<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / 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
- --------------------------------------------------------------------------------
(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)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE>
[LOGO]
---------------------------------------
NOTICE OF THE 2000
ANNUAL MEETING OF SHAREHOLDERS
---------------------------------------
Dear Equity Residential Shareholder:
The trustees and officers of Equity Residential Properties Trust
cordially invite you to attend our 2000 Annual Meeting of Shareholders. This
year's meeting will be held on Tuesday, May 16, 2000, at 10:00 a.m., at One
North Franklin Street, Third Floor, Chicago, Illinois. At the meeting we will
consider and take action on the following matters:
(1) Election of four trustees to the Board of Trustees to terms
expiring in 2003; and
(2) Any other business properly before the meeting.
Your Board of Trustees recommends that you vote for each of the
nominees for trustee. Shareholders of record at the close of business on March
17, 2000 are entitled to vote at the meeting.
Your vote is very important. In addition to voting by signing, dating
and mailing the enclosed proxy card, you may instead vote by using a toll-free
telephone number or the Internet. If you attend the meeting and prefer to vote
in person, you may do so. Whether you plan to attend the meeting or not, we
encourage you to vote as soon as possible so that your shares will be
represented at the meeting.
Sincerely,
/s/ Bruce C. Strohm
-----------------------------------------
Bruce C. Strohm
Executive Vice President, General Counsel
and Secretary
Two North Riverside Plaza
Chicago, Illinois
March 31, 2000
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
TWO NORTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
- -------------------------------------------------------------------------------
PROXY STATEMENT
- -------------------------------------------------------------------------------
This Proxy Statement contains information related to the Annual Meeting
of Equity Residential Properties Trust ("Equity Residential" or the "Trust"),
which will be held on Tuesday, May 16, 2000, at 10:00 a.m., at One North
Franklin Street, Third Floor, Chicago, Illinois.
ABOUT THE ANNUAL MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Annual Meeting, shareholders will vote on the proposal regarding
the election of trustees. We sent you these proxy materials because our Board of
Trustees is requesting that you allow your common shares to be represented at
the meeting by the proxies named in the enclosed proxy card. This Proxy
Statement summarizes information that we are required to provide you under the
rules of the Securities and Exchange Commission ("SEC") and that is designed to
assist you in voting your shares. On March 31, 2000, we began mailing these
proxy materials to all shareholders of record at the close of business on March
17, 2000. Equity Residential will pay the cost of this proxy solicitation, which
is expected to be nominal.
WHO IS ENTITLED TO VOTE?
You will be entitled to vote your shares on any proposal if you held
your shares as of the close of business on March 17, 2000. Each of the shares
outstanding on that date is entitled to one vote on the proposal.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the common shares outstanding on the record date of March 17, 2000,
will constitute a quorum, permitting the meeting to conduct its business. As of
the record date, a total of 127,360,099 common shares were outstanding and
entitled to vote. If you have returned valid proxy instructions (whether in
writing, by phone or by Internet) or attend the meeting in person, your shares
will be counted for the purpose of determining whether there is a quorum.
Abstentions and broker non-votes count for quorum purposes, but we do not count
abstentions or broker non-votes as votes for or against any proposal.
<PAGE>
HOW DO I VOTE?
YOUR VOTE IS IMPORTANT. Shareholders can vote in person at the Annual
Meeting or by proxy. If you are a registered shareholder (that is, if you hold
your shares in your own name and not through a broker or other nominee), there
are three ways to vote by proxy:
- BY TELEPHONE: You can vote by touch-tone telephone using the
toll-free number 1-877-PRX-VOTE (1-877-779-8683) and following the
instructions on the proxy card;
- BY INTERNET: You can vote by Internet by going to the website at
http://www.eproxyvote.com/eqr and following the instructions
provided; or
- BY MAIL: You can vote by mail by signing, dating and mailing the
enclosed proxy card in the envelope provided.
If you vote by proxy, the individuals named on the proxy card as
representatives will vote your shares in the manner you indicate. You may
specify whether your shares should be voted for all, some or none of the
nominees for trustee.
If your shares are held in "street name" through a broker or other
nominee, you will need to contact your broker or other nominee to determine
whether you will be able to vote by telephone or Internet.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
If no instructions are indicated on your properly voted proxy, the
representatives holding proxies will vote in accordance with the recommendations
of the Board of Trustees. In summary, the Board recommends a vote for the
election of the nominated slate of trustees.
With respect to any other matter that properly comes before the
meeting, the representatives holding proxies will vote as recommended by the
Board, or if no recommendation is given, in their own discretion.
CAN I REVOKE OR CHANGE MY PROXY?
Yes, you may change or revoke your proxy at any time before the
meeting. To do so, you must advise the Secretary of Equity Residential in
writing before your shares are voted by the representatives at the meeting,
deliver later proxy instructions, or attend the meeting and vote your shares in
person. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, but attendance at the meeting will not by
itself revoke a previously granted proxy.
2
<PAGE>
WHAT VOTE IS REQUIRED TO APPROVE THE ELECTION OF TRUSTEES?
The affirmative vote of a plurality of all the votes cast at the
meeting is required for the election of trustees, meaning that the four nominees
for trustee with the most votes will be elected. A properly voted proxy marked
"WITHHELD" with respect to the election of one or more trustees will not be
voted with respect to the trustee or trustees indicated, although it will be
counted for purposes of whether there is a quorum.
If you hold shares in "street name," your broker or nominee may not be
permitted to exercise voting discretion with respect to certain matters that are
not routine. Therefore, unless you give your broker or nominee specific
instructions, your shares may not be voted on those matters and will not be
counted in determining the number of shares necessary for approval. Shares
represented by such "broker non-votes" will, however, be counted in determining
whether a quorum exists.
HOW DO I DISCONTINUE FUTURE DUPLICATE COPIES OF ANNUAL REPORTS?
Our 1999 Annual Report has been mailed to shareholders with this Proxy
Statement. If more than one copy of the Annual Report is sent to your address,
we will discontinue the mailing of reports on the account you select if you mark
the designated box on the appropriate proxy card(s), or if you are a shareholder
of record, if you call our transfer agent, EquiServe, toll-free at
1-800-733-5001, or follow the instructions if you are voting by Internet.
3
<PAGE>
PROPOSAL 1
ELECTION OF TRUSTEES
BOARD OF TRUSTEES. The business and affairs of Equity Residential are
managed under the direction of the Board, which consists of fourteen trustees.
The Board has responsibility for establishing broad corporate policies and for
the overall performance of Equity Residential rather than day-to-day operating
details. Members of the Board are kept informed of Equity Residential's business
by various reports and documents sent to them each month, as well as by reports
presented at meetings of the Board and its committees by officers of Equity
Residential.
Our Declaration of Trust provides that our trustees are to be divided
into three classes as nearly equal in number as possible, with each class having
three-year terms that expire in successive years. The current term of four of
our trustees expires at the 2000 Annual Meeting. The Board has nominated Stephen
O. Evans, Edward Lowenthal, Jeffrey H. Lynford and B. Joseph White for
re-election to serve as trustees of Equity Residential until the 2003 meeting
and until their successors are duly elected and qualified.
GENERAL INFORMATION ABOUT THE NOMINEES. All of the nominees are
presently trustees and each of them has consented to be named in this Proxy
Statement and to serve if elected. In 1999 each of the nominees attended at
least 75% of the meetings of the Board and committees on which the nominees
served in that year. Biographical information for each of the nominees is set
forth below under the caption "Management."
VOTE REQUIRED. The affirmative vote of a plurality of all the votes
cast in person or by proxy at the meeting is required for the election of
trustees. This means that the four nominees for trustee with the most votes will
be elected. An abstention will have no effect on the outcome of the election of
trustees.
Although we know of no reason why any of the nominees would not be able
to serve, if any nominee should become unavailable for election, the Board may
designate a substitute nominee. In that case, the persons named as proxies will
vote for the substitute nominee designated by the Board.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED "FOR" THE NOMINEES UNLESS INSTRUCTIONS TO
WITHHOLD OR TO THE CONTRARY ARE GIVEN.
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<PAGE>
MANAGEMENT
TRUSTEES AND EXECUTIVE OFFICERS
The following table and biographies provide certain information with
respect to the trustees and executive officers of Equity Residential as of March
1, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Samuel Zell 58 Chairman of the Board of Trustees (term expires in 2002)
Douglas Crocker II 59 President, Chief Executive Officer and Trustee
(term expires in 2001)
John W. Alexander 52 Trustee (term expires in 2002)
Stephen O. Evans 54 Trustee (term expires in 2000)
Henry H. Goldberg 61 Trustee (term expires in 2002)
Errol R. Halperin 59 Trustee (term expires in 2002)
James D. Harper, Jr. 66 Trustee (term expires in 2001)
Boone A. Knox 63 Trustee (term expires in 2002)
Edward Lowenthal 55 Trustee (term expires in 2000)
Jeffrey H. Lynford 52 Trustee (term expires in 2000)
Sheli Z. Rosenberg 58 Trustee (term expires in 2001)
Gerald A. Spector 53 Executive Vice President, Chief Operating Officer and Trustee
(term expires in 2001)
Michael N. Thompson 51 Trustee (term expires in 2001)
B. Joseph White 52 Trustee (term expires in 2000)
Leslie B. Fox 41 Executive Vice President and President - Lexford Division
Alan W. George 42 Executive Vice President - Acquisitions/Dispositions and Strategic Business
Development
Edward J. Geraghty 50 Executive Vice President and President - Eastern Division
Michael J. McHugh 44 Executive Vice President, Chief Accounting Officer and Treasurer
David J. Neithercut 44 Executive Vice President and Chief Financial Officer
Gregory H. Smith 48 Executive Vice President and President - Central Division
Bruce C. Strohm 45 Executive Vice President, General Counsel and Secretary
Frederick C. Tuomi 45 Executive Vice President and President - Western Division
</TABLE>
The following is a biographical summary of the experience of the
trustees and executive officers of the Trust. Officers serve at the pleasure of
the Board.
