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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
[Amendment No. ___]
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of the
|_| Definitive Proxy Statement Commission Only (as permitted
|_| Definitive Additional Materials by Rule 14a-6(e)(2))
|_| Soliciting Material under Section 240.14a-12
EQUITY OFFICE PROPERTIES TRUST
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with written preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: __________
(2) Form, Schedule or Registration Statement No.: _________
(3) Filing Party: __________
(4) Date Filed: __________
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PRELIMINARY COPY
EQUITY OFFICE PROPERTIES TRUST
TWO NORTH RIVERSIDE PLAZA, SUITE 2100
CHICAGO, ILLINOIS 60606
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 2000
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Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of
Shareholders of Equity Office Properties Trust (the "Company") to be held on
Thursday, May 4, 2000, at 9:00 a.m. (C.D.T.) at One North Franklin Street, 3rd
Floor, Chicago, Illinois for the following purposes:
1. To elect two Trustees of the Company to serve until the 2003
Annual Meeting of Shareholders;
2. To approve amendments to the Company's Declaration of Trust
regarding voting requirements for business combinations;
3. To approve an amendment to the Company's Bylaws regarding
voting by electronic means; and
4. To transact such other business as may properly come before
the meeting and any adjournment or postponement.
Only shareholders of record of the Company's common shares of
beneficial interest, par value $.01 per share, at the close of business on March
7, 2000 will be entitled to vote at the meeting or any adjournment or
postponement thereof.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, YOU ARE URGED TO MARK, SIGN, DATE AND PROMPTLY RETURN YOUR PROXY CARD
IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY REVOKE
YOU PROXY AND VOTE IN PERSON, IF YOU SO DESIRE.
Any proxy may be revoked at any time prior to its exercise at the
meeting.
By Order of the Board of Trustees,
Stanley M. Stevens
EXECUTIVE VICE PRESIDENT, CHIEF LEGAL
COUNSEL AND SECRETARY
Chicago, Illinois
March ___, 2000
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TABLE OF CONTENTS
PAGE
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PROXY STATEMENT............................................................. 1
GENERAL INFORMATION ABOUT VOTING............................................ 1
Who Can Vote.......................................................... 1
Voting by Proxy Holders............................................... 1
Voting on Other Matters............................................... 2
How to Revoke Your Proxy Instructions................................. 2
How Your Votes Are Counted............................................ 2
Cost of This Proxy Solicitation....................................... 2
Attending the Annual Meeting.......................................... 2
List of Shareholders.................................................. 2
PROPOSAL 1: ELECTION OF TRUSTEES........................................... 3
Board of Trustees..................................................... 3
Vote Required......................................................... 3
General Information About the Nominees................................ 3
Board Recommendation.................................................. 3
Principal Occupation of and Other Information Regarding Nominees
and Trustees........................................................ 3
Nominees for Election to Terms Expiring in 2003.................. 3
Incumbent Trustees with Terms Expiring in 2001................... 4
Incumbent Trustees with Terms Expiring in 2002................... 5
Meetings and Committees of the Board of Trustees...................... 6
Annual Fees........................................................... 7
Options............................................................... 7
Indemnification....................................................... 7
COMMON SHARE AND UNIT OWNERSHIP BY TRUSTEES AND
EXECUTIVE OFFICERS.................................................. 8
Section 16(a) Disclosure.............................................. 9
EXECUTIVE COMPENSATION...................................................... 10
Report of the Compensation and Option Committee on Executive
Compensation........................................................ 10
Performance Graph..................................................... 14
Summary Compensation Table............................................ 15
1999 Option Grants.................................................... 16
Option Exercises and Fiscal Year-End Option Values.................... 17
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS................................ 18
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PAGE
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COMPENSATION AND OPTION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION................................................. 20
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................. 20
Wright Runstad Affiliated Transactions................................ 20
Equity Group Investments Affiliated Transactions...................... 21
Management Affiliated Transactions.................................. 22
Miscellaneous......................................................... 22
PROPOSAL 2: APPROVAL OF AMENDMENTS TO DECLARATION OF TRUST
REGARDING VOTING REQUIREMENTS FOR BUSINESS COMBINATIONS........ 23
Reasons for and General Effect of Proposed Amendments................ 23
Vote Required........................................................ 25
Board Recommendation................................................ 25
PROPOSAL 3: APPROVAL OF BYLAW AMENDMENT REGARDING VOTING BY ELECTRONIC
MEANS.......................................................... 26
Reasons for and General Effect of Proposed Amendment................. 26
Vote Required........................................................ 26
Board Recommendation................................................. 26
AUDITORS.................................................................... 27
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING........................... 27
EXHIBIT A - TEXT OF AMENDMENTS TO SECTIONS 8.2 AND 8.4 OF OUR DECLARATION
OF TRUST ....................................................... A-1
EXHIBIT B - TEXT OF AMENDED ARTICLE II, SECTION 9 OF BYLAWS ................ B-1
ii
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EQUITY OFFICE PROPERTIES TRUST
TWO NORTH RIVERSIDE PLAZA, SUITE 2100
CHICAGO, ILLINOIS 60606
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PROXY STATEMENT
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Your vote is very important. For this reason, the Board of Trustees is
soliciting the enclosed proxy to allow your common shares of beneficial interest
to be represented and voted, as you direct, by the Proxy Holders named in the
enclosed proxy card at the 2000 annual meeting of shareholders of Equity Office
Properties Trust to be held on Thursday, May 4, 2000, at 9:00 a.m. (C.D.T.), for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. This Proxy Statement contains information related to this
solicitation and has been prepared for the Board by our management. "We," "our"
and "Equity Office" refer to Equity Office Properties Trust. This Proxy
Statement, the enclosed proxy card and our 1999 Annual Report to Shareholders
are being mailed to shareholders beginning on or about March ____, 2000.
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GENERAL INFORMATION ABOUT VOTING
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WHO CAN VOTE. You are entitled to vote your common shares if our
records showed that you held your common shares as of the close of business on
March 7, 2000. At the close of business on that date, a total of 247,942,376
common shares were outstanding and entitled to vote. Each common share entitles
its holder to cast one vote on each matter on which a vote may be taken. The
enclosed proxy card shows the number of common shares which you are entitled to
vote. Your individual vote is confidential and will not be disclosed to third
parties.
VOTING BY PROXY HOLDERS. IF YOUR COMMON SHARES ARE HELD BY A BROKER,
BANK OR OTHER NOMINEE (THAT IS,, IN "STREET NAME"), YOU WILL RECEIVE
INSTRUCTIONS FROM YOUR NOMINEE WHICH YOU MUST FOLLOW IN ORDER TO HAVE YOUR
COMMON SHARES VOTED. If you hold your common shares in your own name as a holder
of record, you may instruct the Proxy Holders how to vote your common shares by
marking your proxy card, signing and dating it, and returning it in the
postage-paid envelope provided.
The Proxy Holders will vote your common shares in accordance with your
instructions. IF YOU GIVE US A PROXY WITHOUT GIVING SPECIFIC VOTING
INSTRUCTIONS, YOUR COMMON SHARES WILL BE VOTED BY THE PROXY HOLDERS (A) FOR THE
ELECTION OF THE BOARD OF TRUSTEE'S TWO NOMINEES AS TRUSTEES, (B) FOR APPROVAL OF
THE AMENDMENTS TO THE DECLARATION OF TRUST REGARDING VOTING REQUIREMENTS FOR
BUSINESS COMBINATIONS AND (C) FOR APPROVAL OF THE BYLAW AMENDMENT REGARDING
VOTING BY ELECTRONIC MEANS.
VOTING ON OTHER MATTERS. We are not now aware of any other matters to
be presented at the Annual Meeting except for those described in this Proxy
Statement. If any other matters not described in the Proxy Statement are
properly presented at the meeting, the Proxy Holders will use their own judgment
to determine how to vote your common shares. If the meeting is adjourned or
postponed, your common shares may be voted by the Proxy Holders on the new
meeting date as well, unless you have revoked your proxy instructions prior to
such date.
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HOW TO REVOKE YOUR PROXY INSTRUCTIONS. You may revoke a previously
granted proxy by (a) so advising our Secretary, Stanley M. Stevens, c/o Equity
Office Properties Trust, Two North Riverside Plaza, Suite 2100, Chicago, IL
60606, in a writing received before your common shares have been voted by the
Proxy Holders at the meeting, (b) delivering to our Secretary prior to the date
of the meeting a later dated proxy or (c) attending the meeting and voting your
common shares in person.
HOW VOTES ARE COUNTED. The Annual Meeting will be held if a majority of
the outstanding common shares entitled to vote is represented at the meeting. If
you have returned a valid proxy or attend the meeting in person, your common
shares will be counted for the purpose of determining whether there is a quorum,
even if you wish to abstain from voting on some or all matters introduced at the
meeting. If you hold your common shares through a broker, bank or other nominee,
generally the nominee may only vote the common shares which it holds for you in
accordance with your instructions. However, if it has not received your
instructions within ten days of the meeting, the nominee may vote on matters
which the New York Stock Exchange determines to be routine. If a nominee cannot
vote on a particular matter because it is not routine, there is a "broker
non-vote" on that matter. Abstentions and broker non-votes will be treated as
shares present, in person or by proxy, and entitled to vote for purposes of
determining a quorum at the Annual Meeting. Abstentions and broker non-votes
will have the same effect as a negative vote on Proposals 2 and 3.
COST OF THIS PROXY SOLICITATION. We will pay the cost of this proxy
solicitation. In addition to soliciting proxies by mail, we expect that certain
of our employees will solicit shareholders personally and by telephone. None of
these employees will receive any additional or special compensation for doing
this. We will, upon request, reimburse brokers, banks and other nominees for
their expenses in sending proxy material to their principals and obtaining their
proxies.
ATTENDING THE ANNUAL MEETING. If you are a holder of record and you
plan to attend the Annual Meeting, please indicate this when you vote. If you
are a beneficial owner of common shares held by a bank or broker, you will need
proof of ownership to be admitted to the meeting. A recent brokerage statement
or letter from a bank or broker are examples of proof of ownership. If you want
to vote in person your common shares held in street name, you will have to get a
proxy in your name from the registered holder.
