<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Bradley Real Estate, Inc.
-------------------------
(Name of Registrant as Specified In Its Charter)
Bradley Real Estate, Inc.
-------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
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[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee if offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number of
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(4) Date Filed:
<PAGE>
BRADLEY REAL ESTATE, INC.
40 SKOKIE BOULEVARD, SUITE 600
NORTHBROOK, ILLINOIS 60062-1626
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 13, 1999
March 26, 1999
To Stockholders of
BRADLEY REAL ESTATE, INC.:
The 1999 Annual Meeting of Stockholders (the "Annual Meeting") of Bradley
Real Estate, Inc. (the "Company") will be held at 11:00 a.m., local time, on
the 57th floor of The First National Bank of Chicago (BANK ONE), One First
National Plaza, Chicago, Illinois on Thursday, May 13, 1999 for the following
purposes:
1. To elect three Directors of the Company to serve for three-year terms
until the 2002 Annual Meeting of Stockholders and until their respective
successors have been elected and qualified; and
2. To consider and act upon any other matters which may properly be brought
before the Annual Meeting and any adjournments or postponements thereof.
The close of business on March 17, 1999 has been fixed by the Company's
Board of Directors as the record date for determining stockholders entitled to
notice of and to vote at the Annual Meeting or any adjournments or
postponements thereof.
By Order of the Board of Directors:
WILLIAM B. KING, Secretary
IMPORTANT REMINDER: Please complete, date and sign the enclosed proxy card
and return it in the accompanying postage paid envelope, even if you plan to
attend the Annual Meeting. Stockholders of record may revoke their proxies
in writing or at the Annual Meeting if they wish to vote in person.
<PAGE>
BRADLEY REAL ESTATE, INC.
40 Skokie Boulevard, Suite 600
Northbrook, Illinois 60062-1626
PROXY STATEMENT
Proxies in the form of the enclosed proxy card are solicited by the Board of
Directors of Bradley Real Estate, Inc., a Maryland corporation (the
"Company"), for use at the 1999 Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held on Thursday, May 13, 1999 on the 57th floor
of The First National Bank of Chicago (BANK ONE), One First National Plaza,
Chicago, Illinois at 11:00 a.m. local time. The Board has fixed the close of
business on March 17, 1999 as the record date for determining stockholders
entitled to notice of and to vote at the Annual Meeting (the "Record Date").
Only holders of record of shares of the common stock, par value $.01 per
share, of the Company (the "Common Shares") and/or shares of the 8.4% Series A
Convertible Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Shares," and together with the Common Shares, the "Shares") at the
close of business on the Record Date will be entitled to notice of and to vote
at the Annual Meeting. As of the Record Date, the Company had (i) 24,055,952
Common Shares outstanding, each of which is entitled to one vote with respect
to each matter submitted at the Annual Meeting and (ii) 3,478,471 Preferred
Shares outstanding, each of which is entitled to one vote for each share of
the Common Shares into which the holder's Preferred Shares are convertible,
which as of the date of this Proxy Statement is 1.0208 votes per Preferred
Share.
At the Annual Meeting, stockholders will be asked to vote upon the election
of three Directors of the Company. Stockholders of the Company will vote
together as a single class on the election of Directors. The presence, in
person or by proxy, of Shares entitled to cast at least a majority of the
votes entitled to vote at the Annual Meeting is necessary to constitute a
quorum for the transaction of business at the Annual Meeting. STOCKHOLDERS ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENVELOPE PROVIDED. Shares represented by properly executed proxies received by
the Company will be voted at the Annual Meeting in accordance with the
instructions contained therein. If no specific voting instructions are
indicated on the proxy, the Shares represented thereby will be voted in favor
of the Directors nominated by the Board and in the named proxies' discretion
as to any other matters which may properly come before the Annual Meeting or
any adjournment or postponement thereof. Any proxy may be revoked by the
holder of record at any time before it is voted, by written notice to the
Company, by executing and duly delivering a proxy bearing a later date or by
voting in person at the Annual Meeting. Any stockholder of record as of the
Record Date attending the Annual Meeting may vote in person whether or not a
proxy has been previously given, but the presence, without further action, of
a stockholder at the Annual Meeting will not constitute a revocation of a
previously delivered proxy.
The Notice of Annual Meeting, the Proxy Statement and the proxy card,
together with the Company's Annual Report for 1998, are first being mailed to
stockholders on or about March 26, 1999.
<PAGE>
I. ELECTION OF DIRECTORS
A. Information Regarding Nominees and Directors
The Charter and the Bylaws of the Company provide for a staggered board,
consisting of the number of Directors designated from time to time by the
Board of Directors, divided into three classes. The Directors of each class
serve for three-year terms that expire over a three-year period on a revolving
basis.
The Board of Directors has nominated Thomas P. D'Arcy, Joseph E. Hakim and
William L. Brown for election as Directors at the Annual Meeting, to serve for
three-year terms until the 2002 Annual Meeting of Stockholders and until their
respective successors have been elected and qualified, and to serve with the
four Directors whose terms expire in 2000 and 2001. Each of these nominees
currently is serving as a Director for a term expiring at the Annual Meeting.
The Board of Directors recommends a vote FOR the Directors nominated by the
Board.
There were six meetings of the Board of Directors of the Company in 1998.
