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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.............)
Urban Shopping Centers, Inc.
--------------------------
(Name of Subject Company)
Urban Shopping Centers, Inc.
--------------------------
(Name of Person(s) Filing Statement)
Common Stock, par value $.01 per share (including the associated preferred share
purchase rights)
(Title of Class of Securities)
917060 10 5
--------------------------------------
(CUSIP Number of Each Class of Securities)
Matthew S. Dominski
Urban Shopping Centers, Inc.
900 North Michigan Avenue, Suite 1500
Chicago, Illinois 60611
(312) 915-2000
(Name, address and telephone number of person authorized to
receive notices and communications on behalf of the person(s) filing statement)
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with copies to:
<S> <C> <C>
Edward J. Schneidman Charles W. Mulaney, Jr. Steven J. Gavin
Mayer, Brown & Platt Skadden, Arps, Slate, Meagher & Flom (Illinois) Winston & Strawn
190 South LaSalle Street 333 West Wacker Drive, Suite 2100 35 West Wacker Drive
Chicago, Illinois 60603 Chicago, Illinois 60606 Chicago, Illinois 60601
(312) 782-0600 (312) 407-0700 (312) 558-5600
</TABLE>
/ / Check box if the filing relates solely to preliminary communications made
before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION
NAME AND ADDRESS.
The name of the subject company is Urban Shopping Centers, Inc., a Maryland
corporation ("Urban Shopping Centers"). The address of the principal executive
offices of Urban Shopping Centers is 900 North Michigan Avenue, Suite 1500,
Chicago, Illinois 60611, and its telephone number is (312) 915-2000.
SECURITIES.
The title of each class of equity securities to which this
Solicitation/Recommendation Statement (this "Statement") relates is the
(i) common stock, par value $.01 per share (the "Stock"), (ii) unit voting
common stock, par value $.01 per share ("Unit Voting Stock"), (iii) Series A
Cumulative Convertible Redeemable Preferred Stock, par value $.01 per share
("Series A Preferred Stock") and (iv) Series B Cumulative Convertible Redeemable
Preferred Stock, par value $.01 per share ("Series B Preferred Stock"). Unless
the context requires otherwise, references to Stock and Unit Voting Stock shall
include the associated preferred share purchase rights of Urban Shopping Centers
issued pursuant to the Rights Agreement, dated May 5, 1999, between Urban
Shopping Centers and First Chicago Trust Company of New York, as Rights Agent,
as amended by Amendment No. 1 thereto dated as of September 25, 2000. As of
September 25, 2000, there were 17,781,018 shares of Stock issued and
outstanding, 407,935 shares of Unit Voting Stock issued and outstanding,
2,999,400 shares of Series A Preferred Stock issued and outstanding and 773,515
shares of Series B Preferred Stock issued and outstanding; and 904,885 shares of
Stock reserved for issuance upon the exercise of outstanding stock options,
9,041,369 shares of Stock reserved for issuance upon the conversion of
outstanding common limited partnership interests ("Units") of Urban Shopping
Centers, L.P., an Illinois limited partnership in which Urban Shopping Centers
is the sole general partner ("Urban L.P."), 1,018,182 shares of Stock reserved
for issuance upon the redemption and exchange of outstanding preferred limited
partnership interests of Urban L.P., 253,989 shares of Stock reserved for
issuance upon redemption and exchange of outstanding incentive units of Urban
L.P., 629,500 shares of Stock reserved for issuance pursuant to the incentive
stock programs of Urban Shopping Centers, 2,999,400 shares of Stock reserved for
issuance upon the redemption and exchange of the outstanding shares of Series A
Preferred Stock, 773,515 shares of Stock reserved for issuance upon the
redemption and exchange of the outstanding shares of Series B Preferred Stock,
3,278,161 shares of Stock reserved for issuance to certain significant security
holders or their affiliates as payment of part or all of the purchase price of
interests in certain developed and undeveloped properties in the event that
Urban Shopping Centers purchases those interests and 407,935 shares of Stock
reserved for issuance upon conversion of the outstanding Unit Voting Stock.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
NAME AND ADDRESS
The name, business address and business telephone number of Urban Shopping
Centers, which is the subject company and the filing person, are set forth in
Item 1 above.
TENDER OFFER
This Statement relates to the tender offer by Head Acquisition, L.P., a
Delaware limited partnership ("Head Acquisition"), an indirect wholly owned
subsidiary of Rodamco North America N.V., a company organized under the laws of
the Netherlands ("Rodamco"), to purchase all outstanding shares of Stock, Unit
Voting Stock, Series A Preferred Stock and Series B Preferred Stock (other than
shares of such stock owned by Head Acquisition, Rodamco and their subsidiaries)
at a purchase price of $48.00 per share, net to the seller in cash (less any
required withholding taxes), without interest thereon, on the terms and subject
to the conditions set forth in the Offer to Purchase, dated October 2, 2000 (the
"Offer to Purchase"), and in the related Letter of Transmittal (the "Letter of
Transmittal," which, together with the Offer to Purchase, as each may be amended
or supplemented from time to time, constitute the "Offer"),
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copies of which are filed as Exhibits (a)(1) and (a)(2) herewith, respectively,
and are incorporated herein by reference in their entirety. Head Acquisition and
Rodamco and their subsidiaries have indicated that they currently do not
beneficially own any shares of Stock, Unit Voting Stock, Series A Preferred
Stock or Series B Preferred Stock. The Offer is described in a Tender Offer
Statement on Schedule TO, dated October 2, 2000 (the "Schedule TO"), which was
filed with the Securities and Exchange Commission on October 2, 2000.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of September 25, 2000 (the "Merger Agreement"), by and among Rodamco, Hexalon
Real Estate, Inc., a Delaware corporation ("Hexalon"), Head Acquisition, Head
Acquisition Corp., a Delaware corporation ("Head Acquisition Corp"), Urban
Shopping Centers and Urban L.P. Following the completion of the Offer and the
satisfaction or waiver of the conditions to the Offer, if Head Acquisition and
certain related parties have the right to acquire or otherwise own, at least 90%
of the votes entitled to be cast on the Merger (as defined below), Head
Acquisition shall assign the right to acquire the shares holding such voting
power to Head Acquisition Corp and Head Acquisition Corp shall acquire the
Stock, Unit Voting Stock, Series A Preferred Stock and Series B Preferred Stock
tendered pursuant to the Offer. If Head Acquisition acquires the Stock, Unit
Voting Stock, Series A Preferred Stock and Series B Preferred Stock tendered
pursuant to the Offer, it is proposed that Urban Shopping Centers shall merge
with and into Head Acquisition, with Head Acquisition surviving and pursuant to
which each outstanding share of Stock, Unit Voting Stock, Series A Preferred
Stock and Series B Preferred Stock shall be converted into the right to receive
$48.00 per share. If Head Acquisition Corp acquires the Stock, Unit Voting
Stock, Series A Preferred Stock and Series B Preferred Stock tendered pursuant
to the Offer, it is proposed that Head Acquisition Corp shall merge with and
into Urban Shopping Centers, with Urban Shopping Centers surviving and pursuant
to which each outstanding share of Stock, Unit Voting Stock, Series A Preferred
Stock and Series B Preferred Stock shall be converted into the right to receive
$48.00 per share (the transaction in the previous two sentences which is
consummated being the "Merger"). Immediately following the merger of Head
Acquisition Corp with and into Urban Shopping Centers, Urban Shopping Centers
shall merge with and into Head Acquisition, with Head Acquisition being the
surviving entity. A copy of the Merger Agreement is filed as Exhibit (e)(1)
hereto and is incorporated herein by reference in its entirety.
The Schedule TO states that the principal executive offices of Rodamco are
located at Coolsingel 120, Postbus 973 NL-3000 AZ Rotterdam and that the
principal executive offices of Hexalon, Head Acquisition and Head Acquisition
Corp are located at 950 East Paces Ferry Road, Suite 2275, c/o Hexalon, Atlanta,
Georgia 30326.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Information concerning the actual or potential conflicts of interest
involving Urban Shopping Centers and its executive officers, directors and
affiliates is set forth in Urban Shopping Centers' definitive proxy statement
for its Annual Meeting of Shareholders dated March 27, 2000 under the captions
"Executive Compensation--Employment Contracts, Termination of Employment and
Change-in-Control Arrangement", "Certain Relationships and Related Transactions"
and "Security Ownership". A copy of the relevant information from such Proxy
Statement is filed as part of Annex B hereto and incorporated by reference
herein.
Additional information concerning the actual or potential conflicts of
interest involving Urban Shopping Centers, its executive officers, directors,
affiliates and Head Acquisition, its executive officers, general partner and
affiliates as a result of entering into the Merger Agreement and the
transactions contemplated thereby, including those resulting from the proposed
amendment to the Urban L.P. partnership agreement is set forth in "Item 11.
Purpose of the Offer and Merger; The Merger Agreement; Other Agreements; Effects
of Inability to Consummate the Merger; Statutory Requirements; Appraisal Rights;
Plans for Urban" in the Offer to Purchase and is incorporated by reference
herein.
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As of September 29, 2000, JMB and its affiliates beneficially owned
approximately 42.6% of the voting power of the outstanding securities of Urban
Shopping Centers. At the same time that the Merger Agreement was executed,
certain limited partners of Urban L.P., including JMB Realty Corporation ("JMB")
and certain of its affiliates, agreed to amend the existing Urban L.P.
partnership agreement following the Merger. In addition, affiliates of JMB have
entered or will enter into certain other agreements and arrangements in
connection with the Offer and the Merger, including the following:
- JMB Properties Company, an Illinois general partnership, entered into a
Stock Purchase Agreement as of September 25, 2000 with Urban Shopping
Centers and a company affiliated with Rodamco, pursuant to which, at the
closing of the Merger, JMB Properties Company will dispose of its common
stock in the Urban Management Company (as defined in the Offer to
Purchase) in exchange for (i) $2 million and (ii) retention through a
newly formed limited liability company of the 95% ownership interest in a
land parcel that was originally contributed to Urban Management Company by
JMB Properties Company. A copy of the Stock Purchase Agreement is filed as
Exhibit (e)(2) hereto and is incorporated herein by reference.
- Upon effectiveness of the Merger, JMB Insurance Agency, Inc. will enter
into an Insurance Agreement with Head Acquisition and Urban L.P. pursuant
to which JMB Insurance Agency, Inc. would have the opportunity to provide
all property casualty insurance brokerage for the Urban L.P. and its
subsidiaries for a period of five years following the Merger on terms no
less favorable than those which would be obtained from unaffiliated third
parties. A copy of the Insurance Agreement is filed as Exhibit (e)(3)
hereto and is incorporated herein by reference.
- Pursuant to the Voting Agreement (as defined in the Offer to Purchase),
upon effectiveness of the Merger, non-competition agreements currently in
effect between Urban Shopping Centers and Mr. Neil G. Bluhm, Mr. Judd D.
Malkin (Messrs. Bluhm and Messrs. Malkin being the control persons of
JMB), JMB Institutional Realty Corporation and JMB will be terminated. The
non-competition agreements would otherwise have terminated in October of
2003 except that, with respect to Messr. Bluhm or Malkin, the agreements
would have terminated earlier if at any time such person was no longer a
director or officer of Urban Shopping Centers. A copy of the Voting
Agreement is filed as Exhibit (e)(4) hereto and is incorporated herein by
reference.
More-detailed information concerning the foregoing agreements is set forth in
"Item 11. Purpose of the Offer and the Merger; The Merger Agreement; Other
Agreements; Effects of Inability to Consummate the Merger; Statutory
Requirements; Appraisal Rights; Plans for Urban" in the Offer to Purchase and is
incorporated herein by reference.
The Merger Agreement provides that, at the effective time of the Merger, the
holder of each outstanding option to purchase Stock or Units granted under Urban
Shopping Centers' 1993 Option Plan, whether or not then vested or exercisable,
will be paid an amount of cash equal to (A) the product of (i) the number of
shares of Stock or Units provided for in the option and (ii) the excess, if any,
of $48.00 per share over the exercise price of the option, less (B) any
applicable withholding taxes.
The Merger Agreement also provides that, at the effective time of the
Merger, the holder of an earned incentive unit granted under Urban L.P.'s 1996
Incentive Unit Program or earned incentive share granted under Urban Shopping
Centers' 1999 Incentive Stock Program or 1999 Supplemental Incentive Stock
Program, whether or not then vested, will be paid an amount of cash equal to
(A) the product of (i) the number of earned incentive units and shares
(including shares for the 2000 performance year which are deemed earned for this
purpose) and (ii) the $48.00 per share, less (B) any applicable withholding
taxes.
