<PAGE>
Proxy materials filed with the Securities and Exchange Commission must include a
cover page in the form indicated below in Schedule 14A and the appropriate box
on the cover page must be checked to indicate the type of filing.
Please mark up the template below for your filing.
- --------------------------------------------------------------------------------
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:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
The Rouse Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
The Rouse Company
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No filing fee needed.
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- ---------
*Set forth the amount on which the filing is calculated and state how it was
determined.
[_] 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:
Notes:
<PAGE>
THE ROUSE COMPANY
10275 LITTLE PATUXENT PARKWAY
COLUMBIA, MARYLAND 21044-3456
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE HOLDERS OF COMMON STOCK:
The Annual Meeting of Stockholders of The Rouse Company is called to be held
on Thursday, May 15, 1997, at 11:00 a.m. at The Rouse Company Building,
Columbia, Maryland, for the following purposes:
(a) Election of directors to hold office until the next Annual Meeting of
Stockholders and until their respective successors are duly elected and
qualify;
(b) Consideration of a proposal by the Board of Directors to approve the
issuance of Common Stock under the Contingent Stock Agreement entered
into in connection with the acquisition of The Hughes Corporation and
Howard Hughes Properties, Limited Partnership in amounts exceeding 20%
of the number of shares of Common Stock outstanding immediately prior
to such acquisition (THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
PROPOSAL);
(c) Consideration of a proposal by the Board of Directors to approve The
Rouse Company 1997 Stock Incentive Plan (THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE PROPOSAL); and
(d) Consideration of such other business as may properly come before the
meeting.
Holders of Common Stock of the Company as of the close of business on March
3, 1997 will be entitled to notice of, and to vote at, the meeting. The stock
transfer books will not be closed.
For the convenience of stockholders, a form of proxy is enclosed. You are
urged to complete and return the proxy.
By Order of the Board of Directors
Bruce I. Rothschild
Secretary
April , 1997
<PAGE>
THE ROUSE COMPANY
10275 LITTLE PATUXENT PARKWAY
COLUMBIA, MARYLAND 21044-3456
PROXY STATEMENT
(FIRST MAILED TO STOCKHOLDERS ON APRIL , 1997)
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of The Rouse Company (the
"Company") to be voted at the Annual Meeting of Stockholders on May 15, 1997
and at any adjournment or adjournments thereof (the "meeting"). The
solicitation of proxies generally will be by mail and by directors, officers
and regular employees of the Company. In some instances, solicitation may be
made by telephone, telegraph or other means. All costs incurred in connection
with the solicitation of proxies will be borne by the Company. 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 reasonable out-of-pocket and clerical expenses. The Company
has retained Georgeson & Company, Inc. to assist in the solicitation of
proxies from stockholders for a fee of approximately $7,000 plus a charge for
contacting specific stockholders and reasonable out-of-pocket expenses and
disbursements.
Each properly executed proxy will be voted in accordance with the
instructions marked on it. In the absence of specific instructions, a proxy
will be voted for the election of directors and nominees listed in the Proxy
Statement, in accordance with the Board of Directors' recommendation as to any
proposal listed in the Proxy Statement and in the best discretion of the proxy
holders as to any other matters, including, but not limited to, the election
of one or more persons to fill any vacancy that exists on the Board of
Directors at the time of the meeting or any adjournment or adjournments
thereof.
Any proxy given pursuant to this solicitation may be revoked by the
stockholder at any time prior to exercise of the proxy. Such right of
revocation is not limited or subject to compliance with any formal procedure.
Directors are elected by a plurality of the votes cast by the holders of
shares of Common Stock of the Company ("Common Stock") present in person or
represented by proxy at the meeting, at which a quorum is present. For
purposes of the election of directors, abstentions and broker non-votes are
not considered to be votes cast and do not affect the plurality vote required
for directors. The affirmative vote of the holders of a majority of the shares
of Common Stock present in person or represented by proxy and entitled to vote
at the meeting, with a quorum present, is required for approval of the
proposals set forth in Exhibits A and C to this Proxy Statement, and New York
Stock Exchange Rule 312.05 further requires that the total vote cast on the
proposal represent over 50% in interest of all securities entitled to vote on
the proposal. For purposes of approval of the proposals, abstentions are
treated as present and entitled to vote on the matter and have the effect of a
vote against the proposal, and broker non-votes are not considered to be votes
cast.
On March 3, 1997, the record date for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting of Stockholders, the
Company had outstanding and entitled to vote 66,797,221 shares of Common
Stock, par value $.01 per share. This class of stock has no cumulative voting
rights, and each issued and outstanding share of Common Stock is entitled to
one vote at the meeting and any adjournment or adjournments thereof.
<PAGE>
The Annual Report of the Company, including financial statements for the
fiscal year ended December 31, 1996, has been mailed to all stockholders with
this Proxy Statement. You may receive, without charge, a copy of the Company's
1996 Form 10-K as filed with the Securities and Exchange Commission by
contacting David L. Tripp, Vice President and Director of Investor Relations,
The Rouse Company, 10275 Little Patuxent Parkway, Columbia, Maryland 21044-
3456.
ELECTION OF DIRECTORS AND RELATED MATTERS
It is proposed that 12 directors be elected at the meeting, each to serve
until the next Annual Meeting of Stockholders and until his or her successor
is duly elected and qualified.
In connection with the consummation in June 1996 of the merger with The
Hughes Corporation ("Hughes"), the Company entered into a Contingent Stock
Agreement (the "Agreement") under which the owners of Hughes (the "Hughes
Owners") received rights to future distributions of Common Stock as part of
the consideration in the merger. Under the Agreement, as long as the Hughes
Owners own at least 5% of the outstanding shares of Company Common Stock (but
in no event for longer than 10 years), the Hughes Owners will be entitled,
through certain representatives, to designate an individual for election to
the Company's Board. Mr. Lummis was designated under this provision to serve
as a director.
If one or more of the nominees for director is unable to serve for any
reason or if a vacancy otherwise exists on the Board of Directors, the holders
of proxies solicited hereby reserve the right to nominate and vote for any
other person or persons of their choice.
Certain information as to the nominees follows:
David H. Benson, age 59, has been a member of the Company's Board since
1987. Mr. Benson is a member of the Board of Kleinwort Benson Group plc, a
bank holding company. He is also Chairman of the Board of Kleinwort Charter
Investment Trust plc and Trustee of The Pilot Funds, both of which are
investment management companies. Previously, Mr. Benson was Vice Chairman of
the Board of Kleinwort Benson Group plc. Mr. Benson is a director of British
Gas plc, The Dover Corporation, Harrow Corporation, Kleinwort Benson U.S.A.
Inc., Leach International, Inc. and Marshall Cavendish Ltd. He is also a
Trustee of the Charities Official Investment Fund and the Edward James
Foundation.
Jeremiah E. Casey, age 57, has been a member of the Company's Board since
1990. Mr. Casey is Chief Executive, USA, of Allied Irish Banks plc, and
Chairman of the Board of First Maryland Bancorp and its banking subsidiaries.
Mr. Casey is a director of Allied Irish Banks plc and a director of the
Federal Reserve Bank of Richmond, Baltimore Branch. In addition, he is a
director of the Children's Research and Healing Center, Inc., Ireland-United
States Council for Commerce & Industry, Inc., Irish Educational Development
Foundation, Inc., The Kennedy Kreiger Institute, Inc., the Atlantic Council of
the United States and The World Trade Center Institute. Mr. Casey also is a
Trustee of both Mercy Medical Center and The Walters Art Gallery.
Anthony W. Deering, age 52, has been a member of the Company's Board since
1993. Mr. Deering is Chairman of the Board, President and Chief Executive
Officer of the Company. Previously, he was President and Chief Executive
Officer of the Company; President and Chief Operating Officer of the Company;
Executive Vice-President, Finance and Administration and Chief Financial
Officer of the Company; and Senior Vice-President and Chief Financial Officer
of the Company. Mr. Deering is a director of T. Rowe Price Fixed Income and
International Mutual Funds. He is a Trustee of the Baltimore Museum of Art,
the Friends School of
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Baltimore and the Parks and People Foundation of The Foundation for Baltimore
Recreation and Parks. Mr. Deering also is Chairman of the Mayor's Business
Advisory Council of the City of Baltimore and a member of the Board of
Directors of the Greater Baltimore Committee.
Rohit M. Desai, age 58, has been a member of the Company's Board since 1980.
Mr. Desai is Chairman of the Board and President of Desai Capital Management
Incorporated ("DCMI"), a specialized investment firm managing assets of
various institutional clients. Mr. Desai is also a director of Sunglass Hut
International, Inc. and Finlay Enterprises, Inc.
Mathias J. DeVito, age 66, has been a member of the Company's Board since
1972. Mr. DeVito is Chairman Emeritus of the Board. Previously, he was
Chairman of the Board of the Company and, prior to that, he was Chairman of
the Board and Chief Executive Officer of the Company. Mr. DeVito is a director
of Allied Irish Banks plc, First Maryland Bancorp and USAir Group, Inc. He is
Chairman of the Board of the Baltimore Empowerment Management Corporation and
a member of the Advisory Board of Equity-Linked Investors, II. Mr. DeVito also
is a Trustee of the Maryland Institute, College of Art.
Juanita T. James, age 44, has been a member of the Company's Board since
1989. Ms. James is Senior Vice-President of Finance and Operations at
Doubleday Direct, Inc. Previously she was Senior Vice-President of the Book-
of-the-Month Club, Inc., a subsidiary of Time Warner Inc., and President and
Chief Executive Officer of Time-Life Libraries, Incorporated. Ms. James is a
Charter Trustee of Princeton University and a member of the Advisory Council
of both the National Urban League and the National Coalition of 100 Black
Women. She is also president of the Parent Teacher Organization, Toquam
School, Stamford Public Schools.
William R. Lummis, age 68, has been a member of the Company's board since
1996. Mr. Lummis is a private investor and was Chairman of the Board of The
Hughes Corporation ("Hughes") from 1976 until June 12, 1996. He served as
Chief Executive Officer of Hughes from 1977 until 1990. Mr. Lummis has served
as administrator of the Estate of Howard R. Hughes, Jr. since 1976. He is a
trustee of the Howard Hughes Medical Institute and is affiliated with Glenwood
Cemetery, Inc. and The Brown Foundation.
Thomas J. McHugh, age 65, has been a member of the Company's Board since
1980. Mr. McHugh is President of McHugh Associates, Inc., a registered
investment adviser. Mr. McHugh is a director of Philadelphia Consolidated
Holding Corp. and is Vice Chairman and Trustee of St. Joseph's University.
Hanne M. Merriman, age 55, has been a member of the Company's Board since
1992. Ms. Merriman is a Retail Business Consultant for Hanne Merriman
Associates, a retail consulting firm. Previously, she was President and Chief
Operating Officer of Nan Duskin, Inc., a women's specialty store. Ms. Merriman
is a director of AnnTaylor Stores Corporation, CIPSCO Incorporated, State Farm
Mutual Automobile Insurance Company, T. Rowe Price Mutual Funds and USAir
Group, Inc. She is also a Trustee of the American-Scandinavian Foundation and
a member of the National Women's Forum.
Roger W. Schipke, age 60, has been a member of the Company's Board since
1992. Mr. Schipke, a private businessman, previously was Chairman of the Board
and Chief Executive Officer of the Sunbeam Corporation and, prior to that,
Chairman of the Board, President and Chief Executive Officer of The Ryland
Group, Inc. Mr. Schipke is a director of The Brunswick Corporation, Legg
Mason, Inc. and Oakwood Homes Corporation. He is also director and treasurer
of The Schipke Family Foundation, Inc. and part owner of Colts Ltd.
Alexander B. Trowbridge, age 67, has been a member of the Company's Board
since 1985. Mr. Trowbridge is President of Trowbridge Partners, Inc., a
corporation that engages in the consulting business. Mr. Trowbridge
3
<PAGE>
is a director of The Gillette Co., Harris Corp., ICOS Corp., New England
Mutual Life Insurance Co., PHH Corporation, Sun Company, Inc., Sun Resorts
International Ltd., and WMX Technologies, Inc. He also serves as a director of
several publicly owned mutual funds managed by Warburg Pincus Counsellors,
Inc. Mr. Trowbridge is a Trustee of both The Aspen Institute and Phillips
Academy Andover.
Gerard J. M. Vlak, age 63, has been a member of the Company's Board since
1996. Mr. Vlak is an Investment Advisor for North America Stichting Pension
Fund ABP. He serves as a board member for Icon International, a private
company. He is a director of both BJB Investment Funds and Bank Julius Baer.
