As filed with the Securities and Exchange Commission on April 28, 2000
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
-----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission File Number 1-14788
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Capital Trust, Inc.
-------------------
(Exact name of registrant as specified in its charter)
Maryland 94-6181186
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
605 Third Avenue, 26th Floor, New York, NY 10016
- ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 655-0220
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Class A Common Stock, New York Stock Exchange
par value $0.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10- K. [ ]
<PAGE>
MARKET VALUE
Based on the closing sales price of $3.75 per share, the aggregate market
value of the outstanding Class A Common Stock held by non-affiliates of the
registrant as of April 26, 2000 was $56,819,419.
OUTSTANDING SHARES
As of April 26, 2000 there were 21,058,228 outstanding shares of Class A
Common Stock. The Class A Common Stock is listed on the New York Stock Exchange
(trading symbol "CT"). Trading is reported in many newspapers as "CapitalTr".
<PAGE>
CAPITAL TRUST, INC.
PART III
<TABLE>
<CAPTION>
<S> <C> <C>
Item 10. Directors and Executive Officers of the Registrant..............................................1
Item 11. Executive Compensation..........................................................................6
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................12
Item 13. Certain Relationships and Related Transactions.................................................14
Signatures...................................................................................................... 15
</TABLE>
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<PAGE>
Capital Trust, Inc. (the "Company") hereby amends Items 10, 11, 12 and 13
of Part III of its Form 10-K Annual Report for the fiscal year ended December
31, 1999 as filed with the Securities and Exchange Commission on March 30, 2000.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The name, age as of April 28, 2000, and existing positions with the Company
of the directors and executive and senior officers of the Company are as
follows:
<TABLE>
<CAPTION>
Name Age Office or Position Held
---- --- -----------------------
<S> <C> <C>
Samuel Zell........................ 58 Chairman of the Board of Directors
Jeffrey A. Altman.................. 33 Director
Thomas E. Dobrowski................ 56 Director
Martin L. Edelman.................. 58 Director
Jeremy FitzGerald.................. 36 Managing Director
Gary R. Garrabrant................. 43 Director
Craig M. Hatkoff................... 46 Director, Vice Chairman and Chairman of the
Executive Committee
John R. Klopp...................... 46 Director, Vice Chairman, Chief Executive Officer
and President
Nicholas B. Laird.................. 34 Managing Director
Stephen D. Plavin.................. 40 Chief Operating Officer
Sheli Z. Rosenberg................. 58 Director
Steven Roth........................ 58 Director
Lynne B. Sagalyn................... 52 Director
Alvin J. Sarter.................... 43 Managing Director
Managing Director, Chief Financial Officer,
Edward L. Shugrue III.............. 34 Treasurer and Assistant Secretary
Michael Watson..................... 42 Director
Marc P. Weill...................... 43 Director
</TABLE>
<PAGE>
The name, principal occupation for the last five years, selected
biographical information and the period of service as a director or officer of
the Company of each of the directors and executive and senior officers are set
forth below.
Directors
Samuel Zell has been chairman of the board of directors of the Company
since July 1997. Mr. Zell is chairman of Equity Group Investments, L.L.C., a
privately held real estate and corporate investment firm ("EGI"), American
Classic Voyages Co., an owner and operator of cruise lines, Anixter
International Inc., a provider of integrated network and cabling systems
("Anixter"), Manufactured Home Communities, Inc., a REIT specializing in the
ownership and management of manufactured home communities ("MHC"), Davel
Communications, Inc., an owner and operator of public pay telephones, Chart
House Enterprises, Inc., an owner and operator of restaurants and Danielson
Holding Corporation, a holding company that offers a variety of insurance
products and financial services. He is chairman of the board of trustees of
Equity Residential Properties Trust ("ERPT"), a REIT specializing in the
ownership and management of multi-family housing, and of Equity Office
Properties Trust ("EOPT"), a REIT specializing in the ownership and management
of office buildings. Mr. Zell is also a director of Ramco Energy PLC, an
independent oil company based in the United Kingdom.
Jeffrey A. Altman has been a director of the Company since November 1997.
Since November 1996, Mr. Altman has been a senior vice president of Franklin
Mutual Advisers, Inc., formerly Heine Securities Corporation, a registered
investment adviser ("FMA"), and a vice president of Franklin Mutual Series Fund
Inc., a mutual fund with assets in excess of $20 billion, advised by FMA. From
August 1988 to October 1996, Mr. Altman was an analyst with FMA.
Thomas E. Dobrowski has been a director of the Company since August 1998.
Mr. Dobrowski has been the managing director of real estate and alternative
investments of General Motors Investment Management Corporation ("GMIMCo"), an
investment advisor to several pension funds of General Motors Corporation ("GM")
and its subsidiaries and to several other clients also controlled by GM for more
than the past five years. Mr. Dobrowski is a trustee of EOPT and a director of
MHC.
Martin L. Edelman has been a director of the Company since February 1997.