Under the terms of Urban Shopping Centers' Senior Executive Parachute Plan,
upon the occurrence of a change in control, each employee of Urban Shopping
Centers who has been designated an "Eligible Senior Executive" is entitled to
receive an amount equal to the sum of the employee's annual base salary and
average annual bonus multiplied by 2.99. For this purpose, (i) a change in
control includes the time
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when a person, other than JMB or any of its affiliated entities, owns or
controls fifty percent or more of the voting control of the capital stock of
Urban Shopping Centers, (ii) annual base salary is the rate in effect
immediately prior to the change in control, excluding bonuses, overtime and
premium pay, shift differentials, incentive compensation and all other
compensation and (iii) average annual bonus equals the average annual cash bonus
paid to the participant under Urban Shopping Centers' Bonus Incentive
Compensation Plan for the most recent three calendar years preceding the change
in control. As a result, this provision will be triggered upon the closing of
the Offer. In addition, each participant subject to the plan is entitled to up
to $20,000 for personal financial counseling and tax preparation services
incurred during or with respect the calendar year in which the change in control
occurs. If a participant is terminated within thirty-six months following a
change in control, the participant is entitled to be covered under Urban
Shopping Centers' health, dental and life insurance plans as in effect at the
termination, or a comparable plan, for a period ending on the earlier to occur
of the thirty-six month anniversary of the change in control or the
participant's employment by a new entity providing comparable benefits. In
addition, the Chief Executive Officer of Urban Shopping Centers is entitled to
an amount equal to all of the benefits (other than base salary and bonus)
provided to the Chief Executive Officer in the calendar year immediately
preceding the change in control. Finally, in the event that a tax under
Section 4999 of the Internal Revenue Code is imposed on payments made to a
participant in connection with a change in control, each participant is entitled
to a payment such that the net amount retained by the participant after payment
of the tax and any federal, state and local income or employment taxes on the
amounts paid to the participant in respect of the tax equals the amount the
participant would have paid had the tax imposed by Section 4999 had not been
imposed.
Pursuant to the provisions of the Merger Agreement regarding the amounts
payable with respect to outstanding options, earned incentive units and shares
and otherwise payable pursuant to the provisions of
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the Senior Executive Parachute Plan, the directors and executive officers of
Urban Shopping Centers will be entitled to receive, generally on a pre-tax
basis, the following estimated amounts:
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NAME TITLE AMOUNT
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Neil G. Bluhm Co-Chairman of the Board of Directors $ --
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James B. Digney Director 250,000
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Matthew S. Dominski Director and Chief Executive Officer 17,409,000
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Adam S. Metz President 8,017,000
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Susan Getzendanner Director 250,000
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Judd D. Malkin Co-Chairman of the Board of Directors --
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John E. Neal Director 176,000
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Phillip B. Rooney Director 97,000
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John G. Schreiber Director --
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Henry T. Segerstrom Director 97,000
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James L. Czech Executive Vice President 4,337,000
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James H. Lyman Executive Vice President and Chief 2,981,000
Financial Officer
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Joseph M. Shrader President--Property Management of Urban 1,662,000
Retail Properties Co.
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Ross B. Glickman President--Leasing of Urban Retail 3,139,000
Properties Co.
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Michael Hilborn Senior Vice President and General Counsel 2,603,000
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
RECOMMENDATION OF THE SPECIAL COMMITTEE
In connection with evaluating the proposed Merger, the board of directors
(the "Board of Directors") of Urban Shopping Centers formed a special committee
of directors who did not hold Units and who were independent of management and
JMB (the "Special Committee"). At a meeting of the Special Committee of the
Board of Directors of Urban Shopping Centers held on September 25, 2000, the
Special Committee unanimously determined to recommend to the Board of Directors
that the Board of Directors approve the Merger Agreement, the Offer, the Merger
and the other transactions contemplated thereby. In addition, the Special
Committee determined that the Merger Agreement, the Offer, the Merger and the
other transactions contemplated thereby, taken together, were fair to, and
advisable and in the best interests of Urban Shopping Centers and its
stockholders (other than holders of Unit Voting Stock, as to which no
determination was made). In considering the recommendation of the Special
Committee with respect to the Offer and the Merger, you should be aware that
some members of the Board of Directors and management have interests in the
Merger that may conflict with the interests of Urban Shopping Centers'
stockholders generally. The Special Committee was aware of these interests and
considered them, among other matters, in recommending that the Board of
Directors approve the Merger Agreement, the Offer, the Merger and the other
transactions contemplated thereby.
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RECOMMENDATION OF THE BOARD OF DIRECTORS
At a meeting held on September 25, 2000, the Board of Directors
(i) determined that each of the Merger Agreement, the Offer, the Merger and the
other transactions contemplated by the Merger Agreement, taken together, were
fair to, advisable and in the best interests of Urban Shopping Centers and its
stockholders, and (ii) recommended acceptance and approval by the holders of
Stock of the Merger Agreement, the Offer, the Merger and the transactions
contemplated by the Merger Agreement. ACCORDINGLY, THE BOARD OF DIRECTORS
RECOMMENDS THAT THE HOLDERS OF URBAN SHOPPING CENTER'S STOCK, UNIT VOTING STOCK,
SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER AND APPROVE THE MERGER.
A letter to the holders of Urban Shopping Center's Stock, Unit Voting Stock,
Series A Preferred Stock and Series B Preferred Stock; the Offer to Purchase; a
letter to brokers, dealers, commercial banks, trust companies and other
nominees; a letter to clients for use by brokers, dealers, commercial banks,
trust companies and other nominees communicating the recommendation of the
Special Committee and the Board of Directors; a summary advertisement, and a
press release announcing the Merger Agreement are filed herewith as Exhibits
(a)(1), (a)(4), (a)(5), (a)(6) and (a)(7), respectively, and are incorporated
herein by reference.
The recommendations of the Special Committee and the Board of Directors are
based in part on the opinion of Morgan Stanley & Co. Incorporated ("Morgan
Stanley") to the Special Committee and the Board of Directors on September 25,
2000, to the effect that, as of such date and based upon the assumptions and
qualifications set forth in its opinion, the consideration to be received by the
holders of Stock, Unit Voting Stock, Series A Preferred Stock and Series B
Preferred Stock, in the aggregate, pursuant to the Merger Agreement was fair
from a financial point of view to such holders (other than Hexalon and its
affiliates). The full text of the written opinion, which sets forth the
assumptions made, the procedures followed, the matters considered and the
limitations on the review undertaken by Morgan Stanley, is attached hereto as
Annex A and filed herewith as Exhibit (a)(8) and is incorporated herein by
reference. We urge you to read Morgan Stanley's opinion carefully and in its
entirety.
REASONS
BACKGROUND OF THE OFFER
Information concerning the background of the Offer is set forth in "Item 10.
Background of the Offer; Contacts with Urban" in the Offer to Purchase and is
incorporated by reference herein.
REASONS OF THE SPECIAL COMMITTEE
In recommending that the Board of Directors approve the Merger Agreement,
the Offer, the Merger and the other transactions contemplated thereby, the
Special Committee consulted with its legal and financial advisors and considered
a number of factors, including the following:
- TERMS. The financial and other terms and conditions of the Merger
Agreement, the Offer, the Merger.
- FINANCIAL RESULTS AND PROSPECTS. Urban Shopping Centers' financial
performance and outlook, based on the directors' familiarity with and
review of its assets, business, financial condition, business strategy,
results of operations and prospects.
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- CURRENT AND HISTORICAL MARKET PRICE. The relationship of the $48 per share
cash consideration offered in the Offer and the Merger to the current
market price and the market prices of Stock from the initial public
offering in 1993 to date. The Special Committee considered the fact that
the Stock had closing prices as high as $36.13 per share and as low as
$18.88 per share during this period. The Special Committee also considered
the fact that the $48 per share cash consideration offered in the Offer
and the Merger represents a premium of approximately 39.4% over the per
share closing price of the Stock on September 25, 2000, the last trading
day prior to the public announcement of the Merger Agreement.
- ANALYSES AND FAIRNESS OPINION OF FINANCIAL ADVISOR. The opinion of Morgan
Stanley, dated as of September 25, 2000, that, as of that date, based upon
the assumptions and qualifications set forth in its opinion, the
consideration to be received by holders of shares of Stock, Unit Voting
Stock, Series A Preferred Stock and Series B Preferred Stock, in the
aggregate, pursuant to the Merger Agreement was fair from a financial
point of view to such holders (other than Hexalon and its affiliates). The
Special Committee also considered Morgan Stanley's presentation to the
Special Committee. In its review of the financial analyses performed by
Morgan Stanley, the Special Committee did not weigh each analysis prepared
by Morgan Stanley separately, but rather considered all of them taken as a
whole.
- THE CONDITIONAL NATURE OF THE PROPOSAL AND THE TERMS OF THE MERGER
AGREEMENT REGARDING A SUPERIOR TRANSACTION PROPOSAL. The Special Committee
noted that Rodamco's September 5, 2000 written proposal letter stated that
the offer of $48 per share would be withdrawn if it were disclosed to
third parties and would expire on September 20, 2000, unless extended. The
Special Committee also considered provisions in the Merger Agreement that
would allow the Special Committee to consider and, under certain
circumstances, pursue an unsolicited alternative proposal from a third
party, including the termination provisions, the "no solicitation"
provisions, the expenses payable to Hexalon and the conditions precedent
to payment of such expenses, and the termination fee payable to Hexalon
and the conditions precedent to payment of such termination fee. The
Merger Agreement prohibits Urban from soliciting alternative proposals,
but does not prohibit Urban Shopping Centers from considering unsolicited
proposals, negotiating with the parties submitting such proposals or
furnishing such third parties with information about Urban Shopping
Centers under certain circumstances. The Merger Agreement permits Urban
Shopping Centers, subject to certain conditions and the payment to Rodamco
of expenses up to $12.5 million and a termination fee of $37.5 million, to
terminate the Merger Agreement if an alternative superior transaction
proposal not matched by Hexalon is received from a third party. The
Special Committee concluded that the amount of such expenses and fee would
not deter a third party from making a transaction proposal that was
materially more favorable to Urban Shopping Centers' stockholders.
- STRUCTURE OF THE TRANSACTION. The transaction is structured to include a
first-step cash tender offer for all of the outstanding shares of Stock,
Unit Voting Stock, Series A Preferred Stock and Series B Preferred Stock,
subject to the condition that a minimum of shares representing two-thirds
of the votes entitled to be cast on the Merger are tendered and not
withdrawn, which effectively requires holders of a majority of the Stock
not held by affiliates of JMB or management to tender their shares in
order for the transaction to be completed.
- FINANCING. There is no financing contingency to Hexalon's obligations to
consummate the Offer and the Merger, Hexalon and Rodamco have significant
financial resources and the Merger Agreement required that Hexalon and
Rodamco provide a bank commitment letter upon execution of the Merger
Agreement.
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- ROLE OF THE SPECIAL COMMITTEE IN NEGOTIATING CERTAIN TERMS OF THE PROPOSED
TRANSACTION. The Special Committee noted that the Special Committee and
its representatives had engaged in arm's-length negotiations with Hexalon
and Hexalon's representatives. Among other things, these negotiations
resulted in:
- the Special Committee having the right to engage in negotiations with,
and supply information to, a person who makes an unsolicited
alternative proposal if the Special Committee determines in good faith
that such proposal is more favorable from a financial point of view to
Urban Shopping Centers' stockholders than the Offer and Merger;
- the Special Committee having the right to terminate the Merger
Agreement in light of a superior transaction proposal; and
- a reduction in the expense reimbursement and termination fee sought by
Hexalon in the event that the Merger Agreement were to be terminated as
a result of a superior transaction proposal.
- CONFLICTS AND POTENTIAL CONFLICTS OF INTERESTS OF CERTAIN DIRECTORS AND
MEMBERS OF MANAGEMENT OF URBAN SHOPPING CENTERS. The Special Committee
considered the benefits to JMB affiliates and other limited partners from
the amendment to the Urban L.P. partnership agreement and the difference
in the tax consequences of the transaction to the limited partners in
comparison to Urban Shopping Centers' stockholders. Among such matters,
the Special Committee considered the following benefits to the limited
partners, consisting primarily of JMB affiliates, in the amendment to the
Urban L.P. partnership agreement: (i) a special cash distribution of
$38.40 times the number of their outstanding units; (ii) a special
allocation in Urban L.P. of 43% of the depreciation on the existing tax
basis of properties owned by Urban L.P.; (iii) preferential distributions
which equate to approximately 8% on such limited partners' post-Merger
partnership interest in Urban L.P. (or approximately $5.8 million per
annum); (iv) the maintenance of sufficient nonrecourse liabilities to
enable such limited partners to be allocated an amount of liabilities at
least equal to the limited partners' aggregate negative capital account
balance (taking into account the special cash distribution and other tax
items) so that the special cash distribution would be treated as a
tax-free distribution to the limited partners. It was the understanding of
the Special Committee that the benefits to the limited partners as a
result of the amendment to the Urban L.P. partnership agreement did not
reduce the consideration Rodamco was willing or able to pay to the
stockholders of Urban Shopping Centers in the Offer and the Merger. The
Special Committee also considered the agreement by Rodamco to indemnify
the affiliates of JMB who are limited partners in Urban L.P. if Urban L.P.
sold four identified properties, if Urban L.P. failed to maintain a
certain level of agreed indebtedness, failed to allocate such indebtedness
in accordance with the terms of the amended Urban L.P. partnership
agreement, or if such affiliates could not claim the deductions
attributable to the special depreciation allocation. The Special Committee
considered the benefits to certain affiliates of JMB resulting from the
purchase by Rodamco of the common stock of the property management company
owned by JMB, the termination of the non-competition agreements with JMB
affiliates and Rodamco's agreement to use a JMB insurance brokerage agency
for five years. The Special Committee also considered the benefits of the
transaction to members of Urban Shopping Centers' management under certain
severance and other compensation agreements and arrangements discussed
above, as well as the likelihood that members of Urban Shopping Centers'
current management would continue to manage its properties for Rodamco
after the transaction is completed.
