<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 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
</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.
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(3) Per unit price or other underlying value of transaction computed
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Rule 0-11(a)(2) and identify the filing for which the offsetting fee
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statement number, or the form or schedule and the date of its filing.
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<PAGE> 2
MILLS CORPORATION LOGO
THE MILLS CORPORATION
1300 WILSON BOULEVARD
SUITE 400
ARLINGTON, VIRGINIA 22209
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 16, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of Shareholders
(the "Meeting") of The Mills Corporation (the "Company") which will be held on
Tuesday, May 16, 2000, 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 four 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,
2000.
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 21, 2000,
will be entitled to vote at the Meeting or any adjournments thereof.
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.
By order of the Board of Directors,
/s/ Laurence C. Siegel
Laurence C. Siegel
Chairman of the Board and
Chief Executive Officer
/s/ Thomas E. Frost
Thomas E. Frost
Secretary
March 31, 2000
<PAGE> 3
THE MILLS CORPORATION
1300 WILSON BOULEVARD
SUITE 400
ARLINGTON, VIRGINIA 22209
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 16, 2000
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 16, 2000, 10:00 a.m., eastern daylight
savings time, at The Key Bridge Marriott, 1401 Lee Highway, Arlington, Virginia
22209, and at any adjournment of the Meeting. At the Meeting, shareholders will
act upon the matters specified 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").
This Proxy Statement, together with the Company's 1999 Annual Report to
Shareholders, was mailed to shareholders on or about March 31, 2000. The
executive offices of the Company are currently located at 1300 Wilson Boulevard,
Suite 400, Arlington, Virginia 22209.
SHAREHOLDERS ENTITLED TO VOTE
Holders of record of common stock of the Company as of the close of
business on the record date, March 21, 2000, 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. Each share of common stock entitles
the holder to one vote. At the close of business on March 21, 2000, there were
23,971,307 shares of common stock issued and outstanding.
PROXIES
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 represented by the proxy 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.
For your shares to be voted, you must file your proxy with the Secretary of
the Company prior to the time of voting. You may change your vote at any time
before the proxy is exercised by filing a notice of revocation or later dated
proxy with the Secretary of the Company or by voting in person at the Meeting.
REQUIRED VOTE
QUORUM. The presence at the Meeting, in person or by proxy, of the holders
of a majority of the shares of common stock outstanding on the record date will
constitute a quorum.
ELECTION OF DIRECTORS. The four nominees receiving the most affirmative
votes will be elected as directors.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS. Ratification of the
appointment of Ernst & Young LLP as independent auditors requires the approval
of a majority of votes cast at the Meeting. Abstentions will have the same
effect as votes against Proposal 2.
The Company knows of no business other than that set forth above to be
transacted at the Meeting. If other matters requiring a vote do arise, it is the
intention of the persons named in the proxy to vote on those matters in
accordance with their judgment.
<PAGE> 4
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 2000 is comprised of four directors. The class of directors whose
term expires in 2001 is comprised of five directors, and the class of directors
whose term expires in 2002 is comprised of three directors. The class of
directors whose terms will expire at the Meeting includes Charles R. Black, Jr.,
Dietrich von Boetticher, John M. Ingram and Peter B. McMillan. Messrs. Black,
von Boetticher, Ingram and McMillan each have been nominated for re-election at
the Meeting to hold office until the 2003 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 ALL FOUR OF THE
NOMINEES. 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 2003
CHARLES R. BLACK, JR., Director Since November 1995, Age 52
President and Chief Executive Officer of Black, Kelly, Scruggs and Healey,
Inc., a public affairs company or its predecessors since 1980. Mr. Black also
serves on the board of directors of the American Conservative Union and the Fund
for American Studies. Mr. Black is a member of the NOMINATING COMMITTEE of the
Board of Directors.
DIETRICH VON BOETTICHER, Director Since April 1994, Age 58
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, Director Since April 1994, Age 64
VICE CHAIRMAN of the Company since August 1995. In addition, Mr. Ingram is
currently an independent retail, real estate and bankruptcy 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, Director Since August 1995, Age 52
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 development company located in Norfolk, Virginia.
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<PAGE> 5
INCUMBENT DIRECTORS -- TERM ENDING 2001
JAMES C. BRAITHWAITE, Director Since April 1994, Age 59
Chief Executive Officer and President of Kan Am U.S., Inc., an
international investment company since 1980. Mr. Braithwaite previously served
as Executive Vice President of Operations of the Company from August 1994 to
November 1994. 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, Director Since October 1997, Age 57
SENIOR EXECUTIVE VICE PRESIDENT OF DEVELOPMENT of the Company since April
1999. From December 1994 until April 1999, Mr. Dausch was Executive Vice
President of Development of the Company. 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. He is a graduate of The Johns Hopkins University and the
Columbia University School of Law.
