<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
FOREST CITY ENTERPRISES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
FOREST CITY ENTERPRISES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 10, 1997
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of Forest
City Enterprises, Inc. will be held in the auditorium of the Brooklyn Union Gas
Building, One MetroTech Center, Brooklyn, New York 11201, on Tuesday, June 10,
1997 at 9:00 a.m. eastern daylight saving time, for the purpose of considering
and acting upon:
(1) The election of twelve (12) directors, each to hold office until the
next annual shareholders' meeting and until his or her successor shall
be elected and qualified. Three (3) directors will be elected by
holders of Class A Common Stock and nine (9) by holders of Class B
Common Stock.
(2) The proposed amendment of the Articles of Incorporation of the Company
to increase the number of shares of Class A Common Stock and Class B
Common Stock which the Company is authorized to issue from 16,000,000
shares to 48,000,000 shares and 6,000,000 shares to 18,000,000 shares,
respectively.
(3) The proposed amendment of the Articles of Incorporation of the Company
to increase the number of shares of Preferred Stock which the Company
is authorized to issue from 1,000,000 shares to 5,000,000 shares.
(4) The ratification of Coopers & Lybrand, L.L.P. as independent auditors
for the Company for the fiscal year ending January 31, 1998.
(5) Such other business as may properly come before the meeting or any
adjournment thereof.
Shareholders of record at the close of business on April 15, 1997 will be
entitled to notice of and to vote at such annual meeting or any adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas G. Smith, Secretary
Cleveland, Ohio
May 14, 1997
IMPORTANT: IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING.
WHETHER OR NOT YOU INTEND TO BE PRESENT, PLEASE MARK, DATE AND SIGN
THE APPROPRIATE ENCLOSED PROXY OR PROXIES AND SEND THEM BY RETURN
MAIL IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
<PAGE> 3
FOREST CITY ENTERPRISES, INC.
PROXY STATEMENT
SOLICITATION AND REVOCATION OF PROXIES
The enclosed Proxy or Proxies relating to shares of Class A Common Stock and
Class B Common Stock are solicited by and on behalf of the Board of Directors of
Forest City Enterprises, Inc. (hereinafter referred to as the "Company") for use
at the annual meeting of shareholders to be held on Tuesday, June 10, 1997 at
9:00 a.m., eastern daylight saving time, in the auditorium of the Brooklyn Union
Gas Building, One MetroTech Center, Brooklyn, New York 11201. This Proxy
Statement and related form of proxy are being first sent to shareholders on or
about May 15, 1997. A shareholder giving a Proxy may revoke the same by
notifying the Secretary of the Company in writing or at the annual meeting,
without affecting any vote previously taken.
OUTSTANDING SHARES AND VOTING RIGHTS
As of April 15, 1997, the record date ("Record Date") fixed for the
determination of shareholders entitled to vote at the annual meeting, there were
outstanding 7,702,633 shares of Class A Common Stock, par value $.33-1/3 per
share, and 5,409,343 shares of Class B Common Stock, par value $.33-1/3 per
share, of the Company (hereinafter collectively referred to as "Common
Stock").The number of shares outstanding and all other share numbers in this
Proxy Statement reflect the effect of a 3-for-2 stock split of the Class A
Common Stock and Class B Common Stock that took effect on February 17, 1997. At
the annual meeting, the holders of Class A Common Stock will be entitled as a
class to elect three (3) directors, and will be entitled to one vote per share
for this purpose. J Maurice Struchen, Michael P. Esposito, Jr. and Joan K.
Shafran have been nominated for election to serve as these directors. At the
annual meeting, the holders of Class B Common Stock will be entitled as a class
to elect nine (9) directors, and will be entitled to one vote per share for this
purpose. Albert B. Ratner, Samuel H. Miller, Charles A. Ratner, James A. Ratner,
Jerry V. Jarrett, Ronald A. Ratner, Scott S. Cowen, Brian J. Ratner and Deborah
Ratner Salzberg have been nominated for election to serve as these directors.
Except for the election of directors, the holders of Class A Common Stock and
Class B Common Stock will vote together on all other matters presented at the
meeting and will be entitled to one (1) vote per share of Class A Common Stock
and ten (10) votes per share of Class B Common Stock held of record.
If notice in writing is given by any shareholder to the President, a Vice
President or the Secretary of the Company not less than forty-eight hours before
the time fixed for the holding of the meeting that such shareholder desires
cumulative voting with respect to the election of directors by a class of
shareholders to which he belongs, and if an announcement of the giving of such
notice is made upon the convening of the meeting by the Chairman or Secretary or
by or on behalf of the shareholder giving such notice, each holder of shares of
that class shall have the right to accumulate such voting power as he possesses
at such election with respect to shares of that class. Each holder of shares of
Class A Common Stock or Class B Common Stock as the case may be, shall have as
many votes as equal the number of shares of that class of Common Stock owned by
him multiplied by the number of directors to be elected by the holders of that
class of Common Stock. These votes may be distributed among the total number of
directors to be elected by the holders of that class of common stock or
distributed among any lesser number, in such proportion as the holder may
desire.
Under Ohio law and the Company's Articles of Incorporation, broker non-votes and
abstaining votes will be counted for purposes of determining whether a quorum is
present at the annual meeting, but will not be counted in favor of or against
any nominee for election to the Board of Directors of the Company. Broker
non-votes and abstentions will have the same effect as votes against the
proposed amendments to the Articles of Incorporation or the ratification of
Coopers & Lybrand, L.L.P. as the Company's independent auditors for the fiscal
year ending January 31, 1998.
1
<PAGE> 4
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended January 31, 1997 is
enclosed herewith, but is not part of this Proxy Statement.
ELECTION OF DIRECTORS
It is intended that proxies will be voted for the election of the nominees named
in the table below as directors of the Company unless authority is withheld.
Each is to serve until the next annual shareholders' meeting and until his or
her successor is elected and qualified. In the event any one or more of such
nominees unexpectedly becomes unavailable for election, proxies will be voted in
accordance with the best judgment of the proxy holder. All of the nominees are
presently directors of the Company except for Joan K. Shafran. Joan K. Shafran
is the nominee to replace Nathan Shafran who will retire from the Board at the
end of his term.
At March 4, 1997, the Ratner, Miller and Shafran Families, which include members
of the Company's current Board of Directors and certain executive officers
("Family Interests"), owned 74.3% of the Class B Common Stock. RMS, Limited
Partnership ("RMSLP"), which owned 74.0% of the Class B Common Stock outstanding
as of the Record Date, is a limited partnership, comprised of the Family
Interests, with eight individual general partners, currently consisting of
Samuel H. Miller, Co-Chairman of the Board of Directors and Treasurer of the
Company, Charles A. Ratner, President, Chief Executive Officer of the Company
and Director, Ronald A. Ratner, Executive Vice President of the Company and
Director, Brian J. Ratner, Senior Vice President - Development of the Company
and Director, Deborah Ratner Salzberg, Vice President of Forest City
Residential, Inc., a subsidiary of the Company, and Director, Fannye Shafran and
Joseph Shafran, and one position that is currently vacant. Nathan Shafran and
Fannye Shafran are the father and mother of Joan K. Shafran and Joseph Shafran
and the uncle and aunt of Charles A. Ratner, James A. Ratner and Ronald A.
Ratner, who are brothers, and of Albert B. Ratner. Albert B. Ratner is the
father of Brian J. Ratner and Deborah Ratner Salzberg and is first cousin to
Charles A. Ratner, James A. Ratner, Ronald A. Ratner, Joan K. Shafran and Joseph
Shafran. Samuel H. Miller was married to Ruth Ratner Miller (now deceased), a
sister of Albert B. Ratner. The vacant general partnership position relates to
shares controlled by the children of Ruth Ratner Miller.
Under the partnership agreement of RMSLP ("Agreement"), the voting power of the
general partners representing a family branch is determined by dividing the
interest of the family branch they represent by the aggregate interests of all
family branches. The voting power of the general partner or general partners
representing a family branch may not be divided or apportioned but must be voted
together as a whole. If the general partners representing a family branch are
unable to agree on how to vote that branch, the total voting power of the other
general partners is computed without reference to the voting power otherwise
available to that family branch. Accordingly, the voting power of the Ruth
Miller Family Branch will be excluded until its vacant general partner position
is filled. General partners holding 60% of the total voting power (excluding the
voting power of a family branch, if any, unable to agree on how to vote on a
particular matter) of RMSLP determine how to vote the Class B Common Stock of
Forest City Enterprises, Inc. held by RMSLP.