Mr. Vlak is also a board member and member of the Education/Scholarship
Committee, The Netherland-America Foundation.
Please Note:
(1) There exist no family relationships between any of the director-
nominees or between any of such nominees and any executive officer of
the Company.
(2) All corporations identified have securities registered under the
Securities Exchange Act of 1934, as amended, except for non-profit
organizations, the companies identified with respect to Mr. Benson with
the exception of British Gas plc, and New England Mutual Life Insurance
Co. and State Farm Mutual Automobile Insurance Company, both of which
are mutual insurance companies.
The Board of Directors has established three permanent committees of the
Board--the Audit, Executive and Personnel Committees--to perform certain
designated functions.
The Audit Committee, composed of Messrs. Desai (Chairman), Benson, Lummis,
Schipke and Vlak and Ms. Merriman, recommends to the Board of Directors the
appointment of the Company's independent certified public accountants, reviews
the year-end financial statements and related matters with management and the
Company's independent certified public accountants and independent real estate
consultants, reviews the Company's Form 10-K Annual Report filed with the
Securities and Exchange Commission and reviews such accounting and auditing
issues concerning the Company and its subsidiaries and affiliates as may be
deemed appropriate. The Audit Committee held four meetings during 1996.
The Executive Committee, composed of Messrs. DeVito (Chairman), Casey,
Deering, Desai, Lummis, McHugh and Trowbridge and Ms. James, takes action with
respect to approved projects and corporate financings of the Company, such
special matters as may be delegated to it by the Board and any other
appropriate matters that arise between Board meetings. In addition, this
Committee serves as a nominating committee. In this capacity, the Executive
Committee determines the criteria and qualifications for membership on the
Board of Directors, develops an orderly process for nominating persons to fill
vacancies on the Board, considers nominees for election to the Board and makes
recommendations regarding the compensation of directors. Stockholders may
submit to the Secretary of the Company names of nominees for membership on the
Board of Directors to be considered by the Executive Committee. Section 2.05
of the Company's Bylaws generally provides that nominations shall be made not
more than 90 days nor less than 60 days before the scheduled date of a
stockholders meeting at which directors are to be elected and specifies
information that the stockholder must provide at the time of the nomination.
The Executive Committee held one meeting during 1996.
The Personnel Committee, composed of Messrs. McHugh (Chairman), Casey and
Trowbridge and Ms. James, reviews and makes recommendations to the Board
regarding the compensation programs of the Company, including the compensation
of its executive officers, and reviews and approves grants under the Company's
stock incentive plans. See "Personnel Committee Report on Executive Officer
Compensation"
4
<PAGE>
below. This Committee also has certain responsibilities with respect to the
Company's Pension Plan, including general oversight of the investment of
Pension Plan assets and approval of amendments to the Pension Plan that do not
significantly increase the Company's funding costs or that are required under
federal or state law. In addition, the Personnel Committee has general
oversight responsibility for The Rouse Company Supplemental Retirement Benefit
Plan. The Personnel Committee held six meetings during 1996.
During 1996, the Board of Directors of the Company held four meetings in
addition to the eleven meetings held by Board Committees. During their
respective terms as directors, all directors of the Company attended 75% or
more of the aggregate of all Board meetings and all meetings of Committees of
which they were a member.
The following table sets forth the number of shares of Common Stock
beneficially owned by each named executive officer (see Summary Compensation
Table below), director of the Company, by all directors and executive officers
of the Company as a group and by all persons, to the knowledge of the Company,
beneficially owning more than five percent (5%) of Company Common Stock. To
the knowledge of the Company, no person beneficially owns more than five
percent (5%) of the Series B Convertible Preferred Stock of the Company. No
named executive officer or director of the Company owns any shares of the
Series B Convertible Preferred Stock of the Company.
EQUITY SECURITIES BENEFICIALLY OWNED
ON MARCH 3, 1997
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------
PERCENT OF
NAME OF BENEFICIAL OWNER NUMBER OF SHARES
OR IDENTITY OF GROUP SHARES OUTSTANDING
------------------------ --------- -----------
<S> <C> <C>
EXECUTIVE OFFICERS(1)
Anthony W. Deering........................... 665,031(2) (3)
Jeffrey H. Donahue........................... 112,510 (3)
Douglas A. McGregor.......................... 513,875 (3)
Robert Minutoli.............................. 85,430 (3)
Jerome D. Smalley............................ 93,512 (3)
DIRECTORS(4)
David H. Benson.............................. 9,350(4)(5) (3)
Jeremiah E. Casey............................ 11,500(4) (3)
Anthony W. Deering........................... See above See above
Rohit M. Desai............................... 1,103,906(4)(6) 1.64%
Mathias J. DeVito............................ 867,471(4)(7) 1.28%
Juanita T. James............................. 8,200(4) (3)
William R. Lummis............................ 151,869(4)(8) (3)
Thomas J. McHugh............................. 18,000(4) (3)
Hanne M. Merriman............................ 8,500(4) (3)
Roger W. Schipke............................. 14,500(4) (3)
Alexander B. Trowbridge...................... 8,450(4) (3)
Gerard J. M. Vlak............................ 5,000(4) (3)
All executive officers and directors as a
group (22 persons).......................... 4,318,080(9) 6.39%
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------
PERCENT OF
NAME OF BENEFICIAL OWNER NUMBER OF SHARES
OR IDENTITY OF GROUP SHARES OUTSTANDING
------------------------ --------- -----------
<S> <C> <C>
NAME AND ADDRESS OF 5%
HOLDERS OF COMMON STOCK
Algemeen Burgerlijk Pensioenfonds................ 4,593,800(10) 6.88%
Oude Lindestraat 70
Postbus 2980, 6401 DL Heerlen
The Netherlands
Cohen & Steers Capital Management, Inc........... 4,299,900(11) 6.44%
757 Third Avenue
New York, New York 10017
FMR Corp......................................... 5,461,368(12) 8.18%
82 Devonshire Street
Boston, Massachusetts 02109-3614
Franklin Resources, Inc. ........................ 3,862,564(13) 5.80%
P.O. Box 7777
777 Mariners Island Boulevard
San Mateo, California 94403-7777
</TABLE>
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(1) With respect to the named executive officers of the Company, includes (i)
319,558 shares of Common Stock subject to stock options granted under the
Company's 1985 and 1990 Stock Option Plans and 1994 Stock Incentive Plan
that either are presently exercisable or will become exercisable within
60 days of March 3, 1997, (ii) with respect to such named executive
officers' accounts under The Rouse Company Savings Plan as of February 5,
1997, 8,133 shares of Common Stock, and (iii) 5,589 shares of Common
Stock that are issuable if the Company's 5 3/4% Convertible Subordinated
Debentures due 2002 that are beneficially held by a named executive
officer were converted. Also includes 35,040 shares of Common Stock owned
directly or indirectly by spouses of named executive officers, children
who share the same residence and certain other family members, as to
which shares the named executive officers in some instances disclaim
beneficial ownership. Unless otherwise indicated below, and with the
exception of shares owned by spouses, children and certain other family
members, each of the beneficial owners indicates that he has sole voting
and dispositive powers.
(2) Includes 5,589 shares of Common Stock that are issuable if the Company's
5 3/4% Convertible Subordinated Debentures due 2002 that are beneficially
held by Mr. Deering were converted. Includes 171,159 shares that are
owned by the Deering Family Limited Partnership of which Mr. Deering is a
Trustee and has shared voting and dispositive powers. Includes 67,438
shares that are owned by a Foundation of which Mr. Deering is the
Trustee. Mr. Deering disclaims beneficial ownership of the shares that
are owned by the Foundation.
(3) Beneficial ownership does not exceed one percent of the shares of Common
Stock outstanding.
(4) Includes 8,000 shares of Common Stock subject to stock options granted
under the Company's 1994 Stock Incentive Plan to each non-employee
director, except for Mr. DeVito, who received two 1,000-share stock
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<PAGE>
option grants since he attained non-employee status in February 1995, and
Messrs. Lummis and Vlak, who each received a 5,000-share stock option
grant upon his initial election as a director in June and September, 1996,
respectively. All of the options are presently exercisable.
(5) Includes 450 shares of Common Stock owned directly by Mr. Benson's
spouse, as to which shares he disclaims beneficial ownership. Mrs. Benson
has sole voting and dispositive power with respect to such shares. Does
not include 114,525 shares of Common Stock that, as of March 3, 1997, are
owned and held in accounts managed by Kleinwort Benson Investment
Management Limited or its affiliates, all of which are subsidiaries of
Kleinwort Benson Group plc. Mr. Benson is a member of the Board of
Kleinwort Benson Group plc. Mr. Benson has no voting or dispositive power
with respect to such shares and disclaims beneficial ownership of them.
(6) Includes 1,500 shares directly owned by Mr. Desai and 8,000 shares of
Common Stock subject to stock options referenced in Footnote (4) above.
Mr. Desai disclaims beneficial ownership as to all other shares. Desai
Capital Management Incorporated, of which Mr. Desai is Chairman of the
Board and President, has dispositive power on behalf of clients with
respect to 1,094,406 shares of Common Stock.
(7) Includes 148,100 shares that are in trusts for Mr. DeVito's children and
other descendants and as to which shares Mr. DeVito has no voting or
dispositive power. Also includes 14,300 shares that are owned by a
Foundation of which Mr. DeVito is a Trustee and has shared voting and
dispositive power. Mr. DeVito disclaims beneficial ownership of the
shares in both the trusts and the Foundation.
(8) Includes 146,869 shares of Common Stock that represents Mr. Lummis'
interest in THC Partners, a Texas general partnership. THC Partners held
5,366,599 shares of Rouse Company Common Stock at December 31, 1996.
(9) Includes 758,041 shares of Common Stock subject to stock options granted
under the Company's 1985 and 1990 Stock Option Plans and 1994 Stock
Incentive Plan that either are presently exercisable or will become
exercisable within 60 days of March 3, 1997. With respect to executive
officers' accounts under The Rouse Company Savings Plan as of February 5,
1997, includes 31,374 shares of Common Stock. Also includes 5,589 shares
of Common Stock that are issuable if the Company's 5 3/4% Convertible
Subordinated Debentures due 2002 that are attributable to an executive
officer were converted. Does not include 114,525 shares of Common Stock
of the Company that, as of March 3, 1997, are owned and held in accounts
managed by Kleinwort Benson Investment Management Limited or its
affiliates, all of which are subsidiaries of Kleinwort Benson Group plc.
See Footnote (5) above.
(10) Represents shares beneficially held as of December 31, 1996 by Algemeen
Burgerlijk Pensioenfonds, which has sole voting and dispositive power
with respect to 4,381,000 shares and no voting or dispositive power with
respect to 212,800 shares.
(11) Represents shares beneficially held as of February 11, 1997 by Cohen &
Steers Capital Management Inc., which has sole voting power with respect
to 3,727,600 shares and sole dispositive power with respect to all
4,299,900 shares.
(12) Represents shares beneficially held as of December 31, 1996 by FMR Corp.,
which has sole voting power with respect to 204,015 shares and sole
dispositive power with respect to all 5,461,368 shares.
(13) Represents shares beneficially held as of December 31, 1996 by Franklin
Resources, Inc., which includes 349,974 shares of Common Stock that are
issuable if the Company's 5 3/4% Convertible Subordinated Debentures due
2002 were converted. Franklin Resources, Inc. has sole voting and
dispositive power with respect to all 3,862,564 shares.
7
<PAGE>
PERSONNEL COMMITTEE REPORT ON
EXECUTIVE OFFICER COMPENSATION
The Personnel Committee of the Board of Directors (the "Committee") is
pleased to present its report on executive compensation for 1996. The
Committee is composed of four outside directors of the Company and is
responsible for reviewing and making recommendations to the Board generally
with respect to the compensation of the Company's executive officers. During
1996, the Board of Directors reviewed these recommendations and approved all
executive compensation actions or concurred in the Committee's actions.
OVERALL COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company has developed an overall compensation program and specific
compensation plans which are designed to enhance corporate performance and
stockholder value by aligning the financial interests of executives with those
of its stockholders. This linkage is established by tying a significant
portion of executive compensation to the Company's success in meeting
specified performance objectives adopted annually as described below. In
pursuit of these objectives, the Company's compensation program is designed to
attract to the Company and retain the best possible executive talent; to
motivate these executives to achieve specific performance goals which are
integral to the Company's business plan approved by its Board of Directors; to
reinforce and link executive and stockholder interests through equity-based
plans; and to recognize individual performance. The goal is for Company
compensation to be within the top quartile of compensation for comparable
companies.
