<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240.14a-11(c) or Section
240.14a-12
Manufactured Home Communities, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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(1):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA
CHICAGO, IL 60606
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1998
------------------
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
("Meeting") of MANUFACTURED HOME COMMUNITIES, INC., a Maryland corporation (the
"Company"), to be held at One North Franklin Street, Third Floor, Chicago,
Illinois, on Tuesday, May 12, 1998, at 10:00 A.M. Central Daylight Time, for the
following purposes:
(1) To elect three (3) directors of the Board of Directors to terms
expiring in 2001;
(2) To consider and vote upon the adoption of the Company's Second Amended
and Restated 1992 Stock Option and Stock Award Plan which increases by 2 million
shares the number of shares available under the Plan and amends certain other
technical provisions of the Amended and Restated 1992 Stock Option and Stock
Award Plan; and
(3) To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on March 13, 1998,
will be entitled to vote at the Meeting or any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON, PLEASE
SIGN AND DATE THE ENCLOSED PROXY WHICH IS BEING SOLICITED BY THE BOARD OF
DIRECTORS, AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
SUSAN OBUCHOWSKI
SUSAN OBUCHOWSKI, Secretary
<PAGE> 3
MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA
CHICAGO, IL 60606
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Manufactured Home Communities, Inc., a
Maryland corporation ("MHC" or the "Company"), of proxies to be voted at the
Annual Meeting of Stockholders (the "Meeting") to be held on Tuesday, May 12,
1998, and any adjournment or postponement thereof. The cost of this solicitation
is anticipated to be nominal and will be borne by the Company. In addition to
solicitation by mail, employees of the Company may solicit proxies by telegraph,
telephone, telecopy and personal interviews. Brokers and other nominees who held
of record stock of the Company on March 13, 1998, the record date for
determining stockholders entitled to notice of and to vote at the Meeting, will
be asked to contact the beneficial owners of the shares which they hold.
This Proxy Statement and accompanying proxy are being mailed to
stockholders commencing on or about March 31, 1998. The proxy, if properly
executed and returned, will be voted according to your instructions, but it may
be revoked at any time before it is exercised by giving notice of revocation in
writing to the Secretary of the Company or by voting in person at the Meeting.
Only stockholders of record at the close of business on March 13, 1998 (the
"Record Date") will be entitled to vote at the Meeting. On such date 24,915,399
shares of common stock, par value $.01 per share ("Common Stock"), were
outstanding. Each share of Common Stock outstanding on the Record Date entitles
the holder thereof to one vote upon each matter to be voted upon at the Meeting.
The presence in person or by proxy of stockholders entitled to cast a majority
of all the votes entitled to be cast at the Meeting shall constitute a quorum.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. If, however,
there is not a quorum at the Meeting, the stockholders entitled to vote at the
Meeting, whether present in person or represented by proxy, shall only have the
power to adjourn the Meeting until such time as there is a quorum. At such time
as there is a quorum, the Meeting will reconvene without notice to stockholders,
other than an announcement at the prior adjournment of the Meeting, unless the
adjournment is to a date not more than 120 days after the Record Date.
If a proxy in the form enclosed is duly executed and returned, the shares
of Common Stock represented thereby will be voted in accordance with the
specifications made thereon by the stockholder. If no such specifications are
made, such proxy will be voted (i) FOR election of the three nominees for
directors to terms expiring in 2001; (ii) FOR the adoption of the Company's
Second Amended and Restated 1992 Stock Option and Stock Award Plan; and (iii) at
the discretion of Samuel Zell and Howard Walker, the Board's designated
representatives for the Meeting, with respect to such other business as may
properly come before the Meeting or any adjournment or postponement thereof. A
proxy is revocable prior to its exercise by revoking the proxy in writing, by a
subsequently dated proxy or by attending the Meeting and voting in person. The
mere presence at the Meeting of a stockholder who appointed a representative
does not itself revoke the appointment.
1997 ANNUAL REPORT
Stockholders are concurrently being furnished with a copy of the Company's
1997 Annual Report, which contains its audited financial statements as of
December 31, 1997. Additional copies of the Annual Report and of the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 as filed with
the Securities and Exchange Commission (the "SEC") may be obtained by contacting
Cynthia McHugh, Senior Vice President -- Investor Relations of the Company, at
Two
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North Riverside Plaza, Suite 900, Chicago, IL 60606, 312-474-1122, and it will
be furnished promptly at no additional expense.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Board consists of ten members. The charter of the Company provides that
the directors of the Company shall be divided into three classes as nearly equal
in number as possible, with each class having a term of three years. The Board
has nominated Louis H. Masotti, Sheli Z. Rosenberg and Gary L. Waterman for
election to serve as directors of the Company until the 2001 Meeting and until
their successors are duly elected and qualified. Biographical information for
each of the nominees is set forth under the caption "Management." The
affirmative vote of a plurality of all votes cast at the Meeting, if a quorum is
present, is sufficient to elect the three directors. Abstentions and broker non-
votes will have no effect on the outcome of the election of directors.
Each nominee has consented to be named in this proxy statement and to serve
if elected. All nominees are currently directors. In the event that any nominee
should become unable to serve as a director (which is not anticipated), the
persons designated as representatives will cast votes for the remaining nominees
and for such other person or persons as the Board may recommend.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED ABOVE. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED "FOR" THE NOMINEES UNLESS INSTRUCTIONS TO
WITHHOLD OR TO THE CONTRARY ARE GIVEN.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers and directors of the Company as of March 13, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Samuel Zell 56 Chairman of the Board of Directors (term expires in 1999)
Howard Walker 58 President, Chief Executive Officer and Director (term
expires in 2000)
Ellen Kelleher 37 Executive Vice President, General Counsel and Assistant
Secretary
Thomas P. Heneghan 34 Executive Vice President, Chief Financial Officer and
Treasurer
Gary W. Powell 57 Executive Vice President -- Operations
Donald S. Chisholm 63 Director (term expires in 2000)
Thomas E. Dobrowski 54 Director (term expires in 2000)
David A. Helfand 33 Director (term expires in 1999)
Louis H. Masotti, Ph.D 63 Director (term expires in 1998)
John F. Podjasek Jr 56 Director (term expires in 2000)
Sheli Z. Rosenberg 56 Director (term expires in 1998)
Michael A. Torres 37 Director (term expires in 1999)
Gary L. Waterman 56 Director (term expires in 1998)
</TABLE>
The following is a biographical summary of the experience of the executive
officers and directors of the Company. For information concerning membership on
committees of the Board, see "Committees of the Board of Directors; Meetings"
below.
SAMUEL ZELL has been Chairman of the Board since March 31, 1995 and had
been Chief Executive Officer from March 31, 1995 until August 1996. Mr. Zell had
been Co-Chairman of the Board of the Company from its formation until March 31,
1995. Mr. Zell was a director of Mobile Home
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<PAGE> 5
Communities, Inc. ("MH Inc."), the former manager of the Company's manufactured
home communities, from 1983 until its dissolution in 1993. Mr. Zell is chairman
of the board of directors of Equity Group Investments, Inc. ("EGI"), an
investment company; American Classic Voyages Co. ("American Classic"), a
provider of overnight cruises in the United States; Anixter International Inc.
("Anixter"), a distributor of electrical and cable products; and Jacor
Communications, Inc. ("Jacor"), an owner and operator of radio stations. Mr.
Zell is chairman of the board of trustees of Capital Trust, a specialized
finance company; Equity Office Properties Trust ("Equity Office"), an equity
real estate investment trust ("REIT") primarily focused on office buildings; and
Equity Residential Properties Trust ("Equity Residential"), an equity REIT
primarily focused on multifamily residential properties. He is a director of
Chart House Enterprises, Inc., an owner and operator of restaurants; Fred Meyer,
Inc., an owner and operator of grocery stores and discount stores; Ramco Energy
plc, an independent oil company in the United Kingdom; and TeleTech Holdings,
Inc., a provider of customer care solutions.
HOWARD WALKER has been a director of the Company since November 4, 1997,
President since September 5, 1997 and Chief Executive Officer since December 31,
1997. He has been President of Realty Systems, Inc. since March 30, 1995. Realty
Systems, Inc. is an affiliate of the Company. Mr. Walker is also a member of the
Company's management committee, which was created in 1995 and is comprised of
the Company's senior executives. Mr. Walker had been a Vice President of the
Company from January 16, 1995 until March 30, 1995. From August 1994 until
January 1995, Mr. Walker had been the principal of Walker Realty Co., a
full-service real estate company. From January 1989 until July 1994, Mr. Walker
had been a principal and partner in The Markin Group, a full-service real estate
company.
ELLEN KELLEHER has been Executive Vice President and General Counsel of the
Company since March 1997. Ms. Kelleher is also a member of the Company's
management committee. She had been Senior Vice President and General Counsel of
the Company from March 1994 until March 1997. Ms. Kelleher had been a vice
president of the law firm, Rosenberg & Liebentritt, P.C., from January 1993
until December 1995. Ms. Kelleher had been an associate of Rosenberg &
Liebentritt, P.C. from October 1990 until January 1993.
