<PAGE>
================================================================================
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
SCHEDULE 14A INFORMATION
Filed by the Registrant [_]
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
Essex Property Trust, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Essex Property Trust, Inc.
- --------------------------------------------------------------------------------
(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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(4) Proposed maximum aggregate value of transaction:
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
ESSEX PROPERTY TRUST, INC.
925 East Meadow Drive
Palo Alto, California 94303
March 23, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of Essex Property Trust, Inc., a Maryland corporation (the "Company"), to be
held at The Stanford Park Hotel, 100 El Camino Real, Menlo Park, California,
on April 25, 2000, at 10:00 a.m., local time.
The attached Notice of Annual Meeting and Proxy Statement describe the
matters expected to be acted upon at the meeting. We urge you to review these
materials carefully.
Please use this opportunity to take part in the Company's affairs by voting
on the business to be presented at the meeting. Whether or not you plan to
attend the meeting, please complete, sign, date and return the accompanying
proxy card as promptly as possible. If you attend the meeting, you may vote in
person, even if you have previously mailed your proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/ KEITH R. GUERICKE
Keith R. Guericke
Vice Chairman of the Board,
Chief Executive Officer and
President
<PAGE>
ESSEX PROPERTY TRUST, INC.
Notice of Annual Meeting of Stockholders
To Be Held April 25, 2000
The 2000 Annual Meeting of Stockholders (the "Annual Meeting") of Essex
Property Trust, Inc., a Maryland corporation (the "Company"), will be held at
The Stanford Park Hotel, 100 El Camino Real, Menlo Park, California, on April
25, 2000, at 10:00 a.m., local time, to consider and vote upon the following
proposals:
1. Election of the following three Class III directors of the Company to
serve until the 2003 Annual Meeting of Stockholders and until their successors
are elected and qualified: George M. Marcus, Gary P. Martin and William A.
Millichap;
2. To ratify and approve the amendment to the Company's 1994 Stock
Incentive Plan, as amended, to increase the number of shares reserved for
issuance thereunder from 875,400 to 1,375,400 shares;
3. Ratification of the appointment of KPMG Peat Marwick LLP as the
independent public auditors for the Company for the year ending December 31,
2000; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
With respect to item 2 above, the Board of Directors wishes to note to the
stockholders that it has amended the Company's 1994 Stock Incentive Plan, as
amended, to delete certain repricing provisions pertaining to options and
other awards under it.
The foregoing items of business, including the nominees for directors, are
more fully described in the proxy statement which is attached and made a part
of this Notice.
The Board of Directors has fixed the close of business on March 3, 2000 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
Whether or not you expect to attend the Annual Meeting in person, you are
urged to complete, sign, date and return the enclosed proxy card as promptly
as possible in the enclosed postage-prepaid envelope to ensure your
representation and the presence of a quorum at the Annual Meeting. If you send
in your proxy card and then decide to attend the Annual Meeting to vote your
shares in person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the proxy statement.
By Order of the Board of Directors,
/s/ KEITH R. GUERICKE
Keith R. Guericke
Vice Chairman of the Board,
Chief Executive Officer and
President
Palo Alto, California
March 23, 2000
<PAGE>
Mailed To Stockholders On Or About March 23, 2000
ESSEX PROPERTY TRUST, INC.
925 E. Meadow Drive
Palo Alto, California 94303
PROXY STATEMENT
This Proxy Statement is furnished to the holders (the "Common Stockholders"
or the "Stockholders") of the outstanding shares of Common Stock $0.0001 par
value (the "Common Stock") of Essex Property Trust, Inc., a Maryland
corporation (the "Company"), in connection with the solicitation by the
Company's Board of Directors (the "Board") of proxies in the accompanying form
for use in voting at the 2000 Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held on April 25, 2000 at 10:00 a.m., local time,
at The Stanford Park Hotel, 100 El Camino Real, Menlo Park, California, and
any adjournment or postponement thereof.
Form of Proxy Card
This Proxy Statement is accompanied by a form of Proxy Card for use by
Stockholders.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is exercised by delivering to the Company (to
the attention of Mr. Jordan E. Ritter) a written notice of revocation or a
properly executed proxy bearing a later date, or by attending the Annual
Meeting and voting in person.
Solicitation and Voting Procedures
The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing
and mailing proxy materials for the Annual Meeting and reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to the Stockholders.
The Company may use the services of Corporate Investor Communications, Inc.
to assist in soliciting proxies and, in such event, the Company expects to pay
approximately $5,000 for such services. The Company may conduct further
solicitation personally, telephonically or by facsimile through its officers,
directors and regular employees, none of whom will receive additional
compensation for assisting with the solicitation.
The presence at the Annual Meeting, either in person or by proxy, of
Stockholders holding a majority of the shares of Common Stock outstanding on
the Record Date (as defined below) will constitute a quorum for the purposes
of approving Proposals 1, 2 and 3 at the Annual Meeting. The close of business
on March 3, 2000 has been fixed as the record date (the "Record Date") for
determining the Stockholders entitled to notice of and to vote at the Annual
Meeting. Each share of Common Stock outstanding on the Record Date is entitled
to one vote on Proposals 1, 2 and 3. As of the Record Date, there were
18,325,576 shares of Common Stock outstanding.
Shares of Common Stock represented by proxies that reflect abstentions or
"broker non-votes" (i.e., shares held by a broker or nominee which are
represented at the Annual Meeting but with respect to which such broker or
nominee is not empowered to vote on a particular proposal) will be counted as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. The affirmative vote of a plurality of the shares of
Common Stock present in person or by proxy and entitled to vote is required to
elect directors.
1
<PAGE>
Accordingly, abstentions or broker non-votes as to the election of directors
will not affect the election of the candidates receiving the most votes.
Approval of Proposals 2 and 3 require the affirmative vote of a majority of
shares of Common Stock who are present or represented by proxy and entitled to
vote at the Annual Meeting. For purposes of the vote on Proposals 2 and 3
abstentions will have the same effect as a vote against such Proposal and
broker non-votes will not be counted as votes cast and will have no effect on
the result of the vote on such Proposal.
Stockholder votes will be tabulated by the persons appointed by the Board
to act as inspectors of election for the Annual Meeting. The New York Stock
Exchange permits member organizations to give proxies, whether or not
instructions have been received from beneficial owners, to vote as to the
election of directors and also on matters of the type contained in Proposals 2
and 3. The shares of Common Stock represented by properly executed Common
Stock proxy cards will be voted at the Annual Meeting as indicated or, if no
instruction is given, in favor of Proposals 1, 2 and 3. The Company does not
presently know of any other business which may come before the Annual Meeting.
2
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VOTING SECURITIES AND PRINCIPAL HOLDERS
The following table sets forth the beneficial ownership of shares of Common
Stock as of the Record Date for (i) each person known by the Company to hold
more than 5% of the outstanding shares of Common Stock, (ii) each director and
each of the executive officers named in the Summary Compensation Table below,
and (iii) all directors and such executive officers as a group.
Beneficial ownership in the following table is determined in accordance
with the rules of the Securities and Exchange Commission ("SEC"). In computing
the number of shares beneficially owned by a person and the percentage
ownership of that person, shares of Common Stock subject to options held by
that person that are currently exercisable or exercisable within 60 days of
the Record Date are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of each
other person. To the Company's knowledge, except as set forth in the footnotes
to this table and subject to applicable community property laws, each person
named in the table below has sole voting and investment power with respect to
the shares set forth opposite such person's name.
<TABLE>
<CAPTION>
Percentage of
Shares of
Common Stock
Amount and Outstanding
Nature of Percentage of and Operating
Name and Business Address of Beneficial Common Stock Partnership
Beneficial Owner Ownership(1)(2) Outstanding(3) Interests(4)
---------------------------- --------------- -------------- -------------
<S> <C> <C> <C>
George M. Marcus(5)(6).......... 1,981,655 9.9% 9.6%
Chairman of the Board of
Directors
William A. Millichap(5)(7)...... 792,284 4.2 3.8
Director
Keith R. Guericke(5)(8)......... 186,371 1.0 *
Vice Chairman of the Board,
Chief Executive Officer and
President
Michael J. Schall(5)(9)......... 111,692 * *
Director, Senior Executive Vice
President
and Chief Financial Officer
John D. Eudy(5)(10)............. 36,100 * *
Executive Vice President--
Development
Robert C. Talbott(5)(11)........ -- * *
Senior Vice President
Craig K. Zimmerman(5)(12)....... 76,926 * *
Executive Vice President--
Acquisitions
David W. Brady(5)(13)........... 12,500 * *
Director
Anthony Downs(5)(14)............ 12,500 * *
Director
Robert E. Larson(5)(15)......... 10,000 * *
Director
Gary P. Martin(5)(16)........... 12,500 * *
Director
Issie N. Rabinovitch(5)(17)..... 12,500 * *
Director
Thomas E. Randlett(5)(18)....... 27,177 * *
Director
Willard H. Smith, Jr. (5)(19)... 11,167 * *
Director
All directors and executive
officers
as a group (14 persons)(20).... 2,604,674 12.7 12.5
Morgan Stanley, Dean Witter
Discover & Co. (21)............ 2,118,251 11.6 10.4
Cohen & Steers(22).............. 1,860,600 10.1 9.1
LaSalle Investment
Management(Securities), L.P.
(23)........................... 934,490 5.1 4.6
</TABLE>
3
<PAGE>
- --------
* Less than 1%.
(1) Mr. Marcus, certain officers and directors of the Company and certain
other entities and investors own limited partnership interests in Essex
Portfolio, L.P., a California limited partnership (the "Operating
Partnership"), which presently aggregate to an approximately 10.3%
limited partnership interest. The Company presently has an approximately
89.7% general partnership interest in the Operating Partnership. The
limited partners of the Operating Partnership share with the Company, as
general partner, in the net income or loss and any distributions of the
Operating Partnership. Pursuant to the partnership agreement of the
Operating Partnership, limited partnership interests can be exchanged
into shares of Common Stock.
(2) Through the Company's Director and Executive Stock Purchase Program,
certain directors and executive officers participate indirectly in an
investment in the Company's Common Stock. See "Certain Relationships and
Related Transactions--Director and Executive Stock Purchase Program."
The participation of each director and executive officer in this program
is detailed in the footnotes below.
(3) With respect to shares of Common Stock, assumes exchange of the limited
partnership interests in the Operating Partnership held by such person,
if any, into shares of Common Stock. The total number of shares
outstanding used in calculating this percentage assumes that none of the
limited partnership interests or vested options held by other persons
are exchanged or converted into shares of Common Stock and is based on
18,325,576 shares of Common Stock outstanding as of the Record Date.
There are 184,687 outstanding shares of the Company's 8.75% Convertible
Preferred Stock, Series 1996A (the "Preferred Stock"), which are
convertible at the option of the holder into Common Stock. Assumes that
none of the Preferred Stock held by other persons is converted into
shares of Common Stock.
(4) Assumes exchange of all outstanding limited partnership interests in the
Operating Partnership. Assumes that none of the Preferred Stock held by
other persons are converted into shares of Common Stock.
(5) The business address of such person is 925 East Meadow Drive, Palo Alto,
California 94304.
(6) Includes 1,169,435 shares of Common Stock that may be issued upon the
exchange of all of Mr. Marcus' limited partnership interests in the
Operating Partnership and in certain other partnerships and 301,494 and
15,941 shares of Common Stock that may be issued upon the exchange of
all the limited partnership interests in the Operating Partnership held
by The Marcus & Millichap Company ("M&M") and Essex Portfolio Management
Company ("EPMC"), respectively. Also includes 155,000 shares of Common
Stock held by M&M, 220,000 shares of Common Stock subject to an option
granted to M&M and exercisable within 60 days of the Record Date, 16,852
shares of Common Stock held in The Marcus & Millichap Company 401(k)
Plan (the "M&M 401(k) Plan") 8,333 shares of Common Stock subject to
options that are exercisable within 60 days of the Record Date and 8,000
shares of Common Stock held by Mr. Marcus' children. Mr. Marcus is a
principal stockholder of each of M&M and EPMC and may be deemed to own
beneficially, and to share the voting and dispositive power of, 692,435
shares of Common Stock (including shares issuable upon exchange of
limited partnership interests and options). Mr. Marcus disclaims
beneficial ownership of (i) all shares, options and limited partnership
interests held by M&M, and (ii) 6,376 shares of the 15,941 shares of
Common Stock that may be issued upon conversion of limited partnership
interests held by EPMC. Excludes 111,738 shares representing Mr. Marcus'
pro rata participation in the Director and Executive Stock Purchase
Program. See footnote 2 above.
