<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
-------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 30, 1998
EQUITY OFFICE PROPERTIES TRUST
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
MARYLAND 1-13115 36-4151656
(State or Other Jurisdiction of (Commission File Number) (IRS Employer Identification No.)
Incorporation or Organization)
TWO NORTH RIVERSIDE PLAZA 60606
SUITE 2200, CHICAGO ILLINOIS (Zip Code)
(Address of Principal Executive
Offices)
</TABLE>
(312) 466-3300
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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<PAGE> 2
ITEM 5. OTHER EVENTS
On September 18, 1998, the Board of Trustees (the "Board") of Equity Office
Properties Trust (the "Company") approved Amendment No. 3 to the Company's
Amended and Restated 1997 Share Option and Share Award Plan (the "Plan").
Amendment No. 3 to the Plan clarifies when restrictions on certain awards under
the Plan lapse upon termination, restates the section of the Plan which
addresses the Expiration Date (as defined in the Plan) and provides for the
acceleration of the vesting schedule of Options or Shares subject thereto under
certain circumstances.
A copy of the Plan, including Amendment Nos. 1, 2 and 3 is attached hereto
as Exhibit 99.1. All capitalized terms used in this report but not otherwise
defined herein have the meanings ascribed to such terms in the attached Plan.
On September 18, 1998, the Board approved Amendment No. 2 to the Company's
Bylaws, which specifies the authority granted to the Executive Committee of the
Board. A copy of the Amended Bylaws, including Amendment No. 2, is attached
hereto as Exhibit 3.2.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
3.2 Amended Bylaws of Equity Office Properties Trust, including
Amendment No. 1 and Amendment No. 2 to the Bylaws effective
May 15, 1998 and September 18, 1998, respectively.
99.1 Amended and Restated Equity Office Properties Trust 1997
Share Option and Share Award Plan (as Amended and Restated
effective July 1, 1997), including Amendment No. 1 and
Amendment No. 2 to the Plan, each effective May 15, 1998;
and Amendment No. 3 to the Plan effective September 18,
1998.
</TABLE>
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EQUITY OFFICE PROPERTIES TRUST
Date: September 30, 1998 By: /s/ STANLEY M. STEVENS
------------------------------------
Stanley M. Stevens
Executive Vice President,
Chief Legal Counsel and Secretary
3
<PAGE> 4
EQUITY OFFICE PROPERTIES TRUST
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
Capitalized terms used herein are as defined in the Company's Annual Report
on Form 10-K, as amended by Form 10-K/A, for the year ended December 31, 1997
and the Company's Form 10-Q for the six months ended June 30, 1998.
The accompanying unaudited Pro Forma Condensed Combined Balance Sheet as of
June 30, 1998 reflects the following transactions which all occurred or are
expected to occur subsequent to June 30, 1998: (a) the acquisition or probable
acquisition of 14 office properties; (b) the purchase of a mortgage receivable
for $245.0 million; and (c) the $50.0 million investment in preferred shares of
Capital Trust.
The accompanying unaudited Pro Forma Condensed Combined Statement of
Operations for the six months ended June 30, 1998 reflects the following
transactions as if they had occurred on January 1, 1998: (a) the acquisition of
13 office properties, and one parking facility, acquired during the six months
ended June 30, 1998; (b) the acquisition of 10 office properties, acquired
between July 1, 1998 and July 29, 1998; (c) the purchase of the remaining
partnership interests in one of the Company's unconsolidated joint ventures; (d)
the probable acquisition of four office properties; (e) the purchase of a
mortgage receivable for $245.0 million; (f) the $50.0 million investment in
preferred shares of Capital Trust; (g) the February 1998 Notes Offering; (h) the
Series B Preferred Shares Offering; (i) the increase in the $600 Million Credit
Facility to $1.0 billion; (j) the UIT Offering; and (k) the June 1998 Notes
Offering.
The accompanying unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 1997 reflects the following
transactions as if they had occurred on January 1, 1997: (a) the acquisition of
66 office properties, including 20 office properties acquired by Beacon prior to
the Beacon Merger, and seven parking facilities, including an interest in four
parking facilities, acquired during the year ended December 31, 1997; (b) the
disposition of three office properties; (c) the $180 million private debt
offering (the "$180 Million Notes Offering") which occurred on September 3,
1997; (d) the transactions that occurred in connection with the consolidation of
the entities which comprise the predecessors ("Equity Office Predecessors") of
the Company (the "Consolidation") and the initial public offering (the "IPO"),
which closed on July 11, 1997, and the decrease in interest expense resulting
from the use of the net proceeds for the repayment of mortgage debt; (e) the net
change in interest expense from draws on the $1.5 Billion Credit Facility used
to refinance existing mortgage debt; (f) the Beacon Merger; (g) the acquisition
of 23 office properties and one parking facility acquired between January 1,
1998 and July 29, 1998; (h) the purchase of the remaining partnership interest
in one of the Company's unconsolidated joint ventures; (i) the probable
acquisition of four office properties; (j) the purchase of a mortgage receivable
for $245.0 million; (k) the $50.0 million investment in preferred shares of
Capital Trust; (l) the February 1998 Notes Offering; (m) the Series B Preferred
Shares Offering; (n) the increase in the $600 Million Credit Facility to $1.0
billion; (o) the UIT Offering; and (p) the June 1998 Notes Offering.
The accompanying unaudited pro forma condensed combined financial
statements have been prepared by management of the Company and do not purport to
be indicative of the results which would actually have been obtained had the
transactions described above been completed on the dates indicated or which may
be obtained in the future. The pro forma condensed combined financial statements
should be read in conjunction with the accompanying notes to the pro forma
condensed combined financial statements as of and for the six months ended June
30, 1998 and the year ended December 31, 1997, included elsewhere herein.
4
<PAGE> 5
EQUITY OFFICE PROPERTIES TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 ACQUIRED
EQUITY OFFICE PROPERTIES AND EQUITY OFFICE
PROPERTIES TRUST PROBABLE CAPITAL TRUST PROPERTIES TRUST
HISTORICAL ACQUISITIONS INVESTMENT PRO FORMA
---------------- -------------- ------------- ----------------
(A) (B)
<S> <C> <C> <C> <C>
ASSETS
Investment in real estate, net........ $12,217,747 $ 925,830 $ -- $13,143,577
Cash and cash equivalents............. 52,751 (40,000) -- 12,751
Rents and other receivables........... 84,258 -- -- 84,258
Escrow deposits and restricted cash... 31,713 -- -- 31,713
Investments in unconsolidated joint
ventures and mortgage
receivables........................ 350,022 281,000 -- 631,022
Other assets.......................... 138,643 -- 50,000 188,643
----------- ---------- ------- -----------
TOTAL ASSETS.................. $12,875,134 $1,166,830 $50,000 $14,091,964
=========== ========== ======= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage debt......................... $ 2,112,024 $ 279,844 $ -- $ 2,391,868(C)
Unsecured notes....................... 2,459,481 -- -- 2,459,481(C)
Lines of credit....................... 367,944 652,072 50,000 1,070,016(C)
Distribution payable.................. 92,951 -- -- 92,951
Other liabilities..................... 348,142 31,230 -- 379,372
----------- ---------- ------- -----------
TOTAL LIABILITIES............. 5,380,542 963,146 50,000 6,393,688
Minority interests:
Operating Partnership.............. 718,806 203,684 -- 922,490
Partially owned properties......... 29,695 -- -- 29,695
Preferred Shares (100,000 authorized
and 14,000 issued)................. 500,000 -- -- 500,000
Common Shares......................... 2,521 -- -- 2,521
Additional paid in capital............ 6,243,570 -- -- 6,243,570
----------- ---------- ------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY........ $12,875,134 $1,166,830 $50,000 $14,091,964
=========== ========== ======= ===========
</TABLE>
5
<PAGE> 6
EQUITY OFFICE PROPERTIES TRUST
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 ACQUIRED
EQUITY OFFICE PROPERTIES AND FEBRUARY 1998 SERIES B JUNE 1998
PROPERTIES TRUST PROBABLE NOTES PREFERRED UIT NOTES
HISTORICAL ACQUISITIONS OFFERING OFFERING OFFERING OFFERING
---------------- -------------- ------------- --------- -------- ---------
(D) (Q)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental..................... $597,901 $ 86,139 $ -- $ -- $ -- $ --
Tenant reimbursements...... 108,743 15,923 -- -- -- --
Parking.................... 44,607 3,198 -- -- -- --
Other...................... 13,640 1,114 -- -- -- --
Fees from noncombined
affiliates............... 2,664 -- -- -- -- --
Interest................... 6,209 -- -- -- -- --
-------- -------- ----- ------- ----- -------
Total revenues....... 773,764 106,374 -- -- -- --
-------- -------- ----- ------- ----- -------
Expenses:
Property operating......... 276,907 36,355 -- -- -- --
Interest................... 150,030 56,047 508(R) (2,774)(S) (760)(U) 1,966(V)
Depreciation............... 133,430 21,651 -- -- -- --
Amortization............... 2,747 -- -- -- -- --
General and
administrative........... 28,440 -- -- -- -- --
-------- -------- ----- ------- ----- -------
591,554 114,053 508 (2,774) (760) 1,966
-------- -------- ----- ------- ----- -------
Income before allocation to
minority interests, income
from investment in
unconsolidated joint
ventures and mortgage
receivables................ 182,210 (7,679) (508) 2,774 760 (1,966)
Minority interests:
Operating Partnership.... (17,026) (3,645) 63 (73) (95) 245
Partially owned
properties............. (1,036) -- -- -- -- --
Income from investment in
unconsolidated joint
ventures and mortgage
receivables................ 5,026 2,718 -- -- -- --
-------- -------- ----- ------- ----- -------
Net income from continuing
operations................. 169,174 (8,606) (445) 2,701 665 (1,721)
-------- -------- ----- ------- ----- -------
Preferred dividends......... (14,703) -- -- (2,188)(T) -- --
-------- -------- ----- ------- ----- -------
Net income available for
Common Shares.............. $154,471 $ (8,606) $(445) $ 513 $ 665 $(1,721)
======== ======== ===== ======= ===== =======
Net income available per
weighted average Common
Share Outstanding
(Basic)....................
Weighted Average Common
Shares Outstanding
(Basic)....................
Net income available per
weighted average Common
Share Outstanding
(Diluted)..................
Weighted Average Common
Shares Outstanding
(Diluted)..................
<CAPTION>
CAPITAL EQUITY OFFICE
TRUST PROPERTIES TRUST
INVESTMENT PRO FORMA
---------- ----------------
(W)
<S> <C> <C>
Revenues:
Rental..................... $ -- $684,040
Tenant reimbursements...... -- 124,666
Parking.................... -- 47,805
Other...................... -- 14,754
Fees from noncombined
affiliates............... -- 2,664
Interest................... 2,063 8,272
------ --------
Total revenues....... 2,063 882,201
------ --------
Expenses:
Property operating......... -- 313,262
Interest................... 1,625 206,642
Depreciation............... -- 155,081
Amortization............... -- 2,747
General and
administrative........... -- 28,440
------ --------
1,625 706,172
------ --------
Income before allocation to
minority interests, income
from investment in
unconsolidated joint
ventures and mortgage
receivables................ 438 176,029
Minority interests:
Operating Partnership.... (55) (20,585)(X)
Partially owned
properties............. -- (1,036)
Income from investment in
unconsolidated joint
ventures and mortgage
receivables................ -- 7,744
------ --------
Net income from continuing
operations................. 383 162,152
------ --------
Preferred dividends......... -- (16,891)
------ --------
Net income available for
Common Shares.............. $ 383 $145,261
====== ========
Net income available per
weighted average Common
Share Outstanding
(Basic).................... $ 0.58
========
Weighted Average Common
Shares Outstanding
(Basic).................... 252,078
========
Net income available per
weighted average Common
Share Outstanding
(Diluted).................. $ 0.57
========
Weighted Average Common
Shares Outstanding
(Diluted).................. 289,242
========
</TABLE>
6
<PAGE> 7
EQUITY OFFICE PROPERTIES TRUST
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
EQUITY BEACON
OFFICE BEACON MERGER
PROPERTIES 1997 CONSOLIDATION PROPERTIES AND
TRUST ACQUIRED FINANCING AND IPO CORPORATION HISTORICAL
HISTORICAL PROPERTIES DISPOSITIONS ACTIVITY ADJUSTMENTS HISTORICAL ADJUSTMENTS
---------- ---------- ------------ --------- ------------- ----------- -----------
(D) (E) (F) (L)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental................... $570,379 $245,032 $(5,645) $ -- $ 8,983 (H) $299,196 $5,834(M)
Tenant reimbursements.... 106,437 54,560 (62) -- -- 39,856 --
Parking.................. 47,051 17,229 (573) -- -- -- --
Other.................... 9,863 4,307 (431) -- -- 11,907 --
Fees from noncombined
affiliates............. 4,950 -- -- -- 3,090 --
Interest/dividends....... 13,392 69 -- -- -- 10,067 --
-------- -------- ------- -------- -------- -------- ------
Total revenues.... 752,072 321,197 (6,711) -- 8,983 364,116 5,834
-------- -------- ------- -------- -------- -------- ------
Expenses:
Property operating....... 282,964 124,069 (2,710) -- -- 107,905 --
Interest................. 164,105 94,782 (36) 16,606(G) (27,042)(I) 52,344 943(N)
Depreciation............. 122,074 56,550 (2,071) -- 2,737 (J) 65,034 5,374(O)
Amortization............. 7,357 -- (54) -- -- 4,209 --
General and
administrative......... 34,891 2,185 (283) -- 1,800 (K) 37,455 --(P)
-------- -------- ------- -------- -------- -------- ------
611,391 277,586 (5,154) 16,606 (22,505) 266,947 6,317
-------- -------- ------- -------- -------- -------- ------
Income before allocation to
minority interests,
income from investment in
unconsolidated joint
ventures and mortgage
receivables.............. 140,681 43,611 (1,557) (16,606) 31,488 97,169 (483)
Minority interests:
Operating Partnership.... (7,010) -- -- -- (13,170) (12,021) 2,305
Partially owned
properties............. (1,701) -- -- -- -- -- --
Income from investment in
unconsolidated joint
ventures and mortgage
receivables.............. 5,155 1,581 -- -- 6,087
-------- -------- ------- -------- -------- -------- ------
Net income from continuing
operations............... 137,125 45,192 (1,557) (16,606) 18,318 91,235 1,822
-------- -------- ------- -------- -------- -------- ------
Preferred dividends........ (649) (7,962) -- -- (9,349) --
-------- -------- ------- -------- -------- -------- ------
Net income available to
Common Shares............ $136,476 $ 37,230 $(1,557) $(16,606) $ 18,318 $ 81,886 $1,822
======== ======== ======= ======== ======== ======== ======
Net income available per
weighted average Common
Share Outstanding
(Basic)..................
Weighted Average Common
Shares Outstanding
(Basic)..................
Net income available per
weighted average Common
Share Outstanding
(Diluted)................
Weighted Average Common
Shares Outstanding
(Diluted)................
