statements continuously since our initial public offering in June 1997. In order to ensure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered public accounting firm. Further, in conjunction with the mandated rotation of the PricewaterhouseCoopers LLP’s lead engagement partner, the Audit Committee and its Chair were directly involved in the selection of PricewaterhouseCoopers LLP’s lead engagement partner. The members of the Audit Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm is in the best interests of Boston Properties and its stockholders. Although ratification by stockholders is not required by law or by ourBy-laws, the Audit Committee believes that submission of its selection to stockholders is a matter of good corporate governance. Even if the appointment is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time if the Audit Committee believes that such a change would be in the best interests of Boston Properties and its stockholders. If our stockholders do not ratify the appointment of PricewaterhouseCoopers LLP, the Audit Committee will consider that fact, together with such other factors it deems relevant, in determining its next selection of independent auditors. It is anticipatedWe expect that a representative of PricewaterhouseCoopers LLP will attend the annual meeting of stockholders, will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.
| | | | | ✓ | | The Board of Directors unanimously recommends a voteTHE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR the ratification of the appointment of PricewaterhouseCoopers THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP as the Company’s independent registered public accounting firm for the year ending DecemberAS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2019. Properly authorized proxies solicited by the Board of Directors will be voted2021. PROPERLY AUTHORIZED PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS PROPOSAL UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN. this proposal unless instructions to the contrary are given.
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BOSTON PROPERTIES, INC. |2019 Proxy Statement 101
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PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| | | 11› | | PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
FEES TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee is responsible for the audit fee negotiations associated with the retention of PricewaterhouseCoopers LLP.LLP (“PwC”). Aggregate fees for professional services rendered by PricewaterhouseCoopers LLPPwC for the years ended December 31, 20182020 and 20172019 were as follows: | | | | 2018 | | | 2017 | | | 2020 | | 2019 | | Audit Fees | | | | | | | | | Recurring audit, quarterly reviews and accounting assistance for new accounting standards and potential transactions | | $ | 2,711,004 | | | $ | 2,204,421 | | | $ | 2,733,710 | | | $ | 2,681,649 | | Comfort letters, consents and assistance with documents filed with the SEC and securities offerings | | | 115,107 | | | | 173,580 | | | 189,000 | | | 168,644 | | | | | | | | | | Subtotal | | | 2,826,111 | | | | 2,378,001 | | | 2,922,710 | | | 2,850,293 | | Audit-Related Fees | | | | | | | | | Audits required by lenders, joint ventures and tenants | | | 420,350 | | | | 341,042 | | | Audits required by lenders, joint ventures, tenants and other attestation reports | | | 416,648 | | | 447,575 | | Tax Fees | | | | | | | | | Recurring tax compliance and REIT and other compliance matters | | | 420,084 | | | | 409,640 | | | 524,332 | (1) | | 444,241 | | Tax planning and research | | | 84,595 | | | | 120,810 | | | 62,025 | | | 55,999 | | Tax assistance for potential transactions | | | — | | | | 7,480 | | | State and local tax examinations | | | 28,447 | | | | 37,750 | | | 8,937 | | | 28,307 | | | | | | | | | | Subtotal | | | 533,126 | | | | 575,680 | | | 595,294 | | | 528,547 | | All Other Fees | | | | | | | | | Software licensing fee | | | 2,700 | | | | 2,700 | | | 2,756 | | | 2,756 | | | | | | | | | | Total | | $ | 3,782,287 | | | $ | 3,297,423 | | | $ | 3,937,408 | | | $ | 3,829,171 | |
(1) | Includes an annual subscription fee for tax allocation software of $50,000 for 2019 but billed in 2020. |
AUDIT ANDNON-AUDIT SERVICESPRE-APPROVAL POLICY The Audit Committee has approved a policy concerning thepre-approval of audit andnon-audit services to be provided by PricewaterhouseCoopers LLP,PwC, our independent registered public accounting firm. The policy requires that all services provided by PricewaterhouseCoopers LLPPwC to us, including audit services, audit-related services, tax services and other services, must bepre-approved by the Audit Committee. In some cases,pre-approval is provided by the full Audit Committee for up to a year, relates to a particular category or group of services and is subject to a particular budgeted maximum. In other cases, specificpre-approval is required. The Audit Committee has delegated authority to the Chair of the Audit Committee topre-approve additional services, and any suchpre-approvals must then be communicated to the full Audit Committee. The Audit Committee approved all audit andnon-audit services provided to us by PricewaterhouseCoopers LLPPwC during the 20182020 and 20172019 fiscal years and none of the services described above were approved pursuant to Rule2-01(c)(7)(i)(c) of RegulationS-X, which relates to circumstances where the Audit Committeepre-approval requirement is waived. VOTE REQUIRED The affirmative vote of a majority of shares of common stock present in person or represented by proxy at the meeting and entitled to vote on this proposal is required for the ratification of the appointment of PricewaterhouseCoopers LLP.PwC. Abstentions shall be included in determining the number 102 BOSTON PROPERTIES, INC. |2019 Proxy Statement
PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
of shares present and entitled to vote on the proposal, thus having the effect of a vote against the proposal. Broker non-votes, if any, are not counted in determining the number of shares present and entitled to vote and will therefore have no effect on the outcome. | | | | | | | | | | | | 2021 Proxy Statement | | 103 |
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AUDIT COMMITTEE REPORT The members of the Audit Committee of the Board of Directors of Boston Properties submit this report in connection with the committee’s review of the financial reports for the fiscal year ended December 31, 20182020 as follows: 1. | The Audit Committee has reviewed and discussed with management the audited financial statements for Boston Properties, Inc. for the fiscal year ended December 31, 2018.2020. |
2. | The Audit Committee has discussed with representatives of PricewaterhouseCoopers LLPPwC the matters required to be discussed pursuant to Auditing Standard No. 1301, as adoptedwith the Audit Committee by the applicable requirements of the Public Company Accounting Oversight Board.Board and the SEC. |
3. | The Audit Committee has received the written disclosures and the letter from the independent accountant required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence. |
Based on the review and discussions referred to above, the Audit Committee recommended to our Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 20182020 for filing with the SEC. The Audit Committee operates pursuant to a charter that was approved by our Board of Directors. A copy of the Audit Committee Charter is available on our website athttp://www.bostonproperties.comwww.bxp.com under the heading “Corporate Governance.” Submitted by the Audit Committee: David A. Twardock, Chair Bruce W. Duncan Karen E. Dykstra Martin Turchin
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
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The Board of Directors has adopted a Related Person Transaction Approval and Disclosure Policy for the review, approval or ratification of any related person transaction. This written policy provides that all related person transactions, other than a transaction for which an obligation to disclose under Item 404 of RegulationS-K (or any successor provision) arises solely from the fact that a beneficial owner of more than 5% of a class of the Company’s voting securities (or an immediate family member of any such beneficial owner) has an interest in the transaction, must be reviewed and approved by a majority of the disinterested directors on our Board of Directors in advance of us or any of our subsidiaries entering into the transaction; provided that, if we or any of our subsidiaries enter into a transaction without recognizing that such transaction constitutes a related person transaction, the approval requirement will be satisfied if such transaction is ratified by a majority of the disinterested directors on the Board of Directors promptly after we recognize that such transaction constituted a related person transaction. Disinterested directors are directors that do not have a personal financial interest in the transaction that is adverse to our financial interest or that of our stockholders. The term “related person transaction” refers to a transaction required to be disclosed by us pursuant to Item 404 of RegulationS-K (or any successor provision) promulgated by the SEC. For purposes of determining whether such disclosure is required, a related person will not be deemed to have a direct or indirect material interest in any transaction that is deemed to be not material (or would be deemed not material if such related person was a director) for purposes of determining director independence pursuant to the Company’s categorical standards of director independence. Please refer to the categorical standards under “Corporate Governance Principles and Board Matters – Director Independence” beginning on page 15.
Since January 1, 2018, the Company has paid a firm controlled by Mr. Raymond A. Ritchey’s brother aggregate leasing commissions of approximately $921,000. The Company expects to pay additional commissions to this firm during 2020. In January 2018, Mr. Ritchey’s brother became an employee of a real estate firm with which the Company has entered into a contract for services that is nearly identical to the previous contract with the firm controlled by Mr. Ritchey’s brother. Given current and anticipated leasing activity, it is currently expected that the Company will pay equivalent or increased leasing commissions to Mr. Ritchey’s brother in 2019, as compared to leasing commissions paid to the firm controlled by him. Mr. Ritchey is the Senior Executive Vice President of Boston Properties. The Company believes the terms of the related agreements are comparable to, and in most cases more favorable to us than, similar arrangements with other brokers in relevant markets.
We are partners with affiliates of Norges Bank Investment Management in joint ventures relating to Times Square Tower, 601 Lexington Avenue, 100 Federal Street and Atlantic Wharf Office. Based on a Schedule 13G/A filed with the SEC on January 24, 2019, Norges Bank (The Central Bank of Norway), an affiliate of Norges Bank Investment Management, is the beneficial owner of more than 5% of our common stock.
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INFORMATION ABOUT THE ANNUAL MEETING ATTENDING THE VIRTUAL ANNUAL MEETING Our preference is to hold an in-person annual meeting. However, due to the ongoing public health concerns resulting from the COVID-19 pandemic and to support the health and well-being of our stockholders, employees and community, this year’s annual meeting will be a virtual meeting conducted via live audio webcast. We have structured our virtual annual meeting to provide stockholders the same rights as if the meeting were held in person, including the ability to vote shares electronically during the meeting and ask questions in accordance with the rules of conduct for the meeting. All stockholders of record of shares of common stock of Boston Properties at the close of business on March 24, 2021, which is referred to in this proxy statement as the “record date,” or their designated proxies, are authorized to attend the annual meeting. Cameras, recording devices and other electronic devices will not be permitted and attendees may be subject to other security precautions. › MEETING ACCESS In order to attend the virtual annual meeting, you must be a holder of Boston Properties stock as of March 24, 2021. To participate in the virtual annual meeting, visit www.virtualshareholdermeeting.com/BXP2021 and enter your unique 16-digit voting control number found on your proxy card, email, notice of internet availability of proxy materials or voting instruction form. The annual meeting is scheduled to begin at 9:00 a.m., Eastern Time, on May 20, 2021. Online access will open at 8:45 a.m. Eastern Time to allow time for you to log in and test your device’s audio system. We encourage you to access the meeting prior to the start time. If you encounter any difficulties accessing the virtual annual meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual annual meeting website. Technical support will be available starting at 8:45 a.m. Eastern Time and until the end of the meeting. › SUBMITTING QUESTIONS If you wish to submit a question during the annual meeting, type your question into the “Submit a question” field, and click “Submit.” Questions may be submitted beginning at 8:45 a.m. Eastern Time. We will endeavor to answer as many questions submitted by stockholders as time permits. We reserve the right to exclude questions regarding topics that are not pertinent to meeting matters or company business. If we receive substantially similar questions, we may group such questions together and provide a single response to avoid repetition. Responses to questions relevant to meeting matters that we do not have time to respond to during the meeting will be posted to our Investor Relations website following the meeting. Questions regarding personal matters or matters not relevant to meeting matters will not be answered. › VOTING DURING THE VIRTUAL ANNUAL MEETING You will be able to vote your shares electronically during the annual meeting, except that if you hold shares through a Shareworks account, voting instructions for those shares must be submitted by May 17, 2021 at 11:59 p.m., Eastern Time. Voting online during the annual meeting will replace any previous votes. See “– How to Vote” below for additional information on voting. › ADDITIONAL MEETING INFORMATION In the event of technical difficulties with the virtual annual meeting, we expect that an announcement will be made on www.virtualshareholdermeeting.com/BXP2021. If necessary, the announcement will provide updated information regarding the date, time, and location of the annual meeting. Any updated information regarding the annual meeting will also be posted on our Investor Relations website at http://www.bxp.com/proxy. A replay of the annual meeting webcast, including the Q&A portion of the annual meeting, will be available on www.virtualshareholdermeeting.com/BXP2021 for at least 30 days following the annual meeting. Why did I receive a Notice of Internet Availability of Proxy Materials?
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS In order to both save money and help conserve natural resources, we are making this proxy statement and our 2018 annual report,2020 Annual Report, including a copy of our annual report on Form10-K and financial statements for the year ended December 31, 2018,2020, available to our stockholders electronically via the Internet instead of mailing the full set of printed proxy materials, in accordance with the rules of the SEC. On or about April 5, 2019,2021, we began mailing to many of our stockholders a Notice of Internet Availability of Proxy Materials (“Notice”) containing instructions on how to access this proxy statement and our annual report online, as well as instructions on how to vote. Also on or about April 5, 2019,2021, we began mailing printed copies of these proxy materials to stockholders that have requested printed copies. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request a copy. Instead, the Notice instructs you on how to access and review all of the important information contained in the proxy statement and annual report. The Notice also instructs you on how you may vote via the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice. Our 20182020 annual report is not part of the proxy solicitation material. What is the purpose of the annual meeting? PURPOSE OF THE ANNUAL MEETING
At the annual meeting, stockholders will be asked to vote upon the matters set forth in the accompanying notice of annual meeting, including the election of directors, an advisory resolution on named executive officer compensation, the approval of ournon-employee director compensation planthe Boston Properties, Inc. 2021 Stock Incentive Plan and the ratification of the appointment of our independent registered public accounting firm. Will other matters be voted on at the annual meeting? PRESENTATION OF OTHER MATTERS AT THE ANNUAL MEETING
We are not currently aware of any other matters to be presented at the 20192021 annual meeting other than those described in this proxy statement. If any other matters not described in this proxy statement are properly presented at the meeting, any proxies received by us will be voted in the discretion of the proxy holders. Who is entitled to vote? STOCKHOLDERS ENTITLED TO VOTE
If you were a stockholder of record as of the close of business on March 27, 2019, which is referred to in this proxy statement as the “record date,”24, 2021, you are entitled to receive notice of the annual meeting and to vote the shares of common stock that you held as of the close of business on the record date. Each stockholder is entitled to one vote for each share of common stock you held by such stockholderas of the close of business on the record date. Holders of common units, LTIP units, preferred stock and deferred stock units are not entitled to vote such securities on any of the matters presented at the 20192021 annual meeting. May I attend the meeting?
All stockholders of record of shares of common stock of Boston Properties, Inc. at the close of business on the record date, or their designated proxies, are authorized to attend the annual meeting. Each stockholder and proxy will be asked to present a valid government-issued photo identification, such as a driver’s license or passport, before being admitted. If you are not a stockholder of record but you hold your shares in “street name” (i.e., your shares are held in an account maintained by a bank, broker or other nominee), then you should provide proof of beneficial ownership as of the record date, such as an account statement reflecting your stock ownership as of the record date, a copy of the voting instruction card provided by your broker, bank or other nominee, or other similar evidence of ownership. We reserve the right to determine the validity of any purported proof of beneficial
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INFORMATION ABOUTQUORUM FOR THE ANNUAL MEETING
ownership. If you do not have proof of ownership, you may not be admitted to the annual meeting. Cameras, recording devices and other electronic devices will not be permitted, and attendees may be subject to security inspections and other security precautions. You may obtain directions to the annual meeting on our website at http://www.bostonproperties.com/proxy.
