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PROXY STATEMENT PURSUANT TO SECTION 14(A)14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c)Section 240.14a-11(c) or Rule 14a-12Section
240.14a-12
Manufactured Home Communities, Inc.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the registrant)Registrant)
Payment of filing fee (check(Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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(1):
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(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
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MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA
CHICAGO, IL 60606
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 199712, 1998
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You are cordially invited to attend the 19971998 Annual Meeting of Stockholders
("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 13, 1997,12, 1998, at 10:00 A.M. Central Daylight Time, for the
following purposes:
(1) To elect four (4)three (3) directors of the Board of Directors to terms
expiring in 2000;2001;
(2) To consider and vote upon the adoption of the Company's 1997
Non-Qualified EmployeeSecond Amended
and Restated 1992 Stock PurchaseOption and Stock Award Plan which increases by 2 million
shares the number of shares available under the Plan and amends certain other
technical provisions of the Amended and Restated 1992 Stock Option and Stock
Award Plan; and
(3) To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Only stockholders of record at the close of business on March 19, 1997,13, 1998,
will be entitled to vote at the Meeting or any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON, PLEASE
SIGN AND DATE THE ENCLOSED PROXY WHICH IS BEING SOLICITED BY THE BOARD OF
DIRECTORS, AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
SUSAN OBUCHOWSKI
SUSAN OBUCHOWSKI, Secretary
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MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA
CHICAGO, IL 60606
PROXY STATEMENT
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 ("MHC" or the "Company"), of proxies to be voted at the
Annual Meeting of Stockholders (the "Meeting") to be held on Tuesday, May 13, 1997,12,
1998, and any adjournment or postponement thereof, thethereof. The cost of whichthis solicitation
is anticipated to be nominal and will be borne by the Company. In addition to
solicitation by mail, 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 19, 1997,13, 1998, 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 28, 1997.31, 1998. 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 duly executing and delivering a
later dated proxy or by voting in person at the Meeting. The mere presence at
the Meeting of a stockholder who appointed a representative does not itself
revoke the appointment.
Only stockholders of record at the close of business on March 19, 199713, 1998 (the
"Record Date") will be entitled to vote at the Meeting. On such date 25,006,94424,915,399
shares of 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 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. If, however,
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. At such time
as there is a quorum, the Meeting will reconvene without notice to stockholders,
other than an announcement at the prior adjournment of the Meeting, unless the
adjournment is forto a date not more than 120 days after the original Record Date or a new record date has
been set.Date.
If a proxy in the form enclosed is duly executed and returned, the shares
of Common Stock represented thereby will be voted in accordance with the
specifications made thereon by the stockholder. If no such specifications are
made, such proxy will be voted (i) forFOR election of the fourthree nominees for
directors to terms expiring in 2000;2001; (ii) forFOR the adoption of the Company's
1997
Non-Qualified EmployeeSecond Amended and Restated 1992 Stock PurchaseOption and Stock Award Plan; and (iii) at
the discretion of Samuel Zell and David A. Helfand,Howard Walker, the Board's designated
representatives for the Meeting, with respect to such other business as may
properly come before the Meeting or any adjournment or postponement thereof. 1996A
proxy is revocable prior to its exercise by revoking the proxy in writing, by a
subsequently dated proxy or by attending the Meeting and voting in person. The
mere presence at the Meeting of a stockholder who appointed a representative
does not itself revoke the appointment.
1997 ANNUAL REPORT
Stockholders are concurrently being furnished with a copy of the Company's
19961997 Annual Report, which contains its audited financial statements as of
December 31, 1996.1997. Additional copies of the Annual Report and of the Company's
Annual Report on Form 10-K for the year ended December 31, 1996,1997 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
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Two
North Riverside Plaza, Suite 800,900, Chicago, IL 60606, 312-474-1122, and it will
be furnished promptly at no additional expense.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Board consists of ten members. The charter of the Company provides that
the directors of the Company 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 TimothyLouis H. Callahan, Donald S. Chisholm, Thomas E. DobrowskiMasotti, Sheli Z. Rosenberg and John F. Podjasek, Jr.Gary L. Waterman for
election to serve as directors of the Company until the 20002001 Meeting and/orand until
their successors are duly elected and qualified. Biographical information for
each of the nominees is set forth under the caption "Management." The
affirmative vote of a plurality of all votes cast at the Meeting, if a quorum is
present, shall beis sufficient to elect the fourthree directors. Abstentions and broker non-
votes will have no effect on the outcome of the election of directors.
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 BELOW.ABOVE. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED "FOR" THE NOMINEES UNLESS INSTRUCTIONS TO
WITHHOLD OR TO THE CONTRARY ARE GIVEN.
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 March 14, 1997.13, 1998.
NAME AGE POSITION
- ----------------------------------------------------- --- ------------------------------------------------------------
Samuel Zell 5556 Chairman of the Board of Directors (term expires in 1999)
Howard Walker 58 President, Chief Executive Officer and Director (term
David A. Helfand 32 expires in 1999)2000)
Ellen Kelleher 37 Executive Vice President, General Counsel and Assistant
Ellen Kelleher 36 Secretary
Thomas P. Heneghan 34 Executive Vice President, Chief Financial Officer and
Thomas P. Heneghan 33 Treasurer
Gary W. Powell 5657 Executive Vice President -- Operations
President of Realty Systems, Inc., an affiliate of the
Howard Walker 57 Company
Timothy H. Callahan 46Donald S. Chisholm 63 Director (term expires in 1997)
Donald S. Chisholm 622000)
Thomas E. Dobrowski 54 Director (term expires in 1997)
Thomas E. Dobrowski 532000)
David A. Helfand 33 Director (term expires in 1997)1999)
Louis H. Masotti, Ph.D. 62Ph.D 63 Director (term expires in 1998)
John F. Podjasek Jr. 55Jr 56 Director (term expires in 1997)2000)
Sheli Z. Rosenberg 5556 Director (term expires in 1998)
Michael A. Torres 3637 Director (term expires in 1999)
Gary L. Waterman 5556 Director (term expires in 1998)
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 of Directors; Meetings"
below.
SAMUEL ZELL has been Chairman of the Board since March 31, 1995 and had
been Chief Executive Officer from March 31, 1995 until August 1996. Mr. Zell had
been Co-Chairman of the Board of the Company from its formation until March 31,
1995. Mr. Zell was a director of Mobile Home
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Communities, Inc. ("MH Inc."), the former manager of the Company's manufactured
home
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5 communities, from 1983 until its dissolution in 1993. Mr. Zell is chairman
of the board of directors of Equity Group Investments, Inc. ("EGI"), an
investment company, Equity Financial and Management Company ("EF&M"), a real estate
investment company; American Classic Voyages Co. ("American Classics"Classic"), a
provider of overnight cruises in the United States; and Anixter International Inc.
("Anixter"), a distributor of electrical and cable products.products; and Jacor
Communications, Inc. ("Jacor"), an owner and operator of radio stations. Mr.
Zell is chairman of the board of directors and chief executive officertrustees of Capsure
Holding Corp.Capital Trust, a specialized
finance company; Equity Office Properties Trust ("Capsure"Equity Office"), a specialty propertyan equity
real estate investment trust ("REIT") primarily focused on office buildings; and casualty insurance company.
He is Co-Chairman of the board of directors of Revco D.S., Inc. ("Revco"), owner
of retail drug-stores, and chairman of the board of trustees of
Equity Residential Properties Trust ("Equity Residential"), an equity REIT
primarily focused
solely on multifamily residential properties. He is a director of
Chart House Enterprises, Inc., an owner and operator of restaurants; Sealy Corporation
("Sealy"), a manufacturer of mattresses; Quality Food Centers,Fred Meyer,
Inc. ("Quality
Food"), an owner and operator of grocery stores and discount stores; Ramco Energy
plc, an independent oil company in the United Kingdom; and TeleTech Holdings,
Inc., a provider of customer care solutions.
DAVID A. HELFANDHOWARD WALKER has been a director of the Company since May 1995;November 4, 1997,
President of the Company since January 1995;September 5, 1997 and Chief Executive Officer since August 1996.December 31,
1997. He has been President of Realty Systems, Inc. since March 30, 1995. Realty
Systems, Inc. is an affiliate of the Company. Mr. HelfandWalker is also a member of the
Company's management committee, which was created in 1995 and is comprised of
the Company's senior executives. HeMr. Walker had been Chief Financial Officer of the Company from December 1992 until
February 1995 and Senior Vice President from March 1994 until January 1995. Mr.
Helfand had beena Vice President of the
Company from December 1992January 16, 1995 until March 1994.30, 1995. From August 1994 until
January 1995, Mr. HelfandWalker had been employed by EGI or its subsidiaries from Junethe principal of Walker Realty Co., a
full-service real estate company. From January 1989 until December 1992, most recently as assistant vice president of Equity Asset
Management, Inc. ("EAM"),July 1994, Mr. Walker
had been a principal and partner in The Markin Group, a full-service real estate services
company.
ELLEN KELLEHER has been Executive Vice President and General Counsel of the
Company since March 1997. Ms. Kelleher is also a member of the Company's
management committee. She had been Senior Vice President and General Counsel of
the Company from March 1994 until March 1997. Ms. Kelleher had been a vice
president of the law firm, Rosenberg & Liebentritt, P.C., from January 1993
until December 1995 and is currently Of Counsel to the firm.1995. Ms. Kelleher had been an associate of Rosenberg &
Liebentritt, P.C. from October 1990 until January 1993.
THOMAS P. HENEGHAN has been Executive Vice President, Chief Financial
Officer and Treasurer of the Company since March 1997. Mr. Heneghan is also a
member of the Company's management committee. Mr. Heneghan had been Vice
President, Chief Financial Officer and Treasurer from February 1995 until March
1997. Mr. Heneghan had been a member of the accounting firm of Greenberg &
Pociask, Ltd. from January 1994 until February 1995. Mr. Heneghan had been vice
president of Capsure Holdings Corp. ("Capsure") from May 19831993 until June 1994
and controller of Capsure from January 1993 until November 1993. Mr. Heneghan
had been vice president and controller of Great American Management and
Investment, Inc. ("GAMI") from December 1993 until December 1994; and controller
of GAMI from January 1993 until November 1993 and director of accounting of GAMI from August 1990 until December
1992.1993.
GARY W. POWELL has been Executive Vice President -- Operations of the
Company since May 1995. Mr. Powell is also a member of the Company's management
committee. Mr. Powell had been President -- Northern Division of the Company
from August 1994 until May 1995. Mr. Powell had been President and Chief
Operating Officer of the Company from its formation until August 1994. Mr.
Powell had been with MH Inc. or its predecessors from 1971, serving as president
from 1984.1984 until its dissolution in 1993. Mr. Powell was a director of the
Company from its formation until May 1994.
HOWARD WALKER has been President of Realty Systems, Inc. since March 30,
1995. Realty Systems, Inc. is an affiliate of the Company. Mr. Walker is also a
member of the Company's management committee. Mr. Walker had been a Vice
President of the Company from January 16, 1995 until March 30, 1995. From August
1994 until January 1995, Mr. Walker had been the principal of Walker Realty Co.,
a full-service real estate company. From January 1989 until July 1994, Mr.
Walker had been a principal and partner in The Markin Group, a full-service real
estate company.
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TIMOTHY H. CALLAHANDAVID A. HELFAND has been a director of the Company since May 1995. Mr.
Callahan has been chief executive officer1995;
President of Equity Office Holdings, L.L.C.
since August 1996. Mr. Callahan had been an executive vice president of EGIthe Company from January 19941995 until September 1997; and Chief
Executive Officer of the Company from August 1996 and chief financial officer of EGI from November
1994 until August 1996. Mr. Callahan had been an executive vice president --
finance of EAM, from January 1994 until August 1996.December 31, 1997. He
had been senior vice
president -- financeChief Financial Officer of EAMthe Company from JulyDecember 1992 until
February 1995 and Senior Vice President from March 1994 until January 1995. Mr.