(7) Includes 73,100 shares of Common Stock that may be issued upon the
exchange of all of Mr. Millichap's limited partnership interests in the
Operating Partnership and 301,494 and 15,941 shares of Common Stock that
may be issued upon the exchange of all of the limited partnership
interests in the Operating Partnership held by M&M and EPMC,
respectively. Also includes 155,000 shares of Common Stock held by M&M,
220,000 shares of Common Stock subject to an option granted to M&M and
exercisable within 60 days of the Record Date, 7,500 shares of Common
Stock subject to options that are exercisable within 60 days of the
Record Date and 11,849 shares of Common Stock held in the M&M 401(k)
Plan. Mr. Millichap is a principal stockholder of M&M and EPMC and may
be deemed to own beneficially, and to share the voting and dispositive
power of, 692,435 shares of Common Stock (including shares issuable upon
conversion of limited partnership interests and options). Mr. Millichap
disclaims beneficial ownership of (i) all shares,
4
<PAGE>
options and limited partnership interests held by M&M and (ii) 9,565
shares of the 15,941 shares of Common Stock that may be issued upon
conversion of limited partnership interests held by EPMC.
(8) Includes 82,562 shares of Common Stock that may be issued upon the
exchange of all of Mr. Guericke's limited partnership interests in the
Operating Partnership. Also includes 67,000 shares of Common Stock
subject to options that are exercisable within 60 days of the Record
Date, 4,298 shares of Common Stock held in the Essex Property Trust,
Inc. 401(k) Plan (the "Essex 401(k) Plan") and 24,171 shares of Common
Stock issuable upon satisfying certain vesting requirements of the
Company's Phantom Stock Plan. Excludes 15,066 shares representing Mr.
Guericke's pro rata participation in the Director and Executive Stock
Purchase Program. See footnote 2 above.
(9) Includes 35,354 shares of Common Stock that may be issued upon the
exchange of all of Mr. Schall's limited partnership interests in the
Operating Partnership. Also includes 48,000 shares of Common Stock
subject to options that are exercisable within 60 days of the Record
Date, 2,994 shares of Common Stock held in the Essex 401(k) Plan, and
18,415 shares of Common Stock issuable upon satisfying certain vesting
requirements of the Company's Phantom Stock Plan. Further includes 729
shares of Common Stock held by Mr. Schall's three minor children.
Excludes 10,044 shares representing Mr. Schall's pro rata participation
in the Director and Executive Stock Purchase Program. See footnote 2
above.
(10) Includes 7,580 shares of Common Stock that may be issued upon the
exchange of all of Mr. Eudy's limited partnership interests in the
Operating Partnership. Also includes 21,400 shares of Common Stock
subject to options that are exercisable within 60 days of the Record Date
and 6,269 shares of Common Stock held in the Essex Property Trust, Inc.
401(k) Plan (the "Essex 401(k) Plan"). Excludes 12,243 shares
representing Mr. Eudy's pro rata participation in the Director and
Executive Stock Purchase Program. See footnote 2 above.
(11) Does not reflect 2,040 shares representing Mr. Talbott's pro rata
participation in the Director and Executive Stock Purchase Program. See
footnote 2 above.
(12) Includes 25,425 shares of Common Stock that may be issued upon the
exchange of all of Mr. Zimmerman's limited partnership interests in the
Operating Partnership and certain other partnerships. Also includes
34,400 shares of Common Stock subject to options that are exercisable
within 60 days of the Record Date, 5,701 shares of Common Stock held in
the Essex 401(k) Plan. Excludes 8,162 shares representing Mr. Zimmerman's
pro rata participation in the Director and Executive Stock Purchase
Program. See footnote 2 above.
(13) Includes 10,300 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date. Excludes 2,511 shares
representing Dr. Brady's pro rata participation in the Director and
Executive Stock Purchase Program. See footnote 2 above.
(14) Includes 11,500 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date.
(15) Includes 5,000 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date. Excludes 5,022 shares
representing Dr. Larson's pro rata participation in the Director and
Executive Stock Purchase Program. See footnote 2 above.
(16) Includes 8,834 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date.
(17) Includes 11,500 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date. Excludes 25,110 shares
representing Mr. Rabinovitch's pro rata participation in the Director
and Executive Stock Purchase Program. See footnote 2 above.
(18) Includes 11,500 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date. Excludes 10,044 shares
representing Mr. Randlett's pro rata participation in the Director and
Executive Stock Purchase Program. See footnote 2 above.
(19) Includes 10,167 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date. Mr. Smith is a director
of certain funds of Cohen & Steers Capital Management (see
5
<PAGE>
"Proposal No. 1 Election of Directors--Directors and Executive Officers--
Willard H. Smith, Jr.") and he disclaims beneficial ownership of the
shares of Common Stock of the Company held by Cohen & Steers Capital
Management.
(20) Includes 1,654,336 shares of Common Stock that may be issued upon the
exchange of all of the executive officers' and directors' limited
partnership interests in the Operating Partnership and 320,834 shares of
Common Stock subject to options that are exercisable within 60 days of
the Record Date. Excludes 201,980 shares representing the aggregate of
the executive officers' and directors' pro rata participations in the
Director and Executive Stock Purchase Program.
(21) As reported on Schedule 13G filed with the SEC on February 7, 2000.
Morgan Stanley Dean Witter Investment Management, Inc. is a wholly owned
subsidiary of Morgan Stanley, Dean Witter & Co. Both entities are
investment advisors registered under Section 203 of the Investment
Advisors Act of 1940. Morgan Stanley, Dean Witter & Co. has the shared
power to vote and direct the vote of 1,571,601 shares and shared
dispositive power over 2,118,251 shares. Morgan Stanley Dean Witter
Investment Management, Inc. has the shared power to vote and direct the
vote of 1,567,100 shares and shared dispositive power over 2,113,750
shares. Addresses: Morgan Stanley, Dean Witter & Co., 1585 Broadway, New
York, New York 10036. Morgan Stanley Dean Witter Investment Management,
Inc., 1221 Avenue of the Americas, New York, New York.
(22) As reported on Schedule 13G filed with the SEC on February 10, 2000.
Cohen & Steers Capital Management, Inc., an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940, has
the sole power to vote or direct the vote of 1,586,700 shares and sole
dispositive power over 1,860,600 shares of Common Stock. Address: 757
Third Avenue, N.Y., N.Y. 10017.
(23) As reported on Schedule 13G filed with the SEC on February 10, 2000.
LaSalle Investment Management (Securities), L.P., an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940, has
the sole power to vote or direct the vote of 198,400 shares, shared
power to vote and direct the vote of 707,390 shares, sole dispositive
power over 189,100 shares and shared dispositive power over 745,390
shares. Address: 200 East Randolph Drive, Chicago, Illinois 60601.
6
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Charter divides the Company's directors into three classes.
The members of each class of directors serve staggered three-year terms. The
Board presently has the following eleven directors: Keith R. Guericke, Issie
N. Rabinovitch and Thomas E. Randlett who are classified as Class I directors;
David W. Brady, Robert E. Larson, Michael J. Schall and Willard H. Smith who
are classified as Class II directors; George M. Marcus, Gary P. Martin,
William A. Millichap and Anthony Downs who are classified as Class III
directors. The terms of each of the current Class I, Class II and Class III
directors expire at the Annual Meetings of Stockholders to be held in 2001,
2002 and 2000, respectively, and until such directors' respective successors
are elected and qualified or until any such directors' earlier resignation or
removal. Anthony Downs will not be standing for reelection at the Annual
Meeting and the Company appreciates Mr. Downs' contributions as a director
during his term.
At the Annual Meeting, the Stockholders will elect three directors: if
elected, nominees George M. Marcus, Gary P. Martin and William A. Millichap
will serve as Class III directors for three-year terms. The Class III
directors will serve until the Annual Meeting of Stockholders to be held in
2003 and until such directors' respective successors are elected and qualified
or until such directors' earlier resignation or removal. The Board believes
that each such nominee will stand for election and will serve if elected as a
director. However, in the event any nominee is unable or unwilling to serve as
a director at the time of the Annual Meeting, the proxies may be voted for the
balance of those nominees named and for any substitute nominee designated by
the present Board or the proxy holders to fill such vacancy, or for the
balance of those nominees named without nomination of a substitute, or the
Board may be reduced in accordance with the Bylaws of the Company.
The affirmative vote of a plurality of the shares of Common Stock present
in person or by proxy and entitled to vote at the Annual Meeting, assuming a
quorum is present, is necessary for the election of a director. For purposes
of the election of directors, abstentions and other shares not voted will not
be counted as votes cast and will have no effect on the result of the vote.
The holders of the Company's Preferred Stock have the right to elect,
separately as a class, one director. During 1999, the holders of Preferred
Stock sold substantially all of their shares of Preferred Stock. Gregory J.
Hartman, who had been reelected by the holders of Preferred Stock as a
director at the 1999 Annual Meeting of Stockholders, resigned from the Board
effective January 1, 2000. The holders of the Preferred Stock have not elected
a director to replace Mr. Hartman and presently are not exercising their right
to elect a director.
Certain information about each of such nominees is furnished below.
George M. Marcus, Chairman of the Board of Directors, is the founder of,
and has been the Chairman of, The Marcus & Millichap Company and Essex
Property Corporation since 1971. The Marcus & Millichap Company is the parent
company of a diversified group of real estate service, investment, finance and
development firms including Marcus & Millichap Real Estate Investment
Brokerage Company, Marcus & Millichap Capital Corporation, SummerHill Homes,
Pacific Property Company and Hanover Financial Company. Mr. Marcus was one of
the original founders and directors of Plaza Commerce Bank and Greater Bay
Bancorp, both publicly held financial institutions. Mr. Marcus continues to
serve on the board of Greater Bay Bancorp. Mr. Marcus serves on the boards of
numerous real estate related organizations to include the National Multi
Housing Council, the Apartment Industry Foundation, the Policy Advisory Board
of the University of California at Berkeley's Center for Real Estate and Urban
Economics, the Urban Land Institute, the National Realty Committee, the Bay
Area Council and the California Housing Council. He graduated from San
Francisco State University with a Bachelor of Science degree in Economics in
1965; he was honored as Alumnus of the Year in 1989. Mr. Marcus is also a
graduate of the Harvard University Executive Management Program and the
Georgetown University Leadership Program.
7
<PAGE>
Gary P. Martin, Director, is Vice President and Chief Financial Officer of
Halo Data Devices, a supplier of data storage products for the disk drive
market. He served from August 1995 to January 1998 as Vice President of
Finance and Chief Financial Officer of 3Dfx Interactive, Inc. Prior to this
position, from September 1993 to July 1995, he served as Vice President of
Finance and the Chief Financial Officer for MiniStor Peripherals Corporation,
a supplier of data storage products for the mobile computer market. From 1985
to 1993, he was Senior Vice President of Finance and Administration for Chips
and Technologies, Inc., where he also developed joint business ventures within
the Soviet Union. From 1983 to 1984, Mr. Martin was Vice President of Finance
and Chief Financial Officer for Starstruck, Inc., a company involved in space
development through private enterprise. In addition, Mr. Martin was one of the
earliest employees at Apple Computer, Inc., where he held both corporate and
European controller positions during the period from 1977 to 1983. Prior to
working at Apple Computer, Inc., from 1971 to 1977, he worked for Aero Air
Freight and National Semiconductor. Mr. Martin currently serves on the Board
of Directors of the Emergency Housing Consortium. He received a Bachelor of
Science degree in Accounting from San Jose State University in 1971.
William A. Millichap, Director, has been President of The Marcus &
Millichap Company since 1984. Mr. Millichap joined G.M. Marcus & Company in
1971 as one of its first sales associates and became a regional manager in
1974. In 1976, he became a principal, and the name of the company was
subsequently changed to The Marcus & Millichap Company. Mr. Millichap is a
licensed real estate broker, serves on the Board of Directors of the National
Multi-Housing Council and is Chairman of its Political Action Committee, is a
director of AllApartments, Inc. and LoopNet.com, and is active in the
International Council of Shopping Centers. Mr. Millichap received a Bachelor
of Science degree in Economics from the University of Maryland in 1965. Prior
to becoming affiliated with Mr. Marcus in 1971, he served in the United States
Navy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS VOTE FOR
THE ELECTION OF ALL NOMINEES NAMED ABOVE.
8
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of the Record Date with
respect to the directors and executive officers, including their ages.
