<PAGE>
SCHEDULE 14A
(RULE 14A-101)
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 approriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
Kranzco Realty Trust
- ---------------------
(Name of Registrant as Specified in Its Charter)
Robert Dennis
- ---------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which trasaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is 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, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
- --------------------------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE>
KRANZCO REALTY TRUST
128 Fayette Street
Conshohocken, Pennsylvania 19428
March 31, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 annual meeting of shareholders
which will be held on Wednesday, June 3, 1998, beginning at 9:30 a.m. at the
Philadelphia Marriott West, Matson Ford Road and Route 23, West Conshohocken,
Pennsylvania 19428.
Information about the meeting and the various matters on which the
shareholders will act is included in the Notice of Annual Meeting of
Shareholders and Proxy Statement which follow. Also included is a Proxy Card
and postage paid return envelope.
It is important that your common shares of beneficial interest of the Company,
$.01 par value per share, ("Common Shares") be represented at the meeting.
Whether or not you plan to attend, we hope that you will complete and return
your Proxy Card in the enclosed envelope as promptly as possible.
Sincerely,
By: /s/ Norman M. Kranzdorf
Norman M. Kranzdorf
President and Chief Executive Officer
<PAGE>
KRANZCO REALTY TRUST
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 3, 1998
The annual meeting of shareholders of Kranzco Realty Trust (the "Company")
will be held at the Philadelphia Marriott West, Matson Ford Road and Route 23,
West Conshohocken, Pennsylvania 19428, on Wednesday, June 3, 1998 at 9:30 a.m.
local time, for the following purposes:
1. To elect three trustees to serve until the 2001 annual meeting of
shareholders and until their successors are elected and qualify.
2. To approve of Amendment No. 2 to the Company's 1992 Employee Share Option
Plan (the "Employee Plan") and Amendment No. 2 to the Company's 1992 Trustee
Share Option Plan (the "Trustee Plan," together with the Employee Plan, the
"Plans").
3.To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1998.
4.To transact such other business as may properly come before the meeting or
any adjournment(s) or postponement(s) thereof.
The Board of Trustees has fixed March 20, 1998 as the record date for
determining the shareholders of the Company's common shares of beneficial
interest, $.01 par value per share, ("Common Shares") entitled to receive
notice of and to vote at the meeting.
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
THE VOTE OF HOLDERS OF COMMON SHARES IS IMPORTANT. ACCORDINGLY, YOU ARE URGED
TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING.
By Order of the Board of Trustees
By: /s/ Hermina Kranzdorf
Hermina Kranzdorf
Secretary
March 31, 1998
Conshohocken, Pennsylvania
<PAGE>
KRANZCO REALTY TRUST
128 Fayette Street
Conshohocken, Pennsylvania 19428
PROXY STATEMENT
Annual Meeting of Shareholders
June 3, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Trustees of Kranzco Realty Trust, a Maryland real estate investment
trust (the "Company"), of proxies from the holders of the Company's issued and
outstanding common shares of beneficial interest, $.01 par value per share
(the "Common Shares"), to be used at the Annual Meeting of Shareholders to be
held on Wednesday, June 3, 1998 at the Philadelphia Marriott West, Matson Ford
Road and Route 23, West Conshohocken, Pennsylvania 19428, at 9:30 a.m. local
time, and any adjournment(s) or postponement(s) of such meeting (the "Annual
Meeting"), for the purposes set forth in the accompanying Notice of Annual
Meeting.
This Proxy Statement and enclosed form of proxy are first being mailed to the
shareholders of the Company entitled thereto on or about March 31, 1998.
At the Annual Meeting, the holders of Common Shares of the Company will be
asked to consider and vote upon the following proposals (the "Proposals"):
1. The election of three trustees to serve until the 2001 annual meeting of
shareholders and until their successors are elected and qualify;
2. The approval of Amendment No. 2 to the Company's 1992 Employee Share
Option Plan (the "Employee Plan") and Amendment No. 2 to the Company's 1992
Trustee Share Option Plan (the "Trustee Plan," together with the Employee
Plan, the "Option Plans");
3. The ratification of the appointment of Arthur Andersen LLP as independent
public accountants for the fiscal year ending December 31, 1998;
4. Such other business as may properly come before the Annual Meeting.
Only the holders of record of the Common Shares at the close of business on
March 20, 1998 (the "Record Date") are entitled to notice of and to vote at
the Annual Meeting. Each Common Share is entitled to one vote on all matters.
