<PAGE>
FORM 10-K/A
AMENDMENT NO. 1
|X| ANNUAL REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1999
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File No. __________
PHILIPS INTERNATIONAL REALTY CORP.
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(Exact name of Registrant as specified in its charter)
Maryland 13-3963667
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
417 Fifth Avenue, New York, New York 10016
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(Address of principal executive offices) (Zip code)
(212) 545-1100
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of The Act:
(Title of Each Class) (Name of Each Exchange on Which Registered)
Common Stock, $0.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
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PHILIPS INTERNATIONAL REALTY CORP.
AMENDMENT NO. 1
TO THE ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
Philips International Realty Corp. (the "Registrant" or the "Company")
hereby amends and restates in its entirety the following items of its Annual
Report on Form 10-K for the fiscal year ended December 31, 1999, as set forth in
the pages attached hereto:
1. Item 10 is hereby amended and restated as follows:
Directors And Executive Officers
Set forth below is certain information as of April 15, 2000, for (i)
the members of the Board of Directors of the Company, (ii) the executive
officers of the Company and (iii) the directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
Percentage of Shares
Outstanding
Percentage (on a
of Shares fully-
First Term Number of Outstanding diluted
Name and Position(1) Age Elected Expires Shares(2) (%)(3) basis) %(4)
- -------------------- --- -------- -------- ------------ ------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Philip Pilevsky, Chairman of the Board of
Directors and Chief Executive Officer ........ 53 1997 2001 2,045,554(7) 22.6 20.0
Louis J. Petra, President and Director .......... 46 1997 2002 82,143(8) 1.1 *
Sheila Levine, Chief Operating Officer, Executive
Vice President, Secretary and Director(5) .... 42 1997 2000 265,018(9) 3.5 2.6
Brian J. Gallagher, Acquisitions Director ....... 43 -- -- 20,954(10) * *
Carl E. Kraus, Chief Financial Officer .......... 52 -- -- 12,449(11) * *
Elise Jaffe, Director(6) ........................ 44 1997 2002 7,667(12) * *
Robert S. Grimes, Director(5) ................... 55 1997 2001 19,467(13) * *
Arnold S. Penner, Director(5) ................... 63 1997 2001 16,667(14) * *
A. F. Petrocelli, Director(6) ................... 56 1997 2000 63,767(15) * *
All directors and executive officers as a group . -- -- -- 2,533,686 27.0 24.8
</TABLE>
* Beneficial Ownership of less than 1 percent is omitted.
(1) Certain executive officers and directors of the Company beneficially
own approximately 17.7 percent of the total 25.2 percent aggregate
limited partnership interests in the Operating Partnership. The limited
partners of the Operating Partnership share with the Company, which
holds a 74.8 percent general partnership interest in the Operating
Partnership, in the net income or loss and any distributions of the
Operating Partnership. Pursuant to the partnership agreement of the
Operating Partnership, limited partnership interests are redeemable
into shares of Common Stock on a one-for-one basis. Such Units will be
redeemed, at the Company's option and in its sole discretion, either
for shares of Common Stock on a one-for-one basis (subject to certain
anti-dilution adjustments and exceptions) and/or cash (based on the
fair market value of an equivalent number of shares of Common Stock at
the time of redemption).
(2) Except as otherwise noted below, all shares of Common Stock are owned
beneficially by the individual listed with sole voting and/or
investment power.
(3) Assumes redemption of only the limited partnership interests in the
Operating Partnership beneficially owned by such owner into shares of
Common Stock and the exercise of vested options held only by such
owner.
(4) Assumes the redemption of all outstanding limited partnership interests
in the Operating Partnership into shares of Common Stock and the
exercise of all vested options.
(5) Member of the Compensation Committee of the Board of Directors.
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(6) Member of the Audit Committee of the Board of Directors.
(7) Includes 344,695 shares of Common Stock, 160,000 vested Options and
1,540,859 Units.
(8) Includes 57,143 shares of Common Stock and 25,000 vested Options.
(9) Includes 2,800 shares of Common Stock, 66,667 vested Options and
195,551 Units.
(10) Includes 4,287 Shares of Common Stock and 16,667 vested Options.
(11) Includes 12,449 shares of Common Stock.
(12) Includes 1,000 shares of Common Stock and 6,667 vested Options.
(13) Includes 12,800 shares of Common Stock and 6,667 vested Options.
(11,400 shares of Common Stock were purchased by SEJ Properties, L.P.
of which Mr. Grimes is the President/Treasurer and a shareholder of the
general partner, SEJ Properties, Inc. 1,400 shares of Common Stock were
purchased by Mr. Grimes' spouse, Ellen Grimes.)
(14) Includes 10,000 shares of Common Stock and 6,667 vested Options.
(15) Includes 57,100 shares of Common Stock and 6,667 vested Options.
The Company's charter divides the Company's Board of Directors into
three classes, with the members of each such class serving staggered three-year
terms. The Board of Directors presently consists of seven members as follows:
Class I directors, Louis J. Petra and Elise Jaffe, whose terms expire in 2002;
Class II directors, Sheila Levine and A.F. Petrocelli, whose terms expire in
2000; and Class III directors, Philip Pilevsky, Robert Grimes and Arnold S.
Penner, whose terms expire in 2001.
Biographical information concerning the directors and executive
officers is set forth below.
