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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to 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)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee Paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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[LOGO]
April 30, 1998
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
(the "Meeting") of The Mills Corporation on Thursday, May 28, 1998, at 10:00
a.m., eastern daylight savings time, at the Key Bridge Marriott, 1401 Lee
Highway, Arlington, Virginia.
In addition to electing directors and ratifying the appointment of
independent auditors for the coming year, the Company is asking for shareholder
approval of the Company's Amended and Restated 1994 Executive Equity Incentive
Plan which the Company believes would be helpful in recruiting and retaining
qualified executive employees. All items on the agenda are described in the
accompanying Notice and Proxy Statement. A proxy card on which to indicate your
vote and an envelope, postage prepaid, in which to return your proxy are
enclosed. A copy of the Company's Annual Report to Shareholders is also
enclosed.
It is important that your shares be represented at the Meeting, even if
you cannot attend the Meeting and vote your shares in person. Please give
careful consideration to the matters to be voted upon, complete and sign the
accompanying proxy card, and return the card promptly in the envelope provided.
If you later decide to attend the Meeting, you may revoke your proxy at that
time and vote your shares in person.
We look forward to receiving your proxy and seeing you at the Meeting.
Sincerely,
/s/ LAURENCE C. SIEGEL
--------------------------------
Laurence C. Siegel
Chairman of the Board and Chief Executive Officer
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THE MILLS CORPORATION
1300 WILSON BOULEVARD
SUITE 400
ARLINGTON, VIRGINIA 22209
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 28, 1998
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders of The Mills Corporation (the "Company") to be held on Thursday,
May 28, 1998, at 10:00 a.m., eastern daylight savings time, at the Key Bridge
Marriott, 1401 Lee Highway, Arlington, Virginia, to consider the following
proposals:
1. To elect five directors to serve for the ensuing three-year term.
2. To adopt and approve the Company's Amended and Restated 1994 Executive
Equity Incentive Plan.
3. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 31, 1998.
4. To transact such other business as may properly come before such
meeting or any adjournments thereof.
Only shareholders of record at the close of business on April 1, 1998,
will be entitled to vote at the Meeting or any adjournments 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,
/s/ THOMAS E. FROST
---------------------------------
Thomas E. Frost
Secretary
April 30, 1998
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THE MILLS CORPORATION
1300 WILSON BOULEVARD
SUITE 400
ARLINGTON, VIRGINIA 22209
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PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 28, 1998
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 the Annual Meeting of Shareholders (the
"Meeting") of the Company to be held on Thursday, May 28, 1998, at 10:00 a.m.,
eastern daylight savings time, at the Key Bridge Marriott, 1401 Lee Highway,
Arlington, Virginia, and at any adjournment thereof for the purposes set forth
in the Notice of Meeting. This solicitation of proxies is made on behalf of the
board of directors of the Company (the "Board of Directors").
Holders of record of common stock of the Company (the "Common Stock")
as of the close of business on the record date, April 1, 1998, 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 April 1, 1998, there were 23,058,753 shares of Common Stock issued and
outstanding.
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, the election of all nominees for
director, for Proposal 2, approving the Company's Amended and Restated 1994
Executive Equity Incentive Plan, and for Proposal 3, to ratify the appointment
of Ernst & Young LLP, as independent auditors.
Directors will be elected by a plurality of the votes cast.
Approval of Proposal 2 requires the approval of a majority of votes
cast, provided that the total votes cast represent more than a majority in
interest of all shares entitled to vote on the proposal. Accordingly,
abstentions will have the same effect as votes against Proposal 2.
Under the rules of the New York Stock Exchange ("NYSE"), 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, if they
appear or are represented at the Meeting, be counted in determining whether a
quorum is present at the Meeting, but will not be entitled to vote or give a
proxy to vote such shares on Proposal 2. Accordingly, broker non-votes relating
to Proposal 2 will not be treated as votes cast or as shares entitled to vote on
the proposal.
Approval of Proposal 3 requires the approval of a majority of votes
cast at the Meeting.
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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 the
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.
The Company's 1997 Annual Report to Shareholders for the fiscal year
ended December 31, 1997, has been mailed to the shareholders with this Proxy
Statement and proxy card on or about May 4, 1998. The executive offices of the
Company are currently located at 1300 Wilson Boulevard, Suite 400, Arlington,
Virginia 22209.
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ELECTION OF DIRECTORS
(PROPOSAL 1)
BOARD OF DIRECTORS
The Board of Directors of the Company is divided into three classes,
with one class of directors elected by the shareholders annually. The term of
each class of directors is for a three-year period. The class of directors whose
term expires in 1998 is comprised of five directors. The class of directors
whose term expires in 1999 is comprised of three directors and the class whose
term expires in 2000 is comprised of four directors. The class of directors
whose terms will expire at the Meeting includes James C. Braithwaite, James F.
Dausch, Joseph B. Gildenhorn, Harry H. Nick and Robert P. Pincus. Messrs.
Braithwaite, Dausch, Gildenhorn, Nick and Pincus each have been nominated for
election at the Meeting to hold office until the 2001 Annual Meeting of
Shareholders and until his successor is elected and qualified. Nominees for
director will be elected upon a favorable vote of a plurality of the shares of
Common Stock present and entitled to vote, in person or by proxy, at the
Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR JAMES C.
BRAITHWAITE, JAMES F. DAUSCH, JOSEPH B. GILDENHORN, HARRY H. NICK AND ROBERT P.
PINCUS AS DIRECTORS. Should any or all of these nominees become unable to serve
for any reason, the Nominating Committee of the Board of Directors may designate
substitute nominees, in which event the persons named in the enclosed proxy will
vote for the election of such substitute nominee or nominees.
NOMINEES FOR ELECTION FOR TERM ENDING 2001
JAMES C. BRAITHWAITE, 57, has been a director of the Company since
April 1994. He also served as Executive Vice President of Operations of the
Company from August 1994 to November 1994. Since 1980, Mr. Braithwaite also has
been Chief Executive Officer and President of Kan Am U.S., Inc., an
international investment company. Prior to 1980, Mr. Braithwaite served as
Executive Vice President of Glasmacher and Company. Mr. Braithwaite is a member
of the Executive Committee of the Board of Directors.
JAMES F. DAUSCH, 55, has been a director of the Company since October
1997 and Executive Vice President of Development of the Company since December
1994. In this capacity, Mr. Dausch directs all of the Company's current and
future development activities. Prior to joining the Company, Mr. Dausch was
Executive Vice President of Development and New Business for CenterMark
Properties ("CenterMark"). From 1977 to 1989, Mr. Dausch was employed by The
Rouse Company, where he directed the development of urban retail projects in
Baltimore, New York, Philadelphia and Miami. During the 1970's, Mr. Dausch
served in the Department of Justice and the Department of Housing and Urban
Development. He is a graduate of The Johns Hopkins University and the Columbia
University School of Law.
THE HON. JOSEPH B. GILDENHORN, 68, became a director of the Company in
November 1995. Since 1956, Mr. Gildenhorn has been a partner at JBG Companies, a
real estate development and management company, or its predecessors and since
1956, a partner at Brown, Gildenhorn & Jacobs, a law firm, or its predecessors.
From 1984 to 1989, Mr. Gildenhorn also served as director of First Virginia
Communications, Inc., which owns and operates a radio station. Mr. Gildenhorn
also serves on the board of directors of Biscayne Apparel, Inc., Franklin
Bancorporation and is Chairman of the Board of Franklin National Bank. Mr.
Gildenhorn served as United States Ambassador to Switzerland from August 1989 to
March 1993. Mr. Gildenhorn is a member of the Audit Committee and Executive
Compensation Committee of the Board of Directors.
HARRY H. NICK, 56, has been a director of the Company since April 1994
and was Executive Vice President for Strategic Planning and Acquisitions of the
Company from May 1995 until August 1996. Mr. Nick was Chief Financial Officer
and Treasurer of the Company from January 1993 until May 1995. Since 1982, Mr.
Nick was associated in various capacities with Western Development Corporation,
serving as
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its Chief Financial Officer from April 1982 to August 1984 and as its Executive
Vice President from September 1987 to April 1991 and as a consultant to various
affiliates from April 1991 to January 1993. Mr. Nick was employed with the
accounting firm of Grant Thornton from 1966 to 1982, serving eight years as an
audit partner. Mr. Nick is a member of the American Institute of Certified
Public Accountants.
ROBERT P. PINCUS, 51, has been a director of the Company since April
1994. Since May 1991, he has also served as Chief Executive Officer and
President of Franklin National Bank of Washington, D.C. From 1982 to 1991, Mr.
Pincus was Chief Executive Officer and President of D.C. National Bank and
Sovran Bank/DC National. Mr. Pincus is a member of the Audit Committee and the
Executive Compensation Committee of the Board of Directors.
INCUMBENT DIRECTORS - TERM EXPIRING 1999
PETER A. GORDON, 56, has been a director of the Company since April
1994. Since 1992, Mr. Gordon has been the general partner of Ethos Capital
Management, Inc., an international investment company. From 1971 to 1992, Mr.
Gordon was employed by the investment bank of Salomon Brothers where he
eventually served as Managing Director of International Corporate Finance. Mr.
Gordon currently serves as a board member of the Brazilian Fund, the Latin
American Equity Fund, the Latin American Investment Fund, the Portugal Fund, the
Emerging Markets Telecommunications Fund, the First Israel Fund and the Emerging
Markets Infrastructure Fund. Mr. Gordon is a member of the Audit Committee of
the Board of Directors.
FRANZ VON PERFALL, 56, has been a director of the Company since April
1994. Since 1980, Mr. von Perfall has been Managing Director of Kan Am. From
1977 until 1980, Mr. von Perfall served as director of the New Issue Division of
Berliner Handels-und Frankfurter Bank, located in Frankfurt, Germany.
LAURENCE C. SIEGEL, 45, has been a director of the Company since
January 1993. Mr. Siegel has been Chief Executive Officer of the Company since
March 1995 and Chairman of the Board of the Company since March 1995. From the
inception of the Company until 1995, Mr. Siegel served as Executive Vice
President, Secretary and Vice Chairman of the Board of the Company. From 1983 to
1993, Mr. Siegel was Executive Vice President of Western Development
Corporation. Prior to joining Western, Mr. Siegel was the Vice President of
Leasing for the Mid-Atlantic states at Merrill Lynch Commercial Services. Mr.
Siegel is a graduate of Boston University with a degree in marketing and
finance. Mr. Siegel is a member of the Nominating Committee and the Executive
Committee of the Board of Directors.
INCUMBENT DIRECTORS - TERM ENDING 2000
CHARLES R. BLACK, JR., 50, has been a director of the Company since
November 1995. Since 1980, Mr. Black has been President and Chief Executive
Officer of Black, Kelly, Scruggs and Healey, Inc., a public affairs company or
its predecessors. Mr. Black also serves on the board of directors of Burson
Marstellar/Americas, American Conservative Union and the Fund for American
Studies and serves on the executive finance committee of the Dole Foundation.
Mr. Black is a member of the Nominating Committee of the Board of Directors.
DIETRICH VON BOETTICHER, 56, has been a director and Vice Chairman of
the Company since April 1994. Mr. von Boetticher has been a Director of Kan Am
since 1976 and since 1972 has been a partner in the law firm of Von Boetticher,
Hasse, Kaltwasser, both located in Munich, Germany. Mr. von Boetticher is a
member of the Nominating Committee of the Board of Directors.
JOHN M. INGRAM, 62, has been a director of the Company since April 1994
and has served as Vice Chairman of the Company since August 1995. In addition,
Mr. Ingram is currently an independent real estate consultant. Mr. Ingram has an
extensive history serving with major retailers. From 1993 to 1994, he served as
Senior Vice President of T.J. Maxx Company, Inc. and from 1974 until 1993, he
was Senior Vice President
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and Secretary of Marshalls Inc. Mr. Ingram is a member of the Executive
Committee and the Executive Compensation Committee of the Board of Directors.
PETER B. MCMILLAN, 50, has been a director of the Company since August
1995 and President and Chief Operating Officer of the Company since February
1995. From 1993 until joining the Company, Mr. McMillan was Executive Vice
President of Finance and Administration at CenterMark and previously served as
Senior Vice President and Chief Financial Officer from 1989 to 1993. Prior to
joining CenterMark, Mr. McMillan was a Partner at Nicholson, Inc., where he was
responsible for acquisitions, development and financing of commercial real
estate. Prior to joining Nicholson, Inc., Mr. McMillan spent twelve years as
Senior Vice President of Finance and Chief Financial Officer of Goodman Segar
Hogan, a real estate syndicate located in Norfolk, Virginia.
1997 BOARD MEETINGS
The Board of Directors held a total of six meetings during 1997. Each
director of the Company except Peter Gordon attended at least 75% of the
meetings held during 1997 by the Board of Directors and the committees of which
he was a member. The absence of Mr. Gordon was due to illness.
COMMITTEES OF THE BOARD OF DIRECTORS
In accordance with the Bylaws of the Company, the Board of Directors
has established an Executive Committee, an Audit Committee, a Nominating
Committee and an Executive Compensation Committee. The membership of these
Committees is as set forth in the preceding section of this Proxy Statement.
EXECUTIVE COMMITTEE. The Executive Committee, which consists of three
directors, has the authority to exercise those powers authorized by the Board of
Directors, except for actions that must be taken by the full Board of Directors
under the Delaware General Corporation Law. The Executive Committee met 11 times
in 1997.
AUDIT COMMITTEE. The Audit Committee, which consists of three independent
directors, considers and advises the Board of Directors on the scope of the
annual audit by the independent auditors of the Company and approves other
professional services provided by the Company's independent auditors. In
addition, the Audit Committee monitors audit fees and expenses, including fees
incurred for non-audit services provided by the auditors. The Audit Committee
also reviews the adequacy of the Company's internal accounting controls. The
Audit Committee met one time during 1997.
NOMINATING COMMITTEE. The Nominating Committee, which consists of three
directors, selects the nominees to serve on the Board of Directors. Pursuant to
the Company's Bylaws, vacancies on the Board of Directors are to be filled by
the remaining directors then in office based on the recommendations made by the
Nominating Committee. The Nominating Committee met three times during 1997. The
Nominating Committee will consider qualified nominees recommended by the
shareholders. Shareholders who wish to suggest qualified nominees should write
to the Secretary of the Company, 1300 Wilson Boulevard, Suite 400, Arlington,
Virginia 22209.
EXECUTIVE COMPENSATION COMMITTEE. The Executive Compensation Committee,
which currently consists of three independent directors, determines the
compensation for the Company's executive officers and administers the Company's
equity incentive plan. The Executive Compensation Committee met three times
during 1997.
COMPENSATION OF DIRECTORS
Directors of the Company who are not employees of the Company are paid
an annual fee of $18,000 for their service in that capacity and $1,000 for each
board meeting and committee meeting attended. Upon being elected to the Board of
Directors, each director who is not an employee of the Company receives an
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option to purchase 1,000 shares of Common Stock at an exercise price equal to
the fair market value of the underlying Common Stock on the date of the
director's election and which vests in equal installments on the third and
fourth anniversaries of the date of grant, provided that the optionee is still a
director on such date. Thereafter, upon each director's re-election to the Board
of Directors, he or she will receive a similar option to purchase 1,000 shares
of Common Stock.