All of the Directors attended at least 75% of such board meetings and meetings
of committees of which they were members.
Information regarding the three nominees and the other Directors is set
forth below. This information has been furnished by the individuals named.
<TABLE>
<CAPTION>
Director Term
Name Age Principal Occupation and Other Affiliations Since to Expire
---- --- ------------------------------------------- -------- ---------
<S> <C> <C> <C> <C>
Thomas P. D'Arcy........ 39 Mr. D'Arcy was elected President, Chief 1996 2002*
Executive Officer and a Director of the
Company in 1996 and Chairman of the Board
in 1998. Mr. D'Arcy previously served as
Executive Vice President of the Company
from September 1995 to February 1996,
Senior Vice President of the Company from
June 1992 to September 1995, Vice President
of the Company from October 1991 to June
1992 and Investment Manager from September
1989 to October 1991. Mr. D'Arcy is a
member of the International Council of
Shopping Centers, the Building Owners and
Managers Association and the National
Association of Real Estate Investment
Trusts.
Joseph E. Hakim......... 50 Mr. Hakim has served since 1991 as 1994 2002*
President and Chief Executive Officer of
Merchandise Mart Properties, Inc. in
Chicago, Illinois. Mr. Hakim served as
Chairman of the Board of the Company from
February 1996 to May 1998. He is also
Chairman of the Board of Joseph P. Kennedy
Enterprises, Inc. and serves as Treasurer
of the Joseph P. Kennedy, Jr. Foundation.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Director Term
Name Age Principal Occupation and Other Affiliations Since to Expire
---- --- ------------------------------------------- -------- ---------
<S> <C> <C> <C> <C>
William L. Brown........ 77 Mr. Brown is retired. He was Chairman of 1990 2002*
the Board of BankBoston Corporation and The
First National Bank of Boston from 1983 to
1989, Chief Executive Officer from 1983 to
1987 and President from 1971 to 1982. He
was a Director of both Bank of Boston
Corporation and The First National Bank of
Boston until March 1992. He is also a
Director of GC Companies, Inc. and Ionics,
Incorporated.
Paul G. Kirk, Jr........ 61 Mr. Kirk is counsel to, and until 1989 was 1991 2001
a partner in, the law firm of Sullivan &
Worcester in Boston, Massachusetts. He is
also Chairman and Treasurer of Kirk and
Associates, Inc., a business advisory and
consulting firm. From 1985 to 1989, he
served as Chairman of the Democratic Party
of the United States, and from 1983 to 1985
as its Treasurer. Mr. Kirk is a Director of
Hartford Life Insurance Inc., Hartford
Financial Services Group, Inc. and
Rayonier, Inc. He is a Trustee of Stonehill
College and St. Sebastian's School, Co-
Chairman of the Commission on Presidential
Debates, Chairman of the John F. Kennedy
Library Foundation and Chairman of the
National Democratic Institute for
International Affairs.
W. Nicholas Thorndike... 66 Mr. Thorndike serves as a corporate 1980 2001
director or trustee of a number of
organizations, including Courier
Corporation, Eastern Utility Associates,
Data General Corporation, The Putnam Funds
and Cabot Industrial Trust. He also has
served as a Trustee of Massachusetts
General Hospital for many years, having
served as Chairman of the Board from 1987
to 1992 and President from 1992 to 1994.
Until December 1988, he was Chairman and
Managing Partner of Wellington Management
Company (an investment advisor). In
February 1994, he was appointed a successor
Trustee of certain private trusts in which
he had no beneficial interest and
concurrently became (until October 1994)
Chairman of two privately-owned
corporations controlled by such trusts.
These corporations filed voluntary
petitions under Chapter 11 of the Federal
Bankruptcy Code in August 1994.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Director Term
Name Age Principal Occupation and Other Affiliations Since to Expire
---- --- ------------------------------------------- -------- ---------
<S> <C> <C> <C> <C>
Stephen G. Kasnet....... 53 Mr. Kasnet serves as President of Pioneer 1986 2000
Global Investments, Executive Vice
President of The Pioneer Group, and
President of Pioneer Poland Real Estate
Fund. From 1996 to 1998, Mr. Kasnet served
as President of Pioneer Real Estate
Advisors, Inc. and Vice President of The
Pioneer Group. He was Managing Director of
First Winthrop Corporation and Winthrop
Financial Associates, which are real estate
development and management companies, from
1991 to September 1995. He is also Chairman
of the Board of Warren Bancorp, Inc. and
Warren Five Cents Savings Bank in Peabody,
Massachusetts, a Trustee and Vice President
of Pioneer Real Estate Shares and Pioneer
Real Estate Shares (Dublin),
and a member of the Urban Land Institute.
A. Robert Towbin........ 63 Mr. Towbin is a Managing Director of C.E. 1994 2000
Unterberg, Towbin. From January 1994 to
August 1995, he was President and Chief
Executive Officer of the Russian-American
Enterprise Fund and, upon its merger with
the Fund for Large Enterprises in Russia,
Vice Chairman of the resulting U.S. Russia
Investment Fund. From 1987 to 1994, Mr.
Towbin was a Managing Director of Lehman
Brothers. Prior to 1987, he was a Director
and Vice Chairman of L.F. Rothschild,
Unterberg, Towbin Holdings, Inc. Mr. Towbin
serves as a Director of Gerber Scientific,
Inc., Globalstar Telecommunications
Limited, Globecomm Systems, Inc. and K&F
Industries Inc.
