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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 14, 1998, 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; and
(b) 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
16, 1998 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 14, 1998
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THE ROUSE COMPANY
10275 LITTLE PATUXENT PARKWAY
COLUMBIA, MARYLAND 21044-3456
PROXY STATEMENT
(FIRST MAILED TO STOCKHOLDERS ON APRIL 14, 1998)
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 14, 1998
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, telecopy 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 $7,500 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.
On March 16, 1998, 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 66,918,591 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.
The Annual Report of the Company, including financial statements for the
fiscal year ended December 31, 1997, has been mailed to all stockholders with
this Proxy Statement. You may receive, without charge, a copy of the Company's
1997 Form 10-K as filed with the Securities and Exchange Commission by
contacting David L. Tripp, Vice President and Director, Investor Relations and
Corporate Communications, The Rouse Company, 10275 Little Patuxent Parkway,
Columbia, Maryland 21044-3456.
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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 recommend an individual for election to
the Company's Board. Mr. Lummis was recommended 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 60, has been a member of the Company's Board since
1987. Mr. Benson is Chairman of the Board of Charter European Trust plc, an
investment management company. Previously, Mr. Benson was Vice Chairman of the
Board of Kleinwort Benson Group plc. Mr. Benson is a director of B. G. plc,
The Dover Corporation, Harrow Corporation, Kleinwort Benson U.S.A. Inc., Leach
International, Inc. and Marshall Cavendish Ltd. He also is a Trustee of both
the Charities Official Investment Fund and the Edward James Foundation.
Jeremiah E. Casey, age 58, 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 Ireland-United States Council for Commerce & Industry, Inc.,
Irish Educational Development Foundation, 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 53, 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;
and Executive Vice President, Finance and Administration 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 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 59, 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, a specialized investment firm managing assets of various
institutional clients. Mr. Desai also is a director of Sunglass Hut
International, Inc., Finlay Enterprises, Inc. and Independence Community Bank.
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Mathias J. DeVito, age 67, 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 First Maryland Bancorp, US Airways, Inc. and US Airways Group, Inc. He is a
member of the Board of the Baltimore Empowerment Management Corporation and a
member of the Advisory Boards of Carlyle Realty Partners, L.P., Equity-Linked
Investors, L.P., Equity-Linked Investors, II and Private Equity Investors III,
L.P. Mr. DeVito also is a Trustee of the Maryland Institute, College of Art.
Juanita T. James, age 45, has been a member of the Company's Board since
1989. Ms. James is Executive Vice President of the Marketing and Editorial
Departments at Doubleday Direct, Inc. Previously, she was Senior Vice
President of Finance and Operations at Doubleday Direct, Inc., 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 the National Urban League. She also is a
Trustee of the Ferguson Public Library and a Director of the Child Care
Center, both in Stamford, Connecticut.
William R. Lummis, age 69, 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 served as
administrator of the Estate of Howard R. Hughes, Jr. from 1976 until 1996,
when the administration of the Estate was concluded. 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 66, has been a member of the Company's Board since
1980. Mr. McHugh is Chairman of McHugh Associates, Inc., a registered
investment adviser. Prior to that, he was President of McHugh Associates, Inc.
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 56, 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. Ms. Merriman is a director of Ameren
Corporation, AnnTaylor Stores Corporation, Central Illinois Public Service
Company, Finlay Enterprises, Inc., T. Rowe Price Mutual Funds, State Farm
Mutual Automobile Insurance Company, and US Airways Group, Inc. She also is a
director of the Children's Hospital, a part of the Children's National Medical
Center, a Trustee of the American-Scandinavian Foundation and a member of the
National Women's Forum.
Roger W. Schipke, age 61, 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.
Alexander B. Trowbridge, age 68, 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 is a
director of The Gillette Co., Harris Corp., ICOS Corp., IRI International
Corp., New England Life Insurance Co., Sun Company, Inc., Sun Resorts
International Ltd., and Waste Management, 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.
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Gerard J. M. Vlak, age 64, has been a member of the Company's Board since
1996. Mr. Vlak is a former member of the Executive Board of Rabobank Nederland
and a former General Manager of North America Amsterdam-Rotterdam Bank. He is
a Trustee of the BJB Investment Funds of Bank Julius Baer. Mr. Vlak also is 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 B. G. plc, and New England 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. Benson (Chairman), Desai, 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 1997.