At March 4, 1997, members of the Family Interests collectively owned 43.9% of
the Class A Common Stock. The following table includes the shares of Class B
Common Stock held by RMSLP under the Agreement voted by the general partners of
RMSLP at March 4, 1997, who under Rule 13d-3 of the Securities Exchange Act of
1934 are deemed to be the beneficial owners of those shares of Class B Common
Stock:
2
<PAGE> 5
w
<TABLE>
<CAPTION>
Percent of
Shares of Class B RMSLP's
Name of Common Stock Holdings of Class B
Family Branch General Partners Held through RMSLP Common Stock*
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Max Ratner Charles A. Ratner 1,607,685 40.2%
Ronald A. Ratner
Albert Ratner Brian J. Ratner 829,318 20.7%
Deborah Ratner Salzberg
Samuel H. Miller Samuel H. Miller 303,601 7.6%
Shafran Fannye Shafran 800,968 20.0%
Joseph Shafran
Ruth Miller Abraham Miller 459,985 11.5%
(Resigned April 4, 1997;
position presently vacant)
--------- -----
Total 4,001,557 100.0%
========= =====
<FN>
* Represents total voting power for the Family Branch
</TABLE>
The following table sets forth the beneficial ownership of shares of Class A
Common Stock and Class B Common Stock as of March 4, 1997 of each director,
nominee, other named executive officer and all directors and executive officers
as a group. Except as otherwise noted, each person has had the principal
occupation shown for at least the last five years.
<TABLE>
<CAPTION>
Number of Shares of Common
Stock Beneficially Owned
--------------------------------------------------------------------------
Combined
Class
Class A A and B Percent Class B
Occupation Director Common Percent Common of Common Percent
Name And Age Since Stock(e) of Class(e) Stock(f) Class(f) Stock of Class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CURRENT DIRECTOR NOT STANDING FOR RE-ELECTION
Nathan Vice Chairman 1960 330,536(3) 4.29% 332,786 4.32% 2,250(4) 0.04%
Shafran of the Board of (3)(4)
Directors of the Company.
Age 83.(c)
NOMINEES
(1) J Maurice Retired Chairman 1971 750 0.01% 1,500 0.02% 750 0.01%
Struchen and Chief Executive
Officer of Society
Corporation (now Key
Corporation) (banking);
Director of Greif Bros.
Corporation (creative
packaging).
Age 76. (a,b)
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
Number of Shares of Common
Stock Beneficially Owned
--------------------------------------------------------------------------
Combined
Class
Class A A and B Percent Class B
Occupation Director Common Percent Common of Common Percent
Name And Age Since Stock(e) of Class(e) Stock(f) Class(f) Stock of Class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(1) Michael P. Partner, Inter-Atlantic 1995 1,800 0.02% 1,800 0.02% - -
Esposito, Jr. Securities Corporation
(financial services);
Retired Chief Administrative
and Control Officer of The
Chase Manhattan Bank, N.A.
(banking); Chairman of the
Board of Exel Limited
(Bermuda; insurance).
Age 57. (a,b)
(1) Joan K. Managing Partner, The - 145,592(5) 1.89% 147,842 1.92% 2,250(6) 0.04%
Shafran Berimore Company (5)(6)
(investments); Principal,
Do While Studio, Boston
(art and technology nonprofit);
Faculty of School of the
Museum of Fine Arts,
Boston (education). Age 49.
(2) Albert B. Co-Chairman of the 1960 602,446(7) 7.82% 603,874 7.84% 1,428(8) 0.03%
Ratner Board of Directors of the (7)(8)
Company since June 1995,
Vice Chairman of the Board
of the Company from June 1993
to June 1995, Chief Executive
Officer prior to July 1995
and President prior to July
1993. Director of American
Greetings Corporation
(greeting cards) and RPM, Inc.
(manufacturing).
Age 69. (c)
(2) Samuel H. Co-Chairman of the 1960 509,818(9) 6.62% 4,511,375 38.55% 4,001,557(10) 73.97%
Miller Board of Directors (9)(10)
of the Company since
June 1995, Chairman of
the Board of the Company
from June 1993 to June 1995
and Vice Chairman of the
Board, Chief Operating Officer
of the Company prior to
June 1993, Treasurer of the
Company since December 1992.
Age 75.(c)
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
Number of Shares of Common
Stock Beneficially Owned
--------------------------------------------------------------------------
Combined
Class
Class A A and B Percent Class B
Occupation Director Common Percent Common of Common Percent
Name And Age Since Stock(e) of Class(e) Stock(f) Class(f) Stock of Class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(2) Charles A. President of the Company 1972 885,220(11) 11.49% 4,886,777 41.75% 4,001,557(12) 73.97%
Ratner since June 1993, Chief (11)(12)
Executive Officer of the
Company since June 1995,
Chief Operating Officer
from June 1993 to June
1995 and Executive Vice
President prior to June
1993. Director of Cole
National Corporation
(retail) and Cole
National Group Inc.
(retail). Age 55. (c)
(2) James A. Executive Vice 1984 1,007,511(13) 13.08% 1,007,511 13.08% - (14) -
Ratner President of the Company and (13)(14)
President of Forest City
Rental Properties
Corporation, a subsidiary
of the Company. Age 52.(c)
(2) Jerry V. Retired Chairman 1984 - - - - - -
Jarrett and Chief Executive
Officer of Ameritrust
Corporation (banking).
Age 65. (a,b)
(2) Ronald A. Executive Vice President 1985 427,815(15) 5.55% 4,429,372 37.85% 4,001,557(16) 73.97%
Ratner of the Company and (15)(16)
President of Forest
City Residential Group, Inc.,
a subsidiary of the
Company. Age 50. (c)
(2) Scott S. Dean and Professor 1989 1,050 0.01% 1,050 0.01% - -
Cowen of Weatherhead School of
Management, Case Western
Reserve University
(education); Director of
FabriCenters of America,
Inc., (specialty
retailing), Rubbermaid
Corporation (consumer
products), American
Greetings Corporation
(greeting cards) and
KeyBank, N.A. (banking).
Age 50. (a,b)
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
Number of Shares of Common
Stock Beneficially Owned
--------------------------------------------------------------------------
Combined
Class
Class A A and B Percent Class B
Occupation Director Common Percent Common of Common Percent
Name And Age Since Stock(e) of Class(e) Stock(f) Class(f) Stock of Class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(2) Brian J. Senior Vice President- 1993 67,867(17) 0.88% 4,069,424 34.77% 4,001,557(18) 73.97%
Ratner Development of the Company (17)(18)
since January 1997, Vice
President-Urban
Entertainment from June
1995 to December 1996,
Vice President of the
Company from May 1994 to
June 1995 and an officer
of various subsidiaries.
Age 39. (c)
(2) Deborah Officer of various 1995 39,151(19) 0.51% 4,040,708 34.52% 4,001,557(20) 73.97%
Ratner subsidiaries of the (19)(20)
Salzberg Company.
Age 43. (c)
OTHER NAMED EXECUTIVE OFFICER
Thomas G. Senior Vice - - 205 0.00% 205 0.00%
Smith President, Chief
Financial Officer and
Secretary of the Company.
Director of Cleveland
Region Advisory Board,
First National Bank of
Ohio (banking). Age 56.
(c,d)
ALL DIRECTORS, NOMINEES
AND EXECUTIVE OFFICERS 2,794,459(21) 36.28% 6,801,536 58.09% 4,007,077(22) 74.07%
AS A GROUP (21 in number) (21)(22)
</TABLE>
6
<PAGE> 9
(1) Nominated for election by holders of Class A Common Stock.
(2) Nominated for election by holders of Class B Common Stock.
(3) Includes 52,588 shares of Class A Common Stock held in a partnership in
which Mr. Shafran has shared power of voting and disposition. Mr. Shafran
has beneficial ownership of 232,188 shares held in trusts for which he is
trustee and has shared power of voting and disposition.
(4) These represent shares held in a partnership in which Mr. Shafran has
shared power of voting and disposition. Mr. Shafran disclaims beneficial
ownership of 800,668 shares of Class B Common Stock owned through the
Shafran Family Branch of RMSLP. See discussion of RMSLP above.
(5) Includes 52,588 shares of Class A Common Stock held in a partnership in
which Joan K. Shafran has shared power of voting and disposition.
Ms. Shafran has beneficial ownership of 91,879 shares held in a trust for
which she is trustee and has shared power of voting and disposition.
