<PAGE> 1
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
<TABLE>
<S> <C>
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 Rule14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or section 240.14a-12
</TABLE>
THE MILLS CORPORATION
---------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
---------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
---------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------
(5) Total fee Paid:
---------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount Previously Paid:
---------------------------
(2) Form, schedule or registration statement no.:
---------------------------
(3) Filing party:
---------------------------
(4) Date filed:
---------------------------
<PAGE> 2
[THE MILLS CORPORATION LOGO]
March 31, 1999
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders (the "Meeting") of The Mills Corporation on Tuesday, May 18, 1999,
at 10:00 a.m., eastern daylight savings time, at the Key Bridge Marriott, 1401
Lee Highway, Arlington, Virginia 22209.
The Company is asking for you to elect directors and ratify the
appointment of independent auditors for the coming year. 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
<PAGE> 3
THE MILLS CORPORATION
1300 WILSON BOULEVARD
SUITE 400
ARLINGTON, VIRGINIA 22209
-----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 1999
You are cordially invited to attend the 1999 Annual Meeting of
Shareholders of The Mills Corporation (the "Company") to be held on Tuesday, May
18, 1999, at 10:00 a.m., eastern daylight savings time, at the Key Bridge
Marriott, 1401 Lee Highway, Arlington, Virginia 22209, to consider the following
proposals:
1. To elect three directors to serve for the ensuing three-year term.
2. To ratify the appointment of Ernst & Young LLP as independent auditors of
the Company for the fiscal year ending December 31, 1999.
3. 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 March 22, 1999,
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
March 31, 1999
<PAGE> 4
THE MILLS CORPORATION
1300 WILSON BOULEVARD
SUITE 400
ARLINGTON, VIRGINIA 22209
-----------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 1999
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 Tuesday, May 18, 1999, at 10:00 a.m.,
eastern daylight savings time, at The Key Bridge Marriott, 1401 Lee Highway,
Arlington, Virginia 22209, 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 as of the close of
business on the record date, March 22, 1999, 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 March 22,
1999, there were 24,139,317 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, and for Proposal 2, to ratify the appointment of Ernst & Young LLP as
independent auditors.
Directors will be elected by a plurality of the votes cast.
Ratification of the appointment of Ernst & Young LLP as independent
auditors requires the approval of a majority of votes cast at the Meeting.
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 1998 Annual Report to Shareholders for the fiscal year
ended December 31, 1998, has been mailed to the shareholders with this Proxy
Statement and proxy card on or about March 31, 1999. The executive offices of
the Company are currently located at 1300 Wilson Boulevard, Suite 400,
Arlington, Virginia 22209.
<PAGE> 5
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 1999 is comprised of four directors. The class of directors
whose term expires in 2000 is comprised of four directors, and the class of
directors whose term expires in 2001 is comprised of five directors. The class
of directors whose terms will expire at the Meeting includes Peter A. Gordon,
Franz von Perfall, Cristina L. Rose and Laurence C. Siegel. Messrs. von Perfall
and Siegel and Ms. Rose each have been nominated for election at the Meeting to
hold office until the 2002 Annual Meeting of Shareholders and until his or her
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 Company does not intend to
nominate anyone for election at the Meeting to serve as the fourth member of the
class whose term will expire in 2002. The Board of Directors may fill the
vacancy by vote of the Board of Directors at some future date.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR FRANZ
VON PERFALL, CRISTINA L. ROSE AND LAURENCE C. SIEGEL 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 2002
FRANZ VON PERFALL, 57, 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.
CRISTINA L. ROSE, 52, has been a director of the Company since May
1998. Since 1987, she has been the Chairman of Rose & Kindel, a leading
California public affairs firm, which she co-founded. Prior to founding Rose &
Kindel, Ms. Rose headed her own firm, Cristina L. Rose, Inc., from 1984 to 1987
where she specialized in state and local government relations and issue
communications. From 1975 to 1984, she directed the Sacramento lobbying
activities of Winner/Wager & Associates, a national contract lobbying and public
affairs firm.