The Committee has primary responsibility for evaluating the Company's
compensation program and specific compensation plans and establishing policies
that meet the objectives described above. In 1993 a comprehensive review of
the Company's compensation program was conducted by William M. Mercer,
Incorporated (the "Compensation Consultant"). The review included a
comprehensive study of compensation practices in the real estate industry
generally and in twelve major real estate firms deemed to be most comparable
to the Company (including four firms that are included in the peer group used
in the current Performance Graph) and nine real estate investment trusts
(REITs) with assets that include retail centers. The study also included the
executive compensation practices of national corporations whose comparability
is based on asset size and market capitalization. References in this report to
"comparable companies," "competitive pay," "competitive ranges" and the like
refer to the comparison groups described above.
The Committee reviews and makes recommendations to the Board with respect to
the compensation of the Chief Executive Officer and the other executive
officers of the Company. The Committee considers the performance of the
Company in its industry, an individual's circumstances and the Compensation
Consultant's periodic recommendations. With respect to the Chief Executive
Officer, the Committee also considers the Compensation Consultant's
recommended parameters for salary, bonus level and long-term incentive stock
compensation. Except with respect to stock options, the Board provides the
final approval for the compensation of all executive officers, including the
Chief Executive Officer.
In reviewing the individual performance of the Company's executive officers
(other than the Chief Executive Officer), the Committee and the Board consider
the views of the Chief Executive Officer to whom these officers are
responsible. The Committee concurred in Mr. Deering's recommendations with
respect to proposed salaries, bonuses and incentive stock grants for the
executive officers for 1996, which were then approved by the Board.
8
<PAGE>
PRINCIPAL COMPONENTS OF EXECUTIVE COMPENSATION
The principal elements of the Company's executive compensation program
consist of both annual and long-term programs and include base salary and
annual incentive cash bonus, and at appropriate intervals, long-term incentive
compensation in the form of stock option and stock bonus grants. The Company
also provides medical, pension and other fringe benefits generally available
to Company employees.
BASE SALARIES
Base salaries for executive officers are determined by periodically
evaluating the responsibilities of the position held and the experience and
performance of the individual, and aligning such salaries based on periodic
independent compensation consultant recommendations with respect to the
competitive marketplace for executive talent and the relative overall
corporate performance of the Company in relation to its competitors in the
industry. Salary adjustments, if any, are determined by the Board, upon
recommendation from the Chief Executive Officer and the Committee, by
evaluating the performance of the Company and its executive officers, taking
into account any additional or new responsibilities assumed by individual
executive officers in connection with promotions or organizational changes.
ANNUAL INCENTIVE BONUS
The Company's executive officers and other key persons are eligible for an
annual cash bonus under the Incentive Compensation Plan. Under the Plan, the
bonus awards of the executive officers are based in whole or in part upon the
Company's annual corporate objectives as evaluated by the Board, with
consideration given to individual performance. The Board also may grant
special bonus awards in exceptional cases based upon extraordinary
performance.
Each year, a challenging set of corporate performance objectives, assigned
individual relative weightings, is recommended by the Chief Executive Officer
and approved by the Board of Directors. These Board-approved objectives place
heavy emphasis (72 1/2%) on earnings results and financial position, including
specific earnings targets for total corporate and individual business segment
Earnings Before Depreciation and Deferred Taxes ("EBDDT") as well as land
sales and income property earnings. Additional corporate objectives (totalling
27 1/2%) included specific strategic near- and long-term objectives for 1996.
LONG-TERM INCENTIVE STOCK PLANS
The purpose of the Company's long-term incentive stock plans has been to
provide a meaningful equity interest in the Company to senior Company
executives and other key executives in a format that is designed to motivate
these executives and align their financial interests with those of
stockholders.
STOCK BONUS AWARDS
The Board of Directors is authorized to grant stock bonus awards and make
related loans upon such terms and conditions as it may approve. These grants
are made following review by and upon recommendation of the Chief Executive
Officer and the Committee, which have available the services of independent
compensation specialists. In making grants, the Committee principally
considers the amounts and terms of stock bonus awards for the preceding three
years together with approved ranges of annualized values using formula
guidelines recommended by the Compensation Consultant. The awards are subject
to restrictions that lapse over time and that may cause forfeiture of the
applicable shares if the executive voluntarily leaves the employ of the
Company.
9
<PAGE>
In conjunction with these restricted stock grants, the Company makes loans to
recipients, subject to forgiveness in annual installments dependent upon
continued employment in the Company.
STOCK OPTIONS
Stock options are granted by the Committee using approved award size
criteria and based upon market data, the prior grant history for each person,
independent consultants' advice and management's recommendations. Stock
options are granted with an exercise price equal to the market price of the
Common Stock and typically are subject to vesting over a three- to five-year
period. Stock options thus are designed to align the interests of executives
with those of Company stockholders, since no benefit inures to the employee
unless the stock price increases.
CHIEF EXECUTIVE OFFICER COMPENSATION
For 1996, the compensation of Mr. Deering was determined by the Committee
and approved by the Board in conformance with the policies described above for
executive officers. Mr. Deering received an increase in his 1996 salary to
$725,000. The new salary was recommended by the Committee and approved by the
Board based on Mr. Deering's performance. In addition, the Committee and the
Board determined, based on their review of the 1996 corporate performance
objectives described above, that the Company had achieved excellent results
for the year, meeting or significantly exceeding its targeted objectives.
Based on these results, the Board awarded to Mr. Deering a bonus of $900,000.
There were no other changes in Mr. Deering's compensation during 1996.
DEDUCTIBILITY OF CERTAIN EXECUTIVE COMPENSATION EXPENSE UNDER FEDERAL TAX LAWS
The Committee has considered the impact of provisions of the Internal
Revenue Code of 1986 (the "Code") that in certain circumstances disallow
compensation deductions in excess of $1 million for any year with respect to
the Company's Chief Executive Officer and its four other most highly
compensated officers. This disallowance provision does not apply to
performance-based compensation, and the Company expects that this provision
will not limit its tax deductions for executive compensation in the near term.
Thomas J. McHugh,
Chairman
Jeremiah E. Casey
Juanita T. James
Alexander B. Trowbridge
10
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to the Company for the years
ended December 31, 1996, 1995 and 1994 of those persons who were the Chief
Executive Officer and the four other most highly compensated officers of the
Company in 1996. The amounts reported below under the columns captioned
"Salary," "Bonus," "Restricted Stock Awards" and "Securities Underlying
Options" are payable under and in accordance with the Company's annual and
long-term compensation plans as described above in the "Personnel Committee
Report on Executive Officer Compensation." No stock appreciation rights
("SARs") were granted during 1994-1996, nor have any SARs been granted at any
time in prior years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ---------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
SALARY AWARD(S) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) BONUS ($) ($) (#) ($)
- --------------------------- ---- ------------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Anthony W. Deering
Chairman of the Board, 1996 725,000 900,000 None None 579,538(4)
President and Chief Ex- 1995 625,000 520,313 3,725,000(1) None 196,202(5)
ecutive Officer(1) 1994 500,000 412,500 None 50,000 190,721(6)
Douglas A. McGregor
Executive Vice-President
for 1996 475,000 450,000 1,291,875(2)(3) 75,000 125,113(4)
Development and Opera- 1995 430,000 298,334 None None 120,263(5)
tions 1994 400,000 300,000 None 30,000 61,677(6)
Jeffrey H. Donahue
Senior Vice-President 1996 290,000 165,300 695,625(2)(3) 50,000 51,163(4)
and 1995 260,000 139,490 None None 50,240(5)
Chief Financial Officer 1994 240,000 134,400 None 22,500 7,246(6)
Robert Minutoli
Senior Vice-President 1996 290,000 230,000 695,625(2)(3) 50,000 75,819(4)
and 1995 250,000 134,125 None None 96,756(5)
Director of New Business 1994 220,000 112,200 None 22,500 46,636(6)
Jerome D. Smalley 1996 290,000 230,000 695,625(2)(3) 50,000 74,578(4)
Senior Vice-President 1995 250,000 138,750 None None 95,517(5)
and 1994 220,000 122,100 None 22,500 45,992(6)
Director of the Commer-
cial
Development Division
</TABLE>
- --------
(1) During 1994 and early 1995, Mr. Deering was President and Chief Operating
Officer of the Company. Mr. Deering was elected President and Chief
Executive Officer on February 23, 1995 and Chairman of the Board on
February 25, 1997. Upon Mr. Deering's assumption of the role of Chief
Executive Officer of the Company, the Board of Directors, acting pursuant
to the Company's 1994 Stock Incentive Plan, awarded Mr. Deering 200,000
shares of Common Stock (the "1995 Bonus Shares"). Ownership of the 1995
Bonus Shares vests 20% on January 2nd in each of the years 1996, 1997,
1998, 1999 and 2000. Any 1995 Bonus Shares that have not vested will be
forfeited if the recipient leaves the Company's employ for any reason
other than death, disability or discharge without good cause (which is
defined to include certain changes in
11
<PAGE>
control of the Company). Dividends are paid on the restricted shares. As of
December 31, 1996, Mr. Deering had aggregate restricted shareholdings of
232,500 shares of Common Stock having a value, based on the value of the
Company's shares on that date, of $7,381,875.
(2) In February, 1996, the Board of Directors, acting pursuant to the
Company's 1994 Stock Incentive Plan, awarded Mr. McGregor 65,000 shares of
Common Stock and Messrs. Donahue, Minutoli and Smalley 35,000 shares each
of Common Stock (the "1996 Bonus Shares"). Ownership of the 1996 Bonus
Shares vests 25% on February 22nd in each of the years 1998, 1999, 2000
and 2001. Any 1996 Bonus Shares that have not vested will be forfeited if
the recipient leaves the Company's employ for any reason other than death,
disability or discharge without good cause (which is defined to include
certain changes in control of the Company). Dividends are paid on the
restricted shares.
(3) As of December 31, 1996, Mr. McGregor had aggregate restricted
shareholdings of 97,500 shares of Common Stock having a value, based on
the value of the Company's shares on that date, of $3,095,625; Mr. Donahue
had aggregate restricted shareholdings of 43,750 shares of Common Stock
having a value, based on the value of the Company's shares on that date,
of $1,389,062; and Messrs. Minutoli and Smalley each had aggregate
restricted shareholdings of 46,250 shares of Common Stock having a value,
based on the value of the Company's shares on that date, of $1,468,437.
(4) Includes installments on loans by the Company relating to restricted stock
awards under the Company's 1990 Stock Bonus Plan and 1994 Stock Incentive
Plan and stock option grants under the Company's 1985 Stock Option Plan.
Installments were forgiven by the Company during 1996 in the amount of
$555,625 as to Mr. Deering, $109,375 as to Mr. McGregor, $41,563 as to Mr.
Donahue, $66,254 as to Mr. Minutoli and $65,013 as to Mr. Smalley. Also
includes matching contributions under the Company's non-qualified Excess
Savings Plan in the amount of $23,913 as to Mr. Deering, $15,738 as to Mr.
McGregor, $9,600 as to Mr. Donahue and $9,565 as to Messrs. Minutoli and
Smalley.
(5) Includes installments on loans by the Company relating to restricted stock
awards under the Company's 1985 and 1990 Stock Bonus Plans. Installments
were forgiven by the Company during 1995 in the amount of $175,625 as to
Mr. Deering, $109,375 as to Mr. McGregor, $41,563 as to Mr. Donahue,
$88,452 as to Mr. Minutoli and $87,213 as to Mr. Smalley. Also includes
matching contributions under the Company's 401(k) Savings Plan and non-
qualified Excess Savings Plan in the aggregate amounts of $20,577 as to
Mr. Deering, $10,888 as to Mr. McGregor, $8,677 as to Mr. Donahue, and
$8,304 as to both Messrs. Minutoli and Smalley.
(6) Includes installments on loans by the Company relating to restricted stock
awards under the Company's 1985 and 1990 Stock Bonus Plans. Installments
were forgiven by the Company during 1994 in the amount of $175,625 as to
Mr. Deering, $50,000 as to Mr. McGregor, $39,994 as to Mr. Minutoli and
$39,350 as to Mr. Smalley. Also includes matching contributions under the
Company's 401(k) Savings Plan and non-qualified Excess Savings Plan in the
aggregate amounts of $15,096 as to Mr. Deering, $11,677 as to
Mr. McGregor, $7,246 as to Mr. Donahue and $6,642 as to both Messrs.
Minutoli and Smalley.