</TABLE>
- --------
* If elected at the Annual Meeting.
The Company has standing Audit, Compensation and Executive Committees.
The Audit Committee makes recommendations to the full Board as to the
selection of the Company's independent public accounting firm, meets with
representatives of such firm on at least an annual basis and reviews
transactions between the Company and any Director, officer or affiliate for
potential conflicts of interest. Messrs. Brown, as Chairman, Thorndike and
Kasnet served as members of the Audit Committee at the two meetings held by
such Committee in 1998.
The Compensation Committee, consisting of Messrs. Kirk, as Chairman, Brown
and Towbin, with Mr. Hakim as an ex officio non-voting member through May 14,
1998, is responsible for the oversight of executive compensation and the
issuance and administration of option and other grants under the Company's
Amended Stock Option and Incentive Plan (the "Stock Option and Incentive
Plan"). The Compensation Committee met three times during 1998. For more
information regarding the Compensation Committee's duties, see "Report of the
Compensation Committee" below.
4
<PAGE>
The Executive Committee, consisting of Messrs. Hakim, as Chairman, D'Arcy
and Kasnet, has authority to approve acquisitions of, additions to and
dispositions of properties. The Executive Committee met nine times in 1998.
B. Compensation of Directors and Executive Officers
During 1998, the Company paid its non-employee Directors, other than Mr.
Hakim, annual cash retainers of $15,000, plus a fee of $1,000 for each Board
meeting attended. Due to his additional responsibilities as Chairman from
January until May 14, 1998, the Company paid Mr. Hakim an annual cash retainer
of $17,500, plus a fee of $2,000 for each Board meeting attended through May
14, 1998. The chairman of each of the Audit, Compensation and Executive
Committees received an additional fee of $1,000, and each other committee
member an additional fee of $750, for each committee meeting attended. The
Compensation Committee has determined that all of the non-employee Directors,
including Mr. Hakim, will continue to receive the same $15,000 cash retainer
and $1,000 fee per meeting for 1999. Pursuant to advice from compensation
consultants engaged by the Committee and the Company's Stock Option and
Incentive Plan, each non-employee Director who was serving as a Director of
the Company on the next business day after the adjournment of the 1998 Annual
Meeting of Stockholders received on such day a nonqualified option to purchase
8,500 Common Shares. Each non-employee Director serving as a Director on the
next business day after the adjournment of the 1999 Annual Meeting will also
receive on such day a non-qualified option to purchase 3,500 Common Shares.
All such options are immediately exercisable in full and have an exercise
price per share equal to the fair market value of the Common Shares at the
time of grant, as determined by reference to a formula provided in the Stock
Option and Incentive Plan. In addition, all Directors are reimbursed for
travel expenses incurred in attending meetings of the Board and its
committees.
The following sections of this Proxy Statement set forth and discuss the
compensation paid or awarded during the last three fiscal years to (i) the
Company's Chief Executive Officer and (ii) the four other most highly
compensated executive officers who earned in excess of $100,000 as
compensation for their services during 1998 (collectively, the "Named
Executives").
5
<PAGE>
Summary Compensation Table
The following table sets forth certain information regarding the cash and
equity-based compensation paid or granted by the Company to or on behalf of
the Named Executives in all capacities as compensation for their services
during each of the three years ended December 31, 1998.
<TABLE>
<CAPTION>
Annual Compensation
----------------------------
Long-Term
Compensation
Bonus Award
------------------- ------------
Common
Management Shares
Name and Principal Cash Adjustment Underlying All Other
Position Year Salary Bonus Awards(1) Options(2) Compensation
------------------ ---- -------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas P. D'Arcy,....... 1998 $325,000 $244,000 $ -- 100,000 $6,587(3)
President and Chief
Executive 1997 250,000 200,000 713,194 -- 3,342
Officer 1996 190,000 100,000 713,194 -- 41,968
Richard L. Heuer,....... 1998 196,000 75,000 -- 50,000 2,950(4)
Executive Vice President 1997 185,000 70,000 285,274 -- 2,387
1996 185,000 55,000 285,274 -- 3,399
E. Paul Dunn,........... 1998 185,500 75,000 -- 50,000 2,950(4)
Executive Vice President 1997 175,000 70,000 285,274 -- 2,232
1996(5) 147,000 40,000 285,274 -- 7,583
Irving E. Lingo, Jr.,... 1998 180,000 75,000 -- 50,000 2,950(4)
Chief Financial Officer 1997 168,000 70,000 285,274 -- 2,181
1996 147,000 55,000 285,274 -- 72,242
Steven St. Peter,....... 1998 157,576 75,000 -- 50,000 2,908(6)
Executive Vice President 1997 130,000 70,000 142,637 -- 791
1996(7) 34,600 15,000 142,637 -- 68
</TABLE>
- --------
(1) Reflects (i) the market value on the date of issuance of "management
adjustment awards" in the form of unrestricted Common Shares issued on
February 18, 1998 in connection with the Board of Directors' decision in
the fourth quarter of 1997 to terminate the Company's Superior Performance
Incentive Plan, plus cash payments made in 1998 to cover the related
increased income tax liability, (ii) the Compensation Committee's
determination that such management adjustment awards should be allocated
equally to the service of the Named Executives for the Company during 1996
and 1997, and (iii) the Compensation Committee's awareness that no equity-
based compensation was awarded to the Named Executives in 1996 or 1997 and
that no stock options would be granted to the Named Executives during
1998. The Board of Director's decision to terminate the Superior
Performance Incentive Plan was based upon the fact that administrative
complexities made implementation of and accounting for such plan
impractical, primarily because of the impossibility of accurately
estimating quarterly period costs of a plan whose pay-out, if any, would
be based upon the superior total return to stockholders of the Company in
excess of the Company's peer group over a 3-year period.