What constitutes a quorum?
The presence, in personvirtually or by proxy, of holders of at least a majority of the total number of outstanding shares of common stock entitled to vote is necessary to constitute a quorum for the transaction of business at the annual meeting. As of the record date, there were 154,515,486156,074,135 shares of common stock outstanding and entitled to vote at the annual meeting. Each share of common stock outstanding on the record date is entitled to one vote on each matter properly submitted at the annual meeting and, with respect to the election of directors, one vote for each director to be elected. Abstentions or “brokernon-votes” (i.e., shares represented at the meeting held by brokers, as to which instructions have not been received from the beneficial owners or persons entitled to vote such shares and with respect to which, on one or more but not all matters, the broker does not have discretionary voting power to vote such shares) will be counted for purposes of determining whether a quorum is present for the transaction of business at the annual meeting. How do I vote?
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HOW TO VOTE Voting in Person at the Meeting› VOTING DURING THE VIRTUAL ANNUAL MEETING
If you are a stockholder of record and attend the virtual annual meeting you may vote in person at the meeting. If your shares of common stock electronically during the annual meeting using your 16-digit control number on your proxy card or Notice of Internet Availability, except that if you hold shares through a Shareworks account, voting instructions for those shares must be submitted by May 17, 2021 at 11:59 p.m., Eastern Time. See “ – Voting Shares Registered Directly in the Name of the Stockholder or Held in Shareworks” below. If you hold your shares of common stock in “street name” (i.e., your shares are held in an account maintained by a bank, broker or other nominee) and your voting instruction form or Notice of Internet Availability indicates that you may vote those shares through the http://www.proxyvote.com website, then you may vote at the annual meeting with the 16-digit control number indicated on your voting instruction form or Notice of Internet Availability. Voting online during the meeting will replace any previous votes. If you hold your shares of common stock in street name and you wish to vote in person at the meeting,do not have a 16-digit control number, you will need to obtain a “legal proxy” from the bank, broker bank or other nominee that holds your shares of common stock of record.record to attend, participate in and vote at the annual meeting. Voting by Proxy for Shares Registered Directly in the Name of the Stockholder› VOTING SHARES REGISTERED DIRECTLY IN THE NAME OF THE STOCKHOLDER OR HELD IN SHAREWORKS
If you hold your shares of common stock in your own name as a holder of record with our transfer agent, Computershare Trust Company, N.A., you may instruct the proxy holders named in the proxy card how to vote your shares of common stock in one of the following ways: | • | | Vote by Internet.You may vote via the Internet by following the instructions provided in the Notice or, if you received printed materials, on your proxy card. The website for Internet voting is printed on the Notice and also on your proxy card. Please have your Notice or proxy card in hand. Internet voting is available 24 hours per day until 11:59 p.m., Eastern Time, on May 20, 2019. You will receive a series of instructions that will allow you to vote your shares of common stock. You will also be given the opportunity to confirm that your instructions have been properly recorded.
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Vote by Internet. You may vote via the Internet by following the instructions provided in the Notice or, if you received printed materials, on your proxy card. The website for Internet voting is printed on the Notice and also on your proxy card. Please have your Notice or proxy card in hand. Internet voting is available 24 hours per day until 11:59 p.m., Eastern Time, on May 19, 2021. You will receive a series of instructions that will allow you to vote your shares of common stock. You will also be given the opportunity to confirm that your instructions have been properly recorded. If you vote via the Internet, you do not need to return your proxy card. | • | | Vote by Telephone.If you received printed copies of the proxy materials, you also have the option to vote by telephone by calling the toll-free number listed on your proxy card. Telephone voting is available 24 hours per day until 11:59 p.m., Eastern Time, on May 20, 2019.19, 2021. When you call, pleasehave your proxy card in hand. You will receive a series of voice instructions that will allow you to vote your shares of common stock. You will also be given the opportunity to confirm that your instructions have been properly recorded. If you did not receive printed materials and would like to vote by telephone, you must request printed copies of the proxy materials by following the instructions on your Notice. |
If you vote by telephone, you do not need to return your proxy card. 106 BOSTON PROPERTIES, INC. |Vote by Mail. 2019 Proxy StatementIf you received printed materials, and would like to vote by mail, then please mark, sign and date your proxy card and return it promptly in the postage-paid envelope provided. If you did not receive printed materials and would like to vote by mail, you must request printed copies of the proxy materials by following the instructions on your Notice.
If you are a Boston Properties employee or former employee holding shares of common stock on the Shareworks equity portal, the control number you receive on your Notice or proxy card also covers shares of common stock held in your Shareworks account. You may vote these shares via the Internet, by telephone or by completing and returning a proxy card as described above. Your submission of voting instructions for shares of common stock held in your Shareworks account instructs the plan administrator how to vote those shares; it does not result in the appointment of a proxy to vote those shares. Instructions regarding shares held in your Shareworks account must be received by 11:59 p.m., Eastern Time, on May 17, 2021.
INFORMATION ABOUT THE ANNUAL MEETING›
| • | | Vote by Mail.If you received printed materials, and would like to vote by mail, then please mark, sign and date your proxy card and return it promptly to our transfer agent, Computershare Trust Company, N.A., in the postage-paid envelope provided. If you did not receive printed materials and would like to vote by mail, you must request printed copies of the proxy materials by following the instructions on your Notice.
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Voting by Proxy for Shares Registered in Street Name VOTING BY PROXY FOR SHARES REGISTERED IN STREET NAME
If your shares of common stock are held in street name, then you will receive instructions from your broker, bank or other nominee that you must follow in order to have your shares of common stock voted. May I revoke my proxy instructions?
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REVOKING PROXY INSTRUCTIONS You may revoke your proxy at any time before it has been exercised by: filing a written revocation with the Secretary of Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103; submitting a new proxy by telephone, Internet or proxy card after the time and date of the previously submitted proxy; or appearing in personattending the virtual annual meeting and voting by ballot atelectronically during the annual meeting.
If you are a stockholder of record as of the record date attending the virtual annual meeting, you may vote in personelectronically during the meeting whether or not a proxy has been previously given, but your presence (without further action) at the virtual annual meeting will not constitute revocation of a previously given proxy. How can I access Boston Properties’ proxy materials electronically? ACCESSING BOSTON PROPERTIES’ PROXY MATERIALS ELECTRONICALLY
This proxy statement and our 20182020 annual report are available at http://www.edocumentview.com/bxp.www.bxp.com/proxy. Instead of receiving copies of our future annual reports, proxy statements, proxy cards and, when applicable, Notices of Internet Availability of Proxy Materials, by mail, we encourage you to elect to receive an email that will provide electronic links to our proxy materials and also will give you an electronic link to the proxy voting site. Choosing to receive your future proxy materials online will save us the cost of producing and mailing the proxy materials or Notices of Internet Availability of Proxy Materials to you and help conserve natural resources. You may sign up for electronic delivery by visiting http://www.bostonproperties.com/proxy.www.bxp.com/proxy. What is householding? HOUSEHOLDING
If you and other residents at your mailing address own shares of common stock in street name, your broker, bank or other nominee may have sent you a notice that your household will receive only one annual report, Notice of Internet Availability of Proxy Materials, notice of annual meeting and/or proxy statement. This procedure, known as “householding,” is intended to reduce the volume of duplicate information stockholders receive and also reduce our printing and postage costs. Under applicable law, if you consented or were deemed to have consented, your broker, bank or other nominee may send one copy of our annual report, Notice of Internet Availability of Proxy Materials, notice of annual meeting and/or proxy statement to your address for all residents that own shares of common stock in street name. If you wish to revoke your consent to householding, you must contact your broker, bank or other nominee. If you are receiving multiple copies of our annual report, Notice of Internet Availability of Proxy Materials, notice of annual meeting and/or proxy statement, you may be able to request householding by contacting your broker, bank or other nominee. BOSTON PROPERTIES, INC. |2019 Proxy Statement 107
INFORMATION ABOUT THE ANNUAL MEETING
If you wish to request extra copies free of charge of our 2020 annual report or proxy statement, please send your request to Investor Relations, Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103; call us with your request at(617) 236-3822; or visit our website athttp://www.bostonproperties.comwww.bxp.com. 108 BOSTON PROPERTIES, INC. |2019 Proxy Statement
OTHER MATTERS
EXPENSES OF SOLICITATION The cost of solicitation of proxies will be borne by Boston Properties. In an effort to have as many votes cast at the annual meeting as possible, special solicitation of proxies may, in certain instances, be made personally or by telephone, electronic communication or mail by one or more employees of Boston Properties. We also may reimburse brokers, banks, nominees and other fiduciaries for postage and reasonable clerical expenses of forwarding the proxy material to their principals who are beneficial owners of shares of our common stock. In addition, MacKenzie Partners, Inc., a proxy solicitation firm, has been engaged by Boston Properties to act as proxy solicitor and will receive a fee of $7,500 plus reimbursement of reasonableout-of-pocket expenses. | | | | | | | | | 108 | | | | | 2021 Proxy Statement |
OTHER MATTERS CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS The Board of Directors has adopted a Related Person Transaction Approval and Disclosure Policy for the review, approval or ratification of any related person transaction. This written policy provides that all related person transactions, other than a transaction for which an obligation to disclose under Item 404 of Regulation S-K (or any successor provision) arises solely from the fact that a beneficial owner of more than 5% of a class of the Company’s voting securities (or an immediate family member of any such beneficial owner) has an interest in the transaction, must be reviewed and approved by a majority of the disinterested directors on our Board of Directors in advance of us or any of our subsidiaries entering into the transaction; provided that if we or any of our subsidiaries enter into a transaction without recognizing that such transaction constitutes a related person transaction, the approval requirement will be satisfied if such transaction is ratified by a majority of the disinterested directors on the Board of Directors promptly after we recognize that such transaction constituted a related person transaction. Disinterested directors are directors that do not have a personal financial interest in the transaction that is adverse to our financial interest or that of our stockholders. The term “related person transaction” refers to a transaction required to be disclosed by us pursuant to Item 404 of Regulation S-K (or any successor provision) promulgated by the SEC. For purposes of determining whether such disclosure is required, a related person will not be deemed to have a direct or indirect material interest in any transaction that is deemed to be not material (or would be deemed not material if such related person was a director) for purposes of determining director independence pursuant to the Company’s categorical standards of director independence. Please refer to the categorical standards under “Proposal 1: Election of Directors – Director Independence” beginning on page 21. Since January 1, 2020, the Company has paid a firm controlled by Mr. Raymond A. Ritchey’s brother aggregate leasing commissions of approximately $3,587,393. The Company expects to pay additional commissions to this firm during 2021. In January 2018, Mr. Ritchey’s brother became an employee of a real estate firm with which the Company has entered into a contract for services that is nearly identical to the previous contract with the firm controlled by Mr. Ritchey’s brother. Given current and anticipated leasing activity, the Company expects to pay equivalent or increased leasing commissions to the real estate firm that currently employs Mr. Ritchey’s brother in 2021 as compared to leasing commissions paid to the firm controlled by him in prior years. Mr. Ritchey is the Senior Executive Vice President of Boston Properties. The Company believes the terms of the related agreements are comparable to, and in most cases more favorable to us than, similar arrangements with other brokers in relevant markets. We are partners with affiliates of Norges Bank Investment Management in joint ventures that own Times Square Tower, 601 Lexington Avenue, 100 Federal Street and Atlantic Wharf Office. Based on a Schedule 13G/A filed with the SEC on February 1, 2021, Norges Bank (The Central Bank of Norway), an affiliate of Norges Bank Investment Management, is the beneficial owner of more than 5% of our common stock. We lease office space at our Santa Monica Business Park property to an entity that was acquired by an affiliate of BlackRock, Inc. in August 2018. Based on a Schedule 13G/A filed with the SEC on January 27, 2021, BlackRock is the beneficial owner of more than 5% of our common stock. Since January 1, 2020, BlackRock paid the Company $1,413,434 in lease payments. STOCKHOLDER NOMINATIONS FOR DIRECTOR AND PROPOSALS FOR THE 20202022 ANNUAL MEETING OF STOCKHOLDERS Rule14a-8› ProposalsSTOCKHOLDER PROPOSALS SUBMITTED FOR INCLUSION IN OUR PROXY STATEMENT
Any stockholder proposals submitted pursuant to Exchange Act Rule14a-8 for inclusion in Boston Properties’ proxy statement and form of proxy for its 20202022 annual meeting of stockholders must be received by Boston Properties on or before December 7, 20196, 2021 in order to be considered for inclusion in our proxy statement and form of proxy. The proposals must also comply with the requirements as to form and substance established by the SEC if they are to be included in the proxy statement and form of proxy. Any such proposal should be mailed to: Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103, Attn.: Secretary. | | | | | | | | | | | | 2021 Proxy Statement | | 109 |
Director Nominees (Proxy Access)› PROXY ACCESS DIRECTOR NOMINATIONS FOR INCLUSION IN OUR PROXY STATEMENT
