<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1999 or
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____to_____
Commission file number 1-10328
BRADLEY REAL ESTATE, INC.
(Exact name of registrant as specified in its charter)
Maryland 04-6034603
(State of Organization) (I.R.S. Identification No.)
40 Skokie Blvd., Northbrook, Illinois 60062
(Address of Registrant's Principal Executive Offices)
Registrant's telephone number, including area code; (847) 272-9800
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 the number of shares outstanding of each class of Common Stock as of
June 30, 1999:
Shares of Common Stock, $.01 par value: 24,057,300 shares outstanding.
<PAGE> 2
BRADLEY REAL ESTATE, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------- ------------
<S> <C> <C>
ASSETS:
Real estate investments - at cost $ 970,710 $ 936,465
Accumulated depreciation and amortization (69,713) (59,196)
--------- ---------
Net real estate investments 900,997 877,269
Real estate investments held for sale 30,116 46,492
Other assets:
Cash and cash equivalents 108 -
Rents and other receivables, net of allowance for doubtful accounts
of $4,884 for 1999 and $4,078 for 1998 17,423 14,994
Investment in partnership - 13,249
Deferred charges, net and other assets 16,095 16,676
--------- ---------
Total assets $ 964,739 $ 968,680
========= =========
LIABILITIES AND SHARE OWNERS' EQUITY:
Mortgage loans $ 102,000 $ 103,333
Unsecured notes payable 199,573 199,542
Line of credit 120,900 169,500
Accounts payable, accrued expenses and other liabilities 28,068 29,415
--------- ---------
Total liabilities 450,541 501,790
--------- ---------
Exchangeable limited partnership units 20,542 21,573
Series B preferred units 49,100 -
--------- ---------
Total minority interest 69,642 21,573
--------- ---------
Share Owners' equity:
Shares of preferred stock and paid-in capital, par value $.01 per
share; liquidation preference $25.00 per share:
Authorized 20,000,000 shares; issued and outstanding 3,478,471
and 3,478,493 shares of Series A Convertible Preferred Stock
at June 30, 1999 and December 31, 1998, respectively 86,809 86,809
Shares of common stock and paid-in capital, par value $.01 per share:
Authorized 80,000,000 shares; issued and outstanding 24,057,300 and
23,958,662 shares at June 30, 1999 and December 31, 1998, respectively 350,653 349,254
Shares of excess stock, par value $.01 per share:
Authorized 50,000,000 shares; 0 shares issued and outstanding - -
Retained earnings 7,094 9,254
--------- ---------
Total share owners' equity 444,556 445,317
--------- ---------
Total liabilities and share owners' equity $ 964,739 $ 968,680
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
2
<PAGE> 3
BRADLEY REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUE:
Rental income $ 36,872 $ 30,601 $ 75,582 $ 59,337
Other income 686 440 1,329 1,059
-------- -------- -------- --------
37,558 31,041 76,911 60,396
-------- -------- -------- --------
EXPENSES:
Operations, maintenance and management 5,405 4,443 12,083 8,776
Real estate taxes 5,556 5,295 11,671 10,776
Mortgage and other interest 7,182 6,585 14,869 12,143
General and administrative 1,866 1,717 4,067 3,120
Depreciation and amortization 6,484 5,631 12,941 10,594
-------- -------- -------- --------
26,493 23,671 55,631 45,409
-------- -------- -------- --------
Income before equity in earnings of partnership and provision for loss on
real estate investment 11,065 7,370 21,280 14,987
Equity in earnings of partnership 153 - 500 -
Provision for loss on real estate investment - - - (875)
-------- -------- -------- --------
Income before allocation to minority interest 11,218 7,370 21,780 14,112
Income allocated to exchangeable limited partnership units (452) (406) (921) (797)
Income allocated to Series B preferred units (1,109) - (1,565) -
-------- -------- -------- --------
Net income 9,657 6,964 19,294 13,315
Preferred share distributions (1,826) - (3,652) -
-------- -------- -------- --------
Net income attributable to common share owners $ 7,831 $ 6,964 $ 15,642 $ 13,315
======== ======== ======== ========
Earnings per share:
Basic $ 0.33 $ 0.29 $ 0.65 $ 0.57
======== ======== ======== ========
Diluted $ 0.33 $ 0.29 $ 0.65 $ 0.57
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE> 4
BRADLEY REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHARE OWNERS' EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Preferred Common
shares shares
and and Retained
paid-in capital paid-in capital earnings Total
--------------- --------------- --------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $ 86,809 $ 349,254 $ 9,254 $ 445,317
Net income - - 9,637 9,637
Distributions on common stock ($0.37 per share) - - (8,900) (8,900)
Distributions on preferred stock ($0.525 per share) - - (1,826) (1,826)
Exercise of stock options - 123 - 123
Dividend reinvestment and stock purchase plan participation - 1,522 - 1,522
Reallocation of minority interest - (154) - (154)
Shares issued in exchange for limited partnership units - 6 - 6
--------- --------- --------- ---------
Balance at March 31, 1999 86,809 350,751 8,165 445,725
Net income - - 9,657 9,657
Distributions on common stock ($0.37 per share) - - (8,902) (8,902)
Distributions on preferred stock ($0.525 per share) - - (1,826) (1,826)
Dividend reinvestment and stock purchase plan participation - (40) - (40)
Reallocation of minority interest - (58) - (58)
--------- --------- --------- ---------
Balance at June 30, 1999 $ 86,809 $ 350,653 $ 7,094 $ 444,556
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 5
BRADLEY REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 19,294 $ 13,315
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 12,941 10,594
Equity in earnings of partnership (500) -
Amortization of debt premiums, net of discounts (479) -
Provision for loss on real estate investment - 875
Income allocated to minority interest 2,486 797
Change in operating assets and liabilities:
(Increase) decrease in rents and other receivables 860 (1,325)
Increase (decrease) in accounts payable, accrued expenses and other liabilities (1,748) 6,978
Increase in deferred charges (1,064) (2,037)
--------- ---------
Net cash provided by operating activities 31,790 29,197
--------- ---------
Cash flows from investing activities:
Expenditures for real estate investments (21,636) (108,512)
Expenditures for capital improvements (6,934) (5,309)
Net proceeds from sale of properties 16,899 1,869
Cash distributions from partnership 3,943 -
--------- ---------
Net cash used in investing activities (7,728) (111,952)
--------- ---------
Cash flows from financing activities:
Borrowings from line of credit 46,900 118,050
Payments under line of credit (95,500) (123,550)
Proceeds from issuance of unsecured notes payable - 99,051
Expenditures for financing costs (59) (5,979)
Principal payments on mortgage loans (823) (534)
Distributions paid to common share owners (17,802) (16,571)
Distributions paid to limited partnership unit holders (1,044) (967)
Distributions paid to preferred unit holders (1,565) -
Distributions paid to preferred share owners (3,652) -
Net proceeds from stock offerings - 7,489
Proceeds from exercise of stock options 123 4
Net proceeds from dividend reinvestment and stock purchase plan 1,482 2,710
Net proceeds from issuance of Series B preferred units 49,100 -
Payments to redeem limited partnership units (1,114) -
--------- ---------
Net cash provided by (used in) financing activities (23,954) 79,703
--------- ---------
Net increase (decrease) in cash and cash equivalents 108 (3,052)
Cash and cash equivalents:
Beginning of period - 4,747
--------- ---------
End of period $ 108 $ 1,695
========= =========
Supplemental cash flow information:
Interest paid, net of amount capitalized $ 15,499 $ 8,358
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 6
BRADLEY REAL ESTATE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying interim financial statements have been prepared by the Company,
without audit, and in the opinion of management reflect all normal recurring
adjustments necessary for a fair presentation of results for the unaudited
interim periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto for the fiscal year ended December 31, 1998.
NOTE 2 - EARNINGS PER SHARE
Basic earnings per share ("EPS") is computed by dividing income available to
common share owners by the weighted average number of common shares outstanding
for the period. Diluted EPS is computed by reflecting the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company. A reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation, is as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NUMERATOR:
- ----------
Basic
Net income attributable to common share owners $ 7,831,000 $ 6,964,000 $15,642,000 $13,315,000
=========== =========== =========== ===========
Diluted
Net income attributable to common share owners $ 7,831,000 $ 6,964,000 $15,642,000 $13,315,000
Income allocated to exchangeable limited partnership units 452,000 406,000 921,000 797,000
----------- ----------- ----------- -----------
Adjusted net income $ 8,283,000 $ 7,370,000 $16,563,000 $14,112,000
=========== =========== =========== ===========
DENOMINATOR:
- ------------
Basic
Weighted average common shares 24,056,671 23,702,522 24,026,988 23,503,183
=========== =========== =========== ===========
Diluted
Weighted average common shares 24,056,671 23,702,522 24,026,988 23,503,183
Effect of dilutive securities:
Stock options 40,101 50,014 34,823 49,450
Exchangeable limited partnership units 1,387,823 1,381,352 1,414,264 1,408,182
----------- ----------- ----------- -----------
Weighted average shares and assumed conversions 25,484,595 25,133,888 25,476,075 24,960,815
=========== =========== =========== ===========
Basic earnings per share $ 0.33 $ 0.29 $ 0.65 $ 0.57
=========== =========== =========== ===========
Diluted earnings per share $ 0.33 $ 0.29 $ 0.65 $ 0.57
=========== =========== =========== ===========
</TABLE>
For the six months ended June 30, 1999 and 1998, options to purchase 609,250
shares of common stock at prices ranging from $19.90 to $21.35 and 153,500
shares of common stock at prices ranging from $21.25 to $21.35 were outstanding
during each of the respective periods but were not included in the computation
of diluted EPS because the options' exercise prices were greater than the
average market prices of the common shares during those periods. For the six
months ended June 30, 1999, preferred stock distributions of $3,652,000 and the
effect on the denominator of the conversion of the convertible preferred stock
outstanding during the quarter into 3,550,912 shares of common stock were not
included in the computation of diluted EPS because the impact on basic EPS was
anti-dilutive.
6
<PAGE> 7
For the three months ended June 30, 1999 and 1998, options to purchase 158,750
shares of common stock at prices ranging from $20.25 to $21.35 and 153,500
shares of common stock at prices ranging from $21.25 to $21.35 were outstanding
during each of the respective periods but were not included in the computation
of diluted EPS because the options' exercise prices were greater than the
average market prices of the common shares during those periods. For the three
months ended June 30, 1999, preferred stock distributions of $1,826,000 and the
effect on the denominator of the conversion of the convertible preferred stock
outstanding during the quarter into 3,550,910 shares of common stock were not
included in the computation of diluted EPS because the impact on basic EPS was
anti-dilutive.
Income allocated to the minority interest reflects weighted average limited
partnership units ("LP Units") of interest in Bradley Operating Limited
Partnership (the "Operating Partnership") outstanding of 1,414,264 and 1,408,182
for the six months ended June 30, 1999 and 1998, respectively, and 1,387,823 and
1,381,352 for the three months ended June 30, 1999 and 1998, respectively. As of
June 30, 1999 and 1998, there were 1,381,353 and 1,381,742 LP Units outstanding.
The Operating Partnership is a limited partnership of which the Company
currently owns an 88% economic interest.
