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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
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(Name of Registrant as Specified in Its Charter)
The Board of Directors of The Mills Corporation
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(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.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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/ / 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
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THE MILLS CORPORATION
1300 WILSON BOULEVARD
SUITE 400
ARLINGTON, VA 22209
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY ___, 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 February ___, 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 is exploring 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 continues to assess market conditions to determine the
most favorable means by which to raise capital. In December 1996, the Company
filed a registration statement with the Securities and Exchange Commission to
register shares of its common stock, preferred stock and common stock warrants.
These securities are available for issuance and sale by the Company in the
event that the Board of Directors determines that an offering of these
securities would best achieve the Company's objectives for raising capital. At
the same time, the Company is pursuing 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.
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Approval of Proposal 1 described in the Proxy Statement would expand
the range of the Company's sources of capital and, given Kan Am's familiarity
with the Company, permit the Company to obtain additional capital in a
relatively short period of time. The Board of Directors also considered that
the issuance of additional partnership interests to Kan Am affiliates might
create the appearance of increasing Kan Am's influence over the Operating
Partnership. Because the Company, as the sole general partner of the Operating
Partnership, will control the Operating Partnership regardless of the number of
limited partnership interests owned by Kan Am or any other person, the Board of
Directors determined that the issuance of additional limited partnership
interests to Kan Am would not materially affect control of the Company or the
Operating Partnership.
The Company's By-laws 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.
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
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PRELIMINARY COPY
THE MILLS CORPORATION
1300 WILSON BOULEVARD
SUITE 400
ARLINGTON, VA 22209
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY __, 1997
You are cordially invited to attend a special meeting of the
shareholders of The Mills Corporation (the "Company") to be held on
________________________________, February _________________, 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 January __,
1997, 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,
January __, 1997 Thomas E. Frost
Secretary
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PRELIMINARY COPY
THE MILLS CORPORATION
1300 Wilson Boulevard
Suite 400
Arlington, VA 22209
-----------------
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY __, 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
______________________________________________, February __, 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,
January __, 1997, 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 January __, 1997, there were
16,905,953 shares of Common Stock issued and outstanding.
This Proxy Statement and the proxy card were mailed to shareholders on
or about January __, 1997. The executive offices of the Company are located at
1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209.
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
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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 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.
A vote against Proposal 1 or Proposal 2 will not give rise to a right
of appraisal or similar right under Delaware law.
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.
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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
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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 the date of first
issuance of Preferred Units of that class. 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 equally with each other class of Preferred Units issued to Kan Am
Affiliates with respect to preferential distributions, and all such Preferred
Units will participate ratably in the preferential distribution. Following
payment of all required preferential distributions on Preferred Units for any
quarter, the
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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 equally 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
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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. Subject to the timing and amount of the receipt
of proceeds, the Company currently intends to use the net proceeds from the
initial sale of Preferred Securities for capital improvements at Gurnee Mills
and Franklin Mills and to repay amounts outstanding under the Company's line of
credit.
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. (Alternatively, Kan Am may
elect to forego its fee with respect to sales of Preferred Units to one or more
investors in exchange for a corresponding reduction in the purchase price of
those Preferred Units.) 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
issuance of the Preferred Unit; (c) conversion at theholder'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.
ALTERNATIVES CONSIDERED
In addition to considering whether to seek equity financing
from Kan Am, the Board of Directors is considering a number of alternative
means of raising the capital expected to be needed by the Company. In
consultation with the Company's financial advisor, the Company is
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exploring the possibility of offering, directly or through the Operating
Partnership, additional debt or equity securities in a public or private
offering. In this regard, the Company recently registered $250,000,000 of
Common Stock, preferred stock and Common Stock warrants for possible future
sale. Based on current market conditions, the Board of Directors believes that
the sale of Preferred Securities to Kan Am is likely to provide the capital
needed by the Company on the most favorable terms. Approval of Proposal 1 will
not, however, preclude the Company from pursuing one or more other means of
raising equity capital in the future.
RECOMMENDATION OF THE BOARD
The Board is requesting approval of Proposal 1 for the purpose
of expanding the range of financing alternatives available to the Company as it
pursues its 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, based on the factors set forth in the following section,
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 disinterested directors who approved the
proposal and voted to recommend it are Charles R. Black, Jr., Joseph B.
Gildenhorn, John Ingram, Peter B. McMillan, Harry H. Nick, Robert P. Pincus and
Laurence C. Siegel. The three directors affiliated with Kan Am did not vote on
the recommendation.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS IN MAKING ITS RECOMMENDATION
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.
In determining to seek approval of Proposal 1, the
disinterested members of the Board of Directors considered both the advantages
and disadvantages of the proposal. Among the advantages considered were 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 refinancing, 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.