Helfand had been Vice President of the Company from December 1992 until March
1994. Mr. Callahan hadHelfand has been employed by The Edward J. DeBartolo Corporation, a real estate investment
company, from July 1988 until July 1992, most recently serving as vice president
- -- finance.managing director of Equity International Realty, a
division of EGI, since December 31, 1997.
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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.company, both for more than five years.
THOMAS E. DOBROWSKI has been a director of the Company since March 1993.
Mr. Dobrowski is the managing director of real estate and alternative
investments of General Motors Investment Management Corporation ("GMIMCo."). Mr.
Dobrowski is a director of Red Roof Inns, Inc., an owner and operator of hotels.
Mr. Dobrowski serves on the partnership committee of Taubman Realty Group
Limited Partnership, the operating partnership ofhotels,
and Taubman Centers, Inc., an equity REIT focused on regional shopping centers.
He is also a trustee of Equity Office.
LOUIS H. MASOTTI, Ph.D.PH.D., has been a director of the Company since March
1993. Dr. Masotti is 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. He 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 MarchMay 1994.
Mr. Podjasek is retired.has been managing director -- private asset management of
Forstmann -- Leff International, Inc. since July 1997. Mr. Podjasek was retired
from November 1995 until July 1997. Mr. Podjasek had been employed by Allstate
Insurance Company from 1966 until November 1995, most recently serving as vice
president
- -- venturepresident--venture capital and real estate.
SHELI Z. ROSENBERG has been a director of the Company since August 1996.
Mrs. Rosenberg has been chief executive officer and president of EGI since
November 1994. She iswas a principal in the law firm of Rosenberg & Liebentritt
P.C. Mrs. Rosenberg has been a director of Jacor Communications, Inc., an owner
of radio stations, since 1994 and has been the chairman of its board of
directors since February 1996.from 1980 until September 1997. Mrs. Rosenberg is a director of Capsure; Falcon
Building Products, Inc., a manufacturerCVS
Corporation, an owner and supplieroperator of building products;drug stores; American Classic; Anixter;
Quality Food; Sealy;Illinova Inc. and Revco.its subsidiary Illinois Power Company, a supplier of
electricity and natural gas in Illinois; and Jacor. She is a trustee of Capital
Trust; Equity Office; and Equity Residential. Mrs. Rosenberg was a vice
president of First Capital Benefit Administrators, Inc., which filed a petition
under the federal bankruptcy laws on January 3, 1995, which resulted in its
liquidation on November 15, 1995.
MICHAEL A. TORRES has been a director of the Company since March 1993. Mr.
Torres has been president and a principal of ERE Rosen Real Estate Securities,
L.L.C., an investment management firm, since February 1995. Mr. Torres had been
employed by Wilshire Associates Incorporated, an investment consulting firm,
from June 1990 until February 1995, most recently serving as a vice president
directing real estate consulting services for its institutional investors.
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
serviceservices and investment company that he founded.
COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
Meetings: During the year ended December 31, 1996,1997, the Board held 12seven
meetings. Each of the present directors attended over 75% of the total number of
the meetings of the Board held during the period he or she was a director and of its committees on which they were eligible to
attend, except Mr. Dobrowski, who attended six out of nine of the meetings he
or she served.was eligible to attend.
Executive Committee: The Executive Committee of the Board is composed of
Messrs. Zell, HelfandWalker 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
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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, 1996,1997, the
Executive Committee held one meeting anddid not hold any meetings, but took various actions pursuant
to resolutions adopted by unanimous written consent.
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Compensation Committee: TheDuring 1997, the Compensation Committee of the
Board iswas composed of Messrs. Chisholm, Masotti and Waterman. Mrs. Rosenberg
joined the Compensation Committee on January 1, 1998. The Compensation Committee
determines compensation for the Company's executive officers and it 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 1992 Amended and Restated Stock Option and
Stock Award Plan to the management of the Company and its subsidiaries, other
key employees and consultants. During the year ended December 31, 1996,1997, the
Compensation Committee held one meeting and took various actions pursuant to
resolutions adopted by unanimous written consent.
Audit Committee: The Audit Committee of the Board is composed of Messrs.
Dobrowski, Podjasek and Torres. 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. During the year ended
December 31, 1996,1997, the Audit Committee held threetwo meetings.
The Company does not have a Nominating Committee.
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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, 1996,1997, December 31, 19951996 and December 31,
19941995 by those persons holding the office of chief executive officer and those
persons who were, at December 31, 1996,1997, the other four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-------------------------
AWARDS
-------------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
NAME AND ----------------------------- STOCK AWARDS OPTIONS ALL OTHER
PRINCIPAL OCCUPATION(1) YEAR SALARY ($) BONUS ($) ($)(2) GRANTED(#) COMPENSATION(3)COMPENSATION ($)(3)
----------------------- ---- ---------- --------- ------------ ---------- ----------------------------------
Samuel Zell.................... 1996 0 0 0 60,000(5) 0
Chairman and Chief 1995 0 0 0 60,000(5) 0
Executive Officer (4) 1994 0 0David A. Helfand........... 1997 280,000 214,000 0 10,000 0
David A. Helfand...............9,100
Chief Executive Officer 1996 250,000 61,252 1,337,248 10,000 9,000
President, Chief Executiveand Member of 1995 201,021 57,511 57,489 10,000 9,000
Management Committee(4)
Howard Walker.............. 1997 200,000 75,008 684,086 0 6,500
President, Chief 1996 200,000 41,014 744,986 0 9,000
Executive.............
Officer and Member of 1994 121,635 16,883 16,868 36,000 5,5411995 140,192 47,502 47,498 15,000 9,000
Management Committee
(4)
Thomas P. Heneghan.............Heneghan......... 1997 215,000 75,008 622,492 0 9,500
Executive Vice President, 1996 200,000 41,014 1,008,986 0 9,000
Executive Vice President,Chief Financial Officer, 1995 100,917 47,502 47,498 15,000 9,000
Chief Financial Officer, 1994 0 0 0 6,000 0
Treasurer and Member of
Management Committee
Ellen Kelleher.................Kelleher............. 1997 200,000 75,008 560,898 0 9,500
Executive Vice President, 1996 200,000 41,014 744,986 0 9,000
Executive Vice President,General Counsel and 1995 151,104 47,502 47,498 0 9,000
General Counsel and Member 1994 135,000 18,268 18,233 15,000 9,000 of Management
Committee
Gary W. Powell................. 1996Powell............. 1997 200,000 41,014 744,98675,008 560,898 0 9,0009,500
Executive Vice President -- 1995 177,917 47,502 47,498 0 9,000
Operations and Member 1994 172,344 13,300 13,299 20,000 6,000
of Management Committee
Howard Walker.................. 1996 200,000 41,014 744,986 0 9,000
President of Realty 1995 140,192 47,502 47,498 15,000 9,000
Systems, Inc.--
Operations and Member of 19941995 177,917 47,502 47,498 0 0 0 0 09,000
Management Committee
- ---------------
(1) Except for Mr. Zell,Helfand, positions held as of December 31, 1996.1997.
(2) The total number of shares of Restricted Common Stock held by each named
executive officer and the value of such shares at December 31, 1996,1997, the
last trading date of the year, was as follows:
NUMBER OF SHARES VALUE AT 12/31/9697
---------------- -----------------
Samuel Zell..........David A. Helfand..... 2,784 $ 75,168
Howard Walker........ 36,673 990,171
Thomas P. Heneghan... 48,673 1,314,171
Ellen Kelleher....... 36,673 990,171
Gary W. Powell....... 36,673 990,171
The total number of Restricted Common Stock Units which were granted on
December 30, 1997; vest 50% on June 30, 1998, 25% on December 31, 1998 and
25% on December 31, 1999; and will
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convert to Restricted Stock Awards on a one-for-one basis if the
stockholders approve Proposal 2 at the Meeting are as follows:
NUMBER OF SHARES VALUE AT 12/31/97
---------------- -----------------
David A. Helfand....... 0 $ 0
David A. Helfand..... 64,242 1,493,627Howard Walker.......... 22,250 660,750
Thomas P. Heneghan... 48,720 1,132,740Heneghan..... 20,000 540,000
Ellen Kelleher....... 36,720 853,740Kelleher......... 17,750 479,250
Gary W. Powell....... 36,720 853,740
Howard Walker........ 36,720 853,740Powell......... 17,750 479,250
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The number of shares of Restricted Stock Awards awarded in 1996,1997, which will
vest in their entirety on December 13, 199816, 1999 are as follows:
Samuel Zell................................. 0
David A. Helfand............................ 2,7840
Howard Walker............................... 2,810
Thomas P. Heneghan.......................... 1,8632,810
Ellen Kelleher.............................. 1,8632,810
Gary W. Powell.............................. 1,863
Howard Walker............................... 1,8632,810
The number of shares of Restricted Stock Awards awarded in 1996 which will
vest 60% on December 31, 1998, 20% on December 31, 1999, and 20% on December
31, 2000 provided that certain performance benchmarks are achieved are as
follows:
Samuel Zell................................ 0
David A. Helfand........................... 58,00058,000*
Howard Walker.............................. 32,000
Thomas P. Heneghan......................... 44,000
Ellen Kelleher............................. 32,000
Gary W. Powell............................. 32,000
Howard Walker.............................. 32,000
- ---------------
* In December 1997, the Compensation Committee accelerated the vesting of the
58,000 shares granted to Mr. Helfand because related performance benchmarks
had been achieved during his service with the Company in 1997 and because he
did not participate in Restricted Stock Awards made in 1997.
The number of shares of Restricted Stock Awards awarded in 1995,1996, which will
vest in their entirety on December 13, 1998 are as follows:
David A. Helfand............................ 2,784
Howard Walker............................... 1,863
Thomas P. Heneghan.......................... 1,863
Ellen Kelleher.............................. 1,863
Gary W. Powell.............................. 1,863
The number of Restricted Stock Awards awarded in 1995 which vested in their
entirety on December 15, 1997 are as follows:
Samuel Zell................................. 0
David A. Helfand............................ 3,458
Howard Walker............................... 2,857
Thomas P. Heneghan.......................... 2,857
Ellen Kelleher.............................. 2,857
Gary W. Powell.............................. 2,857
Howard Walker............................... 2,857
The number of Restricted Stock Awards awarded in 1994 which vested in their
entirety on December 16, 1996 are as follows:
Samuel Zell.................................. 0
David A. Helfand............................. 865
Thomas P. Heneghan........................... 0
Ellen Kelleher............................... 935
Gary W. Powell............................... 682
Howard Walker................................ 0
All holders of Restricted Stock receive any dividends paid on such shares.
(3) Includes employer matching contributions and/or profit sharing contributions
to the MHC Advantage Retirement Plan or affiliated company's 401(k) plans.
(4) Mr. ZellHelfand was Chief Executive Officer until August 1996December 31, 1997, at which
time Mr. HelfandWalker became Chief Executive Officer. (5) Includes options to purchase 50,000 shares granted to Mr. Zell in lieu of
cash compensation in his capacityHelfand also resigned as
Chairmana member of the Board and options to
purchase 10,000 shares which are granted to all directors annually.management committee as of December 31, 1997.
7
10
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------- POTENTIAL REALIZABLE -------------------------- VALUE AT ASSUMED
% OF TOTAL AT ASSUMED ANNUAL RATES OF
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM
OPTIONS IN FISCAL BASE PRICE EXPIRATION ----------------------------------------------------
NAME GRANTED(#)(1) YEAR(2)YEAR ($/SH) DATE 5% ($)(3)(2) 10% ($)(4)(3)
---- ------------- ---------- ----------- ---------- --------- ----------
Samuel Zell........... 10,000 4.9 18.625 5/07/06 117,132 296,835
50,000 24.5 22.000 12/13/06 691,784 1,753,117
David A. Helfand......Helfand............ 10,000 4.9 18.6252.8 21.375 5/07/06 117,132 296,83513/07 134,426 340,662
Howard Walker............... 0 0 0 -- 0 0
Thomas P. Heneghan....Heneghan.......... 0 0 0 -- 0 0
Ellen Kelleher........Kelleher.............. 0 0 0 -- 0 0
Gary W. Powell........ 0 0 0 -- 0 0
Howard Walker.........Powell.............. 0 0 0 -- 0 0
- ---------------
(1) One-third of the options granted on May 7, 1996,13, 1997, are exercisable six months
after initial grant, one-third are exercisable one year following such grant
date and one-third are exercisable two years following such grant date.