Mr. Edelman served as president of Chartwell Leisure Inc., an owner and operator
of hotel properties ("Chartwell"), from January 1996 until it was sold in March
1998. He has been a director of Cendant Corporation and a member of that
corporation's executive committee since November 1993. Mr. Edelman has been of
counsel to Battle Fowler LLP, a New York City law firm that provides services to
the Company, since January 1994 and was a partner with that firm from 1972
through 1993. Mr. Edelman also serves as a director of Avis Rent-A-Car, Inc.,
Acadia Realty Trust and Delancy Estates, PLC.
Gary R. Garrabrant has been a director of the Company since January 1997.
Mr. Garrabrant was the vice chairman of the Company from February 1997 until
July 1997. Mr. Garrabrant has been a managing director and chief investment
officer of Equity International Properties, Ltd., a privately-held international
real estate investment company, since July 1, 1998. Mr. Garrabrant is executive
vice president of EGI and joined EGI as senior vice president in January 1996.
Previously, Mr. Garrabrant was director of Sentinel Securities Corporation and
co-founded Genesis Realty Capital Management in 1994, both of which were based
in New York and specialized in real estate securities investment management.
From 1989 to 1994, he was associated with The Bankers Trust Company.
-2-
<PAGE>
Craig M. Hatkoff has been a director and a vice chairman of the Company
since July 1997. Mr. Hatkoff was a founder and was a managing partner of Victor
Capital Group, L.P. ("Victor Capital") from 1989 until the acquisition of Victor
Capital by the Company in July 1997. Mr. Hatkoff was a managing director and
co-head of Chemical Realty Corporation, the real estate investment banking arm
of Chemical Banking Corporation, from 1982 until 1989. From 1978 to 1982, Mr.
Hatkoff was the head of new product development in Chemical Bank's Real Estate
Division, where he previously served as a loan officer.
John R. Klopp has been a director of the Company since January 1997, the
chief executive officer, a vice chairman and the president of the Company since
February 1997, July 1997 and January 1999, respectively. Mr. Klopp was a founder
and was a managing partner of Victor Capital from 1989 until the acquisition of
Victor Capital by the Company in July 1997. Mr. Klopp was a managing director
and co-head of Chemical Realty Corporation from 1982 until 1989. From 1978 to
1982, Mr. Klopp held various positions with Chemical Bank's Real Estate
Division, where he was responsible for originating, underwriting and monitoring
portfolios of construction and permanent loans. He is a director of Metropolis
Realty Trust, Inc., a Manhattan office REIT.
Sheli Z. Rosenberg has been a director of the Company since July 1997.
Since January 2000, Ms. Rosenberg has been vice chairman of EGI and had
previously served as the chief executive officer and president of EGI for more
than the prior five years. She was a principal of the law firm Rosenberg &
Liebentritt P.C. from 1980 until September 1997. Ms. Rosenberg is a director of
MHC, Anixter, CVS Corporation, a drugstore chain, Dynergy, Inc., a supplier of
electricity and natural gas, and Danka Business Systems, Inc., a business
solution provider for mid-size companies. She is also a trustee of ERPT and
EOPT.
Steven Roth has been a director of the Company since August 1998. Mr. Roth
has been chairman of the board of trustees and chief executive officer of
Vornado Realty Trust ("Vornado") since May 1989 and chairman of the executive
committee of the board of Vornado since April 1980. Since 1968, he has been a
general partner of Interstate Properties, a real estate and investment company,
and, more recently, he has been managing general partner. On March 2, 1995, he
became chief executive officer of Alexander's, Inc., a real estate company. Mr.
Roth is also a director of Alexander's, Inc.
Lynne B. Sagalyn has been a director of the Company since July 1997. Dr.
Sagalyn is the Earle W. Kazis and Benjamin Shore Director of the M.B.A. Real
Estate Program at the Columbia University Graduate School of Business, and has
been a professor and the director of that program since 1992. From 1991 to 1992,
she was a visiting professor at Columbia. From 1987 to 1991, she was an
associate professor of Planning and Real Estate Development at the Massachusetts
Institute of Technology. She is also on the faculty of the Weimer School for
Advanced Studies in Real Estate and Land Economics. Dr. Sagalyn is a director of
United Dominion Realty Trust, a self-administered REIT in the apartment
communities sector, and she is a director of The Retail Initiative.
Michael Watson has been a director since March 2000. Mr. Watson has been a
senior officer of Citigroup Investments Inc. since March 1998. He was employed
by The Travelers Insurance Company from 1987 until its merger with Citicorp Inc.
where he served in various capacities in its Chicago, Dallas, San Francisco and
New York offices.
-3-
<PAGE>
Marc P. Weill has been a director since March 2000. Mr. Weill has been the
chief investment officer of Citigroup Investments Inc. and its predecessors
since November 1993. He has also been the chairman of Travelers Asset Management
International Company, L.L.C. since January 1994. Prior thereto, he was employed
by Travelers Group and its affiliates in various capacities since 1991.