In order for an eligible stockholder or group of stockholders to nominate a director nomineecandidate for election at Boston Properties’ 20202022 annual meeting pursuant to the proxy access provision of ourBy-laws, notice of such nomination and other required information must be received by Boston Properties on or before December 7, 20196, 2021, unless our 20202022 annual meeting of stockholders is scheduled to take place before April 21, 202020, 2022 or after July 20, 2020.19, 2022. OurBy-laws state that such notice and other required information must be received by Boston Properties not less than 120 days prior to the anniversary of the date of the proxy statement for the prior year’s annual meeting of stockholders; provided, however, that in the event the annual meeting is scheduled to be held on a date more than 30 days before the anniversary of the date of the immediately preceding annual meeting, or the annual meeting anniversary date, or more than 60 days after the annual meeting anniversary date, or if no annual meeting was held in the preceding year, the deadline for the receipt of such notice and other required information shall be the close of business on the later of (1) the 180th180th day prior to the scheduled date of such annual meeting or (2) the 15th15th day following the day on which public announcement of the date of such annual meeting is first made. In addition, ourBy-laws require the eligible stockholder or group of stockholders to update and supplement such information (or provide notice stating that there are no updates or supplements) as of specified dates. Notices and other required information must be received by our Secretary at our principal executive office, which is currently Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103. Other Proposals or Nominees› OTHER PROPOSALS OR NOMINATIONS
Stockholder proposals and nominations of directors to be presented at Boston Properties’ 20202022 annual meeting, other than stockholder proposals submitted pursuant to Exchange Act Rule14a-8 for BOSTON PROPERTIES, INC. |2019 Proxy Statement 109
OTHER MATTERS
inclusion in Boston Properties’ proxy statement and form of proxy for our 20202022 annual meeting or submitted pursuant to the proxy access provision of ourBy-laws, must be received in writing at our principal executive office not earlier than January 22, 2020,20, 2022, nor later than March 7, 2020,6, 2022, unless our 20202022 annual meeting of stockholders is scheduled to take place before April 21, 202020, 2022 or after July 20, 2020.19, 2022. OurBy-laws state that the stockholder must provide timely written notice of such proposal or a nomination and supporting documentation as well as be present at such meeting, either in person or by a representative. A stockholder’s notice shall be timely received by Boston Properties at its principal executive office not less than seventy-five (75)75 days nor more than one hundred twenty (120)120 days prior to the annual meeting anniversary date; provided, however, that in the event the annual meeting is scheduled to be held on a date more than thirty (30)30 days before the annual meeting anniversary date or more than sixty (60)60 days after the annual meeting anniversary date, a stockholder’s notice shall be timely if received by Boston Properties at its principal executive office not later than the close of business on the later of (1) the seventy-fifth (75th)75th day prior to the scheduled date of such annual meeting or (2) the fifteenth (15th)15th day following the day on which public announcement of the date of such annual meeting is first made by Boston Properties. Proxies solicited by our Board of Directors will confer discretionary voting authority with respect to these proposals, subject to SEC rules and regulations governing the exercise of this authority. Any such proposals must be received by our Secretary at our principal executive office, which is currently Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103. 110 BOSTON PROPERTIES, INC. |2019 Proxy Statement
| | | | | | | | | 110 | | | | | 2021 Proxy Statement |
APPENDIX A Reconciliation of Net Income Attributable to Boston Properties, Inc. Common Shareholders to BXP’s Share of Same Property Net Operating Income (NOI)
(excluding termination income)
| | | | | | | | | | | For the year ended December 31, | | | | 2018 | | | 2017 | | | | (unaudited and in thousands) | | Net Income Attributable to Boston Properties, Inc. Common Shareholders | | $ | 572,347 | | | $ | 451,939 | | Preferred dividends | | | 10,500 | | | | 10,500 | | | | | | | | | | | Net Income Attributable to Boston Properties, Inc. | | | 582,847 | | | | 462,439 | | Net Income Attributable to Noncontrolling Interests: | | | | | | | | | Noncontrolling interest – common units of the Operating Partnership | | | 66,807 | | | | 52,210 | | Noncontrolling interests in property partnerships | | | 62,909 | | | | 47,832 | | | | | | | | | | | Net Income | | | 712,563 | | | | 562,481 | | Other Expenses: | | | | | | | | | Add: | | | | | | | | | Interest expense | | | 378,168 | | | | 374,481 | | Impairment losses | | | 11,812 | | | | — | | Other Income: | | | | | | | | | Less: | | | | | | | | | Gains (losses) from early extinguishments of debt | | | (16,490 | ) | | | 496 | | Gains (losses) from investments in securities | | | (1,865 | ) | | | 3,678 | | Interest and other income | | | 10,823 | | | | 5,783 | | Gains on sales of real estate | | | 182,356 | | | | 7,663 | | Income from unconsolidated joint ventures | | | 2,222 | | | | 11,232 | | Other Expenses: | | | | | | | | | Add: | | | | | | | | | Depreciation and amortization expense | | | 645,649 | | | | 617,547 | | Transaction costs | | | 1,604 | | | | 668 | | Payroll and related costs from management services contracts | | | 9,590 | | | | — | | General and administrative expense | | | 121,722 | | | | 113,715 | | Other Revenue: | | | | | | | | | Less: | | | | | | | | | Direct reimbursements of payroll and related costs from management services contracts | | | 9,590 | | | | — | | Development and management services | | | 45,158 | | | | 34,605 | | | | | | | | | | | NOI | | $ | 1,649,314 | | | $ | 1,605,435 | | Less: | | | | | | | | | Termination income | | | 8,205 | | | | 23,058 | | NOI from non Same Properties (excluding termination income) | | | 59,980 | | | | 24,165 | | | | | | | | | | | Same Property NOI (excluding termination income) | | | 1,581,129 | | | | 1,558,212 | | Less: | | | | | | | | | Partners’ share of NOI from consolidated joint ventures (excluding termination income and after priority allocations)(1) | | | 180,398 | | | | 172,658 | | BXP’s share of NOI from non Same Properties from unconsolidated joint ventures (excluding termination income) | | | 13,296 | | | | (25 | ) |
BOSTON PROPERTIES, INC. |2019 Proxy Statement A-1
| | | | | | | | | | | For the year ended December 31, | | | | 2018 | | | 2017 | | | | (unaudited and in thousands) | | Add: | | | | | | | | | Partners’ share of NOI from non Same Properties from consolidated joint ventures (excluding termination income and after priority allocations) | | | 1,018 | | | | (1,853 | ) | BXP’s share of NOI from unconsolidated joint ventures (excluding termination income)(2) | | | 79,588 | | | | 62,799 | | | | | | | | | | | BXP’s Share of Same Property NOI (excluding termination income) | | $ | 1,468,041 | | | $ | 1,446,525 | | | | | | | | | | |
(1) | See “Consolidated Joint Ventures” in this Appendix for additional details.
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(2) | See “Unconsolidated Joint Ventures” in this Appendix for additional details.
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A-2 BOSTON PROPERTIES, INC. |2019 Proxy Statement
Reconciliation of Net Income Attributable to Boston Properties, Inc. Common Shareholders to BXP’s Share of Same Property Net Operating Income (NOI) – Cash (excluding termination income)
| | | | | | | | | | | For the year ended December 31, | | | | 2018 | | | 2017 | | | | (unaudited and in thousands) | | Net Income Attributable to Boston Properties, Inc. Common Shareholders | | $ | 572,347 | | | $ | 451,939 | | Preferred dividends | | | 10,500 | | | | 10,500 | | | | | | | | | | | Net Income Attributable to Boston Properties, Inc. | | | 582,847 | | | | 462,439 | | Net Income Attributable to Noncontrolling Interests: | | | | | | | | | Noncontrolling interest – common units of the Operating Partnership | | | 66,807 | | | | 52,210 | | Noncontrolling interests in property partnerships | | | 62,909 | | | | 47,832 | | | | | | | | | | | Net Income | | | 712,563 | | | | 562,481 | | Other Expenses: | | | | | | | | | Add: | | | | | | | | | Interest expense | | | 378,168 | | | | 374,481 | | Impairment losses | | | 11,812 | | | | — | | Other Income: | | | | | | | | | Less: | | | | | | | | | Gains (losses) from early extinguishments of debt | | | (16,490 | ) | | | 496 | | Gains (losses) from investments in securities | | | (1,865 | ) | | | 3,678 | | Interest and other income | | | 10,823 | | | | 5,783 | | Gains on sales of real estate | | | 182,356 | | | | 7,663 | | Income from unconsolidated joint ventures | | | 2,222 | | | | 11,232 | | Other Expenses: | | | | | | | | | Add: | | | | | | | | | Depreciation and amortization expense | | | 645,649 | | | | 617,547 | | Transaction costs | | | 1,604 | | | | 668 | | Payroll and related costs from management services contracts | | | 9,590 | | | | — | | General and administrative expense | | | 121,722 | | | | 113,715 | | Other Revenue: | | | | | | | | | Less: | | | | | | | | | Direct reimbursements of payroll and related costs from management services contracts | | | 9,590 | | | | — | | Development and management services | | | 45,158 | | | | 34,605 | | | | | | | | | | | NOI | | | 1,649,314 | | | | 1,605,435 | | Less: | | | | | | | | | Straight-line rent | | | 48,054 | | | | 53,511 | | Fair value lease revenue | | | 23,811 | | | | 22,290 | | Termination income | | | 8,205 | | | | 23,058 | | Add: | | | | | | | | | Straight-line ground rent expense adjustment(1) | | | 3,559 | | | | 3,729 | | Lease transaction costs that qualify as rent inducements | | | 8,692 | | | | 920 | | | | | | | | | | | NOI – cash (excluding termination income) | | | 1,581,495 | | | | 1,511,225 | | Less: | | | | | | | | | NOI – cash from non Same Properties (excluding termination income) | | | 81,841 | | | | 23,217 | | | | | | | | | | | Same Property NOI – cash (excluding termination income) | | | 1,499,654 | | | | 1,488,008 | |
BOSTON PROPERTIES, INC. |2019 Proxy Statement A-3
| | | | | | | | | | | For the year ended December 31, | | | | 2018 | | | 2017 | | | | (unaudited and in thousands) | | Less: | | | | | | | | | Partners’ share of NOI – cash from consolidated joint ventures (excluding termination income and after priority allocations)(2) | | | 166,973 | | | | 163,514 | | BXP’s share of NOI – cash from non Same Properties from unconsolidated joint ventures (excluding termination income) | | | 10,532 | | | | (33 | ) | Add: | | | | | | | | | Partners’ share of NOI – cash from non Same Properties from consolidated joint ventures (excluding termination income and after priority allocations) | | | 2,190 | | | | (1,763 | ) | BXP’s share of NOI – cash from unconsolidated joint ventures (excluding termination income)(3) | | | 66,742 | | | | 50,437 | | | | | | | | | | | BXP’s Share of Same Property NOI – cash (excluding termination income) | | $ | 1,391,081 | | | $ | 1,373,201 | | | | | | | | | | |
(1) | In light of the front-ended, uneven rental payments required by the Company’s99-year ground and air rights lease for the 100 Clarendon Street garage and Back Bay Transit Station in Boston, MA, and to makeperiod-to-period comparisons more meaningful to investors, the adjustment does not include the straight-line impact of approximately $414 and $(1,240) for the twelve months ended December 31, 2018 and 2017, respectively. As of December 31, 2018, the Company has remaining lease payments aggregating approximately $26.1 million, all of which it expects to incur by the end of 2021 with no payments thereafter. Under GAAP, the Company is recognizing expense of $(348) per year on a straight-line basis over the term of the lease. However, unlike more traditional ground and air rights leases, the timing and amounts of the rental payments by the Company correlate to the uneven timing and funding by the Company of capital expenditures related to improvements at Back Bay Transit Station. As a result, the amounts excluded from the adjustment each quarter through 2021 may vary significantly.
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(2) | See “Consolidated Joint Ventures” in this Appendix for additional details.
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(3) | See “Unconsolidated Joint Ventures” in this Appendix for additional details.
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A-4 BOSTON PROPERTIES, INC. |2019 Proxy Statement
CONSOLIDATED JOINT VENTURES
for the year ended December 31, 2018
(unaudited and in dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | Norges Joint Ventures | | | | | | | | | | 767 Fifth Avenue (The GM Building) | | | Times Square Tower 601 Lexington Avenue/ One Five Nine East 53rd Street 100 Federal Street Atlantic Wharf Office | | | Salesforce Tower | | | Total Consolidated Joint Ventures | | REVENUE | | | | | | | | | | | | | | | | | Rent | | $ | 220,509 | | | $ | 299,299 | | | $ | 48,951 | | | $ | 568,759 | | Straight-line rent | | | 4,593 | | | | 12,095 | | | | (21,370 | ) | | | (4,682 | ) | Fair value lease revenue | | | 17,644 | | | | 960 | | | | — | | | | 18,604 | | Termination income | | | 275 | | | | 16 | | | | — | | | | 291 | | | | | | | | | | | | | | | | | | | Base rent | | | 243,021 | | | | 312,370 | | | | 27,581 | | | | 582,972 | | Recoveries from tenants | | | 50,625 | | | | 62,926 | | | | 13,952 | | | | 127,503 | | Parking and other | | | 2,976 | | | | 6,095 | | | | 736 | | | | 9,807 | | | | | | | | | | | | | | | | | | | Total rental revenue | | | 296,622 | | | | 381,391 | | | | 42,269 | | | | 720,282 | | EXPENSES | | | | | | | | | | | | | | | | | Operating | | | 116,403 | | | | 134,219 | | | | 20,166 | | | | 270,788 | | | | | | | | | | | | | | | | | | | NET OPERATING INCOME (NOI) | | | 180,219 | | | | 247,172 | | | | 22,103 | | | | 449,494 | | | | | | | | | | | | | | | | | | | Development and management services revenue | | | 1,942 | | | | 3,008 | | | | 1,219 | | | | 6,169 | | Interest and other income | | | 2,027 | | | | 1,961 | | | | 362 | | | | 4,350 | | Interest expense | | | (82,158 | ) | | | (25,455 | ) | | | — | | | | (107,613 | ) | Depreciation and amortization | | | (90,955 | ) | | | (82,823 | ) | | | (10,207 | ) | | | (183,985 | ) | | | | | | | | | | | | | | | | | | SUBTOTAL | | | (169,144 | ) | | | (103,309 | ) | | | (8,626 | ) | | | (281,079 | ) | | | | | | | | | | | | | | | | | | NET INCOME | | $ | 11,075 | | | $ | 143,863 | | | $ | 13,477 | | | $ | 168,415 | | | | | | | | | | | | | | | | | | | BXP’s ownership percentage | | | 60.00 | % | | | 55.00 | % | | | 95.00 | % | | | | | | | | | | | | | | | | | | | | | | Partners’ share of NOI (after priority allocations)(1) | | $ | 70,703 | | | $ | 109,629 | | | $ | 183 | | | $ | 180,515 | | | | | | | | | | | | | | | | | | | BXP’s share of NOI (after priority allocations) | | $ | 109,516 | | | $ | 137,543 | | | $ | 21,920 | | | $ | 268,979 | | | | | | | | | | | | | | | | | | | Reconciliation of Partners’ share of NOI(1): | | | | | | | | | | | | | | | | | Rental revenue | | $ | 118,650 | | | $ | 171,627 | | | $ | 2,114 | | | $ | 292,391 | | Less: Termination income | | | 110 | | | | 7 | | | | — | | | | 117 | | | | | | | | | | | | | | | | | | | Rental revenue (excluding termination income) | | | 118,540 | | | | 171,620 | | | | 2,114 | | | | 292,274 | | Less: Operating expenses (including partners’ share of management and other fees) | | | 47,946 | | | | 62,040 | | | | 1,082 | | | | 111,068 | | Priority allocations | | | — | | | | (42 | ) | | | 850 | | | | 808 | | | | | | | | | | | | | | | | | | | NOI (excluding termination income and after priority allocations) | | | 70,594 | | | | 109,622 | | | | 182 | | | | 180,398 | | | | | | | | | | | | | | | | | | | Rental revenue (excluding termination income) | | $ | 118,540 | | | $ | 171,620 | | | $ | 2,114 | | | $ | 292,274 | | Less: Straight-line rent | | | 1,837 | | | | 5,443 | | | | (1,068 | ) | | | 6,212 | | Fair value lease revenue | | | 7,059 | | | | 431 | | | | — | | | | 7,490 | | Add: Lease transaction costs that qualify as rent inducements(2) | | | — | | | | 277 | | | | — | | | | 277 | | | | | | | | | | | | | | | | | | | Subtotal | | | 109,644 | | | | 166,023 | | | | 3,182 | | | | 278,849 | | Less: Operating expenses (including partners’ share of management and other fees) | | | 47,946 | | | | 62,040 | | | | 1,082 | | | | 111,068 | | Priority allocations | | | — | | | | (42 | ) | | | 850 | | | | 808 | | | | | | | | | | | | | | | | | | | NOI – cash (excluding termination income and after priority allocations) | | $ | 61,698 | | | $ | 104,025 | | | $ | 1,250 | | | $ | 166,973 | | | | | | | | | | | | | | | | | | |
(1) | Amounts represent the partners’ share based on their respective ownership percentage.
