<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>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] 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)
XXXXXXXXXXXXXXXX
(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: .......
(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 9, 1998
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of Forest
City Enterprises, Inc. will be held in the ballroom of the Ritz-Carlton Hotel,
1515 West Third Street, Cleveland, Ohio 44113, on Tuesday, June 9, 1998 at 2:00
p.m., local 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 a 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 48,000,000
shares to 96,000,000 shares and 18,000,000 shares to 36,000,000 shares,
respectively.
(3) The proposed amendment of the 1994 Stock Option Plan (the "Plan" ) to
increase the number of shares authorized to be issued under the Plan
from 375,000 shares to 1,125,000 shares.
(4) The ratification of Coopers & Lybrand, L.L.P. as independent auditors
for the Company for the fiscal year ending January 31, 1999.
(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, 1998 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 11, 1998
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 on behalf of the Board of Directors of Forest
City Enterprises, Inc. (the "Company") for use at the annual meeting of
shareholders to be held on Tuesday, June 9, 1998 at 2:00 p.m., local time, in
the ballroom of the Ritz-Carlton Hotel, 1515 West Third Street, Cleveland, Ohio
44113. This Proxy Statement and related form of proxy are being first sent to
shareholders on or about May 11, 1998. 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, 1998, the record date ("Record Date") fixed for the
determination of shareholders entitled to vote at the annual meeting, there were
outstanding 9,599,936 shares of Class A Common Stock, par value $.33-1/3 per
share, and 5,389,340 shares of Class B Common Stock, par value $.33-1/3 per
share, of the Company (collectively "Common Stock"). 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. Under New
York Stock Exchange rules, approval of the increase in the number of shares to
be awarded under the 1994 Stock Option Plan will require the affirmative vote of
a majority of the votes represented at the annual meeting in person or by proxy,
provided that the total vote cast (whether "for," "against" or "abstain") on the
proposal represents a majority of the voting power of the outstanding Common
Stock. Abstentions will be counted as cast with respect to a proposal and have
the same effect as votes against the proposed amendments to the Articles of
1
<PAGE> 4
Incorporation, the approval of the increase in the number of shares authorized
under the 1994 Stock Option Plan or the ratification of Coopers & Lybrand,
L.L.P. as the Company's independent auditors for the fiscal year ending January
31, 1999. Broker non-votes will not be counted as cast for any proposal.
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 nominees are
presently directors of the Company.
At March 4, 1998, the Ratner, Miller and Shafran Families, which include members
of the Company's current Board of Directors and certain executive officers
("Family Interests"), owned 74.5% of the Class B Common Stock. RMS, Limited
Partnership ("RMSLP"), which owned 74.3% 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, 1998, members of the Family Interests collectively owned 32.3% of
the Class A Common Stock. The following table includes the shares of Class B
Common Stock held by RMSLP at March 4, 1998, under the Agreement voted by the
general partners of RMSLP 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
<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 Joan K. Shafran 800,968 20.0%
Joseph Shafran
Ruth Miller (Presently vacant) 459,985 11.5%
---------------- --------
Total 4,001,557 100.0%
=====================================================================================================
</TABLE>
* Represents total voting power for the Family Branch
The following table sets forth the beneficial ownership of shares of Class A
Common Stock and Class B Common Stock as of March 4, 1998 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>
HONORARY DIRECTOR
Nathan Honorary Vice Chairman of 1960 307,661 (3) 3.21% 309,911 3.23% 2,250 (4) 0.04%
Shafran the Company since June 1997; Vice (3) (4)
Chairman of the Board of Directors
of the Company prior to June 1997.
Age 84. (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 77. (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. Vice Chairman, Inter-Atlantic 1995 6,250 .07% 6,250 .07% - -
Esposito, Jr.Capital Partners
(investment banking);
Chairman of the Board
of Exel Limited
(insurance); Retired Executive
Vice President, Chief
Control Compliance and
Administrative Officer, The
Chase Manhattan Bank, N.A.
(banking).
Age 58. (a,b)
(1) Joan K. Executive Managing Partner, The 1997 127,263 (5) 1.33% 4,131,070 30.37% 4,003,807 (6) 74.25%
Shafran Berimore Company, LLC (5)(6)
(investments); Principal and
President of the Board,
Do While Studio (art and
technology nonprofit).
Age 50.
(2) Albert B. Co-Chairman of the 1960 366,018 (7) 3.81% 367,544 3.83% 1,526 (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 70. (c)
(2) Samuel H. Co-Chairman of the 1960 510,428 (9) 5.32% 4,511,985 33.18% 4,001,557 (10) 74.21%
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 76. (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>
(2) Charles A. President of the Company since 1972 884,880 (11) 9.22% 4,886,437 35.93% 4,001,557 (12) 74.21%
Ratner June 1993, Chief Executive (11)(12)
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 56. (c)
(2) James A. Executive Vice President 1984 998,740 (13) 10.41% 998,740 10.41% - (14) -
Ratner of the Company and (13)(14)
President of Forest City
Rental Properties
Corporation,
a subsidiary of the
Company.
Age 53. (c)
(2) Jerry V. Retired Chairman 1984 - - - - - -
Jarrett and Chief Executive
Officer of Ameritrust
Corporation (banking);
Director of International
Total Services (services)
Age 66. (a,b)
(2) Ronald A. Executive Vice President 1985 427,475 (15) 4.45% 4,429,032 32.57% 4,001,557 (16) 74.21%
Ratner of the Company and (15)(16)
President of Forest
City Residential Group, Inc.,
a subsidiary of the
Company. Age 51. (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) and
American Greetings
Corporation (greeting cards).