THE HON. JOSEPH B. GILDENHORN, Director Since November 1995, Age 70
Partner of The JBG Companies, a real estate development and management
company, or its predecessors since 1956. Partner at the law firm of Brown,
Gildenhorn & Jacobs since 1956. Mr. Gildenhorn also serves as Chairman of the
Board of Directors of BB&T Bank, D.C. Metro Region. 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 the EXECUTIVE COMPENSATION
COMMITTEE of the Board of Directors.
HARRY H. NICK, Director Since April 1994, Age 58
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 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 AUDIT COMMITTEE of the
Board of Directors.
ROBERT P. PINCUS, Director Since April 1994, Age 53
President, D.C. Metro Region, of BB&T Bank since February 1999. 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.
INCUMBENT DIRECTORS -- TERM ENDING 2002
FRANZ VON PERFALL, Director Since April 1994, Age 58
Managing Director of Kan Am since 1980. From 1977 until 1980, Mr. von
Perfall served as director of BHF Bank, located in Frankfurt, Germany.
CHRISTINA L. ROSE, Director Since May 1998, Age 53
Chairman of Rose & Kindel, a leading California public affairs firm, which
she co-founded, since 1987. From 1984 to 1987, Ms. Rose headed her own firm,
Cristina L. Rose, Inc., 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.
3
<PAGE> 6
LAURENCE C. SIEGEL, Director Since January 1993, Age 47
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.
1999 BOARD MEETINGS
The Board of Directors held a total of five meetings during 1999. Each
director of the Company attended at least 75% of the meetings held during 1999
by the Board of Directors and the committees of which he or she was a member.
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
Number of Directors: 3
Number of Meetings in 1999: 8
Functions:
- Exercises the 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
AUDIT COMMITTEE
Number of Directors: 3
Number of Meetings in 1999: 2
Functions:
- Considers and advises the Board of Directors on the scope of the annual
audit by the independent auditors
- Approves other professional services provided by the Company's
independent auditors
- Monitors audit fees and expenses, including fees incurred for non-audit
services provided by the auditors, and the independence of the Company's
independent auditors
- Reviews the Company's accounting policies and procedures and the adequacy
of the Company's internal accounting controls
NOMINATING COMMITTEE
Number of Directors: 3
Number of Meetings in 1999: 2
Functions:
- Selects the nominees for election to the Board of Directors
- Considers candidates for the Board of Directors as recommended by the
shareholders
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 will
consider qualified nominees recommended by the shareholders. The Company's
Bylaws provide that shareholders who wish to suggest qualified nominees should
write to the Secretary of the Company, 1300 Wilson Boulevard, Suite 400,
Arlington, Virginia 22209, not less than 60 days and not more
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<PAGE> 7
than 90 days prior to the date of the annual meeting of shareholders. The notice
must contain the information required by the Company's Bylaws.
EXECUTIVE COMPENSATION COMMITTEE
Number of Directors: 3
Number of Meetings in 1999: 11
Functions:
- Determines the compensation for the Company's executive officers
- Administers the Company's equity incentive plan and other compensatory
plans
COMPENSATION OF DIRECTORS
BASE COMPENSATION. Directors of the Company who are also employees of the
Company receive no director's fees. Non-employee directors of the Company
receive the following fees for their service in that capacity:
<TABLE>
<S> <C>
Annual Fee.................................................. $24,000
For Each Board or Committee Meeting Attended................ $ 1,000
</TABLE>
OPTIONS/RESTRICTED STOCK. In addition, each non-employee director is
entitled to receive grants of restricted stock and options under the Company's
Amended and Restated 1994 Executive Equity Incentive Plan. 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. Upon being elected to the Board of Directors, each
non-employee director 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. The options vest
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 re-election to the Board of Directors, the director 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,
2000. 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 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, 2000.
EXECUTIVE OFFICERS OF THE COMPANY
The following is a biographical summary of the executive officers of the
Company as of December 31, 1999, (other than those who serve as directors):
JUDITH S. BERSON, 57, EXECUTIVE VICE PRESIDENT OF LEASING of the Company
since April 1999, is responsible for directing the leasing efforts for
Anchor/Major, Peripheral/Land Sales and Specialty stores in the Mills portfolio,
as well as all projects under development domestically and internationally. From
November 1996 until March 1999, Ms. Berson was Executive Vice President of
Specialty Leasing. Ms. Berson joined the Company's predecessor in 1989. Prior to
joining the Company, Ms. Berson was head of
5
<PAGE> 8
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.