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(2) | Consists of lease transaction costs that qualify as rent inducements in accordance with GAAP.
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BOSTON PROPERTIES, INC. |2019 Proxy Statement A-5
CONSOLIDATED JOINT VENTURES
for the year ended December 31, 2017
(unaudited and dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | Norges Joint Ventures | | | | | | | | | | 767 Fifth Avenue (The GM Building) | | | Times Square Tower 601 Lexington Avenue/ One Five Nine East 53rd Street 100 Federal Street Atlantic Wharf Office | | | Salesforce Tower | | | Total Consolidated Joint Ventures | | REVENUE | | | | | | | | | | | | | | | | | Rent | | $ | 220,926 | | | $ | 298,550 | | | $ | 3,239 | | | $ | 522,715 | | Straight-line rent | | | 7,229 | | | | (343 | ) | | | (2,791 | ) | | | 4,095 | | Fair value lease revenue | | | 15,372 | | | | 944 | | | | — | | | | 16,316 | | Termination income | | | 14,228 | | | | (1,415 | ) | | | — | | | | 12,813 | | | | | | | | | | | | | | | | | | | Base Rent | | | 257,755 | | | | 297,736 | | | | 448 | | | | 555,939 | | Recoveries from tenants | | | 52,237 | | | | 57,170 | | | | 223 | | | | 109,630 | | Parking and other | | | 2,357 | | | | 5,379 | | | | — | | | | 7,736 | | | | | | | | | | | | | | | | | | | Total rental revenue | | | 312,349 | | | | 360,285 | | | | 671 | | | | 673,305 | | | | | | | EXPENSES | | | | | | | | | | | | | | | | | Operating | | | 114,988 | | | | 133,691 | | | | 296 | | | | 248,975 | | | | | | | | | | | | | | | | | | | NET OPERATING INCOME (NOI) | | | 197,361 | | | | 226,594 | | | | 375 | | | | 424,330 | | | | | | | | | | | | | | | | | | | Development and management services revenue | | | 2,355 | | | | 3,132 | | | | 50 | | | | 5,537 | | Interest and other income | | | 773 | | | | 1,308 | | | | 60 | | | | 2,141 | | Interest expense | | | (89,184 | ) | | | (30,045 | ) | | | — | | | | (119,229 | ) | Interest expense – outside members’ notes | | | (16,256 | ) | | | — | | | | — | | | | (16,256 | ) | Fair value interest adjustment | | | 20,227 | | | | — | | | | — | | | | 20,227 | | Depreciation and amortization | | | (103,314 | ) | | | (82,189 | ) | | | (129 | ) | | | (185,632 | ) | Gain from early extinguishment of debt | | | 14,606 | | | | — | | | | — | | | | 14,606 | | Other | | | — | | | | (78 | ) | | | — | | | | (78 | ) | | | | | | | | | | | | | | | | | | SUBTOTAL | | | (170,793 | ) | | | (107,872 | ) | | | (19 | ) | | | (278,684 | ) | | | | | | NET INCOME | | $ | 26,568 | | | $ | 118,722 | | | $ | 356 | | | $ | 145,646 | | | | | | | | | | | | | | | | | | | BXP’s ownership percentage | | | 60.00 | % | | | 55.00 | % | | | 95.00 | % | | | | | | | | | | | | | | | | | | | | | | Partners’ share of NOI (after priority allocations)(1) | | $ | 77,474 | | | $ | 100,411 | | | $ | (172 | ) | | $ | 177,713 | | | | | | | | | | | | | | | | | | | BXP’s share of NOI (after priority allocations) | | $ | 119,887 | | | $ | 126,183 | | | $ | 547 | | | $ | 246,617 | | | | | | | | | | | | | | | | | | | Reconciliation of Partners’ share of NOI(1) | | | | | | | | | | | | | | | | | Rental revenue | | $ | 124,939 | | | $ | 162,129 | | | $ | 34 | | | $ | 287,102 | | Less: Termination income | | | 5,691 | | | | (636 | ) | | | — | | | | 5,055 | | | | | | | | | | | | | | | | | | | Rental revenue (excluding termination income) | | | 119,248 | | | | 162,765 | | | | 34 | | | | 282,047 | | Less: Operating expenses (including partners’ share of management and other fees) | | | 47,465 | | | | 61,718 | | | | 31 | | | | 109,214 | | Priority allocations | | | — | | | | — | | | | 175 | | | | 175 | | | | | | | | | | | | | | | | | | | NOI (excluding termination income and after priority allocations) | | | 71,783 | | | | 101,047 | | | | (172 | ) | | | 172,658 | | | | | | | | | | | | | | | | | | | Rental revenue (excluding termination income) | | $ | 119,248 | | | $ | 162,765 | | | $ | 34 | | | $ | 282,047 | | Less: Straight-line rent | | | 2,892 | | | | (155 | ) | | | (140 | ) | | | 2,597 | | Fair value lease revenue | | | 6,149 | | | | 423 | | | | — | | | | 6,572 | | Add: Lease transaction costs that qualify as rent inducements(2) | | | 25 | | | | — | | | | — | | | | 25 | | | | | | | | | | | | | | | | | | | Subtotal | | | 110,232 | | | | 162,497 | | | | 174 | | | | 272,903 | | Less: Operating expenses (including partners’ share of management and other fees) | | | 47,465 | | | | 61,718 | | | | 31 | | | | 109,214 | | Priority allocations | | | — | | | | — | | | | 175 | | | | 175 | | | | | | | | | | | | | | | | | | | NOI – cash (excluding termination income and after priority allocations) | | $ | 62,767 | | | $ | 100,779 | | | $ | (32 | ) | | $ | 163,514 | | | | | | | | | | | | | | | | | | |
(1) | Amounts represent the partners’ share based on their respective ownership percentage.
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(2) | Consists of lease transaction costs that qualify as rent inducements in accordance with GAAP.
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A-6 BOSTON PROPERTIES, INC. |2019 Proxy Statement
UNCONSOLIDATED JOINT VENTURES
for the year ended December 31, 2018
(unaudited and dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 540 Madison Avenue | | | Market Square North | | | Metropolitan Square | | | 901 New York Avenue | | | Annapolis Junction(1) | | | 500 North Capitol Street, N.W. | | | Colorado Center | | | Santa Monica Business Park | | | Other Joint Ventures(2) | | | Total Unconsolidated Joint Ventures | | REVENUE | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Rental | | $ | 22,049 | | | $ | 17,439 | | | $ | 23,262 | | | $ | 27,977 | | | $ | 10,558 | | | $ | 11,517 | | | $ | 52,325 | | | $ | 22,722 | | | $ | 6,301 | | | $ | 194,150 | | Straight-line rent | | | 553 | | | | 1,125 | | | | (214 | ) | | | 78 | | | | 230 | | | | (31 | ) | | | 10,774 | | | | 3,661 | | | | (243 | ) | | | 15,933 | | Fair value lease revenue | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 384 | | | | 1,651 | | | | — | | | | 2,035 | | Termination income | | | 3 | | | | — | | | | (16 | ) | | | 50 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 37 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Base rent | | | 22,605 | | | | 18,564 | | | | 23,032 | | | | 28,105 | | | | 10,788 | | | | 11,486 | | | | 63,483 | | | | 28,034 | | | | 6,058 | | | | 212,155 | | Recoveries from tenants | | | 2,300 | | | | 3,714 | | | | 4,730 | | | | 5,168 | | | | 1,980 | | | | 5,346 | | | | 2,578 | | | | 3,312 | | | | 2,630 | | | | 31,758 | | Parking and other | | | 91 | | | | 868 | | | | 2,698 | | | | 1,676 | | | | 223 | | | | 503 | | | | 10,961 | | | | 3,111 | | | | 4,719 | | | | 24,850 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total rental revenue | | | 24,996 | | | | 23,146 | | | | 30,460 | | | | 34,949 | | | | 12,991 | | | | 17,335 | | | | 77,022 | | | | 34,457 | | | | 13,407 | | | | 268,763 | | EXPENSES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating | | | 14,012 | | | | 9,585 | | | | 14,804 | | | | 14,229 | | | | 6,409 | | | | 5,983 | | | | 22,805 | | | | 13,412 | | | | 5,380 | | | | 106,619 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NET OPERATING INCOME | | | 10,984 | | | | 13,561 | | | | 15,656 | | | | 20,720 | | | | 6,582 | | | | 11,352 | | | | 54,217 | | | | 21,045 | | | | 8,027 | | | | 162,144 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other income/(expense) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Development and management services revenue | | | 283 | | | | 10 | | | | 18 | | | | — | | | | — | | | | — | | | | 29 | | | | 16 | | | | 3 | | | | 359 | | Interest and other income | | | 249 | | | | 256 | | | | 17 | | | | 249 | | | | 284 | | | | 65 | | | | 508 | | | | — | | | | 1,185 | | | | 2,813 | | Interest expense | | | (4,077 | ) | | | (5,896 | ) | | | (8,864 | ) | | | (8,300 | ) | | | (5,458 | ) | | | (4,476 | ) | | | (19,970 | ) | | | (12,758 | ) | | | (1,510 | ) | | | (71,309 | ) | Depreciation and amortization expense | | | (7,763 | ) | | | (4,109 | ) | | | (34,024 | ) | | | (6,007 | ) | | | (4,064 | ) | | | (3,779 | ) | | | (18,811 | ) | | | (17,424 | ) | | | (7,094 | ) | | | (103,075 | ) | Gain on distribution of real estate | | | — | | | | — | | | | — | | | | — | | | | 16,959 | | | | — | | | | — | | | | — | | | | — | | | | 16,959 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | | (11,308 | ) | | | (9,739 | ) | | | (42,853 | ) | | | (14,058 | ) | | | 7,721 | | | | (8,190 | ) | | | (38,244 | ) | | | (30,166 | ) | | | (7,416 | ) | | | (154,253 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NET INCOME/(LOSS) | | $ | (324 | ) | | $ | 3,822 | | | $ | (27,197 | ) | | $ | 6,662 | | | $ | 14,303 | | | $ | 3,162 | | | $ | 15,973 | | | $ | (9,121 | ) | | $ | 611 | | | $ | 7,891 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s nominal ownership percentage | | | 60 | % | | | 50 | % | | | 20 | % | | | 25 | % | | | 50 | % | | | 30 | % | | | 50 | % | | | 55 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of net income/(loss) | | $ | (194 | ) | | $ | 1,913 | | | $ | (5,439 | ) | | $ | 1,808 | (3) | | $ | 7,461 | | | $ | (359 | ) | | $ | 6,154 | | | $ | (5,016 | ) | | $ | 3,487 | | | $ | 9,815 | | Basis differential | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Straight-line rent | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,074 | (4) | | | — | | | | 1,360 | | | | 2,434 | | Fair value lease revenue | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 820 | (4) | | | — | | | | 814 | | | | 1,634 | | Depreciation and amortization expense | | | 653 | | | | (174 | ) | | | (48 | ) | | | (1,793 | ) | | | (99 | ) | | | (57 | ) | | | (4,872 | )(4) | | | — | | | | (5,062 | ) | | | (11,452 | ) | Gain on distribution of real estate | | | — | | | | — | | | | — | | | | — | | | | (209 | ) | | | — | | | | — | | | | — | | | | — | | | | (209 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total basis differential(5) | | | 653 | | | | (174 | ) | | | (48 | ) | | | (1,793 | ) | | | (308 | ) | | | (57 | ) | | | (2,978 | )(4) | | | — | | | | (2,888 | ) | | | (7,593 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income/(loss) from unconsolidated joint ventures | | $ | 459 | | | $ | 1,739 | | | $ | (5,487 | ) | | $ | 15 | (3) | | $ | 7,153 | | | $ | (416 | ) | | $ | 3,176 | | | $ | (5,016 | ) | | $ | 599 | | | $ | 2,222 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
BOSTON PROPERTIES, INC. |2019 Proxy Statement A-7
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 540 Madison Avenue | | | Market Square North | | | Metropolitan Square | | | 901 New York Avenue | | | Annapolis Junction(1) | | | 500 North Capitol Street, N.W. | | | Colorado Center | | | Santa Monica Business Park | | | Other Joint Ventures(2) | | | Total Unconsolidated Joint Ventures | | Reconciliation of BXP’s share of Net Operating Income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of rental revenue | | $ | 14,998 | | | $ | 11,574 | | | $ | 6,093 | | | $ | 17,004 | (3) | | $ | 6,497 | | | $ | 5,201 | | | $ | 42,580 | (4) | | $ | 18,952 | | | $ | 5,837 | | | $ | 128,736 | | BXP’s share of operating expenses | | | 8,408 | | | | 4,793 | | | | 2,961 | | | | 6,922 | (3) | | | 3,206 | | | | 1,796 | | | | 11,404 | | | | 7,377 | | | | 2,257 | | | | 49,124 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of net operating income | | | 6,590 | | | | 6,781 | | | | 3,132 | | | | 10,082 | (3) | | | 3,291 | | | | 3,405 | | | | 31,176 | | | | 11,575 | | | | 3,580 | | | | 79,612 | | Less: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of termination income | | | 2 | | | | — | | | | (3 | ) | | | 25 | (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 24 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of net operating income (excluding termination income) | | | 6,588 | | | | 6,781 | | | | 3,135 | | | | 10,057 | (3) | | | 3,291 | | | | 3,405 | | | | 31,176 | | | | 11,575 | | | | 3,580 | | | | 79,588 | | Less: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of straight-line rent | | | 331 | | | | 563 | | | | (43 | ) | | | 42 | (3) | | | 115 | | | | (9 | ) | | | 7,822 | (4) | | | 2,014 | | | | (122 | ) | | | 10,713 | | BXP’s share of fair value lease revenue | | | — | | | | — | | | | — | | | | — | (3) | | | — | | | | — | | | | 1,826 | (4) | | | 908 | | | | — | | | | 2,734 | | Add: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of lease transaction costs that qualify as rent inducements | | | — | | | | 241 | | | | 50 | | | | 84 | (3) | | | — | | | | — | | | | 180 | | | | 46 | | | | — | | | | 601 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of net operating income – cash (excluding termination income) | | $ | 6,257 | | | $ | 6,459 | | | $ | 3,228 | | | $ | 10,099 | (3) | | $ | 3,176 | | | $ | 3,414 | | | $ | 21,708 | | | $ | 8,699 | | | $ | 3,702 | | | $ | 66,742 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Annapolis Junction includes four in-service properties and two undeveloped land parcels. On December 31, 2018 the Company and its partner in the joint venture entered into a distribution agreement whereby the joint venture distributed one of the four in-service properties to the partner including the assumption by the partner of the mortgage indebtedness collateralized by the property. Mortgage indebtedness at the time of the distribution totaled $45.4 million including accrued interest. The gain on distribution of real estate is included within income from unconsolidated joint ventures in the Company’s consolidated statements of operations.
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(2) | Includes The Hub on Causeway, 1001 6th Street, Dock 72, 7750 Wisconsin Avenue, 1265 Main Street, Wisconsin Place Parking Facility and 3 Hudson Boulevard.