Executive and Senior Officers
Jeremy FitzGerald has been a managing director of the Company since July
1997. Prior to that time, Ms. FitzGerald served as a principal of Victor Capital
and had been employed in various positions at such firm since May 1990. She was
previously employed in various positions at PaineWebber Incorporated.
Nicholas B. Laird has been a managing director of the Company since April
1999. Prior to that time, Mr. Laird served as a principal of Victor Capital and
had been employed as an employee or a consultant in various positions at such
firm since June 1992. He was previously employed in various positions at CCS,
Inc., an affordable housing company.
Stephen D. Plavin has been the chief operating officer of the Company since
August 1998. Prior to that time, Mr. Plavin was employed for fourteen years with
the Chase Manhattan Bank and its securities affiliate, Chase Securities Inc.
(collectively "Chase"). Mr. Plavin held various positions within the real estate
finance unit of Chase including the management of real estate loan syndications,
portfolio management, banking services and REO (real estate owned) sales. Since
1995, he served as a managing director responsible for real estate client
management in which position he directed the origination of loan and financing
transactions, as well as investment banking and advisory assignments for Chase's
major real estate relationships.
Alvin J. Sarter has been a managing director of the Company since April
1998. Prior to that time, Mr. Sarter was a partner in the law firm of Battle
Fowler, LLP since 1989, where he specialized in real estate law representing a
national client base in connection with the acquisition, development,
management, financing and securitization of real estate.
Edward L. Shugrue III has been the chief financial officer of the Company
since September, 1997 and has been a managing director, an assistant secretary
and the treasurer of the Company since July 1997, July 1997 and January 1999,
respectively. Prior to that time, Mr. Shugrue served as a principal of Victor
Capital since January 1997. He previously served as director of real estate for
and a vice president of River Bank America from April 1994 until June 1996 after
serving as a vice president of the bank since January 1992. He was previously
employed in various positions at Bear, Stearns & Co. Inc.
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act")
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange ("NYSE"). Officers, directors
and greater than ten percent stockholders are required by regulation of the SEC
to furnish the Company with copies of all Section 16(a) forms they file.
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<PAGE>
Based solely on its review of Forms 3, 4 and 5 and amendments thereto
available to the Company and written representations from certain of the
directors, officers and 10% stockholders that no form is required to be filed,
the Company believes that no director, officer or beneficial owner of more than
10% of its Class A Common Stock failed to file on a timely basis reports
required pursuant to Section 16(a) of the Exchange Act with respect to 1999,
except that Veqtor Finance Company, L.L.C. ("Veqtor") filed late a Form 4 in
December 1999 following the disposition of shares of Class A Common Stock in
September 1999 in redemption of interests in Veqtor held by certain members
thereof.
-5-
<PAGE>
ITEM 11. Executive Compensation
Executive Compensation
The following table sets forth for the years indicated the annual
compensation of the chief executive officer and the other executive officers of
the Company who earned annual salary and bonus in excess of $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation(1) Long Term Compensation
- ---------------------------------------------------------------------------------------------------------------------------
Securities
Stock Underlying Other
Name and Principal Position Year Salary($)(2) Bonus($) Awards($) Options(#) Compensation($)(7)
- --------------------------- ---- --------- -------- --------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
John R. Klopp
Vice Chairman, Chief 1999 600,000 750,000 -- -- 30,000
Executive Officer and 1998 575,000 750,000 -- 100,000 --
President 1997 935,964(3) 500,000 -- 75,000 --
Craig M. Hatkoff
Vice Chairman and 1999 600,000 750,000 -- -- 30,000
Chairman of the Executive 1998 575,000 750,000 -- 100,000 --
Committee 1997 935,964(3) 500,000 -- 75,000 --
Stephen D. Plavin
Chief Operating Officer 1999 350,000 1,100,000 300,000(5) -- 14,400
1998 118,295(4) 850,000 -- 100,000 --
Edward L. Shugrue III 1999 300,000 750,000 239,585(6) 75,000 14,400
Managing Director, 1998 287,500 400,000 198,750(6) 80,000 --
Chief Financial Officer 1997 275,067 200,000 -- 50,000 --
and Treasurer
</TABLE>
- ------------------------
(1) As permitted by rules established by the SEC, no amounts are shown with
respect to certain "perquisites" where such amounts do not exceed, in
the aggregate, the lesser of 10% of bonus plus salary or $50,000.
(2) The Company paid total compensation of $140,000 to Frank M. Morrow, the
Company's former chief executive officer, for the year ended December
31, 1997.
(3) Includes $235,417 of base salary paid by the Company for the pro rata
portion of each of Messrs. Klopp and Hatkoff's $500,000 annual base
salary for 1997, payment of which commenced after the acquisition of
Victor Capital. Also includes an allocation equal to half of the
$407,021 of total management fees ($235,417) paid by Victor Capital to
Valentine & Wildove & Company, Inc., a company owned equally by Messrs.
