FOREST CITY ENTERPRISES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 11, 1996
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of
Forest City Enterprises, Inc. will be held in the ballroom at the
Ritz-Carlton Hotel, 1515 West Third Street, Cleveland, Ohio 44113, on
Tuesday, June 11, 1996 at 2:00 p.m., eastern daylight saving time, for the
purpose of considering and acting upon:
(1) The election of twelve (12) directors, each to hold office until the
next annual shareholders' meeting and until his successor shall be
elected and qualify. Three (3) directors will be elected by holders of
Class A common stock and nine (9) by holders of Class B common stock.
(2) The election of Coopers & Lybrand as independent auditors for the
Company for the fiscal year ending January 31, 1997.
(3) Such other business as may properly come before the meeting or any
adjournment thereof.
Shareholders of record at the close of business on April 15, 1996 will be
entitled to notice of and to vote at such annual meeting or any adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas G. Smith, Secretary
Cleveland, Ohio
April 29, 1996
IMPORTANT: IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING.
WHETHER OR NOT YOU INTEND TO BE PRESENT, PLEASE MARK, DATE AND
SIGN THE APPROPRIATE ENCLOSED PROXY OR PROXIES AND SEND THEM BY
RETURN MAIL IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES.
FOREST CITY ENTERPRISES, INC.
PROXY STATEMENT
SOLICITATION AND REVOCATION OF PROXIES
The enclosed Proxy or Proxies relating to shares of Class A common stock
and Class B common stock are solicited by and on behalf of the management
of Forest City Enterprises, Inc. (hereinafter referred to as the "Company")
for use at the annual meeting of shareholders to be held on Tuesday,
June 11, 1996 at 2:00 p.m., eastern daylight saving time, in the ballroom at
The Ritz-Carlton Hotel, 1515 West Third Street, Cleveland, Ohio 44113. A
shareholder giving a Proxy may revoke the same by notifying the Company
in writing or at the annual meeting, without affecting any vote previously
taken.
OUTSTANDING SHARES AND VOTING RIGHTS
As of April 15, 1996, the record date fixed for the determination of
shareholders entitled to vote at the annual meeting, there were outstanding
5,208,527 shares of Class A common stock, par value $.33-1/3 per share,
and 3,629,487 shares of Class B common stock, par value $.33-1/3 per share,
of the Company. At the annual meeting, the holders of Class A common stock
will be entitled as a class to elect three (3) directors. Nathan Shafran,
J. Maurice Struchen and Michael P. Esposito, Jr. have been nominated for
election to serve as these directors. At the annual meeting, the holders of
Class B common stock will be entitled as a class to elect nine (9) directors.
Albert B. Ratner, Samuel H. Miller, Charles A. Ratner, Scott S. Cowen,
James A. Ratner, Ronald A. Ratner, Jerry V. Jarrett, Brian J. Ratner and
Deborah Ratner Salzberg have been nominated for election to serve as these
directors. Except for the election of directors, the holders of Class A
common stock and Class B common stock will vote together on all other
matters presented at the meeting and will be entitled to one (1) vote per
share of Class A common stock and ten (10) votes per share of Class B common
stock held of record.
If notice in writing is given by any shareholder to the President, a Vice
President or the Secretary of the Company not less than forty-eight hours
before the time fixed for the holding of the meeting that such shareholder
desires cumulative voting with respect to the election of directors by a
class of shareholders to which he belongs, and if an announcement of the
giving of such notice is made upon the convening of the meeting by the
Chairman or Secretary or by or on behalf of the shareholder giving such
notice, each holder of shares of that class shall have the right to
accumulate such voting power as he possesses at such election with respect
to shares of that class. Each holder of shares of Class A common stock or
Class B common stock, as the case may be, shall have as many votes as equal
the number of shares of that class of common stock owned by him multiplied
by the number of directors to be elected by the holders of that class of
common stock. These votes may be distributed among the total number of
directors to be elected by the holders of that class of common stock or
distributed among any lesser number, in such proportion as the holder may
desire.
Under Ohio law and the Company's Articles of Incorporation, broker nonvotes
and abstaining votes will not be counted in favor of or against any nominee
for election to the Board of Directors of the Company nor will such votes
be counted in favor of or against the election of Coopers & Lybrand as the
Company's independent auditors for the fiscal year ending January 31, 1997.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended January 31, 1996 is
enclosed herewith, but is not part of this Proxy Statement.
ELECTION OF DIRECTORS
It is intended that proxies wil1 be voted for the election of the nominees
named in the following table as directors of the Company unless authority
is withheld. Each is to serve until the next annual shareholders' meeting
and until his successor shall be elected and shall qualify. In the event
any one or more of such nominees unexpectedly becomes unavailable for
election, proxies will be voted in accordance with the best judgment of the
proxy holder. All of the nominees are presently directors of the Company.
The following table sets forth the security ownership of management for
each director, nominee, other named executive officer and all directors,
nominees, named executive of officers and officers as a group.