Philip Pilevsky is Chairman of the Board, Chief Executive Officer and a
Director of the Company, and has served as Chief Executive Officer and President
of Philips International Holding Corp. since its formation in 1982. Mr. Pilevsky
has been involved in the real estate business for 27 years, including the
development, leasing, management, operation, acquisition and disposition of
commercial properties. Together with Ms. Levine, he founded the entities that
now comprise Philips International Holding Corp. and its affiliates. Mr.
Pilevsky is a nationally recognized member of the real estate community,
providing the Company with strategic leadership and a broadly based network of
relationships. Outside the real estate industry he is renowned as an educator,
author in the field of international relations and frequent commentator for Fox
5 and CNBC. Mr. Pilevsky received a Bachelor of Arts degree from C.W. Post
College and a Masters Degree of Arts and a Masters Degree of Education from
Columbia University. Mr. Pilevsky is the brother of Sheila Levine.
Louis J. Petra is the President and a Director of the Company. Prior to
joining the Company, he served as Chief Financial Officer, Vice President and
Treasurer of Kimco Realty Corporation, a public REIT, from July 1984 through
June 1997. Mr. Petra has extensive experience in the financial management,
administration and control of public and private real estate companies, with
particular knowledge of the shopping center industry and the REIT industry. Mr.
Petra received a Bachelor of Science in Accounting from St. John's University
and is a member of the American Institute of Certified Public Accountants and
the New York State Society of Certified Public Accountants.
Sheila Levine is Chief Operating Officer, Executive Vice President,
Secretary and a Director of the Company, and has served as Chief Operating
Officer and Executive Vice President of Philips International Holding Corp. Ms.
Levine oversees the daily operations of the Company including acquisitions,
development, property management, finance and asset management, construction,
leasing and marketing for each property in
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the Company's portfolio. Ms. Levine is also responsible for overseeing property
development, which entails setting the management direction from
pre-construction planning to the marketing and leasing strategies. She has been
involved in the real estate business for 19 years and, together with Mr.
Pilevsky, founded the entities that now comprise Philips International Holding
Corp. and its affiliates. Ms. Levine received a Bachelor of Science in Business
Administration from Hofstra University's School of Business. Ms. Levine is the
sister of Mr. Pilevsky.
Brian J. Gallagher is Acquisitions Director of the Company, and served
from March 1989 until December 31, 1997 as the Director of Finance of Philips
International Holding Corp. Mr. Gallagher is primarily responsible for capital
deployment and capital management of the Company, including obtaining financing
and structuring and negotiating acquisitions and joint ventures. Since joining
the Philips Group, he has been responsible for transactions valued at over $1
billion. Prior to joining the Company, Mr. Gallagher held positions in
commercial real estate finance with Credit Alliance Corporation and National
Westminister Bank USA where he was responsible for project finance and major
account relationships. He received a Bachelor of Science and a Master's Degree
in City and Regional Planning from Ohio State University.
Carl E. Kraus is Chief Financial Officer of the Company. Prior to
joining the Company in July 1999, Mr. Kraus had 23 years of real estate
experience including serving as President and CFO of the Radnor Corporation, a
$1.3 billion commercial real estate subsidiary of the Sun Company. Mr. Kraus
received a Bachelor of Business Administration in Accounting from Temple
University and is a member of the American Institute of Certified Public
Accountants and the Pennsylvania Institute of Certified Public Accountants.
Elise Jaffe is a Director of the Company. Ms. Jaffe has served since
1994 as Senior Vice President of Real Estate for Dress Barn, Inc., a major
women's apparel retailer owning approximately 725 stores within the United
States. She has been with Dress Barn, Inc. for 17 years and serves on its
Executive Committee. Ms. Jaffe is on the Advisory Board of the International
Council of Shopping Centers/Value Retail News and is Vice President and the
Treasurer of the Paul Taylor Dance Foundation. Ms. Jaffe graduated from Tufts
University with a Bachelor of Arts in English and Psychology.
Arnold S. Penner is a Director of the Company. For the past thirty
years Mr. Penner has been active in the real estate market as a real estate
broker and investor in a diverse portfolio of properties, including office
buildings, retail properties and parking facilities. Mr. Penner is a Director of
United Capital Corp. ("United Capital"), an American Stock Exchange-listed
company specializing in the investment and management of real estate assets and
the manufacturing and sale of antenna and transformer products to a global
customer base. Mr. Penner also is involved with several philanthropic
organizations devoted to children's education.
A.F. Petrocelli is a Director of the Company. He has served as Chairman
of the Board and Chief Executive Officer of United Capital since December 1987
and President since 1991. Mr. Petrocelli currently owns over 65% of United
Capital and has been a Director of United Capital since 1981. Mr. Petrocelli
also serves on the Board of Directors of Prime Hospitality Corp., a New York
Stock Exchange-listed company, Nathan's Famous, Inc., Metex Corporation and
Boyar Value Fund, Inc.
Robert S. Grimes is a Director of the Company. He has served as
President of RS Grimes Co., Inc., an investment company, since September 1987.
Mr. Grimes has also been a Director and Executive Vice President of
Autobytel.com Inc. since July 1996. From April 1981 to March 1987, Mr. Grimes
was a partner with the investment firm of Cowen & Company. Mr. Grimes holds a
Bachelor of Science from Wharton School of Commerce and Finance at the
University of Pennsylvania and an L.L.B. from the University of Pennsylvania Law
School.