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ADOPTION AND APPROVAL OF THE COMPANY'S AMENDED AND RESTATED
1994 EXECUTIVE EQUITY INCENTIVE PLAN
(PROPOSAL 2 )
The Board of Directors has approved, and recommends that the
shareholders approve, the Amended and Restated 1994 Executive Equity Incentive
Plan (the "Plan"). The Plan is an amended version of the 1994 Executive Equity
Incentive Plan, as amended (the "Current Plan"). (No further awards will be made
under the Current Plan after the Meeting.) There is no specified termination
date for the Plan, but it may be terminated by the Board of Directors at any
time.
The purposes of the Plan are to enhance the ability of the Company, The
Mills Limited Partnership (the "Operating Partnership") and their affiliates to
attract and retain highly qualified individuals to serve as executive officers,
other key employees and members of the Board of Directors and to provide
additional incentives to executive officers, other key employees and members of
the Board of Directors to promote the success of the Company, the Operating
Partnership and their affiliates. The Plan provides for the grant of options and
restricted stock, which give grantees an opportunity to acquire or increase a
proprietary interest in the Company. Options granted under the Plan may be
incentive stock options ("ISOs"), intended to qualify as such under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
The Board's primary reason for amending the Current Plan is to increase
the number of shares available for grants of options and restricted stock. The
Current Plan authorizes 2,500,000 shares, and the Plan increases the number
authorized to 4,500,000. As of April 1, 1998, 152,283 shares of Common Stock had
been issued under the Current Plan as restricted stock, 34,056 shares of Common
Stock had been issued upon the exercise of options granted under the Current
Plan and 3,138,073 shares of Common Stock were subject to outstanding options
(including shares subject to options that were granted subject to shareholder
approval of the Plan). As of that date, the number of shares of Common Stock and
units of limited partnership interest in the Operating Partnership outstanding
was 38,917,701, and the closing price of the Common Stock on the NYSE was
$25.375 per share.
DESCRIPTION OF THE PLAN
The following is a general description of certain material provisions
of the Plan. The description is only a summary and is qualified by reference to
the Plan itself, a copy of which is included as APPENDIX A to this Proxy
Statement.
ADMINISTRATION. The Plan will be administered by the Executive
Compensation Committee (or other committee designated by the Board of Directors
from time to time). The committee must at all times consist of no fewer than two
members of the Board of Directors of the Company, and each member of the
committee must qualify in all respects as a "non-employee director" as defined
in Rule 16b-3 under the Exchange Act and as an "outside director" as defined in
Treasury Regulations Sections 1.162-27(e)(3). Subject to the limitations set
forth in the Plan, the committee has the authority to determine, among other
things: (i) the eligible persons to whom options and restricted stock will
be granted, (ii) the type or types of grants to be made, (iii) the number of
shares subject to each grant and (iv) the terms and conditions of the options
and restricted stock. Subject to the express provisions of the Plan, the
committee will have full authority to administer and interpret the Plan.
ELIGIBILITY. The committee will have discretion to grant options
and restricted stock under the Plan to employees (including officers) of
the Company, the Operating Partnership or their affiliates. Subject to the
restrictions set forth in the Plan, an eligible person may receive successive
grants of options and restricted stock. No grantee, however, may receive an
option to purchase more than 500,000 shares in any calendar year. Each
non-employee member of the Board of Directors (an "Outside Director") shall,
upon the date of his or her initial election or reelection by the Board of
Directors or the shareholders of the Company to serve as an Outside Director,
automatically be granted nonstatutory options to purchase 1,000 shares of
Common Stock. Each such option shall
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become exercisable with respect to 500 shares beginning on the third
anniversary of the date of grant and 500 shares beginning on the fourth
anniversary of the date of grant if the person remains a director of the
Company.
SHARES SUBJECT TO THE PLAN. Assuming approval of the Plan at the
Meeting, 4,313,661 authorized but unissued shares of Common Stock (including
shares reserved under the Current Plan) will be reserved for issuance pursuant
to future awards made under the Plan and the exercise of outstanding options
previously granted under the Current Plan and the Plan. The number of shares
issued under the Plan pursuant to awards of restricted stock may not exceed
1,500,000 (including restricted stock issued under the Current Plan), provided
that restricted stock that is forfeited pursuant to the terms of an award will
again be available for issuance as restricted stock. In the event any change is
made to the shares of Common Stock subject to the Plan (whether by reason of
recapitalization, reclassification, share split, reverse split, combination of
shares, exchange of shares, share dividend, or other increase, decrease or
change in such shares), the Company will adjust proportionately and accordingly
the number and kinds of shares that may be issued under the Plan or purchased
upon exercise of an outstanding option or restricted stock award. Any such
adjustment, however, will be made without a change in the total price applicable
to the unexercised portion of the award, but with a corresponding adjustment in
the per share price. Shares of Common Stock underlying any option that expires
unexercised, or any award of restricted stock that is forfeited, will again be
available for issuance pursuant to the Plan.
OPTIONS.
General. All options granted under the Plan are intended to be treated
as nonstatutory stock options, unless the committee specifically designates a
stock option as an ISO within the limitations of the Plan and Section 422 of the
Internal Revenue Code. The exercise price of options granted under the Plan will
be determined by the committee in accordance with the Plan. For both ISOs and
nonstatutory options, the exercise price per share will be equal to 100% of the
Fair Market Value (determined in accordance with the Plan) of a share of Common
Stock on the Date of Grant (as defined in the Plan), but not less than the par
value per share. In addition, no person may receive an ISO if, at the time of
grant, such person owns directly or indirectly more than 10% of the total
combined voting power of the Company or any of its 50% or more subsidiaries,
unless the option exercise price is at least 110% of the Fair Market Value of
the shares of Common Stock and the exercise period of such ISO is limited to
five years. There also is a $100,000 limit on the value of shares (determined on
the Date of Grant) with respect to which ISOs granted to an optionee may first
become exercisable in any calendar year.
At the discretion of the committee, options granted under the Plan may
include a "re-load" feature pursuant to which an optionee exercising an option
by the delivery of shares of Common Stock would automatically be granted an
additional option (with an exercise price equal to the Fair Market Value of the
Common Stock on the date the additional option is granted) to purchase that
number of Common Stock equal to the number delivered to exercise the original
option.
Vesting. The committee will determine the exercise period and any
vesting requirements for options granted under the Plan, provided that no option
may be exercised after ten years following its Date of Grant. The committee will
also have the authority to accelerate the vesting of any outstanding option, in
its sole discretion, at any time. Options under the Plan are subject to
acceleration of vesting upon a Change of Control (as defined in the Plan) of the
Company, unless the options are canceled by the Company in accordance with the
Plan. Unless the committee determines otherwise, options will expire if the
optionee ceases to be an employee of the Company, Operating Partnership or their
affiliates (other than for individuals, by reason of death, retirement or
"permanent and total disability" within the meaning of Section 22(e)(3) of the
Code). Special rules will govern the expiration of options following the death,
retirement or "permanent and total disability" of an optionee. In such cases,
the committee may extend the period during which an option may be exercised (but
not to a date that is later than the date the option would otherwise expire).
Transferability. Options granted under the Plan will be exercisable
only by the optionee or his or her permitted transferees during the optionee's
lifetime. Options will be transferable by the optionee only as provided in the
agreement evidencing the grant or as may be provided by will or the laws of
descent and distribution.
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Payment of Option Exercise Price. Payment for shares purchased upon
exercise of an option may be made in cash, by exchanging shares of Common Stock
of the Company valued at their Fair Market Value on the date of exercise, by
surrendering exercisable options covering shares of Common Stock having a spread
on the date of exercise equal to the exercise price of the option being
exercised or by a combination of the foregoing. Where permitted under the
agreement evidencing the grant of an option, an optionee may also pay the
exercise price by promissory note or by directing that the certificates for the
shares purchased upon exercise be delivered to a licensed broker acceptable to
the Company as agent for the optionee and that the broker tender to the Company
cash equivalents equal to the option exercise price plus the amount of any taxes
that the Company may be required to withhold in connection with the exercise of
the option.
RESTRICTED STOCK. The committee may grant to eligible persons shares of
Common Stock that are subject to vesting based upon the passage of time, the
achievement by the grantee or the Company of specified performance objectives or
other conditions deemed appropriate by the committee. At the time of grant, the
committee will establish the conditions to vesting and the period of time during
which the conditions will apply.
As to eligible employees who are determined by the committee may be
"Covered Employees" under Section 162(m)(3) of the Code (generally the five most
highly compensated officers of the Company), any applicable performance
objectives will be established in writing by the committee prior to the 90th day
of the year in which the grant is made and while the outcome is substantially
uncertain. Performance objectives for Covered Employees will be based on
earnings per share from continuing operations, shareholder return, attainment of
certain revenue levels or attainments of certain pre-tax income levels. The
maximum number of shares of Common Stock which may be granted as restricted
stock to any eligible person under the Plan is 200,000 per year.
Restricted stock may not be assigned, sold or transferred by the
grantee until it is vested and the applicable restrictions and conditions have
been satisfied or lapsed. In its discretion, the committee may shorten or
terminate vesting conditions or waive any other restrictions or conditions
applicable to restricted stock.
Unless the committee determines otherwise, all restricted stock granted
to an employee shall be forfeited without payment of any consideration upon such
employee's termination of employment. Special rules will apply to the vesting of
an award upon the death or permanent and total disability of a grantee.
Grantees of restricted stock are generally entitled to vote and receive
distributions on their restricted stock. Upon vesting of an award of restricted
stock, including the satisfaction, lapse or waiver of all applicable
restrictions and conditions, the grantee will be entitled to receive a stock
certificate representing the vested shares.
9
<PAGE> 13
The following table sets forth the options and restricted stock grants
approved by the Board of Directors in 1997 and 1998, subject to approval of the
Plan by the Company's shareholders. The majority of these options become
exercisable, and all of the restricted stock vests, only upon a Change of
Control. A Change of Control is defined in the agreements granting such options
and restricted stock as: (i) any person or group of persons acting in concert
becoming the beneficial owner of securities possessing more than 50% of the
voting power for the election of directors of the Company, (ii) the
consummation of any merger, consolidation or other business combination
involving the Company in which the holders of voting securities of the Company
immediately prior to such transaction hold, immediately after such transaction,
securities possessing less than 50% of the total voting power in an election
of directors of the Company, (iii) during any period of two consecutive years,
directors of the Company at the beginning of such period ceasing, for any
reason, to constitute at least a majority of the directors of the Company
unless the election, or the nomination for election by the Company's
shareholders, of each new director of the Company was approved by a vote of at
least two-thirds of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period or (iv) the
consummation of any sale, lease, exchange or other transfer of all or
substantially all of the assets of the Company to a party which is not
controlled by or under common control with the Company.
PLAN BENEFITS
<TABLE>
<CAPTION>
Number of
Shares of
Number of Exercise Restricted Dollar
Name and Position Options Price(1) Stock Value(2)
- ----------------- ------- -------- ----- --------
<S> <C> <C> <C> <C>
Laurence C. Siegel -- -- -- --
Chairman of the Board, Chief Executive
Officer and Director
Peter B. McMillan 76,953 24.50 7,027 172,162
President, Chief Operating Officer and 76,593 25.375
Director
James F. Dausch 57,499 24.50 5,275 129,238
Executive Vice President - Development and 57,499 25.375
Director
Kent S. Digby 51,339 24.50 4,710 115,395
Executive Vice President - Management &
Marketing
Judith S. Berson 49,843 24.50 4,573 112,039
Executive Vice President - Leasing
Executive officers as a group (11 persons) 447,472 24.50 41,053 1,005,799
166,563 25.375
Non-executive directors as a group -- -- -- --
(0 persons)
Non-executive officers as a group -- -- -- --
(0 persons)
</TABLE>
- ----------
(1) The exercise price of such options is equal to the closing price of the
Common Stock on the NYSE on the date of grant.
(2) Restricted stock is valued at the closing price of the Common Stock on
the NYSE on the date of grant.
FEDERAL INCOME TAX CONSEQUENCES OF COMPANY GRANTS UNDER THE PLAN
The grant of an option will not be a taxable event for the optionee or
the Company.
An optionee will not recognize taxable income upon exercise of an ISO,
and any gain realized upon a disposition of shares of Common Stock received
pursuant to the exercise of an ISO will be taxed as long-term capital gain if
the optionee holds the shares for at least two years after the date of grant and
for one year after the date of exercise. However, the excess of the Fair Market
Value of shares subject to an ISO on the exercise date over
10
<PAGE> 14
the option exercise price will be included in the optionee's alternative minimum
taxable income in the year of exercise for purposes of the alternative minimum
tax. An optionee may be entitled to a credit against regular tax liability in
future years for minimum taxes paid with respect to the exercise of ISOs. An
employer will not entitled to any business expense deduction with respect to the
exercise of an ISO, except as discussed below.
For the exercise of an option to qualify for the foregoing tax
treatment, the optionee generally must be an employee of the Company or a
subsidiary of the Company from the date the option is granted through a date
within three months before the date of exercise of the option. In the case of an
optionee who is disabled or who dies, the three-month period for exercise
following the termination of employment is extended to one year. In the case of
an optionee who dies, both the time for exercising ISOs after termination of
employment and the holding period for shares received pursuant to the exercise
of the option are waived.
If all of the foregoing requirements are met except the special holding
period rules mentioned above, the optionee will recognize ordinary income upon
the disposition of the shares in an amount generally equal to the excess of the
Fair Market Value of the shares at the time the option was exercised over the
option exercise price (but not in excess of the gain realized on the sale). The
balance of the realized gain, if any, will be capital gain. The employer will be
allowed a business expense deduction to the extent the optionee recognizes
ordinary income.
If an optionee exercises an ISO by tendering shares of Common Stock
with a Fair Market Value equal to part of all of the option exercise price, the
exchange of shares will be treated as a nontaxable exchange (except that this
treatment would not apply if the optionee had acquired the shares being
transferred pursuant to the exercise of an ISO and had not satisfied the special
holding period requirement summarized above). If the exercise is treated as a
tax free exchange, the optionee would not have taxable income from the exchange
and exercise (other than minimum taxable income as discussed above) and the tax
basis of the shares exchanged would be treated as the substituted basis for the
shares received. If the optionee used shares received pursuant to the exercise
of an ISO (or another nonstatutory option) as to which the optionee had not
satisfied the applicable holding period requirement, the exchange would be
treated as a taxable disqualifying disposition of the exchanged shares.
Upon exercising a nonstatutory option, an optionee will recognize
ordinary income in an amount equal to the difference between the exercise price
and the Fair Market Value of the shares on the date of exercise. If the employer
complies with applicable reporting requirements, it will be entitled to a
business expense deduction in the same amount and at the same time as the
optionee recognizes ordinary income. Upon the subsequent sale or exchange of
shares acquired pursuant to the exercise of a nonstatutory option, the optionee
will have taxable gain or loss, measured by the difference between the amount
realized on the disposition and the tax basis of the shares (generally, the
amount paid for the shares plus the amount treated as ordinary income at the
time the option was exercised).