One-third(2) Assumes stock price of the options granted on December 13, 1996, are exercisable one
year after initial grant, one-third are exercisable two years after such
grant date, and one-third are exercisable three years after such grant date.
(2) Does not include options granted to non-employee directors and consultants.
If such grants are included the percentages would be:
Samuel Zell...........................3.2%
16.2%
David A. Helfand......................3.2%
Thomas P. Heneghan...................0.00%
Ellen Kelleher.......................0.00%
Gary W. Powell.......................0.00%
Howard Walker........................0.00%$34.82.
(3) Assumes stock pricesprice of $30.34 for options expiring May 7, 2006 and $35.84
for options expiring December 13, 2006.
(4) Assumes stock prices of $48.31 for options expiring May 7, 2006 and $57.06
for options expiring December 13, 2006.$55.44.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF
NUMBER OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT OPTIONS AT
ON VALUE FY-END(#) FY-END($)(1)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- -------- -------- ------------- -------------
Samuel Zell............................David A. Helfand.......................... 0 0 46,665/93,335 274,573/310,427
David A. Helfand.......................122,000/10,000 1,066,582/65,418
Howard Walker............................. 0 0 99,999/22,001 521,493/ 96,75710,000/5,000 112,500/56,250
Thomas P. Heneghan.....................Heneghan........................ 0 0 21,000/12,000 123,750/ 81,75028,000/5,000 273,000/56,250
Ellen Kelleher.........................Kelleher............................ 0 0 16,000/ 5,000 44,250/ 16,87521,000/0 139,875/0
Gary W. Powell......................... 4,000 35,500 60,666/ 3,334 487,748/ 11,252
Howard Walker..........................Powell............................ 0 0 5,000/10,000 37,500/ 75,00064,000/0 739,000/0
- ---------------
(1) Assumes a value equal to the year-end stock price of $23.25$27.00 less the
exercise price of in-the-money options.
8
11
COMPENSATION OF DIRECTORS
The Company paid each of its non-employee directors an annual fee of
$12,000$30,000 in 1996.1997. 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. In addition, theThe 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 of Director's meeting
after each Annual Meeting of Stockholders, each director then in office will
receive aan annual grant of options to purchase 10,000 shares of Common Stock at
the then-current market price.
8
11
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The Compensation Committee members arefor 1997 were Messrs. Chisholm, Masotti
and Waterman.
No Compensation Committee interlocking relationships existed during 1996.
Messrs.1997.
Mr. Zell and Callahan and Mrs. Rosenberg serve as members of the board of directors of
numerous non-public companies owned or controlled in whole or in part by Mr.
Zell or his affiliates which do not have compensation committees, and in many
cases, the executive officers of those companies include Messrs.Mr. Zell and
Callahan, and Mrs.
Rosenberg.
For a description of certain transactions with Board members or their
affiliates, see "Certain Relationships and Related Transactions."
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, that might incorporate future filings, including this
Proxy Statement, in whole or in part, the Compensation Committee Report on
Executive Compensation presented below and the Performance Graph following such
report shall not be incorporated by reference into any such filings.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board determines the compensation of the
Company's executive officers, including those named in the Summary Compensation
Table. 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 19961997 for REITs ("SNL Survey") and the National Association
of Real Estate Investment Trusts 1995 Executive Compensation Survey ("NAREIT
Survey"). The SNL Survey and NAREIT Survey containcontains
detailed compensation and performance data on publicly traded REITs. The
CompanyCommittee believes the SNL Survey and NAREIT Survey provideprovides comparable salary data for the
Company. The CompanyCommittee 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 12.
During the fiscal year ended December 31, 1996,1997, there were three major
components of executive compensation: base salary, bonuses, and restricted
stock. This salary structure is designed to attract and retain highly qualified
executives. This is accomplished by providing competitive base salaries and
meaningful incentives, including short-term, mid-term and long-term incentives,
intended to reward performance. Benchmarks for determining base salary and bonus
levels include targeted funds from 9
12
operations ("FFO") levels, strength of the
balance sheet, and creation of stockholder value. Each performance measure
carries equal weight.
The Company's overall salary structure is reviewed annually by the
Compensation Committee using the SNL Survey and NAREIT Survey for guidance. 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 executive's, including
the chief executive officer's, performance and contribution to the Company.Company's
performance.
Further short-term and mid-term incentives for executive officers are
accomplished through the Company's management-by-objective ("MBO") bonus plan.
The MBO bonus plan involves the Company and the executive officer setting goals
for such executive officer at the beginning of each
9
12
year. The Compensation Committee established the following bonus ranges for its
executive officers based on salary for 1996:1997:
President and Chief Executive Officer 0 -- 50%
Senior Vice Presidents and75%
Executive Vice Presidents 0 -- 40%50%
Senior Vice Presidents 0 -- 30%35%
Vice Presidents 0 -- 20%
In determining the amount of the bonuses for 1996,1997, the following criteria
were taken into account: achieving targeted FFO levels; the strength of the
balance sheet; and creation of stockholder value. The achievement of targeted
FFO levels included gains achieved through reduction of expenses, and increases
in revenue achieved through increases in rental rates and increases in occupancy
at the Company's communities. The strength of the balance sheet included
maintenance of appropriate debt-to-equity levels and maintaining and improving
asset value. Increases in stockholder value included improving the performance
of the Common Stock in the long term and maintaining and improving the dividend
yield on the Common Stock. The Compensation Committee believes such goals were
met or exceeded during 1996.1997. As a result, an additional bonus pool was made
available to acknowledge employees' contribution to the overall performance of
the Company. All executive officers received an additional bonus.
It is the Compensation Committee's intention to tie executive officers',
including the Chief Executive Officer's, performancecompensation to the continued
performance of the Company. The Company accomplishes this by awarding each
executive officer 50% of his MBO bonus in restricted Common Stock. Requiring
executive officers to "invest" 50% of their bonuses in Common Stock facilitates
better alignment of such executive officer's compensation with the Common
Stock's performance. These restricted stock awards accomplish the Company's
objective of mid-term incentives.
To provide long-term incentives for executive officers and as a means to
retain qualified executives, the Company created the 19961997 Restricted Stock Award
Program (the "1996"1997 Awards"). The 1996 Awards to provide for restricted stock awards for the next
five years. On December 30, 1997 awards of restricted stock units were granted
to executive officers are subjectother than Mr. Helfand, which will be converted to
10-15 year restrictions unless certain performance
benchmarks are achievedrestricted stock if Proposal 2 is approved by the Company. Should the Company have FFO growth
exceeding a targeted compounded annual growth rate over a five-(5) year period
through December 31, 2000, the restrictions are subject to releasestockholders at the end of
such 5 years. Should the performance benchmark not be achieved at the end of 5
years, the awardsMeeting. The
restricted stock, if issued, will remain restricted for an additional 5 to 10 years
depending upon when the performance benchmarks are achieved. In addition to the
restrictions, executive officers could vest in 60% of their respective 1996
Awards50% on June 30, 1998, 25% on December 31,
1998 and an additional 20%25% on December 31, 1999, subject to acceleration in the case of death,
disability, involuntary termination not for cause or change of control. The
number of shares of Common Stock awarded under the 1997 Awards is based upon a
fixed number determined for each of the executive officers which number
increases or decreases based on the increase or decrease in the fair market
value of a share of Common Stock and on
December 31, 2000, respectively.the amount of the dividends paid per share
times a multiple determined by the Compensation Committee. The Compensation
Committee recognizes that while the MBO bonus program provides rewards for positive
short-term and mid-term performance, the interests of stockholders are best
served by giving key employees the opportunity to participate in the
appreciation of the Company's Common Stock over the long term.
10
13Stock.
At the end of 1996,1997, the Compensation Committee granted options to purchase
Common Stock to many of the Company's employees. The executive officers of the
Company except for Mr. Zell, Chairman of the Board, were not granted options. During 1996 Mr. Zell, the Chairman of the Board from March 31, 1995 until
August 1996,Helfand was granted options to purchase 50,000 shares which was determined
to be fair and competitive based on local and national surveys and given the
fact that he took no salary. Mr. Zell and Mr. Helfand also were granted optionsan option to purchase
10,000 shares each in their capacitieshis capacity as directorsa director as were all other directors of the
Company.Company on May 13, 1997.
The Compensation Committee believes that the compensation program properly
rewards its executive officers for achieving improvements in the Company's
performance and serving the interest of its stockholders.
Section 162(m) of the Internal Revenue Code of 1986, as amended ("Code"),
generally disallows a Federal income tax deduction for compensation in excess of
$1 million paid in any year to any of the Company's executive officers listed in
the Summary Compensation Table who are employed by the Company on the last day
of a taxable year. Section 162(m), however, does allow a deduction for payments
of "performance based" compensation, which includes most stock options and other
10
13
incentive arrangements, the material terms of which have been approved by
stockholders. AwardsStock awards under the Company's MBO bonus planAmended & Restated 1992 Stock
Option & Stock Award Plan may, but need not, satisfy the requirements of Section
162(m). The Company believes that because it qualifies as a REIT under the Code
and therefore is not subject to Federal income taxes, the payment of
compensation that does not satisfy the requirements of Section 162(m) will not
affect the Company's taxable income, although to the extent that compensation
does not qualify for deduction under Section 162(m), a larger portion of
stockholder distributions may be subject to Federal income taxation as dividend
income rather that return of capital. The Company does not believe that Section
162(m) will materially affect the taxability of stockholders' distributions,
although no assurance can be given in this regard due to the variety of factors
that affect the tax position of individual stockholders. For the above reasons,
the Company may or may not structure compensation arrangements to satisfy the
requirements for performance based compensation under Section 162(m).
Respectfully submitted,
Donald S. Chisholm
Louis H. Masotti
Gary L. Waterman
11
14
PERFORMANCE GRAPH
The following performance graph compares total stockholders' return on the
Common Stock since February 24, 1993, the date of commencement of the Company's
initial public offering ("IPO"), with the Standard and Poors ("S&P") 500 Stock
Index and the index of equity REITs prepared by NAREIT.the National Association of Real
Estate Investment Trusts ("NAREIT"). The Common Stock price performance graph
assumes an investment of $100 in the CompanyCommon Stock on February 24, 1993 and an
investment of $100 in the two indexes on February 24, 1993 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
New York Stock Exchange, the American Stock Exchange or the NASDAQ Stock Market.
Common Stock price performance presented for the period from February 24, 1993
through December 31, 19961997 is not necessarily indicative of future results.
