<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE MILLS CORPORATION
---------------------
(Name of Registrant as Specified in Its Charter)
The Board of Directors of The Mills Corporation
-----------------------------------------------
(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
Samount 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
THE MILLS CORPORATION
1300 WILSON BOULEVARD
SUITE 400
ARLINGTON, VA 22209
SPECIAL MEETING OF SHAREHOLDERS
, 1997
------------------ ---
January ___, 1997
Dear Fellow Shareholder:
You are cordially invited to attend a special meeting of the
shareholders of The Mills Corporation (the "Company") on ____________ ___,
1997, at 10:00 a.m., Eastern Standard Time, at the Hyatt Arlington Hotel
located at 1325 Wilson Boulevard, Arlington, VA. This special meeting is being
called to take action on two proposals which, although somewhat technical, are
very important to the Company. These proposals, if adopted, should
significantly enhance the Company's ability to secure capital for its strategic
development program.
1. THE COMPANY IS SEEKING SHAREHOLDER APPROVAL OF POTENTIAL
EQUITY FINANCING TRANSACTIONS WITH AFFILIATES OF KAN AM US, INC. ("KAN AM")
WHICH, IF CONCLUDED SUCCESSFULLY, COULD GENERATE UP TO $150,000,000 IN
ADDITIONAL EQUITY CAPITAL FOR THE MILLS LIMITED PARTNERSHIP (THE "OPERATING
PARTNERSHIP"), OF WHICH THE COMPANY IS THE GENERAL PARTNER.
In November 1996, the Company opened Ontario Mills, California. This
"grand opening" signals the first milestone in the Company's mission to develop
its signature Mills Projects in major metropolitan markets throughout the
United States. Construction is well underway for Grapevine Mills near Dallas,
Texas, and Arizona Mills in Tempe, Arizona. The Company also recently
announced its intent to search for development opportunities in Canada, through
a proposed joint venture with Cambridge Shopping Centres, Ltd., and in other
parts of the world, as part of the Company's long range strategic plan.
In order to develop additional projects like Ontario Mills, Grapevine
Mills and Arizona Mills, while complying with the regulations governing real
estate investment trusts, the Company must seek additional sources of capital
for its projects. As part of this effort, the Company has explored a number of
alternatives with its financial advisors. One of the most attractive
opportunities that we have identified is the possible contribution of
additional capital by Kan Am affiliates in exchange for the issuance of
preferred units of limited partnership interest in the Operating Partnership.
The Company's Bylaws require the Company to obtain the prior approval
of its shareholders for such a transaction, and under certain circumstances the
rules of the New York Stock Exchange may require such shareholder approval. We
are asking the shareholders to approve the basic parameters of an arrangement
under which preferred units could be issued to Kan Am. Before concluding such
a transaction, the actual terms and conditions of the transaction would be
presented to the disinterested directors of the Company for their consideration
and approval.
<PAGE> 3
2. THE COMPANY ALSO IS SEEKING SHAREHOLDER APPROVAL OF AN
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION. THIS AMENDMENT WOULD
INSURE THAT THE COMPANY WILL REMAIN A "DOMESTICALLY CONTROLLED REIT" FOR
FEDERAL INCOME TAX PURPOSES.
As part of its strategy to attract capital, the Company is considering
the issuance of capital stock (or interests in the Operating Partnership that
could ultimately be converted into capital stock) to foreign institutional
investors. Under current tax laws in the United States, significant tax
ramifications could occur to foreign stockholders if a majority of the
Company's capital stock were owned by "non-U.S. persons" (as defined in the tax
code). The proposed amendment would prohibit the ownership of 50% or more of
the Company's capital stock by non-U.S. persons and, as a result, would assure
such investors that they would not become subject to such tax ramifications.
THE DISINTERESTED DIRECTORS HAVE DETERMINED THAT BOTH PROPOSALS ARE IN
THE BEST INTERESTS OF SHAREHOLDERS AND RECOMMEND A VOTE "FOR" BOTH PROPOSALS.
Your vote is important regardless of the number of shares you own.
Your failure to vote could result in there being less than the quorum necessary
to transact business at the special meeting. In that event, the Company could
sustain delays in procuring the capital required to achieve its development
mission. Accordingly, we urge you to promptly sign, date and return the
enclosed proxy.
Sincerely,
Laurence C. Siegel,
Chairman and
Chief Executive Officer
<PAGE> 4
PRELIMINARY COPY
THE MILLS CORPORATION
1300 WILSON BOULEVARD
SUITE 400
ARLINGTON, VA 22209
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ______________________ _____, 1997
You are cordially invited to attend a special meeting of the
shareholders of The Mills Corporation (the "Company") to be held on
________________________________, ________________ ____, 1997, at 10:00 a.m.,
Eastern Standard Time, at the Hyatt Arlington Hotel, 1325 Wilson Boulevard,
Arlington, VA, for the following purposes:
1. To consider and vote upon a proposal to authorize the Company,
individually and in its capacity as the general partner of The Mills Limited
Partnership (the "Operating Partnership"), to sell to affiliates of Kan Am US,
Inc., from time to time, upon the approval of a majority of the disinterested
members of the Company's board of directors, up to $150 million of preferred
units of limited partnership interest in the Operating Partnership and/or
shares of preferred stock, par value $.01 per share, of the Company.
2. To consider and vote upon a proposal to amend the Company's
Amended and Restated Certificate of Incorporation to facilitate the Company's
continued qualification as a "domestically controlled REIT" for federal income
tax purposes by imposing limits on the amount of the Company's capital stock
that may be owned by "non-U.S. persons."
3. To transact such other business as may properly come before
the meeting or any adjournments thereof.
Only shareholders of record at the close of business on
___________________ _____, 1996, will be entitled to vote at the meeting or any
adjournment thereof.
IF YOU ARE UNABLE TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE THE
ENCLOSED PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS,
, 1997 Thomas E. Frost
- ------------------ ----- Secretary
<PAGE> 5
PRELIMINARY COPY
THE MILLS CORPORATION
1300 Wilson Boulevard
Suite 400
Arlington, VA 22209
------------------
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ______________________ ____, 1997
This Proxy Statement is furnished to shareholders of The Mills
Corporation (the "Company"), a Delaware corporation, in connection with the
solicitation of proxies for use at a Special Meeting of Shareholders (the
"Meeting") of the Company to be held on _______________________________,
__________________________ _____, 1997, at 10:00 a.m., Eastern Standard Time,
at the Hyatt Arlington Hotel, 1325 Wilson Boulevard, Arlington, VA, and at any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Special Meeting of Shareholders. This solicitation of proxies is made on
behalf of the board of directors of the Company (the "Board of Directors").