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 did not meet during 1997.
The Personnel Committee, composed of Messrs. Casey (Chairman), McHugh 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" 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 four meetings during
1997.
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During 1997, the Board of Directors of the Company held eight meetings in
addition to the eight 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. As of
March 16, 1998, one executive officer and one director of the Company
beneficially owned shares of the Series B Convertible Preferred Stock of the
Company. See Footnotes (2) and (10) below.
EQUITY SECURITIES BENEFICIALLY OWNED
ON MARCH 16, 1998
<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............................... 679,942(2) 1.00%
Jeffrey H. Donahue............................... 126,785 (3)
John L. Goolsby.................................. 140,943 (3)
Douglas A. McGregor.............................. 556,375 (3)
Jerome D. Smalley................................ 114,102 (3)
DIRECTORS(4)
David H. Benson.................................. 10,350(4)(5) (3)
Jeremiah E. Casey................................ 12,500(4) (3)
Anthony W. Deering............................... See above See above
Rohit M. Desai................................... 626,674(4)(6) (3)
Mathias J. DeVito................................ 797,471(4)(7) 1.17%
Juanita T. James................................. 9,200(4) (3)
William R. Lummis................................ 130,465(4)(8) (3)
Thomas J. McHugh................................. 19,000(4) (3)
Hanne M. Merriman................................ 9,500(4) (3)
Roger W. Schipke................................. 15,893(4)(10) (3)
Alexander B. Trowbridge.......................... 9,450(4) (3)
Gerard J. M. Vlak................................ 6,000(4) (3)
All executive officers and directors as a group
(22 persons).................................... 4,034,029(9) 5.94%
</TABLE>
5
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<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
Stichting Pensioenfonds ABP........................... 4,593,800(11) 6.86%
Oude Lindestraat 70
Postbus 2980, 6401 DL Heerlen
The Netherlands
Cohen & Steers Capital Management, Inc................ 8,248,000(12) 12.33%
757 Third Avenue
New York, New York 10017
Franklin Resources, Inc............................... 3,799,445(13) 5.70%
P. O. Box 7777
777 Mariners Island Boulevard
San Mateo, California 94403-7777
THC Partners.......................................... 3,877,556(14) 5.79%
c/o Andrews & Kurth, L.L.P.
4200 Texas Commerce Tower
600 Travis Street
Houston, Texas 77002-3090
T. Rowe Price Associates, Inc......................... 3,593,014(15) 5.20%
P.O. Box 17218
100 East Pratt Street
Baltimore, Maryland 21202
</TABLE>
- --------
(1) With respect to the named executive officers of the Company, includes (i)
392,101 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 16, 1998, (ii) with respect to such named executive
officers' accounts under The Rouse Company Savings Plan as of December 31,
1997, 6,081 shares of Common Stock, (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, and (iv) 60,983 shares of Common Stock that are
issuable if the Company's Series B Convertible Preferred Stock that is
beneficially held by a named executive officer were converted. Also
includes 9,600 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 148,316 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 60,983
shares of Common Stock that are issuable upon conversion
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of the 46,500 shares of the Company's Series B Convertible Preferred Stock
that are owned by a Foundation of which Mr. Deering is the Trustee.
(3) Beneficial ownership does not exceed one percent of the shares of Common
Stock outstanding.
(4) Includes 9,000 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 three 1,000-share stock
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, and one 1,000-share stock option grant for 1997. 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
107,850 shares of Common Stock that, as of March 16, 1998, 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 Chairman of the Board of Charter European Trust plc and
is a member of the Board of Kleinwort Benson U.S.A., Inc., which is an
affiliate 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 9,000 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 616,174 shares of Common Stock.
(7) Includes 476,371 shares that are owned by The DeVito Family Limited
Partnership of which Mr. DeVito has an equity interest. Also includes
78,100 shares that are in trusts for Mr. DeVito's descendants and as to
which shares Mr. DeVito has no voting or dispositive power. Additionally,
includes 20,000 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 124,465 shares of Common Stock that represent Mr. Lummis'
interest in THC Partners, a Texas general partnership. THC Partners held
3,877,556 shares of Rouse Company Common Stock at March 16, 1998.
