<PAGE>
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:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
THE ROUSE COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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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 11, 2000, 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 Annual Meeting of
Stockholders that is to be held in 2003 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
10, 2000 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
Gordon H. Glenn
Secretary
April 13, 2000
<PAGE>
THE ROUSE COMPANY
10275 LITTLE PATUXENT PARKWAY
COLUMBIA, MARYLAND 21044-3456
PROXY STATEMENT
(First Mailed to Stockholders on April 13, 2000)
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 11, 2000
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 Shareholder Communications, 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 10, 2000, 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 70,806,005 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, 1999, has been mailed to all stockholders with
this Proxy Statement. You may receive, without charge, a copy of the Company's
1999 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.
<PAGE>
ELECTION OF DIRECTORS AND RELATED MATTERS
The Board of Directors currently consists of 12 directors. On February 24,
2000, the Company adopted a resolution and amended its Bylaws as permitted by
the Maryland Unsolicited Takeover Act to create a classified board. As a
result of this action, three directors are up for election at the Annual
Meeting of Stockholders to be held on May 11, 2000 and, if elected, their new
terms of office will expire at the Annual Meeting of Stockholders that is held
in 2003 or when their successors are elected and qualify.
The remaining eight directors serve terms which expire at either the Annual
Meeting of Stockholders to be held in 2001 or the Annual Meeting of
Stockholders to be held in 2002.
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. Platt W. Davis, III was recommended under this provision
and currently serves as a director of the Company.
After 14 years of loyal service on the Board, Alexander B. Trowbridge will
be retiring as a director at the May 11, 2000 Annual Meeting of Stockholders
in accordance with the Company's mandatory retirement policy for directors who
have attained age 70. The Board of Directors deeply appreciates his dedication
to the principles of the Company and the wisdom, high standards and leadership
demonstrated by him during his tenure 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 who are up for election at the Annual
Meeting of Stockholders follows:
Nominees for Term Expiring in 2003
Anthony W. Deering, age 55, 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 and, prior to that, President and Chief Operating
Officer of the Company. Mr. Deering is a director of certain T. Rowe Price
Fixed Income and International Mutual Funds. He also is a member of the Board
of Governors of the National Association of Real Estate Investment Trusts, The
Real Estate Roundtable and the Association of Foreign Investors in U.S. Real
Estate. Mr. Deering is Chairman of the Baltimore Museum of Art, Vice Chairman
of the Board of Directors of the Greater Baltimore Committee and a Trustee of
Parks and People, The Foundation for Baltimore Recreation and Parks.
Rohit M. Desai, age 61, 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
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Enterprises, Inc., Independence Community Bank and TeleCorp PCS, Inc. In
addition, Mr. Desai is Chairman of the Finance Committee of Grace Church and a
Trustee of the Asia Society.
Hanne M. Merriman, age 58, 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., certain T. Rowe Price Mutual Funds, State
Farm Mutual Automobile Insurance Company, and US Airways Group, Inc. She also
is a director of Children's Hospital, which is a part of the Children's
National Medical Center, and a member of the National Women's Forum.
Certain information as to directors who are not up for election at the
Annual Meeting of Stockholders follows:
Directors Whose Terms Expire in 2001
Jeremiah E. Casey, age 60, has been a member of the Company's Board since
1990. Mr. Casey is a director of Allfirst Financial, Inc. and Allfirst Bank,
and a director of the Federal Reserve Bank of Richmond, Baltimore Branch.
Previously, he was Chairman of the Board of First Maryland Bancorp and its
banking subsidiaries, Chief Executive, USA, Allied Irish Banks plc and a
director of Allied Irish Banks plc. Mr. Casey also is a Trustee of Mercy
Health Services, Inc. and The Walters Art Gallery.
Mathias J. DeVito, age 69, 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 Allfirst Financial, Inc., US Airways, Inc., US Airways Group, Inc. and Mars
Supermarkets, Inc. He is a member of the Advisory Boards of Carlyle Realty
Partners, L.P., Equity-Linked Investors, L.P., Equity-Linked Investors, II,
Private Equity Investors III, L.P. and Private Equity Investors IV, L.P. Mr.
DeVito also is a Trustee of the Maryland Institute, College of Art.