The Board of Directors has approved the development of
Grapevine Mills in Grapevine located near Dallas, Texas,
Arizona Mills in Tempe, Arizona, and City Center in Orange,
California. The Board of Directors also is considering
proposals to develop certain other projects, including
Meadowlands Mills in East Rutherford,
7
<PAGE> 12
New Jersey, Columbus Mills in Columbus, Ohio, and Mills-type
malls in Houston, Texas and Monee, Illinois. The Company's
development costs and related costs for the foreseeable future
will depend upon the number of these and other projects
undertaken, the nature of the joint venture or other
partnering arrangements the Company enters into, the extent of
the Company's obligation to make equity contributions to the
projects, and other factors. Generally, the Company makes a
capital investment in a project ranging from $5,000,000 to
$50,000,000 prior to obtaining construction financing.
- 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.
The disinterested members of the Board of Directors also
considered the following factors as possible disadvantages of issuing Preferred
Securities to Kan Am. For the reasons indicated, the disinterested members
believe that the advantages offered by Proposal 1 outweigh the possible
disadvantages.
- Effect on Dividend Policy. The Board of Directors considered
the possible impact on the Company's ability to pay dividends
of the right of holders of Preferred Securities to receive a
preferential distribution. The Board of Directors believes
that the sale of Preferred Securities on terms providing for a
preferred return 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 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 and the Company. 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
8
<PAGE> 13
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.
The Board of Directors also believes that Kan Am's ownership
of Preferred Securities would not increase its influence over
the affairs of the Company. Kan Am is limited in the number
of Preferred Securities that it may convert into Common Stock
because of ownership limits set forth in the Company's
Certificate of Incorporation. In addition, the Company does
not expect to grant to Kan Am any additional rights to
nominate or elect directors to the Company's Board of
Directors in connection with the sale or conversion of
Preferred Securities.
- Pricing. The initial sale of Preferred Units to Kan Am
Affiliates may involve the delayed sale of a portion of the
Preferred Units, at the same price paid for the Preferred
Units initially issued. To the extent that the Company's
Common Stock price in the future exceeds the purchase price of
any Preferred Units issued on a delayed basis, the purchase
price of those Preferred Units may be less than their fair
value on the date of issuance. In addition, while the Company
generally has the ability to control the timing of Kan Am's
investments, if the proceeds of a sale of Preferred Securities
are not invested in a timely or accretive manner, there could
be dilution of earnings per share to the existing shareholders
of the Company.
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."
9
<PAGE> 14
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 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 (i) who is not
(A) a citizen or resident of the United States, or (B) an
entity created or organized in the United States or under the
laws of the United States or any state therein (including the
District of Columbia) that is treated as either a
"partnership" or "corporation" for United States federal
income tax purposes, 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 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); (iv) no Person 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
10
<PAGE> 15
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.
(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
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
11
<PAGE> 16
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 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 January 1, 1997 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
12
<PAGE> 17
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.
13
<PAGE> 18
<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 * *
James F. Dausch . . . . . . . . . . . . . 1,000 * *
Kent S. Digby . . . . . . . . . . . . . . 4,846 (4) * *
Dietrich von Boetticher . . . . . . . . . 297,192 (5) 1.73% *
John Ingram . . . . . . . . . . . . . . . 5,000 * *
Charles R. Black, Jr. . . . . . . . . . . 0 * *
James C. Braithwaite . . . . . . . . . . 88,018 (6) * *
Joseph B. Gildenhorn . . . . . . . . . . 13,500 (7) * *
Peter A. Gordon . . . . . . . . . . . . . 0 * *
Herbert S. Miller. . . . . . . . . . . . 1,310,563 (8) 8.22% 4.50%
Harry H. Nick . . . . . . . . . . . . . . 296,521 (9) 1.74% *
Franz von Perfall . . . . . . . . . . . . 56,879(10) * *
Robert P. Pincus . . . . . . . . . . . . 4,000 * *
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.
14
<PAGE> 19
(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
James C. Braithwaite, Dietrich von Boetticher and Franz von Perfall,
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 in Item 7 of the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, (ii)
the Company's Audited Financial Statements set forth at pages F-1 through F-19
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 through 6
of the Company's Form 10-Q for the quarter ending March 31, 1996, (iv) the
unaudited Financial Statements set forth at pages 1 through 7 of the Company's
Form 10-Q for the quarter ending June 30, 1996 , and (v) the unaudited
Financial Statements set forth at pages ___ through ____ of the Company's Form
10-Q for the quarter ended September 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
15
<PAGE> 20
Corporation, 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209,
Attention: Investor Relations ((703) 526-5000).
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
January ____, 1997
16
