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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material under Rule 14a-12
MANUFACTURED HOME COMMUNITIES, INC.
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(Name of Registrant as Specified in Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA, SUITE 800
CHICAGO, IL 60606
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 2001
------------------
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
(the "Meeting") of MANUFACTURED HOME COMMUNITIES, INC., a Maryland corporation
(the "Company"), to be held at One North Franklin Street, Third Floor, Chicago,
Illinois, on Tuesday, May 8, 2001, at 10:00 A.M. Central Daylight Time. At the
Meeting, we will consider and take action on the following matters:
(1) Election of three (3) directors to the Company's Board of Directors for
terms expiring in 2004;
(2) Approval of the Company's 1992 Stock Option and Stock Award Plan, as
amended and restated ("Plan"); and
(3) Any other business as may properly come before the Meeting or any
adjournment or postponement thereof.
The Board of Directors recommends that you vote for each of the nominees
for the Board of Directors and that you vote to approve the Plan.
Only stockholders of record at the close of business on March 16, 2001 will
be entitled to vote at the Meeting or any adjournment or postponement thereof.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING IN PERSON, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT AS SOON
AS POSSIBLE IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Ellen Kelleher
Ellen Kelleher
Secretary
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MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA, SUITE 800
CHICAGO, IL 60606
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PROXY STATEMENT
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INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Manufactured Home Communities, Inc., a
Maryland corporation (the "Company"), of proxies to be voted at the Annual
Meeting of Stockholders (the "Meeting") of the Company to be held on Tuesday,
May 8, 2001, and any adjournment or postponement thereof, the cost of which is
anticipated to be nominal and will be paid by the Company. In addition to
solicitation by mail, officers, directors and employees of the Company may
solicit proxies by telegraph, telephone, telecopy and personal interviews.
Brokers and other nominees who held of record stock of the Company on March 16,
2001 (the "Record Date"), the record date for determining stockholders entitled
to notice of and to vote at the Meeting, will be asked to contact the beneficial
owners of the shares which they hold.
This Proxy Statement and accompanying proxy are being mailed to
stockholders commencing on or about March 30, 2001. The proxy, if properly
executed and returned, will be voted according to your instructions, but it may
be revoked at any time before it is exercised by giving notice of revocation in
writing to the Secretary of the Company, by voting in person at the Meeting or
by a subsequently dated proxy submitted to the Secretary of the Company. The
mere presence at the Meeting of a stockholder who appointed a representative
shall not itself revoke the appointment. Shares held in street name may be voted
in person only if the stockholder obtains a signed proxy from the record holder
giving the stockholder the right to vote.
2000 ANNUAL REPORT
Stockholders are concurrently being furnished a copy of the Company's 2000
Annual Report, which contains its audited financial statements as of December
31, 2000. Additional copies of the Annual Report and of the Company's Annual
Report on Form 10-K for the year ended December 31, 2000 as filed with the
Securities and Exchange Commission (the "SEC") may be obtained by contacting
Cynthia McHugh, Senior Vice President -- Investor Relations of the Company, at
Two North Riverside Plaza, Suite 800, Chicago, Illinois 60606, 312-928-1905;
copies will be furnished promptly at no additional expense.
VOTING
Only stockholders of record at the close of business on the Record Date
will be entitled to vote at the Meeting. On the Record Date, 21,175,097 shares
of the Company's common stock, par value $.01 per share ("Common Stock"), were
outstanding. Each share of Common Stock outstanding on the Record Date entitles
the holder thereof to one vote upon each matter to be voted upon at the Meeting.
The presence in person or by proxy of stockholders entitled to cast a majority
of all the votes entitled to be cast at the Meeting (including shares
represented by proxies that reflect abstentions) shall constitute a quorum.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. The affirmative
vote of a plurality of all votes cast at the Meeting, if a quorum is present, is
sufficient to elect each nominated director to the Board. A majority of the
votes cast at the Meeting, if a quorum is present, is sufficient to approve the
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Plan, as described below. An abstention as to any particular matter when passage
requires the vote of a majority of the votes entitled to be cast at the Meeting,
however, does not constitute a vote "for" or "against" and will be disregarded
in calculating the votes cast as to such matter. "Broker non-votes" (i.e., where
a broker or nominee submits a proxy specifically indicating the lack of
discretionary authority to vote on a matter) will be treated in the same manner
as abstentions.
If there is not a quorum at the Meeting, the stockholders entitled to vote
at the Meeting, whether present in person or represented by proxy, shall only
have the power to adjourn the Meeting until such time as there is a quorum. The
Meeting may be reconvened without notice to stockholders, other than an
announcement at the prior adjournment of the Meeting, within 120 days after the
Record Date, and a quorum must be present at such reconvened meeting.
If a proxy in the form enclosed is duly executed, dated and returned, and
it has not been revoked in accordance with the instructions set forth therein,
the shares of Common Stock represented thereby will be voted by Samuel Zell and
Howard Walker, the Board's proxy agents for the Meeting, in accordance with the
specifications made thereon by the stockholder. If no such specifications are
made, such proxy will be voted (i) for the election of the three nominees for
director to the Board for terms expiring in 2004, (ii) for the approval of the
Plan and (iii) at the discretion of Mr. Zell and Mr. Walker, with respect to
such other business as may properly come before the Meeting or any adjournment
or postponement thereof.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board consists of ten members. The Company's charter provides that the
Company's directors shall be divided into three classes as nearly equal in
number as possible, with each class having a term of three years. The Board has
nominated Louis H. Masotti, Ph.D., Sheli Z. Rosenberg and Gary L. Waterman for
election to serve as directors of the Company until the 2004 Meeting and until
their successors are duly elected and qualified. Biographical information for
each of the nominees is set forth under the caption "Management."
Each nominee has consented to be named in this Proxy Statement and to serve
if elected. All nominees are currently directors. In the event that any nominee
should become unable to serve as a director (which is not anticipated), the
persons designated as representatives will cast votes for the remaining nominees
and for such other person or persons as the Board may recommend.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED ABOVE. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED "FOR" THE NOMINEES UNLESS INSTRUCTIONS TO
WITHHOLD SUCH VOTE OR TO THE CONTRARY ARE GIVEN.
PROPOSAL NO. 2
APPROVAL OF 1992 STOCK OPTION AND STOCK AWARD PLAN,
AS AMENDED AND RESTATED
The Board has adopted the Company's 1992 Stock Option and Stock Award Plan,
as amended and restated effective March 23, 2001 (the "Plan"), and recommends
that the stockholders approve the Plan. A copy of the Plan is set forth in
Appendix A attached to this Proxy Statement.
The Plan was originally adopted by the Company effective December 18, 1992
and was last amended and restated effective November 8, 1999. The authority of
the Company to make grants under the Plan was to terminate, effective December
18, 2002. As of the Record Date, the Company had 373,603 shares of Common Stock
available for future grant under the Plan, and there were outstanding but
unexercised options that had been granted under the Plan covering 2,086,117
shares of Common Stock, and 331,625 outstanding but unvested shares of
restricted Common Stock that had been granted under the Plan (with an average
remaining vesting period of 2.9 years). The amendment and
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restatement adopted by the Board made two substantive changes: (1) extension of
the authority to make grants to March 23, 2011, and (2) addition of 2,000,000
shares to the number of shares of Common Stock available under the Plan. The
amendment and restatement also made other nonsubstantive changes.
Pursuant to the Plan, officers, directors, employees and consultants of the
Company are offered the opportunity: (i) to acquire shares of Common Stock
through the exercise of incentive stock options ("ISOs") and non-qualified stock
options ("NQSOs") granted under the Plan; and (ii) to be awarded shares of
Common Stock, subject to conditions and restrictions determined by the
Compensation Committee of the Board (the "Compensation Committee"). No more than
250,000 shares may be subject to grants to any one individual in any calendar
year. There are approximately 1,000 persons who are currently eligible to
receive grants under the Plan, consisting of officers, directors, employees and
a limited number of consultants. It is not possible at this time to estimate the
number of additional persons who may become eligible to receive grants under the
Plan.
Grants under the Plan are made by the Compensation Committee, which
determines the individuals eligible to receive awards, the types of awards, and
the terms, conditions and restrictions applicable to any award. In addition, the
terms of two specific types of awards are contemplated under the Plan:
- The first type of award is a grant of stock options or shares of Common
Stock made to each member of the Board at the meeting held immediately
after each annual meeting of the Company's stockholders. Generally, if
the director elects to receive options, the grant will cover 10,000
shares of Common Stock at an exercise price equal to the fair market
value on the date of grant. If the director elects to receive shares of
Common Stock, he or she will receive an award of 2,000 shares. Pro rata
awards are made to new directors who join the Board between annual
meetings. Exercisability or vesting with respect to either type of award
will be with respect to one-third of the award after six months,
two-thirds of the award after one year, and the full award after two
years.
- The second type of award is a grant of Common Stock in lieu of 50% of the
MBO bonus (as hereinafter defined) otherwise payable to individuals with
a title of Vice President or above. As described on pages 9 and 10, a
recipient can request that the Compensation Committee pay a greater or
lesser portion of the bonus in shares of Common Stock.
Although the specific terms of awards are determined by the Compensation
Committee at the time of grant, the Plan provides for the acceleration of
exercisability (in the case of an option) or the expiration of all risks of
forfeiture (in the case of a stock award) if a "change in control" of the
Company occurs. In addition, accelerated exercisability or vesting (as
applicable) will occur if a grantee's employment terminates because of
disability, retirement, layoff or similar workforce reduction, or the death of
the grantee. In the case of a member of the Board, full exercisability or
vesting will also occur if he or she fails to be reelected to the Board.
The Plan may be amended by the Board without further stockholder approval,
except to the extent stockholder approval is required by law.
Options granted under the Plan will constitute "performance-based
compensation" under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). A grant of shares of Common Stock may also constitute
"performance-based compensation" depending on whether the Compensation Committee
makes the grant subject to one or more of the following performance-related
goals: total stockholder return; growth in funds from operations (as defined by
the National Association of Real Estate Investment Trusts ("NAREIT"), from time
to time), revenues, net income, stock price and/or earnings per share; dividend
growth; return on assets, net assets and/or capital; return on stockholders'
equity; debt/equity ratio; working capital; the Company's financial performance
versus its peers; economic value added; acquisitions; expense reductions; and
adherence to
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strategic plan. The Compensation Committee may select among the goals specified
from award to award, and the Compensation Committee need not select the same, or
any, goals for each grantee.
The future benefits receivable by grantees under the Plan cannot be
determined at this time. On the Record Date, the Common Stock closed at $27.05
per share.
FEDERAL INCOME TAX CONSEQUENCES
The Federal income tax consequences to the Company and the grantee upon the
grant and exercise of stock options are substantially as follows:
A grantee will not recognize any taxable income at the time an NQSO is
granted. Upon the exercise of the NQSO, the grantee will recognize ordinary
income equal to the excess of the fair market value of the shares received on
the exercise over the exercise price.
The Company is not entitled to a tax deduction at the time an NQSO is
granted; however, the Company is entitled to a deduction equal to the grantee's
taxable income at the time the grantee recognizes the income. The Company will
withhold from the grantee taxes due, as the Company determines is required.