Klopp and Hatkoff, and $463,036 of capital distributions made by Victor
Capital to each of Messrs. Klopp and Hatkoff. The foregoing management
fees and capital distributions were paid or made prior to the Company's
acquisition of Victor Capital in 1997.
(4) Represents pro rata portion of $350,000 annual base salary for the
portion of the year employed.
(5) Represents the value of 50,000 shares of Class A Common Stock awarded
to Mr. Plavin (based on the $6.00 per share NYSE closing price on the
date of the grant). The value of such restricted stock awards to Mr.
Plavin at December 31, 1999 was $250,000 (based on the $5.00 per share
NYSE closing price on such date).
(6) Represents the value of the 41,667 and 20,000 shares of restricted
Class A Common Stock awarded to Mr. Shugrue during 1999 and 1998,
respectively (based on the $5.75 and $9.94 per share, respectively,
NYSE
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<PAGE>
closing price on the date of grant). The value of all such restricted
stock awards to Mr. Shugrue at December 31, 1999 was $308,335 (based on
the $5.00 per share NYSE closing price on such date).
(7) Represents contributions made by the Company to the Capital Trust, Inc.
401(k) Profit Sharing Plan.
Employment Agreements
The Company is a party to employment agreements with John R. Klopp and
Craig M. Hatkoff. The employment agreements provide for five-year terms of
employment commencing as of July 15, 1997. On the fifth anniversary of the
commencement of the employment agreements, and on each succeeding anniversary,
the terms of the employment agreements shall be automatically extended for one
additional year unless, not later than three months prior to such anniversary
date, either party shall have notified the other that it will not extend the
term of the agreement. Messrs. Klopp and Hatkoff will receive annual base
salaries of $600,000 for calendar year 2000, which are subject to further
increases each calendar year to reflect increases in the cost of living or as
otherwise determined in the discretion of the board of directors. Mr. Klopp and
Mr. Hatkoff are also entitled to annual incentive cash bonuses to be determined
by the board of directors based on individual performance and the profitability
of the Company. Mr. Klopp and Mr. Hatkoff are also participants in the incentive
stock and other employee benefit plans of the Company.
If the employment of Mr. Klopp or Mr. Hatkoff is terminated without cause,
with good reason or following a change of control, as those terms are defined in
the employment agreements, the affected employee would be entitled to (i) a
severance payment equal to the greater of the amount payable to such employee
over the remainder of the term of the employment agreement or an amount equal to
the aggregate base salary and cash incentive bonus paid to the employee during
the previous year; (ii) continued welfare benefits for two years; and (iii)
automatic vesting of all unvested stock options such that all of the employee's
stock options would become immediately exercisable. Each vested option will
remain exercisable for a period of one year following the employee's
termination. The employment agreements provide for a non-competition period of
one year if Mr. Klopp or Mr. Hatkoff terminates his employment voluntarily or is
terminated for cause.
The Company is a party to an employment agreement, as amended, with Stephen
D. Plavin which provides for a term of employment commencing as of August 15,
1998 and expiring on January 2, 2002. On the date of expiration of the initial
term, the employment agreement shall be automatically extended until December
31, 2002 unless, prior to April 7, 2001, either party shall have delivered to
the other a non- renewal notice. The employment agreement provides for an annual
base salary of $350,000, which will be increased each calendar year to reflect
increases in the cost of living and may otherwise be further increased in the
discretion of the board of directors. Mr. Plavin will receive an annual base
salary of $350,000 for calendar year 2000. The employment agreement also
provides for annual incentive cash bonuses for calendar years 1999 through 2001
to be determined by the board of directors based on individual performance and
the profitability of the Company, provided that the minimum of each of said
three annual incentive bonuses shall be no less than $750,000. In addition to
the base salary and incentive bonus, Mr. Plavin received during calendar year
1999 only, a total of $1,200,000 of special cash payments of which $850,000 was
expensed in 1998 and the remaining $350,000 was expensed in 1999. Mr. Plavin is
entitled to participate in employee benefit plans of the Company at levels
determined by the board of directors and commensurate with his position and
receives Company provided life and disability insurance. In accordance with the
agreement, Mr. Plavin was granted pursuant to the Company's incentive stock plan
options to purchase 100,000 shares of Class A Common Stock with an exercise
price of $9.00 immediately
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<PAGE>
vested and exercisable as of the date of the agreement. The Company also agreed
to grant pursuant to the incentive stock plan fully vested Class A Common Stock,
50,000 shares on January 1, 1999 and 100,000 shares on each of the three
successive anniversaries thereof.