Holders of record of the Company's common stock, par value $.01 per
share (the "Common Stock"), as of the close of business on the record date,
___________________ ___, 1996, are entitled to receive notice of, and to vote
at, the Meeting. The Common Stock constitutes the only class of securities
entitled to vote at the Meeting, and each share of Common Stock entitles the
holder thereof to one vote. At the close of business on _____________________
___, 1996, there were 16,905,953 shares of Common Stock issued and outstanding.
VOTING PROCEDURES
Shares represented by proxies in the form enclosed, if such proxies
are properly executed and returned and not revoked, will be voted as specified.
Where no specification is made on a properly executed and returned form of
proxy, the shares will be voted for Proposal 1, authorizing the sale to
affiliates of Kan Am US, Inc. ("Kan Am"), from time to time upon the approval
of a majority of the disinterested members of the Board of Directors, of up to
$150 million of preferred stock of the Company or preferred units of limited
partnership interest of The Mills Limited Partnership (the "Operating
Partnership"), and for Proposal 2 amending the Company's Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") to facilitate
the Company's qualification as a "domestically controlled REIT" for federal
income tax purposes by imposing limits on the amount of the Company's capital
stock that may be owned by "non-U.S. persons."
For purposes of Section 3.14 of the Company's Amended and Restated
Bylaws (the "Bylaws"), Proposal 1 requires the approval of a majority of the
votes cast. Under the Bylaws, abstentions are deemed present for purposes of
determining whether a quorum is present but are not treated as votes cast.
Accordingly, for purposes of the Bylaws, abstentions will not count as votes
for or against the proposal. For purposes of the New York Stock Exchange
("NYSE") approval requirements, Proposal 1 requires the approval of a majority
of votes cast, provided that the total votes cast on the proposal represent
more than 50% of the shares entitled to vote. Accordingly, abstentions will
not count as votes for or against the proposal for purposes of the NYSE
1
<PAGE> 6
requirement, nor will they be counted as votes cast in determining whether more
than 50% of the outstanding shares of Common Stock were voted on the proposal.
Brokers or nominees who do not have discretionary power to vote shares
held in their name and who have not received instructions from the beneficial
owner or other person entitled to vote the shares (commonly called "broker
non-votes") will not be entitled to vote or give a proxy to vote such shares on
Proposal 1 or Proposal 2 under the rules of the NYSE. Shares represented by
broker non-votes will be counted in determining whether a quorum is present at
the Meeting but will not be treated as votes cast for purposes of Proposal 1.
Accordingly, broker non-votes relating to Proposal 1 will have the same effect
as abstentions for purposes of both the Bylaws and the NYSE rules.
If Proposal 1 receives sufficient affirmative votes to satisfy the
approval requirements of the Bylaws but fails to obtain the affirmative votes
necessary to satisfy the requirements of the NYSE, the Company will be able to
sell preferred securities in accordance with the proposal, provided that the
number of securities issued are not convertible into or exchangeable for (or
deemed exchangeable for) more than 20% of the number of shares of Common Stock
outstanding on the date of such sale. If the proposal does not receive
sufficient affirmative votes under either requirement, the Operating
Partnership will not be able to issue partnership interests to affiliates of
Kan Am ("Kan Am Affiliates"). The Company, however, will be able to sell
preferred stock (as well as Common Stock) to Kan Am Affiliates, since Section
3.14 of the Bylaws does not require shareholder approval of the issuance to Kan
Am Affiliates of Company securities (as opposed to securities of the Operating
Partnership).
Approval of Proposal 2 requires the affirmative vote of a majority of
the outstanding shares of Common Stock. Accordingly, abstentions and broker
non-votes will have the same effect as votes against Proposal 2.
The Company knows of no business other than that set forth above to be
transacted at the Meeting. 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.
To be voted, proxies must be filed with the Secretary of the Company
prior to the time of voting. Proxies may be revoked at any time before
exercise thereof by filing a notice of such revocation or a later dated proxy
with the Secretary of the Company or by voting in person at the Meeting.
This Proxy Statement and the proxy card were mailed to shareholders on
or about ___________________ _____, 1997. The executive offices of the Company
are located at 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209.
2
<PAGE> 7
AUTHORIZATION OF APPROVAL OF SALE OF PREFERRED SECURITIES
TO KAN AM AFFILIATES
(PROPOSAL 1)
The Company is soliciting approval of a proposal to authorize
the Company, individually and as the general partner of the Operating
Partnership, to approve, by a majority vote of the disinterested members of the
Board of Directors, sales to Kan Am Affiliates, in one or more transactions, of
up to $150 million of preferred stock, par value $.01 per share, of the Company
("Preferred Stock") and/or preferred units of limited partnership interest of
the Operating Partnership ("Preferred Units" and, together with the Preferred
Stock, "Preferred Securities") on the terms and subject to the conditions
described below.
REASONS FOR SEEKING SHAREHOLDER APPROVAL
Shareholder approval of the proposed authorization to sell
Preferred Securities to Kan Am Affiliates is not required by Delaware law
(under which the Company was incorporated), the Company's Certificate of
Incorporation, or the partnership agreement of the Operating Partnership (the
"Partnership Agreement"). Instead, the Company is seeking shareholder approval
of the proposal for purposes of satisfying the requirements of the Bylaws and,
to the extent required, the rules of the NYSE.
The Bylaws. Section 3.14 of the Bylaws sets forth certain
approvals that must be obtained when a director of the Company has an interest
in a transaction proposed to be entered into by the Company. This section
states:
All matters in which a director of the corporation is
an interested party shall require the approval of a
majority of the disinterested directors; provided
that no joint venture or similar arrangement between
the Corporation or an entity controlled, directly or
indirectly, by the Corporation and Kan Am US, Inc.
("Kan Am"), or an entity under common control with
Kan Am, shall be entered into without the prior
approval of the shareholders so long as any person
who is an officer, director, shareholder, employee or
partner in Kan Am or an entity under common control
with Kan Am is a director of the Corporation.
This provision was added to the Bylaws prior to the Company's
initial public offering of Common Stock, in recognition of the fact that, after
the formation transactions occurring in conjunction with the initial public
offering, Kan Am would own beneficially a substantial amount of the equity of
the Operating Partnership and would have three representatives on the Company's
nine-member Board of Directors (the Board of Directors now has twelve members).