(2) Stock options to purchase Common Shares granted to the Named Executives
under the Stock Option and Incentive Plan on February 1, 1999 based on
1998 performance. All such options vest over a period of 5 years, as
follows: 50% on the third anniversary of their grant and 25% each on the
fourth and fifth anniversaries of their grant, subject to earlier vesting
upon the occurrence of specified events including a change of control (as
defined in the Stock Option and Incentive Plan) of the Company.
6
<PAGE>
(3) Includes $3,787 in premiums paid by the Company for disability and life
insurance policies and Company matching contributions of $2,800 under the
Company's 401(k) plan.
(4) Includes $150 in premiums paid by the Company for a term life insurance
policy and Company matching contributions of $2,800 under the Company's
401(k) plan.
(5) Mr. Dunn joined the Company in March 1996.
(6) Includes $150 in premiums paid by the Company for a term life insurance
policy and Company matching contributions of $2,758 under the Company's
401(k) plan.
(7) Mr. St. Peter joined the Company in August 1996.
Options Granted in Last Fiscal Year
No options were granted to Named Executives during 1998.
Unexercised Options at 1998 Year-End
The following table sets forth certain information regarding unexercised
stock options held by the Named Executives as of December 31, 1998. No Named
Executive exercised options during 1998.
<TABLE>
<CAPTION>
Number of
Common Shares Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Name December 31, 1998(1) December 31, 1998(2)
---- ------------------------ -----------------------
<S> <C> <C>
Thomas P. D'Arcy......... 40,500 $233,250
Richard L. Heuer......... 25,000 140,625
E. Paul Dunn............. -- --
Irving E. Lingo, Jr...... 25,000 100,000
Steven St. Peter......... -- --
</TABLE>
- --------
(1) All of such options were vested and exercisable in full at year-end. Does
not include options granted in 1999. See "Summary Compensation Table."
(2) Market value of the Common Shares underlying the Named Executive's in-the-
money options at year-end (based on a closing market price of $20.50 per
Common Share) minus the aggregate exercise price.
C. Report of the Compensation Committee
Committee Responsibilities. The responsibilities of the Compensation
Committee (the "Committee") include: (i) reviewing the performance of the
Chief Executive Officer and the other executive officers of the Company on at
least an annual basis; (ii) establishing the cash and equity-based
compensation and benefits to be provided to the executive officers of the
Company; (iii) issuing and administering awards under the Stock Option and
Incentive Plan; (iv) informally reviewing, to the extent available,
information with respect to the compensation paid to executive officers of
comparable equity real estate investment trusts ("REITs") comprising the
"NAREIT Strip Center Index," and comparing such information with the overall
compensation paid to the Company's executive officers; (v) recommending
compensation for the members of the Board of Directors for their services as
Directors; and (vi) reporting periodically to the full Board with respect to
the foregoing.
Compensation Philosophy for Executive Officers. The Committee's executive
compensation philosophy is to align the interests of key executives with the
interests of stockholders by developing appropriate compensation measures for
such executives. The Committee believes that components of the total
compensation package for
7
<PAGE>
senior executives should include (i) a base salary, (ii) an annual incentive
bonus, which may be in the form of cash or stock and the amount of which will
depend upon the success of the Company and of the executives' involvement in
achieving specified objectives, and (iii) a long-term performance incentive
the value of which will depend upon an increase in the value of the Company's
Shares over an extended period of time. For 1998, the compensation of the
Company's Chief Executive Officer and other executive officers was comprised
of (i) an annual base salary, (ii) an annual incentive cash bonus, and (iii) a
long-term performance incentive in the form of grants of nonqualified options
made as of February 1, 1999 under the Company's Stock Option and Incentive
Plan described below under "Long-Term Incentive Program."
Base Salary. In order to compete for and retain talented executives who are
critical to the Company's long-term success, the Committee has determined that
the base salaries of executive officers should approximate those of executives
of equity REITs which compete with the Company for employees, investors and
tenants while also taking into account the executive officers' performance and
tenure. The Committee reviews base salaries annually and, if appropriate,
modifies such salaries to reflect recent market practices and performance. The
increase in base salaries for 1998 over 1997 for the Named Executives
reflected in the accompanying table reflects the modifications made by the
Committee in early 1998. After its annual review of base salaries in early
1999, the Committee has increased the base salaries for 1999 of its Named
Executives other than the Chief Executive Officer as follows: $10,000 for each
of Messrs. Heuer and Dunn, $15,000 for Mr. Lingo and $20,000 for Mr. St.
Peter.