Samuel Zell has been Chairman of the Board of the Trust since March
1993. Since January 1999, Mr. Zell has been chairman of Equity Group
Investments, LLC, an investment company ("EGI LLC"). For more than five years
prior to 1999, Mr. Zell had been chairman of the board of directors of Equity
Group Investments, Inc., an owner, manager and financier of real estate and
corporations ("EGI"). He is also chairman of the board of directors of American
Classic Voyages Co., an owner and operator of cruise lines, Anixter
International Inc., a provider
5
<PAGE>
of integrated network and cabling systems ("Anixter"), Manufactured Home
Communities, Inc. ("MHC"), a manufactured home community real estate investment
trust ("REIT"), Chart House Enterprises, Inc., an owner and operator of
restaurants, Capital Trust, Inc., a specialized finance company ("Capital
Trust"), Davel Communications, Inc., an owner and operator of public payphones,
Danielson Holding Corporation, an insurance holding company, and Equity Office
Properties Trust, an office building REIT ("EOP"). He is a director of Ramco
Energy plc, an independent oil company based in the United Kingdom.
Douglas Crocker II has been Chief Executive Officer, President and a
Trustee of the Trust since March 1993. Mr. Crocker has been a director of
Wellsford Real Properties, Inc. ("WRP"), a publicly traded real estate merchant
banking firm since its formation in June 1997, Ventas, Inc., a real estate
company focusing on the ownership and acquisition of health care properties,
since November 1998, and was a director of Horizon Group Inc., an owner,
developer and operator of outlet retail properties from July 1996 to June 1998.
Mr. Crocker has been president and chief executive officer of First Capital
Financial Corporation, a sponsor of public limited real estate partnerships
("First Capital"), since December 1992, and a director of First Capital since
January 1993. He was an executive vice president of Equity Financial and
Management Company, a subsidiary of EGI, providing strategic direction and
services for EGI's real estate and corporate activities from November 1992 until
March 1997. Mr. Crocker chairs and serves on boards or committees of various
multi-family housing associations, including the National Multi-Housing Council
and the Multifamily Council of the Urban Land Institute, and is a member of the
Board of Governors of the National Association of Real Estate Investment Trusts
("NAREIT").
John W. Alexander has been a Trustee of the Trust since May 1993 and is
the president of Mallard Creek Capital Partners, Inc., an investment company
with interests in real estate and development entities. He is also a partner of
Meringoff Equities, a real estate investment and development company, and is a
member of the International Council of Shopping Centers and the Urban Land
Institute.
Stephen O. Evans has been a Trustee of the Trust since December 23,
1997, the date of the merger of Evans Withycombe Residential, Inc. ("Evans"), a
multifamily property REIT founded by Mr. Evans, into the Trust ("Evans Merger"),
and is President of Evans Realty Associates, a real estate holding company. Mr.
Evans has also served as an Executive Vice President from December 1997 to
December 1999. Prior to the Evans Merger, Mr. Evans served as the chairman of
the board and chief executive officer of Evans since its formation in May 1994.
Mr. Evans is a member of NAREIT, Lambda Alpha, a national land economic
fraternity, and the Urban Land Institute.
Henry H. Goldberg has been a Trustee of the Trust since January 1995.
Mr. Goldberg is chairman of the board, chief executive officer and founder of
The Artery Group, L.L.C., a diversified real estate company. Mr. Goldberg is
also a director of the University of Maryland Foundation.
6
<PAGE>
Errol R. Halperin has been a Trustee of the Trust since May 1993. Mr.
Halperin has been an attorney at the law firm of Piper Marbury Rudnick & Wolfe
and its predecessor since 1979, serving as a senior partner and a member of the
firm's executive committee since 1981 and co-chairman of the firm's Business and
Technology Group since 1999, and a director of Elkay Manufacturing Company, a
plumbing fixtures manufacturer, since 1980. Mr. Halperin specializes in federal
income tax counseling and real estate and corporate transactions.
James D. Harper, Jr. has been a Trustee of the Trust since May 1993.
Mr. Harper is the president of JDH Realty Co., a real estate development and
investment company, and is the principal partner in AH Development, S.E. and AH
HA Investments, S.E., special limited partnerships formed to develop over 400
acres of land in Puerto Rico. He is a trustee of EOP and a director of Burnham
Pacific Properties Inc., a commercial real estate REIT. Mr. Harper is also a
trustee of the Urban Land Institute.
Boone A. Knox has been a Trustee of the Trust since October 19, 1998,
the date of the merger of Merry Land & Investment Company, Inc. ("Merry Land"),
a multifamily property REIT, into the Trust ("Merry Land Merger"). Mr. Knox has
been a director of Merry Land Properties, Inc. ("MRYP"), a publicly traded
diversified real estate company, since its formation as part of the Merry Land
Merger. Prior to the Merry Land Merger, Mr. Knox had been chairman of the board
of Merry Land since December 1996. Mr. Knox has served as chairman of the board
of directors of Regions Bank, Central Georgia since January 1997, and has been a
director of Cousins Properties, Incorporated, a retail and office building REIT,
since 1969, and of The InterCept Group, Inc., a technology products and services
provider to financial institutions, since February 1998.
Edward Lowenthal has been a Trustee of the Trust since June 1997,
shortly after the merger of Wellsford Residential Property Trust ("Wellsford"),
a multifamily property REIT, and the Trust on May 30, 1997 (the "Wellsford
Merger"). Mr. Lowenthal has been the president, chief executive officer and a
director of WRP since its formation in January 1997, and had been the president
and chief executive officer and a trustee of Wellsford since its formation in
July 1992 until the Wellsford Merger. Mr. Lowenthal is a director of Omega
Healthcare, Inc., a healthcare REIT, Omega Worldwide, Inc., a health care
finance company, and Great Lakes REIT, Inc., an office building REIT. He is also
a member of the Board of Governors of NAREIT and a member of the New York bar.
Jeffrey H. Lynford has been a Trustee of the Trust since June 1997,
shortly after the Wellsford Merger. Mr. Lynford has been the chairman of the
board and secretary of WRP since its formation in January 1997, and had been the
chairman of the board and secretary of Wellsford since its formation in July
1992 until the Wellsford Merger. Mr. Lynford currently serves as a trustee
emeritus of the National Trust for Historic Preservation and as a director of
six mutual funds managed by Cohen & Steers. He is also a trustee of Polytechnic
University, a trustee for Caramoor Center for Music and the Arts, and a member
of the New York bar.
7
<PAGE>
Sheli Z. Rosenberg has been a Trustee of the Trust since March 1993.
Ms. Rosenberg has been vice chairman of EGI, LLC from January 1, 2000 and chief
executive officer and president of EGI LLC from January 1, 1999 to January 1,
2000. From November 1994 until 1999, Ms. Rosenberg had been chief executive
officer, president and a director of EGI. Ms. Rosenberg had been a principal of
the law firm of Rosenberg & Liebentritt, P.C. ("R&L"), from 1980 to 1997. Ms.
Rosenberg is a trustee of EOP and is a director of Capital Trust, MHC, Anixter,
CVS Corporation, a drugstore chain, Dynergy Inc., a supplier of electricity and
natural gas, and Danka Business Systems PLC, an office imaging equipment and
services supplier.
Gerald A. Spector has been a Trustee and Executive Vice President of
the Trust since March 1993 and Chief Operating Officer of the Trust since
February 1995.
Michael N. Thompson has been a Trustee of the Trust since October 19,
1998, the date of the Merry Land Merger. Mr. Thompson has been president, chief
operating officer and a director of MRYP since its formation as part of the
Merry Land Merger. Prior to the Merry Land Merger, Mr. Thompson served as
executive vice president and chief operating officer of Merry Land since
December 1996, and as a vice president of Merry Land from August 1992 until
December 1996.
B. Joseph White has been a Trustee of the Trust since May 1993. Mr.
White has been a professor at the University of Michigan Business School since
1987 and has served as the dean since 1991. Mr. White is a director of Kelly
Services, Inc., a temporary services firm, Gordon Food Service, Inc., a
midwestern food distribution company, Kaydon Corporation, a manufacturer of
precision engineered metal products, and five mutual funds managed by Alger
Management, Inc.
Leslie B. Fox has been Executive Vice President and President - Lexford
Division of the Trust since October 1, 1999, the date of the merger of Lexford
Residential Trust ("Lexford") into the Trust (the "Lexford Merger"). Prior to
the Lexford Merger, Ms. Fox had been executive vice president and chief
operating officer of Lexford since December 1997, and executive vice president
investment management since June 1997. Ms. Fox was president of Asset Investors
Corporation ("AIC") and Commercial Assets, Incorporated ("CAI"), both publicly
traded REITs, from October 1996 through May 1997, and held senior management
positions with AIC and CAI from November 1993 through September 1996.
Alan W. George has been Executive Vice President - Acquisitions/
Dispositions and Strategic Business Development of the Trust since February
1997 and was Senior Vice President - Acquisitions of the Trust from December
1995 until February 1997.
Edward J. Geraghty has been Executive Vice President of the Trust since
March 1998 and President - Eastern Division since April, 1999. Mr. Geraghty was
a managing director - real estate of The Travelers Investment Group, Inc. from
June 1995 to March 1998.
8
<PAGE>
Michael J. McHugh has been an Executive Vice President of the Trust
since January 1998, and Chief Accounting Officer and Treasurer of the Trust
since February 1995. Mr. McHugh was Senior Vice President of the Trust from
February 1995 until January 1998.