</TABLE>
7
<PAGE> 8
EQUITY OFFICE PROPERTIES TRUST
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 ACQUIRED FEBRUARY JUNE
PROPERTIES AND 1998 SERIES B 1998 CAPITAL
PROBABLE NOTES PREFERRED UIT NOTES TRUST
ACQUISITIONS OFFERING OFFERING OFFERING OFFERING INVESTMENT
-------------- -------- --------- -------- -------- ----------
(Q) (W)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental....................... $197,771 $ -- $ -- $ -- $ -- $ --
Tenant reimbursements........ 34,782 -- -- -- -- --
Parking...................... 7,449 -- -- -- -- --
Other........................ 3,113 -- -- -- -- --
Fees from noncombined
affiliates................. -- -- -- -- -- --
Interest..................... -- -- -- -- -- 4,125
-------- ------- --------- ---------- ----- ------
Total revenues......... 243,115 -- -- -- -- 4,125
-------- ------- --------- ---------- ----- ------
Expenses:
Property operating........... 88,447 -- -- -- -- --
Interest..................... 128,300 3,735(R) (19,976)(S) (3,040)(U) 479(V) 3,450
Depreciation................. 47,915 -- -- -- -- --
Amortization................. -- -- -- -- -- --
General and administrative... -- -- -- -- -- --
-------- ------- --------- ---------- ----- ------
264,662 3,735 (19,976) (3,040) 479 3,450
-------- ------- --------- ---------- ----- ------
Income before allocation to
minority interests, income
from investment in
unconsolidated joint ventures
and mortgage receivables..... (21,547) (3,735) 19,976 3,040 (479) 675
Minority interests:
Operating Partnership...... (3,806) 468 (530) (381) 60 (85)
Partially owned
properties............... -- -- -- -- -- --
Income from investment in
unconsolidated joint ventures
and mortgage receivables..... 2,783 -- -- -- -- --
-------- ------- --------- ---------- ----- ------
Net income from continuing
operations................... (22,570) (3,267) 19,446 2,659 (419) 590
-------- ------- --------- ---------- ----- ------
Preferred dividends............ -- -- (15,750)(T) -- -- --
-------- ------- --------- ---------- ----- ------
Net income available for Common
Shares....................... $(22,570) $(3,267) $ 3,696 $ 2,659 $(419) $ 590
======== ======= ========= ========== ===== ======
Net income available per
weighted average Common Share
Outstanding (Basic)..........
Weighted Average Common Shares
Outstanding (Basic)..........
Net income available per
weighted average Common Share
Outstanding (Diluted)........
Weighted Average Common Shares
Outstanding (Diluted)........
<CAPTION>
EQUITY OFFICE
PROPERTIES TRUST
PRO FORMA
----------------
<S> <C>
Revenues:
Rental....................... $1,321,550
Tenant reimbursements........ 235,573
Parking...................... 71,156
Other........................ 28,759
Fees from noncombined
affiliates................. 8,040
Interest..................... 27,653
----------
Total revenues......... 1,692,731
----------
Expenses:
Property operating........... 600,675
Interest..................... 414,650
Depreciation................. 297,613
Amortization................. 11,512
General and administrative... 76,048
----------
1,400,498
----------
Income before allocation to
minority interests, income
from investment in
unconsolidated joint ventures
and mortgage receivables..... 292,233
Minority interests:
Operating Partnership...... (34,170)(X)
Partially owned
properties............... (1,701)
Income from investment in
unconsolidated joint ventures
and mortgage receivables..... 15,606
----------
Net income from continuing
operations................... 271,968
----------
Preferred dividends............ (33,710)
----------
Net income available for Common
Shares....................... $ 238,258
==========
Net income available per
weighted average Common Share
Outstanding (Basic).......... $ 0.95
==========
Weighted Average Common Shares
Outstanding (Basic).......... 251,156
==========
Net income available per
weighted average Common Share
Outstanding (Diluted)........ $ 0.94
==========
Weighted Average Common Shares
Outstanding (Diluted)........ 289,136
==========
</TABLE>
8
<PAGE> 9
EQUITY OFFICE PROPERTIES TRUST
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
A. To reflect the following acquisitions during the period from July 1, 1998 to
July 29, 1998 and the Probable Acquisitions:
<TABLE>
<CAPTION>
LIABILITIES VALUE
PURCHASE CASH ASSUMED OF UNITS
PROPERTY DATE ACQUIRED PRICE PAID OR ISSUED ISSUED
-------- ------------- -------- ---- ----------- --------
<S> <C> <C> <C> <C> <C>
Northland Plaza......................... July 2, 1998 47,000 47,000 -- --
Miller Global Portfolio................. July 15, 1998 125,003 73,938 51,065
Second and Spring....................... July 29, 1998 19,374 15,000 -- 4,374
Worldwide Plaza......................... (1) 584,453 74,069 311,074 199,310
Colonnade I, II and III................. (2) 150,000 150,000 -- --
---------- -------- -------- --------
Total investment in real estate.... 925,830 360,007 362,139 203,684
Park Avenue Tower....................... July 15, 1998 245,000 245,000 -- --
Worldwide Plaza......................... (1) 36,000 36,000 -- --
---------- -------- -------- --------
Total investment in unconsolidated
joint ventures and mortgage
receivables...................... 281,000 281,000 -- --
---------- -------- -------- --------
Total.............................. $1,206,830 $641,007 $362,139 $203,684
========== ======== ======== ========
</TABLE>
- -------------------------
(1) The Company's probable acquisition of Worldwide Plaza will consist of 100%
ownership of a 47-story office tower and a $36.0 million investment in an
adjacent mixed-use facility. The $578 million purchase price contained in
the purchase agreement has been adjusted for these purposes in order to
consist of the following: (i) the assumption of a $268.6 million mortgage
with an estimated mark to market adjustment of $11.2 million; (ii) the
assumption of a deferred real estate tax liability with a present value of
approximately $31.2 million (approximately 66% of which the Company expects
to collect from tenants in the form of recoverable costs); (iii) the
issuance of 6,861,166 Units with an estimated fair value of $171.9 million
based on a fair value of $25.05 per unit; (iv) the issuance of a put option
on the Units with an estimated fair value of $27.4 million; and (v) a cash
payment of approximately $110.1 million.
(2) Probable Acquisition
B. On July 29, 1998, the Company completed the purchase of 50,000 shares of
Capital Trust 8.25% Step Up Convertible Preferred Securities, for $50
million, in a private placement.
C. Scheduled payments of principal on total indebtedness for each of the next
five years and thereafter, on a pro forma basis are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 213,886
1999........................................................ 52,908
2000........................................................ 158,451
2001........................................................ 1,414,005
2002........................................................ 319,583
Thereafter.................................................. 3,745,140
----------
Subtotal............................................... 5,903,973
Net premium (net of accumulated amortization of $2.1
million).................................................. 17,392
----------
Total............................................. $5,921,365
==========
</TABLE>
D. Represents the consolidated historical statement of operations of the
Company for the six months ended June 30, 1998 for the Pro Forma Condensed
Combined Statement of Operations for the six months
9
<PAGE> 10
EQUITY OFFICE PROPERTIES TRUST
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
ended June 30, 1998 and the combined historical statements of operations of
the Company for the period from July 11, 1997 to December 31, 1997 and
Equity Office Predecessors for the period from January 1, 1997 to July 10,
1997, for the Pro Forma Condensed Combined Statement of Operations for the
year ended December 31, 1997.
E. To reflect the operations and the depreciation expense for properties
acquired in 1997 for the period from January 1, 1997 through the date of
acquisition. Interest expense was also adjusted, where applicable, to a full
year, for the year ended December 31, 1997.
<TABLE>
<CAPTION>
NOTE
PROPERTY DATE ACQUIRED REFERENCE
-------- ------------- ---------
<S> <C> <C>
177 Broad Street............................................ January 29, 1997
Biltmore Apartments......................................... January 29, 1997
Preston Commons............................................. March 21, 1997
Oakbrook Terrace Tower...................................... April 16, 1997
50% Interest in Civic Parking, L.L.C........................ April 16, 1997
One Maritime Plaza.......................................... April 21, 1997
10880 Wilshire Boulevard.................................... April 23, 1997 (1)
Smith Barney Tower.......................................... April 29, 1997
201 Mission Street.......................................... April 30, 1997
Centerpointe I and II....................................... April 30, 1997 (1)
Westbrook Corporate Center.................................. May 23, 1997 (1)
225 Franklin Street......................................... June 4, 1997 (1)
30 N. LaSalle............................................... June 13, 1997
Sunnyvale Business Center................................... July 1, 1997 (1)
Adams -- Wabash Parking Facility............................ August 11, 1997
Columbus America Properties................................. September 3, 1997
Civic Opera Building........................................ October 1, 1997 (1)
Prudential Properties....................................... October 1, 1997
550 South Hope Street....................................... October 6, 1997
10 & 30 South Wacker Drive.................................. October 7, 1997
Acorn Properties............................................ October 7, 1997
200 West Adams.............................................. October 8, 1997 (1)
One Lafayette Centre........................................ October 17, 1997
Lakeside Office Park........................................ October 20, 1997 (1)
Acorn Properties............................................ November 21, 1997
PPM Properties.............................................. November 24, 1997
LaSalle Office Plaza........................................ November 25, 1997
Stanwix Parking Facility.................................... November 25, 1997
101 North Wacker............................................ December 11, 1997 (1)
Wright Runstad Properties................................... December 17, 1997
Wright Runstad Associates Limited Partnership............... December 17, 1997
</TABLE>
- -------------------------
(1) Represents properties acquired during 1997 by Beacon prior to the Beacon
Merger.
The depreciation adjustment of $56.6 million in the "1997 Acquired
Properties" column in the statement of operations for the year ended December
31, 1997, is based on the cost to acquire the above listed properties, assuming
that 10% of the purchase price is allocated to land and the depreciable lives
are 40 years. Depreciation is computed using the straight-line method.
10
<PAGE> 11
EQUITY OFFICE PROPERTIES TRUST
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
F. To eliminate the operations of Barton Oaks Plaza II, Westlakes Office Park
and 8383 Wilshire for the year ended December 31, 1997. Barton Oaks Plaza II
was sold in January 1997 and Westlakes Office Park and 8383 Wilshire were
sold in May 1997.
G. To reflect the additional interest expense on debt obtained in the year
ended December 31, 1997 on properties acquired before 1997 and to reflect
the $180 Million Notes Offering which occurred on September 3, 1997, and the
resulting paydown of the revolving credit facility, and to reflect the
$235.3 million of mortgage indebtedness repaid from draws on the $1.5
Billion Credit Facility and the repayment of the revolving credit facility
balance. The adjustment also eliminates amortization expense recorded on the
mark-to-market adjustment on debt repaid from draws on the $1.5 Billion
Credit Facility and reflects amortization related to the fees associated
with the $1.5 Billion Credit Facility for the year ended December 31, 1997,
as follows:
<TABLE>
<S> <C>
Additional interest from debt obtained during 1997 on
properties acquired before 1997........................... $ 1,042
Additional interest on $180 Million Notes Offering.......... 9,218
Additional interest on $1.5 Billion Credit Facility......... 24,126
Decrease in interest from repayment of mortgage
indebtedness.............................................. (13,263)
Decrease in interest from repayment of the revolving credit
facility.................................................. (8,052)
Amortization of fees associated with the $1.5 Billion Credit
Facility.................................................. 5,018
Eliminate amortization expense recorded on mark to market
adjustment on debt repaid with the $1.5 Billion Credit
Facility.................................................. (1,483)
-------
Total....................................................... $16,606
=======
</TABLE>
H. To reflect the adjustment for the straight-line effect of scheduled rent
increases, assuming the Consolidation and the IPO closed on January 1, 1997.
I. To reflect the net decrease in interest expense associated with the $15.0
million of mortgage debt on Denver Corporate Center Towers II and III
repaid in May 1997 and the $598.4 million repaid with the net proceeds of
the IPO and cash held by Equity Office Predecessors. In addition, to
eliminate the $5.9 million of amortization historically recognized as a
result of the write-off of deferred loan costs, net of the $4.1 million
amortization of the discount required to record the mortgage debt at fair
value recorded in connection with the Consolidation and the IPO.
J. To reflect depreciation expense related to the adjustment to record the net
equity value of the investment in real estate for the year ended December
31, 1997, on a straight-line basis, as follows:
<TABLE>
<S> <C>
Historical investment in real estate before accumulated
depreciation at time of IPO............................... $5,022,946
Less: Portion allocated to land estimated to be 10%......... (502,295)
----------
Depreciable basis........................................... $4,520,651
==========
Depreciation expense based on an estimated useful life of 40
years..................................................... $ 113,016
Less: Historical depreciation expense related to properties
contributed at the Consolidation and IPO.................. (106,888)
Less: Pro forma depreciation expense on properties acquired
in 1997 prior to the Consolidation and the IPO............ (3,391)
----------
Depreciation expense adjustment............................. $ 2,737
==========
</TABLE>
11
<PAGE> 12
EQUITY OFFICE PROPERTIES TRUST
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
K. To reflect additional general and administrative expenses expected to be
incurred as a result of reporting as a public entity as follows:
<TABLE>
<S> <C>
Trustees' and officers' insurance........................... $ 375
Printing and mailing........................................ 375
Trustees' fees.............................................. 225
Investor relations.......................................... 225
Other....................................................... 600
------
Total....................................................... $1,800
======
</TABLE>
L. Represents Beacon's historical statement of operations prior to the Beacon
Merger for the period from January 1, 1997 to December 18, 1997.
M. To reflect the adjustment for the straight-line effect of scheduled rent
increases, assuming the Beacon Merger closed on January 1, 1997.
N. To reflect amortization of mark-to-market adjustment of Beacon's mortgage
debt.
O. To reflect the depreciation expense related to the adjustment to record the
net equity value of the investment in real estate and investment in joint
ventures on a straight-line basis for the year ended December 31, 1997
associated with the Beacon Merger, as follows:
<TABLE>
<S> <C>
Investment in real estate for Beacon Properties............. $4,204,502
Less: Portion allocated to land............................. (515,022)
----------
Pro Forma depreciable basis of Beacon's investment in real
estate, net............................................... $3,689,480
==========
Depreciation expense based on an estimated useful life of 40
years..................................................... $ 92,237
Less: Historical expense related to the Beacon Properties,
including the period from December 19, 1997 to December
31, 1997 after the Beacon Merger.......................... (73,393)
Less: Pro Forma depreciation expense on Beacon's 1997
acquired properties....................................... (13,470)
----------
Adjustment to depreciation expense.......................... $ 5,374
==========
</TABLE>
P. Management has estimated that there will be a reduction of general and
administrative expenses as a result of the Beacon Merger, as follows. The
general and administrative expenses savings have not been included in the
pro forma condensed combined statement of operations. There can be no
assurance that the Company will be successful in realizing such anticipated
cost savings.
<TABLE>
<S> <C>
Salaries and benefits....................................... $16,500
Rent........................................................ 1,200
Office and computer expenses................................ 1,600
Investor relations.......................................... 1,600
Other....................................................... 1,100
-------
Total....................................................... $22,000
=======
</TABLE>
Q. To reflect the operations and the depreciation expense for the following
properties acquired in 1998 for (a) the pro forma condensed combined
statement of operations for the six months ended June 30, 1998; for the
period from January 1, 1998 through the earlier of the date of acquisition
or June 30, 1998, as applicable, and (b) the pro forma condensed combined
statement of operations for the year ended December 31, 1997, for the period
from January 1, 1997 to December 31, 1997. Interest expense was also
12
<PAGE> 13
EQUITY OFFICE PROPERTIES TRUST
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
adjusted, where applicable, to reflect six months and a full year, for the
six months ended June 30, 1998 and the year ended December 31, 1997,
respectively.