12
<PAGE>
OPTIONS AND STOCK APPRECIATION RIGHTS
The following table summarizes information relating to stock option grants
during 1996 to the executive officers named in the Summary Compensation Table.
No stock appreciation rights have been granted at any time under the Company's
Stock Option and Stock Incentive Plans.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE GRANT DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/SHARE) DATE VALUE(2)
---- ---------- ------------ --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Anthony W. Deering....... None -- -- -- --
Jeffrey H. Donahue....... 50,000 8.2 $19.875 2-21-06 $249,500
Douglas A. McGregor...... 75,000 12.3 $19.875 2-21-06 $374,250
Robert Minutoli.......... 50,000 8.2 $19.875 2-21-06 $249,500
Jerome D. Smalley........ 50,000 8.2 $19.875 2-21-06 $249,500
</TABLE>
- --------
(1) All of the shares were granted on February 22, 1996, and are exercisable
as to 25% of the shares granted on February 22nd in each of the years 1998
through 2001.
(2) These values are based on the Black-Scholes option pricing model, which
produces a per option share value of $4.99 using the following
assumptions: options exercised after 7 years, stock price volatility of
.28, dividend yield of 4% and an interest rate of 5.71%, which was the 7-
year Treasury note rate at the time of grant. No adjustments have been
made for forfeitures or nontransferability. The actual value, if any, that
the executive officer will realize from these options will depend solely
on the increase in the stock price over the $19.875 exercise price when
the options are exercised.
The following table summarizes information relating to stock option
exercises during 1996 and the number and value of unexercised stock options
previously granted to the executive officers named in the Summary Compensation
Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS(1)
ACQUIRED ON VALUE OPTIONS AT FY-END (#) AT FY-END ($)
NAME EXERCISE (#) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Anthony W. Deering...... None None 150,000/75,000 $1,921,875/$928,125
Jeffrey H. Donahue...... None None 28,886/88,614 $332,156/$1,178,469
Douglas A McGregor...... None None 120,000/110,000 $1,558,125/$1,327,500
Robert Minutoli......... 14,534 $159,916 5,625/79,741 $71,719/$1,027,628
Jerome D. Smalley....... 7,712 $86,760 15,047/79,741 $231,893/$1,027,628
</TABLE>
- --------
(1) An "in-the-money" stock option is an option for which the market price, on
December 31, 1996, of Company Common Stock underlying the option exceeds
the exercise price (i.e., the market price of Company Common Stock on the
date the option was granted). The value shown represents stock price
appreciation since the grant date of the option.
13
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the S&P 500 Index and a Peer Group of real estate companies
identified below. The graph assumes that $100 is invested initially and all
dividends are reinvested.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96
<S> <C> <C> <C> <C> <C> <C>
Rouse Co. $100 $101 $103 $116 $128 $207
S&P 500(/R/) $100 $108 $118 $120 $165 $203
Custom Composite Index (15 Stocks) $100 $70 $78 $71 $75 $105
</TABLE>
The Peer Group consists of the following publicly traded real estate
companies: Bramalea Ltd., Cambridge Shopping Centers, Catellus Development
Corp., Crown America Realty Trust, Federal Realty Investment Trust, First
Union Realty, Forest City Enterprises, General Growth Properties, Inc., Kimco
Realty, Koger Properties, Simon Property Group, Inc., Taubman Centers, Inc.,
Trizec Corporation Ltd., Urban Shopping Centers, Inc. and Weingarten Realty
Investment.
14
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
With respect to all named executive officers, all stock option grants, bonus
stock grants and related loans under the Company's Stock Option, Stock Bonus
and Stock Incentive Plans provide that any non-vested portion of a stock
option grant will vest, any remaining restrictions upon bonus stock shares
will be released and any related loan balance will be forgiven if the person
dies, becomes disabled, retires on or after the normal retirement age of 62 or
is discharged without good cause (which is defined to include certain changes
in control of the Company). If such an event were to occur with respect to an
executive officer, all stock options not yet exercised, as set forth above in
the table captioned "Aggregated Option Exercises in Last Fiscal Year and
FY-End Option Values" (and an additional 350,000 option shares that were
granted to Mr. Deering on February 25, 1997), would become vested, and the
outstanding principal loan balances set forth below in "Indebtedness of
Executive Officers" would be forgiven. In addition, Mr. Deering and Mr.
McGregor would have forfeiture restrictions released on 171,250 and 81,250
shares, respectively, of bonus stock, and Messrs. Donahue, Minutoli and
Smalley would have forfeiture restrictions released on 43,750 shares of bonus
stock.
The Company also has a severance plan available on a non-discriminatory
basis to all employees, including executive officers, that provides benefits
for involuntary terminations of employment, except for discharges for cause or
disciplinary reasons. Severance pay generally is equal to one week's salary
for each six months (or portion of six months) of service performed in the
first three years of employment and one week's salary for each full or partial
year worked in excess of three years. Group medical and life insurance
coverage also are continued at no cost to the individual for up to 90 days.
INDEBTEDNESS OF EXECUTIVE OFFICERS
In November, 1990, upon the elections of Anthony W. Deering and Douglas A.
McGregor as Executive Vice-Presidents of the Company, the Board of Directors
awarded Messrs. Deering and McGregor shares of Common Stock pursuant to the
Company's 1990 Stock Bonus Plan. In February, 1993, upon the election of
Mr. Deering as President and Chief Operating Officer, the Board of Directors
awarded Mr. Deering shares of Common Stock pursuant to the Company's 1990
Stock Bonus Plan. In September, 1993, the Board of Directors, acting pursuant
to the Company's 1990 Stock Bonus Plan, awarded shares of Common Stock as
incentive awards to certain of the Company's executive officers in conjunction
with a reorganization of the responsibilities of senior management, which
included the election of eight new Senior Vice-Presidents. In February, 1995,
upon the election of Mr. Deering as Chief Executive Officer, the Board of
Directors awarded Mr. Deering shares of Common Stock pursuant to the Company's
1994 Stock Incentive Plan. In February, 1996, the Board of Directors awarded
Messrs. Donahue, McGregor, Minutoli and Smalley, and certain other executive
officers, shares of Common Stock pursuant to the Company's 1994 Stock
Incentive Plan. In addition, Mr. Goolsby was awarded shares of Common Stock
contingent on the acquisition of Hughes by the Company. In connection with
such grants of bonus stock and to assist the recipients in paying related tax
and other obligations, the Board of Directors approved loans to such executive
officers. Each loan is to be forgiven, except as to interest, in either four
or five equal annual installments if the person continues to serve the
Company.
In March, 1989, the Personnel Committee of the Board of Directors granted
stock options to Messrs. Kassolis, Minutoli, Riedy and Smalley (elected as
Senior Vice-Presidents in 1993) pursuant to the Company's 1990 Stock Option
Plan. At the same time, the Board of Directors authorized loans to each person
to be made in connection with the exercise of the options. Subsequently, the
terms of the options were modified by the Board
15
<PAGE>
or the Personnel Committee to permit, as an alternative, open market purchases
of the same number of shares of Common Stock and loans in the amount of the
open market purchases. Each loan is to be forgiven, except as to interest, in
five equal annual installments if the person continues to serve the Company.
The following table lists those executive officers who received loans in
connection with the bonus stock grants and the stock option grants described
in the two preceding paragraphs, and whose maximum indebtedness to the Company
from January 1, 1996 through March 3, 1997 exceeded $60,000:
<TABLE>
<CAPTION>
MAXIMUM PRINCIPAL PRINCIPAL
AMOUNT OF LOANS AMOUNT
OUTSTANDING OF LOANS
FROM 1-1-96 OUTSTANDING
NAME OF INDIVIDUAL RELATIONSHIP WITH COMPANY THROUGH 3-3-97(1) ON 3-3-97
------------------ ------------------------- ----------------- -----------
<S> <C> <C> <C>
Anthony W. Deering Chairman of the Board, President and $2,326,875 $1,265,625
Chief Executive Officer
Jeffrey H. Donahue Senior Vice-President, Chief Financial 402,656 361,093
Officer and Director of the Finance
Division
John L. Goolsby President and Chief Executive Officer of 500,000 333,333
The Howard Hughes Corporation
Duke S. Kassolis Senior Vice-President and Director of 480,625 433,874
Office and Mixed-Use Operations
Paul I. Latta, Jr. Senior Vice-President and Director of 472,688 431,125
Retail Operations
Douglas A. McGregor Executive Vice-President for Development 874,125 764,750
and Operations
Robert Minutoli Senior Vice-President and Director of 535,449 469,196
New Business
Robert D. Riedy Senior Vice-President and Director of 448,054 393,929
Retail Leasing
Alton J. Scavo Senior Vice-President, Director of the 392,002 350,439
Community Development Division and
General Manager of Columbia
Jerome D. Smalley Senior Vice-President and Director of 531,838 466,825
the Commercial and Office Development
Division
George L. Yungmann Senior Vice-President, Controller and 239,063 209,375
Director of the Controller's Division
</TABLE>
- --------
(1) Interest accrues on the principal amount of the outstanding loans and is
payable on December 31st of each year. The interest rate on all the loans
is 6% per year, except that the interest rate on the loans relating to the
stock bonus grants that were made in September, 1993 and February, 1996
are 5.35% and 5% per year, respectively.
16
<PAGE>
PENSION PLAN
The persons named in the Summary Compensation Table participate in the
Company's noncontributory Pension Plan (the "Plan"), which is a career average
plan. The Plan provides for a combination of "past service" benefits and
"future service" benefits. The past service benefit is (i) 1.15% of the lesser
of (a) the employee's Cash Compensation as defined in the Plan during 1996 or
(b) the employee's average annual Compensation or Cash Compensation for the
employee's high three consecutive years of service prior to separation, in
either case which is not in excess of the Social Security covered compensation
level plus (ii) 1.65% of the lesser of (a) the employee's Cash Compensation
during 1996 or (b) the employee's average annual Compensation or Cash
Compensation for the employee's high three consecutive years of service prior
to separation, in either case which exceeds the Social Security covered
compensation level, multiplied by the employee's years of service prior to
January 1, 1997. For each year of service commencing after December 31, 1996
(future service), the employee receives an annual benefit of (i) 1.15% of the
employee's Cash Compensation which is not in excess of the Social Security
covered compensation level plus (ii) 1.65% of the employee's Cash Compensation
which exceeds the Social Security covered compensation level.
The Company also maintains its Supplemental Plan primarily to provide for
the payment of retirement benefits to those eligible Company employees whose
pension benefit under the Pension Plan, described above, would be limited to
amounts less than the Pension Plan would normally provide due to tax and
pension laws enacted since 1982. The Supplemental Plan is a nonqualified,
unfunded plan, and benefits are payable from the general assets of the
Company. The primary purpose of the Supplemental Plan is to insure that the
total retirement benefits of affected employees payable under both pension
plans (the "Plans") are determined on the same basis, so that the retirement
benefits to be received are no more or less than what could have been received
by affected employees under the Pension Plan but for the enactment since 1982
of federal tax and pension laws limiting such benefits.
Messrs. Deering, Donahue, McGregor, Minutoli and Smalley have, respectively,
24, , 23, and credited years of service under the Plans, and their
estimated annual benefits payable under such Plans at the normal retirement
age of 62 (assuming each continues to live and receives his 1997 rate of
compensation to retirement) are $ , $ , $ , $ and $ , respectively.
All benefits payable under the Pension Plan are subject to certain
limitations contained in the Internal Revenue Code of 1986 and the regulations
promulgated thereunder. The limit on annual benefits for 1996 was $150,000 as
to any individual who retired at the normal retirement age.
DIRECTORS' FEES AND OTHER TRANSACTIONS
Under current Company policy, an annual fee of $27,500 is paid to each
director of the Company (other than Mr. DeVito) who is not employed by the
Company on a full-time or other basis. The Chairman of a Board Committee
receives an additional annual fee of $3,000. Each director (other than Mr.
DeVito) also is paid a fee of $1,250 for attendance at any meeting of the
Board and $1,000 for attendance at any meeting of a Committee of the Board or
for special assignments. As discussed below, Mr. DeVito received a fee of
$100,000 for his services during 1996 as Chairman of the Board of Directors,
Chairman of the Executive Committee and a member of the Audit Committee and
for advisory services rendered to the Company.
17
<PAGE>
Under The Rouse Company 1994 Stock Incentive Plan (the "Plan"), non-employee
directors receive 5,000-share stock option grants of the Company's Common
Stock upon their initial election. Each director receives an additional 1,000-
share stock option grant upon reelection as a director at each subsequent
annual meeting.