<TABLE>
<CAPTION>
First Term
Name and Position Age Elected Expires
- ----------------- --- ------- -------
<S> <C> <C> <C>
George M. Marcus......................................... 58 1994 2000
Chairman of the Board
William A. Millichap..................................... 56 1994 2000
Director
Keith R. Guericke........................................ 51 1994 2001
Vice Chairman of the Board, Chief Executive Officer and
President
Michael J. Schall........................................ 42 1994 2002
Director, Senior Executive Vice President and Chief
Financial Officer
John D. Eudy............................................. 45 -- --
Executive Vice President -- Development
Robert C. Talbott........................................ 39 -- --
Senior Vice President
Craig K. Zimmerman....................................... 49 -- --
Executive Vice President -- Acquisitions
David W. Brady........................................... 59 1994 2002
Director
Anthony Downs............................................ 69 1996 2000
Director
Robert E. Larson......................................... 61 1994 2002
Director
Gary P. Martin........................................... 52 1994 2000
Director
Issie N. Rabinovitch..................................... 54 1994 2001
Director
Thomas E. Randlett....................................... 57 1994 2001
Director
Willard H. Smith, Jr..................................... 63 1996 2002
Director
</TABLE>
Biographical information concerning the director nominees is set forth
above under the caption "Proposal No. 1 Election of Directors." Biographical
information concerning the remaining directors (other than Anthony Downs,
whose term will not continue after the Annual Meeting) and the other executive
officers is set forth below.
Keith R. Guericke, Vice Chairman of the Board, is the Company's President
and Chief Executive Officer and oversees the day-to-day operations and
administration of the Company. Mr. Guericke joined the Company's predecessor,
Essex Property Corporation, in 1977. Since that time, he has actively
participated in the acquisition, development, management and disposition of
multifamily, retail and office properties. Prior to joining Essex Property
Corporation, Mr. Guericke was with Kenneth Leventhal & Company in San
Francisco. He received his Bachelor of Science degree in Accounting from
Southern Oregon College in 1971. Mr. Guericke is a member of the National
Association of Real Estate Investment Trusts, the American Institute of
Certified Public Accountants, the Urban Land Institute, and the National
Multi-Housing Council.
Michael J. Schall, Director, is the Senior Executive Vice President and
Chief Financial Officer of the Company and is responsible for the overall
management and control of the Company's financial matters, including leverage
management, liquidity, capital alternatives, financial analysis and external
reporting. He
9
<PAGE>
joined The Marcus & Millichap Company in 1986. He was also the Chief Financial
Officer of the Company's predecessor, Essex Property Corporation, in which
capacity he was reponsible for the financial management of multiple investment
and development entities, and the development of a wide range of corporate
borrowing relationships. From 1982 to 1986, Mr. Schall was the Director of
Finance for Churchill International, a technology-oriented venture capital
company. From 1979 to 1982, Mr. Schall was employed in the audit department of
Ernst & Whinney (now Ernst and Young), where he specialized in the real estate
and financial services industries. In 1979, Mr. Schall received his Bachelor
of Science degree from the University of San Francisco. Mr. Schall is a
Certified Public Accountant and a member of the American Institute of
Certified Public Accountants.
David W. Brady, Director, serves in the following capacities at Stanford
University, Palo Alto, California: Associate Dean for Academic Affairs and the
Bowen H. and Janice Arthur McCoy Professor of Political Science and Ethics, at
the Graduate School of Business; Professor of Political Science, School of
Humanities and Sciences; and Senior Fellow, Hoover Institution. He was a John
M. Olin Faculty Fellow at Stanford University during 1988 and 1989. From 1982
to 1987, Professor Brady was Herbert S. Autry Professor at the Department of
Political Science at Rice University in Houston, Texas. Professor Brady served
as Acting Dean of the School of Social Sciences, Rice University from 1984 to
1985, Associate Chair of the Department of Political Science, Stanford
University from 1988 to 1990, and Area Coordinator, Political Economy,
Graduate School of Business, Stanford University in 1990. Professor Brady has
written numerous books and was awarded in 1989 the Richard F. Fenno Award for
Best Book of Legislative Studies. Professor Brady received his Bachelor of
Science degree from Western Illinois University in 1963, and Master's and
Doctorate degrees from the University of Iowa in 1967 and 1970, respectively.
John D. Eudy, Executive Vice President--Development, joined the Company in
1985. Mr. Eudy played a key role in initiating the Company's development
activities and has successfully guided the development of over 6,000 apartment
homes. Prior to joining the Company, Mr. Eudy was a Vice President with
Crocker National Bank in San Francisco in the Commercial Real Estate
Industries Group specializing in construction loans to national real estate
companies. From 1977 to 1980, Mr. Eudy was with Home Federal Savings in a
similar capacity. He was a founder and is an active board member of Silvergate
Bank based in San Diego. Mr. Eudy holds a Bachelor of Science degree in
Finance from San Diego State University and is a graduate of the University of
Southern California's Management Leadership School. He is also a member of the
Urban Land Institute, National Association of Real Estate Investment Trusts
and National Association of Home Builders.
Robert E. Larson, Director, has been a General Partner of the Woodside
Fund, a venture capital firm based in the Silicon Valley of Northern
California, since 1983. Professor Larson currently serves as a director of
Automated Power Exchange, Inc., Myelos Corporation, Orion Instruments, Inc.,
OsteoBiologics, Inc., Poseidon Technology, Inc., Skye Investment Advisors,
Televideo Systems, Inc., and TriVida Corporation. He is also Chairman of the
Board of Simpler Energy, Inc., Pharmalytics, Inc., Open Systems Control, Inc.
and CAST Enterprises, Inc., a joint venture in the People's Republic of China.
Prior to 1983, Professor Larson was founder, director and President of Systems
Control, Inc. and was employed by IBM Corporation, Hughes Aircraft Company and
SRI International. He was a Consulting Professor at Stanford University from
1973 to 1988 and President of the International Institute of Electrical and
Electronic Engineers in 1982. Professor Larson received his Bachelor of
Science Degree from M.I.T. in 1960, and his Master's and Doctorate degrees
from Stanford University in 1961 and 1964, respectively.
Issie N. Rabinovitch, Director, is a partner at Cheyenne Capital, a venture
capital firm. Prior to joining Cheyenne Capital, Mr. Rabinovitch served from
1990 to 1994 as President and Chief Executive Officer of Micro Power Systems,
Inc., a company engaged in the designing, manufacturing and marketing of
multiple semiconductor products. From 1985 to 1990, Mr. Rabinovitch was
President of Berkeley International Capital Corporation, a venture capital
firm. From 1983 to 1985, Mr. Rabinovitch was President of Crowntek Software
International, a software development and distribution company. Before joining
Crowntek, he was employed by the Xerox Corporation in various management
roles. Mr. Rabinovitch presently serves on the Board of Directors of
Instashred Security Systems, Inc., Incode, Inovate, The Adderley Group, A.I.P.
and Informlink. He received a
10
<PAGE>
Bachelor of Science degree from McGill University in 1967 and a Master's of
Business Administration degree from Harvard University in 1970.
Thomas E. Randlett, Director, is a certified public accountant and has been
a director at the Law & Economics Consulting Group, Inc. since 1992. Prior to
becoming a director, Mr. Randlett was employed as an affiliated expert. The
firm's professional specialties include the real estate and construction,
financial institutions and transportation industries. Prior to joining the Law
& Economics Consulting Group, Mr. Randlett was a managing partner and senior
real estate specialist for Peat Marwick Main & Co. in Northern California,
where he had been employed since 1966, and then a consultant at the New York
branch of Midland Bank from 1989 to 1990. Mr. Randlett is a former member of
the Policy Advisory Board, School of Real Estate and Urban Economics,
University of California at Berkeley and a current member of the American
Institute of Certified Public Accountants. He received a Bachelor of Arts
degree from Princeton University in 1966.
Robert C. Talbott, Senior Vice President--Operations, joined the Company in
1999 and is responsible for property and asset management activities. Prior to
joining the Company, Mr. Talbott was the Vice President of Asset Management
with BRE Properties, Inc., a real estate investment trust. In 1995, he served
as the Partner and Chief Operating Officer of Trammell Crow Residential
Services. From 1985 to 1989, he served as the General Manager of the Solano
County Fair Association. He graduated with honors upon receiving a Masters in
Business Administration degree from Saint Mary's College in Moraga, CA. In
1985, he received a Bachelor of Science in Agricultural Business Management
from California Polytechnic State University in San Luis Obispo.
Willard H. Smith, Jr., Director, was employed at Merrill Lynch & Co. from
1979 through 1995, and served as Managing Director since 1983 in their Equity
Capital Markets Division. From 1992 through 1995, Mr. Smith's primary focus
was the REIT industry. His duties as Managing Director at Merrill Lynch
included evaluating companies' capital structure and equity requirements,
placing offerings with Merrill Lynch's retail and institutional client base,
and assessing the market's demand for potential equity security offerings. Mr.
Smith is also a Board Member of the Cohen & Steers Realty Shares, the Cohen &
Steers Institutional Realty Shares, Inc., the Cohen & Steers Realty Income
Fund, the Cohen & Steers Special Equity Fund, Inc., the Cohen & Steers Total
Return Realty Fund and the Cohen & Steers Equity Income Fund. He is also a
Board member of Highwoods Properties, Inc. and Realty Income Corporation,
which are both REITS, Willis Lease Finance Corporation and, recently, he
joined the Board of Directors of Crest Net Lease, Inc. Prior to joining
Merrill Lynch, Mr. Smith worked at F. Eberstadt & Co. from 1971 to 1979. A
member of NAREIT, Mr. Smith received his Bachelor of Science degree in
Business Administration, and Bachelor of Science degree in Industrial
Engineering from the University of North Dakota in 1959 and 1960,
respectively.
Craig K. Zimmerman, Executive Vice President--Acquisitions, joined the
Company in 1985 and is responsible for negotiating and effecting property
acquisitions for the Company and the initial redevelopment and repositioning
of such assets where appropriate. He joined the Company's predecessor, Essex
Property Corporation, in 1984 and was responsible for the acquisition of
various multifamily residential properties, suburban office properties and
neighborhood shopping centers. Prior to joining the Company, Mr. Zimmerman was
the Vice President of Acquisitions with Prometheus Development Company, a
national real estate development firm, and a principal in Zimmerman
Properties. From 1975 through 1978, Mr. Zimmerman worked as a real estate
acquisitions specialist for American Equities Corporation. In 1974, he
received a Bachelor of Arts degree in Rhetoric from the University of
California at Berkeley.
Meetings and Committees of the Board of Directors
During 1999, the Board held nine (9) meetings (in person, telephonically or
by written consent). Except for Messrs. Brady and Rabinovitch, each other
director elected by the Common Stockholders attended (whether in person,
telephonically or by written consent) at least 75% of the total number of the
meetings of the Board and meetings of the committee of the Board on which he
served. The Board has five committees: the Executive Committee, the Audit
Committee, the Compensation Committee, the Stock Incentive Plan Committee and
the Pricing Committee.
11
<PAGE>
The Board does not have a nominating committee or a committee performing
the functions of a nominating committee. Although there are no formal
procedures for stockholders to recommend nominations, the Board will consider
recommendations from stockholders, which should be addressed to Jordan E.
Ritter, the Company's General Counsel, at the Company's address set forth
above.
The Executive Committee presently consists of Messrs. Guericke, Marcus and
Randlett. The Executive Committee has such authority as is delegated by the
Board, including the authority to execute certain contracts and agreements
with unaffiliated parties, except that the Executive Committee does not have
the power to declare dividends or other distributions on stock, elect
directors, issue stock other than in certain limited circumstances, recommend
to the stockholders any action which requires stockholder approval, amend the
Bylaws, or approve any merger or share exchange which does not require
stockholder approval. The Executive Committee met (in person, telephonically
or by written consent) five (5) times during 1999.
The Audit Committee presently consists of Messrs. Brady, Martin and
Randlett. The Audit Committee recommends the appointment of a firm of
certified public accountants to audit the financial statements of the Company
for the fiscal year for which they are appointed, reviews audit reports, takes
such action as may be deemed appropriate with respect to such audit reports
and monitors the effectiveness of the audit effort, the Company's financial
and accounting organization and its system of internal accounting controls.
The Audit Committee met (in person, telephonically or by written consent)
twice during 1999.
The Compensation Committee presently consists of Messrs. Larson, Marcus and
Rabinovitch. The Compensation Committee establishes and reviews annually the
Company's general compensation policies applicable to the Company's executive
officers, reviews and approves the level of compensation of the Chief
Executive Officer and other executive officers of the Company, reviews and
advises the Board concerning the performance of the Chief Executive Officer
and other employees whose compensation is within the review jurisdiction of
the Compensation Committee, reviews and advises the Board concerning regional
and industry-wide compensation practices and trends, and recommends benefit
plans from time to time. The Compensation Committee met (in person,
telephonically or by written consent) once during 1999.
The Stock Incentive Plan Committee presently consists of Messrs. Larson,
Martin and Rabinovitch. The Stock Incentive Plan Committee administers the
Essex Property Trust, Inc. 1994 Stock Incentive Plan, as amended (the "1994
Stock Incentive Plan"), and the Essex Property Trust, Inc. 1994 Employee Stock
Purchase Plan, including the authority to issue stock and grant and to amend
options thereunder, and to report to the Board regarding those plans from time
to time, or whenever called upon to do so. The Stock Incentive Plan Committee
met (in person, telephonically or by written consent) seven (7) times during
1999.
