SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-12
Manufactured Home Communities, Inc.
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(Name of Registrant as Specified in Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required
[ ] 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:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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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(4) Date filed:
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MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA, SUITE 800
CHICAGO, ILLINOIS 60606
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 2002
---------------------
You are cordially invited to attend the 2002 Annual Meeting of Stockholders
(the "Meeting") of MANUFACTURED HOME COMMUNITIES, INC., a Maryland corporation
(the "Company"), to be held at One North Franklin Street, Third Floor, Chicago,
Illinois, on Wednesday, May 8, 2002, at 10:00 a.m. Central time. At the Meeting,
we will consider and take action on the following matters:
(1) Election of three directors to the Company's Board of Directors
for terms expiring in 2005; and
(2) Any other business as may properly come before the Meeting or any
adjournment or postponement thereof.
The Board of Directors recommends that you vote "for" each of the nominees
for the Board of Directors.
Only stockholders of record at the close of business on March 15, 2002 will
be entitled to vote at the Meeting or any adjournment or postponement thereof.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING IN PERSON, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT AS SOON
AS POSSIBLE IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
/s/ Ellen Kelleher
Ellen Kelleher
Secretary
April 5, 2002
MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA, SUITE 800
CHICAGO, ILLINOIS 60606
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PROXY STATEMENT
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INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Manufactured Home Communities, Inc., a
Maryland corporation (the "Company"), of proxies to be voted at the Annual
Meeting of Stockholders of the Company to be held on Wednesday, May 8, 2002 (the
"Meeting"), and any adjournment or postponement thereof. In addition to
solicitation by mail, officers, directors and employees of the Company may
solicit proxies by telegraph, telephone, telecopy and personal interviews. The
cost of the solicitation is anticipated to be nominal and will be paid by the
Company. Brokers and other nominees who held of record stock of the Company on
March 15, 2002 (the "Record Date"), the record date for determining stockholders
entitled to notice of and to vote at the Meeting, will be asked to contact the
beneficial owners of the shares which they hold.
This Proxy Statement and accompanying proxy are being mailed to
stockholders commencing on or about April 5, 2002. The proxy, if properly
executed and returned, will be voted according to your instructions, but it may
be revoked at any time before it is exercised by giving notice of revocation in
writing to the Secretary of the Company, by voting in person at the Meeting or
by submitting a subsequently dated proxy to the Secretary of the Company. The
mere presence at the Meeting of a stockholder who has granted a proxy shall not
itself revoke the proxy. Shares held in street name may be voted in person only
if the stockholder obtains a signed proxy from the record holder giving the
stockholder the right to vote.
2001 ANNUAL REPORT
Stockholders are concurrently being furnished a copy of the Company's 2001
Annual Report. Additional copies of the Annual Report and of the Company's
Annual Report on Form 10-K for the year ended December 31, 2001 as filed with
the Securities and Exchange Commission (the "SEC") may be obtained by contacting
Cynthia McHugh, Senior Vice President -- Investor Relations of the Company, at
Two North Riverside Plaza, Suite 800, Chicago, Illinois 60606, 312-928-1905;
copies will be furnished promptly at no additional expense.
VOTING
Only stockholders of record at the close of business on the Record Date
will be entitled to vote at the Meeting. On the Record Date, 21,740,248 shares
of the Company's common stock, par value $.01 per share ("Common Stock"), were
outstanding. Each share of Common Stock outstanding on the Record Date entitles
the holder thereof to one vote upon each matter to be voted upon at the Meeting.
The presence in person or by proxy of stockholders entitled to cast a majority
of all the votes entitled to be cast at the Meeting shall constitute a quorum.
Shares represented by proxies that reflect abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business. The affirmative vote of a plurality of all votes cast
at the Meeting, if a quorum is present, is sufficient to elect each nominated
director to the Board. An abstention as to any particular matter when passage
requires the vote of a majority of the votes entitled
to be cast at the Meeting, however, does not constitute a vote "for" or
"against" and will be disregarded in calculating the votes cast as to such
matter. "Broker non-votes" (i.e., where a broker or nominee submits a proxy
specifically indicating the lack of discretionary authority to vote on a matter)
will be treated in the same manner as abstentions.
If there is not a quorum at the Meeting, the stockholders entitled to vote
at the Meeting, whether present in person or represented by proxy, shall only
have the power to adjourn the Meeting until such time as there is a quorum. The
Meeting may be reconvened without notice to the stockholders, other than an
announcement at the prior adjournment of the Meeting, within 120 days after the
Record Date, and a quorum must be present at such reconvened Meeting.
If a proxy in the form enclosed is duly executed, dated and returned, and
it has not been revoked in accordance with the instructions set forth herein,
the shares of Common Stock represented thereby will be voted by Samuel Zell and
Howard Walker, the Board's proxy agents for the Meeting, in accordance with the
specifications made thereon by the stockholder. If no such specifications are
made, such proxy will be voted (i) for the election of the three nominees for
director to the Board for terms expiring in 2005, and (ii) at the discretion of
Mr. Zell and Mr. Walker with respect to such other business as may properly come
before the Meeting or any adjournment or postponement thereof.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board consists of ten members. The Company's charter provides that the
Company's directors shall be divided into three classes as nearly equal in
number as possible, with each class having a term of three years. The Board has
nominated Samuel Zell, David A. Helfand and Michael A. Torres for election to
serve as directors of the Company until the 2005 Annual Meeting of Stockholders
and until their successors are duly elected and qualified. Biographical
information for each of the nominees is set forth below under the caption
"Management."
Each nominee has consented to be named in this Proxy Statement and to serve
if elected. All nominees are currently directors. In the event that any nominee
should become unable to serve as a director (which is not anticipated), the
persons designated as representatives will cast votes for the remaining nominees
and for such other person or persons as the Board may recommend.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED ABOVE. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED "FOR" THE NOMINEES UNLESS INSTRUCTIONS TO
WITHHOLD SUCH VOTE OR TO THE CONTRARY ARE GIVEN.
2
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers and directors of the Company as of the Record Date:
NAME AGE POSITION
---- --- --------
Samuel Zell.......................... 60 Chairman of the Board (term expires in 2002)
Howard Walker........................ 62 Chief Executive Officer and Director (term expires in
2003)
Thomas P. Heneghan................... 38 President and Chief Operating Officer
Ellen Kelleher....................... 41 Executive Vice President, General Counsel and Secretary
John M. Zoeller...................... 41 Vice President, Chief Financial Officer and Treasurer
Donald S. Chisholm................... 67 Director (term expires in 2003)
Thomas E. Dobrowski.................. 58 Director (term expires in 2003)
David A. Helfand..................... 37 Director (term expires in 2002)
Louis H. Masotti, Ph.D............... 67 Director (term expires in 2004)
John F. Podjasek, Jr................. 60 Director (term expires in 2003)
Sheli Z. Rosenberg................... 60 Director (term expires in 2004)
Michael A. Torres.................... 41 Director (term expires in 2002)
Gary L. Waterman..................... 60 Director (term expires in 2004)
The following is a biographical summary of the experience of the executive
officers and directors of the Company. For information concerning membership on
committees of the Board, see "Committees of the Board; Meetings" below.