Age 51. (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 68,207 (17) 0.71% 4,069,764 29.93% 4,001,557 (18) 74.21%
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 40. (c)
(2) Deborah Ratner Officer of various 1995 39,491 (19) 0.41% 4,041,048 29.72% 4,001,557 (20) 74.21%
Salzberg subsidiaries of the (19)(20)
Company.
Age 44. (c)
OTHER NAMED EXECUTIVE OFFICER
Thomas G. Senior Vice - - 224 0.00% 224 0.00%
Smith President, Chief
Financial Officer and
Secretary of the
Company. Director
of Cleveland Region
Advisory Board, First
Merit Bank (banking).
Age 57. (c,d)
ALL DIRECTORS, NOMINEES AND EXECUTIVE
OFFICERS AS A GROUP (18 in number) 2,538,954 (21) 26.46% 6,545,411 48.12% 4,006,457 (22) 74.3%
(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 34,559 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 34,559 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 91,579 shares held in a trust for
which she is trustee and has shared power of voting and disposition.
(6) Includes 2,250 shares of Class B Common Stock held in a partnership in
which Joan K. Shafran has shared power of voting and disposition. Ms.
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 above.
(7) Albert B. Ratner has beneficial ownership of 189,170 shares of Class A
Common Stock held in trusts for which he is trustee and has shared power
of voting and disposition and 90,301 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 771,093 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, of which 306,174 shares are
held in the Albert Ratner Family Branch of RMSLP, 363,578 shares are held
in the Max Ratner Family Branch of RMSLP and 138,241 shares are held in
the Ruth Miller 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 677,504 shares of Class A
Common Stock held in trusts for which he is trustee and has shared power
of voting and disposition and 69,266 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 949,708 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, of which 585,531 shares are
held in the Max Ratner Family Branch of RMSLP, 187,023 shares are held in
the Albert Ratner Family Branch of RMSLP and 244,220 shares are held in
the Ruth Miller 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 2,470 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 25,570 shares of Class
A Common Stock held in trusts 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) These shares of Class B Common Stock represent all the shares in which
beneficial ownership is claimed by these persons. Included in this total
are 4,001,557 shares of Class B Common Stock that are held by RMSLP.
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
Each Director who was not an officer of the Company received a fee of $5,000 for
attending each regular Board of Directors meeting during the fiscal year ended
January 31,1998. Each Director received an additional fee for attending any
committee meeting and for acting as chairman for any committee meeting. During
fiscal 1997, Messrs. Cowen, Esposito, Jarrett and Struchen received $3,000,
$2,000, $3,000 and $2,000, respectively, for attending or acting as chairman for
such meetings. In addition, Messrs. Esposito, Jarrett and Struchen received
$7,000, $6,000 and $26,000, respectively, for attending various operating,
strategic planning and other special meetings in their capacity as a Director of
the Company. 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, 1998 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 Aand B Class B
Common Percent Common Percent Common Percent
Name and Address Stock (a) of Class (a) Stock (b) of Class (b) Stock of Class
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Private Capital Management, Inc. and 8 25,573 (1)(5) 8.61% 947,873 (1)(5) 9.75% 121,800 (1)(5) 2.26%
Bruce S. Sherman
3003 Tamiami Trail North
Naples, FL 33940
Southeast Asset Management, Inc. and 746,400 (2)(5) 7.78% 834,289 (2)(5) 8.62% 87,889 (2)(5) 1.63%
Longleaf Partners Realty Fund
610 Poplar Ave., Suite 900
Memphis, TN 38119
Wanger Asset Management, L.P,. 369,480 (3)(5) 3.85% 604,460 (3)(5) 6.15% 234,980 (3)(5) 4.35%
Wanger Asset Management, Ltd.,
Ralph Wanger and Acorn Investment
Trust, Series Designated Acorn Fund
227 West Monroe, Suite 3000
Chicago, IL 60606
William Harris Investors, Inc. 319,642 (4)(5) 3.33% 508,807 (4)(5) 5.20% 189,165 (4)(5) 3.51%
2 North LaSalle Street, Suite 400
Chicago, IL 60602-3703
Joseph Shafran 126,138 (6) 1.31% 4,129,945 (6) 30.37% 4,003,807 (6) 74.25%
Paran Management Company
13212 Shaker Boulevard, Suite 100
Cleveland, OH 44120
Ratner, Miller & Shafran Family
Interests 3,096,128 (7) 32.26% 7,114,136 (7) 52.25% 4,018,008 (7) 74.51%
1600 Terminal Tower
50 Public Square
Cleveland, OH 44113
</TABLE>
10
<PAGE> 13
(1) 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 the securities in
the table above 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 825,573 shares
beneficially owned by PCM. Mr. Michael J. Seaman, an employee of PCM or
its affiliates, owns 4,550 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.
(2) Southeastern Asset Management, Inc. (SAM), a Tennessee corporation, is an
investment advisor registered under Section 203 of the Investment Advisers
Act of 1940. Longleaf Partners Realty Fund (LPRF) is a series of Longleaf
Partners Fund Trust, a Massachusetts business trust. O. Mason Hawkins is a
U.S. citizen. SAM is the beneficial owner of the securities included in
the table above because of its advisory relationship with the persons
owning the securities. The Class A Common Stock included in the table
above includes 127,300 shares held in an account over which SAM and LPRF
have no voting or dispositive control and which LPRF does not claim as
beneficially owned. Mr. O. Mason Hawkins, Chairman of the Board and Chief
Executive Officer of SAM could be deemed to be a controlling person of SAM
as a result of his official position with or ownership of its voting
securities. The existence of such control is expressly disclaimed. Mr.