LAURENCE C. SIEGEL, 46, has been a director of the Company since
January 1993. Mr. Siegel has been Chief Executive Officer 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., 51, 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.
2
<PAGE> 6
DIETRICH VON BOETTICHER, 57, 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, 63, 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 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, 51, 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.
INCUMBENT DIRECTORS -- TERM ENDING 2001
JAMES C. BRAITHWAITE, 58, 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, 56, has been a director of the Company since
October 1997 and Executive Vice President of Development of the Company since
December 1994. As Executive Vice President of Development, 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, 69, 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, 57, 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 its Chief Financial Officer from
4
<PAGE> 7
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, 52, has been a director of the Company since April
1994. Since February 1999, he has served as President, D.C. Metro Region, of
BB&T Corporation. From May 1991 until February 1999, he also served as Chief
Executive Officer and President of Franklin National Bank of Washington, D.C.
From 1983 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.
1998 BOARD MEETINGS
The Board of Directors held a total of eight meetings during 1998.
Each director of the Company except Peter Gordon attended at least 75% of the
meetings held during 1998 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 eight
times in 1998.
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 Company's accounting policies and procedures and the adequacy
of the Company's internal accounting controls. The Audit Committee met once
during 1998.
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 once during 1998. 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 twice during
1998.
4
<PAGE> 8
COMPENSATION OF DIRECTORS
Directors of the Company who are not employees of the Company are
paid an annual fee of $24,000 for their service in that capacity and $1,000 for
each board meeting and committee meeting attended. In addition, each such
director receives an annual grant of restricted stock having a value of $6,000.
The restricted stock vests in three equal annual installments beginning one year
after the date of grant. The first grants of restricted stock were issued on
October 1, 1998, pro rated for a partial year. Upon being elected to the Board
of Directors, each director who is not an employee of the Company receives an
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 receives a similar option to purchase 1,000 shares of
common stock.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 2)
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, 1999. 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, 1999.
EXECUTIVE OFFICERS OF THE COMPANY
The following is a biographical summary of the executive officers of
the Company as of December 31, 1998, (other than those who serve as directors):
Judith S. Berson, 56, has been Executive Vice President - Specialty
Leasing of the Company 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.
Kent S. Digby, 46, has been Executive Vice President of
Management/Marketing of the Company 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.
Thomas E. Frost, 46, 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
5
<PAGE> 9
Company. Mr. Frost was previously Senior Vice President and General Counsel for
CenterMark Properties, 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, 45, has been Senior Vice President of Real Estate
of the Company 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, 43, has been Senior Vice President of
Development of the Company 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.
Terrence W. LaPier, 45, joined the Company as Senior Vice President
- - International Development in June 1998. From 1996 to 1998, Mr. LaPier founded
and was President and Chief Executive Officer of Piermont Group, which provided
strategic advisory services to U.S. REIT and foreign-based publicly held real
estate multinationals. During 1996 to 1998, Mr. LaPier also served as The
Wharton School's Entrepreneur-in-Residence as a faculty member. From 1994 to
1996, Mr. LaPier was Senior Vice President and Group Managing Director of
Bechtel. Mr. Lapier is a graduate of Syracuse University. He also received his
[AMP] degree from the University of Pennsylvania, The Wharton School and his
Ph.D. from the London School of Economics.
Kenneth R. Parent, 38, joined the Company in September 1994 as
Senior Vice President, became Chief Financial Officer in May 1995 and Executive
Vice President - Finance 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 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.
Mark J. Rivers, 33, Senior Vice President - Anchor 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, 52, 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
Properties. 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.