Samuel Zell has been Chairman of the Board of the Company since March 1995,
and was Chief Executive Officer of the Company from March 1995 to August 1996.
Mr. Zell was Co-Chairman of the Board of the Company from its formation until
March 1995. Mr. Zell was a director of Mobile Home Communities, Inc., the former
manager of the Company's manufactured home communities, from 1983 until its
dissolution in 1993. Mr. Zell has been chairman of Equity Group Investments,
L.L.C. ("EGI"), an investment company, since 1999, and has been chairman of the
board of Equity Group Investments, Inc. ("EGI, Inc."), an investment company,
for more than five years. Mr. Zell is also chairman of the board of American
Classic Voyages Co., a provider of overnight cruises in the United States, and
has served as a member of its compensation committee since July 1999; Anixter
International Inc. ("Anixter"), a distributor of electrical and cable products;
Capital Trust, Inc. ("Capital Trust"), a specialized finance company; Chart
House Enterprises, Inc., an owner and operator of restaurants; and Danielson
Holding Corporation, an insurance holding company. Mr. Zell is chairman of the
board of trustees of Equity Office Properties Trust ("Equity Office"), an equity
real estate investment trust ("REIT") primarily focused on office buildings; and
Equity Residential Properties Trust ("Equity Residential"), an equity REIT
primarily focused on multifamily residential properties.
Howard Walker has been a director of the Company since November 1997 and
Chief Executive Officer of the Company since December 1997. Mr. Walker was
President of the Company from September 1997 to May 2000, and President of
Realty Systems, Inc., an affiliate of the Company, from March 1995 to April
2000. Mr. Walker is also a member of the Company's management committee (the
"Management Committee"), which was created in 1995 and is comprised of the
Company's senior executive officers. Mr. Walker was a Vice President of the
Company from January 1995 to March 1995.
Thomas P. Heneghan has been President and Chief Operating Officer of the
Company since May 2000. Mr. Heneghan is also a member of the Management
Committee. Mr. Heneghan was Executive Vice President, Chief Financial Officer
and Treasurer of the Company from April 1997 to May 2000,
3
and Vice President, Chief Financial Officer and Treasurer of the Company from
February 1995 to March 1997.
Ellen Kelleher has been Executive Vice President and General Counsel of the
Company since March 1997, and has been Secretary of the Company since May 2000.
Ms. Kelleher is also a member of the Management Committee. Ms. Kelleher was
Senior Vice President, General Counsel and Assistant Secretary of the Company
from March 1994 to March 1997.
John M. Zoeller has been Vice President, Chief Financial Officer and
Treasurer of the Company since May 2000. Mr. Zoeller is also a member of the
Management Committee. From January 1999 to May 2000, Mr. Zoeller was a vice
president of EGI. From January 1997 to December 1998, Mr. Zoeller was a vice
president of EGI, Inc. Mr. Zoeller was a member of the accounting firm of
Greenberg & Pociask, Ltd. from January 1994 to December 1996, and a vice
president of Capsure Holdings Corp., an insurance holding company, from January
1993 to September 1997.
Donald S. Chisholm has been a director of the Company since March 1993. Mr.
Chisholm has been president of Vernon Development Co., the developer of a
650-acre golf course community, and of Ann Arbor Associates Inc., a real estate
development and management company, both for more than five years.
Thomas E. Dobrowski has been a director of the Company since March 1993.
Mr. Dobrowski has been the managing director of real estate and alternative
investments of General Motors Investment Management Corporation since December
1994. Mr. Dobrowski is a director of Capital Trust. Mr. Dobrowski is also a
trustee of Equity Office.
David A. Helfand has been a director of the Company since May 1995. Mr.
Helfand has been with Equity Office since July 1998, and serves as its chief
investment officer. Mr. Helfand was a managing director of Equity International
Properties, a division of EGI, Inc., from December 1997 to July 1998. Mr.
Helfand was President of the Company from January 1995 to September 1997, and
was Chief Executive Officer of the Company from August 1996 to December 1997.
Mr. Helfand was Chief Financial Officer of the Company from December 1992 to
February 1995, and Senior Vice President of the Company from March 1994 to
January 1995.
Louis H. Masotti, Ph.D., has been a director of the Company since March
1993. Dr. Masotti has been president of Louis H. Masotti, Ltd., a management,
real estate and urban development consultancy, for more than five years. Dr.
Masotti was professor of management and urban development and director of the
program in real estate management for the Graduate School of Management of the
University of California at Irvine from 1992 to 1998. Dr. Masotti is a professor
emeritus of Northwestern University's Kellogg Graduate School of Management.
John F. Podjasek, Jr., has been a director of the Company since May 1994.
Mr. Podjasek has been the managing director of the private equity group at
WestLB Asset Management (USA) LLC since September 2000. Mr. Podjasek was the
managing director and co-head of the Private Markets Group of Forstmann -- Leff
International, Inc. from July 1997 to September 2000. Mr. Podjasek was retired
from November 1995 to July 1997. Previously, Mr. Podjasek was employed by
Allstate Insurance Company from 1966 to November 1995, most recently serving as
vice president of venture capital and real estate.
Sheli Z. Rosenberg has been a director of the Company since August 1996.
Since January 2000, Mrs. Rosenberg has been vice chairman of EGI. Mrs. Rosenberg
was president of EGI, Inc. from November 1994 to December 1999, and was chief
executive officer of EGI, Inc. from November 1994 to December 1998. Mrs.
Rosenberg was a principal of the law firm of Rosenberg & Liebentritt from 1980
to September 1997. Mrs. Rosenberg is a director of CVS Corporation, an owner and
operator of drug stores; Capital Trust; Dynergy Inc., a supplier of electricity
and natural gas; Cendant Corporation, a travel related, real estate related and
direct marketing consumer and business services company; Idine Rewards Network,
Inc., a membership rewards marketer; and Ventas, Inc., an owner of real estate
in the health care field. Mrs. Rosenberg is a trustee of Equity Office and
Equity Residential.
4
Michael A. Torres has been a director of the Company since March 1993. Mr.
Torres has been president and a principal of Lend Lease Rosen Real Estate
Securities LLC, an investment management firm, since February 1995. Mr. Torres
is a trustee of Lend Lease Funds, a family of mutual funds.
Gary L. Waterman has been a director of the Company since March 1993. Since
1989, Mr. Waterman has been president of Waterman Limited, a real estate
services and investment company that he founded. Mr. Waterman is a director of
Java Trading Company, a wholesale coffee roasting company.
COMMITTEES OF THE BOARD; MEETINGS
Meetings. During the year ended December 31, 2001, the Board held four
meetings and took three actions by unanimous written consent. Each of the
directors attended 75% or more of the total number of the meetings of the Board
and of its committees on which they served.
Executive Committee. The Executive Committee of the Board is composed of
Messrs. Zell, Walker and Chisholm. The Executive Committee has the authority,
within certain parameters set by the Board, to acquire, dispose of and finance
investments for the Company (including the issuance of additional limited
partnership interests of MHC Operating Limited Partnership) and to execute
contracts and agreements, including those related to the borrowing of money by
the Company, and generally exercise all other powers of the Board except as
prohibited by law. During the year ended December 31, 2001, the Executive
Committee held no meetings.