The Company also provides credits to a nonqualified Company Common Stock
account established for each director. In May, 1996, each director's account
was credited with an amount equal to 10% of the annual fee for each prior year
of service on the Board, which amount was deemed to be invested in Company
Common Stock. In addition, each director receives quarterly credits to his or
her account equal to 2 1/2% of the current annual fee. Upon retirement from
the Board, each director is entitled to receive the value of his or her
account, but no director will receive less than an amount equal to the then
present value of the payments such director would have received under the
directors' retirement plan that was terminated when this program was
established in 1996.
On November 30, 1994, the Company entered into an agreement with Mr. DeVito
in connection with his retirement as Chief Executive Officer and retirement
from employment with the Company (the "Retirement Agreement"). Under the
Retirement Agreement, Mr. DeVito served as Chairman of the Board of Directors
of the Company during 1996. In that capacity, Mr. DeVito presided over
meetings of the Board of Directors and stockholders of the Company, served as
Chairman of the Executive Committee and a member of the Audit Committee of the
Board, and oversaw the Contributions Committee of the Company. Mr. DeVito also
was available to consult with management of the Company and undertake certain
specific advisory services at the request of the Board of Directors or the
Chief Executive Officer. For his services as Chairman of the Board as
described above, and in lieu of any other directors' fees, Mr. DeVito received
a fee of $100,000 for 1996. The Company also provided appropriate office space
and secretarial and other support to Mr. DeVito and reimbursed him for
expenses incurred in connection with his responsibilities as Chairman.
David H. Benson is a member of the Board of Kleinwort Benson Group plc
(together with its subsidiaries and affiliates, "Kleinwort Benson"), and his
interest in the matters described below arises solely from such position. The
Company has investment banking relationships with Kleinwort Benson under which
the Company maintains a revolving credit facility with Kleinwort Benson and is
indebted to Kleinwort Benson for certain loans. In addition, Kleinwort Benson
assists from time to time in obtaining various forms of financing for the
Company.
Rohit M. Desai is Chairman of the Board and President and the sole
stockholder of Desai Capital Management Incorporated ("DCMI"), a specialized
investment firm that manages assets of various institutional clients. Mr.
Desai's interest in the transaction described below arises solely from these
relationships, and DCMI received only its standard advisory compensation in
connection with the transaction.
On January 10, 1997, the Company purchased 325,000 shares of Company Common
Stock for an aggregate price of $9,593,025 from Equity-Linked Investors, L.P.
("ELI"), an investment partnership for which DCMI is the investment manager.
The purchase price for the shares was based on the average closing price of
Company Common Stock for the 15 consecutive trading days ending at the close
of business on January 6, 1997. The methodology for establishing the purchase
price for the stock was approved by the Audit Committee of the Company's Board
of Directors at its meeting on November 19, 1996. Mr. Desai, who is Chairman
of the Audit Committee, was not present during the discussion or approval of
the transaction by the Audit Committee.
The Company purchased such stock in anticipation of its obligation to
distribute stock under the Contingent Stock Agreement executed in connection
with the acquisition of The Hughes Corporation. On March 3, 1997,
18
<PAGE>
591,857 shares of Company stock were distributed to the former owners of The
Hughes Corporation, which included all of the stock which the Company had
acquired from ELI-I. The sale by ELI-I was a result of an ordinary wind down
under the terms of the ELI partnership agreement.
Transactions between the Company and certain companies with which Jeremiah
E. Casey is associated are described under "Compensation Committee Interlocks
and Insider Participation" below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
During 1996, Jeremiah E. Casey, Juanita T. James, Thomas J. McHugh and
Alexander B. Trowbridge served on the Personnel Committee, which Committee has
certain responsibilities relating to the compensation of executive officers of
the Company. See "Personnel Committee Report on Executive Officer
Compensation" above.
Mr. Casey is Chairman of the Board of First Maryland Bancorp and its
principal subsidiary The First National Bank of Maryland (the "Bank"). The
Company maintains various banking relationships with the Bank involving
depositary accounts, the issuance of letters of credit, the purchase of short-
term, high quality money market instruments from the Bank and other cash
management services. Subsidiaries and affiliates of the Company also are
indebted to the Bank for certain loans. In addition, the Bank leases space at
various locations in Maryland from subsidiaries and affiliates of the Company.
Mr. Casey's interest in these matters arises solely from the positions he
holds with the Bank and its parent, First Maryland Bancorp.
PROPOSAL TO AUTHORIZE THE ISSUANCE OF COMMON STOCK
UNDER THE CONTINGENT STOCK AGREEMENT RELATING
TO THE HUGHES ACQUISITION
On June 12, 1996, the Company completed the acquisition, through merger, of
The Hughes Corporation and its affiliated partnership, Howard Hughes
Properties, Limited Partnership (collectively "Hughes"), from the heirs of the
late Howard R. Hughes, Jr. and others (collectively, the "Hughes Owners"). As
part of the purchase price, the Company issued to the Hughes Owners 7,742,884
shares of the Company's Common Stock, par value $0.01 per share (the "Common
Stock"). In addition, the Company entered into an agreement (the "Contingent
Stock Agreement") pursuant to which additional shares of Common Stock, or
under certain circumstances, a new class of Company Preferred Stock
denominated the Increasing Rate Cumulative Preferred Stock, par value $0.01
per share (the "Increasing Rate Preferred Stock"), may be issued to the Hughes
Owners over a 14-year period ending in 2009. The number of shares of Common
Stock or Increasing Rate Preferred Stock that may be issued (collectively, the
"Contingent Shares") will be determined on the basis of the excess cash flow
from and the appraised value of certain of the assets acquired from Hughes
(the "Business Units").
The Company believes that it is in the best economic interests of the
Company and its stockholders to issue Common Stock rather than Increasing Rate
Preferred Stock as Contingent Shares. The stockholder approvals requested
below are necessary to assure that only Common Stock will be issued as
Contingent Shares.
The rules of the New York Stock Exchange provide that if the aggregate
number of shares of Common Stock to be issued in any transaction or series of
related transactions will equal or exceed 20% of the number of
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shares of Common Stock outstanding immediately prior to any such issuance,
stockholder approval of the plan or arrangement governing the issuance of such
shares must be obtained as a prerequisite to the listing on the New York Stock
Exchange of any such shares exceeding the 20% limit. The aggregate number of
shares that were issued to the Hughes Owners on June 12, 1996 (the "Merger
Date") equal approximately 16.1% of the number of shares of Common Stock that
were outstanding immediately prior to the Merger Date.
It is very likely that the aggregate number of shares of Common Stock that
may be issued in the future as Contingent Shares pursuant to the terms of the
Contingent Stock Agreement, when added to the number of shares of Common Stock
that were issued on the Merger Date, will equal or exceed 20% of the number of
shares of Common Stock outstanding immediately prior to the Merger Date. As a
result, stockholder approval is required for the issuance of shares of Common
Stock under the Contingent Stock Agreement (the "Stock Issuance Approval").
The Contingent Stock Agreement provides that if the Company is precluded for
any reason from delivering shares of Common Stock that are required to be
issued under the Contingent Stock Agreement, including because the Company
does not obtain the Stock Issuance Approval, the Company will be required to
deliver in lieu thereof shares of Increasing Rate Preferred Stock. Shares of
Increasing Rate Preferred Stock are issuable only to the Hughes Owners, and no
shares are currently issued and outstanding.
As detailed below, the cost to the Company of issuing Common Stock as
Contingent Shares is substantially less than the cost of issuing Increasing
Rate Preferred Stock, and the holders of Increasing Rate Preferred Stock have
certain veto rights that may be detrimental to the Company. Specifically, the
value of the shares of Common Stock that must be issued as Contingent Shares
and the related dividends are less than the value of the shares of Increasing
Rate Preferred Stock that would have to be issued and the related dividends.
In addition, the holders of the Increasing Rate Preferred Stock may require
the Company to redeem their shares for cash, while Common Stock holders have
no redemption rights. Moreover, the holders of Increasing Rate Preferred Stock
have veto rights with respect to a number of important actions that the
Company may wish to take, including the payment of dividends on Common Stock
and the issuance of additional Preferred Stock that ranks on parity with or
senior to the Increasing Rate Preferred Stock. A comparison of the significant
terms of the Common Stock and Increasing Rate Preferred Stock follows:
1. Value of Shares--Under the Contingent Stock Agreement, the Company must
distribute semiannually to the Hughes Owners shares of Common Stock having a
value equal to 100% of the excess cash flow from the Business Units. In
addition, the assets in the Business Units will be valued at specific dates
(the "Valuation Dates") ranging from five to 14 years after the Merger Date,
and shares of Common Stock having an equal value must be distributed to the
Hughes Owners at that time.
If the Company is required to distribute Increasing Rate Preferred Stock,
the Increasing Rate Preferred Stock must have a value equal to 125% of the
excess cash flow from the Business Units and 125% of the value of the Business
Units at the Valuation Dates.
2. Dividends--The dividend on the Common Stock is determined by the
Company's Board of Directors in its discretion. The annual dividend rate on
the Common Stock is 3.33% based on the $.25 per share dividend declared in the
first quarter of 1997 and a share price of $30.00 on March 5, 1997.
As of March 5, 1997 the annual dividend rate of the Increasing Rate
Preferred Stock would be approximately 12.5%. Dividends on the Increasing Rate
Preferred Stock would initially be payable at an annual
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rate equal to a base rate determined by a nationally recognized investment
banking firm (the "Base Rate") plus 3.5% (the "Dividend Rate"). The Base Rate
would be the rate at which the Company would be able to successfully sell the
Company's perpetual preferred stock at par in a private placement transaction.
Alex. Brown & Sons Incorporated indicates that the Base Rate as of March 5,
1997 would be approximately 9%. The Base Rate would be reset for each dividend
period, and following the first dividend payment date, the dividend rate would
be increased by 0.50% on each successive dividend payment date, which could
substantially increase the dividend rate over time.
3. Veto Rights--Holders of Common Stock have none of the veto rights of the
holders of the Increasing Rate Preferred Stock described below.
While any shares of Increasing Rate Preferred Stock are outstanding, the
Company must obtain the consent of the holders of at least 66 2/3% of the
outstanding shares of Increasing Rate Preferred Stock or the consent of the
representatives of the Hughes Owners appointed under the Contingent Stock
Agreement (the "Representatives") with respect to a number of matters. Such
consent must be obtained, for example, (i) to issue any capital stock of the
Company ranking on a parity with ("Parity Stock") or prior to the Increasing
Rate Preferred Stock as to payment of dividends or liquidation amounts; (ii)
to pay cash dividends on Common Stock or any other capital stock of the
Company ranking junior to the Increasing Rate Preferred Stock as to payment of
dividends or liquidation amounts ("Junior Stock") or to make any other
distribution on or with respect to shares of Junior Stock, (iii) to pay cash
or in kind dividends on shares of Parity Stock or to make any other
distribution on or with respect to Parity Stock, unless a proportionate
dividend on the Increasing Rate Preferred Stock is ratably distributed or (iv)
to acquire any shares of Common Stock or other Junior Stock (other than Common
Stock in connection with an exchange of shares of Common Stock for shares of
Increasing Rate Preferred Stock).
4. Redemption Rights--Holders of Common Stock have no redemption rights.
Holders of Increasing Rate Preferred Stock who have held such stock for one
year may require the Company to redeem their shares for cash on any dividend
payment date.
SINCE IT IS IN THE BEST ECONOMIC INTERESTS OF THE COMPANY AND ITS
SHAREHOLDERS TO ISSUE COMMON STOCK RATHER THAN INCREASING RATE PREFERRED STOCK
AS CONTINGENT SHARES, THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE
FOR THE STOCK ISSUANCE APPROVAL. A resolution substantially in the form set
forth as Exhibit A will be submitted to stockholders for adoption.
PROPOSAL TO APPROVE THE ADOPTION OF
THE ROUSE COMPANY 1997 STOCK INCENTIVE PLAN
Frederic W. Cook & Co., Inc. (the "Compensation Consultant"), a leading
consultant on compensation practices, has made recommendations to Management
as part of an overall review of the Company's incentive compensation program.
The Compensation Consultant recommended that the Company adopt a new stock
incentive plan under which 5,000,000 shares of Common Stock could be issued to
directors and to officers and other key employees of the Company over the next
five to seven years as long-term incentive compensation.
Consistent with the Compensation Consultant's recommendations, on February
25, 1997, the Board of Directors adopted The Rouse Company 1997 Stock
Incentive Plan (the "Plan") contained in Exhibit B, subject to approval by
Common Stock holders at the next Annual Meeting or any adjournment or
adjournments thereof.
