<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SIMON DEBARTOLO GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
SIMON DEBARTOLO GROUP, INC.
115 WEST WASHINGTON STREET
INDIANAPOLIS, INDIANA 46204
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To The Shareholders of Simon DeBartolo Group, Inc.:
Please take notice that the 1997 Annual Meeting of Shareholders of Simon
DeBartolo Group, Inc. (the "Company") will be held at The Indianapolis Hyatt
Regency, One South Capitol Avenue, Indianapolis, Indiana, on Wednesday, May 14,
1997, at 11:00 a.m., Indianapolis time, to consider the following proposals:
(1) to elect a total of seven (7) directors (one (1) to be elected by
the holders of all classes of voting securities, four (4) to be elected by
the holders of Class B Common Stock and two (2) to be elected by the
holders of Class C Common Stock) each to serve until the next annual
meeting of shareholders;
(2) to ratify the appointment of Arthur Andersen LLP as independent
accountants for 1997; and
(3) to transact such other business as may come before the meeting.
Only shareholders of record at the close of business on March 17, 1997,
will be entitled to vote at the meeting or any adjournment or postponement
thereof.
WE CORDIALLY INVITE YOU TO ATTEND THE MEETING, BUT REGARDLESS OF WHETHER
YOU PLAN TO BE PRESENT, PLEASE PROMPTLY DATE, MARK, SIGN AND MAIL THE ENCLOSED
PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO ADDITIONAL POSTAGE IF MAILED
IN THE UNITED STATES. ANY SHAREHOLDER WHO EXECUTES AND DELIVERS A PROXY MAY
REVOKE THE AUTHORITY GRANTED THEREUNDER AT ANY TIME PRIOR TO ITS USE BY GIVING
WRITTEN NOTICE OF SUCH REVOCATION TO THE UNDERSIGNED AT 115 WEST WASHINGTON
STREET, INDIANAPOLIS, INDIANA 46204, BY EXECUTING AND DELIVERING A PROXY BEARING
A LATER DATE OR BY ATTENDING AND VOTING AT THE MEETING. YOUR VOTE IS IMPORTANT,
REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
The Annual Report to Shareholders for the year ended December 31, 1996, is
also enclosed.
Dated: March 31, 1997.
By Order of the Board of Directors
of Simon DeBartolo Group, Inc.
James M. Barkley, Secretary
<PAGE> 3
SIMON DEBARTOLO GROUP, INC.
115 WEST WASHINGTON STREET
INDIANAPOLIS, INDIANA 46204
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 14, 1997
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
Proxies by and on behalf of the Board of Directors of Simon DeBartolo Group,
Inc. (the "Company") for use at the 1997 annual meeting of shareholders and at
any adjournment or postponement thereof (the "Meeting") to be held, for the
purposes set forth in the accompanying Notice of Annual Meeting, on Wednesday,
May 14, 1997, at The Indianapolis Hyatt Regency, One South Capitol Avenue,
Indianapolis, Indiana, at 11:00 a.m., Indianapolis time. This Proxy Statement
and the accompanying Notice of Annual Meeting and Proxy are to be mailed on or
about March 31, 1997, to shareholders of record on March 17, 1997.
Valid Proxies will be voted at the Meeting as specified thereon. Any person
giving a Proxy may revoke it by written notice to the Company at any time prior
to its exercise or by executing and delivering a Proxy bearing a later date.
Attendance at the Meeting by a shareholder will not constitute a revocation of a
Proxy unless such shareholder affirmatively indicates at the Meeting that such
shareholder intends to vote the shares in person.
VOTING SECURITIES
The holders of record of shares of the Company's Common Stock, par value
$0.0001 per share ("Common Stock"), Class B Common Stock, par value $0.0001 per
share ("Class B Common Stock"), Class C Common Stock, par value $0.0001 per
share ("Class C Common Stock") and Series A Preferred Stock, par value $0.0001
per share ("Series A Preferred Stock," together with the Common Stock, the Class
B Common Stock and the Class C Common Stock, "Voting Stock") outstanding at the
close of business on March 17, 1997, are entitled to vote at the Meeting. On
that date, there were outstanding 93,801,787 shares of Common Stock, 3,200,000
shares of Class B Common Stock, 4,000 shares of Class C Common Stock and
4,000,000 shares of Series A Preferred Stock. As to matters subject to approval
by the holders of Voting Stock, holders of Common Stock, Class B Common Stock
and Class C Common Stock are entitled to one vote per share and holders of
Series A Preferred Stock are entitled to an aggregate of 3,809,523 votes.
Accordingly, the Voting Stock outstanding on the record date represents an
aggregate of 100,815,310 votes. The presence at the Meeting in person or by
proxy of a majority of all the votes entitled to be cast at the Meeting or
50,407,656 votes will constitute a quorum for the transaction of business.
Unless contrary instructions are indicated on the Proxy, all shares of
Common Stock represented by valid Proxies received pursuant to this solicitation
(and not revoked before they are voted) will be voted FOR the election of the
nominees named in the Proxy and FOR the appointment of Arthur Andersen LLP as
the Company's independent accountants for the year ending December 31, 1997.
All of the Class B Common Stock is owned by Melvin Simon, Herbert Simon and
David Simon, all of whom are executive officers of the Company, as voting
trustees. All of the Class C Common Stock is owned by The Edward J. DeBartolo
Corporation. All of the Series A Preferred Stock is held by a single
institutional investor. The Company is not soliciting Proxies in respect of the
Class B Common Stock, the Class C Common Stock or Series A Preferred Stock,
although such shares are expected to be represented at the Meeting.
<PAGE> 4
REQUIRED VOTE
A plurality of the votes is required to elect directors. On all other
proposals, the proposal will be approved if the number of votes cast in favor
exceed the number of votes against. Abstentions and broker non-votes will be
treated as shares not voted and will have no effect on such voting. Holders of
Class B Common Stock have informed the Company that they intend to cause all
such shares to be voted in favor of the nominee for Independent Director and the
nominees for Class B Directors named below. Holders of Class C Common Stock have
informed the Company that they intend to cause all such shares to be voted in
favor of the nominee for Independent Director and the nominees for Class C
Directors.
OTHER BUSINESS
The Company knows of no business other than that set forth above to be
transacted at the Meeting, but if other matters requiring a vote do arise, it is
the intention of the persons named in the Proxy to vote in accordance with their
judgment on such matters.