(9) Includes 965,105 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 16, 1998. With respect to executive
officers' accounts under The Rouse Company Savings Plan as of December 31,
1997, includes 31,741 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, and 61,376 shares of Common Stock that are
issuable if the Company's Series B Convertible Preferred Stock that are
attributable to an executive officer and a director of the Company were
converted. Does not include 107,850 shares of Common Stock of the Company
that, as of March 16, 1998, 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) Includes 393 shares of Common Stock that are issuable upon conversion of
the 300 shares of the Company's Series B Convertible Preferred Stock that
are beneficially owned by Mr. Schipke.
7
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(11) Represents shares beneficially held as of March 16, 1998 by Stitchting
Pensioenfonds ABP, 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.
(12) Represents shares beneficially held as of February 6, 1998 by Cohen &
Steers Capital Management Inc., which has sole voting power with respect
to 7,202,700 shares and sole dispositive power with respect to all
8,248,000 shares.
(13) Represents shares beneficially held as of December 31, 1997 by Franklin
Resources, Inc., which includes 349,345 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 3,799,445 shares.
(14) Represents shares beneficially held as of March 16, 1998 by THC Partners,
a Texas general partnership, which has sole voting and dispositive power
with respect to all 3,877,556 shares.
(15) Represents shares owned by various individual and institutional investors
as of December 31, 1997 for which T. Rowe Price Associates, Inc. ("Price
Associates") serves as investment adviser with power to direct
investments and/or sole power to vote the shares. For purposes of the
reporting requirements of the Securities Exchange Act of 1934, Price
Associates is deemed to be a beneficial owner of such shares; however,
Price Associates expressly disclaims that it is, in fact, the beneficial
owner of such shares.
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 1997. 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
1997, 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 1996 a comprehensive review of
the Company's compensation program was conducted by Frederic W. Cook & Co.,
Inc. The review included a comprehensive study of compensation practices of
the 14 publicly traded real estate companies that are included in the Peer
Group used in the current Comparative Stock Performance Graph. These major
real
8
<PAGE>
estate companies are deemed to be most comparable to the Company. References
in this report to "comparable companies," "competitive pay," "competitive
ranges" and the like refer to the comparison group 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 and stock bonus awards, 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 1997. The Board approved the proposed salaries and
bonuses and was informed by the Committee of the incentive stock grants.
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 (75%) on earnings results and financial position, including
specific earnings targets for total corporate and individual business segment
Earnings Before Depreciation and Deferred Taxes ("EBDT") as well as land sales
and income property earnings. Additional corporate objectives (totalling 25%)
included specific strategic near- and long-term objectives for 1997.
9
<PAGE>
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 Committee 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 the Committee and upon recommendation of the Chief
Executive Officer, 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. In conjunction with these restricted stock grants, the Company may
make 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 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 1997, 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 continued to receive a salary of $725,000 in
1997. In addition, the Committee and the Board determined, based on their
review of the 1997 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 $978,750. Moreover, in February 1997, the Committee
granted Mr. Deering stock options for 350,000 shares of Common Stock. The
grant contained standard terms and conditions. See "Options and Stock
Appreciation Rights" below.
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 $1 million for any year with respect to
the Company's Chief Executive Officer and its four other most highly
compensated officers. This disallowance provision does not apply to
performance-based compensation, and the Company expects that this provision
will not materially limit its tax deductions for executive compensation in the
near term.