If the Company terminates Mr. Plavin's employment for other than for cause
or disability, as those terms are defined in the agreement, or Mr. Plavin
terminates employment with good reason (including following a change in
control), as those terms are defined in the agreement, he would be entitled to
(i) his base salary accrued and unpaid up to the termination date, (ii) a
severance payment equal to the greater of his base salary payable over the
remainder of the employment term and his base salary as of the termination date
for one full calendar year, plus the minimum bonus to the extent not paid for
each of calendar years 1999 through 2001, plus the minimum bonus to the extent
not paid for calendar year 2002 unless the initial term expires without renewal,
(iii) any unpaid calendar year 1999 special payments, (iv) medical insurance
coverage for him and his family for a period expiring on the earlier of the
second anniversary of the termination date or such time as he obtains employment
offering comparable or better medical insurance coverage, (v) receive a grant of
all of the shares of Class A Common Stock not yet granted that the Company has
agreed to grant to him and (vi) exercise his stock options for a period of one
year from the termination date. If Mr. Plavin terminates for special reason
(i.e., he shall not have been appointed chief executive officer when neither
Messrs. Klopp nor Hatkoff hold such position), Mr. Plavin would be entitled to
the foregoing compensation and benefits, except that, instead of the severance
payment set forth in clause (ii), he would be entitled to a severance payment
equal his base salary as of the termination date for one full calendar year,
plus $750,000 and would not be entitled to any grant of Class A Common Stock as
set forth in clause (v). The employment agreement also specifies termination
payments in the event of voluntary termination by Mr. Plavin for other than
special reason or good reason and in the event of termination by the Company
following death or disability and for cause. The employment agreement provides
for restrictions on solicitation of employees and clients of the Company
following termination by the Company for cause or termination by Mr. Plavin for
other than good reason or special reason.
Compensation of Directors
The Company pays two of its non-employee directors an annual cash retainer
of $30,000 which is paid monthly. Three of its non-employee directors serve with
no compensation paid by the Company for their services. The remaining
non-employee directors are not paid any cash fees for their services as such,
but rather are compensated with an annual award of stock units under the
Company's non-employee director stock plan with a value equal to $30,000. The
number of stock units awarded to each director, which are convertible into an
equal number of shares of Class A Common Stock according to individual schedules
set by each director, is determined quarterly in arrears by dividing one-quarter
of the annual retainer amount ($7,500) by the average closing price of the Class
A Common Stock for the quarter. The stock units vest when issued. There is no
separate compensation for service on committees of the board of directors. All
directors are also reimbursed for travel expenses incurred in attending board
and committee meetings.
The Company is a party to a consulting agreement, dated as of January 1,
1998, with Martin L. Edelman, a director of the Company. Pursuant to the
agreement, Mr. Edelman provides consulting services for the Company including
client development and advisory services in connection with lending and
investment banking activities and asset and business acquisition transactions.
The consulting agreement, which had an initial term of one year, was
automatically extended twice for additional one year
-8-
<PAGE>
terms. The agreement is terminable by either party upon thirty (30) days prior
notice and provides for a consulting fee of $8,000 per month. Pursuant to the
agreement, the Company granted 50,000 options to purchase Class A Common Stock.
Mr. Edelman is also entitled to participate in the Company's incentive stock
plan.
Compensation Committee Interlocks and Insider Participation
The compensation committee of the board of directors was comprised during
1999 of Ms. Rosenberg, Dr. Sagalyn and Messrs. Altman, Edelman and Klopp. Other
than Mr. Klopp, none of the committee's members was an officer or employee of
the Company during 1999. No committee member had any interlocking relationships
requiring disclosure under applicable rules and regulations.
Mr. Zell and Ms. Rosenberg serve as members of the board of directors of
numerous non-public companies owned or controlled in whole or in part by Mr.
Zell or his affiliates which do not have compensation committees, and in many
cases, the executive officers of those companies include Mr. Zell and Ms.
Rosenberg.
For a description of certain relationships and transactions with members of
the board of directors or their affiliates, see "Item 13 Certain Relationships
and Related Transactions."
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<PAGE>
Stock Options
The following table sets forth stock options issued in 1999 to the
executive officers named in the Summary Compensation Table. The table also sets
forth the hypothetical gains that would exist for the stock options at the end
of their ten-year terms, assuming compound rates of appreciation of 5% and 10%
from the $5.75 market price on the respective February 1, 1999 date of grant.
The actual future value of the options will depend on the market value of the
Company's Class A Common Stock.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term(2)
- ----------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of
Securities
Underlying % of Total
Options/ Option/SARs
SARs Granted to Exercise or Expira-
Granted Employees in Base Price tion
Name (#)(1) Fiscal Year ($/sh) Date 5% ($) 10% ($)
- --------- --------- ----------- ----------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Edward L. Shugrue III 75,000 21.3% 6.00 2/1/09 252,461 668,551
</TABLE>
- -------------------
(1) Represents shares underlying stock options; none of the executive
officers were granted SARs. One-third of the options become exercisable
in equal increments on the first, second and third anniversaries of the
date of grant. Messrs. Klopp, Hatkoff and Plavin were not granted any
stock options in 1999.
(2) The amounts of potential realizable value, which are based on assumed
appreciation rates of 5% and 10% prescribed by Securities and Exchange
Commission rules, are not intended to forecast possible future
appreciation, if any, of the Company's share price. The amounts of
potential value with respect to the options do not account for
expiration of the options upon termination of employment or the
phased-in exercise schedule. Future compensation resulting from the
options is based solely on the actual performance of the Company's
share price in the trading market.