COSTS OF PROXY SOLICITATION
The cost of preparing, assembling, and mailing the proxy material will be
borne by the Company. It is expected that solicitation will be made primarily by
mail, but employees of the Company or other representatives of the Company may
also solicit Proxies without additional compensation. The Company will also
request persons, firms and corporations holding shares in their names or in the
names of their nominees, which shares are beneficially owned by others, to send
the proxy material to, and to obtain Proxies from, such beneficial owners and
will reimburse such holders for their reasonable expenses in doing so. In
addition, the Company has retained Beacon Hill Partners, Inc., a proxy
solicitation firm, to assist in the solicitation of Proxies. Such firm will be
paid a fee of $3,500 for its services. The telephone number of Beacon Hill
Partners, Inc. is (212) 843-8500.
INCORPORATION BY REFERENCE
To the extent this Proxy Statement has been or will be specifically
incorporated by reference into any filing by the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the
sections of this Proxy Statement entitled "Report of Compensation Committee on
Executive Compensation" and "Performance Graph" shall not be deemed to be so
incorporated unless specifically otherwise provided in any such filing.
2
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Voting Stock and the units of limited partnership
interest ("Units") of the Company's majority-owned subsidiary, Simon DeBartolo
Group, L.P. (the "Operating Partnership") as of March 17, 1997, by (1) each
director and nominee for director, (2) the executive officers named in the
Summary Compensation Table and (3) the directors and executive officers of the
Company, as a group. Unless otherwise indicated in the footnotes, shares or
Units are owned directly, and the indicated person has sole voting and
investment power.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF PERCENT OF
OF VOTING STOCK VOTING STOCK UNITS
NAME OF BENEFICIALLY BENEFICIALLY NUMBER OF UNITS BENEFICIALLY
BENEFICIAL OWNER OWNED(1)(2)(3) OWNED(4) BENEFICIALLY OWNED OWNED(5)
- ----------------------------------- ---------------- ------------ ------------------ ------------
<S> <C> <C> <C> <C>
Birch Bayh......................... 11,000 * 0 --
Edward J. DeBartolo, Jr............ 1,561,160(6) 1.5% 1,561,160 *
William T. Dillard, II............. 17,200(7) * 0 --
G. William Miller.................. 5,440 * 0 --
Fredrick W. Petri.................. 9,520 * 0 --
Terry S. Prindiville............... 12,000 * 0 --
David Simon........................ 2,236,770(8) 2.2% 2,013,010 1.3%
Herbert Simon...................... 5,597,851(9) 5.3% 5,554,250(9) 3.5%
Melvin Simon....................... 7,153,795(9) 6.6% 7,116,385(9) 4.5%
J. Albert Smith, Jr................ 12,000 * 0 --
Richard S. Sokolov................. 169,427 * 60,835 *
M. Denise DeBartolo York........... 1,306,271(6) 1.3% 1,290,439(6) *
Philip J. Ward..................... 1,802 * 0 --
Randolph L. Foxworthy.............. 202,973 * 71,463 *
William J. Garvey.................. 117,480 * 21,200 *
James A. Napoli.................... 69,110 * 0 --
All directors and executive
officers as a group (19
persons)......................... 52,740,782(10) 35.1% 48,493,583 30.7%
</TABLE>
- ---------------
* Less than one percent
(1) Includes the following shares of Common Stock that may be purchased
pursuant to stock options that are exercisable within 60 days: Birch
Bayh -- 11,000; William T. Dillard, II -- 11,000; G. William
Miller -- 1,360; Fredrick W. Petri -- 1,360; Terry S.
Prindiville -- 11,000; David Simon -- 200,000; J. Albert Smith,
Jr. -- 11,000; Philip J. Ward -- 1,360; Randolph L. Foxworthy -- 100,000;
William J. Garvey -- 75,000; James A. Napoli -- 50,000; and all directors
and executive officers as a group -- 679,330.
(2) Includes the following shares of Common Stock that may be received upon
exchange of Units held by the following persons on March 17, 1997: Edward
J. DeBartolo, Jr. -- 1,561,160; David Simon -- 2,013,010; Melvin
Simon -- 7,116,385; Herbert Simon -- 5,554,250; Richard S.
Sokolov -- 60,835; M. Denise DeBartolo York -- 1,290,439; Randolph L.
Foxworthy -- 71,463; William J. Garvey -- 21,200; and all directors and
executive officers as a group -- 48,493,583. Units held by limited partners
are exchangeable either for shares of Common Stock (on a one-to-one basis)
or for cash as selected by the Independent Directors.
(3) Includes the following restricted shares which are subject to vesting
requirements: David Simon -- 19,110; Randolph L. Foxworthy -- 19,110;
William J. Garvey -- 19,110; James A. Napoli -- 19,110; and all directors
and executive officers as a group -- 117,145.
(4) At March 17, 1997, there were 93,801,787 shares of Common Stock, 3,200,000
shares of Class B Common Stock, 4,000 shares of Class C Common Stock and
4,000,000 shares (entitled to cast 3,809,523 votes) of Series A Preferred
Stock outstanding. Upon the occurrence of certain events, shares
3
<PAGE> 6
of Class B Common Stock and Class C Common Stock convert automatically into
Common Stock (on a share-for-share basis). The percentages in this column
assume the exercise of stock options and exchange of Units for shares of
Common Stock.
(5) At March 17, 1997, there were 157,979,837 outstanding Units of which the
Company owned, directly or indirectly, 97,005,787 or 61.4%. The percentages
in this column assume that no Units are exchanged for shares of Common
Stock.
(6) Does not include shares of Voting Stock and Units held by DeBartolo, Inc.
and certain related persons and entities. See "PRINCIPAL SHAREHOLDERS."
(7) Does not include 10,000 shares of Common Stock owned by Mr. Dillard's
spouse who has sole voting and investment power of such shares.
(8) Includes Units owned by trusts of which David Simon is a beneficiary.
(9) Does not include shares of Voting Stock and Units held by Melvin Simon &
Associates, Inc. See "PRINCIPAL SHAREHOLDERS."
(10) Includes shares of Voting Stock and Units held by DeBartolo, Inc. and
Melvin Simon & Associates, Inc. See "PRINCIPAL SHAREHOLDERS."