THOMAS P. HENEGHAN has been Executive Vice President, Chief Financial
Officer and Treasurer of the Company since March 1997. Mr. Heneghan is also a
member of the Company's management committee. Mr. Heneghan had been Vice
President, Chief Financial Officer and Treasurer from February 1995 until March
1997. Mr. Heneghan had been a member of the accounting firm of Greenberg &
Pociask, Ltd. from January 1994 until February 1995. Mr. Heneghan had been vice
president of Capsure Holdings Corp. ("Capsure") from May 1993 until June 1994
and controller of Capsure from January 1993 until November 1993. Mr. Heneghan
had been vice president and controller of Great American Management and
Investment, Inc. ("GAMI") from December 1993 until December 1994; and controller
of GAMI from January 1993 until November 1993.
GARY W. POWELL has been Executive Vice President -- Operations of the
Company since May 1995. Mr. Powell is also a member of the Company's management
committee. Mr. Powell had been President -- Northern Division of the Company
from August 1994 until May 1995. Mr. Powell had been President and Chief
Operating Officer of the Company from its formation until August 1994. Mr.
Powell had been with MH Inc. or its predecessors from 1971, serving as president
from 1984 until its dissolution in 1993. Mr. Powell was a director of the
Company from its formation until May 1994.
DAVID A. HELFAND has been a director of the Company since May 1995;
President of the Company from January 1995 until September 1997; and Chief
Executive Officer of the Company from August 1996 until December 31, 1997. He
had been Chief Financial Officer of the Company from December 1992 until
February 1995 and Senior Vice President from March 1994 until January 1995. Mr.
Helfand had been Vice President of the Company from December 1992 until March
1994. Mr. Helfand has been a managing director of Equity International Realty, a
division of EGI, since December 31, 1997.
3
<PAGE> 6
DONALD S. CHISHOLM has been a director of the Company since March 1993. Mr.
Chisholm is president of Vernon Development Co., the developer of a 650-acre
golf course community, and of Ann Arbor Associates Inc., a real estate
development and management company, both for more than five years.
THOMAS E. DOBROWSKI has been a director of the Company since March 1993.
Mr. Dobrowski is the managing director of real estate and alternative
investments of General Motors Investment Management Corporation ("GMIMCo."). Mr.
Dobrowski is a director of Red Roof Inns, Inc., an owner and operator of hotels,
and Taubman Centers, Inc., an equity REIT focused on regional shopping centers.
He is also a trustee of Equity Office.
LOUIS H. MASOTTI, PH.D., has been a director of the Company since March
1993. Dr. Masotti is professor of management and urban development and director
of the program in real estate management for the Graduate School of Management
of the University of California at Irvine. He is a professor emeritus of
Northwestern University's Kellogg Graduate School of Management.
JOHN F. PODJASEK, JR. has been a director of the Company since May 1994.
Mr. Podjasek has been managing director -- private asset management of
Forstmann -- Leff International, Inc. since July 1997. Mr. Podjasek was retired
from November 1995 until July 1997. Mr. Podjasek had been employed by Allstate
Insurance Company from 1966 until November 1995, most recently serving as vice
president--venture capital and real estate.
SHELI Z. ROSENBERG has been a director of the Company since August 1996.
Mrs. Rosenberg has been chief executive officer and president of EGI since
November 1994. She was a principal in the law firm of Rosenberg & Liebentritt
P.C. from 1980 until September 1997. Mrs. Rosenberg is a director of CVS
Corporation, an owner and operator of drug stores; American Classic; Anixter;
Illinova Inc. and its subsidiary Illinois Power Company, a supplier of
electricity and natural gas in Illinois; and Jacor. She is a trustee of Capital
Trust; Equity Office; and Equity Residential. Mrs. Rosenberg was a vice
president of First Capital Benefit Administrators, Inc., which filed a petition
under the federal bankruptcy laws on January 3, 1995, which resulted in its
liquidation on November 15, 1995.
MICHAEL A. TORRES has been a director of the Company since March 1993. Mr.
Torres has been president and a principal of ERE Rosen Real Estate Securities,
L.L.C., an investment management firm, since February 1995. Mr. Torres had been
employed by Wilshire Associates Incorporated, an investment consulting firm,
from June 1990 until February 1995, most recently serving as a vice president
directing real estate consulting services for its institutional investors.
GARY L. WATERMAN has been a director of the Company since March 1993. Since
1989, Mr. Waterman has been president of Waterman Limited, a real estate
services and investment company that he founded.
COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
Meetings: During the year ended December 31, 1997, the Board held seven
meetings. Each of the present directors attended over 75% of the total number of
the meetings of the Board and of its committees which they were eligible to
attend, except Mr. Dobrowski, who attended six out of nine of the meetings he
was eligible to attend.
Executive Committee: The Executive Committee of the Board is composed of
Messrs. Zell, Walker and Chisholm. The Executive Committee has the authority,
within certain parameters set by the Board, to acquire, dispose of and finance
investments for the Company (including the issuance of additional limited
partnership interests of MHC Operating Limited Partnership ("OP Units")) and
execute contracts and agreements, including those related to the borrowing of
money by the Company, and generally exercise all other powers of the Board
except as prohibited by law. During the year ended December 31, 1997, the
Executive Committee did not hold any meetings, but took various actions pursuant
to resolutions adopted by unanimous written consent.
4
<PAGE> 7
Compensation Committee: During 1997, the Compensation Committee of the
Board was composed of Messrs. Chisholm, Masotti and Waterman. Mrs. Rosenberg
joined the Compensation Committee on January 1, 1998. The Compensation Committee
determines compensation for the Company's executive officers and it exercises
all powers of the Board in connection with compensation matters, including
incentive compensation and benefit plans. The Compensation Committee also has
the authority to grant stock options, stock appreciation rights and restricted
stock awards in accordance with the 1992 Amended and Restated Stock Option and
Stock Award Plan to the management of the Company and its subsidiaries, other
employees and consultants. During the year ended December 31, 1997, the
Compensation Committee held one meeting and took various actions pursuant to
resolutions adopted by unanimous written consent.
Audit Committee: The Audit Committee of the Board is composed of Messrs.
Dobrowski, Podjasek and Torres. The Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews with the
independent public accountants the plans and results of the audit engagement,
approves professional services provided by the Company's independent public
accountants, reviews the independence of the Company's independent public
accountants, considers the range of audit and non-audit fees and reviews the
adequacy of the Company's internal accounting controls. During the year ended
December 31, 1997, the Audit Committee held two meetings.
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<PAGE> 8
EXECUTIVE COMPENSATION
The following tables show information with respect to the annual
compensation (including option grants) for services rendered to the Company for
the fiscal years ended December 31, 1997, December 31, 1996 and December 31,
1995 by those persons holding the office of chief executive officer and those
persons who were, at December 31, 1997, the other four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
AWARDS
-------------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
NAME AND ----------------------------- STOCK AWARDS OPTIONS ALL OTHER
PRINCIPAL OCCUPATION(1) YEAR SALARY ($) BONUS ($) ($)(2) GRANTED(#) COMPENSATION ($)(3)
----------------------- ---- ---------- --------- ------------ ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
David A. Helfand........... 1997 280,000 214,000 0 10,000 9,100
Chief Executive Officer 1996 250,000 61,252 1,337,248 10,000 9,000
and Member of 1995 201,021 57,511 57,489 10,000 9,000
Management Committee(4)
Howard Walker.............. 1997 200,000 75,008 684,086 0 6,500
President, Chief 1996 200,000 41,014 744,986 0 9,000
Executive.............
Officer and Member of 1995 140,192 47,502 47,498 15,000 9,000
Management Committee
Thomas P. Heneghan......... 1997 215,000 75,008 622,492 0 9,500
Executive Vice President, 1996 200,000 41,014 1,008,986 0 9,000
Chief Financial Officer, 1995 100,917 47,502 47,498 15,000 9,000
Treasurer and Member of
Management Committee
Ellen Kelleher............. 1997 200,000 75,008 560,898 0 9,500
Executive Vice President, 1996 200,000 41,014 744,986 0 9,000
General Counsel and 1995 151,104 47,502 47,498 0 9,000
Member of Management
Committee
Gary W. Powell............. 1997 200,000 75,008 560,898 0 9,500
Executive Vice 1996 200,000 41,014 744,986 0 9,000
President --
Operations and Member of 1995 177,917 47,502 47,498 0 9,000
Management Committee
</TABLE>
- ---------------
(1) Except for Mr. Helfand, positions held as of December 31, 1997.
(2) The total number of shares of Restricted Common Stock held by each named
executive officer and the value of such shares at December 31, 1997, the
last trading date of the year, was as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE AT 12/31/97
---------------- -----------------
<S> <C> <C>
David A. Helfand..... 2,784 $ 75,168
Howard Walker........ 36,673 990,171
Thomas P. Heneghan... 48,673 1,314,171
Ellen Kelleher....... 36,673 990,171
Gary W. Powell....... 36,673 990,171
</TABLE>
The total number of Restricted Common Stock Units which were granted on
December 30, 1997; vest 50% on June 30, 1998, 25% on December 31, 1998 and
25% on December 31, 1999; and will
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<PAGE> 9
convert to Restricted Stock Awards on a one-for-one basis if the
stockholders approve Proposal 2 at the Meeting are as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE AT 12/31/97
---------------- -----------------
<S> <C> <C>
David A. Helfand....... 0 $ 0
Howard Walker.......... 22,250 660,750
Thomas P. Heneghan..... 20,000 540,000
Ellen Kelleher......... 17,750 479,250
Gary W. Powell......... 17,750 479,250
</TABLE>
The number of shares of Restricted Stock Awards awarded in 1997, which will
vest in their entirety on December 16, 1999 are as follows:
<TABLE>
<S> <C>
David A. Helfand............................ 0
Howard Walker............................... 2,810
Thomas P. Heneghan.......................... 2,810
Ellen Kelleher.............................. 2,810
Gary W. Powell.............................. 2,810
</TABLE>
The number of shares of Restricted Stock Awards awarded in 1996 which will
vest 60% on December 31, 1998, 20% on December 31, 1999, and 20% on December
31, 2000 provided that certain performance benchmarks are achieved are as
follows:
<TABLE>
<S> <C>
David A. Helfand........................... 58,000*
Howard Walker.............................. 32,000
Thomas P. Heneghan......................... 44,000
Ellen Kelleher............................. 32,000
Gary W. Powell............................. 32,000
</TABLE>
- ---------------
* In December 1997, the Compensation Committee accelerated the vesting of the
58,000 shares granted to Mr. Helfand because related performance benchmarks
had been achieved during his service with the Company in 1997 and because he
did not participate in Restricted Stock Awards made in 1997.