Hawkins does not own, directly or indirectly, any securities included in
the table above.
(3) 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.
(4) 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 because of its
advisory relationship with the persons owning the securities.
(5) The number of shares of capital stock beneficially owned represent shares
beneficially owned at December 31, 1997 as disclosed in Form 13G filed by
the Principal Security Holder named in the table.
(6) Joseph Shafran is the son of Nathan Shafran and brother of Joan K.
Shafran. Included in the Class A Common Stock are 34,559 shares held in a
partnership in which Joseph Shafran has shared power of voting and
disposition. Mr. Shafran has beneficial ownership of 91,579 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
11
<PAGE> 14
B Common Stock reflects his status as a general partner of RMSLP. See
discussion of RMSLP under "Election of Directors."
(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 74.21% of the Class B
Common Stock outstanding at March 4, 1998.
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 1997 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. Two Compensation Committee meetings were held during the 1997
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 1997.
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 that 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.
The 1994 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,
13
<PAGE> 16
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. The Compensation Committee
has determined that the number of shares currently available for award under
the 1994 Stock Option Plan is not adequate to fulfill the need for stock-based
compensation and has recommended the increase in shares for which shareholder
approval is being sought.
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 is unlikely to 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, effective February 1, 1997. The Agreement provides for
an annual salary of $400,000. The contract was initially for a one year term but
is renewable annually. In reviewing the Chief Executive Officer's compensation,
the Compensation Committee feels one of the most important indicators of
performance on his part is his ability to understand and react to changing
conditions affecting our industry and to adjust strategic directions and
tactical plans to be responsive. Improving shareholder value and development of
management succession plans also rank high on the list of performance
indicators.
Jerry V. Jarrett, Chairman Scott S. Cowen Michael P. Esposito, Jr.
J Maurice Struchen
14
<PAGE> 17
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to, earned by, or paid
to the Company's chief executive officer and the five other most highly
compensated named executive officers.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Long Term
Compensation
Awards
-------------
Annual Compensation Securities
----------------------- Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Options (#) Compensation ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles A. Ratner, 1997 $ 398,543 $ - - $ 125,562
President and Chief 1996 324,986 - 14,400 137,726
Executive Officer 1995 324,986 - - 11,551
Albert B. Ratner, Co-Chairman 1997 449,679 - - 143,466
of the Board of Directors 1996 449,986 - - 159,634
1995 449,987 - - 12,550
Samuel H. Miller, Co-Chairman 1997 399,986 - - 12,128
of the Board of Directors 1996 385,121 109,000 - 12,103
and Treasurer 1995 384,986 60,000 - 12,103
Thomas G. Smith, 1997 309,800 140,000 - 51,900
Senior Vice President, 1996 310,804 100,000 7,200 51,875
Chief Financial Officer 1995 287,005 100,000 - 51,875
and Secretary
Ronald A. Ratner 1997 323,543 - - 8,554
Executive Vice President 1996 249,985 - 9,000 6,323
1995 249,985 - - 6,323
James A. Ratner 1997 323,543 - - 8,554
Executive Vice President 1996 249,985 - 9,000 6,551
1995 249,985 - - 6,551
</TABLE>
Amounts reported as "All Other Compensation" in 1997 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 $7,000 and
James A. Ratner $7,000; (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 $866, Albert B. Ratner $2,712, Samuel H. Miller $1,128, Thomas G. Smith
$900, Ronald A. Ratner $554 and James A. Ratner, $554; (iv) the Company's
matching contribution to the 40l(k) plan as follows: Charles A. Ratner $1,000,
Albert B. Ratner, $1,000, Samuel H. Miller $1,000, Thomas G. Smith $1,000,
Ronald A. Ratner $1,000 and James A. Ratner $1,000; 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
15
<PAGE> 18
named 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 $113,696 and Albert B. Ratner $129,754.
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 and
February 1, 1997, respectively, which provide for an annual salary of $450,000
and $400,000, 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, 1997 providing for annual salaries of $325,000
each. These contracts, which were initially for a term of one year, are
renewable annually.
The employment agreements for Albert Ratner, Samuel Miller, Charles Ratner,
James Ratner and Ronald Ratner further provide that upon the death of such
officer his beneficiary will receive an annual payment for five years equal to
one-half of his average annual contractual salary and bonus, if any, for the
five calendar years immediately preceding his death.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
-----------------------------------------------
The following table sets forth information with respect to the six executive
officers named in the Summary of Compensation Table concerning the number and
value of stock options to purchase Class A Common Stock outstanding at the end
of fiscal 1997. No stock options were granted during 1997.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares FY-End (#) FY-End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles A. Ratner - - 0/14,400 $0/ $ 357,264
Albert B. Ratner - - - -
Samuel H. Miller - - - -
Thomas G. Smith - - 0/ 7,200 $0/ $ 178,632
Ronald A. Ratner - - 0/ 9,000 $0/ $ 223,290
James A. Ratner - - 0/ 9,000 $0/ $ 223,290
</TABLE>
The closing price of the Company's Class A Common Stock on January 31, 1998 was
$53.56 per share.