Annual Incentive Bonus. In order to motivate key executives to achieve
annual strategic business goals, the Committee believes executives should
receive annual incentive bonuses for their contributions in achieving such
goals. In particular, the Committee seeks to provide key executives with a
total compensation package that is competitive with comparable equity REITs
when, among other things, the Company's per share funds from operations
("FFO") grow and its total return to stockholders exceeds that of comparable
equity REITs.
Beginning with the 1997 fiscal year, the Committee implemented an incentive
award program to compensate senior executive officers in the form of annual
incentive bonuses for achieving the Company's strategic business goals.
Pursuant to this program, at the beginning of each year the Committee, in
consultation with the Chief Executive Officer, establishes for each executive
a range of incentive bonus opportunities, stated as percentages of such
executive's base salary, which the executive is entitled to receive based in
part upon such executive's position to impact the annual success of the
Company and in part upon the level of performance achieved by the Company and
the individual executive for that year. With respect to that portion of the
annual incentive bonus that is based upon the Company's and the individual
executive's performance, sixty-five percent (65%) is tied to the Company's
overall performance level and thirty-five percent (35%) is tied to the
individual executive's performance level. In general, the threshold, target
and maximum amounts of the annual bonus, subject in each case to the
Committee's discretion, are set at 25%, 50% and 75% of annual base salary in
the case of the Chief Executive Officer and at 15%, 25% and 40% of annual base
salary in the event of each other executive officer.
In accordance with the incentive award program, the Chief Executive Officer
and the Committee set as the corporate performance measures for 1998 (i)
growth in FFO per share and (ii) achieving greater total stockholder return
than its peer group. In order to achieve the maximum incentive bonus allocated
to corporate performance, the Company's FFO per share had to increase by 9%
and its total stockholder return had to be 5% greater than its peer group. The
Company's actual growth in FFO per share in 1998 was 10.1% and its total
market return was 11.4% in excess of its peer group.
In assessing the individual performance component of the incentive award
program for each senior executive, the Committee considered the significant
roles played by the various executive officers in achieving the following
strategic initiatives during 1998: (i) exceeding an FFO per share target of
$2.02, (ii) improving the
8
<PAGE>
Company's FFO multiple to a level in excess of the average of its peer group,
(iii) completing $200 million in new acquisitions, and (iv) increasing the
Company's total market capitalization to over $1 billion. In addition to these
financial factors, the Committee considered the Company's success in improving
its research, analytic and technological capabilities, expanding its coverage
by market analysts and implementing a development program, among other things.
The Committee acknowledged that the Company's ratio of debt to total market
capitalization of 44% exceeded its target level of 40% but determined that the
state of the equity capital markets had prevented the Company from achieving
this target. Based upon these achievements and the recommendation of the Chief
Executive Officer, the Committee determined each senior executive was entitled
to substantially the maximum incentive bonus allocated to individual
performance.
As a result of the above analysis, and exercising its authority to increase
or decrease amounts determined by formulaic allocation, the Committee, in
consultation with the Chief Executive Officer in the case of all officers
other than himself, awarded to the Named Executives the following cash bonuses
for 1998: $244,000 to Mr. D'Arcy and $75,000 to each of Messrs. Heuer, Dunn,
Lingo and St. Peter.
Long-Term Incentive Program. Beginning with the 1998 fiscal year, the Board
of Directors, upon terminating the previous Superior Performance Incentive
Plan for the reasons described in note (1) to the accompanying Summary
Compensation Table and in the Committee's Report contained in the proxy
statement relating to the 1998 Annual Meeting, determined that the Company's
long-term incentive program would consist of the grant of nonqualified stock
options under the Company's Stock Option and Incentive Plan at the beginning
of each year to senior executives of the Company for a number of Common Shares
which will vary, depending on the position and salary of the executive and the
Company's success in delivering annual total stockholder returns that meet
threshold, target or superior returns established by the Committee. For 1998,
the Committee initially established these threshold, target and superior total
returns at 10%, 12% and 15%, respectively.
The Committee met in early 1999 to review the Company's results and the
senior executives' respective performance during 1998. Although the 10%
threshold was not met for 1998, the Committee noted that, relative to its peer
group, the Company's performance during the year was very strong despite
difficult market conditions. The Company's total return was 21% above the
NAREIT Equity REIT Index and 11% above the NAREIT Strip Center Index, which
consists of owners of community shopping centers such as the Company.
Accordingly, the Committee exercised its discretionary power to grant stock
options largely equivalent to the amount set to have been granted upon meeting
the threshold level, including with respect to the Chief Executive Officer and
the Named Executive Officers the grant of options to purchase 100,000 Common
Shares to Mr. D'Arcy and 50,000 Common Shares to each of Messrs. Heuer, Dunn,
Lingo and St. Peter. The options were granted at an exercise price of $19.90
per share, the rounded average high and low sale price per Common Share on the
New York Stock Exchange on the February 1, 1999 grant date.
Pursuant to the long-term incentive program, each such option will vest with
respect to 50% of the underlying Common Shares on the third anniversary of the
grant, 75% of the underlying Common Shares on the fourth anniversary of the
grant, and 100% of the underlying Common Shares on the fifth anniversary of
the grant or earlier upon the occurrence of certain events, including a change
of control (as defined in the Company's Stock Option and Incentive Plan) of
the Company. The right to exercise any option granted under the program will
expire on the tenth anniversary of such grant or earlier upon the occurrence
of certain events.
Compensation of Chief Executive Officer. The Committee believes that Mr.