<TABLE>
<CAPTION>
PROPERTY DATE ACQUIRED
-------- -------------
<S> <C>
BP Tower Garage............................................. January 29, 1998
100 Summer Street........................................... March 18, 1998
The Tower at New England Executive Park..................... March 31, 1998
Denver Post Tower........................................... April 21, 1998
301 Howard and 215 Fremont.................................. April 29, 1998
Miller Global Portfolio..................................... (1)
Millennium Plaza............................................ May 19, 1998
Polk & Taylor(2)............................................ May 22, 1998
Walker Building............................................. June 1, 1998
Columbia Seafirst Center.................................... June 26, 1998
Northland Plaza............................................. July 2, 1998
Park Avenue Tower(2)........................................ July 15, 1998
Second and Spring........................................... July 29, 1998
Worldwide Plaza(2).......................................... Probable Acquisition
Colonnade I and II.......................................... Probable Acquisition
</TABLE>
- -------------------------
(1) The Company acquired four properties on April 30, 1998 and one property on
May 15, 1998 and the remaining eight properties on July 15, 1998.
The depreciation adjustment of $21,651 million for the six months ended June
30, 1998 and $47,915 million for the year ended December 31, 1997 is based
on the cost to acquire the properties described above assuming that 10% of
the purchase price is allocated to land and the depreciable lives are 40
years. Depreciation is computed using the straight-line method.
(2) Income from investment in unconsolidated joint ventures and mortgage
receivables has been adjusted for (i) the acquisition of a the remaining 90%
interest in Polk & Taylor; (ii) the acquisition of mortgage receivable on
Park Avenue Tower; and (iii) the investment in the mixed-use portion of
Worldwide Plaza.
R. To reflect the net increase in interest expense in connection with the
February 1998 Notes Offering and the paydown of the revolving credit
facility and the $1.5 Billion Credit Facility with the net proceeds of the
February 1998 Notes Offering and to reflect amortization of the financing
costs incurred in connection with the February 1998 Notes Offering.
S. To reflect the decrease in interest expense in connection with the paydown of
the Credit Facilities with the net proceeds of the Series B Preferred
Offering.
T. To reflect preferred dividends in connection with the Series B Preferred
Offering of 5.25% per annum.
U. To reflect the decrease in interest in connection with the paydown of the
Credit Facilities with the net proceeds of the UIT Offering.
V. To reflect the net increase in interest expense in connection with the June
1998 Notes Offering and the paydown of the revolving credit facility with
the net proceeds of the June 1998 Notes Offering and to reflect amortization
of the financing cost incurred in connection with the June 1998 Notes
Offering.
W. To reflect income from our investment in Capital Trust and interest expense
on the line of credit (see Note B).
13
<PAGE> 14
EQUITY OFFICE PROPERTIES TRUST
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
X. To reflect the 12.5% minority interests ownership in the Company at June 30,
1998 and December 31, 1997, respectively:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
Historical allocation of income and minority interests...... $17,026 $ 7,010
Beacon minority interests allocation........................ -- 12,021
Minority interests allocation of income after pro forma
adjustments............................................... 3,559 15,139
------- -------
Net income allocated to minority interests ownership in the
Company................................................... $20,585 $34,170
======= =======
</TABLE>
14
<PAGE> 1
EXHIBIT 3.2
EQUITY OFFICE PROPERTIES TRUST
BYLAWS *
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of Equity Office
Properties Trust (the "Trust") shall be located at such place or places as the
Trustees may designate.
Section 2. ADDITIONAL OFFICES. The Trust may have additional offices at
such places as the Trustees may from time to time determine or the business of
the Trust may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE. All meetings of shareholders shall be held at the
principal office of the Trust or at such other place within the United States as
shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the shareholders for the
election of Trustees and the transaction of any business within the powers of
the Trust shall be held during the month of May of each year, after the delivery
of the annual report referred to in Section 12 of this Article II, at a
convenient location and on proper notice, on a date and at the time set by the
Trustees, beginning with the year 1998. Failure to hold an annual meeting does
not invalidate the Trust's existence or affect any otherwise valid acts of the
Trust.
Section 3. SPECIAL MEETINGS. The chairman of the board or the president or
one-third of the Trustees may call special meetings of the shareholders. Special
meetings of shareholders shall also be called by the secretary upon the written
request of the holders of shares entitled to cast not less than a majority of
all the votes entitled to be cast at such meeting. Such request shall state the
purpose of such meeting and the matters proposed to be acted on at such meeting.
Within ten (10) days of the receipt of such a request, the secretary shall
inform such shareholders of the reasonably estimated cost of preparing and
mailing notice of the meeting (including all proxy materials that may be
required in connection therewith) and, upon payment by such shareholders to the
Trust of such costs, the secretary shall, within thirty (30) days of
- -------------------
* As amended by Amendment No. 1 on May 15, 1998 and Amendment No. 2 on
September 18, 1998.
1
<PAGE> 2
such payment, or such longer period as may be necessitated by compliance with
any applicable statutory or regulatory requirements, give notice to each
shareholder entitled to notice of the meeting.
Unless requested by shareholders entitled to cast a majority of all the
votes entitled to be cast at such meeting, a special meeting need not be called
to consider any matter which is substantially the same as a matter voted on at
any meeting of the shareholders held during the preceding twelve months.
Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of shareholders, the secretary shall give to each shareholder entitled
to vote at such meeting and to each shareholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by mail or by presenting it to such shareholder personally or by leaving it at
his residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail addressed to the
shareholder at his post office address as it appears on the records of the
Trust, with postage thereon prepaid.
Section 5. SCOPE OF NOTICE. Any business of the Trust may be transacted at
an annual meeting of shareholders without being specifically designated in the
notice, except such business as is required by any statute to be stated in such
notice. No business shall be transacted at a special meeting of shareholders
except as specifically designated in the notice.
Section 6. ORGANIZATION. At every meeting of the shareholders, the Chairman
of the Board, if there be one, shall conduct the meeting or, in the case of
vacancy in office or absence of the Chairman of the Board, one of the following
officers present shall conduct the meeting in the order stated: the Vice
Chairman of the Board, if there be one, the President, the Vice Presidents in
their order of rank and seniority, or a Chairman chosen by the shareholders
entitled to cast a majority of the votes which all shareholders present in
person or by proxy are entitled to cast, shall act as Chairman, and the
Secretary, or, in his absence, an assistant secretary, or in the absence of both
the Secretary and assistant secretaries, a person appointed by the Chairman
shall act as Secretary.
Section 7. QUORUM. At any meeting of shareholders, the presence in person
or by proxy of shareholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the declaration of trust
("Declaration of Trust") for the vote necessary for the adoption of any measure.
If, however, such quorum shall not be present at any meeting of the
shareholders, the shareholders entitled to vote at such meeting, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time to a date not more than 120 days after the original record date without
notice other than announcement at the meeting. At such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally notified.
2
<PAGE> 3
Section 8. VOTING. A plurality of all the votes cast at a meeting of
shareholders duly called and at which a quorum is present shall be sufficient to
elect a Trustee. Each share may be voted for as many individuals as there are
Trustees to be elected and for whose election the share is entitled to be voted.
A majority of the votes cast at a meeting of shareholders duly called and at
which a quorum is present shall be sufficient to approve any other matter which
may properly come before the meeting, unless more than a majority of the votes
cast is required herein or by statute or by the Declaration of Trust. Unless
otherwise provided in the Declaration of Trust, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote at a meeting of shareholders.
Section 9. PROXIES. A shareholder may cast the votes entitled to be cast
by the shares owned of record by him either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the Secretary of the Trust before or at the time of
the meeting. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of the Trust
registered in the name of a corporation, partnership, trust or other entity, if
entitled to be voted, may be voted by the president or a vice president, a
general partner or trustee thereof, as the case may be, or a proxy appointed by
any of the foregoing individuals, unless some other person who has been
appointed to vote such shares pursuant to a bylaw or a resolution of the
governing board of such corporation or other entity or agreement of the partners
of the partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such shares. Any trustee or other
fiduciary may vote shares registered in his name as such fiduciary, either in
person or by proxy.
Shares of the Trust directly or indirectly owned by it shall not be voted
at any meeting and shall not be counted in determining the total number of
outstanding shares entitled to be voted at any given time, unless they are held
by it in a fiduciary capacity, in which case they may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
The Trustees may adopt by resolution a procedure by which a shareholder may
certify in writing to the Trust that any shares registered in the name of the
shareholder are held for the account of a specified person other than the
shareholder. The resolution shall set forth the class of shareholders who may
make the certification, the purpose for which the certification may be made, the
form of certification and the information to be contained in it; if the
certification is with respect to a record date or closing of the share transfer
books, the time after the record date or closing of the share transfer books
within which the certification must be received by the Trust; and any other
provisions with respect to the procedure which the Trustees consider necessary
or desirable. on receipt of such certification, the person specified in the
certification shall be regarded as, for the purposes set forth in the
certification, the shareholder of record of the specified shares in place of the
shareholder who makes the certification.
3
<PAGE> 4
Notwithstanding any other provision contained herein or in the Declaration
of Trust or these Bylaws, Title 3, Subtitle 7 of the Corporations and
Associations Article of the Annotated Code of Maryland (or any successor
statute) shall not apply to any acquisition by any person of shares of
beneficial interest of the Trust. This section may be repealed, in whole or in
part, at any time, whether before or after an acquisition of control shares and,
upon such repeal, may, to the extent provided by any successor bylaw, apply to
any prior or subsequent control share acquisition.
Section 11. INSPECTORS. At any meeting of shareholders, the chairman of the
meeting may appoint one or more persons as inspectors for such meeting. Such
inspectors shall ascertain and report the number of shares represented at the
meeting based upon their determination of the validity and effect of proxies,
count all votes, report the results and perform such other acts as are proper to
conduct the election and voting with impartiality and fairness to all the
shareholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of them if there is more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be PRIMA
FACIE evidence thereof.
Section 12. REPORTS TO SHAREHOLDERS. The Trustees shall submit to the
shareholders at or before the annual meeting of shareholders a report of the
business and operations of the Trust during such fiscal year, containing a
balance sheet and a statement of income and surplus of the Trust, accompanied by
the certification of an independent certified public accountant, and such
further information as the Trustees may determine is required pursuant to any
law or regulation to which the Trust is subject. Within the earlier of 20 days
after the annual meeting of shareholders or 120 days after the end of the fiscal
year of the Trust, the Trustees shall place the annual report on file at the
principal office of the Trust and with any governmental agencies as may be
required by law and as the Trustees may deem appropriate.
Section 13. NOMINATIONS AND PROPOSALS BY SHAREHOLDERS.
(a) ANNUAL MEETINGS OF SHAREHOLDERS. (1) Nominations of persons for
election to the Board of Trustees and the proposal of business to be considered
by the shareholders may be made at an annual meeting of shareholders (i)
pursuant to the Trust's notice of meeting, (ii) by or at the direction of the
Trustees or (iii) by any shareholder of the Trust who was a shareholder of
record both at the time of giving of notice provided for in this Section 13 (a)
and at the time of the annual meeting, who is entitled to vote at the meeting
and who complied with the notice procedures set forth in this Section 13(a).
(2) For nominations or other business to be properly brought before
an annual meeting by a shareholder pursuant to clause (iii) of paragraph (a) (1)
of this Section 13, the shareholder must have given timely notice thereof in
writing to the Secretary of the Trust and such other business must otherwise be
a proper matter for action by shareholders. To be timely, a shareholder's notice
shall be delivered to the Secretary at the principal executive offices of the
Trust not later than the close of
4
<PAGE> 5
business on the 60th day nor earlier than the close of business on the 90th day
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 30 days or delayed by more than 60 days from such anniversary date or
if the Trust has not previously held an annual meeting, notice by the
shareholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the tenth day following the day on which public announcement of the date of such
meeting is first made by the Trust. In no event shall the public announcement of
a postponement or adjournment of an annual meeting to a later date or time
commence a new time period for the giving of a shareholder's notice as described
above. Such shareholder's notice shall set forth as to each person whom the
shareholder proposes to nominate for election or reelection as a Trustee all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Trustees in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a Trustee if elected); (ii) as to any other business that the
shareholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
shareholder and of the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made, (x) the name
and address of such shareholder, as they appear on the Trust's books, and of
such beneficial owner and (y) the number of each class of shares of the Trust
which are owned beneficially and of record by such shareholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(a) (2) of this Section 13 to the contrary, in the event that the number of
Trustees to be elected to the Board of Trustees is increased and there is no
public announcement by the Trust naming all of the nominees for Trustee or
specifying the size of the increased Board of Trustees at least 70 days prior to
the first anniversary of the preceding year's annual meeting, a shareholder's
notice required by this Section 13(a) shall also be considered timely, but only
with respect to nominees for any new positions created by such increase, if it
shall be delivered to the secretary at the principal executive offices of the
Trust not later than the close of business on the tenth day following the day on
which such public announcement is first made by the Trust.
(b) SPECIAL MEETINGS OF SHAREHOLDERS. Only such business shall be
conducted at a special meeting of shareholders as shall have been brought before
the meeting pursuant to the Trust's notice of meeting. Nominations of persons
for election to the Board of Trustees may be made at a special meeting of
shareholders at which Trustees are to be elected (i) pursuant to the Trusts
notice of meeting (ii) by or at the direction of the Board of Trustees or (iii)
provided that the Board of Trustees has determined that Trustees shall be
elected at such special meeting, by any shareholder of the Trust who was a
shareholder of record both at the time of giving of notice provided for in this
Section 13(b) and at the time of the special meeting, who is entitled to vote at
the meeting and who complied with the notice procedures set forth in this
Section 13 (b). In
5
<PAGE> 6
the event the Trust calls a special meeting of shareholders for the purpose of
electing one or more Trustees to the Board of Trustees, any such shareholder may
nominate a person or persons (as the case may be) for election to such position
as specified in the Trust's notice of meeting, if the shareholder's notice
containing the information required by paragraph (a) (2) of this Section 13
shall be delivered to the Secretary at the principal executive offices of the
Trust not earlier than the close of business on the 90th day prior to such
special meeting and not later than the close of business on the later of the
60th day prior to such special meeting or the tenth day following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Trustees to be elected at such meeting. In no
event shall the public announcement of a postponement or adjournment of a
special meeting to a later date or time commence a new time period for the
giving of a shareholder's notice as described above.
(c) GENERAL. (1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 13 shall be eligible to serve as
Trustees and only such business shall be conducted at a meeting of shareholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 13. The chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Section 13 and, if any proposed
nomination or business is not in compliance with this Section 13, to declare
that such nomination or proposal shall be disregarded.