(6) These represent shares held in a partnership in which Joan K. Shafran has
shared power of voting and disposition.
(7) Albert B. Ratner has beneficial ownership of 198,961 shares of Class A
Common Stock held in trusts for which he is trustee and has shared power of
voting and disposition and 315,268 shares for which he has sole power of
voting and disposition. Mr. Ratner has beneficial ownership of 33,494
shares held in trusts for which he is trust advisor and has shared power of
voting and disposition with the trustees.
(8) Albert B. Ratner disclaims beneficial ownership of 684,498 shares of Class
B Common Stock held by trusts for which he is trustee and 36,900 shares
held by trusts for which he is trust advisor, all of which are held in the
Albert Ratner Family Branch of RMSLP. See discussion of RMSLP above.
(9) Samuel H. Miller has beneficial ownership of 232,188 shares of Class A
Common Stock held in trusts for which he is trustee and has shared power of
voting and disposition and 275,101 shares for which he has sole power of
voting and disposition.
(10) Samuel H. Miller's beneficial ownership of these shares of Class B Common
Stock reflects his status as a general partner of RMSLP. See discussion of
RMSLP above.
(11) Charles A. Ratner has beneficial ownership of 644,334 shares of Class A
Common Stock held in trusts for which he is trustee and has shared power of
voting and disposition and 1,336 shares for which he has sole power of
voting and disposition. Mr. Ratner has beneficial ownership of 64,957
shares held in trusts for which he is trust advisor and has shared power of
voting and disposition with the trustees.
7
<PAGE> 10
(12) Charles A. Ratner's beneficial ownership of these shares of Class B Common
Stock reflects his status as a general partner of RMSLP. See discussion of
RMSLP above.
(13) James A. Ratner has beneficial ownership of 686,615 shares of Class A
Common Stock held in trusts for which he is trustee and has shared power of
voting and disposition and 68,586 shares for which he has sole power of
voting and disposition. Mr. Ratner has beneficial ownership of 11,812
shares held in trusts for which he is trust advisor and has shared power of
voting and disposition with the trustees.
(14) James A. Ratner disclaims beneficial ownership of 758,779 shares of Class B
Common Stock held by trusts for which he is trustee and 67,066 shares held
by trusts for which he is trust advisor, all of which are held in the Max
Ratner Family Branch of RMSLP. See discussion of RMSLP above.
(15) Ronald A. Ratner has beneficial ownership of 111,951 shares of Class A
Common Stock held in trusts for which he is trustee and has shared power of
voting and disposition and 68,860 shares for which he has sole power of
voting and disposition.
(16) Ronald A. Ratner's beneficial ownership of these shares of Class B Common
Stock reflects his status as a general partner of RMSLP. See discussion of
RMSLP above.
(17) Brian J. Ratner has beneficial ownership of 2,130 shares of Class A Common
Stock held in trusts for which he is trustee and has shared power of voting
and disposition. Mr. Ratner claims beneficial ownership of 7,800 shares
held as custodian for his daughter and as to which he has sole power of
voting and disposition.
(18) Brian J. Ratner's beneficial ownership of these shares of Class B Common
Stock reflects his status as a general partner of RMSLP. See discussion of
RMSLP above.
(19) Deborah Ratner Salzberg has beneficial ownership of 25,230 shares of Class
A Common Stock held in a trust for which she is trustee and has shared
power of voting and disposition.
(20) Deborah Ratner Salzberg's beneficial ownership of these shares of Class B
Common Stock reflects her status as a general partner of RMSLP. See
discussion of RMSLP above.
(21) These shares of Class A Common Stock represent all the shares in which
beneficial ownership is claimed by these persons. Shares for which
beneficial ownership have been claimed by more than one person have been
counted only once in this category.
(22) Included in this total are 4,001,557 shares of Class B Common Stock that
are held by RMSLP. These shares of Class B Common Stock represent all the
shares in which beneficial ownership is claimed by these persons. Shares
for which beneficial ownership have been claimed by more than one person
have been counted only once in this category.
8
<PAGE> 11
(a) Member of the Audit Committee.
(b) Member of the Compensation Committee.
(c) Officer and/or director of various subsidiaries of the Company.
(d) This officer is not a director.
(e) Does not reflect potential conversion of Class B Common Stock to Class A
Common Stock.
(f) Reflects potential conversion of all Class B Common Stock held by the
nominee or officer listed to Class A Common Stock. Shares of Class B Common
Stock are convertible pursuant to their terms into shares of Class A Common
Stock at any time on a 1-for-1 basis.
The Company has been advised that the shares owned by RMSLP and shares owned by
other Ratner, Miller and Shafran families will be voted for the approval of the
election of the directors nominated. If such shares are voted for approval, then
such vote will be sufficient to elect the nominees voted on by the Class B
shareholders.
9
<PAGE> 12
DIRECTOR COMPENSATION
Directors who are not officers of the Company received fees of $5,000 each for
attending each of four regular Board of Directors meetings during the fiscal
year ended January 31, 1997. Each Director also receives fees for attending any
committee meeting and for acting as chairman for any committee meeting. During
fiscal 1996, Messrs. Cowen, Jarrett, Struchen and Esposito received $4,000,
$4,000, $2,500 and $2,500, respectively, for attending or acting as chairman for
such meetings. In addition, Messrs. Struchen, Jarrett and Esposito received
$46,500, $7,000 and $3,000, respectively for attending various operating,
strategic planning and other special meetings in their capacity as a Director of
the Company. During fiscal 1996, Messrs. Cowen, Esposito, Jarrett and Struchen
were each granted 2,250 non-qualified stock options to purchase shares of Class
A Common Stock pursuant to the 1994 Stock Option Plan. The options have a term
of 10 years and vest as follows: 25% after two years, 50% after three years and
100% after four years from date of grant. The exercise price of $28.75 is equal
to the fair market value of a share of Class A Common Stock on the date of
grant. Officers of the Company who serve as directors do not receive any
additional compensation.
PRINCIPAL SECURITY HOLDERS
The following table sets forth the security ownership as of March 4, 1997 of all
other persons who beneficially own 5% or more of the Company's Common Stock.
<TABLE>
<CAPTION>
Number of Shares of Common
Stock Beneficially Owned
----------------------------------------------------------------------------------
Combined
Class
Class A A and B Class B
Common Percent Common Percent Common Percent
Name and Address Stock (a) of Class Stock(b) of Class(b) Stock of Class
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William Harris Investors, Inc. 338,322(1)(4) 4.39% 534,908(1)(4) 6.77% 196,586(1)(4) 3.63%
2 North LaSalle Street, Suite 400
Chicago, IL 60602-3703
Wanger Asset Management, L.P., 184,500(2)(4) 2.40% 417,000(2)(4) 5.26% 232,500(2)(4) 4.30%
Wanger Asset Management, Ltd.,
Ralph Wanger and Acorn Investment
Trust, Series Designated Acorn Fund
227 West Monroe, Suite 3000
Chicago, IL 60606
Private Capital Management, Inc. 617,625(3)(4) 8.02% 617,625(3)(4) 8.02% - -
3003 Tamiami Trail North
Naples, FL 33940
Fannye Shafran 136,211 (5) 1.77% 4,140,018 (5) 35.37% 4,003,807 (5) 74.01%
RMS, Limited Partnership
10800 Brookpark Road
Cleveland, OH 44130
Joseph Shafran 144,467 (6) 1.88% 4,148,274 (6) 35.44% 4,003,807 (6) 74.01%
Paran Management Company
13212 Shaker Boulevard, Room 201
Cleveland, OH 44120
Ratner, Miller & Shafran Family Interests 3,378,987 (7) 43.87% 7,396,897 (7) 63.11% 4,017,910 (7) 74.27%
10800 Brookpark Road
Cleveland, OH 44130
</TABLE>
10
<PAGE> 13
(1) William Harris Investors,Inc. (WHI), a Delaware corporation, is an
investment advisor registered under Section 203 of the Investment Advisers
Act of 1940. WHI has reported to the Company that it is the beneficial
owner of the securities included in the table above by virtue of its
advisory relationship with persons owning the securities.
(2) Wanger Asset Management, L.P. (WAM) is a Delaware limited partnership
registered under Section 203 of the Investment Advisers Act of 1940, Wanger
Asset Management, Ltd. (WAM Ltd) is a Delaware corporation, and Ralph
Wanger (Wanger) is a U.S. citizen. WAM Ltd. is the sole general partner of
WAM. Wanger is the principal stockholder of WAM Ltd. Acorn Investment
Trust, Series Designated Acorn Fund (Acorn) is a Massachusetts business
trust. Power over voting and disposition of the securities reported by
Acorn is shared with WAM, which is the investment advisor of Acorn.