16
<PAGE> 19
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 500) and the Dow Jones Real Estate Investment Index. The cumulative total
return is based on a $100 investment on January 31, 1993 and the subsequent
change in market prices of the securities at each respective fiscal year end. It
also assumes that dividends were reinvested quarterly.
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
JAN-93 JAN-94 JAN-95 JAN-96 JAN-97 JAN-98
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FCEA $100 $150 $116 $128 $239 $314
- -------------------------------------------------------------------------------
FCEB $100 $165 $119 $127 $237 $315
- -------------------------------------------------------------------------------
S&P 500 $100 $113 $113 $157 $199 $252
- -------------------------------------------------------------------------------
Dow Jones Real Estate
Investment Index $100 $118 $108 $133 $180 $210
- -------------------------------------------------------------------------------
</TABLE>
TRANSACTIONS WITH AFFILIATED PERSONS
The Company paid approximately $193,000 as total compensation during 1997 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) 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), the four children of Ruth Miller (deceased
sister of Albert Ratner) and Samuel H. Miller (a Co-Chairman of the Company's
Board of Directors) each holding a 2.75% interest, Samuel H. Miller as Trustee
(14.0%), Nathan Shafran (an Honorary Director of the Company) as Trustee (3.6%)
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
17
<PAGE> 20
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 repurchased, 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 and Ruth Miller, who died on November 26, 1996. The
repurchase provided 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 $2,836,000 plus 8% interest from May 7, 1997 to August 18, 1997, less any
dividend paid between those two dates for a total of $2,896,000. The transfer of
the shares and the payment for the same occurred 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,
Deborah Ratner Salzberg, Vice President of Forest City Residential, Inc. (a
subsidiary of the Company) and Director, James A. Ratner, Executive Vice
President, Director and President of Forest City Rental Properties Corporation
and Nathan Shafran, Honorary 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. The amount outstanding against these credit lines and
mortgages as of January 31, 1998 was $84,529,000. The Company has a real estate
mortgage of $4,955,000 with Chase Manhattan Bank, N.A. of which Michael P.
Esposito, Jr., a Director of the Company, is a retired Executive Vice President
- - Chief Control Compliance and Administrative Officer.
18
<PAGE> 21
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 1997
and the net investment by Harris remaining at the end of 1997 are as shown
below:
<TABLE>
<CAPTION>
Harris Forest City
Partnership Partnership Residential 1997 Distribution Harris Net Investment
Interest Interest Property to Harris at 12/31/97
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
.5% .5% Lenox Club $ 0 $ 650,347
Arlington, VA
.5% .5% Lenox Park 0 55,312
Silver Spring, MD
.5% .5% Pavilion 1,053,500 (4,115,885)
Chicago, IL
</TABLE>
Granite Development Partners, L.P. (Granite) 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 $5,507,000 investment in partnership units at
the end of 1997. No distributions were paid during 1997 on any Granite
partnership units. Interest payments of $453,236 were made by Granite to Harris
during 1997.
In 1997, the Company's Silver Lakes investment was restructured. Under the
agreement, Harris is a passive partner and the Forest City partner has
management control. Harris is entitled to receive monthly distributions of
$698,042 each month until a total of $16,753,000 has been distributed to Harris.
At January 31, 1998, 15 payments totaling $10,470,630 (including retroactive
payments) had been made to Harris. The Company also purchased from Harris a note
payable to Harris for its face amount of $856,227 payable at $74,080 per month.
At December 31, 1997, Harris's partnership interest in Silver Lakes was 45% and
net investment was $(2,863,630). The Forest City partner's partnership interest
in Silver Lakes was 45%.
During 1997, the Company acquired 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. At January 31, 1998, $284,589 of principal was
outstanding on the note.
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 New York 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
19
<PAGE> 22
Reporting Persons that no Forms 5 were required for those persons, the Company
believes that during 1997 all filing requirements applicable to Reporting
Persons were complied with except for the following: Joseph M.Shafran
inadvertently filed two Forms 4 late to report sales of shares of stock.
PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The authorized capital stock of the Company consists of 5,000,000 shares of
preferred stock without par value (none issued at April 15, 1998) and 66,000,000
shares of Common Stock with a par value of $.33 1/3 divided into two classes:
(1) 48,000,000 shares of Class A Common Stock (9,913,586 shares issued and
9,599,936 shares outstanding at April 15, 1998) and (2) 18,000,000 shares of
Class B Common Stock (5,528,390 shares issued and 5,389,340 shares outstanding
at April 15, 1998).
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 48,000,000 shares to 96,000,000 shares and Class B Common Stock from
18,000,000 shares to 36,000,000 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 137,000,000 shares, consisting of 96,000,000 shares
of Class A Common Stock with a par value of $.33 1/3 per share
(hereinafter designated "Class A Common Stock"), 36,000,000 shares of
Class B Common Stock with a par value of $.33 1/3 per share
(hereinafter designated "Class B Common Stock"), and 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 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 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,
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 and that such vote will be
sufficient to approve such proposal.
20
<PAGE> 23
PROPOSAL TO INCREASE THE NUMBER OF SHARES TO BE AWARDED UNDER THE 1994 STOCK
OPTION PLAN
The 1994 Stock Option Plan (the "Plan") currently provides that the aggregate
number of shares of the Company's Class A Common Stock that may be awarded as
stock options during the term of the Plan may not exceed 250,000 authorized but
unissued shares or shares held by the Company in its Treasury, subject to
certain adjustments described in the Plan (the "Award Shares"). The February 17,
1997 three-for-two stock split adjusted the number of Award Shares to 375,000.