LIST OF SHAREHOLDERS. A list of shareholders entitled to vote at the
Annual Meeting will be available at the Annual Meeting and for ten days prior to
the meeting, between the hours of 8:45 a.m. and 4:30 p.m. (C.D.T.), at our
corporate offices located at Two North Riverside Plaza, Suite 2100, Chicago,
Illinois 60606, by contacting Stanley M. Stevens, the Secretary of Equity
Office.
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PROPOSAL 1: ELECTION OF TRUSTEES
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BOARD OF TRUSTEES. The business and affairs of Equity Office are
managed under the direction of the Board of Trustees, currently consisting of
eleven trustees. The Board has responsibility for establishing broad corporate
policies and for the overall performance of Equity Office rather than day-to-day
operating details.
Our Declaration of Trust provides that our trustees are divided into
three classes with each class having a term of three years. The terms of two of
our trustees expire in 2000. The Board has nominated David K. McKown and Sheli
Z. Rosenberg for election to serve as trustees of Equity Office until our 2003
annual meeting of shareholders.
VOTE REQUIRED. There is no cumulative voting in the election of
trustees. Trustees are elected by a plurality of votes cast at the meeting. This
means that each common share may be voted for as many individual trustees as
there are to be elected. Votes withheld for any trustees will not be counted.
Although we know of no reason why any of the nominees would not be able
to serve, if any nominee is unavailable for election, the Proxy Holders would
vote your common shares to approve the election of any substitute nominee
proposed by the Board of Trustees.
GENERAL INFORMATION ABOUT THE NOMINEES. Both of the nominees are
currently trustees. Each has agreed to be named in this Proxy Statement and to
serve if elected. In 1999, each nominee attended at least 75% of the meetings of
the Board and committees on which the nominee served.
Unless stated otherwise, both of the nominees have been continuously
employed by their present employers for more than five years.
BOARD RECOMMENDATION. The Board recommends a vote FOR each of the
nominees. Proxies solicited by the Board will be voted FOR each of the nominees
unless instructions to withhold or to the contrary are given.
PRINCIPAL OCCUPATION OF AND OTHER INFORMATION REGARDING NOMINEES AND
TRUSTEES. Set forth below are biographies of each of the trustee nominees and
our trustees, including committee memberships indicated as follows: (1)
Executive Committee, (2) Audit Committee, (3) Compensation and Option Committee,
(4) Conflicts Committee and (5) Trust Governance Committee. The age indicated in
each is as of March 15, 2000.
NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2003
DAVID K. MCKOWN, 62, has been a trustee since July 1997. Mr. McKown has
been Group Executive of Diversified Finance of BankBoston, N.A., a commercial
bank since 1993. Mr. McKown was director of Loan Review for BankBoston, N.A.
from 1990 until 1993. Committee memberships: (1), (3) and (4).
SHELI Z. ROSENBERG, 58, has been a trustee of Equity Office since March
1997. Since February 2000, Ms. Rosenberg has been the Vice Chairman of Equity
Group Investments L.L.C. From January 1999 until February 2000, Ms. Rosenberg
was Chief Executive Officer and President of Equity Group Investments L.L.C., an
owner and financier of real estate and corporate investments. Ms. Rosenberg was
Chief Executive Officer and President of Equity Group Investments, Inc., from
November 1994 through December 1998. From 1980 until September 1997, Ms.
Rosenberg was a principal of the law firm of Rosenberg & Liebentritt, P.C. For
more than
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five years, Ms. Rosenberg has served on the Board of Directors of Anixter
International Inc., a provider of integrated network and cabling solutions and
previously served for more than five years on the Board of Directors of Equity
Group Investments, Inc. Since March 1993, Ms. Rosenberg has been a trustee of
Equity Residential Properties Trust, a REIT that owns and operates multifamily
residential properties. Since August 1996, Ms. Rosenberg has been a director of
Manufactured Home Communities, Inc., a REIT engaged in the ownership and
management of manufactured home communities. Since April 1997, Ms. Rosenberg has
been a director of Illinois Power Co., a supplier of electricity and natural gas
in Illinois, the holding company of which is Dynegy Inc., of which Ms. Rosenberg
is also a director. Since May 1997, Ms. Rosenberg has been a director of CVS
Corporation, a drugstore chain. Since July 1997, Ms. Rosenberg has been a member
of the board of Capital Trust, Inc., a specialized finance company. Since
February 2000, Ms. Rosenberg has been a member of the Board of Directors of
Danka Business Systems PLC, a business services provider. Ms. Rosenberg
currently chairs Equity Office's Trust Governance Committee. Committee
memberships: (3) and (5).
INCUMBENT TRUSTEES WITH TERMS EXPIRING IN 2001
THOMAS E. DOBROWSKI, 56, has been a trustee since July 1997. Since
December 1994, Mr. Dobrowski has been the managing director of real estate and
alternative investments of General Motors Investment Management Corporation
located in New York, New York, an investment advisor to several pension funds,
including those of General Motors Corporation, its subsidiaries and affiliates.
For more than five years, Mr. Dobrowski has been a director of Manufactured Home
Communities, Inc. Since August 1998, Mr. Dobrowski has been a trustee of Capital
Trust, Inc. Committee membership: (2).
JERRY M. REINSDORF, 64, has been a trustee since July 1997. Mr.
Reinsdorf has been the Chairman of the Chicago White Sox baseball team, the
Chairman of the Chicago Bulls basketball team, and a partner of Bojer Financial
Ltd., a real estate investment company located in Park City, Utah, for more than
five years. Since 1996, Mr. Reinsdorf has served as a director of LaSalle
National Bank, N.A., a commercial bank in Chicago, Illinois, the holding company
of which is LaSalle National Corporation, of which Mr. Reinsdorf is also a
director. Since 1993, Mr. Reinsdorf has been a trustee of Northwestern
University in Evanston, Illinois. Mr. Reinsdorf is a stockholder, officer and
director of Jerbo Holdings I, Inc., which is the corporate general partner of a
limited partnership which is the general partner of Bojer Realty Limited
Partnership I. Committee memberships: none.
H. JON RUNSTAD, 58, has been a trustee since January 1998. Since 1971,
Mr. Runstad has been Chief Executive Officer of Wright Runstad & Company, a
Seattle, Washington based owner, manager and developer of office buildings in
the western United States, primarily in the Pacific Northwest; and since January
1995, he has served as its Chairman. From 1971 until May 1995, Mr. Runstad was
President of Wright Runstad & Company. From 1987 through September 1998, Mr.
Runstad served as a member of the Board of Regents for the University of
Washington. Committee memberships: none.
EDWIN N. SIDMAN, 57, has been a trustee since March 1998. Until the
consummation of the merger of Beacon Properties Corporation into Equity Office
in December 1997, Mr. Sidman served as Chairman of the Board and a director of
Beacon Properties Corporation from 1994. He is currently the managing partner of
The Beacon Companies, a private company in Boston, Massachusetts, which is
involved in real estate investment, development and management. Prior to joining
Beacon Properties Corporation in 1971, Mr. Sidman practiced law with the
predecessor to the firm of Rubin and Rudman in Boston, Massachusetts. Mr.
Sidman's past professional affiliations include service as Senior Vice Chairman
of the National Realty Committee. Mr. Sidman is a member of the Board of
Trustees and Executive Committee of Duke University and of the Board of
Directors and Executive Committee for the United Way of Massachusetts Bay.
Committee membership: (5).
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SAMUEL ZELL, 58, has been a trustee and Chairman of the Board of Equity
Office since October 1996. Since January 1999, Mr. Zell has served as Chairman
of Equity Group Investments, LLC. For more than five years, Mr. Zell has served
as Chairman of the Boards of Directors of Anixter International Inc. and
American Classic Voyages Co., a provider of overnight passenger cruises in the
United States. Since March 1995, Mr. Zell has served as Chairman of the Board of
Manufactured Home Communities, Inc. Since March 1993, Mr. Zell has served as
Chairman of the Board of Trustees of Equity Residential Properties Trust. Since
July 1997, Mr. Zell has been Chairman of the Board of Capital Trust, Inc. Since
April 1996, Mr. Zell has served as a director of Ramco Energy plc, an
independent oil company based in the United Kingdom. Since March 1997, Mr. Zell
has served as a director of Chart House Enterprises, Inc., an owner and operator
of restaurants and since May 1998, Mr. Zell has been Chairman of the Board.
Since June 1998, Mr. Zell has served as a member of the Board of Directors, and
since July 1999 has been Chairman of the Board, of Davel Communications, Inc.,
an operator of public pay telephones. Mr. Zell currently chairs Equity Office's
Executive Committee. Committee membership: (1).
INCUMBENT TRUSTEES WITH TERMS EXPIRING IN 2002
TIMOTHY H. CALLAHAN, 49, has been a trustee, Chief Executive Officer
and President of Equity Office since October 1996. Mr. Callahan served on the
Board of Managers and was the Chief Executive Officer of Equity Office Holdings,
L.L.C., and Equity Office Properties, L.L.C., predecessors to Equity Office,
from August 1996 until October 1997. Mr. Callahan was Executive Vice President
and Chief Financial Officer of Equity Group Investments, Inc., an owner, manager
and financier of real estate and corporate investments from January 1995 until
August 1996, was Executive Vice President of Equity Group Investments, Inc. from
November 1994 through January 1995 and was Senior Vice President of Equity Group
Investments, Inc., from July 1992 until November 1994. Mr. Callahan was Vice
President-Finance of the Edward J. DeBartolo Corporation, a developer, owner and
operator of shopping centers, from July 1988 until July 1992. Mr. Callahan was
employed by Chemical Bank, a commercial bank located in New York, New York, from
July 1973 until March 1987. Committee membership: (1).