MEASUREMENT PERIOD MHCMeasurement Period S&P 500 STOCK NAREIT
EQUITY
(FISCAL YEAR COVERED) INDEX INDEX(Fiscal Year Covered) MHC Stock Index Equity Index
FEBRUARYFebruary 1993 100 100 100
1993 174.04 109.17 106.70
1994 170.05 110.61 110.10
1995 160.85 152.18 142.46
1996 227.51 187.12 171.65
1997 278.87 249.54 206.41
12
15
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the rules of the SEC, the Company is required to report, based on its
review of reports to the SEC about transactions in its Common Stock furnished to
the Company and written representations of its directors, executive officers and
10% stockholders, that for 1996: 1) David A. Helfand filed a Form 4 late for
January 1996 on February 29, 1996 which reported the acquisition of 50,000
shares; 2) Thomas P. Heneghan filed a Form 4 late for January 1996 on February
29, 1996 which reported the acquisition of 50,000 shares; 3) Ellen Kelleher
filed a Form 4 late for a January 1996 on February 29, 1996 which reported the
acquisition of 50,000 shares; 4) Gary W. Powell filed a Form 4 late for January
1996 on February 29, 1996 which reported the acquisition of 50,000 shares; 5)
Louis H. Masotti filed a Form 4 late for December 1996 on February 13, 1997
which reported the exercise of options to purchase 16,666 shares and the sale of
16,666 shares; and 6) Gary W. Powell filed a Form 4 late for December 1996 on
February 13, 1997 which reported the exercise of options to purchase 4,000
shares and the sale of 4,000 shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 14, 199713, 1998 (except as
noted), with respect to each person who is known by the management of the
Company 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 partnerships................................ 2,858,730 10.5%entities controlled by Samuel Zell(2)Zell 2,975,251 10.9%
and Ann Lurie and entities
controlled by Ann Lurie(2)(3).............................
Two North Riverside Plaza
Chicago, Illinois 60606
General Motors Hourly-Rate Employes......................... 2,271,198 9.1%9.2%
Pension Trust and
General Motors Salaried
Employes Pension Trust(4)
c/o General Motors Investment
Management Corporation
767 Fifth Avenue
New York, New York 10153
Goldman Sachs & Co. and..................................... 1,745,604 7.0%
The Allstate Corporation(5)................................. 1,817,631 7.3%
2775 Sanders Road
Northbrook, Illinois 60062Goldman Sachs Group, L.P.(5)
85 Broad Street
New York, NY 10004
FMR Corp(6)................................................. 1,370,900 5.5%
82 Devonshire Street
Boston, MA 02109
The Prudential Insurance Company of America(6)America(7).............. 1,668,000 6.7%1,279,900 5.2%
751 Broad Street
Newark, New Jersey 07102
Fleet Financial Group, Inc.(8).............................. 1,279,023 5.2%
One Federal Street
Boston, MA 02110
- ---------------
(1) The amounts of Common Stock beneficially owned is reported on the basis of
regulations of the SEC 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 March 14, 199713, 1998 to acquire Common Stock
held by the person are exercised and that no options to acquire Common Stock
held by other persons are exercised.
13
16
(2) Includes Common Stock, OP Units which are exchangeable on a one-for-one
basis into shares offor Common Stock, and
options to purchase Common Stock which are currently exercisable or
exercisable within 60 days owned as follows:
a) 2,201,460 OP Units, which are exchangeable at the holder's option into
2,201,460 shares of Common Stock, beneficially owned by PN Associates
Limited Partnership ("PN Associates"), an Illinois limited partnership
whose sole general partner is Samuel Zell as Trustee of the Samuel Zell
Revocable Trust ("Zell Trust"). The limited partners of PN Associates
are trusts created for the benefit of Mr. Zell and his family, trusts
created for the benefit of the family of Robert Lurie, a deceased
partner of Mr. Zell, and corporations whose stockholders are trusts
created for the benefit of Mr. Zell and his family and Mr. Lurie's
family.
b) 600,272 shares of Common Stock beneficially owned by EGI-MHC Limited
Partnership, an Illinois limited partnership ("EGI-MHC"). EGI-MHC's sole
general partner is Zell General Partnership, Inc. The sole stockholder
of the general partner is the Zell Trust. The limited partners of
EGI-MHC are the Zell Trust and Ann Lurie as Trustee of the Ann Lurie
Revocable Trust.
c) 7,000 shares of Common Stock beneficially owned by Samuel Zell as
Trustee of the Donald S. Chisholm Trust.
COMMON
STOCK OP UNITS OPTIONS
------ -------- -------
ENTITIES CONTROLLED BY SAMUEL ZELL:
Samuel Zell............................................... 1,071 -- 96,666
Samuel Zell Revocable Trust............................... 4,406 -- --
Samstock/SZRT, L.L.C...................................... 294,133 13,641 --
Samstock/ZGPI, L.L.C...................................... 6,003 -- --
Samstock, L.L.C........................................... -- 601,665 --
Samstock/ZFT, L.L.C....................................... -- 187,278 --
Donald S. Chisholm Trust.................................. 7,000 -- --
ENTITIES CONTROLLED BY ANN LURIE:
Ann Lurie Revocable Trust................................. 364,512 -- --
Anda Partnership.......................................... -- 233,694 --
LFT Partnership........................................... -- 5,436 --
ENTITIES CONTROLLED BY SAMUEL ZELL & ANN LURIE:
EGI Holdings, Inc......................................... -- 579,873 --
EGIL Investments, Inc..................................... -- 579,873 --
------- --------- ------
TOTALS:................................................... 677,125 2,201,460 96,666
======= ========= ======
Mr. Zell disclaims beneficial ownership of the 7,000371,512 shares of Common Stock
and 819,003 OP Units. Mrs. Lurie disclaims beneficial ownership of 312,613
shares of Common Stock, 1,382,457 OP Units and options to purchase 96,666
shares of Common Stock.
d) Options to purchase 49,998 shares of Common Stock which are currently
exercisable or exercisable within 60 days by Mr. Zell.
(3) Includes 2,201,4601,382,457 OP Units (exchangeable into 2,201,4601,382,457 shares of Common
Stock) and 600,272300,136 shares of Common Stock which are pledged as collateral
for loans to threefour financial institutions. Under the loan agreements, the
institutions cannot vote (assuming exchange of the OP Units for Common
Stock) or exercise ownership rights relating to the pledged OP Units or
Common Stock unless there is an event of default.
(4) The shares 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 filed with the SEC for calendar 1996, includes
1,488,201 shares1997, the Goldman
Sachs Group, L.P. ("GS Group") and Goldman Sachs & Co. ("Goldman Sachs")
each disclaim beneficial ownership of the Common Stock beneficially owned by
Allstate Insurance Company,(i) managed accounts and (ii) certain investment limited partnerships, of
which a
wholly owned subsidiary of The Allstate Corporation; 148,065 shares of
Common Stock ownedGS Group or Goldman Sachs is the general partner or
managing general partner, to the extent partnership interests in such
partnerships are held by Agents Pension Plan; and 181,365 shares owned by
Allstate Retirement Plan.persons other than GS Group, Goldman Sachs or their
affiliates.
(6) Pursuant to a Schedule 13G filed with the SEC for calendar 1996,1997, Fidelity
Management & Research Company ("Fidelity"), a wholly owned subsidiary of FMR
Corp. and an investment
14
17
advisor registered under Section 203 of the Investment Advisors Act of 1940
("Investment Act"), is the beneficial owner of 1,370,700 shares of Common
Stock as a result of acting as investment advisor to various investment
companies under the Investment Act.
Fidelity Management Trust Company, a wholly owned subsidiary of FMR Corp.
and a bank as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, is the beneficial owner of 200 shares of Common Stock as a result of
its serving as investment manager of institutional account(s).
(7) Pursuant to a Schedule 13G filed with the SEC for calendar 1997, Prudential
may have direct or indirect voting and/or investment discretion over
1,668,0001,279,900 shares of Common Stock which are held for the benefit of its
clients by its separate accounts, externally managed accounts, registered
investment companies, subsidiaries and/or affiliates. Prudential reported
the combined holdings of these entities for the purpose of administrative
convenience.
14(8) Pursuant to a Schedule 13G filed with the SEC for calendar 1997, Fleet
Financial Group, Inc. is a parent holding company for the following banking
subsidiaries which acquired the shares of Common Stock: Columbia Management
Company; Columbia Funds Management Company; and Fleet Investment Advisors.
15
1718
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 14, 1997,13, 1998, certain information
with respect to the Common Stock that may be deemed to be beneficially owned by
each director of MHC, by the five executive officers named in the Summary
Compensation Table and by all directors and executive officers as a group:
SHARES OF SHARES UPON PERCENT
COMMON EXERCISE OF OF
NAME OF BENEFICIAL HOLDER STOCK(1) OPTIONS(2) TOTAL(1) CLASS
------------------------- --------- ----------- -------- -------
Timothy H. Callahan............................. 0 50,665 50,665 *
Donald S. Chisholm.............................. 7,000(3) 33,332 40,33217,000(3) 36,667 53,667 *
Thomas E. Dobrowski............................. 0 33,332 33,33246,667 46,667 *
David A. Helfand................................ 135,107 103,332 238,439 *128,667 263,774 1.1%
Thomas P. Heneghan.............................. 98,720 21,000 119,720105,249 28,000 133,249 *
Ellen Kelleher.................................. 87,935 16,000 103,93592,227 21,000 113,227 *
Louis H. Masotti................................ 0 16,666 16,666602 26,667 27,269 *
John F. Podjasek, Jr............................ 1,000 23,332 24,332Jr. .......................... 2,418 36,667 39,085 *
Gary W. Powell.................................. 237,402 60,666 298,068240,212 64,000 304,212 1.2%
Sheli Z. Rosenberg.............................. 20,106(4) 46,666 66,77225,550(4) 64,000 89,550 *
Michael A. Torres............................... 1,700 33,332 35,0322,438 46,667 49,105 *
Howard Walker................................... 86,720 5,000 91,72090,840 10,000 100,840 *
Gary L. Waterman................................ 0 33,332 33,3321,418 46,667 48,085 *
Samuel Zell..................................... 2,808,732(3)2,274,943(3)(5) 49,998 2,858,730 10.5%96,666 2,364,609 8.8%
All directors and executive officers as a group
(14(15 persons) including the above-named
persons....................................... 3,477,422 526,653 4,004,075 14.4%2,981,321 662,832 3,644,153 13.2%
- ---------------
* Less than 1%
(1) The amounts of Common Stock beneficially owned isare reported on the basis of
regulations of the SEC 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 March 14, 199713, 1998 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 Company's 1992 Amended and Restated 1992 Stock Option
and Stock Award Plan which are currently exercisable or exercisable within
60 days of the date of this table.
(3) Includes 7,000 shares owned by the Donald S. Chisholm Trust, Samuel Zell,
Trustee. Under the regulations of the SEC, Mr. Zell may be deemed to be the
beneficial owner of all the shares which are beneficially owned by the
Donald S. Chisholm Trust. Mr. Zell disclaims beneficial ownership of the
shares owned by the Donald S. 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 2,201,4601,962,330 OP unitsUnits which are exchangeable into 2,201,4601,962,330 shares of
Common Stock owned by PN Associates. Also includes 600,272and 300,136 shares of Common Stock beneficially owned by
EGI-MHC.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 818,428579,873 OP unitsUnits owned by PN Associates which are
exchangeable into 818,428579,873 shares of Common Stock and 300,136 shares of Common Stock owned by Equity-MHC.
15Stock.
16
1819
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 provides the Company and its subsidiaries with office space and
certain administrative, office facility and other services with respect to
certain aspects of the Company's business, including, but not limited to,
financial and accounting services, tax services, investor relations, corporate
secretarial, computer and support services and other services. Amounts incurred
for these services amounted to approximately $708,000$140,000 for the year ended
December 31, 1996.1997. Amounts due to these affiliates at December 31, 19961997 were
$31,000.$15,000. Other affiliates of Mr. Zell provided insurance brokerage services
(excluding reimbursements for insurance premiums paid to third parties), tax and
accounting services and computer services to the Company. Amounts incurred for
these services amounted to approximately $142,000$313,000 for the year ended December
31, 1996.1997. Amounts due to these affiliates at December 31, 19961997 were $38,000.$28,000.
Rosenberg & Liebentritt, P.C., a law firm in which Mrs. Rosenberg iswas a
principal until September 1997, performs legal services to the Company. Amounts
incurred for these services amounted to approximately $385,000$146,000 for the year
ended December 31, 1996.1997. Amounts due to Rosenberg & Liebentritt, P.C. at
December 31, 19961997 were $36,000.$35,000.
The independent members of the Board annually review and approve the rates
charged by EGI and its affiliates for services rendered to the Company and its
subsidiaries. Additionally, the budget for such services are submitted, reviewed
and approved by the Audit Committee of the Company.