If the optionee surrenders shares of Common Stock in payment of part or
all of the exercise price for nonstatutory options, no gain or loss will be
recognized with respect to the shares surrendered (regardless of whether the
shares were acquired pursuant to the exercise of an ISO) and the optionee will
be treated as receiving an equivalent number of shares pursuant to the exercise
of the option in a nontaxable exchange. The basis of the shares surrendered will
be treated as the substituted tax basis for an equivalent number of option
shares received and the new shares will be treated as having been held for the
same holding period as had expired with respect to the transferred shares. The
difference between the aggregate option exercise price and the aggregate Fair
Market Value of the shares received pursuant to the exercise of the option will
be treated as ordinary income. The optionee's basis in the additional shares
will be equal to the amount included in the optionee's income.
An award of restricted stock will create no immediate tax consequences
for the employee or the Company unless the employee makes an election pursuant
to Section 83(b) of the Code. The employee will, however, realize ordinary
income when restricted stock become vested, in an amount equal to the Fair
Market Value of the underlying shares of Common Stock on the date of vesting
less any consideration paid by the employee for such shares. If the employee
makes an election pursuant to Section 83(b) of the Code with respect to a grant
of restricted stock, the employee will recognize income at the time the shares
of restricted stock are awarded (based upon the
11
<PAGE> 15
value of such shares at the time of award), rather than when the shares of
restricted stock become vested. The employer will be allowed a business expense
deduction for the amount of any taxable income recognized by the employee at the
time such income is recognized (assuming the employer complies with applicable
reporting requirements).
The foregoing provides only a general description of the federal income
tax consequences of transactions contemplated by the Plan. Participants should
consult a tax advisor as to their individual circumstances.
Approval of the Plan requires the approval of a majority of the votes
cast on the proposal at the Meeting, provided that the total votes cast
represent more than 50% of the shares entitled to vote on the proposal. THE
BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO ADOPT AND APPROVE THE COMPANY'S
AMENDED AND RESTATED 1994 EXECUTIVE EQUITY INCENTIVE PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 3)
The Board of Directors of the Company, upon the recommendation of the
Audit Committee, has appointed the accounting firm of Ernst & Young LLP to serve
as independent auditors of the Company for the fiscal year ending December 31,
1998. Ernst & Young LLP has served as independent auditors of the Company since
its initial public offering in 1994. The Company has been advised by Ernst &
Young LLP that representatives of Ernst & Young LLP will be present at the
Meeting, will have the opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.
The ratification of the appointment of Ernst & Young LLP requires the
approval of a majority of the votes cast at the Meeting. THE BOARD OF DIRECTORS
OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE APPOINTMENT OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1998.
EXECUTIVE OFFICERS OF THE COMPANY
The following is a biographical summary of the executive officers of
the Company (other than those who serve as directors):
Kent S. Digby has been Executive Vice President of Management and
Marketing of MillsServices Corporation (the "Third-Party Services Corporation")
since May 1995 and has directed the management and marketing functions on behalf
of the Company or its predecessors since 1988. In this capacity, Mr. Digby
oversees all management and marketing issues for the entire portfolio of
properties for the Company. Prior to 1988, Mr. Digby served as the Vice
President of Management for The Rouse Company.
Judith S. Berson has been Executive Vice President-Leasing of the
Company or its affiliates since November 1996. From June 1995 to November 1996,
Ms. Berson was a Senior Vice President-Specialty Leasing and from 1989 to May
1995, she was Vice President and Executive Director of Leasing/East Coast
Development for the Company and its predecessors. Prior to joining the Company,
Ms. Berson was head of Retail Leasing and Retail Development for Adaron, a
diversified development company in North Carolina. Ms. Berson graduated from the
University of Michigan with a bachelor's degree in political science and
graduated from the University of Santa Clara with a master's degree in
Counseling Psychology.
Kenneth R. Parent joined the Company in September 1994 as Senior Vice
President, became Chief Financial Officer in May 1995 and Executive Vice
President in November 1997. Prior to joining the Company, Mr. Parent's
experience included eleven years in public accounting at Kenneth Leventhal & Co.
and Price Waterhouse, where he
12
<PAGE> 16
specialized in real estate accounting, tax and consulting. Mr. Parent is a
member of the American Institute of Certified Public Accountants and a graduate
of the University of Southern California.
Thomas E. Frost has been Secretary and Senior Vice President of the
Company since March 1995 and General Counsel since May 1995. From March 1995
until May 1995, Mr. Frost was Corporate Counsel of the Company. Mr. Frost was
previously Senior Vice President and General Counsel for CenterMark, which he
joined in 1989. Before joining CenterMark, he served as Senior Counsel to The
May Department Stores Company from 1984 through 1989, served as staff attorney
for The Edward J. DeBartolo Corporation from 1981 through 1984 and was
associated with the firm of Olds, Olds & Lynett from 1979 through 1981. Mr.
Frost is a graduate of Miami University and the University of Akron School of
Law.
Thomas M. Hindert has been Senior Vice President of Planning,
Predevelopment and Acquisitions of the Company or its affiliates since April
1994 and has served in a similar capacity on behalf of the Company or its
predecessors since 1986. Mr. Hindert has also served as Development Coordinator
for the New Orleans Center and the San Antonio River Center projects with The
Edward J. DeBartolo Corporation and as Senior Planner for the City of
Pittsburgh. Mr. Hindert received his master's degree in Architecture and Urban
Planning from the University of Michigan.
Steven J. Jacobsen has been Senior Vice President of Development of the
Company or its affiliates since April 1994 and has served in a similar capacity
on behalf of the Company or its predecessors since 1984. Prior to 1984, Mr.
Jacobsen worked as a Senior Construction Manager and Regional Manager for
various development companies in the Midwest. Mr. Jacobsen is a licensed
architect and received his undergraduate degree from the University of Illinois,
Champaign/Urbana and is currently a candidate for a Masters of Business
Administration from Roosevelt University.
Mark J. Rivers, Senior Vice President-Anchor/Major Leasing, joined the
Company in July 1997 and was elected to his current office in November 1997.
From 1995 to 1997, Mr. Rivers served as Senior Vice President and Director of
Development for DeBartolo Entertainment where he led initiatives in retail
development and the creation of new restaurant and hospitality concepts. From
1993 to 1995, Mr. Rivers was Vice President of New City Development for Mirage
Resorts, Incorporated. Mr. Rivers is a graduate of the State University of New
York at Albany.
James P. Whitcome has been Senior Vice President-Capital Services since
December 1994. In this capacity, he is responsible for all design and
construction activities related to the physical plant and tenanting of the
Company's portfolio. From December 1989 until joining the Company, Mr. Whitcome
served as Senior Vice President of Capital Improvements for CenterMark. From
1981 to 1989, Mr. Whitcome was employed by The Rouse Company as Vice President
of Engineering and Director of Construction. During the 1970's, Mr. Whitcome was
employed by General Growth as Director of Construction. Mr. Whitcome is a
graduate of Iowa State University.
Barry H. Young has been Senior Vice President-Specialty Leasing of the
Company or its affiliates since June 1995. From 1990 to 1995, Mr. Young served
as Vice President of Leasing for the Company and Western. From 1988 until 1990,
Mr. Young was a Senior Leasing Executive at Western. Prior to joining Western,
Mr. Young spent seven years as a vice president and director of real estate for
S&A Restaurant Corporation, a division of Pillsbury, in Dallas, Texas. Between
1971 and 1981, Mr. Young owned a restaurant and food court in a Columbia,
Maryland mall. Mr. Young received his bachelors degree from George Washington
University and his master's degree in Hotel and Restaurant Administration from
Michigan State University.
13
<PAGE> 17
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
annual and long-term compensation for the Company's Chief Executive Officer and
the five other most highly compensated executive officers of the Company (the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------- -----------------------------------------
RESTRICTED SECURITIES ALL
OTHER ANNUAL STOCK UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION AWARDS($)(1) OPTIONS(#) COMPENSATION
- --------------------------- ---- --------- -------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Laurence C. Siegel 1997 $484,666 $ 467,914 $ 838(2) $277,907 119,377 $ 3,710(3)
Chairman of the Board, 1996 442,894 360,477 636(2) 197,995 130,837 3,708(3)
Chief Executive Officer 1995 331,561 115,000 126,219(2) -- 4,062(3)
and Director
Peter B. McMillan 1997 342,537 279,822 -- 178,310 76,593 4,070(4)
President, Chief Operating 1996 326,250 215,572 95,500(5) 134,000 88,546 3,062(4)
Officer and Director 1995 247,917 90,000 -- -- 75,000 77,894(6)
James F. Dausch 1997 286,300 191,357 -- 133,853 57,499 4,561(7)
Executive Vice 1996 272,500 147,420 102,000(5) 100,800 66,608 3,517(7)
President-Development and 1995 250,000 72,000 -- -- -- 54,886(6)
Director
Kent S. Digby 1997 255,626 170,855 -- 119,516 51,339 3,898(8)
Executive Vice President- 1996 222,500 121,095 -- 82,800 54,714 3,333(8)
Management & Marketing 1995 191,667 58,000 -- -- -- --
Judith S. Berson 1997 250,000 184,324 -- 116,040 49,843 4,304(9)
Executive Vice 1996 191,250 95,200 -- -- 37,004 3,997(9)
President-Leasing 1995 165,000 43,000 -- -- -- 3,817(9)
Howard J. Samuels 1997 276,870 -- (10) -- -- 51,339 --
Executive Vice President- 1996 242,867 127,125 -- 90,000 134,471 2,568(11)
Leasing
</TABLE>
- ----------
(1) The number of shares of restricted stock held by Messrs. Siegel,
McMillan, Dausch and Digby and Ms. Berson on December 31, 1997 was
20,511, 13,497, 10,141, 13,497, 8,708 and 7,277, respectively. The value
of such restricted stock holdings as of December 31, 1997 was $502,520,
$330,677, $248,455, $213,346 and $178,287, respectively, based on the
closing price of the Common Stock on the NYSE on December 31, 1997, which
was $24.50. Each award of restricted stock vests in five equal annual
installments beginning on the first anniversary of the date of grant.
(2) As part of Mr. Siegel's employment agreement, the Company makes certain
payments on Mr. Siegel's behalf relating to an interest he owns in a
property (Kenwood) which the Company manages. These payments aggregated
$124,399 in 1995. In addition, the Company paid $838 in medical
reimbursements in 1997, $636 in 1996 and $1,820 in 1995.
(3) Includes Company contributions to the 401(k) Plan of $3,200, $3,000 and
$3,000 for 1997, 1996 and 1995, respectively, and the cost of group term
life insurance amounting to $510, $708 and $1,062 in 1997, 1996 and 1995,
respectively.
(4) Includes Company contributions to the 401(k) Plan of $3,200 and $2,250
for 1997 and 1996, respectively, and the cost of group term life
insurance amounting to $870 and $812 in 1997 and 1996, respectively.
(5) Includes $62,000 for forgiveness of loans to each of Messrs. McMillan and
Dausch in 1996. In addition, Mr. McMillan and Mr. Dausch were reimbursed
$33,500 and $40,000, respectively, in 1996 for additional taxes owed as a
result of taxable relocation expenses.
(6) Includes reimbursement of certain relocation expenses. See " Employment
Agreements and Other Arrangements."
(7) Includes Company contributions to the 401(k) Plan of $3,200 and $2,250
for 1997 and 1996, respectively, and the cost of group term life
insurance amounting to $1,361 and $1,267 in 1997 and 1996, respectively.
(8) Includes Company contributions to the 401(k) Plan of $3,200 and $3,000
for 1997 and 1996, respectively, and the cost of group term life
insurance amounting to $698 and $333 in 1997 and 1996, respectively.
(9) Includes Company contributions to the 401(k) Plan of $3,200 in each of
1997, 1996 and 1995, respectively, and the cost of group term life
insurance amounting to $1,104, $797 and $617 in 1997, 1996 and 1995,
respectively.
(10) Mr. Samuels resigned his position as Executive Vice President - Leasing
of the Company effective November 8, 1997.
(11) Includes $2,231 in medical reimbursements and $247 for the cost of group
term life insurance for 1996.
14
<PAGE> 18
The following table sets forth certain information concerning exercised
and unexercised options held by the Named Executive Officers at December 31,
1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
AT DECEMBER 31, 1997 DECEMBER 31, 1997
-------------------- -----------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Laurence C. Siegel -0- $-0- 50,000 300,214 $ 50,000 $933,150
Peter B. McMillan -0- -0- 17,709 222,430 103,952 918,400
James F. Dausch -0- -0- 50,822 148,285 248,674 518,431
Kent S. Digby -0- -0- 35,943 120,110 98,865 320,454
Judith S. Berson -0- -0- 25,901 97,946 68,457 218,320
Howard J. Samuels 34,056 243,570 -0- -0- -0- -0-
</TABLE>
The following table sets forth certain information relating to options
to purchase Common Stock granted to the Named Executive Officers during 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------- POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES IN PRICE EXPIRATION OPTION TERM
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5% 10%
---- -------------- ------------ ------ ---- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Laurence C. Siegel 119,377 18.8% 25.375 4/01/07 $ 1,906,015 $ 4,827,751
Peter B. McMillan 76,593 12.1% 25.375 4/01/07 1,222,287 3,097,514
James F. Dausch 57,499 9.1% 25.375 4/01/07 917,581 2,325,329
Kent S. Digby 51,339 8.1% 25.375 4/01/07 819,278 2,076,212
Judith S. Berson 49,843 7.9% 25.375 4/01/07 795,405 2,015,712
Howard J. Samuels(2) 51,339 8.1% 25.375 2/08/98 819,278 2,076,212
</TABLE>
- ----------
(1) Each option granted in fiscal year 1997 vests in five equal annual
installments beginning on the first anniversary of the date of grant.
(2) Mr. Samuels left the employment of the Company effective November 8,
1997. These numbers reflect the incentive grants he would have received
had he remained employed with the Company through December 31, 1997.
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
During 1994, the Company entered into an employment agreement (the
"Employment Agreement") with Mr. Siegel. Pursuant to the Employment Agreement,
Mr. Siegel agreed to serve at the pleasure of the Board of Directors, to receive
such compensation as may be established by the Board of Directors and to be
reimbursed for such expenses as the Board of Directors may approve from time to
time. The Employment Agreement provides that if Mr. Siegel's employment is
terminated without cause, Mr. Siegel is entitled to all compensation and
benefits which are fully accrued and vested, but unpaid, on the date of such
termination, including severance pay in accordance with the
15
<PAGE> 19
Company's severance pay policy then in effect. Further, if Mr. Siegel terminates
his employment for good reason (as defined below), he is entitled to receive
only the compensation and benefits which are fully accrued and vested, but
unpaid, on the date of such termination. The Employment Agreement prohibits Mr.
Siegel, subject to certain limited exceptions, from engaging directly or
indirectly, without the Company's prior consent, in the development,
redevelopment, operation, management or leasing of any type of retail shopping
center anywhere in the world during the period of employment with the Company
and for 18 months thereafter, except that, if Mr. Siegel terminates his
employment for "good reason" as defined in his Employment Agreement, the
non-competition period ends one year subsequent to the date employment is
terminated. The Employment Agreement defines "good reason" to include the
Company's breach of its agreements applicable to Mr. Siegel's duties and certain
changes in the composition of the Board of Directors. Currently, the Company and
Mr. Siegel are negotiating a new employment agreement.