NOTE 3 - SUPPLEMENTAL CASH FLOW DISCLOSURE
During the first quarter of 1999, 411 shares of common stock were issued in
exchange for an equivalent number of LP Units held by the minority interest.
During the second quarter of 1999, the acquisition of the Company's non-owned
portion of a joint venture resulted in a non-cash reclassification of investment
in partnership to real estate investments of $6,556,000 and a non-cash transfer
of a $3,100,000 note receivable.
NOTE 4 - ACQUISITION AND DISPOSITION ACTIVITY
At June 30, 1999, the Company was holding for sale three enclosed malls, all
acquired in connection with the merger acquisition of Mid-America Realty
Investments, Inc. ("Mid-America"). During the second quarter, the Company
completed the sales of an additional three properties, for an aggregate gross
sales price of $17,325,000. These three properties, all acquired in connection
with the merger acquisition of Mid-America, had been held for sale since the
merger acquisition. Two of these properties, Macon County Plaza and Town West
Shopping Center, are shopping centers located in the Southeast region of the
United States and are not aligned with the Company's strategic market focus. The
third property, Monument Mall, is an enclosed mall and, like the three
properties currently held for sale, is not aligned with the Company's strategic
property focus. The dispositions of the three properties held for sale are
expected to be completed during 1999, although there can be no assurance that
any such dispositions will occur.
In connection with the merger acquisition of Mid-America, the Company acquired a
50% interest in a joint venture that owned two neighborhood shopping centers and
one enclosed mall. During the second quarter, the joint venture sold Imperial
Mall, the enclosed mall located in Hastings, Nebraska, to the same buyer of
Monument Mall for $12,100,000 including the issuance of a $3,100,000 note at
9.0%, secured by a second deed of trust. Subsequently, the Company acquired the
50% non-owned portion of the joint venture for a purchase price equal to
$7,750,000 subject to customary closing costs and pro-rations. As a result, the
two neighborhood shopping centers previously owned by the joint venture are now
wholly-owned by the Company and are consolidated for financial reporting
purposes.
During the second quarter of 1999, the Company also completed the acquisitions
of two shopping centers located in Michigan and Ohio, aggregating approximately
264,000 square feet for a total purchase price of $13,853,000. Both of these
shopping centers are expected to be substantially redeveloped, bringing the
number of active redevelopment projects being undertaken by the Company to four.
The estimated total incremental capital investment for these four projects is
approximately $32 million.
NOTE 5 - SEGMENT REPORTING
As of June 30, 1999, the Company owned 96 shopping centers located primarily in
the Midwest region of the United States. Such shopping centers are typically
anchored by grocery and drug stores complemented with stores providing a wide
range of other goods and services to shoppers. During the first half of 1998,
the Company also owned a mixed-use office property located in downtown Chicago,
Illinois, which was sold in July 1998. Because this property required a
different operating strategy and management expertise than all other properties
in the portfolio, it was considered a separate reportable segment.
The Company assesses and measures operating results on an individual property
basis for each of its 96 shopping centers without differentiation, based on net
operating income, and then converts such amounts in the aggregate to a
performance measure referred to as Funds from Operations ("FFO"). Since all of
the Company's shopping centers exhibit similar economic characteristics, cater
to the day-to-day living needs of their respective surrounding communities, and
offer similar degrees of risk and opportunities for growth, the shopping centers
have been aggregated and reported as one operating segment.
The revenue and net operating income for the reportable segments and for the
Company, the computation of FFO for the Company, and a reconciliation to net
income attributable to common share owners, are as follows for each of the three
and six month periods ended June 30, 1999 and 1998 (dollars in thousands):
7
<PAGE> 8
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
TOTAL PROPERTY REVENUE:
Mixed-use office property $ - $ 3,570 $ - $ 7,273
Shopping center properties 37,345 27,379 76,410 52,929
-------- -------- -------- --------
37,345 30,949 76,410 60,202
-------- -------- -------- --------
TOTAL PROPERTY OPERATING EXPENSES:
Mixed-use office property - 1,279 - 2,831
Shopping center properties 10,961 8,459 23,754 16,721
-------- -------- -------- --------
10,961 9,738 23,754 19,552
-------- -------- -------- --------
Net operating income 26,384 21,211 52,656 40,650
-------- -------- -------- --------
NON-PROPERTY (INCOME) EXPENSES:
Other non-property income (213) (92) (501) (194)
Equity in earnings of partnership, excluding
depreciation and amortization (210) - (600) -
Mortgage and other interest 7,182 6,585 14,869 12,143
General and administrative 1,866 1,717 4,067 3,120
Amortization of deferred finance and non-real estate
related costs 280 226 559 467
Preferred share distributions 1,826 - 3,652 -
Income allocated to Series B preferred units 1,109 - 1,565 -
-------- -------- -------- --------
11,840 8,436 23,611 15,536
-------- -------- -------- --------
Funds from Operations $ 14,544 $ 12,775 $ 29,045 $ 25,114
======== ======== ======== ========
RECONCILIATION TO NET INCOME ATTRIBUTABLE TO COMMON
SHARE OWNERS:
Funds from Operations $ 14,544 $ 12,775 $ 29,045 $ 25,114
Depreciation of real estate assets and amortization of
tenant improvements (5,553) (4,315) (11,002) (8,246)
Amortization of deferred leasing commissions (353) (791) (784) (1,284)
Other amortization (298) (299) (596) (597)
Depreciation and amortization included in equity in
earnings of partnership (57) - (100) -
Income allocated to exchangeable limited partnership
units (452) (406) (921) (797)
Provision for loss on real estate investment - - - (875)
-------- -------- -------- --------
Net income attributable to common share owners $ 7,831 $ 6,964 $ 15,642 $ 13,315
======== ======== ======== ========
</TABLE>
8
<PAGE> 9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Throughout 1998, we acquired 44 shopping centers and a 50% interest in a joint
venture that owned two neighborhood shopping centers and one enclosed mall for
an aggregate cost of approximately $362 million. Of these acquisitions, we
acquired 22 of the shopping centers and the joint venture interest in connection
with the merger acquisition of Mid-America in August 1998. During the second and
third quarters of 1998, we also completed the sales of two properties that did
not meet our strategic focus for an aggregate net sales price of $84 million,
resulting in a net gain of $29.7 million. This gain is net of a provision for
loss on real estate investment of $875,000 reflected in the first quarter of
1998.
During the second quarter of 1999, we completed the acquisitions of two shopping
centers for an aggregate purchase price of $13.9 million, and sold three
properties for an aggregate gross sales price of $17.3 million. During the
second quarter of 1999, we also acquired the 50% non-owned portion of the two
shopping centers held by the joint venture acquired in connection with the
merger acquisition of Mid-America. As a result, these two shopping centers are
consolidated for financial reporting purposes.
Differences in results of operations for the six and three-month periods ended
June 30, 1999 compared with the same periods in 1998 were driven in large part
from the acquisition activity. Including the provision for loss on real estate
investment in 1998, net income attributable to common share owners increased
$2,327,000, or 17%, from $13,315,000 in the first half of 1998 to $15,642,000 in
the first half of 1999. Basic and diluted net income per share increased $0.08
per share, or 14%, from $0.57 per share in the first half of 1998 to $0.65 per
share in the first half of 1999. For the quarter ended June 30, 1999, net income
attributable to common share owners increased $867,000, or 12%, from $6,964,000
in the quarter ended June 30, 1998 to $7,831,000 in the quarter ended June 30,
1999. Basic and diluted net income per share increased $0.04 per share, or 14%,
from $0.29 per share in the quarter ended June 30, 1998 to $0.33 per share in
the quarter ended June 30, 1999. Our results of operations for the first half of
1998 and 1999 reflect 51 properties that were held both six-month periods and 50
properties that we purchased or sold between the two periods. Our results of
operations for the second quarter of 1998 and 1999 reflect 56 properties that
were held both quarters and 45 properties that we purchased or sold between the
two periods.
Property Specific Revenues And Expenses (in thousands of dollars):
<TABLE>
<CAPTION>
Six months ended
June 30, Properties
------------------ Acquisitions/ Held Both
1999 1998 Difference Dispositions Periods
------- ------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Rental income $75,582 $59,337 $16,245 $14,862 $ 1,383
Operations, maintenance and management 12,083 8,776 3,307 2,636 671
Real estate taxes 11,671 10,776 895 752 143
Depreciation and amortization 12,941 10,594 2,347 2,402 (55)
</TABLE>
<TABLE>
<CAPTION>
Three months ended
June 30, Properties
------------------ Acquisitions/ Held Both
1999 1998 Difference Dispositions Periods
------- ------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Rental income $36,872 $30,601 $ 6,271 $ 6,065 $ 206
Operations, maintenance and management 5,405 4,443 962 966 (4)
Real estate taxes 5,556 5,295 261 410 (149)
Depreciation and amortization 6,484 5,631 853 1,132 (279)
</TABLE>
Results attributable to acquisition and disposition activities:
Rental income increased from $59,337,000 in the first half of 1998 to
$75,582,000 in the first half of 1999 and from $30,601,000 in the second quarter
of 1998 to $36,872,000 in the second quarter of 1999. Approximately $14,862,000
of the increase during the six-month period was attributable to acquisition
activities, including $10,205,000 for properties acquired in connection with the
merger acquisition of Mid-America, partially offset by $6,208,000 attributable
to disposition activities, primarily One North State. Approximately $6,065,000
of the increase during the three-month period was attributable to acquisition
activities, including $4,987,000 for properties acquired in connection with the
merger acquisition of Mid-America, partially offset by $3,180,000 attributable
to disposition activities, primarily One North State.
9
<PAGE> 10
Operations, maintenance and management expense increased from $8,776,000 in the
first half of 1998 to $12,083,000 in the first half of 1999 and from $4,443,000
in the second quarter of 1998 to $5,405,000 in the second quarter of 1999.
Approximately $2,636,000 of the increase during the six-month period was
attributable to acquisition and disposition activities, including an increase of
$1,830,000 for properties acquired in connection with the merger acquisition of
Mid-America. For the three-month period, approximately $966,000 of the increase
was attributable to acquisition and disposition activities, including an
increase of $849,000 for properties acquired in connection with the merger
acquisition of Mid-America.
Real estate taxes increased from $10,776,000 in the first half of 1998 to
$11,671,000 in the first half of 1999 and from $5,295,000 in the second quarter
of 1998 to $5,556,000 in the second quarter of 1999. Approximately $752,000 of
the increase during the six-month period was attributable to acquisition and
disposition activities, including an increase of $1,285,000 for properties
acquired in connection with the merger acquisition of Mid-America, partially
offset by a decrease of $1,655,000 for properties sold, primarily One North
State. For the three-month period, approximately $410,000 of the increase was
attributable to acquisition and disposition activities, including an increase of
$634,000 for properties acquired in connection with the merger acquisition of
Mid-America, partially offset by a decrease of $682,000 for properties sold,
primarily One North State.
Depreciation and amortization increased from $10,594,000 in the first half of
1998 to $12,941,000 in the first half of 1999 and from $5,631,000 in the second
quarter of 1998 to $6,484,000 in the second quarter of 1999. Approximately
$2,402,000 of the increase during the six-month period was attributable to
acquisition and disposition activities, including an increase of $949,000 for
properties acquired in connection with the merger acquisition of Mid-America.