(3) Private Capital Management, Inc. (PCM), a Florida corporation, is an
investment advisor registered under Section 203 of the Investment Advisers
Act of 1940. PCM is deemed to be the beneficial owner of 617,625 shares of
Class A Common Stock because of its shared power to dispose or to direct
the disposition of these securities; PCM disclaims any power to vote or to
direct the voting of these securities. Bruce S. Sherman, as president of
PCM, may also be deemed to be the beneficial owner of the 617,625 shares
beneficially owned by PCM. Mr. Michael J. Seaman, an employee of PCM or its
affiliates, owns 4,500 shares of Class A Common Stock not included in the
table above. Mr. Seaman disclaims any beneficial ownership in any of the
securities beneficially owned by either PCM or Mr. Sherman.
(4) The number of shares of capital stock beneficially owned represent shares
beneficially owned at December 31, 1996 as disclosed in Form 13G filed by
the Principal Security Holder named in the table. The number of shares
beneficially owned have been adjusted to reflect the February 1997 stock
split.
(5) Fannye Shafran is the wife of Nathan Shafran and mother of Joan K. Shafran
and Joseph Shafran. Included in the Class A Common Stock are 52,588 shares
held in a partnership in which Fannye Shafran has shared power of voting
and disposition. Mrs. Shafran has beneficial ownership of 38,416 shares of
Class A Common Stock held in a trust for which she is trustee and has sole
power of voting and disposition. Included in the Class B Common Stock are
2,250 shares held in a partnership in which Fannye Shafran has shared power
of voting and disposition. Fannye Shafran's beneficial ownership of the
remaining 4,001,557 shares of Class B Common Stock reflects her status as a
general partner of RMSLP. See discussion of RMSLP under "Election of
Directors."
(6) Joseph Shafran is the son of Nathan and Fannye Shafran and brother of Joan
K. Shafran. Included in the Class A Common Stock are 52,588 shares held in
a partnership in which Joseph Shafran has shared power of voting and
disposition. Mr. Shafran has beneficial ownership of 91,879 shares of Class
A Common Stock held in a trust for which he is trustee and has shared power
of voting and disposition. Included in the Class B Common Stock are 2,250
shares held in a partnership in which Joseph Shafran has shared power of
voting and disposition. Joseph Shafran's beneficial ownership of the
remaining 4,001,557 shares of Class B Common Stock reflects his status as a
general partner of RMSLP. See discussion of RMSLP under "Election of
Directors."
11
<PAGE> 14
(7) The Ratner, Miller and Shafran families have an ownership interest in the
Company as reflected in the table above. These securities are beneficially
owned by members of these families either individually or through a series
of trusts and custodianships. Of the shares of Class B Common Stock listed
above, RMSLP owns 4,001,557 shares which represents 73.97% of the Class B
Common Stock outstanding at March 4, 1997.
Certain members of the Ratner Miller and Shafran families have been
nominated for election to serve on the Board of Directors of the Company.
(See information regarding nominees and directors previously disclosed for
further information regarding the beneficial ownership of the Company's
Common Stock by these individuals).
(a) Does not reflect potential conversion of Class B Common Stock to Class A
Common Stock.
(b) Reflects potential conversion of all Class B Common Stock held by the
principal security holder listed to Class A Common Stock. Shares of Class B
Common Stock are convertible into shares of Class A Common Stock at anytime
on a 1-for-1 basis.
COMMITTEES OF THE BOARD OF DIRECTORS
During the last fiscal year, the Company's Board of Directors held four regular
meetings.
The Audit Committee is composed of four outside directors: Messrs. Scott S.
Cowen (Chairman), Michael P. Esposito, Jr., Jerry V. Jarrett and J Maurice
Struchen. The Audit Committee recommends the firm of independent accountants to
be appointed by the Board of Directors, subject to approval by the shareholders,
reviews the fee structure and the scope of the annual audit, reviews the results
of the annual audit, reviews reports of significant audits performed by the
Company's internal auditors, reviews the adequacy of internal controls and
consults with independent accountants and financial management on accounting
issues, including significant changes in accounting practices. Three Audit
Committee meetings were held during the 1996 fiscal year.
The Compensation Committee is comprised of four outside directors: Messrs. Jerry
V. Jarrett (Chairman), Scott S. Cowen, Michael P. Esposito, Jr., and J Maurice
Struchen. The Compensation Committee reviews the compensation arrangements for
senior management. Three Compensation Committee meetings were held during the
1996 fiscal year.
Each nonemployee director who serves on either the Audit or Compensation
Committees receives $500 for each meeting attended. In addition, any nonemployee
director who chairs any such meeting receives an additional $500.
The Board does not have a nominating committee. Board of Director nominees are
proposed by the existing Board members.
All Board members and Committee members attended at least 75% of their
respective meetings during fiscal 1996.
12
<PAGE> 15
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists entirely of the
following nonemployee Directors:
Jerry V. Jarrett, Chairman Michael P. Esposito, Jr
Scott S. Cowen J Maurice Struchen
No member of the Compensation Committee is a current or former officer or
employee of the Company or any of its subsidiaries.
COMPENSATION COMMITTEE REPORT
The Compensation Committee Report shall not be deemed incorporated by reference
by any general statement incorporating by reference this proxy statement into
any filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934, except to the extent that the Company specifically incorporates the
information by reference, and shall not otherwise be deemed filed under such
Acts.
The primary role of the Compensation Committee is to develop and implement
compensation policies which are consistent with and integrally linked to the
accomplishment of the Company's strategic objectives.
The Company believes that shareholder value is best maximized through the
increase in Earnings Before Depreciation, Amortization and Deferred Taxes, as
discussed in the Management's Discussion and Analysis section of the Company's
Annual Report, and the increase in the value of its real estate portfolio over
time.
The Company adheres to certain principles in developing its compensation
policies. First, total compensation should be competitive with other companies
in the real estate industry of similar size. Incentive compensation should be
linked both to each individual's performance and the performance of the Company
as a whole. Compensation opportunities should be structured to attract and
retain those individuals that can help achieve the Company's strategic
objectives and thus maximize shareholder value.
The Compensation Committee reviews and approves all policies under which each
form of compensation is paid or awarded to the Company's "key" officers as
defined by the Committee. The salaries of the Chief Executive Officer and the
five other most highly compensated officers are proposed by the Chief Executive
Officer to the Committee for approval. The Committee then reviews and approves
the compensation of the Chief Executive Officer and the five other most highly
compensated executive officers. The Compensation Committee also reviews the
salaries and incentives for each member of the Ratner, Miller and Shafran
families identified as executive officers.
The Compensation Committee utilizes nationally recognized outside experts as
consultants to assist it in the performance of its duties. These consultants are
asked to analyze officers salaries and compare those paid by Forest City
Enterprises with comparable corporations in the real estate field. In addition,
the consultants are asked to provide the committee with guidance on ranges in
annual salary and incentive compensation so officers of Forest City Enterprises
would be compensated on a competitive basis. The committee meets with these
consultants as required, and expects to continue to use their services in the
future.
13
<PAGE> 16
The Stock Option Plan is intended to grant options for key executives to
purchase shares of Class A Common Stock of the Company at fair market value.
Consistent with its approach to all incentive compensation, stock awards under
the Plan will be granted based upon the Committee's evaluation of all
performance criteria and at target levels commensurate with industry survey data
regarding long-term incentives.
Section 162(m) of the Internal Revenue Code of 1986, as amended, and adopted
under the Omnibus Budget Reconciliation Act of 1993, limits the deduction a
publicly-held corporation may take for compensation paid to its chief executive
officer and its four other most highly compensated employees. This Section of
the Code currently does not apply to executive officer compensation for the
Company. The Compensation Committee, therefore, does not have a policy regarding
the qualification of executive officer compensation for deductibility under that
Section of the Code.
In December 1996, the Compensation Committee approved an Executive Compensation
Plan ("Plan"). The Plan includes executives who are part of the Company's
strategic planning group. It features a short-term Management Incentive Plan
Outline ("MIP") and a Long-Term Performance Plan Outline ("LTPP"). The MIP will
provide short-term incentives for outstanding individual performance and
achievement of annual objectives. Annually the Compensation Committee will set a
range of performance objectives and related target incentives. Incentive awards
may be in cash or deferral arrangements. The MIP is jointly administered by the
Compensation Committee, the Chief Executive Officer and senior management.