Compliance with Section 16(a) of the Exchange Act
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Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who beneficially own more than 10% of the Company's Common
Stock to file initial reports of ownership and reports of changes of ownership
(Forms 3, 4 and 5) of the Common Stock with the SEC and the New York Stock
Exchange. Officers, directors and greater than 10% holders are required by SEC
regulations to furnish the Company with copies of such forms that they file.
To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company, the Company believes that during
fiscal year 1999, its officers, directors and greater than 10% beneficial owners
complied with all applicable Section 16(a) filing requirements.
2. Item 11 is hereby amended and restated as follows:
Executive Compensation
The following table sets forth certain information concerning the
compensation of the chief executive officer and the four other executive
officers of the Company (collectively, the "Named Executive Officers") for the
period July 16, 1997 (date of incorporation) through December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Awards Payouts
------ -------
Annual Compensation(1)
----------------------
Other Securities All
Annual Restricted Underlying Other
Compen- Stock Options/ LTIP Compen-
Name and Principal Position Year Salary($) Bonus($) sation($)(2) Award(s)($) SAR's(#) Payout sation
- ---------------------------- ---- --------- -------- ------------ ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip Pilevsky, .................... 1999 (4) 0 0 0 0 0
Chief Executive Officer .......... 1998 (4) 0 0 240,000(3) 0 0
1997 (4) 0 0 0 0 0
Louis J. Petra, ..................... 1999 175,000 0 0 0 0 0
President(2) ..................... 1998 175,000 0 0 100,000(3) 0 0
1997 57,211 0 0 0 0 0
Sheila Levine,
Chief Operating Officer, Executive 1999 175,000 0 0 0 0 0
Vice President and Secretary ..... 1998 175,000 0 0 100,000(3) 0 0
1997 (5) 0 0 0 0 0
Brian J. Gallagher,
Acquisitions Director (2) 1999 162,400 0 0 0 0 0
................................. 1998 150,000 0 0 25,000(3) 0 0
1997 (5) 0 0 0 0 0
Carl E. Kraus, ...................... 1999 66,346 0 0 50,000(6) 0 0
Chief Financial Officer (2) 1998(5)
1997(5)
</TABLE>
- -----------------------
(1) The annual compensation portion of this table includes the dollar value
of regular annual payments of base salary, bonus & any other annual
compensation earned by each Named Executive Officer during the year
indicated.
(2) In connection with their respective employment agreements, the Company
made non-recourse stock acquisition loans (the "Stock Acquisition
Loans") to Louis J. Petra, Carl E. Kraus and Brian J. Gallagher, in the
amounts of $1,000,000, $200,000 and $50,000, respectively, the proceeds
of which were simultaneously used by each of Louis J. Petra, Carl E.
Kraus and Brian J. Gallagher to purchase 57,143, 12,449 and 2,857
shares of Common Stock, respectively. The Stock Acquisition Loans are
to be forgiven in installments under certain terms and conditions,
including the continued employment of each such executive with the
Company. Such employment agreements provide that the forgiveness of the
Stock Acquisition Loans is to be accelerated upon a change in control
or, in the case of Louis J. Petra and Carl E. Kraus also upon
termination of his employment by the Company other than for cause or
termination of his employment for good reason.
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(3) Represents an option to purchase shares of Common Stock at an exercise
price of $17.50 per share.
(4) Philip Pilevsky, Chairman of the Board of Directors and Chief Executive
Officer, did not receive compensation from the Company in consideration
for services rendered in such capacities during calendar years 1999,
1998 and 1997.
(5) Sheila Levine and Brian J. Gallagher entered into employment agreements
with the Company effective December 31, 1997. Carl Kraus commenced
employment with the Company in July 1999. Accordingly, those
executive officers did not receive compensation from the Company during
prior reporting periods, as applicable.
(6) Represents an option to purchase shares of Common Stock at an exercise
price of $16.75 per share.
Option Plans
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Assumed
Annual
Individual Grants Rates of
----------------- Stock
Percent of Price
Number of Total Options Appreciation
Securities Granted to for Option
Underlying Employees in Exercise Term
Options Fiscal or Base Expiration -----------------
Name Granted(#)(2) 1999(%) ($/Sh)(3) Date(4) 5%($) 10%($)
- ---- ------------- ------- --------- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Carl E. Kraus,
Chief Financial Officer(5).............. 50,000 100% 16.75 7/12/09 526,700 1,334,800
</TABLE>
- --------------------
(1) The Company has not, to date, granted any stock appreciation rights
under the Stock Option Plan.
(2) The Company has established the Stock Option Plan for the purpose of
attracting and retaining officers, directors and employees. Options
granted under the Stock Option Plan are exercisable for shares of
Common Stock.
(3) The exercise price of all options is equal to the closing price of
$16.75 per share on the grant date. As of April 14, 2000, the closing
stock price was $17.12 per share.
(4) Each option granted in 1999 has a ten-year term.
(5) Options will vest 33 1/3% on July 12 of each of 2000, 2001 and 2002.