Number of Shares of Capital Stock
Beneficially Owned at March 1, 1996
-------------------------------------------------------
Class A Class B
Occupation Director Common Percent Percent Common Percent
Name And Age Since Stock of Class of Class(e) Stock of Class
- ---------------------------- ------------------------------- -------- ------------ -------- ----------- ------------ --------
(1) Nathan Shafran Vice Chairman of the Board 1960 159,976 (3) 3.04% 11.99% 535,279 (4) 14.71%
of Directors of the Company.
Age 82. (c)
(1) J Maurice Struchen Retired Chairman and chief 1971 500 0.01% 0.02% 500 0.01%
Executive Officer of Society
Corporation (banking); Director
of Greif Bros. Corporation (creative
packaging). Age 75. (a,b)
(1) Michael P. Esposito, Jr. Retired Executive Vice President 1995 1,000 0.02% 0.02% - -
of The Chase Manhattan Bank, N.A.;
Chairman of the Board of Exel Limited
(Bermuda; insurance).
Partner, Inter-Atlantic Securities
Corporation (financial services).
Age 56. (a,b)
(2) Albert B. Ratner Co-Chairman of the Board of 1960 222,809 (5) 4.23% 7.28% 172,678 (6) 4.74%
Directors, Director of American
Greetings Corporation
(greeting cards). Age 68. (c)
(2) Samuel H. Miller Co-Chairman of the Board of 1960 184,995 (7) 3.51% 7.09% 202,401 (8) 5.56%
Directors and Treasurer of the
Company. Age 74. (c)
(2) Charles A. Ratner President and Chief Executive 1972 284,446 (9) 5.40% 8.82% 197,449(10) 5.43%
Officer of the Company.
Age 54. (c)
(2) James A. Ratner Executive Vice President of the 1984 323,179(11) 6.14% 9.07% 169,579(12) 4.66%
Company and President of Forest
City Rental Properties Corporation,
a subsidiary of the Company.
Age 51. (c)
(2) Jerry V. Jarrett Retired Chairman and Chief 1984 - - - - -
Executive Officer of Ameritrust
Corporation (banking).
Age 64. (a,b)
(2) Ronald A. Ratner Executive Vice President of the 1985 220,917(13) 4.20% 7.46% 185,647(14) 5.10%
Company and President of Forest
City Residential Development, Inc.,
a subsidiary of the Company
Age 49. (c)
(2) Scott S. Cowen Dean and Albert J. 1989 400 0.01% 0.01% - -
Weatherhead, III
Professor of Management,
Weatherhead School of Management,
Case Western Reserve University;
Director of FabriCenters of America,
Inc. (specialty retailing); Premier
Industrial Corporation (industrial
distribution); LDI Corporation
(equipment leasing); American
Greetings Corporation (greeting
cards) and Society National Bank
(banking). Age 49. (a,b)
(2) Brian J. Ratner Vice President-Urban 1993 139,871(15) 2.66% 4.07% 77,691(16) 2.13%
Entertainment of the Company.
Age 38. (c)
(2) Deborah Ratner Salzberg Vice President of Forest City 1995 116,127(17) 2.21% 4.46% 124,339(18) 3.42%
Residential Development, Inc., a
subsidiary of the Company.
Age 42. (c)
OTHER NAMED EXECUTIVE OFFICER
Thomas G. Smith Senior Vice President, - - 100 0.00%
Chief Financial Offcer and
Secretary of the Company; First
National Bank of Ohio - Northern
Region Advisory Board. Age 55 (c,d)
ALL DIRECTORS, NOMINEES
AND OFFICERS AS A GROUP (20 in number) 1,439,801(19) 27,36% 44.62% 1,641,074(20) 45.09%
(1) Nominated for election by holders of Class A common stock.
(2) Nominated for election by holders of Class B common stock.
(3) Includes 85,219 shares of Class A common stock held in a partnership in
which Mr. Shafran and his wife have shared voting and investment power.
Mr. Shafran disclaims beneficial ownership in 795,297 shares of Class A
common stock that are not included in the table above. Certain of these
shares are beneficially owned by Nathan Shafran because of his
relationship as a trustee over shares in which he has no residual
interest. The remainder, which are beneficially owned by his wife, are
shares in which Mr. Shafran disclaims any beneficial ownership.
(4) These represent shares held in a partnership in which Mr. Shafran and
his wife have shared voting and investment power. In addition, these
shares are held by RMS, Ltd, an entity owned by the Ratner, Miller and
Shafran families. Excluded from the table above are 100 shares of
Class B common stock, also held by RMS, Ltd., that are beneficially
owned by Mr. Shafran's wife in which he disclaims any beneficial
ownership.
(5) Includes 184,946 shares of Class A common stock held in a trust in which
Albert B. Ratner has an income interest but no interest in the remainder.
Mr. Ratner disclaims beneficial ownership in 802,668 shares of Class A
common stock that are not included in the table above. Certain of these
shares are beneficially owned by Albert Ratner because of his relationship
as a trustee over shares in which he has no residual interest. The
remainder, which are beneficially owned by his wife, are shares in which
Mr. Ratner disclaims any beneficial ownership.
(6) Includes 171,880 shares of Class B common stock held by RMS, Ltd.
Excluded from the table above are 70,671 shares of Class B common stock,
also held by RMS, Ltd., that are beneficially owned by Albert B. Ratner
because of his relationship as a trustee over shares in which he has no
residual interest and for which Mr. Ratner disclaims any beneficial
ownership. Also excluded are 100 shares of Class B common stock
beneficially owned by his wife in which he disclaims any beneficial
ownership.