In addition to the factors listed above, the Special Committee considered
the fact that the consummation of the Offer and the Merger would eliminate the
opportunity of the stockholders (other than those stockholders, including
affiliates of JMB, who are also limited partners in Urban L.P. and determine to
retain an interest therein) to participate in any future growth in the value of
Urban Shopping Centers. The
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Special Committee believed that this loss of opportunity was appropriately
reflected in the $48 per share price to be paid in cash in connection with the
Offer and the Merger.
The foregoing discussion of the information and factors considered by the
Special Committee includes all of the material factors considered by the Special
Committee in reaching its conclusions and recommendations but is not meant to be
exhaustive. In view of the variety of factors considered in reaching its
determination, the Special Committee did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the specific factors
considered in reaching its conclusions and recommendations. In addition,
individual members of the Special Committee may have given different weights to
different factors.
REASONS OF THE BOARD OF DIRECTORS
In reaching its determinations referred to above, the Board of Directors
considered the following factors, each of which, in the view of the Board of
Directors, supported such determinations: (i) the conclusions and
recommendations of the Special Committee; (ii) the factors referred to above as
having been taken into account by the Special Committee, including the receipt
by the Special Committee and the Board of Directors of the opinion of Morgan
Stanley, dated as of September 25, 2000, that, as of that date, based upon the
assumptions and qualifications set forth in its opinion, the consideration to be
received by the holders of shares of Stock, Unit Voting Stock, Series A
Preferred Stock and Series B Preferred Stock, in the aggregate, pursuant to the
Merger Agreement was fair from a financial point of view to such holders (other
than Hexalon and its affiliates); and (iii) the analysis presented by Morgan
Stanley to the Board.
The members of the Board of Directors, including the members of the Special
Committee, evaluated the Offer and the Merger in light of their knowledge of the
business, financial condition and prospects of Urban Shopping Centers and based
upon the advice of financial and legal advisors.
In view of the wide variety of factors considered in connection with their
evaluation of the tender offer and the merger, the Board of Directors found it
impracticable to, and did not, qualify or otherwise attempt to assign relative
weights to the specific factors it considered in reaching its determinations. In
addition, individual members of the Board of Directors may have given different
weight to different factors.
The foregoing discussion of the information and factors considered and given
weight by the Board of Directors is not intended to be exhaustive, but includes
all material factors considered by the Board of Directors.
INTENT TO TENDER
Pursuant to the terms of a voting agreement (the "Voting Agreement") entered
into on September 25, 2000 among Rodamco, Hexalon, Head Acquisition, Head
Acquisition Corp, Urban Shopping Centers, Urban L.P., certain stockholders of
Urban Shopping Centers and certain limited partners of Urban L.P. (such
stockholders and limited partners, the "Subject Stockholders") each Subject
Stockholder agreed that it will not contract to sell, sell or otherwise transfer
or otherwise dispose of any shares of Stock and Unit Voting Stock or Units, or
any interest therein, or securities convertible into, or any voting rights with
respect to such securities, other than (a) pursuant to the Voting Agreement or
the Merger Agreement or (b) in a transfer to a party who executes a counterpart
to the Voting Agreement agreeing to be bound by its terms and provisions. Each
Subject Stockholder further agreed to (1) tender such holder's shares of Stock
and Unit Voting Stock pursuant to the Offer or (2) to the extent not so
tendered, to vote, or cause to be voted, all of the shares of Stock and Unit
Voting Stock or Units, as applicable, beneficially owned by such person, (i) in
favor of the amendment to the partnership agreement of Urban L.P., (ii) against
any action or agreement that could reasonably be expected to result in a breach
in any material respect of any covenant, representation or warranty, or any
other obligation of Urban Shopping Centers in or under the Merger Agreement or
any related agreement or is intended or could reasonably be expected, to
materially impede,
10
<PAGE>
interfere with, delay, postpone or adversely affect the Offer, the Merger, the
amendment to the partnership agreement of Urban L.P. or the other transactions
contemplated by the Merger Agreement, and (iii) against any competing
transaction. In addition, certain Subject Stockholders have agreed to convert
certain of the Units into Stock and to tender such shares into the Offer. The
Voting Agreement terminates on the earlier to occur of the closing of the Merger
or the termination of the Merger Agreement in accordance with its terms. A copy
of the Voting Agreement is filed as Exhibit (e)(4) to this Statement and is
incorporated herein by reference. Finally, to the best knowledge of Urban
Shopping Centers, after making reasonable inquiry, the remaining executive
officers and directors of Urban Shopping Centers who own or hold shares of Stock
or Unit Voting Stock currently intend to tender such shares, other than shares
of Stock that they have the right to purchase under the incentive stock program
or by exercising stock options.
ITEM 5 PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
The information contained under "Summary Term Sheet," "Important,"
"Introduction," and "Item 16. Certain Fees and Expenses" in the Offer to
Purchase is incorporated herein by reference.
Except as set forth in the sections of the Offer to Purchase incorporated
herein by reference to this Item 5, neither Urban Shopping Centers nor any
person acting on its behalf has employed, retained or compensated, or currently
intends to employ, retain or compensate, any person to make solicitations or
recommendations to the holders of Stock, Unit Voting Stock, Series A Preferred
Stock or Series B Preferred Stock on its behalf with respect to the Offer or the
Merger.
ITEM 6 INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
Except for regular purchases made pursuant to the Urban Shopping Centers'
Dividend Reinvestment Plan and employee benefit plans, no transactions in shares
of Stock, Unit Voting Stock, Series A Preferred Stock or Series B Preferred
Stock have been effected by Urban Shopping Centers or, to Urban Shopping
Centers' knowledge, by any executive officer, director, affiliate or subsidiary
of Urban Shopping Centers during the last 60 days.
ITEM 7 PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Except as described or referred to in this Statement, to Urban Shopping
Centers' knowledge, no negotiation is being undertaken or engaged in by Urban
Shopping Centers which relates to or would result in (i) a tender offer or other
acquisition of the shares of Stock, Unit Voting Stock, Series A Preferred Stock
or Series B Preferred Stock by Urban Shopping Centers, any of its subsidiaries
or any other person, (ii) an extraordinary transaction, such as a merger,
reorganization, or liquidation, involving Urban Shopping Centers or any of its
subsidiaries, (iii) a purchase, sale or transfer of a material amount of assets
of Urban Shopping Centers or any of its subsidiaries, or (iv) any material
change in the present dividend rate or policy, or indebtedness or capitalization
of Urban Shopping Centers. Additionally, the information set forth in "Item 11.
Purpose of the Offer and the Merger; The Merger Agreement; Other Agreements;
Effects of Inability to Consummate the Merger; Statutory Requirements; Appraisal
Rights; Plans for Urban" in the Offer to Purchase is incorporated herein by
reference.
Except as described or referred to in this Statement, to Urban Shopping
Centers' knowledge, there are no transactions, resolutions of the Board of
Directors, agreements in principle, or signed contracts entered into in response
to the Offer that would relate to one or more of the matters referred to in this
Item 7.
ITEM 8 ADDITIONAL INFORMATION.
The Information Statement pursuant to Rule 14f-1 attached hereto as
Exhibit B is being furnished to the stockholders of Urban Shopping Centers in
connection with the possible designation by Head
11
<PAGE>
Acquisition, pursuant to the Merger Agreement, of certain persons to be
appointed to the Board of Directors other than at a meeting of Urban Shopping
Centers' stockholders, and such information is incorporated herein by reference.
In addition, the information contained in the Offer to Purchase is
incorporated herein by reference.
ITEM 9 EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
(a)(1)*+ Offer to Purchase dated October 2, 2000
(a)(2)*+ Letter of Transmittal
(a)(3)+ Letter from the Chief Executive Officer of Urban Shopping
Centers to the holders of Urban Shopping Centers' Stock,
Unit Voting Stock, Series A Preferred Stock and Series B
Preferred Stock
(a)(4)* Letter to Brokers, Dealers, Commercial Banks, Trust
Companies, and Other Nominees
(a)(5)* Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies, and Other Nominees
(a)(6)* Summary Advertisement dated October 2, 2000
(a)(7)* Text of joint press release issued by Urban Shopping Centers
and Rodamco, dated September 25, 2000
(a)(8)+ Opinion of Morgan Stanley dated September 25, 2000 (attached
as Annex A hereto)
(e)(1)* Agreement and Plan of Merger, dated as of September 25, 2000
by and among Rodamco, Hexalon, Head Acquisition, Head
Acquisition Corp, Urban Shopping Centers and Urban L.P.
(e)(2)* Stock Purchase Agreement dated as of September 25, 2000 by
and among JMB Properties Company, Head Management Company
Holding, Inc. and the Urban Management Company
(e)(3)* Form of Insurance Agreement to be entered into by Head
Acquisition, Urban L.P. and JMB Insurance Agency, Inc.
(e)(4)* Voting Agreement dated as of September 25, 2000 by and among
Rodamco, Hexalon, Head Acquisition, Head Acquisition Corp,
Urban Shopping Centers, Urban L.P., certain stockholders of
Urban Shopping Centers and certain limited partners of Urban
L.P.
(e)(5)+ Information Statement of Urban Shopping Centers dated
October 2, 2000 (attached as Annex B hereto)
(e)(6)* Form of Third Amended and Restated Agreement of Limited
Partnership of Urban L.P. to be entered into by Head
Acquisition, as general partner, and the limited partners
(e)(7)* Form of Indemnification and Tax Contest Agreement by and
among Urban L.P., Head Acquisition, Hexalon and the
indemnities named therein
</TABLE>
------------------------
* Incorporated by reference to the Schedule TO filed by Rodamco, Hexalon, Head
Acquisition and Head Acquisition Corp on October 2, 2000.
+ Included in copies mailed to holders of Stock, Unit Voting Stock, Series A
Preferred Stock and Series B Preferred Stock.
12
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
<TABLE>
<S> <C> <C>
URBAN SHOPPING CENTERS, INC.
By: /s/ MATTHEW S. DOMINSKI
-----------------------------------------
Name: Matthew S. Dominski
Title: Chief Executive Officer
</TABLE>
Dated: October 2, 2000
13
<PAGE>
ANNEX A
[LOGO]
September 25, 2000
Board of Directors and Special Committee of the Board of Directors
Urban Shopping Centers, Inc.
900 North Michigan Avenue
Suite 1500
Chicago, IL 60611
Members of the Board and the Special Committee of the Board:
We understand that Urban Shopping Centers, Inc. ("Urban" or the "Company"),
Rodamco North America N.V. (the "Buyer"), Rodamco Acquisition LP, a subsidiary
of the Buyer ("Acquisition Sub") and certain other parties propose to enter into
an Agreement and Plan of Merger, substantially in the form of the draft dated
September 23, 2000 (the "Merger Agreement"), which provides, among other things,
for (i) the commencement by Acquisition Sub of a tender offer (the "Tender
Offer") for (A) all outstanding shares of common stock, par value $0.01 per
share, of Urban (the "Public Common Stock") and unit voting stock, par value
$0.01 per share, of Urban (the "Unit Voting Stock" and together with the Public
Common Stock, the "Urban Common Stock") for $48.00 per share net to the seller
in cash and (B) all outstanding shares of Series A Cumulative Convertible
Redeemable Preferred Stock, par value $0.01 per share, of Urban (the "Series A
Preferred Stock") and Series B Cumulative Convertible Redeemable Preferred
Stock, par value $0.01 per share, of Urban (the "Series B Preferred Stock" and
together with the Series A Preferred Stock, the "Urban Preferred Stock") at a
price per share of Urban Preferred Stock of $48.00 net to the seller in cash;
and (ii) the subsequent merger (the "Merger") of the Company with and into a
subsidiary of Rodamco North America N.V. Pursuant to the Merger, the surviving
entity of the Merger will become a wholly owned subsidiary of the Buyer, and
each outstanding share of Urban Common Stock, other than shares held in treasury
or held by the Buyer or any affiliate of the buyer (or, in the case of Unit
Voting Stock, as to which dissenters' rights have been perfected), will be
converted into the right to receive $48.00 per share in cash, subject to the
adjustments set forth in the Merger Agreement. We further understand that in
connection with the Merger, the limited partners holding common partnership
units or certain preferred partnership units in Urban Shopping Centers, L.P. may
either (i) receive a cash distribution in respect of their units and retain a
continuing, but substantially reduced, partnership interest in Urban Shopping
Centers, L.P. or (ii) elect to exchange such partnership units for shares of
Public Common Stock that would be tendered into and purchased in the Tender
Offer. The terms and conditions of the Tender Offer and the Merger are more
fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration to be received by
the holders of shares of Urban Common Stock and Urban Preferred Stock, in the
aggregate, pursuant to the Merger Agreement is fair from a financial point of
view to such holders (other than the Buyer and its affiliates).