Roger W. Schipke, age 63, 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.
Gerard J. M. Vlak, age 66, 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 North America of 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 of The
Netherland-America Foundation and a board member of Oce-USA Holding, Inc.
Directors Whose Terms Expire in 2002
David H. Benson, age 62, 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
(formerly British Gas plc), Daniel Thwaites plc, The Dover Corporation,
Kleinwort Benson U.S.A. Inc., Marshall
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Cavendish Ltd. and Murray International Trust plc. He also is Vice Chairman
and Director of Leach International, Inc., Chairman of the Board of Trustees
of the Charities Official Investment Fund and a Trustee of the Edward James
Foundation.
Platt W. Davis, III, age 56, has been a member of the Company's Board since
1999. Mr. Davis is a Partner in Vinson & Elkins, L.L.P., a partnership engaged
in the practice of law. He also is a Representative of the Hughes Owners under
the Contingent Stock Agreement that was entered into in connection with the
Company's merger with Hughes and is a Managing Partner of THC Partners, an
investment management company whose members consist of certain of the Hughes
Owners.
Juanita T. James, age 47, has been a member of the Company's Board since
1989. Ms. James is Vice President and General Manager of Pitney Bowes
Professional Services, Inc., a subsidiary of Pitney Bowes, Inc. Previously,
she was President of JJ Marketing Ventures, a management consultant firm
specializing in book publishing and direct marketing, Executive Vice President
of the Marketing and Editorial Departments at Doubleday Direct, Inc., Senior
Vice President of Finance and Operations at Doubleday Direct, Inc. and Senior
Vice President of the Book-of-the-Month Club, Inc., a subsidiary of Time
Warner Inc. Ms. James is a Trustee Emeritus of Princeton University. She also
is a Trustee of the Ferguson Public Library and President of the Board of the
Child Care Center, both in Stamford, Connecticut. Ms. James also is a Deacon
at the First Presbyterian Church in Stamford, Connecticut.
Thomas J. McHugh, age 68, has been a member of the Company's Board since
1980. Mr. McHugh is Chairman and Chief Executive Officer 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.
Please note:
(1) There exist no family relationships between any of the directors or
between any such directors 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, State Farm Automobile Insurance Company, which is a
mutual insurance company, and the companies identified with respect to
Mr. Benson with the exception of B. G. plc.
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), Davis, Desai,
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, 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 1999.
The Executive Committee, composed of Messrs. DeVito (Chairman), Casey,
Deering, Desai, McHugh and Trowbridge and Ms. James, takes action with respect
to approved projects and corporate financings of the
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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 1999.
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 two meetings during
1999.
During 1999, the Board of Directors of the Company held five meetings
(including one special telephonic Board meeting) in addition to the six
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), and each 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 5% of Company Common Stock. To the
knowledge of the Company, no person beneficially owns more than 5% of the
Series B Convertible Preferred Stock of the Company. As of March 10, 2000, 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
(9) below.
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EQUITY SECURITIES BENEFICIALLY OWNED
ON MARCH 10, 2000
<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.............................. 1,002,293(2) 1.38%
Jeffrey H. Donahue.............................. 240,967 (3)
Douglas A. McGregor............................. 666,770 (3)
Robert Minutoli................................. 172,092 (3)
Jerome D. Smalley............................... 213,588 (3)
Directors and Director Nominees
David H. Benson................................. 12,350(4)(5) (3)
Jeremiah E. Casey............................... 14,500(4) (3)
Platt W. Davis, III............................. 151,075(4)(6) (3)
Anthony W. Deering.............................. See above See above
Rohit M. Desai.................................. 628,674(4)(7) (3)
Mathias J. DeVito............................... 796,570(4)(8) 1.10%
Juanita T. James................................ 11,200(4) (3)
Thomas J. McHugh................................ 21,000(4) (3)
Hanne M. Merriman............................... 11,500(4) (3)
Roger W. Schipke................................ 19,859(4)(9) (3)
Alexander B. Trowbridge......................... 11,450(4) (3)
Gerard J. M. Vlak............................... 8,000(4) (3)