The provision represented a determination by the directors of the Company prior
to the initial public offering that it generally would be desirable to seek
shareholder approval before engaging in additional transactions with Kan Am.
Consistent with Section 3.14 of the Bylaws, on February 16, 1995, the Company
obtained shareholder approval of a proposal to authorize the Operating
Partnership to enter into joint ventures with affiliates of Kan Am on certain
terms approved by the disinterested directors. Because the sale of Preferred
Units (but not Preferred Stock) to Kan Am Affiliates would create an
arrangement similar to a joint venture, the Company has decided to seek
approval of the issuance of Preferred Units to Kan Am Affiliates under Section
3.14 of the Bylaws.
New York Stock Exchange Requirements. The Company also is
seeking shareholder approval of Proposal 1 for purposes of the rules of the
NYSE. The rules of the NYSE require, as a
3
<PAGE> 8
condition to the continued listing of the Common Stock on the NYSE, that the
Company submit for shareholder approval any transaction or series of related
transactions (other than a public offering for cash) in which the Company
issues securities representing, or that could be converted into or exchanged
for, a number of shares of Common Stock representing 20% or more of the shares
outstanding immediately prior to such issuance. The Company anticipates that
any Preferred Stock sold to Kan Am Affiliates would be convertible into Common
Stock and that any Preferred Units sold to Kan Am Affiliates would be
convertible into Common Units, which are exchangeable under the Partnership
Agreement for shares of Common Stock or, at the Company's option, the cash
equivalent thereof. If Proposal 1 is approved, it is possible that Preferred
Securities sold to Kan Am Affiliates over time could, if converted into or
exchanged for Common Stock, result in the issuance of Common Stock in excess of
the 20% threshold. Accordingly, the Company is seeking approval of the
proposal for purposes of satisfying the NYSE shareholder approval requirements.
TERMS OF PREFERRED SECURITIES
The terms of any Preferred Securities issued to Kan Am
Affiliates will be established from time to time by the disinterested members
of the Board of Directors, and are expected to include the terms described
below.
DESCRIPTION OF PREFERRED UNITS
Classification of Units. As the general partner of the
Operating Partnership, the Company will amend the Partnership Agreement to
reclassify the existing partnership units (both limited and general) as "Class
A Units," the terms of which will not otherwise be changed. In connection with
each new issuance of Preferred Units, if any, the Company will establish a new
class of limited partnership units denominated as "Class B Units," "Class C
Units," "Class D Units," etc. Each class of Preferred Units will be issued
separately, upon receipt of the required capital contribution from the
purchasing Kan Am Affiliates.
Purchase Price. The price per Preferred Unit issued to a Kan
Am Affiliate will be equal to 110% of the "fair market value" of a share of
Common Stock. For this purpose, the Common Stock will be deemed to have a fair
market value equal to the average of the closing prices of the Common Stock on
the NYSE for the 15 consecutive trading days immediately preceding the date of
issuance of the first Preferred Units of that Class (or, if no sales of Common
Stock take place on any such day, the average of the closing bid and asked
prices on such day).
Conversion Rights. Preferred Units issued to a Kan Am
Affiliate will be convertible into Class A Units, at the election of the
holder, at any time on or after the third anniversary of their issuance.
Consistent with the existing terms of the Partnership Agreement, the Class A
Units received upon conversion of Preferred Units will be exchangeable, at the
election of the holder, for an equal number of shares of Common Stock or, at
the Company's election, the cash value of such shares. A director who has a
direct or indirect interest in Class A Units tendered for exchange may not vote
on whether the Company will elect to pay cash in connection with such exchange.
The Company will provide certain registration rights for any shares of Common
Stock issued in exchange for Class A Units.
Distribution Preference. Holders of Preferred Units issued to
a Kan Am Affiliate will receive a cumulative preferential annual distribution
equal to a specified percentage of their capital contributions to the Operating
Partnership, payable quarterly on the fifth day following the end of the
calendar quarter. Each class of Preferred Units issued to Kan Am Affiliates
will rank pari passu with each other class of Preferred Units issued to Kan Am
Affiliates, and all such Preferred Units will participate ratably in the
preferential distribution. Following payment of all required
4
<PAGE> 9
preferential distributions on Preferred Units for any quarter, the remaining
distributable cash will be distributed to the holders of the Class A Units
(including the Company) on a pro rata basis.
Liquidation Preference. Upon a liquidation of the Operating
Partnership, the holders of Preferred Units will be entitled to receive a
preferred return of their capital contributions, plus any unpaid preferred
distributions, prior to the return of capital to the holders of any class of
Preferred Units ranking junior to such Preferred Units and then to the holders
of Class A Units, subject to there being enough gain on liquidation to restore
the capital accounts of holders of Preferred Units to the amount of their
original capital contributions plus any unpaid preferred distributions. (Any
gain upon liquidation would be allocated first to the holders of Preferred
Units in amounts sufficient to restore their capital accounts to the amount of
their original capital contributions plus any unpaid preferred distribution.)
Income Allocation. Income and loss of the Operating
Partnership generally will be allocated to holders of Class A Units and holders
of Preferred Units proportionately based on their respective capital
contributions, without regard for the preferential amounts payable to holders
of Preferred Units. Under this allocation method, holders of Preferred Units
will recognize less income (and holders of Class A Units, including the Company
(and shareholders of the Company's Common Stock), will recognize
correspondingly more income) each year than would be the case if holders of
Preferred Units were allocated income corresponding to their preferential
distributions.
Voting Rights. Holders of Preferred Units issued to Kan Am
Affiliates will vote together with holders of Class A Units and will have a
number of votes equal to the number of Class A Units into which their Preferred
Units are convertible. The Company, as general partner of the Operating
Partnership, has sole authority and discretion in the management and control of
the business and affairs of the Operating Partnership. The consent of a
majority of the outstanding limited partnership interests is required only as
to certain limited matters, including the amendment of the Partnership
Agreement in certain limited circumstances, the admission of a substitute or
successor general partner, and the continuation of the Operating Partnership
after the withdrawal of the last general partner. The general partner does not
need the consent of the limited partners to sell all or substantially all of
the Operating Partnership's assets or to dissolve the Operating Partnership.
Limited partners do not have the power to remove the general partner.
Moreover, holders of limited partnership interests in the Operating Partnership
(whether Class A Units or Preferred Units) do not vote on the election of
directors of the Company.