The number of shares of Restricted Stock Awards awarded in 1996, which will
vest in their entirety on December 13, 1998 are as follows:
<TABLE>
<S> <C>
David A. Helfand............................ 2,784
Howard Walker............................... 1,863
Thomas P. Heneghan.......................... 1,863
Ellen Kelleher.............................. 1,863
Gary W. Powell.............................. 1,863
</TABLE>
The number of Restricted Stock Awards awarded in 1995 which vested in their
entirety on December 15, 1997 are as follows:
<TABLE>
<S> <C>
David A. Helfand............................ 3,458
Howard Walker............................... 2,857
Thomas P. Heneghan.......................... 2,857
Ellen Kelleher.............................. 2,857
Gary W. Powell.............................. 2,857
</TABLE>
All holders of Restricted Stock receive any dividends paid on such shares.
(3) Includes employer matching contributions and/or profit sharing contributions
to the MHC Advantage Retirement Plan or affiliated company's 401(k) plans.
(4) Mr. Helfand was Chief Executive Officer until December 31, 1997, at which
time Mr. Walker became Chief Executive Officer. Mr. Helfand also resigned as
a member of the management committee as of December 31, 1997.
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<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE OR TERM
OPTIONS IN FISCAL BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(#)(1) YEAR ($/SH) DATE 5% ($)(2) 10% ($)(3)
---- ------------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
David A. Helfand............ 10,000 2.8 21.375 5/13/07 134,426 340,662
Howard Walker............... 0 0 0 -- 0 0
Thomas P. Heneghan.......... 0 0 0 -- 0 0
Ellen Kelleher.............. 0 0 0 -- 0 0
Gary W. Powell.............. 0 0 0 -- 0 0
</TABLE>
- ---------------
(1) One-third of the options granted on May 13, 1997, are exercisable six months
after initial grant, one-third are exercisable one year following such grant
date and one-third are exercisable two years following such grant date.
(2) Assumes stock price of $34.82.
(3) Assumes stock price of $55.44.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT OPTIONS AT
ON VALUE FY-END(#) FY-END($)(1)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
David A. Helfand.......................... 0 0 122,000/10,000 1,066,582/65,418
Howard Walker............................. 0 0 10,000/5,000 112,500/56,250
Thomas P. Heneghan........................ 0 0 28,000/5,000 273,000/56,250
Ellen Kelleher............................ 0 0 21,000/0 139,875/0
Gary W. Powell............................ 0 0 64,000/0 739,000/0
</TABLE>
- ---------------
(1) Assumes a value equal to the year-end stock price of $27.00 less the
exercise price of in-the-money options.
COMPENSATION OF DIRECTORS
The Company paid each of its non-employee directors an annual fee of
$30,000 in 1997. In addition, directors who serve on the Audit Committee,
Executive Committee or Compensation Committee receive an additional $1,000 per
annum for each committee on which they serve. Committee chairs receive an
additional $500 per annum. Directors who are employees of the Company are not
paid any directors' fees or committee fees. The Company reimburses the directors
for travel expenses incurred in connection with their activities on behalf of
the Company. Additionally, on the date of the first Board of Director's meeting
after each Annual Meeting of Stockholders, each director then in office will
receive an annual grant of options to purchase 10,000 shares of Common Stock at
the then-current market price.
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<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The Compensation Committee members for 1997 were Messrs. Chisholm, Masotti
and Waterman.
No Compensation Committee interlocking relationships existed during 1997.
Mr. Zell and Mrs. Rosenberg serve as members of the board of directors of
numerous non-public companies owned or controlled in whole or in part by Mr.
Zell or his affiliates which do not have compensation committees, and in many
cases, the executive officers of those companies include Mr. Zell and Mrs.
Rosenberg.
For a description of certain transactions with Board members or their
affiliates, see "Certain Relationships and Related Transactions."
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, that might incorporate future filings, including this
Proxy Statement, in whole or in part, the Compensation Committee Report on
Executive Compensation presented below and the Performance Graph following such
report shall not be incorporated by reference into any such filings.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board determines the compensation of the
Company's executive officers, including those named in the Summary Compensation
Table. The Compensation Committee believes that the compensation of the
Company's Chief Executive Officer and all of the Company's executive officers
should be both competitive and based on individual and Company performance.
The Company's compensation policy takes into account a review of local and
national peer group salary surveys focusing primarily on the SNL Executive
Compensation Review 1997 for REITs ("SNL Survey"). The SNL Survey contains
detailed compensation and performance data on publicly traded REITs. The
Committee believes the SNL Survey provides comparable salary data for the
Company. The Committee believes that its compensation levels compare favorably
to its peer groups described in the surveys and targets median to high
compensation levels for its executive officers. This is not the same peer group
that is used in the Performance Graph on page 12.
During the fiscal year ended December 31, 1997, there were three major
components of executive compensation: base salary, bonuses, and restricted
stock. This salary structure is designed to attract and retain highly qualified
executives. This is accomplished by providing competitive base salaries and
meaningful incentives, including short-term, mid-term and long-term incentives,
intended to reward performance. Benchmarks for determining base salary and bonus
levels include targeted funds from operations ("FFO") levels, strength of the
balance sheet, and creation of stockholder value. Each performance measure
carries equal weight.
The Company's overall salary structure is reviewed annually by the
Compensation Committee using the SNL Survey for guidance. Where salary
information is unavailable for a particular position, other positions having
similar responsibilities either within the Company or in companies of comparable
size are used. Salary increases are based both upon each executive's, including
the chief executive officer's, performance and contribution to the Company's
performance.
Further short-term and mid-term incentives for executive officers are
accomplished through the Company's management-by-objective ("MBO") bonus plan.
The MBO bonus plan involves the Company and the executive officer setting goals
for such executive officer at the beginning of each
9
<PAGE> 12
year. The Compensation Committee established the following bonus ranges for its
executive officers based on salary for 1997:
<TABLE>
<S> <C>
President and Chief Executive Officer 0 -- 75%
Executive Vice Presidents 0 -- 50%
Senior Vice Presidents 0 -- 35%
Vice Presidents 0 -- 20%
</TABLE>
In determining the amount of the bonuses for 1997, the following criteria
were taken into account: achieving targeted FFO levels; the strength of the
balance sheet; and creation of stockholder value. The achievement of targeted
FFO levels included gains achieved through reduction of expenses, and increases
in revenue achieved through increases in rental rates and increases in occupancy
at the Company's communities. The strength of the balance sheet included
maintenance of appropriate debt-to-equity levels and maintaining and improving
asset value. Increases in stockholder value included improving the performance
of the Common Stock in the long term and maintaining and improving the dividend
yield on the Common Stock. The Compensation Committee believes such goals were
met or exceeded during 1997. As a result, an additional bonus pool was made
available to acknowledge employees' contribution to the overall performance of
the Company. All executive officers received an additional bonus.
It is the Compensation Committee's intention to tie executive officers',
including the Chief Executive Officer's, compensation to the continued
performance of the Company. The Company accomplishes this by awarding each
executive officer 50% of his MBO bonus in restricted Common Stock. Requiring
executive officers to "invest" 50% of their bonuses in Common Stock facilitates
better alignment of such executive officer's compensation with the Common
Stock's performance. These restricted stock awards accomplish the Company's
objective of mid-term incentives.
To provide long-term incentives for executive officers and as a means to
retain qualified executives, the Company created the 1997 Restricted Stock Award
Program (the "1997 Awards") to provide for restricted stock awards for the next
five years. On December 30, 1997 awards of restricted stock units were granted
to executive officers other than Mr. Helfand, which will be converted to
restricted stock if Proposal 2 is approved by stockholders at the Meeting. The
restricted stock, if issued, will vest 50% on June 30, 1998, 25% on December 31,
1998 and 25% on December 31, 1999, subject to acceleration in the case of death,
disability, involuntary termination not for cause or change of control. The
number of shares of Common Stock awarded under the 1997 Awards is based upon a
fixed number determined for each of the executive officers which number
increases or decreases based on the increase or decrease in the fair market
value of a share of Common Stock and the amount of the dividends paid per share
times a multiple determined by the Compensation Committee. The Compensation
Committee recognizes that while the MBO bonus program provides for positive
short-term and mid-term performance, the interests of stockholders are best
served by giving key employees the opportunity to participate in the
appreciation of the Company's Common Stock.