D.J. ANDRE DE BOCK, 61, has been a trustee since May 1998. He currently
is a member of the Board of Directors of Rodamco North America N.V., a Dutch
real estate investment company, OTIS B.V., Orange Global Property Fund N.V., an
international real estate investment fund listed on the Amsterdam stock
exchange, and Stichting ROZ Index, a Dutch property index, and serves as an
advisor to Jones Lang LaSalle N.V., an international real estate services
company. From 1995 through 1996, prior to his retirement, Mr. de Bock was
Chairman and Chief Executive Officer of ING Real Estate, the real estate
development and investment arm of ING Group. From 1991 until 1994, Mr. de Bock
was Managing Director of Innovest Management, an Amsterdam-listed REIT organized
under Dutch law. Committee membership: (5).
WILLIAM M. GOODYEAR, 51, has been a trustee since July 1997. From July
1997 until January 1999, Mr. Goodyear was Chairman of Bank of America, Illinois,
the Midwest business unit of BankAmerica Corporation, a commercial bank. From
July 1997 until January 1999, he was also President of Bank of America, Private
Bank. Mr. Goodyear was Chairman and Chief Executive Officer of Bank of America
Illinois, a subsidiary of BankAmerica Corporation, from September 1994 until
June 1997, at which time it merged with Bank of America NT & SA. For more than
two years prior to September 1994, Mr. Goodyear was a Vice Chairman and a member
of the Board of Directors of Continental Bank Corporation, the parent company of
Continental Bank, N.A., a commercial bank which merged into Bank of America
Illinois in September 1994. Since June 1992, Mr. Goodyear has been a member of
the Board of Trustees of the Museum of Science and Industry in Chicago,
Illinois. Mr. Goodyear has been a member of the Board of Trustees of the
University of Notre Dame since May 1996 and of Rush-Presbyterian St. Lukes
Medical Center in Chicago, Illinois, since June 1996. Since June 1999, Mr.
Goodyear has served as a member of the Board of Directors of Homeplace of
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America, Inc., a holding company for retail stores specializing in home
furnishings and houseware items. Since December 1999, Mr. Goodyear has served as
a member of the Board of Directors of Navagant Consulting, Inc., an energy
consultant for utility companies. Mr. Goodyear currently chairs Equity Office's
Audit Committee. Committee memberships: (2) and (4).
JAMES D. HARPER, JR., 66, has been a trustee since July 1997. Mr.
Harper has been president of JDH Realty Co., a real estate development and
investment company since 1982. Since 1988, he has been a co-managing partner in
AH Development, S.E. and AH HA Investments, S.E., special limited partnerships
formed to develop over 400 acres of land in Puerto Rico. Since May 1993, Mr.
Harper has been a trustee of Equity Residential Properties Trust. Since 1993,
Mr. Harper has been a trustee of Urban Land Institute. Since 1997, Mr. Harper
has been a director of Burnham Pacific Properties Inc., a REIT that owns,
develops and manages commercial real estate properties in California. Mr. Harper
currently chairs Equity Office's Compensation and Option and Conflicts
Committees. Committee memberships: (2), (3) and (4).
MEETINGS AND COMMITTEES OF THE BOARD OF TRUSTEES. Our Board held six
meetings during 1999. All of the trustees, except Mr. Reinsdorf, attended over
75% of the meetings of the Board and those committees on which he or she served
during the year. Mr. Reinsdorf attended four of the six meetings of the Board
during the year. The Board of Trustees has standing executive, compensation and
option, audit, trust governance and conflicts committees, which are described
below.
EXECUTIVE COMMITTEE. Our Board's Executive Committee consists of the
trustees identified above, with Mr. Zell as its Chairman. Subject to limitations
which are specified in our Bylaws, the Executive Committee has the general
authority to acquire, dispose of and finance investments and to approve the
execution of contracts and agreements, including those related to indebtedness.
Although the Executive Committee did not formally meet during 1999, its members
were in frequent communication and approved numerous matters by unanimous
written consent.
COMPENSATION AND OPTION COMMITTEE. Our Board's Compensation and Option
Committee consists of the independent trustees identified above, with Mr. Harper
as its Chairman. The Compensation and Option Committee determines compensation
and benefits for all executive officers other than the President and Chief
Executive Officer and makes recommendations to our Board's disinterested Board
members in respect to the compensation and benefits for our President and Chief
Executive Officer. The Compensation and Option Committee met five times during
1999.
AUDIT COMMITTEE. Our Board's Audit Committee consists of the
independent trustees identified above, with Mr. Goodyear as its Chairman. The
Audit Committee recommends the engagement of independent public accountants,
reviews with the independent public accountants the plans and results of the
audit engagement, approves professional services provided by the independent
public accountants, reviews the independence of the independent public
accountants, considers the range of audit and nonaudit fees and reviews the
adequacy of Equity Office's and EOP Operating Limited Partnership's internal
accounting controls. The Audit Committee met twice during 1999.
CONFLICTS COMMITTEE. Our Board's Conflicts Committee consists of the
independent trustees identified above, with Mr. Harper as its Chairman. Our
Bylaws permit any trustee to require that the Conflicts Committee review and
approve, prior to a vote of the disinterested trustees of the full Board, any
transaction in which a trustee has a direct or indirect interest. The Conflicts
Committee met twice during 1999.
TRUST GOVERNANCE COMMITTEE. Our Board's Trust Governance Committee
consists of the independent trustees identified above, with Ms. Rosenberg as its
Chairman. Our Committee on Trust Governance is
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responsible for on-going review of the effectiveness of our Board, the
maintenance of criteria and procedures for the identification and recruitment of
candidates for election or reelection as Trustees and the recommendation to our
Board, with the advice of our Board's Chairman and our President and Chief
Executive Officer, of nominees for election or reelection as Trustees. In 1999,
the Board adopted Guidelines on Trust Governance Issues after their
recommendation to the Board by the Trust Governance Committee. The Trust
Governance Committee met twice during 1999.
We do not have a nominating committee.
ANNUAL FEES. Our President and Chief Executive Officer, Mr. Callahan
receives no fees for his services as trustee. Each of our non-employee trustees
receives an annual fee of $50,000 and an additional $1,000 per annum for each
committee on which he or she serves. Committee chairs receive an additional $500
per annum for each committee chaired. Generally, these fees are paid in common
shares. In addition, independent trustees receive an annual grant of options to
purchase 10,000 common shares at the fair market value on the date of each
annual meeting of shareholders. The annual trustee option grants vest as
follows: options for 3,333 common shares vest six months after grant date;
options for an additional 3,333 common shares vest on the first anniversary of
the grant date; and options for the remaining 3,334 common shares vest on the
second anniversary of the grant date.
OPTIONS. On February 16, 1999, the Compensation and Option Committee
granted Mr. Zell options to purchase 500,000 common shares at an above-market
exercise price of $29.50 per share. On December 31, 1999, the Board of Trustees
granted Mr. Zell options to purchase an additional 750,000 common shares at
$24.225 per share, which equaled fair market value on the date of grant. One
third of such options granted to Mr. Zell will vest on each of the first three
anniversary dates of the option grants.
INDEMNIFICATION. We indemnify our trustees and officers to the fullest
extent permitted by law so that they will serve free from undue concern. This is
required under our Bylaws, and we have also signed agreements with each of those
individuals contractually obligating us to provide this indemnification to them.
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COMMON SHARE AND UNIT OWNERSHIP BY TRUSTEES AND EXECUTIVE OFFICERS
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This table indicates how many common shares and units of partnership
interest in EOP Operating Limited Partnership the trustees and executive
officers beneficially owned as of March 7, 2000. In general, "beneficial
ownership" includes those common shares a trustee or executive officer has the
power to vote, or the power to dispose, and share options or warrants that are
exercisable currently or become exercisable within 60 days. Except as otherwise
noted, the persons named in the table below have sole voting and investment
power with respect to all common shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
COMMON SHARES AND OPTIONS AND/OR PERCENTAGE OF ALL
UNITS BENEFICIALLY WARRANTS EXERCISABLE PERCENTAGE OF ALL COMMON SHARES
NAME OWNED (1) WITHIN 60 DAYS COMMON SHARES (1) AND UNITS(2)
- ---- --------- -------------- ----------------- ------------
<S> <C> <C> <C> <C>
Samuel Zell (3)...................... 8,331 809,998 * *
Timothy H. Callahan (4).............. 527,066 399,999 * *
D.J. Andre de Bock................... 1,000 9,999 * *
Thomas E. Dobrowski.................. - 67,249 * *
William M. Goodyear.................. 12,086 67,249 * *
James D. Harper, Jr.................. 4,363 114,499 * *
David K. McKown...................... 7,624 67,249 * *
Edwin N. Sidman (5).................. 590,167 12,099 * *
Sheli Z. Rosenberg (6)............... 272,100 137,832 * *
Jerry M. Reinsdorf................... 7,107 67,249 * *
H. Jon Runstad (7)................... 594,931 303,720 * *
David A. Helfand..................... 59,899 28,332 * *
Richard D. Kincaid................... 159,768 203,332 * *
Michael A. Steele.................... 142,066 203,332 * *
Stanley M. Stevens (8)............... 86,148 175,000 * *
All trustees and executive officers
as a group (15 persons).......... 2,472,656 2,667,138 2.04% 1.81%
</TABLE>
- ----------
* Less than 1%.
(1) The number of common shares beneficially owned is based on SEC
regulations regarding the beneficial ownership of securities. Assumes a
total of 247,942,376 common shares outstanding as of March 7, 2000. The
percentage of common shares beneficially owned by a person assumes that
all units held by the person are exchanged for common shares, that none
of the units held by other persons are so exchanged, that all options
and warrants exercisable within sixty days of March 7, 2000 to acquire
common shares held by the person are exercised and that no options or
warrants to acquire common shares held by other persons are
8
<PAGE>
exercised.
(2) Assumes a total of 281,453,518 common shares and units outstanding as
of March 7, 2000 (247,942,376 common shares and 33,511,142 additional
units). Further assumes that all options and warrants exercisable
within sixty days of March 7, 2000 to acquire common shares held by the
person are exercised and that no options or warrants to acquire common
shares held by other persons are exercised.