(2) For purposes of this Section 13, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Trust with the Securities and Exchange Commission pursuant to Section 13, 14
or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 13, a
shareholder shall also comply with all applicable requirements of state law and
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 13. Nothing in this Section 13 shall be deemed
to affect any rights of shareholders to request inclusion of proposals in, nor
any of the rights of the Trust to omit a proposal from, the Trust's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
Section 14. INFORMAL ACTION BY SHAREHOLDERS. Notwithstanding the provisions
of Section 13 of this Article II, any action required or permitted to be taken
at a meeting of shareholders may be taken without a meeting if a consent in
writing, setting forth such action, is signed by shareholders entitled to cast a
sufficient number of votes to approve the matter, as required by statute, the
Declaration of Trust of the Trust or these Bylaws, and such consent is filed
with the minutes of proceedings of the shareholders.
Section 15. VOTING BY BALLOT. Voting on any question or in any
election may be VIVA VOCE unless the presiding officer shall order or any
shareholder shall demand that voting be by ballot.
6
<PAGE> 7
ARTICLE III
TRUSTEES
Section 1. GENERAL POWERS; QUALIFICATIONS; TRUSTEES HOLDING OVER. The
business and affairs of the Trust shall be managed under the direction of its
Board of Trustees. A Trustee shall be an individual at least 21 years of age who
is not under legal disability. In case of failure to elect Trustees at an annual
meeting of the shareholders, the Trustees holding over shall continue to direct
the management of the business and affairs of the Trust until their successors
are elected and qualify.
Section 2. NUMBER. At any regular meeting or at any special meeting called
for that purpose, a majority of the entire Board of Trustees may establish,
increase or decrease the number of Trustees, subject to any limitations on the
number of Trustees set forth in the Declaration of Trust. Except during the
period when a vacancy exists, at least two-thirds of the Trustees shall be
persons who are not executive officers of the Trust or persons affiliated with
Samuel Zell or his affiliates ("Independent Trustees"). For purposes of this
Section, the terms "executive officers" and "affiliated" shall have the
definitions set forth in Rule 405 under the Securities Act of 1933, as amended.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Trustees
shall be held immediately after and at the same place as the annual meeting of
shareholders, no notice other than this Bylaw being necessary. The Trustees may
provide, by resolution, the time and place, either within or without the State
of Maryland, for the holding of regular meetings of the Trustees without other
notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Trustees may be called
by or at the request of the chairman of the board or the president or by a
majority of the Trustees then in office. The person or persons authorized to
call special meetings of the Trustees may fix any place, either within or
without the State of Maryland, as the place for holding any special meeting of
the Trustees called by them.
Section 5. NOTICE. Notice of any special meeting shall be given by written
notice delivered personally, telegraphed, facsimile-transmitted or mailed to
each Trustee at his business or residence address. Personally delivered or
telegraphed notices shall be given at least two days prior to the meeting.
Notice by mail shall be given at least five days prior to the meeting. Telephone
or facsimile-transmission notice shall be given at least 24 hours prior to the
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail properly addressed, with postage thereon prepaid. If
given by telegram, such notice shall be deemed to be given when the telegram is
delivered to the telegraph company. Telephone notice shall be deemed given when
the Trustee is personally given such notice in a telephone call to which he is a
party. Facsimile-transmission notice shall be deemed given upon completion of
the transmission of the message to the number given to the Trust by the Trustee
and receipt of a completed answer-back indicating receipt. Neither the business
to be
7
<PAGE> 8
transacted at, nor the purpose of, any annual, regular or special meeting of the
Trustees need be stated in the notice, unless specifically required by statute
or these Bylaws.
Section 6. QUORUM. A majority of the Trustees shall constitute a quorum
for transaction of business at any meeting of the Trustees, provided that, if
less than a majority of such Trustees are present at said meeting, a majority of
the Trustees present may adjourn the meeting from time to time without further
notice, and provided further that if, pursuant to the Declaration of Trust or
these Bylaws, the vote of a majority of a particular group of Trustees is
required for action, a quorum must also include a majority of such group.
The Trustees present at a meeting which has been duly called and convened
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough Trustees to leave less than a quorum.
Section 7. VOTING. The action of the majority of the Trustees present at a
meeting at which a quorum is present shall be the action of the Trustees, unless
the concurrence of a greater proportion is required for such action by
applicable statute.
Section 8. TELEPHONE MEETINGS. Trustees may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.
Section 9. INFORMAL ACTION BY TRUSTEES. Any action required or permitted
to be taken at any meeting of the Trustees may be taken without a meeting, if a
consent in writing to such action is signed by each Trustee and such written
consent is filed with the minutes of proceedings of the Trustees.
Section 10. VACANCIES. If for any reason any or all of the Trustees cease
to be Trustees, such event shall not terminate the Trust or affect these Bylaws
or the powers of the remaining Trustees hereunder (even if fewer than two
Trustees remain). Any vacancy (including a vacancy created by an increase in the
number of Trustees) shall be filled, at any regular meeting or at any special
meeting called for that purpose, by a majority of the Trustees. Any individual
so elected as Trustee shall hold office until the next annual meeting of
shareholders.
Section 11. COMPENSATION; FINANCIAL ASSISTANCE.
(a) COMPENSATION. Trustees shall not receive any stated salary for
their services as Trustees but, by resolution of the Trustees, may receive fixed
sums per year and/or per meeting and/or per visit to real property owned or to
be acquired by the Trust and for any service or activity they performed or
engaged in as Trustees. Such fixed sums may be paid either in cash or in shares
of the Trust. Trustees may be reimbursed for expenses of attendance, if any, at
each annual, regular or special meeting of the Trustees or of any committee
thereof; and for their expenses, if any, in connection with each property visit
and any other service or activity performed or engaged in as Trustees; but
nothing herein contained shall be construed to preclude any Trustees from
serving the Trust in any other capacity and receiving compensation therefor.
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(b) FINANCIAL ASSISTANCE TO TRUSTEES. The Trust may lend money to,
guarantee an obligation of or otherwise assist a Trustee or a trustee or
director of a direct or indirect subsidiary of the Trust; provided, however,
that such Trustee or other person is also an executive officer of the Trust or
of such subsidiary, or the loan, guarantee or other assistance is in connection
with the purchase of Shares. The loan, guarantee or other assistance may be with
or without interest, unsecured, or secured in any manner that the Board of
Trustees approves, including a pledge of shares.
Section 12. REMOVAL OF TRUSTEES. The shareholders may, at any time, remove
any Trustee in the manner provided in the Declaration of Trust.
Section 13. LOSS OF DEPOSITS. No Trustee shall be liable for any loss which
may occur by reason of the failure of the bank, trust company, savings and loan
association, or other institution with whom moneys or shares have been
deposited.
Section 14. SURETY BONDS. Unless required by law, no Trustee shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
Section 15. RELIANCE. Each Trustee, officer, employee and agent of the
Trust shall, in the performance of his duties with respect to the Trust, be
fully justified and protected with regard to any act or failure to act in
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel or upon reports made to the Trust by any of its
officers or employees or by the adviser, accountants, appraisers or other
experts or consultants selected by the Trustees or officers of the Trust,
regardless of whether such counsel or expert may also be a Trustee.
Section 16. INTERESTED TRUSTEE TRANSACTIONS. Section 2-419 of the Maryland
General Corporation Law (the "MGCL") shall be available for and apply to any
contract or other transaction between the Trust and any of its Trustees or
between the Trust and any other trust, corporation, firm or other entity in
which any of its Trustees is a trustee or director or has a material financial
interest.
Section 17. CERTAIN RIGHTS OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS. The
Trustees shall have no responsibility to devote their full time to the affairs
of the Trust. Any Trustee or officer, employee or agent of the Trust (other than
a full-time officer, employee or agent of the Trust), in his personal capacity
or in a capacity as an affiliate, employee, or agent of any other person, or
otherwise, may have business interests and engage in business activities similar
or in addition to those of or relating to the Trust.)
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ARTICLE IV **
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATION. The Trustees may appoint from
among its members an Audit Committee, a Compensation Committee and other
committees, each composed of at least three Trustees, to serve at the pleasure
of the Trustees. A majority of the Trustees on the Compensation Committee and
all of the Trustees on the Audit Committee shall be Independent Trustees. In
addition, the Trustees may from time to time appoint from among its members a
Pricing Committee composed of one or more Trustees to serve at the pleasure of
the Trustees.
Section 2. POWERS. The Trustees may delegate to committees appointed
under Section 1 of this Article any of the powers of the Trustees, except as
prohibited by law.
Section 3. MEETINGS. In the absence of any member of any such committee,
the members thereof present at any meeting, whether or not they constitute a
quorum, may appoint another Trustee to act in the place of such absent member.
Notice of committee meetings shall be given in the same manner as notice for
special meetings of the Board of Trustees.
One-third, but not less than two (except for one-member committees), of the
members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum for the transaction of business at
such meeting, and the act of a majority present shall be the act of such
committee. The Board of Trustees may designate a chairman of any committee, and
such chairman or any two members of any committee (except for one-member
committees) may fix the time and place of its meetings unless the Board shall
otherwise provide. In the absence or disqualification of any member of any such
committee, the members thereof present at any meeting and not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint another
Trustee to act at the meeting in the place of such absent or disqualified
members.
Each committee shall keep minutes of its proceedings and shall report the
same to the Board of Trustees at the next succeeding meeting, and any action by
the committee shall be subject to revision and alteration by the Board of
Trustees, provided that no rights of third persons shall be affected by any such
revision or alteration.
Section 4. TELEPHONE MEETINGS. Members of a committee of the Trustees may
participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.
- ----------------
** This section was amended on May 15, 1998. Please see Amendment No. 1
attached hereto.
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Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or permitted
to be taken at any meeting of a committee of the Trustees may be taken without a
meeting, if a consent in writing to such action is signed by each member of the
committee and such written consent is filed with the minutes of proceedings of
such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Trustees shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Trust shall include a
president, a secretary and a treasurer and may include a chairman of the board,
a vice chairman of the board, a chief executive officer, a chief operating
officer, a chief financial officer, a chief legal counsel, one or more vice
presidents, one or more assistant secretaries and one or more assistant
treasurers. In addition, the Trustees may from time to time appoint such other
officers with such powers and duties as they shall deem necessary or desirable.
The officers of the Trust shall be elected annually by the Trustees at the first
meeting of the Trustees held after each annual meeting of shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as may be convenient. Each officer shall hold office
until his successor is elected and qualifies or until his death, resignation or
removal in the manner hereinafter provided. Any two or more offices except
president and vice president may be held by the same person. In their
discretion, the Trustees may leave unfilled any office except that of president
and secretary. Election of an officer or agent shall not of itself create
contract rights between the Trust and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the Trust may
be removed by the Trustees if in their judgment the best interests of the Trust
would be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Any officer of the Trust may
resign at any time by giving written notice of his resignation to the Trustees,
the chairman of the board, the president or the secretary. Any resignation shall
take effect at any time subsequent to the time specified therein or, if the time
when it shall become effective is not specified therein, immediately upon its
receipt. The acceptance of a resignation shall not be necessary to make it
effective unless otherwise stated in the resignation. Such resignation shall be
without prejudice to the contract rights, if any, of the Trust.
Section 3. VACANCIES. A vacancy in any office may be filled by the
Trustees for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Trustees may designate a chief
executive officer from among the elected officers. The chief executive
officer shall have
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responsibility for implementation of the policies of the Trust, as determined by
the Trustees, and for the administration of the business affairs of the Trust.
In the absence of both the chairman and vice chairman of the board, the chief
executive officer shall preside over the meetings of the Trustees and of the
shareholders at which he shall be present.
Section 5. CHIEF OPERATING OFFICER. The Trustees may designate a chief
operating officer from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the Trustees or the chief executive
officer.
Section 6. CHIEF FINANCIAL OFFICER. The Trustees may designate a chief
financial officer from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the Trustees or the chief executive
officer.
Section 7. CHIEF LEGAL COUNSEL. The Trustees may designate a chief legal
counsel from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the trustees or the chief executive
officer.
Section 8. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The chairman of the
board shall preside over the meetings of the Trustees and of the shareholders at
which he shall be present and shall in general oversee all of the business and
affairs of the Trust. In the absence of the chairman of the board, the vice
chairman of the board shall preside at such meetings at which he shall be
present. The chairman and the vice chairman of the board may execute any deed,
mortgage, bond, contract or other instrument, except in cases where the
execution thereof shall be expressly delegated by the Trustees or by these
Bylaws to some other officer or agent of the Trust or shall be required by law
to be otherwise executed. The chairman of the board and the vice chairman of the
board shall perform such other duties as may be assigned to him or them by the
Trustees.
Section 9. PRESIDENT. In the absence of the chairman, the vice chairman of
the board and the chief executive officer, the president shall preside over the
meetings of the Trustees and of the shareholders at which he shall be present.
In the absence of a designation of a chief executive officer by the Trustees,
the president shall be the chief executive officer and shall be ex officio a
member of all committees that may, from time to time, be constituted by the
Trustees. The president may execute any deed, mortgage, bond, contract or other
instrument, except in cases where the execution thereof shall be expressly
delegated by the Trustees or by these Bylaws to some other officer or agent of
the Trust or shall be required by law to be otherwise executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the Trustees from time to time.
Section 10. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there
be more than one vice president, the vice presidents in the order designated
at the time of their election or, in the absence of any designation, then in
the order of their election) shall perform the duties of the president and
when so acting shall have all the powers of and be subject to all the
restrictions upon the president; and shall perform such other duties as from
time to time may be assigned to him by the president or by the Trustees. The
Trustees may
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designate one or more vice presidents as executive vice president, senior vice
president or as vice president for particular areas of responsibility.
Section 11. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the shareholders, the Trustees and committees of the Trustees in
one or more books provided for that purpose; (b) see that all notices are duly
given in accordance with the provisions of these Bylaws or as required by law;
(c) be custodian of the trust records and of the seal of the Trust; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the secretary by such shareholder; (e) have general charge of the share
transfer books of the Trust; and (f) in general perform such other duties as
from time to time may be assigned to him by the chief executive officer, the
president or by the Trustees.
Section 12. TREASURER. The treasurer shall have the custody of the funds
and securities of the Trust and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and shall deposit all
moneys and other valuable effects in the name and to the credit of the Trust in
such depositories as may be designated by the Trustees.
He shall disburse the funds of the Trust as may be ordered by the Trustees,
taking proper vouchers for such disbursements, and shall render to the president
and Trustees, at the regular meetings of the Trustees or whenever they may
require it, an account of all his transactions as treasurer and of the financial
condition of the Trust.
If required by the Trustees, he shall give the Trust a bond in such sum and
with such surety or sureties as shall be satisfactory to the Trustees for the
faithful performance of the duties of his office and for the restoration to the
Trust, in case of his death, resignation, retirement or removal from office, of
all books, papers, vouchers, moneys and other property of whatever kind in his
possession or under his control belonging to the Trust.
Section 13. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant
secretaries and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or treasurer, respectively, or by the
president or the Trustees. The assistant treasurers shall, if required by the
Trustees, give bonds for the faithful performance of their duties in such sums
and with such surety or sureties as shall be satisfactory to the Trustees.
Section 14. SALARIES. The salaries and other compensation of the officers
shall be fixed from time to time by the Trustees and no officer shall be
prevented from receiving such salary or other compensation by reason of the fact
that he is also a Trustee.
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ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Trustees may authorize any officer or agent to
enter into any contract or to execute and deliver any instrument in the name of
and on behalf of the Trust and such authority may be general or confined to
specific instances. Any agreement, deed, mortgage, lease or other document
executed by one or more of the Trustees or by an authorized person shall be
valid and binding upon the Trustees and upon the Trust when authorized or
ratified by action of the Trustees.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Trust shall be signed by such officer or agent of the Trust in such manner
as shall from time to time be determined by the Trustees.