David J. Neithercut has been Executive Vice President and Chief
Financial Officer of the Trust since February 1995.
Gregory H. Smith has been Executive Vice President of the Trust since
December 1994 and President - Central Division since April 1999.
Bruce C. Strohm has been Executive Vice President and General Counsel
of the Trust since March 1995 and Secretary of the Trust since November 1995.
Frederick C. Tuomi has been Executive Vice President of the Trust since
January 1994 and President - Western Division since April 1999.
MEETINGS AND COMMITTEES OF THE BOARD OF TRUSTEES
MEETINGS. The Board held 15 meetings during 1999. All of the trustees
attended at least 75% of the meetings of the Board and committees on which he or
she served, except Mr. Knox who attended approximately 73% of the Board meetings
and 25% of the Audit Committee meetings. The Board has standing Executive,
Compensation, Audit and Corporate Governance Committees, all of which are
described below.
EXECUTIVE COMMITTEE. The Executive Committee is comprised of Mr. Zell,
Chairman, and Messrs. Alexander, Crocker and Thompson. The Executive Committee
has the authority within certain parameters to acquire, dispose of and finance
investments for the Trust, including the issuance of additional limited
partnership interests ("OP units") in ERP Operating Limited Partnership (the
"Operating Partnership"). The Executive Committee held four meetings in 1999.
COMPENSATION COMMITTEE. The Compensation Committee, which is comprised
entirely of trustees who are not officers or employees of the Trust, is
comprised of Mr. Harper, Chairman, Mr. Halperin and Ms. Rosenberg. The
Compensation Committee reviews and makes recommendations concerning proposals by
management regarding compensation, bonuses, loans, employment agreements and
other benefits and policies respecting such matters for the executive officers
of the Trust. The Compensation Committee held seven meetings in 1999.
AUDIT COMMITTEE. During 1999 the Audit Committee, which is comprised
entirely of trustees who are not officers or employees of the Trust, was
comprised of Mr. White, Chairman, and Messrs. Alexander, Halperin, Knox,
Lowenthal and Lynford. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews the plans and results of
the audit engagement with the independent public accountants, approves all
related party transactions, and evaluates significant matters relating to the
audit and internal
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<PAGE>
controls of the Trust. The Audit Committee held four meetings in 1999. As of
February 15, 2000, the Audit Committee is comprised of Mr. White, Chairman,
Messrs. Alexander and Harper and Ms. Rosenberg.
CORPORATE GOVERNANCE COMMITTEE. The Corporate Governance Committee is
comprised of Ms. Rosenberg, Chairman, and Messrs. Evans, Goldberg, Lowenthal and
White. The Corporate Governance Committee recommends candidates for election to
the Board, considers issues and makes recommendations concerning the size,
composition and organization of the Board, including committee assignments,
makes recommendations on the Board's practices and considers other issues
relating to corporate governance. The Corporate Governance Committee held four
meetings in 1999.
COMPENSATION OF TRUSTEES
Trustees who are not employees of the Trust and Mr. Evans each received
an annual fee in 1999 of $40,000 for serving as trustees. In addition, trustees
who serve on the Executive Committee, the Compensation Committee, the Audit
Committee or the Corporate Governance Committee receive an additional $1,000 per
year for each committee on which they serve. Committee chairs for the Audit
Committee and the Compensation Committee receive an additional $4,000 per year,
the Committee chair of the Executive Committee receives an additional $500 per
year and the Committee chair of the Corporate Governance Committee receives an
additional $1,500 per year. The Trust also reimburses the trustees of each
committee for travel expenses incurred in connection with their activities on
behalf of the Trust. Each trustee is also granted options to purchase 5,000
common shares at the current market price as of each annual meeting of
shareholders. These options vest in approximately equal installments of six
months, one year and two years from the date of grant.
In addition, in January 1999 Mr. Zell and Ms. Rosenberg were granted
options to purchase 150,000 and 25,000 common shares, respectively, at the
current market price as of the grant date. These options vest in equal
installments over three years. In January 1999 Mr. Zell and Ms. Rosenberg were
also awarded 30,047 and 5,008 restricted common shares, respectively, at the
current price as of the grant date. These shares vest in full upon the third
anniversary of the share grant. In March 1999 Messrs. Harper and White were also
each granted 1,244 fully vested common shares at the current price as of the
grant date in recognition of the extensive work involved in chairing the
Compensation and Audit Committees, respectively, over the past years.
The Trust has adopted an optional deferred compensation plan for its
non-employee trustees pursuant to which these trustees may take any percentage
of their annual trustees' compensation they desire in the form of cash, which is
placed in a Supplemental Retirement Savings Plan on a tax deferred basis and
used to purchase common shares under the Trust's 1996 Non-Qualified Employee
Share Purchase Plan. Each trustee is immediately 100% vested in his or her
common shares and is allowed to begin withdrawals over a one to ten year period
following termination of his or her trusteeship. The majority of the trustees
have elected to join the deferred compensation plan and defer the taxation of
all fees received.
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<PAGE>
SHARE OWNERSHIP OF TRUSTEES AND MANAGEMENT
The following table sets forth information as of March 1, 2000,
concerning the beneficial ownership of the Trust's common shares by each
trustee, its five most highly compensated executive officers at year end, and
the trustees and all executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES UPON PERCENT OF
COMMON EXERCISE OF COMMON
NAME SHARES(1) OPTIONS(2) TOTAL(1) SHARES(1)
---- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Samuel Zell 3,235,723(3) 480,001 3,715,724 2.85%
Douglas Crocker II 292,505(4) 770,833 1,063,338 *
John W. Alexander 7,432 30,001 37,433 *
Stephen O. Evans 743,641(5) 82,001 825,642 *
Henry H. Goldberg 421,146(6) 20,001 441,147 *
Errol R. Halperin 6,796(7) 30,001 36,797 *
James D. Harper, Jr. 6,997 30,001 36,998 *
Boone A. Knox 1,432,687(8) 1,667 1,434,354 1.13%
Edward Lowenthal 103,474(9) 10,001 113,475 *
Jeffrey H. Lynford 50,680 10,001 60,681 *
Sheli Z. Rosenberg 109,149(10) 101,667 210,816 *
Gerald A. Spector 194,683(11) 329,084 523,767 *
Michael N. Thompson 122,257(12) 1,667 123,924 *
B. Joseph White 6,636 25,001 31,637 *
Edward J. Geraghty 25,248 48,999 74,247 *
Alan W. George 35,317 102,499 137,816 *
David J. Neithercut 24,940(13) 180,374 205,314 *
Trustees and Executive
Officers as a
Group (22 persons) 6,995,607 2,616,877 9,612,484 7.22%
</TABLE>
- --------------------------
* Less than 1%.
(1) Calculated in accordance with applicable SEC rules.
(2) Reflects common shares which may be acquired within 60 days after March
1, 2000 through the exercise of share options.
(3) Includes 2,431,350 OP units which are exchangeable on a one-for-one
basis into 2,431,350 common shares. Also includes 30,000 common shares
beneficially owned by the Zell Family Foundation. Mr. Zell disclaims
beneficial ownership of 567,256 common shares (including the 30,000
common shares held by the Zell Family Foundation and assuming the
exchange of 537,256 OP units) because the economic benefits with
respect to such common shares are attributable to other persons.
11
<PAGE>
(4) Includes 8,825 common shares beneficially owned by Mr. Crocker's
spouse, as to which Mr. Crocker disclaims beneficial ownership. Also
includes 175,000 common shares beneficially owned by MWC Partners, L.P.
(1"MWC"), of which Mr. Crocker is the sole general partner. The sole
limited partner of MWC is a trust created for the benefit of Mr.
Crocker's wife and Mr. Crocker's children.
(5) Includes 739,753 OP units which are exchangeable on a one-for-one basis
into 739,753 common shares.
(6) Includes 182,269 OP units held by Mr. Goldberg, which are exchangeable
on a one-for-one basis into 182,269 common shares; 14,460 Junior
Convertible Preference Units which are exchangeable into 29,509 common
shares; 6,047 Junior Convertible Preference Units which are
exchangeable into 12,340 common shares; and 179,632 common shares held
by Goldberg Investment Limited Partnership ("GILP"). Mr. Goldberg is
the sole limited partner of GILP and the sole shareholder of Goldberg
Investment, Inc. ("GII"), which is the sole general partner of GILP.
(7) Includes 1,000 common shares beneficially owned by Mr. Halperin's
spouse, as to which Mr. Halperin disclaims beneficial ownership.
(8) Includes 1,173,949 common shares beneficially owned by Knox, Ltd., of
which Mr. Knox is the general partner, and includes 3,387 common shares
beneficially owned by BT Investments, of which Mr. Knox is the managing
partner. Mr. Knox disclaims beneficial ownership of the common shares
owned by Knox, Ltd. and BT Investments, except to the extent of his
pecuniary interest in 151,116 common shares. Also includes 3,114 common
shares beneficially owned by Mr. Knox's spouse and 424 common shares
beneficially owned by Mr. Knox, not individually, but as custodian for
his niece and nephew, as to all of which Mr. Knox disclaims beneficial
ownership. Also includes 167,881 common shares beneficially owned by
the Knox Foundation, of which Mr. Knox is the trustee. Mr. Knox
disclaims beneficial ownership of the common shares owned by the Knox
Foundation.
(9) Includes 49,178 common shares beneficially owned by Mr. Lowenthal's
spouse, as to which Mr. Lowenthal disclaims beneficial ownership.
(10) Includes 16,200 common shares beneficially owned by Ms. Rosenberg's
spouse, as to which Ms. Rosenberg disclaims beneficial ownership. Also
includes 1,528 OP units which are exchangeable on a one-for-one basis
into 1,528 common shares.