The Pricing Committee presently consists of Messrs. Guericke and Schall.
The Pricing Committee establishes the price at which the Company's securities
will be offered to the public in public offerings of the Company's securities.
The Pricing Committee did not meet during 1999.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee and the Stock Incentive Plan Committee
were formed in June 1994. No interlocking relationship existed in 1999 or
presently exists between any member of the Company's Compensation Committee,
Stock Incentive Plan Committee or Board of Directors on the one hand and
another company's compensation committee, stock incentive plan committee or
Board of Directors on the other hand. Certain transactions and relationships
between the Company and certain of its officers and directors are set forth
below in the section titled "Certain Relationships and Related Transactions."
Compensation of Directors
Each independent director receives a meeting fee of $500 for each Board of
Directors meeting attended. Such directors are also paid $500 for attending a
committee meeting if such meeting is not held on the same day
12
<PAGE>
as a meeting of the Board of Directors. In 1999, the independent directors
were Messrs. Brady, Downs, Larson, Martin, Rabinovitch, Randlett and Smith. In
addition to the $500 meeting fee, Mr. Smith received a fee of $20,000 in 1999
for consulting services performed by Mr. Smith for the Company.
Each independent director, upon joining the Board of Directors, receives an
automatic grant of an option to purchase 4,000 shares of Common Stock at an
exercise price equal to 100% of the fair market value of the Common Stock at
the date of the grant of such option pursuant to the Company's 1994 Stock
Incentive Plan. In the event of a change in control of the Company, the Board
may unilaterally cancel a director option as of any date to the extent then
unexercised after advance written notice to each affected director.
In 1999, pursuant to the Company's 1994 Stock Incentive Plan, Mr. Marcus,
Mr. Millichap and each independent director received a grant of an option to
purchase 2,500 shares of Common Stock at an exercise price equal to 100% of
the fair market value of the Common Stock at the date of the grant of such
option.
Relationships Among Directors or Executive Officers
There are no family relationships among any of the directors or executive
officers of the Company.
13
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Compensation
The following table sets forth certain information concerning compensation
of the Company's Chief Executive Officer and the other executive officers of
the Company (collectively, the "Named Executive Officers") for the years ended
December 31, 1997, 1998 and 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
Annual --------------------------------------------
Compensation Awards
-------------- --------------------------------------------
Restricted Securities
Stock Underlying Stock
Name and Position Year Salary($) Bonus($) Awards($)(1) Options/SARs(#)(2)
----------------- ---- --------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Keith R. Guericke(3).... 1999 $250,000 $150,000 $150,000(4) --
Vice Chairman of the
Board, 1998 250,000 -- 200,000(5) --
Chief Executive
Officer and President 1997 100,000 125,000 150,000(6) 55,000
Michael J. Schall(3).... 1999 $215,000 $112,500 $112,500(4) --
Director, Senior
Executive Vice
President 1998 215,000 -- 150,000(5) --
and Chief Financial
Officer 1997 100,000 90,000 125,000(6) 45,000
John D. Eudy(3)......... 1999 $100,000 $200,750 -- --
Executive Vice
President 1998 100,000 160,000(7) -- --
1997 100,000 135,000 -- 30,000
Robert C. Talbott (3)... 1999 58,333(8) 87,500(8) -- 30,000(9)
Senior Vice President
Craig K. Zimmerman(3)... 1999 $100,000 $180,000 -- --
Executive Vice
President 1998 100,000 135,000 -- --
1997 90,000 118,750 -- 30,000
</TABLE>
- --------
(1) Represents phantom stock units which, upon vesting in full, over a five-
year period, can be exchanged into an equivalent number of Common Stock
shares, or at the Company's option, cash. Prior to vesting, the holder
receives cash payments equal in amount and payment date to dividends paid
on Common Stock.
(2) In 1997, stock options to acquire shares of Common Stock at an exercise
price of $34.25 per share were issued to Mr. Guericke and Mr. Schall.
(3) This officer also participates in the Director and Executive Stock
Purchase Program. See "Certain Relationships and Related Transactions--
Director and Executive Stock Purchase Program" and "Voting Securities and
Principal Holders."
(4) Represents the value of phantom stock units granted in 2000 to Mr.
Guericke and Mr. Schall for the 1999 fiscal year. Each unit is deemed to
be equivalent in value to one share of Common Stock. The total value of
the units is determined by multiplying the closing price of the Company's
Common Stock as of January 3, 2000, which was $33.313 per share, by the
number of units granted, which, in the case of Mr. Guericke, was 4,503
units and, in the case of Mr. Schall, was 3,377 units.
(5) Represents the value of phantom stock units granted to Mr. Guericke and
Mr. Schall for the 1998 fiscal year. Each unit is deemed to be equivalent
in value to one share of Common Stock. The total value of the units is
determined by multiplying the closing price of the Company's Common Stock
as of February 12, 1999, which was $28.50 per share, by the number of
units granted, which, in the case of Mr. Guericke, was 7,018 units and,
in the case of Mr. Schall, was 5,263 units.
(6) Represents the value of phantom stock units granted in 1998 to Mr.
Guericke and Mr. Schall for the 1997 fiscal year. Each unit is deemed to
be equivalent in value to one share of Common Stock. The total value of
the units is determined by multiplying the closing price of the Company's
Common Stock as of December
14
<PAGE>
16, 1998, which was $30.06 per share, by the number of units granted,
which, in the case of Mr. Guericke, was 4,990 units and, in the case of Mr.
Schall, was 4,158 units.
(7) Excludes $12,890 paid in lieu of vacation.
(8) Reflects salary and bonus paid from May 3, 1999, when Mr. Talbott joined
the Company, through December 31, 1999.
(9) See "Option Grants in Last Fiscal Year."
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information with respect to a stock
option granted to a Named Executive Officer in fiscal year 1999 under the
Company's 1994 Stock Incentive Plan, as amended. The table also lists
potential realizable values of such option on the basis of assumed annual
compounded stock appreciation values of 5% and 10% over the life of the
option.
<TABLE>
<CAPTION>
Potential Realizable
Value At Assumed Annual
Rates of Stock Price
Appreciation for
Individual Option Grant Option Term (3)
--------------------------------------------- -------------------------
Number of % of Total
Securities Options Exercise
Underlying Granted to Price Per 5% 10%
Option Grant Employee in Share Expiration ----------- -------------
Name and Position (#)(1) Fiscal Year ($/Sh)(2) Date
----------------- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Talbot........ 30,000 18.6% $31.938 05/26/09 $602,569.00 $1,527,028.00
Senior Vice President
</TABLE>
- --------
(1) Twenty percent of such options become exercisable one year after grant and
an additional 20% becomes exercisable each year thereafter.
(2) Exercise price is 100% of the closing price of the stock on the date of
the option grant.
(3) The "potential realizable value" shown represents the potential gains
based on annual compounded stock price appreciation of 5 percent and 10
percent from the date of grant through the full ten-year option term, net
of exercise price, but before any taxes. The amounts represent certain
assumed rates of appreciation only based on the SEC rules. Actual gains,
if any, on stock option exercises are dependent on the future performance
of the Common Stock, overall market conditions and the option holders'
continued employment through the vesting period. The amounts reflected on
this table may not necessarily be achieved and do not reflect the
Company's estimate of future stock price growth.
LONG-TERM INCENTIVE AWARDS
In 2000, the Company granted Phantom Stock Units for the 1999 fiscal year
to Keith Guericke, Vice Chairman of the Board, Chief Executive Officer and
President, and Michael Schall, Director, Senior Executive Vice President and
Chief Financial Officer.
<TABLE>
<CAPTION>
Number of Shares, Units Performance or Other Period
Name or Other Rights(#)(1) Until Maturation or Payout
---- ----------------------- ---------------------------
<S> <C> <C>
Keith R. Guericke........ 4,503 January 1, 2005
Michael J. Schall........ 3,377 January 1, 2005
</TABLE>
- --------
(1) Represents number of units granted under the Company's Phantom Stock Unit
Agreements to Mr. Guericke and Mr. Schall. The units granted to Messrs.
Guericke and Schall were based on the closing price for the Common Stock
on the New York Stock Exchange on January 3, 2000, which was $33.313 per
share.
15
<PAGE>
A "unit" or "share" of phantom stock does not represent or entitle the
recipient to any equity securities of the Company, but instead involves the
creation of an unfunded account for the recipient, the value of which is
measured by reference to the value of the Common Stock. The Phantom Stock
Units issued to Messrs. Guericke and Schall vest in installments in accordance
with the vesting schedule set forth in the Phantom Stock Unit Agreements such
that the Phantom Stock Units granted will be fully vested on January 1, 2005.
On or shortly after January 1, 2005, the Company will issue to each of Messrs.
Guericke and Schall the number of shares of Common Stock (and fractions
thereof) equal to the number of Phantom Stock Units then represented under the
Phantom Stock Unit Agreements, or at the Company's option, an equivalent
amount in cash. In the event of a Change in Control (as defined in the Phantom
Stock Unit Agreements), the executive will be paid immediately prior to the
effective date of the Change in Control the shares of Common Stock (or
equivalent amount of cash, at the Company's option) represented by the number
of Phantom Stock Units then represented under the Phantom Stock Unit
Agreements.
The Company shall pay to each of Messrs. Guericke and Schall as of the
payment date of each cash dividend with respect to the Common Stock an amount
equal to the aggregate dividends payable with respect to the number of shares
of Common Stock that are then respectively represented under the Phantom Stock
Unit Agreements. If either Mr. Guericke or Mr. Schall terminates his
employment relationship with the Company voluntarily prior to January 1, 2005,
the executive will forfeit the Phantom Stock Units issued under the Phantom
Stock Unit Agreements that are not vested at the time of termination. If the
executive's termination is due to death, disability (as defined in the Phantom
Stock Unit Agreements), a material and adverse change in the executive's
position, duties, responsibilities or status, or other involuntary termination
of employment, the executive (or his estate) shall be issued the shares of
Common Stock or cash to be paid on January 1, 2005.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides the specified information concerning exercises
of options to purchase the Company's Common Stock in fiscal year 1999, and
unexercised options held as of December 31, 1999.
<TABLE>
<CAPTION>
Number
of Number of Securities Value of Unexercised
Shares Value Underlying Unexercised In-the-Money Options
Acquired Realized Options At Fiscal Year-End (#) at Fiscal Year-End ($)(2)
Upon Upon ----------------------------------- -------------------------
Name Exercise Exercise(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- ----------- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Keith R. Guericke....... -- -- 77,000 33,000 $797,500 --
Michael J. Schall....... -- -- 58,000 27,000 $580,000 --
John D. Eudy............ 19,200 $303,398 21,400 21,600 $165,500 $49,500
Robert C. Talbott....... -- -- -- 30,000 -- $61,875
Craig K. Zimmerman...... 11,700 $134,550 34,400 21,600 $326,000 $64,500
</TABLE>
- --------
(1) The value realized upon the exercise of stock options represents the
positive spread between the exercise price of stock options and the fair
market value on the exercise date.
(2) The value of "in-the-money" stock options represents the positive spread
between the exercise price of options and $34.00, the price per share of
the underlying shares of Common Stock, as reported on the New York Stock
Exchange on December 31, 1999 (the last trading day of fiscal year 1999).
16
<PAGE>
EMPLOYMENT CONTRACTS
The Company and Robert C. Talbott are parties to an employment agreement,
dated May 3, 1999. The employment agreement provides for an at-will employment
relationship with the Company with a base salary payable to Mr. Talbott of
$100,000 per year and, in addition, a guaranteed bonus of $50,000 per year
payable in $12,500 installments per quarter at the end of each quarter.
Pursuant to the terms of the employment agreement, Mr. Talbott is also
eligible to participate in the Company's executive bonus program. For the
period ended December 31, 1999, Mr. Talbott received $37,500 of the guaranteed
$50,000 bonus and $50,000 under the executive bonus program. Pursuant to the
employment agreement, upon commencing employment in May 1999, Mr. Talbott
received stock options to purchase 30,000 shares of common stock at an
exercise price of $31.938 per share.
Under the employment agreement, in the event the Company were to merge with
or be acquired by a certain real estate investment trust within 18 months of
the inception of Mr. Talbott's employment with the Company, Mr. Talbott could
receive up to 9,500 shares of the Company's restricted Common Stock. He would
also be entitled to receive a severance payment equal to nine months of his
base salary and guaranteed bonus if he were not hired by the acquiring
company.
Compensation Committee Report on Executive Compensation
Notwithstanding anything to the contrary set forth in any of the Company's
previous 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 following
report and the Performance Graph which follows shall not be deemed to be
incorporated by reference into any such filings.