Section 3. DEPOSITS. All funds of the Trust not otherwise employed shall be
deposited from time to time to the credit of the Trust in such banks, trust
companies or other depositories as the Trustees may designate.
ARTICLE VII
SHARES
Section 1. CERTIFICATES. Each shareholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of beneficial interest held by him in the Trust. Each
certificate shall be signed by the chief executive officer, the president or a
vice president and countersigned by the secretary or an assistant secretary or
the treasurer or an assistant treasurer and may be sealed with the seal, if any,
of the Trust. The signatures may be either manual or facsimile. Certificates
shall be consecutively numbered; and if the Trust shall, from time to time,
issue several classes of shares, each class may have its own number series. A
certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. Each certificate representing shares
which are restricted as to their transferability or voting powers, which are
preferred or limited as to their dividends or as to their allocable portion of
the assets upon liquidation or which are redeemable at the option of the Trust,
shall have a statement of such restriction, limitation, preference or redemption
provision, or a summary thereof, plainly stated on the certificate. In lieu of
such statement or summary, the Trust may set forth upon the face or back of the
certificate a statement that the Trust will furnish to any shareholder, upon
request and without charge, a full statement of such information.
Section 2. TRANSFERS. Certificates shall be treated as negotiable and title
thereto and to the shares they represent shall be transferred by delivery
thereof to the same extent as those of a Maryland stock corporation. Upon
surrender to the Trust or the transfer agent of the Trust of a share certificate
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, the Trust shall issue
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a new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
The Trust shall be entitled to treat the holder of record of any share or
shares as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
Notwithstanding the foregoing, transfers of shares of beneficial interest
of the Trust will be subject in all respects to the Declaration of Trust and all
of the terms and conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Trustees
may direct a new certificate to be issued in place of any certificate previously
issued by the Trust alleged to have been lost, stolen or destroyed upon the
making of an affidavit of that fact by the person claiming the certificate to be
lost, stolen or destroyed. When authorizing the issuance of a new certificate,
an officer designated by the Trustees may, in his discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or the owner's legal representative to advertise the same
in such manner as he shall require and/or to give bond, with sufficient surety,
to the Trust to indemnify it against any loss or claim which may arise as a
result of the issuance of a new certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Trustees
may set, in advance, a record date for the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or determining
shareholders entitled to receive payment of any dividend or the allotment of any
other rights, or in order to make a determination of shareholders for any other
proper purpose. Such date, in any case, shall not be prior to the close of
business on the day the record date is fixed and shall be not more than 90 days
and, in the case of a meeting of shareholders not less than ten days, before the
date on which the meeting or particular action requiring such determination of
shareholders of record is to be held or taken.
In lieu of fixing a record date, the Trustees may provide that the share
transfer books shall be closed for a stated period but not longer than 20 days.
If the share transfer books are closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least ten days before the date of such meeting.
If no record date is fixed and the share transfer books are not closed for
the determination of shareholders, (a) the record date for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day on which the notice of meeting is mailed
or the 30th day before the meeting, whichever is the closer date to the meeting;
and (b) the record date for the determination of shareholders entitled to
receive payment of a dividend or an allotment of any other rights shall be the
close of business on the day on which the resolution of the Trustees, declaring
the dividend or allotment of rights, is adopted.
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When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except when (i) the determination has been
made through the closing of the transfer books and the stated period of closing
has expired or (ii) the meeting is adjourned to a date more than 120 days after
the record date fixed for the original meeting, in either of which case a new
record date shall be determined as set forth herein.
Section 5. STOCK LEDGER. The Trust shall maintain at its principal office
or at the office of its counsel, accountants or transfer agent, an original or
duplicate share ledger containing the name and address of each shareholder and
the number of shares of each class held by such shareholder.
Section 6. FRACTIONAL SHARES; ISSUANCE OF UNITS. The Trustees may issue
fractional shares or provide for the issuance of scrip, all on such terms and
under such conditions as they may determine. Notwithstanding any other provision
of the Declaration of Trust or these Bylaws, the Trustees may issue units
consisting of different securities of the Trust. Any security issued in a unit
shall have the same characteristics as any identical securities issued by the
Trust, except that the Trustees may provide that for a specified period
securities of the Trust issued in such unit may be transferred on the books of
the Trust only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Trustees shall have the power, from time to time, to fix the fiscal
year of the Trust by a duly adopted resolution.
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the shares
of beneficial interest of the Trust may be authorized and declared by the
Trustees, subject to the provisions of law and the Declaration of Trust.
Dividends and other distributions may be paid in cash, property or shares of the
Trust, subject to the provisions of law and the Declaration of Trust.
Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any funds of the Trust available
for dividends or other distributions such sum or sums as the Trustees may from
time to time, in their absolute discretion, think proper as a reserve fund for
contingencies, for equalizing dividends or other distributions, for repairing or
maintaining any property of the Trust or for such other purpose as the Trustees
shall determine to be in the best interest of the
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Trust, and the Trustees may modify or abolish any such reserve in the manner in
which it was created.
ARTICLE X
PROHIBITED INVESTMENTS AND ACTIVITIES;
INVESTMENT POLICIES
Notwithstanding anything to the contrary in the Declaration of Trust, the
Trust shall not enter into any transaction referred to in (i), (ii) or (iii)
below which it does not believe is in the best interests of the Trust, and will
not, without the approval of a majority of the disinterested Trustees, (i)
acquire from or sell to any Trustee, officer or employee of the Trust, any
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise in which a Trustee, officer or employee of the Trust owns more than a
one percent interest or any affiliate of any of the foregoing, any of the assets
or other property of the Trust, except for the acquisition directly or
indirectly of certain properties or interest therein, directly or indirectly,
through entities in which it owns an interest in connection with the initial
public offering of shares by the Trust or pursuant to agreements entered into in
connection with such offering, which properties shall be described in the
prospectus relating to such initial public offering, (ii) make any loan to or
borrow from any of the foregoing persons or (iii) engage in any other
transaction with any of the foregoing persons. Each such transaction will be in
all respects on such terms as are, at the time of the transaction and under the
circumstances then prevailing, fair and reasonable to the Trust. Subject to the
foregoing and the provisions of the Declaration of Trust, the Board of Trustees
may from time to time adopt, amend, revise or terminate any policy or policies
with respect to investments by the Trust as it shall deem appropriate in its
sole discretion.
ARTICLE XI
SEAL
Section 1. SEAL. The Trustees may authorize the adoption of a seal by
the Trust. The seal shall have inscribed thereon the name of the Trust and
the year of its formation. The Trustees may authorize one or more duplicate
seals and provide for the custody thereof.
Section 2. AFFIXING SEAL. Whenever the Trust is permitted or required to
affix its seal to a document, it shall be sufficient to meet the requirements of
any law, rule or regulation relating to a seal to place the word "(SEAL)"
adjacent to the signature of the person authorized to execute the document on
behalf of the Trust.
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ARTICLE XII
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law in effect from time to
time, the Trust shall indemnify (a) any Trustee, officer or shareholder or any
former Trustee, officer or shareholder (including among the foregoing, for all
purposes of this Article XII and without limitation, any individual who, while a
Trustee, officer or shareholder and at the express request of the Trust, serves
or has served another corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, shareholder,
partner or trustee of such corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise) who has been successful, on the
merits or otherwise, in the defense of a proceeding to which he was made a party
by reason of service in such capacity, against reasonable expenses incurred by
him in connection with the proceeding, (b) any Trustee or officer or any former
Trustee or officer against any claim or liability to which he may become subject
by reason of such status unless it is established that (i) his act or omission
was material to the matter giving rise to the proceeding and was committed in
bad faith or was the result of active and deliberate dishonesty, (ii) he
actually received an improper personal benefit in money, property or services or
(iii) in the case of a criminal proceeding, he had reasonable cause to believe
that his act or omission was unlawful and (c) each shareholder or former
shareholder against any claim or liability to which he may become subject by
reason of such status. In addition, the Trust shall, without requiring a
preliminary determination of the ultimate entitlement to indemnification, pay or
reimburse, in advance of final disposition of a proceeding, reasonable expenses
incurred by a Trustee, officer or shareholder or former Trustee, officer or
shareholder made a party to a proceeding by reason such status, provided that,
in the case of a Trustee or officer, the Trust shall have received (i) a written
affirmation by the Trustee or officer of his good faith belief that he has met
the applicable standard of conduct necessary for indemnification by the Trust as
authorized by these Bylaws and (ii) a written undertaking by or on his behalf to
repay the amount paid or reimbursed by the Trust if it shall ultimately be
determined that the applicable standard of conduct was not met. The Trust may,
with the approval of its Trustees, provide such indemnification or payment or
reimbursement of expenses to any Trustee, officer or shareholder or any former
Trustee, officer or shareholder who served a predecessor of the Trust and to any
employee or agent of the Trust or a predecessor of the Trust. Neither the
amendment nor repeal of this Article, nor the adoption or amendment of any other
provision of the Declaration of Trust or these Bylaws inconsistent with this
Article, shall apply to or affect in any respect the applicability of this
Article with respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption.
Any indemnification or payment or reimbursement of the expenses permitted
by these Bylaws shall be furnished in accordance with the procedures provided
for indemnification or payment or reimbursement of expenses, as the case may be,
under Section 2-418 of the MGCL for directors of Maryland corporations. The
Trust may provide to Trustees, officers and shareholders such other and further
indemnification or payment or reimbursement of expenses, as the case may be, to
the fullest extent permitted by the MGCL, as in effect from time to time, for
directors of Maryland corporations.
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ARTICLE XIII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the Declaration of
Trust or Bylaws or pursuant to applicable law, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at nor the purpose of any meeting
need be set forth in the waiver of notice, unless specifically required by
statute. The attendance of any person at any meeting shall constitute a waiver
of notice of such meeting, except where such person attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
ARTICLE XIV
AMENDMENT OF BYLAWS
The Trustees shall have the power to adopt, alter or repeal any provision
of these Bylaws and to make new Bylaws; provided, however, that Article II,
Section 2 of Article III and this Article XIV of these Bylaws shall not be
amended without the consent of shareholders by a vote of a majority of the votes
cast at a meeting of shareholders duly called and at which a quorum is present.
ARTICLE XV
MISCELLANEOUS
All references to the Declaration of Trust shall include any amendments
thereto.
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AMENDMENT NO. 1 TO THE BYLAWS OF
EQUITY OFFICE PROPERTIES TRUST
EFFECTIVE MAY 15, 1998
This will confirm that, effective as of May 15, 1998, the Bylaws of Equity
Office Properties Trust have been amended in order to add Sections 7, 8, 9 and
10 to Article IV as follows:
Section 7. EXECUTIVE COMMITTEE. The Executive Committee shall be composed
of not less than three Trustees and, subject to the exceptions hereafter
described, established for the purpose of undertaking or authorizing, on behalf
of the Board, any and all actions which might be undertaken or authorized by the
Board itself; provided that, in the absence of further resolution from the
Board, the Executive Committee shall not be empowered (i) to bind the Trust in
respect to an acquisition or disposition or series of acquisitions or
dispositions which have not been approved by or reported to the Board at a
duly-called meeting of the Board and any one of which exceeds Fifty Million
Dollars ($50,000,000) individually or Seventy-Five Million Dollars
($75,000,000), when aggregated with all other such unreported or unapproved
acquisitions or dispositions; (ii) to approve any merger or other
re-organization of the Trust; (iii) to make any recommendation to the
shareholders of the Trust; (iv) to elect any individual to an office of
executive vice-president or higher of the Trust; (v) to amend the Bylaws of the
Trust; (vi) to undertake any action which is within the jurisdiction of any
other committee of the Board; (vii) to authorize (x) the Trust to issue shares
of beneficial interest or other securities or (y) the Operating Partnership to
issue OP Units or other equity securities which, in the case of either (x) or
(y), exceed Fifty Million Dollars, ($50,000,000) in one transaction, or
Seventy-Five Million Dollars ($75,000,000) in a series of transactions which
have not been approved by the Board or reported to the Board in writing as
described above for acquisitions or dispositions; (viii) to enter into any
transaction in which any member of the Executive Committee has a financial
interest which is adverse to the Trust; or (ix) to borrow or enter into
agreements to borrow in excess of One Hundred Million Dollars ($100,000,000)
individually or in the aggregate, in loans which have not been reported to or
approved by the Board; and provided further that the Executive Committee is
expressly empowered, upon its determination that any such increase is required
in order to close a given transaction, to increase any purchase price previously
approved by the Board by an amount not greater than the lesser of (x) five
percent (5%) of the purchase price previously approved by the Board or (y) Fifty
Million Dollars ($50,000,000).
Section 8. SPECIAL CONFLICTS COMMITTEE.
8.1 The Special Conflicts Committee shall be composed of not less than
three (3) members, all of whom shall be Independent Trustees. The chair and
other members of the Special Conflicts Committee shall be appointed by the Board
of Trustees, with the affirmative vote of at least a majority of the Independent
Trustees.
8.2 The Special Conflicts Committee shall have the power to consider and
approve any transaction to which the Trust is or is proposed to be a party and
as to which any Trustee knows at the time of commitment that any of the
following persons
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either is or is entitled to be a party, whether directly or indirectly, to the
transaction or has a sufficiently material beneficial interest that the interest
might reasonably be expected to exert an influence on the Trustee's judgment if
he were called upon to vote on the transaction: (a) any Trustee or any Related
Person of any Trustee; (b) any person (other than the Trust) of which the
Trustee is the owner of more than 5% of any class of equity securities or is a
director, trustee, general partner, agent or employee; (c) any person that
controls one or more of the persons specified in clause (b) or a person that is
controlled by, or is under common control with, one or more of the persons
specified in clause (b); or (d) an individual who is a general partner,
principal or employer of the trustee.
8.3 Any Trustee who knows of a transaction covered by Section 8.2 shall
immediately notify and provide all material information about the transaction to
the Special Conflicts Committee, which shall thereafter promptly consider the
transaction. The Board of Trustees, any Trustee or any officer of the Trust may
notify the Special Conflicts Committee about any transaction that it has reason
to believe is covered by Section 8.2 and, upon request, such Trustee shall
provide to the Special Conflicts Committee all relevant information known or in
the control of the referring person. Upon receipt of notice pursuant to this
paragraph, the Special Conflicts Committee shall notify the Chairman of the
Board and the Secretary of the Trust in order that the Board of Trustees which,
absent the Board's determination that such notice was improper, shall take no
further action with respect to the transaction unless and until approved by the
Special Conflicts Committee. The Trust shall not enter into such transaction
without the approval or ratification of the Special Conflicts Committee acting
by unanimous written consent or by the affirmative vote of a majority of its
members present and voting at any meeting thereof (excluding any members
disqualified pursuant to Section 8.4). Nothing in this Section 8 shall require
approval of fees or other compensation to Independent Trustees for their service
as Trustees.
8.4. Any member of the Special Conflicts Committee who is a party to or who
has an interest in the transaction of the type described in Section 8.2 shall
take no part in the deliberations of the Special Conflicts Committee on the
transaction.