Compensation Committee. The Compensation Committee of the Board is
composed of Messrs. Chisholm, Masotti and Waterman and Mrs. Rosenberg. The
Compensation Committee determines compensation for the Company's executive
officers and exercises all powers of the Board in connection with compensation
matters, including incentive compensation and benefit plans. The Compensation
Committee also has the authority to grant stock options, stock appreciation
rights and restricted stock awards in accordance with the Company's 1992 Stock
Option and Stock Award Plan, as amended and restated (the "Plan"), to the
management of the Company and its subsidiaries, other employees and consultants.
During the year ended December 31, 2001, the Compensation Committee held three
meetings.
Audit Committee. The Audit Committee of the Board is composed of Messrs.
Dobrowski and Torres and Mrs. Rosenberg. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the Company's independent public accountants the plans for and
results of the audit engagement, approves professional services provided by the
Company's independent public accountants, reviews the independence of the
Company's independent public accountants, considers the range of audit and
non-audit fees and reviews the adequacy of the Company's internal accounting
controls. Each of the Audit Committee members is an "independent" director
within the meaning of "independent" set forth in The New York Stock Exchange
("NYSE") listing standards. The Board adopted a written charter for the Audit
Committee on August 25, 2000, a copy of which (as amended effective March 1,
2002) is attached to this Proxy Statement as Appendix A. During the year ended
December 31, 2001, the Audit Committee held four meetings.
EXECUTIVE COMPENSATION
The following table shows information with respect to the annual
compensation for services rendered to the Company for the fiscal years ended
December 31, 2001, December 31, 2000 and December 31, 1999 by the Company's
Chief Executive Officer and those persons who were, at December 31, 2001, the
next three most highly compensated executive officers of the Company.
5
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
-------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
------------------- COMMON UNDERLYING ALL OTHER
BONUS STOCK AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($)(2) GRANTED(#) ($)(3)
--------------------------- ---- --------- ------- ------------ ---------- ------------
Howard Walker................. 2001 273,000 103,000 53,980 0 8,500
Chief Executive Officer, 2000 262,650 175,000 554,625 0 10,200
Director and Member of 1999 255,000 175,000 644,563 0 8,000
Management Committee(4)
Thomas P. Heneghan............ 2001 261,500 113,600(5) 0 0 8,500
President, Chief Operating 2000 251,320 298,964(5) 493,000 0 10,200
Officer and Member of 1999 244,000 190,646(5) 473,750 0 8,000
Management Committee
Ellen Kelleher................ 2001 244,500 103,000 0 0 8,500
Executive Vice President, 2000 234,840 275,000 431,375 0 10,174
General Counsel, Secretary 1999 228,000 175,000(5) 473,750 0 8,000
and Member of Management
Committee
John M. Zoeller............... 2001 244,500 113,600(5) 695,325 0 8,500
Vice President, Chief 2000 147,227 198,964(5) 431,375 0 8,819
Financial Officer, Treasurer
and Member of Management
Committee(6)
---------------
(1) Actual payment of 2001 bonuses was made in 2002. Bonuses for 2000 and 1999
were paid in the year during which they were earned.
(2) The total number and value of shares of Common Stock ("Restricted Common
Stock") awarded pursuant to restricted stock grants ("Restricted Common
Stock Awards") in various years, pursuant to the plans and programs
described below under "Compensation Committee Report on Executive
Compensation" and held by each named executive officer as of December 31,
2001, was as follows:
NUMBER OF
SHARES VALUE($)
--------- ---------
Howard Walker.............................................. 47,064 1,468,867
Thomas P. Heneghan......................................... 39,500 1,232,795
Ellen Kelleher............................................. 28,938 903,155
John M. Zoeller............................................ 28,938 903,155
No Restricted Common Stock was granted to executive officers in 2001, except
as described in footnotes (4) and (6) below with respect to Mr. Walker and
Mr. Zoeller, respectively.
The number of shares of Restricted Common Stock granted to executive
officers in 2000, excluding shares awarded as part of the 2000 MBO bonus,
was as follows:
Howard Walker............................................... 20,250
Thomas P. Heneghan.......................................... 18,000
Ellen Kelleher.............................................. 15,750
John M. Zoeller............................................. 15,750
The shares of Restricted Common Stock granted in 2000 to Messrs. Walker,
Heneghan and Zoeller and to Ms. Kelleher were made in two separate grants,
one on November 14, 2000 and the second on December 29, 2000. 50% of such
Restricted Common Stock Award vested on December 29, 2000; 25% vested on
December 29, 2001; and 25% will vest on December 29, 2002.
6
The number of shares of Restricted Common Stock granted to executive
officers on December 1, 1999 and which vested 50% on December 1, 1999, 25%
on December 1, 2000 and 25% on December 1, 2001, was as follows:
Howard Walker............................................... 25,000
Thomas P. Heneghan.......................................... 20,000
Ellen Kelleher.............................................. 20,000
All holders of Restricted Common Stock receive any dividends paid on such
shares.
(3) For 2001, includes employer matching contributions and/or profit sharing
contributions to The MHC Advantage Retirement Savings Plan based on the
maximum available profit sharing contribution.
(4) As a member of the Board, Mr. Walker received an award of 2,000 shares of
Restricted Common Stock on May 8, 2001. The award is subject to a vesting
schedule, with one-third of the award vesting six months from the date of
the award; one-third vesting one year from the date of the award; and the
remainder vesting two years from the date of the award.
(5) Under the Plan, an officer who receives a management-by-objective ("MBO")
bonus receives 50% of his or her MBO bonus in cash and 50% of the MBO bonus
in the form of a stock award. However, the officer may request, subject to
approval by the Compensation Committee, to receive any portion of the MBO
bonus in the form of a stock award. To the extent that an individual
receives up to 50% of his or her MBO bonus as a stock award, the stock award
is calculated using the fair market value of a share of Common Stock as of
the date the bonus is paid. If more than 50% of the MBO bonus is to be paid
as a stock award, the additional stock award is calculated using the most
recent purchase price for a share of Common Stock under the Company's
Non-Qualified Employee Stock Purchase Plan ("ESPP") or the price that would
be used under the ESPP for the offering period then in progress if the
period ended the day the MBO bonus was paid, which is less than the fair
market value of a share of Common Stock on the day the MBO bonus is paid.
Bonus amounts reflected for Messrs. Heneghan and Zoeller and Ms. Kelleher
for each of the years indicated include the discount on shares with respect
to elections they made to receive more than 50% of the MBO bonus as a stock
award.
(6) Mr. Zoeller became an executive officer of the Company in May 2000 (the
salary figure shown for Mr. Zoeller for 2000 is a pro-rated amount).
Effective January 1, 2001, Mr. Zoeller was awarded 25,000 shares of
Restricted Common Stock pursuant to the "1998 Program" described below under
"Compensation Committee Report on Executive Compensation."