The Company's Compensation Committee is responsible for developing,
administering and monitoring the compensation policies applicable to the
Company's executive officers. The Company's Stock Incentive Plan Committee
(collectively, with the Compensation Committee, the "Committees") is
responsible for the administration of the Company's 1994 Stock Incentive Plan,
under which grants may be made to executive officers and other key employees.
Executive Compensation Philosophy. The Committees believe that the primary
goal of the Company's executive compensation program should be related to
creating stockholder value. The Committee seeks to offer the Company's
executive officers competitive compensation opportunities based upon their
personal performance, the financial performance of the Company and their
contribution to that performance. The executive compensation program is
designed to attract and retain executive talent that contributes to the
Company's long-term success, to reward the achievement of the Company's short-
term and long-term strategic goals, to link executive officer compensation and
stockholder interests through equity-based plans, and to recognize and reward
individual contributions to Company performance. When setting executive
officer compensation, the Committees intend to evaluate annually the
performance of the Company and to compare the Company's performance and
compensation structure with those of other REITs and real estate companies
engaged in activities similar to those of the Company.
Key factors considered by the Compensation Committee in 1999 included
growth in funds from operations per share, progress in expanding the Company's
development program and success in the Company's ability to identify growing
markets consistent with its strategy, and the Company's success in acquiring
properties in those markets.
The Company's compensation program has three principal elements: base
salary, performance incentive bonuses and long-term incentive awards.
Base Salaries and Bonus. The base compensation for the Company's Named
Executive Officers in 1999 was established through negotiations between the
Company and each Named Executive Officer. The base salaries
17
<PAGE>
will be reviewed annually and may be adjusted by the Compensation Committee in
accordance with certain criteria determined primarily on the basis of growth
in revenues and funds from operations per share of Common Stock, and on the
basis of certain other factors, which include (i) individual performance, (ii)
the functions performed by the executive officer, and (iii) changes in the
compensation peer group in which the Company competes for executive talent.
Although the Compensation Committee considers these factors in determining
base salaries and adjustments thereto, the Compensation Committee anticipates
that the analysis will be subjective rather than objective and the weight
given such factors may vary from individual to individual.
Long-Term Incentive Awards. The Stock Incentive Plan Committee grants
awards under the 1994 Stock Incentive Plan based on a number of factors,
including (i) the executive officer's or key employee's position in the
Company, (ii) his or her performance and responsibilities, (iii) the extent to
which he or she already holds an equity stake in the Company, (iv) equity
participation levels of comparable executives and key employees at other
companies in the compensation peer group, and (v) individual contribution to
the success of the Company's financial performance. However, the 1994 Stock
Incentive Plan does not provide a formulaic method for weighing these factors,
and a decision to grant an award is based primarily upon the Stock Incentive
Plan Committee's subjective evaluation of the past as well as the future
anticipated performance and responsibilities of the individual in question.
Deductibility of Compensation. Section 162(m) of the Internal Revenue Code
denies a deduction for compensation in excess of $1 million paid to certain
executive officers, unless certain performance, disclosure, and stockholder
approval requirements are met. Option grants under the Company's 1994 Stock
Incentive Plan are intended to qualify as "performance-based" compensation not
subject to the Section 162(m) deduction limitation. In addition, the
Committees believe that a substantial portion of the compensation program
would be exempted from the $1 million deduction limitation. The Committees'
present intention is to qualify, to the extent reasonable, the substantial
portion of the executive officers' compensation for deductibility under
applicable tax laws. However, the Committees reserve the right to design
programs that recognize a full range of performance criteria important to the
Company's success, even where compensation payable under such programs may not
be deductible.
Chief Executive Officer Compensation. The base compensation of Keith R.
Guericke in 1999 was $250,000, which had been determined through negotiations
between the Company and Mr. Guericke. The long-term incentive award for Mr.
Guericke for 1999 was determined on the same general basis as discussed above
for long-term incentive award grants to executive officers. In 1999, Mr.
Guericke received a cash bonus of $150,000 and phantom stock units valued at
$150,000, the value of such phantom stock units determined by multiplying the
closing price of the Company's Common Stock as of January 3, 2000 by the
number of phantom stock units issued to Mr. Guericke. Mr. Guericke's base
salary and long-term incentive awards will be reviewed by the Committees and
adjusted annually based on the criteria for all executive officers discussed
above.
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
ISSIE N. RABINOVITCH
GEORGE M. MARCUS
ROBERT E. LARSON
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Stock Price Performance Graph
The following stock price performance graph compares the yearly percentage
change in (i) the cumulative total stockholder return on the Company's Common
Stock since December 31, 1994 with (ii) the cumulative total stockholder return
on (a) the Standard & Poor's 500 Stock Index ("S&P 500") and (b) the Equity
REIT Total Return Index prepared by the National Association of Real Estate
Investment Trusts, Inc. ("NAREIT"). The stock price performance graph assumes
an investment of $100 in the Company's Common Stock, the S&P 500, and in the
NAREIT Equity REIT Total Return Index, on December 31, 1994. The graph also
assumes the reinvestment of all dividends.
IT SHOULD BE NOTED THAT THE FOLLOWING LINE GRAPH REPRESENTS HISTORICAL STOCK
PRICE PERFORMANCE AND IS NOT NECESSARILY INDICATIVE OF ANY FUTURE STOCK PRICE
PERFORMANCE.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Period Ending
---------------------------------------------------------------
Index 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Essex Property
Trust, Inc. 100.00 140.05 229.80 289.09 261.47 319.56
S&P 500 100.00 137.58 169.03 225.44 289.79 350.78
NAREIT All
Equity REIT
Index 100.00 115.27 155.92 187.51 154.69 147.54
</TABLE>
19
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Director and Executive Stock Purchase Program
In September 1999, the Company formed a program in which directors and
management of the Company can participate indirectly in an investment in the
Company's Common Stock. The participants have entered into a swap agreement
with a securities broker whereby the securities broker has acquired, in open
market transactions, 223,475 shares of the Company's Common Stock. The
agreement terminates in five years at which time the settlement amount is
determined by comparing the original purchase price of the stock plus interest
at a rate of LIBOR plus 1.5% to the termination date market value of the
shares and all dividends received during the investment period. In certain
circumstances the participants may be required to provide collateral to the
securities broker. The Company has guaranteed performance of the participants
with respect to any obligations relating to the swap agreement. For the
specific amounts of each directors' and executive officers' participation in
this program, see "Voting Securities and Principal Holders."
Marcus & Millichap Real Estate Investment Brokerage Company
The Marcus & Millichap Real Estate Investment Brokerage Company ("M&M
REIBC") is a commercial real estate brokerage firm that is a subsidiary of The
Marcus & Millichap Company ("M&M"). Mr. Marcus, the Chairman of the Company,
is the Chairman of M&M. In connection with the Company's 1994 initial public
offering (the "IPO"), M&M REIBC, Essex Portfolio, L.P. (the "Operating
Partnership"), the Company and Essex Management Corporation ("EMC") entered
into an agreement (the "Brokerage Agreement") that provides that if the
Company or the Operating Partnership enters into a transaction with M&M REIBC
in which either of them or a third party pays a brokerage commission to M&M
REIBC, a percentage of such commission, reflecting M&M REIBC's net profit,
will be discounted or paid to EMC. For brokerage commissions paid to M&M REIBC
in 1999, an amount of $1,831 was determined to be payable to EMC pursuant to
the Brokerage Agreement. In accordance with the terms of the Brokerage
Agreement, the Company submitted the calculation of M&M REIBC's net profit, as
defined in such Agreement, to the Company's independent directors for their
review.
In connection with the IPO, the Company, the Operating Partnership, M&M,
M&M REIBC and EMC also entered into an agreement, pursuant to which M&M REIBC
agreed to provide, for ten years, real estate transaction, trend and other
information to the Company and its direct and indirect subsidiaries, including
the Operating Partnership and EMC. In return for the right to receive such
information, the Company provided M&M, the parent company of M&M REIBC, a one-
time grant of options to purchase 220,000 shares of Common Stock at the
initial public offering price of $19.50 per share. The option, which began
vesting one year after the completion of the IPO, became fully vested in 1999.
Pathways Loan
In connection with the IPO, the Operating Partnership repaid the
outstanding indebtedness of the 30.7% interest in the Pathways property which
was not contributed to the Company. In return for such repayment, the
Operating Partnership received a note in the amount of $4.8 million from the
two partnerships that are co-tenants with the Operating Partnership in the
Pathways property. The note bears interest at 9.0% per annum, has a maturity
date of June 2001 and is secured by the co-tenants' interests in the Pathways
property. For the year ended December 31, 1999, the largest principal balance
owed under the note was $4,452,000. In 1999, the loan was repaid in full
following the Company's acquisition of the co-tenants' interests in the
Pathways property for $7,500,000.
Sale of Property
In September 1999, the Company sold 777 California (a 45,500 square foot
office building which was the Company's former headquarters) located in Palo
Alto, California for a gross sales price of $18,400,000. The
20
<PAGE>
building was sold to an entity controlled by Mr. Marcus, the Company's
Chairman, following approval by the Company's independent directors. The
Company believes that this sale was made on terms no less favorable to it than
could have been obtained from unaffiliated third parties.
M&M Lease
Prior to the sale of the Company's former headquarters building, M&M leased
from the Company at such building approximately 22,384 square feet of space at
a monthly rent of approximately $72,352 subject to an annual cost of living
adjustment. Pursuant to such lease, for fiscal year 1999, M&M paid the Company
an aggregate net lease payment, including common area maintenance expenses, of
$694,540.
Property Management
The Company, through the Operating Partnership, owns all of the non-
preferred voting preferred stock of EMC. During 1999, EMC received
approximately $181,237 for property and asset management services for
properties that are not owned by the Company but in which Mr. Marcus holds a
partial ownership interest. The fees charged by EMC with respect to such
properties are comparable to the fees it charges for providing property and
asset management services for other properties.
Indebtedness of Management
On April 15, 1996, December 31, 1996, December 31, 1997, December 31, 1998
and December 31, 1999 the Operating Partnership made loans to Keith Guericke,
Vice Chairman of the Board, Chief Executive Officer and President of the
Company, in the amount of $75,000 each. Each loan bears interest at 8% per
annum, noncompounded, and are due and payable in full, together with all
accrued interest, ten years after the date the loans were made. The loans were
made to Mr. Guericke to pay certain tax liabilities related to Mr. Guericke's
ownership of interests in the Operating Partnership. During 1999, the largest
amount of the aggregate principal outstanding under the loans was $375,000. As
of the Record Date, the entire principal amounts of all the loans were
outstanding.
On April 30, 1996, December 31, 1996, December 31, 1997, December 31, 1998
and December 31, 1999 the Operating Partnership made loans to Michael J.
Schall, Executive Vice President and Chief Financial Officer of the Company,
in the amount of $50,000 each. Each loan bears interest at 8% per annum,
noncompounded, and are due and payable in full, together with all accrued
interest, ten years after the date the loans were made. The loans were made to
Mr. Schall to pay certain tax liabilities related to Mr. Schall's ownership of
interests in the Operating Partnership. During 1999, the largest amount of the
aggregate principal outstanding under the loans was $250,000. As of the Record
Date, the entire principal amounts of all the loans were outstanding.
PROPOSAL NO. 2
RATIFICATION AND APPROVAL OF AN AMENDMENT TO THE COMPANY'S
1994 STOCK INCENTIVE PLAN, AS AMENDED
GENERAL
The Common Stockholders are being asked to act to approve an amendment to
the Company's 1994 Employee Stock Incentive Plan, as amended (the "Stock
Incentive Plan," or the "Plan") to increase the maximum aggregate number of
shares of Common Stock available for the grant of awards under the Plan from
875,400 shares of Common Stock to 1,375,400 shares of Common Stock. As of
December 31, 1999, there were outstanding options for an aggregate of 842,450
shares granted under the Plan. Thus, the Company is nearing the maximum
aggregate number of shares, 875,400, available under the Plan. Consequently,
the Company's Board of Directors is requesting that the Stockholders approve
an amendment to the Plan to increase the number of shares available for grant.
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<PAGE>
The Board and management believe that the Company's ability to offer equity
participation to individuals by granting awards under the Plan significantly
strengthens the Company's capability to attract and retain exceptional
individuals, who due to their abilities and qualifications, can make valuable
contributions to the Company. In addition, the Board and management believe
that by further aligning the interests of key employees with the interests of
stockholders and by providing an opportunity to key employees to benefit from
stock price appreciation that generally accompanies improved financial
performance, stockholder value can be increased.
In 1999, the Company achieved solid increases in revenues, cash flow and
Funds From Operations and was among one of the top performers in its industry.