AGGREGATED OPTION/SAR EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Shares Options/SARs at Fiscal The-Money Options/SARs at
Acquired Value Year-End (#) Fiscal Year-End ($)
on Exercise Realized ------------ -------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --- --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip Pilevsky.............. 0 0 160,000 80,000 0 0
Louis J. Petra............... 0 0 25,000 75,000 0 0
Sheila Levine................ 0 0 66,667 33,333 0 0
Brian J. Gallagher........... 0 0 16,667 8,333 0 0
Carl E. Kraus................ 0 0 0 50,000 0 0
</TABLE>
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Compensation of Directors
Directors' Fees. Each non-employee director of the Company is paid
$10,000 per year, plus (i) $750 for attendance in person at each meeting of the
full Board of Directors, (ii) $500 for attendance in person at each meeting of a
committee thereof, if such meeting is held on a day other than the day of a full
Board meeting, and (iii) $250 for each telephonic meeting participation. Each
non-employee director of the Company has also received a grant of options to
purchase 10,000 shares of Common Stock at $17.50 per share under the Stock
Option Plan, which options vest in three equal installments on January 1, 1999,
2000 and 2001. Employee directors of the Company are not compensated for their
services as directors. Each director will be reimbursed for expenses relating to
attendance at meetings of the Board of Directors or any committee thereof.
During 1999, Elise Jaffe, Robert S. Grimes, Arnold S. Penner, and A.F.
Petrocelli received directors' fees in the amounts of $13,250, $12,250, $13,750
and $13,250, respectively.
Stock Option Plan. Pursuant to the 1997 Stock Option and Long-Term
Incentive Plan (the "Stock Option Plan"), each non-employee director was granted
a non-qualified option to purchase 10,000 shares of Common Stock in connection
with the director's initial appointment to the Board of Directors. These grants
under the Stock Option Plan were made at an exercise price equal to the "fair
market value" (as defined under the Stock Option Plan) at the time of the grant
of the shares of Common Stock subject to such option. The Compensation Committee
may make additional discretionary option grants to eligible directors,
consistent with the terms of the Plan. No options were granted to directors in
1999.
Employment Contracts; Termination of Employment
Louis J. Petra Employment Agreement. Mr. Petra entered into an
employment agreement with the Company (the "Petra Employment Agreement"),
effective as of September 2, 1997, providing for a term of five years four
months. Mr. Petra's initial base salary is $175,000, with an increase to
$200,000 for the 2001 calendar year and $225,000 for the 2002 calendar year. Mr.
Petra is also entitled to receive a portion of the Company's annual bonus pool
to be determined in the discretion of the Board of Directors. On January 1,
1998, Mr. Petra received options to purchase 100,000 shares of Common Stock
under the Stock Option Plan, with 25% of the options vesting on December 31 of
each of 1999, 2000, 2001 and 2002. In addition, the Company loaned on a
non-recourse basis to Mr. Petra $1,000,000 (the "Petra Loan"), the proceeds of
which were used to simultaneously purchase newly issued Common Stock at $17.50
per share. The Petra Loan will be forgiven in two $500,000 installments on
December 31, 2000 and December 31, 2002. Mr. Petra is entitled to receive
dividends on the Common Stock purchased with the proceeds of the Petra Loan, net
of interest, which accrues on the outstanding balance of such loan at 6% per
annum. Either party may terminate the Petra Employment Agreement on or after
December 31, 2000, in which event Mr. Petra will receive his accrued but unpaid
salary through his termination date, the balance of his options will fully vest,
a pro rata portion (based upon the number of days Mr. Petra's employment was
extended beyond December 31, 2000) of the $500,000 outstanding balance of the
Petra Loan will be forgiven and the balance, if any, will be immediately
payable. If the Company terminates Mr. Petra's employment other than for cause,
or if Mr. Petra terminates his employment for good reason, in either case
between June 1, 1998 and December 31, 2000, Mr. Petra will be entitled to
continuation of his salary through December 31, 2000, a pro rata bonus payment
and forgiveness of $500,000 of the Petra Loan and the balance, if any, will be
immediately payable. In addition, all options and restricted share awards will
vest and the non-competition provisions will no longer apply. If Mr. Petra is
employed on the date of a change in control, the outstanding balance of the
Petra Loan will be forgiven, all options and restricted share awards will vest
and the non-competition provisions will no longer apply. If such a change in
control occurs between June 1, 1998 and December 31, 2000 and Mr. Petra's
employment is terminated by the Company or its successor on or after the date of
the change in control, Mr. Petra will also be entitled to receive a pro rata
bonus payment and continuation of his salary through December 31, 2000. Mr.
Petra is subject to a non-compete agreement during his employment period and for
a period of one year following termination of his employment by the Company for
cause or by Mr. Petra without good reason.
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Sheila Levine Employment Agreement. Ms. Levine entered into an
employment agreement with the Company (the "Levine Employment Agreement"),
effective as of consummation of the Formation Transactions, providing for an
initial term of three years, subject to automatic one-year extensions. Ms.
Levine's annual base salary is $175,000, with annual increases in the discretion
of the Board of Directors or Compensation Committee of the Board of Directors.