(7) Samuel H. Miller disclaims any beneficial ownership in 739,548 shares
of Class A common stock that are not included in the table above. These
shares are beneficially owned by him because of his relationship as a
trustee over these shares in which he has no residual interest.
(8) All of these shares of Class B common stock beneficially owned by
Samuel H. Miller are held by RMS, Ltd.
(9) Includes 107,849 shares of Class A held in trusts of which Charles A.
Ratner is trustee and/or has a residual interest. Includes 60,201 shares
of Class A common stock held in a trust in which Charles A. Ratner has an
income interest but no interest in the remainder. Charles A. Ratner
disclaims any beneficial ownership in 416,425 shares of Class A common
stock that are not included in the table above. Certain of these shares
are beneficially owned by Charles Ratner because of his relationship as a
trustee over shares in which he has no residual interest. The remainder,
which are beneficially owned by his wife, are shares in which Mr. Ratner
disclaims any beneficial ownership.
(10) All of these shares are held by RMS, Ltd. Excluded from the table above
are 934,806 shares of Class B common stock held by RMS, Ltd. that are
beneficially owned by Charles A. Ratner because of his relationship as a
trustee over shares in which he has no residual interest. An additional
1,350 shares of Class B common stock, which are beneficially owned by his
children, are shares in which Mr. Ratner disclaims any beneficial
ownership.
(11) Includes 107,123 shares of Class A held in trusts of which James A.
Ratner is trustee and/or has a residual interest. Includes 45,724
shares of Class A common stock held in a trust in which James A. Ratner
has a term income interest but no interest in the remainder. James A.
Ratner disclaims any beneficial ownership in 362,828 shares of Class A
common stock that are not included in the table above. Certain of
these shares are beneficially owned by James Ratner because of his
relationship as a trustee over shares in which he has no residual
interest. The remainder, which are beneficially owned by his wife,
are shares in which Mr. Ratner disclaims any beneficial ownership.
(12) All of these shares are held by RMS, Ltd. Excluded from the table
above are 190,285 shares of Class B common stock held by RMS, Ltd. that are
beneficially owned by James A. Ratner because of his relationship as a
trustee over shares in which he has no residual interest or which are
shares beneficially owned by his children in which Mr. Ratner disclaims
any beneficial ownership.
(13) Includes 45,907 shares of Class A common stock held in a trust in
which Ronald A. Ratner has a term income interest but no interest in the
remainder. Ronald A. Ratner disclaims any beneficial ownership in 75,925
shares of Class A common stock that are not included in the table above.
Certain of these shares are beneficially owned by Ronald Ratner because of
his relationship as a trustee over shares in which he has no residual
interest. The remainder, which are beneficially owned by his wife, are
shares in which Mr. Ratner disclaims any beneficial ownership.
(14) All of these shares of Class B common stock beneficially owned by
Ronald A. Ratner are held by RMS, Ltd. Excluded from the table above are
886,145 shares of Class B common stock held by RMS, Ltd. that are
beneficially owned by Ronald Ratner because of his relationship as a
trustee over shares in which he has no residual interest or which are
shares beneficially owned by his children in which Mr. Ratner disclaims
any beneficial ownership.
(15) Brian J. Ratner disclaims any beneficial ownership in 28,600 shares of
Class A common stock that are not included in the table above. Certain of
these shares are beneficially owned by Brian Ratner because of his
relationship as a trustee over shares in which he has no residual interest.
The remainder, which are beneficially owned by his wife and children, are
shares in which Mr. Ratner disclaims any beneficial ownership.
(16) All of these shares of Class B common stock beneficially owned by
Brian J. Ratner are held by RMS, Ltd. Excluded from the table above are
475,185 shares of Class B common stock held by RMS, Ltd. that are
beneficially owned by Brian Ratner because of his relationship as a trustee
over shares in which he has no residual interest or which are shares
beneficially owned by his wife and children in which Mr. Ratner disclaims
any beneficial ownership. Also excluded from the table above are 300
shares of Class B common stock not held by RMS, Ltd. that are
beneficially owned by Brian Ratner's wife in which Mr. Ratner
disclaims any beneficial ownership.
(17) Deborah Ratner Salzberg disclaims any beneficial ownership in 33,700
shares of Class A common stock that are not included in the table above.
Certain of these shares are beneficially owned by Deborah Salzberg because
of her relationship as a trustee over shares in which she has no residual
interest. The remainder, which are beneficially owned by her husband and
children, are shares in which Ms. Salzberg disclaims any beneficial
interest.
(18) All of these shares of Class B common stock beneficially owned by
Deborah Ratner Salzberg are held by RMS, Ltd. Excluded from the table
above are 428,537 shares of Class B common stock held by RMS, Ltd. that
are beneficially owned by Ms. Salzberg because of her relationship as a
trustee over shares in which she has no residual interest or which are
shares beneficially owned by her husband and children in which Ms.
Salzberg disclaims any beneficial interest.
(19) These shares of Class A common stock represent all the shares in which
beneficial ownership is claimed by these persons. Those shares of which any
of these persons disclaim beneficial ownership are disclosed in the
footnotes above.