All executive officers and directors as a group
(20 persons)................................... 4,690,160(10) 6.47%
Name and Address of 5% Holders of Common Stock
Ariel Capital Management, Inc................... 7,471,890(11) 10.55%
307 North Michigan Avenue
Chicago, Illinois 660601
Franklin Resources, Inc......................... 6,826,229(12) 9.64%
P. O. Box 7777
777 Mariners Island Boulevard
San Mateo, California 94403-7777
T. Rowe Price Associates, Inc................... 6,902,030(13) 9.75%
P.O. Box 17218
100 East Pratt Street
Baltimore, Maryland 21202
</TABLE>
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(1) With respect to the named executive officers of the Company, includes
(i)1,273,978 shares of Common Stock subject to stock options granted under
the Company's 1985 and 1990 Stock Option Plans and the 1994 and 1997 Stock
Incentive Plans that either are presently exercisable or will become
exercisable within 60 days of March 10, 2000, (ii) with respect to such
named executive officers' accounts under The Rouse
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Company Savings Plan as of December 31, 1999, 33,090 shares of Common
Stock, and (iii) 60,983 shares of Common Stock that are issuable if the
Company's Series B Convertible Preferred Stock that is beneficially owned
by a named executive officer were converted. Also includes 44,856 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 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 13,640 shares of Common Stock that are owned
by a Foundation of which Mr. Deering is the Trustee and 60,983 shares of
Common Stock that are issuable upon conversion of the 46,500 shares of the
Company's Series B Convertible Preferred Stock that are owned by the
Foundation. For purposes of the reporting requirements of the Securities
Exchange Act of 1934, Mr. Deering is deemed to be a beneficial owner of
the Foundation's shares; however, he expressly disclaims that he has any
economic interest in or beneficial ownership of such shares.
(3) Beneficial ownership does not exceed one percent of the shares of Common
Stock outstanding.
(4) Includes 11,000 shares of Common Stock subject to stock options granted
under the Company's 1994 and 1997 Stock Incentive Plans to each non-
employee director, except for Mr. DeVito, who received five 1,000-share
stock option grants since he attained non-employee status in February
1995; Mr. Vlak, who received a 5,000-share stock option grant upon his
initial election as a director in September 1996, and 1,000-share stock
option grants in each of the years 1997 through 1999; and Mr. Davis, who
received a 5,000-share option grant upon his initial election as a
director in May 1999. 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.
(6) Includes 54,615 shares that are owned by a family trust, of which Mr.
Davis has shared voting and dispositive powers. Mr. Davis is one of three
Managing Partners of THC Partners, a Texas general partnership, which held
1,196,479 shares of Rouse Common Stock at March 10, 2000. By majority
vote, the Managing Partners may vote and, in limited circumstances,
dispose of such shares.
(7) Includes 1,500 shares of Common Stock directly owned by Mr. Desai. 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.
(8) Includes 473,470 shares of Common Stock that are owned by The DeVito
Family Limited Partnership, in 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.
(9) Includes 2,359 shares of Common Stock that are issuable upon conversion of
the 1,800 shares of the Company's Series B Convertible Preferred Stock
that are beneficially owned by Mr. Schipke.
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(10) Includes 1,599,978 shares of Common Stock subject to stock options
granted under the Company's 1985 and 1990 Stock Option Plans and 1994,
1997 and 1999 Stock Incentive Plans that either are presently exercisable
or will become exercisable within 60 days of March 10, 2000. With respect
to executive officers' accounts under The Rouse Company Savings Plan as
of December 31, 1999, includes 33,090 shares of Common Stock. Also
includes 63,342 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.
(11) Represents shares beneficially held as of December 31, 1999 by Ariel
Capital Management, Inc., which has sole voting power with respect to
7,027,830 shares and sole dispositive power with respect to 7,471,890
shares.
(12) Represents shares owned, as of December 31, 1999, by one or more open or
closed-end investment companies or other managed accounts which are
advised by direct and indirect investment advisory subsidiaries (the
"Adviser Subsidiaries") of Franklin Resources, Inc. ("Franklin
Resources"). The Adviser Subsidiaries have shared power to direct
investments and/or shared power to vote the shares. For purposes of the
reporting requirements of the Securities Exchange Act of 1934, Franklin
Resources is deemed to be a beneficial owner of such shares; however,
Franklin Resources expressly disclaims that it has any economic interest
in or beneficial ownership of such shares.