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The Plan will supplement the Company's 1990 and 1994 stock plans, which,
although they have not expired, have available only 35,000 shares for stock
bonus and stock option awards. It is the judgment of the Board of Directors
that stock awards made under the 1990 and 1994 Plans have been an effective
and efficient means of attracting, retaining and motivating officers and other
key employees.
The Plan contains the principal features of the 1994 Stock Incentive Plan,
while shifting overall responsibility for administration of the Plan to the
Personnel Committee of the Board of Directors. Currently, the Personnel
Committee grants stock options, while the Board makes bonus stock awards.
Recent changes in Maryland corporate law make it permissible to centralize all
stock compensation decisions in the Personnel Committee, and the new Plan
reflects this approach. Thus, the Personnel Committee would have full
discretion as Administrator of the Plan to grant bonuses of Common Stock for
past services, with or without additional consideration, to key officers and
certain other employees of the Company. The Administrator, in its full
discretion, could establish such conditions or restrictions on the grants as
it deems appropriate, such as that the grants vest only if the person
continues to be employed by the Company or meets other conditions established
by the Administrator. The Administrator also could provide loans in connection
with stock grants.
The Plan authorizes stock awards to officers and other key employees in the
form of stock options, bonus stock, stock appreciation rights and stock-
equivalent units. In addition, the Plan provides for stock option grants to
the Company's non-employee directors. A maximum of 5,000,000 shares may be
awarded under the Plan. The closing price of Company Common Stock on February
24, 1997 was $29.125 per share. Significant provisions of the Plan are:
1. The number of shares of Common Stock that may be issued pursuant to
the Plan will not exceed 5,000,000 shares, except that, unless the Board of
Directors expressly determines otherwise, the maximum number of shares will
be adjusted automatically to reflect stock dividends, stock splits,
recapitalizations and the like.
2. The Plan is to be administered by a committee of the Board (the
"Personnel Committee") appointed by the Board of Directors and consisting
of not less than one director. In addition, the Chairman of the Board and
Chief Executive Officer, acting as a Board Committee, may grant stock
options for an aggregate of up to 50,000 shares per year. This new feature
would permit the Chairman of the Board and Chief Executive Officer to grant
stock options to reward instances of exceptional performance by a
particular employee on a timely basis.
References in this proxy statement to the "Administrator" are to the
Personnel Committee or the Chief Executive Officer, as applicable.
3. The Administrator is authorized to determine which officers and other
key employees will be granted stock awards, whether in the form of stock
options, stock appreciation rights, bonus stock or stock-equivalent units.
The Administrator also is to determine the number of shares covered by each
award and the terms and conditions of the awards, including the vesting
provisions, if any. At December 31, 1996, there were 149 officers of the
Company and its affiliates and a total of approximately 200 key employees,
including officers of the Company and its affiliates. Under the Plan, the
Administrator has discretion to determine which employees will receive
stock awards.
4. No individual may receive awards under the Plan totaling more than
900,000 for all types of stock awards cumulatively, except that, unless the
Board of Directors expressly determines otherwise, the maximum number of
shares will be adjusted automatically to reflect stock dividends, stock
splits, recapitalizations and the like.
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5. Except as otherwise provided in this paragraph or as may be imposed by
the Administrator, the minimum vesting period is six months after the date
of grant. If an award holder's employment with the Company is terminated
for cause, the remaining portion of the award is canceled, including the
unexercised portion of any stock option. Upon the death, disability or
retirement after attaining age 62 (the normal retirement age for Company
employees) of an award holder or the termination of an award holder's
employment under specific circumstances defined by the Administrator (which
may include a discharge without good cause, including a change in control
of the Company), the entire award vests and becomes exercisable. Stock
options and other awards will be transferable for the benefit of members of
a grantee's immediate family.
6. With respect to stock options, an option generally may be exercised
not earlier than 6 months nor later than 10 years after the date of grant,
as determined by the Administrator. An option generally is exercisable for
the full term specified in the grant, except that an option is exercisable
for only one year following a voluntary termination of employment other
than at normal retirement or a termination of employment due to a discharge
without good cause other than as a result of a reduction in force. The
option price is as determined by the Administrator and is generally the
fair market value of the Common Stock, which may, but need not, be based on
the New York Stock Exchange ("NYSE") closing price the day before the
grant. The option price may be paid to the Company by the option holder in
any medium as specified by the Administrator and must be paid to the
Company prior to delivery of the stock.
7. With respect to bonus stock, shares may be issued for or without cash
consideration for past services rendered to the Company or its subsidiaries
or affiliates. Awards may be restricted and subject to such terms and
conditions as the Administrator deems appropriate.
8. The Administrator may grant stock appreciation rights or stock-
equivalent units. Stock appreciation rights (which have been authorized in
previously approved plans but have not been granted to date) enable a
person to receive stock, cash or a combination of stock and cash equal to
the difference between the grant price and the market value of the Common
Stock on the date of exercise of the right. Stock appreciation rights thus
give the holder the functional equivalent of a stock option, while
eliminating the need for a recipient to finance the exercise of an option.
Stock-equivalent units (which also have not been granted to date) enable a
person to receive stock, cash or a combination of stock and cash equal to a
specific number of shares of Common Stock. Stock-equivalent units thus may
be the functional equivalent of either bonus stock grants or stock options.
9. In the Administrator's discretion, vesting of a stock award may be
based on the Company's performance with respect to one or more of the
following business criteria (or the functional equivalent thereof) relating
to the Company, or any division or subdivision thereof: Earnings Before
Depreciation and Deferred Taxes from Operations, Earnings Before
Depreciation and Deferred Taxes from Operating Properties, Income from
Operations, Current Value Shareholders' Equity, revenues, land sales,
acquisitions or dispositions of assets, corporate liquidity, financing
activities, budgets, leasing and development projects. This provision is in
response to potential federal tax law limitations affecting the
deductibility of compensation expense relating to the Chief Executive
Officer and the four other most highly compensated Company employees. Stock
awards that meet certain requirements, including vesting based on pre-
established objective performance goals, are exempt from the deductibility
limitations.
10. The Company or any of its subsidiaries or affiliates may lend money
to any officer or employee or guarantee a loan from a third party to an
officer or employee in connection with a stock award.
11. The Administrator may offer an award holder the opportunity to
surrender an award for cancellation and receive, in return, securities of
the Company or cash, or any combination thereof for such payment as the
Administrator specifies.
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12. Unless the Administrator determines otherwise, an employee may have
the Company retain or accept a sufficient number of shares of Common Stock
or other securities issued by the Company in connection with the grant or
exercise of an award, a sale of the underlying shares or the receipt or
forgiveness of a related loan to satisfy the Company's tax withholding
obligations or the employee's tax liabilities with respect to such
transactions.
13. With respect to non-employee directors, stock options may be granted
under Article VII of the Plan on the same terms as under the 1994 Stock
Incentive Plan. Article VII establishes fixed rules for the timing, pricing
and amount of options to be granted. Each new director will initially be
granted an option to purchase 5,000 shares of Common Stock on the date of
his or her election. Upon re-election at each annual meeting, each director
will be granted an additional option to purchase 1,000 shares of Common
Stock.
The exercise price of options that are granted to directors will be the
fair market value of Common Stock based on the NYSE closing price the day
before the grant. The minimum vesting period will be six months, except
that options will automatically vest upon death, disability, retirement as
a director at age 70 or a change in control of the Company. The exercise
period generally will be 10 years. All terms of the option other than the
timing, pricing and amount of options to be granted to non-employee
directors will be determined by the Administrator.
14. The Administrator may amend, modify or terminate the Plan or waive
any of its provisions, subject to the limitations contained in Article IX
of the Plan.
15. The Plan becomes effective as of February 25, 1997 and terminates as
of February 25, 2007, but any stock awards granted prior to termination may
be exercised according to their terms.
On February 25, 1997, the Board of Directors granted options for a total of
632,400 shares of Common Stock under the Plan to officers of the Company
(including options for 100,000 shares to Anthony W. Deering, Chairman of the
Board, President and Chief Executive Officer of the Company) and other key
employees. In addition, under the terms of the Plan as described in paragraph
13 above, each of the 11 non-employee directors will receive an option grant
for 1,000 shares upon his or her re-election at the next annual meeting and at
each subsequent annual meeting. All option grants described in this paragraph
are subject to the approval of the Plan by the stockholders at the next Annual
Meeting.
With the exception of the option grants described in the immediately
preceding paragraph, it has not been determined at this time who will be
selected to receive stock awards or the amount of stock to be awarded to any
person other than the non-employee directors. The Administrator will make
these determinations on the basis of the individual's responsibilities, his or
her present and potential contribution to the success of the Company as
indicated by an evaluation of the position occupied and past, present and
expected future performance, and other relevant factors. Among those who
qualify as recipients are officers and other key employees in executive,
administrative, professional and technical positions of the Company and its
subsidiaries and affiliates.
A resolution substantially in the form set forth as Exhibit C will be
submitted to stockholders for adoption.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RESOLUTION.
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TAX ASPECTS--1997 STOCK INCENTIVE PLAN
The following is a brief summary of the significant aspects of current
federal income tax treatment under the Internal Revenue Code of 1986 (the
"Code") and regulations promulgated thereunder of the stock options, stock
appreciation rights, bonus stock awards and stock-equivalent units that may be
granted under the 1997 Stock Incentive Plan. This summary does not cover the
federal tax effects if the described conditions are not met.
Incentive Stock Options: Incentive stock options under the Plan are intended
to meet the requirements of Section 422 of the Code. No tax consequences
result from the grant of the option. If an option holder acquires stock upon
the exercise of the option, no income will be recognized by the option holder
for ordinary income tax purposes (although the difference between the option
exercise price and the fair market value of the stock subject to the option
may result in alternative minimum tax liability to the option holder) and the
Company will be allowed no deduction as a result of such exercise, if the
following conditions are met: (a) at all times during the period beginning
with the date of the granting of the option and ending on the day three months
before the date of such exercise, the option holder is an employee of the
Company or a subsidiary; and (b) the option holder makes no disposition of the
stock within two years from the date the option is granted nor within one year
after the stock is transferred to the option holder. The three-month period is
extended to one year in the event of disability and is waived in the event of
death of the employee. In the event of a sale of such stock by the option
holder after compliance with these conditions, any gain realized over the
price paid for the stock ordinarily will be treated as long-term capital gain,
and any loss will be treated as long-term capital loss, in the year of the
sale.
If the option holder fails to comply with the employment requirement
discussed above, the option will be treated as a non-qualified stock option,
the tax consequences of which are described below. If the option holder fails
to comply with the holding period requirements discussed above, the option
holder will recognize ordinary income in an amount equal to the lesser of (i)
the excess of the fair market value of the stock on the date the option was
exercised over the exercise price or (ii) the excess of the amount realized
upon such disposition over the exercise price. Any additional gain will be
long-term or short-term capital gain, depending upon whether or not the shares
were held for more than one year following the date of exercise. If the option
holder is treated as having received ordinary income because of this failure
to comply with either condition above, an equivalent deduction will be allowed
to the Company in the same year.
Non-Qualified Stock Options: No tax consequences result from the grant of
the option. An option holder who exercises a non-qualified stock option with
cash generally will realize compensation taxable as ordinary income in an
amount equal to the difference between the option price and the fair market
value of the shares on the date of exercise, and the Company will be entitled
to a deduction from income in the same amount in the fiscal year in which the
exercise occurred. Option holders subject to Section 16 of the Securities
Exchange Act of 1934 generally will recognize income at the time the option is
exercised; however, under limited circumstances such an option holder may not
recognize income until six months after the grant date of the option or
another non-exempt transaction in the Common Stock of the Company. The option
holder's basis in such shares will be the fair market value on the date income
is realized, and when he or she disposes of the shares, he or she will
recognize capital gain or loss, either long-term or short-term, depending on
the holding period of the shares.
Stock Appreciation Rights: The grant of a stock appreciation right will not
result in income tax consequences to the Company or to the grantee. A grantee
who exercises a stock appreciation right will realize
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compensation taxable as ordinary income in an amount equal to the cash or the
fair market value of the shares received on the date of exercise, and the
Company will be entitled to a deduction in the same amount.
Stock Awards: Stock awards (or bonus stock awards) granted under the Plan
and paid in Common Stock generally will constitute ordinary income to the
recipient and a deductible expense to the Company, in the year paid if the
stock is then transferable and not subject to forfeiture restrictions or in
the first year in which transfer or forfeiture restrictions lapse unless the
participant elects to recognize income in the year the stock is received by
making a timely election under Section 83(b) of the Code. Unless such an
election is made, the amount of the taxable income and corresponding deduction
for the Company will be equal to the fair market value of the stock on the
date the restrictions lapse. Stock awards structured as stock equivalent units
and payable in cash or in Common Stock will be treated for federal income tax
purposes in substantially the same manner as stock appreciation rights.