6
<PAGE> 10
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 four other most highly compensated executive officers of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION
- --------------------------- ---- --------- -------- ------------
<S> <C> <C> <C> <C>
Laurence C. Siegel 1998 $ 526,599 $ 516,600 $ 692(3)
Chairman of the Board, 1997 484,666 467,914 838(3)
Chief Executive Officer and Director 1996 442,894 360,477 636(3)
Peter B. McMillan 1998 368,552 197,369 --
President, Chief Operating 1997 342,537 279,822 --
Officer and Director 1996 326,250 215,572 95,500(6)
James F. Dausch 1998 317,635 138,436 --
Executive Vice President- 1997 286,300 191,357 --
Development and Director 1996 272,500 147,420 102,000(6)
Kent S. Digby 1998 282,480 122,616 --
Executive Vice President- 1997 255,626 170,855 --
Management/Marketing 1996 222,500 121,095 --
Judith S. Berson 1998 276,500 119,925 --
Executive Vice President 1997 250,000 184,324 --
- -Specialty Leasing 1996 191,250 95,200 --
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------------------------
RESTRICTED SECURITIES ALL
STOCK UNDERLYING OTHER
NAME AND PRINCIPAL POSITION AWARDS ($)(2) OPTIONS (#) COMPENSATION
- --------------------------- ---------- ----------- ------------
<S> <C> <C> <C>
Laurence C. Siegel $ 0 119,377 $ 11,480(4)
Chairman of the Board, 277,907 119,377 4,898(4)
Chief Executive Officer and Director 197,995 130,837 5,116(4)
Peter B. McMillan 193,145 170,964 10,957(5)
President, Chief Operating 178,310 76,593 5,258(5)
Officer and Director 134,000 88,546 4,470(5)
James F. Dausch 145,291 128,488 10,524(7)
Executive Vice President- 133,853 57,499 5,749(7)
Development and Director 100,800 66,608 4,925(7)
Kent S. Digby 129,724 114,722 10,464(8)
Executive Vice President- 119,516 51,339 5,086(8)
Management/Marketing 82,800 54,714 4,741(8)
Judith S. Berson 128,649 112,701 9,788(9)
Executive Vice President 116,040 49,843 5,492(9)
- -Specialty Leasing -- 37,004 5,405(9)
</TABLE>
(1) Bonus figures included in the table are preliminary and may change
following the Compensation Committee's review of each executive
officer's performance for 1998.
(2) The number of shares of restricted stock held by Messrs. Siegel,
McMillan, Dausch and Digby and Ms. Berson on December 31, 1998 was
33,853, 30,139, 22,649, 19,789 and 17,853, respectively. The value of
such restricted stock holdings as of December 31, 1998 was $672,828,
$599,013, $450,149, $393,306 and $354,828, respectively, based upon the
closing price of the common stock on the NYSE on December 31, 1998,
which was $19.875. Each award of restricted stock vests in five equal
annual installments beginning on the first anniversary of the date of
grant.
(3) Represents medical reimbursements.
(4) Includes Company contributions to the 401(k) Plan of $8,000, $3,200 and
$3,000 for 1998, 1997 and 1996, respectively, the cost of group term
life insurance amounting to $900, $510 and $708 in 1998, 1997 and 1996,
respectively, and the cost of parking paid by the Company amounting to
$2,580, $1,188 and $1,408 in 1998, 1997 and 1996, respectively.
(5) Includes Company contributions to the 401(k) Plan of $8,000, $3,200 and
$2,250 for 1998, 1997 and 1996, respectively, the cost of group term
life insurance amounting to $650, $870 and $812 in 1998, 1997 and 1996,
respectively, and the cost of parking paid by the Company amounting to
$2,307, $1,188 and $1,408 in 1998, 1997 and 1996, respectively.
(6) 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.
(7) Includes Company contributions to the 401(k) Plan of $8,000, $3,200 and
$2,250 for 1998, 1997 and 1996, respectively, the cost of group term
life insurance amounting to $550, $1,361 and $1,267 in 1998, 1997 and
1996, respectively, and the cost of parking paid by the Company
amounting to $1,974, $1,188 and $1,408 in 1998, 1997 and 1996,
respectively.
(8) Includes Company contributions to the 401(k) Plan of $8,000, $3,200 and
$3,000 for 1998, 1997 and 1996, respectively, the cost of group term
life insurance amounting to $490, $698 and $333 in 1998, 1997 and 1996,
respectively, and the cost of parking paid by the Company amounting to
$1,974, $1,188 and $1,408 in 1998, 1997 and 1996, respectively.