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other business
and financial information of the Company;
A-1
<PAGE>
Board of Directors and Special Committee of the Board of Directors
Urban Shopping Centers, Inc.
September 25, 2000
Page 2
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of the
Company;
(iii) reviewed certain financial forecasts prepared by the management of the
Company;
(iv) discussed the past and current operations and financial condition and the
prospects of the Company with senior executives of the Company;
(v) reviewed the reported prices and trading activity for the Public Common
Stock;
(vi) compared the financial performance of the Company and the prices and
trading activity of the Public Common Stock with that of certain other
comparable publicly traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(viii) reviewed the draft Merger Agreement, dated September 23, 2000, and
certain related documents; and
(ix) considered such other factors and performed such other analyses as we have
deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information supplied or otherwise made available to us
by the Company for the purposes of this opinion. With respect to the financial
forecasts, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of the Company. We have not made any independent valuation
or appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals. Our opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition, business
combination or other extraordinary transaction, involving the Company, nor did
we negotiate with any party with respect to a possible acquisition of the
Company or any of its assets.
We have acted as financial advisor to the Board of Directors and the Special
Committee of the Board of Directors for the Company in connection with this
transaction and will receive a fee for our services, including a transaction fee
that is contingent upon the consummation of the Merger. In the past, Morgan
Stanley & Co. Incorporated and its affiliates have provided financial advisory
and financing services for the Company and have received fees for the rendering
of these services. In the ordinary course of business, Morgan Stanley may from
time to time trade in the debt and equity securities or senior loans of the
Company. In addition, asset management affiliates of Morgan Stanley beneficially
own, in the aggregate, approximately 2.6% of the Company's Public Common Stock.
It is understood that this letter is for the information of the Board of
Directors and the Special Committee of the Board of Directors of the Company
only and may not be used for any other purpose without our prior written
consent, except that this opinion may be included in its entirety in any filing
made by the Company in respect of the transaction with the Securities and
Exchange Commission. Morgan Stanley expresses no opinion or recommendation as to
whether the holders of Urban Common Stock or Urban Preferred Stock should accept
the Tender Offer or as to how holders of Urban Common Stock should vote if there
is a shareholders' meeting in connection with the Merger. In addition, we
express no opinion as to
A-2
<PAGE>
Board of Directors and Special Committee of the Board of Directors
Urban Shopping Centers, Inc.
September 25, 2000
Page 3
the relative fairness of the consideration to be received by the holders of
Urban Common Stock and the holders of Urban Preferred Stock.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by the holders of shares of Urban
Common Stock and Urban Preferred Stock, in the aggregate, pursuant to the Merger
Agreement is fair from a financial point of view to such holders (other than the
Buyer and its affiliates).
<TABLE>
<S> <C> <C>
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By:
[SIGNATURE]
Christopher J. Niehaus
MANAGING DIRECTOR
</TABLE>
A-3
<PAGE>
ANNEX B
URBAN SHOPPING CENTERS, INC.
900 NORTH MICHIGAN AVENUE, SUITE 1500
CHICAGO, ILLINOIS 60611
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about October 2, 2000 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 of Urban
Shopping Centers, Inc. ("Urban" or the Company") that has been filed with the
Securities and Exchange Commission (the "SEC") on October 2, 2000. You are
receiving this Information Statement in connection with the possible election of
persons designated by Head Acquisition L.P., a Delaware limited partnership
("Head Acquisition"), to a majority of the seats on Urban's board of directors
(the "Board of Directors" or "Board"). On September 25, 2000, Urban entered into
an Agreement and Plan of Merger (the "Merger Agreement") by and among Rodamco
North America N.V. ("Rodamco"), Hexalon Real Estate, Inc. ("Hexalon"), Head
Acquisition, Head Acquisition Corp. ("Head Acquisition Corp") and Urban Shopping
Centers, L.P., pursuant to which (1) Head Acquisition is required to commence a
tender offer (the"Offer") to purchase all of the outstanding shares or Urban's
common stock, par value $.01 per share ("Stock"), and unit voting common stock,
par value $.01 per share ("Unit Voting Stock") (each including the associate
preferred stock purchase rights issued pursuant to the Rights Agreement, dated
May 5, 1999, between Urban and First Chicago Trust Company of New York, as
Rights Agent, as amended by Amendment No. 1 thereto dated as of September 25,
2000), Series A Cumulative Convertible Redeemable Preferred Stock, par value
$.01 per share ("Series A Preferred Stock"), and Series B Cumulative Convertible
Redeemable Preferred Stock, par value $.01 per share ("Series B Preferred
Stock"), for $48.00 per share, net to the seller in cash and (2) following
consummation of the Offer, Urban will merge with and into Head Acquisition or,
in the alternative depending upon the amount of securities acquired in the
Offer, Head Acquisition Corp will merge with and into Urban which will then
immediately merge with and into Head Acquisition (the "Merger"). Following
consummation of the Merger, Head Acquisition will continue as the surviving
entity. Each issued and outstanding share of Stock, Unit Voting Stock, Series A
Preferred Stock and Series B Preferred Stock not purchased in the Offer (other
than shares owned by Rodamco, Hexalon, Head Acquisition or Head Acquisition Corp
or any of their affiliates and by stockholders, if any, who exercise their
statutory appraisal rights under Maryland law, if any are available) will be
converted into the right to receive $48.00 per share in cash or any greater
amount per share paid pursuant to the Offer. The Offer, the Merger and the
Merger Agreement are more fully described in the Schedule 14D-9 to which this
Information Statement forms Annex B.
The Merger Agreement provides that upon the consummation of the Offer, Urban
shall cause Head Acquisition's designees to be elected to the Board of Directors
under circumstances described in the Merger Agreement. This Information
Statement is being mailed to you in accordance with Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
promulgated thereunder. The information contained herein supplements certain
information contained in the Schedule 14D-9. Information herein related to
Rodamco, Hexalon, Head Acquisition and Head Acquisition Corp has been provided
to Urban by such parties, and Urban assumes no responsibility for the accuracy
or completeness of such information.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action in connection with the matters set forth
herein. Capitalized terms used herein and not otherwise defined herein shall
have the meaning set forth in the Schedule 14D-9. Pursuant to the Merger
Agreement, Head Acquisition commenced the Offer on October 2, 2000. The Offer is
currently scheduled to expire at 12:00 midnight, New York City, on October 30,
2000, unless the Offer is extended.
B-1
<PAGE>
HEAD ACQUISITION DESIGNEES
The Merger Agreement provides that, promptly upon the acceptance and payment
for shares pursuant to the Offer, either Head Acquisition or Head Acquisition
Corp, as applicable (the "Head Purchaser"), will be entitled to representation
on the Board of Directors in the same proportion as the number of shares of
Stock and Unit Voting Stock accepted for payment and paid for by the Head
Purchaser pursuant to the Offer bears to the total number diluted shares of
Stock deemed outstanding for financial reporting purposes. Hexalon has agreed
that at all times prior to the effective time of the Merger (the "Effective
Time"), each of the members of the Special Committee are entitled to remain as
members of the Special Committee and the Board of Directors. At such time, Urban
will also cause, if requested by the Head Purchaser, (i) each committee of the
Board of Directors, other than the Special Committee, (ii) the board of
directors of each subsidiary of Urban and (iii) each committee of each such
subsidiary board of directors to include designees of the Head Purchaser
constituting up to the same percentage of each such committee or board of
directors as the Head Purchaser's designees constitute on the Board of
Directors. Following the time directors designated by the Head Purchaser are
appointed or elected to the Board of Directors and prior to the Effective Time,
the affirmative vote of a majority of the Independent Directors (as defined
below) shall be required to (i) amend or terminate the Merger Agreement on
behalf of Urban, (ii) exercise or waive any of Urban's rights or remedies under
the Merger Agreement, (iii) extend the time for performance of any of the
obligations of the Head Purchaser, (iv) take any other action by Urban in
connection with the Merger Agreement required to be taken by the Special
Committee or the Board of Directors, or (v) take any action by Urban in
connection with the transactions contemplated by the Merger Agreement. In the
event that Head Purchaser's designees are elected to the Board of Directors,
until the Effective Time, those continuing members of the Board of Directors who
are members of the Special Committee on the date of the Merger Agreement and who
are neither officers of Urban, nor designees, affiliates or associates (within
the meaning of the federal securities laws) of the Head Purchaser are deemed
"Independent Directors" for purposes of the Merger Agreement.
Purchaser has informed Urban that it will choose the Purchaser designees
from the persons listed below. Purchaser has informed Urban that each of the
Purchaser designees has consented to act as a director, if so designated. The
business address of each designee, unless otherwise indicated, is c/o Hexalon
Real Estate, Inc., 950 E. Paces Ferry Road, Suite 2275, Atlanta, Georgia 30326.
Biographical information concerning each of the Purchaser designees is presented
below.
<TABLE>
<CAPTION>
POSITION WITH PURCHASER OR AFFILIATES;
NAME AND ADDRESS AGE 5-YEAR EMPLOYMENT HISTORY
---------------- -------- --------------------------------------
<S> <C> <C>
DANIEL S. WEAVER............... 39 Mr. Weaver has been a Managing Director and Chief Financial
Officer of Rodamco North America N.V. since July 1999.
Mr. Weaver received a Bachelor's Degree in Architecture and
a M.B.A. from Miami University of Oxford, Ohio. He has
14 years of real estate experience. From January 1996 to
July 1999, Mr. Weaver was responsible for providing capital
markets services and structuring development investments for
RREEF. Prior to joining RREEF, from March 1988 to January
1996, Mr. Weaver was a vice president with Homart
Development Co. with responsibility for executing major
capital transactions. Mr. Weaver began his real estate
career in March 1986 with Sun Bank as a commercial real
estate officer. He is currently a member of International
Council of Shopping Centers and the Association of Foreign
Investors in Real Estate.
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PURCHASER OR AFFILIATES;
NAME AND ADDRESS AGE 5-YEAR EMPLOYMENT HISTORY
---------------- -------- --------------------------------------
<S> <C> <C>
LEE M. LETCHFORD............... 54 Mr. Letchford has been a Managing Director and Chief
Operating Officer of Rodamco North America N.V. since July
1999. Mr. Letchford received his B.A and M.B.A. degrees from
the University of Northern Iowa. Mr. Letchford has 28 years
of experience in real estate management. From 1990 to July
1999, he was senior vice president and director of
properties for the retail property group of RREEF Management
Company, which includes all types of retail property
throughout the United States. From 1984 until February 1990,
when he joined RREEF, he was senior vice president and
director of retail management for JMB Properties. In
addition, from 1974 to 1984 he was involved with the
management of retail properties for both The Rouse Company
and The Taubman Company. Mr. Letchford is a member of the
International Council of Shopping Centers and the
Association of Foreign Investors in Real Estate.
GERALD E. EGAN................. 56 Mr. Egan has been the Chairman, Managing Director and Chief
Executive Officer of Rodamco North America N.V. since July
1999. Mr Egan holds a B.A. degree from Northwestern
University and a law degree from DePaul University School of
Law. He has 30 years of experience in real estate. From
July, 1981 to July 1999 Mr. Egan was principal-in-charge of
the portfolio management group of RREEF America LLC
("RREEF"), a company which manages investments in real
property. He sits on the management board of RREEF. Prior to
joining RREEF as a principal in 1981, Mr. Egan was a senior
associate in brokerage, development and management of
industrial and commercial properties at Bennett & Kahnweiler
Associates, with whom he was affiliated for 10 years. He is
a member of the International Council of Shopping Centers,
the National Association of Industrial and Office Parks, and
the Illinois Bar Association.