The Board and management strongly believe that by providing an incentive to
contribute to the Company's financial performance through equity
participation, the Plan continues to deliver substantial benefits to the
Company and its stockholders and therefore is an important component of its
long-term success.
The increase in the number of shares reserved for issuance is intended to
support the Company's requirements for granting stock options to both current
employees and future employees.
As of the date of this Proxy Statement, no options have been granted that
would depend on the stockholders' approval of the proposed increase to shares
available for option grant under the Plan. The benefits to be received
pursuant to the Plan amendment by the Company's directors, executive officers
and employees are not determinable at this time.
Ratification and approval of the proposed increase requires the approval of
a majority of the shares represented in person or by proxy and voting at the
Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS VOTE FOR RATIFICATION AND
APPROVAL OF THE AMENDMENT TO THE STOCK INCENTIVE PLAN
A general description of the principal terms of the Stock Incentive Plan is
set forth below. This description is qualified in its entirety by the terms of
the Stock Incentive Plan, a copy of which is attached to this Proxy Statement
as Exhibit A and is incorporated by reference herein. Capitalized terms not
otherwise defined below have the meanings set forth in the Stock Incentive
Plan.
GENERAL DESCRIPTION
The Stock Incentive Plan provides for the grant of (i) Shares, (ii) an
option, a SAR or similar right with an exercise or conversion privilege at a
fixed or variable price related to the Common Stock and/or the passage of
time, the occurrence of one or more events, or the satisfaction of performance
criteria or other conditions, or (iii) any other security with the value
derived from the value of the Common Stock of the Company or other securities
issued by a Related Entity (collectively, the "Awards"). Such Awards include,
without limitation, options, SARs, sales or bonuses of restricted stock,
Dividend Equivalent Rights, Performance Units or Performance Shares.
Amendment to Increase Overall Limit. Under the existing Stock Incentive
Plan, the number of shares available for grant is 875,400. If the Stockholders
approve Proposal No. 2, the number of shares of Common Stock available for
grant under the Plan will be increased to 1,375,400 shares.
Amendments to Section 4(b)(vi), Powers of the Administrator, and Section
6(g), Individual Option and SAR Limit. The Board, in its capacity as
Administrator of the Plan, has made further amendments to the Plan. The
following language has been deleted from Section 4(b)(vi), Powers of the
Administrator: "including a reduction in the exercise price (or base amount on
which appreciation is measured) of any Award to reflect a reduction in the
Fair Market Value of the Common Stock since the grant date of the Award." In
addition, the following
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<PAGE>
language has been deleted from Section 6(g), Individual Option and SAR Limit:
"For this purpose, the repricing of an Option (or in the case of a SAR, the
base amount on which the stock appreciation is calculated is reduced to
reflect a reduction in the Fair Market Value of the Common Stock) shall be
treated as the cancellation of the existing Option or SAR and the grant of a
new Option or SAR."
The Board may at any time amend, suspend or terminate the Stock Incentive
Plan. To the extent necessary to comply with applicable provisions of federal
securities laws, state corporate and securities laws, the Internal Revenue
Code of 1986, as amended (the "Code") the rules of any applicable stock
exchange or national market system, and the rules of any foreign jurisdiction
applicable to Awards granted to residents therein, the Company shall obtain
stockholder approval of any amendment to the Stock Incentive Plan in such a
manner and to such a degree as required.
Other Terms. Under the Stock Incentive Plan, incentive stock options may
not be sold, pledged, assigned, hypothecated, transferred or disposed of in
any manner other than by will or by the laws of descent or distribution and
may be exercised during the lifetime of the grantee only by the grantee.
However, the Stock Incentive Plan permits the designation of beneficiaries by
holders of incentive stock options. Other Awards shall be transferable to the
extent provided in the Award agreement.
Stock options granted under the Stock Incentive Plan may be either
incentive stock options under the provisions of Section 422 of the Code, or
non-qualified stock options. Incentive stock options may be granted only to
employees of the Company or any parent or subsidiary corporation of the
Company. Awards other than incentive stock options may be granted to
employees, directors and consultants. Under the Stock Incentive Plan, Awards
may be granted to such employees, directors or consultants who are residing in
foreign jurisdictions as the Administrator may determine from time to time.
The Stock Incentive Plan authorizes the Administrator to select the
employees, directors and consultants of the Company or any Related Entity of
the Company to whom Awards may be granted and to determine the terms and
conditions of any Award; however the term of an incentive stock option may not
be for more than 10 years (or 5 years in the case of incentive stock options
granted to any grantee who owns stock representing more than 10% of the
combined voting power of the Company or any parent or subsidiary corporation
of the Company). The Stock Incentive Plan authorizes the Administrator to
grant Awards at an exercise price determined by the Administrator. In the case
of incentive stock options, such price cannot be less than 100% (or 110%, in
the case of incentive stock options granted to any grantee who owns stock
representing more than 10% of the combined voting power of the Company or any
parent or subsidiary corporation of the Company) of the fair market value of
the Common Stock on the date the option is granted. The exercise price of non-
qualified stock options cannot be less than 100% of the fair market value of
the Common Stock on the date the option is granted. The exercise price is
generally payable in cash or, in certain circumstances, with a promissory
note, with such documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of an Award and delivery to
the Company of the sale or loan proceeds required to pay the exercise price,
or with shares of Common Stock. The aggregate fair market value of the Common
Stock with respect to any incentive stock options that are exercisable for the
first time by an eligible employee in any calendar year may not exceed
$100,000.
The Awards may be granted subject to vesting schedules and restrictions on
transfer and repurchase or forfeiture rights in favor of the Company as
specified in the agreements to be issued under the Stock Incentive Plan.
Unless the Administrator determines otherwise, the vesting schedule is
accelerated and all Awards become fully vested, exercisable, and released from
any restrictions on transfer and repurchase or forfeiture rights in the event
of a Corporate Transaction, a Change in Control or a Subsidiary Disposition,
each as defined in the Stock Incentive Plan. Effective upon the consummation
of the Corporate Transaction, all outstanding Awards under the Plan shall
terminate unless assumed by the successor company or its parent. In the event
of a Change in Control or a Subsidiary Disposition, each Award shall remain
exercisable until the expiration or sooner termination of the Award term. The
Stock Incentive Plan also permits the Administrator to include a provision
whereby the grantee may elect at any time while an employee, director or
consultant to exercise any part or all of the Award prior to full vesting of
the Award.
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<PAGE>
Under the Stock Incentive Plan, the Administrator may establish one or more
programs under the Stock Incentive Plan to permit selected grantees the
opportunity to elect to defer receipt of consideration payable under an Award.
The Administrator also may establish under the Stock Incentive Plan separate
programs for the grant of particular forms of Awards to one or more classes of
grantees. These programs may not be established under the existing Stock
Incentive Plan.
CERTAIN FEDERAL TAX CONSEQUENCES
The following summarizes only the federal income tax consequences of stock
options and shares of restricted stock granted under the Stock Incentive Plan.
State and local tax consequences may differ.
The grant of a non-qualified stock option under the Stock Incentive Plan
will not result in any federal income tax consequences to the optionee or to
the Company. Upon exercise of a non-qualified stock option, the optionee is
subject to income taxes at the rate applicable to ordinary compensation income
on the difference between the option price and the fair market value of the
Shares on the date of exercise. This income is subject to withholding for
federal income and employment tax purposes. The Company is entitled to an
income tax deduction in the amount of the income recognized by the optionee.
Any gain or loss on the optionee's subsequent disposition of the Shares of
Common Stock will receive long or short-term capital gain or loss treatment,
depending on whether the Shares are held for more than one year following
exercise. The Company does not receive a tax deduction for any such gain.
The grant of an incentive stock option under the Stock Incentive Plan will
not result in any federal income tax consequences to the optionee or to the
Company. An optionee recognizes no federal taxable income upon exercising an
incentive stock option ("ISO") (subject to the alternative minimum tax rules
discussed below), and the Company receives no deduction at the time of
exercise. In the event of a disposition of stock acquired upon exercise of an
ISO, the tax consequences depend upon how long the optionee has held the
Shares of Common Stock. If the optionee does not dispose of the Shares within
two years after the ISO was granted, nor within one year after the ISO was
exercised and Shares were purchased, the optionee will recognize a long-term
capital gain (or loss) equal to the difference between the sale price of the
Shares and the exercise price. The Company is not entitled to any deduction
under these circumstances.
If the optionee fails to satisfy either of the foregoing holding periods,
he or she must recognize ordinary income in the year of the disposition
(referred to as a "disqualifying disposition"). The amount of such ordinary
income generally is the lesser of (i) the difference between the amount
realized on disposition and the exercise price, or (ii) the difference between
the fair market value of the stock on the exercise date and the exercise
price. Any gain in excess of the amount taxed as ordinary income will be
treated as a long or short-term capital gain, depending on whether the stock
was held for more than one year. The Company, in the year of the disqualifying
disposition, is entitled to a deduction equal to the amount of ordinary income
recognized by the optionee.
The "spread" under an ISO -- i.e., the difference between the fair market
value of the Shares at exercise and the exercise price -- is classified as an
item of adjustment in the year of exercise for purposes of the alternative
minimum tax.
Section 162(m) of the Internal Revenue Code contains special rules
regarding the federal income tax deductibility of compensation paid to the
Company's Chief Executive Officer and to each of the other four most highly
compensated executive officers. The general rule is that annual compensation
paid to any of these specified executives will be deductible to the Company
only to the extent that it does not exceed $1 million. However, the Company
can preserve the deductibility of certain compensation in excess of $1 million
if it complies with conditions imposed by Section 162(m) of the Internal
Revenue Code, including the establishment of a maximum number of shares which
may be granted to any one employee during a specified time period. A limit of
100,000 shares has been established by the Company as the maximum number of
shares with respect to which options and SARs may be granted to any one
employee in any calendar year.
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The grant of restricted stock will subject the recipient to ordinary
compensation income on the difference between the amount paid for such stock
and the fair market value of the Shares on the date that the restrictions
lapse. This income is subject to withholding for federal income and employment
tax purposes. The Company is entitled to an income tax deduction in the amount
of the income recognized by the recipient. Any gain or loss on the recipient's
subsequent disposition of the Shares will receive long or short-term capital
gain or loss treatment depending on whether the Shares are held for more than
one year and depending on how long the stock has been held since the
restrictions lapsed. The Company does not receive a tax deduction for any such
gain. Recipients of restricted stock may make an election under Internal
Revenue Code Section 83(b) to recognize as ordinary compensation income in the
year that such restricted stock is granted the amount equal to the spread
between the amount paid for such stock and the fair market value on date of
the issuance of the stock. If such an election is made, the recipient
recognizes no further amounts of compensation income upon the lapse of any
restrictions and any gain or loss on subsequent disposition will be long or
short term capital gain. The Section 83(b) election must be made within thirty
days from the time the restricted stock is issued.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP served as the Company's independent auditors for the
fiscal year ended December 31, 1999 and has been appointed by the Board to
continue as the Company's independent auditors for the fiscal year ending
December 31, 2000. In the event that ratification of this appointment of
auditors is not approved by the affirmative vote of a majority of the votes
cast on the matter, then the appointment of independent auditors will be
reconsidered by the Board. Unless marked to the contrary, proxies received
will be voted FOR ratification of the appointment of KPMG Peat Marwick LLP as
the independent auditors for the fiscal year ending December 31, 2000.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting. The representative will have an opportunity to make a
statement and will be able to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2000
OTHER MATTERS
Deadline for Receipt of Stockholder Proposals
Requirements for Stockholder Proposals to be Brought Before an Annual
Meeting. For stockholder proposals to be considered properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
therefor in writing to Jordan E. Ritter, the Secretary of the Company. To be
timely for the Company's 2001 Annual Meeting of Stockholders, a stockholder's
notice must be received by the Secretary at the principal executive offices of
the Company, no earlier than January 2, 2001 and no later than February 1,
2001. A stockholder's notice shall set forth (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Exchange Act (including such
person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); (ii) as to any other business that
the stockholder proposes to bring before the meeting, a brief description of
the business desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material interest in such
business of such stockholder and
25
<PAGE>
of the beneficial owner, if any, on whose behalf the proposal is made; and
(iii) as to the stockholder giving the notice and the beneficial owner, if
any, on whose behalf the nomination or proposal is made, (x) the name and
address of such stockholder, as they appear on the Company's books, and of
such beneficial owner and (y) the number of shares of each class of stock of
the Company which are owned beneficially and of record by such stockholder and
such beneficial owner.