At the end of 1997, the Compensation Committee granted options to purchase
Common Stock to many of the Company's employees. The executive officers of the
Company were not granted options. Mr. Helfand was granted an option to purchase
10,000 shares in his capacity as a director as were all other directors of the
Company on May 13, 1997.
The Compensation Committee believes that the compensation program properly
rewards its executive officers for achieving improvements in the Company's
performance and serving the interest of its stockholders.
Section 162(m) of the Internal Revenue Code of 1986, as amended ("Code"),
generally disallows a Federal income tax deduction for compensation in excess of
$1 million paid in any year to any of the Company's executive officers listed in
the Summary Compensation Table who are employed by the Company on the last day
of a taxable year. Section 162(m), however, does allow a deduction for payments
of "performance based" compensation, which includes most stock options and other
10
<PAGE> 13
incentive arrangements, the material terms of which have been approved by
stockholders. Stock awards under the Company's Amended & Restated 1992 Stock
Option & Stock Award Plan may, but need not, satisfy the requirements of Section
162(m). The Company believes that because it qualifies as a REIT under the Code
and therefore is not subject to Federal income taxes, the payment of
compensation that does not satisfy the requirements of Section 162(m) will not
affect the Company's taxable income, although to the extent that compensation
does not qualify for deduction under Section 162(m), a larger portion of
stockholder distributions may be subject to Federal income taxation as dividend
income rather that return of capital. The Company does not believe that Section
162(m) will materially affect the taxability of stockholders' distributions,
although no assurance can be given in this regard due to the variety of factors
that affect the tax position of individual stockholders. For the above reasons,
the Company may or may not structure compensation arrangements to satisfy the
requirements for performance based compensation under Section 162(m).
Respectfully submitted,
Donald S. Chisholm
Louis H. Masotti
Gary L. Waterman
11
<PAGE> 14
PERFORMANCE GRAPH
The following performance graph compares total stockholders' return on the
Common Stock since February 24, 1993, the date of commencement of the Company's
initial public offering ("IPO"), with the Standard and Poors ("S&P") 500 Stock
Index and the index of equity REITs prepared by the National Association of Real
Estate Investment Trusts ("NAREIT"). The Common Stock price performance graph
assumes an investment of $100 in the Common Stock on February 24, 1993 and an
investment of $100 in the two indexes on February 24, 1993 and further assumes
the reinvestment of all dividends. Equity REITs are defined as those REITs which
derive more than 75% of their income from equity investments in real estate
assets. The NAREIT equity index includes all tax qualified REITs listed on the
New York Stock Exchange, the American Stock Exchange or the NASDAQ Stock Market.
Common Stock price performance presented for the period from February 24, 1993
through December 31, 1997 is not necessarily indicative of future results.
<TABLE>
<CAPTION>
Measurement Period S&P 500 NAREIT
(Fiscal Year Covered) MHC Stock Index Equity Index
<S> <C> <C> <C>
February 1993 100 100 100
1993 174.04 109.17 106.70
1994 170.05 110.61 110.10
1995 160.85 152.18 142.46
1996 227.51 187.12 171.65
1997 278.87 249.54 206.41
</TABLE>
12
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 13, 1998 (except as
noted), with respect to each person who is known by the management of the
Company to be the beneficial owner of more than 5% of the outstanding shares of
Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND BUSINESS ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------------- -------------------- ----------
<S> <C> <C>
Samuel Zell and entities controlled by Samuel Zell 2,975,251 10.9%
and Ann Lurie and entities
controlled by Ann Lurie(2)(3).............................
Two North Riverside Plaza
Chicago, Illinois 60606
General Motors Hourly-Rate Employes......................... 2,271,198 9.2%
Pension Trust and
General Motors Salaried
Employes Pension Trust(4)
c/o General Motors Investment
Management Corporation
767 Fifth Avenue
New York, New York 10153
Goldman Sachs & Co. and..................................... 1,745,604 7.0%
The Goldman Sachs Group, L.P.(5)
85 Broad Street
New York, NY 10004
FMR Corp(6)................................................. 1,370,900 5.5%
82 Devonshire Street
Boston, MA 02109
The Prudential Insurance Company of America(7).............. 1,279,900 5.2%
751 Broad Street
Newark, New Jersey 07102
Fleet Financial Group, Inc.(8).............................. 1,279,023 5.2%
One Federal Street
Boston, MA 02110
</TABLE>
- ---------------
(1) The amounts of Common Stock beneficially owned is reported on the basis of
regulations of the SEC governing the determination of beneficial ownership
of securities. The percentage of Common Stock beneficially owned by a person
assumes that all OP Units held by the person are exchanged for Common Stock,
that none of the OP Units held by other persons are so exchanged, that all
options exercisable within 60 days of March 13, 1998 to acquire Common Stock
held by the person are exercised and that no options to acquire Common Stock
held by other persons are exercised.
13
<PAGE> 16
(2) Includes Common Stock, OP Units which are exchangeable for Common Stock, and
options to purchase Common Stock which are currently exercisable or
exercisable within 60 days owned as follows:
<TABLE>
<CAPTION>
COMMON
STOCK OP UNITS OPTIONS
------ -------- -------
<S> <C> <C> <C>
ENTITIES CONTROLLED BY SAMUEL ZELL:
Samuel Zell............................................... 1,071 -- 96,666
Samuel Zell Revocable Trust............................... 4,406 -- --
Samstock/SZRT, L.L.C...................................... 294,133 13,641 --
Samstock/ZGPI, L.L.C...................................... 6,003 -- --
Samstock, L.L.C........................................... -- 601,665 --
Samstock/ZFT, L.L.C....................................... -- 187,278 --
Donald S. Chisholm Trust.................................. 7,000 -- --
ENTITIES CONTROLLED BY ANN LURIE:
Ann Lurie Revocable Trust................................. 364,512 -- --
Anda Partnership.......................................... -- 233,694 --
LFT Partnership........................................... -- 5,436 --
ENTITIES CONTROLLED BY SAMUEL ZELL & ANN LURIE:
EGI Holdings, Inc......................................... -- 579,873 --
EGIL Investments, Inc..................................... -- 579,873 --
------- --------- ------
TOTALS:................................................... 677,125 2,201,460 96,666
======= ========= ======
</TABLE>
Mr. Zell disclaims beneficial ownership of 371,512 shares of Common Stock
and 819,003 OP Units. Mrs. Lurie disclaims beneficial ownership of 312,613
shares of Common Stock, 1,382,457 OP Units and options to purchase 96,666
shares of Common Stock.
(3) Includes 1,382,457 OP Units (exchangeable into 1,382,457 shares of Common
Stock) and 300,136 shares of Common Stock which are pledged as collateral
for loans to four financial institutions. Under the loan agreements, the
institutions cannot vote (assuming exchange of the OP Units for Common
Stock) or exercise ownership rights relating to the pledged OP Units or
Common Stock unless there is an event of default.
(4) The shares reported herein are held of record by Mellon Bank, N.A. acting as
the trustee (the "Trustee") for the General Motors Hourly-Rate Employes
Pension Plan and the General Motors Salaried Employes Pension Plan
(collectively, the "GM Trusts"). The GM Trusts are trusts under and for the
benefit of certain employee benefit plans of General Motors Corporation
("GM") and its subsidiaries. These shares may be deemed to be owned
beneficially by GMIMCo, a wholly owned subsidiary of GM. GMIMCo's principal
business is providing investment advice and investment management services
with respect to the assets of certain employee benefit plans of GM and its
subsidiaries and associated entities. GMIMCo is serving as the GM Trusts'
investment manager with respect to these shares and in that capacity it has
the sole power to direct the Trustee as to the voting and disposition of
these shares. Because of the Trustee's limited role, beneficial ownership of
the shares by the Trustee is disclaimed.
(5) Pursuant to a Schedule 13G filed with the SEC for calendar 1997, the Goldman
Sachs Group, L.P. ("GS Group") and Goldman Sachs & Co. ("Goldman Sachs")
each disclaim beneficial ownership of the Common Stock beneficially owned by
(i) managed accounts and (ii) certain investment limited partnerships, of
which a subsidiary of GS Group or Goldman Sachs is the general partner or
managing general partner, to the extent partnership interests in such
partnerships are held by persons other than GS Group, Goldman Sachs or their
affiliates.
(6) Pursuant to a Schedule 13G filed with the SEC for calendar 1997, Fidelity
Management & Research Company ("Fidelity"), a wholly owned subsidiary of FMR
Corp. and an investment
14
<PAGE> 17
advisor registered under Section 203 of the Investment Advisors Act of 1940
("Investment Act"), is the beneficial owner of 1,370,700 shares of Common
Stock as a result of acting as investment advisor to various investment
companies under the Investment Act.
Fidelity Management Trust Company, a wholly owned subsidiary of FMR Corp.
and a bank as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, is the beneficial owner of 200 shares of Common Stock as a result of
its serving as investment manager of institutional account(s).
(7) Pursuant to a Schedule 13G filed with the SEC for calendar 1997, Prudential
may have direct or indirect voting and/or investment discretion over
1,279,900 shares of Common Stock which are held for the benefit of its
clients by its separate accounts, externally managed accounts, registered
investment companies, subsidiaries and/or affiliates. Prudential reported
the combined holdings of these entities for the purpose of administrative
convenience.