(13) Represents shares owned by various individual and institutional investors
as of December 31, 1999 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 1999. During 1999,
the Committee was 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
1999, 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.
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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 "Compensation Consultant"). An update of this review was completed
during 1998. 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 Performance Graph. These major real 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 approves or reviews the Committee's actions with respect to 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 and the Board concurred with Mr. Deering's
recommendations with respect to proposed salaries, bonuses and incentive stock
grants for the executive officers for 1999. The Committee and the Board also
concurred with Mr. Deering's recommendation that neither he nor any other
executive officer receive a salary increase for 1999, except in connection
with promotions or organizational changes.
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, annual
incentive cash bonuses 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 Committee with the
Board's approval or concurrence, 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
9
<PAGE>
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, with
assigned individual relative weightings, is recommended by the Chief Executive
Officer and approved by the Board of Directors. For 1999, these Board-approved
objectives placed heavy emphasis (72.5%) on earnings results and financial
position, including specific earnings targets for total corporate and
individual business segment Funds From Operations as well as leasing goals.
Additional corporate objectives (totalling 27.5%) included specific strategic
near- and long-term objectives for 1999.
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 employees in a format that is designed to motivate
these executives and key employees 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, who have available the services of independent compensation
consultants. In making grants, the Committee principally considers the amounts
and terms of stock bonus awards for prior 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 or is discharged for cause. In
conjunction with these restricted stock grants, the Company may make loans to
recipients, subject to forgiveness in annual installments dependent upon
continued employment by the Company.
Stock Options
Stock options are granted by the Committee generally using approved award
size criteria and based upon market data, the prior grant history for each
person, independent compensation 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
period of years. 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 1999, the compensation of Mr. Deering was determined by the Committee
and approved by the Board. In 1999, Mr. Deering received a salary of $800,000,
which was the same as his salary in 1998. In addition, the Committee and the
Board determined, based on their review of the 1999 corporate performance
objectives described above, that the Company had achieved excellent results
for the year, meeting or significantly exceeding its targeted objectives.
Particular emphasis was placed by the Committee and the Board on the strong
earnings growth of the Company during 1999. Based on these results, the Board
awarded to Mr. Deering a bonus of $972,000.
10
<PAGE>
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 $1 million for any year with respect to
the Company's Chief Executive Officer and its four other most highly
compensated officers. This disallowance provision does not apply to
performance-based compensation, and the Company expects that this provision
will not limit its tax deductions for executive compensation in the near term.
Jeremiah E. Casey,
Chairman
Juanita T. James
Thomas J. McHugh
Alexander B. Trowbridge
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to the Company for the years
ended December 31, 1999, 1998 and 1997 of those persons who were the Chief
Executive Officer and the four other most highly compensated officers of the
Company in 1999. The amounts reported below under the columns captioned
"Salary," "Bonus," "Restricted Stock Awards" and "Securities Underlying
Options" are payable under and in accordance with the Company's annual and
long-term compensation plans as described above in the "Personnel Committee
Report on Executive Officer Compensation." No stock appreciation rights
("SARs") were granted during 1997-1999, nor have any SARs been granted at any
time in prior years.