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning each person
(including any group) known to the Company to beneficially own more than five
percent (5%) of any class of Voting Stock as of March 17, 1997. Unless otherwise
indicated in the footnotes, shares are owned directly, and the indicated person
has sole voting and investment power.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF VOTING STOCK
NAME AND ADDRESS OF BENEFICIAL BENEFICIALLY
BENEFICIAL OWNER OWNERSHIP(1) OWNED(2)
----------------------------------------------------------- ------------ ------------
<S> <C> <C>
DeBartolo, Inc. et al.(3).................................. 22,227,720(4) 18.0%
7620 Market Street
Youngstown, OH 44513
Melvin Simon & Associates, Inc.(5)......................... 14,651,581(6) 13.0%
115 W. Washington Street
Indianapolis, IN 46204
Stichting Pensioenfonds ABP................................ 5,903,258(7) 5.8%
P.O. Box 2889
6401 D J Harleen
The Netherlands
T. Rowe Price Associates, Inc.............................. 5,105,818(8) 5.4%
100 E. Pratt Street
Baltimore, MD 21202
</TABLE>
- ---------------
(1) Voting Stock includes shares of Common Stock, Class B Common Stock, Class C
Common Stock, and Series A Preferred Stock. Upon the occurrence of certain
events, shares of Class B Common Stock and Class C Common Stock convert
automatically into Common Stock (on a share-for-share basis). On and after
October 27, 1997, shares of Series A Preferred Stock are convertible into
Common Stock (on a 0.9523809-to-one basis). The amounts in the table also
include shares of Common Stock that may be issued upon the exchange of
Units. Units held by limited partners are exchangeable either for shares of
Common Stock (on a one-to-one basis) or for cash as selected by the
Independent Directors.
(2) The percentages in this column assume the exercise of stock options and
exchange of Units for shares of Common Stock.
(3) According to a Schedule 13D dated August 9, 1996, the beneficial owners of
the securities are DeBartolo, Inc. ("DI"), certain subsidiaries of DI, held
directly or indirectly through The Edward J. DeBartolo Corporation, the
estate of the late Edward J. DeBartolo, members of the DeBartolo family,
including
4
<PAGE> 7
Edward J. DeBartolo, Jr. and M. Denise DeBartolo York, or trusts established
for the benefit of members of the DeBartolo family or partnerships in which
the foregoing persons hold partnership interests.
(4) Includes 22,204,859 shares of Common Stock issuable upon exchange of Units
and 4,000 shares of Class C Common Stock.
(5) Melvin Simon & Associates, Inc., is owned 69% by Melvin Simon and 31% by
Herbert Simon.
(6) Includes 11,451,581 shares of Common Stock issuable upon exchange of Units
and 3,200,000 shares of Class B Common Stock.
(7) According to a Schedule 13F filed for the period ending December 31, 1996,
the reporting person owns 1,903,258 shares of Common Stock and 4,000,000
shares of Series A Preferred Stock.
(8) According to a Schedule 13G dated February 14, 1997, T. Rowe Price
Associates, Inc. ("Price Associates") has sole voting power of 704,592
shares of Common Stock, shared voting power of 0 shares, sole dispositive
power of 5,105,818 shares and shared dispositive power of 0 shares. These
securities are owned by various individual and institutional investors which
Price Associates serves as investment advisor with power to direct
investment and/or sole power to vote the securities. Price Associates
disclaims that it is the beneficial owner of such securities.
ELECTION OF DIRECTORS
Under the Company's Charter, as amended in connection with the merger (the
"Merger") in August 1996 with DeBartolo Realty Corporation ("DRC"), the Board of
Directors consists of thirteen members, seven of whom are to be elected by the
holders of all classes of Voting Stock voting together (the "Independent
Directors"), four by the holders of the Class B Common Stock voting as a single
class (the "Class B Directors") and two by the holders of the Class C Common
Stock voting as a single class (the "Class C Directors"). Through 1999, the
seven Independent Directors have been classified into three groups of one or two
members, each of whom is serving a term of office initially expiring either at
the first, second or third annual meeting of shareholders following the Merger.
Class B Directors and Class C Directors each serve a term of office expiring at
the next annual meeting of shareholders.
At the Meeting, one Independent Director is to be elected by the holders of
Voting Stock, four Class B Directors are to be elected by the holders of Class B
Common Stock and two Class C Directors are to be elected by the holders of Class
C Common Stock. Each director will serve until the 1998 annual meeting of
shareholders and until his or her successor has been elected.
By virtue of a voting trust agreement, the shares of Class B Common Stock
are held until December 20, 2003, by a voting trust and such trust is obligated
to elect Melvin Simon, Herbert Simon and David Simon as directors of the
Company.
Set forth below are the names of and certain other information regarding
the nominees for director. Information about each such person's ownership of
equity securities of the Company appears elsewhere in this Proxy Statement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE NOMINEES NAMED BELOW.
NOMINEE FOR INDEPENDENT DIRECTOR TO BE ELECTED BY THE HOLDERS OF VOTING STOCK
Birch Bayh, 69, has been a director of the Company since 1993. He has been
the senior partner in the Washington, D.C. law firm of Bayh, Connaughton, &
Malone, P.C. for more than five years. He served as a United States Senator from
Indiana from 1963 to 1981. Mr. Bayh also serves as a director of ICN
Pharmaceuticals, Inc. and Acordia, Inc.
5
<PAGE> 8
NOMINEES FOR CLASS B DIRECTORS TO BE ELECTED BY HOLDERS OF CLASS B COMMON STOCK
Melvin Simon, 70, is the Co-Chairman of the Board of the Company and has
been a director since the Company's incorporation. In addition, he is the
Co-Chairman of the Board of Melvin Simon & Associates, Inc. ("MSA"), a company
he founded in 1960 with his brother, Herbert Simon.
Herbert Simon, 62, is the Co-Chairman of the Board of the Company and has
been a director since the Company's incorporation. Mr. Simon served as Chief
Executive Officer from the Company's incorporation through January 2, 1995, when
he was appointed Co-Chairman of the Board. In addition, Mr. Simon is the
Co-Chairman of the Board of MSA. Mr. Simon is also a director of Kohl's
Corporation, a specialty retailer.
David Simon, 35, is the Chief Executive Officer of the Company and has been
a director since the Company's incorporation. Mr. Simon served as President of
the Company from the Company's incorporation until 1996 and was appointed Chief
Executive Officer on January 3, 1995. In addition, he has been Executive Vice
President, Chief Operating Officer and Chief Financial Officer of MSA since
1990. From 1988-1990, Mr. Simon was Vice President of Wasserstein Perella &
Company, a firm specializing in mergers and acquisitions. He is the son of
Melvin Simon, the nephew of Herbert Simon and a director of Healthcare Compare
Corp.