As of the Record Date, 10,427,212 Common Shares were outstanding.
A majority of the Common Shares outstanding must be represented at the Annual
Meeting in person or by proxy to constitute a quorum for the transaction of
business at the Annual Meeting.
In order to be elected as a trustee, a nominee must receive a plurality of all
the votes cast at the Annual Meeting (Proposal 1). The affirmative vote of the
holders of at least a majority of the votes cast at the Annual Meeting is
required to approve the Amendments to the Employee Plan and the Trustee Plan
and to ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants (Proposals 2 and 3). For purposes of
calculating votes cast with respect to each Proposal, abstentions and broker
non-votes will not be counted as cast and will have no effect on the result of
the vote on either Proposal.
The Common Shares represented by all properly executed proxies returned to the
Company will be voted at the Annual Meeting as indicated or, if no instruction
is given, in favor of all Proposals. As to any other business which may
properly come before the Annual Meeting, all properly executed proxies will be
voted by the persons named therein in accordance with their best judgment. The
Company does not presently know of any other business which will come before
the Annual Meeting. Any person giving a proxy has the right to revoke it at
any time before it is exercised (a) by filing with the Secretary of the
Company a duly signed revocation or a proxy bearing a later date or (b) by
electing to vote in person at the Annual Meeting. Mere attendance at the
Annual Meeting will not serve to revoke a proxy. If a holder of Common Shares
is a participant in the Company's Dividend Reinvestment Plan, the accompanying
Proxy Card should include the number of Common Shares registered in the
participant's name under the plan.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE,
SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED AND THE
DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
PROPOSAL 1
ELECTION OF TRUSTEES
The Company's Board of Trustees (the "Board") currently consists of seven
members who hold office until their terms of office expire and, in each case,
until their respective successors are duly elected and qualify. The trustees
are divided into three classes, consisting of two members (the "Class I
Trustees") whose terms will expire at the 2000 annual meeting of shareholders,
three members (the "Class II Trustees") whose terms will expire at this Annual
Meeting of shareholders, and two members (the "Class III Trustees") whose term
will expire at the 1999 annual meeting.
Mr. James Selonick, a Class II Trustee whose term expires at this Annual
Meeting, has decided not to stand for re-election as a Trustee.
EXCEPT WHERE OTHERWISE INSTRUCTED, PROXIES SOLICITED BY THIS PROXY STATEMENT
WILL BE VOTED FOR THE ELECTION OF EACH OF THE BOARD'S NOMINEES LISTED BELOW.
Each such nominee has consented to be named in this Proxy Statement and to
serve as a trustee if elected.
The information below relating to the nominees for election as trustees and
for each of the other trustees whose terms of office continue after the Annual
Meeting has been furnished to the Company by the respective individuals.
NOMINEES FOR ELECTION AS CLASS II TRUSTEES
Edmund Barrett, 64, has been a trustee of the Company since June 1995, the
Chief Operating Officer of the Company since December 1994, the Director of
Leasing from 1992 to May 1997 and Executive Vice President of the Company
since 1992. Previously, he was the Assistant Director of Development of
Kranzco Realty, Inc., a general commercial real estate management and
brokerage company ("Kranzco Realty"), from 1987 to 1988 and a Vice President
of Kranzco Realty from 1988 to 1992. Mr. Barrett is a Class II Trustee.
Robert H. Dennis, 51, has been a trustee of the Company since 1994 and Vice
President, Chief Financial Officer and Treasurer of the Company since its
organization in June 1992. Prior thereto he was the Chief Financial Officer
and Assistant Secretary of Kranzco Realty from 1981 to 1992. Mr Dennis is a
Class II Trustee.