The Company also entered into employment agreements (the "Other
Employment Agreements") in 1997 with each of Messrs. McMillan, Dausch and Digby
and Ms. Berson (the "Other Officers"). The employment agreements of Messrs.
McMillan and Dausch amended and restated their 1994 employment agreements.
Pursuant to the Other Employment Agreements, each of the Other Officers agreed
to be employed by the Company for a term of three years, to be automatically
renewed for successive one-year periods unless terminated by the Other Officer
or the Company within 30 days of the scheduled expiration date. Pursuant to the
Other Employment Agreements, the Company agreed to (i) pay each of Messrs.
McMillan, Dausch and Digby and Ms. Berson a base annual salary of $345,050,
$288,400, $257,500 and $250,000, respectively, subject to review and adjustment
on April 1 of each year and (ii) reimburse each Other Officer for expenses in
accordance with the Company's expense reimbursement policies applicable to
employees in the same or substantially equivalent position. With respect to
Messrs. Dausch and Digby and Mr. Berson, the Other Employment Agreements provide
that, if an Other Officer's employment is terminated by the Company without
cause or by an Other Officer for "good reason," in either case before the end of
the initial term, such Other Officer will be entitled to his salary for two
years, payable over a two-year period. If an Other Officer's employment is so
terminated after the end of the initial term, such Other Officer will be
entitled to his salary for one year, payable over a one-year period. In the
event of a Change of Control (as defined in the Plan), Messrs. Dausch and Digby
and Ms. Berson shall be entitled to an amount equal to two times the highest
rate of their annualized base salary, an amount equal to two times the greater
of (i) their average annual cash bonus earned under the Company's short term
bonus plan during the three years prior to the Change of Control or (ii) the
target level of bonus established for the fiscal year, and an amount equal to
the target level of bonus for the year in which the effective date of
termination occurs. With respect to Mr. McMillan, the Other Employment Agreement
provides that if his employment is terminated by the Company without cause or by
him for "good reason," in either case before the end of the initial term, he
will be entitled to his salary for three years, payable over a two-year period.
If Mr. McMillan's employment is terminated after the end of the initial term, he
will be entitled to his salary for one year, payable over a one-year period. In
the event of a Change of Control (as defined in the Plan), Mr. McMillan shall be
entitled to an amount equal to three times the highest rate of his annualized
base salary and an amount equal to three times the greater of (i) his annual
cash bonus earned under the Company's short term bonus plan during the three
years prior to the Change of Control or (ii) the target level of bonus
established for the fiscal year. The Other Employment Agreements contain
non-competition provisions similar to those contained in the Employment
Agreement, except they relate only to Mills-type retail malls.
Pursuant to Mr. McMillan's employment agreement, the Company made a
$150,000 housing relocation loan to Mr. McMillan, one-third of which was
forgiven on February 16, 1996. Under the terms of the amended employment
agreement the balance of the loan principal plus interest thereon is payable in
full by Mr. McMillan in the event his employment with the Company terminates for
any reason other than for "good reason" or without cause. On the third
anniversary of the execution of Mr. McMillan's employment agreement, the Company
shall automatically forgive the entire remaining loan principal, together with
all interest accruing under the loan as of such date.
Pursuant to Mr. Dausch's original employment agreement, the Company
made a $150,000 housing relocation loan to Mr. Dausch, one-third of which was
forgiven on January 23, 1996. Under the terms of the amended employment
agreement the balance of the loan principal plus interest thereon is payable in
full by Mr. Dausch in the event his employment with the Company terminates for
any reason other than for "good reason" or without cause. On the third
anniversary of the execution of Mr. Dausch's employment agreement, the Company
shall automatically forgive the entire remaining loan principal, together with
all interest accruing under the loan as of such date.
16
<PAGE> 20
CUMULATIVE TOTAL SHAREHOLDER RETURN(1)
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
4/15/94 12/94 12/95 12/96 12/97 3/98
------- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
The Company $100 $ 82 $ 86 $132 $147 $159
S&P 500 Index $100 $105 $145 $177 $233 $264
NAREIT Equity Index $100 $ 99 $114 $154 $186 $185
</TABLE>
- -----------
(1) Assumes $100 invested on April 15, 1994 in the Company's Common Stock
(NYSE symbol: MLS), the S&P 500 Index and the NAREIT Equity REIT Total
Return Index. Total return assumes reinvestment of all dividends.
17
<PAGE> 21
REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee (the "Committee") of the Board of
Directors has prepared the following report regarding 1997 executive
compensation. The Committee, which is composed entirely of non-employee
directors, is responsible for determining the compensation for the Company's
executive officers and for administration of the Company's 1994 Executive Equity
Incentive Plan, as amended. This report describes the Committee's basic approach
to executive compensation and the basis on which 1997 compensation
determinations were made by the Committee with respect to the Company's
executive officers, including the Named Executive Officers. The Committee works
closely with the entire Board of Directors in the execution of its duties.
EXECUTIVE COMPENSATION POLICY
In 1996, the Committee authorized the Company to assist in an analysis
of the Company's compensation practices. Towers Perrin analyzed the Company's
plans for executive officers' base salaries, cash bonus incentives and long term
incentives and compared the Company's compensation plans to plans offered by
comparable companies (the "comparable companies") active in the ownership,
development and operation of shopping centers, based on publicly available data.
The comparable companies included CBL & Associates Properties, Crown America
Realty Trust, DeBartolo Realty Corporation, Federal Realty Investment Trust,
General Growth Properties, Inc., Glimcher Realty Trust, Prime Retail, The Rouse
Company, Simon Property Group, Inc. (which has since merged with DeBartolo
Realty Corporation), Taubman Centers, Inc. and Urban Shopping Centers, Inc. In
its analysis, Towers Perrin concluded that the Company's "total cash
compensation" (consisting of base salary plus annual incentives) and "total
direct compensation" (meaning total cash compensation plus the annualized
present value of long-term incentives) tended to significantly trail the
marketplace 50th percentile. Towers Perrin noted two significant factors: the
Company had limited annual incentive grants and the Company had limited annual
grants of long-term incentives. As a result, the Company believed that its
executive compensation package was insufficient to attract and retain qualified
executive officers.
In 1996, the Board of Directors authorized the Committee to implement a
comprehensive compensation plan (the "Compensation Plan") that is intended to
compensate the Company's executive officers between the 50th and 75th
percentiles of comparable companies. With the assistance of Towers Perrin, the
Company implemented the Compensation Plan consisting of three principal
components: base salary, an annual Performance Incentive Plan and a Long Term
Incentive Plan. Effective as of April 1, 1997, the Committee approved
adjustments to the executive officers' base salaries, awarded bonuses pursuant
to the Performance Incentive Plan and issued grants of stock options and
restricted stock, all in conformance with the approved Compensation Plan and the
Towers Perrin analysis.
1997 EXECUTIVE OFFICER COMPENSATION
Effective April 1, 1996, base salaries for the Company's executive
officers were adjusted to the levels identified by Towers Perrin to be within
the ranges of the 50th and 75th percentiles of comparable companies. These base
salaries were increased by 3% (for the Chief Executive Officer and the Executive
Vice Presidents) and 4% (for Senior Vice Presidents) on April 1, 1997.
In addition, goals and objectives were established pursuant to the
Performance Incentive Plan as the basis for determining the cash bonuses to be
paid to the executive officers for 1997 performance. The goals and objectives
included goals for: achieving budgeted levels of net operating income from the
Company's properties, achieving budgeted levels of funds from operations and
managing central office expenditures within budgeted levels. The balance of
objectives included property-specific development, operations and leasing goals.
The Company's actual performance in achieving its goals and objectives was used
in calculating the adjusted bonus levels payable to the executive officers for
1997. The Company's actual performance met or exceeded budgeted levels for all
goals and objectives outlined above, and the bonuses paid to the executive
officers were calculated on that basis. These bonuses were paid in April 1998.
18
<PAGE> 22
On May 23, 1997, the Committee also approved grants of stock options
and restricted stock pursuant to the Long Term Incentive Plan. The aggregate
values of such grants were based on target levels determined by Towers Perrin as
placing the total direct compensation for participating executives within the
50th and 75th percentiles of comparable companies.
1997 CHIEF EXECUTIVE OFFICER PAY
Effective April 1, 1997, the Committee increased Mr. Siegel's annual
salary 3% to $488,220. On March 30, 1998, the Committee approved a payment to
Mr. Siegel pursuant to the 1997 Performance Incentive Plan in the amount of
$467,914. This payment was calculated on the basis of the Company's achievement
of its 1997 goals and objectives, as outlined above in "1997 Executive Officer
Compensation." Effective as of April 1, 1997, as part of the Long Term Incentive
Plan, the Committee granted to Mr. Siegel stock options for 119,377 shares and
granted 10,952 shares of restricted stock. These actions were taken pursuant to
the Towers Perrin recommendation and were intended to place Mr. Siegel's base
salary and long term incentive compensation at the 75th percentile of the market
data.
$1 MILLION PAY DEDUCTIBILITY LIMIT
The Internal Revenue Code prohibits publicly traded companies from
taking a tax deduction for compensation in excess of $1 million paid to the
chief executive officer or any of the Company's four other most highly
compensated officers for any fiscal year. Certain performance-based compensation
is excluded from this $1 million cap. Stock options granted pursuant to the 1994
Executive Equity Incentive Plan are intended to qualify as such
performance-based compensation. During 1997, none of the Company's executive
officers' compensation subject to the deductibility limits exceeded $1 million.
THE EXECUTIVE COMPENSATION COMMITTEE
John M. Ingram, Chairman
Robert P. Pincus
The Hon. Joseph B. Gildenhorn
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<PAGE> 23
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock as of March 31, 1998 for (1) each person
known by the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock, (2) each director of the Company and each Named
Executive Officer 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 of limited partnership
interest ("Units") in the Operating Partnership owned by a person named in the
table are included in the "Number of Shares of Common Stock" column because such
Units are redeemable, 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 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, Virginia 22209 unless
otherwise provided.
<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 1,120,146(3) 4.74% 2.87%
Peter B. McMillan 99,232(4) * *
James F. Dausch 78,201(5) * *
Kent S. Digby 96,707(6) * *
Judith S. Berson 69,724(7) * *
Howard J. Samuels 0 * *
Dietrich von Boetticher 298,192(8) 1.28% *
John M. Ingram 6,000(9) * *
Charles R. Black, Jr. 750 * *
James C. Braithwaite 89,318(10) * *
Joseph B. Gildenhorn 10,000 * *
Peter A. Gordon 1,000(11) * *
Harry H. Nick 270,053(12) 1.16% *
Franz von Perfall 77,879(13) * *
Robert P. Pincus 5,500(14) * *
Kan Am 13,262,420(15) 36.51% 34.08%
3495 Piedmont Road
Ten Piedmont Center, Suite 520
Atlanta, Georgia 30305
FMR Corporation 1,341,000(16) 5.82% 3.45%
82 Devonshire Street
Boston, Massachusetts 02109
All executive officers and directors
as a group (22 persons) 2,579,973(17) 10.67%(18) 6.50%(19)
</TABLE>
- -----------
* Less than 1%
(1) For purposes of this calculation, the shares of Common Stock deemed
outstanding includes 23,058,753 shares of Common Stock outstanding as
of March 31, 1998, plus the number of shares of Common Stock issuable
to the named person(s) upon the exercise of options exercisable within
60 days of March 31, 1998 and 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 23,058,753 shares of Common Stock
outstanding as of March 31, 1998, 15,858,948 Units outstanding as of
March 31, 1998 (excluding Units held by the Company) and shares of
Common Stock issuable to the named persons(s) upon the exercise of
options exercisable within 60 days of March 31, 1998.
20
<PAGE> 24
(3) Includes 387,143 shares of Common Stock, 556,793 Units and options to
purchase 176,210 shares of Common Stock exercisable within 60 days of
March 31, 1998.
(4) Includes 26,314 shares of Common Stock and options to purchase 72,918
shares of Common Stock exercisable within 60 days of March 31, 1998.
(5) Includes 14,058 shares of Common Stock and options to purchase 64,143
shares of Common Stock exercisable within 60 days of March 31, 1998.
(6) Includes 9,707 shares of Common Stock, 4,846 Units and options to
purchase 82,154 shares of Common Stock exercisable within 60 days of
March 31, 1998.
(7) Includes 7,953 shares of Common Stock and options to purchase 61,771
shares of Common Stock exercisable within 60 days of March 31, 1998.
(8) Includes 297,192 Units and options to purchase 1,000 shares of Common
Stock exercisable within 60 days of March 31, 1998.
(9) Includes 5,000 shares of Common Stock and options to purchase 1,000
shares of Common Stock exercisable within 60 days of March 31, 1998.
(10) Includes 85,318 Units and options to purchase 1,000 shares of Common
Stock exercisable within 60 days of March 31, 1998. Also includes 1,000
shares held in an IRA over which Mr. Braithwaite has sole voting and
investment power and 2,000 shares held in an account for Mr.
Braithwaite's mother-in-law with respect to which Mr. Braithwaite
shares voting and investment power.
(11) Includes options to purchase 1,000 shares of Common Stock exercisable
within 60 days of March 31, 1998.
(12) Includes 144,832 shares of Common Stock and 125,221 Units.
(13) Includes 20,000 shares of Common Stock, 56,879 Units and options to
purchase 1,000 shares of Common Stock exercisable within 60 days of
March 31, 1998.
(14) Includes 4,000 shares of Common Stock and options to purchase 1,500
shares of Common Stock exercisable within 60 days of March 31, 1998.
(15) Includes 13,262,420 Units deemed to be beneficially owned by Kan Am as
general partner of nine limited partnerships.
(16) Includes 1,341,000 shares of Common Stock held by FMR Corporation.
(17) Includes 673,476 shares of Common Stock, 1,126,249 Units and options to
purchase 780,248 shares of Common Stock exercisable within 60 days of
March 31, 1998.
(18) For purposes of this calculation, the shares of Common Stock deemed
outstanding includes 23,058,753 shares of Common Stock outstanding as
of March 31, 1998, 1,126,249 Units beneficially owned by all executive
officers and directors as a group and options to purchase 780,248
shares of Common Stock exercisable within 60 days of March 31, 1998 for
all officers and directors as a group.
(19) The number of shares of Common Stock and Units deemed outstanding for
purposes of this calculation is described in note 2 to this table.
21
<PAGE> 25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
KAN AM JOINT VENTURES
At a special shareholders meeting held on February 16, 1995, the
Company's shareholders authorized the Company, as general partner of the
Operating Partnership, to cause the Operating Partnership to enter into joint
ventures with affiliates of Kan Am for the purpose of developing future projects
designated by the Board of Directors, on terms described in the proxy statement
for such meeting, with such reasonable modifications as may be approved by the
disinterested members of the Board of Directors.
On May 25, 1995, the disinterested members of the Board of Directors
authorized a joint venture with Kan Am to develop Ontario Mills in Ontario,
California. Pursuant to this approval, affiliates of the Operating Partnership,
Kan Am and the Simon-DeBartolo Realty Group formed Ontario Mills Limited
Partnership ("OMLP"), with the Operating Partnership holding an effective 50%
interest in exchange for a capital contribution of $10 million, Simon-DeBartolo
holding an effective 25% interest in exchange for a capital contribution of $10
million, and Kan Am holding a 25% interest in exchange for a capital
contribution of $20 million. In addition, the Operating Partnership has loaned
approximately an additional $5,000,000 in connection with the Ontario Mills
project. As of December 31, 1997, the outstanding balance on this loan was $5.5
million.