Richard S. Sokolov, 47, has been a director of the Company since the
Merger. He served as the President and Chief Executive Officer and a director of
DRC from its incorporation until the Merger. Prior to that he had served as
Senior Vice President, Development of EJDC since 1986 and as Vice President and
General Counsel since 1982. In addition, Mr. Sokolov is a trustee and a member
of the Executive Committee of the International Council of Shopping Centers.
NOMINEES FOR CLASS C DIRECTORS TO BE ELECTED BY HOLDERS OF CLASS C COMMON STOCK
Edward J. DeBartolo, Jr., 50, has been a director of the Company since the
Merger. He served as the Chairman of the DRC Board of Directors from its
incorporation until the Merger. Mr. DeBartolo has been President and Chief
Executive Officer of EJDC since 1994 and a director of EJDC since 1973. He
previously served as President and Chief Administrative Officer of EJDC since
1979. He has been associated with EJDC in an executive capacity since 1973. Mr.
DeBartolo is Chairman of the San Francisco 49ers professional football team and
is also Chairman and Chief Executive Officer of DeBartolo Entertainment, Inc.
EJDC owns a majority of the interests in the San Francisco 49ers. Mr. DeBartolo,
Jr. is the son of the late Edward J. DeBartolo and the brother of M. Denise
DeBartolo York.
M. Denise DeBartolo York, 46, has been a director of the Company since the
Merger. She served as a director of DRC from February 1995 until the Merger. She
serves as Chairman of the Board of EJDC and DeBartolo, Inc. Ms. DeBartolo York
previously served EJDC as Executive Vice President of Personnel/Communications
and has been associated with EJDC in an executive capacity since 1975. She is
the daughter of the late Edward J. DeBartolo and the sister of Edward J.
DeBartolo, Jr.
INDEPENDENT DIRECTORS CONTINUING IN OFFICE UNTIL 1998
William T. Dillard, II, 52, has been a director of the Company since 1993.
He is President and Chief Operating Officer of Dillard Department Stores, Inc.,
a retailing chain, a position he has held since 1977. Mr. Dillard also serves as
a director of Dillard Department Stores, Inc., Frederick Atkins, Inc., Texas
Commerce Bancshares, Inc., Acxiom Corporation and Barnes & Noble, Inc.
G. William Miller, 72, has been a director of the Company since the Merger.
He has been Chairman of the Board and Chief Executive Officer of G. William
Miller & Co. Inc., a merchant banking firm, since 1983. He is a former Secretary
of the U.S. Treasury and a former Chairman of the Federal Reserve Board. From
January 1990 until February 1992, he was Chairman and Chief Executive Officer of
Federated Stores, Inc., the parent company of predecessors to Federated
Department Stores, Inc. Mr. Miller is Chairman of the Board and a director of
Waccamaw Corporation. He is also a director of GS Industries, Inc., Kleinwort
Benson Australian Income Fund, Inc. and Repligen Corporation.
6
<PAGE> 9
Terry S. Prindiville, 61, has been a director of the Company since 1993. He
retired as Executive Vice President and Director of Support Services of J.C.
Penney Company, Inc., a retailing chain, a position he held from 1988 until
1995. He is also the Chairman of the Board of Directors of JCP Realty, Inc., a
wholly-owned subsidiary of J.C. Penney Company, Inc. which is a Unit holder, and
a director of Eckerd Corporation.
INDEPENDENT DIRECTORS CONTINUING IN OFFICE UNTIL 1999
Fredrick W. Petri, 50, has been a director of the Company since the Merger.
He is a partner of Petrone, Petri & Company, a real estate investment firm he
founded in 1993, and an officer of Housing Capital Company since its formation
in 1994. Prior thereto, he was an Executive Vice President of Wells Fargo Bank,
where for over 18 years he held various real estate positions. Mr. Petri is
currently a trustee of the Urban Land Institute and a director of Storage Trust
Realty. He previously was a member of the Board of Governors and a Vice
President of the National Association of Real Estate Investment Trusts and a
director of the National Association of Industrial and Office Park Development.
He is a director of the University of Wisconsin's Real Estate Center.
J. Albert Smith, Jr., 56, has been a director of the Company since 1993. He
is the President of Bank One, Indianapolis, NA, a commercial bank, a position he
has held since September 30, 1994. Prior to his current position, he was the
President of Banc One Mortgage Corporation, a mortgage banking firm, a position
he held since 1975.
Philip J. Ward, 48, has been a director of the Company since the Merger. He
is Senior Managing Director, Head of Real Estate Investments, for CIGNA
Investments, Inc., a wholly-owned subsidiary of CIGNA Corporation. He is a
member of the International Council of Shopping Centers, the Urban Land
Institute, the National Association of Industrial and Office Parks and the
Society of Industrial and Office Realtors. He is a director of the Connecticut
Investment Fund and Wyndham Hotel Corporation.
ATTENDANCE AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held eight meetings during 1996. The Board of
Directors has established four standing committees, the Compensation Committee,
the Audit Committee, the Executive Committee and the Nominating Committee. All
directors attended 75% or more of the meetings of the Board and each committee
on which they served.
The Compensation Committee, which currently consists of Messrs. Bayh,
DeBartolo, Prindiville, Herbert Simon and Ward, sets remuneration levels for
officers of the Company, reviews significant employee benefit programs and
establishes, as it deems appropriate, and administers executive compensation
programs, including bonus plans, stock option and other equity-based programs,
deferred compensation plans and any other cash or stock incentive programs. The
Compensation Committee met one time during 1996.
The Audit Committee, which currently consists of Messrs. Dillard, Miller,
Petri and Smith, makes recommendations concerning the engagement of independent
public accountants, reviews with the independent public accountants the scope of
the audit engagement, reviews the independent public accountants' letter of
comments and management's responses thereto, approves professional services
provided by the independent public accountants, reviews the independence of the
independent public accountants, reviews any major accounting changes made or
contemplated, considers the range of audit and non-audit fees, and reviews the
adequacy of the Company's internal accounting controls. The Audit Committee met
two times during 1996.
The Executive Committee, which currently consists of Messrs. DeBartolo,
David Simon, Herbert Simon, Melvin Simon and Sokolov, approves the acquisition
and disposition of real property, authorizes the execution of certain contracts
and agreements, including those related to the borrowing of money by the
Company, and generally exercises all other powers of the Board of Directors
between meetings of the Board of Directors, except in cases where action of the
entire Board of Directors is required by the Charter, the By-Laws or applicable
law and except where action by Independent Directors (as defined in the
Company's Charter) is required by the Company's conflict of interest policies.