(8) Pursuant to a Schedule 13G filed with the SEC for calendar 1997, Fleet
Financial Group, Inc. is a parent holding company for the following banking
subsidiaries which acquired the shares of Common Stock: Columbia Management
Company; Columbia Funds Management Company; and Fleet Investment Advisors.
15
<PAGE> 18
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 13, 1998, certain information
with respect to the Common Stock that may be deemed to be beneficially owned by
each director of MHC, by the five executive officers named in the Summary
Compensation Table and by all directors and executive officers as a group:
<TABLE>
<CAPTION>
SHARES OF SHARES UPON PERCENT
COMMON EXERCISE OF OF
NAME OF BENEFICIAL HOLDER STOCK(1) OPTIONS(2) TOTAL(1) CLASS
------------------------- --------- ----------- -------- -------
<S> <C> <C> <C> <C>
Donald S. Chisholm.............................. 17,000(3) 36,667 53,667 *
Thomas E. Dobrowski............................. 0 46,667 46,667 *
David A. Helfand................................ 135,107 128,667 263,774 1.1%
Thomas P. Heneghan.............................. 105,249 28,000 133,249 *
Ellen Kelleher.................................. 92,227 21,000 113,227 *
Louis H. Masotti................................ 602 26,667 27,269 *
John F. Podjasek, Jr. .......................... 2,418 36,667 39,085 *
Gary W. Powell.................................. 240,212 64,000 304,212 1.2%
Sheli Z. Rosenberg.............................. 25,550(4) 64,000 89,550 *
Michael A. Torres............................... 2,438 46,667 49,105 *
Howard Walker................................... 90,840 10,000 100,840 *
Gary L. Waterman................................ 1,418 46,667 48,085 *
Samuel Zell..................................... 2,274,943(3)(5) 96,666 2,364,609 8.8%
All directors and executive officers as a group
(15 persons) including the above-named
persons....................................... 2,981,321 662,832 3,644,153 13.2%
</TABLE>
- ---------------
* Less than 1%
(1) The amounts of Common Stock beneficially owned are reported on the basis of
regulations of the SEC governing the determination of beneficial ownership
of securities. The percentage of Common Stock beneficially owned by a person
assumes that all OP Units held by the person are exchanged for Common Stock,
that none of the OP Units held by other persons are so exchanged, that all
options exercisable within 60 days of March 13, 1998 to acquire Common Stock
held by the person are exercised and that no options to acquire Common Stock
held by other persons are exercised.
(2) The amounts shown in this column reflect shares of Common Stock subject to
options granted under the Company's Amended and Restated 1992 Stock Option
and Stock Award Plan which are currently exercisable or exercisable within
60 days of the date of this table.
(3) Includes 7,000 shares owned by the Donald S. Chisholm Trust, Samuel Zell,
Trustee. Under the regulations of the SEC, Mr. Zell may be deemed to be the
beneficial owner of all the shares which are beneficially owned by the
Donald S. Chisholm Trust. Mr. Zell disclaims beneficial ownership of the
shares owned by the Donald S. Chisholm Trust.
(4) Includes 11,530 OP Units beneficially owned by Mrs. Rosenberg which are
exchangeable into 11,530 shares of Common Stock.
(5) Includes 1,962,330 OP Units which are exchangeable into 1,962,330 shares of
Common Stock and 300,136 shares of Common Stock beneficially owned by
entities in which Mr. Zell has a pecuniary interest or which he may be
deemed to control. See "Security Ownership of Certain Beneficial Owners."
Mr. Zell disclaims beneficial ownership of 579,873 OP Units owned which are
exchangeable into 579,873 shares of Common Stock.
16
<PAGE> 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company occupies office space owned by an affiliate of EGI, an entity
controlled by Mr. Zell, at Two North Riverside Plaza, Chicago, Illinois 60606.
In addition, pursuant to an administrative services agreement, EGI or certain of
its affiliates provides the Company and its subsidiaries with office space and
certain administrative, office facility and other services with respect to
certain aspects of the Company's business, including, but not limited to,
financial and accounting services, tax services, investor relations, corporate
secretarial, computer and support services and other services. Amounts incurred
for these services amounted to approximately $140,000 for the year ended
December 31, 1997. Amounts due to these affiliates at December 31, 1997 were
$15,000. Other affiliates of Mr. Zell provided insurance brokerage services
(excluding reimbursements for insurance premiums paid to third parties), tax and
accounting services and computer services to the Company. Amounts incurred for
these services amounted to approximately $313,000 for the year ended December
31, 1997. Amounts due to these affiliates at December 31, 1997 were $28,000.
Rosenberg & Liebentritt, P.C., a law firm in which Mrs. Rosenberg was a
principal until September 1997, performs legal services to the Company. Amounts
incurred for these services amounted to approximately $146,000 for the year
ended December 31, 1997. Amounts due to Rosenberg & Liebentritt, P.C. at
December 31, 1997 were $35,000.
The independent members of the Board annually review and approve the rates
charged by EGI and its affiliates for services rendered to the Company and its
subsidiaries. Additionally, the budget for such services are submitted, reviewed
and approved by the Audit Committee of the Company.
The executive officers listed below are indebted to the Company as a result
of purchasing stock from the Company. The loans accrue interest, payable
quarterly in arrears at the applicable federal rate, as defined in the Code in
effect at the time the loans were made. The loans are recourse to the respective
individuals; are collateralized by a pledge of the shares of Common Stock
purchased; and are due and payable of the first to occur of the employee leaving
the Company or March 3, 2003 for the loans bearing interest at 6.77% and January
2, 2005 for the loans bearing interest at 5.91%. All dividends paid on pledged
shares in excess of the then marginal tax rate are used to pay interest and
principal on the loans.
<TABLE>
<CAPTION>
LARGEST AGGREGATE BALANCE AS OF
NAME AMOUNT OWED IN 1997 DECEMBER 31, 1997 INTEREST RATE
---- ------------------- ----------------- -------------
<S> <C> <C> <C>
David A. Helfand............................. $125,226 $ 0 6.77%
David A. Helfand............................. 920,029 0 5.91%
Howard Walker................................ 883,039 882,948 5.91%
Thomas P. Heneghan........................... 881,458 848,844 5.91%
Ellen Kelleher............................... 876,228 867,779 5.91%
Gary W. Powell............................... 953,802 885,537 6.77%
Gary W. Powell............................... 883,801 881,691 5.91%
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of its Common Stock,
to file reports of ownership and changes of ownership with the SEC and the New
York Stock Exchange. Officers, directors and greater than 10% stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on the Company's review of the copies of those forms received
by the Company, or written representations from directors and officers that no
Forms 5 were required to be filed, it appears that no director or officer or 10%
owner failed to file a monthly report of a transaction on a timely basis.
17
<PAGE> 20
PROPOSAL 2
APPROVAL OF THE SECOND AMENDED
AND RESTATED 1992 STOCK OPTION
AND STOCK AWARD PLAN
The Board has approved and recommends that the stockholders consider and
approve the Company's Second Amended and Restated 1992 Stock Option and Stock
Award Plan (the "Plan"). The Plan is set forth in Exhibit A attached to this
Proxy Statement.
The 1992 Stock Option Plan was adopted by the Company effective December
18, 1992 and was amended and restated, effective March 1, 1994, as the Amended
and Restated 1992 Stock Option and Stock Award.
On November 4, 1997, Board of Directors approved an amendment to the
Amended and Restated 1992 Stock Option and Stock Award Plan which increased by
2,000,000 the number of shares available for future grant. On March 10, 1998,
the Board approved the Plan which not only incorporated the November 4, 1997
amendment but other technical changes.
Pursuant to the Plan, officers, directors, employees and consultants of the
Company are offered the opportunity: (i) to acquire shares of Common Stock
through the grant of incentive stock options ("ISOs"), non-qualified stock
options ("NQSOs") and stock appreciation rights ("SARs"); and (ii) to be awarded
shares of Common Stock, subject to conditions and restrictions as described in
the Plan or determined by the Committee. At present there are approximately 275
persons who are currently Plan participants. It is not possible at this time to
estimate the number of additional persons who will become eligible to
participate in the Plan.
The Compensation Committee ("Committee") may, in order to achieve certain
tax consequences under Section 162(m) of the Code, establish performance-related
goals to be used in connection with conditions, restrictions and limitations for
awards of stock under the Plan. To the extent such tax consequences are not
desired, the following performance-related goals may not be established. If the
Committee chooses to establish performance-related goals for a particular grant
or award, it may choose such goals from among the following factors, or any
combination thereof, as it deems appropriate or choose any other
performance-related goal it may establish from time to time: total stockholder
return; growth in funds from operations (as defined by the National Association
of Real Estate Investments Trusts ("NAREIT"), from time to time), revenues, net
income, stock price and/or earnings per share; dividend growth; return on
assets, net assets and/or capital; return on stockholders' equity; debt/equity
ratio; working capital; the Company's financial performance versus its peers;
economic value added; acquisitions; expense reductions; and adherence to
strategic plan. The Committee may select among the goals specified from award to
award, and the Committee need not select the same, or any, goals for each
grantee.