Gerald C. Finn, 66, is the founder of New America Network, Inc. ("New
America"), an international brokerage and real estate services company, and
has served as a Director and the Chief Executive Officer of New America since
1974. He also served as President and Chief Operating Officer from 1974 until
1995. He was elected as Chairman of the Board in May, 1990. Prior to his
association with New America, Mr. Finn was an active real estate broker and
developer for his own account and for the account of various entities in which
he had an equity interest. He is a licensed real estate broker and a member of
the National Association of Corporate Real Estate Executives, International
Council of Shopping Centers, Urban Land Institute and National Board of
Realtors. Mr Finn, assuming election, will be a Class II Trustee.
OTHER TRUSTEES WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL MEETING
Information concerning the other trustees whose terms do not expire at the
Annual Meeting is set forth below.
Norman M. Kranzdorf, 67, a co-founder of the Company, has been a trustee of
the Company since its organization in June 1992. Mr. Kranzdorf was the
President of Kranzco Realty from 1979, when he founded it, to 1992. He served
as President of Amterre Development Inc ("Amterre") from 1972 to 1981.
Amterre, the successor to Food Fair Properties, Inc., owned and operated over
50 shopping centers, as well as other single-tenant retail properties, on the
Eastern seaboard. Mr. Kranzdorf was also an officer and director of Kranzco
Management, Inc., a general commercial real estate management and brokerage
company and wholly-owned subsidiary of Kranzco Realty, from 1980, when it was
founded, to 1992. He is a former trustee of the International Council of
Shopping Centers and a member of the Board of Governors of the National
Association of Real Estate Investment Trusts. Mr. Kranzdorf is a member of the
Board's Executive Committee and Executive Compensation Committee. Mr.
Kranzdorf is a Class III Trustee.
Dr. Peter D. Linneman, 47, has been a trustee of the Company since November
1992. Dr. Linneman has been a Professor of Finance and Public Policy at the
Wharton School of the University of Pennsylvania since 1979, the Albert
Sussman Professor of Real Estate at the Wharton School since 1989 and a
director of the Wharton Real Estate Center since 1986. In addition, he is an
Urban Land Institute Research Fellow and a member of the National Association
of Real Estate Investment Trusts. Dr. Linneman is also currently engaged as
Managing Director of Amerimar Realty, a real estate investment firm, and
serves as an advisor to other real estate investors. Dr. Linneman is a trustee
of Universal Health Realty Trust (a REIT). Dr. Linneman was formerly Chairman
and trustee of Rockefeller Center Properties Trust (a REIT). Dr. Linneman is a
member of the Board's Audit Committee and Incentive Plan Committee. Dr.
Linneman is a Class I Trustee.
E. Donald Shapiro, 66, has been a trustee of the Company since June 1994. Mr.
Shapiro has been The Joseph Solomon Distinguished Professor of Law at New York
Law School since 1983. Mr. Shapiro also serves as a director of each of the
following entities: Loral Space and Communications (formerly Loral
Corporation) (NYSE) (satellite communications) (since 1973); Bank Leumi
(Bank)(since 1980); Vasomedical, Inc. (formerly Future Medical Products, Inc.)
(medical products) (NASDAQ) (since 1992); Vion, Inc. (formerly Mela Rx) (drug)
(NASDAQ) (since 1992); Eyecare Products PLC (eyeglass frames) (London Stock
Exchange) (since 1994); Premier Laser Systems (medical laser) (NASDAQ) (since
1994); United Industrial Corporation (defense industry) (NYSE) (since 1996);
and Telepad Corporation (computer hardware and software systems) (NASDAQ)
(since 1996). Mr. Shapiro is a member of the Board's Audit Committee,
Executive Committee and Executive Compensation Committee. Mr. Shapiro is a
Class I Trustee.
Bernard J. Korman, 66, has been a trustee of the Company since May 1997. Mr.
Korman is Chairman of Graduate Health System, Inc., a non-profit organization,
and NutraMax Products, Inc. (NASDAQ), a consumer healthcare products company.