(3) See "Security Ownership of Principal Shareholders."
(4) Includes 527,066 common shares (assuming redemption of 89,338 units)
held by Mr. Callahan.
(5) Includes 590,167 common shares (assuming redemption of 347,805 units)
held directly and indirectly by Mr. Sidman. Excludes 401,809 common
shares (assuming redemption of 401,809 units) held by The Leventhal
Family Limited Partnership. Paula Sidman, Mr. Sidman's spouse, is a
general partner of such partnership; however, Mrs. Sidman disclaims
beneficial ownership of the units beneficially owned by such
partnership except for the units in which she has a pecuniary interest.
(6) Includes 272,100 common shares (assuming redemption of 191,134 units)
held by Ms. Rosenberg. Does not include 15,171,486 common shares
(assuming redemption of 13,620,819 units) attributable to EGI Holdings,
Inc., EGIL Investments, Inc., Samstock/ZFT, L.L.C., Samstock/SZRT,
L.L.C., Samstock/ZGPI, L.L.C. and Samstock/Alpha, L.L.C., which may be
deemed to be beneficially owned by Ms. Rosenberg solely as a result of
her position as director, and/or executive officer of the ultimate
general partner or shareholder of such entities, or a director, and/or
executive officer, of such entities. Ms. Rosenberg disclaims beneficial
ownership of such 15,171,486 common shares, including units redeemable
for common shares.
(7) Includes 541,884 common shares (assuming redemption of 523,643 units)
held directly by Mr. Runstad. Includes 53,047 common shares (assuming
redemption of a like number of units) held by Wright Runstad & Company,
which may be deemed to be beneficially owned by Mr. Runstad; however,
Mr. Runstad disclaims beneficial ownership of 24,115 of these units.
Includes 255,525 warrants held directly by Mr. Runstad. The number of
warrants shown includes 34,496 warrants held by Wright Runstad &
Company, which may be deemed to be beneficially owned by Mr. Runstad;
however, Mr. Runstad disclaims beneficial ownership of 15,682 of such
warrants.
(8) Includes 86,148 common shares (assuming redemption of 6,927 units) held
by Mr. Stevens.
SECTION 16(A) DISCLOSURE
Section 16(a) of the Securities Exchange Act of 1934 requires our
trustees and executive officers to file reports of holdings and transactions in
Equity Office shares with the SEC and the New York Stock Exchange.
We believe that, during 1999, all applicable filing requirements of our
officers and trustees were satisfied with the exception of the initial filing
requirement for Mr. Helfand who was late in filing his Form 3.
9
<PAGE>
----------------------
EXECUTIVE COMPENSATION
----------------------
REPORT OF THE COMPENSATION AND OPTION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION AND OPTION COMMITTEE: LONG-TERM ROLES AND 1999 ACTIONS:
The role of the Compensation and Option Committee is to:
o Review and approve a compensation philosophy for Equity Office which is
consistent with its mission and strategies;
o Ensure that the rewards program in total and each of its component
parts are designed consistent with the approved compensation
philosophy;
o Review and approve all compensation plans impacting the senior officers
of Equity Office;
o Review and approve the benefit plans impacting all Equity Office
employees;
o Determine the specific levels of compensation for the four highest paid
officers other than the President and Chief Executive Officer; and
o Recommend to the Board the specific levels of compensation for the
Chairman, the President and Chief Executive Officer, as well as the
Trustees.
During 1999, the Compensation and Option Committee, with the advice and
assistance of a team of outside compensation consultants, fully reviewed Equity
Office's "total rewards" programs for senior officers (as well as other
employees). The results of this review were refinements to Equity Office's
existing compensation plans, which are designed to:
o Align the compensation packages of senior officers with Equity Office's
mission and strategies as well as the long-term interests of
shareholders;
o Improve the incentive to achieve key financial and strategic
performance metrics by linking annual incentive award opportunities to
the achievement of performance benchmark goals in these areas; and
o Foster greater shareholder identification by:
* Adopting and implementing share ownership requirements for
senior officers; and
* Providing a large portion of total compensation opportunities
in the form of restricted shares and share options; and
* Enhancing opportunities for retention of key people through
vesting of equity opportunities and by initiating
change-in-control agreements
1999 compensation decisions were made with a view towards furthering
the foregoing compensation objectives and in light of Equity Office's
performance in 1999.
1999 COMPENSATION PROGRAM:
For 1999, Equity Office's outside compensation consultants provided
competitive compensation data to help the Committee in establishing the desired
positioning of Equity Office relative to the market, as well as the desired mix
of base salary, annual incentive opportunity and long-term compensation
opportunities.
The competitive market for senior officers included:
o Large REITS with an emphasis on office REITs;
10
<PAGE>
o Other for profit companies of comparable size to Equity Office
in the general business arena; and
o The real estate industry in general.
TYPES OF COMPENSATION:
The three major components of executive compensation include base
salary, annual incentive bonus and long-term/equity compensation.
BASE SALARY. Positions are classified by salary on the basis of
assigned responsibilities and an evaluation of the latest available survey
information. A range of earnings opportunities has been established for each
position. The mid-point of the salary range is dependent on the position's
responsibilities relative to the market references. Where salary information is
unavailable for a particular position, the salary range is based on other
positions having similar responsibilities at Equity Office.
11
<PAGE>
Each salary range has three defined points of reference:
o Minimum or the lowest salary to be paid to a qualified
incumbent;
o Mid-point or the middle position of the salary range
established with reference to the market value and objectives
of Equity Office; and
o Maximum or the highest amount to be paid to an incumbent in
this position.
Individual base salaries are reviewed at least annually. Salary increases are
granted based on each executive's performance as well as his or her position in
the applicable salary range.
INCENTIVE BONUS. Equity Office's bonus program is designed to motivate
all employees by more closely linking bonus awards to value added for Equity
Office's shareholders. Equity Office has created and intends to promote a
culture of performance and ownership among its managers. Executive officers'
short-term incentives are accomplished by tying the executive officers'
performance to Equity Office's continued performance.
The incentive bonus program recognizes three aspects of performance
which are corporate, team and individual:
o "Corporate" refers to the performance measures of Equity
Office, including its financial and strategic measures;
o "Team" refers to key functional or departmental performance
measures. This aspect of performance links individuals to the
performance of their collective work group or assigned
geographic territory, and is intended to foster cooperation
within Equity Office; and
o "Individual" performance refers to specific performance
measures developed for each individual participant in the
program. This aspect of performance motivates individuals to
achieve a high level of individual success and personal
contribution.
The senior officers have their annual incentives weighted more heavily toward
the achievement of corporate and team performance rather than individual
performance.
SHARE OPTIONS AND RESTRICTED SHARE AWARDS. The Compensation and Option
Committee recognizes that, while the bonus program provides awards for positive
short-term and mid-term performance, the interests of shareholders are best
served by giving key employees the opportunity to participate in the
appreciation of Equity Office's common shares thorough the granting of share
options and restricted share awards. The members of the Committee believe that
share performance, over the long-term, will reflect executive performance and
that such arrangements further reinforce management goals and incentives to
achieve shareholder objectives. All employee share options granted to date vest
over a period of three years at a rate of one third of such grant each year and
all restricted share awards vest over a period of five years. The Committee used
the compensation surveys, and an assessment of the senior officer's achieved
performance goals and objectives, to determine the amount of share options and
restricted shares awarded each senior officer.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. Based on the executive
compensation surveys and Equity Office's financial performance in 1999, the
Compensation and Option Committee concluded that (a) the recommended salary,
bonus, restricted share awards and option grants to Mr. Callahan, Equity
Office's Chief Executive Officer and President, is fair and competitive in light
of Mr. Callahan's contribution and (b) Equity Office's overall executive
compensation ranks within the upper quartile among the general real estate
industry and among REITs. The Committee determined that this was appropriate
given Equity Office's performance in 1999 and its status as the largest public
office company in the United States. The Committee further noted that
third-party analysts have consistently pointed to the strength of Equity
Office's management team as a reason
12
<PAGE>
for their positive view of Equity Office and its future prospects.
TAX POLICY. Section 162(m) of the Internal Revenue Code limits to $1
million Equity Office's tax deduction each year for compensation to each of its
Chief Executive Officer and other four most highly paid executive officers.
Section 162(m), however, allows a deduction without regard to amount for
payments of performance-based compensation, which includes most share option,
and other incentive arrangements, the material terms of which have been approved
by shareholders. Awards issued under Equity Office's Amended and Restated 1997
Share Option and Share Award Plan may, but need not, satisfy the requirements of
Section 162(m). Options under this plan that have an exercise price equal to
grant date fair market value and that vest based solely on continued employment
qualify as "performance-based compensation." Incentive bonuses are determined
based on the evaluation of Equity Office's performance, taking into
consideration such factors as pre-set financial and strategic goals. Since, the
Board, however, does not apply these factors on a strict formula basis, the
incentive bonuses do not satisfy the requirements of 162(m). Restricted share
grants, which are used to help retain key executives in a highly competitive job
market, also do not qualify as performance based under 162(m). Equity Office
believes that because it qualifies as a REIT under the Code and is, therefore,
not subject to Federal income taxes, the payment of compensation that does not
satisfy the requirements of Section 162(m) does not have a material adverse
financial consequence to it provided it continues to distribute 100% of its
taxable income.
RESPECTFULLY SUBMITTED,
James D. Harper, Jr., Chairman
David K. McKown
Sheli Z. Rosenberg
13
<PAGE>
PERFORMANCE GRAPH. This graph compares our shareholder returns
(assuming reinvestment of dividends) since July 11, 1997, the date of our
initial public offering, with the Standard and Poors 500 Composite Stock Index
and the index of equity REITs prepared by the National Association of Real
Estate Investment Trusts. The graph assumes an investment of $100 in each of
Equity Office and the S&P 500 Index on July 11, 1997 and with respect to the
NAREIT Index on July 30, 1997. Equity REITs are defined as those companies which
derive more than 75% of their income from equity investments in real estate
assets. The NAREIT equity index includes all tax qualified REITs listed on the
New York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market.