(20) Included in this total are 1,637,793 shares of Class B common stock that
are held by RMS, Ltd. These shares represent all the shares in which
beneficial ownership is claimed by these persons. Those shares of which any
of these persons disclaim beneficial ownership are disclosed in the
footnotes above.
(a) Member of the Audit Committee.
(b) Member of the Compensation Committee.
(c) Officer and/or director of various subsidiaries of the Company.
(d) This officer is not a director.
(e) Shares of Class B common stock are convertible into shares of Class A
common stock at any time on a l-for-l basis. If Class B common shares for
the nominee or officer listed were to be converted, the ownership of Class A
common shares for that person would be as disclosed in the table above.
The Company has been advised that the shares owned by RMS, Ltd. and shares
owned by other Ratner, Miller and Shafran families will be voted for the
approval of the election of the directors nominated and that such vote will
be sufficient to elect said nominees.
Nathan Shafran is the uncle of Charles A. Ratner, James A. Ratner and
Ronald A. Ratner are brothers. Albert B. Ratner is the father of Brian J.
Ratner and Deborah Ratner Salzberg.
DIRECTOR COMPENSATION
Directors who are not officers of the Company received fees of $20,000 each
for the fiscal year ended January 31, 1996, except for Mr. Esposito who
received $15,000. In addition, Messrs. Cowen, Struchen, Jarrett and
Esposito performed certain special consulting services for the Company,
including participation on various committees, for which they received, in
the aggregate, $74,000. Mr. Struchen received $42,000, primarily for
attending meetings of the Company's Executive, Audit and Compensation
Committees, monthly meetings of the Operating Committee and Strategic
Planning meetings. Mr. Jarrett received $14,500, for attending meetings of
the Company's Executive, Audit and Compensation Committees and Strategic
Planning Meetings. Messrs. Cowen and Esposito received $11,000 and $6,500,
respectively, for attending meetings of the Company's Audit and Compensation
Committees and Strategic Planning meetings. Officers of the Company who
serve as directors do not receive any additional compensation.
PRINCIPAL SECURITY HOLDERS
The following table sets forth the security ownership of all other persons
who beneficially own 5% or more of the Company's common stock.
Number of Shares of Capital Stock
Beneficially Owned at March 1, 1996
-------------------------------------------------
Class A Class B
Name and Address of Other 5% Common Percent Percent Common Percent
Holders of Common Stock Stock of Class of Class(a) Stock of Class
- ---------------------------------------------------------------------------------------------------------------
William Harris Investors, Inc. 222,162(1) 4.22% 6.47% 126,500(1) 3.48%
Suite 400
Two North La Salle Street
Chicago, IL 60602-3703
Wanger Asset Management, L. P. & 303,920(2) 5.77% 8.49% 156,320(2) 4.30%
Wanger Asset Management, Ltd.
227 West Monroe, Suite 3000
Chicago, IL 60606
Acorn Investment Trust, 123,000(2) 2.34% 5.13% 155,000 4.26%
Series Designated Acorn Fund
227 West Monroe, Suite 3000
Chicago, IL 60606
Heine Securities Corporation & 170,800(3) 3.25% 3.25% - -
Michael F. Price
51 J.F.K. Parkway
Short Hills, NJ 07078
Private Capital Management, Inc. 411,750(4) 7.82% 7.82% - -
3003 Tamiami Trail North
Naples, FL 33940
Ratner, Miller & Shafran Family Interests 2,423,677(5) 46.05% 64.23% 2,678,453(5) 73.60%
10800 Brookpark Road
Cleveland, OH 44130
(1) William Harris Investors, Inc. ("WHI"), a Delaware corporation, is an
investment advisor registered under the Investment Adviser Act of 1940.
It has reported to the Company that it is the beneficial owner of the
shares included in the table above by virtue of its advisory
relationship with persons owning the shares. WHI disclaims any
economic interest in any of these shares.
(2) Wanger Asset Management, L.P. is a Delaware limited partnership and Wanger
Asset Management, Ltd. is a Delaware corporation (collectively referred to
as "Wanger"). Acorn Investment Trust, Series Designated Acorn Fund
("Acorn") is a Massachusetts business trust. Power over voting and
disposition of the securities reported by Acorn is shared with Wanger
Asset Management, L.P., which is the investment advisor of Acorn.
(3) Heine Securities Corporation ("Heine") is an investment advisor
registered under the Investment Adviser Act of 1940. Heine has reported
to the Company that one or more of its clients is the legal owner of these
securities. Pursuant to investment advisory agreements with its advisory
clients, Heine has sole investment discretion and voting authority with
respect to the securities shown in the table above. Michael F. Price, as
president of Heine, also may be deemed to have investing and voting power
over the same shares. Both Mr. Price and Heine disclaim any economic
beneficial interest in any of these shares.
(4) Private Capital Management, Inc. ("PCM"), a Florida corporation, is an
investment advisor registered under the Investment Adviser Act of 1940.