The executive officers listed below are indebted to the Company as a result
of purchasing 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 of the first to occur of the employee leaving
the Company or March 3, 2003 for the loans beingbearing 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 19961997 DECEMBER 31, 19961997 INTEREST RATE
---- ------------------- ----------------- -------------
David A. Helfand............................. $131,950 $124,522$125,226 $ 0 6.77%
David A. Helfand............................. 889,898 889,898920,029 0 5.91%
Howard Walker................................ 883,039 882,948 5.91%
Thomas P. Heneghan........................... 883,801 879,354881,458 848,844 5.91%
Ellen Kelleher............................... 883,520 874,137876,228 867,779 5.91%
Gary W. Powell............................... 999,692 948,440953,802 885,537 6.77%
Gary W. Powell............................... 883,801 881,691 5.91%
Howard Walker................................ 883,520 879,063 5.91%
16SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 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 New
York Stock Exchange. 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 directors and officers that no
Forms 5 were required to be filed, it appears that no director or officer or 10%
owner failed to file a monthly report of a transaction on a timely basis.
17
1920
PROPOSAL 2
APPROVAL OF THE COMPANY'S
1997 NON-QUALIFIED EMPLOYEESECOND AMENDED
AND RESTATED 1992 STOCK PURCHASEOPTION
AND STOCK AWARD PLAN
The Company seeks stockholder approval ofBoard has approved and recommends that the stockholders consider and
approve the Company's 1997 Non-Qualified
EmployeeSecond Amended and Restated 1992 Stock PurchaseOption and Stock
Award Plan ("Purchase Plan"(the "Plan"). The Board adopted the Purchase
Plan on March 12, 1997 and recommended that it be submitted to the stockholders
of the Company for approval. If the stockholders approve the Purchase Plan at
the Meeting, the Purchase Plan will become effective no earlier than July 1,
1997.
The purpose of the Purchase Plan is to provide a method for eligible
employees of the Company and its subsidiaries and partnerships, and for
directors of the Board, to acquire an interest in the Company through the
purchase of shares of Common Stock from the Company at a discount from fair
market value. A total of 1,000,000 shares of Common Stock (subject to adjustment
for stock splits, stock dividends, recapitalizations or other corporate
restructurings) have been authorized for issuance under the Purchase Plan. The
Common Stock closed at $22.375 on the New York Stock Exchange on March 21, 1997.
As of March 1, 1997, there were approximately 550 individuals who were eligible
to participate in the Purchase Plan. The full text of the Purchase Plan is set forth in Exhibit A attached to this
Proxy Statement.
The following description1992 Stock Option Plan was adopted by the Company effective December
18, 1992 and was amended and restated, effective March 1, 1994, as the Amended
and Restated 1992 Stock Option and Stock Award.
On November 4, 1997, Board of Directors approved an amendment to the
Amended and Restated 1992 Stock Option and Stock Award Plan which increased by
2,000,000 the number of shares available for future grant. On March 10, 1998,
the Board approved the Plan which not only incorporated the November 4, 1997
amendment but other technical changes.
Pursuant to the Plan, officers, directors, employees and consultants of the
Purchase Plan is qualified in its entirety by referenceCompany are offered the opportunity: (i) to the text of the
Purchase Plan.
DESCRIPTION OF THE PURCHASE PLAN
General. Sharesacquire shares of Common Stock
through the grant of incentive stock options ("ISOs"), non-qualified stock
options ("NQSOs") and stock appreciation rights ("SARs"); and (ii) to be awarded
shares of Common Stock, subject to conditions and restrictions as described in
the Plan or determined by the Committee. At present there are approximately 275
persons who are currently Plan participants. It is not possible at this time to
estimate the number of additional persons who will be offered under the Purchase Plan in
quarterly offering periods (each an "Offering"). Eligible employees and
directors who electbecome eligible to
participate in the Purchase PlanPlan.
The Compensation Committee ("Participants"Committee") may, in order to achieve certain
tax consequences under Section 162(m) of the Code, establish performance-related
goals to be used in connection with conditions, restrictions and limitations for
awards of stock under the Plan. To the extent such tax consequences are not
desired, the following performance-related goals may not be established. If the
Committee chooses to establish performance-related goals for a particular grant
or award, it may choose such goals from among the following factors, or any
combination thereof, as it deems appropriate or choose any other
performance-related goal it may establish from time to time: total stockholder
return; growth in funds from operations (as defined by the National Association
of Real Estate Investments 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
strategic plan. The Committee may select among the goals specified from award to
award, and the Committee need not select the same, or any, goals for each
grantee.
Set forth below is information concerning stock option grants made on
December 16, 1997 by the Committee which are subject to the approval by the
stockholders at the Meeting of this Proposal for Executive Officers as a Group,
Non-Executive Directors as a Group and All Employees, except Executive Officers,
as a Group. The maximum benefit received by such grantees pursuant to these
grants cannot be determined at this time because the future performance of the
Common Stock is unknown. The Committee may make additional grants in 1998 and
beyond that could be on materially different terms from those of the grants set
forth below. It is not possible to determine the maximum benefits (other than
pursuant to limits on the number of shares that may be granted in the aggregate
or to any person) that will be ablegranted to use funds accumulated through cash contributionsany person in 1998 under the Plan or
payroll deductionswhat benefits or amount would have been received by any person. Information
concerning Restricted Stock Unit grants to purchase shares ofthe
18
21
named Executive Officers is included in the Summary Compensation Table. No named
Executive Officer was granted stock options on December 16, 1997.
NUMBER OF SHARES
NUMBER OF SHARES SUBJECT TO RESTRICTED
NAME AND POSITION SUBJECT TO OPTIONS STOCK UNITS
----------------- ------------------ ---------------------
Executive Officers as a Group, including those named 1,000 77,500
above.....................................................
Non-Executive Directors as a Group.......................... 125,000 0
All Employees, except Executive Officers, as a Group........ 146,600 0
On March 20, 1998, the Common Stock closed at a price less than$25.9375.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences to the Company and the grantee upon the
grant and exercise of stock options and SARs 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 Common Stockshares received on
the date of purchase.
Eligibility.exercise over the option price.
The Purchase PlanCompany is opennot entitled to employees ofa tax deduction at the time an NQSO is
granted; however, the Company and its
subsidiaries and partnerships who (i) have been employed for six full calendar
monthsis entitled to a deduction equal to the grantee's
taxable income at the beginning of an Offering and (ii) are otherwise eligible for
normal employee benefits.time the grantee recognizes the income. The Purchase PlanCompany will
withhold from the grantee taxes due, as the Company determines is also open to directors of the
Board who have served on the Board for at least six full calendar monthsrequired.
A grantee will not recognize income at the beginningtime an ISO is granted and
generally will not recognize income when the ISO is exercised. The excess of an Offering.
Administration. The Compensation Committee ("Committee") of the Board has
responsibility for the general operation of the Purchase Plan, but intends to
appoint an agent (the "Plan Agent") to handle the day-to-day operations of the
Purchase Plan and administer the recordkeeping for each Participant.
Participation. After a Participant's enrollment in the Purchase Plan is
effective, the amount deducted from a Participant's payroll check (in the case
of an employee) and retainer or fees (in the case of a director) as well as
amounts otherwise contributed in cash by the Participant will be allocated to
such Participant's account. At the end of each quarterly Offering, a Participant
shall be deemed to have purchased from the Company such number of full shares of
Common Stock as his or her accumulated deductions and contributions on such date
will allow at the purchase price to be determined as described below. Unless a
Participant elects otherwise, the Company will carry over the remaining balance
in such Participant's Account to the next Offering. No interest will be paid or
allowed on any money in the accounts of the Participant. The maximum
contributions which a Participant may make shall not exceed $100,000 in any
calendar year.
Purchase Price. The purchase price per share of Common Stock for each
Offering will be the price set by the Committee but not below 85% of the lesser
of: a) the
fair market value of the Common Stockshares received on the last business daydate of exercise over the option
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 Offering; and b)ISO or within two years of the date of grant), the grantee
has income equal to the excess of the amount realized on the disposition over
the exercise price. The excess of the fair market value of the Common Stock on the first business
day of the Offering.
17
20
Withdrawal. A Participant may withdraw from the Purchase Plan by delivering
a withdrawal notice to the Plan Agent at least 15 days prior to the end of such
Offering. In such event, the Plan Agent will direct the Company to refund the
entire balance of his or her account as soon as practicable thereafter. To
re-enter the Purchase Plan, a Participant who has previously withdrawn must
re-enroll in the Purchase Plan.
Disposition of the Shares of Common Stock. No disposition may be made of
any shares of Common Stock purchased under the Purchase Plan until the first
anniversary of such purchase. If a Participant who owns shares of Common Stock
subject to the foregoing restriction is determined by the Plan Agent to have a
serious financial need for the proceeds of the sale of the Common Stock, the
Plan Agent may allow a disposition to the extent necessary to satisfy the
serious financial need.
Expenses. Fees and expenses incurred in connection with the administration
of the Purchase Plan will be paid by the Company. The expenses of any sale,
however, will be borne by the Participant.
Terminations and Amendments. The Purchase Plan may be terminated at any
time by the Board. It will terminate in any case on the
date of exercise over the option price will be ordinary income; the balance, if
any, will be a capital gain. If the grantee sells the shares in a disposition
which is not a disqualifying disposition, the grantee will realize capital gain
on which all or
substantially allthe sale equal to the excess of the unissued shares of Common Stock reserved for its
purpose have been purchased.amount realized on the sale over the
option price.
The Board also reserves the rightCompany is not entitled to amend the
Purchase Plan from time to time in any respect, provided, however, that no
amendment shall become effective without prior approvala tax deduction as a result of the Company's
stockholders: (i) togrant or
exercise of an ISO. If the extent such approvalgrantee makes a disqualifying disposition of shares,
the Company is required under the laws of the
State of Maryland; and (ii) to the extent such approval is required to meet
security holder approval requirements under any requirement applicable to the
Company.
Approval of Stockholders. The Purchase Plan shall not take effect until
approved by the holders of a majority of the shares of Common Stock present, or
represented, and entitled to vote at the Meeting. Abstentions will have the same
effect as votes against the approval of the Purchase Plan. Broker non-votes will
not be counted as shares of Common Stock entitled to vote on the matter and will
have no effect on the vote.
Federal Income Tax Consequences. Amounts deducted from a Participant's
payroll check or retainer or fees under the Purchase Plan shall continue to be
taxable income to the Participant in the year such amounts are earned. As the
Purchase Plan will not qualify as an "employee stock purchase plan" within the
meaning of Section 423 of the Code, Participants will also recognize additional
taxable income equivalentdeduction equal to the amount of the discount whengrantee's
ordinary income.
A grantee will not recognize taxable income at the time an SAR is granted.
When the grantee exercises the SAR, the fair market value of the shares of Common
Stock are purchased underreceived
and/or the Purchase Plan.cash received is ordinary income to the grantee.
The Company will beis not entitled to a corresponding deduction. Participants are urgedtax deduction when the SAR is granted but
is entitled to consulta deduction equal to the taxable income recognized by the grantee
on the exercise of the SAR and the Company will withhold from the grantee taxes
due, as the Company determines is required.
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 their own tax
advisors to determine the particular tax consequencesresult that may result from
participationany future
appreciation (or depreciation) in the Purchase Plan andvalue of the shares of stock granted shall
be taxed as a capital gain (or loss) upon a subsequent disposalsale of Common Stock
purchased pursuantthe shares.
However, if the grantee does not make a Section 83(b) Election, then the grant
will be taxed as 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 Purchase Plan.restrictions are compensation income
to the grantee.
19
22
The Company is generally entitled to an income tax deduction for any
compensation income taxed to the grantee, including dividends paid on the stock,
subject to the limitations of Section 162(m) of the Code.