DONALD A. KING, JR. 60 Mr. King received a B.S. degree from the University of
C/O RREEF, Virginia and an M.B.A. degree from Harvard Business School.
875 N. MICHIGAN AVENUE, Mr. King has 30 years of experience in real estate
SUITE 4100, acquisition, development, and management. Before joining
CHICAGO, ILLINOIS 60611 RREEF he was active as a real estate developer and property
manager. From 1974 to 1976, as vice president of Trust
Investments, he founded the Bank of America Real Estate
Fund. Mr. King joined RREEF as a principal in 1979 and was
co-founder of RREEF MidAmerica Partners in Chicago. He was
named RREEF's Managing Partner in 1988 and holds positions
on the firm's Investment and Policy Committees. Mr. King is
a member of the National Association of Real Estate
Investment Trusts, the National Association of Real Estate
Investment Managers, the Pension Real Estate Association,
the Urban Land Institute, and Lambda Alpha International, an
honorary society of land use economists.
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PURCHASER OR AFFILIATES;
NAME AND ADDRESS AGE 5-YEAR EMPLOYMENT HISTORY
---------------- -------- --------------------------------------
<S> <C> <C>
H. PATRICK HACKETT, JR.; 49 Mr. Hackett received B.A and M.M. degrees from Northwestern
C/O RREEF, University. Mr. Hackett has over 25 years of experience in
875 N. MICHIGAN AVENUE, real estate investment, development, and management. At
SUITE 4100, RREEF, Mr. Hackett has responsibility for the value-added
CHICAGO, ILLINOIS 60611 line of business and is a member of RREEF's Policy
Committee. He serves as the value-added specialist on
RREEF's Investment Committee. Mr. Hackett taught as an
adjunct faculty member in the Finance Department of the
Kellogg Graduate School of Management for 15 years and is a
member of the Real Estate Advisory Boards at MIT and
Kellogg. Before joining RREEF, he was a shareholder and
member of the five-member Investment Committee of JMB Realty
Corporation.
</TABLE>
Except as maybe disclosed herein or in the Schedule 14D-9, Purchaser has
advised Urban that all of the Purchaser designees are citizens of the United
States. Purchaser has also advised Urban that none of the Purchaser designees
(i) has, during the last five years, been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was, or is, subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws,
(ii) is currently a director of, or holds any position with, Urban,
(iii) beneficially owns any securities (or rights to acquire any securities) of
Urban or (iv) has been involved in any transaction with Urban or any of its
directors, executive officers or affiliates which is required to be disclosed
pursuant to the rules and regulations of the SEC.
None of the potential designees described above currently is a director of, or
holds any positions with, Urban. Head Acquisition has advised Urban that, to the
best of Head Acquisition's knowledge, none of the potential designees or any of
their affiliates beneficially owns any equity securities or rights to acquire
any such securities of Urban, nor has any such person been involved in any
transaction with Urban or any of its directors, executive officers or affiliates
that is required to be disclosed pursuant to the rules and regulations of the
SEC other than with respect to transactions relating to the entering into of the
Merger Agreement and the transactions contemplated thereby.
It is expected that the designees will assume office following consummation
of the Offer, which cannot be earlier than October 31, 2000.
CERTAIN INFORMATION CONCERNING URBAN
The Stock and the Unit Voting Stock are the only classes of equity
securities of Urban outstanding that are entitled to vote at a meeting of
stockholders of Urban. As of the close of business on September 25, 2000, there
were 17,781,018 shares of Stock and 407,935 shares of Unit Voting Stock
outstanding. None of Rodamco, Hexalon, Head Acquisition, Head Acquisition Corp
owns any shares of Stock or Unit Voting Stock as of the date hereof.
INFORMATION CONCERNING DIRECTORS AND
EXECUTIVE OFFICERS OF URBAN
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and executive officers of the Company, including certain executive
officers of Urban Retail Properties Co. (the "Management Company") who are
deemed to be executive officers of the Company. Under the Company's Articles of
B-4
<PAGE>
Incorporation, a majority of the Board of Directors must be unaffiliated with
JMB and its affiliates (the "Disinterested Directors").
<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- ------------------------------------------
<S> <C> <C>
Neil G. Bluhm............................. 62 Co-Chairman of the Board of Directors
James B. Digney*.......................... 53 Director
Matthew S. Dominski*...................... 45 Director and Chief Executive Officer
Adam S. Metz.............................. 38 President
Susan Getzendanner*....................... 60 Director
Judd D. Malkin............................ 62 Co-Chairman of the Board of Directors
John E. Neal*............................. 50 Director
Phillip B. Rooney*........................ 55 Director
John G. Schreiber......................... 53 Director
Henry T. Segerstrom*...................... 76 Director
James L. Czech............................ 60 Executive Vice President
Executive Vice President and Chief
James H. Lyman............................ 41 Financial Officer
President-Property Management, of the
Joseph M. Shrader......................... 54 Management Company
President-Leasing, of the Management
Ross B. Glickman.......................... 51 Company
</TABLE>
------------------------
* a Disinterested Director
The following is a summary of the experience of the directors and executive
officers listed in the above table:
Neil G. Bluhm is the President of JMB. Mr. Bluhm was one of the founders of
JMB in 1968 and has been an executive officer and a director of JMB since that
time. Mr. Bluhm is a lawyer and a Certified Public Accountant. Mr. Bluhm is also
a founder and member of Walton Street Capital Group, LLC.
James B. Digney is a Senior Vice President of Metropolitan Life Insurance
Company ("MetLife") and is the head of MetLife's Real Estate Investments
Department. In his present position, which he has held since 1988, Mr. Digney
oversees a portfolio of debt and equity real estate investments exceeding $20
billion. Prior to attaining his current post, Mr. Digney spent 13 years with
MetLife in Chicago, where he held several positions and ultimately assumed
responsibility for all equity and new business production. Mr. Digney is a
member of the Urban Land Institute and currently serves as a director of MetLife
International Real Estate Equity Shares, Inc., the Realty Foundation of New
York, the Community Preservation Corporation and the Greater New York Councils,
Boy Scouts of America. In addition, he is a member and director of the Real
Estate Board of New York and a member of NAIOP, the Association for Commercial
Real Estate.
Matthew S. Dominski is the Chief Executive Officer of the Company and is the
Chairman of the Management Company. From 1991 to 1993, Mr. Dominski was the
Chairman of JMB Retail Properties Company, a position in which he was
responsible for all retail development, management and leasing activities within
affiliated entities of JMB. From 1987 to 1993, Mr. Dominski was Executive Vice
President of JMB and from 1988 to 1993, an Executive Vice President of JMB Urban
Development Co. Mr. Dominski joined JMB in 1979 in the real estate acquisition
area. He became a Vice President in 1982 and has overseen over $1.3 billion of
real estate developed by JMB and its affiliates.
B-5
<PAGE>
Susan Getzendanner is a partner with the law firm of Skadden, Arps, Slate,
Meagher & Flom (Illinois) in Chicago, Illinois, a position she has held since
1987. From 1980 to 1987, Ms. Getzendanner served as a U.S. Federal District
Court Judge for the Northern District of Illinois. Ms. Getzendanner also is a
director of the Rehabilitation Institute of Chicago.
James H. Lyman is an Executive Vice President and the Chief Financial
Officer of the Company since March 15, 2000. From 1989 to March 2000, Mr. Lyman
was a Director in the Real Estate Investment Banking Group of Merrill Lynch &
Co. Mr. Lyman received his Masters of Business Administration degree from
Columbia University and his Bachelors degree from the University of Illinois.
Judd D. Malkin is Chairman of the Board of JMB. Mr. Malkin was one of the
founders of JMB in 1968 and has been an executive officer and a director of JMB
since that time. Mr. Malkin is a Certified Public Accountant.
John E. Neal is the head of the Commercial Real Estate department of Bank
One Corporation, since November 16, 1998. From January 1996 to January 1998, Mr.
Neal was the President of Kemper Funds, a unit of Scudder Kemper Investments,
Inc. From February 1995 to January 1996, he was the President and Chief
Operating Officer of Kemper Financial Services, Inc. From July 1992 to February
1995, he was a Senior Vice President of Kemper Corporation and the head of
Kemper's Real Estate Investments department. From 1974 to 1992, he served in a
variety of management and executive positions within Continental Bank
Corporation. Mr. Neal also serves as director of the following entities:
Lakeshore Development Corporation, LINK Unlimited and the YMCA of Metropolitan
Chicago.
Phillip B. Rooney is the Vice Chairman of the ServiceMaster Company, a
management and consumer services company, since May 1997. From November 1984 to
June 1996, he was the President and Chief Operating Officer, and, from
June 1996 to February 1997, the President and Chief Executive Officer, of Waste
Management, Inc. Mr. Rooney also currently serves as a director of Illinois Tool
Works, Inc., the ServiceMaster Company, Van Kampen Funds and the Lyric Opera of
Chicago and is a member of the Board of Trustees of the University of Notre
Dame.
John G. Schreiber is President of Centaur Capital Partners, Inc., since
January 1991. He is also senior advisor and partner of Blackstone Real Estate
Advisors, an affiliate of the Blackstone Group, L.P. Mr. Schreiber is a Trustee
of AMLI Residential Properties Trust and a director of Host Marriott Corporation
and a number of mutual funds advised by T. Rowe Price Associates, Inc. Mr.
Schreiber is also a director of The Brickman Group, Ltd. and JMB. Prior to his
retirement as an officer of JMB Realty in 1990, Mr. Schreiber was Chairman of
JMB/Urban Development Co. from its inception in 1988 until 1990, and an
Executive Vice President of JMB from 1979 to 1990.
Henry T. Segerstrom is a Managing Partner of C.J. Segerstrom & Sons, a
California-based real estate development company. Mr. Segerstrom joined C.J.
Segerstrom & Sons, the developer of South Coast Plaza and South Coast Plaza Town
Center, in 1948 and has served in his current position since 1963. In addition,
Mr. Segerstrom currently serves as a director and Vice Chairman, Endowment, of
the Orange County Performing Arts Center, having served as Chairman of the Board
and Chief Executive Officer thereof from 1987 to 1990, as a director of the
Orange County Business Committee for the Arts and as Chairman of the Board of
the Business Committee for the Arts. Mr. Segerstrom formerly served as a
director of Security Pacific National Bank and of Bank America Corporation and
as an advisory director of Bank of America, NT&SA until May 1993.
James L. Czech is an Executive Vice President of the Company and the
President-Development Group of the Management Company. Prior to 1993, Mr. Czech
was President of the development group of JMB Retail Properties Company since
its inception. Prior to joining an affiliate of JMB in 1983 in a corporate
acquisition, Mr. Czech was a Senior Vice President of Federated Stores
Realty, Inc., the shopping center subsidiary of Federated Department Stores,
Inc., where he served in that capacity since 1981. Mr. Czech is also a Certified
Public Accountant.
Adam S. Metz is the President of the Company since March 15, 2000. From
October 1993 to March 2000, he was an Executive Vice President and the
Treasurer, Chief Financial Officer and Director
B-6
<PAGE>
of Acquisitions of the Company. Prior to 1993, he was a Vice President in the
Capital Markets group of JMB, where he was employed since 1987. From 1983 to
1987, Mr. Metz worked in the Commercial Real Estate Lending Group at The First
National Bank of Chicago as a Corporate Lending Officer. He received his Masters
of Management degree from Northwestern University and his Bachelor's degree from
Cornell University.
Joseph M. Shrader is the President-Property Management of the Management
Company. From 1991 to 1993, Mr. Shrader was a Senior Executive Vice President of
JMB Retail Properties Company where he directed property management for over 52
million square feet of retail space located across the country. From 1978 to
1991, Mr. Shrader served as Director of Retail Operations for JMB Properties
Company. Mr. Shrader is a Certified Property Manager by the Institute of Real
Estate Management. Ross B. Glickman is the President-Leasing of the Management
Company. From 1991 to 1993, Mr. Glickman served as an Executive Vice President
and the National Director of Leasing for JMB Retail Properties Company. From
1989 to 1991, Mr. Glickman was President of Glickman Properties and, from 1983
to 1989, he was Director of Real Estate for The Limited, Inc.
Ross B. Glickman is the President-Leasing of the Management Company. From
1991 to 1993, Mr. Glickman served as an Executive Vice President and the
National Director of Leasing for JMB Retail Properties Company. From 1989 to
1991, Mr. Glickman was President of Glickman Properties and, from 1983 to 1989,
he was Director of Real Estate for The Limited, Inc.
BOARD COMMITTEES AND MEETINGS
The Company has standing Audit, Nominating and Executive Compensation
Committees of the Board. Five meetings of the Board were held in 1999. The Audit
Committee met three times in 1999. The Nominating Committee met once in 1999.