A grantee will not recognize income at the time an ISO is granted and
generally will not recognize income when the ISO is exercised. The excess of the
fair market value of the shares received on the date of exercise over the
exercise price is an item of tax preference for purposes of computing the
alternative minimum tax. If the shares received upon the exercise of an ISO are
disposed of in a "disqualifying disposition" (i.e., disposition of shares within
one year after exercise of the ISO or within two years after the date of grant),
the grantee has income equal to the lesser of (i) the excess of the fair market
value of the shares on the date of exercise over the exercise price, or (ii) the
excess of the amount realized on the disposition over the exercise price. If
clause (i) applies, the balance realized on the disposition will be a long-term
or short-term capital gain. If the grantee sells the shares in a disposition
which is not a disqualifying disposition, the grantee will realize capital gain
on the sale equal to the excess of the amount realized on the sale over the
exercise price.
The Company is not entitled to a tax deduction as a result of the grant or
exercise of an ISO. If the grantee makes a disqualifying disposition of shares,
the Company is entitled to a deduction equal to the amount of the grantee's
ordinary income.
A grantee who receives restricted stock may make an election under Section
83(b) of the Code (a "Section 83(b) Election") to have the grant taxed as
compensation income at the time of receipt, with the result that any future
appreciation (or depreciation) in the value of the shares of stock granted shall
be taxed as a capital gain (or loss) upon a subsequent sale of the shares.
However, if the grantee does not make a Section 83(b) Election, then the grant
will be taxed as ordinary compensation income at the full fair market value
(less any amount paid therefor by the grantee) on the date that the restrictions
imposed on the shares expire. Unless a grantee makes a Section 83(b) Election,
any dividends paid on the stock subject to the restrictions are compensation
income to the grantee.
The Company is generally entitled to an income tax deduction for any
compensation income taxed to the grantee on restricted stock, including
dividends paid on the stock, subject to the limitations of Section 162(m) of the
Code.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN AND PROXIES
SOLICITED BY THE BOARD WILL BE VOTED "FOR" THE PLAN UNLESS INSTRUCTIONS TO
WITHHOLD SUCH VOTE OR TO THE CONTRARY ARE GIVEN.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers and directors of the Company as of the Record Date:
NAME AGE POSITION
---- --- --------
Samuel Zell................. 59 Chairman of the Board (term expires in 2002)
Howard Walker............... 61 Chief Executive Officer and Director (term expires in 2003)
Thomas P. Heneghan.......... 37 President and Chief Operating Officer
Ellen Kelleher.............. 40 Executive Vice President, General Counsel and Secretary
John M. Zoeller............. 40 Vice President, Chief Financial Officer and Treasurer
Donald S. Chisholm.......... 66 Director (term expires in 2003)
Thomas E. Dobrowski......... 57 Director (term expires in 2003)
David A. Helfand............ 36 Director (term expires in 2002)
Louis H. Masotti, Ph.D. .... 66 Director (term expires in 2001)
John F. Podjasek Jr. ....... 59 Director (term expires in 2003)
Sheli Z. Rosenberg.......... 59 Director (term expires in 2001)
Michael A. Torres........... 40 Director (term expires in 2002)
Gary L. Waterman............ 59 Director (term expires in 2001)
The following is a biographical summary of the experience of the executive
officers and directors of the Company. For information concerning membership on
committees of the Board, see "Committees of the Board; Meetings" below.
SAMUEL ZELL has been Chairman of the Board of the Company since March 31,
1995 and was Chief Executive Officer of the Company from March 31, 1995 to
August 1996. Mr. Zell was Co-Chairman of the Board of the Company from its
formation until March 31, 1995. Mr. Zell was a director of Mobile Home
Communities, Inc. ("MH Inc."), the former manager of the Company's manufactured
home communities, from 1983 until its dissolution in 1993. Mr. Zell has been
chairman of Equity Group Investments, L.L.C. ("EGI"), an investment company,
since 1999, and was chairman of the board of Equity Group Investments, Inc.
("EGI, Inc.") for more than five years prior to 2000. Mr. Zell is also chairman
of the board of American Classic Voyages Co. ("American Classic"), a provider of
overnight cruises in the United States, and has served as a member of its
compensation committee since July 1999; Anixter International Inc. ("Anixter"),
a distributor of electrical and cable products; Capital Trust, Inc. ("Capital
Trust"), a specialized finance company; Chart House Enterprises, Inc., an owner
and operator of restaurants; and Danielson Holding Corporation, an insurance
holding company. Mr. Zell is chairman of the board of trustees of Equity Office
Properties Trust ("Equity Office"), an equity real estate investment trust
("REIT") primarily focused on office buildings; and Equity Residential
Properties Trust ("Equity Residential"), an equity REIT primarily focused on
multifamily residential properties.
HOWARD WALKER has been a director of the Company since November 4, 1997 and
Chief Executive Officer of the Company since December 31, 1997. He was President
of the Company from September 5, 1997 to May 9, 2000, and President of Realty
Systems, Inc., an affiliate of the Company ("RSI, Inc."), from March 30, 1995 to
April 10, 2000. Mr. Walker is also a member of the Company's management
committee (the "Management Committee"), which was created in 1995 and is
comprised of the Company's senior executive officers. Mr. Walker was a Vice
President of the Company from January 16, 1995 to March 30, 1995.
THOMAS P. HENEGHAN has been President and Chief Operating Officer of the
Company since May 9, 2000. Mr. Heneghan is also a member of the Management
Committee. Mr. Heneghan was Executive Vice President, Chief Financial Officer
and Treasurer of the Company from April 1997 to
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May 9, 2000 and Vice President, Chief Financial Officer and Treasurer of the
Company from February 1995 to March 1997.
ELLEN KELLEHER has been Executive Vice President and General Counsel of the
Company since March 1997, and has been Secretary of the Company since May 9,
2000. Ms. Kelleher is also a member of the Management Committee. Ms. Kelleher
was Senior Vice President, General Counsel and Assistant Secretary of the
Company from March 1994 to March 1997.
JOHN M. ZOELLER has been Vice President, Chief Financial Officer and
Treasurer of the Company since May 9, 2000. Mr. Zoeller is also a member of the
Management Committee. From January 1999 to May 9, 2000, Mr. Zoeller was a vice
president of EGI. From January 1997 to December 1998, Mr. Zoeller was a vice
president of EGI, Inc. Mr. Zoeller was a member of the accounting firm of
Greenberg & Pociask, Ltd. from January 1994 to December 1996 and a vice
president of Capsure Holdings Corp. from January 1993 to September 1997.
DONALD S. CHISHOLM has been a director of the Company since March 1993. Mr.
Chisholm is president of Vernon Development Co., the developer of a 650-acre
golf course community, and of Ann Arbor Associates Inc., a real estate
development and management company, both for more than six years.
THOMAS E. DOBROWSKI has been a director of the Company since March 1993.
Mr. Dobrowski has been the managing director of real estate and alternative
investments of General Motors Investment Management Corporation ("GMIMCo.")
since December 1994. Mr. Dobrowski is a director of Capital Trust. Mr. Dobrowski
is also a trustee of Equity Office.
DAVID A. HELFAND has been a director of the Company since May 1995. Since
July 1998, Mr. Helfand has been executive vice president of Equity Office. Mr.
Helfand was President of the Company from January 1995 to September 1997, and
was Chief Executive Officer of the Company from August 1996 to December 31,
1997. Mr. Helfand was Chief Financial Officer of the Company from December 1992
to February 1995 and Senior Vice President of the Company from March 1994 to
January 1995. Mr. Helfand was Vice President of the Company from December 1992
to March 1994. Mr. Helfand was a managing director of Equity International
Properties, a division of EGI, from December 31, 1997 to July 1998.
LOUIS H. MASOTTI, PH.D., has been a director of the Company since March
1993. Dr. Masotti is president of Louis H. Masotti, Ltd., a management, real
estate and urban development consultancy. Dr. Masotti was professor of
management and urban development and director of the program in real estate
management for the Graduate School of Management of the University of California
at Irvine from 1992 to 1998. Dr. Masotti is a professor emeritus of Northwestern
University's Kellogg Graduate School of Management.
JOHN F. PODJASEK, JR. has been a director of the Company since May 1994.
Mr. Podjasek is the Managing Director of the private equity group at WestLB
Asset Management (USA) LLC since September 2000. Mr. Podjasek was the Managing
Director and co-head of the Private Markets Group of Forstmann -- Leff
International, Inc. from July 1997 to September 2000. Mr. Podjasek was retired
from November 1995 to July 1997. Previously, Mr. Podjasek was employed by
Allstate Insurance Company from 1966 to November 1995, most recently serving as
vice president of venture capital and real estate.
SHELI Z. ROSENBERG has been a director of the Company since August 1996.
Since January 2000, Mrs. Rosenberg has been Vice Chairman of EGI. Mrs. Rosenberg
was chief executive officer and president of EGI, Inc. from January 1999 to
December 1999. Mrs. Rosenberg was chief executive officer and president of EGI
from November 1994 to December 1998. She was a principal of the law firm of
Rosenberg & Liebentritt from 1980 to September 1997. Mrs. Rosenberg is a
director of CVS Corporation, an owner and operator of drug stores; Anixter;
Capital Trust; Dynergy Inc., a supplier of electricity and natural gas; and
Cendant Corporation, a travel related, real estate related and direct marketing
consumer and business services company. Mrs. Rosenberg is a trustee of Equity
Office and Equity Residential.
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MICHAEL A. TORRES has been a director of the Company since March 1993. Mr.
Torres has been president and a principal of Lend Lease Rosen Real Estate
Securities LLC, an investment management firm, since February 1995. Mr. Torres
is a trustee of Lend Lease Funds, a family of mutual funds.
GARY L. WATERMAN has been a director of the Company since March 1993. Since
1989, Mr. Waterman has been president of Waterman Limited, a real estate
services and investment company that he founded.
COMMITTEES OF THE BOARD; MEETINGS
Meetings: During the year ended December 31, 2000, the Board held four (4)
meetings and took three (3) actions by unanimous written consent. Each of the
present directors attended 75% or more of the total number of the meetings of
the Board and of its committees on which they served.
Executive Committee: The Executive Committee of the Board is composed of
Messrs. Zell, Walker and Chisholm. The Executive Committee has the authority,
within certain parameters set by the Board, to acquire, dispose of and finance
investments for the Company (including the issuance of additional limited
partnership interests of MHC Operating Limited Partnership ("OP Units")) and
execute contracts and agreements, including those related to the borrowing of
money by the Company, and generally exercise all other powers of the Board
except as prohibited by law. During the year ended December 31, 2000, the
Executive Committee did not hold any meetings.
Compensation Committee: The Compensation Committee of the Board is composed
of Messrs. Chisholm, Masotti and Waterman and Mrs. Rosenberg. The Compensation
Committee determines compensation for the Company's executive officers and
exercises all powers of the Board in connection with compensation matters,
including incentive compensation and benefit plans. The Compensation Committee
also has the authority to grant stock options, stock appreciation rights and
restricted stock awards in accordance with the Plan to the management of the
Company and its subsidiaries, other employees and consultants. During the year
ended December 31, 2000, the Compensation Committee held four (4) meetings.
Audit Committee: The Audit Committee of the Board is composed of Messrs.
Dobrowski and Torres and Mrs. Rosenberg. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the independent public accountants the plans and results of the
audit engagement, approves professional services provided by the Company's
independent public accountants, reviews the independence of the Company's
independent public accountants, considers the range of audit and non-audit fees
and reviews the adequacy of the Company's internal accounting controls. Each of
the Audit Committee members is an "independent" director within the meaning of
"independent" set forth in the New York Stock Exchange ("NYSE") listing
standards. The Board adopted a written charter for the Audit Committee on August
25, 2000, a copy of which is attached to this Proxy Statement as Appendix B.