Restrictions on Future Issuances of Units. The terms of each
class of Preferred Units will provide that the Operating Partnership may not
issue any equity securities that are senior to such Preferred Units. In
addition, the Operating Partnership will agree not to issue any Preferred Units
ranking pari passu with Preferred Units issued to Kan Am Affiliates with
respect to distribution or liquidation rights unless the required annual
preferential distribution on all such Preferred Units would amount to less than
20% of the Operating Partnership's funds from operations during the immediately
preceding 12 months.
PREFERRED STOCK
The Board of Directors is empowered under the Certificate of
Incorporation to designate and issue from time to time one or more classes or
series of Preferred Stock without shareholder approval. The Board of Directors
may determine the relative preferences, rights and other terms of each class or
series of Preferred Stock so issued. If any shares of Preferred Stock are
issued to a Kan Am Affiliate, the preferences, rights, privileges and other
terms of each series or class of Preferred Stock will be determined by a
majority of the disinterested members of the Board of Directors, in negotiation
with the purchasing Kan Am Affiliates. The terms of any class or series of
Preferred Stock will include, but not be limited to, the stated value of the
Preferred Stock, the
5
<PAGE> 10
dividend rate, whether dividends will accumulate, the liquidation preference
(if any), conversion rights, redemption rights and voting rights.
USE OF PROCEEDS
The Company currently expects the net proceeds of any sale of
Preferred Securities to be used to repay outstanding indebtedness and to fund
the development of additional Mills-type super-regional, value-oriented malls
and other retail properties.
CURRENT NEGOTIATIONS
The Company also is negotiating with Kan Am to retain Kan Am
or one of its affiliates to serve as placement agent with respect to a possible
sale of up to $50 million of Preferred Securities, some or all of which may be
purchased by Kan Am Affiliates if Proposal 1 is approved. If any sales are
consummated pursuant to the placement agent arrangement, the Company
anticipates that Kan Am, or one of its affiliates, will receive a placement fee
equal to six percent of the equity capital raised. This agency arrangement
with Kan Am does not require shareholder approval to the extent that sales are
made to persons other than Kan Am Affiliates, and the Company intends to pursue
its negotiations with Kan Am with respect to such sales whether or not
shareholders approve Proposal 1.
The transaction currently under discussion with Kan Am
provides for the possible issuance of Preferred Units having the following
terms: (a) a cumulative preferred distribution of 9% per annum, payable
quarterly, and a liquidation preference equal to the original purchase price
plus any unpaid preferred return; (b) a purchase price per Preferred Unit equal
to 110% of the fair market value of a share of Common Stock at the time of
initial issuance of Preferred Units of that class; (c) conversion at the
holder's option after three years, on a one-for-one basis, into Common Units
(which will be immediately exchangeable under the Partnership Agreement on a
one-for-one basis for Common Stock or, at the Company's election, the cash
equivalent thereof); and (d) registration rights pursuant to which Common Stock
received upon the exchange of Preferred Units may be registered for resale
pursuant to a registration statement to be filed by the Company upon receipt of
a written request of the holders of such a specified minimum amount of Common
Stock. The commencement of negotiations with Kan Am was approved by the Board
of Directors, including a majority of the disinterested directors, and the
final terms of any transaction will be subject to the approval of a majority of
the disinterested directors.
The Company has retained [a nationally recognized investment
banking firm] to serve as financial advisor in connection with its current
negotiations with Kan Am Affiliates. The Company may, but will not be
obligated to, obtain a "fairness opinion" in connection with any issuance of
Preferred Securities to a Kan Am Affiliate, stating the opinion of the
financial advisor that the terms of the proposed transaction are fair to the
partners of the Operating Partnership (including the Company) from a financial
point of view.
RECOMMENDATION OF THE BOARD
The Board is requesting approval of the foregoing proposal to
facilitate its business strategy of developing additional Mills-type
super-regional, value-oriented malls and other retail properties. The Board of
Directors, including a majority of the disinterested directors, has approved
the proposal and has determined that the proposal is in the best interests of
the Company and its shareholders. THE DISINTERESTED MEMBERS OF THE BOARD OF
DIRECTORS RECOMMEND A VOTE "FOR" APPROVAL OF THIS PROPOSAL. The three
directors affiliated with Kan Am did not vote on the recommendation.
6
<PAGE> 11
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS
The Board of Directors believes that enabling the Company and
the Operating Partnership to sell Preferred Securities to Kan Am Affiliates is
in the best interests of the Company and its shareholders because it affords
the Company an attractive opportunity to raise additional equity capital on
favorable terms. By providing up to $150 million of capital to the Company on
favorable terms, the Kan Am Affiliates provide the potential to enable the
Company to continue to develop additional Mills-type projects without incurring
the delays and expense that can be involved in public equity offerings.
Among the reasons why the disinterested members of the Board
of Directors recommended approval of the Proposal are the following:
- Continuation of Business Strategy. The Company's business
strategy is to develop, through the Operating Partnership,
additional Mills-type super-regional, value-oriented malls in
major metropolitan areas of the United States and Canada, and
to explore the possibility of developing additional retail
properties in other countries as well. The Company currently
anticipates that it will incur substantial additional
development costs through 1999 in regard to these projects.
To date, the Operating Partnership has financed development
costs through a combination of additional construction
financing, a bank line of credit, excess proceeds of the
Sawgrass Mills and Potomac Mills refinancings, and equity from
joint venture partners (including affiliates of Kan Am).
Additional equity will be required for the proposed
developments if the Operating Partnership is to maintain an
appropriate debt to total market capitalization ratio.
- Access to Capital on Favorable Terms. The ability to sell
securities to Kan Am Affiliates will afford the Company
potential access to capital at a price per Preferred Security
exceeding the market price of a share of Common Stock. The
capital that would be invested by Kan Am will be utilized to
help the Company achieve growth and development that may not
otherwise be attainable under current circumstances.
- Access to Other Capital. In addition to providing needed
capital, the sale of equity securities to Kan Am Affiliates is
expected to facilitate the Company's access to equity capital
in the public markets and elsewhere because such sales will
improve the Company's debt-to-equity ratio and increase its
total capitalization. The Board of Directors believes that
greater access to the capital markets should further enhance
the Company's ability to grow, and therefore considers this to
be a positive factor in favor of the proposal.
- Prior and Ongoing Relationship with Kan Am. Kan Am has proven
a reliable source of equity in the past. The Board of
Directors believes that the Company has benefited and will
continue to benefit significantly from its association with
Kan Am and its affiliates.