OPTION GRANTS IN LAST FISCAL YEAR
There were no option grants to any of the executive officers named in the
Summary Compensation Table in fiscal year 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- ------------------- --------------------
Howard Walker................... 0 0 25,000/0 276,500/0
Thomas P. Heneghan.............. 21,000 255,785 12,000/0 168,270/0
Ellen Kelleher.................. 0 0 21,000/0 228,285/0
John M. Zoeller................. 0 0 3,666/334 34,765/2,513
7
---------------
(1) Calculated by determining the difference between (a) $31.21, the per share
value of the Company's Common Stock on December 31, 2001, the last trading
day of the year, and (b) the exercise price of in-the-money options.
COMPENSATION OF DIRECTORS
The Company paid each of its non-employee directors an annual fee of
$30,000 in 2001. In addition, directors who serve on the Audit Committee,
Executive Committee or Compensation Committee receive an additional $1,000 per
annum for each committee on which they serve. Committee chairs receive an
additional $500 per annum. Directors who are employees of the Company are not
paid any directors' fees or committee fees. The Company reimburses the directors
for travel expenses incurred in connection with their activities on behalf of
the Company. Additionally, on the date of the first Board meeting after each
Annual Meeting of Stockholders, each director then in office will receive at the
director's option either an annual grant of options to purchase 10,000 shares of
Common Stock at the then-current market price or an annual grant of 2,000 shares
of Restricted Common Stock. In 2001, in addition to the foregoing, (i) Mr. Zell,
as Chairman of the Board, received a grant of options to purchase 100,000 shares
of Common Stock at the then-current market price, and (ii) Mrs. Rosenberg
received a grant of options to purchase 25,000 shares of Common Stock at the
then-current market price, in recognition of additional advisory and consulting
services she provided.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The Compensation Committee members for 2001 were Messrs. Chisholm, Masotti
and Waterman and Mrs. Rosenberg. No Compensation Committee interlocking
relationships existed in 2001. For a description of certain transactions with
Board members or their affiliates, see "Certain Relationships and Related
Transactions."
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee determines the compensation of the Company's
executive officers, including those named in the Summary Compensation Table, and
guides the Company's overall philosophy towards compensation of its employees.
The Compensation Committee believes that the compensation of the Company's Chief
Executive Officer and all of the Company's executive officers should be both
competitive and based on individual and Company performance.
The Company's compensation policy takes into account a review of local and
national peer group salary surveys focusing primarily on the SNL Executive
Compensation Review 2001 for REITs ("SNL Survey"). The SNL Survey contains
detailed compensation and performance data on publicly traded REITs. The
Compensation Committee believes the SNL Survey provides comparable salary data
for the Company. The Compensation Committee believes that the Company's
compensation levels compare favorably to the Company's peer groups described in
the surveys and targets median to high compensation levels for the Company's
executive officers. This is not the same peer group that is used in the
Performance Graph on page 12.
During the fiscal year ended December 31, 2001, there were three major
components of executive compensation: base salary, bonuses and Restricted Common
Stock Awards. While this salary structure is designed to attract and retain
highly qualified executives, because of factors affecting the United States
economy in general that resulted in reduced expectations for the Company in
2001, the Compensation Committee determined it was necessary to reduce bonuses
by 40% and to defer payment of bonuses until late January 2002 when the
Company's actual results for 2001 had been determined.
8
The Compensation Committee believes that attracting and retaining highly
qualified executives is accomplished by providing competitive base salaries and
meaningful incentives, both short-term and long-term, intended to reward
performance and retain experienced management. Benchmarks for determining base
salary and bonus levels include targeted funds from operations ("FFO") levels,
strength of the balance sheet and creation of stockholder value. Each
performance measure carries equal weight.
The Company's executive salary structure is reviewed annually by the
Compensation Committee using the SNL Survey for guidance. In addition, the
entire Company's salary structure is reviewed annually. Where salary information
is unavailable for a particular position, other positions having similar
responsibilities either within the Company or in companies of comparable size
are used. Salary increases are based both upon each executive officer's
(including the Chief Executive Officer's) performance and contribution to the
Company's performance. Also, the Compensation Committee has deliberately kept
base salaries at levels which may compare less favorably with comparable
positions in other companies. This allows the Compensation Committee to reward
executive officers' performance through bonuses and long-term incentives such as
Restricted Common Stock Awards.
Further short-term and mid-term incentives for executive officers are
accomplished through the Company's MBO bonus plan. The MBO bonus plan involves
the Company and the executive officer jointly setting goals for such executive
officer at the beginning of each year.
Because factors affecting the economy in general caused the Company to
reduce performance expectations for 2001 in terms of achieving targeted FFO
levels, the Compensation Committee reduced bonus potential by 40% and deferred
payment of bonuses to late January 2002 when the Company's actual results for
2001 were known. In 2001, the Company met expected FFO levels through reduction
of certain expenses and increases in revenue achieved through increases in
rental rates and increases in occupancy at the Company's communities. During
2001, the Company maintained its balance sheet at an appropriate debt-to-equity
level. In determining the total MBO bonus for each executive officer, the
Compensation Committee also considered the amount of other awards and benefits
which were included in the total compensation of such executive officer.
MBO bonuses, if paid, are paid to the executive officers of the Company 50%
in cash and 50% in a stock award calculated using the fair market value of a
share of Common Stock on the date the bonus is paid. The officer may request,
subject to the Compensation Committee's approval, to receive more or less of the
bonus in the form of a stock award. To the extent that the officer receives more
than 50% of the MBO bonus as a stock award, the stock award is calculated using
the most recent purchase price for a share of Common Stock under the ESPP or the
price that would be used under the ESPP for the offering period then in progress
if the period ended the day the MBO bonus was paid.
To provide long-term incentives for executive officers and as a means to
retain qualified executive officers, the Company has created performance and
tenure-based Restricted Common Stock Award programs.
In 1997, the Company implemented a five-year incentive program tied to
increases in stockholder value (the "1997 Program"). Shares were awarded under
the 1997 Program only if annual performance benchmarks (based upon increases in
share price plus distributions to stockholders) were achieved. Shares awarded
are then subject to a vesting schedule (50% immediately and 25%, respectively,
on the next two anniversaries of the award). Executive officers received awards
under the 1997 Program in 1997 and 2000. In addition, effective January 4, 2002,
executive officers received awards under the 1997 Program as follows: Mr. Walker
was awarded 20,250 shares; Mr. Heneghan was awarded 18,000 shares; Ms. Kelleher
was awarded 15,750 shares; and Mr. Zoeller was awarded 15,750 shares.
In 1998, the Company implemented an incentive program tied to achieving
targeted levels of FFO per share through 2003 (the "1998 Program"). On November
24, 1998, Restricted Common Stock Awards were granted to executive officers and
other members of senior management under the 1998 Program. In 1999 and 2001,
awards were made under the 1998 Program to certain additional members
9
of senior management (excluding executive officers who had received awards in
1998). Any Restricted Common Stock awarded under the 1998 Program will vest over
a five-year period, with lapsing of restrictions tied to achieving targeted
levels of FFO per share. Vesting with respect to 60% of the Restricted Common
Stock awarded under the 1998 Program had occurred as of December 31, 2001.