PCM is deemed to be the beneficial owner of 306,200 shares of Class A
common stock because of its shared power to dispose or to direct the
disposition of these shares; PCM disclaims any power to vote or to
direct the voting of these shares. Bruce S. Sherman, as president of
PCM, also may be deemed to be the beneficial owner of the 306,200 shares
beneficially owned by PCM. Mr. Michael J. Seaman, an employee of PCM or
its affiliates, also owns 3,000 shares of Class A common stock not
included in the table above. Mr. Seaman disclaims any beneficial
ownership in any of the shares beneficially owned by either PCM or Mr.
Sherman.
(5) The Ratner, Miller and Shafran families have an ownership interest in
the Company as reflected in the table above. These shares are
beneficially owned by members of these families either individually or
through a series of trusts and custodianships. Of the Class B common
shares listed above, RMS, Ltd. owns 2,667,705 shares which represents
73.30% of the Class B common stock outstanding at March l, 1996.
Certain members of the Ratner, Miller and Shafran families have been
nominated for election to serve on the Board of Directors of the Company.
(See information regarding nominees and directors previously disclosed
for further information regarding the beneficial ownership of the Company's
common stock by these individuals.)
Included in the data referred to above are shares owned by Fannye
Shafran, wife of Nathan Shafran. Mrs. Shafran has a beneficial interest
in 188,993 shares of Class A common stock and 535,379 shares of Class B
common stock. Of those amounts, 125,469 shares of Class A common stock
and 535,279 shares of Class B common stock are in a partnership with
Nathan Shafran in which they have shared voting and investment power.
If the Class B common shares were converted into Class A common shares,
Fannye Shafran would own 11.43% of the Class A common shares outstanding.
(a) Shares of Class B common stock are convertible into shares of Class A
common stock at any time on a l-for-l basis. If Class B common shares for
each holder of common stock listed were to be converted, the ownership of
Class A common shares for that holder would be as disclosed in the table
above.
COMMITTEES OF THE BOARD OF DIRECTORS
During the last fiscal year, the Company's Board of Directors held four
regular meetings.
The Audit Committee is composed of all four outside directors: Messrs.
Scott S. Cowen (Chairman), J. Maurice Struchen, Michael P. Esposito, Jr., and
Jerry V. Jarrett. The Audit Committee recommends the firm of independent
accountants to be appointed by the Board of Directors, subject to approval
by the shareholders, reviews the fee structure and the scope of the annual
audit, reviews the results of the annual audit, reviews reports of significant
audits performed by the Company's internal auditors, reviews the adequacy of
internal controls and consults with independent accountants and financial
management on accounting issues, including significant changes in accounting
practices. The Audit Committee met four times during the last fiscal year.
The Compensation Committee is comprised of all four outside directors:
Messrs. Jerry V. Jarrett (Chairman),Michael P. Esposito, Jr., Scott S.
Cowen and J. Maurice Struchen. The Compensation Committee reviews the
compensation arrangements for senior management. Two Compensation Committee
meetings were held during fiscal 1995.
Each nonemployee director who serves on either the Audit or Compensation
Committees receives $500 for each meeting attended. In addition, any
nonemployee director who chairs a meeting receives an additional $500.
The Board does not have a nominating committee. Board of Director nominees
are proposed by the existing Board members.
All Board members and Committee members attended at least 75% of their
respective meetings during fiscal 1995, except for Jerry V. Jarrett.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors consists entirely of
the following nonemployee Directors:
Jerry V. Jarrett, Chairman
Michael P. Esposito, Jr.
Scott S. Cowen
J. Maurice Struchen
The primary role of the Compensation Committee is to develop and implement
compensation policies which are consistent with and integrally linked to the
accomplishment of the Company's strategic objectives.
The Company believes that shareholder value is best maximized through the
increase in Earnings Before Depreciation and Deferred Taxes and the increase
in the value of its real estate portfolio over time.
The Company adheres to certain principles in developing its compensation
policies. First, total compensation should be competitive with other
companies in the real estate industry of similar size. Incentive
compensation should be linked both to each individual's performance and the
performance of the Company as a whole. Compensation opportunities should be
structured to attract and retain those individuals that can help achieve the
Company's strategic objectives and thus maximize shareholder value.
The Compensation Committee reviews and approves all of the policies under
which each form of compensation is paid or awarded to the Company's "key" of
officers as defined by the Committee. The Committee approves the compensation
of the Chief Executive Officer and the other five most highly compensated
executive offcers. The Compensation Committee also reviews the salaries and
incentives for each of the members of the Ratner, Miller and Shafran
families identified as executive of officers. The Compensation Committee
utilizes nationally recognized outside experts as consultants to assist it
in the performance of its duties. These consultants are asked to analyze
officers salaries and compare those paid by Forest City Enterprises with
comparable corporations in the real estate field. In addition, the
consultants are asked to provide the committee with guidance on ranges in
annual salary and incentive compensation so officers of Forest City
Enterprises would be compensated on a competitive basis. The committee
meets with these consultants as required, and expects to continue to use
their services in the future.
The Stock Option Plan is intended to grant options for key executives to
purchase shares of Company stock at fair market value. Consistent with its
approach to all incentive compensation, stock awards under the Plan will be
granted based upon the Committee's evaluation of all performance criteria
and at target levels commensurate with industry survey data regarding
long-term incentives.