(11) Includes 35,647 common shares beneficially owned by Mr. Spector's
spouse, and 2,337 common shares beneficially owned by Mr. Spector as
custodian for his minor children, as to all of which Mr. Spector
disclaims beneficial ownership. Also includes 1,683 OP units which are
exchangeable on a one-for-one basis into 1,683 common shares.
(12) Includes 419 common shares beneficially owned by Mr. Thompson's
children and 2,648 common shares beneficially owned by Mr. Thompson's
spouse, as to all of which Mr. Thompson disclaims beneficial ownership.
12
<PAGE>
(13) Includes 2,000 common shares and 1,112 Series E Convertible Preferred
Shares beneficially owned by Mr. Neithercut's children, as to all of
which Mr. Neithercut disclaims beneficial ownership.
SHARE OWNERSHIP OF PRINCIPAL SHAREHOLDERS
This table sets forth information with respect to persons who are known
to own more than 5% of the Trust's outstanding common shares.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
COMMON SHARES COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) SHARES (1)
- ------------------------------------ ---------------------- -------------
<S> <C> <C>
FMR Corp.(2)
82 Devonshire Street
Boston, MA 02109 8,760,696 6.93%
</TABLE>
- ------------------------
(1) The number of common shares beneficially owned is calculated as of
December 31, 1999 and is based on SEC regulations governing the
determination of beneficial ownership of securities.
(2) Pursuant to a Schedule 13G filed with the SEC effective as of December
31, 1999, FMR Corp. may have direct or indirect voting and/or
investment discretion over these common shares which are held for the
benefit of its clients by its separate accounts, externally managed
accounts, registered investment companies, subsidiaries and/or other
affiliates. FMR Corp. is reporting the combined holdings of these
entities for the purpose of administrative convenience.
EXECUTIVE COMPENSATION
The following tables show compensation for services to the Trust of
the persons who during 1999 were the Chief Executive Officer and the other four
most highly compensated executive officers.
13
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------------------------- LONG-
RESTRICTED NUMBER TERM
NAME AND SHARE OF OPTIONS INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) AWARDS (3) GRANTED(4) PAYOUTS COMPENSATION(5)
------------------ ---- --------- -------- ---------- ------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas Crocker II 1999 $700,000 $1,250,000 $1,619,275 175,000 $0 $9,600
President and Chief 1998 650,000 625,000 624,996 165,000 0 9,600
Executive Officer 1997 500,000 625,000 624,976 457,500 0 9,600
Gerald A. Spector 1999 425,000 600,000 744,634 90,000 0 9,600
Executive Vice President 1998 400,000 300,000 299,999 80,000 0 9,600
and Chief Operating Officer 1997 375,000 287,500 287,500 192,500 0 9,600
Edward J. Geraghty 1999 310,000 275,000 178,513 47,000 0 253,871
Executive Vice President 1998 240,000(6) 150,000 576,767 50,000 0 148,357
and President Eastern 1997 0 0 0 0 0 0
Division
David J. Neithercut 1999 280,000 280,000 0 74,623 0 63,108
Executive Vice President 1998 245,000 132,500 132,500 45,000 0 63,108
and Chief Financial Officer 1997 235,000 117,500 117,500 22,500 0 54,315
Alan W. George 1999 275,000 275,000 275,124 35,000 0 64,200
Executive Vice President - 1998 251,923 130,000 129,966 50,000 0 64,200
Acquisitions/Dispositions 1997 200,000 137,500 137,465 25,000 0 54,315
and Strategic Business
Development
</TABLE>
- -----------------------
(1) Compensation deferred at the election of named officers is included in
the category and year it would have otherwise been reported had it not
been deferred.
(2) Cash bonuses and restricted shares issued as one-half of the annual
bonuses are reported in the year earned, even if paid or issued in a
subsequent year.
(3) The named executives received restricted common shares as one-half of
their annual bonuses for 1997 and 1998. The dollar amount shown equals
the number of restricted common shares granted multiplied by the fair
market value of the common shares on the grant date ($40.1875 in 1998
and $50.6875 in 1997) and, in the case of Mr. Geraghty, reflects the
additional value of 8,985 restricted common shares issued on March 2,
1998 at a price of $47.50 to induce Mr. Geraghty to join Equity
Residential. These common shares vest upon completion of two years of
continuous employment following the date of grant, except for Mr.
Geraghty's 8,985 restricted common shares, which vest as follows: 4,080
on January 24, 1999; 2,500 on January 22, 2000; and 2,405 on January
22, 2001, assuming his continued employment as of such dates. For 1999,
the named executives received all of their annual bonus in cash, and
were granted restricted common shares which vest upon completion of
three years of continuous employment following the grant date. The
dollar amount shown equals the number of restricted common shares
granted in January 1999 multiplied by the fair market value of the
common shares on the grant date ($40.1875). The valuations do not take
into account the diminution in value attributable to the restrictions
applicable to the common shares. Distributions are paid on all
14
<PAGE>
restricted common shares at the same rate as on unrestricted common
shares. The total number of restricted common shares awarded to each
named executive officer for the years of 1999, 1998 and 1997,
respectively, were: Mr. Crocker - 40,293, 15,552 and 12,330; Mr.
Spector - 18,529, 7,465 and 5,672; Mr. Geraghty - 4,442 and 12,717
(1999 and 1998); Mr. Neithercut - 3,297 and 2,318 (1998 and 1997); and
Mr. George - 6,846, 3,234 and 2,712. As of December 31, 1999, the
number and value of total restricted common shares held by the above
officers are: Mr. Crocker - 55,845 shares ($2,383,883); Mr. Spector -
25,994 shares ($1,109,619); Mr. Geraghty - 13,079 shares ($558,310);
Mr. Neithercut - 3,297 shares ($140,741); and Mr. George - 10,080
shares ($430,290).
(4) Shares underlying options are reported in the year granted.
(5) Principally includes employer contributions to Equity Residential's
401(k) Plan, and for Mr. Geraghty, $63,357 in reimbursements related to
his relocation to Chicago in 1998, and $168,871 in reimbursements
related to his relocation to Atlanta in 1999. This column also reflects
the dollar value of life insurance premiums paid for the purchase of
split-dollar life insurance policies for the following executive
officers: Mr. Geraghty: 1999 - $85,000 and 1998 - $85,000; Mr.
Neithercut: 1999 - $53,508, 1998 - $53,508 and 1997 - $44,715; and Mr.
George: 1999 - $54,600, 1998 - $54,600 and 1997 - $44,715. While the
executive is the owner of such policy, upon the executive's death, the
Trust will receive from the death benefits all premiums paid by it on
the executive's behalf, plus 10% interest per annum on such premium
payments for up to 10 years of such premium payments (collectively,
"Trust Premiums"), and the executive's beneficiary will receive the
balance of the death benefits. In addition, the executive is entitled
to 50% of the cash surrender value of the policy at age 62, and 50% at
age 65. Upon the executive's termination of employment prior to age 62,
the executive must borrow against the policy or partially surrender the
policy in an amount sufficient to repay the Trust Premiums to the
Trust.
(6) Reflects the salary paid between March 2, 1998 (Mr. Geraghty's hire
date) and December 31, 1998. Mr. Geraghty's annualized salary in 1998
was $300,000.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES OF
OPTIONS SHARE PRICE APPRECIATION FOR
NUMBER OF GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ------------------------------
NAME GRANTED(1) IN 1999 SHARE DATE 5% 10%
---- ---------- ---------- --------- ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Douglas Crocker II 170,000 11.14% $40.1875 1/18/09 $4,296,529 $10,888,249
5,000 0.33 46.75 5/17/09 147,004 372,537
Gerald A. Spector 85,000 5.57 40.1875 1/18/09 2,148,265 5,444,125
5,000 0.33 46.75 5/17/09 147,004 372,537
Edward J. Geraghty 47,000 3.08 40.1875 1/18/09 1,187,864 3,010,281
David J. Neithercut 74,623 4.89 40.1875 1/18/09 1,886,000 4,779,493
Alan W. George 35,000 2.29 40.1875 1/18/09 884,580 2,241,698
</TABLE>
- --------------------------------
(1) All options are granted at the fair market value of the common shares
at the date of grant. Options granted are for a term of not more than
ten years from the date of grant and vest in equal amounts over three
years, with the exception of the 5,000 options granted annually to each
15
<PAGE>
trustee, which vest as follows: 1,667 shares six months after the grant
date, 1,667 shares one year after the grant date and 1,666 shares two
years after the grant date.
(2) The dollar amounts under these columns reflect the 5% and 10% rates of
compounded annual appreciation set by the SEC over the ten year option
term and are not intended to forecast possible future appreciation of
the Trust's common share price. No gain to the optionee is possible
without an increase in common share price, which would benefit all
shareholders as well. A 5% per year compounded appreciation in common
share price from $40.1875 yields $65.46 per common share, and from
$46.75 yields $76.15 per common share. A 10% per year compounded
appreciation in common share price from $40.1875 yields $104.24 per
common share, and from $46.75 yields $121.26 per common share.
OPTION EXERCISES IN 1999
AND DECEMBER 31, 1999 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
NUMBER OF UNEXERCISED UNEXERCISED
SHARES VALUE OPTIONS AT OPTIONS AT
ACQUIRED REALIZED DEC. 31, 1999 DEC. 31, 1999
UPON UPON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE EXERCISE(1) UNEXERCISABLE UNEXERCISABLE(2)
---- -------- ----------- ------------------ -------------------
<S> <C> <C> <C> <C>
Douglas Crocker II 60,000 $1,156,930 510,000/432,500 $2,132,522/0
Gerald A. Spector 88,500 863,906 213,251/202,499 925,376/0
Edward J. Geraghty 0 0 16,666/80,334 0/0
David J. Neithercut 0 0 133,000/112,123 1,460,693/0
Alan W. George 0 0 75,832/76,668 612,112/0
</TABLE>
- -------------------
(1) Represents the market value of a common share on the exercise date less
the exercise price of the option.