During the year ended December 31, 2000, the Audit Committee held four (4)
meetings.
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EXECUTIVE COMPENSATION
The following tables show information with respect to the annual
compensation (including option grants) for services rendered to the Company for
the fiscal years ended December 31, 2000, December 31, 1999 and December 31,
1998 by the Company's Chief Executive Officer and those persons who were, at
December 31, 2000, the next four most highly compensated executive officers of
the Company.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
AWARDS
-------------------------
RESTRICTED SECURITIES
ANNUAL COMPENSATION COMMON UNDERLYING ALL OTHER
NAME AND --------------------------- STOCK AWARDS OPTIONS COMPENSATION
PRINCIPAL OCCUPATION YEAR SALARY($) BONUS($) ($)(1) GRANTED(#) ($)(2)
-------------------- ---- --------- -------- ------------ ---------- ------------
Howard Walker................. 2000 262,650 175,000 554,625 0 10,200
Chief Executive Officer 1999 255,000 175,000 644,563 0 8,000
and Member of 1998 240,000 75,000 1,049,978 10,000 9,600
Management Committee
Thomas P. Heneghan............ 2000 251,320 298,964(3)(4) 493,000 0 10,200
President, Chief Operating 1999 244,000 190,646(3) 473,750 0 8,000
Officer and Member 1998 230,000 75,000 928,103 0 9,600
of Management Committee
Ellen Kelleher................ 2000 234,840 275,000(4) 431,375 0 10,174
Executive Vice President, 1999 228,000 175,000 473,750 0 8,000
General Counsel, 1998 215,000 75,000 684,353 0 9,600
Secretary and Member of
Management Committee
John M. Zoeller............... 2000 147,227 198,964(3) 431,375 0 8,819
Vice President, Chief
Financial Officer, Treasurer
and Member of Management
Committee(5)
Gary W. Powell................ 2000 234,840 175,000 0 0 10,200
Executive Vice President -- 1999 228,000 175,000 0 0 8,000
Operations(6) 1998 215,000 75,000 684,353 0 9,600
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(1) The total number of shares of Restricted Common Stock held by each named
executive officer as of the end of fiscal year 2000, based on the value of
such shares at December 29, 2000, the last trading date of the year, was as
follows:
NUMBER OF SHARES VALUE AT 12/31/00
---------------- -----------------
Howard Walker................ 58,376 $1,692,904
Thomas P. Heneghan........... 49,000 $1,421,000
Ellen Kelleher............... 37,875 $1,098,375
Gary W. Powell............... 25,000 $ 725,000
John M. Zoeller.............. 7,875 $ 228,375
8
11
The number of shares of Restricted Common Stock granted to executive
officers in 2000, excluding shares awarded as part of the 2000 MBO bonus,
was as follows:
Howard Walker............................... 20,250
Thomas P. Heneghan.......................... 18,000
Ellen Kelleher.............................. 15,750
John M. Zoeller............................. 15,750
Gary W. Powell.............................. 0
The shares of Restricted Common Stock granted in 2000 to Messrs. Walker,
Heneghan and Zoeller and to Ms. Kelleher were made in two separate grants,
one on November 14, 2000 and the second on December 29, 2000. 50% of such
award of Restricted Common Stock vested December 29, 2000; 25% will vest
December 29, 2001; and 25% will vest December 29, 2002.
The number of shares of Restricted Common Stock which were granted on
December 1, 1999 and vested 50% on December 1, 1999, 25% on December 1,
2000 and will vest 25% on December 1, 2001 is as follows:
Howard Walker............................... 25,000
Thomas P. Heneghan.......................... 20,000
Ellen Kelleher.............................. 20,000
Gary W. Powell.............................. 0
Mr. Walker is a member of the Board. As a member of the Board, Mr. Walker
received an award of 2,000 shares of Restricted Common Stock on May 11,
1999 and an award of 2,000 shares of Restricted Common Stock on May 9,
2000. Each such award is subject to a vesting schedule, with one-third of
the award vesting six months from the date of the award; one-third vesting
one year from the date of the award; and the remainder vesting two years
from the date of the award.
The total number of shares of Restricted Common Stock which were granted on
November 24, 1998 and will vest 60% on December 31, 2001, 20% on December
31, 2002 and 20% on December 31, 2003, if certain performance benchmarks
are achieved, is as follows:
Howard Walker............................... 40,000
Thomas P. Heneghan.......................... 35,000
Ellen Kelleher.............................. 25,000
Gary W. Powell.............................. 25,000
The number of shares of Restricted Common Stock awarded in 1998, which
vested in their entirety on December 11, 2000, was as follows:
Howard Walker............................... 3,076
Thomas P. Heneghan.......................... 3,076
Ellen Kelleher.............................. 3,076
Gary W. Powell.............................. 3,076
All holders of Restricted Common Stock receive any dividends paid on such
shares.
---------------
(2) For 2000, includes employer matching contributions and/or profit sharing
contributions to the MHC Advantage Retirement Plan or affiliated company's
401(k) plan based on the maximum available profit sharing contribution,
although the Board has not yet determined if any profit sharing award will
be made.
(3) Under the Plan, an officer who receives a management-by-objective ("MBO")
bonus may request, subject to approval by the Compensation Committee, to
receive any portion of the bonus in the form of a stock award. To the extent
that an individual requests that up to 50% of his or her MBO bonus be paid
as a stock award, the stock award is calculated using the fair market value
of a share of Common Stock as of the date the bonus is paid. If more than
50% of the MBO bonus is to be paid as a stock award, the additional stock
award is calculated using the most recent selling price
9
12
for a share of Common Stock under the Company's Non-Qualified Employee Stock
Purchase Plan ("ESPP") or the price that would be used under the ESPP for
the offering period then in progress if the period ended the day the MBO
bonus was paid, which is less than the fair market value of a share of
Common Stock on the day the MBO bonus is paid. Bonus amounts reflected for
Messrs. Heneghan and Zoeller include the discount on shares with respect to
elections they made to receive more than 50% of the MBO bonus as a stock
award.
(4) Mr. Heneghan and Ms. Kelleher were each awarded $100,000 cash bonuses in May
2000 for their efforts in achieving a successful closing of the acquisition
of over 30 properties from partnerships controlled by Ellenburg Capital
Corporation.
(5) Mr. Zoeller became an executive officer of the Company in May 2000.
(6) Mr. Powell ceased to be an executive officer of the Company in January 2001.
OPTION GRANTS IN LAST FISCAL YEAR
There were no option grants to any of the executive officers named in the
Summary Compensation table above in fiscal year 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED ON VALUE FY-END (#) FY-END($)(1)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- -------------
Howard Walker............................ 0 0 25,000/0 221,250/0
Thomas P. Heneghan....................... 0 0 33,000/0 395,250/0
Ellen Kelleher........................... 0 0 21,000/0 181,875/0
Gary W. Powell........................... 7,500 84,613 27,500/0 278,438/0
John M. Zoeller.......................... 0 0 2,999/1,001 23,349/5,088
---------------
(1) Calculated by determining the difference between (a) $29.00, the per share
value of the Company's Common Stock at the end of fiscal year 2000, based on
the value of such shares on December 29, 2000, the last trading day of the
year, and (b) the exercise price of in-the-money options.
COMPENSATION OF DIRECTORS
The Company paid each of its non-employee directors an annual fee of
$30,000 in 2000. In addition, directors who serve on the Audit Committee,
Executive Committee or Compensation Committee receive an additional $1,000 per
annum for each committee on which they serve. Committee chairs receive an
additional $500 per annum. Directors who are employees of the Company are not
paid any directors' fees or committee fees. The Company reimburses the directors
for travel expenses incurred in connection with their activities on behalf of
the Company. Additionally, on the date of the first Board meeting after each
Annual Meeting of Stockholders, each director then in office will receive at the
director's option either an annual grant of options to purchase 10,000 shares of
Common Stock at the then-current market price or an annual grant of 2,000 shares
of Restricted Common Stock.
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13
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The Compensation Committee members for 2000 were Messrs. Chisholm, Masotti
and Waterman and Mrs. Rosenberg.
No Compensation Committee interlocking relationships existed in 2000.
For a description of certain transactions with Board members or their
affiliates, see "Certain Relationships and Related Transactions."
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee determines the compensation of the Company's
executive officers, including those named in the Summary Compensation Table, and
guides the Company's overall philosophy towards compensation of its employees.
The Compensation Committee believes that the compensation of the Company's Chief
Executive Officer and all of the Company's executive officers should be both
competitive and based on individual and Company performance.
The Company's compensation policy takes into account a review of local and
national peer group salary surveys focusing primarily on the SNL Executive
Compensation Review 2000 for REITs ("SNL Survey"). The SNL Survey contains
detailed compensation and performance data on publicly traded REITs. The
Compensation Committee believes the SNL Survey provides comparable salary data
for the Company. The Compensation Committee believes that its compensation
levels compare favorably to its peer groups described in the surveys and targets
median to high compensation levels for its executive officers. This is not the
same peer group that is used in the Performance Graph on page 15.
During the fiscal year ended December 31, 2000, there were three major
components of executive compensation: base salary, bonuses and Restricted Common
Stock. This salary structure is designed to attract and retain highly qualified
executives. This is accomplished by providing competitive base salaries and
meaningful incentives, both short-term and long-term, intended to reward
performance and retain experienced management. Benchmarks for determining base
salary and bonus levels include targeted funds from operations ("FFO") levels,
strength of the balance sheet and creation of stockholder value. Each
performance measure carries equal weight.
The Company's executive salary structure is reviewed annually by the
Compensation Committee using the SNL Survey for guidance. In addition, the
entire Company's salary structure is reviewed annually. Where salary information
is unavailable for a particular position, other positions having similar
responsibilities either within the Company or in companies of comparable size
are used. Salary increases are based both upon each officer's (including the
Chief Executive Officer's) performance and contribution to the Company's
performance. Also, the Compensation Committee has deliberately kept base
salaries at levels which may compare less favorably with comparable positions in
other companies. This allows the Compensation Committee to reward executive
officers' performance through bonuses and long-term incentives such as
Restricted Common Stock.
Further short-term and mid-term incentives for executive officers are
accomplished through the Company's MBO bonus plan. The MBO bonus plan involves
the Company and the executive officer jointly setting goals for such executive
officer at the beginning of each year.
In determining the amount of the MBO bonuses for 2000, the following
criteria were taken into account: achieving targeted FFO levels; identifying and
consummating acquisitions; and the strength of the balance sheet. In 2000, the
Company exceeded targeted FFO levels through reduction of certain expenses and
increases in revenue achieved through increases in rental rates and increases in
occupancy at the Company's communities. During 2000, the Company maintained its
balance sheet at an appropriate debt-to-equity level. In determining the total
MBO bonus for each executive officer, the
11
14
Compensation Committee also considered the amount of other awards and benefits
which were included in total compensation of such executive officer.
MBO bonuses, if paid, are paid to the executive officers of the Company 50%
in cash and 50% in a stock award calculated using the fair market value of a
share of Common Stock on the date the bonus is paid. The officer may request,
subject to the Compensation Committee's approval, to receive more or less of the
bonus in the form of a stock award. To the extent that the officer requests that
more of the MBO bonus be paid as a stock award, the stock award is calculated
using the most recent selling price for a share of Common Stock under the ESPP
or the price that would be used under the ESPP for the offering period then in
progress if the period ended the day the MBO bonus was paid.
To provide long-term incentives for executive officers and as a means to
retain qualified executive officers, the Company has created performance and
tenure-based Restricted Stock Award Programs.