The Executive Compensation Committee met once in 1999.
Messrs. Digney, Schreiber and Segerstrom constitute the Audit Committee,
which must consist of at least two independent directors. All three members of
the Audit Committee are "independent directors" within the meaning of New York
Stock Exchange rules. The Audit Committee makes recommendations concerning the
appointment of independent public accountants, reviews with such accountants the
plans and results of audits, reviews and approves the scope of professional
services provided by such accountants and anticipated fees, considers the
independence of such accountants, reviews management's evaluation of the
adequacy of the Company's internal accounting controls and reviews the scope of
the Company's internal audit procedures.
Messrs. Bluhm, Dominski and Rooney constitute the Nominating Committee, a
majority of the members of which must be Disinterested Directors. The Nominating
Committee nominates the persons to be presented to the Company's stockholders
for election as directors at each annual meeting. The Nominating Committee will
consider nominees recommended by shareholders of the Company if such nominations
are received not more than 120 days nor fewer than 90 days prior to the
anniversary of the previous year's annual meeting of shareholders and the
nominating shareholder provides all information relating to the nominee that is
required to be disclosed in solicitations of proxies for elections of directors,
or is otherwise required by the Nominating Committee.
Mr. Malkin, Ms. Getzendanner, Mr. Neal and Mr. Segerstrom constitute the
Executive Compensation Committee, which must consist entirely of "non-employee
directors" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and a majority of the members of which
must be Disinterested Directors. The Executive Compensation Committee determines
the compensation of the Company's executive officers, reviews and makes
recommendations on forms of incentive compensation, administers the Company's
Option Plan, Incentive Unit and Incentive Stock Programs and deferred
compensation plans and reviews and acts upon any changes to the Company's bonus
incentive compensation plan and the Company's participation in the JMB 401(k)
Plan and the Core Retirement Award Program.
B-7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding the
compensation of Mr. Dominski and the Company's four other most highly
compensated executive officers during 1999. The table includes compensation from
all sources for services rendered to the Company and its subsidiaries during
1997, 1998 and 1999.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
AWARDS
ANNUAL -----------------------
COMPENSATION RESTRICTED SECURITIES
-------------------- STOCK UNDERLYING ALL OTHER
BONUS AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(I) ($)(2) (NUMBER) ($)(3)
--------------------------- -------- --------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Matthew S. Dominski .............. 1997 473,846 176,016 -- -- 5,750
Chief Executive Officer and
Director 1998 560,385 210,853 -- -- 5,800
1999 638,462 282,000 3,075,000 60,000 5,800
Adam S. Metz ..................... 1997 282,000 125,000 -- -- 5,750
President 1998 361,308 150,000 -- -- 6,220
1999 417,308 175,000 1,537,500 35,000 5,800
James L. Czech ................... 1997 367,692 93,425 -- -- 5,750
Executive Vice President 1998 386,923 98,475 -- -- 5,800
1999 403,962 120,934 845,625 -- 5,800
Ross B. Glickman.................. 1997 312,692 79,538 -- -- 4,800
President--Leasing of the 1998 331,923 84,588 -- -- 5,791
Management Company 1999 356,154 107,100 845,625 -- 5,800
Joseph M. Shrader................. 1997 253,461 64,388 -- -- 5,750
President--Property Management 1998 266,000 67,670 -- -- 6,220
of the Management Company 1999 278,154 83,300 461,250 -- 5,800
</TABLE>
------------------------
(1) Paid in February of the following year.
(2) The amounts shown represent the value determined based on the closing price
of the Stock on the New York Stock Exchange (the "NYSE") on the date of
grant of the total amount of Incentive Stock awarded to each of the named
persons which awards are subject both to the achievement of performance
based conditions before they are earned and to subsequent vesting
requirements. The total number of Incentive Stock awards to the named
persons were as follows: Mr. Dominski, 100,000 Incentive Stock awards;
Mr. Czech, 27,500 Incentive Stock awards; Mr. Glickman, 27,500 Incentive
Stock awards; Mr. Metz, 50,000 Incentive Stock awards; and Mr. Shrader,
15,000 Incentive Stock awards. A portion of such Incentive Stock awards are
earned over a four-year performance period commencing in 2000 only if the
Company attains certain performance targets measured in terms of annual and
cumulative growth in funds available for distribution per share and
thereafter vest subject to the satisfaction of certain vesting requirements.
Distributions are paid on Incentive Stock earned but not vested. At
December 31, 1999, the total number of earned Incentive Units held under the
Urban Shopping Centers 1996 Incentive Unit Program by the persons named (and
the value of such earned Incentive Units on such date determined based on
the closing price of the Stock on the NYSE on such date) are as follows: Mr.
Dominski, 63,750 Incentive Units ($1,729,219); Mr. Czech, 20,625 Incentive
Units ($559,453); Mr. Glickman, 11,458 Incentive Units ($310,798);
Mr. Metz, 30,000 Incentive Units ($813,750); and Mr. Shrader, 11,250
Incentive Units ($305,156).
(3) For 1997, includes, with respect to Messrs. Dominski and Metz, contributions
by the Company of $4,800 each under the Core Retirement Award Program and
$950 each under the JMB Realty Corporation Employee Savings Plan (the "JMB
401(k) Plan"), with respect to Messrs. Czech,
B-8
<PAGE>
Glickman and Shrader, contributions by the Management Company of $4,800 each
under the Core Retirement Award Program and, with respect to Messrs. Czech
and Shrader, contributions by the Management Company of $950 each under the
JMB 401(k) Plan. For 1998, includes, with respect to Messrs. Dominski and
Metz, contributions by the Company of $4,800 each under the Core Retirement
Award Program and $1,000 each under the JMB 401(k) Plan, with respect to
Mr. Metz, a contribution by the Company of $420 under the Urban Shopping
Centers Deferred Cash Compensation Plan, with respect to Messrs. Czech,
Glickman and Shrader, contributions by the Management Company of $4,800 each
under the Core Retirement Award Program, with respect to Messrs. Czech and
Shrader, contributions by the Management Company of $1,000 each under the
JMB 401 (k) Plan and with respect to Mr. Shrader, $420 under the Urban
Shopping Centers Deferred Cash Compensation Plan and, with respect to
Mr. Glickman, contributions by the Management Company of $571 under the JMB
401(k) Plan and $420 under the Urban Shopping Centers Deferred Cash
Compensation Plan. For 1999, includes, with respect to Messrs. Dominski and
Metz, contributions by the Company of $4,800 each under the Core Retirement
Award Program and $1,000 each under the Urban Shopping Centers Deferred Cash
Compensation Plan and, with respect to Messrs. Czech, Glickman and Shrader,
contributions by the Management Company of $4,800 each under the Core
Retirement Award Program and $1,000 each under the Urban Shopping Centers
Deferred Cash Compensation Plan.
OPTION GRANTS IN 1999
The following table sets forth certain information with respect to
individual grants of options during 1999 by the Company to each of the Executive
officers named in the above table who received such grants.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------- ANNUAL RATES OF
SECURITIES PERCENT OF STOCK PRICE
UNDERLYING TOTAL OPTIONS APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM
GRANTED(1) EMPLOYEES PRICE EXPIRATION ------------------------
NAME (NUMBER) IN 1999 ($/OPTION) DATE 5%($) 10%($)
---- ---------- ------------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Matthew S. Dominski........ 60,000 52.2% 30.6875 2/9/09 1,158,150 2,934,750
Adam S. Metz............... 35,000 30.4% 30.6875 2/9/09 675,588 1,711,938
</TABLE>
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning exercises of
options during 1999 by each of the executive officers named in the above table
and the year-end value of unexercised options owned by such executive officers.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SECURITIES VALUE OPTIONS AT YEAR-END(1) AT YEAR-END($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Matthew S. Dominski......... 8,000 75,797 282,000 60,000 1,388,891 --
James L. Czech.............. -- 0 73,000 -- 361,938 --
Ross B. Glickman............ 5,000 37,500 -- -- -- --
Adam S. Metz................ 2,000 14,125 63,000 45,000 294,859 --
Joseph M. Shrader........... 0 -- 27,000 -- 141,313 --
</TABLE>
------------------------
(1) Represents aggregate options to purchase shares of Stock or units of
partnership interest ("Units") in Urban L.P.. The unexercisable options
shown in the table are exercisable, in the case of Mr. Dominski, one third
each on or after February 9, 2000, February 9, 2001 and February 9, 2002
and, in the case of Mr. Metz, 10,000 options are exercisable one-half each
on or after February 10, 2000 and February 10, 2001 and 35,000 options are
exercisable one-third each on or after February 9, 2000, February 9, 2001
B-9
<PAGE>
and February 9, 2002. All of the foregoing options are exercisable earlier
in the event of a change in control of the Company.
(2) The closing price of the Stock on the NYSE on December 31, 1999 was $27.125
per share. The values reflected represent the difference between such price
and the option exercise prices.
OPTION PLAN
The Company has adopted the Urban Shopping Centers 1993 Option Plan (the
"Option Plan") to provide incentives to attract and retain officers and key
employees and service providers. The Option Plan provides for the grant of
options to purchase a specified number of shares of Stock or Units. A total of
1,500,000 shares of Stock were available for grant and available to be issued
upon exchange of Units issued under the Option Plan. Of that total, 588,714
shares of Stock had been issued at September 29, 2000 upon exercise of options
or upon exchange of Units issued upon exercise of options and options to acquire
an additional 904,885 shares of Stock or Units were outstanding at such date.
Participants in the Option Plan, who may be officers or employees of, or
advisors/ consultants to, the Company, its subsidiaries or designated
affiliates, are selected by the Executive Compensation Committee. The Executive
Compensation Committee also determines the terms of options granted under the
Option Plan including, among other things, the individuals who receive options,
whether Incentive Stock Options ("ISOs") or non-qualified options are granted,
the number of shares of Stock or Units subject to each option and the vesting
schedule applicable to each option. Directors of the Company are also eligible
to participate, but, in the case of non-employee directors, only pursuant to
automatic grants under a specified formula set forth in the Option Plan.
Notwithstanding the foregoing references to the Executive Compensation
Committee, the authority to grant and administer options awarded to Management
Company employees who are not also directors or officers of the Company subject
to Section 16(a) of the Exchange Act is vested in a committee of two or more
directors of the Management Company. All options granted to such persons will be
Unit options.
INCENTIVE UNIT AND INCENTIVE STOCK PROGRAMS
The Company adopted the Urban Shopping Centers 1996 Incentive Unit Program
(as amended and restated, the "Incentive Unit Program") and the Urban Shopping
Center 1999 Incentive Stock Program (the "Incentive Stock Program") to further
the Company's objective of long-term growth in funds available for distribution
of the Company by providing long-term incentives to those key employees of Urban
L.P. and the Management Company who will be largely responsible for achievement
of the long-term goals and long-term growth of the Company. The Incentive Unit
and Incentive Stock Programs are deferred compensation plans which are tied to
the attainment of targeted levels of annual and cumulative growth in the
Company's funds available for distribution per share.
The Incentive Unit and Incentive Stock Programs are generally administered
by the Executive Compensation Committee. Participants in the Incentive Unit and
Incentive Stock Programs are senior management and key employees of Urban L.P.
and the Management Company. The Executive Compensation Committee has sole and
exclusive authority to select participants, and determine the awards to be made
to each participant, from among those persons who are employees or otherwise
provide services to Urban L.P., or who are officers, directors or other persons
subject to Section 16(a) of the Exchange Act with respect to the Company, and
the Board of Directors of the Management Company (or a committee duly authorized
by it) has sole and exclusive authority to grant awards to those persons who are
employees or otherwise provide services to the Management Company and who are
not officers, directors or other persons subject to Section 16(a) of the
Exchange Act with respect to the Company.
The Incentive Unit Program and the Incentive Stock Program each established
a four-year performance period, commencing January 1, 1996 and January 1, 2000,
respectively, during which participants were allocated an award of "Incentive
Units" or "Incentive Stock" which constitute the right to receive Units or
shares of Stock if certain performance targets and vesting requirements are
satisfied. A total of 525,000
B-10
<PAGE>
Units were awarded under the Incentive Unit Program, and accordingly 525,000
shares of Stock are available to be issued upon exchange of such Units. A total
of 620,000 shares of Stock may be awarded under the Incentive Stock Program,
620,000 of which had been awarded as of September 29, 2000.
One-quarter of the Incentive Units or Incentive Stock initially awarded to a
participant is attributable to and may be earned during each program year of the
four-year performance period. The Incentive Units or Incentive Stock
attributable to a program year is earned only if the annual and cumulative
performance targets for such year are met. If the annual target is not met, the
awards attributable to that program year may be earned in a subsequent year if
the cumulative performance target is met. The funds available for distribution
goal for 1996 was $2.38 per share and increased 7% for each year through 1999.