Incentive award payments require the approval of the Compensation Committee.
The LTPP is designed to reward the achievement of long-term performance goals as
set forth in the strategic plan which, in turn, are expected to lead to improved
shareholder return performance. Incentive awards may be in cash, stock
compensation and deferral arrangements. The performance period over which awards
may be earned span four fiscal years. The LTPP is administered by the
Compensation Committee.
The Company entered into an agreement with Charles A. Ratner, President and
Chief Executive Officer, on February 1, 1994. The Agreement provides for an
annual salary of $325,000. The contract was initially for a one year term but is
renewable annually. In reviewing the Chief Executive Officer's compensation, the
Compensation Committee feels one of the most important indicators of performance
on his part is his ability to understand and react to changing conditions
affecting our industry and to adjust strategic directions and tactical plans to
be responsive. Improving shareholder value and development of management
succession plans also rank high on the list of performance indicators.
<TABLE>
<S> <C> <C> <C>
Jerry V. Jarrett, Chairman Scott S. Cowen Michael P. Esposito, Jr. J Maurice Struchen
</TABLE>
14
<PAGE> 17
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to, earned by, or paid
to the Company's chief executive officer and the five other most highly
compensated named executive officers.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Long Term
Compensation
Awards
----------
Annual Compensation Securities
------------------- Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Options(#) Compensation ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles A. Ratner, 1996 $324,986 $ -- 14,400 $137,726
President and Chief 1995 324,986 -- -- 11,551
Executive Officer 1994 321,812 -- -- 7,551
Albert B. Ratner, Co-Chairman 1996 449,986 -- -- 159,634
of the Board of Directors 1995 449,987 -- -- 12,550
1994 430,946 -- -- 13,490
Samuel H. Miller, Co-Chairman 1996 385,121 109,000 -- 12,103
of the Board of Directors 1995 384,986 60,000 -- 12,103
and Treasurer 1994 384,986 -- -- 13,103
Thomas G. Smith, 1996 310,804 100,000 7,200 51,875
Senior Vice President, 1995 287,005 100,000 -- 51,875
Chief Financial Officer 1994 274,986 125,000 -- 52,551
and Secretary
Ronald A. Ratner 1996 249,985 -- 9,000 6,323
Executive Vice President 1995 249,985 -- -- 6,323
1994 249,985 -- -- 7,243
James A. Ratner 1996 249,985 -- 9,000 6,551
Executive Vice President 1995 249,985 -- -- 6,551
1994 249,985 -- -- 7,552
</TABLE>
Amounts reported as "All Other Compensation" in 1996 include (i) accrual of
annual benefits to each named executive officer's vested balance in the
Company's deferred compensation plan as follows: Charles A. Ratner $10,000,
Albert B. Ratner $10,000, Samuel H. Miller $10,000, Ronald A. Ratner $5,000 and
James A. Ratner $5,000; (ii) accrual of an amount for Thomas G. Smith that is
provided in lieu of a deferred compensation plan that existed with his prior
employer $50,000; (iii) cost of group term life insurance as follows: Charles A.
Ratner $900, Albert B. Ratner $1,575, Samuel H. Miller $1,128, Thomas G. Smith
$900, Ronald A. Ratner $348 and James A. Ratner, $576; (iv) the Company's
matching contribution to the 40l(k) plan as follows: Charles A. Ratner $975,
Albert B. Ratner, $975, Samuel H. Miller $975, Thomas G. Smith $975, Ronald A.
Ratner $975 and James A. Ratner $975; and (v) the dollar value of the benefit to
the named executive officer of the interest-free use of the Company paid
premiums, excluding the term insurance portion which is paid by the named
15
<PAGE> 18
executive officer, from the current year to the projected date the premiums will
be refunded to the Company for split-dollar life insurance as follows: Charles
A. Ratner $125,851 and Albert B. Ratner $147,084.
The Company entered into employment agreements with Albert B. Ratner and Samuel
H. Miller, Co-Chairmen of the Board of Directors effective July 1, 1989 which
provide for an annual salary of $450,000 and $385,000, respectively. The
contracts were initially for a term of one year and are renewable annually.
Although no formal bonus plan exists, an annual bonus may be awarded, determined
on a discretionary basis.
The Company entered into employment agreements with James A. Ratner and Ronald
A. Ratner effective February 1, 1993 providing for annual salaries of $250,000
each. These contracts, which were initially for a term of one year, are
renewable annually.
The employment agreements for Albert Ratner, Samuel Miller, Charles Ratner,
James Ratner and Ronald Ratner further provide that upon the death of such
officer his beneficiary will receive an annual payment for five years equal to
one-half of his average annual contractual salary, as stated in the contract,
and bonus, if any, for the five calendar years immediately preceding his death.
Option Grants in Last Fiscal Year
---------------------------------
The following table sets forth information regarding stock options granted
during fiscal 1996 to the six executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Individual Grants
- ----------------------------------------------------------------------------------------
Number
of % of Total Grant Date
Securities Options Value
Underlying Granted to Exercise ----------
Options Employees or Base Grant Date
Granted in Fiscal Price Expiration Present
Name (#) (1) Year ($/Sh) Date Value $ (2)
- ---- ------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Charles A. Ratner 14,400 8.0% $28.75 9/8/06 $206,928
Albert B. Ratner - - - - -
Samuel H. Miller - - - - -
Thomas G. Smith 7,200 4.0% $28.75 9/8/06 $103,464
Ronald A. Ratner 9,000 5.0% $28.75 9/8/06 $129,330
James A. Ratner 9,000 5.0% $28.75 9/8/06 $129,330
</TABLE>
(1) On September 9, 1996, stock options to purchase Class A Common Stock were
granted under the 1994 Stock Option Plan ("Plan"). The options have a term
of 10 years and vest as follows: 25% after two years, 50% after three years
and 100% after four years from date of grant. The exercise price is equal
to the fair market value of a share of Class A Common Stock on the date of
grant. Under the Plan, awards may be incentive stock options or
non-qualified stock options. All the options granted in the above table
were non-qualified stock options, except Thomas G. Smith was granted 6,900
incentive stock options and 300 non-qualified stock options.
16
<PAGE> 19
(2) The options were valued using the Black-Scholes option-pricing model using
the following assumptions: expected volatility of 30.7%, based on closing
prices of Class A Common Stock for 43 months prior to grant; risk-free
interest rate of 6.5%, based on return of U.S. Government notes and bonds;
dividend yield of .5% and expected life of 8.7 years.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
-----------------------------------------------
The following table sets forth information with respect to the six executive
officers named in the Summary of Compensation Table concerning the number and
value of stock options to purchase Class A Common Stock outstanding at the end
of fiscal 1996.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares FY-End (#) FY-End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles A. Ratner - - 0/14,400 $0/ $ 176,400
Albert B. Ratner - - - -
Samuel H. Miller - - - -
Thomas G. Smith - - 0/ 7,200 $0/ $ 88,200
Ronald A. Ratner - - 0/ 9,000 $0/ $ 110,250
James A. Ratner - - 0/ 9,000 $0/ $ 110,250
</TABLE>
The closing price of the Company's Class A Common Stock on January 31, 1997 was
$41.00 per share.
17
<PAGE> 20
The following graph shows a comparison of five-year cumulative total return of
Forest City Enterprises, Inc. Class A Common Stock (FCEA), Forest City
Enterprises, Inc. Class B Common Stock (FCEB), Standard & Poor's 500 Stock Index
(S&P) and the Dow Jones Real Estate Investment Index (Dow Index).
<TABLE>
PERFORMANCE GRAPH
<CAPTION>
Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97
<S> <C> <C> <C> <C> <C> <C>
FCEA $100 $151 $227 $176 $194 $361
FCEB $100 $152 $251 $182 $194 $361
S&P $100 $111 $125 $125 $174 $220
Dow Index $100 $ 90 $106 $ 97 $119 $161
</TABLE>
Companies that comprise the Dow Index include Catellus Development Corporation,
Federal Realty Investment Trust, Health & Retirement Properties Trust,
Healthcare Properties Investments, Inc., Host Marriott Corp., Kimco Realty
Corp., Meditrust, New Plan Realty Trust, Newhall Land & Farming, The Rouse
Company, Security Capital Pacific Trust, Simon DeBartolo Group, Vornado Realty
Trust and Weingarten Realty Trust. Forest City Enterprises is not included in
this Dow Index. The cumulative total return is based on a $100 investment on
January 31, 1992 and the subsequent change in market prices of the securities at
each respective fiscal year end. It also assumes that dividends were reinvested
quarterly.