Mr. Korman, served as President and Chief Executive Officer of MEDIQ
Incorporated (AMEX) (healthcare services) from 1981 to 1995 and as chairman of
PCI Services, Inc. from 1992 to 1996. Mr. Korman currently is a director of
The Pep Boys, Inc. (NYSE) (auto supplies); Today's Man, Inc. (NASDAQ) (retail
men's clothing sales); The New America High Income Fund, Inc. (NYSE)
(financial services); InnoServ Technologies, Inc. (NASDAQ) (medical equipment
support services); Kapson Senior Quarters Corp. (NASDAQ) (assisted living
quarters) and Omega Healthcare Investors, Inc. (NYSE) (a REIT). Mr. Korman is
a member of the Board's Executive Compensation Committee and Audit Committee.
Mr. Korman is a Class III Trustee.
BOARD OF TRUSTEES' MEETINGS
During the Company's fiscal year ended December 31, 1997, the Board held four
regular meetings and two special meetings.
BOARD COMMITTEES
The Board has an Audit Committee, an Executive Committee, an Executive
Compensation Committee, a committee which administers the Company's 1992
Employee Share Option Plan (the "Employee Plan") and the 1992 Trustee Share
Option Plan (the "Trustee Plan" and, together with the Employee Plan, the
"Option Plans"), and a committee which administers the Company's 1995
Incentive Plan (the "Incentive Plan Committee") adopted at the 1995 annual
meeting of shareholders (the "Incentive Plan"). The Board does not have a
nominating committee or a committee performing the functions of a nominating
committee; the Board performs the functions of that committee.
The Audit Committee is composed of Messrs. Linneman, Shapiro and Selonick. The
function of the Audit Committee is to review the results and scope of the
audit and other services provided by the Company's independent public
accountants. The Audit Committee also reviews related party transactions. No
member of the Audit Committee is an employee of the Company. The Audit
Committee met twice during the fiscal year ended December 31, 1997.
The Executive Committee is composed of Messrs. Kranzdorf and Shapiro. The
function of the Executive Committee is to approve the acquisition, financing
and disposition of investments for the Company and to execute certain
contracts and agreements, including those related to the borrowing of money by
the Company, and generally exercise all other powers of the Board except for
those which require action by all trustees or the independent trustees under
the Declaration of Trust or the Bylaws of the Company or under applicable law.
The Executive Committee met once during the fiscal year ended December 31,
1997.
The Executive Compensation Committee is composed of Messrs. Kranzdorf,
Selonick and Shapiro. The function of the Executive Compensation Committee is
to review and make recommendations to the Board and administrators of the
Option Plans and Incentive Plan regarding compensation for the Company's
executive officers. No member of the Executive Compensation Committee, other
than Mr. Kranzdorf, is an employee of the Company. The Executive Compensation
Committee met once during the fiscal year ended December 31, 1997.
The Option Plans Committee is composed of Messrs. Kranzdorf and Barrett. The
function of the Option Plans Committee is to administer the Option Plans. The
purpose of the Option Plans is to attract, retain and motivate key employees
of the Company by granting such employees incentive qualified and
non-qualified options to purchase Common Shares. The Option Plans Committee
met once during the fiscal year ended December 31, 1997.
The Incentive Plan Committee is composed of Messrs. Linneman and Selonick. The
function of the Incentive Plan Committee is to determine awards granted
pursuant to the Incentive Plan to employees and trustees which align the
interests of the Company's trustees, executive officers, key employees,
advisors and consultants with those of the shareholders and to enable the
Company to attract, compensate and retain trustees, executive officers, key
employees, advisors and consultants and provide them with appropriate
incentives and rewards for performance. The Incentive Plan Committee met twice
during the fiscal year ended December 31, 1997.