Jeremiah E. Casey,
Chairman
Juanita T. James
Thomas J. McHugh
Alexander B. Trowbridge
10
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to the Company for the years
ended December 31, 1997, 1996 and 1995 of those persons who were the Chief
Executive Officer and the four other most highly compensated officers of the
Company in 1997. The amounts reported below under the columns captioned
"Salary," "Bonus," "Restricted Stock Awards" and "Securities Underlying
Options" are payable under and in accordance with the Company's annual and
long-term compensation plans as described above in the "Personnel Committee
Report on Executive Officer Compensation." No stock appreciation rights
("SARs") were granted during 1995-1997, nor have any SARs been granted at any
time in prior years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-
TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------- ---------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
AWARD(S) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) (#) ($)
- --------------------------- ---- ---------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Anthony W. Deering 1997 725,000 978,750 None 350,000 527,375(7)
Chairman of the Board,
President 1996 725,000 900,000 None None 579,538(8)
and Chief Executive Of-
ficer(1) 1995 625,000 520,313 3,725,000(1)(2) None 196,202(9)
John L. Goolsby 1997 493,269 508,250 470,625(2)(3) 130,000 181,465(7)
President and Chief Ex-
ecutive 1996 236,891(4) 255,020(4) 1,000,000(5) 40,000 6,711(8)
Officer, The Howard
Hughes 1995(4) -- -- -- -- --
Corporation
Douglas A. McGregor 1997 475,000 534,375 313,750(2)(3) 150,000 73,625(7)
Executive Vice President
for 1996 475,000 450,000 1,291,875(6) 75,000 125,113(8)
Development and Opera-
tions 1995 430,000 298,334 None None 120,263(9)
Jeffrey H. Donahue 1997 290,000 261,000 None(2) 102,000 50,262(7)
Senior Vice President
and 1996 290,000 165,300 695,625(6) 50,000 51,163(8)
Chief Financial Officer 1995 260,000 139,490 None None 50,240(9)
Jerome D. Smalley 1997 290,000 261,000 None(2) 102,000 67,412(7)
Senior Vice President 1996 290,000 230,000 695,625(6) 50,000 74,578(8)
and Director of the Com-
mercial 1995 250,000 138,750 None None 95,517(9)
Development Division
</TABLE>
- --------
(1) During 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 control of the Company). Dividends are paid on the
restricted shares.
11
<PAGE>
(2) As of December 31, 1997, Mr. Deering had aggregate restricted
shareholdings of 171,250 shares of Common Stock having a value, based on
the value of the Company's shares on that date, of $5,608,437; Mr. Goolsby
had aggregate restricted shareholdings of 43,000 shares of Common Stock
having a value, based on the value of the Company's shares on that date,
of $1,408,250; Mr. McGregor had aggregate restricted shareholdings of
91,250 shares of Common Stock having a value, based on the value of the
Company's shares on that date, of $2,988,437; and Messrs. Donahue and
Smalley each had aggregate restricted shareholdings of 39,375 shares of
Common Stock having a value, based on the value of the Company's shares on
that date, of $1,289,531.
(3) In December 1997, the Board of Directors, acting pursuant to the Company's
1997 Stock Incentive Plan, awarded Messrs. Goolsby and McGregor 15,000
shares of Common Stock (the "1997 Bonus Shares"). Mr. McGregor elected,
however, to convert 5,000 shares of the 1997 Bonus Shares into options to
purchase 20,000 shares of Common Stock, which reduced his 1997 Bonus
Shares to 10,000 shares. At the same time, the Board of Directors awarded
Messrs. Donahue and Smalley 8,000 shares each of the 1997 Bonus Shares;
however, each elected to convert all of the 8,000 shares into options to
purchase 32,000 shares of Common Stock. Ownership of the 1997 Bonus Shares
vests 25% on December 11th in each of the years 1999, 2000, 2001 and 2002.
Any 1997 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.
(4) Prior to the Company's acquisition in June 1996 of The Howard Hughes
Corporation and its affiliated partnership, Howard Hughes Properties,
Limited Partnership, Mr. Goolsby was an employee of The Howard Hughes
Corporation. The salary and bonus figures referenced above thus reflect a
partial year's compensation.
(5) In June 1996, the Board of Directors, acting pursuant to the Company's
1994 Stock Incentive Plan, awarded Mr. Goolsby 40,000 shares of Common
Stock (the "Acquisition Shares"). Subject to attaining certain income
objectives, ownership of the Acquisition Shares vests 30% on January 31st
in each of the years 1997 and 1998, and 40% on January 31, 1999. Any
Acquisition Shares that have not vested will be forfeited if the recipient
leaves the Company's employ for any reason other than death, disability,
discharge without good cause (which is defined to include certain changes
in control of the Company) or termination of employment by recipient for
"good reason." Dividends are paid on the restricted shares.