In December 2001, the Compensation Committee created the 2004 Long Term
Restricted Stock Plan, which provides for shares of Restricted Common Stock to
be granted on January 5, 2004 to individuals who are employed by the Company on
November 15, 2001 and on January 5, 2004 and who hold the respective titles of
Chief Executive Officer, Chief Operating Officer, General Counsel and Chief
Financial Officer, as well as certain other titles on such grant date. Any
shares granted on January 5, 2004 would be subject to a further three year
vesting schedule, with one-third vesting December 10, 2004, one-third vesting
December 10, 2005 and one-third vesting December 10, 2006, with vesting based
solely on an individual's tenure in such titled positions. These shares have not
been issued and there can be no assurance that any person listed in the Summary
Compensation Table would be eligible for a grant of shares under this program.
The vesting of Restricted Common Stock Awards is subject to acceleration in
the case of death, disability and involuntary termination not for cause or
change of control of the Company. The Compensation Committee recognizes that the
interests of stockholders are best served by giving key employees the
opportunity to participate in the appreciation of the Company's Common Stock.
To encourage Mr. Walker to remain employed by the Company, the Company has
entered into a deferred compensation agreement with Mr. Walker. The agreement,
entered into in December 2000, provides Mr. Walker with a salary benefit
commencing May 17, 2004. Pursuant to the agreement, commencing on such date Mr.
Walker will receive an annual deferred compensation payment in the amount of
$200,000 for a ten year period. The Company has purchased an annuity for
approximately $1,200,000 to fund its future obligations under the agreement. The
annuity is held by a trust for the benefit of Mr. Walker and is subject to the
claims of creditors of the Company.
At the end of 2001, the Compensation Committee granted options to purchase
Common Stock to certain of the Company's employees. The executive officers of
the Company were not granted options.
The Compensation Committee believes that the compensation program properly
rewards the Company's officers for achieving improvements in the Company's
performance and serving the interests of its stockholders.
The Company may or may not structure compensation arrangements to satisfy
the requirements for performance-based compensation under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
Respectfully submitted,
Donald S. Chisholm
Louis H. Masotti, Ph.D.
Sheli Z. Rosenberg
Gary L. Waterman
AUDIT COMMITTEE REPORT
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board. Management has the primary responsibility for the financial
statements and the reporting process, including the system of internal controls.
In fulfilling its oversight responsibilities, the Audit Committee reviewed the
audited financial statements in the Company's 2001 Annual Report with
management, including a discussion of the quality, not just the acceptability,
of the accounting principles, the reasonableness of significant judgments, and
the clarity of disclosures in the financial statements.
10
The Audit Committee reviewed with the Company's independent accountants,
who are responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Audit Committee under generally accepted auditing standards. In
addition, the Audit Committee has discussed with the independent accountants the
accountants' independence from management and the Company, including the matters
in the written disclosures required by the Independence Standards Board, and
considered the compatibility of non-audit services provided to the Company by
the independent accountants with the accountants' independence.
The Audit Committee discussed with the Company's independent accountants
the overall scope and plans for their audit. The Audit Committee meets with the
independent accountants, with and without management present, to discuss the
results of their examinations, their evaluation of the Company's internal
controls and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board (and the Board has approved) that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2001 for filing with the SEC.
Respectfully submitted,
Thomas E. Dobrowski
Sheli Z. Rosenberg
Michael A. Torres
AUDIT FEES
The aggregate fees billed (or expected to be billed) for professional
services rendered by the independent accountants for the audit of the Company's
financial statements for fiscal year 2001 and the reviews by the independent
accountants of the financial statements included in the Company's Forms 10-Q for
fiscal year 2001 were $127,500.
ALL OTHER FEES
There were no fees billed for professional services rendered by the
independent accountants for any financial systems design and implementation in
fiscal year 2001. The aggregate fees billed (or expected to be billed) for
services rendered by the independent accountants to the Company and not
otherwise described under "Audit Fees" for fiscal year 2001 were $133,850.
The Audit Committee has determined that the independent accountants'
provision of the non-audit services described above is compatible with
maintaining the independent accountants' independence.
11
PERFORMANCE GRAPH
The following performance graph compares total stockholders' return on the
Common Stock since December 31, 1996 with the Standard and Poors ("S&P") 500
Stock Index and the index of equity REITs prepared by the National Association
of Real Estate Investment Trusts ("NAREIT"). The Common Stock price performance
graph assumes that an investment of $100 was made on December 31, 1996 in the
Common Stock and in each of the two indexes and further assumes the reinvestment
of all dividends. Equity REITs are defined as those REITs which derive more than
75% of their income from equity investments in real estate assets. The NAREIT
equity index includes all tax qualified REITs listed on the NYSE, the American
Stock Exchange or the NASDAQ Stock Market. Common Stock price performance
presented for the period from December 31, 1996 through December 31, 2001 is not
necessarily indicative of future results.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
ASSUMES INITIAL INVESTMENT OF $100
DECEMBER 31, 2001
[PERFORMANCE GARPH]
--------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
--------------------------------------------------------------------------------------------------------------
Company Return % 22.57 -1.69 3.31 27.37 14.36
Cumulative
$ $100.00 $122.57 $120.49 $124.48 $158.55 $181.32
S&P 500 Return % 33.36 28.58 21.05 -9.10 -11.88
Cumulative
$ $100.00 $133.36 $171.47 $207.56 $188.66 $166.24
NAREIT Equity Return % 20.26 -17.50 -4.62 26.37 13.89
Cumulative
$ $100.00 $120.26 $ 99.21 $ 94.63 $119.58 $136.19
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of the Record Date (except as
noted), with respect to each person who is known by the Company's management to
be the beneficial owner of more than 5% of the outstanding shares of Common
Stock.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND BUSINESS ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
--------------------------------------------- ------------ --------
Samuel Zell and entities controlled by Samuel Zell and Ann
Lurie and entities controlled by Ann Lurie(2)............. 3,366,906 13.8%
Two North Riverside Plaza
Chicago, Illinois 60606
General Motors Employes Global Group Pension Trust(3)....... 2,271,198 10.4%
c/o General Motors Investment
Management Corporation
767 Fifth Avenue
New York, New York 10153
Morgan Stanley Dean Witter & Co.(4)......................... 2,219,239 10.2%
1585 Broadway
New York, New York 10036
FMR Corp(5)................................................. 1,477,200 6.8%
82 Devonshire Street
Boston, Massachusetts 02109
---------------
(1) MHC Operating Limited Partnership (the "Operating Partnership") is the
entity through which the Company conducts substantially all of its
operations. The limited partners of the Operating Partnership own units of
limited partnership interest ("OP Units") which are convertible into an
equivalent number of shares of Common Stock. In accordance with SEC
regulations governing the determination of beneficial ownership of
securities, the percentage of Common Stock beneficially owned by a person
assumes that all OP Units held by the person are exchanged for Common Stock,
that none of the OP Units held by other persons are so exchanged, that all
options exercisable within 60 days of the Record Date to acquire Common
Stock held by the person are exercised and that no options to acquire Common
Stock held by other persons are exercised.