For the three-month period, approximately $1,132,000 of the increase was
attributable to acquisition and disposition activities, including an increase of
$498,000 for properties acquired in connection with the merger acquisition of
Mid-America.
Results for properties fully operating throughout both periods:
Several factors affected the comparability of results for properties fully
operating throughout both six and three-month periods ended June 30, 1999 and
1998. Winter storms in the Midwest occurring during the first quarter of 1999
resulted in an increase in the level of snow removal expenses of approximately
$564,000 during the first half of 1999 compared with the first half of 1998.
This increase in operations, maintenance and management expense was mitigated by
the recoverability of such expenses through operating expense reimbursements,
which were $512,000 higher during the first half of 1999 compared with the first
half of 1998. Additionally, two large tenants, Montgomery Ward at Heritage
Square, and HomePlace at Har Mar Mall, vacated their respective stores during
1998 after declaring bankruptcy in July 1997 and January 1998, respectively.
Rental income decreased from the first half of 1998 at these two shopping
centers by $624,000 and $412,000, respectively, and by $302,000 and $303,000
respectively, during the second quarter of 1999 from the second quarter of 1998.
A 62,000 square-foot lease with Carson Pirie Scott commenced July 14, 1999,
which replaces approximately one half the space previously occupied by
Montgomery Ward. We are currently negotiating leases to replace the remaining
space previously occupied by Montgomery Ward and the space vacated by HomePlace.
Finally, our company, as well as most other real estate companies, was affected
by a consensus reached by the Emerging Issues Task Force ("EITF") of the
Financial Accounting Standards Board regarding the accounting for percentage
rents. On May 22, 1998, the EITF reached a consensus under Issue No. 98-9,
Accounting for Contingent Rent in Interim Financial Periods, that despite the
fact that the achievement of a future specified sales target of a lessee may be
considered as probable and reasonably estimable at some earlier point in the
year, a lessor should defer recognition of contingent rental income until such
specified targets are met. The pronouncement was effective May 23, 1998. Because
the majority of our retail tenant leases have sales years ending in December or
January, a substantial portion of percentage rental income from such leases is
now recognized in the first quarter, once it is determined that specified sales
targets have been achieved. Previously, we recognized percentage rental income
each period based on reasonable estimates of tenant sales. Largely due to the
implementation of EITF 98-9, therefore, percentage rental income for properties
held throughout both quarters ended June 30, 1999 and 1998 decreased by
$331,000. Percentage rental income for properties held throughout both six-month
periods ended June 30, 1999 and 1998 decreased by only $165,000 due to the
increase in percentage rents during the first quarter of 1999 from the first
quarter of 1998.
In addition to the changes in rental income described above, during the first
half of 1999 compared with the first half of 1998, rental income increased
$271,000 at Rollins Crossing and $179,000 at Burning Tree Plaza, due to a 71,000
square-foot lease with Regal Cinema at Rollins Crossing and a 24,000 square-foot
lease with Dunham's Athleisure at Burning Tree Plaza, both commencing in the
fourth quarter of 1998. For the second quarter of 1999 rental income for these
shopping centers increased $120,000 and $95,000, respectively from the second
quarter of 1998. Additionally, rental income increased $171,000 at Sun Ray
Shopping Center for the six-month period of 1999 due to an increase in tax
reimbursements primarily resulting from a tax abatement received in the first
quarter of 1998, contributing to an increase in real estate taxes of $171,000
from the six-month period in the prior year. Rental income increased $96,000 at
Brookdale Square for the six-month period of 1999 primarily due to the receipt
of a termination fee from Brookdale Cinema in the first quarter of 1999 and the
commencement of a 22,000 square-foot lease with Pep Boys. Rental income
increased at Speedway Super Center by $670,000 and $476,000 for the six and
three-month periods respectively, ended June 30, 1999 from the same periods in
the prior year due to the receipt of a termination fee from PetsMart in the
second quarter of 1999 and due to the commencement of several new leases.
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<PAGE> 11
Non-Property Specific Revenues and Expenses:
Other income increased from $1,059,000 during the first half of 1998 to
$1,329,000 during the first half of 1999, and from $440,000 for the second
quarter of 1998 to $686,000 for the second quarter of 1999. Other income
contains both property specific and non-property specific income; however, the
increase is primarily attributable to property specific sources. The increase in
other income resulted from an increase in other property income generated from
properties acquired during 1998, primarily from four enclosed malls acquired in
connection with the merger acquisition of Mid-America, partially offset by a
reduction in other income of $159,000 at Grandview Plaza for the six-month
period for insurance proceeds in excess of the net book value of assets
destroyed and costs incurred for a fire at Grandview Plaza in 1997 received and
recognized in the first quarter of 1998.
Mortgage and other interest expense increased from $12,143,000 during the first
half of 1998 to $14,869,000 during the first half of 1999, and from $6,585,000
for the second quarter of 1998 to $7,182,000 for the second quarter of 1999.
Mortgage debt of $37,933,000 assumed in connection with the merger acquisition
of Mid-America, as well as $25,753,000 in mortgage indebtedness assumed upon the
acquisitions of three additional shopping centers during 1998, partially offset
by the repayment in the third quarter of 1998 of mortgage notes secured by
Richfield Hub and Hub West aggregating $10 million, contributed to an increase
in interest expense of $1,686,000 for the six-month period and $817,000 for the
second quarter. A higher weighted average balance outstanding on the line of
credit during the first half of 1999 compared with the first half of 1998,
partially offset by a lower weighted average interest rate in 1999, resulted in
an increase in interest expense of $502,000. A slightly lower weighted average
balance outstanding on the line of credit during the second quarter of 1999
compared with the second quarter of 1998 resulting from the pay-down of
approximately $49,100,000 with net proceeds from the issuance on February 23,
1999 of Series B Preferred Units, combined with a slightly lower weighted
average interest rate, resulted in a decrease in interest expense of $256,000
for the second quarter of 1999 compared with the second quarter of 1998. On
January 28, 1998, the Operating Partnership issued $100 million, 7.2% ten-year
unsecured Notes maturing January 15, 2008. Proceeds from the offering were used
to reduce outstanding borrowings under the line of credit, which had been
increased throughout 1997 primarily to fund acquisition activity. Interest
incurred on these unsecured Notes in the first half of 1998 amounted to
$6,829,000 compared with $7,403,000 for the full six months in 1999, an increase
of $574,000. Our total weighted average interest rate decreased to 7.05% for the
second quarter of 1999 from 7.20% for the second quarter of 1998.
General and administrative expense increased from $3,120,000 during the first
half of 1998 to $4,067,000 during the first half of 1999, and from $1,717,000
for the quarter ended June 30, 1998 to $1,866,000 for the quarter ended June 30,
1999. The increase primarily resulted from the growth of the Company, including
increases in salaries for additional personnel, investor relations for a larger
share owner base, and franchise taxes and related fees for a larger equity base
and expanded geographic market.
While the capital markets for REITs have remained challenging, during February
1999, we took advantage of an opportunity to replace $50 million of short term
floating rate debt under the line of credit with the issuance of 8.875% Series B
Cumulative Redeemable Perpetual Preferred Units (the "Series B Preferred
Units"). Although the spread between the interest rate currently available under
the line of credit facility and the rate associated with the Series B Preferred
Units is dilutive in the short-term, the infusion of such permanent capital
reduced the amount of outstanding indebtedness and increased the capacity under
the line of credit, providing us with additional flexibility to take advantage
of the favorable acquisition, development, and redevelopment opportunities we
continue to identify from both prospective acquisitions in our target markets
and from shopping centers in our core portfolio. Distributions on the Series B
Preferred Units were $1,565,000 during the first half of 1999, and $1,109,000
during the quarter ended June 30, 1999, the first full quarterly period that the
Series B Preferred Units have been outstanding.
Distributions on the Series A Convertible Preferred Stock issued in connection
with the merger acquisition of Mid-America in August 1998 were $3,652,000 for
the first half of 1999, and $1,826,000 during the second quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
General
We fund operating expenses and distributions primarily from operating cash
flows, although we may also use our bank line of credit for these purposes. We
fund acquisitions and capital expenditures primarily from the line of credit
and, to a lesser extent, operating cash flows, as well as through the issuance
of securities. We may also acquire properties through the direct issuance of
debt and equity securities of the Company, or through the issuance of limited
partnership units in the Operating Partnership to the seller or contributor of
the acquired properties. Additionally, we may dispose of certain non-core
properties, reinvesting the proceeds from such dispositions into properties with
better growth potential and that are more consistent with our strategic focus.
In addition, we may acquire partial interests in real estate assets through
participation in joint venture transactions.
We focus our investment activities on community and neighborhood shopping
centers, primarily located in the midwestern United States, anchored by regional
and national grocery store chains. We will continue to seek acquisition
opportunities of individual properties and property portfolios and of private
and public real estate entities in both primary and secondary Midwest markets,
where we can utilize our
11
<PAGE> 12
extensive experience in shopping center renovation, expansion, re-leasing and
re-merchandising to achieve long-term cash flow growth and favorable investment
returns. Additionally, we expect to continue to engage in development
activities, either directly or through contractual relationships with
independent development companies, to develop community and neighborhood
shopping centers in selected Midwest markets where we anticipate that value can
be created from new developments more effectively than from acquisitions of
existing shopping center properties. We would also consider investment
opportunities in markets beyond the Midwest in the event such opportunities were
on a scale that enabled us to actively manage, lease, develop and redevelop
shopping centers consistent with our focus that create favorable investment
returns and increase value to our share owners.
We consider our liquidity and ability to generate cash from operating and from
financing activities to be sufficient to meet our operating expense, development
costs, debt service and distribution requirements for at least a year. Despite a
current difficult capital markets environment for REITs, we also believe we have
sufficient liquidity and flexibility to be able to continue to take advantage of
favorable acquisition and development opportunities. However the utilization of
available liquidity for such opportunities will be carefully calibrated to
changing market conditions.
As of June 30, 1999, our financial liquidity was provided by $108,000 in cash
and cash equivalents and by the unused balance on our bank line of credit of
$129.1 million. As of June 30, 1999, we were holding for sale three properties
with an aggregate book value of $30.1 million. We expect to complete the sales
of these properties during the second half of 1999, although we can give no
assurance that any such sales will occur. Proceeds received from a sale of any
of such properties would provide us with additional liquidity. In addition, we
have an effective "shelf" registration statement under which the Company may
issue up to $201.4 million in equity securities, and an additional "shelf"
registration statement under which the Operating Partnership may issue up to
$400 million in unsecured, non-convertible investment grade debt securities. The
"shelf" registration statements provide the Company and its Operating
Partnership with the flexibility to issue additional equity or debt securities
from time to time when we determine that market conditions and the opportunity
to utilize the proceeds from the issuance of such securities are favorable. The
Operating Partnership has also implemented a Medium-Term Note program providing
it with the added flexibility of issuing Medium-Term Notes due nine months or
more from date of issue in varying amounts in an aggregate principal amount of
up to $150 million from time to time using the debt "shelf" registration in an
efficient and expeditious manner.