On February 16, 1995, the disinterested members of the Board of
Directors authorized a joint venture with Kan Am to develop the Company's
project in metropolitan Columbus, Ohio. On April 12, 1996, the Company, as
general partner of the Operating Partnership, and an affiliate of Kan Am
established Mills-Kan Am Columbus Limited Partnership (the "Columbus
Partnership") in which the Operating Partnership held a 75% partnership interest
and Kan Am held a 25% partnership interest. Pursuant to an approval given by the
Executive Committee on December 16, 1996, which was ratified by the Board of
Directors on March 17, 1997, the Operating Partnership entered into an amendment
of the partnership agreement for the Columbus Partnership whereby the name of
the partnership was changed to Mills-Kan Am Columbus/ Sawgrass Limited
Partnership, the purpose of the partnership was modified to authorize the
Columbus Partnership to develop and own either the proposed Columbus, Ohio
project or the proposed Phase III expansion of Sawgrass Mills in Sunrise,
Florida, and Kan Am was obligated to contribute up to $25 million in capital
contributions for the project, which represents 100% of the anticipated equity
required for the Phase III expansion of Sawgrass Mills.
On February 22, 1996, the disinterested members of the Board of
Directors authorized a joint venture with Kan Am to develop City Mills in
Orange, California. On December 16, 1996, the Executive Committee approved
additional terms and conditions to the joint venture, which were ratified by the
Board of Directors on June 10, 1997. The Operating Partnership and affiliates of
Kan Am formed Orange City Mills Limited Partnership on December 30, 1996, in
which the Operating Partnership and Kan Am each held a 50% interest and Kan Am
agreed to contribute up to $45 million to the Partnership,. On December 18,
1997, the Operating Partnership assigned all of its general partner interest,
consisting of 1.0%, to Orange City Mills, L.L.C. ("OCMLLC"). The partnership
agreement was further amended on December 18, 1997, to increase Kan Am's capital
contribution to $49 million and adjust the percentage of partnership interests
as follows: OCMLLC holds a 1% interest, Kan Am holds a 50% interest and the
Operating Partnership holds a 49% interest.
On June 10, 1997, the disinterested members of the Board of Directors
authorized the formation of a joint venture with Kan Am to develop Katy Mills in
Katy, Texas. On September 18, 1997, the disinterested members of the Board of
Directors approved the final terms of such joint venture. On December 12, 1997,
the Operating Partnership and Katy Mills, L.L.C. ("KMLLC") formed Katy Mills
Limited Partnership, in which the Operating Partnership held a 99% interest for
a capital contribution of $990.00 and KMLLC held a 1% interest for a capital
contribution of $10.00. On January 23, 1998, the partnership agreement was
amended and restated to provide for the admission of Kan Am to the partnership
and for the adjustment of the percentage partnership interests in the
partnership as follows: KMLLC holds a 1% interest, Kan Am holds a 25% interest
and the Operating Partnership holds a 74% interest.
22
<PAGE> 26
On September 18, 1997, the disinterested members of the Board of
Directors authorized a joint venture with Kan Am to develop Meadowlands Mills in
Carlstadt, New Jersey. On December 18, 1997, the Operating Partnership and
affiliates of Kan Am formed Meadowlands Mills Limited Partnership in which the
Operating Partnership holds a 67% interest and Kan Am holds a 33% interest.
Kan Am receives, or will receive, a 9% preferential return on its cash
contributions to the partnerships in which the Company and Kan Am are partners,
but income is allocated to the partners for tax purposes based on the partners'
proportionate interests in the partnership, which will have the effect of
allocating to the Company a higher percentage of the taxable income than its
share of cash distributions.
Three members of the Board of Directors, Messrs. von Boetticher,
Braithwaite and von Perfall, are affiliated with Kan Am and abstained from
voting on the proposed joint ventures. Mr. Braithwaite also is a member of the
Executive Committee and abstained from voting in the Executive Committee on the
proposed joint ventures. As of April 1, 1998, partnerships affiliated with Kan
Am owned approximately 34.17% of the outstanding Units in the Operating
Partnership, through which the Company owns all of its properties. The Company
is the sole general partner of the Operating Partnership and, as of April 1,
1998, owned approximately 57.95% of the outstanding Units.
On April 28, 1997, the Operating Partnership acquired the remaining
minority interests in the partnership that owns Franklin Mills in exchange for
Units as follows: Western Franklin Mills Corp. ("WFMC") assigned a 0.4430%
interest, Mr. Herbert S. Miller (a former director and officer of the Company)
assigned a 15.7005% interest in exchange for 140,582 Units; Mr. Siegel assigned
a 4.5000% interest in exchange for 39,081 Units and Mr. Nick assigned a 1.80000%
interest in exchange for 15,632 Units.
AMOUNT DUE TO AND FROM RELATED PARTIES
Pursuant to employment agreements the Company entered into with each of
Messrs. McMillan, Dausch, Whitcome, Frost and Rivers, the Company has loaned to
them $150,000, $150,000, $150,000, $100,000 and $50,000, respectively, to cover
the increased housing costs incurred by them in relocating to accept employment
with the Company. Each of the loans has a term of three years (except Mr.
Whitcome's loan, which has a term of five years) and bears interest at a rate of
8% per annum. The loans to Messrs. McMillan and Dausch are payable in full by
Mr. McMillan and Mr. Dausch in the event their employment with the Company
terminates for any reason other than for "good reason" or without cause;
provided, however, that on the third anniversary of the execution of each of
Messrs. McMillan's and Dausch's employment agreement, the Company shall
automatically forgive the entire loan principal, together with all interest
accruing under the loan as of such date. The loan to Mr. Frost is payable at
maturity and provides that one-third of the amount of the loan will be forgiven
annually if Mr. Frost remains employed by the Company. The terms of Mr.
Whitcome's employment agreement provide for forgiveness of the amount of the
loan, with 20% of such amount forgiven annually if Mr. Whitcome remains employed
by the Company. The loan to Mr. Rivers is payable at maturity and provides that
one-third of the amount of the loan will be forgiven annually on the anniversary
of his employment if Mr. Rivers remains employed by the Company. If any of the
officers terminates employment with the Company, the then outstanding principal
amount of the loan, plus interest, will become payable on terms specified in the
respective employment agreements.
OTHER TRANSACTIONS
The Third-Party Services Corporation manages a regional mall owned by a
partnership of which Mr. Miller is the sole general partner and in which Messrs.
Miller, Siegel and Nick are limited partners. In 1997, the Third-Party Services
Corporation earned approximately $859,804 in management, administration and
leasing fees from such partnership. These fees were computed in accordance with
the management contracts assigned to the Third-Party Services Corporation at the
time of the Company's initial public offering.
During 1997, the Company maintained certain interest-bearing accounts
with Franklin National Bank of Washington, D.C., of which Mr. Pincus is the
chief executive officer and a shareholder. Borrowings from Franklin National
Bank in 1997 included (i) a $2.4 million line of credit which was repaid in
April 1997; this loan was subsequently reestablished in July 1997, bearing
interest at a rate of 6.01% which matures on July 15, 1998 with an
23
<PAGE> 27
outstanding balance at December 31, 1997 of $2.4 million and (ii) a $1.5 million
loan for furniture and fixtures to Third-Party Services Corporation bearing
interest at a rate of 8.25% which matures in October 2000 and had an outstanding
balance at December 31, 1997 of $1,114,000.
Mr. Miller and Kan Am own equally 95% of the voting common stock of the
Third-Party Services Corporation. The Company owns the remaining 5% of the
voting common stock and 99% of the non-voting preferred stock. The Third-Party
Services Corporation was indebted to The Mills Limited Partnership, the balance
of which, as of December 31, 1997, was $35 million. No dividends were paid by
the Third-Party Services Corporation in 1997.
On September 18, 1997, the disinterested members of the Board of
Directors authorized the purchase of unimproved real property in Broward County,
Florida ("Sawgrass Residual") by the Third-Party Services Corporation from
Sunrise Mills Residual Limited Partnership. The parties entered into a purchase
and sale agreement on December 4, 1997, by which the Third-Party Services
Corporation would take title to the property for a purchase price of $7 million,
financed in party through the assumption of a $4.7 million mortgage loan held by
Hypo Bank. This transaction closed on December 10, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires directors, executive officers and certain shareholders of the Company
to file reports with the Securities and Exchange Commission regarding
transactions in the Company's securities. For 1997, each of Messrs. Dausch,
Nick, Siegel and Whitcome was late in filing one report to report one
transaction. Mr. Herbert Miller was late in filing one Form 4 reporting one
transaction and one Form 4 reporting nine transactions.
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.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of shareholders to be presented at the 1999 Annual Meeting of
Shareholders must be received by the Secretary of the Company prior to December
31, 1998 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 By-laws, 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 $4,500. Additional expenses will be incurred if the Meeting is
adjourned and to solicit additional proxies to procure a quorum at the adjourned
meeting.
24
<PAGE> 28
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,
/s/ THOMAS E. FROST
--------------------------
Thomas E. Frost
Secretary
April 30, 1998
25
<PAGE> 29
APPENDIX A
THE MILLS CORPORATION
AMENDED AND RESTATED 1994 EXECUTIVE EQUITY INCENTIVE PLAN
The Mills Corporation Amended and Restated 1994 Executive
Equity Incentive Plan (the "Plan") amends and restates in its entirety The Mills
Corporation 1994 Executive Equity Incentive Plan, as amended, which became
effective upon the closing of The Mills Corporation's initial public offering on
April 21, 1994 (the "Effective Date").
1. DEFINITIONS.
In this Plan, except where the context otherwise indicates,
the following definitions apply:
1.1 "AGREEMENT" means a written agreement implementing a grant
of an Option or an award of Restricted Stock.
1.2 "BOARD" means the Board of Directors of the Company.
1.3 "CODE" means the Internal Revenue Code of 1986, as
amended.
1.4 "COMMITTEE" means the committee of the Board meeting the
standards of Rule 16b-3(d)(1) under the Exchange Act, or any similar successor
rule and Treas. Reg. Section 1.162-27(e)(3) or any similar successor rule,
appointed by the Board to administer the Plan. Unless otherwise determined by
the Board, the Executive Compensation Committee of the Board shall be the
Committee.
1.5 "COMMON STOCK" means the common stock, par value $.01 per
share, of the Company.
1.6 "COMPANY" means The Mills Corporation.
1.7 "CONVERSION MULTIPLE" shall have the meaning set forth in
Article II of the Limited Partnership Agreement.
1.8 "DATE OF EXERCISE" means the date on which the Company
receives notice of the exercise of an Option in accordance with the terms of
SECTION 9 hereof.
1.9 "DATE OF GRANT" means the date on which an Option is
granted or Restricted Stock is awarded by the Committee (or such later date as
specified in advance by the Committee) or, in the case of a Nonstatutory Stock
Option granted to an Outside Director, the date on which such Nonstatutory Stock
Option is granted pursuant to and in accordance with the provisions of Section
11 hereof.
1.10 "OUTSIDE DIRECTOR" means any person who is a director of
the Company and who is not also an employee of either the Company, the Limited
Partnership or any of their affiliates.
1.11 "EMPLOYEE" means any REIT Employee or a Limited
Partnership Employee.
1.12 "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
1.13 "FAIR MARKET VALUE" of a Share means:
(a) If on the applicable date the Common Stock is
listed for trading on a national or regional securities
exchange or authorized for quotation on the National
Association of Securities Dealers, Inc.'s Nasdaq National
Market System ("NASDAQ/NMS"), the closing price of the Common
Stock on such exchange or NASDAQ/NMS, as the case may be, on
the applicable date, or
<PAGE> 30
if no sales of Common Stock shall have occurred on such
exchange or NASDAQ/NMS, as the case may be, on the applicable
date, the closing price of the Common Stock on the next
preceding date on which there were such sales;
(b) If on the applicable date the Common Stock is not
listed for trading on a national or regional securities
exchange or authorized for quotation on NASDAQ/NMS, the mean
between the closing bid price and the closing ask price of the
Common Stock as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") with
respect to the applicable date or, if closing bid and ask
prices for the Common Stock shall not have been so reported
with respect to the applicable date, on the next preceding
date with respect to which such bid and ask prices were so
reported; or
(c) if on the applicable date the Common Stock is not
listed for trading on a national or regional securities
exchange or is not authorized for quotation on NASDAQ/NMS or
NASDAQ, the Fair Market Value of a Share as determined by the
Committee pursuant to a reasonable method adopted in good
faith for such purpose.
Such Fair Market Value shall be subject to adjustment as
provided in SECTION 24 hereof.
1.14 "GRANTEE" means an Employee to whom Restricted Stock has
been awarded pursuant to SUBSECTION 7.6 hereof.
1.15 "INCENTIVE STOCK OPTION" means on Option granted under
the Plan that qualifies as an incentive stock option under Section 422 of the
Code and that the Company designates as such in the Agreement granting the
Option.
1.16 "LIMITED PARTNERSHIP" means The Mills Limited
Partnership, a Delaware limited partnership.
1.17 "LIMITED PARTNERSHIP AGREEMENT" means the Limited
Partnership's Amended and Restated Limited Partnership Agreement dated April 21,
1994.
1.18 "LIMITED PARTNERSHIP EMPLOYEE" means any person
determined by the Committee to be an employee of the Limited Partnership or any
Limited Partnership Subsidiary.
1.19 "LIMITED PARTNERSHIP SUBSIDIARY" means an entity at least
50% of the total equity interests of which is owned by the Limited Partnership
either directly or through one or more Limited Partnership Subsidiaries.
1.20 "NONSTATUTORY STOCK OPTION" means an Option granted under
the Plan that is not an Incentive Stock Option.
1.21 "OPTION" means an option to purchase Shares granted under
the Plan in accordance with the terms of either SECTION 7 or SECTION 11 hereof.
1.22 "OPTIONEE" means an Outside Director or an Employee to
whom an Option has been granted.
1.23 "OPTION PERIOD" means the period during which an Option
may be exercised.
1.24 "OPTION PRICE" mean the price per Share at which an
Option may be exercised. The Option Price shall be determined by the Committee,
except that, in the case of Nonstatutory Stock Options covering up to a maximum
of 985,000 Shares to be granted to certain Employees contemporaneously with the
consummation of the initial public offering of the Common Stock, and in the case
of Nonstatutory Stock Options granted to the Outside
2
<PAGE> 31
Directors pursuant to the provisions of SECTION 11, in no event shall the Option
Price in respect of Options granted contemporaneously with the initial public
offering be less than the initial public offering price of a share of Common
Stock, and in all other cases, the Option Price shall not be less that 100% of
the Fair Market Value per Share determined as of the Date of Grant.
1.25 "PERMANENT DISABILITY" means a mental or physical
condition which, in the opinion of the Committee, renders an Optionee or Grantee
unable or incompetent to carry out the job responsibilities which such Optionee
or Grantee held or tasks to which such Optionee or Grantee was assigned at the
time the disability was incurred and which is expected to be permanent or for an
indefinite period.
1.26 "PLAN" means The Mills Corporation Amended and Restated
1994 Executive Equity Incentive Plan, as the same may be amended, modified or
supplemented from time to time.