Set forth below is information concerning stock option grants made on
December 16, 1997 by the Committee which are subject to the approval by the
stockholders at the Meeting of this Proposal for Executive Officers as a Group,
Non-Executive Directors as a Group and All Employees, except Executive Officers,
as a Group. The maximum benefit received by such grantees pursuant to these
grants cannot be determined at this time because the future performance of the
Common Stock is unknown. The Committee may make additional grants in 1998 and
beyond that could be on materially different terms from those of the grants set
forth below. It is not possible to determine the maximum benefits (other than
pursuant to limits on the number of shares that may be granted in the aggregate
or to any person) that will be granted to any person in 1998 under the Plan or
what benefits or amount would have been received by any person. Information
concerning Restricted Stock Unit grants to the
18
<PAGE> 21
named Executive Officers is included in the Summary Compensation Table. No named
Executive Officer was granted stock options on December 16, 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF SHARES SUBJECT TO RESTRICTED
NAME AND POSITION SUBJECT TO OPTIONS STOCK UNITS
----------------- ------------------ ---------------------
<S> <C> <C>
Executive Officers as a Group, including those named 1,000 77,500
above.....................................................
Non-Executive Directors as a Group.......................... 125,000 0
All Employees, except Executive Officers, as a Group........ 146,600 0
</TABLE>
On March 20, 1998, the Common Stock closed at $25.9375.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences to the Company and the grantee upon the
grant and exercise of stock options and SARs are substantially as follows:
A grantee will not recognize any taxable income at the time an NQSO is
granted. Upon the exercise of the NQSO, the grantee will recognize ordinary
income equal to the excess of the fair market value of the shares received on
the exercise over the option price.
The Company is not entitled to a tax deduction at the time an NQSO is
granted; however, the Company is entitled to a deduction equal to the grantee's
taxable income at the time the grantee recognizes the income. The Company will
withhold from the grantee taxes due, as the Company determines is required.
A grantee will not recognize income at the time an ISO is granted and
generally will not recognize income when the ISO is exercised. The excess of the
fair market value of the shares received on the date of exercise over the option
price is an item of tax preference for purposes of computing the alternative
minimum tax. If the shares received upon the exercise of an ISO are disposed of
in a "disqualifying disposition" (i.e., disposition of shares within one year
after exercise of the ISO or within two years of the date of grant), the grantee
has income equal to the excess of the amount realized on the disposition over
the exercise price. The excess of the fair market value of the shares on the
date of exercise over the option price will be ordinary income; the balance, if
any, will be a capital gain. If the grantee sells the shares in a disposition
which is not a disqualifying disposition, the grantee will realize capital gain
on the sale equal to the excess of the amount realized on the sale over the
option price.
The Company is not entitled to a tax deduction as a result of the grant or
exercise of an ISO. If the grantee makes a disqualifying disposition of shares,
the Company is entitled to a deduction equal to the amount of the grantee's
ordinary income.
A grantee will not recognize taxable income at the time an SAR is granted.
When the grantee exercises the SAR, the fair market value of the shares received
and/or the cash received is ordinary income to the grantee.
The Company is not entitled to a tax deduction when the SAR is granted but
is entitled to a deduction equal to the taxable income recognized by the grantee
on the exercise of the SAR and the Company will withhold from the grantee taxes
due, as the Company determines is required.
A grantee who receives restricted stock may make an election under Section
83(b) of the Code (a "Section 83(b) Election") to have the grant taxed as
compensation income at the time of receipt, with the result that any future
appreciation (or depreciation) in the value of the shares of stock granted shall
be taxed as a capital gain (or loss) upon a subsequent sale of the shares.
However, if the grantee does not make a Section 83(b) Election, then the grant
will be taxed as compensation income at the full fair market value (less any
amount paid therefor by the grantee) on the date that the restrictions imposed
on the shares expire. Unless a grantee makes a Section 83(b) Election, any
dividends paid on the stock subject to the restrictions are compensation income
to the grantee.
19
<PAGE> 22
The Company is generally entitled to an income tax deduction for any
compensation income taxed to the grantee, including dividends paid on the stock,
subject to the limitations of Section 162(m) of the Code.
THE BOARD RECOMMENDS A VOTE "FOR" THE PLAN. PROXIES SOLICITED BY THE BOARD
WILL BE VOTED "FOR" THE PURCHASE PLAN UNLESS INSTRUCTIONS TO WITHHOLD OR TO THE
CONTRARY ARE GIVEN.
AUDITORS
Ernst & Young LLP served as the Company's auditors for the year ended
December 31, 1997. The Audit Committee intends to make a future recommendation
to the Board concerning the selection of the Company's auditors for the current
fiscal year which began January 1, 1998. There have been no disagreements
between the Company and its auditors relating to accounting procedures,
financial statement disclosures, or related items. Representatives of Ernst &
Young LLP are expected to be available at the Meeting and will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
STOCKHOLDER PROPOSALS
Under regulations adopted by the SEC, stockholder proposals intended to be
presented at the 1999 Annual Meeting of Stockholders must be received by the
Secretary of the Company no later than December 2, 1998, in order to be
considered for inclusion in the Company's proxy statement and on the proxy card
that will be solicited by the Board in connection with the 1998 Meeting.
In addition, the Bylaws of the Company provide that in order for a
stockholder to nominate a candidate for election as a director at a Meeting or
propose business for consideration at such Meeting, notice must generally be
given to the Secretary of the Company no more than 90 days nor less than 60 days
prior to the first anniversary of the preceding year's Meeting. The fact that
the Company may not insist upon compliance with these requirements should not be
construed as a waiver by the Company of its right to do so at any time in the
future.
OTHER MATTERS
The Board is not aware of any business which will be presented at the
Meeting other than those matters set forth in the accompanying Notice of Annual
Meeting of Stockholders. If any other matters are properly presented at the
Meeting for action, it is intended that the persons named in the accompanying
Proxy and acting thereunder will vote in accordance with their best judgment on
such matters.
======= By Order of the Board of
Directors
SUSAN OBUCHOWSKI
Susan Obuchowski
Secretary
March 31, 1998
Chicago, Illinois
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<PAGE> 23
EXHIBIT A
MANUFACTURED HOME COMMUNITIES, INC.
SECOND AMENDED AND RESTATED 1992
STOCK OPTION AND STOCK AWARD PLAN
1. Purpose. The Manufactured Home Communities, Inc. Second Amended and
Restated 1992 Stock Option and Stock Award Plan (the "Plan") has been
established by Manufactured Home Communities, Inc., a Maryland corporation (the
"Company"), to secure for the Company and its stockholders the benefits arising
from capital ownership by those employees, officers, directors and consultants
of the Company and its Subsidiaries (as defined below) who are and will be
responsible for its future growth and continued success. The Plan will provide a
means whereby such individuals may receive: (i) shares of the Common Stock of
the Company ("Shares"), subject to conditions and restrictions described herein
and otherwise determined by the Board of Directors ("Stock Awards"); and (ii)
options to purchase Shares ("Options"). The term "Subsidiary" means each entity
the Company owns or controls directly or indirectly either through voting
control or as a general partner, provided that, for purposes of Incentive Stock
Options (as defined below) such term shall have the meaning given in Section 424
of the Internal Revenue Code of 1986, as amended (the "Code").
2. Administration. The authority to manage and control the operation and
administration of the Plan shall be vested in a Committee (the "Committee")
consisting of two (2) or more members of the Board of Directors of the Company,
each of whom is a "disinterested person" as such term is defined in Section
240.16b-3(c)(2)(i) of the General Rules and Regulations promulgated under the
Securities Exchange Act of 1934 (the "Act") (and, in addition, with respect to
any grant of an Option or the determination of conditions and restrictions
intended to make a Stock Award constitute "performance-based compensation"
within the meaning of Section 162(m)(4)(C) of the Internal Revenue Code, as
amended ("Code"), such grant, award or determination is made by a Committee
consisting of two (2) or more outside directors as such term is defined in
Treasury Regulation Section 1.162-27(e)(3)), who shall be appointed by, and may
be removed by, such Board, provided that the Committee shall have no authority,
power or discretion to determine the number or timing of Options and Stock
Awards granted pursuant to paragraph 3(b) or 3(c), or to alter the terms and
conditions of Options or Stock Awards as set forth therein. Any interpretation
of the Plan by the Committee and any decision made by the Committee on any other
matter within its discretion is final and binding on all persons. No member of
the Committee shall be liable for any action or determination made with respect
to the Plan.
3. Participation.
(a) Subject to the terms and conditions of the Plan, the Committee shall
determine and designate from time to time the employees, officers, directors and
consultants of the Company and its Subsidiaries to whom Options and Stock Awards
are to be granted ("Grantees"), the number of Shares subject to such Option and
Stock Award to be granted to each Grantee and the terms, conditions and
restrictions applicable to such Option or Stock Award. Notwithstanding the
foregoing, the maximum number of Shares with respect to which Options and Stock
Awards may be granted during any calendar year to any Grantee is 250,000 Shares.
(b) An Option to purchase (i) ten thousand (10,000) Shares shall be awarded
to each member of the Board of Directors of the Company on the date of each
meeting of the Board held immediately after each annual meeting of the Company's
stockholders, and (ii) the product of ten thousand (10,000) Shares times a
fraction, the numerator of which is the number of quarters (or any portion
thereof) such director will serve before the next annual meeting of the
Company's stockholders and the denominator of which is four, shall be awarded to
each new member of the Board of Directors of the Company on the date he or she
first becomes a member of the Board of Directors of the Company. A director
shall become a Grantee in the Plan on the first date on which the director is
awarded an Option under the Plan. Directors may, in addition to Options awarded
under this paragraph, also be entitled to Options under paragraph 3(a).