(9) Includes Company contributions to the 401(k) Plan of $8,000 in 1998 and
$3,200 in each of 1997 and 1996, and the cost of group term life
insurance amounting to $480, $1,104, and $797 in 1998, 1997 and 1996,
respectively, and the cost of parking paid by the Company amounting to
$1,308, $1,188 and $1,408 in 1998, 1997 and 1996, respectively.
7
<PAGE> 11
The following table sets forth certain information concerning
exercised and unexercised options held by the Company's Chief Executive Officer
and the four other most highly compensated executive officers of the Company at
December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED OPTIONS
SHARES AT DECEMBER 31, 1998
ACQUIRED VALUE --------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- --------------------------------------------
<S> <C> <C> <C> <C>
Laurence C. Siegel - 0 - - 0 - 200,084 269,507
Peter B. McMillan 13,422 $71,304 151,856 251,175
James F. Dausch 11,742 39,157 102,102 213,755
Kent S. Digby - 0 - - 0 - 105,097 165,678
Judith S. Berson - 0 - - 0 - 61,768 174,780
</TABLE>
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
OPTIONS AT
DECEMBER 31, 1998
-----------------
NAME EXERCISABLE UNEXERCISABLE
- ---- -------------------------------------
<S> <C> <C>
Laurence C. Siegel $ 111,210 $ 166,819
Peter B. McMillan 158,923 64,410
James F. Dausch 103,482 84,932
Kent S. Digby 46,506 69,762
Judith S. Berson 31,452 47,181
</TABLE>
The following table sets forth certain information relating to
options to purchase common stock granted to the Company's Chief Executive
Officer and the four other most highly compensated executive officers of the
Company during 1998.
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(2) 5.4% $ 24.50 1/1/2008 $ 1,839,351 $ 4,661,277
76,593(2) 3.5% $ 24.50 1/1/2008 1,180,139 2,990,703
Peter B. McMillan 94,371 4.3% 26.19 4/1/2008 1,554,361 3,939,056
57,499(2) 2.6% $ 24.50 1/1/2008 885,940 2,245,146
James F. Dausch 70,989 3.2% 26.19 4/1/2008 1,169,242 2,963,089
51,339(2) 2.3% $ 24.50 1/1/2008 791,027 2,004,618
Kent S. Digby 63,383 2.9% 26.19 4/1/2008 1,043,966 2,645,613
49,843(2) 2.3% $ 24.50 1/1/2008 767,977 1,946,204
Judith S. Berson 62,858 2.9% 26.19 4/1/2008 1,035,318 2,623,700
</TABLE>
- ---------
(1) Each option vests only upon a change of control of the Company. A change
of control will be deemed to occur upon: (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 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
8
<PAGE> 12
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 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 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.
(2) Except as noted, each option granted in fiscal year 1998 vests in five
equal annual installments beginning on the first anniversary of the date
of grant.
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
In 1994, the Company entered into an 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 Company's severance pay policy then in effect. Further, if
Mr. Siegel terminates his employment for good reason, 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 in 1997 with
each of Messrs. McMillan, Dausch and Digby and Ms. Berson. The employment
agreements of Messrs. McMillan and Dausch amended and restated their 1994
employment agreements. Pursuant to the employment agreements with each of
Messrs. McMillan, Dausch and Digby and Ms. Berson, each employee agreed to be
employed by the Company for a term of three years, with the agreement to be
automatically renewed for successive one-year periods unless terminated by the
employee or the Company within 30 days of the scheduled expiration date.
Pursuant to such 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 employee 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 Ms. Berson, such
employment agreements provide that, if the employee's employment is terminated
by the Company without cause or by the employee for good reason, in either case
before the end of the initial term, the employee will be entitled to his or her
salary for two years, payable over a two-year period. If the employee's
employment is so terminated after the end of the initial term, the employee will
be entitled to his or her salary for one year, payable over a one-year period.