TRUSTEES' COMPENSATION
Each non-employee trustee of the Company receives an annual fee of $12,000 and
a fee of $1,000 for each quarterly meeting attended. In December 1995, the
trustees agreed to receive these fees in the form of Common Shares beginning
in 1996. The shares are awarded quarterly on the first business day of the
fiscal quarter and are valued based on the closing price of the Common Shares
on the New York Stock Exchange on the last business day of the previous
quarter. Each trustee is entitled to cash payments of $500 for each separate
committee meeting attended, $1,000 for each trip to visit properties which are
the subject of possible acquisition by the Company, and is entitled, pursuant
to the provisions of the Trustee Plan, to grants of options to purchase Common
Shares. Employees of the Company who are also trustees are not paid any
trustees' fees. In addition, the Company reimburses the trustees for travel
expenses incurred in connection with their activities on behalf of the
Company. During the fiscal year ended December 31, 1997, Mr. Barrett was
issued 3,000 options pursuant to the Trustee Plan.
Under the terms of the Incentive Plan each non-employee trustee of the Company
is granted options each year to purchase 1,500 Common Shares at a price equal
to the then fair market value of Common Shares on the date of grant.
Additionally, each non-employee trustee shall be granted options each year to
purchase an additional 1,500 Common Shares at a price equal to the then fair
market value of Common Shares on the date of grant, provided that the
Company's funds from operations per Common Share, as defined, have increased
at least 4% over the prior year's funds from operations per common share. In
accordance with the terms of the Incentive Plan, on March 13, 1998 the Company
awarded 3,000 options to purchase Common Shares to each of the Company's
non-employee trustees at an exercise price of $19.19 per Common Share.
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THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF MESSRS. BARRETT,
DENNIS AND FINN TO SERVE UNTIL THE 2001 ANNUAL MEETING OF SHAREHOLDERS AND
UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFY.
- ------------------------------------------------------------------------------
PROPOSAL 2
APPROVAL OF AMENDMENT NO. 2 TO THE EMPLOYEE PLAN AND AMENDMENT NO. 2 TO THE
TRUSTEE PLAN
On March 17, 1998, the Board approved, subject to the approval of the holders
of the Trust's Common Shares, Amendment No. 2 to each of the Employee Plan and
the Trustee Plan, which will permit the Board to extend the term of
Nonqualified Options (as defined below), beyond the current maximum term of 10
years provided for in the Plans.
If the amendments are approved by the holders of Common Shares, the Board
intends to extend the term of Nonqualified Options issued under the Plans to
purchase an aggregate of 490,100 Common Shares, for an additional five years
(i.e. options expiring on November 19, 2002 will be extended until November
19, 2007). These options were granted on November 19, 1992 shortly after
formation of the Company and have an exercise price of $20 per share, which is
currently higher than the trading price of the Common Shares purchasable
thereunder. The Board believes that extending the term of these options
serves the purpose of the Trustee Plan (to attract and retain the best
available candidates to act as trustees of the Company, to provide additional
equity incentive to such trustees and to promote the success of the Company's
business) and the Employee Plan (to encourage high levels of performance by
the individuals who are key to the success of the Company and to encourage
such individuals to remain in the employ of the Company and its subsidiaries
by increasing their proprietary interest in the Company's growth and success),
as the case may be.
The following table sets the number of the options to be extended which are
held by (i) each of the Company's Chief Executive Officer and the Named
Executives, (ii) the Company's executive officers, as a group, (iii) the
Company's non-executive officer Trustees, as a group and (iv) the Company's
non-executive officer employees, as a group:
EXTENDED OPTIONS UNDER TRUSTEE PLAN AND EMPLOYEE PLAN
Number of Common Shares
Name and Position Subject to Extended Options
- ------------------- ---------------------------
Norman M. Kranzdorf
President & Chief Executive Officer 352,800 (1)
Robert H. Dennis
Vice President, Chief Financial Officer and Treasurer 54,000 (2)
Edmund Barrett
Executive Vice President & Chief Operating Officer 18,000 (2)
Executive Officers as a Group 442,800 (3)
Non-Executive Officer Trustees, as a Group 6,000 (1)
Non-Executive Officer Employees, as a Group 41,300 (2)
- -----
(1) Granted under Trustee Plan
(2) Granted under Employee Plan
(3) Includes 352,800 Shares granted under Trustee Plan and 90,000 Shares
granted under Employee Plan.