- Effect on Dividend Policy. The Board of Directors believes
that the sale of Preferred Securities on terms providing for a
preferred return of capital will not adversely affect the
amount of cash otherwise distributable to the holders of the
Company's Common Stock. The Company anticipates that the
preferred return payable on any Preferred Securities will be
equal to or less than the cost of other forms of capital to
which the Company might have access to fund its ongoing
development projects and other operations. The Board of
Directors does not expect its dividend policy to be
7
<PAGE> 12
affected by either the rate of return applicable to any class
or series of Preferred Securities or by the preferential
rights of holders of Preferred Securities.
- Control of Operating Partnership. Kan Am owns directly and
indirectly approximately 39.95% of the partnership interests
("Units") of the Operating Partnership. The Company is the
sole general partner of the Operating Partnership and owns
approximately 50.86% of the outstanding Units. The sale of
Preferred Units to Kan Am Affiliates may have the effect of
reducing the Company's percentage ownership of outstanding
Units to less than 50%. The Company does not, however, expect
any reduction in its percentage ownership of the Operating
Partnership to affect its ability to control the business or
operations of the Operating Partnership. As the sole general
partner of the Operating Partnership, the Company is charged
with sole responsibility for the management and operation of
the Operating Partnership. The general partner does not need
the consent of the limited partners to sell all or
substantially all of the Operating Partnership's assets or to
dissolve the Operating Partnership. The only matters as to
which the limited partners of the Operating Partnership must
consent, and with respect to which ownership of a majority of
outstanding voting securities of the Operating Partnership
might prove beneficial, are the amendment of the Partnership
Agreement in certain limited circumstances, the admission of a
substitute or successor general partner, and the continuation
of the Operating Partnership after the withdrawal of the last
general partner. The limited partners of the Operating
Partnership may not remove the Company as the general partner
without the Company's consent. Because control of the
Operating Partnership is vested in the Company, as general
partner, the Company does not expect that shareholders would
be adversely affected if Kan Am or its affiliates were to own
more than 50% of the outstanding Units. In determining the
desirability of issuing any Preferred Units to Kan Am
Affiliates in the future, however, the disinterested directors
will take into consideration whether the issuance would result
in Kan Am's becoming the beneficial owner of more than 50% of
the outstanding Units.
PROPOSAL TO AMEND THE OWNERSHIP RESTRICTIONS IN THE
CERTIFICATE OF INCORPORATION
(PROPOSAL 2)
The Company is soliciting approval of a proposal to amend Article XII
of the Certificate of Incorporation to add limitations on ownership of the
Company's capital stock to facilitate the Company's continued qualification as
a "domestically controlled REIT" for federal income tax purposes. This
amendment would prevent any "non-U.S. person" (generally, any individual who is
not a citizen or resident of the United States or any entity that is not
organized under the laws of the United States or one of its political
subdivisions) from acquiring additional shares of the Company's capital stock
if, as a result of such acquisition, the Company would fail to qualify as a
"domestically controlled REIT."
REASONS FOR SEEKING SHAREHOLDER APPROVAL
Shareholder approval of the amendment to the Certificate of
Incorporation is required by Delaware law and the Certificate of Incorporation.
Delaware Law. Section 242 of the General Corporation Law of the State
of Delaware requires shareholder approval to amend a certificate of
incorporation to change the limitations or
8
<PAGE> 13
restrictions of rights pertaining to shares of capital stock. Such amendment
requires the affirmative vote of the holders of a majority of the outstanding
Common Stock.
Certificate of Incorporation. Article XI of the Certificate of
Incorporation requires the affirmative vote of the holders of both (a) a
majority of the members of the Board of Directors then in office, and (b) a
majority of the voting power of all of the shares of capital stock of the
Company then entitled to vote generally in the election of directors, voting
together as a single class, to approve any amendment to Article XII of the
Certificate of Incorporation.
DESCRIPTION OF THE AMENDMENT
If Proposal 2 is adopted, the following definition will be added to
Article XII, "Section 12.1 Defined Terms," of the Certificate of Incorporation,
and will read as follows:
"(h) "NON-U.S. PERSON" shall mean any Person who (i) is not
--------------------------------------------------------------
(A) a citizen or resident of the United States, (B) a
--------------------------------------------------------------
partnership created or organized in the United States or under
--------------------------------------------------------------
the laws of the United States or any state therein (including
--------------------------------------------------------------
the District of Columbia), or (C) a corporation created or
--------------------------------------------------------------
organized in the United States or under the laws of the United
--------------------------------------------------------------
States or any state therein (including the District of
--------------------------------------------------------------
Columbia), or (ii) that is a foreign estate or foreign trust
--------------------------------------------------------------
within the meaning of Section 7701(a)(31) of the Code."
-------------------------------------------------------
If Proposal 2 is adopted, Article XII, Section 12.2 of the Certificate
of Incorporation will be amended to read as follows (new language is
underlined, and language to be deleted is stricken through):
"Section 12.2 Restrictions.
------------
(a) Except as provided in Section 12.11, during the period
commencing on the date of the IPO and prior to the Restriction
Termination Date: (i) no Person (other than an Existing
Holder) shall Acquire any shares of capital stock of the
Corporation if, as the result of such Acquisition, such Person
shall Beneficially Own shares of capital stock in excess of
the Ownership Limit; (ii) no Existing Holder shall Acquire
shares of capital stock xxxxxxxxxxxxxxxxxx of the Corporation
[of the Corporation]
if, as a result of such Acquisition, the Existing Holders,
taken together, would Beneficially Own shares of capital stock
of the Corporation in excess of the Existing Holder Limit or
if the only Existing Holder would own shares of capital stock
of the Corporation in excess of the Existing Holder Limit;
(iii) no Person shall Acquire any shares of capital stock of
the Corporation if, as a result of such Acquisition, the
capital stock of the Corporation would be directly or
indirectly owned by less than 100 (Persons (determined without
reference to any rules of attribution); xxx (iv) no Person
[and]
shall Acquire any shares of capital stock of the Corporation
if as a result of such Acquisition, the Corporation would be
"closely held" within the meaning of Code Section 856(h); and
---
(v) no Person shall Acquire any shares of capital stock of the
--------------------------------------------------------------
Corporation if, as a result of such acquisition, the fair
--------------------------------------------------------------
market value of the shares of capital stock of the Corporation
--------------------------------------------------------------
owned directly and indirectly by Non- U.S. Persons would
--------------------------------------------------------------
comprise 50% or more of the fair market value of the issued
--------------------------------------------------------------
and outstanding shares of capital stock of the Corporation.