Mortgage debt outstanding at June 30, 1999 consisted of fixed-rate notes
totaling $102.0 million with a weighted average interest rate of 7.51% maturing
at various dates through 2016. Short-term liquidity requirements include debt
service payments due within one year. Scheduled principal payments of mortgage
debt totaled $823,000 during the six-month period ended June 30, 1999, with
another $1.2 million of scheduled principal amortization due for the remainder
of the year. We have no maturing debt until February 2000, when $6.0 million in
mortgage debt becomes due, and December 2000, when the line of credit expires.
While we currently expect to fund short-term and long-term liquidity
requirements primarily through a combination of issuing additional investment
grade unsecured debt securities and equity securities and with borrowings under
the bank line of credit, there can be no assurance that we will be able to repay
or refinance indebtedness on commercially reasonable or any other terms.
Operating Activities
Net cash flows provided by operating activities increased to $31,790,000 during
the first half of 1999, from $29,197,000 during the same period in 1998. This
increase occurred despite an increase of $7,141,000 in interest paid, net of
amount capitalized, from $8,358,000 during the first half of 1998 to $15,499,000
during the first half of 1999, while interest expense increased during these
same periods by only $2,726,000. The increase in interest payments primarily
resulted from a $3,600,000 semi-annual interest payment due January 1999 on $100
million of 7.2% ten-year bonds, accrued in the prior year. Excluding the
semi-annual interest payment, cash provided by operating activities increased
$6,193,000. This increase is primarily due to the growth of our portfolio, from
53 properties at January 1, 1998 (66 properties at June 30, 1998), to 96
properties at June 30, 1999.
For the six months ended June 30, 1999, funds from operations ("FFO") increased
$3,931,000, or 16%, from $25,114,000 to $29,045,000. For the three months ended
June 30, 1999, FFO increased $1,769,000, or 14%, from $12,775,000 to
$14,544,000. The Company generally considers FFO to be a relevant and meaningful
supplemental measure of the performance of an equity REIT because it is
predicated on a cash flow analysis, contrasted with net income, a measure
predicated on generally accepted accounting principles which gives effect to
non-cash items such as depreciation. We compute FFO in accordance with the March
1995 "White Paper" on FFO published by the National Association of Real Estate
Investment Trusts ("NAREIT"), as income before allocation to minority interest
(computed in accordance with generally accepted accounting principles),
excluding gains or losses from debt restructuring and sales of property, plus
depreciation and amortization, and after preferred stock distributions and
adjustments for unconsolidated partnerships. Adjustments for unconsolidated
partnerships are computed to reflect FFO on the same basis. In computing FFO, we
do not add back to net income the amortization of costs incurred in connection
with our financing activities or depreciation of non-real estate assets. FFO
does not represent cash generated from operating activities in accordance with
generally accepted accounting principles and should not be considered as an
alternative to cash flow as a measure of liquidity. Since the NAREIT White Paper
provides guidelines only for computing FFO, the computation of FFO may vary from
one REIT to another. FFO is not necessarily indicative of cash available to fund
cash needs.
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<PAGE> 13
Investing Activities
Net cash flows from investing activities increased to a use of cash of
$7,728,000 during the first half of 1999, from a use of cash of $111,952,000
during the same period in 1998. During the first half of 1999, we completed the
acquisitions of two shopping centers located in Michigan and Ohio aggregating
264,000 square feet for an aggregate purchase price of approximately
$13,853,000, and sold three properties aggregating 434,000 square feet for an
aggregate net sales price of $16,899,000. During this period, we also acquired
the 50% non-owned portion of two shopping centers held by our joint venture
acquired in connection with the merger acquisition of Mid-America, for a
purchase price of approximately $7,750,000. The acquisition of the 50% non-owned
portion of the joint venture was completed after the joint venture sold an
enclosed mall to a third party for $12,100,000, including the assumption of a
$3,100,000 note receivable. Cash distributions received from the joint venture
during the first half of 1999 amounted to $3,943,000.
During the first half of 1998, we completed the acquisitions of fourteen
shopping centers located in Illinois, Indiana, Kentucky, Michigan and Wisconsin
aggregating 1.7 million square feet for an aggregate purchase price of
approximately $111,783,000, and completed the sale of one shopping center for a
net sales price of $1,869,000.
Financing Activities
Net cash flows from financing activities decreased to a use of cash of
$23,954,000 during the first half of 1999 from a source of cash of $79,703,000
during the same period in 1998. Distributions to common and preferred share
owners, as well as to the minority interest, were $24,063,000 in the first half
of 1999, and $17,538,000 in the first half of 1998.
The two shopping centers acquired during the first half of 1999 were acquired
with cash provided by our line of credit. Of the fourteen shopping centers
acquired during the first half of 1998, thirteen were acquired with cash
provided by our line of credit, and one was acquired with a combination of cash
provided by the line of credit and the assumption of $5,173,000 in non-recourse
mortgage indebtedness.
On February 23, 1999, we issued two million 8.875% Series B Cumulative
Redeemable Perpetual Preferred Units to two institutional investors at a price
of $25.00 per unit. Net proceeds from the issuance of approximately $49.1
million were used to reduce outstanding borrowings under the line of credit,
strengthening our capital structure, replacing floating rate debt with permanent
capital, and thereby adding liquidity, flexibility and additional capital to
fund our acquisition and development activities.
In the prior year period, we issued $100 million, 7.2% ten-year unsecured Notes
maturing January 15, 2008, and issued 392,638 shares of common stock to a unit
investment trust, raising net proceeds of $7,489,000. Proceeds from the
offerings were used to reduce outstanding borrowings under the line of credit.
Capital Strategy
We continue to identify favorable acquisition, development, and redevelopment
opportunities from both prospective acquisitions in our target markets and from
shopping centers in our core portfolio. We have expanded our internal
development capabilities to take advantage of such higher yielding investment
opportunities, which we expect to result in part from our existing relations
with the dominant grocery store operators in our Midwest markets. During the
second quarter of 1999, we continued the redevelopment of Prospect Plaza,
located in Gladstone, Missouri, and acquired two additional redevelopment
projects, Cherry Hill Marketplace located in Westland, Michigan, and 30th Street
Plaza located in Canton, Ohio. The redevelopment of Prospect Plaza is expected
to be complete in early 2000, with the redevelopments of Cherry Hill Marketplace
and 30th Street Plaza expected to be completed later in 2000. During the first
quarter of 1999, we finalized the necessary leasing transactions to commence our
planned redevelopment of the Commons of Chicago Ridge, a shopping center in our
core portfolio located in metropolitan Chicago. These projects are the types of
redevelopment investment opportunities upon which we will continue to focus. The
redevelopments will represent an incremental investment of approximately $32
million, and are expected to generate high returns on invested capital while
adding substantial long-term value to the centers. We also continue to establish
a pipeline of development opportunities and potential acquisitions of shopping
centers where our redevelopment experience can create similar enhanced returns.
We expect to finance these acquisition, development, and redevelopment
opportunities with a combination of proceeds from the sale of non-core assets,
retained cash, external capital and possible joint ventures.
Year 2000 Issues
Many existing computer software programs and operating systems were designed
such that the year 1999 is the maximum date that they will be able to process
accurately. The failure of our computer software programs and operating systems
to process the change in calendar year from 1999 to 2000 may result in system
malfunctions or failures. In the conduct of our operations, we rely on equipment
manufacturers and commercial computer software primarily provided by independent
software vendors, and we have undertaken an assessment of our vulnerability to
the so-called "Year 2000 issue" with respect to our equipment and computer
systems.
We have undertaken a five-step program in order to achieve Year 2000 readiness,
including:
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<PAGE> 14
- - Awareness - Education involving all levels of Bradley personnel regarding
Year 2000 implications.
- - Inventory - Creating a checklist and conducting surveys to identify Year
2000 compliance issues in all systems, including both mechanical and
information systems. The surveys were also designed to identify critical
outside parties such as banks, tenants, suppliers and other parties with
whom we do a significant amount of business, for purposes of determining
potential exposure in the event such parties are not Year 2000 compliant.
- - Assessment - Based upon the results of the inventory and surveys, assessing
the nature of identified Year 2000 issues and developing strategies to
bring our systems into substantial compliance with respect to Year 2000.
- - Correction and Testing - Implementing the strategy developed during the
assessment phase.
- - Implementation - Incorporating repaired or replaced systems into our
systems environment.
The program, which is ongoing, has yielded the following conclusions:
With respect to our potential exposure to information technology systems,
including our accounting and lease management systems, we believe that such
commercial software is Year 2000 ready. This assessment is based upon
installation and testing of upgraded software provided by software vendors, as
well as formal and informal communications with software vendors and literature
supplied with certain software.
In the operation of our properties, we have acquired equipment with embedded
technology such as microcontrollers which operate heating, ventilation and air
conditioning systems ("HVAC"), fire alarms, security systems, telephones and
other equipment utilizing time-sensitive technology. We have evaluated the
potential exposure to such non-information technology systems and believe that
such equipment is Year 2000 ready. This assessment is based upon formal and
informal communications with software vendors, literature supplied with the
software, literature supplied in connection with maintenance contracts, and test
evaluations of the software and equipment.
We have incurred less than $50,000 to bring our information technology systems
and equipment with embedded time-sensitive technology Year 2000 ready, and do
not expect to incur more the $10,000 to continue to monitor our Year 2000
readiness.
The failure of our tenants' or suppliers' computer software programs and
operating systems to process the change in calendar year from 1999 to 2000 may
also result in system malfunctions or failures. Such an occurrence would
potentially affect the ability of the affected tenant or supplier to operate its
business and thereby raise adequate revenue to meet its contractual obligations
to us. As a result, we may not receive revenue or services we had otherwise
expected to receive pursuant to existing leases and contracts. We have completed
an inventory of the tenants, suppliers and other parties with whom we do a
significant amount of business and have conducted surveys of such parties to
identify the potential exposure in the event they are not Year 2000 ready in a
timely manner. Based on the responses received, we are not aware of any party
that is anticipating a material Year 2000 readiness issue. Although the
investigations and assessments of possible Year 2000 issues are still ongoing,
we do not anticipate a material impact on our business, operations or financial
condition even if one or more parties is not Year 2000 ready in a timely manner,
because the number and nature of our tenant base are diverse, and because we do
not rely on a concentration of suppliers and other parties to conduct our
business.
Although we are aware that we may not, in fact, be Year 2000 ready upon the year
2000, at this time we have not adopted a contingency plan for the conduct of our
own operations because we expect to be Year 2000 ready in advance of 2000.
However, we will continue to monitor our progress and state of readiness, and
will be prepared to adopt a contingency plan with respect to areas in which
evidence arises that we may not become Year 2000 ready in sufficient time. It is
possible that an aggregation of tenants, suppliers, and other parties who
experience Year 2000 related system malfunctions or failures may have a material
impact on our business, operations, and financial condition. Although we believe
that we will be able to adopt appropriate contingency plans to deal with any
Year 2000 readiness issue that any other party, excluding public utilities, with
whom we have significant relationships may experience as we continue our Year
2000 assessment and testing, we cannot be certain at this time that such
contingency plans will be effective in limiting the harm caused by such third
parties' system malfunctions and failures.
The reasonably likely worst case scenario that could affect our operations would
be a widespread prolonged power failure affecting a substantial portion of the
midwestern states in which our shopping centers are located. In the event of
such a widespread prolonged power failure, a significant number of tenants may
not be able to operate their stores and, as a result, their ability to pay rent
could be substantially impaired. We are not aware of an economically feasible
contingency plan which could be implemented to prevent such a power failure from
having a material adverse effect on our operations.