(2) Represents the market value of a common share at December 31, 1999
($42.6875) less the exercise price of in-the-money options.
LONG-TERM INCENTIVE PLAN AWARDS IN 1999
<TABLE>
<CAPTION>
NAME NUMBER OF UNITS PERFORMANCE PERIOD
---- ---------------- --------------------
<S> <C> <C>
Douglas Crocker II 26,113 1-1-00 to 12-31-2003
Gerald A. Spector 16,712 1-1-00 to 12-31-2003
Edward J. Geraghty 2,611 1-1-00 to 12-31-2003
David J. Neithercut 4,748 1-1-00 to 12-31-2003
Alan W. George 4,700 1-1-00 to 12-31-2003
</TABLE>
This table identifies the target number of performance units awarded
under the Trust's Performance Based Restricted Share Grant Agreement (the
"Performance Based Plan") in January 2000 for services rendered during 1999. The
executive officers have the opportunity to earn in common shares, which will be
issued under the Share Option and Share Award Plan, an amount up to 225% of the
target amount of units. The owners of performance units have no right to vote,
receive dividends or transfer the units until common shares are issued in
exchange for the units. The number of common shares the executive receives on
the third anniversary of the grant date will depend on the excess, if any, by
which the Trust's average annual return (i.e.,
16
<PAGE>
common share dividends as a percentage of common share price as of January 1st
of each year, and increase in funds from operations ("FFO") on a per share basis
over the prior year) for the three performance years ("Average Annual Return")
exceeds the average of the 10-year Treasury Note Interest Rate as of January 1st
of each performance year (the "T-Note Rate").
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
If the Trust's Average
Annual Return exceeds
the T-Note Rate by: 0-0.9% 1-1.9% 2-2.9% 3-3.9% 4-4.9% 5-5.9% 6-6.9% 7%
Then the executive will receive
common shares equal to the
target number of units times the
following payment percentage: 0% 50% 100% 115% 135% 165% 190% 225%
</TABLE>
Fifty percent of the common shares to which an executive under the
Performance Based Plan may be entitled will vest on the third anniversary of the
award; twenty-five percent will vest on the fourth anniversary and the remaining
twenty-five percent will vest on the fifth anniversary. The executive's rights
under the common shares will also fully vest upon the employee's death,
disability or upon a change in control of the Trust.
In 1999, as more fully described in the Compensation Committee Report
on Executive Compensation, the Compensation Committee extended the determination
date for valuation of the performance units issued under the Performance Based
Plan in 1997 and 1998, which originally had a valuation determination date of
January 2000 and January 2001, respectively. The determination date was extended
from the third anniversary of the grant date to any calendar quarter (to be
selected by the employee within 15 days of the end of the quarter) between the
third anniversary and the fifth anniversary of the grant, with a minimum
valuation as of the third anniversary. The Compensation Committee did not amend
the underlying performance criteria required to be met for issuance of the
shares. The following table lists the performance based share grants of the
Chief Executive Officer and the other four most highly compensated executive
officers who were affected by this change.
17
<PAGE>
PERFORMANCE BASED PLAN AMENDMENTS
<TABLE>
<CAPTION>
LENGTH OF
MARKET ORIGINAL
SHARES PRICE OF TERM
DATE UNDERLYING SHARES AT EXERCISE PRICE NEW REMAINING AT
OF NUMBER OF SARS TIME OF AT TIME OF EXERCISE DATE OF
NAME AMENDMENT AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
---- --------- -------------- ---------- --------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Douglas Crocker II 6/99 45,000 $45.125 N/A N/A 6 months
14,000 45.125 18 months
Gerald A. Spector 6/99 20,000 45.125 N/A N/A 6 months
8,500 45.125 18 months
Edward J. Geraghty 6/99 0 N/A N/A N/A N/A
0
David J. Neithercut 6/99 6,500 45.125 N/A N/A 6 months
5,100 45.125 18 months
Alan W. George 6/99 6,500 45.125 N/A N/A 6 months
5,700 45.125 18 months
</TABLE>
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
TRUST'S FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), 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 FUTURE FILINGS.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board consists of the independent
trustees of the Trust listed below. The Committee's functions include the review
and approval of the Trust's executive compensation structure and overall
benefits program. The purpose of the Trust's executive compensation program is
to establish and maintain a performance and achievement oriented environment
throughout the Trust so that the interests of its executives are aligned with
the interests of the Trust's shareholders. The program is designed so that
executives may earn higher than average total compensation for above-average job
performance. There are four major components of the Trust's executive
compensation program: (1) base salary, (2) bonuses, (3) performance based shares
and (4) share and share option awards. Each of these components is further
discussed below.
18
<PAGE>
BASE SALARY. The Trust's overall salary structure is reviewed annually,
using outside executive compensation surveys of the real estate industry in
general and REITs in particular, to ensure that it remains competitive.
Positions are classified within the salary structure on the basis of assigned
responsibilities and on an evaluation of the latest survey information
available, as to appropriate compensation levels. Individual base salaries are
reviewed at least annually. Salary increases are granted based on each
executive's performance as well as such executive's position in the applicable
salary range.
BONUS. Annual bonuses are awarded based on the executive's achievement
of company and individual performance goals and objectives. The Trust's overall
bonus structure is also reviewed annually, taking in account data and general
trends in the real estate industry and REIT industry in particular. For bonuses
earned in 1999, executives received the entire bonus in cash, rather than a
combination of cash and restricted share awards, to be more consistent with
market competition.
The long-term incentives for executive officers are in the form of
performance-based restricted share awards and restricted share and share option
awards.
PERFORMANCE BASED SHARES. The Performance Based Restricted Share Plan
is designed to focus the Trust's key employees eligible under this plan on
achieving a high level of financial performance (i.e., common share dividends
and FFO growth), and to encourage such key employees to continue their
employment with the Trust. Under this plan, awards are made to certain executive
officers on an annual basis by setting a target number of common shares for each
executive. The employee will be eligible to receive from 0% to 225% of the
target number of common shares, based on the Trust's Average Annual Return (as
described above) during the three-year period following the award. The number of
common shares an executive will receive will be fixed and determined and then
issued (subject to the five-year vesting formula previously discussed) to the
executive beginning on the third anniversary of the grant of award. It is
anticipated that awards will be made on an annual basis so that by the fifth
year of an award, each executive will have vested and unvested rights in each of
the previous five awards.
For awards made in January 1997 and January 1998 under the Performance
Based Restricted Share Plan, the underlying financial performance standards were
based on common share dividend and share price growth. The Compensation
Committee changed this definition in January 1999 for post 1998 grants to focus
on common share dividends and FFO growth. The Committee felt that the executives
were successful in achieving a high level of financial performance during 1997
and 1998, which did not necessarily result in an increased market share price.
The Committee felt it appropriate to extend the determination date of the 1997
and 1998 awards as these grants were no longer effectively providing the
incentive to executives they were intended to provide. Accordingly, in 1999, the
Committee amended the 1997 and 1998 performance share grants to extend the
determination date of the awards from the third anniversary of the grant to any
calendar quarter (to be selected by the employee within 15 days of the end of
the quarter) between the third anniversary and fifth anniversary of the grant,
with a
19
<PAGE>
minimum valuation established as of the third anniversary. The underlying
performance criteria required to be met for issuance of the shares was not
amended.
RESTRICTED SHARE AND SHARE OPTION AWARDS. The Compensation Committee
recognizes that the interests of shareholders are also served by giving key
employees the opportunity to participate in the appreciation of the Trust's
common shares through the granting of share options and/or share awards. The
Compensation Committee believes that over an extended period of time, share
performance will, to a meaningful extent, reflect executive performance and that
such arrangements further reinforce management goals and incentives to achieve
shareholder objectives by aligning the interests of the Trust's key personnel
with the interests of the Trust and its shareholders. The share options vest
over a period of three years at a rate of one-third of such grant each year,
thereby encouraging the retention of key employees who receive awards. Since
January 1999, the Trust has allowed its executive officers to take up to
one-half of the value of the share options they otherwise would have received in
the form of restricted common shares which vest in full upon the third
anniversary of the share grant. The amount of restricted shares or share options
awarded each executive was determined utilizing the aforementioned executive
compensation surveys and an assessment of the executive officer's achieved
performance goals and objectives.
Based on the executive compensation surveys and the Trust's financial
performance in 1999, the Compensation Committee believes that the salary, bonus,
performance shares and share option grants of Mr. Crocker, the Chief Executive
Officer and President of the Trust, are fair and competitive and that the
Trust's overall executive compensation ranks in the upper quartile among the
general real estate industry and among REITs. This ranking correlates with the
excellent financial performance of the Trust in 1999. The Trust accomplished its
main goals in 1999 by increasing its net income, FFO and pay-out per common
share, increasing its portfolio size and continuing the diversification of its
portfolio across the United States, thereby providing stability in cash flows
and insulation against regional economic downturns.
During Mr. Crocker's tenure as Chief Executive Officer and President,
the Trust has become the largest owner and operator of multifamily properties
and has the largest market capitalization of all multifamily REITs and among the
largest market capitalization of all REITs. The key performance measure the
Compensation Committee used to determine Mr. Crocker's 1999 compensation was the
continued excellent financial operating results of the Trust. The Trust's
financial performance in 1999 was in the top quartile in almost every financial
category when compared to other multifamily REITs, due in large part to Mr.