Requirements for Stockholder Proposals to be Considered for Inclusion in
the Company's Proxy Materials. Stockholder proposals submitted pursuant to
Rule 14a-8 under the Exchange Act and intended to be presented at the
Company's 2001 Annual Meeting of Stockholders must be received by the Company
not later than November 17, 2000 in order to be considered for inclusion in
the Company's proxy materials for that meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") and the New York Stock Exchange initial reports of
ownership and changes in ownership of the Company's Common Stock. Reporting
Persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) reports they file. To the Company's knowledge, based solely
on its review of the copies of such reports received, the Company believes
that for the fiscal year ending December 31, 1999, all Section 16(a) filing
requirements applicable to the Reporting Persons were complied with, except
for the following late reports: one report filed by Mr. Marcus relating to
three transactions, one report filed by Mr. Millichap relating to two
transactions, one report filed by Mr. Randlett relating to two transactions
and one report filed by each of Messrs. Brady, Downs, Larson, Martin,
Rabinovitch and Smith relating to one transaction by each such person.
Other Matters
The Board is not aware of any other matter to be presented to the Annual
Meeting. If any other business is properly brought before the Annual Meeting,
the persons named in the enclosed proxy will act thereon according to their
best judgment.
It is important that the proxies be returned promptly and that your shares
be represented. Stockholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors
/s/ KEITH R. GUERICKE
Keith R. Guericke
Vice Chairman of the Board,
Chief Executive Officer and
President
March 23, 2000
Palo Alto, California
26
<PAGE>
EXHIBIT A
ESSEX PROPERTY TRUST, INC.
1994 STOCK INCENTIVE PLAN, AS AMENDED
(amended and restated as of February 15, 2000 and formerly
known as the 1994 Employee Stock Incentive Plan)
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business.
2. Definitions. As used herein, the following definitions shall apply:
(a)"Administrator" means the Board or any of the Committees appointed to
administer the Plan.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act. All
references to "Affiliates" in any Award Agreement issued prior to the date of
adoption by the Board of this April 3, 1997 amendment and restatement of the
Plan shall be deemed to refer to Parents and Subsidiaries.
(c) "Applicable Laws" means the legal requirements relating to the
administration of stock incentive plans, if any, under applicable provisions
of federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the
rules of any foreign jurisdiction applicable to Awards granted to residents
therein.
(d) "Award" means the grant of an Option, SAR, Dividend Equivalent
Right, Restricted Stock, Performance Unit, Performance Share, or other right
or benefit under the Plan.
(e) "Award Agreement" means the written agreement evidencing the grant
of an Award executed by the Company and the Grantee, including any amendments
thereto.
(f) "Board" means the Board of Directors of the Company.
(g) "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:
(i)the direct or indirect acquisition by any person or related group
of persons (other than an acquisition from or by the Company or by a Company-
sponsored employee benefit plan or by a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company) of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than twenty percent (20%) of the total combined
voting power of the Company's outstanding securities, or
(ii) a change in the composition of the Board over a calendar year or
less such that a majority of the Board members (rounded up to the next whole
number) ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who are Continuing Directors.
(h)"Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means any committee appointed by the Board to administer
the Plan. All references to the "Committee" in any Award Agreement shall be
deemed to refer to the Administrator.
(j) "Common Stock" means the common stock of the Company.
(k) "Company" means Essex Property Trust, Inc., a Maryland corporation.
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(l) "Consultant" means any person who is engaged by the Company or any
Related Entity to render consulting or advisory services as an independent
contractor and is compensated for such services.
(m) "Continuing Directors" means members of the Board who either (i)
have been Board members continuously for a period of at least a calendar year
or (ii) have been Board members for less than a calendar year and were elected
or nominated for election as Board members by at least a majority of the Board
members described in clause (i) who were still in office at the time such
election or nomination was approved by the Board.
(n) "Continuous Status as an Employee, Director or Consultant" means
that the provision of services to the Company or a Related Entity in any
capacity of Employee, Director or Consultant, is not interrupted or
terminated. Continuous Status as an Employee, Director or Consultant shall not
be considered interrupted in the case of (i) any approved leave of absence or
(ii) transfers between locations of the Company or among the Company, any
Related Entity, or any successor in any capacity of Employee, Director or
Consultant. An approved leave of absence shall include sick leave, military
leave, or any other authorized personal leave. For purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract.
(o) "Corporate Transaction" means any of the following stockholder-
approved transactions to which the Company is a party:
(i)a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is
to change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company (including the capital stock of the Company's
subsidiary corporations) in connection with the complete liquidation or
dissolution of the Company; or
(iii) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are transferred
to a person or persons different from those who held such securities
immediately prior to such merger.
(p)"Covered Employee" means an Employee who is a "covered employee"
under Section 162(m)(3) of the Code.
(q) "Director" means a member of the Board.
(r) "Dividend Equivalent Right" means a right entitling the Grantee to
compensation measured by dividends paid with respect to Common Stock.
(s) "Employee" means any person, including an Officer or Director, who
is an employee of the Company or any Related Entity. The payment of a
director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(t) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(u) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i)Where there exists a public market for the Common Stock, the Fair
Market Value shall be (A) the closing price for a Share for the last market
trading day prior to the time of the determination (or, if no closing price
was reported on that date, on the last trading date on which a closing price
was reported) on the stock exchange determined by the Administrator to be the
primary market for the Common Stock or the Nasdaq National Market, whichever
is applicable or (B) if the Common Stock is not traded on any such exchange or
national market system, the average of the closing bid and asked prices of a
Share on the Nasdaq Small Cap Market for the day prior to the time of the
determination (or, if no such prices were reported on that date, on the last
date on which such prices were reported), in each case, as reported in The
Wall Street Journal or such other source as the Administrator deems reliable;
or
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(ii) In the absence of an established market of the type described in
(i), above, for the Common Stock, the Fair Market Value thereof shall be
determined by the Administrator in good faith.
(v)"Grantee" means an Employee, Director or Consultant who receives an
Award under the Plan.
(w) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(x) "Non-Qualified Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(y) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(z) "Option" means a stock option granted pursuant to the Plan.
(aa) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(bb) "Performance--Based Compensation" means compensation qualifying as
"performance-based compensation" under Section 162(m) of the Code.
(cc) "Performance Shares" means Shares or an award denominated in Shares
which may be earned in whole or in part upon attainment of performance
criteria established by the Administrator.
(dd) "Performance Units" means an award which may be earned in whole or
in part upon attainment of performance criteria established by the
Administrator and which may be settled for cash, Shares or other securities or
a combination of cash, Shares or other securities as established by the
Administrator.
(ee) "Plan" means this 1994 Stock Incentive Plan, as amended and
restated. All references to the "1994 Employee Stock Incentive Plan" in any
Award Agreement shall be deemed to refer to the Plan.
(ff) "Related Entity" means any Parent, Subsidiary and any business,
corporation, partnership, limited liability company or other entity in which
the Company, a Parent or a Subsidiary holds an ownership interest, directly or
indirectly, and including but not limited to Summerhill Development and Marcus
& Millichap Real Estate Investment Brokerage Company.
(gg) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture
provisions, and other terms and conditions as established by the
Administrator.
(hh) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor thereto.
(ii) "SAR" means a stock appreciation right entitling the Grantee to
Shares or cash compensation, as established by the Administrator, measured by
appreciation in the value of Common Stock.
(jj) "Share" means a share of the Common Stock.
(kk) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(ll) "Subsidiary Disposition" means the disposition by the Company of
its equity holdings in any subsidiary corporation effected by a merger or
consolidation involving that subsidiary corporation, the sale of all or
substantially all of the assets of that subsidiary corporation or the
Company's sale or distribution of substantially all of the outstanding capital
stock of such subsidiary corporation.
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3. Stock Subject to the Plan.
(a)Subject to the provisions of Section 10, below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards
(including Incentive Stock Options) is one million three hundred seventy-five
thousand four hundred (1,375,400) Shares. The Shares to be issued pursuant to
Awards may be authorized, but unissued, or reacquired Common Stock.
(b) If an Award expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Award exchange program, or
if any unissued Shares are retained by the Company upon exercise of an Award
in order to satisfy the exercise price for such Award or any withholding taxes
due with respect to such Award, such unissued or retained Shares shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that actually have been issued under the Plan pursuant to
an Award shall not be returned to the Plan and shall not become available for
future distribution under the Plan, except that if unvested Shares are
forfeited, or repurchased by the Company at their original purchase price,
such Shares shall become available for future grant under the Plan.
4. Administration of the Plan.
(a)Plan Administrator.
(i)Administration with Respect to Directors and Officers. With
respect to grants of Awards to Directors or Employees who are also Officers or
Directors of the Company, the Plan shall be administered by (A) the Board or
(B) a Committee designated by the Board, which Committee shall be constituted
in such a manner as to satisfy the Applicable Laws and to permit such grants
and related transactions under the Plan to be exempt from Section 16(b) of the
Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee
shall continue to serve in its designated capacity until otherwise directed by
the Board.
(ii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Awards to Employees or Consultants who
are neither Directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board,
which Committee shall be constituted in such a manner as to satisfy the
Applicable Laws. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. The Board may
authorize one or more Officers to grant such Awards and may limit such
authority as the Board determines from time to time.
(iii) Administration With Respect to Covered
Employees. Notwithstanding the foregoing, grants of Awards to any Covered
Employee intended to qualify as Performance-Based Compensation shall be made
only by a Committee (or subcommittee of a Committee) which is comprised solely
of two or more Directors eligible to serve on a committee making Awards
qualifying as Performance-Based Compensation. In the case of such Awards
granted to Covered Employees, references to the "Administrator" or to a
"Committee" shall be deemed to be references to such Committee or
subcommittee.
(iv) Administration Errors. In the event an Award is granted in a
manner inconsistent with the provisions of this subsection (a), such Award
shall be presumptively valid as of its grant date to the extent permitted by
the Applicable Laws.
(b)Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
(i)to select the Employees, Directors and Consultants to whom Awards
may be granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are granted
hereunder;
(iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;
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(iv) to approve forms of Award Agreement for use under the Plan;
(v) to determine the terms and conditions of any Award granted
hereunder;
(vi) to amend the terms of any outstanding Award granted under the
Plan, provided that any amendment that would adversely affect the Grantee's
rights under an outstanding Award shall not be made without the Grantee's
written consent;
(vii) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan;
(viii) to establish additional terms, conditions, rules or procedures
to accommodate the rules or laws of applicable foreign jurisdictions and to
afford Grantees favorable treatment under such laws; provided, however, that
no Award shall be granted under any such additional terms, conditions, rules
or procedures with terms or conditions which are inconsistent with the
provisions of the Plan; and
(ix)to take such other action, not inconsistent with the terms of the
Plan, as the Administrator deems appropriate.
(c)Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be conclusive and binding on all
persons.
5. Eligibility. Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company, a Parent or a Subsidiary. An Employee,
Director or Consultant who has been granted an Award may, if otherwise
eligible, be granted additional Awards. Awards may be granted to such
Employees, Directors or Consultants who are residing in foreign jurisdictions
as the Administrator may determine from time to time.
6. Terms and Conditions of Awards.
(a)Type of Awards. The Administrator is authorized under the Plan to
award any type of arrangement to an Employee, Director or Consultant that is
not inconsistent with the provisions of the Plan and that by its terms
involves or might involve the issuance of (i) Shares, (ii) an Option, a SAR or
similar right with an exercise or conversion privilege at a fixed or variable
price related to the Common Stock and/or the passage of time, the occurrence
of one or more events, or the satisfaction of performance criteria or other
conditions, or (iii) any other security with the value derived from the value
of the Common Stock or other securities issued by a Related Entity. Such
awards include, without limitation, Options, SARs, sales or bonuses of
Restricted Stock, Dividend Equivalent Rights, Performance Units or Performance
Shares, and an Award may consist of one such security or benefit, or two or
more of them in any combination or alternative.
(b) Designation of Award. Each Award shall be designated in the Award
Agreement. In the case of an Option, the Option shall be designated as either
an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of Shares subject to Options designated as Incentive Stock Options which
become exercisable for the first time by a Grantee during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds $100,000,
such excess Options, to the extent of the Shares covered thereby in excess of
the foregoing limitation, shall be treated as Non-Qualified Stock Options. For
this purpose, Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of the Shares shall be
determined as of the date the Option with respect to such Shares is granted.
(c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net
operating income, cash flow, revenue, economic value added, personal
management
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objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or
vesting corresponding to the degree of achievement as specified in the Award
Agreement.
(d) Deferral of Award Payment. The Administrator may establish one or
more programs under the Plan to permit selected Grantees the opportunity to
elect to defer receipt of consideration upon exercise of an Award,
satisfaction of performance criteria, or other event that absent the election
would entitle the Grantee to payment or receipt of Shares or other
consideration under an Award. The Administrator may establish the election
procedures, the timing of such elections, the mechanisms for payments of, and
accrual of interest or other earnings, if any, on amounts, Shares or other
consideration so deferred, and such other terms, conditions, rules and
procedures that the Administrator deems advisable for the administration of
any such deferral program.