1.27 "RELOAD OPTION" means a new Option granted to an Optionee
pursuant to and in accordance with SUBSECTIONS 4.2(d)(v) and 9.2 hereof, upon
the surrender of Shares to pay the Option Price of a previously granted Option.
1.28 "REIT EMPLOYEE" means any person determined by the
Committee to be an employee of the Company or any REIT Subsidiary.
1.29 "REIT SUBSIDIARY" means a corporation at least 50% of the
total combined voting power of all classes of stock which is owned by the
Company either directly or through one or more REIT Subsidiaries.
1.30 "RESTRICTED STOCK" means Shares awarded pursuant to the
provisions of SUBSECTION 7.6 hereof.
1.31 "SHARE" means a share of Common Stock.
1.32 "UNIT" means a "Partnership Unit," as that term is
defined in the Limited Partnership Agreement.
2. PURPOSE.
The purpose of the Plan is to advance the interests of the
Company, the Limited Partnership and their affiliates by encouraging and
facilitating the acquisition of a larger personal financial interest in the
Company by Outside Directors and those Employees upon whose judgment and
interest the Company, the Limited Partnership and their affiliates are largely
dependent for the successful conduct of their operations, and making executive
positions in the Company, the Limited Partnership and their affiliates more
attractive. It is anticipated that the acquisition of such financial interest
will stimulate the efforts of such Employees and Outside Directors on behalf of
the Company, the Limited Partnership and their affiliates and strengthen their
desire to continue in the service of the Company, the Limited Partnership or
their affiliates. It is also anticipated that the opportunity to obtain such a
financial interest will prove attractive to promising executive talent and will
assist the Company, the Limited Partnership and their affiliates in attracting
such persons.
3. SCOPE OF THE PLAN.
3.1 SHARES AVAILABLE. An aggregate of 4,500,000 Shares is
hereby made available and shall be reserved for issuance under the Plan with
respect to the exercise of Options and awards of Restricted Stock, provided that
no more than 1,500,000 Shares may be issued pursuant to awards of Restricted
Stock. Such number of Shares shall be reduced by the aggregate number of Shares
acquired from time to time to be held as treasury Shares reserved for use under
the Plan. The aggregate number of Shares available under this Plan shall be
subject to adjustment upon the occurrence of any of the events and in a manner
set forth in SECTION 24 hereof.
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3.2 SHARES SUBJECT TO TERMINATED OPTIONS OR FORFEITED
RESTRICTED STOCK AWARDS. If and to the extent, an Option shall expire or
terminate for any reason without having been exercised in full, the Shares
subject thereto which have not become outstanding shall (unless the Plan shall
have terminated) become available under the Plan for other awards. Any Shares of
Restricted Stock forfeited by the Grantee, will (unless the Plan shall have
terminated) become available under the Plan for other grants or awards.
3.3 AUTHORITY TO PURCHASE SHARES. The Board, such committee of
the Board that the Board shall specifically authorize or direct on its behalf,
or the Committee shall have the authority to cause the Company to purchase from
time to time, in such amounts and at such prices as the Board, in its
discretion, shall deem advisable or appropriate, Shares to be held as treasury
Shares and reserved and used solely for or in connection with grants or awards
under the Plan, at the discretion of the Committee.
4. ADMINISTRATION.
4.1 THE COMMITTEE. The Plan shall be administered by the
Committee. Members of the Committee shall not participate in the Plan or receive
grants or awards of equity securities under any other plan of the Company or any
of its affiliates except as provided in SECTION 11.
4.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full
and final authority, in its discretion, but subject to the express provisions of
the Plan, as follows:
(a) to grant Options and awards of Restricted Stock;
(b) subject to SECTIONS 7 and 11, to determine (a) the Option
Price of the Shares subject to each Option, (b) the Employees
and Outside Directors to whom, and the time or times at which,
Options shall be granted or Restricted Stock shall be awarded,
and (c) subject to SECTION 3, the number of Shares subject to
an Option and the number of Shares of Restricted Stock to be
granted to each Optionee and Grantee thereof, respectively;
(c) to determine all other terms and provisions of each
Agreement (which may, but need not be, identical), and with
the consent of the Optionee or Grantee, as the case may be, to
modify any Agreement (including, without limitation, the
vesting of Restricted Stock subject to such Agreement);
(d) without limiting the foregoing, to provide, in its
discretion, in any Agreement:
(i) for an agreement by the Optionee or Grantee, as
the case may be, to render services to the Company, a
REIT Subsidiary, the Limited Partnership or a Limited
Partnership Subsidiary upon such terms and conditions
as may be specified in the Agreement, provided that
the Committee shall not have the power to commit the
Company, a REIT Subsidiary, the Limited Partnership
or a Limited Partnership Subsidiary to employ or
otherwise retain any Optionee or Grantee;
(ii) for restrictions on the transfer, sale or other
disposition of Shares issued to the Optionee upon the
exercise of an Option, and for other restrictions
permitted by SUBSECTION 7.6 hereof with respect to
Restricted Stock awarded to a Grantee;
(iii) for an agreement by the Optionee or Grantee, as
the case may be, to resell to the Company, under
specified conditions, Shares issued upon the exercise
of an Option or awarded as Restricted Stock;
(iv) for the payment of the Option Price upon the
exercise of an Option otherwise than in cash,
including without limitation by delivery of Shares
(other than Restricted Stock) valued at Fair Market
Value on the Date of Exercise of the Option in
accordance with the terms of SUBSECTION 9.1 hereof,
or a combination of cash and Shares, or for the
payment in part of the Option Price with a promissory
note in accordance with the
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terms of SUBSECTION 9.3 hereof;
(v) for the automatic issuance of a Reload Option
covering a number of Shares equal to the number of
any Shares used to pay the Option Price in accordance
with the terms of SUBSECTION 9.2 hereof;
(vi) for the right of the Optionee to surrender to
the Company an Option (or a portion thereof) that has
become exercisable and to receive upon such
surrender, without any payment to the Company, the
Limited Partnership, a REIT Subsidiary or a Limited
Partnership Subsidiary (other than required tax
withholding amounts) that number of Shares (equal to
the highest whole number of Shares) having an
aggregate Fair Market Value as of the date of
surrender equal to that number of Shares subject to
the Option (or portion thereof) being surrendered
multiplied by an amount equal to the excess of (I)
the Fair Market Value of a Share on the date of
surrender, over (II) the Option Price, plus an amount
of cash equal to the Fair Market Value of any
fractional Share to which the Optionee might be
entitled. Other than for purposes of SUBSECTION
6.2(b) hereof, any such surrender shall be treated as
the exercise of the Option (or portion thereof).
(e) to construe and interpret the Plan and Agreements;
(f) to prescribe, amend and rescind rules and regulations
relating to the Plan, including, without limitation and
subject to SECTION 15 hereof, the rules with respect to the
exercisability of Options and the vesting of Restricted Stock;
(g) to require, whether or not provided for in the pertinent
Agreement, of any person exercising an Option or acquiring
Restricted Stock, at the time of such exercise or acquisition,
the making of any representations or agreements which the
Committee may deem necessary or advisable in order to comply
with the securities laws of the United States or of any state;
(h) to prescribe the method by which grants of Options and
awards of Restricted Stock shall be evidenced;
(i) to cancel, with the consent of the Optionee thereof,
outstanding Options and to grant new Options in substitution
therefor;
(j) to require withholding from or payment by an Optionee or
Grantee, as the case may be, of any federal, state, or other
governmental taxes;
(k) to prohibit the election described in SECTION 12 hereof;
(l) to make all other determinations deemed necessary or
advisable for the administration of the Plan; and
(m) to impose such additional conditions, restrictions and
limitations upon the exercise, vesting or retention of Options
or Restricted Stock as the Committee may, prior to or
concurrently with the grant or award thereof, deem
appropriate, including, but not limited to, limiting the
percentage of Options which may from time to time be exercised
by an Optionee.
4.3 FINALITY OF COMMITTEE DETERMINATIONS: LIABILITY OF
MEMBERS. The determination of the Committee on all matters relating to the Plan
or any Agreement shall be conclusive and final. No member of the Committee shall
be liable for any action or determination made in good faith with respect to the
Plan, any Agreement or any grant thereunder.
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4.4 PERIODIC COMMITTEE REVIEW AND MEETINGS WITH MANAGEMENT.
The Committee shall from time to time review the implementation and results of
the Plan to determine the extent to which the Plan's purpose is being
accomplished. In addition, the Committee shall periodically meet with senior
management of the Company and the Limited Partnership to review their
suggestions regarding grants and awards under the Plan, including the
individuals who are proposed to receive grants or awards and the amount and
terms of such grants or awards; provided, that all such grants and awards shall
be determined solely by the Committee in its discretion.
4.5 INDEMNIFICATION OF THE COMMITTEE. In addition to such
other rights of indemnification as they may have as directors of the Company or
as members of the Committee, the members of the Committee shall be indemnified
by the Limited Partnership or, if related to a grant or award to an Outside
Director or REIT Employee, by the Company, against the reasonable expenses,
including attorneys' fees, actually and reasonably incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option or
Restricted Stock granted or awarded hereunder, and against all amounts
reasonably paid by them in a settlement thereof or paid by them in satisfaction
of a judgment in any such action, suit or proceeding, if such members acted in
good faith and in a manner which they believed to be in, and not opposed to, the
best interests of the Limited Partnership or, with respect to an Outside
Director or REIT Employee, the Company.
5. ELIGIBILITY.
Options and Restricted Stock may be granted or awarded, as the
case may be, only to Outside Directors and Employees, except that Limited
Partnership Employees are not eligible to receive Incentive Stock Options and
Outside Directors and other members of the Committee are not eligible to receive
Options or Restricted Stock other than pursuant to SECTION 11. Subject to the
provisions of SECTION 3 and 28 hereof, an Employee or Outside Director who has
been granted an Option or awarded Restricted Stock may be granted additional
Options or awarded additional Restricted Stock; provided, however, that grants
of Nonstatutory Stock Options to Outside Directors are subject to the
limitations set forth in SECTION 11. In selecting the individuals to whom
Options or Restricted Stock shall be granted or awarded, as the case may be, as
well as in determining the number of Shares subject to each Option or Restricted
Stock to be granted or awarded, the Committee shall take into consideration such
factors as it deems relevant in connection with promoting the purposes of the
Plan.
6. GENERAL OBLIGATIONS OF THE COMPANY AND THE LIMITED PARTNERSHIP.
6.1 ISSUANCE OF SHARES AND FRACTIONAL SHARE PAYMENTS. All
Shares issued under the Plan pursuant to the exercise of an Option or an award
of Restricted Stock shall be issued by the Company. All cash paid under the Plan
with respect to a fractional Share upon the surrender of an Option in accordance
with SUBSECTION 4.2(d)(iv) and 9.2 hereof shall be paid by the Company.
6.2 OPTIONS EXERCISED.
(a) ISSUANCE OF UNITS AND CAPITAL ACCOUNT ADJUSTMENTS. Upon
the exercise of an Option, the Limited Partnership shall issue
to the Company, a number of Units equal to (i) the number of
Shares issued to the Optionee, divided by (ii) the Conversion
Multiple. The Company's Limited Partnership capital account in
the Limited Partnership shall be credited with an amount equal
to the Fair Market Value of the number of Shares issued upon
the exercise of an Option.
(b) CASH CONTRIBUTIONS BY THE COMPANY. Upon the exercise of an
Option (not including any deemed exercise upon the surrender
of an Option in accordance with SUBSECTION 4.2(d)(vi) hereof),
the Company shall contribute to the Limited Partnership an
amount of cash equal to the aggregate Option Price paid by the
Optionee for the Shares issued upon exercise, regardless of
whether the Optionee pays the Option Price in cash, Shares or
a combination thereof; provided, that to the extent the Option
Price is paid with a promissory note of the Optionee in
accordance with the provisions of SUBSECTION 9.3 hereof, the
amount of cash contributed to the Limited Partnership pursuant
to this SUBSECTION 6.2(b) shall be contributed to the Limited
Partnership only upon receipt by the Company
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of any installment and interest due under such promissory note
and shall be limited to the amount of such installment and
interest and provided that, if the Optionee pays with Shares,
the Company shall have the right to cancel the Shares received
in which event Units held by the Company in an amount equal to
the Shares canceled multiplied by the Conversion Multiple
shall be canceled by the Limited Partnership. The Company's
contribution of cash to the Limited Partnership pursuant to
the preceding sentence shall not be treated as a contribution
to capital and the Company's capital account in the Limited
Partnership shall not be credited with the amount of cash so
contributed.
(c) FRACTIONAL SHARE CASH REIMBURSEMENTS BY THE LIMITED
PARTNERSHIP AND TREATMENT THEREOF. The Limited Partnership
shall reimburse the Company for any cash paid with respect to
a fractional Share upon the surrender of an Option in
accordance with SUBSECTION 4.2(d)(vi) hereof. Such
reimbursement shall be treated as the reimbursement of an
expense incurred by the Company on behalf of the Limited
Partnership, shall not be treated as a distribution by the
Limited Partnership to the Company and shall not reduce the
Company's Limited Partnership capital account.
6.3 RESTRICTED STOCK AWARDS. Upon the award of shares of
Restricted Stock, the Limited Partnership shall issue to the Company a number of
restricted Units, equal to (i) the number of shares of Restricted Stock awarded
to the Grantee, divided by (ii) the Conversion Multiple, that are subject to the
same restrictions as those applicable to the shares of Restricted Stock. Upon
the lapse of restrictions applicable to the shares of Restricted Stock, the
restrictions applicable to the corresponding restricted Units referred to in
this SUBSECTION 6.3 also shall lapse. The Company's capital account in the
Limited Partnership shall be adjusted, as appropriate, to reflect the issuance
of shares of Restricted Stock, and such capital account also shall be adjusted,
as appropriate, in the event that the shares of Restricted Stock are forfeited
or the restrictions thereon lapse.
7. CONDITIONS TO GRANTS AND AWARDS.
7.1 GENERAL. Subject to the provisions of SECTIONS 5 and 11
hereof, the Committee is hereby authorized to grant Nonstatutory Stock Options
to Outside Directors and Employees and Incentive Stock Options to REIT
Employees. All Agreements granting Options shall contain a statement that the
Option is intended to be either (a) a Nonstatutory Stock Option, or (b) an
Incentive Stock Option, and all Options designated as Incentive Stock Options
shall be, in addition to other provisions of this Plan, subject to the terms and
conditions of SUBSECTION 7.4 below. Subject to the provisions of SECTIONS 3 and
28 hereof, an individual who has been granted an Option or Restricted Stock may,
if such individual is otherwise eligible, be granted additional Options or
awarded additional Restricted Stock if the Committee shall so determine. Subject
to the other provisions of this Plan, the Committee may grant Options or award
Restricted Stock with terms and conditions which differ among the Optionees or
Grantees thereof, respectively.
7.2 OPTION PERIOD AND EXERCISABILITY. Subject to the terms of
SECTION 11 hereof, the Option Period shall be determined by the Committee and
specifically set forth in the Agreement; provided, however, that the Option
Period shall not be for a period of more than ten years from the Date of Grant,
and shall be subject to earlier termination as herein provided. The terms and
conditions with respect to exercisability shall be determined by the Committee.