13
(2) Includes Common Stock, OP Units which are exchangeable for Common Stock, and
options to purchase Common Stock which are currently exercisable or
exercisable within 60 days of the Record Date owned as follows:
COMMON
STOCK OP UNITS OPTIONS
------- --------- -------
ENTITIES CONTROLLED BY SAMUEL ZELL:
Samuel Zell........................................ 13,320 -- 466,665
Samuel Zell Revocable Trust........................ 10,551 -- --
Samstock/SZRT, L.L.C. ............................. 294,133 13,641 --
Samstock/ZGPI, L.L.C. ............................. 6,003 -- --
Samstock, L.L.C. .................................. 346,000 601,665 --
Samstock/ZFT, L.L.C. .............................. 8,887 187,278 --
Samstock/Alpha, L.L.C. ............................ 8,887
EGI Holdings, Inc. ................................ -- 579,873 --
Rochelle Zell...................................... 4,000
Donald S. Chisholm Trust........................... 7,000 -- --
ENTITIES CONTROLLED BY ANN LURIE:
Anda Partnership................................... -- 233,694 --
LFT Partnership.................................... -- 5,436 --
EGIL Investments, Inc.............................. -- 579,873 --
TOTALS........................................... 698,781 2,201,460 466,665
======= ========= =======
Mr. Zell disclaims beneficial ownership of 11,000 shares of Common Stock and
819,003 OP Units because the economic benefits with respect to such shares
of Common Stock and OP Units are attributable to other persons. EGIL
Investments, Inc. ("EGIL") has beneficial ownership of 579,873 OP Units.
Under a stockholders' agreement dated December 31, 1999 among certain Zell
family trusts and certain Lurie family trusts, (a) the Zell trusts have the
power to vote and to dispose of the OP Units beneficially owned by EGI
Holdings, Inc. and (b) the Lurie trusts have the power to vote and to
dispose of the OP Units beneficially owned by EGIL.
(3) The shares of Common Stock reported herein are held of record by State
Street Bank & Trust Company, acting as trustee (the "Trustee") for the
General Motors Employes Global Group Pension Trust (the "GM Trust Fund"), a
trust formed under and for the benefit of certain employee benefit plans of
General Motors Corporation ("GM") and its subsidiaries and a former GM
affiliate and its subsidiaries. These shares may be deemed to be owned
beneficially by General Motors Investment Management Corporation ("GMIMCo"),
a wholly owned subsidiary of GM. GMIMCo's principal business is providing
investment advice and investment management services with respect to the
assets of certain employee benefit plans of GM and its subsidiaries and
former affiliates. The Trustee may vote and dispose of the shares held by
the GM Trust Fund only pursuant to the direction of GMIMCo personnel, and
accordingly beneficial ownership of the shares by the Trustee is disclaimed.
(4) Pursuant to a Schedule 13G/A filed with the SEC for calendar year 2001,
Morgan Stanley Dean Witter & Co. ("Morgan Stanley") and its wholly-owned
subsidiary, Morgan Stanley Dean Witter Investment Management Inc. ("Morgan
Stanley, Inc."), are the beneficial owners of 2,129,239 and 2,116,200 shares
of Common Stock, respectively, through accounts managed by them on a
discretionary basis. Morgan Stanley has shared voting power over 1,877,839
shares and shared dispositive power over 2,129,239 shares. Morgan Stanley,
Inc. has shared voting power over 1,864,800 shares and shared dispositive
power over 2,116,200 shares.
(5) Pursuant to a Schedule 13G/A filed with the SEC for calendar year 2001,
Fidelity Management & Research Company, a wholly-owned subsidiary of FMR
Corp. ("FMR") and an investment advisor
14
registered under Section 203 of the Investment Advisors Act of 1940 ("Investment
Act"), is the beneficial owner of 1,233,500 shares of Common Stock as a result
of acting as investment advisor to various investment companies under the
Investment Act. Fidelity Management Trust Company, a wholly owned
subsidiary of FMR, is the beneficial owner of 243,700 shares of Common
Stock as a result of serving as investment manager of institutional
accounts.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the Record Date, certain information
with respect to the Common Stock that may be deemed to be beneficially owned by
each director of the Company, by the four executive officers named in the
Summary Compensation Table and by all such executive officers and directors as a
group. The address for each of the executive officers and directors is c/o
Manufactured Home Communities, Inc., Two North Riverside Plaza, Suite 800,
Chicago, Illinois 60606. Unless otherwise indicated, each person has sole
investment and voting power, or shares such power with his or her spouse, with
respect to the shares set forth in the following table.
SHARES OF SHARES UPON
COMMON EXERCISE OF PERCENT
NAME OF BENEFICIAL HOLDER STOCK(1) OPTIONS(2) TOTAL OF CLASS(3)
------------------------- --------- ----------- --------- -----------
Donald S. Chisholm(4)................... 50,918 40,000 90,918 *
Thomas E. Dobrowski..................... -- 86,666 86,666 *
David A. Helfand........................ 136,607 76,000 212,607 1.0%
Thomas P. Heneghan...................... 276,362 12,000 288,362 1.3%
Ellen Kelleher.......................... 235,444 21,000 256,444 1.2%
Louis H. Masotti, Ph.D. ................ 12,835 -- 12,835 *
John F. Podjasek, Jr. .................. 11,728 70,000 81,728 *
Sheli Z. Rosenberg(5)................... 84,241 133,999 218,240 1.0%
Michael A. Torres....................... 13,618 46,666 60,284 *
Howard Walker........................... 259,915 25,000 284,915 1.3%
Gary L. Waterman........................ 15,286 60,000 75,286 *
Samuel Zell(6).......................... 2,900,241 466,665 3,366,906 13.8%
John M. Zoeller......................... 75,137 3,666 78,803 *
All directors and executive officers as
a group (13 persons) including the
above-named persons................... 4,072,332 1,041,662 5,113,994 20.5%
========= ========= ========= ====
---------------
* Less than 1%
(1) The shares of Common Stock beneficially owned includes OP Units that can be
exchanged for an equivalent number of shares of Common Stock.
(2) The amounts shown in this column reflect shares of Common Stock subject to
options granted under the Plan which are currently exercisable or
exercisable within 60 days of the Record Date.
(3) In accordance with SEC regulations governing the determination of beneficial
ownership of securities, the percentage of Common Stock beneficially owned
by a person assumes that all OP Units held by the person are exchanged for
Common Stock, that none of the OP Units held by other persons are so
exchanged, that all options exercisable within 60 days of the Record Date to
acquire Common Stock held by the person are exercised and that no options to
acquire Common Stock held by other persons are exercised.
(4) Includes 7,000 shares of Common Stock owned by the Donald S. Chisholm Trust
(the "Chisholm Trust"), Samuel Zell, Trustee. Under SEC regulations, Mr.
Zell may be deemed to be the
15
beneficial owner of all the shares which are beneficially owned by the
Chisholm Trust. Mr. Zell disclaims beneficial ownership of the shares owned
by the Chisholm Trust.
(5) Includes 11,530 OP Units beneficially owned by Mrs. Rosenberg which are
exchangeable into 11,530 shares of Common Stock.
(6) Mr. Zell disclaims beneficial ownership of 11,000 shares of Common Stock and
819,003 OP Units included above because the economic benefits with respect
to such shares of Common Stock and OP Units are attributable to other
persons. See "Security Ownership of Certain Beneficial Owners."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company occupies office space owned by an affiliate of EGI, an entity
controlled by Mr. Zell, at Two North Riverside Plaza, Chicago, Illinois 60606.