Crocker's leadership, foresight and experience. The Committee notes the
following factors in support of its conclusion:
- - An 11.1% increase in FFO per fully-diluted common share over 1998, compared
with the average multifamily REIT increase of 7.8%;
- - Excellent "same store" operating results with such properties achieving a
5.6% increase in net operating income over 1998;
- - Distributions per common share of $2.94, an 8.1% increase over 1998 while
simultaneously lowering the Trust's distribution pay-out ratio;
20
<PAGE>
- - Acquisition of 424 properties with 43,202 units in 1999 representing an
investment of $1.4 billion: 6,593 units and 22 properties through property
acquisitions and 36,609 units and 402 properties in the Lexford Merger
(which includes investments in 58 unconsolidated properties with 7,752
units);
- - Disposition of 42 properties with 9,183 units in 1999 representing proceeds
of $402 million, for a gain of approximately $93.5 million (which includes
six joint venture properties with 1,297 units representing proceeds of $54.1
million);
- - Maintenance of investment grade credit ratings of the Operating
Partnership's public unsecured debt: Moody's (A3), Standard and Poor's
(BBB+) and Duff & Phelps (A-); and
- - Mr. Crocker's recognition again as Multifamily Property Executive of the
Year and REIT Executive of the Year by Commercial Property News and as
Outstanding CEO by Realty Stock Review.
Based on the Trust's excellent financial performance in 1999, the
Compensation Committee believes that the compensation program properly rewards
its executive officers for achieving improvements in the Trust's performance and
serving the interest of its shareholders.
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 Trust's executive officers
listed in the Summary Compensation Table who are employed by the Trust on the
last day of a taxable year. Section 162(m), however, does allow a deduction for
payments of "performance based" compensation, the material terms of which have
been approved by shareholders. Awards under the Trust's award plans may, but
need not, satisfy the requirements of Section 162(m). The Trust 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 Trust's taxable income,
although to the extent that compensation does not qualify for deduction under
Section 162(m), a larger portion of shareholder distributions may be subject to
Federal income taxation as dividend income rather than return of capital. The
Trust does not believe that Section 162(m) will materially affect the taxability
of shareholder distributions, although no assurance can be given in this regard
due to the variety of factors that affect the tax portion of individual
shareholders.
RESPECTFULLY SUBMITTED,
James D. Harper, Jr., Chairman
Errol R. Halperin
Sheli Z. Rosenberg
21
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph that compares the cumulative total returns
of the Trust, the Standard and Poors ("S&P") 500 Stock Index and the index of
equity REITs prepared by NAREIT for the last five calendar years. The
performance graph assumes an investment of $100 in each of the Trust and the two
indexes on December 31, 1994, and the reinvestment of all dividends. The NAREIT
equity index includes all REITs which derive more than 75% of their income from
equity investments in real estate assets and are listed on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq Stock Market.
CUMULATIVE TOTAL SHAREHOLDER RETURN
[EDGAR REPRESENTATION OF CHART]
Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99
EQR 100 108 153 201 170 193
S&P 500 100 137 168 225 290 351
NAREIT 100 118 160 190 155 144
22
<PAGE>
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
DEFERRED COMPENSATION AGREEMENTS. To encourage Mr. Crocker and Mr.
Spector to remain employed by the Trust, the Trust has entered into Deferred
Compensation Agreements with Mr. Crocker and Mr. Spector. Mr. Crocker's Deferred
Compensation Agreement, entered into in 1996, provides Mr. Crocker with a salary
benefit after the termination of his employment with the Trust. If Mr. Crocker's
employment is terminated by the Trust without cause prior to January 1, 2003, or
for any reason (including voluntary termination) on or after January 1, 2003, he
would be entitled to annual deferred compensation for a ten year period
commencing on the termination date in an amount equal to $600,000 (as increased
by a CPI index from January 1999), multiplied by a percentage equal to 10% per
each year since December 31, 1992. In the event Mr. Crocker's employment is
terminated as a result of his death, permanent disability or incapacity, he
would be entitled to a similar amount except that the annual percentage would be
15%, not 10%. Should Mr. Crocker be terminated for cause or should he choose to
leave voluntarily, without good reason, prior to January 1, 2003, he would not
be entitled to any deferred compensation.
Mr. Spector's Deferred Compensation Agreement, entered into in 1997,
provides Mr. Spector with a salary benefit after the termination of his
employment with the Trust. If Mr. Spector's employment is terminated by the
Trust without cause prior to January 1, 2012 or for any reason (including
voluntary termination) on or after January 1, 2012, he would be entitled to
annual deferred compensation for a 15-year period commencing on the termination
date in an amount equal to 75% of his average annual base compensation (before
bonus) for the prior five calendar years, multiplied by a percentage equal to
6.67% per each year since December 31, 1996. In the event Mr. Spector's
employment is terminated as a result of his death, permanent disability or
incapacity, he would be entitled to a similar amount except that the annual
percentage would be 10%, not 6.67%. Should Mr. Spector be terminated for cause
or should he choose to leave voluntarily, without good reason, prior to January
1, 2012, he would not be entitled to any deferred compensation.
EMPLOYMENT AGREEMENT. In April 1998, Mr. Geraghty executed an
employment agreement with the Trust. The agreement has a three-year term which
expires on March 9, 2001. Pursuant to the agreement, Mr. Geraghty will receive
compensation of at least $300,000 per year, and the initial bonus, restricted
share awards and share options, performance based units and one-time relocation
expense reimbursements described above and in the "Summary Compensation Table."
SHARE DISTRIBUTIONS AGREEMENT. In January 1996, Mr. Crocker was issued
options to purchase 100,000 common shares, which options vest over a three-year
period and are effective for ten years. The Trust also entered into a Share
Distributions Agreement with Mr. Crocker with respect to such options in 1996.
Pursuant to the terms of this agreement, upon the exercise of any of these
options, Mr. Crocker is entitled to a cash payment in an amount equal to the
total amount of common share distributions that would have been paid upon the
exercise of such common shares had he owned them for the period from January 18,
1996 until the date of the
23
<PAGE>
exercise of the options. This agreement is not affected by Mr. Crocker's death
or termination of employment with the Trust.
CONSULTING AGREEMENTS. In connection with the Wellsford Merger, Messrs.
Lynford and Lowenthal each executed a consulting agreement with the Operating
Partnership. Each consulting agreement has a term of five years from May 30,
1997, the closing date of the Wellsford Merger. Pursuant to the consulting
agreements, each of Messrs. Lynford and Lowenthal will serve as a senior
management consultant to the Operating Partnership and will receive compensation
at the rate of $200,000 per year plus reimbursement for reasonable out-of-pocket
expenses.
In connection with the Evans Merger, in December 1997, Mr. Evans
executed a Consulting Agreement with an affiliate of the Operating Partnership.
The consulting agreement had a term of two years and expired on December 31,
1999. Pursuant to the consulting agreement, Mr. Evans served as a senior
management consultant to the Operating Partnership and received compensation at
the rate of $225,000 per year. Mr. Evans also received an option to purchase
115,500 common shares that vest in three equal annual installments and have an
exercise price equal to $50.125 per common share. Mr. Evans was also eligible to
participate in all of the Trust's employee benefit plans in which persons in
comparable positions participate, effectively treating Mr. Evans as an employee
in 1999.
Several of the Trust's employment benefit plans provide for enhanced
employee benefits upon a "Change in Control" of the Trust. A Change in Control
will generally be deemed to have occurred upon a third party's acquisition of
30% or more of the Trust's stock, whether through purchase, merger or
consolidation or a sale of all or substantially all of the assets of the Trust.
In general, upon a Change in Control, all share options, restricted shares and
performance based shares become immediately vested.
The Trust has Change in Control Agreements (the "Agreements") with the
persons named in the Summary Compensation Table and other key employees of the
Trust that become effective only upon a Change in Control. In the event that an
employee is dismissed following the effective date of the Change of Control
without Cause or resigns for Good Reason (as such terms are defined in the
Agreements), he or she will be entitled to all accrued but unpaid compensation
and benefits in a lump sum cash payment consisting of the employee's base salary
through the date of termination, and a severance payment equal to a multiple
(ranging from 3.0 for the CEO and 2.50 to 2.0 times for other officers) times
the executive's annual base salary plus the average of the employee's annual
bonus for the last three fiscal years. The employee is also entitled to
continued employee welfare benefits for the remainder of the applicable time
period. The termination of employment of any of these individuals during the
three year period following the effective date of the Change in Control is
deemed to be for Good Reason.
24
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The Compensation Committee members are Messrs. Harper and Halperin and
Ms. Rosenberg. For a description of certain transactions between the Trust and
Compensation Committee members or their affiliates, see "Certain Relationships
and Related Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EGI or certain of its affiliated entities provide the Trust with
certain services with respect to certain aspects of the Trust's business,
including, but not limited to, real estate tax evaluation services, and office
facility services. The Audit Committee annually reviews the rates charged by EGI
for services rendered to the Trust. Amounts incurred for these services amounted
to approximately $708,600 for the year ended December 31, 1999.
The Trust has engaged Seyfarth, Shaw, Fairweather & Geraldson, a law
firm in which Ms. Rosenberg's husband is a partner, and Piper Marbury Rudnick &
Wolfe, a law firm in which Mr. Halperin is a partner, to perform legal services
for the Trust and certain of its subsidiaries from time to time.
The Trust occupies office space at various office buildings which are
owned and/or managed by EOP and its affiliates. Amounts incurred for such office
space in 1999 were $1,455,036. Multifamily residential communities owned by
various affiliates of Mr. Zell, Mr. Goldberg and Mr. Evans are also managed by
the Trust. The Trust received approximately $2.4 million in property and asset
management fees from such affiliates for the year ended December 31, 1999.