(6) 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 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.
(7) 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 1997 in the amount of
$505,625 as to Mr. Deering, $166,667 as to Mr. Goolsby, $59,375 as to Mr.
McGregor, $41,562 as to Mr. Donahue and $58,712 as to Mr. Smalley. Also
includes matching contributions under the Company's nonqualified Excess
Savings Plan in the amount of $21,750 as to Mr. Deering, $14,798 as to Mr.
Goolsby, $14,250 as to Mr. McGregor and $8,700 as to both Messrs. Donahue
and Smalley.
(8) 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
12
<PAGE>
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 and $65,013 as to Mr. Smalley. Also includes
matching contributions under the Company's nonqualified Excess Savings Plan
in the amount of $23,913 as to Mr. Deering, $6,711 as to Mr. Goolsby,
$15,738 as to Mr. McGregor, $9,600 as to Mr. Donahue and $9,565 as to Mr.
Smalley. No installments were due on the loan granted to Mr. Goolsby in June
1996.
(9) 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 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 $8,304 as to Mr. Smalley.
OPTIONS AND STOCK APPRECIATION RIGHTS
The following table summarizes information relating to stock option grants,
including original stock option grants and "reload" option grants, during 1997
to the executive officers named in the Summary Compensation Table. No stock
appreciation rights have been granted at any time under the Company's Stock
Option and Stock Incentive Plans.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANT
OPTIONS GRANTED TO EXERCISE DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#) FISCAL YEAR ($/SHARE) DATE VALUE
---- ---------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Anthony W. Deering...... 350,000(1) 16.5 $29.125 2-24-07 $2,877,000(1)
Jeffrey H. Donahue...... 102,000(1) 4.8 $31.375 12-10-07 $873,120(1)
2,659(2) .12 $30.875 5-20-02 $20,129(2)
John L. Goolsby......... 130,000(1) 6.1 $31.375 12-10-07 $1,112,800(1)
Douglas A. McGregor..... 150,000(1) 7.1 $31.375 12-10-07 $1,284,000(1)
36,122(2) 1.7 $32.75 5-16-00 $211,674(2)
7,145(2) .34 $32.75 11-28-00 $45,013(2)
3,196(2) .15 $32.75 9-22-03 $26,719(2)
Jerome D. Smalley....... 102,000(1) 4.8 $31.375 12-10-07 $873,120(1)
2,500(2) .12 $27.875 5-20-02 $16,250(2)
4,375(2) .21 $31.00 5-20-02 $32,681(2)
</TABLE>
- --------
(1) All of these shares were granted under original stock option grants on
December 11, 1997, and are exercisable as to 25% of the shares granted on
December 11th in each of the years 1999 through 2002, except that Mr.
Deering's shares were granted as an original stock option grant on
February 25, 1997, and are exercisable as to 25% of the shares granted on
February 25th in each of the years 1999 through 2002. All option grants
contained a "reload" feature, under which if a stock-for-stock exercise
occurs and the
13
<PAGE>
exercise price is paid by surrendering shares of Common Stock, a new option
will be issued for the number of shares surrendered and having substantially
the same terms as the option that was exercised, except that the exercise
price of the new option will be the market price of the shares surrendered
at the time of the surrender. The values for the grants are based on the
Black-Scholes option pricing model. With respect to all such grants, a
dividend yield of 3.5%, a stock price volatility of .28, an interest rate
based on the 7-year Treasury note rate at the time of grant and option
exercises occurring after 7 years are assumed. Based on these assumptions,
the model produces a per option share value of (i) with respect to the
February 25, 1997 grant, $8.22 (using an interest rate of 6.295%) and (ii)
with respect to the December 11, 1997 grants, $8.56 (using an interest rate
of 5.824%).