11
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
------------------------
Annual Compensation Restricted Securities
------------------- Stock Underlying All Other
Name and Principal Award(s) Options Compensation
Position Year Salary($) Bonus($) ($) (#) ($)
------------------ ---- --------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Anthony W. Deering 1999 800,000 972,000 None(1) None 404,923(5)
Chairman of the Board,
President 1998 800,000 1,015,200 3,000,278(2) 600,000 3,173,338(6)
and Chief Executive
Officer 1997 725,000 978,750 None 350,000 527,375(7)
Douglas A. McGregor 1999 567,115 630,540 None(1) None 179,108(5)
Vice Chairman and Chief
Operating 1998 520,961 548,972 420,000(3) 100,000 236,325(6)
Officer 1997 475,000 534,375 313,750(4) 150,000 73,625(7)
Jeffrey H. Donahue 1999 403,808 406,800 None(1) None 99,472(5)
Executive Vice President
and 1998 320,731 265,816 560,000(3) 145,000 137,862(6)
Chief Financial Officer 1997 290,000 261,000 None(4) 102,000 50,262(7)
Jerome D. Smalley 1999 403,808 406,800 None(1) None 105,772(5)
Executive Vice
President-- 1998 320,731 265,816 560,000(3) 145,000 150,112(6)
Development 1997 290,000 261,000 None(4) 102,000 67,412(7)
Robert Minutoli 1999 367,327 275,575 None(1) None 105,272(5)
Senior Vice President
and 1998 316,557 256,871 None None 152,914(6)
Director of New Business 1997 290,000 195,750 None 102,000 68,564(7)
</TABLE>
- --------
(1) As of December 31, 1999, Mr. Deering had aggregate restricted
shareholdings of 164,850 shares of Common Stock having a value of
$3,503,062; Mr. McGregor had aggregate restricted shareholdings of 55,000
shares of Common Stock having a value of $1,168,750; Messrs. Donahue and
Smalley each had aggregate restricted shareholdings of 37,500 shares of
Common Stock having a value of $796,875; and Mr. Minutoli had aggregate
restricted shareholdings of 17,500 shares of Common Stock having a value
of $371,875. The values specified above are based on the value of the
Company's shares on December 31, 1999.
(2) In September 1998, the Board of Directors, acting pursuant to the
Company's 1997 Stock Incentive Plan, awarded Mr. Deering 109,850 shares of
Common Stock (the "Special Retention Bonus Shares"), as part of a special
retention contract arrangement (the "Agreement"). The terms and conditions
of the Special Retention Bonus Shares are described in "Employment
Contracts and Termination of Employment and Change of Control
Arrangements" below. Dividends are paid on the restricted shares.
(3) In December 1998, the Board of Directors, acting pursuant to the Company's
1997 Stock Incentive Plan, awarded Mr. McGregor 15,000 shares of Common
Stock upon his promotion to Vice Chairman and Chief Operating Officer of
the Company. At the same time, Messrs. Donahue and Smalley were awarded
20,000 shares each of Common Stock (collectively, with the shares awarded
to Mr. McGregor, the "1998 Bonus Shares") upon their promotion to
Executive Vice Presidents of the Company. Ownership of the 1998 Bonus
Shares vests 20% on December 3rd in each of the years 2000, 2001, 2002,
2003 and 2004. Any 1998 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.
12
<PAGE>
(4) In December 1997, the Board of Directors, acting pursuant to the Company's
1997 Stock Incentive Plan, awarded Mr. 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.
(5) Includes forgiveness of installments on loans by the Company relating to
restricted stock awards under the Company's 1990 Stock Bonus Plan and 1994
and 1997 Stock Incentive Plans and stock option grants under the Company's
1985 Stock Option Plan. Installments were forgiven by the Company during
1999 in the amount of $380,000 as to Mr. Deering, $161,500 as to Mr.
McGregor, $87,000 as to Mr. Donahue, $93,300 as to Mr. Smalley and $93,895
as to Mr. Minutoli. Also includes matching contributions under the
Company's nonqualified Excess Savings Plan in the amount of $24,923 as to
Mr. Deering, $17,608 as to Mr. McGregor, $12,472 as to both Messrs.
Donahue and Smalley and $11,377 as to Mr. Minutoli.
(6) Includes forgiveness of installments on loans by the Company relating to
restricted stock awards under the Company's 1990 Stock Bonus Plan and 1994
and 1997 Stock Incentive Plans and stock option grants under the Company's
1985 Stock Option Plan. Installments were forgiven by the Company during
1998 in the amount of $505,625 as to Mr. Deering, $220,875 as to Mr.
McGregor, $128,562 as to Mr. Donahue, $140,812 as to Mr. Smalley and
$141,439 as to Mr. Minutoli. Also includes matching contributions under
the Company's nonqualified Excess Savings Plan in the amount of $24,000 as
to Mr. Deering, $15,450 as to Mr. McGregor, $9,300 as to both Messrs.
Donahue and Smalley and $11,475 as to Mr. Minutoli. With respect to Mr.
Deering, includes a payment of $2,643,713 to pay income taxes resulting
from a restricted stock award under the special retention contract
arrangement that was entered into in 1998. See "Employment Contracts and
Termination of Employment and Change of Control Arrangements" below.