8.5. For purposes of this Section 8, the following terms shall have the
followings meanings:
"Affiliate" means a person or entity that directly or
indirectly controls, or is controlled by, or is under common control
with, a specified person or entity.
"Control", including the terms "controlling" or "under common
control with," means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of a person, whether by ownership of voting securities, by contract or
otherwise. The beneficial ownership of ten percent or more of
securities entitled to be voted generally in the election of directors
creates a presumption of control.
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<PAGE> 22
"Independent Trustee" shall mean a Trustee who is not an officer,
employee or agent of the Trust or an Affiliate of the Trust. For these
purposes, Equity Group Investments, L.L.C. and its Affiliates shall be
deemed to be Affiliates of the Trust until such time, if any, as the
Board shall determine otherwise.
"Time of commitment" as to a transaction means the time when the
transaction is consummated or, if made pursuant to contract, the time
when the Trust becomes contractually obligated so that its unilateral
withdrawal from the transaction would entail significant loss,
liability or other damage.
"Related Person" of a Trustee means (a) the spouse (or a parent or
sibling thereof) of the Trustee, or a child, grandchild, sibling,
parent (or spouse of any thereof) of the Trustee, or an individual
sharing the same residence as the Trustee, or a Trust or estate of
which a Trustee or an individual specified in this definition is a
substantial beneficiary or (b) a trust, estate, incompetent,
conservatee or minor of which the Trustee is a fiduciary.
Section 9. AUDIT COMMITTEE. The Audit Committee shall be composed of not
less than three Trustees. The function of the Audit Committee shall be (i) to
review the professional services and independence of the Trust's independent
auditors, (ii) to ensure that the scope of the annual external audit by the
independent auditors of the Trust is sufficiently comprehensive, (iii) to
review, in consultation with the independent auditors and the internal auditors,
the plan and results of the annual external audit, the adequacy of the Trust's
internal control systems and the results of the Trust's internal audits, (iv) to
review, with management and the independent auditors, the Trust's annual
financial statements, financial reporting practices and the results of each
external audit and (v) to undertake reasonably related activities to those set
forth in clauses (i) through (iv) of this Section. The Audit Committee shall
also have the authority to consider the qualification of the Trust's independent
auditors, to make recommendations to the Board as to their selection and to
review and resolve disputes between such independent auditors and management
relating to the preparation of the annual financial statements.
Section 10. COMPENSATION AND OPTION COMMITTEE. The Compensation and Option
Committee shall be composed of not less than three Trustees. The Compensation
and Option Committee shall be authorized to establish the compensation and
benefit arrangements for the officers and key employees of the Trust and to
establish general policy relating to compensation and benefit arrangements of
employees of the Trust. The Compensation and Option Committee shall also
administer the share plans and compensation programs of the Trust. The
Compensation and Option Committee shall discharge the duties of a Compensation
Committee under the Proxy Rules established by the Securities and Exchange
Commission.
The Compensation and Option Committee shall be authorized to establish
awards under and administer the Trust's Supplemental Retirement Savings Plan and
compensation programs of the Trust insofar as they relate to executive officers
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<PAGE> 23
of the Trust so that any such award or component that is intended to qualify
under Rule 16b-3 under the Exchange Act or that any share plan or executive
compensation program (or a component thereof) or other form of compensation that
is intended to qualify for an exception under such Section 162 (m) (or any
successor provision) of the Code does qualify for such exception. Composition of
the Compensation and Option Committee shall satisfy requirements set forth under
Rule 16(b)(3) under the Exchange Act and Section 162(m) under the Internal
Revenue Code.
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AMENDMENT NO. 2 TO THE BYLAWS OF
EQUITY OFFICE PROPERTIES TRUST
EFFECTIVE SEPTEMBER 18, 1998
This will confirm that, effective as of September 18, 1998, Section 7
of Article IV of the Bylaws of Equity Office Properties Trust has been amended
and restated in its entirety as follows:
Section 7. EXECUTIVE COMMITTEE. The Executive Committee shall be
composed of not less than three Trustees and, subject to the exceptions
hereafter described, established for the purpose of undertaking or authorizing,
on behalf of the Board, any and all actions which might be undertaken or
authorized by the Board itself; provided that, in the absence of further
resolution from the Board, the Executive Committee shall not be empowered (i) to
bind the Trust in respect to an acquisition or disposition or series of
acquisitions or dispositions which have not been approved by or reported to the
Board at a duly-called meeting of the Board and any one of which exceeds Fifty
Million Dollars ($50,000,000) individually or Seventy-Five Million Dollars
($75,000,000), when aggregated with all other such unreported or unapproved
acquisitions or dispositions; (ii) to approve any merger or other
re-organization of the Trust; (iii) to make any recommendation to the
shareholders of the Trust; (iv) to elect any individual to an office of
executive vice-president or higher of the Trust; (v) to amend the Bylaws of the
Trust; (vi) to undertake any action which is within the jurisdiction of any
other committee of the Board; (vii) to authorize or fix the terms of any shares
of beneficial interest or other securities to be issued by the Trust or any OP
Units to be issued by the Operating Partnership unless (x) the maximum number of
securities of the Trust or OP Units of the Operating Partnership is not greater
than the quotient of $50,000,000 (in any one transaction) or $75,000,000 (in a
series of transactions which are unapproved by or unreported to the Board), and
in either case the Board has approved the terms and conditions of the
securities, divided by the fair market value (as determined by the Executive
Committee, whose determination shall be final and binding) of a share, OP Units
or other security or (y) the Board has given general authorization for issuance
of securities providing for or establishing a method or procedure for
determining the maximum number of such securities to be issued by the Trust or
the Operating Partnership;(viii) to enter into any transaction in which any
member of the Executive Committee has a financial interest which is adverse to
the Trust; or (ix) to borrow or enter into agreements to borrow in excess of One
Hundred Million Dollars ($100,000,000) individually or in the aggregate, in
loans which have not been reported to or approved by the Board; and provided
further that the Executive Committee is expressly empowered, upon its
determination that any such increase in purchase
<PAGE> 25
price or decrease in sales price is required in order to close a given
transaction, to increase any purchase price or to decrease any sales price
previously approved by the Board by an amount not greater than the lesser of (x)
five percent (5%) of the purchase or sales price previously approved by the
Board or (y) Fifty Million Dollars ($50,000,000).
---------------------------
Secretary
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<PAGE> 1
EXHIBIT 99.1
EQUITY OFFICE PROPERTIES TRUST
1997 SHARE OPTION AND SHARE AWARD PLAN
(AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1997)*
- -------------------
* As amended by Amendment No. 1 and Amendment No. 2, each effective as of
May 15, 1998 and by Amendment No. 3, effective as of September 18, 1998.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SECTION Page
- ------------------------------------------------------------------------------
<S> <C> <C>
1. Purposes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Shares Subject to the Plan. . . . . . . . . . . . . . . . . . . . . . . 3
5. Share Awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. Share Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. Share Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . . 7
8. Dividend Equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . 9
9. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
10. Compliance with Applicable Laws and Policies. . . . . . . . . . . . . .10
11. Transferability.. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
12. Service and Shareholder Status. . . . . . . . . . . . . . . . . . . . .11
13. Adjustments to Number of Shares Subject to the Plan and to Terms of
Options, SARs and Dividend Equivalents. . . . . . . . . . . . . . . . .11
14. Agreement with Company. . . . . . . . . . . . . . . . . . . . . . . . .11
15. Term of Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
16. Amendment and Termination of Plan . . . . . . . . . . . . . . . . . . .12
17. Headings, References and Construction . . . . . . . . . . . . . . . . .12
</TABLE>
<PAGE> 3
EQUITY OFFICE PROPERTIES TRUST
1997 SHARE OPTION AND SHARE AWARD PLAN
1. PURPOSES. The Equity Office Properties Trust 1997 Share Option and Share
Award Plan (the "Plan") was established by Equity Office Properties Trust, a
Maryland real estate investment trust (the "Company"), to secure for the Company
and its shareholders the benefits arising from capital ownership by those key
employees, officers, trustees and consultants of the Company and its Related
Companies who are and will be responsible for its future growth and continued
success. (The Plan is hereby amended and restated to further accomplish those
objectives.) The term "Related Company" means Equity Office Properties
Management Corp. and each other company determined by the Committee (as defined
below) from time to time and set forth on Exhibit A hereto, as it may be
amended.
The Plan will provide a means whereby such individuals may receive:
(a) authorized common shares of beneficial interest of the Company ("Shares"),
subject to conditions and restrictions described herein and otherwise determined
by the Committee ("Share Awards"); (b) options to purchase Shares ("Options");
(c) Share Appreciation Rights ("SARs") in tandem with or independent of Options;
or (d) dividend equivalent rights with respect to Shares ("Dividend
Equivalents").
2. ADMINISTRATION. (a) The authority to manage and control the operation
and administration of the Plan shall be vested in a Committee (the "Committee")
consisting of two or more members of the Board of Trustees of the Company (the
"Board"), each of whom is a "disinterested person" as such term is defined in
Section 16b-3(c)(2)(i) of the General Rules and Regulations promulgated under
the Securities Exchange Act of 1934 (the "Act") (and, in addition, with respect
to any grant of an Option or SAR, or the determination of conditions and
restrictions intended to make the grant or award subject thereto constitute
"performance-based compensation" within the
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<PAGE> 4
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 or more "outside directors" as such term is defined in Treasury
Regulation Section 1.162-27(e)(3)), who shall be appointed, and may be removed,
by such Board. Any interpretation of the Plan by the Committee and any decision
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.
(b) The day-to-day administration of the Plan may be carried out by an
Option Coordinator designated by the Chief Legal Counsel of the Company.
3. PARTICIPATION.
(a) GENERALLY. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate from time to time the employees,
officers, trustees and consultants of the Company and its Related Companies to
whom Share Awards, Options, SARs or Dividend Equivalents are to be granted
("Grantees" and individually, a "Grantee"), the terms of such grants and the
number of Shares subject to
2
<PAGE> 5
such grants. Notwithstanding the foregoing, the maximum number of Shares with
respect to which Options and SARs may be granted during any calendar year to any
Grantee is 1,000,000 Shares.
(b) BOARD OF TRUSTEES.
(i) Each member of the Board shall automatically receive the
following awards under the Plan:
(A) if he or she is a member of the Board on the tenth (10th)
day after the Company's initial public offering of Shares, an Option to purchase
10,000 Shares at the per Share initial public offering price; and
(B) immediately following each annual meeting of the
Company's shareholders thereafter, an Option to purchase 10,000 Shares shall be
awarded to each member of the Board. Effective January 1, 1998, if an individual
first becomes a member of the Board other than at an annual meeting of the
Company's shareholders, an Option will be granted to him or her covering a
number of Shares equal to 10,000 multiplied by a fraction, the numerator of
which is the number of days such individual will serve until the next annual
meeting of the Company's shareholders (as determined by the Committee) and the
denominator of which is 365. The exercise price of the Options described in the
preceding two sentences shall be the Fair Market Value (as defined in paragraph
6(b)) of a Share on the date of grant.
(ii) Board and Committee fees paid to each Trustee shall, unless
the Committee otherwise determines, be payable in Share Awards issued under the
Plan having a Grant Value (as defined in subparagraph (d) below) as of the date
the fees are payable equal to the amount of such fees. A Trustee who is not
otherwise a Grantee shall become a Grantee on the first date on which the
Trustee is awarded an Option or a Share Award pursuant to this subparagraph (b).
Trustees may, in addition to Share Awards and Options awarded under this
subparagraph (b), also be awarded Share Awards, Options, SARs and Dividend
Equivalents under paragraph 3(a).
(c) ANNUAL INCENTIVE BONUS PLAN. As of a date (the "Bonus Date")
selected by the Committee that is not less than 30 days before or after the date
on which a cash distribution (a "Bonus") is earned by an individual under the
Company's annual incentive bonus plan (the "Bonus Plan"), the Committee may, in
its discretion, elect to pay all or a portion of such Bonus in the form of a
Share Award, Option or SAR having an aggregate Grant Value, determined as of the
Bonus Date, equal to the cash amount of the Grantee's Bonus being so replaced
(the "Award Portion"). All awards made under this subparagraph (c) shall be
governed by paragraphs 5, 6 or 7 hereof, as applicable. If approved by the
Committee, each individual who participates in the Bonus Plan and who receives a
Share Award under this subparagraph (c) will be given an opportunity to elect,
in accordance with procedures established by the Committee, to have all or a
portion of his Bonus in excess of the Award Portion paid in the form of a Share
Award so as to increase the total Award Portion. Such opportunity provided under
this subparagraph (c) is subject to compliance with all applicable federal and
state securities laws.
3
<PAGE> 6
(d) VALUE. For all purposes of the Plan:
(i) the "Grant Value" of grants made pursuant to paragraph 3(b) or
3(c) shall equal (A) for a Share Award, the Fair Market Value of a Share (as
defined below) as of the date of grant, (B) for an Option or SAR (1) if the
Company has complied with the disclosure requirements described in Item 402(c)
of Regulation S-K under the Act by disclosing the present value of options
under the Black-Scholes or binomial option pricing model or another valuation
method (any of the foregoing constituting a "Valuation Method"), the value of
such Option or SAR calculated based on the Valuation Method and assumptions
contained in the most recent document used by the Company to satisfy those
requirements; or (2) if the Company has not so disclosed the present value of
Options, then "Grant Value" shall, at the election of the Committee either be
calculated using a Valuation Method and assumptions that would satisfy such
requirements, or shall equal the difference between the Fair Market Value of a
Share as of the date of grant and the exercise or base price of the Option or
SAR, times the number of Shares subject to the Option or SAR; and
(ii) except as provided in paragraph 6(b), the "Fair Market
Value" of a Share shall equal the closing price paid for Shares on the New York
Stock Exchange on the first trading day immediately preceding the date for which
Fair Market Value is being determined.
4. SHARES SUBJECT TO THE PLAN.** Subject to the provisions of paragraph 13,
the aggregate number of Shares for which Share Awards, Options and SARs may be
granted under the Plan shall not exceed 6.8% of the outstanding Shares, on a
fully diluted basis, on the date of the closing of the initial public offering
of the Shares. Shares subject to the Plan may be authorized but unissued Shares,
Shares now held in the treasury of the Company or Shares hereafter acquired by
the Company. In the event that (a) any Option granted under the Plan expires
unexercised or is terminated, surrendered or canceled (other than in connection
with the exercise of a "Tandem" (as defined in paragraph 7 below) SAR) without
being exercised, in whole or in part, for any reason, (b) any Tandem SAR granted
under the Plan expires unexercised or is terminated, surrendered or canceled
(other than in connection with the exercise of its related Option), or (c) any
"Non-Tandem" (as defined in paragraph 7 below) SAR granted under the Plan
expires unexercised or is terminated, surrendered or canceled without being
exercised, in whole or in part, for any reason, then the number of Shares then
subject to the Option or SAR, or the unexercised, terminated, surrendered,
forfeited, canceled or reacquired portion thereof, shall be added to the
remaining number of Shares available for grant under the Plan unless the Plan
shall have terminated.
5. SHARE AWARDS. This paragraph 5 sets forth specific terms and conditions
applicable to Share Awards under the Plan.
- -------------------
** The first sentence of this Section 4 was amended on May 15,
1998. Please see Amendment No. 1 and Amendment No. 2 attached
hereto.