To the extent not set forth in the Plan, the terms and conditions of each grant
shall be set forth in an Agreement.
7.3 GRANTS OF OPTIONS AND OPTION PRICE. Before the grant of
any Option, the Committee shall determine the Option Price of the Shares subject
to such Option; provided that, except as provided in SUBSECTION 7.4 below, with
respect to Incentive Stock Options, the Option Price shall not be less that 100%
of the Fair Market Value of the Common Stock on the Date of Grant.
7.4 GRANTS OF INCENTIVE STOCK OPTIONS. Any Option designated
as an Incentive Stock Option may be granted only to a REIT Employee and shall:
(a) have an Option Price of (i) not less than 100% of the Fair
Market Value of a Share on the Date of Grant, or (ii) in the
case of a REIT Employee who owns stock (including stock
treated as owned under Section 424(d) of the Code) possessing
more than 10% of the total combined voting
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power of all classes of stock of the Company or any of its
50%-or-more owned subsidiaries (a "10% Owner"), not less than
110% of the Fair Market Value of a Share on the Date of Grant;
(b) have an Option Period of not more than ten years (five
years, in the case of a 10% Owner) from the Date of Grant, and
shall be subject to earlier termination as herein provided;
(c) notwithstanding the provisions relating to termination of
employment set forth in SECTION 15 hereof, not to be
exercisable more than three months (or one year, in the case
of an Optionee who is disabled within the meaning of Section
22(e)(3) of the Code) after termination of employment;
(d) not have an aggregate Fair Market Value (determined for
each Incentive Stock Option at the time it is granted) of
Shares with respect to which Incentive Stock Options are
exercisable for the first time by such Optionee during any
calendar year (under this Plan and any other employee stock
option plan of the Optionee's employer or any parent or
50%-or-more owned subsidiary thereof), determined in
accordance with the provisions of Section 422 of the Code,
which exceeds $100,000 (the "$100,000 Limit");
(e) if the aggregate Fair Market Value of Shares (determined
on the Date of Grant) with respect to all Incentive Stock
Options previously granted under this Plan and Other Plans
("Prior Grants") and any Incentive Stock Options under such
grant (the "Current Grant") which are exercisable for the
first time during any calendar year would exceed the $100,000
Limit, be exercisable as follows:
(i) the portion of the Current Grant exercisable for
the first time by the Optionee during any calendar
year which would be, when added to any portions of
any Prior Grants exercisable for the first time by
the Optionee during any such calendar year with
respect to Shares which would have an aggregate Fair
Market Value (determined at the time of each such
grant) in excess of the $100,000 Limit shall,
notwithstanding the terms of the Current Grant, be
exercisable for the first time by the Optionee in the
first subsequent calendar year or years in which it
could be exercisable for the first time by the
Optionee when added to all Prior Grants without
exceeding the $100,000 Limit;
(ii) if, viewed as of the date of the Current Grant,
any portion of a Current Grant could not be exercised
under the provisions of the immediately preceding
sentence during any calendar year commencing with the
calendar year in which it is first exercisable
through and including the last calendar year in which
it may by its terms be exercised, such portion of the
Current Grant shall not be an Incentive Stock Option,
but shall be exercisable as a separate Option at such
date or dates as are provided in the Current Grant;
(iii) be granted within ten years from the earlier of
the date the Plan is adopted or the date the Plan is
approved by stockholders of the Company; and
(iv) require the Optionee to notify the Committee of
any disposition of any Shares issued pursuant to the
exercise of the Incentive Stock Option under the
circumstances described in Section 421(b) of the Code
(relating to certain disqualifying dispositions),
within ten days of such disposition.
7.5 CODE SECTION 162(m) COMPLIANCE FOR OPTION GRANTS. The
maximum number of Shares subject to Options which may be awarded to any Optionee
in any one calendar year shall not exceed 500,000 Shares. In all events,
determinations under the preceding sentence shall be made in a manner which is
consistent with Code Section 162 and the regulations promulgated thereunder.
7.6 AWARDS OF RESTRICTED STOCK. The Committee is hereby
authorized to award shares of Restricted Stock to Employees in accordance with
the following provisions:
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(a) GENERAL NATURE OF RESTRICTIONS. Restricted Stock awards
under the Plan shall consist of Shares that are restricted
against transfer, subject to forfeiture and subject to such
other terms and conditions intended to further the purposes of
the Plan as may be determined by the Committee.
(b) TERMS OF AWARD AGREEMENTS. Restricted Stock awards shall
be evidenced by Agreements containing provisions setting forth
the terms and conditions governing such awards. Each such
Agreement shall contain the following:
(i) prohibitions against the sale, assignment,
transfer, exchange, pledge, hypothecation or other
encumbrance of (A) the Shares awarded as Restricted
Stock under the Plan, (B) the right to vote the
Shares, or (C) the right to receive dividends thereon
in each such case during the restriction period
applicable to the Shares; provided, however, that the
Grantee shall, unless otherwise provided in the
applicable Agreement, have all the other rights of a
stockholder including, but not limited to, the right
to receive dividends and the right to vote the
Shares;
(ii) at least one term, condition or restriction
constituting a "substantial risk of forfeiture" as
defined in Section 83(c) of the Code;
(iii) such other terms, conditions and restrictions
as the Committee in its discretion may specify
(including, without limitation, provisions creating
additional substantial risks of forfeiture);
(iv) a requirement that each certificate representing
shares of Restricted Stock shall be deposited with
the Company, or its designee, and shall bear the
following legend:
"This certificate and the shares of stock
represented hereby are subject to the terms
and conditions (including the risks of
forfeiture and restrictions against
transfer) contained in The Mills Corporation
Amended and Restated 1994 Executive Equity
Incentive Plan, as the same may be amended
from time to time (the "Plan") and a written
agreement (the "Agreement") entered into
between the registered owner and The Mills
Corporation. Release from such terms and
conditions shall be made only in accordance
with the provisions of the Plan and the
Agreement, a copy of each of which is on
file in the office of the Secretary of The
Mills Corporation."
(v) the applicable period or periods of any terms,
conditions or restrictions applicable to the
Restricted Stock; provided, however, that the
Committee in its discretion may accelerate the
expiration of the applicable restriction period with
respect to any part or all of the Shares awarded to a
Grantee; and
(vi) the terms and conditions upon which any
restrictions upon Shares of Restricted Stock awarded
under the Plan shall lapse and new certificates free
of the foregoing legend shall be issued to the
Grantee or his or her legal representative.
(c) FORFEITURE UPON TERMINATION OF EMPLOYMENT. Notwithstanding
the provisions of SUBSECTION 15.1 hereof, the Committee may
include in an Agreement relating to an award of Restricted
Stock a requirement that in the event of a Grantee's
termination of employment for any reason prior to the lapse of
restrictions, all Shares of Restricted Stock shall be
forfeited by the Grantee to the Company without payment of any
consideration by the Company, and neither the Grantee nor any
successors, heirs, assigns or personal representatives of the
Grantee shall thereafter have any further rights or interest
in the Shares or certificates.
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(d) RESTRICTED STOCK - DIVIDEND EQUIVALENTS. The Committee may
establish terms and conditions under which the Grantee of a
Restricted Stock award shall be entitled to receive a credit
equivalent to any dividend payable with respect to the number
of Shares which, as of the record date for such dividend, had
been stated in the award but not satisfied by delivery to him
of Shares. Any such dividend equivalents shall be paid to the
Grantee at such time or times during the period when the
Shares are being held by the Company pursuant to the terms of
the Restricted Stock award, or at the time the Shares to which
the dividend equivalents apply are delivered to the Grantee,
as the Committee shall determine. Any arrangement for payment
of dividend equivalents shall be terminated if, under the
terms and conditions established by the Committee, the right
to receive Shares of Restricted Stock being held pursuant to
the terms of the Restricted Stock award shall lapse.
(e) CODE SECTION 162(m) COMPLIANCE FOR RESTRICTED STOCK. This
SUBSECTION 7.6(e) applies only to those salaried Employees
who, in the judgment of the Committee, may be Covered
Employees, under Code Section 162(m)(3). With respect to the
grant of Restricted Stock, the Committee may establish
performance goals applicable to Restricted Stock granted to
Grantees in such manner as shall permit the Grant to qualify
as "performance-based compensation" as described in Section
162(m)(4)(C) of the Code. It is specifically provided that the
material terms of such performance goals for Grantees shall,
until changed by the Committee, with the approval of the
shareholders, be as follows: (i) the business criterion on
which performance goals shall be based shall be
o the attainment of such levels of either earnings per
share from continuing operations or shareholder
return as may be specified by the Committee; or
o the attainment of certain revenue or pre-tax income
levels, as established by the Committee; and
(ii) the maximum number of shares of Restricted Stock which
may be granted to any Grantee in any one calendar year shall
not exceed 200,000 shares. In all events, determinations under
the preceding sentence shall be made in a manner which is
consistent with Code Section 162 and the regulations
promulgated thereunder.
8. NON-TRANSFERABILITY.
Unless otherwise provided in the applicable Agreement, each
Option granted and Restricted Stock awarded hereunder shall not be assignable or
transferable other than by will or the laws of descent and distribution and
Options may be exercised, during the Optionee's lifetime, only by the Optionee.
9. EXERCISE OF OPTIONS.
9.1 MANNER OF EXERCISE AND PAYMENT. Subject to the provisions
hereof and the provisions of the Agreement under which it was granted, each
Option shall be exercised by delivery to the Company's treasurer of written
notice of intent to purchase a specific number of Shares subject to the Option.
The Option Price of any Shares as to which an Option is exercised shall be paid
in full at the time of the exercise, unless and to the extent that the Committee
agreed in the Agreement in which the Option was granted to accept a promissory
note as provided in SUBSECTION 9.2 below. Payment may, at the election of the
Optionee, be made in (i) cash, (ii) Shares valued at its Fair Market Value on
the date of exercise, (iii) surrender of an exercisable Option covering Shares
with an aggregate Fair Market Value as the date of exercise in excess of the
Option Price of such Option equal to the Option Price of the Options sought to
be exercised, (iv) through the delivery of irrevocable instructions to a broker
to deliver promptly to the Company an amount in cash equal to the Option Price,
or (v) any combination of the foregoing. In certain circumstances, payment may
also be made in accordance with SUBSECTION 9.3 below.
9.2 RELOAD OPTION. Pursuant to SUBSECTION 4.2(d)(v) hereof,
the Committee may, in its sole discretion, award Reload Options in an amount
equal to the number of Shares delivered in payment of the Option Price
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in connection with the exercise of an Option. To the extent required by
applicable law, the number of Reload Options available to each Optionee shall be
set forth in each award. The Option Price for any Reload Option shall be the
Fair Market Value of a Share on the date that Shares are surrendered in payment
of the Option Price. Other terms of the Reload Option shall be the same as the
terms contained in the Agreement relating to the Option being exercised,
provided that if a Reload Option is granted in connection with the use of Shares
to pay the exercise price of an Incentive Stock Option, the Reload Option shall
be a Nonstatutory Stock Option.
9.3 DEFERRED PAYMENT OF OPTION PRICE. To the extent permitted
by applicable law, the Committee may agree in the Agreement in which an Option
is granted to accept as partial payment for the Shares a promissory note of the
Optionee evidencing his or her obligation to make further cash payment therefor;
provided, however, that in no event may the Committee accept a promissory note
for an amount in excess of the difference between the aggregate Option Price and
the par value of the Shares. Promissory notes made pursuant to this SUBSECTION
9.3 shall be payable as determined by the Committee, shall be secured by a
pledge of the Shares in respect of the purchase of which the promissory note is
being delivered and shall bear interest at a rate fixed by the Committee (which
rate shall not be lower than a reasonable commercial rate).
10. ACCELERATED EXERCISE.
Notwithstanding any other provisions of the Plan, all
unexercised Options and non-vested Restricted Stock awards may be exercised or
disposed of commencing on the date of a Change of Control, as defined in SECTION
16 hereof; provided, however, that the Company may cancel all such Options and
Restricted Stock under the Plan as of the date of a Change of Control by giving
notice to each Optionee or Grantee thereof, as the case may be, of its intention
to do so and by permitting the purchase during the thirty-day period next
preceding such effective date of all of the Shares subject to such outstanding
Options or by payment for outstanding Restricted Stock during such thirty-day
period.
11. GRANT OF STOCK OPTIONS TO OUTSIDE DIRECTORS.
Each Outside Director shall be eligible to be granted
Nonstatutory Stock Options and all such grants shall only be made under and in
accordance with the provisions of this SECTION 11.
11.1 GRANT TO OUTSIDE DIRECTORS. Each person who becomes an
Outside Director during 1994 shall be granted, on the date such person first
becomes an Outside Director, a Nonstatutory Stock Option to purchase 1,000
Shares at an Option Price equal to the initial public offering price of a share
of Common Stock in connection with the initial public offering of the Common
Stock. Thereafter, each Outside Director shall be granted on each date such
person first becomes an Outside Director or is re-elected as an Outside
Director, which shall be the Date of Grant, a Nonstatutory Stock Option to
purchase 1,000 Shares at an Option Price equal to the Fair Market Value of such
shares on the Date of Grant. Each Nonstatutory Stock Option shall provide that
it may be exercised no later than ten years following the Date of Grant and that
the Nonstatutory Stock Option shall become exercisable with respect to the 500
Shares beginning on the third anniversary of the Date of Grant and 500 Shares
beginning on the fourth anniversary of the Date of Grant, provided that the
Optionee remains a director of the Company on such third and fourth
anniversaries of the Date of Grant.
11.2 INSUFFICIENT SHARES AVAILABLE. If on any date on which
Nonstatutory Stock Options are to be granted pursuant to SUBSECTION 11.1 above
there is an insufficient number of Shares available pursuant to SECTION 3 hereof
for such grant, the number of Shares subject to each Option granted pursuant to
SUBSECTION 11.1 on such date shall equal the number of Shares that otherwise
would be subject to such Nonstatutory Stock Options but for such limitation
multiplied by a fraction, the numerator of which shall be the total number of
Shares then available pursuant to SECTION 3 for the grant of Nonstatutory Stock
Options, and the denominator of which shall be the aggregate number of Shares
that otherwise would be granted pursuant to SUBSECTION 11.1, such product to be
rounded down to the nearest whole number.
11.3 CHANGE OF CONTROL. Notwithstanding the provisions of
SUBSECTION 11.1, a Nonstatutory Stock Option granted pursuant to SUBSECTION 11.1
may be exercised in full upon a Change of Control.
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12. NOTIFICATION UNDER SECTION 83(b).
Provided that the Committee has not prohibited such Optionee
or Grantee, as the case may be, from making the following election, if an
Optionee or Grantee shall, in connection with the exercise of any Option or the
award of Restricted Stock, respectively, make the election permitted under
Section 83(b) of the Code (i.e., an election to include in such Optionee's or
Grantee's gross income in the year of transfer the amounts specified in Section
83(b) of the Code), such Optionee or Grantee shall notify the Committee of such
election within ten days of filing notice of the election with the Internal
Revenue Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Section 83(b) of the Code.
13. WITHHOLDING TAXES.
The Company shall be entitled to require as a condition of
delivery of Shares hereunder that the Optionee or Grantee, as the case may be,
remit an amount sufficient to satisfy all federal, state, and other governmental
withholding tax requirements related thereto.