In 1997, a five-year incentive program tied to increases in stockholder
value was implemented (the "1997 Program"). Shares are awarded under the 1997
Program only if annual performance benchmarks (based upon increases in share
price plus distributions to stockholders) are achieved. Shares that are awarded
are then subject to a vesting schedule (50% immediately and 25%, respectively,
on the next two anniversaries of the award). Executive officers received awards
under the 1997 Program in 1997 and 2000. In 2000, executive officers received
the awards set forth in footnote 1 to the Summary Compensation Table herein.
In 1998, the Company implemented a new incentive program tied to achieving
targeted levels of FFO per share through the year 2003 (the "1998 Program"). On
November 24, 1998, awards of Restricted Common Stock were granted to executive
officers and other members of senior management under the 1998 Program. In 1999
and early 2001, awards were made under the 1998 Program to certain additional
members of senior management (excluding executive officers who had received
awards in 1998). Effective January 1, 2001, Mr. Zoeller was awarded 25,000
shares under the 1998 Program. Any restricted stock awarded under the 1998
Program will vest over a five-year period, with lapsing of restrictions tied to
achieving targeted levels of FFO per share. No vesting has occurred on any
awards under the 1998 Program as of December 31, 2000.
In making the award to Mr. Zoeller, the Compensation Committee recognized
him as a material part of the Company's executive management. The Compensation
Committee determined that it was in the Company's best interests to incentivize
Mr. Zoeller and align his long-term interests with those of the Company.
In December 1999, in light of the highly competitive labor market, the
Compensation Committee determined that further stock awards were necessary in
order to retain executive management. The Compensation Committee believed it was
important to recognize certain members of senior management with the granting of
stock awards. Three executive officers, Messrs. Walker and Heneghan and Ms.
Kelleher, were granted stock awards in 1999 of 25,000, 20,000 and 20,000 shares,
respectively. These awards vested 50% immediately and are subject to additional
vesting of 25% each over the next two years. As of December 31, 2000, 75% of the
shares awarded to each executive officer had vested.
The vesting of Restricted Stock awards is subject to acceleration in the
case of death, disability and involuntary termination not for cause or change of
control of the Company. The Compensation Committee recognizes that the interests
of stockholders are best served by giving key employees the opportunity to
participate in the appreciation of the Company's Common Stock.
To encourage Mr. Walker to remain employed by the Company, the Company has
entered into a deferred compensation agreement with Mr. Walker. The agreement,
entered into in December 2000, provides Mr. Walker with a salary benefit
commencing May 17, 2004. Pursuant to the agreement, commencing on such date Mr.
Walker will receive an annual deferred compensation payment in the amount of
$200,000 for a ten year period. The Company has purchased an annuity for
approximately $1,200,000 in order to fund its future obligations under the
agreement. The annuity is held by a trust for the benefit of Mr. Walker and is
subject to the claims of the creditors of the Company.
12
15
At the end of 2000, the Compensation Committee granted options to purchase
Common Stock to many of the Company's employees. The executive officers of the
Company were not granted options.
The Compensation Committee believes that the compensation program properly
rewards the Company's officers for achieving improvements in the Company's
performance and serving the interests of its stockholders.
The Company may or may not structure compensation arrangements to satisfy
the requirements for performance-based compensation under Section 162(m) of the
Code.
Respectfully submitted,
Donald S. Chisholm
Louis H. Masotti, Ph.D.
Sheli Z. Rosenberg
Gary L. Waterman
AUDIT COMMITTEE REPORT
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board. Management has the primary responsibility for the financial
statements and the reporting process, including the system of internal controls.
In fulfilling its oversight responsibilities, the Audit Committee reviewed the
audited financial statements in the Company's Annual Report with management,
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent accountants, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Audit Committee under generally accepted auditing standards. In
addition, the Audit Committee has discussed with the independent accountants,
the independent accountants' independence from management and the Company,
including the matters in the written disclosures required by the Independence
Standards Board, and considered the compatibility of non-audit services provided
to the Company by the independent accountants with the accountants'
independence.
The Audit Committee discussed with the Company's independent accountants
the overall scope and plans for their audit. The Audit Committee meets with the
independent accountants, with and without management present, to discuss the
results of their examinations, their evaluation of the Company's internal
controls and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board (and the Board has approved) that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000 for filing with the SEC.
Respectfully submitted,
Thomas E. Dobrowski
Sheli Z. Rosenberg
Michael A. Torres
13
16
AUDIT FEES
The aggregate fees billed (or expected to be billed) for professional
services rendered by the independent accountants for the audit of the Company's
financial statements for fiscal year 2000 and the reviews by the independent
accountants of the financial statements included in the Company's Forms 10-Q for
fiscal year 2000 were $122,500.
ALL OTHER FEES
There were no fees billed for professional services rendered by the
independent accountants for any financial systems design and implementation in
fiscal year 2000. The aggregate fees billed (or expected to be billed) for
services rendered by the independent accountants to the Company and not
otherwise described under AUDIT FEES for fiscal year 2000 were $120,100.
The Audit Committee has determined that the independent accountants'
provision of the non-audit services described above is compatible with
maintaining the independent accountants' independence.
14
17
PERFORMANCE GRAPH
The following performance graph compares total stockholders' return on the
Common Stock since December 31, 1995 with the Standard and Poors ("S&P") 500
Stock Index and the index of equity REITs prepared by NAREIT. The Common Stock
price performance graph assumes an investment of $100 in the Common Stock on
December 31, 1995 and an investment of $100 in the two indexes on December 31,
1995 and further assumes the reinvestment of all dividends. Equity REITs are
defined as those REITs which derive more than 75% of their income from equity
investments in real estate assets. The NAREIT equity index includes all tax
qualified REITs listed on the NYSE, the American Stock Exchange or the NASDAQ
Stock Market. Common Stock price performance presented for the period from
December 31, 1995 through December 31, 2000 is not necessarily indicative of
future results.
[PERFORMANCE CHART]
-----------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
-----------------------------------------------------------------------------------------------------------------------
MHC Return % 41.44 22.57 -1.69 3.31 27.38
-----------------------------------------------------------------------------------------------------------------------
Cum $ $100.00 $141.44 $173.35 $170.42 $176.06 $224.25
-----------------------------------------------------------------------------------------------------------------------
S&P 500 Return % 22.96 33.36 28.58 21.05 -9.10
-----------------------------------------------------------------------------------------------------------------------
Cum $ $100.00 $122.96 $163.98 $210.84 $255.22 $231.98
-----------------------------------------------------------------------------------------------------------------------
NAREIT-Equity Return % 35.27 20.26 -17.50 -4.62 26.37
-----------------------------------------------------------------------------------------------------------------------
Cum $ $100.00 $135.27 $162.68 $134.21 $128.01 $161.76
-----------------------------------------------------------------------------------------------------------------------
15
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of the Record Date (except as
noted), with respect to each person who is known by the Company's management to
be the beneficial owner of more than 5% of the outstanding shares of Common
Stock.
AMOUNT AND NATURE OF
NAME AND BUSINESS ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------------- -------------------- ----------
Samuel Zell and entities controlled by
Samuel Zell and Ann Lurie and entities
controlled by Ann Lurie(2)(3)............................. 3,240,359 15.3%
Two North Riverside Plaza
Chicago, Illinois 60606
General Motors Hourly--Rate Employes
Pension Trust and General Motors Salaried
Employes Pension Trust(4)................................. 2,271,198 10.7%
c/o General Motors Investment
Management Corporation
767 Fifth Avenue
New York, New York 10153
Morgan Stanley Dean Witter & Co.(5)......................... 2,193,515 10.4%
1585 Broadway
New York, New York 10036
FMR Corp(6)................................................. 1,270,500 6.0%
82 Devonshire Street
Boston, Massachusetts 02109
European Investors, Inc.(7)................................. 1,203,560 5.7%
667 Madison Avenue
New York, New York 10021
---------------
(1) The amount of Common Stock beneficially owned is reported on the basis of
SEC regulations governing the determination of beneficial ownership of
securities. The percentage of Common Stock beneficially owned by a person
assumes that all OP Units held by the person are exchanged for Common Stock,
that none of the OP Units held by other persons are so exchanged, that all
options exercisable within 60 days of the Record Date to acquire Common
Stock held by the person are exercised and that no options to acquire Common
Stock held by other persons are exercised.
16
19
(2) Includes Common Stock, OP Units which are exchangeable for Common Stock, and
options to purchase Common Stock which are currently exercisable or
exercisable within 60 days owned as follows:
COMMON STOCK OP UNITS OPTIONS
------------ -------- -------
ENTITIES CONTROLLED BY SAMUEL ZELL:
Samuel Zell......................................... 3,186 -- 359,999
Samuel Zell Revocable Trust......................... 18,578 -- --
Samstock/SZRT, L.L.C................................ 294,133 13,641 --
Samstock/ZGPI, L.L.C................................ 6,003 -- --
Samstock, L.L.C..................................... 346,000 601,665 --
Samstock/ZFT, L.L.C................................. -- 187,278 --
EGI Holdings, Inc................................... -- 579,873 --
Rochelle Zell....................................... 4,000
Donald S. Chisholm Trust............................ 7,000 -- --
ENTITIES CONTROLLED BY ANN LURIE:
Anda Partnership.................................... -- 233,694 --
LFT Partnership..................................... -- 5,436 --
EGIL Investments, Inc............................... -- 579,873 --
------- --------- -------
TOTALS:............................................. 678,900 2,201,460 359,999
======= ========= =======
Mr. Zell disclaims beneficial ownership of 11,000 shares of Common Stock
and 819,003 OP Units because the economic benefits with respect to such
shares of Common Stock are attributable to other persons. EGIL Investments,
Inc. has beneficial ownership of 579,873 OP Units. Under a stockholders'
agreement dated December 31, 1999 among certain Zell family trusts and
certain Lurie family trusts, (a) the Zell trusts have the power to vote and
to dispose of the OP Units beneficially owned by EGI Holdings, Inc. and (b)
the Lurie trusts have the power to vote and to dispose of the OP Units
beneficially owned by EGIL Investments, Inc.
(3) Includes 1,962,330 OP Units (exchangeable into 1,962,330 shares of Common
Stock) and 646,136 shares of Common Stock which are pledged as collateral
for loans to five financial institutions. Under the loan agreements, the
financial institutions cannot vote (assuming exchange of the OP Units for
Common Stock) or exercise ownership rights relating to the pledged OP Units
or shares of Common Stock unless there is an event of default.
(4) The shares of Common Stock reported herein are held of record by Mellon
Bank, N.A. acting as the trustee (the "Trustee") for the General Motors
Hourly-Rate Employes Pension Plan and the General Motors Salaried Employes
Pension Plan (collectively, the "GM Trusts"). The GM Trusts are trusts under
and for the benefit of certain employee benefit plans of General Motors
Corporation ("GM") and its subsidiaries. These shares may be deemed to be
owned beneficially by GMIMCo, a wholly owned subsidiary of GM. GMIMCo's
principal business is providing investment advice and investment management
services with respect to the assets of certain employee benefit plans of GM
and its subsidiaries and associated entities. GMIMCo is serving as the GM
Trusts' investment manager with respect to these shares and in that capacity
it has the sole power to direct the Trustee as to the voting and disposition
of these shares. Because of the Trustee's limited role, beneficial ownership
of the shares by the Trustee is disclaimed.