In the event of certain change of control events, Messrs. Dausch and Digby and
Ms. Berson will 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 event 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, his 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
9
<PAGE> 13
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
certain change of control events, Mr. McMillan will 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 event or (ii) the target level of bonus established for the
fiscal year.
The employment agreements with each of Messrs. McMillan, Dausch and
Digby and Ms. Berson contain non-competition provisions similar to those
contained in the Company's employment agreement with Mr. Siegel, 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 his 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. The remaining loan
principal, together with all interest accruing under the loan, may be forgiven
under certain circumstances.
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 his 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. The remaining loan
principal, together with all interest accruing under the loan, may be forgiven
under certain circumstances.
On January 1, 1998, each of Messrs. Siegel, McMillan, Dausch and
Digby and Ms. Berson was granted, pursuant to the Amended and Restated 1994
Executive Equity Incentive Plan, 10,952, 7,027, 5,275, 4,710 and 4,573 shares of
common stock of the Company, respectively. The common stock vests only upon a
change of control of the Company. A change of control will be deemed to occur
upon the occurrence of any of the events described in footnote (1) to the table
on page 8 captioned "Option Grants in Last Fiscal Year."
10
<PAGE> 14
CUMULATIVE TOTAL SHAREHOLDER RETURN ]
[STOCK PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
4/15/94 12/94 12/95 12/96 12/97 12/98
------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
The Company $100 $ 82 $ 86 $132 $147 $130
S&P 500 Index $100 $105 $145 $177 $233 $295
NAREIT Equity Index $100 $ 99 $114 $154 $186 $153
</TABLE>
- -----------
] 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.
11
<PAGE> 15
REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee (the "Committee") of the Board
of Directors has prepared the following report regarding 1998 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 Amended and Restated
1994 Executive Equity Incentive Plan, as amended. This report describes the
Committee's basic approach to executive compensation and the basis on which 1998
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 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 April 1, 1998, 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.
1998 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. On April
1, 1998, these base salaries were again increased by 4% (for the Chief Executive
Officer, the Executive Vice Presidents and the Senior Vice Presidents) (except
that certain Senior Vice Presidents received higher increases to bring their
compensation in line with their duties).
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 1998 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 is being
used in calculating the adjusted bonus levels payable to the executive officers
for 1998. Such calculations are currently being reviewed. A portion of these
bonuses was paid in March 1999.
12
<PAGE> 16
Effective January 1 and April 1, 1998, the Committee approved grants
of stock options and common stock pursuant to the Long Term Incentive Plan. The
January 1, 1998 grants of both stock options and common stock vest only upon a
change of control of the Company. The aggregate values of the April 1, 1998
grants of both stock options and restricted stock 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.
1998 CHIEF EXECUTIVE OFFICER PAY
Effective April 1, 1998, the Committee increased Mr. Siegel's annual
salary 4% to $507,748. In March 1999, the Committee approved a payment to Mr.
Siegel in the amount of $302,199 in partial payment of the bonus earned by Mr.
Siegel pursuant to the 1998 Performance Incentive Plan. Mr. Siegel's final bonus
will be calculated on the basis of the Company's achievement of its 1998 goals
and objectives, as outlined above in "1998 Executive Officer Compensation."
Effective January 1, 1998, the Committee granted to Mr. Siegel stock options for
119,377 shares and granted 10,952 shares of common stock which vest only upon a
change of control of the Company.
$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
Amended and Restated 1994 Executive Equity Incentive Plan, as amended, are
intended to qualify as such performance-based compensation. During 1998, 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
13
<PAGE> 17
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth information regarding the beneficial
ownership of shares of common stock as of February 28, 1999 for (i) each person
known by the Company to be the beneficial owner of more than five percent of the
outstanding common stock, (ii) each director of the Company, its Chief Executive
Officer and the four other most highly compensated executive officers of the
Company and (iii) 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 in the Operating Partnership, of which the Company is the sole general
partner and the owner of 59.35% of the outstanding units, 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 ........................................ 1,170,188(3) 4.74% 2.91%
Peter B. McMillan ......................................... 152,508(4) * *
James F. Dausch ........................................... 141,218(5) * *
Kent S. Digby ............................................. 130,592(6) * *
Judith S. Berson .......................................... 105,253(7) * *
Dietrich von Boetticher ................................... 1,172(8) * *
John M. Ingram ............................................ 6,172(9) * *
Charles R. Black, Jr. ..................................... 3,422(10) * *
James C. Braithwaite ...................................... 91,490(11) * *
Joseph B. Gildenhorn ...................................... 14,672(12) * *
Peter A. Gordon ........................................... 1,672(13) * *
Harry H. Nick ............................................. 272,025(14) 1.12% *
Franz von Perfall ......................................... 78,551(15) * *
Robert P. Pincus .......................................... 8,172(16) * *
Cristina L. Rose...........................................