Deductibility of Certain Executive Compensation Expense Under Federal Tax
Laws: Under certain circumstances, the Code disallows compensation deductions
in excess of $1,000,000 for any year with respect to the Company's Chief
Executive Officer and its four other most highly compensated officers.
Compensation payable under certain performance-based compensation arrangements
is not subject to the deduction limitation if the performance goals are
objective, pre-established and determined by a compensation committee
comprised solely of two or more outside directors, the material terms under
which the compensation is to be paid are disclosed to the shareholders and
approved by a majority vote, and the compensation committee certifies that the
performance goals and other material terms were in fact satisfied before
amounts are paid.
The Company expects that this provision will not limit its tax deductions
for executive compensation under the Plan in the near term. In addition, as
noted in the Personnel Committee Report on Executive Compensation above, the
Personnel Committee of the Board of Directors has determined that, if the
Company's shareholders approve the Plan at the 1997 Annual Meeting of
Shareholders, the provisions of the Plan should enable the Company to comply,
to the extent deemed desirable, with the Code's requirements for performance-
based compensation with respect to stock awards made under the Plan.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
The Company provides all stockholders with the opportunity, under certain
circumstances and consistent with SEC Rule 14a-8, to participate in the
governance of the Company by submitting proposals that they believe merit
consideration at the annual meeting of stockholders to be held in May, 1998.
To enable management adequately to analyze and respond to proposals and to
prepare appropriate proposals for presentation in the Company's Proxy
Statement for the 1998 annual meeting, any such proposal must be received by
the Company by December 15, 1997, addressed to the attention of its Secretary
at its principal place of business in Columbia, Maryland.
ACCOUNTING MATTERS
The Board of Directors first appointed KPMG Peat Marwick LLP as its auditors
in December, 1956. The audit services rendered by KPMG Peat Marwick LLP for
the fiscal year ended December 31, 1996 included: examination of the financial
statements of the Company and its subsidiaries, review of unaudited quarterly
financial information, consultation in connection with the preparation of the
Annual Report to Stockholders and
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the filing of the Form 10-K Annual Report with the Securities and Exchange
Commission, issuance of reports of compliance with debt and other agreements,
and consultation with Company personnel on accounting and related matters.
Representatives of KPMG Peat Marwick LLP will attend the Annual Meeting of
Stockholders, will have an opportunity to make a statement and will be
available to respond to appropriate questions submitted by stockholders.
OTHER MATTERS
Management is not aware of any other matters that will be brought before the
meeting. If any matters properly come before the meeting, including, but not
limited to, the election of one or more persons to fill any vacancy that
exists on the Board of Directors at the time of the meeting or any adjournment
or adjournments thereof, the proxy holders will vote in accordance with their
judgment as to the best interests of the Company with respect to such matters.
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EXHIBIT A
The Board of Directors recommends a vote FOR the following resolution:
RESOLVED, that The Rouse Company (the "Company") is authorized to issue
Common Stock, par value $0.01 per share (the "Common Stock"), of the Company
under the Contingent Stock Agreement, effective as of January 1, 1996, by the
Company in favor of and for the benefit of the Holders and the Representatives
(as such terms are defined therein) in amounts equal to or in excess of
(i) shares having 20% of the voting power outstanding immediately prior to
June 12, 1996 and (ii) shares in excess of 20% of the number of shares of
Common Stock outstanding immediately prior to June 12, 1996.
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EXHIBIT B
THE ROUSE COMPANY
1997 STOCK INCENTIVE PLAN
PURPOSE
The purpose of The Rouse Company 1997 Stock Incentive Plan (the "Plan") is
to advance the interests of The Rouse Company (together with all present and
future subsidiaries and affiliates which meet the definition of "subsidiary"
contained in Section 424(f) of the Internal Revenue Code of 1986 (the "Code"),
or any successor provision thereto, referred to as the "Company") and its
stockholders by affording its directors, officers and key employees, upon
whose judgment, initiative and efforts the Company is largely dependent for
the successful conduct of its business, with the additional incentives arising
from increased opportunity for equity ownership in the Company. Awards granted
under the Plan may consist of options, stock appreciation rights ("Rights") or
stock awards. Awards may be granted separately or in tandem with any other
type of award.
ARTICLE I
ADMINISTRATION
(a) The administrator of the Plan or any portion of the Plan (the
"Administrator") shall be the Board of Directors or such committee or
committees (referred to individually and in the aggregate as the "Committee")
of not less than one director as may be appointed by the Board of Directors
from time to time to administer all or certain portions of the Plan. The
Administrator of the awards under the Plan initially shall be the Personnel
Committee of the Board of Directors (the "Personnel Committee"), provided,
however, that the Chief Executive Officer of the Company, serving as a one-
person Committee of the Board of Directors, is authorized to make awards under
Articles IV and V of the Plan with respect to an aggregate of up to 50,000
shares of Common Stock (as defined below) per year.
(b) Subject to the express provisions of the Plan, the Administrator shall
have the authority:
(1) to determine the individuals to whom and the time or times at which
awards under the Plan shall be made, the number of shares to be covered by
each award and all other terms and conditions of the awards;
(2) to interpret the Plan and to prescribe, amend and rescind rules and
regulations relating to it;
(3) to determine the terms and provisions of the respective documents
evidencing awards under the Plan (which need not be identical);
(4) except as provided in Article VII, to determine, for purposes of the
Plan, the fair market value (the "Fair Market Value") at any time of a
share of the Company's common stock (the "Common Stock"), such
determination of Fair Market Value to be in accordance with such standard
as the Administrator by rule of general application or specific
determination selects as reasonably representative of the fair market value
of the Common Stock, but in no case less than par value. The Fair Market
Value may, but need not, be equal to the last sale price, regular way, for
Common Stock for the business day immediately preceding the date the option
is granted or the determination otherwise is made, as reported on the New
York Stock Exchange composite tape or, if the Company's Common Stock is not
traded on the New York Stock Exchange, on the National Association of
Securities Dealers Automated Quotation ("Nasdaq") National
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Market System, or the exchange on which the Company's Common Stock is
principally traded or, if no such sale price is reported for such day, the
first preceding business day for which a sale price for Common Stock is
reported;
(5) to accelerate the time in which such award may be exercised, to
waive, in whole or in part, any restriction with respect to such award,
including with respect to any option or Right issued under the Plan, any
restriction with respect to the exercisability of such award, and to amend
or modify any award in any manner not inconsistent with the terms of the
Plan at the time of such amendment or modification, provided that no such
modification or amendment may materially adversely affect the terms of any
award without the consent of the holder thereof;
(6) to offer to an award holder the opportunity, at such time and on such
terms and conditions as the Administrator prescribes, to surrender his or
her award to the Company for cancellation and to receive in consideration
therefore or in lieu thereof, other awards, cash, securities of the Company
or a combination thereof, as the Administrator determines; and
(7) to make all other determinations and to take all other actions deemed
necessary or advisable for the administration of the Plan.
(c) The Committee shall select one of its members as its chairman and shall
hold its meetings at such times and places as it deems advisable, including by
telephone. A majority of its members shall constitute a quorum. All decisions
of the Committee shall be made by a majority of those present, whether in
person or by telephone. Any action required or permitted to be taken at any
meeting of the Committee may be taken without a meeting if a written consent
to such action is signed by all members of the Committee and such written
consent is filed with the minutes of the proceedings of the Committee. The
effective date of any decision shall be the actual date of the decision,
unless the Committee establishes a different effective date, which may be
either before or after the actual date of the decision. The Committee may
appoint a secretary (who may, but need not be a member of the Committee),
shall keep minutes of its meetings, and shall make such rules and regulations
for the conduct of its business as it deems advisable including changes to the
rules and regulations set forth above.
(d) No member of the Board of Directors or the Committee shall be liable for
any action or determination made under the Plan in good faith, nor for any
matter as to which the Company's charter limits the liability of directors.
Such members shall be entitled to indemnification and reimbursement in the
manner provided in the Company's charter or bylaws and under any directors'
and officers' liability insurance coverage that is in effect from time to
time.
ARTICLE II
PARTICIPATION IN THE PLAN
(a) Except as provided in Article VII, participation in the Plan shall be
limited to such officers and other key employees of the Company as the
Administrator designates.
(b) Directors who are not employees of the Company shall be eligible to
participate in the Plan as provided in Article VII.
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ARTICLE III
COMMON STOCK SUBJECT TO THE PLAN
(a) Subject to the provisions of Sections (c), (d) and (e) of this Article,
the maximum number of shares of Common Stock that may be issued under the Plan
shall be 5,000,000 shares. The total number of shares of Common Stock subject
to issuance under the Plan, and any balance remaining unoptioned or unawarded,
shall be reserved for those purposes during the life of the Plan.
(b) Subject to the provisions of Sections (d) and (e) of this Article,
during the term of the Plan, no person shall be eligible to receive under this
Plan an award or awards for, in the aggregate, more than 900,000 shares of
Common Stock.
(c) Except with respect to option grants under Article VII, the exercise or
purchase price for any award shall be payable (i) in U.S. dollars in cash or
by wire transfer, check, bank draft or money order payable to the Company,
(ii) in the discretion of the Administrator, through the delivery of Common
Stock or other securities issued by the Company with a Fair Market Value on
the date the award is exercised or purchased equal to the total amount due,
(iii) by a combination of the methods described in (i) and (ii), or (iv)
through such other means as may be acceptable to the Administrator. No shares
shall be delivered until full payment of any amount due has been made to the
Company. A holder of an award shall have none of the rights of a stockholder
until the shares are issued to him.
(d) Unless the Administrator expressly determines otherwise, if the capital
stock of the Company changes as a result of stock dividends, stock splits,
split-ups, recapitalization or the like, proportionate adjustments shall
automatically be made in the maximum number of shares of Common Stock
authorized for awards under Section (a) of this Article, the number and kind
of shares reserved for awards under the Plan, the number, kind and price of
shares covered by outstanding awards, the maximum number of shares under
Section (b) of this Article that may be awarded to any one person, and the
minimum number of shares as to which options and Rights shall be exercisable
at any one time. Fractional shares resulting from any such adjustment shall be
eliminated. Unless the Administrator expressly determines otherwise, any
adjustments under this Section (d) shall be effective on the effective date of
the event giving rise to such adjustment.
(e) If the outstanding shares of Common Stock are changed into or exchanged
for a different number or kind of shares or other securities or property
(including cash) of the Company or of another corporation for any reason,
including by reason of reorganization, merger, sale or transfer of all or
substantially all of the Company's assets to another corporation, or exchange
of shares or consolidation, the Administrator shall make appropriate
adjustments in the number and kind of shares, other securities or property for
which awards may be granted under the Plan, including the maximum number that
may be granted to any participant and the number and kind of shares to be
covered by options granted pursuant to Article VII. In addition, the
Administrator shall make appropriate adjustments in the number, kind and price
of shares, other securities or property as to which outstanding awards shall
be exercisable or payable. If any event giving rise to an adjustment involves
an election afforded stockholders to receive cash or some security or other
property, then such adjustment shall be made as if only cash were available to
stockholders; the amount of cash used in determining the appropriate
adjustment shall be the amount of cash per share provided by such election or
such higher per share amount, if any, as the Administrator determines to be
the fair market value of the security or other property available to
stockholders pursuant to the election. Unless the Administrator expressly
determines otherwise, any adjustment or determination made by the
Administrator under this Section (e) shall be effective on the effective date
of the event giving rise to such adjustment or determination and shall be
conclusive when made by the Administrator.
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(f) If for any reason an award or portion of an award expires or is
terminated, surrendered for any reason, canceled, forfeited or paid in cash,
the number of shares of Common Stock covered by the award or portion of the
award shall be restored to the number of shares available for awards under the
Plan as if the award or portion of the award had never been issued. If the
exercise price or the amount of taxes due with respect to any award or portion
of an award is paid by the holder thereof in shares of Common Stock or by the
withholding of shares of Common Stock issued or issuable in connection with
such award, then the number of such shares received or withheld by the Company
shall be restored to the number of shares available for awards under the Plan.
Notwithstanding the foregoing, any shares of Common Stock which have been
issued under the Plan or which are received or withheld by the Company in
connection with any award, and any shares which were subject to any award that
was surrendered as a result of the exercise of any related or tandem award,
shall not be available for issuance of any award intended to qualify as an
incentive stock option under Section 422 of the Code.