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<PAGE>
The following table shows the 1999 year-end value of the stock options held
by the named executive officers. None of the named executive officers exercised
stock options during 1999.
Year End 1999 Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-Money
Options/SARs at Year End # Options/SARs at Year End(1)
--------------------------------------- ---------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John R. Klopp 116,667 58,333 $-- $--
Craig M. Hatkoff 116,667 58,333 -- --
Stephen D. Plavin -- 100,000 -- --
Edward L. Shugrue III 111,608 93,332 -- --
</TABLE>
- ----------------------------------
(1) No amounts are shown because the exercise prices of the stock options
exceeded the market value of the underlying Class A Common Stock at
year end based upon the $5.00 per share closing price reported on the
NYSE on December 31, 1999. The actual value, if any, an executive may
realize is dependent upon the amount by which the market price of Class
A Common Stock exceeds the exercise price when the stock options are
exercised.
The following table provides information with respect to a long term
incentive plan award made to a named executive officer in 1999.
Long Term Incentive Plans -- Awards in Last fiscal Year
<TABLE>
<CAPTION>
Number of Shares, Units Performance or
or Other Other Period Until
Name Rights (#) Maturation of Payout
- ---------------------------------- ---------------------------- -----------------------------
<S> <C> <C>
Edward L. Shugrue III 52,081(1) 3 years
</TABLE>
- ---------------------
(1) Represents performance units with respect to 52,083 shares of Class A
Common Stock granted on February 1, 1999. The shares subject to the
units vest and become potentially payable over a three year period and
the vested shares are earned when the stock price performance criteria
is obtained. The shares vest and become potentially payable in equal
increments of 17,361 shares on each of the three successive
anniversaries of the date of grant. One third of the vested shares are
earned upon the date when the price of the Class A Common Stock reaches
each of the prescribed $8, $10 and $12 price hurdles and maintains such
price hurdles for a 30 day period.
-11-
<PAGE>
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of April 26, 2000 certain information
with respect to the beneficial ownership of Class A Common Stock and class A
9.5% cumulative convertible preferred stock, par value $0.01 per share ("Class A
Preferred Stock" and together with the Class A Common Stock, "Company Stock"),
and the voting power possessed thereby (based on 21,058,228 shares of Class A
Common Stock and 2,277,555 shares of Class A Preferred Stock outstanding on that
date), by (i) each person known to the Company to be the beneficial owner of
more than 5% of each of the outstanding Class A Common Stock and Class A
Preferred Stock, (ii) each director and named executive officer of the Company
who is a beneficial owner of any Class A Common Stock or Class A Preferred Stock
and (iii) all directors and executive officers of the Company as a group. As
indicated below, certain of such information is based on a review of statements
filed with the Commission pursuant to Sections 13(d) and 13(g) of the Exchange
Act with respect to the Company's Class A Common Stock.
<TABLE>
<CAPTION>
Class A Common Stock Class A Preferred Stock
--------------------------- -------------------------
Amount and Nature of Amount and Nature of
Beneficial Ownership(1) Beneficial Ownership(1)
---------------------------- -------------------------
Five Percent Stockholders, Percent of Percent of
Trustees and Executive Officers Number Class Number Class Voting Power
- --------------------------------------- ---------------- ------ ------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Veqtor Finance Company, LLC (2) 3,192,288 15.2% -- --% 13.7%
EOP Operating Limited Partnership (3) 4,273,500(4) 16.9 -- -- 15.5
State Street Bank and Trust Company, as 4,273,500(4) 16.9 -- -- 15.5
Trustee for General Motors Employes Global
Group Pension Trust (5)
Vornado Realty, L.P. (6) 4,273,500(4) 16.9 -- -- 15.5
Wanger Asset Management, L.P. (7) 1,837,300 8.7 -- -- 7.9
FMR Corp. (8) 1,635,782 7.8 -- -- 7.0
BankAmerica Investment Corporation(9) 430,701 2.0 759,185 33.3 5.1
First Chicago Capital Corporation (9) 430,701 2.0 759,185 33.3 5.1
Wells Fargo & Company (9) 430,701 2.0 759,185 33.3 5.1
Jeffrey A. Altman 30,000 * -- -- *
Thomas E. Dobrowski --(10) -- -- -- --
Martin L. Edelman 63,298(11) * -- -- *
Gary R. Garrabrant 456,054(11)(12) 2.2 -- -- 2.0
Craig M. Hatkoff 2,464,799(13)(14) 11.6 -- -- 10.5
John R. Klopp 2,456,799(13)(14) 11.6 -- -- 10.5
Stephen D. Plavin 250,000(15) 1.2 -- -- 1.1
Sheli Z. Rosenberg 432,720(11)(16) 2.1 -- -- 1.9
Steven Roth --(17) -- -- -- --
Lynne B. Sagalyn 29,964(11) * -- -- *
Edward L. Shugrue III 235,941(15) 1.1 -- -- 1.0
Michael Watson -- -- -- -- --
Marc P. Weill -- -- -- -- --
Samuel Zell 168,297(11)(18* -- -- *
All executive officers and directors as a 6,587,872 30.3% -- -- 27.4%
group (14 persons)
* Represents less than 1%.