--------------------------------------------------------------
For purposes of Section 12.2(a)(v) above, the Board of
--------------------------------------------------------------
Directors, in its sole and absolute discretion, may treat
--------------------------------------------------------------
shares owned by a partnership, trust or estate as being owned
--------------------------------------------------------------
proportionately by its partners or beneficiaries, to the
--------------------------------------------------------------
extent the Board of Directors determines such treatment to be
--------------------------------------------------------------
necessary or advisable to help maintain the Corporation's
--------------------------------------------------------------
qualification as a "domestically controlled REIT" under the
--------------------------------------------------------------
U.S. Internal Revenue Code.
---------------------------
9
<PAGE> 14
(b) Any Transfer that would result in a violation of any of the
restrictions in Section 12.2(a) shall be void ab initio as to
the Transfer of such shares of capital stock that would cause
the violation of the applicable restriction in Section
12.2(a), and the intended transferee shall acquire no rights
in such shares of capital stock."
RECOMMENDATION OF THE BOARD
The Board of Directors is requesting approval of the foregoing proposal to
retain and attract capital investments by Non-U.S. Persons. The Board of
Directors has adopted resolutions setting forth the proposed amendment,
declaring its advisability, and calling this Meeting to consider the proposal.
The Board of Directors has determined that the proposal is in the best interest
of the Company and its shareholders. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL.
PURPOSE AND EFFECT OF THE AMENDMENT
The Board of Directors believes that approval of the proposal is important
for the Company to continue to attract investment from Non-U.S. Persons.
Generally, a sale of securities of the Company by a Non-U.S. Person will not be
subject to U.S. taxation under the Foreign Investment in Real Property Tax Act
of 1980 ("FIRPTA") unless such securities constitute a United States Real
Property Interest ("USRPI"). (A Non-U.S. Person is any person other than (i) a
citizen or resident of the United States, (ii) a corporation or partnership
created or organized in the United States or under the laws of the United
States or of any state thereof, or (iii) an estate or trust whose income is
includable in gross income for U.S. federal income tax purposes regardless of
its source.) Securities of the Company will not constitute a USRPI if the
Company is a "domestically controlled REIT." A "domestically controlled REIT"
is a real estate investment trust ("REIT") in which, at all times during a
specified testing period, less than 50% in value of its securities is held
directly or indirectly by Non-U.S. Persons. In the event that the stockholders
of the Company who are Non-U.S. Persons own collectively 50% or more, in value,
of the outstanding capital stock of the Company, the Company would cease to be
a "domestically controlled REIT."
If the Company does not qualify as a "domestically controlled REIT," a
Non-U.S. Person's sale of securities of the Company generally will be subject
to a U.S. tax under FIRPTA as a sale of a USRPI unless (i) the securities sold
are "regularly traded" (as defined by applicable Treasury regulations) on an
established securities market, and (ii) the selling Non-U.S. Person held five
percent or less of the Company's outstanding equity securities at all times
during a specified testing period. If there were a significant risk that the
Company did not qualify as a "domestically controlled REIT," Non-U.S. Persons
might be deterred from purchasing significant blocks of the Company's Common
Stock (where the block could exceed five percent of the Company's outstanding
equity securities) and could significantly limit the Company's ability to sell
to Non-U.S. Persons classes of preferred stock that might not qualify as
"regularly traded" on an established securities market. Thus, the Company does
not believe these considerations will directly affect any of its existing
shareholders who are Non-U.S. Persons.
If gain on the sale of the Company's securities were subject to taxation
under FIRPTA, the Non-U.S. Person would be subject to the same treatment as a
U.S. shareholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals), and the purchaser of securities could be required to
withhold 10% of the purchase price and remit such amount to the Internal
Revenue Service.
If a Non-U.S. Person were to acquire shares of stock of the Company in
violation of this prohibition (a "Transferee"), the capital stock being
transferred (or, in the case of an event other
10
<PAGE> 15
than a transfer, the capital stock beneficially owned) that would cause this
restriction on ownership to be violated shall be automatically exchanged for
Excess Stock that will be transferred, by operation of law, to the Company as a
trustee of a trust for the exclusive benefit of the transferee or transferees
to whom the shares are ultimately transferred (without violating a restriction
on ownership). While held in trust, the Excess Stock will not be entitled to
vote, will not be considered for purposes of any shareholder vote or the
determination of a quorum for such vote, and will not be entitled to
participate in any distributions made by the Company other than liquidating
distributions. The Transferee may, at any time the Excess Stock is held by the
Company in trust, designate a beneficiary of such Transferee's interest in the
trust (representing the number of shares of Excess Stock attributable to the
capital stock originally by the transferor-shareholder), provided that (i) the
price paid by such designated beneficiaries does not exceed the price paid by
the Transferee and (ii) the designated beneficiary's ownership of the capital
stock represented by such Excess Stock would be permitted under Section 12.2 of
the Certificate of Incorporation. Immediately following such designation, the
Excess Stock would automatically be exchanged for capital stock out of the
class of which the Excess Stock resulted. In addition, the Company would have
the right, for a period of 90 days during the time the Excess Stock is held by
the Company in trust, to purchase all or any portion of the Excess Stock from
the Transferee at a price equal to the lesser of the price paid for the stock
on the date the Company exercises its option to purchase the stock or, if the
capital stock being redeemed is not then being traded, the average of the last
reported sales of the capital stock to be redeemed on the ten days immediately
preceding the relevant date. This 90-day period commences on the date of the
violative transfer if the Transferee gives notice of the transfer to the
Company, or the date the Board of Directors determines that violative transfer
has occurred if no notice is provided. Article XII in its current form does
not contain any restrictions on acquisitions of the Company's capital stock by
Non-U.S. Persons.
REQUIRED VOTE AND RELATED MATTERS
The affirmative vote of a majority of the outstanding shares of Common
Stock of the Company entitled to vote thereon is required to approve Proposal
2. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock as of September 30, 1996 for (1) each
person known by the Company to be the beneficial owner of more than five
percent of the Company's outstanding Common Stock, (2) each director of the
Company and each of the Company's most highly compensated executive officers,
and (3) the directors and executive officers of the Company as a group. Each
person named in the table has sole voting and investment power with respect to
all shares shown as beneficially owned by such person, except as otherwise set
forth in the notes to the table. Units owned by a person named in the table
are included in the "Number of Shares of Common Stock" column because Units are
exchangeable, at the option of the holder, for cash equal to the value of an
equal number of shares of Common Stock or, at the election of the Company, for
an equal number of shares of Common Stock. Because of limitations on ownership
of Common Stock imposed by the Company's Amended and Restated Certificate of
Incorporation, some holders of Units listed below could not in fact redeem all
of their Units for Common Stock without divesting a substantial number of
shares of Common Stock in connection with the redemption. The extent to which
a person holds Units as opposed to Common Stock is set forth in the footnotes.