TRANSACTIONS WITH AFFILIATED PERSONS
The Company paid approximately $182,000 as total compensation during 1996 to RMS
Investment Corp. (RMSIC), a company engaged in property management and leasing,
controlled by the four children of Charles A. Ratner (the President, Chief
Executive Officer and a Director of the Company) each holding a 4.3% interest,
the two children of James Ratner (an Executive Vice President and a Director of
the Company) each holding a 4.3% interest, the two children of Ronald Ratner (an
Executive Vice President and a Director of the Company)
18
<PAGE> 21
each holding a 4.3% interest, the two children of Albert Ratner (a Co-Chairman
of the Company's Board of Directors), Deborah Ratner Salzberg and Brian J.
Ratner, each holding a 12.5% interest, the two children of Mark Ratner, (brother
of Charles Ratner, James Ratner and Ronald Ratner) each holding a 4.3% interest,
Albert Ratner as Trustee of the Ruth Miller Trust (11%), Nathan Shafran (a
Director of the Company) as Trustee (3.6%), Samuel H. Miller as Trustee (14.0%)
and Fannye Shafran as Trustee (3.6%). RMSIC manages and provides leasing
services to two of the Company's Cleveland-area specialty retail shopping
centers, Golden Gate (260,000 square feet) and Midtown (256,000 square feet).
The rate of compensation for such management services is 4% of all tenant
rentals, plus a lease fee of 2% to 3%. Management believes these fees are
comparable to that which other management companies would charge.
The Company has agreed to repurchase, as of May 7, 1997, 77,700 shares of Class
A Common Stock owned by Richard Miller, Aaron Miller and Gabrielle Miller, the
children of Samuel H. Miller, the Company's Co-Chairman, and Ruth Miller, who
died on November 26, 1996. The repurchase will provide funds necessary to pay
taxes on the estate of Ruth Miller. The shares were purchased at a price of
$36.50 for an aggregate purchase price of $2,836,050.00 plus 6.7% interest from
May 7, 1997 to August 18, 1997, less any dividend paid between those two dates.
The transfer of the shares and the payment for the same will take place on
August 18, 1997.
Under the Company's current policy, no director, officer or employee, including
members of the Ratner, Miller or Shafran families, is allowed to invest in a
competing real estate opportunity without first obtaining approval of the
Company's Conflict of Interest Committee. However, the Company currently does
not have non-compete agreements with any of its directors, officers and
employees and, upon leaving the Company, any director, officer or employee could
compete with the Company. An exception to the Company's conflict-of-interest
policy permits existing directors, officers and employees, including Albert B.
Ratner, Co-Chairman of the Board of Directors, Samuel H. Miller, Co-Chairman of
the Board of Directors and Treasurer, Charles A. Ratner, President, Chief
Executive Officer and Director, Ronald A. Ratner, Executive Vice President and
Director, Brian J. Ratner, Senior Vice President - Development and Director, and
Deborah Ratner Salzberg, Vice President of Forest City Residential, Inc. (a
subsidiary of the Company) and Director, James A. Ratner, Executive Vice
President and President of Forest City Rental Properties Corporation, and Nathan
Shafran, Director, to retain an interest in 15 properties that were acquired
before 1960 and one post-1960 acquisition, with a total cost of $94.0 million.
All but one of those properties are located in Cleveland and are in competition
with properties owned by the Company. The ownership of these properties by these
directors, officers and employees makes it possible that conflicts of interest
may arise between them and the Company. Although no such conflicts are
anticipated, areas of possible conflict may be in the development or expansion
of properties which may compete with the Company or the solicitation of tenants
for the use of such properties.
The Company and its subsidiaries have credit agreements and real estate
mortgages with KeyBank National Association ("KeyBank"), f/k/a Society National
Bank, of which J Maurice Struchen, who is a director of the Company, is a
retired Chairman of the Board of Society Corporation, the former parent of
Society National Bank. Scott Cowen, also a director of the Company, is a
director of KeyBank. The amount outstanding against these credit lines and
mortgages as of January 31, 1997 was $98,983,000.
19
<PAGE> 22
The Company is a partner in various residential and land development projects
with certain affiliates of William Harris Investors, Inc. ("Harris"), a
principal security holder of the Company. The amounts of distributions,
including repayment of loans, if any, made to Harris during calendar year 1996
and the net investment by Harris remaining at the end of 1996 are as shown
below:
<TABLE>
<CAPTION>
Harris Forest City
Partnership Partnership 1996 Distribution Harris Net Investment
Interest Interest Residential to Harris at 12/31/96
- ------------- ----------- ----------- ------------------ ---------------------
<S> <C> <C> <C> <C>
50% 50% Lenox Club $ 0 $ 400,347
Arlington, VA
50% 50% Lenox Park 0 55,312
Silver Spring, MD
0.05% 0.05% Pavilion 916,000 (3,062,385)
Chicago, IL
Land Development
----------------
50% 50% Seven Bridges &related 1,730,694 11,788,452
projects, Woodridge, IL
45% 45% Silver Lakes 2,412,000 7,607,000
Broward County, FL
50% 50% SLJVII 0 2,150,000
Broward County, FL
</TABLE>
Granite Development Partners, L.P. is a limited partnership in which a Forest
City entity is the general partner and which has publicly traded limited
partnership units. Harris had a $3,300,000 investment in partnership units at
the end of 1996.
Pursuant to a contemplated restructuring of Silver Lakes, Harris will become a
passive partner and the Forest City partner will have management control. Harris
will be entitled to receive monthly distributions (before distributions to the
Forest City partner) of $698,042 each month until a total of $16,753,000 has
been distributed to Harris. The Company will also buy from Harris a note payable
to Harris for its face amount of $856,227 payable at $74,080 per month.
The Company will also acquire Harris' partnership interest in SLJVII in exchange
for the Company's partnership interests in the Seven Bridges partnerships plus a
note for $1,382,931 bearing interest at 7% payable in twelve (12) equal monthly
installments.
20
<PAGE> 23
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING/COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who are beneficial owners of more than ten
percent of a registered class of the Company's equity securities ("Reporting
Persons") to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the American Stock Exchange. Reporting
Persons are required by regulations of the Securities and Exchange Commission to
furnish the Company's Corporate Secretary with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of Section 16(a) forms received by it,
or written representations from Reporting Persons that no Forms 5 were required
for those persons, the Company believes that during 1996 all filing requirements
applicable to Reporting Persons were complied with except for the following:
Joseph M. Shafran inadvertently filed one Form 4 late to report a transfer of
shares of stock.
PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The authorized capital stock of the Company consists of 1,000,000 shares of
preferred stock without par value (none issued at April 15, 1997) and 22,000,000
shares of Common Stock with a par value of $.33 1/3 divided into two classes:
(1) 16,000,000 shares of Class A Common Stock (7,938,583 shares issued and
7,702,633 shares outstanding at April 15, 1997) and (2) 6,000,000 shares of
Class B Common Stock (5,548,393 shares issued and 5,409,343 shares outstanding
at April 15, 1997).
Of the 16,000,000 shares of Class A Common Stock authorized at January 31,1997,
approximately 13,862,000 shares of Class A Common Stock have been issued or are
reserved for issuance under the Company's 1994 Stock Option Plan or for issuance
upon the conversion of issued Class B Common Stock to Class A Common Stock. Only
2,138,000 additional shares of Class A Common Stock would remain available for
issuance under these circumstances. On March 4, 1997, the Company filed a shelf
registration statement with the Securities and Exchange Commission for the
potential offering on a delayed basis of up to $250 million in debt or equity
securities. On May 1, 1997, the Company announced the commencement of an
underwritten public offering of up to 1,955,000 shares of Class A Common Stock.
The long-term utility of the registration statement will be reduced unless the
additional shares of Class A Common Stock are approved.