(5) Pursuant to a Schedule 13G/A filed with the SEC for calendar year 2000,
Morgan Stanley Dean Witter & Co. ("Morgan Stanley") and its wholly-owned
subsidiary, Morgan Stanley Dean Witter Investment Management Inc. ("Morgan
Stanley, Inc.") are the beneficial owners of 2,193,515 and 2,183,200 shares
of Common Stock, respectively, through accounts managed by them on a
discretionary basis. Morgan Stanley has shared voting power over 1,831,705
shares and shared dispositive power over 2,193,515 shares. Morgan Stanley,
Inc. has shared voting power over 1,821,400 shares and shared dispositive
power over 2,183,200 shares.
17
20
(6) Pursuant to a Schedule 13G/A filed with the SEC for calendar year 2000,
Fidelity Management & Research Company, a wholly-owned subsidiary of FMR
Corp. ("FMR") and an investment advisor registered under Section 203 of the
Investment Advisors Act of 1940 ("Investment Act"), is the beneficial owner
of 1,270,500 shares of Common Stock as a result of acting as investment
advisor to various investment companies under the Investment Act. Pursuant
to the Schedule 13G/A filed by FMR, FMR has sole dispositive power over such
shares.
(7) Pursuant to a Schedule 13G filed with the SEC for calendar year 2000,
European Investors Inc. ("European") and its wholly owned subsidiary, EII
Realty Securities Inc. ("EII"), are the beneficial owners of 1,203,560
shares of Common Stock as a result of acting as investment advisor to
various investment companies under the Investment Act. European has sole
voting power over 191,400 shares, shared voting power over 103,200 shares,
sole dispositive power over 217,560 shares and shared dispositive power over
31,200 shares. EII has sole voting power over 851,600 shares, shared voting
power over 103,200 shares and sole dispositive power over 954,800 shares.
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21
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the Record Date, certain information
with respect to the Common Stock that may be deemed to be beneficially owned by
each director of the Company, by the five executive officers named in the
Summary Compensation Table and by all such executive officers and directors as a
group. Unless otherwise indicated, the address for all executive officers and
directors is c/o Manufactured Home Communities, Inc., Two North Riverside Plaza,
Suite 800, Chicago, Illinois 60606. Unless otherwise indicated, each person has
sole investment and voting power, or shares such power with his or her spouse,
with respect to the shares set forth in the following table.
SHARES OF SHARES UPON PERCENT
COMMON EXERCISE OF OF
NAME OF BENEFICIAL HOLDER STOCK(1) OPTIONS(2) TOTAL(1) CLASS
------------------------- --------- ----------- -------- -------
Donald S. Chisholm(3).............................. 44,964 40,000 84,964 *
Thomas E. Dobrowski................................ -- 76,666 76,666 *
David A. Helfand................................... 142,107 127,000 269,107 1.3%
Thomas P. Heneghan................................. 239,450 33,000 272,450 1.3%
Ellen Kelleher..................................... 206,436 21,000 227,436 1.1%
Louis H. Masotti, Ph.D............................. 8,819 20,000 28,819 *
John F. Podjasek, Jr............................... 7,851 66,666 74,517 *
Gary W. Powell..................................... 292,052 27,500 319,552 1.5%
Sheli Z. Rosenberg(4).............................. 74,391 108,999 183,390 *
Michael A. Torres.................................. 11,644 55,000 66,644 *
Howard Walker...................................... 223,269 25,000 248,269 1.2%
Gary L. Waterman................................... 11,102 60,000 71,102 *
Samuel Zell(5)..................................... 2,641,230 359,999 3,001,229 14.2%
John M. Zoeller.................................... 49,909 2,999 52,908 *
All directors and executive officers as a group (14
persons) including the above-named persons....... 3,953,224 1,023,829 4,977,053 23.5%
========= ========= ========= ====
---------------
* Less than 1%
(1) The shares of Common Stock beneficially owned are reported on the basis of
SEC regulations governing the determination of beneficial ownership of
securities. The percentage of Common Stock beneficially owned by a person
assumes that all OP Units held by the person are exchanged for Common Stock,
that none of the OP Units held by other persons are so exchanged, that all
options exercisable within 60 days of the Record Date to acquire Common
Stock held by the person are exercised and that no options to acquire Common
Stock held by other persons are exercised.
(2) The amounts shown in this column reflect shares of Common Stock subject to
options granted under the Plan which are currently exercisable or
exercisable within 60 days of the date of this table.
(3) Includes 7,000 shares of Common Stock owned by the Donald S. Chisholm Trust
(the "Chisholm Trust"), Samuel Zell, Trustee. Under SEC regulations, Mr.
Zell may be deemed to be the beneficial owner of all the shares which are
beneficially owned by the Chisholm Trust. Mr. Zell disclaims beneficial
ownership of the shares owned by the Chisholm Trust.
(4) Includes 11,530 OP Units beneficially owned by Mrs. Rosenberg which are
exchangeable into 11,530 shares of Common Stock.
(5) Includes 1,962,330 OP Units which are exchangeable into 1,962,330 shares of
Common Stock and 670,686 shares of Common Stock beneficially owned by
entities in which Mr. Zell has a pecuniary interest or which he may be
deemed to control. See "Security Ownership of Certain Beneficial Owners."
Mr. Zell disclaims beneficial ownership of 579,873 OP Units which are
exchangeable into 579,873 shares of Common Stock.
19
22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company occupies office space owned by an affiliate of EGI, an entity
controlled by Mr. Zell, at Two North Riverside Plaza, Chicago, Illinois 60606.
In addition, pursuant to an administrative services agreement, EGI or certain of
its affiliates provide the Company and its subsidiaries with certain
administrative, office facility and other services with respect to certain
aspects of the Company's business, including, but not limited to, administrative
support and other services. Amounts incurred for these services totaled
approximately $26,000 for the year ended December 31, 2000. There were no
significant amounts due to these affiliates at December 31, 2000. Certain
related entities, owned by persons affiliated with Mr. Zell, provided investor
relations and insurance brokerage services (excluding reimbursements for
insurance premiums paid to third parties) and office space to the Company.
Amounts incurred for these services totaled approximately $442,000 for the year
ended December 31, 2000. The amount due to these affiliates at December 31, 2000
was $32,000.
The independent members of the Board have reviewed and approved the rates
charged by EGI and its affiliates in connection with the lease of the Company's
office space. Additionally, the budget for services rendered to the Company and
its subsidiaries by EGI and its affiliates is submitted to, reviewed and
approved by the Audit Committee.
The executive officers listed below are indebted to the Company as a result
of purchasing Common Stock from the Company. The loans accrue interest, payable
quarterly in arrears at the applicable Federal rate, as defined in the Code, in
effect at the time the loans were made. The loans are recourse to the respective
individuals; are collateralized by a pledge of the shares of Common Stock
purchased; and are due and payable upon the first to occur of the employee
leaving the Company or March 3, 2003 for the loans bearing interest at 6.77% and
January 2, 2005 for the loans bearing interest at 5.91%. All dividends paid on
pledged shares in excess of the then marginal tax rate are used to pay interest
and principal on the loans:
LARGEST AGGREGATE BALANCE AS OF
NAME AMOUNT OWED IN 2000 DECEMBER 31, 2000 INTEREST RATE
---- ------------------- ----------------- -------------
Howard Walker................................ $910,071 $891,950 5.91%
Thomas P. Heneghan........................... 860,248 822,970 5.91%
Ellen Kelleher............................... 843,988 797,184 5.91%
Gary W. Powell............................... 713,208 595,779 6.77%
Gary W. Powell............................... 886,052 880,360 5.91%
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16(a)")
requires the Company's officers and directors, and persons who own more than 10%
of its Common Stock, to file reports of ownership and changes of ownership with
the SEC and the NYSE. Officers, directors and greater than 10% stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on the Company's review of the copies of those forms received
by the Company, or written representations from officers and directors that no
Forms 5 were required to be filed during the fiscal year ended December 31,
2000, all appropriate Section 16(a) forms were filed in a timely manner.
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP served as the Company's independent accountants for the
year ended December 31, 2000. There have been no disagreements between the
Company and its independent accountants relating to accounting procedures,
financial statement disclosures, or related items. Representatives of Ernst &
Young LLP are expected to be available at the Meeting and will have an
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opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
STOCKHOLDER PROPOSALS
Under regulations adopted by the SEC, stockholder proposals intended to be
presented at the 2002 Annual Meeting of Stockholders (the "2002 Meeting") must
be received by the Secretary of the Company no later than December 3, 2001, in
order to be considered for inclusion in the Company's proxy statement and on the
proxy card that will be solicited by the Board in connection with the 2002
Meeting.
In addition, if a stockholder desires to bring business before an annual
meeting which is not the subject of a proposal for inclusion in the Company's
proxy materials, the stockholder must follow the advance notice procedures
outlined in the Company's Bylaws. The Company's Bylaws provide that in order for
a stockholder to nominate a candidate for election as a director at a meeting or
propose business for consideration at such meeting, notice must generally be
given to the Secretary of the Company no more than 90 days nor less than 60 days
prior to the first anniversary of the preceding year's meeting. The Meeting is
scheduled for May 8, 2001. Therefore, if a stockholder desires to present a
proposal for the 2002 Meeting without seeking to include the proposal in the
Company's proxy materials, the Company must receive notice of the proposal no
earlier than February 8, 2002 and no later than March 9, 2002. The fact that the
Company may not insist upon compliance with these requirements should not be
construed as a waiver by the Company of its right to do so at any time in the
future. The Company reserves the right to reject, rule out of order, or take
other appropriate action with respect to any proposal that does not comply with
these and other applicable requirements.
OTHER MATTERS
The Board is not aware of any business which will be presented at the
Meeting other than those matters set forth in the accompanying Notice of Annual
Meeting of Stockholders. If any other matters are properly presented at the
Meeting for action, it is intended that the persons named in the accompanying
proxy and acting thereunder will vote in accordance with their best judgment on
such matters.
By Order of the Board of Directors
/s/ Ellen Kelleher
Ellen Kelleher
Secretary
March 30, 2001
Chicago, Illinois
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APPENDIX A
MANUFACTURED HOME COMMUNITIES, INC.
1992 STOCK OPTION AND STOCK AWARD PLAN
AS AMENDED AND RESTATED EFFECTIVE MARCH 23, 2001
1. Purpose. The Manufactured Home Communities, Inc. 1992 Stock Option and
Stock Award Plan (the "Plan") was established, effective December 18, 1992, by
Manufactured Home Communities, Inc., a Maryland corporation (the "Company"), to
secure for the Company and its stockholders the benefits arising from capital
ownership by those employees, officers, directors and consultants of the Company
and its "Subsidiaries" (defined below) who are and will be responsible for its
future growth and continued success. The Plan has been amended and restated from
time to time and is hereby amended and restated, as set forth herein. The Plan
provides a means whereby eligible employees, officers, directors and consultants
of the Company and its Subsidiaries may receive: (i) shares of the common stock
of the Company ("Shares"), subject to conditions and restrictions described
herein and otherwise determined by the "Board" (defined below) ("Stock Awards");
and (ii) options to purchase Shares ("Options"). The term "Subsidiary" means
each entity the Company owns or controls, directly or indirectly, either through
voting control, economic interest or as a general partner, provided that, for
purposes of "Incentive Stock Options" (defined below), such term shall have the
meaning given in Section 424 of the Internal Revenue Code of 1986, as amended
(the "Code").