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(c) As of the date on which a distribution (the "Bonus") is made under the
Company's Management by Objectives Bonus Plan (the "MBO Plan"), a Stock Award
will be made to each individual who (i) receives a Bonus, and (ii) has (A) a
title of Vice President or more senior, or (B) a target bonus range of at least
0-20% of base salary. The Grant Value of such Stock Award, as of such date,
shall be in an amount equal to fifty percent (50%) of the Bonus and shall be
made in lieu of fifty percent (50%) of the Bonus otherwise payable to such
individual. All Stock Awards shall be in full satisfaction of the applicable
portion of the Bonus, shall be made without other payment therefor, and shall be
governed by paragraph 5 hereof.
(d) Subject to the provisions of paragraph 15, for all purposes of the Plan
(i) the "Grant Value" of a Stock Award grant made pursuant to paragraph 3(c)
shall equal the Fair Market Value of the Shares subject thereto as of the date
of grant, and (ii) the "Fair Market Value" of a Share as of any date means the
closing price of the Shares on the New York Stock Exchange on such date.
4. Shares Subject to the Plan. Subject to the provisions of paragraph 15,
the aggregate number of Shares for which Options and Stock Awards may be granted
under the Plan shall not exceed 4,000,000 Shares. If any Option or Stock Award
granted pursuant to the Plan shall expire, be forfeited or terminate for any
reason (including without limitation the settlement in cash in lieu of exercise
of an Option), the number of Shares then subject to the Option or Stock Award
shall again be available for grant under the Plan unless the Plan shall have
terminated.
5. Stock Awards.
(a) (i) A Stock Award granted under paragraph 3(a) shall be subject to the
condition that it will be forfeited to the Company upon the Grantee's
termination of employment with the Company and all Extended Companies (as
defined below) within one year from the date of grant of the Stock Award ("Date
of Grant"), and may be subject to such further conditions and restrictions
established by the Committee at the Date of Grant (including conditions
requiring employment by the Grantee for a period in excess of one year). Any
Stock Awards containing further conditions and restrictions as established by
the Committee shall be described in such term sheets or supplements as are
approved by the Committee from time to time. For purposes of the Plan, "Extended
Company" means any company designated as such by the Committee, but only if that
Extended Company either (x) provides that awards that are issued to its
employees and other persons, which are comparable to awards under the Plan, will
not expire if such employees or other persons terminate their relationship with
such company and immediately begin service as an employee, officer, director or
consultant of the Company or (y) has no similar plan in effect. The Extended
Companies may be changed by the Committee from time to time.
(ii) A Stock Award granted under paragraph 3(c) shall be forfeited to the
Company upon a Grantee's termination of employment with the Company and all
Extended Companies within two years from the Date of Grant, unless (A) the
Grantee has five years of service for vesting purposes under the MHC ADVANTAGE
Retirement Plan at the time of such termination of employment, (B) such
termination is not for "good cause" (as determined by the Committee), and (C)
within one year following such termination of employment, the Grantee does not
become employed by a competitor of the Company.
(iii) Notwithstanding the foregoing, the restrictions on all Stock Awards
under this Plan shall immediately lapse in the event of the termination of a
Grantee's employment with the Company or an extended Company following (A) the
Grantee's Disability (as defined in the MHC Advantage Retirement Plan), (B) the
Grantee's death, (C) the Grantee's retirement at or after Normal Retirement Date
as defined in the MHC Advantage Retirement Plan, or (D) a "Change in Control" of
the Company.
(b) A "Change in Control" shall be deemed to occur upon:
(i) the acquisition by any entity, person, or group of more than 50%
of the outstanding Shares from the holders thereof;
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(ii) a merger or consolidation of the Company with one or more other
entities as a result of which the ultimate holders of outstanding Shares
immediately prior to such merger hold less than 50% of the shares of
beneficial ownership of the surviving or resulting corporation; or
(iii) a transfer of substantially all of the property of the Company
other than to an entity of which the Company directly or indirectly owns at
least 50% of the shares of beneficial ownership.
(c) The Grantee shall be entitled to all of the rights of a stockholder
with respect to the Stock Awards including the right to vote such Shares and to
receive dividends and other distributions payable with respect to such Shares
from and after the Date of Grant; provided that any securities or other property
(but not cash) received in any such distribution with respect to a Stock Award
that is still subject to the restrictions in paragraph (a)(i) or (ii) above,
shall be subject to all of the restrictions set forth herein with respect to
such Stock Award.
(d) Certificates for the Stock Award shall be issued in the Grantee's name
and shall be held in escrow by the Company until all restrictions lapse or such
Shares are forfeited as provided herein. A certificate or certificates
representing a Stock Award as to which restrictions have lapsed shall be
delivered to the Grantee upon such lapse.
(e) Whenever the recipient of a Stock Award recognizes income with respect
thereto, the Company shall have the right to withhold from amounts payable to
such recipient in any manner, as necessary to satisfy all federal, state and
local payroll tax withholding requirements. Alternatively, the Committee may
elect to have Shares withheld by the Company from the Shares otherwise to be
delivered to a Grantee. The number of Shares so withheld for payment of tax
withholding shall have an aggregate Fair Market Value as of the later of the
date the Committee makes the foregoing election or the date as of which income
is recognized with respect to such Shares sufficient to satisfy the applicable
withholding taxes.
6. Stock Options. Any Option to purchase Shares granted under paragraph
3(a) that satisfies all of the requirements of Section 422 of the Code may be
designated by the Committee as an "Incentive Stock Option." Options that are not
so designated, or that do not satisfy the requirements of Section 422 of the
Code or that are granted under paragraph 3(b) shall not constitute Incentive
Stock Options and shall be Non-Qualified Stock Options.
7. Option Price. The price at which a Share may be purchased pursuant to
the exercise of any Non-Qualified Stock Option shall not be less than 100% of
its Fair Market Value on the date the Option is awarded under the Plan. The
Option price of an Incentive Stock Option shall not be less than the Fair Market
Value of a Share on the date the Option is awarded under the Plan and, with
respect to an employee who owns on the Date of Grant more than 10% of the
Company's Shares, shall not be less than 110% of its Fair Market Value on such
date.
8. Stock Appreciation Rights. The Committee may, in its sole discretion,
award "Stock Appreciation Rights" together with any Option granted under
paragraph 3(a). A Grantee who is awarded a Stock Appreciation Right shall be
entitled to receive from the Company, at the time such right is exercised, that
number of Shares having an aggregate Fair Market Value as of the date of
exercise equal to the product of (i) the number of Shares as to which the
Grantee is exercising the Stock Appreciation Right, and (ii) the excess of the
Fair Market Value (at the date of exercise) of a Share over the exercise price
specified by the Committee at the time of the award of the related Option,
provided that the Committee, in its sole discretion, may elect to settle all or
a portion of the Company's obligation arising out of the exercise of a Stock
Appreciation Right by the payment of cash in an amount equal to the Fair Market
Value as of the date of exercise of the Shares it would otherwise be obligated
to deliver; provided that any election by the Committee to settle in cash with
regard to a Grantee who is subject to Section 16 of the Act shall be in
conformance with Section 240.16b-3 of the General Rules and Regulations
promulgated under the Act. Stock Appreciation Rights shall be exercisable only
to the extent that the related Option is exercisable and at the exercise price
of the Option. The Stock Appreciation Right shall be canceled to the extent that
the related Option is
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<PAGE> 26
exercised and the Option shall be canceled to the extent that the related Stock
Appreciation Right is exercised.
9. Option Expiration Date. The "Expiration Date" with respect to an Option
or any portion thereof granted under paragraph 3(a) means the date established
by the Committee at the Date of Grant (subject to any earlier termination by the
Committee), but in no event later than the date which is ten (10) years after
the date on which the Option is granted. If the employment of a Grantee with the
Company and all Extended Companies terminates for any reason (other than death
or disability which are governed by Section 12), such Grantee's Option may not
be exercised after the date of such cessation of employment except to the extent
the Committee permits exercise after such date but, in any case, no later than
(i) three months after Grantee's termination for any reason (other than death,
disability or Change in Control) and (ii) the Option's Expiration Date.
Notwithstanding the foregoing, in no event may a Grantee exercise an Option
following the termination of the Grantee's employment if the Committee
determines in its discretion that such employment was terminated for good cause.
The Expiration Date with respect to an Option or any portion thereof granted
under paragraph 3(b) means the date which is ten (10) years after the date on
which the Option is granted. All rights to purchase Shares pursuant to an Option
shall cease as of the Option's Expiration Date. In the event of a Change in
Control, all Options then outstanding under the Plan shall immediately vest.
10. Exercise of Options.
(a) Each Option granted under paragraph 3(a) shall be exercisable, either
in whole or in part, at such time or times as shall be determined by the
Committee at the time the Option is granted or at such earlier times as the
Committee shall subsequently determine, but in no event later than the Option's
Expiration Date.
(b) Shares with respect to which Incentive Stock Options are exercisable
for the first time by a Grantee during any calendar year may not exceed one
hundred thousand dollars ($100,000)). Any Options that become exercisable in
excess of such amount shall be deemed to be a Non-Qualified Stock Option to the
extent of such excess.