[PERFORMANCE GRAPH]
The points on the graph represent the following numbers:
<TABLE>
<CAPTION>
JULY 11, 1997 DECEMBER 1997 DECEMBER 1998 DECEMBER 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
EQUITY OFFICE..... $100.00 $152.89 $122.45 $133.90
S&P 500........... $100.00 $110.58 $142.18 $172.10
NAREIT Index...... $100.00 $110.36 $91.05 $88.64
</TABLE>
14
<PAGE>
SUMMARY COMPENSATION TABLE. The following table shows the annual
compensation for Timothy H. Callahan, the Chief Executive Officer of Equity
Office, and the other four most highly compensated executive officers of Equity
Office.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
------------------- ------
RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMMON SHARE UNDERLYING COMPENSATION
POSITION(S) YEAR ($)(1) ($)(2) AWARDS ($)(3) OPTIONS (#)(4) ($)(5)
---- ------ ------ ------------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Timothy H. Callahan 1997 $600,000 $1,050,000 $4,976,875 450,000 $9,600
President and Chief 1998 $700,000 $1,050,000 $2,640,000 300,000 $9,600
Executive Officer 1999 $700,000 $1,200,000 -- 300,000 $9,600
David A. Helfand 1997 -- -- -- -- --
Executive Vice President- 1998 $138,187 $280,000 $360,000 82,500 --
New Business Development 1999 $302,596 $375,000 -- 100,000 $3,200
Richard D. Kincaid 1997 $235,000 $465,000 $1,523,375 250,000 $9,600
Executive Vice President 1998 $300,000 $465,000 $1,200,000 110,000 $9,600
and Chief Financial Officer 1999 $325,000 $450,000 -- 110,000 $9,600
Michael A. Steele 1997 $265,000 $525,000 $1,523,375 250,000 $9,600
Executive Vice 1998 $350,000 $525,000 $1,200,000 110,000 $9,600
President-Real Estate 1999 $375,000 $375,000 -- 90,000 $9,600
Operations and Chief
Operating Officer
Stanley M. Stevens 1997 $325,000 $375,000 $627,000 225,000 $9,600
Executive Vice President 1998 $375,000 $375,000 $600,000 75,000 $9,600
and Chief Legal Counsel 1999 $375,000 $350,000 -- 75,000 $9,600
</TABLE>
- ----------
(1) Amounts shown include cash compensation earned and received by
executive officers as well as amounts earned but deferred at the
election of these officers. Mr. Helfand's employment with Equity Office
commenced on July 1998.
(2) Cash and non-cash bonuses payable in common shares, including amounts
earned but deferred, are reported in the year in which the compensation
service was performed, even if the bonuses were paid in a subsequent
year.
(3) Represents the dollar value of restricted share awards calculated by
multiplying the closing market price of Equity Office common shares on
the date of grant by the number of shares awarded. This valuation does
not take into account the diminution in value attributable to the
restrictions applicable to the common shares. The restricted share
awards vest over a five-year period (50% on the third anniversary of
the grant date, 25% on the fourth anniversary of the grant date, and
25% on the fifth anniversary of the grant date).
15
<PAGE>
The number and value of the aggregate restricted share holdings of each
executive officer listed above at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
NUMBER OF RESTRICTED VALUE AT
NAME COMMON SHARE AWARDS DECEMBER 31, 1999
- ---- ------------------- -----------------
<S> <C> <C>
Timothy H. Callahan.......... 265,000 $6,360,000
David A. Helfand............. 15,000 $360,000
Richard D. Kincaid........... 97,000 $2,328,000
Michael A. Steele............ 97,000 $2,328,000
Stanley M. Stevens........... 44,000 $1,056,000
</TABLE>
Distributions are paid on all restricted common share awards at the
same rate as on unrestricted common shares.
(4) Securities underlying options are reported in the year granted.
(5) Includes employer matching and profit-sharing contributions to Equity
Office's 401(k) Retirement Savings Plan.
1999 OPTION GRANTS. The following table gives more information on share
options granted during the last fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------------------------------------------------
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED TO EXERCISE GRANT DATE
UNDERLYING OPTIONS EMPLOYEES FOR FISCAL PRICE PER EXPIRATION PRESENT
NAME GRANTED (1) YEAR 1999 SHARE (2) DATE VALUE (3)
- ------------------------ --------------------- --------------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Timothy H. Callahan 300,000 9.1% $24.225 12/31/09 $1,388,093
David A. Helfand 100,000 3.0% $24.225 12/31/09 $462,698
Richard D. Kincaid 110,000 3.3% $24.225 12/31/09 $508,967
Michael A. Steele 90,000 2.7% $24.225 12/31/09 $416,428
Stanley M. Stevens 75,000 2.3% $24.225 12/31/09 $347,023
</TABLE>
- ----------
(1) All options were granted at the fair market value of common shares as of the
date of grant. Options granted are for a term of not more than ten years from
the date of grant and vest in three annual installments over three years.
(2) The exercise price for the grant of options on December 31, 1999 was the
average closing price of the common shares as listed on the New York Stock
Exchange for the five trading days immediately preceding the date of grant.
(3) As permitted by the Securities and Exchange Commission rules, Equity Office
elected to present the grant date present value of the options set forth in this
table calculated using the Black-Scholes option-pricing model. Equity Office's
use of this model should not be construed as an endorsement of its accuracy at
valuing options. All share option models require a prediction about the future
movement of the share price. The following assumptions were made for purposes of
calculating grant date present value: expected time of exercise of 5 years,
volatility of 30%, risk-free interest of 5.4% and dividend yield of 5.8%. The
real value of the options in this table depends upon the actual performance of
the Equity Office's shares during the applicable period and upon when they are
exercised. The dollar amounts in this column are not intended to forecast
potential future appreciation, if any, of the Equity Office's common shares.
16
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES. The following table
shows the number and value of share options (exercisable and unexercisable) for
Messrs. Callahan, Helfand, Kincaid, Steele and Stevens during the last fiscal
year.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/99(#) 12/31/99(1)
------------------------------ -------------------------------
COMMON
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Timothy H. Callahan........... 0 $0.00 399,999 650,001 $562,332 $500,168
David A. Helfand.............. 0 $0.00 28,332 154,168 $17,332 $55,667
Richard D. Kincaid............ 0 $0.00 203,332 266,668 $381,883 $271,242
Michael A. Steele............. 0 $0.00 203,332 246,668 $381,883 $269,742
Stanley M. Stevens............ 0 $0.00 175,000 200,000 $369,750 $239,625
</TABLE>
- ----------
(1) Represents the fair market value of a common share on December 31, 1999
($24.4375) less the option exercise price. An option is "in-the-money"
if the fair market value of the common shares subject to the option
exceeds the option exercise price.
17
<PAGE>
--------------------------------------------
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
--------------------------------------------
This table sets forth information with respect to persons who are
believed by us to beneficially own more than five percent of our outstanding
common shares. The information is as of March 7, 2000. The information is based
on the most recent Schedule 13D or 13G filed with the SEC on behalf of such
persons or other information made available to us. Except as otherwise
indicated, the reporting persons have stated that they possess sole voting and
sole dispositive power over the entire number of shares reported.
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF COMMON SHARES(1)
<S> <C> <C>
FMR Corp.(2)................................. 20,393,242 8.22%
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, MA 02109
Samstock/SZRT, L.L.C.(3)..................... 16,001,973 6.10%
Samuel Zell
Samstock/Alpha, L.L.C.
ZFT Partnership
EGI Holdings, Inc
Samstock/ZFT, L.L.C.
Samstock/ZGPI, L.L.C.
RSB Properties Trust
EGIL Investments, Inc.
Two North Riverside Plaza, Suite 600
Chicago, IL 60606
BellSouth Master Pension Trust............ 13,282,431 5.36%
c/o State Street Bank and Trust, Trustee
225 Franklin Street
Boston, MA 02110
</TABLE>
- ----------
(1) The number and percentage of common shares beneficially owned is based
on SEC regulations governing the determination of beneficial ownership
of securities.
(2) Amendment No. 1 to Schedule 13G of the reporting persons filed with the
SEC on February 11, 2000 states that FMR Corp. has sole power to vote
or direct the vote of 1,666,436 common shares and has the sole power to
dispose or direct the disposition of 20,393,242 common shares. Of these
shares, Fidelity Management & Research Company, a wholly owned
subsidiary of FMR Corp., is reported as the beneficial owner of
18,649,506 shares, as a result of its acting as an investment advisor
to various Fidelity funds, and Edward C. Johnson, FMR Corp.'s chairman,
and FMR Corp., through its control of Fidelity Management, each is
reported as having sole power to dispose of the 18,649,506 shares owned
by the Fidelity funds, but no power to vote or direct the voting of the
shares. Fidelity Management Trust Company, which also is a
18
<PAGE>
wholly owned subsidiary of FMR Corp., is the beneficial owner of
1,743,736 shares, as a result of its serving as investment manager of
certain institutional accounts. Mr. Johnson 3d and FMR Corp., through
its control of Fidelity Management Trust Company, each are reported as
having sole dispositive power over 1,743,736 of these shares and sole
power to vote or direct the voting of 1,666,436 of such shares. The
Amendment No. 1 to Schedule 13G also states that Mr. Johnson 3d owns
12% of the outstanding voting stock of FMR Corp. and that Abigail P.
Johnson is a director and owns 24.5% of the outstanding voting stock of
FMR Corp.