4
<PAGE> 7
(a) CONDITIONS AND RESTRICTIONS ON CERTAIN AWARDS. Share Awards
granted under paragraph 3(a) shall be subject to the following conditions and/or
restrictions:
(i) A Share Award will be forfeited to the Company upon the
termination of the Grantee's Service (as defined below) before a date
established by the Committee that may not be earlier than six (6) months after
the date of grant of the Share Award ("Date of Grant'), and may be subject to
such further conditions and restrictions established by the Committee at the
Date of Grant. An individual's "Service" shall continue until he or she is no
longer an employee, officer, trustee, director or consultant of the Company or
an Extended Company. The term "Extended Company" means a Related Company or each
other company designated by the Committee that has provided that awards provided
to its employees and other persons, which are comparable to the awards provided
under the Plan, will not expire if such employees or other persons terminate
their relationship with such company and immediately become employees, officers,
trustees, directors or consultants of the Company. The Extended Companies shall
be set forth in Exhibit B, as it may be amended from time to time upon the
determination of the Committee.
(ii) The Committee may, but need not, establish performance goals
to be achieved within such performance periods as may be selected by it in its
sole discretion, using such measures of the performance of the Company and/or
one (1) or more of its Related Companies as it may select.
(iii) Notwithstanding the foregoing, the restrictions described
in the preceding subparagraphs (i) and (ii) that are contained in the terms of
any grant made pursuant to paragraph 3(a) shall immediately lapse and be of no
effect in the event of the termination of a Grantee's Service (A) because of the
Grantee's "Disability" (as defined below) or death, (B) with respect to a
Grantee who is an employee or officer, in connection with his retirement at or
after age 62, (C) with respect to a Grantee who is a consultant, in connection
with his retirement (as determined by the Committee in its discretion), (D) with
respect to a Grantee who is a Trustee, in connection with his failure to be
re-elected to the Board, or (E) following a "Change in Control" of the Company
(as defined below). For purposes of this Plan, "Disability" shall mean a
physical or mental condition that entitles a Participant to benefits under the
Employer-sponsored long-term disability plan in which he or she participates, as
determined by the Plan Administrator in its sole and absolute discretion. In
addition, for purposes of this Plan, a "Change in Control" shall be deemed to
occur upon: (1) the acquisition by any entity, person, or group of more than 50%
of the outstanding Shares from the holders thereof; (2) a merger or
consolidation of the Company with one (1) 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 (3) a direct or indirect 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.
5
<PAGE> 8
(b) RIGHTS OF GRANTEE. The Grantee shall be entitled to all of the
rights of a shareholder with respect to the Share 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 cash) received in any such distribution
with respect to a Share Award that is still subject to the restrictions in
subparagraphs (a)(i), (ii) or (iii) above, shall be subject to all of the
restrictions set forth herein with respect to such Share Award.
(c) ISSUANCE. If certificates for the Share Award have been issued,
such certificates shall be held in escrow by the Company. Except in the case of
a Share Award under paragraph 3(b), stock powers for such Shares shall be
executed in blank by the Grantee, until all restrictions lapse or such Shares
are forfeited as provided herein. A certificate or certificates representing a
Share Award as to which restrictions have lapsed shall be delivered to the
Grantee upon such lapse.
6. SHARE OPTIONS. This paragraph 6 addresses specific terms and conditions
for Share Options.
(a) ISO/NQSO. 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 Share Option." Options that are not
so designated, or that do not satisfy the requirements of Section 422 of the
Code or that are granted under paragraph 3(b) shall not constitute Incentive
Share Options and shall be Non-Qualified Share Options.
(b) EXERCISE PRICE. The Option price of an Incentive Share 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. The price at which a Share may be purchased
pursuant to the exercise of any Non-Qualified Share Option shall not be less
than 100% of its Fair Market Value on the date the Option is awarded under the
Plan. Notwithstanding any provision of the Plan to the contrary, for purposes of
this paragraph (b), the "Fair Market Value" of a Share shall equal the lesser
of: (i) the average closing price of the Shares on the New York Stock Exchange
for the five (5) trading days immediately preceding (but not including) the date
on which Fair Market Value is determined, and (ii) the closing price paid for
Shares on the New York Stock Exchange on the first trading day immediately
preceding the date of grant; provided that the Committee, in good faith,
determines that such price accurately reflects the fair market value of a Share.
(c) EXPIRATION DATE. Subject to earlier termination as provided in
paragraph 16, 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, but in no event later than the date that is ten (10) years
after the date on which the Option is granted and, with respect to an Incentive
Share Option granted to an employee who owns on the Date of Grant, more than 10%
of the Company's Shares, in no event later than the date that is five (5) years
from the date on which the Option is granted.
If the Service of a Grantee terminates for cause (as determined by the
Committee in its discretion), his Option shall expire immediately. The
Committee may
6
<PAGE> 9
establish guidelines for determining whether a Grantee's Service has terminated
for cause and communicate such guidelines in the Grantee's award agreement. If
the Grantee's Service terminates other than for cause and other than because of
circumstances described in the last sentence of paragraph (d)(i) below, his
Option shall not thereafter become exercisable with respect to any additional
Shares, and his Option shall expire three months after the date on which his
Service terminated, but no later than the Expiration Date. If such Service
terminates because of the Grantee's death, his Option shall be exercisable by
the person or persons to whom that right passes by will or by the laws of
descent and distribution for a period of 12 months after the date of death (at
which time it will expire), but no later than the Expiration Date. The
Expiration Date with respect to an Option or any portion thereof granted under
paragraph 3(b) means the date which is 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.
(d) EXERCISE OF OPTIONS. The following paragraphs address specific
terms that control a Grantee's right to exercise Options:
(i) Each Option granted under paragraph 3(a) shall be exercisable,
either in whole or in part, at such time or times as shall be determined by the
Committee at the time the Option is granted or later, but in no event later than
the Option's Expiration Date. The Committee may establish performance goals to
be achieved within such periods as may be selected by it in its sole discretion,
using such measures of the performance of the Company and/or a Related Company
as it may select. Notwithstanding the foregoing, an Option granted under the
Plan shall be immediately exercisable in the event of the termination of a
Grantee's Service (A) because of the Grantee's Disability or death, (B) with
respect to a Grantee who is an employee or officer, in connection with his
retirement at or after age 62, (C) with respect to a Grantee who is a
consultant, in connection with his retirement (as determined by the Committee in
its discretion), (D) with respect to a Grantee who is a Trustee, in connection
with his failure to be re-elected to the Board, or (E) following a Change in
Control.
(ii) Each Option granted under paragraph 3(b) shall be
exercisable, either in whole or in part, (A) with respect to one-third (1/3) of
the Shares subject to such Option (rounded to the nearest whole share) at any
time on or after six months from the Date of Grant, (B) with respect to an
additional one-third (1/3) of the Shares subject to such Option (rounded to the
nearest whole share) at any time on or after the first anniversary of the Date
of Grant, and (C) 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.
(iii) The Fair Market Value of Shares with respect to which
Incentive Share Options are exercisable for the first time by a Grantee during
any calendar year may not exceed $100,000. Any Incentive Share Options that
become exercisable in excess of such amount shall be deemed to be Non-Qualified
Share Options to the extent of such excess.
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<PAGE> 10
(iv) An Incentive Share Option may be exercised during the
lifetime of the Grantee only by the Grantee and, after the death of the Grantee,
only by the individuals or entities described in paragraph 6(f).
(v) Notwithstanding the foregoing, at any time following the
grant of an Option, the Committee, in its sole discretion, may elect to
accelerate the date as of which the Grantee may exercise the Option with respect
to all or a portion of the Shares subject thereto.
(vi) Subject to the foregoing, a Grantee may exercise an Option
by giving written notice thereof prior to the Option's Expiration Date to the
Option Coordinator at the principal executive offices of the Company, or to such
other person or entity and/or at such other location, as designated by the Chief
Legal Counsel of the Company. Contemporaneously with the delivery of notice with
respect to exercise of an Option, the full purchase price of the Shares
purchased pursuant to the exercise of the Option, together with any required
state or federal withholding taxes, shall be paid in cash, by tender of share
certificates in proper form for transfer to the Company valued at the Fair
Market Value of the Shares on the preceding day, by any combination of the
foregoing, or with any other consideration reasonably acceptable to the
Committee.
(e) SUSPENSION OF RIGHT. Notwithstanding any other provision of this
paragraph 6, the Chief Legal Counsel of the Company, in his sole and absolute
discretion, may suspend the right of any person to exercise an Option for up to
30 days if the Grantee's Service has been or, in the sole and absolute judgment
of the Chief Legal Counsel of the Company, may be suspended or terminated for
any reason.
(f) PARTIES ENTITLED TO EXERCISE OPTIONS. An Option may be exercised
only by the Grantee, or by his legatee or legatees of such Option under his last
will, by his executors, personal representatives or distributees, or by a
transferee to the extent that a transfer of the Option is permitted pursuant to
paragraph 11(b).
7. SHARE APPRECIATION RIGHTS. The Committee may grant an SAR to a Grantee
who is awarded an Option under paragraph 3 or to any other key employee,
officer, trustee, director or consultant of the Company or a Related Company.
Each SAR shall be subject to such restrictions and conditions and other terms as
the Committee may specify when the SAR is granted.
(a) GRANT. An SAR granted at the time an Option is granted may be
granted either in addition to the related Option ("Non-Tandem SAR") or in tandem
with the related Option ("Tandem SAR"). An SAR granted other than at the time an
Option is granted will be subject to the provisions applicable to Non-Tandem
SARs. At the time a Non-Tandem SAR is granted, the Committee shall specify the
base price of the Shares to be used in connection with the calculation described
in subsection (b)(i) below. The base price of a Non-Tandem SAR shall be a
percentage (as low as zero) of the Fair Market Value of a Share on the date of
grant. The number of Shares subject to a Tandem SAR shall not exceed one for
each Share subject to the related Option. No Tandem SAR may be granted to a key
employee in connection with an Incentive Share Option in a manner that will
disqualify the Incentive Share Option under Section 422 of the Code unless the
key employee consents thereto.
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<PAGE> 11
(b) VALUE. Upon exercise, an SAR shall entitle the Grantee to receive
from the Company the number of Shares having an aggregate Fair Market Value
equal to the following:
(i) in the case of a Non-Tandem SAR, the excess of the Fair
Market Value of one Share as of the date on which the SAR is exercised over the
base Share price specified in such SAR, multiplied by the number of Shares then
subject to the SAR, or the portion thereof being exercised.
(ii) in the case of a Tandem SAR, the excess of the Fair Market
Value of one Share as of the date on which the SAR is exercised over the
exercise price per Share specified in the related Option, multiplied by the
number of Shares then subject to the Option, or the portion thereof as to which
the SAR is being exercised.
Cash shall be delivered in lieu of any fractional shares. The
Committee, in its discretion, shall be entitled to cause the Company to elect to
settle any part or all of its obligation arising out of the exercise of an SAR
by the payment of cash in lieu of all or part of the Shares it would otherwise
<PAGE> 12
be obligated to deliver in an amount equal to the Fair Market Value of such
Shares on the date of exercise.
(c) EXERCISE OF TANDEM SARs. A Tandem SAR shall be exercisable during
such time, and be subject to such restrictions and conditions and other terms,
as the Committee shall specify at the time such Tandem SAR is granted which
restrictions and conditions and other terms need not be the same for all
Grantees. Notwithstanding the preceding sentence, the Tandem SAR shall be
exercisable only at such time as the Option to which it relates is exercisable
and shall be subject to the restrictions and conditions and other terms
applicable to such Option. Upon the exercise of a Tandem SAR, the unexercised
Option, or the portion thereof to which the exercised portion of the Tandem SAR
is related, shall expire. The exercise of any Option shall cause the expiration
of the Tandem SAR related to such Option, or portion thereof, that is exercised.
(d) EXERCISE OF NON-TANDEM SARs.
(i) A Non-Tandem SAR granted under the Plan shall be exercisable
during such time, and shall be subject to such restrictions and conditions and
other terms, as the Committee shall specify at the time the Non-Tandem SAR is
granted. The Committee may establish performance goals to be achieved within
such periods as may be selected by it in its sole discretion, using such
measures of the performance of the Company and/or a Related Company as it may
select. Without limiting the generality of the foregoing, the Committee may
specify a minimum number of full Shares with respect to which any exercise of a
Non-Tandem SAR must be made.
(ii) Subject to earlier termination as provided in the last
sentence of this subparagraph, a Non-Tandem SAR granted under the Plan shall
expire on the date specified by the Committee, provided that such date shall not
be more than 10 years after the Date of Grant. The Committee shall specify at
the time each Non-
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<PAGE> 13
Tandem SAR is granted, the time during which the Non-Tandem SAR may be exercised
prior to its expiration and other provisions relevant to the SAR. The Committee,
in its discretion, shall have the power to accelerate the dates for exercise of
any or all Non-Tandem SARs or any part thereof, granted under the Plan.
Notwithstanding the foregoing, any Non-Tandem SAR shall expire, notwithstanding
any restrictions and conditions that the Committee may impose, following a
termination of the Grantee's Service in the same manner as an Option held by
such Grantee would expire pursuant to the provisions of paragraph 6(c).
(e) ACCELERATION. Notwithstanding any restrictions or conditions
imposed on an SAR pursuant to subparagraphs (c) or (d)(i) above, an SAR granted
under the Plan shall be immediately exercisable in the event of the termination
of the Grantee's Service (A) because of the Grantee's Disability or death, (B)
with respect to a Grantee who is an employee or officer, in connection with his
retirement at or after age 62, (C) with respect to a Grantee who is a
consultant, in connection with his retirement (as determined by the Committee in
its discretion), (D) with respect to a Grantee who is a Trustee, in connection
with his failure to be re-elected to the Board, or (E) following a Change in
Control. In addition, at any time following the grant of an SAR, the Committee,
in its sole discretion, may elect to accelerate the date as of which the Grantee
may exercise the SAR.
(f) SUSPENSION OF RIGHT. Notwithstanding any other provisions of this
paragraph 7, the Chief Legal Counsel of the Company, in his sole and absolute
discretion, may suspend the right of any person to exercise an Option for up to
30 days if the Grantee's Service has been or, in the sole and absolute judgment
of the Chief Legal Counsel of the Company, may be suspended or terminated for
any reason.
(g) PARTIES ENTITLED TO EXERCISE SARs. An SAR may be exercised only by
the Grantee, or by a legatee or legatees of such SAR under his last will, by his
executors, personal representatives or distributees, or by a transferee to the
extent that a transfer of the SAR is permitted pursuant to paragraph 11(b).
(h) SETTLEMENT OF SARs. As soon as is reasonably practicable after the
exercise of an SAR, the Company shall (i) issue, in the name of the Grantee,
Shares representing the total number of full Shares to which the Grantee is
entitled pursuant to subparagraph 7(b) hereof and cash in an amount equal to the
Fair Market Value, as of the date of exercise, of any resulting fractional
Shares, and (ii) if the Committee causes the Company to elect to settle all or
part of its obligations arising out of the exercise of the SAR in cash, deliver
to the Grantee an amount in cash equal to the Fair Market Value, as of the date
of exercise, of the Shares it would otherwise be obligated to deliver.