Kan Am .................................................... 13,262,420(17) 35.46% 33.17%
3495 Piedmont Road
Ten Piedmont Center, Suite 520
Atlanta, Georgia 30305................................
All executive officers and directors as a group
(22 persons) .......................................... 2,651,223(18) 10.62%(19) 6.46%(20)
</TABLE>
- -----------
* Less than 1%
(1) For purposes of this calculation, the shares of common stock deemed
outstanding includes 24,139,317 shares of common stock outstanding
as of February 28, 1999, plus the number of shares of common stock
issuable to the named person(s) upon the exercise of options
exercisable within 60 days of February 28, 1999 and upon redemption
of units held by such named person(s).
14
<PAGE> 18
(2) For purposes of this calculation, the number of shares of common
stock and units deemed outstanding includes 24,139,317 shares of
common stock outstanding as of February 28, 1999, 15,844,084 units
outstanding as of February 28, 1999 (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 February
28, 1999.
(3) Includes 387,143 shares of common stock, 556,793 units and options
to purchase 226,252 shares of common stock exercisable within 60
days of February 28, 1999.
(4) Includes 44,521 shares of common stock and options to purchase
107,987 shares of common stock exercisable within 60 days of
February 28, 1999.
(5) Includes 25,800 shares of common stock and options to purchase
115,418 shares of common stock exercisable within 60 days of
February 28, 1999.
(6) Includes 9,707 shares of common stock, 4,846 units and options to
purchase 116,039 shares of common stock exercisable within 60 days
of February 28, 1999.
(7) Includes 13,544 shares of common stock and options to purchase
91,709 shares of common stock exercisable within 60 days of February
28, 1999.
(8) Includes 172 shares of common stock and options to purchase 1,000
shares of common stock exercisable within 60 days of February 28,
1999.
(9) Includes 5,172 shares of common stock and options to purchase 1,000
shares of common stock exercisable within 60 days of February 28,
1999.
(10) Includes 2,922 shares of common stock and options to purchase 500
shares of common stock exercisable within 60 days of February 28,
1999.
(11) Includes 1,172 shares of common stock, 85,318 units and options to
purchase 2,000 shares of common stock exercisable within 60 days of
February 28, 1999. Also includes 3,000 shares of common stock held
in an account for Mr. Braithwaite's mother-in-law with respect to
which Mr. Braithwaite shares voting and investment power.
(12) Includes 14,172 shares of common stock and options to purchase 500
shares of common stock exercisable within 60 days of February 28,
1999.
(13) Includes 172 shares of common stock and options to purchase 1,500
shares of common stock exercisable within 60 days of February 28,
1999.
(14) Includes 160,457 shares of common stock and 111,568 units.
(15) Includes 20,172 shares of common stock, 56,879 units and options to
purchase 2,000 shares of common stock exercisable within 60 days of
February 28, 1999.
(16) Includes 6,172 shares of common stock and options to purchase 2,000
shares of common stock exercisable within 60 days of February 28,
1999.
(17) Includes 13,262,240 units deemed to be beneficially owned by Kan Am
as general partner of nine limited partnerships.
(18) Includes 749,088 shares of common stock, 815,404 units and options
to purchase 1,086,731 shares of common stock exercisable within 60
days of February 28, 1999.