The Executive Committee did not meet during 1996.
7
<PAGE> 10
The Nominating Committee, which currently consists of Ms. DeBartolo York
and Messrs. Bayh, Prindiville, David Simon and Herbert Simon, nominates persons
to serve as directors who are elected by the holders of Voting Stock. In
considering persons to nominate, the Nominating Committee will consider persons
recommended by shareholders. The Nominating Committee met one time in 1996.
The By-Laws of the Company require that each committee except the Audit
Committee and the Nominating Committee must have at least one member who was
elected by the Class B Common Stock and at least one member elected by the Class
C Common Stock. The entire Audit Committee and a majority of the Compensation
Committee must be composed of Independent Directors. Further, the Nominating
Committee is required to have five members with two members elected by the Class
B Common Stock and one member elected by the Class C Common Stock.
At the meeting of directors to be held following the Meeting, the Board
will reappoint members of the Board to the four standing committees.
COMPENSATION OF DIRECTORS
The Company pays its directors who are not employees of the Company annual
compensation of $20,000 plus $1,000 for attendance (in person or by telephone)
at each meeting of the Board of Directors or a committee thereof. Directors of
the Company who are employees of the Company do not receive any compensation for
their services as directors. In addition, all directors are reimbursed for their
expenses incurred in attending directors' meetings.
Each director who is not an employee of the Company participates in the
Company's Director Stock Option Plan (the "Director Plan"). Each eligible
director is automatically granted options ("Director Options") to purchase at
the fair market value on the date of grant (i) 5,000 shares of Common Stock upon
the director's initial election to the Board of Directors and (ii) 3,000 shares
of Common Stock upon each reelection of such director to the Board of Directors.
Director Options become exercisable on the first anniversary of the date of
grant or at such earlier time as a change in control of the Company (as defined
in the Director Plan) occurs, and remain exercisable through the tenth
anniversary of the date of grant (the "Expiration Date"). Director Options that
are exercisable terminate 30 days after the optionee ceases to be a member of
the Board of Directors. The Board of Directors may amend, suspend or discontinue
the Director Plan at any time. Certain specified amendments must be approved by
the shareholders. In August 1996, in connection with the election of directors,
Director Options to purchase an aggregate of 37,000 shares of Common Stock were
granted to the nine directors then eligible to participate in the Director Plan.
Such Director Options will become exercisable one year from the date of grant,
or such earlier time as a change in control occurs.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and beneficial owners of more than
10% of the Company's capital stock to file reports of ownership and changes of
ownership with the Securities and Exchange Commission and the New York Stock
Exchange. Based solely on its review of the copies of such forms received by it,
and/or written representations from certain reporting persons, the Company
believes that, during the year ended December 31, 1996, its directors, executive
officers and beneficial owners of more than 10% of the Company's Common Stock
have complied with all filing requirements applicable to them.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation for
services in all capacities to the Company for the year ended December 31, 1996,
for the Chief Executive Officer and the four other most highly compensated
executive officers of the Company for the year ended December 31, 1996 (the
"Named Executives"):
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) AWARDS(3) OPTIONS COMPENSATION(4)
- -------------------------------- ---- -------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
David Simon..................... 1996 $400,000 $161,000 -- -- $11,056
Chief Executive Officer 1995 400,000 102,735 $1,365,000 -- 10,996
1994 374,039 150,000 -- -- 12,688
Randolph L. Foxworthy........... 1996 $350,000 $ 75,000 -- -- $12,081
Executive Vice President -- 1995 350,000 75,000 $1,365,000 -- 12,170
Corporate Development 1994 332,692 75,000 -- -- 12,418
William J. Garvey............... 1996 $325,000 $ 85,000 -- -- $12,362
Executive Vice President -- 1995 348,077 75,000 $1,365,000 -- 12,450
Property Development 1994 312,019 60,000 -- -- 13,471
James A. Napoli................. 1996 $316,154 $110,000 -- -- $11,684
Executive Vice President -- 1995 300,000 100,000 $1,365,000 -- 11,773
Leasing 1994 291,346 120,000 -- -- 13,145
Richard S. Sokolov.............. 1996 $208,562 $175,000 -- -- $ --
President and Chief
Operating Officer
</TABLE>
- ---------------
(1) Does not include compensation paid by DRC prior to the Merger.
(2) Bonus awards are accrued in the year indicated, but paid in the following
year. The Compensation Committee is reviewing David Simon's compensation,
and, as part of that review, may determine to award additional cash bonus
compensation to him based on the Company's 1996 performance.
(3) Pursuant to the Company's five-year Stock Incentive Program, a total of
1,000,000 restricted shares of Common Stock were allocated on March 22,
1995, having a total value at the date of grant of $25.0 million. A portion
of the restricted shares allocated are awarded and earned only if the
Company attains annual and cumulative targets for growth in Funds From
Operations. See "-- Employee Plan -- Stock Incentive Program," below. The
amounts indicated in the table represent the total amount of restricted
shares allocated which are subject to performance-based conditions before
they are awarded and earned and to subsequent vesting requirements.
Dividends are paid on restricted shares that are earned. Earned shares vest
in four installments of 25% on January 1 of the year following the year in
which the restricted shares are earned; provided that the participant
remains an employee immediately prior to the vesting date. At December 31,
1996, the total number of restricted shares (and value at such date) that
have been earned by the persons named in the table were as follows: David
Simon -- 19,110 restricted shares ($592,410); Randolph L.
Foxworthy -- 19,110 restricted shares ($592,410); William J. Garvey --
19,110 restricted shares ($592,410); and James A. Napoli -- 19,110
restricted shares ($592,410).
(4) Represents annualized amounts of (i) employer paid contributions to the
Company's 401(k) retirement plan and (ii) Company paid employee and
dependent life insurance premiums. Employer contributions to the 401(k)
retirement plan become vested 30% after completion of three years of
service, 40% after four years and an additional 20% after each additional
year until fully vested after seven years.
9
<PAGE> 12
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to the unexercised
stock options granted to the Named Executives under the Employee Plan and held
by them at December 31, 1996. No stock options were granted to the Named
Executives in 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND
DECEMBER 31, 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David Simon............... -- -- 200,000 -- $ 1,750,000 --
Randolph L. Foxworthy..... -- -- 100,000 -- 875,000 --
William J. Garvey......... 25,000 109,375 75,000 -- 656,250 --
James A. Napoli........... 50,000 218,750 50,000 -- 437,500 --
Richard S. Sokolov........ -- -- -- -- -- --
</TABLE>
- ---------------
(1) The closing price of the Company's Common Stock as reported by the New York
Stock Exchange on December 31, 1996 was $31.00. Value is calculated on the
basis of the difference between the exercise price and $31.00, multiplied by
the number of shares of Common Stock underlying "in-the-money" options.