2. Administration. The authority to manage and control the operation and
administration of the Plan and interpret the provisions of the Plan shall be
vested in a committee (the "Committee") consisting of two (2) or more members of
the Board of Directors of the Company (the "Board"), each of whom is a
"disinterested person," as such term is defined in Section 240.16b-3(c)(2)(i) of
the General Rules and Regulations promulgated under the Securities Exchange Act
of 1934 (the "Act") (and, in addition, with respect to any grant of Options, or
the determination of conditions and restrictions intended to make a Stock Award
or Option constitute "performance-based compensation," within the meaning of
Section 162(m)(4)(C) of the Code, each of whom is an "outside director," as such
term is defined in Treasury Regulation Section 1.162-27(e)(3)), who shall be
appointed by, and may be removed by, the Board, provided that the Committee
shall have no authority, power or discretion to determine the number or timing
of Options or Stock Awards granted pursuant to paragraph 3(b), or to alter the
terms and conditions of Options as set forth therein. Any interpretation of the
Plan by the Committee and any decision made by the Committee hereunder is final
and binding on all persons. No member of the Committee shall be liable for any
action or determination made with respect to the Plan.
3. Participation.
(a) General. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate from time to time the employees,
officers, directors and consultants of the Company and its Subsidiaries to
whom Options and/or Stock Awards are to be granted ("Grantees"), the number
of Shares subject to such Options and/or Stock Awards to be granted to each
Grantee and the terms, conditions and restrictions applicable to such
Options and/or Stock Awards. Notwithstanding the foregoing, the maximum
number of Shares with respect to which Options may be granted during any
calendar year to any Grantee is 250,000 Shares.
(b) Directors. Options to purchase (i) ten thousand (10,000) Shares
shall be awarded to each member of the Board on the date of each meeting of
the Board held immediately after each annual meeting of the Company's
stockholders, and (ii) the product of ten thousand (10,000) Shares
multiplied by a fraction, the numerator of which is the number of calendar
quarters (or any portion thereof) such director will serve before the next
annual meeting of the Company's stockholders and the denominator of which
is four (4), shall be awarded to each new member of the Board on the date
he or she first becomes a member of the Board. As an alternative to the
foregoing, if a member of the Board notifies the Company of the director's
election to receive a
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Stock Award in lieu of Options, prior to the date on which such Options
would be granted to such director (or prior to such other deadline as is
established by the Committee), the Company shall grant a Stock Award to
such director equal to two thousand (2,000) Shares (or, for purposes of
clause (ii), the product of two thousand (2,000) multiplied by the fraction
described therein). Such Stock Award shall be in lieu of the Options grant
and (unless the circumstances described in paragraph 5(a)(iii) have
occurred) shall be (x) entirely forfeited to the Company upon the
termination of the Grantee's "Service" (defined below) before the six (6)
month anniversary of the date of grant of the Stock Award ("Date of
Grant"), (y) so forfeited with respect to two-thirds (2/3) of such Shares
upon such termination on or after the six (6) month and before the first
anniversary of the Date of Grant; and (z) so forfeited with respect to
one-third (1/3) of such Shares upon such termination on or after the first
and before the second anniversary of the Date of Grant. A director shall
become a Grantee under the Plan on the first date on which the director is
awarded Options or a Stock Award under the Plan. Directors may, in addition
to Options and Stock Awards awarded under this paragraph 3(b), also be
entitled to Options and Stock Awards under paragraph 3(a).
(c) Employee Bonus. As of the date on which a distribution (the
"Bonus") is made under the Company's management by objectives bonus plan, a
Stock Award will be made to each individual who (i) receives a Bonus, and
(ii) has (A) a title of Vice President or more senior, or (B) a target
bonus range of up to at least twenty percent (20%) of base salary. The
"Grant Value" (defined below) of such Stock Award, as of such date, shall
be in an amount equal to fifty percent (50%) of the Bonus (the "Award
Portion") and shall be made in lieu of fifty percent (50%) of the Bonus
otherwise payable to such individual. All Stock Awards shall be in full
satisfaction of the applicable portion of the Bonus, shall be made without
other payment therefor, and shall be governed by paragraph 5. Each
individual who would receive a Stock Award under this paragraph 3(c) if the
individual received a Bonus may request, subject to approval by the
Committee, to receive more or less than the Award Portion of such
individual's Bonus in the form of a Stock Award. To the extent that the
individual requests that more of the Bonus be paid as a Stock Award, the
additional Stock Award shall equal a number of Shares determined by
dividing the portion of the Bonus in excess of the Award Amount by a price
selected by the Committee that is either the most recent selling price of a
Share under the Company's Non-Qualified Employee Stock Purchase Plan
("ESPP") or the price that would be used under the ESPP for the offering
period then in progress if the period ended on the day the Bonus was paid.
Such opportunity provided under this paragraph 3(c) is subject to
compliance with all applicable federal and state securities laws.
(d) Subject to paragraph 14, for all purposes of the Plan:
(i) the "Grant Value" of grants made pursuant to paragraph 3(c)
shall equal the "Fair Market Value" (defined below) of a Share as of the
date on which the Bonus is distributed; and
(ii) the "Fair Market Value" of a Share shall equal the closing
price paid for Shares on the New York Stock Exchange on the first
trading day immediately preceding the date for which such Fair Market
Value is being determined.
4. Shares Subject to the Plan. Subject to the provisions of paragraph 14,
the aggregate number of Shares for which Options and Stock Awards may be granted
under the Plan shall not exceed six million (6,000,000) Shares. If any Options
or Stock Award granted pursuant to the Plan shall expire, be forfeited or
terminate for any reason (including without limitation the settlement in cash in
lieu of exercise of an Option), the number of Shares then subject to the Options
or Stock Award shall again be available for grant under the Plan unless the Plan
shall have terminated. No more than half of the two million (2,000,000) Shares
added to the Plan in connection with the adoption of the Second Amended and
Restated 1992 Stock Option and Stock Award Plan may be subject to Stock Awards
from and after the date thereof. In addition, no more than eight hundred
thousand (800,000) of the two million
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(2,000,000) Shares added to the Plan in connection with adoption of the 1992
Stock Option and Stock Award Plan, as amended and restated effective March 23,
2001, may be subject to Stock Awards from and after the date thereof.
5. Stock Awards.
(a) Stock Awards granted under paragraph 3(a) shall be subject to the
following conditions and/or restrictions:
(i) A Stock Award may be subject to such conditions and
restrictions as are established by the Committee as of the Date of
Grant. The Committee may, but need not, establish performance goals to
be achieved within such performance periods as may be selected by it,
using such measures of individual performance or the performance of the
Company and/or one (1) or more of its Subsidiaries as it may select. Any
Stock Award containing conditions, terms or restrictions as established
by the Committee but not set forth herein shall be described in such
term sheets and supplements hereto as are approved by the Committee from
time to time.
(ii) A Stock Award that has not vested or continues to be subject
to restrictions (including any restrictions set forth on term sheets or
supplements hereto approved by the Committee from time to time) will be
forfeited to the Company upon the termination of the Grantee's Service,
unless the circumstances described in paragraph 5(a)(iii) have occurred
(it being the express intent of this document that Stock Awards will not
be forfeited in the event of a "Change in Control" (defined below) of
the Company, or the termination of the Grantee's Service as a result of
any of the circumstances described in paragraph 5(a)(iii)). An
individual's "Service" shall continue until he or she is no longer an
employee, officer, director, trustee or consultant of the Company or an
Extended Company. The term "Extended Company" means a Subsidiary or each
other company designated by the Committee. The Extended Companies shall
be set forth in Exhibit A, as it may be amended from time to time upon
the reasonable determination of the Committee (it being the intention of
the Committee that Extended Companies shall have a reciprocal provision
in similar plans provided for their employees).
(iii) Notwithstanding the foregoing, the conditions and
restrictions described in paragraph 5(a)(i) and (ii) (including in term
sheets or supplements hereto approved by the Committee from time to
time) that are contained in the terms of any Stock Award granted
pursuant to paragraph 3(a), and the restrictions described in paragraph
3(b), shall immediately lapse and be of no effect, and the Stock Awards
subject to such conditions and restrictions shall fully vest in favor of
the Grantees, in the event of (I) a "Change in Control" of the Company,
or (II) the termination of a Grantee's Service:
(A) because of the Grantee's "disability" (as defined in
paragraph 11) or death,
(B) with respect to a Grantee who is an employee, director or
officer, in connection with his or her retirement as determined by
the Committee in its reasonable discretion,
(C) by the Company under circumstances that the Committee
determines in its reasonable discretion constitute a layoff or other
similar reduction in the workforce,
(D) with respect to a Grantee who is a consultant, in connection
with his or her retirement as determined by the Committee in its
reasonable discretion, or
(E) with respect to a Grantee who is a member of the Board, in
connection with his or her failure to be re-elected to the Board.
For purposes of this Plan, a "Change in Control" shall be deemed to occur
upon: (1) the acquisition (either in a single transaction or a series of
related transactions) by any entity, person or group of more than
twenty-five percent (25%) of the outstanding Shares from the holders
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thereof; (2) a merger or consolidation of the Company (either in a single
transaction or in a series of related transactions) with one (1) or more
other entities as a result of which the ultimate holders of outstanding
Shares immediately prior to such transaction hold less than seventy-five
percent (75%) of the shares of beneficial ownership of the surviving or
resulting corporation (considering for such purpose only the shares of the
surviving or resulting corporation that they hold by virtue of their
holding Shares immediately prior to such transaction); (3) a direct or
indirect transfer (either in a single transaction or a series of related
transactions) of substantially all of the property of the Company other
than to an entity of which the Company directly or indirectly owns at least
seventy-five percent (75%) of the shares of beneficial ownership; or (4)
the election to the Board (either in one election or in a series of related
elections) of directors constituting more than one-third (1/3) of the
directors then in office, without the recommendation of the existing Board.
(b) If the Service of a Grantee terminates other than as described
above, the Committee may determine that the conditions and restrictions
described in paragraph 5(a)(i) and (ii) (including in term sheets or
supplements hereto approved by the Committee from time to time) that are
contained in the terms of any Stock Award granted pursuant to paragraph
3(a), and the restrictions described in paragraph 3(b), shall immediately
lapse and be of no effect, and the Stock Awards subject to such conditions
shall fully vest in favor of the Grantee. The Committee may make the
determination described in the preceding sentence and communicate such
determination in the Grantee's award agreement, or in any other manner.
(c) The Grantee shall be entitled to all of the rights of a
stockholder with respect to the Shares of a Stock Award including the right
to vote such Shares and to receive dividends and other distributions
payable with respect to such Shares from and after the Date of Grant;
provided that any securities or other property (but not cash) received in
any such distribution with respect to a Stock Award that is still subject
to the restrictions in paragraph 5(a)(i) or (ii) shall be subject to all of
the restrictions set forth herein with respect to such Stock Award.
(d) Certificates for the Stock Award shall be issued in the Grantee's
name and shall be held in escrow by the Company until all restrictions
lapse or such Shares are forfeited as provided herein. A certificate or
certificates representing a Stock Award as to which all restrictions have
lapsed shall be delivered to the Grantee upon such lapse.
(e) Whenever the recipient of a Stock Award recognizes income with
respect thereto, the Company shall have the right to withhold from amounts
payable to such recipient in any manner, as necessary to satisfy all
federal, state and local payroll tax withholding requirements.
Alternatively, the Committee may elect to have Shares withheld by the
Company from the Shares otherwise to be delivered to a Grantee. The number
of Shares so withheld for payment of tax withholding shall have an
aggregate Fair Market Value as of the later of the date the Committee makes
the foregoing election or the date as of which income is recognized with
respect to such Shares sufficient to satisfy the applicable withholding
taxes.