(19) For purposes of this calculation, the shares of common stock deemed
outstanding includes 24,139,317 shares of common stock outstanding
as of February 28, 1999, 815,404 units beneficially owned by all
executive officers and directors as a group and options to purchase
1,086,731 shares of common stock exercisable within 60 days of
February 28, 1999 for all officers and directors as a group.
(20) The number of shares of common stock and units deemed outstanding
for purposes of this calculation is described in note 2 to this
table.
15
<PAGE> 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
JOINT VENTURES WITH KAN AM
Three members of the Board of Directors of the Company, Messrs. von
Boetticher, Braithwaite and von Perfall, are affiliated with Kan Am. Kan Am is a
real estate developer and investment partnership sponsor headquartered in
Germany. Kan Am provides the funds for certain of the Company's joint venture
projects. Kan Am and its principals will benefit from providing such funds.
Consequently, Messrs. von Boetticher, Braithwaite and von Perfall have a
conflict of interest with respect to joint ventures entered into between the
Company and Kan Am. When the Board (and the Executive Committee, of which Mr.
Braithwaite is a member) voted on the proposed joint ventures with Kan Am, each
of Messrs. von Boetticher, Braithwaite and von Perfall abstained from voting.
The Company does not know the precise arrangement Kan Am has with the investment
partnerships that participate in the joint venture projects, but believes that
Kan Am and its principals derive fees from the investment partnerships based on
the amount of funds raised from the partners in those investment partnerships
and will have carried interests in the partnerships disproportionate to the
amount of capital they contribute to such partnerships. These fees are borne by
Kan Am's investors, not the Company. As of February 28, 1999, Kan Am owned
approximately 33.6% of the outstanding units in the Operating Partnership.
The following sets forth certain information regarding the joint
ventures between the Company and Kan Am.
<TABLE>
<CAPTION>
COMPANY KAN AM
REQUIRED REQUIRED
PROJECT COMPANY OWNERSHIP KAN AM OWNERSHIP CAPITAL CONTRIBUTIONS(1) CAPITAL CONTRIBUTIONS(2)
------- ----------------- ---------------- ------------------------ ------------------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Ontario Mills 37.5% 25.0% $ 10.0 $ 22.5
Grapevine Mills 50.0 25.0 14.5 29.0
The Block at Orange 50.0 50.0 0 60.0
Sawgrass Mills - Phase III 50.0 50.0 0 24.5
Katy Mills 62.5 37.5 26.25 78.75
Concord Mills 37.5 25.0 12.5 25.0
Meadowlands Mills 66.7 33.3 12.0 24.0
</TABLE>
- -----------------
(1) Of which $1.2 million and $6.4 million remains to be funded for
Ontario Mills and Grapevine Mills, respectively, as of December 31,
1998. Excludes certain advances and borrowings for working capital.
(2) Of which $0.4 million, $17.44 million, $20 million and $7 million
remains to be funded for Sawgrass Mills-Phase III, Katy Mills,
Concord Mills and Meadowlands Mills, respectively, as of December
31, 1998.
In general, Kan Am and the Company each receive a 9% preferential
return on their cash contributions to the joint ventures, but income is
allocated to the joint venture partners for tax purposes based on the joint
venture partners' proportionate interests in the joint venture, which has the
effect of allocating to the Company a higher percentage of taxable income than
its share of cash distributions. Under the terms of the partnership agreement,
following the tenth anniversary of the project's opening, either the Company or
Kan Am can exercise a buy-sell provision whereby the Company, if it is the
offeror, can require Kan Am to transfer its entire interest in the partnership
or Kan Am, if it is the offeror, can require the Company to acquire Kan Am's
entire interest in the partnership.
AMOUNTS 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 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
16
<PAGE> 20
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 will forgive
the entire loan principal, together with all accrued interest. The loan to Mr.