KENT S. DIGBY, 47, has been EXECUTIVE VICE PRESIDENT OF MANAGEMENT AND
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, 47, has been SECRETARY of the Company since March 1995,
GENERAL COUNSEL of the Company since May 1995 and EXECUTIVE VICE PRESIDENT of
the Company since April 1999. From March 1995 until April 1999, Mr. Frost was
Senior Vice President of the 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, 46, has been EXECUTIVE VICE PRESIDENT OF REAL ESTATE of
the Company since April 1999, was Senior Vice President of Real Estate of the
Company from April 1994 until April 1999 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 dual master's degrees
in Architecture and Urban Planning from the University of Michigan.
STEVEN J. JACOBSEN, 44, has been EXECUTIVE VICE PRESIDENT OF DEVELOPMENT of
the Company since April 1999, was Senior Vice President of Development of the
Company from April 1994 until April 1999 and has served in a similar capacity on
behalf of the Company or its predecessor since 1984. Prior to 1984, Mr. Jacobsen
worked as a Senior Construction Manager and Regional Manager for various real
estate development companies in the Midwest and worked as Senior Manager for
various architectural project teams in the development of residential, retail
and mixed use projects. Mr. Jacobsen is a licensed architect and received his
undergraduate degree from the University of Illinois, Champaign/Urbana and has
continued his education in the fields of business and finance.
KENNETH R. PARENT, 39, has been CHIEF FINANCIAL OFFICER of the Company
since May 1995 and EXECUTIVE VICE PRESIDENT of the Company since November 1997.
From September 1994 until November 1997, Mr. Parent was Senior Vice President of
the Company. 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, 34, EXECUTIVE VICE PRESIDENT and CHIEF STRATEGIC OFFICER of
the Company, joined the Company in July 1997 and was appointed to his current
offices in April 1999. From November 1997 until April 1999, Mr. Rivers was
Senior Vice President -- Anchor Leasing of the Company. 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, 53, has been EXECUTIVE VICE PRESIDENT OF CAPITAL
SERVICES since April 1999. 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 1994 until April 1999, Mr. Whitcome was
Senior Vice President of Capital Services of the Company. 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
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<PAGE> 9
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.
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 LONG-TERM COMPENSATION
---------------------------------------------- ----------------------------------------
SECURITIES
RESTRICTED UNDERLYING ALL
OTHER ANNUAL STOCK OPTIONS/ OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION AWARDS($)(2) SARS(#)(3) COMPENSATION
- --------------------------- ---- --------- -------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Laurence C. Siegel......... 1999 $540,879 $ *(1) $-- $901,626 249,798 $8,900(4)
Chairman of the Board, 1998 526,599 413,543 -- 0 119,377 8,900(4)
Chief Executive Officer 1997 484,666 467,914 -- 277,907 119,377 3,710(4)
and Director
Peter B. McMillan.......... 1999 375,718 *(1) -- 362,850 64,994 8,677(5)
President, Chief Operating 1998 368,552 243,079 -- 193,145 170,964 8,650(5)
Officer and Director 1997 342,537 279,822 -- 178,310 76,593 4,070(5)
James F. Dausch............ 1999 350,000 *(1) -- 279,950 50,146 6,870(6)
Senior Executive Vice 1998 317,635 170,498 -- 145,291 128,488 8,550(6)
President -- Development 1997 286,300 191,357 -- 133,853 57,499 4,561(6)
and Director
Judith S. Berson........... 1999 320,000 *(1) -- 247,846 44,393 8,576(7)
Executive Vice President -- 1998 276,500 183,313 -- 128,649 112,701 8,480(7)
Specialty Leasing 1997 250,000 184,324 -- 116,040 49,843 4,304(7)
Kenneth R. Parent.......... 1999 290,000 *(1) -- 79,814 128,651 8,522(8)
Executive Vice President, 1998 260,000 204,500 -- 9,788 61,537 8,522(8)
Chief Financial Officer 1997 208,000 182,465 -- 117,412 49,843 2,873(8)
</TABLE>
- ---------------
(1) Bonus figures for 1999 have not been determined and will be based on the
Compensation Committee's review of each executive officer's performance for
1999 as well as the Company's achievement of its 1999 goals and objectives,
including goals for achieving budgeted levels of net operating income and
funds from operations.