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(3) | Reflects the allocation percentages pursuant to the achievement of specified investment return thresholds as provided for in the joint venture agreement.
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(4) | The Company’s purchase price allocation under ASC 805 for Colorado Center differs from the historical basis of the venture resulting in the majority of the basis differential for this venture.
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(5) | Represents adjustments related to the carrying values and depreciation of certain of the Company’s investment in unconsolidated joint ventures.
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A-8 BOSTON PROPERTIES, INC. |2019 Proxy Statement
UNCONSOLIDATED JOINT VENTURES
for the year ended December 31, 2017
(unaudited and dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 540 Madison Avenue | | | Market Square North | | | Metropolitan Square | | | 901 New York Avenue | | | Wisconsin Place Parking Facility | | | Annapolis Junction(1) | | | 500 North Capitol Street, N.W. | | | Colorado Center | | | 1265 Main Street | | | Other Joint Ventures(2) | | | Total Unconsolidated Joint Ventures | | REVENUE | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Rental | | $ | 25,621 | | | $ | 14,842 | | | $ | 15,696 | | | $ | 25,763 | | | $ | 56 | | | $ | 7,720 | | | $ | 11,121 | | | $ | 42,725 | | | $ | 3,975 | | | $ | 154 | | | $ | 147,673 | | Straight-line rent | | | (550 | ) | | | 2,559 | | | | 6,861 | | | | 2,186 | | | | — | | | | 845 | | | | 295 | | | | 9,534 | | | | — | | | | — | | | | 21,730 | | Fair value lease revenue | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 384 | | | | — | | | | — | | | | 384 | | Termination income | | | 694 | | | | — | | | | (13 | ) | | | — | | | | — | | | | — | | | | — | | | | (12 | ) | | | — | | | | — | | | | 669 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Base rent | | | 25,765 | | | | 17,401 | | | | 22,544 | | | | 27,949 | | | | 56 | | | | 8,565 | | | | 11,416 | | | | 52,631 | | | | 3,975 | | | | 154 | | | | 170,456 | | Recoveries from tenants | | | 2,994 | | | | 3,327 | | | | 5,394 | | | | 4,983 | | | | 1,335 | | | | 2,220 | | | | 4,976 | | | | 2,006 | | | | 1,015 | | | | — | | | | 28,250 | | Parking and other | | | 40 | | | | 926 | | | | 3,138 | | | | 1,657 | | | | 3,853 | | | | 240 | | | | 567 | | | | 10,785 | | | | — | | | | 1,519 | | | | 22,725 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total rental revenue | | | 28,799 | | | | 21,654 | | | | 31,076 | | | | 34,589 | | | | 5,244 | | | | 11,025 | | | | 16,959 | | | | 65,422 | | | | 4,990 | | | | 1,673 | | | | 221,431 | | EXPENSES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating | | | 14,073 | | | | 9,264 | | | | 14,695 | | | | 13,903 | | | | 2,540 | | | | 6,523 | | | | 5,611 | | | | 21,257 | | | | 1,066 | | | | 1,608 | | | | 90,540 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NET OPERATING INCOME | | | 14,726 | | | | 12,390 | | | | 16,381 | | | | 20,686 | | | | 2,704 | | | | 4,502 | | | | 11,348 | | | | 44,165 | | | | 3,924 | | | | 65 | | | | 130,891 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other income/(expense) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Development and management services revenue | | | 282 | | | | 2 | | | | 11 | | | | — | | | | — | | | | — | | | | — | | | | 32 | | | | 6 | | | | — | | | | 333 | | Interest and other income | | | 93 | | | | 94 | | | | 38 | | | | 123 | | | | — | | | | 83 | | | | 25 | | | | 183 | | | | 6 | | | | 91 | | | | 736 | | Interest expense | | | (3,336 | ) | | | (6,010 | ) | | | (9,433 | ) | | | (8,301 | ) | | | — | | | | (4,696 | ) | | | (4,475 | ) | | | (8,588 | ) | | | (1,538 | ) | | | — | | | | (46,377 | ) | Depreciation and amortization expense | | | (7,745 | ) | | | (5,956 | ) | | | (7,676 | ) | | | (6,089 | ) | | | (5,540 | ) | | | (4,269 | ) | | | (3,811 | ) | | | (16,806 | ) | | | (1,635 | ) | | | — | | | | (59,527 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal | | | (10,706 | ) | | | (11,870 | ) | | | (17,060 | ) | | | (14,267 | ) | | | (5,540 | ) | | | (8,882 | ) | | | (8,261 | ) | | | (25,179 | ) | | | (3,161 | ) | | | 91 | | | | (104,835 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NET INCOME/(LOSS) | | $ | 4,020 | | | $ | 520 | | | $ | (679 | ) | | $ | 6,419 | | | $ | (2,836 | ) | | $ | (4,380 | ) | | $ | 3,087 | | | $ | 18,986 | | | $ | 763 | | | $ | 156 | | | $ | 26,056 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s nominal ownership percentage | | | 60.00 | % | | | 50.00 | % | | | 20.00 | % | | | 25.00 | % | | | 33.33 | % | | | 50.00 | % | | | 30.00 | % | | | 50.00 | % | | | 50.00 | % | | | 50.00 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of net income/(loss) | | $ | 2,410 | | | $ | 260 | | | $ | (135 | ) | | $ | 7,008 | (3) | | $ | (946 | ) | | $ | (2,190 | ) | | $ | 927 | | | $ | 9,465 | | | $ | 382 | | | $ | 276 | | | $ | 17,457 | | Total basis differential(5) | | | 683 | | | | (561 | ) | | | (214 | ) | | | (300 | ) | | | (30 | ) | | | (102 | ) | | | 20 | | | | (5,704 | )(4) | | | (20 | ) | | | 3 | | | | (6,225 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income/(loss) from unconsolidated joint ventures | | $ | 3,093 | | | $ | (301 | ) | | $ | (349 | ) | | $ | 6,708 | (3) | | $ | (976 | ) | | $ | (2,292 | ) | | $ | 947 | | | $ | 3,761 | | | $ | 362 | | | $ | 279 | | | $ | 11,232 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Reconciliation of BXP’s share of Net Operating Income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of rental revenue | | $ | 17,279 | | | $ | 10,827 | | | $ | 6,215 | | | $ | 16,623 | | | $ | 1,748 | | | $ | 5,513 | | | $ | 5,088 | | | $ | 37,425 | | | $ | 2,495 | | | $ | 837 | | | $ | 104,050 | | BXP’s share of operating expenses | | | 8,445 | | | | 4,632 | | | | 2,940 | | | | 6,682 | | | | 847 | | | | 3,263 | | | | 1,684 | | | | 10,608 | | | | 533 | | | | 803 | | | | 40,437 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of net operating income | | | 8,834 | | | | 6,195 | | | | 3,275 | | | | 9,941 | (3) | | | 901 | | | | 2,250 | | | | 3,404 | | | | 26,817 | | | | 1,962 | | | | 34 | | | | 63,613 | |
BOSTON PROPERTIES, INC. |2019 Proxy Statement A-9
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 540 Madison Avenue | | | Market Square North | | | Metropolitan Square | | | 901 New York Avenue | | | Wisconsin Place Parking Facility | | | Annapolis Junction(1) | | | 500 North Capitol Street, N.W. | | | Colorado Center | | | 1265 Main Street | | | Other Joint Ventures(2) | | | Total Unconsolidated Joint Ventures | | Less: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of termination income | | | 416 | | | | — | | | | (3 | ) | | | — | (3) | | | — | | | | — | | | | — | | | | 401 | | | | — | | | | — | | | | 814 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of net operating income (excluding termination income) | | | 8,418 | | | | 6,195 | | | | 3,278 | | | | 9,941 | (3) | | | 901 | | | | 2,250 | | | | 3,404 | | | | 26,416 | | | | 1,962 | | | | 34 | | | | 62,799 | | Less: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of straight-line rent | | | (330 | ) | | | 1,279 | | | | 1,372 | | | | 1,050 | (3) | | | — | | | | 422 | | | | 88 | | | | 7,672 | | | | — | | | | — | | | | 11,553 | | BXP’s share of fair value lease revenue | | | — | | | | — | | | | — | | | | — | (3) | | | — | | | | — | | | | — | | | | 1,857 | | | | — | | | | ��� | | | | 1,857 | | Add: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of lease transaction costs that qualify as rent inducements | | | — | | | | 381 | | | | 470 | | | | 34 | (3) | | | — | | | | 163 | | | | — | | | | — | | | | — | | | | — | | | | 1,048 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BXP’s share of net operating income – cash (excluding termination income) | | $ | 8,748 | | | $ | 5,297 | | | $ | 2,376 | | | $ | 8,925 | (3) | | $ | 901 | | | $ | 1,991 | | | $ | 3,316 | | | $ | 16,887 | | | $ | 1,962 | | | $ | 34 | | | $ | 50,437 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Annapolis Junction includes four properties in service and two undeveloped land parcels.
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(2) | Includes The Hub on Causeway, 1001 6th Street, Dock 72 and 7750 Wisconsin Avenue.
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(3) | Reflects the allocation percentages pursuant to the achievement of specified investment return thresholds as provided for in the joint venture agreement.
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(4) | The Company’s purchase price allocation under ASC 805 for Colorado Center differs from the historical basis of the venture resulting in the majority of the basis differential for this venture.
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(5) | Represents adjustments related to the carrying values and depreciation of certain of the Company’s investment in unconsolidated joint ventures.
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A-10 BOSTON PROPERTIES, INC. |2019 Proxy Statement
APPENDIX B
BOSTON PROPERTIES, INC. NON-EMPLOYEE DIRECTOR COMPENSATION2021 STOCK INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE DIRECTOR PLANPLAN; DEFINITIONS ThisThe name of the plan is the Boston Properties, Inc. 2021 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to encourage and enable the officers, employees, Non-Employee Director Compensation Plan (the “Director Plan”) is intended to establish the cash compensationDirectors, Consultants and equity grants payable to members of the board of directorsother key persons of Boston Properties, Inc. (the “Company”), as constituted from time and the employees and other key persons of Boston Properties Limited Partnership (the “Operating Partnership”) and the Company’s other Subsidiaries, upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to time (the “Board”), who are not employeesacquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company or any subsidiary ofand its stockholders, thereby stimulating their efforts on the Company(“Non-Employee Directors”). All equity grants made underCompany’s behalf and strengthening their desire to remain with the Director PlanCompany.
The following terms shall be made pursuant to the Boston Properties, Inc. 2012 Stock Option and Incentive Plan (as amended from time to time, the “2012 Plan”) or any other equity plan of the Company designated bydefined as set forth below: “Administrator” means either the Board pursuant to whichor the grants provided for herein may be made (the “Incentive Plan”). Except as otherwise noted herein, the cash compensation and equity grants described in the Director Plan shall be paid or be made, as applicable, to eachNon-Employee Director automatically and without any further action by the Board. All capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in the 2012 Plan. SECTION 2. ADMINISTRATION OF THE DIRECTOR PLAN
The Director Plan shall be administered by the Compensation Committee of the Board (the “Committee”). All decisions and interpretations of the Committee shall be made in the Committee’s sole and absolute discretion and shall be final and binding on all persons, including the Company andNon-Employee Directors.
SECTION 3. BOARD AND COMMITTEE SERVICE FEES
(a) Board Service. EachNon-Employee Director shall receive an annual cash retainer of $85,000 for serving on the Board.Non-Employee Directors shall not receive meeting attendance fees for any meetingcommittee of the Board or a similar committee thereof that he or she attends.
(b) Chairmanperforming the functions of the Board. TheNon-Employee Director serving as Chairman of the Board shall receive an annual cash retainer of $100,000 for such service.
(c) Compensation Committee. EachNon-Employee Director who serves on the Committee shall receive an annual cash retainer of $10,000 for such service. In addition, theNon-Employee Director serving as the chair of the Committee shall receive an additional annual cash retainer of $15,000 for service as chair.
(d) Audit Committee. EachNon-Employee Director who serves on the Audit Committee shall receive an annual cash retainer of $15,000 for such service. In addition, theNon-Employee Director serving as the chair of the Audit Committee shall receive an additional annual cash retainer of $20,000 for service as chair.
(e) Nominating and Corporate Governance Committee. EachNon-Employee Director who serves on the Nominating and Corporate Governance (“NCG”) Committee shall receive an annual cash retainer of $10,000 for such service. In addition, theNon-Employee Director serving as the chair of the NCG Committee shall receive an additional annual cash retainer of $15,000 for service as chair.
(f) Other Standing Committees. EachNon-Employee Director who serves on any other standingcompensation committee of the Board that may be established from time to timeis designated by the Board shall receive an annual cash retainer of $10,000 for such service. In addition, theNon-Employee Director serving as the chairadministrator of such standing committee, ifthe Plan.
“Award” or “Awards,” means an award under the Plan and, except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Unit Awards, Unrestricted Stock Awards, Dividend Equivalent Rights, Cash-Based Awards and other equity-based awards as contemplated herein. “Award Certificate” means a written or electronic agreement or document setting forth the terms and provisions applicable to an Award granted under the Plan. Each Award Certificate is subject to the terms and conditions of the Plan. “Board” means the Board of Directors of the Company. “Cash-Based Award” means an Award granted pursuant to Section 12 entitling the recipient to receive a cash denominated payment. “Change in Control” means the occurrence of any shall receive an additional annual cash retainerone of $15,000 for service as chair.the following events: | (i) | any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any of its Subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its Subsidiaries), together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Exchange Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25 percent or more of the combined voting power of the Company’s then- outstanding securities having the right to vote in an election of the Board (“Voting Securities”) (other than as a result of an acquisition of securities directly from the Company); |
BOSTON PROPERTIES, INC. |2019 Proxy Statement B-1
| (ii) | persons who, as of the Effective Date, constitute the Board (the “Incumbent Directors”) cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to such date shall be considered an Incumbent Director if such person’s election was approved by or such person was nominated for election by either (A) a vote of at least two-thirds of the Incumbent Directors or (B) a vote of at least a majority of the Incumbent Directors who are members of a nominating committee comprised, in the majority, of Incumbent Directors; |
| (iii) | the consummation of (A) any consolidation or merger of the Company as a result of which the Voting Securities outstanding immediately prior to the consolidation or merger do not either (x) continue to represent 60 percent or more of the outstanding stock or other equity interests having the right to vote in an election of the board of directors (or other equivalent governing body) of the resulting or successor entity (or its ultimate parent, if applicable) immediately upon completion of such transaction or (y) convert into, or become immediately exchangeable for, 60 percent or more of the outstanding stock or other equity interest having the right to vote in an election of the board of directors (or other equivalent governing body) of the resulting or successor entity (or its ultimate parent, if applicable) immediately upon completion of such transaction, or |
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| (B) any sale, lease, exchange or other transfer to an unrelated party (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company; or |
(g) Payment and Deferral of Service Fees. Unless otherwise deferred pursuant
| (iv) | the stockholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company. |
Notwithstanding the foregoing, a “Change in Control” shall not be deemed to the Director Deferral Program (as defined below), the sum of all annual cash retainers to which eachNon-Employee Director is entitled pursuant to Sections 3(a)-(f) shall be paid quarterly in arrears, subject to prorationhave occurred for periods of service less than a full quarter or full year in length, as applicable. SECTION 4. EQUITY COMPENSATION
(a) Annual Equity Award. Unless otherwise deferred pursuant to the Director Deferral Program, on the fifth business day after each annual meetingpurposes of the Company’s stockholders (or, if any annual meeting is not completed on a single date,foregoing clause (i) solely as the date on which the polls are closed for voting on the electionresult of directors at such annual meeting) (the “Annual Meeting”), eachNon-Employee Director continuing to serve as a memberan acquisition of the Board immediately following the election and qualification of the directors elected at such Annual Meeting shall be granted, at his or her election, either a number of LTIP Units in Boston Properties Limited Partnership, or any successor thereto, or a number of restricted shares of the Company’s common stock, par value $0.01 per share (“Common Stock”) (or a combination of LTIP Units and Common Stock), pursuant to the Incentive Plan equal to $150,000 dividedsecurities by the closing market price of the Company’s Common Stock on the New York Stock Exchange on the grant date,Company which, grant will vest on the earlier of (i) the first anniversary of the grant date and (ii) the date of the next Annual Meeting (the “Annual Equity Award”), subject to potential acceleration as set forth in the Incentive Plan or the applicable award agreement.