D'Arcy played a significant role in the Company's achieving substantially all
of its objectives for 1998 and performing well in difficult market conditions.
Under the Committee's policies, Mr. D'Arcy's annual compensation is determined
in a manner similar to the other executive officers, with a base salary
reviewed annually, a bonus under the annual incentive
9
<PAGE>
bonus program and an annual grant of a nonqualified stock option under the
long-term incentive program depending on whether the Company meets determined
performance objectives. In accordance with the goals and formulas established
under the Committee's annual incentive bonus program, the Committee awarded
Mr. D'Arcy the maximum cash bonus of $244,000 for 1998. As described above,
exercising its discretionary powers, the Committee awarded 100,000 stock
options to Mr. D'Arcy under the long-term incentive plan. Following its annual
review of base salaries, the Committee voted, consistent with Mr. D'Arcy's
employment agreement, to maintain Mr. D'Arcy's current base salary of $325,000
for 1999.
Federal Tax Regulations. As a result of Section 162(m) of the Internal
Revenue Code (the "Code"), the Company's Federal tax deduction of executive
compensation may be limited to the extent that the Chief Executive Officer or
other executive officers whose compensation is required to be reported in the
summary compensation table in the Company's proxy statement receives
compensation in excess of $1,000,000 in a taxable year of the Company (other
than performance-based compensation that otherwise meets the requirements of
Section 162(m) of the Code). The Committee believes that the amount by which
the fair market value of stock issued to the Chief Executive Officer and to
the other Named Executives upon the exercise of the nonqualified options
granted to them under the long-term incentive program exceeds the exercise
price of such options (which amount will constitute taxable income to the
Named Executive) will be deductible by the Company as performance-based
compensation under Section 162(m) of the Code.
Submitted by:
Paul G. Kirk, Jr., Chairman
William L. Brown
A. Robert Towbin
D. Compensation Committee Interlocks and Inside Participation
The Compensation Committee consists of Messrs. Kirk, as Chairman, Brown and
Towbin. Concurrently with his becoming Chairman of the Board in February 1996,
Mr. Hakim was appointed an ex-officio, non-voting member of the Compensation
Committee and served as such through May 14, 1998. No member of the
Compensation Committee has ever been an officer or employee of the Company.
E. Employment Agreement
In April, 1998, the Company entered into an employment contract with Mr.
D'Arcy for a period of three years ending December 31, 2000, with an automatic
one year evergreen extension unless notice is given by either party. The
employment contract provides a minimum annual base salary of $325,000 per
year, which the Board may increase based on an annual redetermination. Mr.
D'Arcy's base salary for 1999 is $325,000. Under the employment contract, Mr.
D'Arcy is also entitled to receive an annual incentive bonus and to
participate in the Company's long-term incentive program, which at the present
time consists of the grant of nonqualified options for Common Shares under the
Stock Option and Incentive Plan. See "Report of the Compensation Committee."
The contract contains a noncompetition provision and a change in control
provision pursuant to which Mr. D'Arcy would receive up to three times his
annual cash compensation in the event of a termination of his employment or a
significant alteration of his duties within 18 months of such change in
control.
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<PAGE>
F. Share Performance Graph
The following graph provides a comparison of the five-year cumulative total
stockholder return (assuming reinvestment of dividends) among the Company, the
NAREIT Equity REIT Total Return Index (the "NAREIT Equity Index") and the
Standard & Poor's 500 Index, beginning on December 31, 1993. The NAREIT Equity
Index is an industry index maintained by the National Association of Real
Estate Investment Trusts ("NAREIT") which measures the performance over
applicable periods of time of those publicly-traded qualified REITs whose
investments consist primarily of the ownership of equity interests in income
producing real property. The NAREIT Equity Index includes the Company and,
according to NAREIT, 172 other REITs which, in the aggregate, had a market
capitalization of $126.9 billion at December 31, 1998. The historical
information set forth below is not necessarily indicative of future
performance.
[Graph appears here]
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<PAGE>
II. BENEFICIAL OWNERSHIP OF SHARES
A. Security Ownership of Certain Beneficial Owners
Information known to the Company with respect to beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the "Exchange
Act")) of more than 5% of the Company's outstanding Common Shares as of
December 31, 1998 is as follows. Such information is based upon filings
received by the Company under the Exchange Act and the number of shares
outstanding as of March 1, 1999. Based upon filings received by the Company
under the Exchange Act, there were no holders of more than 5% of the Company's
outstanding Preferred Shares as of December 31, 1998.
<TABLE>
<CAPTION>
No. of
Common
Shares Percent
Beneficially of
Name and Address of Beneficial Owner Owned Class
------------------------------------ ------------ -------
<S> <C> <C>
FMR Corp (1).............................................. 1,303,229 5.4%
82 Devonshire Street
Boston, Massachusetts 02109
Public Employees Retirement System of Ohio (2)............ 1,272,646 5.3%
277 East Town Street
Columbus, Ohio 43215-4642
European Investors Inc. (3)............................... 1,285,391 5.3%
667 Madison Avenue, 16th Floor
New York, NY 10021
</TABLE>
- --------
(1) In a filing on Schedule 13G under the Exchange Act dated February 1, 1999
received by the Company and not subsequently amended, FMR Corp. reported
that it had sole voting power with respect to 528,800 of such Shares and
sole dispositive power with respect to all 1,303,229 of such Shares.