Section 162(m) of the Internal Revenue Code of 1986, as amended, and
adopted under the Omnibus Budget Reconciliation Act of 1993, limits the
deduction a publicly-held corporation may take for compensation paid to its
chief executive officer and its four other most highly compensated employees.
This Section of the Code currently does not apply to executive officer
compensation for the Company. The Compensation Committee, therefore, does
not have a policy regarding the qualification of executive officer
compensation for deductibility under that Section of the Code.
There is no other long-term incentive plan covering either the Chief
Executive Officer or any of the named executive officers. If the Company
initiates any new plans, the Compensation Committee will review and approve
such plans.
The Company entered into an employment agreement with Charles A. Ratner,
President and Chief Executive Officer, on February 1, 1994. The Agreement
provides for an annual salary of $325,000. The contract was initially for
a one year term but is renewable annually. In reviewing the Chief Executive
Officer's compensation, the Compensation Committee feels one of the most
important indicators of performance on his part is his ability to understand
and react to changing conditions affecting our industry and to adjust
strategic directions and tactical plans to be responsive. Maintaining
shareholder value and development of management succession plans also rank
high on the list of performance indicators.
Jerry V. Jarrett, Chairman Michael P. Esposito, Jr.
Scott S. Cowen J. Maurice Struchen
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to, earned by, or
paid to the Company's chief executive officer and the five other most
highly compensated named executive officers.
Annual Compensation
-------------------
All Other
Name and Principal Position Year Salary Bonus Compensation
- --------------------------- ---- ------ ------ ----------------
Albert B. Ratner, Co-Chairman 1995 449,987 - 30,569
of the Board of Directors 1994 430,946 - 29,923
1993 399,985 - 28,307
Samuel H. Miller, Co-Chairman 1995 384,986 60,000 33,681
of the Board of Directors 1994 384,986 - 32,893
and Treasurer. 1993 349,986 - 30,677
Charles A. Ratner, 1995 324,986 - 17,896
President and Chief 1994 321,812 - 13,254
Executive Officer. 1993 248,062 - 11,923
Thomas G. Smith, 1995 287,005 100,000 55,052
Senior Vice President, 1994 274,986 125,000 55,265
Chief Financial Officer 1993 274,024 125,000 51,826
and Secretary.
Ronald A. Ratner, 1995 249,985 - 11,271
Executive Vice President 1994 249,985 - 11,628
1993 248,062 - 10,190
James A. Ratner, 1995 249,985 - 11,523
Executive Vice President 1994 249,985 - 11,960
1993 248,062 - 10,473
"All Other Compensation" includes the cost of group term life insurance,
profit sharing payments under the Company's profit sharing plan (which was
terminated at the end of 1993), the accrual of annual benefits and interest
income on each employee's vested balance in the Company's deferred
compensation plan and the Company's matching contribution to each employee
participating in the 401(k) plan. It also includes the accrual of an
amount for Mr. Smith that is provided in lieu of a deferred compensation
plan that existed with his prior employer.
The Company entered into an employment agreement with Albert B. Ratner,
Co-Chairman of the Board of Directors on July 1, 1989. The agreement
provides for an annual salary of $45O,000. The contract was initially for a
term of one year but is renewable annually. Although no formal bonus plan
exists, an annual bonus may be awarded, determined on a discretionary basis.
No bonus has been awarded for the past five years. During fiscal 1991 and
1992, Mr. Ratner agreed to a reduction in his salary to $240,000 and
$340,000, respectively, as part of an overall salary reduction program of the
executive officers of the Company. During fiscal 1993, Mr. Ratner's salary
was increased to $400,000. Effective February 1, 1994, the Compensation
Committee increased Mr. Ratner's salary to his stated contractual amount of
$450,000 with existing benefits.
On July 1, 1989, the Company entered into an employment agreement with
Samuel H. Miller providing for an annual salary of $385,000. On March 1, 1993,
the Company entered into employment agreements with James A. Ratner and
Ronald A. Ratner providing for annual salaries of $250,000 each. These
contracts, which were initially for a term of one year, are renewable
annually. The Company has no bonus plan; however, each year bonuses may
be awarded based upon performance, determined on a discretionary basis.
The employment agreements for Albert Ratner, Samuel Miller, Charles Ratner,
James Ratner and Ronald Ratner further provide that upon the death of such
officer his beneficiary will receive an annual payment for five years equal
to one-half of his average annual contractual salary, as stated in the
contract, and bonus, if any, for the five calendar years immediately
preceding his death.
PERFORMANCE GRAPH
(The performance graph is printed in this space. The table below
represents the data points of the performance graph.)
1/31 1991 1992 1993 1994 1995 1996
FCE 100 109 164 254 193 211
S&P 100 123 136 153 154 213
DJ 100 107 96 114 103 127
The above graph shows a comparison of five-year cumulative total return to
shareholders for Forest City Enterprises, Standard & Poor's 500 Stock Index
("S&P") and the Dow Jones Real Estate Investment Index ("Dow Index").
Companies that comprise the Dow Index include Catellus Development
Corporation, Federal Realty Investment Trust, First Union Real Estate
Equity, Newhall Land & Farming, Rockefeller Center Properties and The Rouse
Company. Forest City Enterprises is not included in this Dow Index. The
cumulative total return is based on a $100 investment on January 31, 1991
and the subsequent change in market prices of the securities at each
respective fiscal year end. It also assumes that dividends were reinvested
quarterly.