6. Stock Options. Any Option to purchase Shares granted under paragraph
3(a) that satisfies all of the requirements of Section 422 of the Code may be
designated by the Committee as an "Incentive Stock Option." Options that are not
so designated, or that do not satisfy the requirements of Section 422 of the
Code or that are granted under paragraph 3(b) shall not constitute Incentive
Stock Options and shall be "Non-Qualified Stock Options."
7. Option Price. The price at which a Share may be purchased pursuant to
the exercise of any Non-Qualified Stock Option shall not be less than 100% of
the Share's Fair Market Value on the date the Option is awarded under the Plan.
The exercise price of an Incentive Stock Option shall not be less than the Fair
Market Value of a Share on the date the Option is awarded under the Plan and,
with respect to an employee who owns on the Date of Grant more than 10% of the
Shares, shall not be less than 110% of the Share's Fair Market Value on such
date.
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8. Exercise of Options.
(a) Each Option granted under paragraph 3(a) shall be exercisable at
such time or times as shall be determined by the Committee at the time the
Option is granted or at such earlier times as the Committee shall
subsequently determine, but in no event later than the Option's "Expiration
Date" (defined below). Each Option granted under paragraph 3(b) shall be
exercisable, either in whole or in part, (i) with respect to three
thousand, three hundred and thirty-three (3,333) of the Shares at any time
on or after six (6) months from the Date of Grant, (ii) with respect to an
additional three thousand, three hundred and thirty-three (3,333) of the
Shares at any time on or after the first anniversary of the Date of Grant
and (iii) with respect to the remaining Shares at any time on or after the
second anniversary of the Date of Grant, but, in each case, not after the
Option's "Expiration Date" (defined below).
(b) The Fair Market Value, determined at the Date of Grant, of shares
with respect to which Incentive Stock Options are exercisable for the first
time by a Grantee during any calendar year may not exceed one hundred
thousand dollars ($100,000). Any Options that are intended to be Incentive
Stock Options but that become exercisable in excess of such amount shall be
deemed to be Non-Qualified Stock Options to the extent of such excess.
(c) Notwithstanding the provisions of paragraph 8(a), each Option
granted under the Plan to an individual and as to which the Expiration Date
has not occurred shall be immediately and fully exercisable, for the period
indicated, in the event of (I) a Change in Control of the Company (in which
case it shall be exercisable until its Expiration Date), or (II) the
termination of a Grantee's Service:
(i) because of the Grantee's "disability" (as defined in paragraph
11) or death (in which case it shall be exercisable until the earlier of
(A) the first anniversary of such termination or (B) its Expiration
Date, and in the case of death shall be exercisable by the person or
persons to whom the Grantee's right passes by will or by the laws of
descent and distribution),
(ii) with respect to a Grantee who is an employee, officer or
director, in connection with his or her retirement as determined by the
Committee in its reasonable discretion (in which case it shall be
exercisable until the earlier of (A) 90 days after such termination
unless extended by the Committee or (B) its Expiration Date),
(iii) by the Company under circumstances that the Committee
determines in its reasonable discretion constitute a layoff or other
similar reduction in the workforce (in which case it shall be
exercisable until the earlier of (A) 90 days after such termination
unless extended by the Committee or (B) its Expiration Date),
(iv) with respect to a Grantee who is a consultant, in connection
with his or her retirement as determined by the Committee in its
reasonable discretion (in which case it shall be exercisable until the
earlier of (A) 90 days after such termination unless extended by the
Committee or (B) its Expiration Date), or
(v) with respect to a Grantee who is a member of the Board, in
connection with his or her failure to be re-elected to the Board (in
which case it shall be exercisable until the earlier of (A) 90 days
after such termination unless extended by the Committee or (B) its
Expiration Date).
(d) If the Service of a Grantee terminates other than as described
above, his or her Options shall not become exercisable with respect to any
additional Shares, unless (other than if the termination occurs for good
cause) the Committee, in its reasonable discretion, determines that the
exercisability of the Options shall accelerate (in whole or in part) in
connection with such termination (in which case each Option shall be
exercisable until the earlier of (i) 90 days after such termination unless
extended by the Committee or (ii) its Expiration Date).
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(e) If the Service of a Grantee terminates for good cause (as
determined by the Committee in its reasonable discretion), his or her
Options shall expire immediately. The Committee may establish guidelines
for determining whether a Grantee's Service has terminated for good cause
and communicate such guidelines in the Grantee's award agreement, or in any
other manner, including but not limited to such term sheets and supplements
hereto as are approved by the Committee from time to time.
(f) A Grantee may exercise an Option by giving written notice thereof
prior to the Option's expiration to the Secretary of the Company at the
principal executive offices of the Company. Contemporaneously with the
delivery of notice with respect to exercise of an Option, the full purchase
price of the Shares purchased pursuant to the exercise of the Option,
together with any required state or federal withholding taxes, shall be
paid in cash, by tender of share certificates in proper form for transfer
to the Company valued at the Fair Market Value of the Shares on the
preceding day, by any combination of the foregoing or with any other
consideration.
(g) Upon the exercise of Options requiring tax withholding, the
Committee may elect to have Shares withheld by the Company from the Shares
otherwise to be received by a Grantee. The number of Shares so withheld for
payment of tax withholding shall have an aggregate Fair Market Value as of
the date of exercise sufficient to satisfy the applicable withholding
taxes. In addition to the terms set forth in paragraph 8, all exercised
Options shall be subject to such reasonable additional guidelines as
established by the Committee.
9. Option Expiration Date. The "Expiration Date" with respect to any Option
granted under paragraph 3(a) means the date established by the Committee at the
Date of Grant (subject to any earlier termination by the Committee), but in no
event later than the date which is ten (10) years after the date on which the
Option is granted. The Expiration Date with respect to any Option granted under
paragraph 3(b) means the date which is ten (10) years after the date on which
the Option is granted. All rights to purchase Shares pursuant to an Option shall
cease as the Option's Expiration Date.
10. Compliance with Applicable Laws. Notwithstanding any other provision in
the Plan, the Company shall have no liability to issue any Shares under the Plan
unless such issuance would comply with all applicable laws and applicable
requirements of any securities exchange or similar entity. Prior to the issuance
of any Shares under the Plan, the Company may require a written statement that
the recipient is acquiring the Shares for investment and not for the purpose or
with the intention of distributing the Shares.
11. Death/Disability of Option Grantee. In the event of the death or
"disability" (defined below, or, for Incentive Stock Options only, as defined in
Section 22(e)(3) of the Code) of a Grantee, all outstanding Options held by the
Grantee on the date of his or her disability or by the Grantee on the date of
his or her death (or by a permitted transferee under paragraph 12) shall be
exercisable by the Grantee, or, in the case of the death of a Grantee, by the
person or persons to whom that right passes by will or by the laws of descent
and distribution, for a period of twelve (12) months, but no later than the
Option's Expiration Date. If any such Option is still outstanding immediately
before it would cease to be exercisable in accordance with the foregoing, and
the price at which Shares may be purchased thereunder is less than the then Fair
Market Value of the Shares, such Option shall automatically be exercised for the
benefit of the Grantee or such person or persons in order to avoid loss to the
Grantee or the Grantee's estate. Any such exercise (other than an automatic
exercise) shall be by written notice thereof filed with the Secretary of the
Company at the principal executive offices of the Company prior to the Option's
Expiration Date. Except as provided above, "disability" shall mean a physical
condition or mental condition which, in the reasonable judgment of the
Committee, based upon medical reports and other evidence satisfactory to such
Committee, prevents a Grantee from satisfactorily performing his or her usual
duties for the Company or the duties of such other position or job which the
Company makes available to him or her and for which such Grantee is qualified by
reason of his or her training, education or experience.
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12. Transferability.
(a) The Shares subject to Stock Awards granted under paragraph 3(a),
3(b) or 3(c) shall not be sold, assigned, pledged or otherwise transferred,
voluntarily or involuntarily, by the Grantee, while they are subject to the
restrictions described in paragraph 5(a).
(b) Options granted under the Plan are not transferable except (i) by
will or by the laws of descent and distribution or, to the extent not
inconsistent with the applicable provisions of the Code, pursuant to a
qualified domestic relations order (as that term is defined in the Code)
and (ii) a Grantee may transfer any Option that is not an Incentive Stock
Option to (A) the Grantee's spouse, child or children, grandchild or
grandchildren, or other relatives; (B) a trust for the benefit of the
Grantee and/or the individuals described in clause (A); or (C) a charitable
remainder trust, but only if the Grantee provides a written determination
from an attorney, accountant or other professional, that is acceptable to
the Committee or its delegate, confirming that more than half of the value
of such charitable remainder trust is provided to the Grantee and/or the
individuals described in clause (A); provided, in the case of all transfers
pursuant to this paragraph 12(b), that the transferee thereof shall hold
such Option subject to all of the conditions and restrictions contained
herein and otherwise applicable to the Option, and that, as a condition to
such transfer, the Company may require the transferee to agree in writing
(in a form acceptable to the Company) that the transfer is subject to such
conditions and restrictions. Except to the extent held by a permitted
transferee hereunder, Options may be exercised during the lifetime of the
Grantee only by the Grantee, and after the death of the Grantee, only as
provided in paragraph 11.
13. Employment and Stockholder Status. The Plan does not constitute a
contract of employment or continued Service, and selection as a Grantee will not
give any employee or Grantee the right to be retained in the employ of the
Company or any Extended Company or the right to continue as a director,
consultant or trustee of the Company or any Extended Company. Any Option granted
under the Plan shall not confer upon the holder thereof any right as a
stockholder of the Company prior to the issuance of Shares pursuant to the
exercise thereof. No person entitled to exercise any Option granted under the
Plan shall have any of the rights or privileges of a stockholder of record with
respect to any Shares issuable upon exercise of such Option until certificates
representing such Shares have been issued and delivered. If the redistribution
of Shares is restricted pursuant to paragraph 10, certificates representing such
Shares may bear a legend referring to such restrictions.
14. Adjustments to Number of Shares Subject to the Plan and to Option
Terms. Subject to the following provisions of this paragraph 14, in the event of
any change in the outstanding Shares by reason of any share dividend, split,
recapitalization, merger, consolidation, combination, exchange of shares or
other similar corporate change, the aggregate number and kind of Shares reserved
for issuance under the Plan or subject to Options outstanding or to be granted
under the Plan shall be proportionately adjusted so that the value of each
Option shall not be changed, and the terms for any outstanding Option may be
adjusted by the Committee in such manner as it deems equitable, provided that in
no event shall the exercise price for an Option be adjusted below the par value
of a Share, nor shall any fraction of a Share be issued upon the exercise of an
Option. Shares subject to a Stock Award shall be treated in the same manner as
other outstanding Shares; provided that (except as provided in paragraph
5(a)(iii)) any conditions and restrictions applicable to a Stock Award shall
continue to apply to any Shares, other security or other consideration received
in connection with the foregoing.
15. Agreement with Company. At the time of grant, the Committee may require
a Grantee to enter into an agreement with the Company in a form specified by the
Committee agreeing to the terms and conditions of the Plan and to such
additional terms and conditions, not inconsistent with the Plan, as the
Committee may prescribe.
16. Term of Plan. The Plan was effective December 18, 1992, and no grants
were to be made under the Plan after December 18, 2002. The last day as of which
grants may be made under the Plan is hereby extended to March 23, 2011; provided
that, to the extent necessary to satisfy Section 422 of the
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Code or regulations thereunder, or the extent necessary to make any Option or
Stock Award granted hereunder constitute performance-based compensation for
purposes of Section 162(m) of the Code or regulations thereunder, or to the
extent otherwise necessary to make the Plan or any Option or Stock Award granted
hereunder comply with any applicable law, such extension shall constitute the
adoption of a new plan and the approval of the stockholders of the Company of
such extension shall constitute stockholder approval of such new plan. In
addition to the foregoing, no Options or Stock Awards may be granted under the
Plan after the date on which the Plan is terminated pursuant to paragraph 17.