In addition, pursuant to an administrative services agreement, EGI or certain of
its affiliates provide the Company and its subsidiaries with certain
administrative, office facility and other services with respect to certain
aspects of the Company's business, including, but not limited to, administrative
support and other services. Amounts incurred for these services totaled
approximately $2,000 for the year ended December 31, 2001. There were no
significant amounts due to these affiliates at December 31, 2001. Certain
related entities, owned by persons affiliated with Mr. Zell, provide investor
relations services and office space to the Company and its subsidiaries. Amounts
incurred for these services totaled approximately $454,000 for the year ended
December 31, 2001. The amount due to these affiliates at December 31, 2001 was
$32,000.
The independent members of the Board have reviewed and approved the rates
charged by EGI and its affiliates in connection with the lease of the Company's
office space. Additionally, the budget for services rendered to the Company and
its subsidiaries by EGI and its affiliates is submitted to, reviewed and
approved by the Audit Committee.
The executive officers listed below are indebted to the Company as a result
of purchasing Common Stock from the Company. The loans accrue interest, payable
quarterly in arrears, at the applicable Federal rate, as defined in the Code, in
effect at the time the loans were made. The loans are recourse to the respective
individuals; are collateralized by a pledge of the shares of Common Stock
purchased; and are due and payable upon the first to occur of the employee
leaving the Company or January 2, 2005. All dividends paid on pledged shares in
excess of the then marginal tax rate are used to pay interest and principal on
the loans:
LARGEST AGGREGATE AMOUNT BALANCE AS OF
NAME OWED IN 2001 DECEMBER 31, 2001 INTEREST RATE
---- ------------------------ ----------------- -------------
Howard Walker.................... $885,279 $885,279 5.91%
Thomas P. Heneghan............... $802,220 $792,259 5.91%
Ellen Kelleher................... $776,434 $743,621 5.91%
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16(a)")
requires the Company's officers and directors, and persons who own more than 10%
of its Common Stock, to file reports of ownership and changes of ownership with
the SEC and the NYSE. Officers, directors and greater than 10% stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on the Company's review of the copies of those forms received
by the Company, or written representations from officers and directors that no
Forms 5 were required to be filed during the fiscal year ended December 31,
2001, all appropriate Section 16(a) forms were filed in a timely manner.
16
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP served as the Company's independent accountants for the
fiscal year ended December 31, 2001. There have been no disagreements between
the Company and its independent accountants relating to accounting procedures,
financial statement disclosures or related items. Representatives of Ernst &
Young LLP are expected to be available at the Meeting and will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
STOCKHOLDER PROPOSALS
Under regulations adopted by the SEC, stockholder proposals intended to be
presented at the 2003 Annual Meeting of Stockholders (the "2003 Meeting") must
be received by the Secretary of the Company no later than December 3, 2002, in
order to be considered for inclusion in the Company's proxy statement and on the
proxy card that will be solicited by the Board in connection with the 2003
Meeting.
In addition, if a stockholder desires to bring business before an Annual
Meeting of Stockholders which is not the subject of a proposal for inclusion in
the Company's proxy materials, the stockholder must follow the advance notice
procedures outlined in the Company's Bylaws. The Company's Bylaws provide that
in order for a stockholder to nominate a candidate for election as a director at
a meeting or propose business for consideration at such meeting, notice must
generally be given to the Secretary of the Company no more than 90 days nor less
than 60 days prior to the first anniversary of the preceding year's meeting. The
Meeting is scheduled for May 8, 2002. Therefore, if a stockholder desires to
present a proposal for the 2003 Meeting without seeking to include the proposal
in the Company's proxy materials, the Company must receive notice of the
proposal no earlier than February 8, 2003 and no later than March 9, 2003. The
fact that the Company may not insist upon compliance with these requirements
should not be construed as a waiver by the Company of its right to do so at any
time in the future. The Company reserves the right to reject, rule out of order
or take other appropriate action with respect to any proposal that does not
comply with these and other applicable requirements.
OTHER MATTERS
The Board is not aware of any business which will be presented at the
Meeting other than those matters set forth in the accompanying Notice of Annual
Meeting of Stockholders. If any other matters are properly presented at the
Meeting for action, it is intended that the persons named in the accompanying
proxy and acting thereunder will vote in accordance with their best judgment on
such matters.
By Order of the Board of Directors
/s/ Ellen Kelleher
Ellen Kelleher
Secretary
April 5, 2002
Chicago, Illinois
17
APPENDIX A
MANUFACTURED HOME COMMUNITIES, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
Pursuant to the By-Laws of Manufactured Home Communities, Inc.
(the"Company"), a Committee of the Directors to be known as the "Audit
Committee" (the "Committee") has been established. The Committee shall be
composed of not less than three independent Directors, none of whom shall be an
employee or officer of the Company, or have a personal business relationship
with any member of management which might conflict with their perceived
independence. All Audit Committee members shall be financially literate. The
members of the Committee shall appoint a Chairperson from amongst their number.
The time and place of meetings of the Committee shall be determined by the
members thereof provided that (1) a quorum for meetings shall be at least two
members, present in person or by telephone; (2) unless otherwise agreed, the
Committee shall meet at least quarterly; and (3) notice of the time and place of
every meeting shall be given in writing or by facsimile communication to each
member of the Committee, and the external and internal auditors of the Company.
Independent Directors who are not members of the Committee are welcome to attend
and participate in the Committee's deliberations unless otherwise specified by
the Chair.
STATEMENT OF POLICY
The Audit Committee is a committee of the Board of Directors. The Audit
Committee shall provide assistance to the full Board of Directors in fulfilling
their responsibility to the shareholders, potential shareholders, and investment
community relating to corporate accounting; the Company's reporting practices;
the quality and integrity of financial reports of the Company and the systems of
internal controls established by management and the Board of Directors. In so
doing, it is the responsibility of the Audit Committee to maintain free and open
communication between the Directors, the independent auditors, the internal
auditors, and the financial management of the Company.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the Directors and shareholders that the
corporate accounting and reporting practices of the Company are in accordance
with all requirements and are of the highest quality.
The Audit Committee will:
- Obtain the full Board of Directors' approval of this Charter and review
and reassess this Charter as conditions dictate (at least annually).
- Review and recommend to the Board of Directors the external auditors to
be selected to audit the financial statements, approve the compensation
of the external auditors, and review and approve the discharge of the
external auditors.
- Establish a clear understanding with the independent auditors that they
are ultimately accountable to the Board of Directors and the Audit
Committee, as the shareholders' representatives, who have the ultimate
authority in deciding to engage, evaluate, and if appropriate, terminate
their services.
A-1
- Review and concur with management's appointment, termination or
replacement of the internal auditors.
- Receive prior to each meeting, a summary of findings from completed
internal audits and a progress report on the proposed internal audit
plan, with explanations for any deviations from the original plan.
- Meet with the external auditors and senior management of the Company at
least annually to review:
- the scope of the proposed audit and quarterly reviews
- procedures for the current year and the related fees
- the adequacy of the Company's internal financial and accounting controls
- the coordination of the internal auditors' work utilized by the external
auditors, if any, with that of the external auditors.