Mr. Goldberg is a two-thirds owner and chairman of the board of
directors of Artery Property Management, Inc., a real estate property management
company ("APMI"). In connection with the acquisition of certain properties from
Mr. Goldberg and his affiliates during 1995, the Operating Partnership made a
loan to Mr. Goldberg and APMI of $15,212,000 evidenced by two notes and secured
by OP units. The largest aggregate amount of indebtedness outstanding under the
loan at any time during 1999 was $14,558,484 and the amount outstanding as of
December 31, 1999 was $6,167,117. The first note issued in the amount of
$1,056,000 accrued interest at the prime rate plus 3 1/2 % per annum and was
repaid in full in October 1999. The second note issued in the amount of
$14,156,000 bears interest equal to approximately $130,695 per year plus the
amount of distributions payable on the remaining OP units and common shares
pledged as collateral for the loan. As of December 31, 1999, the loan was
secured by 64,948 OP Units owned by Mr. Goldberg and 123,792 common shares owned
by Goldberg Investment Limited Partnership, a partnership controlled by Mr.
Goldberg. This loan matures on November 30, 2004.
In connection with the agreement to acquire certain properties from Mr.
Goldberg and his affiliates, the Operating Partnership extended a $12,000,000
non-revolving line of credit to Mr. Goldberg and his wife in September 1998. The
loan bore interest at the prime rate plus 2%. The
25
<PAGE>
largest principal amount owed in 1999 was $5,272,432. The loan was repaid in
full in October 1999.
During 1999, the Operating Partnership acquired eight properties and
the related management agreements from affiliates of Mr. Goldberg for an
aggregate purchase price of approximately $110.2 million, including the
assumption of approximately $44.3 million of mortgage indebtedness. The purchase
price also included the issuance of 28,795 Series A Junior Convertible
Preference Units in the Operating Partnership, which have a liquidation value of
$100 and are exchangeable for OP Units upon certain circumstances. On June 29,
1999, Mr. Goldberg received 8,462 of these units with a liquidation value of
approximately $0.8 million.
Mr. Tuomi borrowed $100,000 from the Trust in 1994 related to his
purchase of a home. The loan bears interest at the 30-day London Interbank
Offered Rate ("LIBOR") plus 2% with interest due quarterly. The largest
principal amount owed in 1999 was $54,000 and the principal balance at December
31, 1999 was $36,000. The loan is payable in equal principal installments of
$18,000 over the next two years.
Mr. Crocker borrowed $564,000 from the Trust in August 1996. The loan
bears interest at 30-day LIBOR plus 2% with interest due quarterly. The largest
principal amount owed in 1999 was $402,850 and the principal balance at December
31, 1999 was $322,280. Payment is secured by a pledge of Mr. Crocker's common
shares. The loan is payable in equal principal installments of $80,570 over
seven years commencing March 15, 1997.
Mr. Crocker borrowed $100,000 from the Trust in August 1998 related to
the payment of a tax liability. The loan bears interest at 30-day LIBOR plus 2%.
The largest principal amount owed in 1999, and the principal balance at December
31, 1999, was $100,000. The loan was repaid in full in February 2000.
Mr. Crocker borrowed $600,000 from an affiliate of the Trust in May
1999. The loan bears interest at 30-day LIBOR plus 2%. The largest principal
amount owed in 1999, and the principal balance due at December 31, 1999, was
$600,000. The loan is due in full in September 2001.
Mr. Spector borrowed $105,000 from an affiliate of the Trust in
December 1998 related to the payment of a partnership interest expense. The loan
was repaid in full in May 1999. The loan bore interest at 30-day LIBOR plus 2%.
Mr. Spector borrowed $258,000 from an affiliate of the Trust in
December 1998 related to the payment of a tax liability. The loan was repaid in
full in May 1999. The loan bore interest at 30-day LIBOR plus 2%.
Mr. Geraghty borrowed $325,000 from an affiliate of the Trust on
September 9, 1999 related to his purchase of a home in Atlanta. The loan was due
in full upon the earlier to occur of the sale of his home in Chicago or one year
from the date of the loan. The loan was repaid in full on September 11, 1999.
The loan bore interest at 30-day LIBOR plus 2%.
26
<PAGE>
Mr. George borrowed $100,000 from the Trust in December 1997 related to
home improvements. The loan bears interest at 30-day LIBOR plus 2% with interest
due monthly beginning in January 1998. The largest principal amount owed in 1999
was $100,000, and the principal balance due at December 31, 1999, was $69,657.
Payment is secured by a pledge of Mr. George's common shares and share options
and a second mortgage on Mr. George's home. Remaining payments of principal are
due in the amount of $30,000 on April 1, 2000 and $39,657 on April 1, 2001.
The executive officers listed below are indebted to the Trust as a
result of purchasing common shares from the Trust in June 1994. The loans accrue
interest, payable quarterly in arrears, at the applicable federal rate, as
defined in the Code in effect at the date of each loan. The loans are due and
payable on the first to occur of the date in which the individual leaves the
Trust, other than by reason of death or disability, or the respective loan's due
date. The due dates of the loans range from August 2000 to August 2004. The
loans are recourse to the respective individuals and are collateralized by a
pledge of the common shares purchased. All distributions paid on pledged common
shares in excess of the then marginal tax rate on the taxable portion of such
distributions are used to pay interest and principal on the loans.
<TABLE>
<CAPTION>
LARGEST PRINCIPAL PRINCIPAL
AMOUNT OWED BALANCE AT INTEREST
NAME IN 1999 DEC. 31, 1999 RATE
---- ----------------- ------------- --------
<S> <C> <C> <C>
Douglas Crocker II $ 770,846 $ 716,504 6.21%
Douglas Crocker II 894,529 847,486 6.15%
Douglas Crocker II 929,073 909,391 7.26%
Douglas Crocker II 1,809,597 1,734,509 7.93%
Frederick C. Tuomi 312,843 312,843 7.26%
Alan W. George 78,081 74,287 7.26%
</TABLE>
CERTAIN AGREEMENTS BETWEEN THE OPERATING PARTNERSHIP AND WRP
The following describes certain aspects of the agreements entered into
by the Operating Partnership and WRP in connection with the Wellsford Merger on
the effective date of the Wellsford Merger. Each of Messrs. Lynford and
Lowenthal are officers and directors of WRP and Mr. Crocker is a director of
WRP.
PREFERRED STOCK PURCHASE AGREEMENT. The Operating Partnership agreed to
purchase from WRP up to 1,000,000 shares of WRP Series A Preferred Stock at
$25.00 per share as requested by WRP over the three-year period commencing on
the date of the Wellsford Merger. The Operating Partnership and WRP entered into
voting agreements, rights of first refusal and registration rights agreements
relating to such shares of WRP. As of March 1, 2000, no shares had been
acquired.
27
<PAGE>
WRP BOARD MEMBER ELECTED BY THE OPERATING PARTNERSHIP. Upon
consummation of the Wellsford Merger, the Operating Partnership, as the holder
of WRP Class A Common Stock, was entitled to elect, and did so elect, Mr.
Crocker to the WRP Board of Directors. In the event Mr. Crocker (or other person
subsequently elected by the Operating Partnership to the WRP Board of Directors)
becomes unable or unwilling to serve as a director or is no longer employed by
the Operating Partnership, the Operating Partnership and WRP will agree to the
election of another member of senior management of the Operating Partnership to
the WRP Board of Directors.
AGREEMENT REGARDING PALOMINO PARK. Upon consummation of the Wellsford
Merger, WRP and the Operating Partnership became the shareholders in Wellsford
Park Highland Corp. ("WPHC"), with WRP owning 80% of the shares of WPHC,
consisting of voting Class A Shares, and the Operating Partnership owning the
remaining 20% of WPHC, consisting of non-voting Class B Shares. WPHC is one of
two members of the limited liability companies which own Phase I and Phase II,
respectively, of Palomino Park, a master planned five phase multifamily
development project in suburban Denver, Colorado. The Operating Partnership has
no further obligation to contribute capital to WPHC.
The Operating Partnership entered into a credit enhancement agreement
with WRP with respect to the Palomino Park development project. Under this
agreement, the Operating Partnership has agreed to make its credit available to
Dresdner Bank, A.G., New York Branch in the form of a guaranty in respect of a
letter of credit issued to WRP for a period of eight years from the date of the
Wellsford Merger. WRP has agreed to pay an annual credit enhancement fee to the
Operating Partnership for such enhancement and has agreed to reimburse the
Operating Partnership for any amounts it pays under the guaranty, together with
interest on such amounts.
CERTAIN AGREEMENTS BETWEEN THE TRUST AND MRYP
The following describes certain aspects of the agreements entered into
by the Trust and MRYP in connection with the Merry Land Merger on the effective
date of the merger. Mr. Knox is a director and Mr. Thompson is an officer and a
director of MRYP.
DEVELOPMENT AGREEMENT. Merry Land had initiated a program to develop
five new apartment communities utilizing the services of third party developers.
Pursuant to a Development Agreement between MRYP and the Operating Partnership,
MRYP agreed to manage the completion of this program for the Trust in exchange
for an aggregate fee of approximately $2.4 million payable in monthly
installments based on the progress of development until all development is
complete. These transactions were consummated in 1999 and the Operating
Partnership or other affiliates of the Trust own fee simple title to these five
properties.
The Operating Partnership and MRYP also entered into property
management agreements under which MRYP provided lease-up property management
services with respect to these development properties in exchange for a
management fee of 4% of gross revenues, with a minimum of $4,000 per month per
project, until an occupancy level of 85% was reached. During 1999, the Operating
Partnership took over management of all of these properties.