Ms. Levine is also entitled to receive a minimum of 25% of the annual bonus
pool, with the amount of the Company's annual bonus pool to be determined in the
discretion of the Board of Directors. In addition, on January 1, 1998, the
Company issued options, which entitle Ms. Levine to acquire 100,000 shares of
Common Stock under the Stock Option Plan, which options vest 33 1/3% on December
31 of each of 1998, 1999 and 2000. If the Company terminates Ms. Levine's
employment other than for cause, if Ms. Levine terminates her employment for
good reason or if there is a change in control, Ms. Levine will be entitled to
her annual base salary and bonus through the end of the contractual employment
period. In addition, in such event, all options and restricted share awards will
vest. Ms. Levine is subject to the Non-Competition Agreement.
Brian J. Gallagher Employment Agreement. The Company entered into an
employment agreement with Mr. Gallagher (the "Gallagher Employment Agreement"),
effective as of consummation of the Formation Transactions, providing for, among
other things: (i) a three year term and an initial base salary of $150,000; (ii)
a minimum of 10% of the annual bonus pool, with the amount of the Company's
annual bonus pool to be determined in the discretion of the Board of Directors;
and (iii) the grant of options to acquire 25,000 shares of Common Stock under
the Stock Option Plan, which options vest 33 1/3% on December 31 of each of
1998, 1999 and 2000. In addition, at the Offering, the Company loaned on a
non-recourse basis to Mr. Gallagher $50,000 (the "Gallagher Loan"), the proceeds
of which were used to simultaneously purchase newly issued Common Stock at the
public offering price. The Gallagher Loan will be forgiven in three installments
of $16,666 on January 1, 1999, January 1, 2000 and on December 31, 2000. In the
event Mr. Gallagher or the Company terminates his employment during the
employment term or there is a Change of Control (as defined in the Gallagher
Employment Agreement), the balance of the Gallagher Loan shall be forgiven.
Carl E. Kraus Employment Agreement. The Company entered into an
employment agreement with Mr. Kraus (the "Kraus Employment Agreement"),
effective as of July 12, 1999, providing for, among other things: (i) an initial
term of 30 months and an initial annual base salary of $150,000; (ii) a bonus
for each year based upon a performance formula not to exceed 50% of annual base
salary; and (iii) the grant of options to acquire 50,000 shares of Common Stock
under the Stock Option Plan, which options vest 33 1/3% on July 12 of each of
2000, 2001 and 2002. In addition, the Company loaned on a non-recourse basis to
Mr. Kraus $200,000 (the "Kraus Loan"), the proceeds of which were used to
simultaneously purchase the Company's Common Stock. The Kraus Loan will be
forgiven in two installments of $100,000 on July 12, 2001 and July 12, 2002. If
the Company terminates Mr. Kraus's employment other than for cause or if Mr.
Kraus terminates his employment for good reason, Mr. Kraus will be entitled to
continuation of his salary through January 1, 2002, a pro rata bonus payment and
forgiveness of $100,000 of the Kraus Loan. In addition, all options will
immediately vest. If Mr. Kraus is employed on the date of a change in control,
among other things, the outstanding balance of the Kraus Loan will be forgiven.
Compensation Committee Interlocks and Insider Participation
There are no interlocking relationships involving the Company's Board
of Directors which require disclosure under the executive compensation rules of
the Securities Exchange Commission.
Board Compensation Committee Report on Executive Compensation
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate
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future filings, including this Form 10-K/A, in whole or in part, the following
report and Performance Graph shall not be deemed to be incorporated by reference
into any such filings.
Executive Compensation Philosophy. The Compensation Committee will
annually consider the appropriate combination of cash and option-based
compensation and weigh the competitiveness of the Company's overall compensation
arrangements in relation to comparable real estate investment trusts. From time
to time, the Compensation Committee may retain compensation and other management
consultants to assist with, among other things, structuring the Company's
various compensation programs and determining appropriate levels of salary,
bonus and other compensatory awards payable to the Company's executive officers
and key employees, as well as to guide the Company in the development of
near-term and long-term individual performance objectives necessary to achieve
long-term profitability.
The Compensation Committee believes that a fundamental goal of the
Company's executive compensation program should be to provide incentives to
create value for the Company's stockholders.
Base Salaries. The base compensation levels for the Company's executive
officers in 1999 were set to compensate the executive officers for the functions
they perform as well as to be consideration for certain non-competition
provisions in the agreements. While no specific formula was used to determine
base compensation levels for the Company's executive officers, the Company
believes that the base salaries are generally in line with those of other
publicly held real estate investment trusts the Company has reviewed, some of
which entities are included in the NAREIT Equity REIT Index. Base salaries will
be reviewed annually and may be increased by the Compensation Committee in
accordance with certain criteria determined primarily on the basis of growth of
revenues and funds from operations per share of Common Stock and on the basis of
certain other factors, which include (i) individual performance, (ii) the
functions performed by the executive officer, and (iii) changes in the
compensation peer group in which the Company competes for executive talent. The
weight given such factors by the Compensation Committee may vary from individual
to individual.
Annual Bonus Compensation. The Company's intention to award annual cash
bonuses is designed to specifically relate executive pay to Company and
individual performance. As a pay-for-performance program, cash bonuses provide
financial rewards for the achievement of substantive Company and personal
objectives. Actual awards will be based primarily on actual Company performance.