(7) Includes forgiveness of 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, $59,375 as to Mr. McGregor,
$41,562 as to Mr. Donahue, $58,712 as to Mr. Smalley and $59,864 as to Mr.
Minutoli. Also includes matching contributions under the Company's
nonqualified Excess Savings Plan in the amount of $21,750 as to Mr.
Deering, $14,250 as to Mr. McGregor and $8,700 each as to Messrs. Donahue,
Minutoli and Smalley.
OPTIONS AND STOCK APPRECIATION RIGHTS
No stock options were granted during 1999 to the executive officers named in
the Summary Compensation Table nor were any previously granted stock options
exercised by such persons during the year. No stock appreciation rights have
been granted at any time under the Company's Stock Option and Stock Incentive
Plans.
The following table summarizes information relating to stock option
exercises during 1999 and the number and value of unexercised stock options
previously granted to the executive officers named in the Summary Compensation
Table.
13
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised In-
Acquired on Underlying Unexercised The-Money Options(1)
Exercise Value Options at FY-End (#) at FY-End ($)
Name (#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Anthony W. Deering...... None None 305,025/862,500 555,150/None
Jeffrey H. Donahue...... None None 103,569/247,902 129,063/$43,488
Douglas A. McGregor..... None None 202,399/250,000 393,636/$51,562
Robert Minutoli......... None None 74,250/101,500 47,425/$34,375
Jerome D. Smalley....... None None 75,878/249,977 56,328/$34,375
</TABLE>
- --------
(1) An "in-the-money" stock option is an option for which the market price, on
December 31, 1999, of Company Common Stock underlying the option exceeds
the exercise price (i.e., the market price of Company Common Stock when the
option was granted). The value shown represents stock price appreciation
since the grant date of the option.
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.
14
<PAGE>
The Peer Group consists of the following publicly traded real estate
companies: Bramalea Ltd. (through the first quarter of 1995), Cambridge
Shopping Centers, Catellus Development Corp., Crown America Realty Trust,
Federal Realty Investment Trust, First Union Real Estate Equity and Mortgage
Investments, Forest City Enterprises, General Growth Properties, Inc., Kimco
Realty, Simon Property Group, Inc., Taubman Centers, Inc., TrizecHahn
Corporation (through the fourth quarter of 1996, Trizec Corporation Ltd),
Urban Shopping Centers, Inc. and Weingarten Realty Investment.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
Effective September 24, 1998, the Board of Directors requested that Anthony
W. Deering enter into a special retention contract arrangement (the
"Agreement") with the Company. Mr. Deering concurred and, under the terms of
the Agreement, as amended, he will serve as the Company's Chief Executive
Officer until January 31, 2005. He will receive a minimum annual base salary
of $800,000 (subject to further increases in accordance with the Company's
executive compensation policy) and will be eligible for an annual cash bonus
under the Company's incentive compensation program.
In connection with the Agreement, Mr. Deering also received options to
purchase 300,000 shares of common stock, 109,850 shares of restricted stock,
and a cash payment of $2,643,713 to pay income taxes resulting from the
restricted stock award. The stock options are at an exercise price of $27.3125
per share (the closing price of the Company's common stock the day before the
grant date) and vest ratably on the fourth and fifth anniversaries of the
grant date. The restricted stock vests on January 31, 2005. In addition, the
Board accelerated the incentive stock award that Mr. Deering would have
received in 1999 under the Company's 1997 Stock Incentive Plan. As a result,
Mr. Deering received options to purchase an additional 300,000 shares at an
exercise price of $32.77 per share ($5.4575 above the closing price of the
Company's Common Stock the day before the grant date) which vest 25% on
February 25th in each of the years 2001-2004.
If Mr. Deering dies, becomes disabled, terminates his employment for Good
Reason (as defined in the Agreement) or is discharged by the Company without
Cause (which is defined in the Agreement to include certain changes of
control), then all unvested stock options and the restricted stock award held
by Mr. Deering will vest immediately. In addition, Mr. Deering will be
entitled to receive his Accrued Annual Bonus (as defined in the Agreement) and
a payment equal to (i) one-twelfth of the sum of his then current base salary
plus his average bonus during the prior three years, multiplied by (ii) the
lesser of 36 or the number of months from the termination date until Mr.