TRANSACTIONS WITH AFFILIATED PERSONS
The Company paid approximately $114,000 as total compensation during the
fiscal year ended January 31, 1996 to RMS Investment Corp. ("RMS"), a
company owned by the principal shareholders of the Company that is engaged
in property management and leasing. RMS serves as an owner's representative
for four of the Company's properties in Greater Cleveland. The rate of
compensation for such services was based on an hourly rate for time expended
and is believed to be comparable to that which other management companies
would charge. RMS also serves as the property manager for these four
properties and is responsible for leasing vacant space. The rate of
compensation for such management services is 4% of all tenant rentals plus a
fee to lease vacant space. Management believes these fees are comparable to
that which other management companies would charge
Those of the principal shareholders who are officers or employees of the
Company own, alone or in conjunction with others, certain commercial,
industrial and residential properties which may be developed, expanded,
operated and sold independently of the business of the Company. The
ownership of these properties by these principal shareholders makes it
possible that conflicts of interest may arise between them and the Company.
Areas of possible conflict maybe in the development or expansion of
properties which may compete with the Company or the solicitation of tenants
for the use of such properties. However, no such conflicts are anticipated.
The Company was informed by these principal shareholders in 1960 that,
except for these properties, they would in the future engage in all business
activities of the type conducted by the Company only through and on behalf
of the Company as long as they were employed by the Company. This would
not preclude them from making personal investments in real estate on which
buildings and improvements have been completed prior to such investments.
During 1991, the Company borrowed $10,000,000 from the Ratner, Miller and
Shafran families and related parties. The loan accrued interest at 2% over
Prime with an 8% minimum per year, and is secured by selected real estate
assets of the Company and a note receivable. During 1992, 1993 and 1994,
the Company repaid $1,377,000 to the Ratner, Miller and Shafran families,
leaving a balance outstanding of $8,623,000 on this debt at January 31, 1995.
During 1995, the loan was repaid in full. The terms of all the foregoing
borrowing arrangements were no less favorable to the Company or its
subsidiaries than those available from unrelated parties for comparable
transactions.
The Company and its subsidiaries have credit agreements and real estate
mortgages with Key Corp, (formerly Society Corporation) of which J. Maurice
Struchen, who is a director of the Company, is a retired Chairman of the
Board. Scott Cowen, also a director of the Company, is a director of
Society National Bank. The amount outstanding against these credit lines
and mortgages as of January 31, 1996 was $145,918,149.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who are beneficial owners of more than ten
percent of a registered class of the Company's equity securities ("Reporting
Persons") to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the American Stock Exchange.
Reporting Persons are required by regulations of the Securities and Exchange
Commission to furnish the Company's Corporate Secretary with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of Section 16(a) forms received
by it, or written representations from Reporting Persons that no Forms 5
were required for those persons, the Company believes that during 1995 all
filing requirements applicable to Reporting Persons were complied with
except for the following:
Joseph Shafran timely filed a Form 5 for the 1995 fiscal year to report
two Form 4 transactions occuring within the fiscal year and previously
unreported.
ELECTION OF INDEPENDENT AUDITORS
The Board of Directors has nominated Coopers & Lybrand, Certified Public
Accountants, for election by the shareholders at the annual meeting as the
Company's independent auditors for the fiscal year ending January 31, 1997.
A representative of Coopers & Lybrand will attend the annual meeting to
respond to appropriate questions from shareholders and will have the
opportunity to make a statement.
The affirmative vote of the horders of a majority of the combined voting
power of the outstanding shares of Class A common stock and Class B common
stock of the Company present or represented at the meeting is required for
approval of proposal 2. The Company has been advised that the shares held
by the Ratner, Miller and Shafran families and partnerships will be voted
in favor of the proposal and that such vote will be sufficient to approve
such proposal.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's 1997
annual meeting of shareholders must be received by the Company at 10800
Brookpark Road, Cleveland, Ohio 44130 on or before December 15, 1996 for
inclusion in the Company's proxy statement and form of proxy relating to the
1997 annual meeting of shareholders.
OTHER BUSINESS
It is not anticipated that matters other than those described in this
Proxy Statement will be brought before the meeting for action, but if any
other matters properly come before the meeting, it is intended that votes
thereon will be cast pursuant to said proxies in accordance with the best
judgment of the proxy holders.
Upon the receipt of a written request from any stockholder entitled to
vote at the forthcoming annual meeting, the Company will mail, at no charge
to the stockholder, a copy of the Company's annual report on Form 10-K
including the financial statements and schedules and excluding exhibits
required to be filed with the Securities and Exchange Commission pursuant
to rule 13a-1 under the Securities Exchange Act of 1934, as amended, for
the Company's most recent fiscal year. Requests from beneficial owners of
the Company's common stock must set forth a good faith representation that,
as of the record date for the annual meeting, the person making the request
was the beneficial owner of securities entitled to vote at such meeting.
Written requests for such report should be directed to:
Investor Relations
Forest City Enterprises, Inc.