(2) In a filing on Schedule 13G under the Exchange Act dated January 31, 1997
received by the Company and not subsequently amended, Public Employees
Retirement System of Ohio reported that it had sole voting power with
respect to all 1,272,646 of such Shares and sole dispositive power with
respect to all 1,272,646 of such Shares.
(3) In a filing on Schedule 13G under the Exchange Act dated February 12, 1999
received by the Company and not subsequently amended, European Investors
Inc. reported that it had sole voting power with respect to 809,100 of
such Shares and sole dispositive power with respect to 957,500 of such
Shares and EII Realty Securities Inc. (identified as a wholly-owned
subsidiary of European Investors Inc.) reported that it had sole voting
power with respect to 141,791 of such Shares, shared voting power with
respect to 186,100 of such Shares, sole dispositive power with respect to
192,991 of such Shares and shared dispositive power with respect to
134,900 of such Shares.
B. Security Ownership of Management
Information known to the Company as of March 1, 1999 with respect to
beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of the
Company's Common Shares by (i) each Director of the Company, (ii) each of the
Named Executives and (iii) all Directors and executive officers of the Company
as a group is as follows. Such information is based on filings received by the
Company under the Exchange Act, as supplemented by additional information
provided to the Company. Unless otherwise indicated, the beneficial owner has
sole voting power and sole dispositive power with respect to the Common Shares
beneficially owned. None of the following individuals own any Preferred
Shares.
12
<PAGE>
<TABLE>
<CAPTION>
No. of Common
Shares Percent
Name of Beneficial Owner Beneficially Owned of Class(1)
------------------------ ------------------ -----------
<S> <C> <C>
William L. Brown............................... 15,000(2) *
Thomas P. D'Arcy............................... 83,912(3) *
Joseph E. Hakim................................ 22,300(4) *
Stephen G. Kasnet.............................. 23,560(5) *
Paul G. Kirk, Jr............................... 15,168(6) *
W. Nicholas Thorndike.......................... 26,377(7) *
A. Robert Towbin............................... 27,500(8) *
Richard L. Heuer............................... 49,155(9) *
E. Paul Dunn................................... 18,000(10) *
Irving E. Lingo, Jr............................ 43,506(11) *
Steven St. Peter............................... 8,577 *
All Directors and executive officers as a group
(13 persons).................................. 370,089(12) 1.5%
</TABLE>
- --------
* Less than one percent.
(1) For purposes of computing the percentage of outstanding Common Shares
held by each person, any Common Shares which such person has the right to
acquire pursuant to the exercise of a stock option within 60 days
following February 28, 1999 is deemed to be outstanding, but is not
deemed to be outstanding for the purposes of computing the percentage
ownership of any other person.
(2) Includes 13,500 Common Shares subject to stock options granted to Mr.
Brown under the Company's Stock Option and Incentive Plan.
(3) Includes 40,500 Common Shares subject to stock options granted to Mr.
D'Arcy under the Company's Stock Option and Incentive Plan.
(4) Includes 13,500 Common Shares subject to stock options granted to Mr.
Hakim under the Company's Stock Option and Incentive Plan and 1,000
Common Shares owned by Mr. Hakim's spouse, as to which Mr. Hakim does not
have any voting or investment power and as to which Mr. Hakim disclaims
any economic interest.
(5) Includes 13,500 Common Shares subject to stock options granted to Mr.
Kasnet under the Company's Stock Option and Incentive Plan and 8,350
Common Shares which Mr. Kasnet and his spouse own jointly. Also includes
1,710 owned by a family trust of which Mr. Kasnet is trustee; Mr. Kasnet
disclaims any economic interest in such 1,710 Common Shares. Does not
include any Common Shares which may be beneficially owned by Pioneer Real
Estate Shares, of which Mr. Kasnet serves as Trustee and Vice President.
Mr. Kasnet does not have any voting or dispositive power with respect to
any Common Shares owned by Pioneer Real Estate Shares.
(6) Includes 13,500 Common Shares subject to stock options granted to Mr.
Kirk under the Company's Stock Option and Incentive Plan.
(7) Includes 13,500 Common Shares subject to stock options granted to Mr.
Thorndike under the Company's Stock Option and Incentive Plan.
(8) Includes 13,500 Common Shares subject to stock options granted to Mr.
Towbin under the Company's Stock Option and Incentive Plan, 1,000 Common
Shares held by a family trust of which Mr. Towbin is trustee and 8,000
Common Shares beneficially owned by Global Foundation for the Humanities,
of which Mr. Towbin serves as a Director. Mr. Towbin disclaims any
economic interest in the 1,000 Common Shares owned by the family trust
and the 8,000 Common Shares owned by Global Foundation for the
Humanities. Mr. Towbin has sole investment power but no voting power with
respect to the Common Shares owned by Global Foundation for the
Humanities.
13
<PAGE>
(9) Includes 25,000 Common Shares subject to stock options granted to Mr.
Heuer under the Company's Stock Option and Incentive Plan.
(10) Includes 2,000 Common Shares owned by Mr. Dunn's spouse, as to which Mr.
Dunn does not have any voting or investment power and as to which Mr.
Dunn disclaims any economic interest.
(11) Includes 25,000 Common Shares subject to stock options granted to Mr.