The Board of Directors have recommended the adoption of an amendment to the
Articles of Incorporation to increase the authorized shares of Class A Common
Stock from 16,000,000 shares to 48,000,000 shares and Class B Common Stock from
6,000,000 shares to 18,000,000 shares. To effect this change, Article IV of the
Articles of Incorporation would be amended to read as follows:
ARTICLE IV
CAPITAL STOCK
A. Authorized Shares
The number of shares which the Corporation is authorized to have issued
and outstanding is 67,000,000 shares, consisting of 48,000,000 shares
of Class A Common Stock with a par value of $.33 1/3 per share
(hereinafter designated "Class A Common Stock"), 18,000,000 shares of
Class B Common Stock with a par value of $.33 1/3 per share
(hereinafter designated "Class B Common Stock"), and 1,000,000 shares
of preferred stock without par value (hereinafter designated
"Preferred Stock").
21
<PAGE> 24
The purpose of the increase in authorized shares is to provide additional Common
Stock that could be issued for future purposes without further shareholder
approval unless required by applicable law, rule or regulation. Future purposes
could include affecting acquisitions of other businesses or properties, securing
additional financing through the issuance of additional shares or for general
corporate purposes. The Company has no definite plan, commitment or
understanding at this time to issue any shares of the proposed additional Common
Stock. If authorization of any increase in the Common Stock is postponed until a
specific need arises, the delay and expense incident to obtaining the approval
of stockholders at that time could impair the Company's ability to meet its
objectives.
The additional shares of Common Stock issued hereafter would be identical to the
Common Stock currently outstanding. No stockholder has any preemptive rights,
and issuance of the additional Common Stock could dilute the voting rights of
present holders of Common Stock. It is possible, depending upon the transaction
in which Common Stock is issued, that issuance of such Common Stock could have a
dilutive effect on shareholders' equity and earnings per share attributable to
present holders. The affirmative vote of the holders of a majority of the
combined voting power of the outstanding shares of Class A Common Stock and
Class B Common Stock of the Company present or represented at the meeting is
required for approval of the proposed amendment to Article IV. The Company has
been advised that the shares held by the Ratner, Miller and Shafran families and
partnerships will be voted in favor of the proposal. If such shares are voted
for approval, then such vote will be sufficient to approve such proposal.
PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK
The Board of Directors have recommended the adoption of an amendment to the
Articles of Incorporation to increase the authorized shares of preferred stock
from 1,000,000 shares to 5,000,000 shares. To effect this change, Article IV of
the Articles of Incorporation would be amended to read as follows (numbers in
parenthesis represent number of shares if the proposal to increase the number of
authorized shares of Common Stock is approved):
ARTICLE IV
CAPITAL STOCK
A. Authorized Shares
The number of shares which the Corporation is authorized to have issued
and outstanding is 27,000,000 (71,000,000) shares, consisting of
16,000,000 (48,000,000) shares of Class A Common Stock with a par value
of $.33 1/3 per share (hereinafter designated "Class A Common Stock"),
6,000,000 (18,000,000) shares of Class B Common Stock with a par value
of $.33 1/3 per share (here inafter designated "Class B Common Stock"),
and 5,000,000 shares of preferred stock without par value (hereinafter
designated "Preferred Stock").
The purpose of the increase in authorized shares is to provide additional
Preferred Stock that could be issued for future purposes without further
shareholder approval unless required by applicable law, rule or regulation.
Future purposes could include paying stock dividends, subdividing outstanding
shares through stock splits, affecting acquisitions of other businesses or
properties, securing additional financing through the issuance of additional
shares or for general corporate purposes. The Company has no definite plan,
22
<PAGE> 25
commitment or understanding at this time to issue any shares of the proposed
additional Preferred Stock. If authorization of any increase in the Preferred
Stock is postponed until a specific need arises, the delay and expense incident
to obtaining the approval of stockholders at that time could impair the
Company's ability to meet its objectives.
The additional shares of Preferred Stock issued hereafter would be identical to
the Preferred Stock currently authorized. No stockholder has any preemptive
rights. It is possible, depending upon the transaction in which Preferred Stock
is issued, that issuance of such Preferred Stock could have a dilutive effect on
shareholders' equity and earnings per share attributable to present holders of
the Company's Common Stock.
The affirmative vote of the holders of a majority of the combined voting power
of the outstanding shares of Class A Common Stock and Class B Common Stock of
the Company present or represented at the meeting is required for approval of
the proposed amendment to Article IV. The Company has been advised that the
shares held by the Ratner, Miller and Shafran families and partnerships will be
voted in favor of the proposal. If such shares are voted for approval, then such
vote will be sufficient to approve such proposal.
Description of Preferred Stock
------------------------------
The description set forth below is subject to and qualified in its entirety by
reference to the amendments to the Articles of Incorporation of the Company (the
"Articles") fixing the preferences, limitations and relative rights of a
particular series of Preferred Stock.
General
Under the Articles, the Board of Directors of the Company is currently
authorized without further shareholder action, to provide for the issuance of up
to 1,000,000 shares of Preferred Stock. The Board of Directors may fix the
specific terms of the issuance, including: (i) the designation and authorized
number of shares of each series; (ii) the title and liquidation preference per
share of such Preferred Stock and the number of shares offered; (iii) the price
at which such series will be issued; (iv) the dividend rate, the dates on which
dividends shall be payable and the dates from which dividends shall commence to
accumulate; (v) any redemption or sinking fund provisions of such series; (vi)
any conversion rights; and (vii) any additional dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges, limitations
and restrictions of such series.
The Preferred Stock will, when issued, be fully paid and nonassessable. Each
series will rank on a parity as to dividends and distributions in the event of a
liquidation with each other series of Preferred Stock and, in all cases, will be
senior to the Common Stock.
Dividend Rights
Holders of Preferred Stock of each series will be entitled to receive, when, as
and if declared by the Board of Directors, out of assets of the Company legally
available therefor, cash dividends at such rates and on such dates as determined
by the Board of Directors. Holders of Preferred Stock will be entitled to
receive dividends in preference to and in priority over dividends on account of
Common Stock and will be cumulative from the date determined by the Board of
Directors.
So long as any shares of Preferred Stock are outstanding, the Company shall not
declare or pay any dividend or make any distribution on account of Common Stock,
unless the accrued dividends on each series of Preferred Stock have been
declared and paid.
23
<PAGE> 26
Each series of Preferred Stock will be entitled to dividends as determined by
the Board of Directors relating to such series, which may be based upon one or
more methods of determination. Different series of Preferred Stock may be
entitled to dividends at different dividend rates or based upon different
methods of determination. No series of Preferred Stock will be entitled to
participate in the earnings or assets of the Company.
Rights Upon Liquidation
Upon any dissolution, liquidation or winding-up of the Company, the holders of
each series of Preferred Stock will be entitled to receive out of the assets of
the Company, whether from capital, surplus or earnings, and before any
distribution of any assets is made on account of Class A Common Stock or Class B
Common Stock, the amount per share fixed by the Board of Directors for such
series of Preferred Stock, plus unpaid dividends to the date fixed for
distribution. Holders of Preferred Stock will be entitled to no further
participation in any distribution made in conjunction with any such dissolution,
liquidation or winding-up.
Redemption
A series of Preferred Stock may be redeemable, in whole or in part, at the
option of the Company, and may be subject to mandatory redemption pursuant to a
sinking fund, in each case upon terms, at the times, the redemption prices and
for the types of consideration as determined by the Board of Directors relating
to such series. Where a series of Preferred Stock is subject to mandatory
redemption, the Board of Directors will determine the number of shares of such
series that will be redeemed by the Company in each year commencing after a date
specified, at a redemption price per share specified, together with an amount
equal to any accrued and unpaid dividends thereon to the date of redemption.
If, after giving notice of redemption to the holders of a series of Preferred
Stock, the Company deposits with a designated bank funds sufficient to redeem
such Preferred Stock, then from and after such deposit, all shares called for
redemption will no longer be outstanding for any purpose, other than the right
to receive the redemption price and the right, if applicable, to convert such
shares into Class A Common Stock of the Company prior to the date fixed for
redemption.
Preferred Stock is not subject to any mandatory redemption at the option of the
holder.
Sinking Fund
The Board of Directors, for any series of Preferred Stock, will determine the
terms, if any, of a sinking fund for the purchase or redemption of that series.
Conversion Rights
The Board of Directors, for any series of Preferred Stock, will determine the
terms, if any, on which shares of that series are convertible into shares of
Class A Common Stock. The Preferred Stock will have no preemptive rights.
Voting Rights
Under ordinary circumstances, the holders of Preferred Stock have no voting
rights except as required by law. However, if dividends on the Preferred Stock
are in arrears for an aggregate of six quarterly dividends upon such
24
<PAGE> 27
shares, the holders of the Preferred Stock, voting as a class, will become
entitled to elect two Directors until such time as such arrearages are paid and
current dividends paid or declared and funded.