Total options granted under the Plan, net of forfeitures, as of April 15, 1998
were 368,200, including 192,700 options granted in March 1998. Shares available
for award under the Plan as of April 15, 1998 total 6,800.
The Board of Directors have recommended the adoption of an amendment to the Plan
to increase the number of Award Shares by 750,000, thereby allowing for a total
of 1,125,000 shares to be awarded as stock options during the term of the Plan.
To effect this change, the 1994 Stock Option Plan would be amended as set forth
in Exhibit A of this Proxy Statement. The following is a summary of significant
Plan features, as proposed.
SUMMARY OF 1994 PLAN, AS AMENDED.
ADMINISTRATION. The 1994 Plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors. Within the limits of the Plan, the
Committee is authorized to interpret its provisions and to determine those
employees who shall receive awards, the number of shares subject to each grant,
the form of the awards, and all applicable limitations and terms under which the
awards are made. In making awards, the Committee will take into consideration
the performance of each employee.
ELIGIBILITY. Stock options under the Plan may be awarded to key employees as
determined by the Committee, based upon each employee's duties and performance,
including officers, senior executives, employee directors and other employees
who are members of the management team. The Committee anticipates that
approximately 75 such key employees will be eligible to participate in the Plan.
SHARE AWARDS UNDER THE PLAN. Shares may be awarded under the Plan in the form of
either incentive stock options or nonqualified stock options. The aggregate
number of shares which may be awarded during the term of the Plan is 1,125,000
shares, subject to adjustments under the Plan. The maximum number of shares
which may be awarded to any employee during any calendar year is 37,500 shares.
Shares awarded may be either authorized but unissued shares or shares held in
the Company's treasury.
TERMS AND CONDITIONS. Stock options granted under the Plan will be covered by an
agreement between the Company and the Grantee in a form approved by the
Committee and delivered by authorized officers of the Company. Grantees may
exercise their option during the term of the grant (maximum of ten years). The
exercise price for options will be at least equal to the fair market value on
the date of the grant. In the event that incentive stock options are awarded to
a Grantee who actually or constructively owns more than ten percent of the
voting power of all classes of stock, the exercise price will be at least 110
percent of the fair market value on the date of the grant. No stock option
awarded under the Plan may be exercised during the first year following its
grant.
DURATION. The Plan will allow the granting of stock options for a period of ten
years from the date the Plan is adopted by the Board and will remain in effect
until all stock options awarded under the Plan have been exercised, surrendered
or expired.
TERMINATION OF EMPLOYMENT. If a Grantee's employment with the Company terminates
by reason of death or disability, the option remains exercisable in accordance
with its terms and may be exercised by the Grantee or his legal representative.
If the Grantee's employment terminates by reason of retirement, the option
remains exercisable for the balance of its term or three months, whichever is a
shorter period. If the Grantee's employment terminates for any reason other than
death, disability or
21
<PAGE> 24
retirement, all rights to exercise will terminate and be forfeited on the date
of termination of employment.
ADJUSTMENTS IN THE EVENT OF CHANGE IN COMMON STOCK. In the event of any change
in the common stock of the Company by reason of a stock dividend,
recapitalization, reorganization, merger, consolidation, combination, split-up
or exchange of shares, or other event with a similar effect, the number of
shares which may be awarded thereafter, the number and kinds of stock and the
option purchase price will be adjusted by the Committee consistent with such
changes.
MERGER OF OTHER REORGANIZATION. In the event of any merger, consolidation or
other reorganization in which the Company is not the surviving or continuing
corporation, all options that are outstanding on the date of such event shall be
assumed by the surviving or continuing corporation.
AMENDMENT AND TERMINATION. The Board may, without further action by the
shareholders, from time to time, amend, alter, suspend or terminate the Plan,
except as otherwise required by applicable federal securities' laws.
ACCOUNTING TREATMENT. The Company follows Accounting Priciples Board Opinion
(APBO) No. 25, "Accounting for Stock Issued to Employees" and related
Interpretations to account for stock-based compensation. As such, compensation
cost for stock options is measured as the excess, if any, of the quoted market
price of the Company's stock at the date of grant over the amount the employee
is required to pay for the stock.
FEDERAL INCOME TAX ASPECTS. The following is only a brief summary of the federal
income tax aspects of awards made under the 1994 Plan based upon the federal
income tax laws in effect on this date. This summary is not intended to be
exhaustive, and does not describe a number of special tax rules, including the
alternative minimum tax, state or local tax laws, and various elections which
may be applicable under certain circumstances.
A Grantee who has been awarded a stock option under the 1994 Plan will
not realize taxable income on the date of grant, and the Company will not be
entitled to a deduction at that time. A Grantee who exercises an incentive stock
option (within the meaning of Section 422A of the Internal Revenue Code) will
not be subject to taxation at the time of exercise nor will the Company be
entitled to a deduction. However, a disposition of the purchased shares after
the expiration of the required holding period (one year after exercise and two
years after grant) will result in long-term capital gains in the year of
disposition on the spread between the option price and the fair market value on
the date of sale, and the Company will not be entitled to a deduction for
federal income tax propose. A disposition of the purchased shares prior to the
expiration of the applicable holding periods will subject the Grantee to
taxation at ordinary income rates in the year of disposition and the Company
will be entitled to a corresponding deduction for federal tax propose.