10800 Brookpark Road
Cleveland, Ohio 44130
COST AND METHOD OF PROXY SOLICITAITON
The cost of solicitation will be paid by the Company. In addition to
solicitation by mail, arrangements maybe made with brokers and other
custodians, nominees and fiduciaries to send proxies and proxy material to
their principals, and the Company may reimburse them for their expense in
so doing. Officers and other regular employees of the Company may, if
necessary, request the return of proxies by telephone, telegram or in person.
By order of the Board of Directors.
/s/ Thomas G. Smith, Secretary
Cleveland, Ohio
April 29, 1996
PROXY CARDS
CLASS A SHAREHOLDERS
FRONT
The front of the proxy cards has a space for the shareholder's name and
address as well as the number of shares registered in their name. There are
two lines for signatures and dates as well as the following language below the
second signature line:
"NOTE: Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such."
The card contains boxes for which the shareholder is to indicate their vote
for each of the issues. Each issue is identified by number and a brief
description as follows:
1. DIRECTORS: FOR, WITHHELD
For, except vote withheld from the following nominee(s):
(A line is printed below this language to allow the shareholder to
indicate the withheld nominee(s).)
2. AUDITORS: FOR, AGAINST, ABSTAIN
The following language is in the lower right hand corner in bold type:
"The Board of Directors recommends a vote FOR items 1 and 2."
BACK
The back of the proxy card contains the following language:
FOREST CITY ENTERPRISES, INC.
Proxy Solicited on Behalf of the Board of Directors of
the Company for the Annual Meeting of Shareholders
The undersigned hereby appoints Albert Ratner, Samuel H. Miller, and Nathan
Shafran, and each of them, with full power of substitution, as proxies for the
undersigned to attend the annual meeting of shareholders of Forest City
Enterprises, Inc. to be held in Salon I at the Ritz-Carlton Hotel, 1515 West
Third Street, Cleveland, Ohio 44113, on Tuesday, June 11, 1996 at 2:00 p.m.,
eastern daylight saving time, and at any adjournment thereof, to vote and act
with respect to all shares of Class A common stock of the Company which the
undersigned would be entitled to vote, with all the power the undersigned would
possess if present in person, as follows:
(1) The election of three (3) directors, each to hold office until the next
annual shareholders' meeting and until his successor shall be elected
and qualify.
Nominees: Nathan Shafran, J Maurice Struchen, Michael P. Esposito, Jr.
(2) The election of Coopers & Lybrand as independent auditors for the
Company for the fiscal year ending January 31, 1997.
(3) In their discretion, to vote upon such other business as may properly
come before the meeting.
Please specify your choices by marking the appropriate boxes, SEE REVERSE SIDE.
When properly executed, this proxy will be voted in accordance with your
instructions, or, IF YOU GIVE NO INSTRUCTIONS, this proxy will be voted FOR
items 1 and 2.
PROXY CARDS
CLASS B SHAREHOLDERS
FRONT
The front of the proxy cards has a space for the shareholder's name and
address as well as the number of shares registered in their name. There are
two lines for signatures and dates as well as the following language below the
second signature line:
"NOTE: Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such."
The card contains boxes for which the shareholder is to indicate their vote
for each of the issues. Each issue is identified by number and a brief
description as follows:
1. DIRECTORS: FOR, WITHHELD
For, except vote withheld from the following nominee(s):
(A line is printed below this language to allow the shareholder to
indicate the withheld nominee(s).)
2. AUDITORS: FOR, AGAINST, ABSTAIN
The following language is in the lower right hand corner in bold type:
"The Board of Directors recommends a vote FOR items 1 and 2."
BACK
The back of the proxy card contains the following language:
FOREST CITY ENTERPRISES, INC.
Proxy Solicited on Behalf of the Board of Directors of
the Company for the Annual Meeting of Shareholders
The undersigned hereby appoints Albert Ratner, Samuel H. Miller, and Nathan
Shafran, and each of them, with full power of substitution, as proxies for the
undersigned to attend the annual meeting of shareholders of Forest City
Enterprises, Inc. to be held in Salon I at the Ritz-Carlton Hotel, 1515 West
Third Street, Cleveland, Ohio 44113, on Tuesday, June 11, 1996 at 2:00 p.m.,
eastern daylight saving time, and at any adjournment thereof, to vote and act
with respect to all shares of Class B common stock of the Company which the
undersigned would be entitled to vote, with all the power the undersigned would
possess if present in person, as follows:
(1) The election of nine(9) directors, each to hold office until the next
annual shareholders' meeting and until his successor shall be elected
and qualify.
Nominees: Albert B. Ratner, Samuel H. Miller, Charles A. Ratner,
Scott S. Cowen, James A. Ratner, Ronald A. Ratner, Jerry V. Jarrett,
Brian J. Ratner, Deborah Ratner Salzberg
(2) The election of Coopers & Lybrand as independent auditors for the
Company for the fiscal year ending January 31, 1997.
(3) In their discretion, to vote upon such other business as may properly
come before the meeting.
Please specify your choices by marking the appropriate boxes, SEE REVERSE SIDE.
When properly executed, this proxy will be voted in accordance with your
instructions, or, IF YOU GIVE NO INSTRUCTIONS, this proxy will be voted FOR
items 1 and 2.