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<PAGE> 15
FORWARD LOOKING STATEMENTS
Statements made or incorporated in this Form 10-Q include "forward-looking"
statements. Forward-looking statements include, without limitation, statements
containing the words "anticipates," "believes," "expects," "intends," "future,"
and words of similar import which express our belief, expectations or intentions
regarding our future performance or future events or trends. We caution you
that, while forward-looking statements reflect our good faith beliefs, they are
not guarantees of future performance and involve known and unknown risks,
uncertainties and other factors, which may cause actual results, performance or
achievements to differ materially from anticipated future results, performance
or achievements expressed or implied by such forward-looking statements as a
result of factors outside of our control. Certain factors that might cause such
a difference include, but are not limited to, the following: Real estate
investment considerations, such as the effect of economic and other conditions
in general and in the midwestern United States in particular; the financial
viability of our tenants; the continuing availability of retail center
acquisitions and development opportunities in the Midwest on favorable terms;
the availability of equity and debt capital in the public markets; the fact that
returns from development and acquisition activity may not be at expected levels;
the need to renew leases or relet space upon the expiration of current leases;
and the financial flexibility to refinance debt obligations when due. The
statements made under the caption "Risk Factors" included in the Company's Form
10-K for 1998 are incorporated herein by reference.
15
<PAGE> 16
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable
Item 2. CHANGES IN SECURITIES
Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held May 13, 1999, shares were
voted on the following matter (number of shares rounded to nearest full share):
Election of Directors:
Nominee For Withheld
------- --- --------
Thomas P. D'Arcy 23,274,748 105,386
Joseph E. Hakim 23,259,913 120,221
William L. Brown 23,256,339 123,795
Item 5. OTHER INFORMATION
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
----------- -----------
10.3 Amendment to 1993 Stock Option and Incentive
Plan, dated May 13, 1999.
10.4 Form of Severance Benefit Agreement entered into
with each of Thomas P. D'Arcy, President and
Chief Executive Officer; Richard L. Heuer,
Executive Vice President; Irving E. Lingo, Jr.,
Executive Vice President and Chief Financial
Officer; E. Paul Dunn, Executive Vice President
of Asset Management; Steven St. Peter, Executive
Vice President of Leasing; Marianne Dunn, Senior
Vice President; Frank J. Comber, Vice President
of Construction; and David M. Garfinkle, Vice
President and Controller.
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
Not applicable
16
<PAGE> 17
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 thereto duly authorized.
Date: August 12, 1999
Bradley Real Estate, Inc.
Registrant
By: /s/ Thomas P. D'Arcy
-------------------------------
Thomas P. D'Arcy
President and CEO
By: /s/ Irving E. Lingo, Jr.
-------------------------------
Irving E. Lingo, Jr.
Chief Financial Officer
17
<PAGE> 1
Exhibit 10.3
Page 1 of 8
BRADLEY REAL ESTATE, INC.
1993 Stock Option and Incentive Plan
As Amended and Restated on September 9, 1996
And Amended through May 13, 1999
1. PURPOSE; DEFINED TERMS
(a) This 1993 Stock Option and Incentive Plan (the "Plan") is intended as a
performance incentive for officers, Directors, employees and consultants of
Bradley Real Estate, Inc. (the "Company") and its Subsidiaries (as hereinafter
defined) to enable the persons to whom Options or other Awards are granted (the
"Optionees" or "Grantees") to acquire or increase a proprietary interest in the
success of the Company. The Company intends that this purpose will be effected
by the granting of "incentive stock options" ("Incentive Options") as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options ("Nonqualified Options"), and rights to receive
restricted stock ("Restricted Stock Awards"), unrestricted stock ("Unrestricted
Stock Awards"), performance shares ("Performance Share Awards"), stock
appreciation rights ("Stock Appreciation Rights") and dividend equivalent rights
("Dividend Equivalent Rights").
(b) The undifferentiated terms "Option" and "Options" include both
Incentive Options and Nonqualified Options. The terms "Award" and "Awards"
include Options, Restricted Stock Awards, Unrestricted Stock Awards, Performance
Share Awards, Stock Appreciation Rights and Dividend Equivalent Rights. The term
"Subsidiaries" includes any corporation, partnership or other organization in
which the Company owns at the time of the grant of the Award fifty percent or
more of the economic interest in the equity of such organization.
2. AWARDS TO BE GRANTED AND ADMINISTRATION
(a) Options granted under the Plan may be either Incentive Options or
Nonqualified Options, and shall be designated as such at the time of grant. To
the extent that any Option intended to be an Incentive Option shall fail to
qualify as an "incentive stock option" under the Code, such Option shall be
deemed to be a Nonqualified Option; and, subject to the preceding part of this
sentence, any Option not designated as either an Incentive Option or a
Nonqualified Option shall be presumed to be intended to be an Incentive Option
unless clear by its terms that it is not eligible to qualify as an Incentive
Option.
(b) The Plan shall be administered by a committee (the "Committee") of not
less than two Directors of the Company appointed by the Board of Directors of
the Company (the "Board of Directors"). It is the intention of the Company that
each member of the Committee shall be a "non-employee director" as that term is
defined and interpreted pursuant to Rule 16b-3(b)(3) or any successor rule
thereto promulgated under the Securities Exchange Act of 1934, as amended (the
"Act"), and an "outside director" within the meaning of Section 162(m) of the
Code and the regulations promulgated thereunder. Unless otherwise determined by
the Board of Directors, the members of the Compensation Committee of the Board
of Directors shall serve as the Committee under the Plan to the extent such
members of the Compensation Committee are "non-employee directors" and "outside
directors." Action by the Committee shall require the affirmative vote of a
majority of all its members.
(c) Subject to the terms and conditions of the Plan, the Committee shall
have the power:
(i) To determine from time to time the Awards to be granted to
eligible persons under the Plan and to prescribe the terms and provisions
(which need not be identical) of Awards granted under the Plan to such
persons;
(ii) To construe and interpret the Plan and grants thereunder and to
establish, amend, and revoke rules and regulations for administration of
the Plan. In this connection, the Committee may correct any defect or
supply any omission, or reconcile any inconsistency in the Plan, in any
Award agreement, or in any related agreements, in the manner and to the
extent it shall deem necessary or expedient to make the Plan fully
effective. All decisions and determinations by the Committee in the
exercise of this power shall be final and binding upon the Company and the
Optionee and Grantees;
(iii) To amend any outstanding Award, subject to Section 17 hereof,
and to accelerate or extend the vesting or exercisability of any Award and
to waive conditions or restrictions on any Awards, to the extent it shall
deem appropriate; and
(iv) Generally, to exercise such powers and to perform such acts as
are deemed necessary or expedient to promote the best interests of the
Company with respect to the Plan.
18
<PAGE> 2
Exhibit 10.3
Page 2 of 8
3. AUTHORIZED SHARES
(a) Awards may be granted under the Plan for up to an aggregate of
2,282,348 Shares (which number is subject to adjustment as provided in Section
13) shares of Common Stock, par value $.01 per share, of the Company ("Shares")
(including 512,350 Shares previously issued or issuable pursuant to outstanding
Awards under the Plan as of March 18, 1998); provided, however, that the maximum
number of Shares for which Incentive Options may be granted under the Plan shall
not exceed 500,000 Shares (which number is subject to adjustment as provided in
Section 13). Subject to such overall limitations, Shares may be issued pursuant
to any type or types of Award; provided, however, that Options or Stock
Appreciation Rights with respect to not more than 250,000 Shares (which number
is subject to adjustment as provided in Section 13) may be granted to any one
individual during any one calendar year period.
(b) Whenever any outstanding Option under the Plan expires, is cancelled or
is otherwise terminated (other than by exercise in the case of Incentive
Options), the Shares allocable to the unexercised portion of such Option may
again be the subject of Awards under the Plan. The Shares underlying any other
Awards which are forfeited, canceled, reacquired by the Company, satisfied
without the issuance of Shares or otherwise terminated (other than by exercise)
shall also be added back to the Shares available for issuance under the Plan.
4. ELIGIBILITY
(a) Incentive Options may be granted only to officers or other employees of
the Company or its Subsidiaries, including members of the Board of Directors who
are also officers or employees of the Company or any of its Subsidiaries. All
other Awards may be granted to officers or other employees of the Company or any
of its Subsidiaries and to consultants (which term includes persons who provide
services to the Company or its Subsidiaries). Nonqualified Options may be
granted to non-employee members of the Board of Directors pursuant to Section 7.
(b) No person shall be eligible to receive any Incentive Option under the
Plan if, at the date of grant, such person beneficially owns stock representing
in excess of 9.8 percent of the voting power of all outstanding capital stock of
the Company.
(c) Notwithstanding any other provision of the Plan, the aggregate fair
market value (determined as of the time the Incentive Option is granted) of the
Shares with respect to which Incentive Options are exercisable for the first
time by any individual during any calendar year (under all plans of the Company
and its parent and Subsidiaries, if any) shall not exceed $100,000.
5. TERMS OF THE OPTION AGREEMENTS
Subject to the terms and conditions of the Plan, each option agreement
shall contain such provisions as the Committee shall from time to time deem
appropriate. Option agreements need not be identical, but each option agreement
by appropriate language shall include the substance of all of the following
provisions, and any such provisions may be included in the option agreement by
reference to the Plan:
(a) Expiration; Termination of Employment. Each Option shall expire on the
date specified in the option agreement, which date shall not be later than the
tenth anniversary of the date on which the Option was granted ("grant date") in
the case of an Incentive Option and not later than one week following the tenth
anniversary of the grant date in the case of a Nonqualified Option. If an
Optionee's employment with the Company or any of its Subsidiaries terminates for
any reason, the Committee may in its discretion provide, at any time, that any
outstanding Option granted to such Optionee under the Plan shall be exercisable
for such period following termination of employment as may be specified by the
Committee, subject to the expiration date of such Option.
(b) Minimum Shares Exercisable. The minimum number of shares with respect
to which an Option may be exercised at any one time shall be one hundred (100)
shares, or such lesser number as is subject to exercise under the Option at the
time.
(c) Exercise. Each Option shall be exercisable in such installments (which
need not be equal) and at such times as may be designated by the Committee. To
the extent not exercised, installments shall accumulate and be exercisable, in
whole or in part, at any time after becoming exercisable, but not later than the
date the Option expires.
(d) Purchase Price. The purchase price per Share subject to each Option
shall be determined by the Committee; provided, however, that the purchase price
per Share subject to each Incentive Option shall be not less than the fair
market value of the Shares on the date such Option is granted, which unless
otherwise determined by the Committee in any particular case shall be deemed to
be the average closing price of the Shares as reported on the principal stock
exchange on which the Shares are listed on each of the ten business days
immediately preceding the date of the grant of the Option.
19
<PAGE> 3
Exhibit 10.3
Page 3 of 8
(e) Rights of Optionee. No Optionee shall be deemed for any purpose to be
the owner of any Shares subject to any Option unless and until (i) the Option
shall have been exercised pursuant to the terms thereof, (ii) all requirements
under applicable law and regulations shall have been complied with to the
satisfaction of the Company, (iii) the Company shall have issued and delivered
the Shares to the Optionee, and (iv) the Optionee's name shall have been entered
as a stockholder of record on the books of the Company. Thereupon, the Optionee
shall have full voting, dividend and other ownership rights with respect to such
Shares.