(b) Initial Equity Awards. Unless otherwise deferred pursuant to the Director Deferral Program, on the fifth business day after the appointment of any newNon-Employee Director, suchNon-Employee Director shall be granted, at his or her election, either a number of LTIP Units in Boston Properties Limited Partnership, or any successor thereto, or a number of restricted shares of Common Stock (or a combination of LTIP Units and Common Stock), pursuant to the Incentive Plan equal to $150,000 (prorated based onby reducing the number of months fromshares of Voting Securities outstanding, increases the effective dateproportionate number of the appointmentshares of theNon-Employee Director to the Board to the first anniversary of the most recent prior Annual Meeting) dividedVoting Securities beneficially owned by the closing market price of the Company’s Common Stock on the New York Stock Exchange on the grant date, which grant will vest on the earlier of (i) the first anniversary of the grant date and (ii) the date of the next Annual Meeting (the “Initial Equity Award”), subject to potential acceleration as set forth in the Incentive Plan or the applicable award agreement.
(c) Form of Equity Awards. Notwithstanding Sections 4(a) and (b), prior to the grant date of any Annual Equity Award or Initial Equity Award, the Committee may, in its sole discretion, determine to (i) grant such Annual Equity Award or Initial Equity Award in the form of any full value Awardperson (as defined in the Incentive Plan) issuable from timeforegoing clause (i)) to time25 percent or more of the combined voting power of all then outstanding Voting Securities; provided, however, that if such person shall thereafter become the beneficial owner of any additional shares of Voting Securities (other than pursuant to the Incentive Plan (i.e., an Award other than an optiona stock split, stock dividend, or stock appreciation right)similar transaction or (ii) discontinue any ability for theNon-Employee Directors to elect to receive the form of equity for any such grants, in which case all equity awards granted hereunder shall be in the form of restricted shares of Common Stock. All equity awards granted hereunder shall be made pursuant to forms of award agreement having terms consistent with those set forth herein, as approved by the Committee or the Board from time to time for such purpose.
(d) Availability of Awards. All equity grants made hereunder shall be subject to the availability of shares of Common Stock reserved for issuance pursuant to the Incentive Plan, and the Director Plan does not increase such number of available shares. To the extent insufficient shares of Common Stock are reserved and available to make the equity grants set forth herein, or at the discretion of the Board, any portion of any equity grant to which aNon-Employee Director is entitled shall be added to the next cash payment of annual cash retainers payable pursuant to Section 3 in an amount equal to the Fair Market Value of any such ungranted equity compensation, to be paid at such times and in the manner set forth in Section 3, unless otherwise determined by the Board.
B-2 BOSTON PROPERTIES, INC. |2019 Proxy Statement
SECTION 5. TAX WITHHOLDING
Except to the extent required by applicable law, eachNon-Employee Director shall be solely responsible for any tax obligations he or she incurs as a result of any compensation received underan acquisition of securities directly from the Director Plan.
SECTION 6. DEFERRAL
EachNon-Employee Director may elect,Company), then a “Change in accordance with the Boston Properties, Inc. Amended and Restated Rules and ConditionsControl” shall be deemed to have occurred for Directors’ Deferred Compensation Program or any other planpurposes of the Company designated or established by the Board for such purpose, as (the “Director Deferral Program”), to defer the cash compensation described in the Director Plan.foregoing clause (i).
The provisions regarding all payments to be made hereunder shall be interpreted in such a manner that all such payments either comply with Section 409A of“Code” means the Internal Revenue Code of 1986, as amended, (the “Code”and any successor Code, and related rules, regulations and interpretations.
“Common Units” shall have the meaning set forth in the Partnership Agreement. “Consultant” means any natural person that provides bona fide services to the Company, and such services are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities. “Dividend Equivalent Right” means an Award entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of Stock specified in the Dividend Equivalent Right (or other award to which it relates) if such shares had been issued to and held by the grantee. “Effective Date” means the date on which the Plan becomes effective as set forth in Section 20. “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. “Fair Market Value” on any given date means the last reported sale price at which Stock is traded on such date or, if no Stock is traded on such date, the next preceding date on which Stock was traded, as reflected on the principal stock exchange or, if applicable, any other national stock exchange on which the Stock is traded or admitted to trading. “Family Member” of a grantee means a grantee’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,father-in-law,son-in-law,daughter-in-law,brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the grantee’s household (other than a tenant of the grantee), a trust in which these persons (or the grantee) have more than 50% of the beneficial interest, a foundation in which these persons (or the grantee) control the management of assets, and any other entity in which these persons (or the grantee) own more than 50% of the voting interests. “Incentive Stock Option” means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code. “LTIP Units” shall have the meaning set forth in the Partnership Agreement. “Non-Employee Director” means a member of the Board who is not also an employee of the Company or any Subsidiary. “Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option. “Operating Partnership” means Boston Properties Limited Partnership, a Delaware limited partnership, and any successor thereto. “Partnership Agreement” means the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of June 29, 1998, among the Company, as general partner, and the limited partners who are parties thereto, as amended, restated or supplemented from time to time. “Performance Criteria” means the performance objectives that the Administrator selects for purposes of earning or attaining an Award for a Performance Cycle. The Performance Criteria which shall be applicable to the organizational level specified by the Administrator, including, but not limited to, the Company or a unit, division, group, region, or Subsidiary of the Company, may include, but will not be limited to, any one or more of the following as selected by the Administrator: funds from operations (“FFO”), adjusted FFO, growth in FFO per share, leasing, rent growth, occupancy or percentage | | | | | | | | | A-2 | | | | | 2021 Proxy Statement |
leased, operating income and/or net annual recurring revenue, net operating income, total stockholder return, revenue, earnings per share, earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”), cash flow (including, but not limited to, operating cash flow and free cash flow), balance sheet management, ratios of net debt to EBITDAre and ratios of market capitalization, net income (loss) (either before or after interest, taxes, depreciation and/or amortization), stock price, economic value-added, acquisitions, dispositions, strategic transactions, portfolio or regional occupancy rates, return on capital, assets, equity, development, re-development, investment, capital deployment, development milestones or any other operational, financial or other performance metric selected by the Administrator, any of which may be (A) measured in absolute terms or compared to any incremental increase, (B) measured in terms of rate of change, (C) compared to another company or companies or to results of a peer group, (D) measured against the market as a whole and/or as compared to applicable market indices, (E) measured on an adjusted basis, by including or excluding categories of items specifically identified in advance by the Compensation Committee or, if not so specified, items that the Compensation Committee determines, in its discretion, are exemptappropriate to include or exclude whether or not specifically identified in advance, (F) measured on a pre-tax or post-tax basis (if applicable), (G) measured on an annualized basis, and/or (H) measured for all or a portion of the Company’s portfolio, including on a same property basis and/or relating to “BXP’s share” (calculated as the consolidated amount calculated in accordance with GAAP, plus the Company’s share of the amount from the requirementsCompany’s unconsolidated joint ventures (calculated based upon the Company’s percentage ownership interest and, in some cases, after priority allocations), minus the Company’s partners’ share of the amount from the Company’s consolidated joint ventures (calculated based upon the partners’ percentage ownership interests and, in some cases, after income allocation to private REIT shareholders and their share of fees due to the Company)). “Performance Cycle” means one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more Performance Criteria will be measured. “Person” means any natural person, corporation, partnership, association, limited liability company, estate, trust, joint venture, any federal, state or municipal government or any bureau, department or agency thereof, any other legal entity, or a “group” as that term is used for purposes of Rule 13d-5(b) or Section 13(d) of the Exchange Act and any fiduciary acting in such capacity on behalf of the foregoing. “Restricted Stock” means the shares of Stock underlying a Restricted Stock Award that remain subject to a risk of forfeiture or the Company’s right of repurchase. “Restricted Stock Award” means an Award of Restricted Stock subject to such restrictions and conditions as the Administrator may determine at the time of grant. “Restricted Stock Units” means the units underlying a Restricted Stock Unit Award, each of which represents the right to receive one share of Stock or a cash payment equal to the Fair Market Value of one share of Stock at the time and upon the conditions applicable to the Restricted Stock Unit Award. “Restricted Stock Unit Award” means an Award of Restricted Stock Units subject to such restrictions and conditions as the Administrator may determine at the time of grant. “Section 409A” means Section 409A of the Code and the regulations and other guidance promulgated thereunder. “Service Relationship” means any relationship as “short-term deferrals”an employee, director or Consultant of the Company or any Subsidiary; provided, however, a change in an individual’s status from a full-time employee or director to part-time employee or Consultant or from a director or Consultant to an employee shall be deemed to continue the Service Relationship. “Stock” means the Common Stock, par value $0.01 per share, of the Company, subject to adjustments pursuant to Section 3. “Stock Appreciation Right” means an Award entitling the recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable Award Certificate) having a value equal to the excess of the Fair Market Value of the Stock on the date of exercise over the exercise price of the Stock Appreciation Right multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised. “Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5. “Subsidiary” means any corporation or other entity (other than the Company) in which the Company has at least a 50 percent interest, either directly or indirectly. “Ten Percent Owner” means an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation. | | | | | | | | | | | | 2021 Proxy Statement | | A-3 |
“Unit” means units of partnership interest in the Operating Partnership, including, without limitation, Common Units, LTIP Units or one or more other classes of units that are convertible into Common Units or LTIP Units on a specified date or at the election of the recipient based on appreciation in the value of the Stock, appreciation in the value of the assets of the Operating Partnership, total return generated by a specified number of shares of Stock or Common Units or such other basis as describedmay be determined by the Administrator. Units may include units of partnership interest in the Operating Partnership that are intended to constitute profits interests for U.S. federal income tax purposes. “Unrestricted Stock Award” means an Award of shares of Stock free of any restrictions. SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS | (a) | Administration of Plan. The Plan shall be administered by the Administrator. |
| (b) | Powers of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan and otherwise administer the Plan and the Awards granted hereunder, including, without limitation, the power and authority: |
| (i) | to select the individuals to whom Awards may from time to time be granted; |
| (ii) | to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Unit Awards, Unrestricted Stock Awards, Dividend Equivalent Rights and other equity-based awards, or any combination of the foregoing, granted to any one or more grantees; |
| (iii) | to determine the number of shares of Stock to be covered by any Award; |
| (iv) | to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and grantees, and to approve the forms of Award Certificates; provided, however, that except as otherwise provided in Section 3(b), the Administrator is not permitted to reduce the exercise price of Stock Options through cancellation and re-grants or cancellation in exchange for cash; |
| (v) | to accelerate at any time the exercisability or vesting of all or any portion of any Award; |
| (vi) | subject to the provisions of Section 5(c), to extend at any time the period in which Stock Options may be exercised; |
| (vii) | to determine at any time whether, to what extent, and under what circumstances Stock and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the participant and whether and to what extent the Company shall pay or credit amounts constituting deemed interest, dividends, distributions or other earnings; and |
| (viii) | at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan. |
All decisions and interpretations of the Administrator shall be made in the Administrator’s sole and absolute discretion and shall be binding and conclusive on all persons, including the Company, the Operating Partnership, the Company’s other Subsidiaries and Plan grantees. | (c) | Delegation of Authority to Grant Awards. Subject to applicable law, the Administrator, in its discretion, may delegate to the Chief Executive Officer of the Company all or part of the Administrator’s authority and duties with respect to the granting of Awards to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act. Any such delegation by the Administrator shall include a limitation as to the amount of Stock underlying Awards that may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price and the vesting criteria. The Administrator may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Administrator’s delegate or delegates that were consistent with the terms of the Plan. |
| (d) | Award Certificate. Awards under the Plan shall be evidenced by Award Certificates that set forth the terms, conditions and limitations for each Award, which may include, without limitation, the term of an Award, and the provisions applicable in the event employment or service terminates. |
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| (e) | Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company and its Subsidiaries may from time to time operate or have employees or other individuals eligible for Awards, the Administrator, in its sole discretion, shall have the power and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine which individuals outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to individuals outside the United States to comply with applicable foreign laws; (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent the Administrator determines such actions to be necessary or advisable (and such subplans and/or modifications shall be attached to this Plan as appendices); provided, however, that no such subplans and/or modifications shall increase the share limitations contained in Section 3(a) hereof; and (v) take any action, before or after an Award is made, that the Administrator determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law. |
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION | (a) | Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be (i) 5,400,000 shares less (ii) one share for every one share of Stock underlying awards granted under the Company’s 2012 Stock Option and Incentive Plan (the “Prior Plan”) after March 4, 2021, subject to adjustment as provided in this Section 3. For purposes of this limitation, the following shares of Stock shall be added back to the shares of Stock available for issuance under the Plan and, to the extent permitted under Section 422 of the Code and the regulations promulgated thereunder, the shares of Stock that may be issued as Incentive Stock Options: (i) the shares of Stock underlying any Awards under the Plan and any awards under the Prior Plan that are forfeited, canceled or otherwise terminated (other than by exercise) and (ii) with respect to a full-value award under the Plan or the Prior Plan (i.e., an award other than a stock option, stock appreciation right or Unit with an economic structure similar to that of a stock option or stock appreciation right), (A) any shares tendered, held back or otherwise reacquired from the grantee to cover tax withholding owed upon vesting, settlement or the occurrence of any other event with respect to such an award that results in amounts being includable in the gross income of the grantee for income tax purposes and (B) any shares previously reserved for issuance pursuant to such an award to the extent that such shares are not issued and are no longer issuable pursuant to such an award (e.g., in the event that a full-value award that may be settled in cash or by issuance of shares of Stock is settled in cash). Notwithstanding the foregoing, the following shares shall not be added to the shares authorized for grant under the Plan: (x) shares tendered or held back upon exercise of a Stock Option to cover the exercise price or tax withholding, and (y) shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right upon exercise thereof. In the event the Company repurchases shares of Stock on the open market, such shares shall not be added to the shares of Stock available for issuance under the Plan. Subject to such overall limitations, shares of Stock may be issued up to such maximum number pursuant to any type or types of Award; provided, however, that no more than 5,400,000 shares of the Stock may be issued in the form of Incentive Stock Options. The shares available for issuance under the Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the Company. |