(c) Each Option granted under paragraph 3(b) shall be exercisable, either
in whole or in part, (i) with respect to three thousand, three hundred and
thirty-three (3,333) of the Shares at any time on or after six (6) months from
the Date of Grant, (ii) with respect to an additional three thousand, three
hundred and thirty-three (3,333) of the Shares at any time on or after the first
anniversary of the Date of Grant and (iii) with respect to the remaining Shares
at any time on or after the second anniversary of the Date of Grant, but, in
each case, no later than the Option's Expiration Date.
(d) A Grantee may exercise an Option or a Stock Appreciation Right by
giving written notice thereof prior to the Option's Expiration Date to the
Secretary of the Company at the principal executive offices of the Company.
Contemporaneously with the delivery of notice with respect to exercise of an
Option, the full purchase price of the Shares purchased pursuant to the exercise
of the Option, together with any required state or federal withholding taxes,
shall be paid in cash, by tender of share certificates in proper form for
transfer to the Company valued at the Fair Market Value of the Shares on the
preceding day, by any combination of the foregoing or with any other
consideration.
(e) Upon the exercise of an Option or a Stock Appreciation Right requiring
tax withholding, the Committee may elect to have Shares withheld by the Company
from the Shares otherwise to be received by a Grantee. The number of Shares so
withheld for payment of tax withholding shall have an aggregate Fair Market
Value as of the date of exercise sufficient to satisfy the applicable
withholding taxes. In addition to the terms set forth in this paragraph 10, all
exercised Options and Stock Appreciation Rights shall be subject to such
additional guidelines as established by the Committee.
11. Compliance with Applicable Laws. Notwithstanding any other provision in
the Plan, the Company shall have no liability to issue any Shares under the Plan
unless such issuance would comply with all applicable laws and applicable
requirements of any securities exchange or similar entity. Prior to the issuance
of any Shares under the Plan, the Company may require a written statement that
the
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<PAGE> 27
recipient is acquiring the Shares for investment and not for the purpose or with
the intention of distributing the Shares.
12. Death/Disability of Grantee.
(a) In the event of the death or disability (as defined in the MHC
ADVANTAGE Plan, or, for ISOs only, as defined in Section 22(e)(3) of the Code)
of a Grantee, all outstanding Options held by the Grantee on the date of his
disability or by the Grantee on the date of his death (or, in either case, by a
permitted transferee under paragraph 13) shall be exercisable by the Grantee or,
in the case of the death of a Grantee, by the person or persons to whom that
right passes by will or by the laws of descent and distribution for a period of
twelve (12) months after the date of death or disability, but no later than the
Option's Expiration Date. Any such exercise shall be by written notice thereof
filed with the Secretary of the Company at the principal executive offices of
the Company prior to the Option's Expiration Date.
(b) Upon the death or disability of a Grantee, all restrictions on a Stock
Award previously granted to the Grantee shall lapse and such Shares shall be
delivered to the Grantee or to the person or persons to whom the right to such
Shares passes by will or by the laws of descent and distribution.
13. Transferability.
(a) The Shares subject to Stock Awards granted under paragraph 3(a) or 3(c)
shall not be sold, assigned, pledged or otherwise transferred, voluntarily or
involuntarily, by the Grantee, while they are subject to the restrictions
described in paragraph 5(a).
(b) Options granted under the Plan are not transferable except (i) by will
or by the laws of descent and distribution or, to the extent not inconsistent
with the applicable provisions of the Code, pursuant to a qualified domestic
relations order (as that term is defined in the Code) and (ii) a Grantee may
transfer all or part of an Option that is not an Incentive Stock Option, or a
Stock Appreciation Right, to the Grantee's spouse, child or children, grandchild
or grandchildren, or other relatives or to a trust for the benefit of the
Grantee and/or any of the foregoing; provided that the transferee thereof shall
hold such Option or Stock Appreciation Right subject to all of the conditions
and restrictions contained herein and otherwise applicable to the Option or
Stock Appreciation Right, and that, as a condition to such transfer, the Company
may require the transferee to agree in writing (in a form acceptable to the
Company) that the transfer is subject to such conditions and restrictions.
Except to the extent held by a permitted transferee hereunder, Options and Stock
Appreciation Rights may be exercised during the lifetime of the Grantee only by
the Grantee, and after the death of the Grantee, only as provided in paragraph
12.
14. Employment and Stockholder Status. The Plan does not constitute a
contract of employment or continued service, and selection as a Grantee will not
give any employee or Grantee the right to be retained in the employ of the
Company or any Extended Company or the right to continue as a director of the
Company. Any Option or a Stock Award granted under the Plan shall not confer
upon the holder thereof any right as a stockholder of the Company prior to the
issuance of Shares pursuant to the exercise thereof. No person entitled to
exercise any Option or Stock Appreciation Right granted under the Plan shall
have any of the rights or privileges of a stockholder of record with respect to
any Shares issuable upon exercise of such Option or Stock Appreciation Right
until certificates representing such Shares have been issued and delivered. If
the redistribution of Shares is restricted pursuant to paragraph 11,
certificates representing such Shares may bear a legend referring to such
restrictions.
15. Adjustments to Number of Shares Subject to the Plan and to Option
Terms. Subject to the following provisions of this paragraph 15, in the event of
any change in the outstanding Shares by reason of any share dividend, split,
recapitalization, merger, consolidation, combination, exchange of shares or
other similar corporate change, the aggregate number and kind of Shares reserved
for issuance under the Plan or subject to Options outstanding or to be granted
under the Plan shall be proportionately adjusted so that the value of each
Option shall not be changed, and the terms of any outstanding Option may be
adjusted by the Committee in such manner as it deems equitable, provided
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<PAGE> 28
that, in no event shall the Option price for a Share be adjusted below the par
value of such Share, nor shall any fraction of a Share be issued upon the
exercise of an Option. Shares subject to a Stock Award shall be treated in the
same manner as other outstanding Shares; provided that any conditions and
restrictions applicable to a Stock Award shall continue to apply to any Shares,
other security or other consideration received in connection with the foregoing.
16. Agreement with Company. At the time of a grant, the Committee may
require a Grantee to enter into an agreement with the Company in a form
specified by the Committee agreeing to the terms and conditions of the Plan and
to such additional terms and conditions, not inconsistent with the Plan, as the
Committee may, in its sole discretion, prescribe.
17. Term of Plan. The Plan was effective December 18, 1992. No Options,
Stock Awards or Stock Appreciation Rights may be granted under the Plan after
December 18, 2002 or, if earlier, the date on which the Plan is terminated
pursuant to paragraph 18.
18. Amendment and Termination of Plan. Subject to any approval of the
stockholders of the Company which may be required by law, the Board of Directors
of the Company may at any time amend, suspend or terminate the Plan. No
amendment, suspension or termination of the Plan shall alter or impair any
Option, or Stock Appreciation Right or Stock Award previously granted under the
Plan without the consent of the holder thereof. No amendment requiring
stockholder approval under Section 240.16b-3 of the Act, Treasury Regulation
Section 1.162-27 or Section 422 of the Code shall be valid unless such
stockholder approval is secured as provided therein.
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<PAGE> 29
MANUFACTURED HOME COMMUNITIES, INC.
Two North Riverside Plaza, Chicago, Illinois 60606
Proxy for Annual Meeting of Stockholders
Solicited on Behalf of the Board of Directors
The undersigned stockholder of Manufactured Home Communities, Inc., a
Maryland corporation (the "Company"), hereby appoints SAMUEL ZELL and HOWARD
WALKER, or either of them, with full power of substitution in each of them, to
attend the Annual Meeting of Stockholders of the Company to be held on Tuesday,
May 12, 1998, at 10:00 a.m., Chicago time, and any adjournment or postponement
thereof, to cast on behalf of the undersigned all votes that the undersigned
is entitled to cast at such meeting and otherwise to represent the undersigned
at the meeting with all powers possessed by the undersigned if personally
present at the meeting. The undersigned hereby acknowledges receipt of the
Notice of the Annual Meeting of Stockholders and of the accompanying Proxy
Statement and revokes any proxy heretofore given with respect to such meeting.
The votes entitled to be cast by the undersigned will be cast as instructed
below. If this proxy is executed but no instruction is given, the votes
entitled to be cast by the undersigned will be cast "for" each of the nominees
for director and "for" each of the other proposals as described in the Proxy
Statement and in the discretion of the proxy holder on any other matter that
may properly come before the meeting or any adjournment or postponement
thereof.
- ------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENTS/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 30
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Please mark [ ]
your votes as [ ]
indicated in [ X ]
this example [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1 AND PROPOSAL 2.
I PLAN TO ATTEND MEETING [ ]
Proposal 1 - ELECTION OF DIRECTORS
Nominees: Louis H. Masotti, Sheli Z. FOR WITHHELD
Rosenberg and Gary L. Waterman FOR ALL COMMENTS/ADDRESS CHANGE
Please mark this box if you have [ ]
WITHHELD FOR (Write name of nominee/s in space any written comments/address
provided below). [ ] [ ] change on the reverse side.
__________________________________________________
FOR AGAINST ABSTAIN
Proposal 2 -ADOPTION OF THE COMPANY'S Second [ ] [ ] [ ] And on any other matter which may properly come
Amended and Restated 1992 Stock Option and before the meeting or any adjournment or postponement
Stock Award Plan thereof in the discretion of the Proxy holder.
Signature(s) Date
---------------------------------------------------------------------------------------- ----------------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee , guardian or officer, please give full title under signature.
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FOLD AND DETACH HERE
</TABLE>