EMPLOYEE PLAN
General. Under the Operating Partnership's Employee Stock Plan (the
"Employee Plan") a maximum of 4,595,000 shares of Common Stock (subject to
adjustment) are available for issuance to eligible officers and key employees.
The Employee Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee") which consists of persons not eligible to
participate in the Employee Plan. During the ten-year period following the
adoption of the Employee Plan, the Committee may, subject to the terms of the
Employee Plan, grant to key employees (including officers and directors who are
employees) of the Operating Partnership or its "affiliates" (as defined in the
Employee Plan) the following types of awards: incentive stock options ("ISOs")
within the meaning of section 422 of the Code, "nonqualified stock options"
("NQSOs"), stock appreciation rights ("SARs"), performance units and shares of
restricted or unrestricted Common Stock.
Any award granted under the Employee Plan may be exercised over a period
determined by the Committee in its discretion. The exercise price of an option
(the "Option Price") may not be less than the fair market value of the shares of
the Common Stock on the date of grant. The Committee may, in its discretion,
with the grantee's consent, amend, cancel, substitute, accelerate the
exercisability of or extend the scheduled expiration date of any award, provided
however, that no award may be exercisable more than ten years after the date of
grant. The Board of Directors of the Company in its capacity as a general
partner of the Operating Partnership may amend, suspend or discontinue the
Employee Plan at any time. Certain specified amendments must be approved by
shareholders.
Option Grants. No options were granted under the Employee Plan during
1996. All options granted to date under the Employee Plan are exercisable at the
fair market value of the Common Stock on the date of grant, have a ten-year
term, generally vest 40% on the first anniversary of the grant date and an
additional 30% on the second anniversary of the grant date, and generally become
100% vested three years after the grant date.
Stock Incentive Program. Under the Company's five-year stock-based
incentive program (the "Stock Incentive Program"), an aggregate of 1,000,000
restricted shares of Common Stock were allocated in March 1995 under the
Employee Plan to a total of 50 executive officers and key employees. A
percentage of the total number of shares allocated, ranging from 15% to 25%, may
be earned in each of the five years of the program
10
<PAGE> 13
only if the Company attains annual and cumulative targets for growth in Funds
From Operations. The determination of whether the Company has achieved its
targets for a particular year is made in March of the following year (the
"Determination Date") and, to the extent the targets have been achieved, a
portion of the allocation of shares of restricted stock is deemed to be earned
and is awarded as of the Determination Date. Although the participant is
entitled to vote all earned shares and receive distributions paid thereon as of
the Determination Date, earned shares vest in four installments of 25% each on
January 1, of each year following the year in which the Determination Date
occurs. The participant must be employed by the Company on the day prior to the
vesting date to receive such shares, otherwise the earned shares are forfeited.
INCENTIVE BONUS PLAN
The Incentive Bonus Plan (the "Bonus Plan") is intended to provide senior
executives and key employees with opportunities to earn incentives based upon
the performance of the Company, the participant's business unit and the
individual participant. At the beginning of a year, the Committee specifies the
maximum incentive pool available for distributions and approves performance
measures for each participant and three levels of performance that must be
attained in order to trigger the award of the bonuses. Each participant's bonus
award for the year is expressed as a percentage of base salary, a fixed dollar
amount, or a percentage of the available incentive pool. Bonus amounts for each
year are determined in the following February with disbursement in March.
DEFERRED COMPENSATION PLAN
The Operating Partnership has a non-qualified deferred compensation plan
(the "Deferred Compensation Plan") that provides deferred compensation to
certain executives and key employees. Under the Deferred Compensation Plan, a
participant may defer all or a part of his compensation. The Company, at its
discretion, may contribute a matching amount equal to a rate selected by the
Company, and an additional incentive contribution amount on such terms as the
Company may specify. All participant deferrals and Company matching and
incentive contributions are credited to a participant's account and remain
general assets of the Company. A participant's elective deferrals are fully
vested. Except in the case of death or disability of the participant or
insolvency or a change in control of the Company, a participant becomes vested
in Company matching and incentive contributions 20% after one year of service
and an additional 20% for each year thereafter. Upon death or disability of the
participant or insolvency or a change in control of the Company, a participant
becomes 100% vested in his account.
All contributions under the Deferred Compensation Plan are deposited in
what is commonly referred to as a "rabbi trust" arrangement pursuant to which
the assets of the trust are subject to the claims of the Company's general
creditors in the event of the Company's insolvency. The trust assets are
invested by the trustee in its sole discretion. Payments of a participant's
elective deferrals and vested matching contributions are made as elected by the
participant. These amounts would be paid earlier in the event of termination of
employment or death of the participant, an unforeseen emergency affecting the
participant or a change in control of the Company.
OTHER RETIREMENT PLANS
The Operating Partnership and certain related entities maintain a
tax-qualified retirement savings plan for eligible employees which contains a
cash or deferred arrangement described in section 401(k) of the Code. Prior to
the Merger, DeBartolo Properties Management, Inc. ("DPMI") maintained a 401(k)
plan for employees of DRC and related entities. Following the Merger, in which
the Operating Partnership acquired substantially all of the economic interest in
DPMI, the individual 401(k) plans were continued.
The Operating Partnership's plan permits participants to defer up to a
maximum of 12% of their compensation (as defined in the plan), subject to
certain limits imposed by the Code. Participants' salary deferrals are matched
by participating employers in an amount equal to 100% of the first 2% of such
deferrals and 50% of the next 4% of such deferrals. In addition, participating
employers contribute annually 3% of eligible employees' compensation (as defined
in the plan). Amounts deferred by employees are immediately
11
<PAGE> 14
vested; amounts contributed by participating employers become vested 30% after
the completion of three years of service, 40% after the completion of four years
of service and an additional 20% after the completion of each additional year of
service until 100% vested after the completion of seven years of service.
The DPMI plan permits participants to defer up to a maximum of 16% of their
compensation (as defined in the plan), subject to certain limits imposed by the
Code. Highly compensated participants (as defined in the plan) are limited to a
4% deferral. Participants' salary deferrals are matched by participating
employers in an amount equal to 100% of the first 4% of such deferrals. Amounts
deferred by employees are immediately vested; amounts contributed by
participating employers become vested 100% after the completion of five years of
service.