(f) Transfer. No Option granted hereunder shall be transferable by the
Optionee other than by will or by the laws of descent and distribution, and such
Option may be exercised during the Optionee's lifetime only by the Optionee, or
his or her guardian or legal representative. Notwithstanding the foregoing, the
Committee may provide in an option agreement that the optionee may transfer,
without consideration for the transfer, his Nonqualified Option to members of
his immediate family, to trusts for the benefit of such family members, to
partnerships in which such family members are the only partners and to
charities.
6. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) Any Option granted under the Plan may be exercised by the Optionee in
whole or, subject to Section 5 (b) hereof, in part by delivering to the Company
on any business day a written notice specifying the number of Shares the
Optionee then desires to purchase (the "Notice").
(b) Payment for the Shares purchased pursuant to the exercise of any Option
shall be made either: (i) in cash or by check for good funds or other payment
acceptable to the Company equal to the Option exercise price for the number of
shares specified in the Notice (the "Total Option Price"); (ii) if authorized by
the applicable option agreement and if permitted by law, by delivery of Shares
that the Optionee may freely transfer having a fair market value, determined by
reference to the provisions of Section 5(d) hereof, equal to or less than the
Total Option Price, plus cash in an amount equal to the excess, if any, of the
Total Option Price over the fair market value of such Shares; (iii) by the
Optionee delivering the Notice to the Company together with irrevocable
instructions to a broker to promptly deliver the Total Option Price to the
Company in cash or by other method of payment acceptable to the Company,
provided, however, that the Optionee and the broker shall comply with such
procedures and enter into such agreements of indemnity or other agreements as
the Company shall prescribe as a condition of payment under this clause (iii);
(iv) if the Directors have authorized the loan of funds to the Optionee for the
purpose of enabling or assisting the Optionee to effect the exercise of the
Option, with the proceeds of such loan; or (v) any combination of the foregoing
which in the aggregate equals the Total Option Price.
(c) The delivery of certificates representing Shares to be purchased
pursuant to the exercise of an Option will be contingent upon the Company's
receipt of the Total Option Price and of any written representations from the
Optionee required by the Committee, and the fulfillment of any other
requirements contained in the option agreement or applicable provisions of law.
7. OPTIONS GRANTED TO INDEPENDENT DIRECTORS
(a) Each Director who is not also an employee of the Company or any of its
Subsidiaries (an "Independent Director") shall automatically be granted on the
days he or she first becomes a Director a Nonqualified Option to acquire 5,000
Shares and each Independent Director who is serving as Director of the Company
on the next business day after the adjournment of each annual meeting of
stockholders, after the 1998 annual meeting, shall automatically be granted on
such day a Nonqualified Option to acquire 3,500 Shares. The exercise price per
share for the Shares covered by an Option granted under this Section 7 shall be
equal to the fair market value of the Shares, determined by reference to the
formula stated in Section 5(d), on the date the Option is granted.
(b) An Option granted under this Section 7 shall be exercisable in full as
of the grant date and for a term of ten years thereafter provided that if the
Optionee ceases to be a Director for any reason, such Option shall thereafter be
exercisable by the Optionee, or by his or her legal representative, for a period
of two years from the date of termination, or until the expiration of the stated
term of the Option if earlier. Options granted under this Section 7 may be
exercised only by written notice to the Company specifying the number of shares
to be purchased. Payment of the full purchase price of the shares to be
purchased may be made by one or more of the methods specified in Section 6(b)
(i), (ii) or (iii). An Optionee shall have the rights of a stockholder only as
to Shares acquired upon the exercise of an Option and not as to unexercised
Options.
(c) The provisions of this Section 7 shall govern the rights and
obligations of the Company and Independent Directors respecting Options granted
or to be granted to Independent Directors pursuant to this Section 7,
notwithstanding any other provision of the Plan.
20
<PAGE> 4
Exhibit 10.3
Page 4 of 8
8. RESTRICTED STOCK AWARDS
(a) A Restricted Stock Award is an Award entitling the recipient to acquire
Shares, at par value or such other purchase price determined by the Committee,
subject to such restrictions and conditions as the Committee may determine at
the time of grant ("Restricted Stock"). Conditions may be based on continuing
employment (or other business relationship) and/or achievement of
pre-established performance goals and objectives.
(b) Upon execution of a written instrument setting forth the Restricted
Stock Award and paying any applicable purchase price, a Grantee shall have the
rights of a stockholder with respect to the voting of the Restricted Stock,
subject to such conditions contained in the written instrument evidencing the
Restricted Stock Award. Unless the Committee shall otherwise determine,
certificates, evidencing the Restricted Stock shall remain in the possession of
the Company until such Restricted Stock is vested as provided in Section 8(d)
below.
(c) Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of except as specifically provided herein or in
the written instrument evidencing the Restricted Stock Award. If a Grantee's
employment (or other business relationship) with the Company and its
Subsidiaries terminates for any reason, the Company shall have the right to
repurchase all shares of Restricted Stock with respect to which conditions have
not lapsed at their purchase price, from the Grantee or the Grantee's legal
representative.
(d) The Committee at the time of grant shall specify the date or dates
and/or the attainment of preestablished performance goals, objectives and other
conditions on which the non-transferability of the Restricted Stock and the
Company's right of repurchase or forfeiture shall lapse. Subsequent to such date
or dates and/or the attainment of such pre-established performance goals,
objectives and other conditions, the shares on which all restrictions have
lapsed shall no longer be Restricted Stock and shall be deemed "vested." Except
as may otherwise be provided by the Committee at any time, a Grantee's rights in
any shares of Restricted Stock that have not vested shall automatically
terminate upon the Grantee's termination of employment (or other business
relationship) with the Company and its Subsidiaries and such shares shall either
be forfeited or subject to the Company's right of repurchase as provided in this
Section 8.
(e) The written instrument evidencing the Restricted Stock Award may
require or permit the immediate payment, waiver, deferral or investment of
dividends paid on the Restricted Stock.
9. UNRESTRICTED STOCK AWARDS
(a) The Committee may, in its sole discretion, grant (or sell at a purchase
price determined by the Committee) an Unrestricted Stock Award, pursuant to
which the Grantee may receive Shares free of any restrictions under the Plan.
Unrestricted Stock Awards may be granted or sold as described in the preceding
sentence in respect of past services or other valid consideration, or in lieu of
any cash compensation due to such Grantee.
(b) The Committee may permit the Grantee of any Unrestricted Stock Award to
elect in advance to defer receipt of such Award in accordance with such rules
and procedures as may be established by the Committee for that purpose. The
Grantee of any deferred Unrestricted Stock Award shall be entitled to receive
Dividend Equivalent Rights on the deferred Shares unless otherwise specified by
the Committee.
(c) The right to receive Shares on a deferred basis may not be sold,
assigned, transferred, pledged or otherwise encumbered, other than by will or
the laws of descent and distribution.
10. PERFORMANCE SHARE AWARDS
(a) Nature of Performance Share Awards. A Performance Share Award is an
Award entitling the recipient to acquire Shares upon the attainment of specified
performance goals. The Committee may make Performance Share Awards independent
of or in connection with the granting of any other Award under the Plan. The
Committee in its sole discretion shall determine whether and to whom Performance
Share Awards shall be made, the performance goals applicable under each such
Award, the periods during which performance is to be measured, and all other
limitations and conditions applicable to the Performance Share Awards.
(b) Restrictions on Transfer. Performance Share Awards and all rights with
respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered, other than by will or the laws of descent and
distribution.
21
<PAGE> 5
Exhibit 10.3
Page 5 of 8
(c) Rights as a Shareholder. A participant receiving a Performance Share
Award shall have the rights of a shareholder only as to Shares actually received
by the participant under the Plan and not with respect to Shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of Shares
under a Performance Share Award only upon satisfaction of all conditions
specified in the written instrument evidencing the Performance Share Award (or
in a performance plan adopted by the Committee).
(d) Termination. Except as may otherwise be provided by the Committee at
any time prior to termination of employment (or other business relationship), a
participant's rights in all Performance Share Awards shall automatically
terminate upon the participant's termination of employment (or business
relationship) with the Company and its Subsidiaries for any reason.
(e) Acceleration, Waiver, Etc. At any time prior to the participant's
termination of employment (or other business relationship), the Committee may in
its sole discretion accelerate, waive or, subject to Section 17 hereof, amend
any or all of the goals, restrictions or conditions imposed under any
Performance Share Award.
11. STOCK APPRECIATION RIGHTS
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
Award entitling the recipient to receive an amount in cash or Shares or a
combination thereof having a value equal to the excess of the fair market value
of a Share, determined by reference to Section 5(d) hereof, on the date of
exercise over the exercise price per Stock Appreciation Right set by the
Committee at the time of grant, which price shall not be less than 85% of the
fair market value of the Shares on the grant date (or over the option exercise
price per share, if the Stock Appreciation Right was granted in tandem with an
Option) multiplied by the number of Shares with respect to which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.
(b) Grant of Stock Appreciation Rights. A Stock Appreciation Right may be
granted by the Committee in tandem with, or independently of, any Option granted
pursuant to the Plan (other than Options granted pursuant to Section 7). In the
case of a Stock Appreciation Right granted in tandem with a Nonqualified Option,
such Stock Appreciation Right may be granted either at or after the time of the
grant of such Option. In the case of a Stock Appreciation Right granted in
tandem with an Incentive Stock Option, such Stock Appreciation Right may be
granted only at the time of the grant of the Option.
(c) Terms and Conditions of Stock Appreciation Rights. Stock Appreciation
Rights shall be subject to such terms and conditions as shall be determined from
time to time by the Committee, subject to the following:
(i) Stock Appreciation Rights granted in tandem with an Option shall
be exercisable at such time or times and to the extent that the related
Option shall be exercisable.
(ii) A Stock Appreciation Right or applicable portion thereof granted
in tandem with an Option shall terminate and no longer be exercisable upon
the termination or exercise of the related Option. Upon exercise of a Stock
Appreciation Right, the applicable portion of any related Option shall be
surrendered.
(iii) Stock Appreciation Rights granted in tandem with an Option shall
be transferable only when and to the extent that the underlying Option
would be transferable. Stock Appreciation Rights not granted in tandem with
a Option shall not be transferable otherwise than by will or the laws of
descent or distribution. All Stock Appreciation Rights shall be exercisable
during the participant's lifetime only by the participant or the
participant's legal representative.