(2) These stock option grants occurred automatically under the "reload"
features of previously granted options as to which there was a stock-for-
stock exercise. The values of the reload option grants are based on the
Black-Scholes option pricing model with an assumed dividend yield of 3.5%,
a stock price volatility of .28, an interest rate based on the Treasury
note that matures on the expiration date of the option, and the option
exercise occurring on the expiration date. Based on these assumptions, the
model produces a per option share value of (i) with respect to the 2,659-
share grant, $7.57 (using an interest rate of 6.270%); (ii) with respect to
the 36,122-share grant, $5.86 (using an interest rate of 5.671%); (iii)
with respect to the 7,145-share grant, $6.40 (using an interest rate of
5.688%); (iv) with respect to the 3,196-share grant, $8.36 (using an
interest rate of 5.751%); (v) with respect to the 2,500-share grant, $7.13
(using an interest rate of 6.500%); and (vi) with respect to the 4,375-
share grant, $7.47 (using an interest rate of 6.000%).
The following table summarizes information relating to stock option exercises
during 1997 and the number and value of unexercised stock options previously
granted to the executive officers named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS(1)
ACQUIRED ON VALUE OPTIONS AT FY-END (#) AT FY-END ($)
EXERCISE (#) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Anthony W. Deering...... None None 181,250/393,750 $2,487,500/$1,856,250
Jeffrey H. Donahue...... 5,500 $ 99,000 30,290/180,869 $ 362,407/$1,212,953
John L. Goolsby......... None None 12,000/158,000 $ 93,000/$395,750
Douglas A. McGregor..... 72,721 $854,123 107,492/246,250 $1,008,377/$1,459,375
Jerome D. Smalley....... 13,930 $250,740 16,919/172,814 $ 201,512/$1,062,150
</TABLE>
- --------
(1) An "in-the-money" stock option is an option for which the market price, on
December 31, 1997, 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.
14
<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.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG THE ROUSE COMPANY
S&P 500 INDEX AND PEER GROUP
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
THE
Measurement Period ROUSE S&P PEER
(Fiscal Year Covered) COMPANY 500 INDEX GROUP
- --------------------- --------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-12/31/1992 $100 $100 $100
FYE 12/31/1993 $102 $110 $112
FYE 12/31/1994 $115 $112 $101
FYE 12/31/1995 $126 $153 $107
FYE 12/31/1996 $204 $189 $150
FYE 12/31/1997 $217 $252 $177
</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 DeBartolo Group, Inc., Taubman Centers, Inc.,
Trizec Corporation Ltd./TrizecHahn Centers Inc., Urban Shopping Centers, Inc.
and Weingarten Realty Investment.
15
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
Under an Employment Agreement, dated May 1, 1996, John L. Goolsby agreed to
continue to serve full-time as President and Chief Executive Officer of The
Howard Hughes Corporation (collectively, with its subsidiaries and affiliates,
"Hughes") until June 30, 1999 (the "Term"). Mr. Goolsby is to receive an
annual salary of $475,000 and an annual bonus in an amount up to 75% of his
annual salary based on performance objectives relating to Hughes. The annual
salary and annual bonus are subject to increases in accordance with the
Company's standard compensation policies relating to its executives. On June
12, 1996, the date of the acquisition of Hughes by the Company, Mr. Goolsby
received a bonus stock award of 40,000 shares of Common Stock, a related loan
of $500,000, and an option grant of 40,000 shares of Common Stock at an
exercise price of $25.00 per share.
The Company may terminate the Agreement with or without cause on 30 days'
written notice. If the Company terminates the Agreement, Mr. Goolsby will
receive an amount equal to his annual salary for the remainder of the Term and
aggregate annual bonuses of 60% of his annual salary for the remainder of the
Term. In addition, all bonus stock and stock options will vest and any
remaining loan relating to the bonus stock will be forgiven. Mr. Goolsby will
receive the same economic benefits if he voluntarily terminates his employment
for "Good Reason," which is defined to include the assignment of duties
materially inconsistent with his duties under the Agreement, a reduction of
his annual salary or a material breach of the Agreement by the Company.
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," would vest, and the outstanding principal loan balances
set forth below in "Indebtedness of Executive Officers" would be forgiven. In
addition, Messrs. Deering, Goolsby and McGregor would have forfeiture
restrictions released on 110,000, 31,000 and 65,000 shares, respectively, of
bonus stock, and Messrs. Donahue and Smalley each would have forfeiture
restrictions released on 30,625 shares of bonus stock. Additional vesting or
forgiveness provisions relating to Mr. Goolsby are described above.