THE BOARD RECOMMENDS A VOTE "FOR" THE PURCHASE PLAN. PROXIES SOLICITED BY THE BOARD
WILL BE VOTED "FOR" THE PURCHASE PLAN UNLESS INSTRUCTIONS TO WITHHOLD OR TO THE
CONTRARY ARE GIVEN.
AUDITORS
Ernst & Young LLP served as the Company's auditors for the year ended
December 31, 1996.1997. The Audit Committee intends to make a future recommendation
to the Board concerning the selection of the Company's auditors for the current
fiscal year which began January 1, 1997.1998. There have been no disagreements
between the Company and its auditors 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
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
18
21
STOCKHOLDER PROPOSALS
Under regulations adopted by the SEC, stockholder proposals intended to be
presented at the 19981999 Annual Meeting of Stockholders must be received by the
Secretary of the Company no later than November 29, 1997,December 2, 1998, 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 1998 Meeting.
In addition, the Bylaws of the Company 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 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.
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
SUSAN OBUCHOWSKI
Susan Obuchowski
Secretary
March 28, 199731, 1998
Chicago, Illinois
1920
2223
EXHIBIT A
MANUFACTURED HOME COMMUNITIES, INC.
SECOND AMENDED AND REALTY SYSTEMS, INC.
1997 NON-QUALIFIED EMPLOYEERESTATED 1992
STOCK PURCHASEOPTION AND STOCK AWARD PLAN
23
TABLE OF CONTENTS
SECTION PAGE
------- ----
1. Purpose..................................................... A-1
2. Definitions................................................. A-1
2.1 Account............................................... A-1
2.2 Beneficiary........................................... A-1
2.3 Board................................................. A-1
2.4 Closing Price......................................... A-1
2.5 Committee............................................. A-1
2.6 Election Form......................................... A-1
2.7 Eligible Director..................................... A-1
2.8 Eligible Employee..................................... A-1
2.9 MHC................................................... A-1
2.10 MLP................................................... A-1
2.11 Participant........................................... A-1
2.12 Participating Employer................................ A-2
2.13 Pay................................................... A-2
2.14 Pay Day............................................... A-2
2.15 Plan.................................................. A-2
2.16 Plan Administrator.................................... A-2
2.17 Purchase Period....................................... A-2
2.18 Purchase Price........................................ A-2
2.19 Rule 16b-3............................................ A-2
2.20 RSI................................................... A-2
2.21 Stock................................................. A-2
3. Administration.............................................. A-2
4. Participation............................................... A-2
5. Contributions............................................... A-3
6. Purchase of Stock........................................... A-3
7. Delivery.................................................... A-4
8. Designation of Beneficiary.................................. A-4
9. Transferability and Dispositions............................ A-4
10. Securities Registration..................................... A-5
11. Compliance with Rule 16b-3.................................. A-5
12. Amendment or Termination.................................... A-5
13. Notices..................................................... A-5
14. Employment.................................................. A-5
15. Employment Transfers........................................ A-6
16. Approval of Shareholders.................................... A-6
17. Changes in Capital Structure................................ A-6
18. Headings, References and Construction....................... A-6
24
1. PurposePurpose. The primary purpose of thisManufactured Home Communities, Inc. Second Amended and
Restated 1992 Stock Option and Stock Award Plan is to encourage Stock ownership by each
Eligible Employee and each Eligible Director in the belief that such stock
ownership will increase his or her interest in the success of MHC so that they
may share in the results of MHC's operations.
2. Definitions
2.1 The term "Account" shall mean the separate bookkeeping account which
shall be established and maintained by the Plan Administrator for each
Participant for each Purchase Period to record the contributions made on his or
her behalf to purchase Stock under this Plan.
2.2 The term "Beneficiary" shall mean the person designated as such in
accordance with Section 8.
2.3 The term "Board" shall mean the Board of Directors of MHC.
2.4 The term "Closing Price" (a) for the first day of any Purchase Period
shall mean the closing price for a share of Stock as reported for such day in
The Wall Street Journal or in any successor to The Wall Street Journal or, if
there is no such successor, in any trade publication selected by the Committee
or, if no such closing price is so reported for such day, the first closing
price which is so reported after such day or, if no such closing price is so
reported during the two week period which begins on the first day of such
Purchase Period, the fair market value of a share of Stock as determined as of
the first day of such Purchase Period by the Committee and (b) for the last day
of a Purchase Period shall mean the closing price for a share of Stock as
reported for such day in The Wall Street Journal or in any successor to The Wall
Street Journal or, if there is no such successor, in any trade publication
selected by the Committee or, if no such closing price is so reported for such
day, the last such closing price which is so reported before such day or, if no
such closing price is so reported during the two week period which ends on the
last day of such Purchase Period, the fair market value of a share of Stock as
determined as of the last day of such Purchase Period by the Committee.
2.5 The term "Committee" shall mean the Compensation Committee of the
Board.
2.6 The term "Election Form" shall mean the form which an Eligible Director
or Eligible Employee shall be required to properly complete in writing and
timely file at least 15 days prior to the commencement of any Purchase Period in
order to make any of the elections available to an Eligible Director or Eligible
Employee under this Plan.
2.7 The term "Eligible Director" shall mean a person (other than an officer
or employee of MHC or a Participating Employer) who(the "Plan") has been
a member of the
Board for at least six full calendar months at the beginning of a Purchase
Period.
2.8 The term "Eligible Employee" shall mean each officer or employee of MHC
or a Participating Employer:
(a) who is shown on the payroll records of MHC or a Participating
Employer as eligible for normal employee benefits, and
(b) who has completed at least six full calendar months of employment
with MHC or a Participating Employer at the beginning of a Purchase Period.
2.9 The term "MHC" shall meanestablished by Manufactured Home Communities, Inc., a Maryland corporation (the
"Company"), to secure for the Company and any successorits stockholders the benefits arising
from capital ownership by those employees, officers, directors and consultants
of the Company and its Subsidiaries (as defined below) who are and will be
responsible for its future growth and continued success. The Plan will provide a
means whereby such individuals may receive: (i) shares of the Common Stock of
the Company ("Shares"), subject to MHC.
2.10conditions and restrictions described herein
and otherwise determined by the Board of Directors ("Stock Awards"); and (ii)
options to purchase Shares ("Options"). The term "MLP" shall mean MHC Management Limited Partnership.
2.11 The term "Participant" shall mean (a) for"Subsidiary" means each Purchase Period an
Eligible Directorentity
the Company owns or Eligible Employee who has elected to purchase Stock in
accordance with Section 4 in such Purchase Period and (b) for any period any
person for whom Stock is held pending delivery under Section 7.
A-1
25
2.12 The term "Participating Employer" shall mean RSI, MLP and any other
organization owned in whole or in part,controls directly or indirectly by MHC whicheither through voting
control or as a general partner, provided that, for purposes of Incentive Stock
Options (as 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 shall be vested in a Committee (the "Committee")
consisting of two (2) or more members of the Board of Directors of the Company,
each of whom is designateda "disinterested person" as such by the Committee.
2.13 The term "Pay" shall mean (i)is defined in the case of an Eligible Employee, all
cash compensation paid to him or her for services to MHC or a Participating
Employer including regular straight time earnings or draw, overtime,
commissions, and bonuses, but excluding amounts paid as living allowance or
reimbursement of expenses and other similar payments; and (ii) in the case of an
Eligible Director, all retainers and meeting and other service fees paid to him
or her by MHC.
2.14 The term "Pay Day" shall mean the day as of which Pay is paid to an
Eligible Employee.
2.15 The term "Plan" shall mean this Manufactured Home Communities, Inc.
and Realty Systems, Inc. Non-Qualified Employee Stock Purchase Plan as effective
as of July 1, 1997, and as thereafter amended from time to time.
2.16 The term "Plan Administrator" shall mean MHC or MHC's delegate.
2.17 The term "Purchase Period" shall mean a period set by the Committee
and which shall run for no more than a year. Unless changed by the Committee,
the initial Purchase Period shall mean a period which shall begin on the first
day of a calendar quarter and end on the last day of such calendar quarter. The
first Purchase Period shall commence no earlier than on July 1, 1997 and
terminate on September 30, 1997.
2.18 The term "Purchase Price" for each Purchase Period shall mean a
percentage set by the Committee before the beginningSection
240.16b-3(c)(2)(i) of the Purchase Period (not
less than 85%) of the lesser of (a) the Closing Price for a share of Stock on
the first day of such Purchase Period; or (b) the Closing Price for a share of
Stock on the last day of such Purchase Period.
2.19 The term "Rule 16b-3" shall mean Rule 16b-3 to Section 16(b) ofGeneral Rules and Regulations promulgated under the
Securities Exchange Act of 1934 (the "Act") (and, in addition, with respect to
any grant of an Option or the determination of conditions and restrictions
intended to make a Stock Award constitute "performance-based compensation"
within the meaning of Section 162(m)(4)(C) of the Internal Revenue Code, as
amended ("Code"), such grant, award or determination is made by a Committee
consisting of two (2) or more outside directors as such term is defined in
Treasury Regulation Section 1.162-27(e)(3)), who shall be appointed by, and may
be removed by, such Board, provided that the Committee shall have no authority,
power or discretion to determine the number or timing of Options and Stock
Awards granted pursuant to paragraph 3(b) or 3(c), or to alter the terms and
conditions of Options or Stock Awards as set forth therein. Any interpretation
of the Plan by the Committee and any successordecision made by the Committee on any other
matter within its discretion 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) 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 Stock Awards
are to be granted ("Grantees"), the number of Shares subject to such rule.
2.20Option and
Stock Award to be granted to each Grantee and the terms, conditions and
restrictions applicable to such Option or Stock Award. Notwithstanding the
foregoing, the maximum number of Shares with respect to which Options and Stock
Awards may be granted during any calendar year to any Grantee is 250,000 Shares.
(b) An Option to purchase (i) ten thousand (10,000) Shares shall be awarded
to each member of the Board of Directors of the Company 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 times a
fraction, the numerator of which is the number of 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, shall be awarded to
each new member of the Board of Directors of the Company on the date he or she
first becomes a member of the Board of Directors of the Company. A director
shall become a Grantee in the Plan on the first date on which the director is
awarded an Option under the Plan. Directors may, in addition to Options awarded
under this paragraph, also be entitled to Options under paragraph 3(a).
A-1
24
(c) As of the date on which a distribution (the "Bonus") is made under the
Company's Management by Objectives Bonus Plan (the "MBO 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 at least
0-20% of base salary. The term "RSI"Grant Value of such Stock Award, as of such date,
shall mean Realty Systems, Inc.be in an amount equal to fifty percent (50%) of the Bonus 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 hereof.
(d) Subject to the provisions of paragraph 15, for all purposes of the Plan
(i) the "Grant Value" of a Delaware corporation.
2.21 The term "Stock"Stock Award grant made pursuant to paragraph 3(c)
shall meanequal the $.01 par value common stockFair Market Value of MHC.
Thethe Shares subject thereto as of the date
of grant, and (ii) the "Fair Market Value" of a Share as of any date means the
closing price of the Shares on the New York Stock Exchange on such date.
4. Shares Subject to the Plan. Subject to the provisions of paragraph 15,
the aggregate number of sharesShares for which Options and Stock Awards may be granted
under the Plan shall not exceed 4,000,000 Shares. If any Option 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 Option or Stock Award
shall again be available for grant under the Plan unless the Plan shall have
terminated.
5. Stock Awards.
(a) (i) A Stock Award granted under paragraph 3(a) shall be subject to the
condition that it will be forfeited to the Company upon the Grantee's
termination of employment with the Company and all Extended Companies (as
defined below) within one year from the date of grant of the Stock Award ("Date
of Grant"), and may be subject to such further conditions and restrictions
established by the Committee at the Date of Grant (including conditions
requiring employment by the Grantee for a period in excess of one year). Any
Stock Awards containing further conditions and restrictions as established by
the Committee shall be described in such term sheets or supplements as are
approved by the Committee from time to time. For purposes of the Plan, "Extended
Company" means any company designated as such by the Committee, but only if that
Extended Company either (x) provides that awards that are issued to its
employees and other persons, which are comparable to awards under the Plan, will
not expire if such employees or other persons terminate their relationship with
such company and immediately begin service as an employee, officer, director or
consultant of the Company or (y) has no similar plan in effect. The Extended
Companies may be changed by the Committee from time to time.