(3) Amendment No. 1 to Schedule 13D of the reporting persons filed with the
SEC on February 15, 2000 states that each reporting person beneficially
owns the number of common shares and units of limited partnership
interest of EOP Operating Limited Partnership as follows:
Samstock/SZRT, L.L.C. -- 27,348 common shares and 1,775,065 units;
Samuel Zell - 818,173 common shares, including 809,998 common shares
issuable to Mr. Zell upon the exercise of share options that are
currently exercisable or exercisable within 60 days and 3,582 common
shares held in an account maintained by the trustee of Equity Office's
supplemental employee retirement plan for the benefit of Mr. Zell;
Samstock/Alpha, L.L.C. - 258,178 common shares and 1,990,579 units; ZFT
Partnership - no common shares or units; EGI Holdings, Inc. - 12,384
common shares and 1,919,706 units; Samstock/ZFT, L.L.C. - 1,239,472
common shares and 6,010,399 units; Samstock/ZGPI, L.L.C. - 5,321 units;
RSB Properties Trust - 12,314 units; and EGIL Investments, Inc. -
12,835 common shares and 1,919,749 units. Under a stockholders'
agreement dated December 31, 1999 among certain Zell family trusts and
certain Lurie family trusts, (a) the Zell trusts have the power to vote
and to dispose of the common shares and units beneficially owned by EGI
Holdings, Inc. and the Lurie trusts have the power to vote and to
dispose of the common shares and units beneficially owned by EGIL
Investments, Inc. Based on the Schedule 13D of the reporting persons
filed with the SEC on January 24, 2000, various trusts formed for the
benefit of Mr. Zell and his family hold 100% of the economic interests
in Samstock/SZRT, L.L.C., Samstock/Alpha, L.L.C., Samstock/ZFT, L.L.C.,
Samstock/ZGPI, L.L.C. and ZFT Partnership and Mr. Zell is the sole
trustee of RSB Properties Trust.
19
<PAGE>
----------------------------------------------------------------------
COMPENSATION AND OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
----------------------------------------------------------------------
The Compensation and Option Committee members are Messrs. Harper and
McKown and Ms. Rosenberg.
Mr. Zell and Ms. Rosenberg serve as members of the Board of Equity
Group Investments, L.L.C. Ms. Rosenberg is the Vice Chairman of Equity Group
Investments, L.L.C. Mr. Zell and Ms. Rosenberg each serves as a director of
other non-public companies owned by Mr. Zell or his affiliates which companies
do not have Compensation and Option Committees.
See "Certain Relationships and Related Transactions."
----------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
WRIGHT RUNSTAD AFFILIATED TRANSACTIONS. H. Jon Runstad, one our
trustees, is the Chairman, Chief Executive Officer and a director of Wright
Runstad & Company, the general partner of Wright Runstad Associates Limited
Partnership, which we refer to as "WRALP." Through direct and indirect holdings,
Mr. Runstad owns 40.27% of WRALP. A subsidiary of Equity Office and an affiliate
of Equity Group Investments, L.L.C. together own a 30% limited partnership
interest in WRALP. During 1999, such Equity Office subsidiary and limited
partner received distributions of $.9 million from WRALP. In addition, various
subsidiaries of Equity Office made payments to WRALP during 1999 totaling $5.1
million as development and management fees, leasing commissions and related
expense reimbursements with respect to some of our properties. An additional
$4.7 million was paid during 1999 to Wright Runstad & Company for the
reimbursement of salaries of personnel in connection with such management
services.
Wright Runstad & Company leases space in some of our office properties.
The terms of the leases are consistent with terms of unaffiliated tenants'
leases. Total rents and other amounts paid by Wright Runstad & Company under its
lease were approximately $1.2 million for the year ending December 31, 1999.
In addition, Mr. Runstad had an interest in the following transactions
during 1999:
o WRALP serves as the co-property manager with Equity Office and
leasing agent for our portfolio of office buildings acquired
in December 1997 from an entity affiliated with WRALP. Those
buildings are located in Seattle and Bellevue, Washington;
Portland, Oregon and Anchorage, Alaska.
o In December 1997, Equity Office agreed to guarantee a line of
credit obtained by WRALP from a third-party lender in an
amount of up to $19.5 million in principal plus $.5 million in
costs. The current balance outstanding on that line of credit
is approximately $10 million. We have not been required to
make any payments under that guarantee.
o WRALP is the property manager for two additional office
buildings which we acquired in 1998 and are located in
Seattle, Washington.
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o WRALP is the property manager for one additional office
building which we acquired in 1999 and is located in Bellevue,
Washington.
o WRALP owns a 20% interest and we own an 80% interest in WRC
Sunset North LLC, a Washington limited liability company that
developed a three-building office complex, Sunset North
Corporate Campus, in Bellevue, Washington. WRALP served as
developer of that project and currently serves as its
co-property manager with Equity Office and leasing agent.
o WRALP owns a 20% interest and we own an 80% interest in Three
Bellevue Center LLC, a Washington limited liability company
that is developing an office building, Three Bellevue Center,
in Bellevue, Washington. WRALP is serving as developer of that
project and, upon completion, is expected to serve as
co-property manager with Equity Office and leasing agent.
o WRALP is currently developing an office building, The World
Trade Center in Seattle, Washington. Upon completion of the
building, Equity Office is expected to serve as co-property
manager and leasing agent with WRALP. We have agreed to
acquire that building after it has been completed and occupied
by a third party tenant.
EQUITY GROUP INVESTMENTS AFFILIATED TRANSACTIONS. Equity Office leases
office space at Two North Riverside Plaza, Chicago, Illinois owned by Two North
Riverside Plaza Joint Venture, a partnership comprised of trusts established for
the benefit of the families of Samuel Zell and Robert Lurie, a deceased former
business partner of Mr. Zell. Prior to May 1, 1999, Equity Group Investments,
L.L.C., and its affiliates provided Equity Office and its subsidiaries with real
estate tax services. We paid approximately $3.5 million during 1999 to Equity
Group Investments, L.L.C. and its affiliates for such office space and services.
We believe these amounts equal a market rental rate for the office space and the
actual cost of providing these services.
Prior to October 1, 1999, EGI Risk Services Inc., a wholly owned
subsidiary of Equity Group Investments, L.L.C. provided risk management services
to Equity Office, including reviewing, obtaining and/or researching various
insurance policies. In addition, National Liberty, an affiliate of Equity Group
Investments, L.L.C. provided certain insurance coverage for Equity Office for
the period prior to October 1, 1999. Fees paid to EGI Risk Services Inc. and
insurance premiums paid to National Liberty during 1999 were approximately $3.5
million.
An affiliate of Equity Group Investments, L.L.C. has an indirect
minority interest in Standard Parking Limited Partnership, which we refer to as
"SPLP." An affiliate of SPLP manages the parking operations at certain
properties that are owned by Equity Office. We believe amounts paid to SPLP's
affiliate are equal to market rates for such services.
We have entered into various lease agreements with SPLP's affiliates
whereby such affiliates lease certain stand-alone parking facilities. Certain of
these lease agreements provide such affiliates with annual successive options to
extend the term of the lease through various dates. The rent paid in 1999 under
these lease agreements was approximately $9.0 million. In addition, we may
receive additional rent based upon actual gross revenues generated by these
parking facilities. In accordance with certain of these leases, we may be
obligated to make an early termination payment if agreement is not reached as to
rent amounts to be paid for future periods.
On July 28, 1998, we purchased for $48.5 million 50,000 8.25% Step Up
Convertible Trust Preferred Securities, $1,000 liquidation preference per share,
issued by CT Convertible Trust I, a subsidiary of Capital Trust, Inc., in a
private placement. The preferred securities are convertible at any time into
Class A common
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shares of Capital Trust, Inc. at a conversion price of $11.70, reflecting a 30%
conversion premium over Capital Trust, Inc.'s common share price at the close of
business on July 24, 1998. The preferred securities are non-callable for five
years, and have a 20-year maturity. Mr. Zell, Chairman of our Board of Trustees
is also Chairman of the Board of Capital Trust, Inc, and Ms. Rosenberg and Mr.
Dobrowski are directors of Capital Trust, Inc. We earned approximately $4.1
million in dividends in 1999. The dividend is payable each calendar quarter;
commencing in year seven, the dividend will increase by 75 basis points per
annum. In connection with the investment, Capital Trust, Inc. has granted Equity
Office and other investors the right to participate in certain strategic lending
opportunities.
MANAGEMENT AFFILIATED TRANSACTIONS. In order to satisfy certain REIT
tax requirements, our five senior-most officers own the equity in Access Holding
Company, L.L.C. ("Access"). Access is the owner of one hundred percent (100%) of
the voting shares (a five percent economic interest) in Real State Insurance
Corporation ("Real State"), a captive insurance company which we created
effective October 1, 1999, to provide insurance solely to Equity Office and its
affiliates. EOP Operating Limited Partnership owns one hundred percent (100%) of
the non-voting shares (a ninety-five percent economic interest) and has an
option to acquire the interest of Access in Real State, effective on or after
January 1, 2001, when REIT tax laws will permit such acquisition and ownership.
MISCELLANEOUS. Equity Office Properties Management Corp., a Delaware
corporation, has entered into third-party management contracts, on terms
equivalent to third-party transactions, with respect to properties which are
owned or controlled by affiliates of Mr. Zell. Income recognized for such
services rendered for 1999 was approximately $8.1 million.
Certain services for our tenants that for tax reasons may not be
performed by a REIT are performed by a service corporation owned entirely by an
affiliate of Mr. Zell. We have no control over, or ownership interest in, this
service corporation, which operates as an independent contractor. We may
terminate such services at any time upon 30-days' notice.
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--------------------------------------------------------
PROPOSAL 2: AMENDMENTS TO DECLARATION OF TRUST REGARDING
VOTING REQUIREMENTS FOR BUSINESS COMBINATIONS
--------------------------------------------------------
At a meeting on February 1, 2000, the Board of Trustees declared
advisable amendments to Sections 8.2 and 8. 4 of our Declaration of Trust and
directed that the proposed amendments be submitted for consideration by the
shareholders. The proposed amendments, the text of which are attached as EXHIBIT
A to this proxy statement and marked to show changes from our existing
Declaration of Trust, clarify the shareholder vote required for approval of
mergers, consolidations and sales of all or substantially all of the assets.