(2) The number of shares of restricted stock held by Messrs. Siegel, McMillan,
Dausch and Parent and Ms. Berson on December 31, 1999 was 67,701, 41,686,
31,741, 17,283 and 27,144, respectively. The value of these restricted stock
holdings as of December 31, 1999 was $1,210,155, $745,137, $567,370,
$308,934 and $485,199, respectively, based upon the closing price of the
common stock on the NYSE on December 31, 1999, which was $17.875. Each award
of restricted stock vests in five equal annual installments beginning on the
first anniversary of the date of grant. Holders of restricted stock are
entitled to receive dividends on their restricted stock.
(3) All of the options granted on January 1, 1998, which vest only upon a change
of control of the Company, were converted into stock appreciation rights in
1999.
(4) Includes Company contributions to the 401(k) Plan of $8,000 for each of 1999
and 1998 and $3,200 for 1997 and the cost of group term life insurance
amounting to $900 in each of 1999 and 1998 and $510 in 1997.
(5) Includes Company contributions to the 401(k) Plan of $8,000 for each of 1999
and 1998 and $3,200 for 1997 and the cost of group term life insurance
amounting to $677, $650 and $870 in 1999, 1998 and 1997, respectively.
7
<PAGE> 10
(6) Includes Company contributions to the 401(k) Plan of $6,240, $8,000 and
$3,200 for 1999, 1998 and 1997, respectively, and the cost of group term
life insurance amounting to $630, $550 and $1,361 in 1999, 1998 and 1997,
respectively.
(7) Includes Company contributions to the 401(k) Plan of $8,000 for each of 1999
and 1998 and $3,200 for 1997 and the cost of group term life insurance
amounting to $576, $480, and $1,104 in 1999, 1998 and 1997, respectively.
(8) Includes Company contributions to the 401(k) Plan of $8,000, for each of
1999 and 1998 and $2,400 for 1997 and the cost of group term life insurance
amounting to $522 for each of 1999 and 1998 and $473 for 1997.
The following table sets forth certain information concerning exercised and
unexercised options held by the Company's Chief Executive Officer and the four
other most highly compensated executive officers of the Company at December 31,
1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SARS AT
SHARES AT DECEMBER 31, 1999 DECEMBER 31, 1999
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Laurence C. Siegel..... - 0 - - 0 - 255,628 344,384 $9,813 $51,569
Peter B. McMillan...... - 0 - - 0 - 164,216 221,866 6,641 32,862
James F. Dausch........ - 0 - - 0 - 140,418 168,082 4,996 25,269
Judith S. Berson....... - 0 - - 0 - 91,710 139,388 2,775 21,272
Kenneth R. Parent...... - 0 - - 0 - 72,226 221,119 2,498 57,954
</TABLE>
The following table sets forth certain information relating to options to
purchase common stock granted to the Company's Chief Executive Officer and the
four other most highly compensated executive officers of the Company during
1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT ANNUAL RATES OF
NUMBER OF OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 5% 10%
---- -------------- ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Laurence C. Siegel..... 146,880 5.34% $26.1900 4/1/2008 $ 226,194 $2,343,957
102,918 3.74% 17.4375 4/1/2009 1,128,635 2,860,182
Peter B. McMillan...... 64,994 2.36% $17.4375 4/1/2009 712,747 1,806,241
James F. Dausch........ 50,146 1.82% $17.4375 4/1/2009 549,919 1,393,602
Judith S. Berson....... 44,393 1.62% $17.4375 4/1/2009 486,829 1,233,721
Kenneth R. Parent...... 128,661 4.68% $17.4375 4/1/2009 1,410,942 3,575,603
</TABLE>
- ---------------
(1) Each option granted in fiscal year 1999 vests in five equal annual
installments on the first anniversary of the date of the 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
8
<PAGE> 11
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.