The address of the directors, executive officers, and beneficial owners
included in the table below is 1300 Wilson Boulevard, Suite 400, Arlington, VA
22209 unless otherwise provided.
11
<PAGE> 16
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF PERCENT OF SHARES OF
NAME AND BUSINESS ADDRESS SHARES OF SHARES OF COMMON STOCK
OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK (1) AND UNITS (2)
- ------------------------------------- -------------- ----------------- -------------
<S> <C> <C> <C>
Laurence C. Siegel . . . . . . . . . . . 879,954 (3) 5.05% 2.65%
Peter B. McMillan . . . . . . . . . . . . 8,800 0.05% 0.03%
James F. Dausch . . . . . . . . . . . . . 1,000 0.01% --
Kent S. Digby . . . . . . . . . . . . . . 4,846 (4) 0.03% 0.01%
Dietrich von Boetticher . . . . . . . . . 297,192 (5) 1.73% 0.89%
John Ingram . . . . . . . . . . . . . . . 5,000 0.03% 0.02%
Charles R. Black, Jr. . . . . . . . . . . -- -- --
James C. Braithwaite . . . . . . . . . . 88,018 (6) 0.50% 0.26%
Joseph B. Gildenhorn . . . . . . . . . . 11,100 (7) 0.07% 0.03%
Peter A. Gordon . . . . . . . . . . . . . -- -- --
Herbert S. Miller. . . . . . . . . . . . 1,494,563 (8) 8.22% 4.50%
Harry H. Nick . . . . . . . . . . . . . . 296,521 (9) 1.74% 0.89%
Franz von Perfall . . . . . . . . . . . . 56,879(10) 0.34% 0.17%
Robert P. Pincus . . . . . . . . . . . . 4,000 0.02% 0.01%
Cohen & Steers Capital Management, Inc. . 2,470,500(11) 14.61% 7.43%
757 Third Avenue
New York, New York 10017
Kan Am . . . . . . . . . . . . . . . . . 13,279,484(12) 43.99% 39.95%
3495 Piedmont Road
Ten Piedmont Center, Suite 520
Atlanta, Georgia 30305
All executive officers and directors
as a group (18 persons) . . . . . . . . 3,151,690(13) 16.36%(14) 9.48%(15)
</TABLE>
- -----------------------
* Less than 1%
- ----------------------------
(1) For purposes of this calculation, the shares of Common Stock deemed
outstanding includes 16,905,953 shares of Common Stock outstanding as of
September 30, 1996 plus the number of shares of Common Stock issuable to
the named person(s) upon redemption of the Units held by such named
person(s).
(2) For purposes of this calculation, the number of shares of Common Stock
and Units deemed outstanding includes 16,905,953 shares of Common Stock
outstanding as of September 30, 1996 and 16,332,517 Units outstanding as
of September 30, 1996 (excluding Units held by the Company).
(3) Includes 362,242 shares of Common Stock and 517,712 Units.
(4) Includes 4,846 Units.
12
<PAGE> 17
(5) Includes 297,192 Units.
(6) Includes 85,318 Units. Also includes 1,000 shares held in an IRA over
which Mr. Braithwaite has sole voting and investment power, 200 shares
held in a joint account for the benefit of Mr. Braithwaite's daughter,
and 1,500 shares held in an account for Mr. Braithwaite's mother-in-law
with respect to which Mr. Braithwaite shares voting and investment power.
(7) Includes 9,600 shares held directly by Mr. Gildenhorn, and 1,500 shares
held as co-trustee of The Gildenhorn/Speisman Family Foundation, Inc., a
non-profit family foundation, over which Mr. Gildenhorn shares voting and
investment power.
(8) Includes 210,501 shares of Common Stock and 381,416 Units over which Mr.
Miller has sole voting and investment power and 902,646 Units over which
Mr. Miller has shared voting and/or investment power.
(9) Includes 186,932 shares of Common Stock and 109,589 Units.
(10) Includes 56,879 Units.
(11) Includes 2,470,500 shares of Common Stock held by Cohen & Steers Capital
Management, Inc. for the benefit of client accounts pursuant to
investment advisory arrangements. Cohen & Steers Capital Management,
Inc. has voting power with respect to only [1,879,000] of the 2,470,500
shares of Common Stock.
(12) Includes 13,279,484 Units deemed to be beneficially owned by Kan Am as
general partner for nine partnerships.
(13) Includes 796,092 shares of Common Stock and 2,355,598 Units.
(14) For purposes of this calculation, the shares of Common Stock deemed
outstanding includes 16,905,953 shares of Common Stock outstanding as of
September 30, 1996 and 2,355,598 Units beneficially owned by all
executive officers and directors as a group.
(15) The number of shares of Common Stock and Units deemed outstanding for
purposes of this calculation is described in note 2 to this table.
CERTAIN RELATIONSHIPS AND CONFLICTS OF INTERESTS
The directors affiliated with Kan Am may be deemed to have a conflict
of interest in regard to Proposal 1 to be considered at the Meeting. Three of
the twelve members of the Board of Directors are currently affiliated with Kan
Am. These Kan Am directors abstained in regard to the vote on the proposal to
be presented at the Meeting and the call for the Meeting and will abstain in
regard to the approval of any future equity investments by Kan Am.
The Company also is negotiating to retain Kan Am or one of its
affiliates to serve as placement agent in connection with the possible sale of
up to $50 million of Preferred Securities. If these negotiations are
successful, Kan Am or its affiliate will receive a commission of six percent of
the capital raised in any such transaction.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference into this Proxy
Statement: (i) Management's Discussion and Analysis set forth at pages 22-25
of the Company's 1995 Annual Report, (ii) the Company's Audited Financial
Statements set forth at pages 26-39 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, (iii) the unaudited Financial Statements
set forth at pages 1-6 of the Company's Form 10-Q for the quarter ending March
31, 1996, and (iv) the unaudited Financial Statements set forth at pages 1-7 of
the Company's Form 10-Q for the quarter ending June 30, 1996.