Management intends to merge the DPMI plan into the Operating Partnership's
plan on April 1, 1997. The resulting plan will permit participants to defer up
to a maximum of 16% of their compensation (as defined in the plan), subject to
certain limits imposed by the Code. Participants' salary deferrals will be
matched by participating employers in an amount equal to 100% of the first 2% of
such deferrals and 50% of the next 3% of such deferrals. In addition,
participating employers will contribute annually 2% of eligible employees'
compensation (as defined in the plan). Amounts deferred by employees will be
immediately vested; amounts contributed by participating employers will become
vested 30% after the completion of three years of service, 40% after the
completion of four years of service and an additional 20% after the completion
of each additional year of service until 100% vested after the completion of
seven years of service. Employer matching contributions from the DPMI plan will
be subject to the vesting schedule for the DPMI plan.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
GENERAL PRINCIPLES
As a general matter, the Company has adopted a compensation philosophy
which embraces the concept of pay-for-performance. The Company's strategy is to
link executive management compensation with the Company's performance and
shareholder return and to reward management for results that are consistent with
the key goals of the Company. This is described further below under "1996
Executive Officer Compensation." The Company believes that its compensation
program attracts result-oriented employees and motivates them to achieve higher
levels of performance.
It is the Company's policy to establish executive officer base salary at
levels which are slightly below industry statistical norms for comparable real
estate investment trusts ("REITs"), while providing significant additional
compensation opportunities through programs which are linked directly to Company
performance.
1996 CEO COMPENSATION
David Simon was paid a base salary of $400,000 for 1996 and received a
bonus of $161,000 in March 1997 with respect to 1996 performance. No stock
options were granted to David Simon under the Employee Plan during 1996. At
December 31, 1996, he held exercisable options to acquire 200,000 shares of
Common Stock. Of David Simon's total allocation under the Stock Incentive
Program of 54,600 shares of restricted stock, 19,110 shares were earned and
awarded as of December 31, 1996, because the Company met its targets for growth
in Funds From Operations for 1994 and 1995. Based on information provided by the
Company's compensation consultants, management believes that David Simon's total
compensation in 1996 was below the 25th percentile for chief executive officers
of REITs with comparable market capitalizations.
1996 EXECUTIVE OFFICER COMPENSATION
The Company compensates its executive officers through four principal
elements. The first element, base pay, is determined through a review and
analysis of peers in the REIT industry in order to determine reasonable and
competitive compensation levels. The second element is participation in a
discretionary Bonus Plan. Under the Bonus Plan, participants have opportunities
to participate in an incentive pool depending upon performance of the Company,
the participant's business unit and the individual participant. Bonuses of
12
<PAGE> 15
$796,000 were paid in 1997 to the eight eligible executive officers with respect
to 1996 performance. See "EXECUTIVE COMPENSATION -- Incentive Bonus Plan." The
two remaining compensation elements are intended to link executive compensation
more directly to increases in value of the Company's Common Stock. The third
element consists of option awards under the Employee Plan. Although no options
were granted during 1996, at December 31, 1996, the eight eligible executive
officers held vested options to acquire an aggregate of 621,875 shares that were
previously granted under the Employee Plan. The fourth element consists of
allocation of restricted stock under the Company's five-year Stock Incentive
Program. Under the Stock Incentive Program, allocations of restricted shares are
earned and awarded if the performance-based goals of the program are met. Of the
total 334,700 shares of restricted stock allocated to the eight eligible
executive officers under the Stock Incentive Program, 117,145 shares were earned
and awarded as of December 31, 1996 because the Company met its targets for
growth in Funds From Operations for 1994 and 1995. See "EXECUTIVE
COMPENSATION -- Employee Plan." The Company believes that each element of its
executive compensation program attracts results-oriented individuals and
motivates them to achieve levels of performance which are consistent with the
performance goals of the Company and its shareholders.
COMPENSATION COMMITTEE:
Philip J. Ward, Chairman
<TABLE>
<S> <C>
Birch Bayh Edward J. DeBartolo, Jr.
Terry S. Pindiville Herbert Simon
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee during 1996 was an officer,
employee or former officer of the Company or any of its subsidiaries or had any
relationship requiring disclosure herein pursuant to regulations of the
Securities and Exchange Commission. No executive officer of the Company served
as a member of a compensation committee or a director of another entity under
circumstances requiring disclosure herein pursuant to regulations of the
Securities and Exchange Commission.
13
<PAGE> 16
PERFORMANCE GRAPH
The following line graph sets forth a comparison of the percentage change
in the cumulative total shareholder return on the Company's Common Stock
compared to the cumulative total return of the S&P Composite -- 500 Stock Index
and the NAREIT Equity REIT Total Return Index for the period December 14, 1993,
the date on which trading of the Company's Common Stock commenced, through
December 31, 1996. The graph assumes an investment of $100 on December 14, 1993,
a reinvestment of dividends and actual increase of the market value of the
Company's Common Stock relative to an initial investment of $100. The
comparisons in this table are required by the Securities and Exchange Commission
and are not intended to forecast or be indicative of possible future performance
of the Company's Common Stock.
<TABLE>
<CAPTION>
NAREIT Equity
Measurement Period Simon DeBartolo REIT Total Return
(Fiscal Year Covered) Group, Inc. Index S&P 500
<S> <C> <C> <C>
12/14/93 100.0000 100.0000 100.0000
12/31/93 101.6854 99.8985 100.7147
12/31/94 117.2120 103.0680 102.0243
12/31/95 124.9298 118.8057 140.2165
12/31/96 173.4442 160.7003 172.4132
</TABLE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH THE SIMONS
The Company has entered into noncompetition agreements with Melvin Simon,
Herbert Simon and David Simon (collectively, the "Simons"), all of whom are
executive officers of the Company. Pursuant to such agreements and except as set
forth below, Melvin Simon and Herbert Simon are prohibited from engaging in the
shopping center business in North America other than through the Company or as
passive investors until the later of (i) December 20, 2003, or (ii) the date
that they are no longer directors or officers of the Company, and David Simon is
prohibited from engaging in the shopping center business in North America other
than through the Company and, with certain exceptions, for two years thereafter
if he resigns or is terminated for cause. The foregoing restrictions will not
prohibit Melvin Simon, Herbert Simon or David Simon from having an ownership
interest in the properties in which the Simons previously owned an interest that
were not contributed to the Company or Simon Property Group, L.P. ("SPG, LP")
(the "Excluded Properties") and in M.S. Management Associates, Inc. (the
"Management Company"), and serving as directors and officers of the Management
Company. It is anticipated that such commitments will not, in the aggregate,
involve a material amount of time, but no assurance can be given in this regard.