14. ELECTIVE SHARE WITHHOLDING.
14.1 An Optionee or Grantee may, subject to Committee
approval, elect the withholding ("Share Withholding") by the Company of a
portion of the Shares otherwise deliverable to such Optionee or Grantee upon his
or her exercise of an Option or vesting of a Restricted Stock award having a
Fair Market Value equal to either (a) the amount necessary to satisfy such
Optionee's or Grantee's required federal, state, or other governmental
withholding tax liability with respect thereto, or (b) a greater amount, not to
exceed the estimated total amount of such Optionee's or Grantee's tax liability
with respect thereto.
14.2 SHARE WITHHOLDING IS SUBJECT TO COMMITTEE APPROVAL. Share
Withholding is subject to Committee approval and each Share Withholding election
by an Optionee or Grantee shall also be subject to the following restrictions:
(a) the election must be made prior to the date on which the
amount of tax to be withheld is determined; and
(b) the election shall be irrevocable.
15. TERMINATION OF EMPLOYMENT.
15.1 FORFEITURE. Subject to the provisions of SUBSECTION 7.4
hereof with respect to Incentive Stock Options and the provisions of SUBSECTION
7.6(c) hereof with respect to Restricted Stock, unless otherwise provided in an
applicable Agreement, an unexercised Option or non-vested Restricted Stock award
shall terminate and/or be forfeited upon the date on which the Optionee or
Grantee thereof, as the case may be, is no longer an Employee ("Termination of
Employment"), except that:
(a) DEATH. If the Optionee's or Grantee's Termination of
Employment is by reason of his or her death, unexercised
Options to the extent exercisable on the date of the
Optionee's death, may be exercised, in whole or in part, at
any time within one (1) year after the date of the death by
the Optionee's personal representative or by the person whom
the Options are transferred by will or the applicable laws of
descent and distribution and non-vested Restricted Stock
awards shall become vested on the date of the Grantee's death.
(b) RETIREMENT. If the Optionee's or Grantee's employment is
terminated as a result of retirement under the provisions of a
retirement plan of the Company or any of its affiliates
applicable to the Optionee or Grantee (or on or after age 60
if no retirement plan of the Company or any of its affiliates
are applicable to the Optionee or Grantee), any unexercised
Option to the extent exercisable at the date of such
Termination of Employment, may be exercised, in whole or in
part, at any time
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within 90 days after the date of such Termination of
Employment, and non-vested Restricted Stock awards shall
become vested; provided that, if the Optionee dies after such
Termination of Employment and before the expiration of such
90-day period, unexercised Options held by such deceased
Optionee may be exercised by his or her personal
representative or by the person to whom the Option is
transferred by will or the applicable laws of descent and
distribution within one year after the Optionee's Termination
of Employment.
(c) PERMANENT DISABILITY. If the Optionee's or Grantee'
employment is terminated as a result of his or her Permanent
Disability, any unexercised Option, to the extent exercisable
at the date of such Termination of Employment, may be
exercised, in whole or in part, at any time within one year
after the date of such Termination of Employment, and
non-vested Restricted Stock awards shall become vested;
provided that, if an Optionee dies after such Termination of
Employment and before the expiration of such one year period,
the unexercised Options may be exercised by the deceased
Optionee's personal representative or by the person to whom
the unexercised Options are transferred by will or the
applicable laws of descent and distribution within one year
after the Optionee's Termination of Employment, or, if later,
within 180 days after the Optionee's death.
(d) OTHER REASONS FOR TERMINATION. If the Optionee or Grantee
has a Termination of Employment for any reason other than by
death, retirement or Permanent Disability, any unexercised
Option to the extent exercisable on the date of such
Termination of Employment, may be exercised, in whole or in
part, at any time within 90 days from the date of such
Termination of Employment.
15.2 OPTION TERM. Any of the provisions herein to the contrary
notwithstanding, no Option shall be exercisable beyond the term specified in the
related Agreement thereof.
16. CHANGE OF CONTROL.
16.1 DEFINITION OF "CHANGE OF CONTROL." The term "Change of
Control" means any of the following events and, if more than one of the
following events shall occur, each such event shall constitute a separate Change
of Control.
(a) ACQUISITION OF STOCK. The acquisition, by a person or
group of persons acting in concert, of a beneficial ownership interest
in the Company, resulting in the total beneficial ownership of such
persons or group of persons equaling or exceeding 20% of the
outstanding common stock of the Company. The Change of Control shall be
deemed to occur on the date the beneficial ownership of the acquiring
person or group of persons first equals or exceeds 20% of the
outstanding common stock of the Company.
(b) CHANGE IN BOARD COMPOSITION. A change, within any period
of twenty-four months or less, in the composition of the Board such
that at the end of such period a majority of the directors who are then
serving were not serving at the beginning of such period, unless at the
end of such period a majority of the directors in office were nominated
upon the recommendation of a majority of the Board at the beginning of
such period. The Change of Control shall be deemed to occur on the date
of the last director necessary to result in a Change of Control takes
office or resigns from office, as applicable.
(c) MERGER, CONSOLIDATION OR OTHER REORGANIZATION. The merger,
consolidation or other reorganization having substantially the same
effect, or the sale of all or substantially all the consolidated assets
of the Company. Such Change of Control shall be deemed to occur on the
date which the transaction is approved by the Company's stockholders.
16.2 EFFECT OF OPTIONEE'S OR GRANTEE'S PARTICIPATION IN CHANGE
OF CONTROL. Notwithstanding the foregoing provisions of this SECTION 16, a
Change of Control shall be deemed not to have occurred with respect to any
Optionee or Grantee, if such Optionee or Grantee is, by written agreement, a
participant on his or her own behalf in a transaction in which the persons (or
their affiliates) with whom such Optionee or Grantee has the written agreement
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acquire the Company and, pursuant to the written agreement the Optionee or
Grantee has an equity interest in the resulting entity.
16.3 NOTICE OF CHANGE OF CONTROL. The Company shall notify all
Optionees and Grantees of the occurrence of a Change of Control promptly after
its occurrence, but any failure of the Company to notify shall not deprive the
Optionees or Grantees of any rights accruing hereunder by virtue of a Change of
Control.
17. SUBSTITUTED OPTIONS.
If the Committee cancels, with the consent of an Optionee, any
Option granted under the Plan, and a new Option is substituted therefor, then
the Committee may, in its discretion, provide that the Date of Grant of the
canceled Option shall be the date used to determine the earliest date or dates
for exercising the new substituted Option under SUBSECTION 7.2 hereof so that
the Optionee may exercise or dispose of the substituted Option at the same time
as if the Optionee had held the substituted Option since the Date of Grant of
the canceled Option.
18. SECURITIES LAW MATTERS.
18.1 INVESTMENT INTENT REPRESENTATION; RESTRICTIVE LEGEND.
Where an investment intent representation or restrictive legend is deemed
necessary to comply with the Securities Act of 1933, as amended, the Committee
may require a written representation to that effect by the Optionee or Grantee,
or may require that such legend be affixed to certificates for Shares at the
time the Option is exercised.
18.2 COMPANY'S RIGHT TO POSTPONE EXERCISE. If based upon the
opinion of the counsel to the Company, the Committee determines that the
exercise of any Options would violate any applicable provisions of (i) state or
federal securities law, or (ii) the listing requirements of any securities
exchange registered under the Exchange Act on which are listed any of the
Company's equity securities, then the Committee may postpone any such exercise;
provided, however, that the Company shall use its best efforts to cause such
exercise to comply with all such provisions at the earliest practicable date;
and provided further, that the Committee's authority under this SUBSECTION 18.2
shall expire from and after the date of any Change of Control.
18.3 RULE 16b-3 COMPLIANCE. With respect to officers,
directors and 10% stockholders of the Company subject to Section 16 of the
Exchange Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision of the Plan or action by the Board or the Committee
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Board and the Committee.
19. FUNDING.
Benefits payable under the Plan to any person shall be paid
directly by the Company. The Company shall not be required to fund, or otherwise
segregate assets are to be used for payment of, benefits under the Plan.
20. NO EMPLOYMENT RIGHTS.
Neither the establishment of the Plan, nor the granting of any
rights under the Plan shall be construed to (a) give any Optionee or Grantee the
right to remain employed by the Company, the Limited Partnership or any of their
affiliates or to any benefits not specifically provided by the Plan, or (b) in
any manner modify the right of the Company, the Limited Partnership or any of
their affiliates to modify, amend, or terminate any of its employee benefit
plans.
21. STOCKHOLDER RIGHTS.
An Optionee or Grantee shall not, by reason of any right
granted hereunder, have any right as a stockholder of the Company with respect
to the Shares which may be deliverable upon exercise of such Option or vesting
of Restricted Stock until such Shares have been delivered to him or her.
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22. NATURE OF PAYMENTS.
Any and all grants or deliveries of Shares hereunder shall
constitute special incentive payments to the Optionee or Grantee and shall not
be taken into account in computing the amount of salary or compensation of the
Optionee or Grantee for the purposes of determining any pension, retirement,
death or other benefits under (a) any pension, retirement, profit-sharing,
bonus, life insurance or other employee benefit plan of the Company, the Limited
Partnership or any of their affiliates, or (b) any agreement between the
Company, the Limited Partnership or any of their affiliates, on the one hand,
and the Optionee or Grantee, on the other hand, except as such plan or agreement
shall otherwise expressly provide.
23. NON-UNIFORM DETERMINATIONS.
Neither the Committee's nor the Board's determinations under
the Plan need be uniform and may be made by the Committee or the Board
selectively among persons who receive, or are eligible to receive grants and
awards under the Plan (whether or not such persons are similarly situated).
Without limiting the generality of the foregoing, the Committee shall entitled,
among other things, to make non-uniform and selective determinations, to enter
into non-uniform and selective Option agreements and Restricted Stock agreements
as to (a) the persons to receive awards under the Plan, (b) the terms and
provisions of awards under the Plan, and (c) the treatment, under SECTION 15
hereof, of leaves of absence.
24. ADJUSTMENTS.
Any Option or Restricted Stock Agreement entered into
hereunder may contain such provisions as the Committee shall determine for
equitable adjustment of (a) the number of Shares covered thereby, (b) the Option
Price, or (c) otherwise, to reflect a stock dividend, stock split, reverse stock
split, Share combination, recapitalization, merger, consolidation, asset
spin-off, reorganization, or similar event, of or by the Company. In any such
event, regardless of whether specified in an Agreement, the aggregate number of
Shares available under the Plan shall be appropriately adjusted to equitably
reflect such event.
25. AMENDMENT OF THE PLAN.
25.1 BOARD'S AUTHORITY TO MODIFY. The Board may make such
modifications of the Plan as it shall deem advisable; provided, however, no
modifications shall be made which would impair the rights of any Optionee or
Grantee theretofore granted or awarded without his or her consent; and provided
further, the Board may not, without further approval of the stockholders of the
Company, except as provided in SECTION 24 above, either:
(a) materially increase the number of Shares reserved for
issuance under the Plan;
(b) materially increase the benefits accruing to
participants under the Plan;
(c) materially modify the requirements as to eligibility
for participation in the Plan; or
(d) extend the date of termination of the Plan.
25.2 DEFINITION OF MATERIAL. For purposes of this SECTION 25,
the term "material" shall be construed in accordance with the Commission's
interpretive views, as modified from time to time, regarding stockholder
approval for amendments to employee benefit plans intended to comply with Rule
16b-3 under Section 16 of the Exchange Act.
26. TERMINATION OF THE PLAN. The Plan shall terminate on
the tenth anniversary of the Effective Date or at such earlier time as the
Board may determine. Any termination, whether in whole or in part, shall not
affect any rights then outstanding under the Plan.
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27. CONTROLLING LAW. The Plan shall be governed, construed and
administered in accordance with the laws of the State of Delaware, except its
laws with respect to choice of law, and the intention of the Company that
Incentive Stock Options granted under the Plan qualify as such under Section 422
of the Code.
28. MAINTAINING REIT STATUS. Subject to SECTIONS 3 and 11 hereof,
there is no limit on the number of Shares that may be subject to awards or
grants to any one Outside Director or Employee under the Plan, except that the
Committee shall not take any action or make any grants or awards hereunder that
could cause the Company to fail to qualify as a real estate investment trust for
federal income tax purposes.
29. ACTION BY THE COMPANY. Any action required by the Company
under the Plan shall be by resolution of the Board.
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THE MILLS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS MAY 28, 1998
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby appoint Peter B. McMillian 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 this card, or, if not so directed, in accordance with the recommendations of
the Board of Directors, all shares of the Mills Corporation (the "Company")
held of record by the undersigned at the close of business on April 1, 1998 and
entitled to vote at the Annual Meeting of Shareholders of the Company to be
held on May 28, 1998 at 10:00 a.m. Eastern Daylight Savings Time, at the Key
Bridge Marriott, 1401 Lee Highway, Arlington, virginia, and upon such other
matters as may properly come before the Annual Meeting or any adjournments
thereof.
This proxy, when properly completed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is otherwise given, this
proxy will be voted (i) FOR the following nominees for election as Directors:
(1) James C. Braithwaite, (2) James F. Dausch, (3) Joseph B. Gildenhorn, (4)
Harry H. Nick and (5) Robert P. Pincus, (ii) FOR Proposal 2 to adopt and
approve the Company's Amended and Restated 1994 Executive Equity Incentive Plan
(the "Plan"), (iii) FOR Proposal 3 to ratify the appointment of Ernst & Young
LLP as independent auditors of the Company for the fiscal year ending December
31, 1998, and (iv) in the discretion of the named proxies as to any other
matters properly presented at the meeting.
Your 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 Board of Directors. The proxies
cannot vote your shares unless you sign and return this proxy card.
- FOLD AND DETACH HERE -
<PAGE> 46
<TABLE>
<S> <C>
[X] PLEASE MARK YOUR 2930
VOTE 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.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Proposal to adopt and approve [ ] [ ] [ ]
Directors the Company's Amended and
(see reverse) Restated 1994 Executive Equity
Incentive Plan.
For, xcept vote withheld from the following nominee(s):
3. Proposal to ratify the [ ] [ ] [ ]
appointment of Ernst &
Young LLp as auditors for 1998.
The undersigned hereby acknowledges receipt of
the Notice of 1998 Annual Meeting of
Shareholders and accompanying Proxy Statement.
SIGNATURE(S)
----------------------------------------------------------------------------------------------------------------------
Please sign above 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 authroized person.
-FOLD AND DETACH HERE-
</TABLE>
THE MILLS CORPORATION
Dear Shareholder:
The Mills Corporation encourages its Shareholders to take advantage of a
convenient way by which you can vote your shares by telephone. If you vote by
telephone, you do not need to return this proxy card.
To vote your shares by telephone you must use the voter control number in the
box above, just below the perforation.
On a touch-tone telephone call toll-free 1-800-OK2-VOTE (1-800-652-8683) 24
hours a day, 7 day a week. The telephone response system will lead you through
the simple process of voting your proxy. Your voter control number above must
be used to access the system.
YOUR TELEPHONE VOTE PROVIDES THE SAME AUTHORIZATION TO VOTE YOUR SHARES AS IF
YOU MARKED, SIGNED, DATED AND RETURNED YOUR PROXY CARD.
Your vote is important. Thank your for voting.