The Company and Mr. Siegel have reached an agreement in principle to enter
into an employment agreement that would begin on April 1, 2000, and expire on
March 31, 2003. During the term of the agreement, Mr. Siegel would receive an
annual base salary of $700,000. The Company also would pay Mr. Siegel a bonus of
$640,000 on April 1, 2000, and bonuses of $500,000 on April 1, 2001 and April 1,
2002. The Company also would pay Mr. Siegel an additional annual incentive bonus
of $1,000,000 on April 1 of 2000, 2001 and 2002. All bonuses may be subject to
and adjusted by the achievement of certain performance objectives and certain
other criteria. On April 1, 2000, Mr. Siegel would receive restricted stock
having a value of $773,000 and an option to purchase common stock having a value
of $1,657,925 at an exercise price equal to the fair market value of the
underlying stock on the date of the grant. On April 1 of each year thereafter,
Mr. Siegel would receive restricted stock having a value of $600,000 and an
option to purchase shares of common stock having a value of $900,000 at an
exercise price equal to the fair market value of the underlying common stock on
the date of the grant. Either the actual amount of each award of options and
restricted stock or the extent to which the award vests, may be subject to and
adjusted by the achievement of certain performance objectives and certain other
criteria. The restricted stock and options would vest if Mr. Siegel's employment
were terminated due to death, disability, termination by Mr. Siegel for good
reason (as to be defined in the agreement), termination without cause (as to be
defined in the agreement), or termination within six months of a change of
control (as to be defined in the agreement) if due to either involuntary
discharge or a substantial reduction in duties. If Mr. Siegel's employment were
terminated without cause or Mr. Siegel were to terminate his employment for good
reason, Mr. Siegel would receive severance pay in accordance with the Company's
severance pay policy then in effect. The employment agreement would contain
non-competition provisions prohibiting Mr. Siegel, subject to certain limited
exceptions and certain criteria, from engaging directly or indirectly in the
development, redevelopment, operation, management or leasing of a retail
shopping center or retail shopping center services anywhere in the world during
the period of employment with the Company and for 18 months thereafter.
The Company also entered into employment agreements in 1997 with each of
Messrs. McMillan, Dausch and Parent and Ms. Berson (the "1997 Agreements").
Pursuant to the 1997 Agreements, 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. The Company, in turn, agreed to (i) pay Messrs. McMillan, Dausch and
Parent and Ms. Berson an initial base annual salary of $345,050, $288,400,
$208,000 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.
The 1997 Agreements provide that if the employee's employment is terminated
by (i) the Company without cause prior to six months before or more than two
years after the effective date of certain change of control events or (ii) the
employee for good reason before the end of the initial term if the effective
date of termination is prior to six months before or more than two years
following the effective date of certain change of control events, the employee
will be entitled to his salary for three years, in the case of Mr. McMillan, or
to his or her salary for two years, in the case of Messrs. Dausch and Parent and
Ms. Berson. In addition, the
9
<PAGE> 12
Company will pay for the continuation of the employee's welfare benefits for a
period of 24 months following the date of termination.
The 1997 Agreements also provide that if the employee's employment is
terminated by the Company without cause or by the employee with good reason
within six months before or within two years following the effective date of
certain change of control events, the employee will be entitled to, in the case
of Mr. McMillan, an amount equal to three times his highest annualized base
salary and an amount equal to three times the greater of (i) his 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 in which the date of termination occurs and, in
the case of Messrs. Dausch and Parent and Ms. Berson, an amount equal to two
times the employee's highest annualized base salary, an amount equal to two
times the greater of (i) the employee's 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 in which the date of termination occurs and an amount equal to the target
level of bonus for the year in which the effective date of termination occurs.
In addition, Messrs. McMillan, Dausch and Parent and Ms. Berson will receive
medical, dental and life insurance for 24 months after the effective date of
termination and a cash payment of any compensation which has been deferred under
the Company's non-qualified deferred compensation plans.
The 1997 Agreements contain non-competition provisions that prohibit the
employees, 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 a retail shopping center or
retail shopping center services within a certain area and/or with certain
competitors during the period of employment with the Company and for 36 months,
in the case of Mr. McMillan, or 24 months, in the case of Messrs. Dausch and
Parent and Ms. Berson, thereafter, except that if the employee terminates his or
her employment for good reason as defined in his employment agreement, the
non-competition period ends one year subsequent to the date employment is
terminated. In addition, the non-competition provisions prohibit the employee
from inducing any employee of the Company to terminate his employment with the
Company, accepting employment with any Competitor of the Company or interfering
with any similar manner with the business of the Company during the period of
employment with the Company and for a period of 24 months thereafter.
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 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.
In 1995, 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
employment agreement, the balance of the loan principal plus interest 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.