(e) Award Exchange Programs. The Administrator may establish one or
more programs under the Plan to permit selected Grantees to exchange an Award
under the Plan for one or more other types of Awards under the Plan on such
terms and conditions as determined by the Administrator from time to time.
(f) Separate Programs. The Administrator may establish one or more
separate programs under the Plan for the purpose of issuing particular forms
of Awards to one or more classes of Grantees on such terms and conditions as
determined by the Administrator from time to time.
(g) Individual Option and SAR Limit. The maximum number of Shares with
respect to which Options and SARs may be granted to any Employee in any
calendar year shall be one hundred thousand (100,000) Shares. The foregoing
limitation shall be adjusted proportionately in connection with any change in
the Company's capitalization pursuant to Section 10, below. To the extent
required by Section 162(m) of the Code or the regulations thereunder, in
applying the foregoing limitation with respect to an Employee, if any Option
or SAR is canceled, the canceled Option or SAR shall continue to count against
the maximum number of Shares with respect to which Options and SARs may be
granted to the Employee.
(h) Early Exercise. The Award may, but need not, include a provision
whereby the Grantee may elect at any time while an Employee, Director or
Consultant to exercise any part or all of the Award prior to full vesting of
the Award. Any unvested Shares received pursuant to such exercise may be
subject to a repurchase right in favor of the Company or to any other
restriction the Administrator determines to be appropriate.
(i) Term of Award. The term of each Award shall be the term stated in
the Award Agreement, provided, however, that the term of an Incentive Stock
Option shall be no more than ten (10) years from the date of grant thereof.
However, in the case of an Incentive Stock Option granted to a Grantee who, at
the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Incentive Stock Option shall be five (5) years
from the date of grant thereof or such shorter term as may be provided in the
Award Agreement.
(j) Transferability of Awards. Incentive Stock Options may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Grantee, only by the Grantee; provided,
however, that the Grantee may designate a beneficiary of the Grantee's
Incentive Stock Option in the event of the Grantee's death on a beneficiary
designation form provided by the Administrator. Other Awards shall be
transferable to the extent provided in the Award Agreement.
(k) Time of Granting Awards. The date of grant of an Award shall for
all purposes be the date on which the Administrator makes the determination to
grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.
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7. Award Exercise or Purchase Price, Consideration, Taxes and Reload
Options.
(a)Exercise or Purchase Price. The exercise or purchase price, if any,
for an Award shall be as follows:
(i)In the case of an Incentive Stock Option:
(A)granted to an Employee who, at the time of the grant of such
Incentive Stock Option owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be not less than one hundred
ten percent (110%) of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
the preceding paragraph, the per Share exercise price shall be not less than
one hundred percent (100%) of the Fair Market Value per Share on the date of
grant.
(ii)In the case of a Non-Qualified Stock Option, the per Share
exercise price shall be not less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant unless otherwise determined by the
Administrator.
(iii) In the case of Awards intended to qualify as Performance-Based
Compensation, the exercise or purchase price, if any, shall be not less than
one hundred percent (100%) of the Fair Market Value per Share on the date of
grant.
(iv) In the case of other Awards, such price as is determined by the
Administrator.
(b)Consideration. Subject to Applicable Laws, the consideration to be
paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator
(and, in the case of an Incentive Stock Option, shall be determined at the
time of grant). In addition to any other types of consideration the
Administrator may determine, the Administrator is authorized to accept as
consideration for Shares issued under the Plan the following:
(i)cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator determines
as appropriate;
(iv) surrender of Shares or delivery of a properly executed form of
attestation of ownership of Shares as the Administrator may require (including
withholding of Shares otherwise deliverable upon exercise of the Award) which
have a Fair Market Value on the date of surrender or attestation equal to the
aggregate exercise price of the Shares as to which said Award shall be
exercised (but only to the extent that such exercise of the Award would not
result in an accounting compensation charge with respect to the Shares used to
pay the exercise price unless otherwise determined by the Administrator);
(v) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Award and delivery to the Company
of the sale or loan proceeds required to pay the exercise price; or
(vi) any combination of the foregoing methods of payment.
(c)Taxes. No Shares shall be delivered under the Plan to any Grantee or
other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Award, the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.
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(d) Reload Options. In the event the exercise price or tax withholding
of an Option is satisfied by the Company or the Grantee's employer withholding
Shares otherwise deliverable to the Grantee, the Administrator may issue the
Grantee an additional Option, with terms identical to the Award Agreement
under which the Option was exercised, but at an exercise price as determined
by the Administrator in accordance with the Plan.
8. Exercise of Award.
(a)Procedure for Exercise; Rights as a Stockholder.
(i)Any Award granted hereunder shall be exercisable at such times and
under such conditions as determined by the Administrator under the terms of
the Plan and specified in the Award Agreement.
(ii) An Award shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of
the Award by the person entitled to exercise the Award and full payment for
the Shares with respect to which the Award is exercised has been received by
the Company. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to
Shares subject to an Award, notwithstanding the exercise of an Option or other
Award. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Award. No adjustment will be made for a dividend
or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in the Award Agreement or Section
10, below.
(b)Exercise of Award Following Termination of Employment, Director or
Consulting Relationship.
(i)An Award may not be exercised after the termination date of such
Award set forth in the Award Agreement and may be exercised following the
termination of a Grantee's Continuous Status as an Employee, Director or
Consultant only to the extent provided in the Award Agreement.
(ii) Where the Award Agreement permits a Grantee to exercise an Award
following the termination of the Grantee's Continuous Status as an Employee,
Director or Consultant for a specified period, the Award shall terminate to
the extent not exercised on the last day of the specified period or the last
day of the original term of the Award, whichever occurs first.
(iii) Any Award designated as an Incentive Stock Option to the extent
not exercised within the time permitted by law for the exercise of Incentive
Stock Options following the termination of a Grantee's Continuous Status as an
Employee, Director or Consultant shall convert automatically to a Non-
Qualified Stock Option and thereafter shall be exercisable as such to the
extent exercisable by its terms for the period specified in the Award
Agreement.
(c)Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares, an Award previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to
the Grantee at the time that such offer is made.
9. Conditions Upon Issuance of Shares.
(a)Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Award, the Company may require
the person exercising such Award to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
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10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by
each outstanding Award, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Awards have yet been granted or
which have been returned to the Plan, as well as the price per share of Common
Stock covered by each such outstanding Award, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other similar
event resulting in an increase or decrease in the number of issued shares of
Common Stock. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason hereof shall be
made with respect to, the number or price of Shares subject to an Award.
11. Corporate Transactions/Changes in Control/Subsidiary Dispositions.
(a)In the event of a Corporate Transaction, each Award which is at the
time outstanding under the Plan automatically shall become fully vested and
exercisable and be released from any restrictions on transfer and repurchase
or forfeiture rights, immediately prior to the specified effective date of
such Corporate Transaction, for all of the Shares at the time represented by
such Award. Effective upon the consummation of the Corporate Transaction, all
outstanding Awards under the Plan shall terminate unless assumed by the
successor company or its Parent.
(b) In the event of a Change in Control (other than a Change in Control
which also is a Corporate Transaction), each Award which is at the time
outstanding under the Plan automatically shall become fully vested and
exercisable and be released from any restrictions on transfer and repurchase
or forfeiture rights, immediately prior to the specified effective date of
such Change in Control, for all of the Shares at the time represented by such
Award. Each such Award shall remain so exercisable until the expiration or
sooner termination of the applicable Award term.
(c) In the event of a Subsidiary Disposition, each Award with respect to
those Grantees who are at the time engaged primarily in Continuous Status as
an Employee or Consultant with the subsidiary corporation involved in such
Subsidiary Disposition which is at the time outstanding under the Plan
automatically shall become fully vested and exercisable and be released from
any restrictions on transfer and repurchase or forfeiture rights, immediately
prior to the specified effective date of such Subsidiary Disposition, for all
of the Shares at the time represented by such Award Each such Award shall
remain so exercisable until the expiration or sooner termination of the Award
term.
(d) Notwithstanding the foregoing, the Administrator, in its discretion,
may prevent the acceleration of vesting and release from any restrictions on
transfer and repurchase or forfeiture rights of any outstanding Award with
respect to any Corporate Transaction, Change in Control or Subsidiary
Disposition.
(e) The portion of any Incentive Stock Option accelerated under this
Section 11 in connection with a Corporate Transaction, Change in Control or
Subsidiary Disposition shall remain exercisable as an Incentive Stock Option
under the Code only to the extent the $100,000 dollar limitation of Section
422(d) of the Code is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated excess portion of such Option shall be exercisable
as a Non-Qualified Stock Option.
12. Term of Plan. The Plan shall terminate on March 16, 2004 unless
sooner terminated.
13. Amendment, Suspension or Termination of the Plan.
(a)The Board may at any time amend, suspend or terminate the Plan. To
the extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.
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(c) Any amendment, suspension or termination of the Plan shall not
affect Awards already granted, and such Awards shall remain in full force and
effect as if the Plan had not been amended, suspended or terminated, unless
mutually agreed otherwise between the Grantee and the Administrator, which
agreement must be in writing and signed by the Grantee and the Company.
14. Reservation of Shares.
(a)The Company, during the term of the Plan, will at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any
Shares hereunder, shall relieve the Company of any liability in respect of the
failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
15. No Effect on Terms of Employment. The Plan shall not confer upon any
Grantee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
16. Stockholder Approval. On February 15, 2000, the Board adopted and
approved an amendment to the Plan, subject to stockholder approval, to
increase the maximum aggregate number of Shares that may be issued pursuant to
Awards (the "Amendment"). The Amendment shall not be given effect until it
shall have been approved by the Company's stockholders.
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1321-SPS-00
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DETACH HERE
PROXY
ESSEX PROPERTY TRUST, INC.
925 EAST MEADOW DRIVE
PALO ALTO, CALIFORNIA 94303
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON APRIL 25, 2000
Keith R. Guericke, Michael J. Schall and Jordan E. Ritter (the
"Proxyholders"), or any of them, each with the power of substitution, are hereby
authorized to represent and vote the shares of the undersigned, with all the
powers which the undersigned would possess if personally present, at the Annual
Meeting of Stockholders of Essex Property Trust, Inc. (the "Company"), to be
held on Tuesday, April 25, 2000, at 10:00 a.m., local time, and any adjournments
or postponements thereof.
Election of three directors (or if the nominee is not available for
election, such substitute as the Board of Directors or the Proxyholders may
designate). Nominees: GEORGE M. MARCUS, GARY P. MARTIN and WILLIAM A. MILLICHAP.
SEE REVERSE SIDE: If you wish to vote in accordance with the Board of
Directors' recommendations, just sign and date on the reverse side. You need not
mark any boxes.
- ------------------ ------------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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<PAGE>
[1321 - ESSWX PROPERTY TRUST][FILE NAME:ESX02A.ELX][VERSION - 4][03/01/00]
[orig. 02/17/00]
DETACH HERE
[X] Please mark
votes as in
this example.
The Board of Directors recommends a vote FOR the election of each of the
Director Nominees listed on the reverse side and FOR proposals 2 and 3.
Shares represented by this proxy will be voted as directed by the stockholder.
If no such directions are indicated, the Proxyholders will have authority to
vote FOR the election of all directors, and FOR proposals 2 and 3. In their
discretion, the Proxyholders are authorized to vote upon such other business
as may properly come before the Annual Meeting.
1. Election of Directors (see reverse):
For WITHHELD
ALL [_] [_] FROM ALL
NOMINEES NOMINEES
[_] ______________________________________
For all nominees except as noted above
2. To ratify the amendment to the FOR AGAINST ABSTAIN
Company's 1994 Stock Incentive [_] [_] [_]
Plan, as amended, to increase the
number of shares reserved for
issuance thereunder from 875,400 to
1,375,400 shares
FOR AGAINST ABSTAIN
3. To ratify the appointment of KPMG [_] [_] [_]
Peat Marwick LLP as the Company's
independent public auditors for
2000.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED REPLY ENVELOPE.
Please sign exactly as your name appears herein. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
Signature:_______________ Date:_________ Signature:______________ Date:________
<PAGE>
ESSEX PROPERTY TRUST, INC.
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
ESSEX PROPERTY TRUST, INC.
1999 Achievements
. The Company increased its dividend 10% in May 1999 following an 11%
increase in 1998, while the Company maintained a conservative dividend
payout ratio of 66%.
. Revenues and net operating income, reported on a same-property basis,
grew by 5.3% and 7.9%, respectively. These results contributed to a 14%
increase in Funds From Operations per share, placing Essex in the top
tier of multifamily-REITs.
. Based on the above, Essex was again one of the top performers within the
REIT Industry, having solid increases in revenues, cash flow, and Funds
From Operations.
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