Stock Option Plan. Awards are granted under the Stock Option Plan based
on a number of factors, including (i) the executive officer's or key employee's
position in the Company, (ii) his or her performance and responsibilities, (iii)
the extent to which he or she already holds an equity stake in the Company, (iv)
equity participation levels of comparable executives and key employees at other
companies in the compensation peer group, and (v) individual contribution to the
success of the Company's financial performance. However, the Stock Option Plan
does not provide any formulated method for weighing these factors, and a
decision to grant an award is based primarily upon the Compensation Committee's
evaluation of the past as well as the future anticipated performance and
responsibilities of the individual in question. In 1999, 50,000 options were
issued to Carl E. Kraus at the exercise price of $16.75 per share.
The Company's Stock Option Plan relates closely to traditional forms of
equity-oriented compensation in the commercial real estate industry. The purpose
of the option grants is to aid the Company in attracting and retaining quality
employees, all advancing the interest of the Company's stockholders, by offering
employees an incentive to maximize their efforts to promote the Company's
economic performance. In addition, to assist the Company in retaining employees
and encouraging them to seek long-term appreciation in the value of the
Company's stock, options generally are not exercisable immediately upon grant,
but instead vest over a period of years. Accordingly, an employee must remain
with the company for a period of years to enjoy the full economic benefit of an
option.
9
<PAGE>
401(k) Savings Plan. The Company maintains a 401(k) Savings and
Retirement Plan (the "401(k) Plan") to cover eligible employees of the Company
and any designated affiliates. The 401(k) Plan permits eligible employees of the
Company (and any designated affiliate) to defer up to 15% of their annual
compensation, subject to certain limitations imposed by the Code. The employees'
elective deferrals are immediately fully vested and non-forfeitable upon
contribution to the 401(k) Plan. The Company currently does not intend to make
matching contributions to the 401(k) Plan; however, it reserves the right to
make matching contributions and/or discretionary profit sharing contributions in
the future. The 401(k) Plan is designed to qualify under Section 401 of the
Internal Revenue Code of 1986, as amended, so that contributions by employees or
by the Company to the 401(k) Plan, and income earned thereon, will not be
taxable to employees until withdrawn from the 401(k) Plan, and so that
contributions by the Company, if any, will be deductible by the Company when
made.
Chief Executive Officer Compensation. Philip Pilevsky, Chairman of the
Board of Directors and Chief Executive Officer of the Company, does not
currently receive any remuneration for services performed in such capacities.
Mr. Pilevsky is, however, a substantial shareholder of the Company and
unitholder of the Operating Partnership and receives dividends and distributions
in respect of these equity interests as may be declared from time to time by the
Board generally with regard to all shares of Common Stock and Units then
outstanding.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
SHEILA LEVINE
ARNOLD S. PENNER
ROBERT S. GRIMES
Performance Graph
Trading of the Company's Common Stock commenced on May 8, 1998, on a
when issued basis. The following graph compares total stockholder returns from
May 8, 1998 through December 31, 1999 to the Standard & Poor's 500 Stock Index
("S&P 500") and to the National Association of Real Estate Investment Trusts,
Inc.'s Equity REIT Total Return Index ("NAREIT"). The graph assumes that the
value of the investment in the Company's Common Stock and in the S&P 500 and
NAREIT indices was $100 at May 8, 1998 and that all dividends have been
reinvested. The Common Stock price on May 8, 1998 (on which the graph is based)
and the initial public offering price of the Common Stock was $17.50.
The stockholder return shown on the following graph is not necessarily
indicative of future performance. The Company does not believe that the graph is
particularly meaningful in that it covers a short period of time.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
PHILIPS INTERNATIONAL REALTY CORP.,
THE S&P 500 INDEX AND THE NAREIT EQUITY REIT INDEX
EDGAR Representation of Data Points Used in Printed Graphic
<TABLE>
<CAPTION>
Philips International Realty Corp. S&P NAREIT
<S> <C> <C> <C>
5/8/98 100.00 100.00 100.00
6/30/98 94.29 102.67 98.78
9/30/98 88.43 92.46 88.39
12/31/98 90.85 112.14 85.81
3/31/99 85.61 117.72 81.67
6/30/99 104.61 126.02 89.91
9/30/99 99.82 118.15 82.68
12/31/99 106.61 135.73 81.84
</TABLE>
10
<PAGE>
3. Item 12 is hereby amended and restated as follows:
Voting Securities and Principal Holders
The following table sets forth information as of April 15, 2000 with
respect to each person who is known by the Company, in reliance on Schedules 13D
and 13G filed with the Securities and Exchange Commission (the "SEC"), to own
beneficially more than 5% of the Company's outstanding shares of Common Stock.
Except as otherwise noted below, all shares of Common Stock are owned
beneficially by the individual listed with sole voting and/or investment power.
<TABLE>
<CAPTION>
Amount and Nature Percent of Shares
Name of of Beneficial Outstanding
Beneficial Owner Ownership (%)(2)
- ----------------- ------------------ -------------------
<S> <C> <C>
The Philips Group(1).................................. 2,447,452 25.93%
Heitman/PRA Securities Advisors LLC(3)................ 985,678 13.43%
Capital Growth Management Limited Partnership(4)...... 765,000 10.42%
LaSalle Investment Management, Inc. and LaSalle
Investment Management (Securities), L.P.(5).......... 737,200 10.04%
</TABLE>
- -----------------------------------------
(1) Address: 417 Fifth Avenue, New York, New York 10016. The Philips Group
(not a legal entity) is composed of certain directors and executive
officers of the Company and their immediate families and related
trusts. Share information is furnished in reliance on the Schedule 13G
dated February 14, 2000 of The Philips Group filed with the SEC, which
represents holdings as of December 31, 1999. This number represents
shares for which The Philips Group has shared dispositive and voting
power, and includes limited partnership Units redeemable for shares of
Common Stock and vested options to purchase shares of Common Stock.