Transfer Agent and Registrar
The transfer agent, registrar and dividend disbursement agent for a series of
Preferred Stock will be selected by the Company upon any issuance of a series of
Preferred Stock. The registrar for shares of Preferred Stock will send notices
to shareholders of any meetings at which holders of Preferred Stock have the
right to vote on any matter.
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors recommends the ratification of Coopers & Lybrand, L.L.P.
Certified Public Accountants, by the shareholders at the annual meeting as the
Company's independent auditors for the fiscal year ending January 31, 1998.
Coopers & Lybrand, L.L.P. has indicated that a representative of Coopers &
Lybrand, L.L.P. will attend the annual meeting to respond to appropriate
questions from shareholders. Their representative will also have the opportunity
to make a statement at the meeting.
The affirmative vote of the holders of a majority of the combined voting power
of the outstanding shares of Class A Common Stock and Class B Common Stock of
the Company present or represented at the meeting is required for the
ratification of Coopers & Lybrand, L.L.P. as the Company's independent auditors
for the year ended January 31, 1998. The Company has been advised that the
shares held by the Ratner, Miller and Shafran families and partnerships will be
voted in favor of the proposal. If such shares are voted for approval, then such
vote will be sufficient to approve such proposal.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's 1998 annual
meeting of shareholders must be received by the Company at the address below on
or before January 4, 1998 for inclusion in the Company's proxy statement and
form of proxy relating to the 1998 annual meeting of shareholders.
OTHER BUSINESS
It is not anticipated that matters other than those described in this Proxy
Statement will be brought before the meeting for action, but if any other
matters properly come before the meeting, it is intended that votes thereon will
be cast pursuant to said proxies in accordance with the best judgment of the
proxy holders.
Upon the receipt of a written request from any stockholder entitled to vote at
the forthcoming annual meeting, the Company will mail, at no charge to the
stockholder, a copy of the Company's annual report on Form 10-K including the
financial statements and schedules and excluding exhibits required to be filed
with the Securities and Exchange Commission pursuant to Rule 13a-1 under the
Securities Exchange Act of 1934, as amended, for the Company's most recent
fiscal year. Requests from beneficial owners of the Company's Common Stock must
set forth a good faith representation that, as of the record date for the annual
meeting, the person making the request was the beneficial owner of securities
entitled to vote at such meeting.
25
<PAGE> 28
Written requests for such report should be directed to :
Investor Relations
Forest City Enterprises, Inc.
10800 Brookpark Road
Cleveland, Ohio 44130
www.fceinc.com
Effective October, 1997
1100 Terminal Tower
Cleveland, Ohio 44113
COST AND METHOD OF PROXY SOLICITATION
The cost of solicitation will be paid by the Company. In addition to
solicitation by mail, arrangements may be made with brokers and other
custodians, nominees and fiduciaries to send proxies and proxy material to their
principals, and the Company may reimburse them for their expense in so doing.
Officers and other regular employees of the Company may, if necessary, request
the return of proxies by telephone, telegram or in person.
By order of the Board of Directors.
/s/Thomas G. Smith, Secretary
Cleveland, Ohio
May 14, 1997
26
<PAGE> 29
CLASS FOREST CITY ENTERPRISES, INC. CLASS
A PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF A
THE COMPANY FOR THE ANNUAL MEETING OF SHAREHOLDERS
P
R
O The undersigned hereby appoints Albert B. Ratner, Samuel H. Miller and
X Nathan Shafran, and each of them, with full power of substitution,
Y as proxies for the undersigned to attend the annual meeting of
shareholders of Forest City Enterprises, Inc. to be held in the auditorium
of the Brooklyn Union Gas Building, One MetroTech Center, Brooklyn, New
York 11201, on June 10, 1997 at 9:00 a.m., eastern daylight saving time,
and at any adjournment thereof, to vote and act with respect to all shares
of Class A Common Stock of the Company which the undersigned would be
entitled to vote, with all the power the undersigned would possess if
present in person, as follows:
(1) The election of three (3) directors, each to hold office until the
next annual shareholders' meeting and until his or her successor
shall be elected and qualified.
Nominees: J Maurice Struchen, Michael P. Esposito, Jr., Joan K.
Shafran
(2) The proposed amendment of Articles of Incorporation of the Company
to increase the number of Class A and Class B common shares which
the Company is authorized to issue as described in the
accompanying proxy statement.
(3) The proposed amendment of Articles of Incorporation of the Company
to increase the number of preferred shares which the Company is
authorized to issue as described in the accompanying proxy
statement.
(4) The ratification of Coopers & Lybrand, L.L.P. as independent
auditors for the Company for the fiscal year ending
January 31, 1998.
(5) In their discretion, to vote upon such other business as may
properly come before the meeting.
PLEASE SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE REVERSE
SIDE. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
YOUR INSTRUCTIONS, OR, IF YOU GIVE NO INSTRUCTIONS, THIS PROXY WILL BE
VOTED FOR ITEM 1, 2, 3 AND 4.
------------
SEE REVERSE
SIDE
------------
<PAGE> 30
<TABLE>
<CAPTION>
<S> <C> <C>
X Please mark your SHARES IN YOUR NAME
votes as in this
example.
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1 2 3
DIRECTORS AUTHORIZE COMMON STOCK AUTHORIZE PREFERRED STOCK
For, except vote withheld from the
following nominee(s):
- ----------------------------------- FOR AGAINST ABSTAIN
4
CHANGE OF
ADDRESS
AUDITORS
ATTEND MEETING
(no ticket required)
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR ITEMS 1, 2, 3 AND 4.
SIGNATURE(S) DATE
----------------------------- -----------------
SIGNATURE(S) DATE
----------------------------- -----------------
</TABLE>
Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
<PAGE> 31
CLASS FOREST CITY ENTERPRISES, INC. CLASS
B PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF B
THE COMPANY FOR THE ANNUAL MEETING OF SHAREHOLDERS
P
R
O The undersigned hereby appoints Albert B. Ratner, Samuel H. Miller and
X Nathan Shafran, and each of them, with full power of substitution,
Y as proxies for the undersigned to attend the annual meeting of
shareholders of Forest City Enterprises, Inc. to be held in the auditorium
of the Brooklyn Union Gas Building, One MetroTech Center, Brooklyn, New
York 11201, on June 10, 1997 at 9:00 a.m., eastern daylight saving time,
and at any adjournment thereof, to vote and act with respect to all shares
of Class B Common Stock of the Company which the undersigned would be
entitled to vote, with all the power the undersigned would possess if
present in person, as follows:
(1) The election of nine (9) directors, each to hold office until the
next annual shareholders' meeting and until his or her successor
shall be elected and qualified.
Nominees: Albert B. Ratner, Samuel H Miller, Charles A. Ratner,
James A. Ratner, Jerry V. Jarrett, Ronald A. Ratner,
Scott S. Cowen, Brian J. Ratner, Deborah Ratner Salzberg
(2) The proposed amendment of Articles of Incorporation of the Company
to increase the number of Class A and Class B common shares which
the Company is authorized to issue as described in the
accompanying proxy statement.
(3) The proposed amendment of Articles of Incorporation of the Company
to increase the number of preferred shares which the Company is
authorized to issue as described in the accompanying proxy
statement.
(4) The ratification of Coopers & Lybrand, L.L.P. as independent
auditors for the Company for the fiscal year ending January 31,
1998.
(5) In their discretion, to vote upon such other business as may
properly come before the meeting.
PLEASE SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE REVERSE
SIDE. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
YOUR INSTRUCTIONS, OR, IF YOU GIVE NO INSTRUCTIONS, THIS PROXY WILL BE
VOTED FOR ITEMS 1, 2, 3 AND 4.
------------
SEE REVERSE
SIDE
------------
<PAGE> 32
<TABLE>
<CAPTION>
<S> <C> <C>
X Please mark your SHARES IN YOUR NAME
votes as in this
example.
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1 2 3
DIRECTORS AUTHORIZE COMMON STOCK AUTHORIZE PREFERRED STOCK
For, except vote withheld from the
following nominee(s):
- ----------------------------------- FOR AGAINST ABSTAIN
4
CHANGE OF
ADDRESS
AUDITORS
ATTEND MEETING
(no ticket required)
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR ITEMS 1, 2, 3 AND 4.
SIGNATURE(S) DATE
----------------------------- -----------------
SIGNATURE(S) DATE
----------------------------- -----------------
</TABLE>
Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