REASONS FOR AND GENERAL EFFECT OF PROPOSED AMENDMENTS
Under Title 8 of the Corporations and Associations Article of the
Annotated Code of Maryland (the "Maryland REIT Statute"), the merger of a
Maryland REIT generally must be approved by two-thirds of all the votes entitled
to be cast on the matter, unless the declaration of trust specifies a greater or
lesser percentage, but not less than a majority. This general rule is subject to
the following two exceptions. First, under the Maryland REIT Statute,
shareholder approval is not required for parent-90% owned subsidiary mergers.
Second, effective October 1, 1999, a merger of a Maryland REIT surviving the
merger need not require a shareholder vote if the declaration of trust does not
provide otherwise and : (1) the merger does not reclassify or change the terms
of any class or series of its shares that are outstanding immediately before the
merger becomes effective or otherwise amend its declaration of trust; and (2)
the number of shares of such class or series outstanding immediately after the
effective time of the merger does not increase by more than 20% the number of
its shares of the class or series of shares outstanding immediately before the
merger becomes effective. The latter requirement is modeled after the rules of
the New York Stock Exchange, which generally do not require shareholder approval
for an issuance of common shares, or securities convertible into common shares,
where the number of shares or convertible securities to be issued does not
exceed 20% of the number of shares of common stock outstanding before the
issuance.
Maryland law does not address the requirements for the approval by
shareholders of a Maryland REIT of a consolidation, but it is customary for
Maryland REITs to address shareholder approval requirements for consolidations
in their declarations of trust. In addition, the Maryland REIT Statute does not
require shareholder approval of the sale or transfer of all or substantially all
of the assets of a Maryland REIT, although a Maryland REIT's declaration of
trust may require otherwise.
Consistent with the Maryland REIT Statute, at the time of our initial
public offering, it was our intent to:
o require shareholder approval of ONLY those mergers required to
be submitted for shareholder approval by the Maryland REIT
Statute;
o REDUCE THE VOTE REQUIRED TO APPROVE MERGERS for which a
shareholder vote was required under the Maryland REIT Statute
FROM TWO-THIRDS TO A MAJORITY of all the votes entitled to be
cast on the matter; and
o require shareholder approval of a CONSOLIDATION or the SALE OR
TRANSFER OF ALL OR SUBSTANTIALLY ALL OF OUR ASSETS by a
MAJORITY of all the votes entitled to be cast on the matter.
However, in its current form, our Declaration of Trust could be read to require
shareholder approval by TWO-THIRDS of all the votes entitled to be cast on the
matter of: (a) a merger, the approval of which is not required by Maryland law,
but which is submitted to our shareholders for approval for any reason (for
example, because shareholder
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approval is required under the rules of the New York Stock Exchange), and (b) a
consolidation or the sale or transfer of all or substantially all of our assets.
If approved, the proposed amendments to Sections 8.2 and 8.4 of our
Declaration of Trust would:
o require shareholder approval of ONLY those mergers required to
be submitted for shareholder approval by the Maryland REIT
Statute; and
o require a MAJORITY of all votes entitled to be cast on the
matter to approve a merger for which a shareholder vote is
required under the Maryland REIT Statute, to approve a
consolidation and a sale of all or substantially all of our
assets.
The text of the proposed amendments relating to the shareholder approval
requirements for sales of all or substantially all of our assets generally is
modeled after the shareholder approval requirements under the Maryland General
Corporation Law for sales by a Maryland corporation of all or substantially of
its assets. Under these provisions, shareholder approval is required only for a
sale of all or substantially all of the assets outside the ordinary course of
business. A mortgage, pledge or other creation of a security interest in any or
all of the assets, whether or not in the ordinary course of business, or as a
distribution to shareholders, does not constitute a sale of all or substantially
all of the assets. In addition, we have provided, given our umbrella REIT
structure, that a sale of all or substantially all of our assets to a majority
owned subsidiary is not deemed to be a sale requiring shareholder approval.
The proposed amendments also will:
o correct an inaccurate cross reference which appears in
existing Section 8.2 of the Declaration of Trust from Section
10.3 to Section 11.2;
o eliminate the existing reference in Section 8.4 to "share
exchanges" because of the lack of express statutory authority
for a Maryland REIT to effect a share exchange;
o provide that amendments to Section 8.4 require approval by not
less than a majority of all votes entitled to be cast on the
matter; and
o clarify that Section 8.4 addresses only the shareholder vote
required for mergers, consolidations and sales of all or
substantially all of the assets, as provided defined therein,
and not to any other matters for which shareholder action is
required.
Apart from clarifying the shareholder approval requirements in the
existing Declaration of Trust for mergers, consolidations and sales of all or
substantially all of the assets, if adopted, the proposed amendments to Sections
8.2 and 8.4 will provide Equity Office with added flexibility, consistent with
the New York Stock Exchange rules, to react to acquisition opportunities,
including the ability to engage in acquisitions which may not otherwise be
feasible due to the time involved in obtaining shareholder approval. In
addition, if approved, the amendments will eliminate the costs relating to
shareholder approval presently required with respect to merger transactions of
limited size, thereby enhancing the feasibility of undertaking such
transactions. There are presently no arrangements or understandings in place
regarding any such transaction.
If approved, the proposed amendments will not change the shareholder
vote required of our proposed merger with Cornerstone Properties Inc. That
transaction, which we anticipate will be submitted for shareholder approval at a
special meeting of shareholders to be held in June 2000, is subject to approval
by the common
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shareholders of Equity Office under existing Section 8.4 of the Declaration of
Trust by the affirmative vote of not less than a majority of all votes entitled
to be cast on the matter.
If approved by shareholders at the annual meeting, the proposed
amendments to Sections 8.2 and 8.4 of our Declaration of Trust will become
effective upon filing of articles of amendment with the Maryland Department of
Assessments and Taxation.
VOTE REQUIRED
Approval of the proposed amendments to Sections 8.2 and 8.4 of our
Declaration of Trust requires the affirmative vote of not less than sixty-six
and two-thirds percent of all the votes entitled to be cast on the matter at the
annual meeting. Since the amendments to Sections 8.2 and 8.4 are interrelated,
they are being submitted together for your approval.
BOARD RECOMMENDATION
The Board of Trustees recommends a vote FOR approval of the proposed
amendments to Sections 8.2 and 8.4 of our Declaration of Trust.
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---------------------------------------
PROPOSAL 3: APPROVAL OF BYLAW AMENDMENT
REGARDING VOTING BY ELECTRONIC MEANS
---------------------------------------
The Board of Trustees has authorized an amendment to Article II,
Section 9 of the Bylaws to modernize the proxy voting provisions to permit proxy
voting by electronic means, including the use of the Internet and by telephone.
The text of the amendment is attached as EXHIBIT B to this proxy statement and
marked to show changes from the existing Bylaws.
Under the Bylaws, the Board of Trustees may not amend any provision of
Article II of the Bylaws without the consent of shareholders at a meeting of
shareholders duly called and at which a quorum is present. Accordingly, the
Board of Trustees is submitting amended Article II, Section 9 of the Bylaws for
consideration by shareholders at the annual meeting.
REASONS FOR AND GENERAL EFFECT OF PROPOSED AMENDMENT
The Maryland REIT Statute does not address proxy voting. However, the
Maryland REIT Statute contains authority of a Maryland REIT to make and alter
bylaws not inconsistent with law or with its declaration of trust to regulate
the government of the REIT and the administration of its affairs. Under existing
Article II, Section 9 of the Bylaws, 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 his duly authorized attorney in fact.
Such proxy is required to by filed with the Secretary of Equity Office before or
at the time of the meeting. Existing Article II, Section 9 of the Bylaws also
provides that no proxy may be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
Amended Article II, Section 9 of the Bylaws adds to the existing proxy
voting provisions proxy voting by electronic means, including the use of the
Internet and by telephone. The new provisions dealing with proxy voting by
electronic means are modeled after similar provisions contained in the Maryland
General Corporation Law, which applies to Maryland corporations. Equity Office
believes modernization of the proxy voting provisions to allow proxy voting by
electronic means will encourage more shareholders to participate at annual and
special meetings of shareholders. The modernization of the proxy voting
procedures also should reduce the cost of soliciting proxies.
VOTE REQUIRED
Approval of amended Article II, Section 9 of the Bylaws requires the
affirmative vote of not less than sixty-six and two thirds percent of all the
votes entitled to be cast on the matter at the annual meeting.
BOARD RECOMMENDATION
The Board of Trustees recommends a vote FOR approval of amended Article
II, Section 9 of the Bylaws.
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--------
AUDITORS
--------
The Board has engaged Ernst & Young LLP to serve as our auditors for
the fiscal year ending December 31, 2000. Ernst & Young LLP was first engaged to
serve as our auditors for the fiscal year ending December 31, 1997.
Representatives of Ernst & Young LLP are expected to be available at the
meeting. Such representatives will have an opportunity to make a statement if
they so desire and will be available to respond to appropriate questions.
-------------------------------------------------
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
-------------------------------------------------
Shareholder proposals intended to be presented at the 2001 annual
meeting of shareholders must be received by the Secretary of Equity Office no
later than November ___, 2000 to be considered for inclusion in our Proxy
Statement relating to the 2001 meeting.
To be considered for inclusion in our Proxy Statement relating to the
2001 meeting, shareholder proposals submitted outside the Rule 14(a)-8 processes
must be received by the Secretary of Equity Office no later than February ___,
2001 to be presented at the 2001 annual meeting of shareholders, and
discretionary authority may be used if untimely submitted.
27
<PAGE>
EXHIBIT A
UNDERLINED DISCLOSURE WILL BE ADDED AND [BRACKETED] DISCLOSURE
WILL BE DELETED
SECTIONS 8.2 AND 8.4 OF EQUITY OFFICE DECLARATION OF TRUST
Section 8.2 VOTING RIGHTS. Subject to the provisions of any class or
series of Shares then outstanding, the shareholders shall be entitled to vote
only on the following matters: (a) election of Trustees as provided in Section
5.2 and the removal of Trustees as provided in Section 5.3; (b) amendment of the
Declaration of Trust as provided in Article X; (c) termination of the Trust as
provided in Section [10.3] 11.2; (d) [merger or consolidation of the Trust, or]
the sale or disposition of substantially all of the property of the Trust, as
provided in Article VIII] A BUSINESS COMBINATION (AS DEFINED IN SECTION 8.4), IF
A SHAREHOLDER VOTE IS REQUIRED UNDER SECTION 8.4; (e) such other matters with
respect to which the Board of Trustees has adopted a resolution declaring that a
proposed action is advisable and directing that the matter be submitted to the
shareholders for approval or ratification; and (f) such other maters as may be
properly brought before a meeting by a shareholder pursuant to the Bylaws.