12. DIVIDEND EQUIVALENT RIGHTS
(a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award
entitling the recipient to receive credits based on cash dividends that would be
paid on the Shares specified in the Dividend Equivalent Right (or other Award to
which it relates) if such Shares were held by the recipient. A Dividend
Equivalent Right may be granted hereunder as a component of another Award or as
a freestanding Award. The terms and conditions of Dividend Equivalent Rights
shall be specified in the grant. Dividend equivalents credited to the holder of
a Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional Shares, which may thereafter accrue additional
equivalents. Any such reinvestment shall be at fair market value of the Shares,
determined by reference to Section 5(d) hereof, on the date of reinvestment or,
at the discretion of the Company, at such other price as may then apply under
any dividend reinvestment plan sponsored by the Company. Dividend Equivalent
Rights may be settled in cash or Shares or a combination thereof, in a single
installment or installments, at the discretion of the Company. A Dividend
Equivalent Right granted as a component of another Award may provide that such
Dividend Equivalent Right shall be settled upon exercise, settlement, or payment
of,
22
<PAGE> 6
Exhibit 10.3
Page 6 of 8
or lapse of restrictions on, such other Award, and that such Dividend Equivalent
Right shall expire or be forfeited or annulled under the same conditions as such
other Award. A Dividend Equivalent Right granted as a component of another Award
may also contain terms and conditions different from such other Award.
(b) Interest Equivalents. Any Award under the Plan that is settled in whole
or in part in cash on a deferred basis may provide in the grant for interest
equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
13. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) If the Shares as a whole are increased, decreased, changed into or
exchanged for a different number or kind of shares or securities of the Company,
whether through merger, consolidation, reorganization, recapitalization,
reclassification, stock dividend, stock split, combination of shares, exchange
of shares, change in corporate structure or the like, an appropriate and
proportionate adjustment shall be made in the number and kind of shares subject
to the Plan, and in the number, kind, and per share exercise price of shares
subject to outstanding unexercised Options or other Awards or portions thereof
granted prior to any such change; but no such adjustments shall be made with
respect to outstanding unexercised Options or other Awards solely as a result of
the Company's issuance of additional Shares or purchase of outstanding Shares in
either case for fair consideration as determined by the Board of Directors. In
the event of any such adjustment in an outstanding Award, the Optionee or
Grantee thereafter shall have the right to purchase the number of Shares under
such Award at the per share price, as so adjusted, which the Optionee or Grantee
could purchase at the total purchase price applicable to the Award immediately
prior to such adjustment.
(b) Adjustments under this Section 13 shall be determined by the Committee
and such determinations shall be conclusive. The Committee shall have the
discretion and power in any such event to determine and to make effective
provision for acceleration of the time or times at which any Option or portion
thereof shall become exercisable. No fractional Shares shall be issued under the
Plan on account of any adjustment specified above.
14. EFFECT OF CERTAIN TRANSACTIONS
In the case of (i) the dissolution or liquidation of the Company, (ii) a
reorganization, merger, consolidation or other business combination in which the
Company is acquired by another entity or in which the Company is not the
surviving entity, or (iii) the sale of all or substantially all of the assets of
the Company to another entity, the Plan and the Awards issued hereunder shall
terminate upon the effectiveness of any such transaction or event, unless
provision is made in connection with such transaction for the assumption of
Awards theretofore granted, or the substitution for such Awards of new awards,
by the successor entity or parent thereof, with appropriate adjustment as to the
number and kind of shares and the per share exercise prices, as provided in
Section 13. In the event of such termination, all outstanding Options and Stock
Appreciation Rights shall be exercisable in full for at least fifteen days prior
to the date of such termination whether or not otherwise exercisable during such
period.
15. TAX WITHHOLDING
(a) Each Grantee (which term shall be deemed to include an Optionee) shall,
no later than the date as of which the value of any Award granted hereunder or
of any Shares or other amounts received thereunder first becomes includable in
the gross income of the Grantee for federal income tax purposes (the "Tax
Date"), pay to the Company, or make arrangements satisfactory to the Company
regarding payment of, any federal, state, or local taxes of any kind required by
law to be withheld with respect to such income.
(b) With the consent of the Committee, a Grantee may elect to have such tax
withholding obligation satisfied, in whole or in part, by (i) authorizing the
Company to withhold from Shares to be issued pursuant to an Award a number of
Shares with an aggregate fair market value (determined in accordance with
Section 5(d) as of the date the withholding is effected) that would satisfy the
withholding amount due, or (ii) transferring to the Company Shares owned by the
Grantee with an aggregate fair market value (determined in accordance with
Section 5(d) as of the date the withholding is effected) that would satisfy the
withholding amount due.
16. CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this Section 16:
(a) Each outstanding Option and Stock Appreciation Right shall
automatically become fully exercisable.
23
<PAGE> 7
Exhibit 10.3
Page 7 of 8
(b) All restrictions and conditions on each Restricted Stock Award,
Performance Share Award and Dividend Equivalent Right shall automatically lapse
and all Awards under the Plan shall be deemed fully vested.
(c) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Act (other than the Company, any of its Subsidiaries, or any trustee,
fiduciary or other person or entity holding securities under any employee
benefit plan or trust of the Company or any of its Subsidiaries), together
with all "affiliates" and "associates" (as such terms are defined in Rule
12b-2 under the Act) of such person, shall become the "beneficial owner"
(as such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 50% or more of either
(A) the combined voting power of the Company's then outstanding securities
having the right to vote in an election of the Board of Directors ("voting
securities") or (B) the then outstanding Shares (in either such case other
than as a result of an acquisition of securities directly from the
Company); or
(ii) persons who, as of the effective date of the amendment and
restatement of the Plan, constitute the Company's Board of Directors (the
"Incumbent Directors") cease for any reason, including, without limitation,
as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that
any person becoming a Director of the Company subsequent to the Effective
Date whose election or nomination for election was approved by a vote of at
least a majority of the Incumbent Directors shall, for purposes of this
Plan, be considered an Incumbent Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
stockholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate more than 50%
of the voting securities of the corporation issuing cash or securities in
the consolidation or merger (or of its ultimate parent corporation, if
any), (B) any sale, lease, exchange or other transfer (in one transaction
or a series of transactions contemplated or arranged by any party as a
single plan) of all or substantially all of the assets of the Company or
(C) any plan or proposal for the liquidation or dissolution of the Company.
17. AMENDMENT OF THE PLAN
The Board of Directors may discontinue the Plan or amend the Plan at any
time, and from time to time, subject to any required regulatory approval, the
limitation set forth in Section 7(c) and the limitation that, except as provided
in Sections 5, 13 and 14 hereof, no amendment shall be effective unless approved
by the stockholders of the Company in accordance with applicable law and
regulations at an annual or special meeting held within twelve months before or
after the date of adoption of such amendment, where such amendment will:
(a) increase the number of Shares as to which Awards may be granted under
the Plan.
(b) change in substance Section 4 hereof relating to eligibility to
participate in the Plan;
(c) change in substance Section 5(d) relating to the requirement that the
purchase price per Share subject to each Incentive Option be not less than the
fair market value of the Shares on the date such Incentive Option is granted;
(d) increase the maximum term of Options provided for herein; or
(e) otherwise materially increase the benefits accruing to participants
under the Plan.
Except as provided in Section 5, 13 and 14 hereof, rights and obligations
under any Award granted before any amendment of the Plan shall not be altered or
impaired by such amendment, except with the consent of the Grantee.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board of Directors to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of Shares or stock options otherwise than under
the Plan, and such arrangements may be either applicable generally or only in
specific cases. Neither the Plan nor any Award granted hereunder shall be deemed
to confer upon any employee any right to continued employment with the Company
or its Subsidiaries.
24
<PAGE> 8
Exhibit 10.3
Page 8 of 8
19. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
(a) The obligation of the Company to sell and deliver Shares with respect
to Awards granted under the Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.
(b) The Plan shall be governed by Maryland law, except to the extent that
such law is preempted by federal law.
20. EFFECTIVE DATE OF PLAN; STOCKHOLDER APPROVAL
The Plan first became effective on March 4, 1993, the date that it was
approved by the Board of Trustees of the Company's predecessor, Bradley Real
Estate Trust; the Plan was approved by the shareholders of said Trust in
accordance with applicable laws and regulations at the annual meeting held on
May 20, 1993. The Plan was amended and restated by the Board of Directors on
March 13, 1996; such amendment and restatement was approved by the stockholders
of the Company in accordance with applicable laws and regulations at the annual
meeting held on May 9, 1996. Following amendment by the Securities and Exchange
Commission of Rule 16b-3 under the Act effective August 15, 1996, the Plan was
further amended and restated by the Board of Directors on September 9, 1996. On
May 14, 1998, the stockholders approved an amendment dated March 18, 1998 that
increased the number of shares for which Awards may be granted under Section
3(a) and changes in the number of options granted to Directors under Section
7(a); and on May 13, 1998, the Board of Directors amended Section 16 of the
Plan. No Awards may be granted under the Plan after March 18, 2008 the tenth
anniversary of the original effective date of the Plan.
25
<PAGE> 1
Exhibit 10.4
Page 1 of 4
SEVERANCE BENEFITS AGREEMENT
AGREEMENT, dated as of May 13, 1999, by and among BRADLEY OPERATING LIMITED
PARTNERSHIP, a Delaware limited partnership, ("BOLP"), BRADLEY REAL ESTATE,
INC., a Maryland corporation ("Bradley"), and ______________________,
("Executive").
WHEREAS, Bradley, BOLP and/or their subsidiaries and affiliates, including
entities in which Bradley or BOLP own a majority of any non-voting stock
(collectively, the "Company"), have employed, or may employ in the future, the
Executive as an employee of the Company to perform certain services to the
Company upon terms and conditions upon which the Company and the Executive have
previously agreed, or may in the future agree (the "Services");
WHEREAS, the Company recognizes that the Executive's contributions to the
past and future growth of the Company have been and will be substantial; and
WHEREAS, to induce the Executive to remain in the employ of the Company,
the parties hereto desire to set forth certain severance benefits which BOLP
will pay to the Executive in the event of a termination of the employment of the
Executive under certain circumstances following a Change in Control of Bradley
(as defined in Section 2 hereof).
IT IS AGREED:
1. TERM. This Agreement shall commence on the date hereof and shall
terminate upon the earliest of (a) the date on which BOLP and Bradley have
satisfied all of their obligations hereunder, or (b) subject to the Employee's
rights under Section 4(e) hereof, the date on which the Executive is no longer
an employee of the Company for any reason whatsoever including, without
limitation, termination without cause or (c) the date which is 12 months after
the date of a Change in Control of Bradley. Notwithstanding the termination of
this Agreement subsequent to a Change in Control of Bradley, in the event that
the Executive is an employee of the Company at the moment immediately prior to a
Change in Control of Bradley, the Executive shall be entitled to receive all
benefits described hereunder as a result of a Termination Event described in
Section 3 and the provisions hereof related thereto shall survive such
termination.