(2) The total number of shares outstanding used in calculating this
percentage does not include 2,472,395 shares reserved for issuance upon
redemption or conversion of outstanding units of limited partnership
interest ("Units") in Philips International Realty L.P., a Delaware
limited partnership (the "Operating Partnership") through which the
Company conducts its real estate activities, or 852,550 shares reserved
for issuance upon the exercise of stock options (the "Options") granted
or reserved for possible grant to certain employees and directors of
the Company, except in all cases where such Units and/or stock options
are owned by the reporting person or group. Of the 2,472,395 shares
reserved for issuance upon redemption of outstanding Units, 1,873,289
shares, or 19% of the total number of shares outstanding or reserved
for issuance, are reserved for issuance upon redemption or conversion
of outstanding Units that are owned by executive officers, directors,
their immediate family members and related trusts. This information is
as of April 15, 2000.
(3) Address: 180 North LaSalle Street, Suite 3600, Chicago, IL 60601.
Heitman/PRA Securities Advisors LLC ("Heitman") takes the position that
such shares are held for investment advisory clients and that Heitman
disclaims beneficial ownership of those shares. Share information is
furnished in reliance on Schedule 13G/A filed January 12, 2000 with the
SEC, which represents holdings as of December 31, 1999. This number
includes 985,678 shares for which Heitman has sole dispositive and
voting power.
(4) Address: One International Place, Boston, Massachusetts, 02110. Capital
Growth Management Limited Partnership ("CGM") takes the position,
however, that since such shares are held for investment advisory
clients, they do not constitute a "group" under the applicable rules of
the Exchange Act, and accordingly, CGM is not required to file a
Schedule 13G or Schedule 13D with respect to the Company's Common
Stock. Share information is furnished in reliance on Schedule 13G/A
filed February 10, 2000 with the SEC, which represents holdings as of
December 31, 1999.
(5) Address: 200 East Randolph Drive, Chicago, IL 60601. LaSalle Investment
Management, Inc. ("LaSalle") and LaSalle Investment Management
(Securities), L.P. ("LISM"), as members of a group, filed with the
SEC, which represents holdings as of December 31, 1999. LISM is a
Maryland limited partnership, the limited partner of which is LaSalle
and the general partner of which is LaSalle Investment Management
(Securities), Inc., a Maryland corporation, the sole stockholder of
which is LaSalle. Each of LaSalle and LISM are investment advisers
registered under Section 203 of the Investment Advisers Act of 1940
and have different advisory clients. LaSalle beneficially owns 100,000
shares for which it has sole voting and dispositive power. LISM
beneficially owns 637,200 shares, 288,400 shares for which it has sole
voting power, 288,400 shares for which it has sole dispositive power,
348,800 shares for which it has shared voting power and 348,800 shares
for which it has shared dispositive power. Share information is
furnished in reliance on the Schedule 13G dated February 9, 2000 of
LaSalle and LISM filed with the SEC.
11
<PAGE>
4. Item 13 is hereby amended and restated as follows:
Certain Relationships and Related Transactions
Certain directors and executive officers of the Company (or members of
their immediate families or related trusts) and persons who hold more than 5% of
the outstanding shares of Common Stock (or Units in the Operating Partnership)
had direct or indirect interests in certain transactions of the Company or the
Operating Partnership in the last fiscal year as follows:
o Management Agreement. Pursuant to a Management Agreement, under the
direction of the Company's executive officers, Philips International Holding
Corp. ("PIHC"), an affiliated entity, provides property management and leasing
services for the Company's interests in 28 retail properties (each a "Property"
and collectively the "Properties") including, among other things, (i) operating,
leasing and maintaining the Properties; (ii) the collection of rents; and (iii)
overseeing the construction of improvements and additions to the Properties.
PIHC receives a management fee from the Company equal to 3% of gross rental
collections received from the Properties, leasing commissions (not to exceed
local current market rates) and a construction supervisory fee (up to 10% of the
cost of a project) with regard to tenant improvements and construction matters
relating to the Properties. In addition, PIHC is reimbursed for out-of-pocket
expenses.
The Management Agreement has an initial term of three years, commencing
December 31, 1997, subject to automatic one-year renewals. The Management
Agreement may be terminated by the Company, at any time, (i) in whole or in
part, upon thirty days' written notice, in the event that the Company elects to
perform one or more of such management functions on an 'in-house' basis (with a
commensurate reduction in fees), and (ii) in whole, immediately, upon the
occurrence of certain other events, including upon the gross negligence or
willful misconduct of PIHC, or if all or substantially all of the Properties are
sold.
PIHC is owned and controlled by Mr. Pilevsky and Ms. Levine. The
Company has granted options under the Stock Option Plan to certain senior
employees of PIHC who are actively involved in the management of the Properties.