10
<PAGE> 13
CUMULATIVE TOTAL SHAREHOLDER RETURN(1)
THE COMPANY VERSUS S&P 500 AND NAREIT INDICES
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
THE COMPANY S&P 500 INDEX NAREIT EQUITY INDEX
----------- ------------- -------------------
<S> <C> <C> <C>
12/94 100 100 100
12/95 94 134 115
12/96 132 161 156
12/97 135 211 188
12/98 110 268 155
12/99 99 320 148
</TABLE>
- ---------------
(1) Assumes $100 invested on December 31, 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> 14
REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee (the "Committee") of the Board of
Directors has prepared the following report regarding 1999 executive
compensation. The Committee is composed entirely of non-employee directors and
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. This report describes the Committee's basic
approach to executive compensation and the basis on which 1999 compensation
determinations were made by the Committee with respect to the Company's
executive officers, including the officers name in the Summary Compensation
Table (the "Named Executive Officers"). The Committee works closely with the
entire Board of Directors in the execution of its duties.
EXECUTIVE COMPENSATION POLICY
The primary objectives of the Committee in determining executive
compensation are (i) to provide a competitive total compensation package to
enable the Company to attract and retain qualified executives and align their
compensation with the Company's overall business strategies and (ii) to provide
each executive officer with a significant equity stake in the Company through
stock options and stock grants.
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. As a
result of the Towers Perrin analysis, in 1996, the Board of Directors authorized
the Committee to implement a comprehensive compensation plan (the "Compensation
Plan") which consists of three principal components: base salary, an annual
Performance Incentive Plan and a Long Term Incentive Plan.
The Company is currently consulting with Towers Perrin to review the
compensation plans of comparable companies and to analyze new compensation
strategies for its executive officers to assure that its compensation practices
are consistent with the Company's goals and objectives.
1999 EXECUTIVE OFFICER COMPENSATION
BASE SALARY. In 1999, the base salaries for the Chief Executive Officer
and the President were increased by approximately 3% from the previous year. In
addition, on April 1, 1999, a number of executive officers were promoted. As a
result of the promotions, the officers' base salaries were increased to bring
their compensation within the range of salaries paid to similarly situated
executives of comparable companies and to reflect their increased
responsibilities.
ANNUAL CASH INCENTIVE BONUS. 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 1999
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 1999. Such calculations are
currently being reviewed.
STOCK OPTIONS AND RESTRICTED STOCK. Effective March 12, 1999 and April 1,
1999, the Committee approved grants of stock options and restricted stock
pursuant to the Amended and Restated 1994 Executive Equity Incentive Plan. The
March 12, 1999 grants of stock options and restricted stock were retroactive to
1998 to compensate Mr. Siegel for 1997 performance. The aggregate values of the
April 1, 1999 grants of both
12
<PAGE> 15
stock options and restricted stock were determined based on a variety of
factors, including the individual's degree of responsibility, ability to affect
future Company performance, salary level and contribution to the overall success
of the Company, as well as to the general level of performance by the Company.
The Company and Mr. Seigel have reached an agreement in principle to enter
into an employment agreement that would begin on April 1, 2000, and expire on
March 31, 2003. In establishing Mr. Siegel's annual compensation and incentive
awards under the new agreement, the Committee reviewed a study by Towers Perrin
analyzing the salaries of executives in comparable companies within the real
estate development industry. Mr. Siegel's total direct compensation under the
new agreement would place him in the 92nd percentile when compared to the group
consisting of the highest paid executive in each of the comparator companies.
Mr. Siegel's compensation would include an annual bonus, grants of options and
restricted stock all of which would be subject to and adjusted by the
achievement of certain performance objectives and certain other criteria. The
Committee believes that basing a large portion of Mr. Siegel's compensation on
long-term performance objectives and certain other criteria fulfills a Company
objective of linking Mr. Siegel's compensation directly and closely to
increasing shareholder value.
1999 CHIEF EXECUTIVE OFFICER PAY
Mr. Siegel received a base salary in 1999 of $540,879. Mr. Siegel's final
bonus will be calculated on the basis of the Company's achievement of its 1999
goals and objectives, as outlined above in "1999 Executive Officer
Compensation." On March 12, 1999, the Committee granted to Mr. Siegel stock
options for 146,880 shares and granted 12,488 shares of restricted stock. On
April 1, 1999, the Committee further granted to Mr. Siegel stock options for
102,918 shares and granted 32,949 shares of restricted stock. The Committee
determined Mr. Siegel's 1999 option and restricted stock grants based on the
factors outlined above in "1999 Executive Officer Compensation."