(ii) A Stock Award granted under paragraph 3(c) shall be forfeited to the
Company upon a Grantee's termination of employment with the Company and all
Extended Companies within two years from the Date of Grant, unless (A) the
Grantee has five years of service for vesting purposes under the MHC ADVANTAGE
Retirement Plan at the time of such termination of employment, (B) such
termination is not for "good cause" (as determined by the Committee), and (C)
within one year following such termination of employment, the Grantee does not
become employed by a competitor of the Company.
(iii) Notwithstanding the foregoing, the restrictions on all Stock Awards
under this Plan shall immediately lapse in the event of the termination of a
Grantee's employment with the Company or an extended Company following (A) the
Grantee's Disability (as defined in the MHC Advantage Retirement Plan), (B) the
Grantee's death, (C) the Grantee's retirement at or after Normal Retirement Date
as defined in the MHC Advantage Retirement Plan, or (D) a "Change in Control" of
the Company.
(b) A "Change in Control" shall be deemed to occur upon:
(i) the acquisition by any entity, person, or group of more than 50%
of the outstanding Shares from the holders thereof;
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25
(ii) a merger or consolidation of the Company with one or more other
entities as a result of which the ultimate holders of outstanding Shares
immediately prior to such merger hold less than 50% of the shares of
beneficial ownership of the surviving or resulting corporation; or
(iii) a transfer of substantially all of the property of the Company
other than to an entity of which the Company directly or indirectly owns at
least 50% of the shares of beneficial ownership.
(c) The Grantee shall be entitled to all of the rights of a stockholder
with respect to the Stock Awards 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 exceed 1,000,000, subjectcash) received in any such distribution with respect to adjustment pursuant to Section 17 hereof. Shares ofa Stock Award
that is still subject to the Plan mayrestrictions in paragraph (a)(i) or (ii) above,
shall be either authorized but unissued shares, shares
now heldsubject 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 treasury of MHC, or shares hereafter acquired by MHC.
3. Administration
Except for the exercise of those powers expressly granted to the Committee
to determine the Closing Price and who is a Participating Employer and to set
the Purchase Period and the Purchase Price, the Plan Administrator shall be
responsible for the administration of this Plan and shall have the power in
connection with such administration to interpret the Plan and to take such other
action in connection with such administration as the Plan Administrator deems
necessary or equitable under the circumstances. The Plan Administrator also
shall have the power to delegate the duty to perform such administrative
functions as the Plan Administrator deems appropriate under the circumstances.
Any person to whom the duty to perform an administrative function is delegated
shall act on behalf ofGrantee's name
and shall be responsibleheld 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 restrictions have lapsed shall be
delivered to the Plan Administrator forGrantee upon such function. Any action or inaction by or on behalflapse.
(e) Whenever the recipient of a Stock Award recognizes income with respect
thereto, the Plan Administrator
under this Plan shall be final and binding on each Eligible Director, each
Eligible Employee, each Participant and on each other person who makes a claim
under this Plan based on the rights, if any, of any such Eligible Director,
Eligible Employee or Participant under this Plan.
4. Participation
Each person who is an Eligible Director or an Eligible Employee shall be a
Participant in this Plan for the related Purchase Period if he or she properly
completes and timely files an Election Form with
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26
the Plan Administrator to elect to participate in this Plan. An Election Form
may require an Eligible Employee to provide such information and to agree to
take such action (in addition to the action required under Section 5) as the
Plan Administrator deems necessary or appropriate in light of the purpose of
this Plan or for the orderly administration of this Plan.
5. Contributions
(a) Initial Contributions. Each Participant's Election Form under Section 4
shall specify the contributions which he or she proposes to make for the related
Purchase Period. Such contributions shall be expressed as a specific dollar
amount which the Participant proposes to contribute in cash, or a percentage of
the Participant's Pay that MHC or the Participant's Participating Employer is
authorized to deduct from his or her Pay each Pay Day during the Purchase Period
(or as a combination of such cash and such payroll deduction contributions),
provided, however:
(1) the minimum payroll deduction for a Participant for each Pay Day
for purposes under this Plan shall be $10.00, and
(2) the maximum contribution which a Participant may make for purposes
under this Plan for any calendar year shall be 100% of his or her Pay, not
to exceed $100,000.
(b) Changes in Contributions and Withdrawals. A ParticipantCompany shall have the right to amend hiswithhold 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 her Election Form at any timethe date as of which income
is recognized with respect to reducesuch 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 to stop histhat do not satisfy the requirements of Section 422 of the
Code or her contributions,that are granted under paragraph 3(b) shall not constitute Incentive
Stock Options and such election shall be effective immediately forNon-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
its Fair Market Value on the date the Option is awarded under the Plan. The
Option 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
Company's Shares, shall not be less than 110% of its Fair Market Value on such
date.
8. Stock Appreciation Rights. The Committee may, in its sole discretion,
award "Stock Appreciation Rights" together with any Option granted under
paragraph 3(a). A Grantee who is awarded a Stock Appreciation Right shall be
entitled to receive from the Company, at the time such right is exercised, that
number of Shares having an aggregate Fair Market Value as of the date of
exercise equal to the product of (i) the number of Shares as to which the
Grantee is exercising the Stock Appreciation Right, and (ii) the excess of the
Fair Market Value (at the date of exercise) of a Share over the exercise price
specified by the Committee at the time of the award of the related Option,
provided that the Committee, in its sole discretion, may elect to settle all or
a portion of the Company's obligation arising out of the exercise of a Stock
Appreciation Right by the payment of cash contributionsin an amount equal to the Fair Market
Value as of the date of exercise of the Shares it would otherwise be obligated
to deliver; provided that any election by the Committee to settle in cash with
regard to a Grantee who is subject to Section 16 of the Act shall be in
conformance with Section 240.16b-3 of the General Rules and as soon as practicableRegulations
promulgated under the Act. Stock Appreciation Rights shall be exercisable only
to the extent that the related Option is exercisable and at the exercise price
of the Option. The Stock Appreciation Right shall be canceled to the extent that
the related Option is
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26
exercised and the Option shall be canceled to the extent that the related Stock
Appreciation Right is exercised.
9. Option Expiration Date. The "Expiration Date" with respect to an Option
or any portion thereof 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. If the employment of a Grantee with the
Company and all Extended Companies terminates for any reason (other than death
or disability which are governed by Section 12), such Grantee's Option may not
be exercised after the date of such cessation of employment except to the extent
the Committee permits exercise after such date but, in any case, no later than
(i) three months after Grantee's termination for any reason (other than death,
disability or Change in Control) and (ii) the Option's Expiration Date.
Notwithstanding the foregoing, in no event may a Grantee exercise an Option
following the termination of the Grantee's employment if the Committee
determines in its discretion that such employment was terminated for good cause.
The Expiration Date with respect to an Option or any portion thereof 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 of the Option's Expiration Date. In the event of a Change in
Control, all Options then outstanding under the Plan Administrator actually
receivesshall immediately vest.
10. Exercise of Options.
(a) Each Option granted under paragraph 3(a) shall be exercisable, either
in whole or in part, at such amended Election Formtime 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.
(b) Shares with respect to which Incentive Stock Options are exercisable
for payroll deductions. A Participant alsothe first time by a Grantee during any calendar year may not exceed one
hundred thousand dollars ($100,000)). Any Options that become exercisable in
excess of such amount shall havebe deemed to be a Non-Qualified Stock Option to the
rightextent of such excess.
(c) 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 before fifteen daysafter 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, no later than the Option's Expiration Date.
(d) A Grantee may exercise an Option or a Stock Appreciation Right by
giving written notice thereof prior to the last day
of a Purchase Period (i)Option's Expiration Date to withdraw (without interest) all or any partthe
Secretary of the contributions creditedCompany at the principal executive offices of the Company.
Contemporaneously with the delivery of notice with respect to his or her Account for such purchase; or (ii) to
increase his or her cash contributions for suchexercise of an
Option, the full purchase by delivering an
amended Election Form (and for purposesprice of clause (ii), a check for such
contributions)the Shares purchased pursuant to the Plan Administrator at least fifteen days priorexercise
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 last
day of such Purchase Period.
(c) Account Credits, General Assets and Taxes. All payroll deductions made
for a Participant shall be credited to his or her Account asCompany valued at the Fair Market Value of the Pay Day asShares on the
preceding day, by any combination of which the deduction is made (orforegoing or with any other
consideration.
(e) Upon the exercise of an Option or a Stock Appreciation Right 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 check describedapplicable
withholding taxes. In addition to the terms set forth in this paragraph 10, all
exercised Options and Stock Appreciation Rights shall be subject to such
additional guidelines as established by the Committee.
11. 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
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27
recipient is acquiring the Shares for investment and not for the purpose or with
the intention of distributing the Shares.
12. Death/Disability of Grantee.
(a) In the event of the death or disability (as defined in the MHC
ADVANTAGE Plan, or, for ISOs only, as defined in Section 5(b)(ii) is delivered). All contributions made22(e)(3) of the Code)
of a Grantee, all outstanding Options held by the Grantee on the date of his
disability or by the Grantee on the date of his death (or, in either case, by a
Participantpermitted transferee under this Plan,
whether in cash or through payroll deductions,paragraph 13) shall be heldexercisable by MHCthe 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 after the date of death or disability, but no later than the
Option's Expiration Date. Any such Participant's Participating Employer, as agent for MHC. All such contributionsexercise shall be held as partby written notice thereof
filed with the Secretary of the general assetsCompany at the principal executive offices of
MHCthe Company prior to the Option's Expiration Date.
(b) Upon the death or disability of a Grantee, all restrictions on a Stock
Award previously granted to the Grantee shall lapse and such Shares shall be
delivered to the Grantee or to the person or persons to whom the right to such
Shares passes by will or by the laws of descent and distribution.
13. Transferability.
(a) The Shares subject to Stock Awards granted under paragraph 3(a) or 3(c)
shall not be held in
trustsold, assigned, pledged or otherwise segregated from MHC's general assets. No interest shall be
paidtransferred, voluntarily or
accrued on any such contributions. Each Participant's right to the
contributions credited to his or her Account shall be that of a general and
unsecured creditor of MHC. MHC and each Participating Employer shall have the
right to make such provisions as it deems necessary or appropriate to satisfy
any tax laws with respect to purchases of Stock made under this Plan. If a
Participant elects to withdraw all of his or her Account under this Section
5(c), his or her status as a Participant shall terminate as of the date the Plan
Administrator receives such election.
(d) Automatic Refunds. The balance credited to the Account of an Eligible
Director automatically shall be refunded in full (without interest) if his or
her status as a member of the Board terminates for any reason whatsoever during
a Purchase Period, and the balance credited to the Account of an Eligible
Employee automatically shall be refunded in full (without interest) if his or
her status as an employee of MHC or a Participating Employer terminates for any
reason whatsoever during a Purchase Period. Such refunds shall be made as soon
as practicable after the Plan Administrator has actual notice of any such
termination. A person's status as a Participant under this Plan shall terminate
at the same time as his or her status as an Eligible Director or Eligible
Employee terminates.
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6. Purchase of Stock
(a) If a Participant is an Eligible Director or an Eligible Employee
through the end of a Purchase Period, the balance that remains credited to his
or her Account at the end of such Purchase Period, up to a maximum of $100,000
for any calendar year, automatically shall be applied to purchase Stock at the
Purchase Price for such Stock for such Purchase Period. Such Stock shall be
purchased on behalf of the Participant by operation of this Plan in whole shares
and any cash remaining in the Participant's Account shall be carried over to the
next Offering unless the Participant directs otherwise.