</TABLE>
-12-
<PAGE>
(1) The number of shares owned are those beneficially owned as determined
under the rules of the Securities and Exchange Commission, and such
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which a person has sole or shared voting power or investment power
and any shares which the person has the right to acquire within 60 days
through the exercise of any option, warrant or right, through conversion
of any security or pursuant to the automatic termination of a power of
attorney or revocation of a trust, discretionary account or similar
arrangement.
(2) Zell General Partnership, Inc. ("Zell GP"), is the sole member of Veqtor
Finance Company, LLC ("Veqtor"). The sole stockholder of Zell GP is the
Samuel Investment Trust, a trust established for the benefit of the family
of Samuel Zell. Chai Trust Company L.L.C. ("Chai Trust"), which is advised
by Equity Group Investments, L.L.C. with respect to its investments,
serves as trustee of Chai Trust. Veqtor is located at c/o Equity Group
Investments, L.L.C., Two North Riverside Plaza, Chicago Illinois 60606.
(3) Beneficial ownership information is based on a statement filed pursuant to
Section 13(d) of the Exchange Act by EOP Operating Limited Partnership, or
EOP. EOP is located at Two North Riverside Plaza, Chicago, Illinois 60606.
(4) Represents shares which may be obtained upon conversion of $50,000,000 in
liquidation amount of 8.25% Step Up Convertible Trust Preferred Securities
issued by the Company's consolidated statutory trust subsidiary, CT
Convertible Trust I, to each of EOP, VNO and the GM Trust.
(5) Beneficial ownership information is based on statements filed pursuant to
Section 13(d) of the Exchange Act by General Motors Investment Management
Corporation ("GMIMCo") and State Street Bank and Trust Company, as trustee
for General Motors Employes Global Group Pension Trust ("GM Trust"), as
another reporting person named therein. State Street Bank and Trust
Company acts as the trustee for the GM Trust, a trust under and for the
benefit of certain employee benefit plans of General Motors Corporation
("GM") and its subsidiaries. These shares may be deemed to be owned
beneficially by GMIMCo, a wholly owned subsidiary of GM. GMIMCo's
principal business is providing investment advice and investment
management services with respect to the assets of certain employee benefit
plans of GM and its subsidiaries and with respect to the assets of certain
direct and indirect subsidiaries of GM and associated entities. GMIMCo is
serving as the GM Trust's investment manager with respect to these shares
and in that capacity it has sole power to direct the Trustee as to the
voting and disposition of these shares. Because of the Trustee's limited
role, beneficial ownership of the shares by the Trustee is disclaimed.
GMIMCo is located at 767 Fifth Avenue, New York, New York 10153.
(6) Beneficial ownership information is based on a statement filed pursuant to
Section 13(d) of the Exchange Act filed by Vornado Realty, L.P. ("VNO").
VNO is located at c/o Vornado Realty Trust, Park 80 West, Plaza II, Saddle
Brook, New Jersey 07663.
(7) Beneficial ownership information is based on the Schedule 13G jointly
filed by Wanger Asset Management, L.P., its general partner, Wanger Asset
Management, Ltd. and its client, Acorn Investment Trust reporting
beneficial ownership of shares on behalf of discretionary clients,
including Acorn Investment Trust. They are located at 227 West Monroe
Street, Suite 3000, Chicago, Illinois 60606.
(8) Beneficial ownership information is based on a Schedule 13G jointly filed
by FMR Corp., Edward C. Johnson 3rd, Abigail P. Johnson, Fidelity
Management and Research Company and Fidelity Growth & Income Fund
reporting ownership of shares by such fund and other funds advised by
Fidelity Management and Research. They are located at 82 Devonshire
Street, Boston, Massachusetts 02109.
(9) BankAmerica Investment Corporation is located at c/o Bank of America, 231
S. LaSalle Street, 19th Floor, Chicago, Illinois 60697. First Chicago
Capital Corporation is located at One First National Plaza, Mail Suite
0597, Chicago, Illinois 60670-0597. Wells Fargo & Company is located at
333 S. Grand Avenue, 9th Floor, Los Angeles, California 90071.
(10) Does not include the shares that may be deemed beneficially owned by
GMIMCo, as to which Mr. Dobrowski disclaims beneficial ownership.
(11) Includes 13,297 shares which may be obtained upon conversion of vested
stock units and, in the case of Mr. Edelman, Dr. Sagalyn, Mr. Garrabrant
and Mr. Zell, 50,001, 16,667, 23,334 and 80,000, respectively, shares
issuable upon the exercise of vested stock options.