A Grantee who exercises a nonqualified stock option will realize
ordinary income in an amount measured by the spread between the option price and
the fair market value on the date of exercise, and the Company will realize a
corresponding deduction for federal tax purposes. In the year of disposition,
the Grantee will be subject to long-term capital gains rates on any gain over
the fair market value on the date of exercise.
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 the 1994 Stock Option Plan. 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 and that such vote will be
sufficient to approve such proposal.
22
<PAGE> 25
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, 1999.
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, 1999. 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 1999 ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's 1999 annual
meeting of shareholders must be received by the Company at the address below on
or before January 4, 1999 for inclusion in the Company's proxy statement and
form of proxy relating to the 1999 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.
23
<PAGE> 26
Written requests for such report should be directed to :
Investor Relations
Forest City Enterprises, Inc.
1100 Terminal Tower
50 Public Square
Cleveland, Ohio 44113
www.fceinc.com
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 11, 1998
24
<PAGE> 27
EXHIBIT A
FOREST CITY ENTERPRISES, INC.
1994 STOCK OPTION PLAN
1. PURPOSE
The purpose of the 1994 Stock Option Plan (the "Plan") shall be to enhance
the retention and motivation of key employees including officers, executives
and other employees who are members of the Company's management team and who,
in the judgement of the Committee, can contribute materially to the Company's
success by awarding these key employees the opportunity to receive stock
options to purchase shares of the Company's Class A common stock. The Plan is
also intended to foster within these key employees an identification with
ownership and shareholder interests.
2. DEFINITIONS
Unless the context of the applicable section clearly indicates otherwise, the
terms below, when used within the Plan, shall have the meaning set forth in
this Section 2.
A. Beneficiary means the person or persons designated in writing by the
Grantee or, in the absence of such a designation or if the designated
person or persons predecease the Grantee, the Grantee's beneficiary
shall be the person or persons who acquire the right to exercise an
option by bequest or inheritance.
B. Board of Directors or Board means the Board of Directors of the Company.
C. Code means the Internal Revenue Code of 1986, as amended from time to
time.
D. Company means Forest City Enterprises, Inc.
E. Compensation Committee or Committee means the Compensation Committee of
the Board of Directors.
F. Disability means a disability as defined in the Company's Long Term
Disability Plan, as amended from time to time.
G. Grantee means a key employee to whom an Option has been granted under
the Plan.
H. Incentive Stock Options means options to purchase shares of stock within
the meaning of Section 422(b) of the Code.
I. Nonqualified Stock Options means options which do not qualify as
Incentive Stock Options within the meaning of Section 422(b) of the
Code.
J. Option means an option to purchase a share or shares of the Company's
par value common stock.
K. Plan means the 1994 Stock Option Plan.
L. Retirement means retirement pursuant to the Company's retirement
policies.
M. Shares means shares of the Company's par Class A common stock.
N. "Subsidiary" and "Subsidiaries" mean a corporation or corporations of
which outstanding shares representing 50% or more of the combined voting
power of such corporation or corporations are owned directly or
indirectly by the Company.
O. Term of Exercise means the time period during which a particular Option
may be exercised in accordance with Section 6(G) of this Plan.
P. Wherever used herein, unless indicated otherwise, words in the
masculine form shall be deemed to refer to females as well as to
males.
3. ADMINISTRATION
A. Compensation Committee
The Plan shall be administered by the Compensation Committee of the
Board of Directors.
B. Determinations
Within the limits of the provisions of the Plan, the Committee shall
have the plenary authority to determine (i) the key employees to whom
awards hereunder shall be granted, (ii) the number of shares subject to
each option; provided that, if the award is an incentive stock option,
the aggregate fair market value of
25
<PAGE> 28
the shares (as determined at the time the option is granted) which
become exercisable in any calendar year for any employee shall not
exceed $100,000, (iii) the form (incentive stock options or nonqualified
stock options) and amount of each award granted, (iv) the provisions of
each Option Agreement, and (v) the limitations, restrictions and
conditions applicable to any such award. In making such awards the
Committee shall take into consideration the performance of each eligible
employee. The determinations of the Committee on all matters regarding
the Plan shall be final and conclusive.
C. Interpretation
Subject to the provisions of the Plan, the Committee may interpret the
Plan, and prescribe, amend and rescind rules and regulations relating to
it. The interpretation of any provision of the Plan by the Committee
shall be final and conclusive.
4. ELIGIBILITY
Stock options may be granted under the Plan to key employees of the Company,
as determined by the Committee, based upon the Committee's evaluation of
employees' duties and their overall performance including current and
potential contributions to the Company's success. Generally, this group of
eligible key employees includes officers, senior executives, directors who
are also employees, and any other members of the Company's management team
deemed appropriate by the Committee. All determinations by the Committee as
to the identity of persons eligible to be granted awards hereunder shall be
conclusive.
5. SHARE AWARDS UNDER THE PLAN
A. Form
Awards under the Plan shall be granted in the form of incentive stock
options or nonqualified stock options as herein defined in Section 2.
B. Shares Subject to the Plan
The aggregate number of shares that may be awarded as stock options
during the term of the plan may not exceed 1,125,000 authorized but
unissued shares or shares held by the Company in its Treasury, subject
to adjustments described in section 9-A. The aggregate number of shares
which may be awarded to an individual participant during the term of the
plan is 37,500 shares, subject to adjustments described in section 9-A.