28
<PAGE>
MRYP managed the development of Wyndham Apartments, Richmond, Virginia
(264 units) and Prairie Creek II, Dallas, Texas (228 units) on a month-to-month
basis for the Operating Partnership in exchange for an aggregate fee of $57,250
payable in monthly installments and, if requested by the Trust, agreed to enter
into property management agreements with respect to those properties, terminable
with thirty days' notice without penalty. During 1999, the Operating Partnership
took over management of these properties.
OPTION AGREEMENT AND RIGHT OF FIRST/LAST OFFER AGREEMENT. Pursuant to
an Option Agreement and Right of First/Last Offer Agreement (the "Option
Agreement"), MRYP has agreed to grant to the Operating Partnership certain
rights of first refusal and last offer with respect to two apartment development
sites adjacent to communities obtained in the Merry Land Merger, which
communities are among the six communities contributed by the Trust to joint
venture entities as described below. MRYP may not develop or transfer the
development sites (as the same may be improved) without first giving notice to
the Operating Partnership. The Operating Partnership may respond to the notice
by giving consent to the proposed transaction, purchasing the property at fair
market value (in the case of a proposed development) or entering into the
transaction with MRYP (in the case of a proposed sale) in place of the proposed
third parties.
JOINT VENTURE AGREEMENTS. MRYP and the Operating Partnership entered
into Joint Venture Agreements pursuant to which the Operating Partnership caused
six apartment communities located in Augusta and Savannah, Georgia and
Charleston, South Carolina, which were obtained by the Trust in the Merry Land
Merger to be contributed to limited liability companies of which the Operating
Partnership and MRYP were the sole members. The joint venture entities entered
into management agreements with MRYP pursuant to which MRYP received a
management fee equal to 4% of gross revenues. Pursuant to the Joint Venture
Agreements, MRYP shared in rental revenues and/or sale proceeds in excess of
certain targets after the Operating Partnership received its preferred return.
MRYP also had a three year option to purchase any or all of these communities
under certain conditions. In August, 1999, MRYP exercised this option and
purchased the Operating Partnership's interest in all six of these communities
for a purchase price of approximately $54.1 million.
SENIOR DEBT AGREEMENT. As partial consideration for the transfer of the
MRYP properties, the Operating Partnership extended to MRYP a $25 million, one
year, non-revolving Senior Debt Agreement, approximately $18.3 million of which
was outstanding as of December 31, 1998, bearing interest at the rate of LIBOR
plus 250 basis points or prime plus 200 basis points, at the election of MRYP.
The Senior Debt Agreement contained certain financial covenants and events of
default restricting the conduct of MRYP's business. In June 1999, MRYP repaid
the $18.3 million outstanding balance of this loan in full.
SUBORDINATED DEBT AGREEMENT. As additional partial consideration for
the transfer of the MRYP properties, the Operating Partnership extended to MRYP
a $20 million, 15-year, Subordinated Debt Agreement, bearing interest payable
quarterly at the rate of 8.00% per annum for the first five years with
escalations thereafter. The Subordinated Debt Agreement contained
29
<PAGE>
various affirmative and negative covenants and events of default restricting the
conduct of MRYP's business. MRYP repaid this loan in full in June 1999.
PREFERRED STOCK PURCHASE AGREEMENT. Pursuant to a Preferred Stock
Purchase Agreement, the Operating Partnership purchased 5,000 shares of MRYP
preferred stock from Merry Land on the day before the effective date of the
Merry Land Merger for a purchase price of $5 million. The dividend rate on the
MRYP preferred stock was 8.00% per annum for the first five years with
escalations thereafter. The Preferred Stock Agreement contained various
affirmative and negative covenants and events of default similar to those set
forth in the Subordinated Debt Agreement. In June 1999, MRYP repurchased all
5,000 preferred shares for $2.7 million.
OFFICE LEASE AGREEMENT. MRYP and the Operating Partnership entered into
an Office Lease Agreement pursuant to which the Operating Partnership leases a
portion of the MRYP office at 624 Ellis Street in Augusta, Georgia. The term of
the lease is three years from the date of the Merry Land Merger with annual rent
equal to the amount of all operating expenses attributable to the leased space.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Trust to report, based
on its review of reports to the SEC about transactions in its common shares
furnished to the Trust and written representations of its trustees, executive
officers and 10% common shareholders, that for 1999:
Mr. Thompson filed a Form 4 late to report the exercise of 26,831
options and the acquisition of 530 shares. Mr. Neithercut filed a Form 4 late to
report the acquisition of 227 common shares. Mr. Knox filed a Form 4 late to
report the gift of 1,900 common shares to the Knox Foundation, and an Amended
Form 3 late to correct his originally reported holdings. Mr. Spector filed a
Form 4 late to report the gift of 505 common shares to his spouse. Mr. Lynford
filed a Form 4 late to report the acquisition of 50 shares. The Trust filed a
Form 4 late to report the grant of 16,200 restricted shares to certain Lexford
employees at the time of the Lexford Merger.
AUDITORS
Ernst & Young LLP has served as our independent auditors since 1996 and
has been engaged to serve as our independent auditors for the fiscal year ending
December 31, 2000. Representatives of Ernst & Young LLP are expected to be
available at the Annual Meeting. Such representatives will have an opportunity
to make a statement if they so desire and will be available to respond to
appropriate questions.
30
<PAGE>
SHAREHOLDER PROPOSALS FOR THE 2001 MEETING
Shareholder proposals intended to be presented at the 2001 Annual
Meeting of Shareholders must be received by the Secretary of the Trust no later
than November 30, 2000, in order to be considered for inclusion in our 2001
Proxy Statement.
1999 ANNUAL REPORT
Shareholders are concurrently being furnished with a copy of Equity
Residential's 1999 Annual Report which contains its audited financial statements
at December 31, 1999. Additional copies of our Annual Report and Form 10-K for
the year ended December 31, 1999, as filed with the SEC, may be obtained without
charge by contacting Equity Residential Properties Trust - Investor Relations,
at Two North Riverside Plaza, Chicago, Illinois 60606.
OTHER MATTERS
The Board knows of no other matters to be presented for shareholder
action at the Annual Meeting. If any other matters are properly presented at the
meeting for action, it is intended that the persons named in the proxies will
vote upon such matters in accordance with their best judgment.
By Order of the Board of Trustees
/s/ Bruce C. Strohm
----------------------------------
Bruce C. Strohm,
Executive Vice President, General Counsel
and Secretary
Chicago, Illinois
March 31, 2000
31
<PAGE>
[LOGO]
EQR-PS-00
<PAGE>
DETACH HERE
PROXY
EQUITY RESIDENTIAL PROPERTIES TRUST
TWO NORTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 16, 2000
The undersigned shareholder of Equity Residential Properties Trust, a
Maryland real estate investment trust (the "Trust") hereby appoints DOUGLAS
CROCKER II and GERALD A. SPECTOR, or either of them (the "Representatives"),
with full power of substitution, as proxies for the undersigned to represent the
undersigned at the Annual Meeting and to vote all Common Shares of the Trust
which the undersigned may be entitled to vote at the Annual Meeting of
Shareholders of the Trust to be held in Chicago, Illinois, on May 16, 2000, and
any adjournment thereof. The undersigned hereby acknowledges receipt of the
Notice of the Annual Meeting of Shareholders and of the accompanying Proxy
Statement and revokes any proxy heretofore given with respect to such Common
Shares.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES ON THE REVERSE SIDE. IF YOU DO NOT MARK ANY BOXES, YOUR PROXY WILL BE
VOTED IN ACCORDANCE WITH THE BOARD OF TRUSTEES' RECOMMENDATIONS. THE
REPRESENTATIVES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
Note: If you plan to attend the Annual Meeting in person, please let us
know by marking the enclosed proxy card in the space provided.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SEE REVERSE
SIDE SIDE
<PAGE>
EQUITY RESIDENTIAL
PROPERTIES TRUST
C/O EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398
<TABLE>
<S> <C>
VOTE BY TELEPHONE VOTE BY INTERNET
Its fast, convenient, and immediate! Its fast, convenient, and your vote is
Call Toll-Free on a Touch-Tone Phone immediately confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683)
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT 1. READ THE ACCOMPANYING PROXY STATEMENT
AND PROXY CARD. AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE
1-877-PRX-VOTE (1-877-779-8683) http://www.eproxyvote.com/eqr
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER 3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME. LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS. 4. FOLLOW THE INSTRUCTIONS PROVIDED.
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/eqr anytime!
</TABLE>
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET.
DETACH HERE
<TABLE>
<S> <C>
/X/ PLEASE MARK VOTES AS
IN THIS EXAMPLE.
1. Authority to vote for the election as trustees of the four
nominees listed below to terms expiring in 2003:
NOMINEES: (01) Stephen O. Evans, (02) Edward Lowenthal, In their discretion, the Representatives are
(03) Jeffrey H. Lynford, and (04) B. Joseph White authorized to vote upon such other matters as may
properly come before the meeting.
FOR
ALL
NOMINEES / /
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
WITHHELD DIRECTION IS MADE, THE PROXY WILL BE VOTED FOR AUTHORITY TO VOTE
FROM ALL FOR THE ELECTION AS TRUSTEES OF THE FOUR NOMINEES TO TERMS
NOMINEES / / EXPIRING IN 2003 AND OTHERWISE IN THE DISCRETION OF THE
REPRESENTATIVES.
/ /
---------------------------------------
For all nominees, except vote withheld from the
nominees noted on the line above. MARK HERE
TO DISCONTINUE
EXTRA ANNUAL
REPORT / /
MARK HERE FOR MARK HERE IF YOU
ADDRESS CHANGE PLAN TO ATTEND
AND NOTE AT LEFT / / THE MEETING / /
Note: Please sign as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title under signature.
</TABLE>
<TABLE>
<S> <C> <C> <C>
Signature Date: Signature: Date:
----------------------------- ------------ ------------------------------ ---------------
</TABLE>