Lingo under the Company's Stock Option and Incentive Plan.
(12) Includes 190,500 Common Shares subject to stock options granted to the
Directors and executive officers of the Company under the Company's Stock
Option and Incentive Plan.
III. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
No Director, officer or associate of any such person is or at any time
during 1998 was indebted to the Company, and it has not been the Company's
practice to make loans to Directors, officers or their associates.
The law firm of Goodwin, Procter & Hoar LLP, of which a professional
corporation controlled by William B. King, Secretary of the Company, is a
partner, provides legal services to the Company.
IV. INDEPENDENT PUBLIC ACCOUNTANT
KPMG LLP served as the Company's independent public auditors for the fiscal
year ended December 31, 1998 and has been selected by the Board to be the
Company's independent public auditors for 1999. A representative of KPMG LLP
is expected to be present at the Annual Meeting with the opportunity to make a
statement, if he or she so desires, and to answer appropriate questions from
stockholders.
V. SOLICITATION OF PROXIES AND VOTING PROCEDURES
The entire cost of soliciting proxies will be borne by the Company. In
addition to solicitation by mail, solicitation may also be made by personal
interview, telegram, facsimile transmission or telephone. Directors and
officers of the Company may participate in such solicitation. Banks, brokerage
houses, custodians, nominees and other fiduciaries have been requested to
forward proxy materials to the beneficial owners of the Shares held of record
by them and such custodians will be reimbursed for their expenses.
The presence, in person or by proxy, of holders of Shares entitled to cast
at least a majority of the total number of votes entitled to vote is necessary
to constitute a quorum for the transaction of business at the Annual Meeting.
Shares held of record by stockholders or nominees who do not return a signed
and dated proxy or attend the Annual Meeting in person will not be considered
present or represented at the Annual Meeting and will not be counted in
determining the presence of a quorum. Shares, if any, whose holders are
represented in person or by proxy at the Annual Meeting but withhold authority
to vote for any nominees for Director will be counted as present for purposes
of determining whether a quorum is present.
Directors are elected by a plurality of votes cast if a quorum is present.
With respect to the election of Directors, votes may only be cast in favor of
or withheld from each nominee; votes that are withheld will have no impact on
the outcome of the election of Directors and will be excluded entirely from
the vote and will have no effect.
VI. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors and persons who own more than ten percent of the Company's Common
Shares or of the Company's Preferred Shares to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Officers, directors and greater than ten percent
stockholders are required by the Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
14
<PAGE>
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Section 16(a)
reports were required for those persons, the Company believes that during the
fiscal year ended December 31, 1998, all filing requirements were complied
with.
VII. STOCKHOLDER PROPOSALS AND OTHER MATTERS
Stockholder proposals intended to be presented at the 2000 Annual Meeting of
Stockholders must be received by the Company on or before December 1, 1999 in
order to be considered for inclusion in the Company's Proxy Statement and form
of proxy for that meeting. These proposals must also comply with the rules of
the Securities and Exchange Commission governing the form and content of
proposals in order to be included in the Company's proxy statement and form of
proxy and should be directed to the Secretary of the Company.
The Company's By-laws provide that any stockholder of record wishing to have
a stockholder proposal that is not included in the Company's Proxy Statement
considered at an annual meeting must provide written notice of such proposal
and appropriate supporting documentation, as provided in the Company's Bylaws,
to the Secretary of the Company no earlier than December 14, 1999 and no later
than February 27, 2000, if the Company's 2000 Annual Meeting of Stockholders
is on the business day closest to the Anniversary Date as defined below. The
Company's Bylaws provide a formula for calculating the above dates, which is
(i) not less than 75 days nor more than 150 days prior to the anniversary date
of the immediately preceding annual meeting or special meeting in lieu thereof
(the "Anniversary Date") or, (ii) if the Annual Meeting is called for a date
more than seven calendar days prior to the Anniversary Date, not later than
the close of business on (1) the 20th calendar day (or if that day is not a
business day for the Company, the next succeeding business day) following the
earlier of (x) the date on which notice of the date of such meeting was mailed
to stockholders, or (y) the date on which the date of such meeting was
publicly disclosed, or (2) if such date of notice or public disclosure occurs
more than 75 calendar days prior to the scheduled date of such meeting, then
the later of (x) the 20th calendar day (or if that day is not a business day
for the Company, the next succeeding business day) following the date of the
first to occur of such notice or public disclosure or (y) the 75th calendar
day prior to such scheduled date of such meeting (or if that day is not a
business day for the Company, the next succeeding business day). Proxies
solicited by the Board of Directors will confer discretionary voting authority
with respect to these proposals, subject to rules of the Securities and
Exchange Commission governing the exercise of this authority.
The Directors know of no other business to be presented at the Annual
Meeting. If other matters properly come before the meeting, the persons named
as proxies will vote on such matters in accordance with their best judgment.
You are urged to complete, date, sign and return your proxy promptly to make
certain your Shares will be voted at the Annual Meeting, even if you plan to
attend the meeting in person. For your convenience in returning the proxy
card, a preaddressed and postage paid envelope has been enclosed.
YOUR PROXY IS IMPORTANT
WHETHER YOU OWN FEW OR MANY SHARES.
Please date, sign and mail the enclosed proxy card today.
15
<PAGE>
1355-PS-99