$1 MILLION PAY DEDUCTIBILITY LIMIT
Section 162(m) of 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
1999, 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> 16
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth information regarding the beneficial
ownership of shares of common stock as of February 29, 2000 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 60.23% 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........................ 1,076,968(3) 4.38% 2.70%
Peter B. McMillan......................... 134,892(4) * *
James F. Dausch........................... 81,947(5) * *
Judith S. Berson.......................... 61,661(6) * *
Kenneth R. Parent......................... 77,899(7) * *
Dietrich von Boetticher................... 443 * *
John M. Ingram............................ 7,443 * *
Charles R. Black, Jr...................... 4,393 * *
James C. Braithwaite...................... 89,761(8) * *
Joseph B. Gildenhorn...................... 14,443 * *
Harry H. Nick............................. 272,296(9) 1.13% *
Franz von Perfall......................... 77,322(10) * *
Robert P. Pincus.......................... 6,443 * *
Cristina L. Rose.......................... 1,443 * *
Kan Am.................................... 12,568,749(11) 34.40% 31.58%
3495 Piedmont Road
Ten Piedmont Center, Suite 520
Atlanta, Georgia 30305
All executive officers and directors as a
group (20 persons)........................ 2,219,880(12) 8.81%(13) 5.52%(14)
</TABLE>
- ---------------
* Less than 1%
(1) For purposes of this calculation, the shares of common stock deemed
outstanding includes 23,971,307 shares of common stock outstanding as of
February 29, 2000, 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 29, 2000 and upon redemption of 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 23,971,307 shares of common stock
outstanding as of February 29, 2000, 15,828,887 units outstanding as of
February 29, 2000 (excluding units held by the Company) and shares of
common
14
<PAGE> 17
stock issuable to the named persons(s) upon the exercise of options
exercisable within 60 days of February 29, 2000.
(3) Includes 446,340 shares of common stock, 556,793 units and options to
purchase 78,835 shares of common stock exercisable within 60 days of
February 29, 2000.
(4) Includes 87,702 shares of common stock and options to purchase 47,190
shares of common stock exercisable within 60 days of February 29, 2000.
(5) Includes 46,220 shares of common stock and options to purchase 35,727
shares of common stock exercisable within 60 days of February 29, 2000.
(6) Includes 30,243 shares of common stock and options to purchase 31,418
shares of common stock exercisable within 60 days of February 29, 2000.
(7) Includes 29,892 shares of common stock and options to purchase 48,007
shares of common stock exercisable within 60 days of February 29, 2000.
(8) Includes 1,443 shares of common stock and 85,318 units. 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.
(9) Includes 160,728 shares of common stock and 111,568 units.
(10) Includes 20,443 shares of common stock and 56,879 units.
(11) Includes 12,568,749 units deemed to be beneficially owned by Kan Am as
general partner of nine limited partnerships.
(12) Includes 996,409 shares of common stock, 815,404 units and options to
purchase 408,070 shares of common stock exercisable within 60 days of
February 29, 2000.
(13) For purposes of this calculation, the shares of common stock deemed
outstanding includes 23,971,307 shares of common stock outstanding as of
February 29, 2000, 815,404 units beneficially owned by all executive
officers and directors as a group and options to purchase 408,070 shares of
common stock exercisable within 60 days of February 29, 2000 for all
officers and directors as a group.
(14) The number of shares of common stock and units deemed outstanding for
purposes of this calculation is described in note 2 to this table.
CERTAIN RELATIONSHIPS AND 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 29, 2000, Kan Am owned
approximately 31.6% of the outstanding units in the Operating Partnership.
15
<PAGE> 18
The following sets forth certain information regarding the joint ventures
between the Company and Kan Am.
<TABLE>
<CAPTION>
COMPANY KAN AM
REQUIRED REQUIRED
COMPANY KAN AM CAPITAL CAPITAL
PROJECT OWNERSHIP OWNERSHIP CONTRIBUTIONS(1) CONTRIBUTIONS(2)
------- --------- --------- ---------------- ----------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Ontario Mills............................... 50.0% 25.0% $10.0 $22.5
Grapevine Mills............................. 37.5 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 24.1
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 -- --
Arundel Mills............................... 37.5 25.0 17.5 35.0
Sugarloaf Mills(3).......................... 50.0 50.0 -- 70.0
Opry Mills.................................. 60.7(4) -- (4) 52.0 (4) --
</TABLE>
- ---------------
(1) Of which $6.4 million and $12.5 million remains to be funded for Grapevine
Mills and Arundel Mills, respectively, as of December 31, 1999. Excludes
certain advances and borrowings for working capital.