The Company will provide without charge to each person to whom
a copy of this Proxy Statement is delivered, on the written or oral request of
such person and by first class mail or other equally prompt means, within one
business day of receipt of such request, a copy of any and all of the documents
referred to above which may have been or may be incorporated by reference into
this Proxy Statement. Such written or oral request should be directed to The
Mills Corporation, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia
22209, Attention: Investor Relations ((703) 526-5000).
13
<PAGE> 18
OTHER MATTERS
The Company knows of no other matters to be presented for
consideration at the Meeting. However, if any other matters properly come
before the Meeting, it is the intention of the persons named in proxies
returned to the Company to vote such proxies in accordance with their judgment
on such matters. Under the Company's Bylaws, no business may be brought before
the Meeting other than the proposals set forth in the Notice of Special Meeting
of Shareholders and procedural matters that may arise in connection with the
Proposal. Representatives of Ernst & Young LLP, the Company's principal
accountants, are not expected to be present at the Meeting.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Proposals of shareholders to be presented at the 1997 Annual Meeting
of Shareholders must have been received by the Secretary of the Company prior
to December 31, 1996 to be considered for inclusion in the Company's proxy
material for that meeting. In addition, any shareholder who wishes to propose
a nominee to the Board of Directors or submit any other matter to a vote at a
meeting of shareholders (other than a shareholder proposal included in the
Company's proxy materials pursuant to SEC Rule 14a-8) must comply with the
advance notice provisions and other requirements of Section 2.7 of the
Company's Amended and Restated Bylaws, which are on file with the Securities
and Exchange Commission and may be obtained from the Secretary of the Company
upon request.
COSTS OF PROXY SOLICITATION
The costs of soliciting proxies will be borne by the Company and will
consist primarily of printing, postage and handling, including the expenses of
brokerage houses, custodians, nominees and fiduciaries in forwarding documents
to beneficial owners. Solicitation will be made initially by mail.
Solicitation may also be made by the Company's officers, directors or
employees, personally or by telephone or telecopy. Solicitation also may be
made by paid proxy solicitors. The Company has engaged the firm of Corporate
Investor Communications, Inc. ("CIC") to aid it in the solicitation of proxies
as required to secure a quorum. CIC will be paid agreed upon amounts for each
contact made with shareholders with the fee depending on the nature of the
contact (e.g., by mail, by phone, or in person). The total fee to be paid to
CIC is estimated at $________ if the Meeting is not required to be adjourned
and reconvened. Additional expenses will be incurred if the Meeting is
adjourned and to solicit additional proxies to procure a quorum at the
adjourned meeting.
Your vote is important. Please complete the enclosed proxy card and
mail it in the enclosed postage-paid envelope as soon as possible.
By Order of the Board of Directors,
Thomas E. Frost
Secretary
, 1997
- -------------------- ----
14
<PAGE> 19
<TABLE>
<CAPTION>
THE MILLS CORPORATION
<S> <C>
P SPECIAL MEETING OF SHAREHOLDERS ____________________ ___, 1997
R THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O The undersigned does hereby appoint Peter B. McMillan and Thomas E. Frost, or either one of them, with full
power of substitution in each, as proxies to vote, on the matters identified and as directed on the reverse side of
X this card, or, if not so directed, in accordance with the recommendations of the disinterested members of the Board of
Directors, all shares of The Mills Corporation (the "Company") held of record by the undersigned at the close of
Y business on _________________________ ___, 1996 and entitled to vote at the Special Meeting of Shareholders of the
Company to be held on _______________________ ___, 1997 at 10:00 a.m. Eastern Standard Time, at the Hyatt Arlington
- Hotel located at 1325 Wilson Boulevard, Arlington, Virginia, and upon such other matters as may properly come before
the Special Meeting or any adjournments thereof.
-
THIS PROXY, WHEN PROPERLY COMPLETED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
- SHAREHOLDER. UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED (i) FOR PROPOSAL 1 TO AUTHORIZE THE
COMPANY, UPON THE APPROVAL OF A MAJORITY OF THE DISINTERESTED MEMBERS OF THE BOARD OF DIRECTORS, TO SELL TO AFFILIATES
OF KAN AM US, INC. UP TO $150 MILLION OF PREFERRED UNITS OF LIMITED PARTNERSHIP INTEREST IN THE MILLS LIMITED
PARTNERSHIP OR SHARES OF PREFERRED STOCK OF THE COMPANY, AND (ii) FOR PROPOSAL 2 TO APPROVE AN AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION TO FACILITATE THE COMPANY'S CONTINUED QUALIFICATION AS A "DOMESTICALLY
CONTROLLED REIT" FOR FEDERAL INCOME TAX PURPOSES BY IMPOSING LIMITS ON THE AMOUNT OF THE COMPANY'S CAPITAL STOCK THAT
MAY BE OWNED BY "NON-U.S. PERSON."
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need
not mark boxes if you wish to vote in accordance with the recommendations of the disinterested members of Board of
Directors. The proxies cannot vote your shares unless you sign and return this proxy card.
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
[x] PLEASE MARK
YOUR VOTES AS
IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS OTHERWISE MADE, THE PROXY WILL BE VOTED FOR THE ITEM OR ITEMS FOR WHICH NO DIRECTION IS MADE, AND IN THE DISCRETION OF THE NAMED
PROXIES AS TO ANY OTHER MATTERS PROPERLY PRESENTED AT THE MEETING.
<S> <C> <C>
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Proposal to authorize [ ] [ ] [ ] 2. Proposal to approve an [ ] [ ] [ ]
the Company to sell to amendment to the Company's
affiliates of Kan Am US, Certificate of
Inc. up to $150 million of Incorporation to facilitate
preferred units of limited the Company's continued
partnership interest in qualification as a
The Mills Limited "domestically controlled
Partnership or shares of REIT" for federal income
preferred stock of the tax purposes. (Proposal 2).
Company (Proposal 1).
The undersigned hereby acknowledges receipt of the Notice of
the Special Meeting of Shareholders and accompanying Proxy
Statement.
PLEASE SIGN BELOW EXACTLY AS NAME APPEARS. When shares are
held by joint tenants, both should sign. When signing as
Guardian, Executor, Administrator, Attorney, Trustee, etc.,
please give full title as such. If a corporation, sign in full
corporate name, by President or other authorized officer,
giving title. If a partnership, sign in partnership name by
authorized person.
-------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN PROXY -------------------------------------------------------------
CARD PROMPTLY USING THE ENCLOSED ENVELOPE. SIGNATURE(S) DATE
</TABLE>