8. DIVIDEND EQUIVALENTS. A Dividend Equivalent shall be related to a number
of Shares specified at the time of grant and shall entitle the holder to cash
payments that equal the cash dividend, if any, paid with respect to such Shares
provided that the Dividend Equivalent is outstanding on the record date thereof
and that it is not subject to any condition limiting the Grantee's right to
receive such payments. A Dividend Equivalent shall be subject to such
restrictions and conditions and other terms including those relating to
expiration or forfeiture, as the Committee shall specify at the time such
10
<PAGE> 14
Dividend Equivalent is granted. A Dividend Equivalent granted pursuant to
subsection 3(c) shall not be subject to any restriction or condition limiting
the Grantee's right to receive the cash payment discussed above from and after
the second anniversary of its Date of Grant. Notwithstanding the foregoing, any
restriction or condition (other than expiration or forfeiture) limiting the
Grantee's right to receive the cash payment described above shall lapse in the
event of (A) the termination of the Grantee's Service because of the Grantee's
Disability or death, (B) with respect to a Grantee who is an employee or
officer, his retirement at or after age 62, (C) with respect to a Grantee who is
a consultant, his retirement (as determined by the Committee in its discretion),
(D) with respect to a Grantee who is a Trustee, his failure to be re-elected to
the Board, or (E) following a Change in Control.
9. WITHHOLDING. Whenever under the Plan a Grantee recognizes income with
respect to any Share Award, Option, SAR or Dividend Equivalent (the "Award")
hereunder, the Company shall have the right to withhold from amounts payable to
such recipient in any manner, as necessary to satisfy all federal, state and
local payroll tax withholding requirements. Without limiting the generality of
the foregoing, (i) a Grantee may elect to satisfy all or part of the foregoing
withholding requirements by delivery of unrestricted Shares owned by the Grantee
having a Fair Market Value (determined as of the date of such delivery by the
Grantee) equal to the amount to be so withheld; and (ii) the Committee may
permit any such delivery to be made by withholding Shares otherwise issuable
pursuant to the award giving rise to the tax withholding obligation (in which
event the date of delivery shall be deemed the date such award was exercised).
If Shares are being surrendered by or withheld for a Grantee who is subject to
Section 16 of the Act, the foregoing shall be accomplished in a manner
consistent with Rule 16b-3(e) thereunder.
10. COMPLIANCE WITH APPLICABLE LAWS AND POLICIES. Notwithstanding any other
provision in the Plan, the Company shall have no liability to issue any Shares
under the Plan unless such issuance would comply with all applicable laws and
applicable requirements of any securities exchange or similar entity. Prior to
the issuance of any Shares under the Plan, the Company may require a written
statement that the recipient is acquiring the Shares for investment and not for
the purpose of or with the intention of distributing the Shares. Notwithstanding
any other provision of the Plan, a Grantee or such other persons as are entitled
to exercise an Option or SAR (as described in paragraph 11(b)) will be
prohibited from exercising the Option or SAR to the extent that the Chief Legal
Counsel of the Company has determined that purchases and sales of Company
securities should be restricted because of the existence or potential existence
of material nonpublic information concerning the Company, whether or not such
determination has been communicated to the Grantee or such persons. If the Chief
Legal Counsel of the Company has made such a determination and the Grantee or
such persons give notice of an intent to exercise the Option or SAR (and satisfy
all other conditions to the exercise thereof), the Chief Legal Counsel of the
Company shall advise the Grantee or such persons concerning such restrictions,
and the effective time of the Grantee's exercise shall be postponed to the
earlier of the date that the Chief Legal Counsel of the Company determines that
such restriction is no longer necessary with respect to exercises of the Option
or SAR, or the day before the date that the Option or SAR expires.
11
<PAGE> 15
11. TRANSFERABILITY. This paragraph 11 shall govern the transferability of
the various benefits under this Plan.
(a) SHARE AWARDS. The Shares subject to Share Awards granted under
paragraph 3(a) or 3(c) shall not be sold, assigned, pledged or otherwise
transferred, voluntarily or involuntarily, by the Grantee, while they are
subject to the restrictions described in paragraph 5(a).
(b) OPTIONS, SARs AND DIVIDEND EQUIVALENTS. Options, SARs and Dividend
Equivalents granted under the Plan are not transferable except (i) by will or by
the laws of descent and distribution or, to the extent not inconsistent with the
applicable provisions of the Code, pursuant to a qualified domestic relations
order (as that term is defined in the Code); and (ii) a Grantee may transfer all
or part of an Option that is not an Incentive Share Option, or an SAR, to the
Grantee's spouse, child or children, grandchild or grandchildren, or other
relatives or to a trust for the benefit of any of the foregoing; provided that
the transferee thereof shall hold such Option or SAR subject to all of the
conditions and restrictions contained herein and otherwise applicable to the
Option or SAR, 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.
12. SERVICE AND SHAREHOLDER 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 other than individual the right to be retained as an
employee, officer, trustee, director or consultant of the Company or any
Extended Company. No person entitled to exercise any Option or SAR granted under
the Plan shall have any of the rights or privileges of a shareholder of record
with respect to any Shares issuable upon exercise of such Option or SAR until
such Shares have been issued. If the redistribution of Shares is restricted
pursuant to paragraph 13, certificates representing such Shares may bear a
legend referring to such restrictions.
13. ADJUSTMENTS TO NUMBER OF SHARES SUBJECT TO THE PLAN AND TO TERMS OF
OPTIONS, SARS AND DIVIDEND EQUIVALENTS. Subject to the following provisions of
this paragraph 13, 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, SARs or Dividend Equivalents outstanding or to be granted under the
Plan shall be proportionately adjusted so that the value of each such unit shall
not be changed, and the terms of any outstanding Option, SAR or Dividend
Equivalent may be adjusted by the Committee in such manner as it deems
equitable, provided 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 Share Award shall be
treated in the same manner as other outstanding Shares; provided that any
conditions and restrictions applicable to a Share Award shall continue to apply
to any Shares, other security or other consideration received in connection with
the foregoing.
14. AGREEMENT WITH COMPANY. At the time of a grant, the Committee may
require a Grantee to enter into an agreement with the Company in a form
specified by the Committee agreeing to the terms and conditions of the Plan and
to such additional
12
<PAGE> 16
terms and conditions, not inconsistent with the Plan, as the Committee may, in
its sole discretion, prescribe.
15. TERM OF PLAN. This amended and restated Plan is effective July 1, 1997.
No Incentive Share Options may be granted under the Plan after July 1, 2007 or,
if earlier, the date on which the Plan is terminated pursuant to paragraph 16.
16. AMENDMENT AND TERMINATION OF PLAN. Subject to any approval of the
shareholders of the Company which may be required by law, the Board of Trustees
of the Company may at any time amend, suspend or terminate the Plan.
No amendment, suspension or termination of the Plan shall alter or impair any
Share Award, Option, SAR or Dividend Equivalent previously granted under the
Plan without the consent of the holder thereof. No amendment requiring
shareholder approval under Section 240.16b-3 of the Act, Treasury Regulation
Section 1.162-27 or Section 422 of the Code shall be valid unless such
shareholder approval is secured as provided therein.
17. HEADINGS, REFERENCES AND CONSTRUCTION. The headings to sections of this
Plan have been included for the convenience of reference only. This Plan shall
be interpreted and construed in accordance with the laws of the State of
Maryland.
13
<PAGE> 17
APPENDIX A
RELATED COMPANIES
Equity Office Properties Management Corp.
EOP Operating Limited Partnership
EOPMC of California, Inc.
EOPMC of Florida, Inc.
APPENDIX B
EXTENDED COMPANIES
Equity Group Investments, LLC
Equity Residential Properties Trust and its affiliated companies
Manufactured Home Communities, Inc. and its affiliated companies
Rosenberg & Liebentritt, PC
14
<PAGE> 18
AMENDMENT NO. 1 TO THE EQUITY OFFICE PROPERTIES TRUST
AMENDED AND RESTATED 1997 SHARE OPTION AND SHARE AWARD PLAN
WHEREAS, Equity Office Properties Trust (the "Trust") has reserved the
right to amend the Amended and Restated 1997 Share Option and Share Award Plan
(the "Plan"); and
WHEREAS, the Trust desires to amend the Plan to increase the number of
Shares for which Share Awards, Option, SARs and Dividend Equivalents may be
granted under the Plan.
RESOLVED, that the first sentence of Paragraph 4 of the Equity Office Trust
Amended and Restated 1997 Share Option and Share Award Plan is hereby amended to
read in its entirety as follows:
4. SHARES SUBJECT TO THE PLAN. Subject to the provisions of paragraph 13,
the maximum number of Shares for which Share Awards, Options, SARs and Dividend
Equivalents may be granted under the Plan shall equal 6.8% of the outstanding
Shares from time-to-time, calculated on a fully diluted basis, determined
annually on the first day of each calendar year.
15
<PAGE> 19
AMENDMENT NO. 2 TO EQUITY OFFICE PROPERTIES TRUST
AMENDED AND RESTATED 1997 SHARE OPTION AND SHARE AWARD PLAN
WHEREAS, Equity Office Properties Trust (the "Trust") has adopted the
Equity Office Properties Trust Amended and Restated 1997 Share Option and Share
Award Plan as amended on May 15, 1998 (the "Plan"), and has reserved the right
to amend the Plan; and
WHEREAS, the Trust desires to amend the Plan to limit the number of Shares
that may be subject to Share Awards thereunder.
NOW, THEREFORE, the Trust hereby amends the Plan, effective as of May 15,
1998, in the following respects:
1. The first sentence of paragraph 4 is amended to read as follows:
"Subject to the provisions of paragraph 13, (i) the maximum number of Shares for
which Share Awards, Options, SARs and Dividend Equivalents may be granted under
the Plan shall equal 6.8% of the outstanding Shares from time-to-time,
calculated on a fully diluted basis, determined annually on the first day of
each calendar year; and (ii) no more than half of the number of Shares described
in clause (i) may be subject to Share Awards granted under the Plan."
16
<PAGE> 20
THIRD AMENDMENT TO EQUITY OFFICE PROPERTIES TRUST
1997 SHARE OPTION AND SHARE AWARD PLAN
(AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1997)
WHEREAS, Equity Office Properties Trust (the "Company") has adopted the
Equity Office Properties Trust 1997 Share Option and Share Award Plan (As
Amended and Restated Effective July 1, 1997) (the "Plan"), and has reserved the
right to amend the Plan; and
WHEREAS, the Company desires to amend the Plan to permit awards granted
thereunder to continue, at the discretion of the Plan Administrator (as defined
below) after a Grantee's termination of Service;
NOW, THEREFORE, the Company amends the Plan, effective September 18,
1998, in the following respects:
1. The first sentence of Section 5(a)(iii) is deleted and replaced with
the following:
"Notwithstanding the foregoing, the restrictions described in the
preceding subparagraphs (i) and (ii) that are contained in the
terms of any grant made pursuant to paragraph 3(a) shall
immediately lapse and be of no effect in the event of the
termination of a Grantee's Service (A) because of the Grantee's
"Disability" (as defined below) or death, (B) with respect to a
Grantee who is an employee or officer, in connection with his
retirement at or after age 62, (C) with respect to a Grantee who is
a consultant, in connection with his retirement (as determined by
the Committee in its discretion), (D) with respect to a Grantee who
is a Trustee, in connection with his failure to be re-elected to
the Board, (E) following a "Change in Control" of the Company (as
defined below) or (F) under circumstances deemed to warrant such
treatment by the Plan Administrator. For purposes of the Plan,
"Plan Administrator" shall mean (X) the President and Chief
Executive Officer of the Company and any one member of the
Committee, or (Y) the full Committee. Notwithstanding the
foregoing, where the affected Grantee is a "covered employee" for
purposes of Section 162(m) of the Code, (i) any authority of the
Plan Administrator under the Plan may only be exercised if the
existence of such authority would not cause the related Share
Award, Option or SAR to fail to constitute performance based
compensation on its Date of Grant under Treasury Regulation Section
1.162-27; and (ii) "Plan Administrator" shall mean only the full
Committee if the exercise of such authority by the President and
Chief Executive Officer and any one member of the Committee would
adversely affect the grant's status as performance based
compensation and its exercise by the full Committee would not so
affect such status."
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<PAGE> 21
2. Section 6(c) is amended to read as follows:
"(c) Expiration Date. Subject to earlier termination as
provided in paragraph 16, 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, but in
no event later than the date that is ten (10) years after the date
on which the Option is granted and, with respect to an Incentive
Share Option granted to an employee who owns, on the Date of Grant,
more than 10% of the Company's Shares, in no event later than the
date that is five (5) years from the date on which the Option is
granted. The Expiration Date with respect to an Option or any
portion thereof granted under paragraph 3(b) means the date which
is 10 years after the date on which the Option is granted. If the
Service of a Grantee terminates for cause (as determined by the
Committee in its discretion), his Option shall expire immediately.
The Committee may establish guidelines for determining whether a
Grantee's Service has terminated for cause and communicate such
guidelines in the Grantee's award agreement. If the Grantee's
Service terminates other than for cause and other than because of
circumstances described in the last sentence of paragraph (d)(i)
below, his Option shall not thereafter become exercisable with
respect to any additional Shares, and his Option shall expire three
months after the date on which his Service terminated, but no later
than the Expiration Date. If such Service terminates because of the
Grantee's death, his Option shall be exercisable by the person or
persons to whom that right passes by will or by the laws of descent
and distribution for a period of 12 months after the date of death
(at which time it will expire), but no later than the Expiration
Date. Notwithstanding the foregoing, the Plan Administrator may
provide, at any time before the Expiration Date, that a Grantee's
Option shall not expire prior to the date it would otherwise expire
in accordance with the preceding sentences, and may provide in
connection therewith (i) the date or event that will cause the
Option to expire (or that the Option will expire on the Expiration
Date); and/or (ii) the extent to which the Option shall continue to
become exercisable. All rights to purchase Shares pursuant to an
Option shall cease as of the Option's Expiration Date or its
earlier expiration as provided herein or in the Grantee's award
agreement."
3. Section 6(d)(v) is amended to read as follows:
"(v) Notwithstanding the foregoing, at any time following the
grant of an Option, the Plan Administrator, in its sole discretion,
may elect to accelerate the date as of which the Grantee may
exercise the Option with respect to all or a portion of the Shares
subject thereto."
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<PAGE> 22
4. The last sentence of section 7(d)(ii) is amended to read as follows:
"Notwithstanding the foregoing, any Non-Tandem SAR shall expire,
notwithstanding any restrictions and conditions that the Committee
may impose, following a termination of the Grantee's Service in the
same manner as an Option held by such Grantee would expire pursuant
to the provisions of paragraph 6(c), taking into account any action
by the Plan Administrator pursuant to the penultimate sentence of
such paragraph."
5. The last sentence of Section 7(e) is amended to read as follows:
"In addition, at any time following the grant of an SAR, the Plan
Administrator, in its sole discretion, may elect to accelerate the
date as of which the Grantee may exercise the SAR."
IN WITNESS WHEREOF, this Amendment has been executed by the duly
authorized officers of the Company, this 18th day of September, 1998.
EQUITY OFFICE PROPERTIES TRUST
By:
-----------------------------------------
Stanley M. Stevens
Executive Vice President
Chief Legal Counsel and Secretary
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