DESCRIPTION OF THE EMPLOYEE PLAN AND THE TRUSTEE PLAN
GENERAL. The Plans were adopted by the Board on August 31, 1992 and by the
shareholder's of the Company on November 19, 1992. The purpose of the Trustee
Plan is to attract and retain the best available candidates to act as trustees
of the Company's business. The purpose of the Employee Plan is to encourage
high levels of performance by the individuals who are key to the success of
the Company and to encourage such individuals to remain in the employ of the
Company and its subsidiaries by increasing their proprietary interest in the
Company's growth and success. The Plans achieve their respective purposes
through the granting of incentive awards of share options ("Options") to those
trustees or individuals, as the case may be, whose judgment, initiative and
efforts are responsible for the success of the Company. The maximum number of
Common Shares that may be the subject of Options under the Employee Plan is
300,000 Common Shares, or approximately 3% of the Common Shares outstanding as
of March 1, 1998, and under the Trustee Plan is 700,000 Common Shares, or
approximately 7% of the Common Shares outstanding as of March 1, 1998. As of
the date hereof, 198,050 options have been granted under the Employee Plan
and 430,800 options have been granted under the Trustee Plan.
ADMINISTRATION. The Plans are administered by a committee (the "Committee")
consisting of not fewer than two trustees, as designated by the trustees. In
the case of the Employee Plan, all members of the Committee are
"disinterested" trustees as defined in the Employee Plan. The members of the
Committee for each of the Employee Plan and Trustee Plan are Norman Kranzdorf
and Edmund Barrett. The trustees may remove from, add members to, or fill
vacancies in the Committees. Each Committee is authorized, subject to the
provisions of the respective Plans, to establish such rules and regulations as
it may deem appropriate for the conduct of meetings and proper administration
of such plan. All actions of a Committee shall be taken by a majority vote of
its members. Subject to the provisions of the respective Plans, each
Committee shall have authority, in its sole discretion, to interpret the
provisions of its Plan and, subject to the requirements of applicable law, to
prescribe, amend, and rescind rules and regulations relating to it as it may
deem necessary or advisable. All decisions made by a Committee pursuant to
the provision of the applicable Plan shall be final, conclusive and binding on
all persons, including participants in such Plan.
ELIGIBILITY. Participants in the Employee Plan shall consist solely of key
employees (other than employees who are also trustees of the Company) or any
of its subsidiaries or affiliates as its Committee shall select from time to
time. Participants in the Trustee Plan shall consist exclusively of such
trustees of the Company or trustees or directors of any of its subsidiaries or
affiliates as its Committee shall select from time to time.
OPTIONS. "Incentive Options" meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and "Nonqualified
Options" that do not meet such requirements are both available for grant under
the Plans. The term of each Option will be determined by the Committee of the
Plan under which the Option is being issued, but no Incentive Option will be
exercisable more than ten years after the date of grant, or in the case of
Incentive Options granted to any trustee or employee who, at the time of such
grant, owns, directly or indirectly (within the meaning of Sections 422(b)(6)
and 424(d) of the Code), shares possessing more than ten percent (10%) of the
total combined voting power of all classes of shares of the Company or any of
its subsidiaries or affiliates, such Incentive Options will not be exercisable
more than five years after the date of grant. The exercise price for
Incentive Options must be at least equal to 100% of the fair market value of
the Common Shares on the date of grant, or in the case of Incentive Options
granted to any trustee or employee who, at the time of such grant, owns
directly or indirectly (within the meaning of Sections 422(b)(6) and 424(d) of
the Code), shares possessing more than ten percent (10%) of the total combined
voting power of all classes of shares of the Company or any of its
subsidiaries or affiliates, the exercise price must be at least 110% of the
fair market value of all of the Common Shares on the date of grant. The
exercise price for Nonqualified Options will be determined by the Committee of
the Plan under which the Nonqualified Options are being issued at the time of
grant. The exercise price can be paid in cash , or if approved by the
Committee, by tendering shares (actually or constructively) of Common Shares
owned by a participant.