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 them 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
16
<PAGE>
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 (or, with respect to Mr. Goolsby, in three 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 1985 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 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.
17
<PAGE>
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, 1997 through March 16, 1998 exceeded $60,000:
<TABLE>
<CAPTION>
MAXIMUM PRINCIPAL
AMOUNT OF LOANS PRINCIPAL
OUTSTANDING AMOUNT
FROM 1-1-97 OF LOANS
NAME OF RELATIONSHIP THROUGH 3-16- OUTSTANDING
INDIVIDUAL WITH COMPANY 98(1) ON 3-16-98
---------- ------------ ----------------- -----------
<C> <S> <C> <C>
Anthony W. Deering Chairman of the Board, $1,771,250 $ 760,000
President and Chief
Executive Officer
Jeffrey H. Donahue Senior Vice President, 431,125 302,563
Chief Financial Officer
and Director of the
Finance Division
John L. Goolsby President and Chief 500,000 166,667
Executive Officer of The
Howard Hughes Corporation
Duke S. Kassolis Senior Vice President and 433,874 304,624
Director of Office and
Mixed-Use Operations
Paul I. Latta, Jr. Senior Vice President and 431,125 302,563
Director of Retail
Operations
Douglas A. McGregor Executive Vice President 764,750 543,875
for Development and
Operations
Robert Minutoli Senior Vice President and 469,196 322,332
Director of New Business
Robert D. Riedy Senior Vice President and 425,929 289,367
Director of Retail Leasing
Alton J. Scavo Senior Vice President, 431,125 302,563
Director of the Community
Development Division and
General Manager of
Columbia
Jerome D. Smalley Senior Vice President and 466,825 321,113
Director of the Commercial
and Office Development
Division
George L. Yungmann Senior Vice President, 209,375 142,188
Controller and 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.
18
<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 in part 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. A 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, Goolsby, McGregor and Smalley have, respectively,
25, 24, 2, 25 and 18 credited years of service under the Plans for benefit
accrual purposes, and their estimated annual benefits payable under such Plans
at the normal retirement age of 62 (assuming each continues to live and
receives his 1998 rate of compensation to retirement) are $795,571, $267,567,
$125,521, $437,030 and $250,648, 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 1997 was $125,000 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 the
directors of the Company who are 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. Directors also are 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.
On December 19, 1996, the Company entered into an agreement with Mr. DeVito
in connection with his retirement as Chairman of the Board of Directors of the
Company (the "Agreement"). Under the Agreement, Mr. DeVito retired as Chairman
of the Board on February 25, 1997 and assumed the honorary title of Chairman
Emeritus. During 1997, Mr. DeVito also served as Chairman of the Executive
Committee of the Board and, for
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part of the year, as a member of the Audit Committee of the Board. For his
services as described above, and in lieu of any other directors' fees, Mr.
DeVito received a fee of $100,000 for 1997.
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 re-election 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.
David H. Benson is Chairman of the Board of Charter European Trust plc and
is a member of the Board of Kleinwort Benson U.S.A., Inc., which is an
affiliate of Kleinwort Benson Group plc, and his interest in the matters
described below arises solely from such positions. The Company has investment
banking relationships with Kleinwort Benson Group plc, its subsidiaries and
affiliates (collectively, "Kleinwort Benson") under which the Company
maintains a revolving credit facility in which Dresdner Bank AG, the parent of
Kleinwort Benson, is a participant. The Company also 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"). On January 10,
1997, the Company purchased Company Common Stock from Equity-Linked Investors,
L.P., an investment partnership for which DCMI is the investment manager. The
methodology for the purchase was approved by the Audit Committee of the
Company's Board of Directors. Mr. Desai's interest in this transaction arose
solely from his relationships with DCMI, and DCMI received only its standard
advisory compensation in connection with the transaction. A more detailed
description of this transaction is provided in the Company's Proxy Statement
dated April 4, 1997.