The funds available for distribution goal for 2000 is $3.60 per share and
increases 7% for each year through 2003.
The Executive Compensation Committee has determined that the targets for
1996, 1997, 1998 and 1999 were met. As of February 22, 2000, a total of 513,917
Incentive Units have been earned and 259,928 of such Units have vested in
participants.
Once Incentive Units or Incentive Stock is earned, the earned Incentive
Units or Incentive Stock vests one-third each year over a three-year period
commencing on the first day of the calendar year subsequent to the year in which
the Incentive Units or Incentive Stock was earned, provided that the participant
remains in the employ of the Company or its affiliates on each such vesting
date. Earned Incentive Units or Incentive Stock that have not vested will be
forfeited upon termination of employment for reasons other than death or
disability. Notwithstanding the foregoing, any earned Incentive Units or
Incentive Stock will vest in full immediately if a participant's employment
terminates by reason of death or disability or upon the occurrence of a change
in control with respect to the Company.
During the period after Incentive Units or Incentive Stock has been earned
but prior to the date such Incentive Units or Incentive Stock has vested and
been distributed to the participant, the participant is entitled to receive a
dividend equivalent cash compensation payment as of each distribution date with
respect to Units or Stock equal to the participant's number of earned but not
vested Incentive Units or shares of Stock as of the record date of such
distribution, multiplied by the distribution amount per Unit or share of Stock
payable as of such distribution date.
INCENTIVE COMPENSATION
The Company established a cash bonus incentive compensation plan for
executive officers and key officers of the Company and the Management Company
beginning in 1994. Under the plan, cash bonuses are awarded to executive
officers and key officers covered under the plan based on the achievement of
specified targets and goals for the Company. The targets are defined annual
percentage increases in funds available for distribution per share. The amount
of the cash bonus is based on a formula determined for each officer based on a
range of 5% to 70% of base compensation. Payments under the plan for 1999 to the
five most highly compensated executive officers are set forth in the "Bonus"
column of the "Summary Compensation Table" above.
401(K) PLAN
The Company and the Management Company are participating employers in the
JMB 401(k) Plan. The JMB 401(k) Plan permits the employees of the Company and
the Management Company to defer a portion of their compensation, in accordance
with the provisions of Section 401(k) of the Code. All employees are limited to
deferrals of 10% of pay not to exceed the statutory limit, for 1999, of $10,000.
Those deferrals are treated for Federal income tax purposes as employer
contributions. In addition, the Company and the Management Company will make a
matching contribution of 10% of deferrals. All contributions to the JMB 401(k)
Plan are subject to nondiscrimination requirements under the Code. The
participating employer contributions other than salary deferrals are subject to
a five-year graduated vesting schedule: the nonforfeitable portion for the first
year of employment is 20% and for succeeding years is 40%, 60%, 80% and 100%.
B-11
<PAGE>
Employees of the Company and the Management Company are eligible to
participate in the JMB 401(k) Plan if they meet certain requirements concerning
minimum age and period of service. The JMB 401(k) Plan invests all contributions
to the JMB 401(k) Plan in accordance with participants' elections among certain
investment options provided through a group of mutual funds or other investment
vehicles. Distributions from a participant's account are not permitted before
age 59 1/2, except in the event of death, disability, certain financial
hardships or termination of employment.
Effective August 1, 1998, future participation in the JMB 401(k) Plan by
employees of the Company and the Management Company who are "highly
compensated," as defined in Section 414(q) of the Code, was terminated. From and
after August I, 1998, such highly compensated employees were eligible to
participate in the Urban Shopping Centers Deferred Cash Compensation Plan (the
"Deferred Cash Compensation Plan").
CORE RETIREMENT AWARD PROGRAM
As of January 1, 1995, JMB replaced its prior retirement plan with the Core
Retirement Award Program which is administered as part of the JMB 401(k) Plan.
Under the Core Retirement Award Program, an employer contribution is made to the
account of an Eligible Employee equal to 3% of such employee's total
compensation (up to the limit set by the Internal Revenue Service). Such
contributions are subject to the same vesting schedule as the JMB 401(k) Plan.
Effective August 1, 1998, future participation in the Core Retirement Award
Program with respect to employees who are "highly compensated," as defined in
Section 414(q) of the Code, is administered as part of the Deferred Cash
Compensation Plan.
DEFERRED CASH COMPENSATION PLAN
The Company and the Management Company are participating employers in the
Deferred Cash Compensation Plan adopted by the Company on August 1, 1998. The
Deferred Cash Compensation Plan permits eligible employees, being those
employees who are "highly compensated," as defined in Section 414(q) of the
Code, to defer a portion, not to exceed 25%, of their compensation. In addition,
the Company and the Management Company will make a matching contribution of 10%
of each participant's deferred compensation, up to a maximum of $1,000 per year
or such greater amount as shall be permitted from time to time under Section
402(g) (i) of the Code. All participants under the Deferred Cash Compensation
Plan have a nonforfeitable interest in their respective accounts. The employer
contributions during 1999 by the Company and the Management Company under the
Deferred Cash Compensation Plan with respect to the five most highly compensated
executive officers are set forth in footnote 3 to the "Summary Compensation
Table" above.
COMPENSATION OF DIRECTORS
In 1999, the Company paid each of its independent directors an annual fee of
$20,000 plus a fee of $1,250 for each quarterly meeting attended (in person or
by telephone). Directors who are not independent are not paid any directors'
fees. In addition, the Company reimburses all directors for expenses incurred in
attending meetings.
Each independent director then serving was also granted, upon reelection at
the 2000 annual meeting, a ten-year option to acquire 1,500 shares of Stock at
$32.34 per share (the fair market value on the grant date), and will annually,
upon election or reelection, be granted a ten-year option to acquire an
additional 1,500 shares at the fair market value on the date of the grant. Such
options are not and will not be exercisable until after the first anniversary of
the date of the grant.
B-12
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Dominski and the Company have entered into an employment agreement,
which, pursuant to its terms, currently runs through December 31, 2002 and which
will be automatically extended for an additional year at the end of each year,
subject to the right of either party to terminate by giving 25 months' prior
written notice. Pursuant to the agreement, Mr. Dominski is required to devote
his entire business time to the Company. The agreement provides for an annual
base salary, which may be increased (but not decreased) from time to time, as
well as the use of an automobile, an allowance of up to $7,500 annually for tax
planning and tax return preparation services and certain additional
compensation. Mr. Dominski is also entitled to a bonus if funds available for
distribution to shareholders per share for any year exceeds such measure for the
immediately preceding year by at least 4%. The bonus may be up to 70% of his
annual salary if funds available for distribution exceeds the prior year's
amount by 19.2% or more. Pursuant to the employment agreement, all outstanding
options for shares of Stock or Units granted to Mr. Dominski shall vest
immediately upon his death, permanent disability or termination without cause or
upon a "Change in Control." "Change in Control" for purposes of the agreement
means (i) the acquisition by any person (other than JMB and its affiliates) of
50% or more of the voting stock of the Company or 20% or more of the voting
stock of the Company if such ownership exceeds that of JMB and its affiliates or
(ii) the approval of a merger or consolidation (other than with JMB or its
affiliates) resulting in a change in ownership of 20% or more of the voting
stock of the Company or sale of all or substantially all of the assets of the
Company.
For information concerning the change in control provisions being triggered
under the Urban Shopping Centers' Senior Executive Parachute Plan, see Item 3 in
the Statement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Malkin, Ms. Getzendanner, Mr. Neal and Mr. Segerstrom served as members
of the Executive Compensation Committee of the Board during 1999. See the
caption "Certain Relationships and Transactions" for a description of certain
relationships and transactions between the Company and JMB (of which Mr. Malkin
is the Chairman) and its affiliates during 1999.
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
For 1999, the Company's Executive Compensation Committee has based its
compensation policy for its executive officers on a variety of factors,
including job responsibility, salaries paid to executive officers of other real
estate companies similar to the Company and the job experience and performance
of such officers. The Company has established a cash bonus incentive
compensation plan and the Incentive Unit and Incentive Stock Programs for its
executive officers and key employees, which provide, respectively, for cash
bonuses of 5% to 70% of base compensation based on the achievement of targeted
annual increases in funds available for distribution per share and for the
issuance of Units or Stock based on the achievement of targeted levels of annual
and cumulative growth in funds available for distribution per share and
continued employment by the Company." See "Incentive Compensation" and
"Incentive Unit and Incentive Stock Programs" above. Also, the Company has
adopted the Option Plan, which authorizes the Executive Compensation Committee
to grant options for Stock and Units to the Company's executive officers and
other employees at exercise prices determined by the Executive Compensation
Committee. See "Option Plan" above. Through these plans and other means, the
Executive Compensation Committee intends to maintain strong links between
executive officer compensation and corporate and individual performance. For
example, in 1999, after taking into account the grant date value of Incentive
Units which vested on January 1, 2000 under the Incentive Unit Program and the
dividend equivalent cash compensation paid under such Program during 1999 on
Units earned but not vested (see "Incentive Unit and Incentive Stock Programs"
above), approximately 59% of Mr. Dominski's total compensation as the Company's
Chief Executive Officer and between 42% and 53% of the total compensation of the
four other
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<PAGE>
most highly compensated executive officers of the Company was incentive-related
and based upon the Company's performance.
It is the Executive Compensation Committee's intention that, so long as it
is consistent with the Company's overall compensation objectives, substantially
all executive compensation be deductible for Federal income tax purposes.
Section 162(m) of the Code limits the tax deduction for compensation paid to the
Company's Chief Executive Officer and the other four most highly compensated
officers who are employed at fiscal year end to $1 million per year, unless
certain requirements are met. The Executive Compensation Committee believes that
the Company's current compensation policies and arrangements will not result in
compensation payments that will be non-deductible under Section 162(m) of the
Code.
EXECUTIVE COMPENSATION COMMITTEE
Judd D. Malkin, Chairman
Susan Getzendanner
John E. Neal
Henry T. Segerstrom
B-14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999, Urban L.P. formed a series of partnerships (the "Retail
Partnerships") with institutional funds advised by Walton Street Capital, LLC
("Walton Street"), an affiliate of Mr. Bluhm, to acquire the retail component of
the Houston Galleria, a mixed use development in Houston, Texas, for an
aggregate consideration of approximately $375.1 million. The acquisition
included an adjacent 14 acre development site and an adjacent strip shopping
center of approximately 104,000 square feet. Urban L.P. owns a two-thirds
interest in each of the partnerships. As part of the same transaction, the
Walton Street advised institutional funds acquired the hotel and office
components of the Houston Galleria. The Management Company provides management,
leasing and development services for the Retail Partnerships. The Management
Company also provides management services for the owner of the office component.
During 1999, the Management Company provided property management, leasing,
development and consulting services for all but two of the Company's properties.
During 1999 and the six months ended June 30, 2000, the Company and Urban L.P.
incurred an aggregate of $12,205,000 and $9,295,636, respectively, in fees to
the Management Company for such services. The Management Company also provides
property management, leasing and development services for certain retail
properties owned or controlled by JMB and its affiliates. The terms of any such
services must be approved by a majority of the disinterested directors of the
Management Company. Management fees are generally in the range of 3-6% of
collected revenue from the managed property, and leasing fees are generally
equal to $2 to $6 per square foot of rented space. For any such development
services, the Management Company charges an amount intended to approximate fair
market value. During 1999 and the six months ended June 30, 2000, JMB and its
affiliates incurred an aggregate of $3,109,000 and $1,409,212, respectively, in
fees to the Management Company for management, leasing and development services.
In 1999 and the six months ended June 30, 2000, the Management Company received
$1,482,000 and $654,672, respectively, in property management, leasing and
development fees from MetLife. Mr. Digney, a Director of the Company, is a
Senior Vice President of MetLife. In 1999 and the six months ended June 30,
2000, the Management Company received $1,273,000 and $1,038,892, respectively,
in fees from Walton Street, an affiliate of Mr. Bluhm, for property management
and development feasibility consulting services. In 1999 and the six months
ended June 30, 2000, the Management Company received $82,000 and $190,109,
respectively, in property management and leasing fees from BRE/Louis Joliet
L.L.C., an affiliate of Mr. Schreiber.
The Company and the Management Company sublease office space from an
affiliate of JMB. The total rent paid during 1999 and the six months ended
June 30, 2000 under the sublease was $900,000 and $453,750, respectively, of
which $450,000 and $225,000, respectively, represented net rent.
The Management Company provides certain administrative, computer and
advisory services to JMB and its affiliates. During 1999 and the six months
ended June 30, 2000, the Management Company received $1,590,000 and $888,652,
respectively, in payment for such services.