Incentive Options are not transferable except by will or the laws of descent
and distribution and may be exercised only by the participant (or his or her
guardian or legal representative) during his or her lifetime, except as
provided below. Nonqualified Options may be transferable to family members
and entities for the benefit of the participant or his or other family
members. If a participant's employment with the Company or service as a
trustee terminates for any reason (other than death or disability), any
unexercised or unexpired Options held by the participant (or its permitted
transferee) will be deemed cancelled and terminated on the day following the
three-month period commencing on the date of such termination, unless earlier
terminated pursuant to its terms; provided, however, if such termination is
attributable to fraud, embezzlement, theft or other misconduct injurious to
the Company or its subsidiaries or affiliates (as determined by the
Committee), any Options granted to such optionee and not previously exercised
or expired shall be deemed cancelled and terminated as of the date of such
termination. If a participant dies while employed by the Company or while
serving as a trustee of the Company, any unexercised or unexpired Options
will, to the extent exercisable on the date of death, be exercisable by the
holder, by a permitted transferee or by the participant's estate or by any
person who acquired such Options by bequest or inheritance, at any time
generally within one year after such death, unless earlier terminated pursuant
to its terms. If a participant becomes totally disabled and his or her
employment or service as a trustee of the Company terminates as a result of
such disability, the holder or the participant (or his guardian or legal
representative) will have the unqualified right to exercise any unexercised
and unexpired Options held by the participant (or its permitted transferee)
generally for one year after such termination, unless earlier terminated
pursuant to its terms.
ANTIDILUTION PROVISIONS. The number of Common Shares authorized to be issued
under the Employee Plan and subject to outstanding awards (and the grant or
exercise price thereof) may be adjusted to prevent dilution or enlargement of
rights in the event of any dividend or other distribution, recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of Common Shares or
other securities or other similar capitalization change.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE EMPLOYEE PLAN. The following
is a brief summary of the principal federal income tax consequences of grants
of Options under the Plan. The summary is based upon current federal income
tax laws and interpretations thereof, all of which are subject to change at
any time, possibly with retroactive effect. The summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
tax consequences.
A participant is not subject to regular federal income tax either at the time
of grant or at the time of exercise of an Incentive Option. However, upon
exercise, the difference between the fair market value of the Common Shares
and the exercise price is an includible item subject to the possible
application of the alternative minimum tax. If a participant does not dispose
of Common Shares acquired through the exercise of an Incentive Option in a
"disqualifying disposition" (i.e., no disposition occurs within two years from
the date of grant of the share option nor within one year of the transfer of
the Common Shares to the participant), then the participant will be taxed only
upon the gain, if any, from the sale of such Common Shares, and such gain will
be taxable as gain from the sale of a capital asset.
The Company will not be allowed any tax deduction on the exercise of an
Incentive Option or, if the above holding period requirements are met, on the
sale of the underlying Common Shares. If there is a disqualifying disposition
(i.e. one of the holding period requirements is not met), the participant will
be treated as receiving compensation subject to ordinary income tax in the
year of the disqualifying disposition and the Company will be entitled to a
deduction for compensation expense in an amount equal to the amount included
in income by the participant. The participant generally will be required to
include in income an amount equal to the difference between the fair market
value of the Common Shares at the time of exercise and the exercise price.
Any appreciation in value after the time of exercise will be taxed as capital
gain and will not result in any deduction by the Company.
If Nonqualified Options are granted to a participant, there are no federal
income tax consequences at the time of grant. Upon exercise of the Option,
the participant must report as ordinary income an amount equal to the
difference between the exercise price and the fair market value of the Common
Shares on the date of exercise. The Company will be allowed a tax deduction
in like amount. Any appreciation in value after the time of exercise will be
taxed as capital gain and will not result in any deduction by the Company.
Applicable withholding taxes may be withheld in connection with any options
granted under the Plans. In that regard, the Committee has the discretion to
allow a participant to satisfy its withholding tax obligations with Common
Shares.
TERMINATION, AMENDMENT AND ERISA STATUS. Each Plan will terminate by its
terms and without any action by the Board on November 19, 2002. No awards may
be made after that date. Awards outstanding on December 11, 2007, will remain
valid in accordance with their terms.