ARTICLE IV
OPTIONS
The Administrator in its discretion may grant options to any individual who
is eligible to participate in the Plan on such terms and conditions as it
shall, in its discretion, deem advisable. Options granted under this Article
IV may be either incentive stock options intended to qualify under Section 422
of the Code or non-qualified stock options not intended to so qualify,
provided, however, that only employees of the Company are eligible to receive
incentive stock options under the Plan. Unless the Administrator, in its sole
discretion, provides otherwise, the terms and conditions of option grants to
employees shall include the following:
(a) An option shall not be exercisable in whole or in part for at least
six months from the date of grant.
(b) The option exercise price per share shall be the Fair Market Value of
a share of Common Stock.
(c) An option shall vest in its entirety upon the employee's death,
disability, retirement from the Company after attaining age 62 (the normal
retirement age under the Company's Pension Plan) or termination of
employment under circumstances specified by the Administrator (which may
include a discharge without good cause, including a change of control of
the Company).
(d) An option generally shall be exercisable for not more than 10 years
from the date of grant and shall be subject to earlier termination as
provided in the Plan or under the terms of the option grant as established
by the Administrator. An option generally shall be exercisable for the full
term specified in the grant, except that an option shall be exercisable for
only one year following a voluntary termination of employment other than at
normal retirement or a termination of employment due to a discharge without
good cause other than as a result of a reduction in force. If an employee's
employment is terminated for cause, all unexercised rights under his or her
option or options shall expire on the date of such termination.
(e) An option may be exercised from time to time during the option period
in whole or in part, but not as to less than ten shares at any one time. An
employee shall exercise an option in whole or in part by giving written
notice to the Secretary of the Company of his or her intention to purchase
such shares, specifying the number of shares and the date that the purchase
is to occur.
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ARTICLE V
STOCK APPRECIATION RIGHTS
The Administrator, in its sole discretion, may grant Rights to any employee
who is eligible to participate in the Plan. A grant of Rights shall be
evidenced by documentation containing such terms and conditions as the
Administrator shall establish, including the following unless the
Administrator, in its sole discretion, provides otherwise:
(a) A Right may relate to a specific option or portion of an option and
may be granted to the option holder at any time prior to the exercise of
such option. The Administrator may fix such waiting periods and exercise
dates for Rights as it deems appropriate, provided that generally no Right
shall be exercisable prior to six months from the date of the grant of the
Right or after the expiration of any option to which it relates.
(b) A Right shall entitle the holder to receive a payment having an
aggregate value equal to the product of (i) the excess of (A) the Fair
Market Value on the exercise date of one share of Common Stock over (B) the
Fair Market Value on the grant date of one share of Common Stock, times
(ii) the number of shares specified by the Right, or portion thereof, which
is exercised. Payment by the Company of the amount receivable upon any
exercise of a Right may be made by the delivery of Common Stock or cash, or
any combination of Common Stock and cash, as determined in the sole
discretion of the Administrator. If upon settlement of the exercise of a
Right the holder is to receive payment in shares of Common Stock, the
number of shares shall be determined by dividing the amount of such payment
by the Fair Market Value of a share of Common Stock on the exercise date.
No fractional shares shall be used for such payment and the Administrator
shall determine whether cash shall be given in lieu of such fractional
shares or whether such fractional shares shall be eliminated.
(c) A Right may be exercised by giving written notice to the Secretary of
the Company. As soon as practicable following receipt of such notice, the
Company shall, without transfer or issue tax, deliver to the person
exercising the Right a certificate or certificates for such shares or, when
so directed by the Administrator, make the required cash payment, or both.
The date the Company receives written notice of an exercise is the exercise
date.
ARTICLE VI
STOCK AWARDS
(a) The Administrator, at any time and from time to time, may authorize the
issuance of Common Stock for past services rendered and at no cost, or for
such payment as the Administrator shall determine, to any employee who is
eligible to participate in the Plan. An award of Common Stock may be
denominated in shares of Common Stock or stock-equivalent units, and may be
paid in Common Stock, in cash, or in a combination of Common Stock and cash.
(b) Stock awards may be granted in lieu of a cash bonus or any other
compensation otherwise payable to an employee, either at the election of the
Administrator or, under rules approved by the Administrator, at the election
of an employee entitled to participate in the Plan.
(c) The Administrator, in its sole discretion, shall establish the terms and
conditions of all stock awards, including the employees who shall be granted
stock awards, the timing of each grant, the circumstances under
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which an award may be forfeited, canceled or terminated, and whether Common
Stock issued pursuant to an award will be restricted or unrestricted. The
Administrator may permit an individual to have the Company retain or accept a
sufficient number of shares of Common Stock in connection with the receipt of
a stock award, the lapse of restrictions with respect to a stock award, the
payment of a stock award, the sale of Common Stock or the receipt or
forgiveness of a loan relating to a stock award, to satisfy the Company's tax
withholding obligations or an employee's tax liabilities with respect to such
transactions.
ARTICLE VII
OPTION GRANTS TO NON-EMPLOYEE DIRECTORS
(a) Each director who is not an employee of the Company ("Non-Employee
Director") who is first elected to the Board of Directors after the effective
date of this Plan shall be granted an option to purchase 5,000 shares of
Common Stock on the date of his or her election. In addition, each Non-
Employee Director shall be granted an option to purchase 1,000 shares of
Common Stock on each date on which he or she is re-elected as a Non-Employee
Director.
(b) The Administrator shall establish the terms and conditions of each
option granted under this Article VII, including the following:
(1) An option shall not be exercisable in whole or in part until six
months from the later of (i) the date of the Annual Meeting of Stockholders
of the Company, or any adjournment thereof, at which the Plan is approved
or (ii) the date of the grant.
(2) The option exercise price per share shall be the Fair Market Value of
a share of Common Stock, which, solely for purposes of this Article VII,
shall be equal to the last sale price, regular way, for Common Stock for
the business day immediately preceding the date such option is granted as
reported on the New York Stock Exchange composite tape or, if the Company's
Common Stock is not traded on the New York Stock Exchange, on the National
Association of Securities Dealers Automated Quotation ("Nasdaq") National
Market System, or the exchange on which the Company's Common Stock is
principally traded, or, if no sale price is reported for such day, the
first preceding business day for which a sale price for Common Stock is
reported.
(3) An option shall vest in its entirety upon the option holder's death,
disability or attainment of age 70 (the mandatory retirement age for
directors of the Company) or upon a change of control of the Company.
(4) An option generally shall be exercisable for not more than 10 years
from the date of grant.
(5) When an option becomes exercisable, it may be exercised from time to
time during the option period in whole or in part, but not as to less than
10 shares at any one time. An option holder shall exercise an option in
whole or in part by giving written notice to the Secretary of the Company
of his or her intention to purchase such shares, specifying the number of
shares and the date that the purchase is to occur.
(6) The option exercise price shall be payable (i) in U.S. dollars in
cash or by wire transfer, check, bank draft or money order payable to the
Company, (ii) through the delivery of Common Stock or other securities
issued by the Company with a Fair Market Value, determined, to the extent
possible, in a manner consistent with Section (b)(2) above, equal to the
total amount due, or (iii) by a combination of the methods described in (i)
and (ii).
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ARTICLE VIII
PERFORMANCE GOALS
The Administrator may, in its sole discretion, cause awards granted under
the Plan to be conditioned upon, vest or become payable on account of the
attainment of performance goals established by the Administrator based on one
or more of the following business criteria (or the functional equivalent
thereof) relating to the Company, or any division or subdivision thereof:
(a) Earnings Before Depreciation and Deferred Taxes ("EBDT") from
Operations;
(b) EBDT from Operating Properties;
(c) Income from Operations;
(d) Current Value Shareholders' Equity;
(e) Revenues;
(f) Land sales;
(g) Acquisitions or dispositions of assets;
(h) Corporate liquidity;
(i) Financing activities;
(j) Budgets;
(k) Leasing; and
(l) Development projects.
ARTICLE IX
AMENDMENT AND DISCONTINUANCE
The Administrator may amend, modify or discontinue the Plan or waive any of
its provisions, except that no such amendment, modification, waiver or
discontinuance shall revoke or alter the terms of any valid award previously
granted in accordance with the Plan without the consent of the award holder.
To the extent necessary to comply with any provision of the Code, no action by
the Administrator that materially modifies the Plan shall become effective
without the approval of the Company's stockholders, except as the
Administrator may otherwise expressly determine.
ARTICLE X
LOAN AUTHORIZATION
The Administrator may authorize the Company or its subsidiaries or
affiliates to grant loans or to guarantee loans from a third party to
employees who are holders of awards in conjunction with such awards, upon such
terms as the Administrator, in its sole discretion, deems appropriate.
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ARTICLE XI
MISCELLANEOUS
(a) The proceeds from the sale of Common Stock pursuant to the Plan shall be
used by the Company for its general corporate purposes.
(b) A holder of an award shall have none of the rights of a stockholder
until the shares are issued to him.
ARTICLE XII
EFFECTIVE DATE AND TERM OF PLAN
The effective date of the Plan shall be February 25, 1997, subject to the
approval by the affirmative vote of a majority of the votes cast in person or
by proxy at the Annual Meeting of the Stockholders of the Company to be held
on May 15, 1997, or any adjournment thereof. The term of the Plan shall be ten
years, and the Plan will terminate on February 25, 2007, unless sooner
terminated by the Administrator.
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EXHIBIT C
The Board of Directors recommends a vote FOR the following resolution:
RESOLVED, that The Rouse Company 1997 Stock Incentive Plan (as set forth in
Exhibit A attached to the Proxy Statement accompanying the Notice of Annual
Meeting of Stockholders of The Rouse Company) is approved.
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THE ROUSE COMPANY
Proxy Solicited on Behalf of the Board of Directors
Annual Meeting of Stockholders--May 15, 1997
The undersigned holder of the Common Stock of The Rouse Company (the
"Company") acknowledges receipt of the Proxy Statement and Notice of Annual
Meeting of Stockholders, dated ______, 1997, and hereby constitutes and appoints
Anthony W. Deering, Chairman of the Board, President and Chief Executive Officer
of the Company, and Bruce I. Rothschild, Vice-President, General Counsel and
Secretary of the Company, or either of them acting singly in the absence of the
other, the true and lawful proxy or proxies for and in the name of the
undersigned to vote the shares of Common Stock that the undersigned is entitled
to vote at the Annual Meeting of Stockholders of the Company to be held on
Thursday, May 15, 1997, and at any adjournment or adjournments thereof:
The Board of Directors recommends a vote FOR the election of all
nominees for directors.
(a) Election of Directors [_] FOR all nominees [_] WITHHOLD VOTE ON
(except as marked all nominees
to the contrary below) listed below
David H. Benson, Jeremiah E. Casey, Anthony W. Deering, Rohit M. Desai, Mathias
J. DeVito, Juanita T. James, William R. Lummis, Thomas J. McHugh, Hanne M.
Merriman, Roger W. Schipke, Alexander B. Trowbridge and Gerard J.M. Vlak.
Instructions: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL (B) BELOW.
---
(b) Consideration of a proposal by the Board of Directors to approve the
issuance of Common Stock under the Contingent Stock Agreement
entered into in connection with the acquisition of The Hughes
Corporation and Howard Hughes Properties, Limited Partnership in
amounts exceeding 20% of the number of shares of Common Stock
outstanding immediately prior to such acquisition.
FOR [_] AGAINST [_] ABSTAIN [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL (C) BELOW.
---
(c) Consideration of a proposal by the Board of Directors to approve The
Rouse company 1997 Stock Incentive Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
(d) IN THEIR DISCRETION on such other matters as may properly come
before the meeting, including, but not limited to, the election of
one or more persons to fill any vacancy that exists on the Board of
Directors at the time of the Annual Meeting of Stockholders or any
adjournment or adjournments thereof.
(continued on reverse side)
<PAGE>
Shares represented by all properly executed proxies will be voted in
accordance with the instructions appearing of this proxy. In the absence of
specific instructions, proxies will be voted FOR the election of Directors; in
accordance with the Board of Directors' recommendations, FOR Proposals (b) and
(c) above; and in the best discretion of the proxy holders as to any other
matters.
Dated:________________________, 1997
______________________________(SEAL)
______________________________(SEAL)
Signature
(Execute proxy exactly as your name
appears on this form. If stock is
registered in more than one name,
each joint owner should sign. When
signing as trustee, executor or
other fiduciary, please so
indicate.)