In addition, Melvin Simon and Herbert Simon may pursue other investment
activities in which they are currently engaged.
14
<PAGE> 17
The Simons continue to own, in whole or in part, the Excluded Properties.
The Management Company has entered into management agreements with the
partnerships that hold the Excluded Properties, some of which agreements were
not negotiated on an arm's-length basis. Management believes, however, that the
terms of such management agreements are fair to the Company.
MANAGEMENT COMPANY
The Management Company manages regional malls and community shopping
centers not wholly-owned by the Operating Partnership and certain other
properties and also engages in certain property development activities. Of the
outstanding voting common stock of the Management Company, 95% is owned by the
Simons, which will enable the Simons to control the election of the board of
directors of the Management Company. The Operating Partnership owns common stock
representing 80% of the value of the outstanding stock of the Management
Company, all of the outstanding participating preferred stock of the Management
Company and a mortgage note of the Management Company, which entitles the
Company to more than 90% of the anticipated after-tax economic benefits, in the
form of dividends and interest, of the Management Company. The Management
Company must receive the approval of a majority of the Independent Directors in
order to provide services for any property not currently managed by the
Management Company unless the Company owns at least a 25% interest in such
property. The Management Company has agreed with the Company that, if in the
future the Company is permitted by applicable tax law and regulations to conduct
any or all of the activities that are now being conducted by the Management
Company, the Management Company will not compete with the Company with respect
to new or renewal business of this nature.
RELATIONSHIP WITH BAYH, CONNAUGHTON & MALONE, P.C.
During 1996, the Company engaged the Washington, D.C. law firm of Bayh,
Connaughton & Malone, P.C. to provide certain legal services. Birch Bayh, a
director of the Company, is a shareholder of such firm.
OTHER TRANSACTIONS
Phillip J. Ward, a director of the Company, is the Head of Real Estate
Investments for CIGNA Investments, Inc., which has, or its affiliates have, made
mortgage loans to the Company or its affiliates totaling approximately $290
million. These loans are considered to be arm's-length agreements.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Arthur Andersen LLP as
the Company's independent accountants for 1997, subject to shareholder approval.
Arthur Andersen LLP has served as the Company's independent accountants since
the Company's inception.
The Company expects that representatives of Arthur Andersen LLP will be
present at the Meeting and will be afforded an opportunity to make a statement
if they desire to do so. The Company also expects that such representatives of
Arthur Andersen LLP will be available at that time to respond to appropriate
questions addressed to the officer presiding at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
RATIFICATION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR
1997.
15
<PAGE> 18
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 1996,
including financial statements audited by Arthur Andersen LLP, independent
accountants, and their report thereon dated February 18, 1997, is being mailed
with this Proxy Statement to each of the Company's shareholders of record at the
close of business on March 17, 1997. IN ADDITION, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996, WILL BE SENT TO ANY
SHAREHOLDER, WITHOUT CHARGE (EXCEPT FOR EXHIBITS, IF REQUESTED, FOR WHICH A
REASONABLE FEE WILL BE CHARGED), UPON WRITTEN REQUEST TO SHELLY J. DORAN, SIMON
DEBARTOLO GROUP, INC., INVESTOR RELATIONS, P. O. BOX 7033, INDIANAPOLIS, INDIANA
46207.
SHAREHOLDER PROPOSALS AT 1998 ANNUAL MEETING
The date by which shareholder proposals must be received by the Company for
inclusion in the proxy materials relating to the 1998 Annual Meeting of
Shareholders is December 11, 1997. Proposals must comply with all of the
requirements of Rule 14a-8 of the Securities and Exchange Commission as well as
the advance notification requirements set forth in the Company's By-Laws. A copy
of the advance notification requirements may be obtained from James M. Barkley,
General Counsel and Secretary, Simon DeBartolo Group, Inc., 115 West Washington
Street, Indianapolis, Indiana 46204.
16
<PAGE> 19
SIMON DeBARTOLO GROUP, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
P TO BE HELD ON MAY 14, 1997
R
O THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
X
Y
The undersigned holder(s) of shares of Common Stock of Simon DeBartolo Group,
Inc. (the "Company") hereby appoints Herbert Simon and David Simon and each of
them, the Proxies of the undersigned, with full power of substitution, to
attend and represent the undersigned at the Annual Meeting of Shareholders of
the Company to be held at The Indianapolis Hyatt Regency, One South Capitol
Avenue, Indianapolis, Indiana, on Wednesday, May 14, 1997 at 11:00 a.m.,
Indianapolis time, and any adjournment or adjournments thereof, and to vote all
of the shares of Common Stock that the undersigned is entitled to vote at such
Annual Meeting or at any adjournment or postponement thereof:
1. To elect one director to serve for a term of one year:
Nominee: Birch Bayh
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION AS DIRECTORS OF THE NOMINEE LISTED UNDER PROPOSAL 1 AND
FOR PROPOSAL 2.
(THIS PROXY CONTINUES AND MUST BE SIGNED AND DATED ON THE REVERSE SIDE)
SEE REVERSE SIDE
<PAGE> 20
Please mark your
/X/ votes as in this
example
Vote Vote
FOR ALL WITHHELD
nominees for all nominees
listed above listed above
[ ] [ ]
1. For, except vote withheld from the following nominee(s):
---------------------------------------------------------------
2. To ratify the appointment of Arthur Andersen LLP as independent accountants
for the Company for 1997:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, the Proxies are authorized to vote upon such other
matters (none known at the time of solicitation of this proxy) as may
properly come before the Annual Meeting or any adjournment or postponement
thereof.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Shareholders, the Proxy Statement furnished therewith, and the
Annual Report of the Company for the fiscal year ended December 31, 1996. Any
proxy herebefore given to vote the shares of Common Stock which the undersigned
is entitled to vote at the Annual Meeting of Shareholders is hereby revoked.
NOTE: Please fill in, sign and return this proxy in the enclosed envelope. When
signing as Attorney, Executor, Administrator, Trustee or Guardian, please give
full title to such. If signer is a corporation, please sign the full corporate
name by authorized officer. Joint owners should each sign individually. (Please
note any change of address on this proxy.)
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SIGNATURE(S) DATE