Frost, which provided that one-third of the amount of the loan would be forgiven
annually if Mr. Frost remained employed by the Company, has been forgiven. The
terms of Mr. Whitcome's employment agreement provide for forgiveness of 20% of
the loan amount to be forgiven annually if Mr. Whitcome remains employed by the
Company. The loan to Mr. Rivers, made in 1997, 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. In 1998, one-third of
the loan to Mr. Rivers was forgiven. 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
MillsServices Corp. manages a regional mall owned by a partnership
of which Herbert S. Miller, a former director and executive officer of the
Company, is the sole general partner and in which Messrs. Miller, Siegel and
Nick are limited partners. In 1998, MillsServices Corp. earned approximately
$984,264 in management, administration and leasing fees from such partnership.
These fees were computed in accordance with the management contract assigned to
MillsServices Corp. at the time of the Company's initial public offering. This
management contract was terminated in December 1998. This partnership and the
purchaser of the property also currently owe the Company, in the aggregate,
approximately $552,000 in leasing fees and payroll expenses.
Mr. Pincus is the chief executive officer of the Franklin National
Bank and was also a stockholder of the Franklin National Bank prior to its
acquisition by BB&T Corporation in 1999. Borrowings from Franklin National Bank
in 1998 included (i) a $2.4 million unsecured loan bearing interest at a rate of
6.20% which matures on July 15, 1999, (ii) a loan secured by furniture, fixtures
and equipment bearing interest at a rate of 8.25% which matures on October 31,
2000 which had an outstanding balance at December 31, 1998 of $751,000, and
(iii) a recourse loan secured in part by certain land parcels near Concord Mills
and bearing interest at LIBOR plus 2%, which matures on December 21, 2000 which
had an outstanding balance at December 31, 1998 of $6,229,000.
Mr. Miller and Kan Am own equally 95% of the voting common stock of
MillsServices Corp. The Company owns the remaining 5% of the voting common stock
and 99% of the non-voting preferred stock. As of December 31, 1998,
MillsServices Corp. was indebted to the Company for $63 million, which debt has
an interest rate of 12% and is payable on demand. No dividends were paid by
MillsServices Corp. in 1998.
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 SEC regarding transactions in the Company's securities.
For 1998. Each of Ms. Rose and Mr. LaPier filed a Form 3 one day late. Mr.
Gildenhorn filed two Forms 4 late, each relating to one transaction. Messrs.
Pincus and Siegel each filed one Form 4 late, each relating to one transaction.
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.
17
<PAGE> 21
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of shareholders to be presented at the 2000 Annual Meeting
of Shareholders must be received by the Secretary of the Company prior to
December 2, 1999 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 deliver such information to the
Secretary of the Company no earlier than February 2, 2000 and no later than
March 3, 2000 and 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 SEC 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.
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
March 31, 1999
18
<PAGE> 22
Please mark your 2930
[ X ] votes as in this
example.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is otherwise made, the proxy will
be voted FOR the item or items for which no direction is made, and in the
discretion of the named proxies as to any other matters properly presented at
the meeting.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ]
1.Election of 2. Proposal to ratify the appointment of Ernst & Young
Directors LLP as auditors for 1999.
(see reverse)
The undersigned hereby acknowledges receipt of the
Notice of the 1999 Annual Meeting of Shareholders
and accompanying Proxy Statement.
</TABLE>
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------------------------------
SIGNATURE(S) DATE
------------------------------------- ------------------------
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 authorized person.
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
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 you for voting.
<PAGE> 23
THE MILLS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS MAY 18, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby appoint Peter B. McMillan and Thomas E.
Frost, or either one of them, with full power of substitution in each, as
proxies to vote on the matters identified and as directed on the reverse side of
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 March 22, 1999 and
entitled to vote at the Annual Meeting of Shareholders of the Company to be held
on May 18, 1999 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) Franz von Perfall, (2) Cristina L. Rose and (3) Laurence C. Siegel, (ii) FOR
Proposal 2 to ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31, 1999, and (iii)
in the discretion of the named proxies as to any other matters properly
presented at the meeting.
You are encouraged to specify your choices by marking the appropriate
boxes, SEE REVERSE SIDE, but you need not mark boxes if you wish to vote in
accordance with the recommendations of the Board of Directors. The proxies
cannot vote your shares unless you sign and return this proxy card.
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