Transactions between the Company and certain companies with which Jeremiah
E. Casey is associated are described under "Compensation Committee Interlocks
and Insider Participation in Compensation Decisions" below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
During 1997, 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
20
<PAGE>
market instruments from the Bank and other cash management services. The
Company and certain of its subsidiaries and affiliates 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.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
On December 31, 1997, Douglas A. McGregor, Executive Vice President of the
Company, exercised stock options for Company Common Stock. The option
exercises were reported on his Form 5 that was filed on February 17, 1998. On
May 30, 1997 and September 26, 1997, Jerome D. Smalley, Senior Vice President
of the Company, exercised stock options for Company Common Stock. These option
exercises were reported on his Form 4 that was filed on November 19, 1997. In
1996, the Securities and Exchange Commission adopted a number of amendments to
its Section 16(a) rules, including an amendment providing that stock option
exercises were to be reported on a Form 4 or Form 5 by the tenth day of the
month following the exercise. The Company person who was responsible for
preparing the necessary Forms 4 and 5 for Messrs. McGregor and Smalley was
unaware of this specific amendment, and this resulted in the late filings.
On August 19, 1996, George L. Yungmann, Senior Vice President of the
Company, made a charitable gift of 120 shares of Company Common Stock, which
he inadvertently failed to report in a timely fashion. Upon discovery of the
error, the required Form 4 was filed promptly.
STOCKHOLDER PROPOSALS FOR 1999 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 1999. 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 1999 annual meeting, any such proposal must be received by
the Company by December 15, 1998, 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, 1997 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 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.
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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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April 14, 1998
To Our Stockholders:
The Annual Meeting of Stockholders of The Rouse Company will be held in
Columbia, Maryland on Thursday, May 14, 1998 at 11:00 a.m.
The meeting will be held in The Spear Center, on the fourth level of The Rouse
Company Building. A luncheon will be available following adjournment.
We hope you can join us. If you plan to attend, please advise us on the
attached postcard.
The Rouse Company
(see map on reverse side)
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- -------------------------------------------------------------------------------
The Rouse Company
Columbia, Maryland 21044-9876
Attn: Ms. Julia C. Kent
I expect to attend the Annual Meeting of Stockholders on May 14, 1998 in
Columbia, Maryland.
Name ___________________
(Please Print)
- -------------------------------------------------------------------------------
<PAGE>
[MAP APPEARS HERE]
The Rouse Company is located in downtown Columbia across from the Mall on
Little Patuxent Parkway (Rt. 175).
DRIVING SOUTH ON RT. 29:
Exit at Rt. 175 West toward Columbia Town Center. Follow the signs directly to
the meeting.
DRIVING NORTH ON RT. 29:
Take Exit 18B toward Columbia Town Center. At the second stoplight, go right
onto Little Patuxent Parkway. Follow the signs directly to the meeting.
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
[POSTAL BAR CODE]
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UITED STATESN
----------
BUSINESS REPLY MAIL ----------
FIRST-CLASS MAIL, PERMIT NO. 129 COLUMBIA, MD ----------
POSTAGE WILL BE PAID BY ADDRESSEE ----------
----------
ATTN MS JULIA C KENT ----------
----------
THE ROUSE COMPANY ----------
10275 LITTLE PATUXENT PKWY ----------
COLUMBIA MD 21044-9876 ----------
----------
----------
----------
[BAR CODE APPEARS HERE]
</TABLE>
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES
FOR DIRECTORS.
<TABLE>
<S> <C> <C> <C>
(a) Election of Directors FOR all nominees [_] WITHHOLD AUTHORITY to vote [_] *EXCEPTIONS [_]
listed below for all nominees listed below
</TABLE>
Nominees: 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, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions
-------------------------------------------------------------------
(b) 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.
(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.)
Dated: , 1998
----------------------------
(SEAL)
----------------------------------
(SEAL)
----------------------------------
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. [X]
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE
PREPAID ENVELOPE.)
THE ROUSE COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS--ANNUAL MEETING OF
STOCKHOLDERS--MAY 14, 1998
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 April 14, 1998, 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 14, 1998, and at any adjournment or adjournments thereof.
Shares represented by all properly executed proxies will be voted in
accordance with the instructions appearing on this proxy. In the absence of
specific instructions, proxies will be voted FOR the election of Directors and
in the best discretion of the proxy holders as to any other matters.
(Continued, and to be signed and dated on the reverse side)
THE ROUSE COMPANY
P.O. BOX 11342
NEW YORK, N.Y. 10203-0342