(12) Includes the 419,423 shares of class A common stock owned by GRG
Investment Partnership LP, for which Mr. Garrabrant serves as the general
partner.
(13) Includes, in the case of Mr. Hatkoff, the 2,330,132 shares of class A
common stock owned by CMH Investment Partnership LP, a family partnership
for which Mr. Hatkoff serves as general partner. Includes, in the case of
Mr. Klopp, 2,330,132 shares of class A common stock owned by JRK
Investment Partnership LP, a family partnership for which Mr. Klopp serves
as general partner.
(14) Includes 116,667 shares issuable upon the exercise of vested stock options
held by each of Messrs. Hatkoff and Klopp.
(15) Includes 108,384 shares for Mr. Shugrue that are the subject of restricted
stock awards for which he retains voting rights. Includes 111,668 and
100,000 shares issuable upon the exercise of vested stock options held by
Mr. Shugrue and Mr. Plavin, respectively.
(16) Includes 419,423 shares of class A common stock owned by Rosenberg--CT
General Partnership LP, for which Ms. Rosenberg serves as a general
partner.
(17) Does not include the shares that may be deemed beneficially owned by VNO,
as to which Mr. Roth disclaims beneficial ownership.
(18) Does not include the shares that may be deemed beneficially owned by EOP,
as to which Mr. Zell disclaims beneficial ownership.
-13-
<PAGE>
ITEM 13. Certain Relationships and Related Transactions
Reimbursement Arrangement
Pursuant to an expense reimbursement arrangement with EGI, the Company has
agreed to reimburse EGI the costs for certain general administrative services to
the Company, including, among others, certain legal, tax, shareholder relations
and insurance acquisition services, which are provided by employees of EGI. The
Company had charged to operations $86,658 during the 1999 fiscal year.
Relationships with Battle Fowler LLP
Martin L. Edelman, a director of the Company, is of counsel to Battle
Fowler LLP, a New York City law firm that provides the Company with ongoing
legal representation with respect to various matters and has represented the
Company and certain affiliates thereof, including Victor Capital, in the past
with respect to various legal matters. The Company expects to continue to engage
Battle Fowler LLP to provide legal representation in the future.
Relationship with Rosenberg & Liebentritt, P.C.
During 1999, the Company retained the services of Rosenberg & Liebentritt,
P.C., a law firm which performs legal services exclusively for entities in which
Samuel Zell, chairman of the board of directors, has an interest.
Asset Management Agreements
VP Metropolis Services, LLC, a wholly owned subsidiary of the Company
("VPM"), is a party to an asset management agreement (the "VPM Asset Management
Agreement") with MVB Metropolis Properties, L.P. ("MVB") pursuant to which VPM
has agreed to manage, service and administer certain real estate assets owned by
MVB and its affiliates, initially including a New York City property consisting
of 46 condominium units and a pool of 18 mortgages secured by properties located
throughout the Unites States. John R. Klopp and Craig M. Hatkoff, both trustees
of the Company, are each 25.05% owners of VP-LP, LLC, which owns a 1.0% interest
in MVB. In addition, Mr. Klopp is a vice president of MVB Metropolis Corp., the
general partner and a 1.0% owner of MVB. Pursuant to the VPM Asset Management
Agreement, fees of $290,625 were paid to VPM and recognized as income by the
Company during 1999.
Victor Asset Management Partners, LLC, a wholly-owned subsidiary of the
Company ("VAMP"), is a party to an asset management agreement (the "VAMP Asset
Management Agreement I") with S.H. Mortgage Acquisition, LLC ("S.H. Mortgage
Acquisition") pursuant to which VAMP has agreed to manage, service and
administer certain real estate assets owned by S.H. Mortgage Acquisition and its
affiliates, initially including 21 loans secured by various properties and other
assets located in New Jersey. Messrs. Klopp and Hatkoff are managing members of
VP-NJ, LLC, which owns a 1.0% interest in and is the managing member of S.H.
Mortgage Acquisition. Pursuant to the VAMP Asset Management Agreement I, fees of
$67,507 were paid to VAMP and recognized as income by the Company during 1999.
VAMP is also a party to an asset management agreement (the "VAMP Asset
Management Agreement II") with RE Acquisition, LLC ("RE Acquisition") pursuant
to which VAMP has agreed to manage, service and administer certain real estate
assets owned by RE Acquisition, initially including a pool of five mortgages and
other rights relating to real properties located in New York and New Jersey.
Messrs. Klopp and Hatkoff are managing members of VPC Partners, LLC, which owns
a 0.7772% interest in RE Acquisition. In addition, Mr. Klopp is a manager of RE
Acquisition. Pursuant to the VAMP Asset Management Agreement II, fees of $33,200
were paid to VAMP and recognized as income by the Company during 1999.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
April 28, 2000 /s/ John R. Klopp
- -------------------------- -----------------
Date John R. Klopp
Vice Chairman, Chief Executive Officer
and President
-15-