17. Amendment and Termination of Plan. Subject to any approval of the
stockholders of the Company which may be required by law, the Board may at any
time amend, suspend or terminate the Plan. No amendment, suspension or
termination of the Plan shall negatively alter or impair any Option or Stock
Award previously granted under the Plan without the consent of the holder
thereof. No amendment requiring stockholder approval under Section 240.16b-3 of
the Act, Treasury Regulation Section 1.162-27 or Section 422 of the Code shall
be valid unless such stockholder approval is secured as provided therein.
18. Special Provisions Under Code Section 162(m).
(a) The provisions of this paragraph 18 shall apply only to the extent
determined by the Committee for purposes of making an award
"performance-based compensation" within the contemplation of Section 162(m)
of the Code. In the event of any inconsistencies between this paragraph 18
and the other Plan provisions within the scope of the foregoing, the
provisions of this paragraph 18 shall control.
(b) As soon as practicable following the grant of an award subject to
this paragraph 18 (but in no event more than ninety (90) days after the
Date of Grant), the Committee shall establish the performance-related goals
to be used in connection with conditions, restrictions and limitations
applicable to such award. The performance-related goals shall be chosen
from among the following factors, or any combination of the following, as
the Committee deems appropriate: total stockholder return; growth in funds
from operations (as defined by the National Association of Real Estate
Investment Trusts, from time to time), revenues, net income, stock price
and/or earnings per share; dividend growth; return on assets, net assets
and/or capital; return on stockholders' equity; debt/equity ratio; working
capital; the Company's financial performance versus its peers; economic
value added; acquisitions; expense reductions; and adherence to strategic
plan. The Committee may select among the goals specified from award to
award, which need not be the same for each Grantee. The foregoing does not
limit the Committee's use of other performance goals, or no performance
goals, in connection the grant of an award not subject to this paragraph
18.
(c) With respect to the grant of an award subject to this paragraph
18, the Committee shall (at the same time it is making the determinations
under paragraph 18(b)) determine the relationship between the
performance-related goals and the conditions, restrictions and limitations
applicable to the award.
(d) In connection with an award subject to this paragraph 18, no
performance-related goal will be considered to be satisfied until the
Committee has certified the extent to which the performance-related goals
and any other material terms were satisfied.
(e) Once established, performance-related goals shall not be changed,
except to the extent that the Committee has specified adjustments as part
of the determinations made under paragraph 18(b) and (c). Except as
provided in the preceding sentence, in connection with an award subject to
this paragraph 18, no performance-related goal applicable to a condition,
restriction or limitation shall be considered to be satisfied if the
minimum performance-related goals applicable thereto are not achieved.
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(f) In connection with an award subject to this paragraph 18,
individual performance shall not be reflected in a performance-related
goal. However, the Committee may retain the discretion to treat a
performance-related goal as not having been satisfied due to the failure of
a Grantee to meet individual performance goals.
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EXHIBIT A
Equity Group Investments, LLC
Equity Office Properties Trust
Equity Residential Properties Trust
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APPENDIX B
MANUFACTURED HOME COMMUNITIES, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
Pursuant to the By-Laws of Manufactured Home Communities, Inc. (the
"Company"), a Committee of the Directors to be known as the "Audit Committee"
(the "Committee") has been established. The Committee shall be composed of not
less than three independent Directors, none of whom shall be an employee or
officer of the Company, or have a personal business relationship with any member
of management which might conflict with their perceived independence. All Audit
Committee members shall be financially literate. The members of the Committee
shall appoint a Chairperson from amongst their number.
The time and place of meetings of the Committee shall be determined by the
members thereof provided that (1) a quorum for meetings shall be at least two
members, present in person or by telephone; (2) unless otherwise agreed, the
Committee shall meet at least quarterly; and (3) notice of the time and place of
every meeting shall be given in writing or by facsimile communication to each
member of the Committee, and the external and internal auditors of the Company.
Independent Directors who are not members of the Committee are welcome to attend
and participate in the Committee's deliberations unless otherwise specified by
the Chair.
STATEMENT OF POLICY
The Audit Committee is a committee of the Board of Directors. The Audit
Committee shall provide assistance to the full Board of Directors in fulfilling
their responsibility to the shareholders, potential shareholders, and investment
community relating to corporate accounting; the Company's reporting practices;
the quality and integrity of financial reports of the Company and the systems of
internal controls established by management and the Board of Directors. In so
doing, it is the responsibility of the Audit Committee to maintain free and open
communication between the Directors, the independent auditors, the internal
auditors, and the financial management of the Company.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the Directors and shareholders that the
corporate accounting and reporting practices of the Company are in accordance
with all requirements and are of the highest quality.
The Audit Committee will:
- Obtain the full Board of Directors' approval of this Charter and review
and reassess this Charter as conditions dictate (at least annually).
- Review and recommend to the Board of Directors the external auditors to
be selected to audit the financial statements, approve the compensation
of the external auditors, and review and approve the discharge of the
external auditors.
- Establish a clear understanding with the independent auditors that they
are ultimately accountable to the Board of Directors and the Audit
Committee, as the shareholders' representatives, who have the ultimate
authority in deciding to engage, evaluate, and if appropriate, terminate
their services.
- Review and concur with management's appointment, termination or
replacement of the internal auditors.
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- Receive prior to each meeting, a summary of findings from completed
internal audits and a progress report on the proposed internal audit
plan, with explanations for any deviations from the original plan.
- Meet with the external auditors and senior management of the Company at
least annually to review:
-- the scope of the proposed audit and quarterly reviews
-- procedures for the current year and the related fees
-- the adequacy of the Company's internal financial and accounting
controls
-- the coordination of the internal auditors' work utilized by the
external auditors, if any, with that of the external auditors.
- Meet with senior management and the external auditors at the completion
of the annual audit and discuss:
-- the external auditors' audit findings, including any management letter
comments noted related to the audit of the financial statements and
related footnotes and their report thereon
-- any significant changes from planning required in the external
auditors' audit plan
-- other matters related to the conduct of the audit which are to be
communicated to the Committee under generally accepted auditing
standards (SAS 61) and management's responses.
- Review with senior management and the external auditors, as necessary, at
the completion of each quarterly review to discuss the following:
-- Any significant changes required in review procedures or plan
-- Any significant changes in the Company's accounting principles or
significant changes in accounting estimates during the quarter and the
related impact on the financial statements
-- The impact of any significant events and transactions on the financial
statements
-- Other matters which came to the attention of the external auditors
during the review which are necessary to be communicated to the
Committee under generally accepted auditing standards and management's
responses.
- Review the quarterly financial statements with management and the
independent auditors, as necessary, prior to the filing of the Form 10-Q
(or prior to the press release of results, if possible) to determine that
the independent auditors do not take exception to any significant changes
in the disclosure and content of the financial statements, and discuss
any other matters required to be communicated to the Committee. The Chair
may represent the entire Committee for purposes of this review.
- Review with senior management and the internal auditors (if applicable):
-- The internal audit function including the independence and authority of
its reporting obligations
-- The proposed audit plan and any changes required in the planned scope
-- Any significant findings, difficulties or issues encountered in the
course of the audit during the year and management's responses
- Review with management and outside consultants such matters as the
Committee may deem appropriate from time to time.
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- Review reports received from regulators and other legal and regulatory
matters that may have a material effect on the financial statements or
related company Compliance policies.
- Review with management their procedures to establish and monitor
compliance with the Company's code of conduct and ethical practices,
conflict of interest policy, and policies and procedures with respect to
use of corporate assets. As necessary, consult with external consultants
to assist in such monitoring.
- The Committee shall perform the following in relation to the Company's
Proxy Statement ("Proxy") for its annual shareholders' meeting:
-- Review the Company's disclosures in the Proxy that describe that the
Committee has satisfied its responsibilities under this Charter for the
prior year
-- Include an Audit Committee Report in the Company's Proxy
-- Include a copy of this Charter in the annual report to shareholders or
the Proxy at least triennially or the year after any significant
amendment to the Charter
- Meet with the external auditors, internal auditors and management in
separate executive sessions, at least annually, to discuss any matters
that the Committee or these groups believe should be discussed privately
with the Committee.
- The Committee will perform such other functions as assigned by law, the
Company's charter or By-Laws and/or the Board of Directors.
- The Committee shall report Committee actions to the Board of Directors
with such recommendations as the Committee may deem appropriate.
- Ensure that minutes of the Audit Committee are kept and retained as
records of the Company
COMMITTEE AUTHORITY
The Committee shall have the right and authority to:
- Obtain all relevant information and documentation in order to carry out
the responsibilities of the Committee
- Conduct or authorize investigations into any matters brought to its
attention if, in the Committee's judgment, such matter warrants
investigation
- Retain independent counsel, accountants, or others to assist in the
conduct of any investigations
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APPENDIX C
FORM OF PROXY
38
MANUFACTURED HOME COMMUNITIES, INC.
Two North Riverside Plaza, Chicago, Illinois 60606
Proxy for Annual Meeting of Stockholders
Solicited on Behalf of the Board of Directors
The undersigned stockholder of Manufactured Home Communities, Inc., a
Maryland corporation (the "Company"), hereby appoints SAMUEL ZELL and HOWARD
WALKER, or either of them, with full power of substitution in each of them, to
attend the Annual Meeting of Stockholders of the Company to be held on Tuesday,
May 8, 2001, at 10:00 a.m., Chicago, time, and any adjournment or postponement
thereof, to cast on behalf of the undersigned all votes that the undersigned is
entitled to cast at such meeting and otherwise to represent the undersigned at
the meeting with all powers possessed by the undersigned if personally present
at the meeting. The undersigned hereby acknowledges receipt of the Notice of
the Annual Meeting of Stockholders and of the accompanying Proxy Statement and
revokes any proxy heretofore given with respect to such meeting.
The votes entitled to be cast by the undersigned will be cast as
instructed on the reverse side. If this proxy is executed but no instruction is
given, the votes entitled to be cast by the undersigned will be cast "for" each
of the nominees for director as described in the Proxy Statement and for each
of the other proposals as described in the Proxy Statement and in the
discretion of the proxy holder on any other matter that may properly come
before the meeting or any adjournment or postponement thereof.
(Continued and to be signed on other side)
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39
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1 AND PROPOSAL 2.
Please mark your vote
as indicated in [X]
this example
Nominee(s) (1) Louis H. Masotti, Ph.D.
(2) Sheli Z. Rosenberg and (3) Gary L. Waterman
WITHHELD FOR (Write name of nominee(s) in space
provided below)
1. ELECTION OF DIRECTORS
FOR all nominees WITHHOLD
listed to the right AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed to the right
[ ] [ ]
2. APPROVAL OF THE COMPANY'S 1992 And any other matter which may
STOCK OPTION AND STOCK AWARD PLAN, properly come before the meeting or
AS AMENDED AND RESTATED any adjournment or postponement thereof
in the discretion of the Proxy holder.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I PLAN TO ATTEND THE MEETING [ ]
Signature Signature Date
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NOTE: Please sign as name appears hereon. Joint owners should both sign. When
signing as attorney, executor, administrator, trustee, guardian or officer
please give full title under signature.
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