If any stock option granted under the Plan shall terminate, expire or,
with the consent of the grantee, be canceled as to any shares, such
shares shall again be available for grant under the Plan.
6. TERMS AND CONDITIONS OF AWARDS
Stock options granted under the Plan shall be in such form and upon such
terms and conditions as the Committee shall determine from time to time,
subject to the following:
A. Stock Option Agreement
Each stock option granted under the Plan shall be evidenced by an
agreement between the Company and the Grantee, in a form approved by the
Committee, which has been executed and delivered. Appropriate officers
of the Company are hereby authorized to execute and deliver these
agreements in the name of the Company as directed from time to time by
the Committee.
B. Exercise Price for Stock Options
(1) With respect to any non-qualified stock options the exercise price
to be paid by the Grantee to the Company for each share shall be at
least equal to the fair market value of a share on the date the option
is granted.
(2) With respect to any incentive stock option awarded to a Grantee who,
on the date of the grant, owns ten percent or less of the total combined
voting power of all classes of stock of the Company, the exercise price
to be paid by the Grantee to the Company for each share shall be at
least equal to the fair market value of a share on the date the option
is granted.
(3) With respect to any incentive stock option awarded to a Grantee who,
on the date of the grant, owns actually or constructively more than ten
percent of the total combined voting power of all classes of
26
<PAGE> 29
stock of the Company, the exercise price to be paid by the Grantee to
the Company for each share shall be not be less than 110% of the fair
market value of a share on the date the incentive stock option award is
granted. At no time may an option be granted under the plan if the
option price per share is less than the par value of the stock.
D. Payment
At the time that a stock option granted under the Plan, or any part
thereof, is exercised, payment for the stock issuable thereupon shall be
made in full in cash, money order, certified check, cashier's check, or
in shares of stock currently owned by the key employee which have
satisfied any required holding period and are valued at the fair market
value of the shares on the date of exercise. As soon as reasonably
possible following such exercise of a stock option, a certificate
representing the shares of stock purchased, registered in the name of
the key employee (Grantee), shall be delivered to same.
E. Cashless Exercise
Options may be exercised in whole or in part upon delivery to the
Secretary of the Company of an irrevocable written notice of exercise.
The date on which such notice is received by the Secretary shall be the
date of exercise of the option, provided that within five business days
of the delivery of such notice the funds to pay for exercise of the
option are delivered to the Company by a broker acting on behalf of the
optionee either in connection with the sale of the shares underlying the
option or in connection with the making of a margin loan to the optionee
to enable payment of the exercise price of the option. In connection
with the foregoing, the Company will provide a copy of the notice of
exercise of the option to the aforesaid broker upon receipt by the
Secretary of such notice and will deliver to such broker, within five
business days of the delivery of such notice to the Company, a
certificate or certificates (as requested by the broker) representing
the number of shares underlying the option that have been sold by such
broker for the optionee.
F. Term of Exercise
The term during which each stock option granted under the Plan may be
exercised shall be as provided within the fully executed and delivered
Option Agreement. In no event shall the term during which an option may
be exercised exceed ten years from the date upon which such option was
granted or, if the grantee on the date of grant owns more than 10% of
the total combined voting power of all classes of stock of the Company
and receives an incentive stock option, five years from the date on
which such incentive stock option was granted.
G. Stock Option Vesting
No stock options awarded under the Plan may be exercised during the
first year following its grant.
H. Fair Market Value
Fair Market Value shall be determined by the price per share at the
close of business on the date on which the stock option grant is awarded
or, if the grant date is not a regular business day, by the price per
share on the next regular business day following the date of the grant.
7. DURATION
With respect to any stock option awarded to a Grantee, such award shall be
granted within a period of 10 years from the date on which the Plan is
adopted or the date on which the Plan is approved by shareholders, whichever
is earlier. The Plan shall remain in effect thereafter until all stock
options awarded under the Plan have been exercised, surrendered or expired.
8. EXERCISE IN THE EVENT OF DEATH OR OTHER TERMINATION OF EMPLOYMENT
A. Death
If a Grantee shall die while an employee of the Company or during a
period of disability, the option can be exercised by his legal
representative at any time during its original term.
27
<PAGE> 30
B. Disability
If a Grantee's employment by the Company shall terminate because of
Disability, he may exercise his options to the extent that he was
entitled to do so on the date of his termination of employment, at any
time, but not later than the expiration date specified in the Option
Agreement by which such award was granted.
C. Retirement
If a Grantee's employment shall terminate (i) by reason of his
retirement in accordance with the Company's retirement plan or (ii) with
the consent of the Committee, his right to exercise shall terminate and
be forfeited on the expiration date specified in the Option Agreement by
which such award was granted, or three months after termination of
employment, whichever date is earlier.
D. Other
If a Grantee's employment shall terminate for any reason other than
death, disability or retirement as provided in Sections 8(A) through
8(C) of the Plan herein, all rights to exercise his option shall
terminate and be forfeited on the date of such termination of
employment.
9. MISCELLANEOUS
A. Adjustments in the Event of Change in Common Stock
In the event of any change in the common stock of the Company by reason
of a stock dividend, recapitalization, reorganization, merger,
consolidation, combination, split-up, or exchange of shares, or of any
similar change affecting the common stock, the number and kind of shares
which thereafter may be awarded under the Plan and the number and kind
of shares subject to option in outstanding agreements, and the option
purchase price per share thereof shall be appropriately adjusted
consistent with such change in such manner as the Committee may deem
equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, eligible key employees.