| (b) | Changes in Stock. Subject to Section 3(c) hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger or consolidation, sale of all or substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged for securities of the Company or any successor entity (or a parent or subsidiary thereof), the Administrator shall make appropriate equitable adjustments to the Plan and any outstanding Awards, which may include, without limitation, appropriate or proportionate adjustments in (i) the maximum number and kind of shares reserved for issuance under the Plan, including the maximum number and kind of shares that may be issued in the form of Incentive Stock Options, (ii) the number and kind of shares or other securities subject to any then outstanding Awards under the Plan, (iii) the repurchase price, if any, per share of Restricted Stock subject to each outstanding Restricted Stock Award, (iv) the exercise price for each share subject to any then outstanding Stock Options and Stock Appreciation Rights under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of shares subject to Stock Options and Stock Appreciation Rights) as to which such Stock Options and Stock Appreciation Rights remain exercisable and (v) other applicable terms of the Plan and any outstanding Awards. |
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| The Administrator shall also make equitable or proportionate adjustments in the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration cash dividends paid other than in the ordinary course or any other extraordinary corporate event. The adjustment by the Administrator shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a cash payment in lieu of fractional shares. |
| (c) | Mergers. In contemplation of and subject to the consummation of a consolidation or merger or sale of all or substantially all of the assets of the Company in which outstanding shares of Stock are exchanged for securities, cash or other property of an unrelated corporation or business entity or in the event of a liquidation of the Company (in each case, a “Transaction”), the Board, or the board of directors of any corporation assuming the obligations of the Company, may, in its discretion, take any one or more of the following actions, as to outstanding Awards: (i) provide that such Awards shall be assumed or equivalent awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), and/or (ii) upon written notice to the participants, provide that all Awards will terminate upon the consummation of the Transaction. In the event that, pursuant to clause (ii) above, Awards will terminate upon the consummation of the Transaction, all Awards shall become vested and fully exercisable as of the effective time of such Transaction (unless otherwise specified in the applicable Award Certificate or other agreement between the holder of such Award and the Company) and vested Awards, other than Stock Options, shall be fully settled in cash or in kind at such appropriate consideration as determined by the Administrator in its sole discretion after taking into account the consideration payable per share of Stock pursuant to the business combination (the “Merger Price”) and all Stock Options shall be fully settled, in cash or in kind, in an amount equal to the difference between (A) the Merger Price times the number of shares of Stock subject to such outstanding Stock Options (to the extent then exercisable at prices not in excess of the Merger Price) and (B) the aggregate exercise price of all such outstanding Stock Options; provided, however, that each participant may be permitted, within a specified period determined by the Administrator prior to the consummation of the Transaction, to exercise all outstanding Stock Options, including those that are not then exercisable, subject to the consummation of the Transaction. |
| (d) | Substitute Awards. The Administrator may grant Awards under the Plan in substitution for stock and stock based awards issued by another corporation or other entity that is acquired by the Company or a Subsidiary; provided that the recipient of such substituted Award is eligible to be granted an Award under the Plan. The Administrator may direct that the substitute Awards be granted on such terms and conditions as the Administrator considers appropriate in the circumstances. Substitute Awards will not reduce the number of shares of Stock authorized for grant under the Plan. |
SECTION 4. ELIGIBILITY Grantees under the Plan will be such full- or part-time officers and other employees, Non-Employee Directors and Consultants of the Company and its Subsidiaries as are selected from time to time by the Administrator in its sole discretion and such other Persons (to the extent the issuance of shares of Stock to such Person under the Plan may be registered by the Company on Form S-8 and would be permitted in an “employee benefit plan” as defined in Rule 405 under the Securities Act of 1933, as amended) as are selected from time to time by the Administrator in its sole discretion. For avoidance of doubt, no Award may be granted under the Plan to a Person unless the issuance of shares of Stock to such Person under the Plan may be registered by the Company on Form S-8 and such Person is permitted to participate in an “employee benefit plan” as defined in Rule 405 under the Securities Act of 1933, as amended. SECTION 5. STOCK OPTIONS | (a) | Award of Stock Options. The Administrator may grant Stock Options under the Plan. Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve. |
Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be granted only to employees of the Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 409A424(f) of the Code. To the extent that any amountsStock Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option. Stock Options granted pursuant to this Section 5 shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable. If the Administrator so determines, Stock Options may be granted in lieu of cash compensation at the optionee’s election, subject to such terms and conditions as the Administrator may establish. | | | | | | | | | A-6 | | | | | 2021 Proxy Statement |
| (b) | Exercise Price. The exercise price per share for the Stock covered by a Stock Option granted pursuant to this Section 5 shall be determined by the Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the exercise price of such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value on the grant date. Notwithstanding the foregoing, Stock Options may be granted with an exercise price per share that is less than 100 percent of the Fair Market Value on the date of grant (i) pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code, (ii) to individuals who are not subject to U.S. income tax on the date of grant or (iii) the Stock Option is otherwise compliant with Section 409A. |
| (c) | Stock Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than ten years after the date the Stock Option is granted. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the term of such Stock Option shall be no more than five years from the date of grant. |
| (d) | Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time or times, whether or not in installments, as shall be determined by the Administrator at or after the grant date. An optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options. |
| (e) | Method of Exercise. Stock Options may be exercised in whole or in part, by giving written or electronic notice of exercise to the Company, specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods to the extent provided in the applicable Award Certificate: |
| (i) | In cash, by certified or bank check or other instrument acceptable to the Administrator; |
| (ii) | Through the delivery (or attestation to the ownership following such procedures as the Company may prescribe) of shares of Stock that are not then subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise date; |
| (iii) | By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Company shall prescribe as a condition of such payment procedure; or |
| (iv) | With respect to Stock Options that are not Incentive Stock Options, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price and the remainder of the aggregate exercise price to be paid by the optionee in cash or other method of payment permitted hereunder. |
Payment instruments will be received subject to collection. The transfer to the optionee on the records of the Company or of the transfer agent of the shares of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the applicable Award Certificate or applicable provisions of laws (including the satisfaction of any withholding taxes that the Company is obligated to withhold with respect to the optionee). In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of attested shares. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the exercise of Stock Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Stock Options may be permitted through the use of such an automated system. | (f) | Annual Limit on Incentive Stock Options. To the extent required for “incentive stock option” treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by an optionee during any calendar year shall not exceed $100,000. To the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option. |
| | | | | | | | | | | | 2021 Proxy Statement | | A-7 |
SECTION 6. STOCK APPRECIATION RIGHTS | (a) | Award of Stock Appreciation Rights. The Administrator may grant Stock Appreciation Rights under the Plan. A Stock Appreciation Right is an Award entitling the recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable Award Certificate) having a value equal to the excess of the Fair Market Value of a share of Stock on the date of exercise over the exercise price of the Stock Appreciation Right multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised. |
| (b) | Exercise Price of Stock Appreciation Rights. The exercise price of a Stock Appreciation Right shall not be less than 100 percent of the Fair Market Value of the Stock on the date of grant. Notwithstanding the foregoing, Stock Appreciation Rights may be granted with an exercise price per share that is less than 100 percent of the Fair Market Value on the date of grant (i) pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code, (ii) to individuals who are not subject to U.S. income tax on the date of grant or (iii) the Stock Appreciation Right is otherwise compliant with, or is not subject to, Section 409A. |
| (c) | Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be granted by the Administrator independently of any Stock Option granted pursuant to Section 5 of the Plan. |
| (d) | Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined on the date of grant by the Administrator. The term of a Stock Appreciation Right may not exceed ten years. The terms and conditions of each such Award shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees. |
SECTION 7. RESTRICTED STOCK AWARDS | (a) | Nature of Restricted Stock Awards. The Administrator may grant Restricted Stock Awards under the Plan. A Restricted Stock Award is any Award of Restricted Stock subject to such restrictions and conditions as the Administrator may determine at the time of grant. Conditions may be based on continuing employment (or other Service Relationship) and/or achievement of pre-established performance goals and objectives. |
| (b) | Rights as a Stockholder. Upon the grant of a Restricted Stock Award and payment of any applicable purchase price, a grantee shall have the rights of a stockholder with respect to the Restricted Stock granted thereunder, including voting of the Restricted Stock and receipt of dividends; provided that if the lapse of restrictions with respect to the Restricted Stock Award is tied to the attainment of vesting conditions, the Administrator may require any cash dividends paid by the Company during the vesting period with respect to unvested Restricted Stock to be retained by, or repaid by the grantee to, the Company. Unless the Administrator shall otherwise determine, (i) uncertificated Restricted Stock shall be accompanied by a notation on the records of the Company or the transfer agent to the effect that they are subject to forfeiture until such Restricted Stock is vested as provided in Section 7(d) below, and (ii) certificated Restricted Stock shall remain in the possession of the Company until such Restricted Stock is vested as provided in Section 7(d) below, and the grantee shall be required, as a condition of the grant, to deliver to the Company such instruments of transfer as the Administrator may prescribe. |
| (c) | Restrictions. Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein or in the Restricted Stock Award Certificate. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 17 below, in writing after the Award is issued, if a grantee’s employment (or other Service Relationship) with the Company and its Subsidiaries terminates for any reason, any Restricted Stock that has not vested at the time of termination shall automatically and without any requirement of notice to such grantee from or other action by or on behalf of, the Company be deemed to have been reacquired by the Company at its original purchase price (if any) from such grantee or such grantee’s legal representative simultaneously with such termination of employment (or other Service Relationship), and thereafter shall cease to represent any ownership of the Company by the grantee or rights of the grantee as a stockholder. Following such deemed reacquisition of Restricted Stock that is represented by physical certificates, a grantee shall surrender such certificates to the Company upon request without consideration. |
| (d) | Vesting of Restricted Stock. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which the non-transferability of the Restricted Stock and the Company’s right of repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on which all restrictions have lapsed shall no longer be Restricted Stock and shall be deemed “vested.” |
| | | | | | | | | A-8 | | | | | 2021 Proxy Statement |
SECTION 8. RESTRICTED STOCK UNIT AWARDS | (a) | Nature of Restricted Stock Unit Awards. The Administrator may grant Restricted Stock Unit Awards under the Plan. A Restricted Stock Unit Award is an Award of Restricted Stock Units that, subject to the terms and conditions of the applicable Award Certificate, may be settled in shares of Stock (or cash, to the extent explicitly provided for in the Award Certificate) upon the satisfaction of applicable restrictions and conditions at the time of grant. Conditions may be based on, among other things, continuing employment (or other Service Relationship) and/or achievement of pre-established performance goals and objectives. The terms and conditions of each such Award shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees. To the extent permitted by the Administrator, the settlement of Restricted Stock Units may be deferred to one or more dates specified in the applicable Award Certificate or elected by the grantee. Restricted Stock Unit Awards with a deferred settlement date may be referred to as Deferred Stock Unit Awards. Each Restricted Stock Unit Award that is subject to Section 409A may contain such additional terms and conditions as the Administrator shall determine in its sole discretion in order to comply with the requirements of Section 409A. |
| (b) | Election to Receive Restricted Stock Unit Awards in Lieu of Compensation. The Administrator may, in its sole discretion, permit a grantee to elect to receive cash compensation otherwise due to such grantee in the form of a Restricted Stock Unit Award. Any such election shall be made in writing and shall be delivered to the Company no later than the date specified by the Administrator and in accordance with such rules and procedures established by the Administrator, which shall include rules and procedures intended to ensure compliance with Section 409A. Unless provided by the Administrator, any such cash compensation that the grantee elects to receive in Restricted Stock Units shall be converted to a fixed number of Restricted Stock Units based on the Fair Market Value of Stock on the date the compensation would otherwise have been paid to the grantee if such election had not been made. The Administrator shall have the sole right to determine whether and under what circumstances to permit such elections and to impose such limitations and other terms and conditions thereon as the Administrator deems appropriate. Any Restricted Stock Units that are elected to be received in lieu of cash compensation shall be fully vested, unless otherwise provided in the Award Certificate. |
| (c) | Rights as a Stockholder. A grantee shall have the rights as a stockholder only as to shares of Stock acquired by the grantee upon settlement of Restricted Stock Units; provided, however, that the grantee may be credited with Dividend Equivalent Rights with respect to the stock units underlying his Restricted Stock Units, subject to the provisions of Section 10 and such terms and conditions as the Administrator may determine. |
| (d) | Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 17 below, in writing after the Award is issued, a grantee’s right in all Restricted Stock Units that have not vested shall automatically terminate upon the grantee’s termination of employment (or cessation of Service Relationship) with the Company and its Subsidiaries for any reason. |
SECTION 9. UNRESTRICTED STOCK AWARDS Grant or Sale of Unrestricted Stock. The Administrator may grant (or sell at par value or such higher purchase price determined by the Administrator) an Unrestricted Stock Award under the Plan. An Unrestricted Stock Award is an Award of Stock free of any restrictions under the Plan. Unrestricted Stock Awards may be granted in respect of past services or other valid consideration, or in lieu of cash compensation due to such grantee. SECTION 10. DIVIDEND EQUIVALENT RIGHTS | (a) | Dividend Equivalent Rights. The Administrator may grant Dividend Equivalent Rights under the Plan. A Dividend Equivalent Right is an Award entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of Stock specified in the Dividend Equivalent Right (or other Award to which it relates) if such shares had been issued to the grantee. A Dividend Equivalent Right may be granted hereunder to any grantee as a component of an Award, including a Restricted Stock Unit Award, or as a freestanding award. The terms and conditions of Dividend Equivalent Rights shall be specified in the applicable Award Certificate. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently, may be deemed to be reinvested in additional shares of Stock, which may thereafter accrue additional equivalents, or may otherwise accrue. Unless otherwise provided in the Award Certificate or by the Administrator, any such reinvestment shall be at Fair Market Value on the date of reinvestment or such other price as may then apply under a dividend reinvestment plan sponsored by the Company, if any. Dividend Equivalent Rights may be settled in cash or shares of Stock or a combination thereof, in a single installment or installments. |
| | | | | | | | | | | | 2021 Proxy Statement | | A-9 |
| (b) | Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 17 below, in writing after the Award is issued, a grantee’s rights in all Dividend Equivalent Rights shall automatically terminate upon the grantee’s termination of employment (or cessation of Service Relationship) with the Company and its Subsidiaries for any reason. |