Except with respect to the foregoing matters, no action taken by the
shareholders at any meeting shall in any way bind the Board of Trustees.
Section 8.4 [EXTRAORDINARY ACTIONS. Except as otherwise specifically]
provided in the Declaration of Trust (including, without limitation, in those
provisions relating to election and removal of Trustees and changes in the
number of authorized Shares), notwithstanding any provision of law permitting or
requiring any action to be taken or authorized by the affirmative vote of the
holders of a greater number of votes, (a) any transaction approval of which
requires by law the affirmative vote of shareholders and pursuant to which the
Trust's business and assets will be combined with those of one or more other
entities (whether by merger, sale or other transfer of assets, consolidation or
share exchange) (a "Business Combination") shall be effective and valid if taken
or authorized by the affirmative vote of not less than a majority of all the
votes entitled to be cast on the matter and (b) any other action shall be
effective and valid if taken or authorized by the affirmative vote of not less
than sixty-six and two-thirds percent (66 2/3%) of all the votes entitled to be
cast on the matter.] MERGER, CONSOLIDATION OR TRANSFER OF ASSETS. THE TRUST MAY
MERGE WITH OR INTO ANOTHER ENTITY, MAY CONSOLIDATE WITH ONE OR MORE OTHER
ENTITIES OR MAY "TRANSFER ASSETS" OF THE TRUST (INDIVIDUALLY, A "BUSINESS
COMBINATION"). SUBJECT TO THE TERMS OF ANY CLASS OR SERIES OF SHARES AT THE TIME
OUTSTANDING, IF A SHAREHOLDER VOTE IS REQUIRED UNDER TITLE 8 TO EFFECT ANY SUCH
MERGER, THEN SUCH MERGER MUST BE APPROVED BY SHAREHOLDERS BY THE AFFIRMATIVE
VOTE OF NOT LESS THAN A MAJORITY OF ALL VOTES ENTITLED TO BE CAST ON THE MATTER.
SUBJECT TO THE TERMS OF ANY CLASS OR SERIES OF SHARES AT THE TIME OUTSTANDING,
ANY BUSINESS COMBINATION OTHER THAN A MERGER MUST BE APPROVED BY SHAREHOLDERS BY
THE AFFIRMATIVE VOTE OF NOT LESS THAN A MAJORITY OF ALL VOTES ENTITLED TO BE
CAST ON THE MATTER. FOR PURPOSES OF THIS SECTION 8.4, THE TERM "TRANSFER ASSETS"
MEANS TO SELL, LEASE, EXCHANGE, OR OTHERWISE TRANSFER ALL OR SUBSTANTIALLY ALL
OF THE ASSETS OF THE TRUST, BUT SHALL NOT INCLUDE (A) ANY SALE, LEASE, EXCHANGE,
OR OTHER TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE TRUST IN THE
ORDINARY COURSE OF BUSINESS ACTUALLY CONDUCTED BY IT OR AS A DISTRIBUTION TO ITS
SHAREHOLDERS, (B) THE MORTGAGE, PLEDGE, OR CREATION OF ANY OTHER SECURITY
INTEREST IN ANY OR ALL OF THE ASSETS OF THE TRUST, WHETHER OR NOT IN THE
ORDINARY COURSE OF BUSINESS OR (C) THE SALE, LEASE, EXCHANGE, OR OTHER TRANSFER
OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE TRUST TO ONE OR MORE ENTITIES
IF AT LEAST A MAJORITY OF THE EQUITY INTERESTS OF THE ENTITY OR
A-1
<PAGE>
ENTITIES ARE OWNED, DIRECTLY OR INDIRECTLY, BY THE TRUST. NOTWITHSTANDING ANY
OTHER PROVISIONS OF THIS DECLARATION OF TRUST, THE AFFIRMATIVE VOTE OF
SHAREHOLDERS HOLDING AT LEAST A MAJORITY OF ALL VOTES ENTITLED TO BE CAST ON THE
MATTER SHALL BE REQUIRED TO AMEND THIS SECTION 8.4.
A-2
<PAGE>
EXHIBIT B
UNDERLINED DISCLOSURE WILL BE ADDED AND [BRACKETED] DISCLOSURE
WILL BE DELETED
ARTICLE II, SECTION 9 OF EQUITY OFFICE'S BYLAWS
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] AS PROVIDED IN THIS SECTION. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy. UNLESS OTHERWISE AGREED IN WRITING, THE HOLDER OF RECORD OF SHARES WHICH
ACTUALLY BELONG TO ANOTHER SHALL ISSUE A PROXY TO VOTE THE SHARES TO THE ACTUAL
OWNER ON THE OWNER'S DEMAND. A SHAREHOLDER MAY AUTHORIZE ANOTHER PERSON TO ACT
AS PROXY FOR THE SHAREHOLDER. A SHAREHOLDER MAY SIGN A WRITING AUTHORIZING
ANOTHER PERSON TO ACT AS PROXY. SIGNING MAY BE ACCOMPLISHED BY THE SHAREHOLDER
OR THE SHAREHOLDER'S AUTHORIZED AGENT SIGNING THE WRITING OR CAUSING THE
SHAREHOLDER'S SIGNATURE TO BE AFFIXED TO THE WRITING BY ANY REASONABLE MEANS,
INCLUDING FACSIMILE SIGNATURE. A SHAREHOLDER MAY AUTHORIZE ANOTHER PERSON TO ACT
AS PROXY BY TRANSMITTING, OR AUTHORIZING THE TRANSMISSION OF, AN AUTHORIZATION
FOR THE PERSON TO ACT AS PROXY TO THE PERSON AUTHORIZED TO ACT AS PROXY OR ANY
OTHER PERSON AUTHORIZED TO RECEIVE THE PROXY AUTHORIZATION ON BEHALF OF THE
PERSON AUTHORIZED TO ACT AS THE PROXY, INCLUDING A PROXY SOLICITATION FIRM OR
PROXY SUPPORT SERVICE ORGANIZATION. THE AUTHORIZATION MAY BE TRANSMITTED BY A
TELEGRAM, CABLEGRAM, DATAGRAM, ELECTRONIC MAIL, OR ANY OTHER ELECTRONIC OR
TELEPHONIC MEANS. A COPY, FACSIMILE TELECOMMUNICATION, OR OTHER RELIABLE
REPRODUCTION OF THE WRITING OR TRANSMISSION AUTHORIZED UNDER THIS SUBSECTION MAY
BE SUBSTITUTED FOR THE ORIGINAL WRITING OR TRANSMISSION FOR ANY PURPOSE FOR
WHICH THE ORIGINAL WRITING OR TRANSMISSION COULD BE USED.
B-1
<PAGE>
PRELIMINARY COPY
PROXY
EQUITY OFFICE PROPERTIES TRUST
TWO NORTH RIVERSIDE PLAZA, SUITE 2100, CHICAGO, ILLINOIS 60606
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 4, 2000
The undersigned shareholder of Equity Office Properties Trust, a
Maryland real estate investment trust (the "Trust"), hereby appoints Timothy H.
Callahan and Stanley M. Stevens, or either of them (the "Proxy Holders"), with
full power of substitution, as proxies for the undersigned to represent the
undersigned at the annual meeting of shareholders of the Trust to be held in
Chicago, Illinois, on May 4, 2000, and any adjournment thereof (the "Annual
Meeting"), and to vote all Common Shares of the Trust which the undersigned may
be entitled to vote at the Annual Meeting. The undersigned hereby acknowledges
receipt of the Notice of the Annual Meeting of Shareholders and of the
accompanying Proxy Statement and revokes any proxy heretofore given with respect
to such Common Shares.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES ON THE REVERSE SIDE. THE PROXY HOLDERS CANNOT VOTE YOUR SHARES UNLESS YOU
SIGN AND RETURN THIS CARD.
Note: If you plan to attend the Annual Meeting in person, please let us
know by marking the enclosed proxy card in the space provided.
- --------------- ---------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- --------------- ---------------
<PAGE>
<TABLE>
<S> <C>
|X| Please mark
votes as in
this example
1. Authority to vote for the election as 4. In their discretion, the Proxy
trustees of the two nominees listed Holders are authorized to vote upon
below to terms expiring in 2003. such other matters as may properly
Nominees: (01) David K. McKown, (02) come before the meeting.
Sheli Z. Rosenberg
FOR ALL WITHHELD This Proxy, when properly executed,
NOMINEES |_| |_| FOR ALL will be voted in the manner directed
NOMINEES herein by the undersigned
shareholder. IF NO DIRECTION IS MADE,
THE PROXY WILL BE VOTED FOR THE
ELECTION OF THE TWO NOMINEES TO TERMS
EXPIRING IN 2003, FOR PROPOSALS 2 AND
3 AND OTHERWISE IN THE DISCRETION OF
THE PROXY HOLDERS.
|_| ______________________________________
For all nominees except as noted above
2. Approval of amendments to Declaration MARK HERE FOR ADDRESS CHANGE AND
of Trust regarding voting requirements NOTE AT LEFT |_|
for business combinations.
FOR AGAINST ABSTAIN
|_| |_| |_|
3. Approval of Bylaw amendment regarding MARK HERE IF YOU PLAN TO ATTEND
voting by electronic means. THE MEETING |_|
FOR AGAINST ABSTAIN
|_| |_| |_|
Note: Please sign as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title under signature.
Signature: ________________ Date: ___________ Signature: ________________ Date: ___________
</TABLE>