(b) Except as specifically provided herein, all Eligible Employees and
Eligible Directors shall have the same rights and privileges under the Plan. All
rules and determinations of the Board in the administration of the Plan shall be
uniformly and consistently applied to all persons in similar circumstances.
(c) If the total shares of Stock to be purchased on any date in accordance
with Section 6(a) exceeds the shares of Stock then available under the Plan
(after deduction of all Stock that has been purchased under Section 6(a)), the
Participating Employer shall make a pro rata allocation of the Stock remaining
available in as nearly a uniform manner as shall be practical and as it shall
determine to be equitable.
7. Delivery
A stock certificate representing any shares of Stock purchased under this
Plan shall be held for or, at a Participant's election made on an Election Form,
delivered to a Participant registered in his or her name or, if the Participant
so elects on such Election Form and if permissible under applicable law, in the
names of the Participant and one such other person as may be designatedinvoluntarily, by the Participant, as joint tenants with rights of survivorship. Such certificate may
contain a legend as determined by the Plan Administrator in connection withGrantee, while they are subject to the restrictions
described in Section 9(b)paragraph 5(a).
The(b) Options granted under the Plan Administrator shall haveare not transferable except (i) by will
or by the rightlaws of descent and distribution or, to charge a Participant for registering Stock in the nameextent not inconsistent
with the applicable provisions of the Participant and any other person. No Participant (or any person who makes a
claim for, on behalf of, or in place of a Participant) shall have any interest
in any shares of Stock under this Plan until they have been purchasedCode, pursuant to the terms of the Plan.
8. Designation of Beneficiary
A Participant may designate on his or her Election Form a Beneficiary (a)
who shall receive the balance credited to his or her Account if the Participant
dies before the end of a Purchase Period and (b) who shall receive the Stock, if
any, purchased for the Participant under this Plan if the Participant dies after
the end of a Purchase Period but before either the certificate representing such
shares of Stock has been delivered to the Participant or before such Stock has
been credited to a brokerage account maintained for the Participant. Such
designation may be revised in writing at any time by the Participant by filing
an amended Election Form, and his or her revised designation shall be effective
at such time as the Plan Administrator receives such amended Election Form. If a
deceased Participant fails to designate a Beneficiary or, if no person so
designated survives a Participant or, if after checking his or her last known
mailing address, the whereabouts of the person so designated are unknown, then
the Participant's estate shall be treated as his designated Beneficiary under
this Section 8.
9. Transferability and Dispositions
(a) Neither the balance credited to a Participant's Account nor any rights
to receive shares of Stock under this Plan may be assigned, encumbered,
alienated, transferred, pledged, or otherwise disposed of in any way by a
Participant during his or her lifetime or by his or her Beneficiary or by any
other person during his or her lifetime, and any attempt to do so shall be
without effect. Notwithstanding the foregoing, a Participant may assign his or
her rights to purchase Shares hereunder to the Manufactured Home Communities,
Inc. and Realty Systems, Inc. Supplemental Retirement Savings Trust, subject to
and in accordance with such procedures as are established by the Plan
Administrator.
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28
(b) Except as provided in the next sentence, no "disposition"qualified domestic
relations order (as that term is defined in Section 424(c)the Code) and (ii) a Grantee may
transfer all or part of an Option that is not an Incentive Stock Option, or a
Stock Appreciation Right, to the Grantee's spouse, child or children, grandchild
or grandchildren, or other relatives or to a trust for the benefit of the
Code)Grantee and/or any of the foregoing; provided that the transferee thereof shall
hold such Option or Stock Appreciation Right subject to all of the conditions
and restrictions contained herein and otherwise applicable to the Option or
Stock Appreciation Right, 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 and Stock
Appreciation Rights may be madeexercised during the lifetime of the Grantee only by
the Grantee, and after the death of the Grantee, only as provided in paragraph
12.
14. 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 of the
Company. Any Option or a Stock purchasedAward granted under the Plan untilshall not confer
upon the first anniversaryholder thereof any right as a stockholder of such purchase. Notwithstanding the foregoing, if a Participant who owns Stock subjectCompany prior to the
foregoing restriction
is determined byissuance of Shares pursuant to the exercise thereof. No person entitled to
exercise any Option or Stock Appreciation Right granted under the Plan Administrator in its discretion toshall
have a serious
financial need for the proceedsany of the salerights or privileges of such Stock, then upon application
made by the Participant, the Plan Administrator shall consent to a dispositionstockholder of such Stock to the extent necessary to satisfy the serious financial need, and
shall give instructions to the transfer agent to register such disposition on
the stock records of MHC.
10. Securities Registration
If MHC shall deem it necessary to register under the Securities Act of
1933, as amended, or any other applicable statutes any shares of Stock purchased
under this Plan or to qualify any such shares of Stock for an exemption from any
such statutes, MHC shall take such action at its own expense before delivery of
the certificate representing such shares of Stock. If shares of Stock are listed
on any national securities exchange at the time shares of Stock are purchased
under this Plan, MHC whenever required shall make prompt application for the
listing on such national securities exchange of such shares, at the expense of
MHC.
11. Compliance with Rule 16b-3
If any provision of this Plan or administrative guidelines under this Plan
or any act or omissionrecord with respect to
this Plan (including any actShares issuable upon exercise of such Option or omission
by an Eligible Director or an Eligible Employee) failsStock Appreciation Right
until certificates representing such Shares have been issued and delivered. If
the redistribution of Shares is restricted pursuant to satisfy an exemptive
condition under Rule 16b-3 or otherwise is inconsistent withparagraph 11,
certificates representing such condition,Shares may bear a legend referring to such
provision, guidelines or act or omission shall be deemed null and void.
12. Amendment or Termination
This Plan may be amended by the Board from timerestrictions.
15. Adjustments to time to the extent that
the Board deems necessary or appropriate, and any such amendment shall be
subject to the approvalNumber of MHC's shareholders to the extent such approval is
required under the laws of the State of Maryland or to the extent such approval
is required to meet the security holder approval requirements under any legal
requirement applicable to MHC; provided, however, no amendment shall be
retroactive unless the Board in its discretion determines that such amendment is
in the best interest of MHC or such amendment is required by applicable law to
be retroactive. The Board also may terminate this Plan and any Purchase Period
at any time (together with any related contribution elections) or may terminate
any Purchase Period (together with any related contribution elections) at any
time; provided, however, no such termination shall be retroactive unless the
Board determines that applicable law requires a retroactive termination of this
Plan.
13. Notices
All Election Forms and other communications from a ParticipantShares Subject to the Plan Administratorand to Option
Terms. Subject to the following provisions of this paragraph 15, 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 of any outstanding Option may be
adjusted by the Committee in such manner as it deems equitable, provided
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28
that, in no event shall the Option price for a Share be adjusted below the par
value of such 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 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 this Plan shall be deemedthe foregoing.
16. Agreement with Company. At the time of a grant, the Committee may
require a Grantee to have
been filedenter into an agreement with the Plan Administrator when actually receivedCompany in thea form
specified by the Plan Administrator atCommittee agreeing to the location, or by the person,
designated byterms and conditions of the Plan Administrator forand
to such additional terms and conditions, not inconsistent with the receiptPlan, as the
Committee may, in its sole discretion, prescribe.
17. Term of Plan. The Plan was effective December 18, 1992. No Options,
Stock Awards or Stock Appreciation Rights may be granted under the Plan after
December 18, 2002 or, if earlier, the date on which the Plan is terminated
pursuant to paragraph 18.
18. Amendment and Termination of Plan. Subject to any such Election Form
and communications.
14. Service
The right to elect to participate in thisapproval of the
stockholders of the Company which may be required by law, the Board of Directors
of the Company may at any time amend, suspend or terminate the Plan. No
amendment, suspension or termination of the Plan shall not constitute an
offer of employmentalter or membership onimpair any
Option, or Stock Appreciation Right or Stock Award previously granted under the
Board, and no election to participate
in this Plan shall constitute an employment agreement for an Eligible Employee
or an agreement with respect to Board membership for an Eligible Director. Any
such right or election shall have no bearing whatsoever onwithout the employment
relationship between an Eligible Employee and any other person or on an Eligible
Director's status as a memberconsent of the Board. Finally, no Eligible Directorholder thereof. No amendment requiring
stockholder approval under Section 240.16b-3 of the Act, Treasury Regulation
Section 1.162-27 or Eligible Employee shall be induced to participate in this
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29
Plan, or shall participate in this Plan, with the expectation that such
participation will lead to employment or continued employment, and no Eligible
Director shall be induced to participate in this Plan, or shall participate in
this Plan, with the expectation that such participation will lead to continued
membership on the Board.
15. Employment Transfers
No Eligible Employee's employment shall be treated as terminated under this
Plan as a result of a transfer between, or among, MHC or any other Participating
Employer.
16. Approval of Shareholders
The Plan shall not take effect until approved by the shareholders of MHC.
17. Changes in Capital Structure
(a) In the event that the outstanding shares of Stock of MHC are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of MHC or of another corporation, by reason
of any reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, or dividend payable in
shares, appropriate adjustment shall be made by the Board in the number of
shares available under this Plan, and in the number or kind of shares as to
which a right to purchase Stock of MHC under this Plan shall be exercisable, to
the end that the applicable Participant's proportionate interest shall be
maintained as before the occurrence of such event. Any such adjustment made by
the Board shall be consistent with Section 424(a)422 of the Code and shall be conclusive.
(b) If MHCvalid unless such
stockholder approval is not the surviving or resulting corporation in any
reorganization, merger, consolidation or recapitalization, each right to
purchase Stock of MHC under this Plan shall be assumed by the surviving or
resulting corporation and each such right shall continue in full force and
effect, and shall apply to the same number and class of securities of the
surviving corporationsecured as a holder of the number of shares of Stock subject to
such right would have received in such consolidation or recapitalization.
18. Headings, References and Construction
The headings to sections in this Plan have been included for convenience of
reference only. This Plan shall be interpreted and construed in accordance with
the laws of the State of Maryland.provided therein.
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MANUFACTURED HOME COMMUNITIES, INC.
By:
--------------------------------------
Title:
--------------------------------------
REALTY SYSTEMS, INC.
By:
--------------------------------------
Title:
--------------------------------------
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MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA, CHICAGO, ILLINOISTwo North Riverside Plaza, Chicago, Illinois 60606
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSProxy 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 DAVID A.
HELFAND,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 13, 1997,12, 1998, 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
below. 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 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.
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COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENTS/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side)
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- ----------------------------- PLEASE MARK [X]
COMMON YOUR VOTES
THIS WAY------------------------------------------------------------------------------------------------------------------------------------
Please mark [ ]
your votes as [ ]
indicated in [ X ]
this example [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1 AND PROPOSAL 2.
WITHHELD
FOR FOR ALL I PLAN TO ATTEND MEETING [ ]
Proposal 1 - ELECTION OF DIRECTORS
[ ] [ ]
Nominees: TimothyLouis H. Callahan,
Donald S. Chisholm, Thomas E. DobrowskiMasotti, Sheli Z. FOR WITHHELD
Rosenberg and John F. Podjasek, Jr.Gary L. Waterman FOR ALL COMMENTS/ADDRESS CHANGE
Please mark this box if you have [ ]
WITHHELD FOR (Write name of nominee/s in Please mark this box if
space any written comments/address
provided below). you have any written comments
address[ ] [ ] change on the reverse side.
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FOR AGAINST ABSTAIN
Proposal 2 - ADOPTION-ADOPTION OF THE COMPANY'S Second [ ] [ ] [ ]
1997 NON-QUALIFIED EMPLOYEE
STOCK OPTION PLAN And on any other matter which may properly come
Amended and Restated 1992 Stock Option and before the meeting or any adjournment or postponement
Stock Award Plan thereof in the discretion of the Proxy holder.
Signature(s) Date
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NOTE: Please sign as name appears heron.hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee , guardian or officer, please give full title under signature.
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