SECTION 11. OTHER EQUITY-BASED AWARDS The Administrator shall have the right (i) to grant other Awards based upon the Stock having such terms and conditions as the Administrator may determine, including, without limitation, the grant of convertible preferred shares, convertible debentures and other exchangeable or redeemable securities or equity interests, (ii) to grant limited-partnership or any other membership or ownership interests (which may be expressed as units or otherwise) in a Subsidiary or operating or other partnership, including, without limitation, Units, with any Stock being issued in connection with the conversion of (or other distribution on account of) an interest granted under the authority of this clause (ii) to be subject, for the avoidance of doubt, to Section 3 and the other provisions of the Plan, and (iii) to grant Awards valued by reference to book value, fair value or performance parameters relative to the Company or any Subsidiary or group of Subsidiaries. SECTION 12. CASH-BASED AWARDS The Administrator may, in its sole discretion, grant Cash-Based Awards to any participant in such number or amount and upon such terms, and subject to such conditions, as the Administrator shall determine at the time of grant. The Administrator shall determine the Performance Cycle and Performance Criteria applicable to such Cash-Based Award, the amount of cash to which the Cash-Based Award pertains, the conditions upon which the Cash-Based Awards shall become vested or payable, hereunderand such other provisions as the Administrator shall determine. Each Cash-Based Award shall specify a cash-denominated payment amount, formula or payment ranges as determined by the Administrator, which may include either a “target” (100 percent attainment of the Performance Criteria) and/or a “minimum” hurdle and/or a “maximum” amount. Payment, if any, with respect to a Cash-Based Award shall be made in accordance with the terms of the Award and may be made in cash or in shares of Stock, as the Administrator determines. SECTION 13. TRANSFERABILITY OF AWARDS | (a) | Transferability. Unless otherwise provided in the Award Certificate or by the Administrator, during a grantee’s lifetime, his or her Stock Options and Stock Appreciation Rights shall be exercisable only by the grantee, or by the grantee’s legal representative or guardian in the event of the grantee’s incapacity. Except as provided in Section 13(b) below and unless otherwise provided in the Award Certificate or by the Administrator, no Awards shall be sold, assigned, transferred or otherwise encumbered or disposed of by a grantee other than by will or by the laws of descent and distribution or pursuant to a domestic relations order; provided that, for the avoidance of doubt, the foregoing shall not apply to shares of Stock issued pursuant to an Award following the date on which such shares are vested. No Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and void. |
| (b) | Administrator Action. Notwithstanding Section 13(a), the Administrator, in its discretion, may provide either in the Award Certificate regarding a given Award or by subsequent written approval that the grantee may transfer his or her Awards (other than Incentive Stock Options) to his or her Family Members for no value or consideration; provided that the transferee agrees in writing to be bound by all of the terms and conditions of this Plan and the applicable Award. |
| (c) | Designation of Beneficiary. To the extent permitted by the Company, each grantee to whom an Award has been made under the Plan may designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee’s death. Any such designation shall be on a form provided for that purpose by the Company and shall not be effective until received by the Company. If no beneficiary has been designated by a deceased grantee, or if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate. |
SECTION 14. TAX WITHHOLDING | (a) | Payment by Grantee. Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the grantee for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any |
| | | | | | | | | A-10 | | | | | 2021 Proxy Statement |
| Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee. The Company’s obligation to deliver evidence of book entry (or stock certificates) to any grantee is subject to and conditioned on tax withholding obligations being satisfied by the grantee. |
| (b) | Payment in Stock. Subject to approval by the Administrator, a grantee may elect to have the Company’s required tax withholding obligation satisfied, in whole or in part, by authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award (or, in the case of a Restricted Stock Award, to reacquire shares of Stock previously issued pursuant such Restricted Stock Award) a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum statutory tax rate or such lesser amount as is necessary to avoid adverse accounting treatment or as determined by the Administrator. The Administrator may also require Awards to be subject to mandatory share withholding up to the required withholding amount. For purposes of share withholding, the Fair Market Value of withheld shares shall be determined in the same manner as the value of Stock includible in income of the grantees. The Administrator may also require the Company’s tax withholding obligation to be satisfied, in whole or in part, by an arrangement whereby a certain number of shares of Stock issued pursuant to any Award are immediately sold and proceeds from such sale are remitted to the Company in an amount that would satisfy the withholding amount due. |
SECTION 15. SECTION 409A AWARDS Awards are intended to be exempt from Section 409A to the greatest extent possible and to otherwise comply with Section 409A. The Plan and all Awards shall be interpreted in accordance with such intent. To the extent that any Award is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of(a “409A Award”), the Code, such amountsAward shall be subject to such additional rules and requirements as specified by the CommitteeAdministrator from time to time in order to comply with Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from service” (within the meaning of Section 409A) to a grantee who is then considered a “specified employee” (within the Codemeaning of Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the grantee’s separation from service, or (ii) the grantee’s death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A. Further, the settlement of any such amounts409A Award may not be accelerated or delayed except to the extent permitted by Section 409A409A. SECTION 16. TERMINATION OF SERVICE RELATIONSHIP, TRANSFER, LEAVE OF ABSENCE, ETC. | (a) | Termination of Service Relationship. If the grantee’s Service Relationship is with a Subsidiary and such Subsidiary ceases to be a Subsidiary, the grantee shall be deemed to have terminated his or her Service Relationship for purposes of the Plan. |
| (b) | For purposes of the Plan, the following events shall not be deemed a termination of a Service Relationship: |
| (i) | a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another; or |
| (ii) | an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee’s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise so provides in writing. |
SECTION 17. AMENDMENTS AND TERMINATION The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall materially and adversely affect rights under any outstanding Award without the holder’s consent. Except as provided in Section 3(b), without prior stockholder approval, in no event may the Administrator exercise its discretion to reduce the exercise price of outstanding Stock Options or Stock Appreciation Rights or effect repricing through cancellation and re-grants or cancellation of Stock Options or Stock Appreciation Rights in exchange for cash or other Awards. The Board, in its discretion, may determine to make any Plan amendments subject to the approval of the Company’s stockholders for purposes of complying with the rules of any securities exchange or market system on which the Stock is listed or ensuring that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code. The Company makes no representationNothing in this Section 17 shall limit the Administrator’s authority to take any action permitted pursuant to Section 3(b). | | | | | | | | | | | | 2021 Proxy Statement | | A-11 |
SECTION 18. STATUS OF PLAN With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or warranty andother consideration not received by a grantee, a grantee shall have no liability to anyNon-Employee Director or any other person if any payments under any provisionsrights greater than those of a general creditor of the Director Plan are determinedCompany unless the Administrator shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to constitute deferred compensation under Section 409Ameet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the Code that are subject to the twenty percent (20%) additional tax under Section 409A of the Code.foregoing sentence. SECTION 19. GENERAL PROVISIONS SECTION | (a) | 8. AMENDMENTS AND TERMINATIONNo Distribution. The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof.
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The Board reserves the right to amend or terminate the Director Plan at any time in its sole discretion.
| (b) | Delivery of Stock. Notwithstanding anything herein to the contrary, the Company shall not be required to issue shares of Stock or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award, unless and until the Administrator has determined, with advice of counsel (to the extent the Administrator deems such advice necessary or advisable), that the issuance and/or delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed, quoted or traded. All Stock delivered pursuant to the Plan shall be subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state or foreign jurisdiction, securities or other laws, rules and quotation system on which the Stock is listed, quoted or traded. The Administrator may place legends on any Stock certificate or in the records of the Company or the transfer agent to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Administrator may require that an individual make such reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems necessary or advisable in order to comply with any such laws, regulations, or requirements. The Administrator shall have the right to require any individual to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Administrator. |
| (c) | Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary. |
| (d) | Trading Policy Restrictions. All actions taken with respect to Awards under the Plan shall be subject to the Company’s insider trading policies and procedures, as in effect from time to time. |
| (e) | Clawback Policy. Awards under the Plan shall be subject to the Company’s Policy for Recoupment of Incentive Compensation, as in effect from time to time, to the extent holders thereof are subject to such policy. |
| (f) | No Further Awards Under the Prior Plan. On and after the Effective Date, no further awards will be issued under the Prior Plan, but outstanding awards granted under the Prior Plan prior to the Effective Date shall continue to be governed by the terms and conditions of the Prior Plan. |
SECTION 9. NON-EXCLUSIVITY; NO BOARD SERVICE RIGHTS The Director Plan is not intended to be exclusive and nothing contained in the Director Plan shall prevent the Board from adopting other or additional compensation arrangements with respect to anyNon-Employee Directors or otherwise. The adoption of the Director Plan and the payment of compensation hereunder shall not confer upon anyNon-Employee Director any right to continued service on the Board.
SECTION 10. 20. EFFECTIVE DATE OF DIRECTOR PLAN
The DirectorThis Plan shall become effective upon stockholder approval in accordance with Delaware law.law and the Company’s certificate of incorporation and bylaws, each as amended. No grants of Awards may be made hereunder after the tenth anniversary of the Effective Date and no grants of Incentive Stock Options may be made hereunder after the tenth anniversary of the date the Plan is approved by the Board.
SECTION 11. 21. GOVERNING LAW The DirectorThis Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of Delaware, applied without regard to conflict of law principles.
DATE APPROVED BY BOARD OF APPROVAL OF DIRECTOR PLAN BY BOARD: February 26, 2019DIRECTORS: March 18, 2021 DATE OF APPROVALAPPROVED BY STOCKHOLDERS: May , 2019 BOSTON PROPERTIES, INC. |2019 Proxy Statement B-3
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| | | | | Annual Stockholders’ Meeting Proxy Card
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q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
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The Board of Directors recommends a vote “FOR” all of the nominees for director listed.
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| | To elect the eleven nominees for director named in the proxy statement, each to serve for a one-year term and until their respective successors are duly elected and qualified:
| | | | | | | | | For | | Against | | Abstain | | | | For | | Against | | Abstain | | | | For | | Against | | | | Abstain | | | | | | | 01 - Kelly A. AyotteA-12
| | ☐ | | ☐ | | ☐ | | | 2021 Proxy Statement 05 - Diane J. Hoskins
| | ☐ | | ☐ | | ☐ | | 09 - Owen D. Thomas
| | ☐ | | ☐ | | | | ☐ | | | | | | | 02 - Bruce W. Duncan
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| | 06 - Joel I. Klein
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| | 10 - David A. Twardock
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| | | | | | | 03 - Karen E. Dykstra
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| | 07 - Douglas T. Linde
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| | 11 - William H. Walton, III
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| | | | | | | 04 - Carol B. Einiger
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| | 08 - Matthew J. Lustig
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BOSTON PROPERTIES, INC. 800 BOYLSTON STREET, SUITE 1900 BOSTON, MA 02199 ATTN: INVESTOR RELATIONS VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on May 19, 2021 for shares held directly and by 11:59 P.M. ET on May 17, 2021 for shares held in a Shareworks account. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/BXP2021 You may attend the meeting via the Internet. Have the information that is printed in the box marked with the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on May 19, 2021 for shares held directly and by 11:59 P.M. ET on May 17, 2021 for shares held in a Shareworks account. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK THE BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D40576-P49725 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. BOSTON PROPERTIES, INC. The Board of Directors recommends ayou vote “FOR” Proposals all of the nominees for director listed. For Against Abstain 1. Election of Directors: Nominees: 1a. Joel I. Klein 1b. Kelly A. Ayotte 1c. Bruce W. Duncan 1d. Karen E. Dykstra 1e. Carol B. Einiger 1f. Diane J. Hoskins 1g. Douglas T. Linde 1h. Matthew J. Lustig 1i. Owen D. Thomas 1j. David A. Twardock 1k. William H. Walton, III For Against Abstain The Board of Directors recommends you vote FOR proposals 2, 3 and 4. 2. To approve, by non-binding, advisory resolution, the Company’s named executive officer compensation. 3. To approve the Boston Properties, Inc. 2021 Stock Incentive Plan. 4. To ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021. NOTE: In their discretion, the proxies are authorized to vote upon any other matters that are properly brought by or at the direction of the Board of Directors before the Annual Meeting and at any adjournments or postponements thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date | | | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | For | | Against | | Abstain | 2. | | To approve, by non-binding, advisory resolution, the Company’s named executive officer compensation. | | ☐ | | ☐ | | ☐ | | 4. | | To ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019. | | ☐ | | ☐ | | ☐ | 3. | | To approve the Boston Properties, Inc. Non-Employee Director Compensation Plan. | | ☐ | | ☐ | | ☐ | | 5. | | In their discretion, the proxies are authorized to vote upon any other matters that are properly brought by or at the direction of the Board of Directors before the Annual Meeting and at any adjournments or postponements thereof. | | | | | | |
IF VOTING BY MAIL, YOUMUST COMPLETE BOTH SIDES OF THIS CARD.
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qImportant Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be Held on May 20, 2021: The Notice and Proxy Statement and Annual Report to Stockholders are available at www.proxyvote.com IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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BOSTON PROPERTIES, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 20192021 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 21, 2019 20, 2021 The undersigned hereby appoints Douglas T. Linde and Frank D. Burt, and each of them, as proxies for the undersigned, each with the power to appoint his substitute, and hereby authorizes them to attend the 20192021 Annual Meeting of Stockholders of Boston Properties, Inc. (the “Annual Meeting”) to be held virtually via live audio webcast at 599 Lexington Avenue, 16th Floor, New York, NY 10022www.virtualshareholdermeeting.com/BXP2021 on May 21, 201920, 2021 at 9:00 a.m., Eastern Time, and at any adjournments or postponements thereof, to vote, as designated on the reverse side, all of the shares that the undersigned is entitled to vote at the Annual Meeting and otherwise to represent the undersigned with all of the powers the undersigned would possess if personally present at the Annual Meeting. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders, the Proxy Statement and the Annual Report to Stockholders and revokes any proxy heretofore given with respect to the Annual Meeting. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN. UNLESS DIRECTION IS GIVEN TO THE CONTRARY, THIS PROXY WILL BE VOTED “FOR” ALL NOMINEES FOR DIRECTOR AND “FOR” PROPOSALS 2, 3 AND 4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER MATTERS THAT ARE PROPERLY BROUGHT BY OR AT THE DIRECTION OF THE BOARD OF DIRECTORS BEFORE THE ANNUAL MEETING AND AT ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF, INCLUDING WHETHER OR NOT TO ADJOURN THE ANNUAL MEETING. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE PROXIES TO VOTE WITH RESPECT TO THE ELECTION OF ANY INDIVIDUAL FOR DIRECTOR WHERE ONE OR MORE NOMINEES ARE UNABLE TO SERVE, OR FOR GOOD CAUSE WILL NOT SERVE, AND WITH RESPECT TO MATTERS INCIDENTAL TO THE CONDUCT OF THE ANNUAL MEETING. Continued and to be signed on reverse side
PLEASE MARK, SIGN AND DATE AND RETURN PROMPTLY, OR VOTE BY TELEPHONE OR INTERNET.
THIS PROXY IS CONTINUED ON REVERSE SIDE
Please sign exactly as name appears hereon. Joint owners should each sign. Executors, administrators, trustees, guardians or other fiduciaries should give full title as such. If signing for a company or partnership, please sign in full company or partnership name by a duly authorized officer or partner.
| | | | | | | | | | | | | Date (mm/dd/yyyy) – Please print date below.
| | | | Signature 1 – Please keep signature within the box.
| | | | Signature 2 – Please keep signature within the box.
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| | | | | | | IF VOTING BY MAIL, YOUMUST COMPLETE BOTH SIDES OF THIS CARD. | |
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