- Meet with senior management and the external auditors at the completion
of the annual audit and discuss:
- the external auditors' audit findings, including any management letter
comments noted related to the audit of the financial statements and
related footnotes and their report thereon
- any significant changes from planning required in the external auditors'
audit plan
- other matters related to the conduct of the audit which are to be
communicated to the Committee under generally accepted auditing
standards (SAS 61) and management's responses.
- Review with senior management and the external auditors, as necessary, at
the completion of each quarterly review to discuss the following:
- Any significant changes required in review procedures or plan
- Any significant changes in the Company's accounting principles or
significant changes in accounting estimates during the quarter and the
related impact on the financial statements
- The impact of any significant events and transactions on the financial
statements
- Other matters which came to the attention of the external auditors
during the review which are necessary to be communicated to the
Committee under generally accepted auditing standards and management's
responses.
- Review the quarterly financial statements with management and the
independent auditors, as necessary, prior to the filing of the Form 10-Q
(or prior to the press release of results, if possible) to determine that
the independent auditors do not take exception to any significant changes
in the disclosure and content of the financial statements, and discuss
any other matters required to be communicated to the Committee. The Chair
may represent the entire Committee for purposes of this review.
- Review with senior management and the internal auditors (if applicable):
- The internal audit function including the independence and authority of
its reporting obligations
- The proposed audit plan and any changes required in the planned scope
- Any significant findings, difficulties or issues encountered in the
course of the audit during the year and management's responses
A-2
- Review with management and outside consultants such matters as the
Committee may deem appropriate from time to time.
- Review reports received from regulators and other legal and regulatory
matters that may have a material effect on the financial statements or
related company Compliance policies.
- Review with management their procedures to establish and monitor
compliance with the Company's code of conduct and ethical practices,
conflict of interest policy, and policies and procedures with respect to
use of corporate assets. As necessary, consult with external consultants
to assist in such monitoring.
- The Committee shall perform the following in relation to the Company's
Proxy Statement ("Proxy") for its annual shareholders' meeting:
- Review the Company's disclosures in the Proxy that describe that the
Committee has satisfied its responsibilities under this Charter for the
prior year
- Include an Audit Committee Report in the Company's Proxy
- Include a copy of this Charter in the annual report to shareholders or
the Proxy at least triennially or the year after any significant
amendment to the Charter.
- Ensure receipt of and review the written disclosures and letter from the
Independent Auditor required by Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees delineating all
relationships between the Independent Auditor and its related entities
and the Company and its related entities that in the Independent
Auditor's professional judgment may reasonably be thought to bear on
independence, engage in dialogue with the Independent Auditor with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the Independent Auditor and recommend
that the Board take appropriate action on any disclosed relationships to
satisfy itself of the Independent Auditor's independence.
- On an annual basis, either as part of the written disclosures to be
provided by the Independent Auditor under Independence Standards Board
Standard No. 1 or in a separate document, obtain from the Independent
Auditor a written statement of the aggregate fees billed for each of the
categories of services set forth in Item 9 of Schedule 14A under the
Securities Exchange Act of 1934. If applicable and consistent with
Independence Standards Board Standard No. 1 and Item 9 of Schedule 14A
under the Securities Exchange Act of 1934, the Audit Committee shall
consider whether the Independent Auditor's provision of non-audit
services to the Company is compatible with maintaining the independence
of the Independent Auditor.
- Meet with the external auditors, internal auditors and management in
separate executive sessions, at least annually, to discuss any matters
that the Committee or these groups believe should be discussed privately
with the Committee.
- The Committee will perform such other functions as assigned by law, the
Company's charter or By-Laws and/or the Board of Directors.
- The Committee shall report Committee actions to the Board of Directors
with such recommendations as the Committee may deem appropriate.
- Ensure that minutes of the Audit Committee are kept and retained as
records of the Company.
- Each member of the Audit Committee shall, in the performance of his or
her duties, be fully justified and protected with regard to any act of
failure to act (1) in reliance in good faith upon the books of account or
other records of the Company, upon an opinion of counsel or upon reports
made to the Company by any of its officers or employees or by the
Independent Auditor or (2) in the exercise of his or her business
judgment.
A-3
- While the Audit Committee has the duties and responsibilities set forth
in this Charter in assisting the Board in fulfilling its oversight
responsibilities with respect to the Company's audit, accounting and
financial reporting processes generally and the Company's system of
internal controls, it is not the duty of the Audit Committee to plan or
conduct audits, to implement internal controls or to determine that the
Company's financial statements are complete and accurate and are in
accordance with generally accepted accounting principles. This is the
responsibility of management and the independent Auditor. Nor is it the
duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, among management, the Independent Auditor or
Internal Audit or to assure compliance with laws and regulations. The
review of the financial statements by the Audit Committee is not an audit
and is not of the same quality as the audit performed by the Independent
Auditor.
COMMITTEE AUTHORITY
The Committee shall have the right and authority to:
- Obtain all relevant information and documentation in order to carry out
the responsibilities of the Committee
- Conduct or authorize investigations into any matters brought to its
attention if, in the Committee's judgment, such matter warrants
investigation
- Retain independent counsel, accountants, or others to assist in the
conduct of any investigations.
A-4
MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA, SUITE 800, CHICAGO, ILLINOIS 60606
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Manufactured Home Communities, Inc., a Maryland corporation (the "Company"), hereby appoints
SAMUEL ZELL and HOWARD WALKER, or either of them, with full power of substitution in each of them, to attend the Annual Meeting of
Stockholders of the Company to be held on Wednesday, May 8, 2002, at 10:00 a.m. Central time, and any adjournment or postponement
thereof, to cast on behalf of the undersigned all votes that the undersigned is entitled to cast at such meeting and otherwise to
represent the undersigned at the meeting with all powers possessed by the undersigned if personally present at the meeting. The
undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and of the accompanying Proxy Statement and
revokes any proxy heretofore given with respect to such meeting.
The votes entitled to be cast by the undersigned will be cast as instructed on the reverse side. If this proxy is executed but
no instruction is given, the votes entitled to be cast by the undersigned will be cast "for" each of the nominees for director as
described in the Proxy Statement, and in the discretion of the proxy holder on any other matter that may properly come before the
meeting or any adjournment or postponement thereof.
COMMENTS/ADDRESS CHANGE:
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----------------------------------------------
---------------------------------------------- (Continued and to be signed on other side)
/\ FOLD AND DETACH HERE /\
MANUFACTURED HOME COMMUNITIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
[ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. ELECTION OF DIRECTORS
Nominees: Samuel Zell, For Withhold For All And on any other matter which may properly come before the
David A. Helfand, and All All Except meeting or any adjournment or postponement thereof in the
Michael A. Torres [ ] [ ] [ ] discretion of the Proxy holder.
Instruction: TO WITHHOLD AUTHORITY to vote for any
individual nominee, write that nominee's name in the
space provided below:
----------------------------------------------------- I PLAN TO ATTEND THE MEETING [ ]
Date
------------------------------------
Signature
-------------------------------------------------
Signature
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NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS
SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN OR OFFICER, PLEASE GIVE
FULL TITLE UNDER SIGNATURE.
/\ FOLD AND DETACH HERE /\
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.