Fees paid by the Company to PIHC pursuant to the Management Agreement totaled
$1,900,000 during 1999.
o Non-Competition Agreement. Mr. Pilevsky, Ms. Levine and PIHC have
agreed pursuant to the Non-Competition Agreement to conduct all their future
retail shopping center activities through the Company, except for their
activities with respect to the Excluded Properties and retail properties under
10,000 square feet. The Non-Competition Agreement is in effect until such time
as (i) neither Mr. Pilevsky nor Ms. Levine owns beneficially more than 15% of
the outstanding shares of Common Stock (including interests redeemable
therefore) and (ii) one year has lapsed since the Management Agreement has been
terminated and neither Mr. Pilevsky nor Ms. Levine is a director or executive
officer of the Company. In addition, in the event that at any time after
December 31, 2002, Ms. Levine is neither a director nor executive officer of the
Company for at least one year, nor owns beneficially more than five percent of
the outstanding shares of Common Stock (including interests redeemable
therefore), then the Non-Competition Agreement will terminate as to Ms. Levine.
12
<PAGE>
o Excluded Properties. Mr. Pilevsky and Ms. Levine have economic
interests in certain retail properties, which were not transferred to the
Company in the formation transactions of the Company (the "Excluded
Properties"). The Excluded Properties were not included in the Company's
portfolio either because of the inability to obtain necessary partnership and
lender consents or because the asset profile was inconsistent with the Company's
criteria. The Excluded Properties consist of 6 properties aggregating
approximately .9 million square feet of gross leasable area ("GLA") located
outside the Company's existing markets and 21 properties aggregating
approximately 1.9 million square feet of GLA and two development sites located
within the Company's existing markets (in each case excluding non-retail
properties and retail properties with less than 10,000 leasable square feet).
The Company believes that only two Excluded Properties, located in Uniondale and
Massapequa, New York, are potentially competitive with two Properties
(specifically, with Merrick Commons and Meadowbrook Commons, respectively).
These properties were not included in the Company's portfolio because
partnership consents could not be obtained. Twelve of the Excluded Properties
are managed by PIHC.
o Mr. Pilevsky, Ms. Levine and PIHC will conduct all their future
retail shopping center activities in accordance with the Non-competition
Agreement. In addition, Mr. Pilevsky has granted the Company a right of first
refusal on the sale or transfer by Mr. Pilevsky of his partnership interest in
any of the Excluded Properties, except for a transfer of Mr. Pilevsky's interest
to an existing partner of such property or a family member, or a sale of the
entire property, in which case Mr. Pilevsky will use reasonable efforts to cause
such property to be offered to the Company.
o Other Matters. Mr. Jeffrey Levine, the husband of Ms. Levine, is a
partner at the accounting firm of Chassin Levine Rosen & Company, LLP which firm
has in the past provided accounting and consulting services with respect to the
entities owning certain of the Properties and is likely to provide similar
services to the Company and PIHC in the future. During the year ended December
31, 1999, the entities owning the Properties paid an aggregate of approximately
$249,400 in fees to Chassin Levine Rosen & Company, LLP.
o Elise Jaffe, a Director of the Company, is also the Senior Executive
Vice President of Real Estate for Dress Barn, Inc., a tenant of certain of the
Properties and of certain of the Excluded Properties. During the year ended
December 31, 1999, Dress Barn, Inc. paid an aggregate of approximately $422,900
in rent under leases for certain of the Properties.
o At the Company's initial public offering, pursuant to the Petra
Employment Agreement and the Gallagher Employment Agreement, the Company made a
non-recourse loan to each of Messrs. Petra and Gallagher in the amounts of
$1,000,000 and $50,000, respectively, the proceeds of which were simultaneously
used by each of Messrs. Petra and Gallagher to purchase newly issued Common
Stock at the public offering price. These loans will be forgiven pursuant to the
terms of the respective employment agreements. Upon commencement of employment
in July 1999, the Company made a $200,000 non-recourse loan to Mr. Kraus, the
proceeds of which were used by Mr. Kraus to purchase shares of the Company's
Common Stock in the open market. The loan will be forgiven over 3 years in
accordance with the Employment Agreement.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PHILIPS INTERNATIONAL REALTY CORP.
(Registrant)
Date: May 1, 2000 /s/ Carl Kraus
-----------------------
Carl Kraus
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Date: May 1, 2000 /s/ Philip Pilevsky
------------------------
Philip Pilevsky
Chairman of the Board and
Chief Executive Officer
Date: May 1, 2000 /s/ Louis J. Petra
------------------------
Louis J. Petra
Director and President
Date: May 1, 2000 /s/ Sheila Levine
------------------------
Sheila Levine
Director, Chief Operating Officer,
Executive Vice President and
Secretary
Date: May 1, 2000 /s/ Carl Kraus
------------------------
Carl Kraus
Chief Financial Officer
Date: May 1, 2000 /s/ Brian J. Gallagher
------------------------
Brian J. Gallagher
Acquisitions Director
Date: May 1, 2000 /s/ Arnold S. Penner
------------------------
Arnold S. Penner
Director
Date: May 1, 2000 /s/ A.F. Petrocelli
------------------------
A.F. Petrocelli
Director
14
<PAGE>
Date: May 1, 2000 /s/ Elise Jaffe
------------------------
Elise Jaffe
Director
Date: May 1, 2000 /s/ Robert Grimes
------------------------
Robert Grimes
Director
15