Deering's 62nd birthday. If Mr. Deering's employment terminates for any reason
other than as stated in the preceding sentence, the unvested portion of the
options and restricted stock granted to Mr. Deering pursuant to the Agreement
will be forfeited, he will be required to repay the tax gross-up payment, and
he will not be entitled to any severance payment.
Effective October 25, 1999, the Company entered into change of control
agreements (the "COC Agreements") with each of its executive officers(/1/)
other than Mr. Deering (who was already subject to the Agreement described
above and who thus did not benefit from the COC Agreements). The Board of
Directors approved the COC Agreements as being in the best interests of the
Company. The purpose of the COC Agreements is to encourage the executives to
remain with the Company in the event of a Change of Control of the Company (as
defined in the COC Agreements). The term of the COC Agreements is four years
(subject to potential one-year extensions) or, if later, three years after a
Change of Control occurs. The COC Agreements become operative only if a Change
of Control occurs.
- --------
(/1/)In addition to the named executive officers, the executive officers are
Duke S. Kassolis, Robert D. Riedy, Alton J. Scavo and Daniel C. Van Epp.
15
<PAGE>
If the Company terminates the executive's employment (other than for Cause
(as defined)) or if the executive terminates his employment for Good Reason
(as defined) after a Change of Control and during the term of the COC
Agreement, the executive is entitled to certain benefits. These benefits
include a severance payment equal to three times the sum of his Annual Base
Salary and Annual Bonus (both, as defined) and enhanced retirement benefits
consisting of three years' additional benefits under the Company's qualified
and nonqualified Pension and Savings Plans (with the Pension Plan benefit
calculated as if the executive were three years older), continued coverage
under the Company's welfare benefit plans (e.g., medical insurance plans) for
three years at no cost, vesting of all options and restricted stock, and
forgiveness of any Company loans. If, prior to or following a Change of
Control, the executive voluntarily terminates his employment, dies or becomes
disabled or if the Company terminates his employment for Cause, the executive
is entitled to no special payments.
With respect to all named executive officers, in addition to the specific
provisions in the COC Agreements described above, 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
of control of the Company). If such an event were to occur with respect to a
named executive officer, all stock options not yet exercisable, including
those 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, Mr. Deering and Mr. McGregor would
have forfeiture restrictions released on 109,850 and 50,000 shares,
respectively, of bonus stock; Messrs. Donahue and Smalley each would have
forfeiture restrictions released on 50,000 shares of bonus stock and Mr.
Minutoli would have forfeiture restrictions released on 22,500 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 of service performed in the first three years of
employment and one week's salary for each year of service from the fourth
through ninth years. Once an employee has reached his or her tenth year
anniversary date with the company, severance will be two weeks for every full
year of service from the date of hire. 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 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. Van Epp was awarded
shares of Common Stock in connection with the acquisition of Hughes by the
Company. In December 1998, the Board of Directors, acting pursuant to the
Company's 1997 Stock Incentive Plan, awarded Mr. McGregor shares of Common
Stock upon his promotion to Vice Chairman and Chief Operating Officer of the
Company. At the same time, Messrs. Donahue and Smalley were awarded shares of
Common Stock upon their promotion to Executive Vice Presidents of the Company.
In connection with such
16
<PAGE>
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 referred to in this paragraph 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 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.
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, 1999 through March 10, 2000 exceeded $60,000:
<TABLE>
<CAPTION>
Maximum Principal
Amount of Loans Principal
Outstanding Amount of Loans
Relationship with from 1-1-99 Outstanding on
Name of Individual Company through 3-10-00(1) 3-10-00
------------------ ------------------------ ------------------ ---------------
<C> <S> <C> <C>
Anthony W. Deering Chairman of the Board, $760,000 None
President and Chief
Executive Officer
Jeffrey H. Donahue Executive Vice President 531,000 357,000
and Chief Financial
Officer
Duke S. Kassolis Senior Vice President 266,000 87,000
and Director of Property
Operations
Douglas A. McGregor Vice Chairman and Chief 687,000 364,000
Operating Officer
Robert Minutoli Senior Vice President 267,893 87,000
and Director of New
Business
Robert D. Riedy Senior Vice President 294,749 120,749
and Director of Retail
Leasing
Alton J. Scavo Senior Vice President 261,000 87,000
and Director of the
Community Development
Division and General
Manager of Columbia
Jerome D. Smalley Executive Vice 537,300 357,000
President--Development
Daniel C. Van Epp Senior Vice President of 104,166 None
the Company and
President of The Howard
Hughes Corporation
</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 is 5.35% per year and
on the loans relating to the stock bonus grants that were made in February
and June 1996 and December 1998 is 5% per year.