(2) Of which $0.3 million, $22.5 million and $26.8 million remains to be funded
for Katy Mills, Arundel Mills and Sugarloaf Mills, respectively, as of
December 31, 1999.
(3) The Company and Kan Am have reached an agreement in principle with Discover
pursuant to which Sugarloaf Mills will be renamed Discover Mills. Definitive
agreements are currently under negotiation.
(4) The Company has a letter of intent with Kan Am under which Kan Am will fund
100% of the Company's equity requirement in exchange for the Company's
transfer to Kan Am of a 33.33% interest in the partnership.
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 and Rivers, the Company loaned to them
$150,000, $150,000, $150,000 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 and bears interest at a
rate of 8% per annum. The loans to Messrs. McMillan, Dausch and Whitcome are
payable in full by Messrs. McMillan, Dausch and Whitcome in the event their
employment with the Company terminates for any reason other than for "good
reason" or without cause; provided, however, that on December 30, 2000, the
third anniversary of the execution of each of Messrs. McMillan's, Dausch's and
Whitcome's employment agreement, the Company will forgive the entire loan
principal, together with all accrued interest. 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.
On September 24, 1999, each of Messrs. Siegel, McMillan, Parent, Rivers and
Whitcome executed a promissory note to the Company evidencing a loan of
$249,642.00, $223,863.75, $225,853.65, $99,495.00 and
16
<PAGE> 19
$49,747.50, respectively. Each borrower used the proceeds of the note to
purchase common stock of the Company. Each loan has a term of three years and
bears interest at a rate of 8% per annum.
OTHER TRANSACTIONS
MillsServices Corp. previously managed 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. The management contract was terminated in
December 1998. However, this partnership and the purchaser of the property
currently owe the Company, in the aggregate, approximately $552,000 in leasing
fees and payroll expenses.
Mr. Pincus is the President, D.C. Metro Region of BB&T Bank. Borrowings
from BB&T Bank in 1999 included (i) a $2.4 million unsecured loan bearing
interest at a rate of 6.25% which matures on July 15, 2000, (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,
1999 of $354,000, 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, 1999 of
$8,956,000.
Mr. Siegel and Mr. McMillan own equally 95% of the voting common stock and
1% of the non-voting preferred 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, 1999, 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 1999.
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
1999, Mr. Ingram filed one Form 4 late, 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
those proxies in accordance with their judgment.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals of shareholders to be presented at the 2001 Annual Meeting of
Shareholders must be received by the Secretary of the Company prior to December
1, 2000 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 1, 2001 and no later than
March 2, 2001 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, without
additional compensation, 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
17
<PAGE> 20
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 not to exceed $5,500.
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, 2000
18
<PAGE> 21
THE MILLS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS MAY 16, 2000
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 subsitution in each, as proxies to
vote on the matters indentified 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 21, 2000 and
entitled to vote at the Annual Meeting of Shareholders of the Company to be held
on May 16, 2000 at 10:00 a.m. Eastern Daylight Savings Time at the Key Bridge
Marriott, 1401 Lee Highway, Arlington, Virginia, 22209 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) Charles R. Black, Jr., (2) Dietrich Von Boetticher, (3) John M. Ingram and
(4) Peter B. McMillan, (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, 2000, 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 /\
<PAGE> 22
[X] PLEASE MARK YOUR [ 2930
MARK 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>
<CAPTION>
<S> <C> <C>
FOR WITHHELD
1. Election of [ ] [ ]
Directors
(see reverse)
For except vote withheld from the following nominee(s):
--------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
2. Proposal to ratify the appointment of Ernst & Young LLP as auditors [ ] [ ] [ ]
for 2000.
The undersigned hereby acknowledges receipt of the Notice of
the 2000 Annual Meeting of Shareholders and accompanying
Proxy Statement.
</TABLE>
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
Shareholders can now give proxies to vote their shares by mail, by telephone or
by using the Internet. To use the telephone or the Internet you will need your
proxy card and voter control number shown above (just below the perforation) and
the tax indentification number associated with your stockholder account. If you
use the telephone or the Internet, there is no need to return the proxy card.
- - To use the telephone, you will need a touch-tone telephone. Dial
1-877-PRX-VOTE (1-877-779-8683), 24 hours a day, seven days a week.
- - To use the Internet, log on to the Internet and go to the following website:
www.eproxyvote.com/mis
----------------------
- - To use the mails, fold and detach the proxy card and use the enclosed
envelope, which is already addressed and requires no postage.
Your vote is important. Thank you for voting.