Pursuant to a corporate services agreement, the Company, Urban L.P. and the
Management Company provide one another various managerial, administrative,
accounting, investor relations and other services. The corporate services
agreement provides for the parties to reimburse one another quarterly for costs
incurred under that agreement. During 1999 and the six months ended June 30,
2000, reimbursements incurred pursuant to the corporate services agreement were
as follows: by the Company to Urban L.P., $686,000 and $351,584, respectively;
by the Company to the Management Company, $61,000 and $28,744, respectively; and
by the Management Company to Urban L.P., $275,000 and $87,616, respectively. The
Company and the Urban L.P. utilize JMB Insurance Agency, Inc., an affiliate of
JMB, to provide insurance brokerage services for their properties and expect to
continue to do so in the future. The terms of such services must be approved on
an annual basis by a majority of the Disinterested Directors. During 1999, the
Company and Urban L.P. incurred an aggregate of $372,000 and $246,287,
respectively, to JMB Insurance Agency, Inc. for insurance brokerage services.
For information concerning the potential or actual conflicts that may arise
in connection with the entering into of the Merger Agreement and the
transactions contemplated thereby, see Item 3 in the Statement.
B-15
<PAGE>
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the shares of
Stock and Unit Voting Stock as of September 25, 2000 for (1) each person who is
known to the Company to have been the beneficial owner of more than five percent
of the shares of Stock or Unit Voting Stock outstanding on such date, (2) each
director and executive officer of the Company and (3) the Company's directors
and executive officers as a group. The number of shares of Stock beneficially
owned by a person includes shares of Stock into which Units or shares of Unit
Voting Stock beneficially owned by the person are exchangeable and shares of
Stock issuable with respect to options held by the person which are exercisable
within 60 days. Any holder of Units and Unit Voting Stock may exchange one share
of Unit Voting Stock together with 24 Units for 25 shares of Stock. The percent
of Stock beneficially owned by a person assumes that all shares of Unit Voting
Stock and Units held by the person are exchanged for shares of Stock and all
options held by the person which are exercisable within 60 days are exercised
and that none of the shares of Unit Voting Stock or Units or options held by
other persons are so exchanged or exercised. Unless otherwise indicated in the
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<PAGE>
footnotes, all of such interests are owned directly, and the indicated person or
entity has sole voting and dispositive power.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF
UNIT UNIT
SHARES OF PERCENT OF VOTING VOTING
STOCK STOCK STOCK STOCK
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED OWNED OWNED OWNED
--------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Center Partners, Ltd.(2)......................... 5,668,989 25.7% 170,389 41.8%
Urban-Water Tower Associates(3).................. 2,267,800 11.3% 90,712 22.2%
Water Tower Associates-I, L.P.(3)................ 2,267,800 11.3% 90,712 22.2%
UIDC Holdings, L.P.(3)(4)........................ 4,808,045 21.6% 180,848 44.3%
JMB Realty Corporation(2)(3)(4)(5)............... 10,894,059 40.4% 367,916 90.2%
1975 Judd D. Malkin Life Insurance Trust(6)...... 11,147,718 42.6% 378,064 92.7%
Old Orchard Limited Partnership (4)(7)........... 1,060,606 5.6% 42,424 10.4%
JMB Properties Co................................ 253,659 1.4% 10,146 2.5%
JMB RES Managers, Inc.(17)....................... 253,659 1.4% 10,146 2.5%
Wellington Management Company, LLP(8)............ 1,155,400 6.8% 0 0%
LaSalle Investment Management, Inc.(9)........... 1,002,816 5.7% 0 0%
Security Capital Group Incorporated(10).......... 969,180 5.5% 0 0%
Lend Lease Rosen Real Estate Securities
LLC(11)........................................ 945,650 5.4% 0 0%
FMR Corp.(12).................................... 919,130 5.2% 0 0%
Morgan Stanley Dean Witter & Co.(13)............. 880,620 5.0% 0 0%
Neil G. Bluhm(14)................................ 11,147,718 42.6% 378,064 92.7%
James B. Digney(15).............................. 10,500 * 0 0%
Matthew S. Dominski(15).......................... 430,651 2.4% 1,052 *
Susan Getzendanner(15)........................... 10,500 * 0 0%
Judd D. Malkin (6)............................... 0 0% 0 0%
John E. Neal(15)................................. 16,400 * 0 0%
Phillip B. Rooney(15)............................ 32,289 * 0 0%
John G. Schreiber................................ 1,000 * 0 0%
Henry T. Segerstrom(15)(16)...................... 605,981 3.3% 23,050 5.7%
James L. Czech(15)............................... 143,068 * 2,223 *
Ross B. Glickman(15)............................. 0 0% 0 0%
Adam S. Metz(15)................................. 110,434 * 0 0%
Joseph M. Shrader(15)............................ 27,938 * 0 0%
All directors and executive officers as a group
(13 persons)................................... 11,518,297 42.2% 404,389 99.1%
</TABLE>
------------------------
* less than 1%
(1) Unless otherwise noted, the address for each of the persons or entities is
900 North Michigan Avenue, Chicago, Illinois 60611.
(2) Center Partners, Ltd. is a limited partnership, the sole general partner of
which is JMB.
(3) Urban-Water Tower Associates is a general partnership, the general partners
of which are UIDC Holdings, L.P. and Water Tower Associates-I, L.P. JMB is
the sole general partner of UIDC Holdings, L.P. and the sole general partner
of Water Tower Associates-I, L.P.
(4) UIDC Holdings, L.P. is a limited partnership, the managing general partner
of which is JMB.
(5) JMB/Miami Investors, L.P. owns 16,681 shares of Unit Voting Stock and
273,067 Units. Miami Associates L.P. owns 127,277 Units. JMB is the
beneficial owner of 75% of the stock of the general
B-17
<PAGE>
partner of JMB/Miami Investors, L.P. and Miami Associates L.P. The
securities owned by JMB/Miami Investors, L.P. are pledged as security for a
loan from a bank. JMB Properties Company owns 10,146 shares of Unit Voting
Stock and 243,513 Units. JMB is the beneficial owner of substantially all of
the partnership interests in JMB Properties Company.
(6) The 1975 Judd D. Malkin Life Insurance Trust, the co-trustees of which are
Judd D. Malkin, Barry A. Malkin, Stephen J. Malkin, and Randi Steinberger,
may be deemed to beneficially own and to share voting and dispositive power
with respect to the shares of Stock and Unit Voting Stock beneficially owned
by JMB. The 1975 Judd D. Malkin Life Insurance Trust is a significant
stockholder of JMB and JMB RES Managers, Inc. The 1975 Judd D. Malkin Life
Insurance Trust disclaims beneficial ownership of the shares of Stock and
Unit Voting Stock beneficially owned by JMB and JMB RES Managers, Inc.
(7) The sole general partner of Old Orchard Limited Partnership is UIDC
Holdings, L.P.
(8) Information with respect to beneficial ownership of Wellington Management
Company, LLP is included herein in reliance on a Schedule 13G dated
February 9, 2000 filed by Wellington Management Company, LLP with the
Securities and Exchange Commission. The Schedule 13G indicates that
Wellington Management Company, LLP, in its capacity as investment advisor,
may be deemed the beneficial owner of 1,155,400 shares of Stock which are
owned by numerous of its investment advisory clients and that no such client
is known by it to own more than five percent of the Stock. The address of
Wellington Management Company, LLP is 75 State Street, Boston, Massachusetts
02109.
(9) Information with respect to beneficial ownership of LaSalle Investment
Management, Inc. is included herein in reliance on a Schedule 13G dated
February 9, 2000 filed by LaSalle Investment Management, Inc. with the
Securities and Exchange Commission. The Schedule 13G indicates that its
affiliate, LaSalle Investment Management (Securities), L.P., in its capacity
as investment advisor, may be deemed the beneficial owner of 1,002,816
shares of Stock which are owned by its investment advisory clients, and that
no such client is known by it to own more than five percent of the Stock
except for Pensioen Fonds PGGM. The address of LaSalle Investment
Management, Inc. is 200 East Randolph Drive, Chicago, Illinois 60601.
(10) Information with respect to beneficial ownership of Security Capital Group
Incorporated is included herein in reliance on a Schedule 13G dated
February 15, 2000 filed by Security Capital Group Incorporated with the
Securities and Exchange Commission. The Schedule 13G indicates that Security
Capital Group Incorporated is the beneficial owner of 969,180 shares of
Stock which are owned by its subsidiary, Security Capital Global Management
Group Incorporated. The address of Security Capital Group Incorporated is
125 Lincoln Avenue, Santa Fe, New Mexico 87501.
(11) Information with respect to beneficial ownership of Lend Lease Rosen Real
Estate Securities LLC is included herein in reliance on a Schedule 13G dated
February 14, 2000 filed by Lend Lease Rosen Real Estate Securities LLC with
the Securities and Exchange Commission. The Schedule 13G indicates that Lend
Lease Rosen Real Estate Securities LLC, in its capacity as investment
adviser, may be deemed the beneficial owner of 945,650 shares of Stock which
are owned by certain separate accounts which it advises. The address of Lend
Lease Rosen Real Estate Securities LLC is 1995 University Avenue, Berkeley,
California, 94704.
(12) Information with respect to beneficial ownership of FMR Corp. is included
herein in reliance on a Schedule 13G dated February 14, 2000 filed by FMR
Corp. with the Securities and Exchange Commission. The Schedule 13G
indicates that Fidelity Management & Research Company, a wholly owned
subsidiary of FMR Corp., is the beneficial owner of 775,930 shares of Stock
and that Fidelity Management Trust Company is the beneficial owner of
143,200 shares of Stock as a result of acting as investment adviser to
various investment companies and that no person is known by it to own more
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<PAGE>
than five percent of the Stock. The address of FMR Corp. is 82 Devonshire
Street, Boston, Massachusetts 02109.
(13) Information with respect to beneficial ownership of Morgan Stanley Dean
Witter & Co. is included herein in reliance on a Schedule 13G dated
February 4, 2000 filed by Morgan Stanley Dean Witter & Co. with the
Securities and Exchange Commission. The Schedule 13G indicates that Morgan
Stanley Dean Witter & Co. may be deemed the beneficial owner of 880,620
shares of Stock in accounts managed by it on a discretionary basis and that
no such account holds more than five percent of the Stock. The address of
Morgan Stanley Dean Witter & Co. is 1585 Broadway, New York, New York.
(14) Mr. Bluhm may be deemed to beneficially own and to share voting and
dispositive power with respect to the shares of Stock and Unit Voting Stock
beneficially owned by JMB and JMB RES Managers, Inc. Mr. Bluhm is the
President and a significant stockholder of JMB and a significant stockholder
of JMB RES Managers, Inc. Mr. Bluhm disclaims beneficial ownership of the
shares of Stock and Unit Voting Stock beneficially owned by JMB and JMB RES
Managers, Inc.
(15) Includes, with respect to Ms. Getzendanner and Mr. Digney, options to
acquire 10,500 shares of Stock each, with respect to Messrs. Rooney and
Segerstrom, options to acquire 4,500 shares of Stock each, and, with respect
to Mr. Neal, options to acquire 7,500 shares of Stock. See "Executive
Compensation--Compensation of Directors." Includes, with respect to
Messrs. Dominski, Czech, Glickman, Metz and Shrader, options as set forth
under "Executive Compensation--Aggregated Option Exercises in 1999 and
Year-End Option Values." Also includes, with respect to Messrs. Czech, Metz
and Shrader, 14,452, 21,018 and 4,132 shares of Stock respectively, which
are being held in a trust until the expiration of specified deferral periods
and which such persons may withdraw prior to the end of such deferral
periods upon payment of a penalty.
(16) Shares are beneficially owned by Mr. Segerstrom personally, by the
Segerstrom Community Property Trust of which Mr. Segerstrom is a co-trustee
and by Henry T. Segerstrom Properties LLC, a limited liability company owned
by Mr. Segerstrom. Mr. Segerstrom's address is c/o Fashion Square Venturers,
P.O. Box 25738, Santa Ana, California 92799.
(17) JMB Properties Company owns 10,146 shares of Unit Voting Stock and 243,513
Units. JMB Properties Company is a general partnership the managing partner
of which is JMB RES Managers, Inc. The other general partner of JMB
Properties Company is JMB Real Estate Services, L.P., the sole general
partner of which is JMB RES Managers, Inc.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors, certain
of the Company's officers, and beneficial owners of more than 10 percent of the
Company's outstanding Stock, to file reports of ownership and changes in
ownership of the Company's Stock with the Securities and Exchange Commission and
to send copies of such reports to the Company. Based solely upon a review of
such reports and amendments thereto furnished to the Company and upon written
representations of certain of such persons that they were not required to file
certain of such reports, the Company believes that no such person failed to file
any such report on a timely basis during 1999, except that Joseph M. Shrader and
John E. Neal each filed one report covering one transaction, which reports were
not filed on a timely basis.
B-19