17
<PAGE>
PENSION PLAN
The persons named in the Summary Compensation Table participate in the
Company's noncontributory Pension Plan (the "Plan"). As of January 1, 2000,
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 1999 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 1999
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, 2000. For
each year of service commencing after December 31, 1999 (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, McGregor, Minutoli and Smalley have, respectively,
27, 26, 27, 21 and 20 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 2000 rate of compensation to retirement) are $1,026,418,
$405,432, $594,646, $344,346 and $373,187, respectively.(/2/)
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 1999 was $130,000 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.
- --------
(/2/)Under the special retention contract arrangement with Mr. Deering, the
Company agreed to supplement his retirement benefits under the Plans to
guarantee annual benefits upon his retirement at or after age 62 equal to
55% of Mr. Deering's Cash Compensation (as defined in The Rouse Company
Pension Plan). Under certain circumstances, Mr. Deering's retirement
benefits will be supplemented in a similar fashion if he retires after
age 60 but before age 62.
18
<PAGE>
Mr. DeVito, as Chairman Emeritus, receives a basic fee of $50,000 for
serving as a director of the Company. In addition, Mr. DeVito receives the
standard director's fee for attending special Board meetings and Executive
Committee meetings.
Under The Rouse Company 1999 Stock Incentive Plan (the "Plan"), non-employee
directors receive 5,000-share stock option grants of Company Common Stock upon
their initial election. Each director receives an additional 1,000-share stock
option grant upon re-election as a director at subsequent annual meetings.
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.
Platt W. Davis, III is a partner in Vinson & Elkins, L.L.P., and his
interest in the matter described below arises solely from such position. From
time to time, Vinson & Elkins, L.L.P. provides legal services to subsidiaries
and affiliates of the Company, though Mr. Davis has provided no such services.
Jeremiah E. Casey is a director of Allfirst Financial, Inc. and Allfirst
Bank (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. 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 Allfirst
Financial, Inc.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
On January 29 , 1999, an adult son of Alton J. Scavo sold 120 shares of the
Company's Common Stock. Mr. Scavo, an executive officer of the Company,
inadvertently failed to report the sale. The sale was reported on a Form 4
that was filed on January 10, 2000.
STOCKHOLDER PROPOSALS FOR 2001 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 2001. 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 2001 annual meeting, any such proposal must be received by
the Company by December 15, 2000, addressed to the attention of its Secretary
at its principal place of business in Columbia, Maryland.
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<PAGE>
ACCOUNTING MATTERS
The Board of Directors first appointed KPMG LLP as its auditors in December
1956. The audit services rendered by KPMG LLP for the fiscal year ended
December 31, 1999 included examination of the financial statements of the
Company, its subsidiaries and affiliates, 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 LLP will attend the Annual Meeting of Stockholders
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.
20
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<TABLE>
HARDING & HEAL, INC. PROOF #4 4/07/00 15:50 CUST. THE BANK OF NEW YORK FILE NAME 71747 ROUSE PROXY
Attn: Ray Poplasky
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The Board of Directors recommends a vote FOR the election of all nominees for
directors.
<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: Anthony W. Deering, Rohit M. Desai and Hanne M. Merriman.
(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
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(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.
<TABLE>
<S> <C>
(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: ,2000
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(SEAL)
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Signature
(Please sign, date and return this proxy Votes must be indicated
in the enclosed postage prepaid envelope.) (x) in black or blue ink. X
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</TABLE>
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THE ROUSE COMPANY
Proxy Solicited on Behalf of the Board of Directors-Annual Meeting of
Stockholders-May 11, 2000
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 13, 2000, and hereby constitutes and
appoints Anthony W. Deering, Chairman of the Board, President and Chief
Executive Officer of the Company, and Gordon H. Glenn, 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 11, 2000, 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
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