2. CHANGE IN CONTROL OF BRADLEY. For purposes of this Agreement, a "Change
in Control of Bradley" shall be deemed to occur if:
(a) There shall have occurred a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date hereof, whether or not Bradley is then
subject to such reporting requirement, provided, however, that there shall not
be deemed to be a Change in Control of Bradley if immediately prior to the
occurrence of what would otherwise be a Change in Control of Bradley (i) the
Executive is the other party to the transaction (a "Control of Bradley Event")
that would otherwise result in a Change in Control of Bradley or (ii) the
Executive is an Executive officer, trustee, or director or more than 5% equity
holder of the other party to a Control of Bradley Event or of any entity,
directly or indirectly, controlling such other party;
(b) Bradley merges or consolidates with, or sells all or substantially all
of its assets to, another company, corporation or other entity (each, a
"Transaction"), provided, however, that a Transaction shall not be deemed to
result in a Change in Control of Bradley if (i) immediately prior thereto the
circumstances in (a) (i) or (a) (ii) above exist, or (ii) (A) the stockholders
of Bradley, immediately before such Transaction own, directly or indirectly,
immediately following such Transaction in excess of fifty percent (50%) of the
combined voting power of the outstanding voting securities of the company or
other entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
Bradley immediately before such Transaction and (B) the individuals who were
members of Bradley's Board of Directors immediately prior to the execution of
the agreement providing for such Transaction constitute at least a majority of
the members of the board of directors or the board of trustees, as the case may
be, of the Surviving Corporation, or of a company or other entity beneficially
directly or indirectly owning a majority of the outstanding voting securities of
the Surviving Corporation; or
(c) Bradley acquires assets of another company or entity or a subsidiary of
Bradley merges or consolidates with another company or entity (each, an "Other
Transaction") and (i) the stockholders of Bradley, immediately before such Other
Transaction own, directly or indirectly, immediately following such Other
Transaction 50% or less of the combined voting power of the outstanding voting
securities of the company or other entity resulting from such Other Transaction
(the "Other Surviving Corporation") in substantially the same proportion as
their ownership of the voting securities of Bradley immediately before such
Other Transaction or (ii) the individuals who were members of Bradley's Board of
Directors immediately prior to the execution of the agreement providing for such
Other
26
<PAGE> 2
Exhibit 10.4
Page 2 of 4
Transaction constitute less than a majority of the members of the board of
directors or the board of trustees, as the case may be, of the Other Surviving
Corporation, or of a company or other entity beneficially directly or indirectly
owning a majority of the outstanding voting securities of the Other Surviving
Corporation, provided, however, that an Other Transaction shall not be deemed to
result in a Change in Control of Bradley if immediately prior thereto the
circumstances in (a) (i) or (a) (ii) above exist.
3. TERMINATION EVENT. The Executive shall be entitled to receive
compensation from BOLP in the amount determined pursuant to the following
Section 4 if the employment of the Executive by the Company is terminated within
the 12 months following the date of the Change in Control of Bradley for any of
the following reasons (a "Termination Event"):
(a) Termination by the Company other than for cause ("cause" being defined
as (i) conduct by the Executive constituting a material act of willful
misconduct in connection with the performance of his duties, including without
limitation misappropriation of funds or property or opportunities of the Company
other than the occasional, customary and de minimus use of Company property for
personal purposes, (ii) conviction of the Executive for a felony or misdemeanor
involving moral turpitude, or (iii) continued, deliberate non-performance by the
Executive of the duties incident to his position (other than by reason of
Executive's physical or mental illness, incapacity or disability) and such
non-performance has continued for more than thirty (30) days following written
notice of such non-performance from the chief executive officer of the Company
or other officer to whom the Executive usually reports); or
(b) Termination by the Executive following either (i) the Company's
notification to the Executive of a reduction in the annual base compensation
below that in effect with respect to the calendar year immediately prior to the
year in which the Change in Control of Bradley occurs (the "Prior Year") and
failure to assure the Executive that his bonus, when added to his base
compensation for each of the calendar years in which the Change in Control of
Bradley occurs and for the following calendar year, will be at least the amount
of his Annual Compensation for the Prior Year, or (ii) the Company's
reassignment of the Executive to either (A) a location more than 50 miles from
the place of work of the Executive or (B) a position that does not have the same
or greater authority and responsibility as the position held by the Executive
immediately prior to the Change in Control of Bradley.
4. COMPENSATION UPON TERMINATION EVENT. Upon the occurrence of a
Termination Event, the Executive shall be entitled to receive the compensation
and benefits set forth below:
(a) BOLP shall pay to the Executive, not later than the date of any
Termination Event, unless otherwise agreed to in writing, a lump sum severance
payment (the "Severance Payment") equal to two times the Base Amount (as defined
below). For purposes of this Section 4(a), the Base Amount shall mean the
Executive's Annual Compensation during the Prior Year preceding the calendar
year in which the Change in Control of Bradley occurs. For purposes of
determining Annual Compensation in the preceding sentence, there shall be
included (i) all base salary and cash bonuses paid or payable to the Executive
by the Company with respect to the Prior Year and (ii) the fair market value of
any stock issued to the Executive under Bradley's Stock Option and Incentive
Plan with respect to such Prior Year provided, however, that there shall not be
included in Annual Compensation for any year any value attributable to stock
options granted to the Executive in that year or any value attributable to stock
issued pursuant to the exercise of any stock option granted in any prior year,
and provided, further, that there shall not be included in Annual Compensation
for the calendar year 1998 any amount paid in 1998 that was a part of the
"Management Adjustment Award" with respect to 1996 or 1997 described on page 6
of Bradley's Proxy Statement for its 1999 Annual meeting of Stockholders.
(b) Bradley and BOLP shall cause the Company to maintain in full force and
effect for the Executive's continued benefit, for a period of 12 months
following the Termination Event, all life, accident, medical and dental
insurance benefit plans and programs or arrangements in which the Executive was
entitled to participate immediately prior to the date of the Change in Control
of Bradley; provided that the Executive's continued participation is possible
under the general terms and provisions of such plans and programs; and provided,
further, that in the event that the Executive becomes employed on a full-time
basis by any other employer during such period, then upon the date of such
employment the Executive shall no longer be entitled to any of the accident,
medical or dental insurance benefits described in the preceding clause. Subject
to the preceding sentence, in the event that the Executive's participation in
any such plan or program is barred, Bradley and BOLP shall arrange to cause the
Company to provide the Executive with benefits substantially similar to those
which the Executive was entitled to receive under such plans and programs.
Subject to the first sentence of this subsection, at the end of the period of
coverage, the Executive shall have the option to have assigned to him at no cost
to the Executive and with no apportionment of prepaid premiums, any assignable
insurance policy owned by the Company and relating specifically to the
Executive.
(c) All options to purchase Shares now or hereafter granted to the
Executive shall vest on the day immediately prior to the date of the Termination
Event and become fully exercisable in accordance with their terms.
27
<PAGE> 3
Exhibit 10.4
Page 3 of 4
(d) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by him as the result of employment by another
employer or by retirement benefits after the date of termination, or otherwise,
except as specifically provided in this Section 4.
5. GROSS UP PAYMENT. Regardless of whether Section 4 hereof is applicable,
if, in the opinion of tax counsel selected by the Executive and reasonably
acceptable to the Company, the Executive has or will receive any compensation or
recognize any income (whether or not pursuant to this Agreement or any plan or
other arrangement of the Company which constitutes an "excess parachute payment"
within the meaning of Section 280G(b) (1) of the Internal Revenue Code of 1986,
as amended (the "Code") (or for which a tax is otherwise payable under Section
4999 of the Code), BOLP shall pay the Executive an additional amount (the "Gross
Up Payment") equal to the sum of (a) all taxes payable by the Executive under
Section 4999 of the Code with respect to all such excess parachute payments (or
otherwise), including without limitation the Gross Up Payment, plus (b) all
federal, state and local income taxes payable by Executive with respect to the
Gross Up Payment. The amounts payable pursuant to this Section 5 shall be paid
by BOLP to the Executive not later than the date of the Termination Event or as
soon thereafter as the same is calculated, but at such time or times as to
eliminate the need for the Executive to pay any such taxes or installment
thereof from funds not paid or advanced by BOLP, unless otherwise agreed to in
writing.
6. EXPENSES. BOLP shall pay or reimburse the Executive, as the case may
be, for all properly documented, reasonable legal fees and related expenses
(including the costs of experts, evidence and counsel) paid by the Executive as
a result of (a) the Executive seeking to obtain or enforce any right or benefit
provided by this Agreement, or (b) any action taken by the Company against the
Executive in enforcing its rights hereunder; provided, however, that BOLP shall
reimburse the legal fees and related expenses described in this Section 6 only
if and when a final judgment has been rendered in favor of the Executive and all
appeals related to any such action have been exhausted.
7. NO EMPLOYMENT RIGHTS OR OBLIGATIONS. Nothing contained herein shall
confer upon the Executive the right to continue in the employment or service of
the Company or affect any right that the Company may have to terminate the
employment or service of the Executive at any time for any reason.
8. BRADLEY GUARANTY. Bradley guarantees the satisfaction of all
obligations of, and the full and prompt payment of all amounts payable by, BOLP
hereunder. In addition, Bradley guarantees the satisfaction of all obligations
of the Company hereunder.
9. ARBITRATION; OTHER DISPUTES. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by arbitration
in Chicago, Illinois, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction. Notwithstanding the above, should a dispute occur
concerning the Executive's mental or physical capacity as described in
Subsection 3(a), a doctor selected by the Executive and a doctor selected by the
Company shall be entitled to examine the Executive. If the opinion of the
Company's doctor and the Executive's doctor conflict, the Company's doctor and
the Executive's doctor shall together agree upon a third doctor, whose opinion
shall be binding.
10. LITIGATION AND REGULATORY COOPERATION. During and after the period of
employment by the Company, the Executive shall reasonably cooperate with the
Company in the defense or prosecution of any claims or actions now in existence
or which may be brought in the future against or on behalf of the Company which
relate to events or occurrences that transpired while the Executive was employed
by the Company; provided, however, that such cooperation shall not materially
and adversely affect the Executive or expose the Executive to an increased
probability of civil or criminal litigation. The Executive's cooperation in
connection with such claims or actions shall include, but not be limited to,
being available to meet with counsel to prepare for discovery or trial and to
act as a witness on behalf of the Company at mutually convenient times. During
and after the Executive's employment, the Executive also shall cooperate fully
with the Company in connection with any investigation or review of any federal,
state or local regulatory authority as any such investigation or review relates
to events or occurrences that transpired while Executive was employed by the
Company. The Company shall also provide the Executive with compensation on an
hourly basis calculated at his final base compensation rate for requested
litigation and regulatory cooperation that occurs after his termination of
employment, and reimburse the Executive for all costs and expenses incurred in
connection with his performance under this Paragraph 10, including, but not
limited to, properly documented and reasonable attorneys' fees and costs.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties and is intended to supersede all prior negotiations, understandings and
agreements with respect to the subject matter hereof. No provision of this
Agreement may be waived or changed, except by a writing signed by the party to
be charged with such waiver or change.
28
<PAGE> 4
Exhibit 10.4
Page 4 of 4
12. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the
benefit of, be binding upon and be enforceable by Bradley and BOLP, their
successors and assigns and the Executive, and the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
13. NOTICES. All notices provided for in this Agreement shall be in
writing, and shall be deemed to have been duly given when delivered personally
to the party to receive the same, when given by telex, telegram or mailgram, or
when mailed first class postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to receive the same at his or its
address above set forth, or such other address as the party to receive the same
shall have specified by written notice given in the manner provided for in this
Section 12. All notices shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.
14. SEVERABILITY. If any provision of this Agreement is determined to be
invalid, it shall not affect the validity or enforceability of any of the other
remaining provisions hereof. IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first above written.
BRADLEY REAL ESTATE, INC.
By:___________________________________
BRADLEY OPERATING LIMITED PARTNERSHIP
By: Bradley Real Estate, Inc.
Its: General Partner
By:___________________________________
______________________________________
Executive
29
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