B. Non-Transferability and Non-Assignability
No option granted under the Plan shall be transferable by an employee
otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code
or Title I of the Employee Retirement Income Security Act, or the rules
thereunder. An option may be exercised only by the optionee or grantee
thereof or his guardian or legal representative; provided that Incentive
Stock Options may be exercised by such guardian or legal representative
only if permitted by the Code and any regulations promulgated
thereunder.
C. Investment Representation
Each stock option agreement may provide that, upon demand by the
Committee, the Grantee shall deliver to the Committee at the time of
exercise of an option or portion thereof, a written representation that
the shares to be acquired upon such exercise are to be acquired for
investment and not for resale or with a view to the distribution
thereof.
D. Rights as a Shareholder
Any eligible key employee who receives a stock option under the Plan
shall have no rights to the underlying shares until the date of the
issuance of a stock certificate to him, and only after such shares are
fully paid. No adjustment will be made for dividends or other rights for
which the record date is prior to the date such stock certificate is
issued.
E. No Obligation to Exercise
The granting of a stock option under the Plan shall impose no obligation
upon an eligible key employee to exercise such option.
F. Incentive Stock Options
Each option agreement which provides for the grant of an incentive stock
option to an eligible key employee shall contain such terms and
provisions as the Committee may determine to be necessary or desirable
in order to qualify such option as an incentive stock option within the
meaning of Section
28
<PAGE> 31
422(b) of the Internal Revenue Code of 1986, as amended from time to
time.
G. Application of Proceeds
The proceeds received by the Company from the sale of common stock under
the Plan shall be used for general corporate purposes.
H. Withholding Taxes
Upon the issuance of any stock pursuant to the exercise of a stock
option, the Company shall have the right to require the Grantee to remit
to the Company an amount payable in cash, money order, certified check
or cashier's check that is sufficient to satisfy all federal, state and
local withholding tax requirements prior to the delivery of any
certificate(s) for shares of common stock. The Committee, in its sole
discretion, may permit the Grantee to pay such taxes through the
withholding of shares otherwise deliverable to such Grantee in
connection with such exercise or the delivery to the Company of shares
otherwise acquired by the Grantee.
I. Right to Terminate Employment
Nothing in the Plan or any agreement entered into pursuant to the Plan
shall confer upon any key employee the right to continue in the
employment of the Company or affect any right which the Company has to
terminate any key employee.
J. Governing Law
The Plan shall be construed and its provisions enforced and administered
in accordance with the laws of Ohio, except to the extent that such laws
may be superseded by any federal laws.
K. Awards Not Treated as Compensation Under Benefit Plans
No awards under the Plan shall be considered as compensation under any
employee benefit plan of the Company, except as specifically provided in
any such plan or as otherwise determined by the Board of Directors.
L. Effect of Merger or Other Reorganization
In the event that the Corporation shall be the surviving Corporation in
a merger, consolidation or other reorganization, stock options shall
extend to the new Corporation to the same extent that they applied at
the former Corporation. In the event that the Corporation shall not be
the surviving Corporation in a merger or other reorganization, any
Participant to whom a stock option has been granted under the Plan shall
retain the right to receive the value of such stock option awards,
subject to all applicable Plan provisions and restrictions, for awards
granted prior to the effective date of such merger or other
reorganization.
M. Elimination of Fractional Shares
If, under any provision of the Plan or formula used to calculate award
levels of stock options, the number so computed is not a whole number,
such number of shares shall be rounded down to the next whole number.
10. EFFECTIVE DATE/APPROVAL BY SHAREHOLDERS
The effective date of the Plan shall be the date on which it is adopted by
the Board, subject to approval of the Plan by the Company's shareholders..
The Plan and any grants made as a part of the Plan shall be null and void
and of no effect if such condition is not fulfilled.
11. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, without further action by the shareholders, from time to
time, amend, alter, suspend or terminate the Plan, except as otherwise
required by applicable federal securities laws.
29
<PAGE> 32
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
X
Y
The undersigned hereby appoints Albert B. Ratner and Samuel H. Miller, and each
of them, with full power of substitution, as proxies for the undersigned to
attend the annual meeting of shareholders of Forest City Enterprises, Inc. to be
held in the Ballroom of the Ritz-Carlton Hotel, 1515 West Third Street,
Cleveland, Ohio 44113, on June 9, 1998 at 2:00 p.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 the 1994 Stock Option Plan to increase the
number of shares authorized to be issued under the Plan 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 31,1999.
(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> 33
[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 OPTION PLAN
For, except vote
withheld from
the following
nominee(s):
- ----------------
FOR AGAINST ABSTAIN
4 [ ] [ ] [ ]
CHANGE OF [ ] AUDITORS
ADDRESS
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
---------------------------------- ---------
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> 34
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
X
Y
The undersigned hereby appoints Albert B. Ratner and Samuel H. Miller, and each
of them, with full power of substitution, as proxies for the undersigned to
attend the annual meeting of shareholders of Forest City Enterprises, Inc. to be
held in the Ballroom of the Ritz-Carlton Hotel, 1515 West Third Street,
Cleveland, Ohio 44113 on June 9, 1998 at 2:00 p.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 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 the 1994 Stock Option Plan to increase the
number of shares authorized to be issued under the Plan 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, 1999.
(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> 35
[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 OPTION PLAN
For, except vote FOR AGAINST ABSTAIN
withheld from the
following nominee(s): 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
----------------------------- ----------------
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.