The Board may, from time to time, alter, amend, suspend or terminate the Plans
as it shall deem advisable, subject to any requirement for shareholder
approval imposed by applicable law; provided that the Board may not amend the
Plans in any manner that would result in noncompliance with Rule 16B-3
promulgated under the Exchange Act, or any applicable law; and further
provided that the Board may not, without the approval of the Company's
shareholders, amend the Plan to (a) increase the number of shares that may be
the subject of Options under the Plans, (b) reduce the minimum option price of
Incentive Options, (c) increase the maximum permissible term of any Option or
(d) remove responsibility for administering the grant of Options from the
Committee.
The Plans are not subject to the provision of the Employee Retirement Income
Security Act of 1976, as amended.
- ------------------------------------------------------------------------------
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF AMENDMENT NO. 2 TO
THE EMPLOYEE PLAN AND AMENDMENT NO. 2 TO THE TRUSTEE PLAN
- ------------------------------------------------------------------------------
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board and the Audit Committee have appointed the firm of Arthur Andersen
LLP, which firm was engaged as independent public accountants for the fiscal
year ended December 31, 1997, to audit the financial statements of the Company
for the fiscal year ended December 31, 1998. A proposal to ratify this
appointment is being presented to the shareholders at the Annual Meeting. A
representative of Arthur Andersen LLP is expected to be present at the meeting
and available to respond to appropriate questions and, although the firm has
indicated that no statement will be made, an opportunity for a statement will
be provided.
- ------------------------------------------------------------------------------
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED RATIFICATION OF
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
- ------------------------------------------------------------------------------
EXECUTIVE OFFICERS
The following is provided with respect to the executive officers of the
Company. Other than Norman M. Kranzdorf and Hermina G. Kranzdorf, who are
husband and wife, none of the executive officers of the Company are related to
each other. Executive officers are chosen by and serve at the discretion of
the Board.
Norman M. Kranzdorf, 67, President and Chief Executive Officer. Biographical
information regarding Mr. Kranzdorf is set forth under "Proposal 1 - Election
of Trustees."
Robert H. Dennis, 51, Vice President, Chief Financial Officer and Treasurer.
Biographical information regarding Mr. Dennis is set forth under "Proposal 1 -
Election of Trustees."
Edmund Barrett, 64, Executive Vice President, Chief Operating Officer.
Biographical information regarding Mr. Barrett is set forth under "Proposal 1
- - Election of Trustees."
Hermina G. Kranzdorf, 62, has been the Secretary and the Director of
Communications of the Company since 1992. From 1986 to 1992, she was the
Director of Communications and Secretary of Kranzco Realty. Ms. Kranzdorf is
a member of the International Council of Shopping Centers.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the cash
and other compensation paid or accrued by the Company for services rendered
by Norman M. Kranzdorf, the Company's President and Chief Executive Officer,
Robert H. Dennis, the Company's Vice President, Chief Financial Officer and
Treasurer, and Edmund Barrett, the Company's Executive Vice President and
Chief Operating Officer (collectively, the "Named Executives"), during the
fiscal years ended December 31, 1997, 1996 and 1995. Other than the Named
Executives, no executive officer of the Company earned a total salary and
bonus exceeding $100,000 during the fiscal year ended December 31, 1997.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term All Other
Annual Compensation Compensation Compensation
- ---------------------------------------------------------------------- ------------ ------------
Other Annual Underlying
Name & Principal Position Year Salary Bonus Compensation Options
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Norman M. Kranzdorf 1997 $256,692 $ 5,288 <F1><F2> 20,000 $8,440
President and Chief 1996 $230,769 $10,618 <F1><F2> 3,000 $5,394
Executive Officer 1995 $200,000 $13,842 <F1><F2> - - $6,568
Robert H. Dennis 1997 $139,308 $ 2,981 <F1><F2> 10,000 $7,506
Vice President, Chief 1996 $119,231 $ 5,530 <F1><F2> 3,000 $5,952
Financial Officer and 1995 $100,000 $ 6,921 <F1><F2> - - $5,456
Treasurer3
Edmund Barrett 1997 $125,615 $ 2,692 <F1><F2> 13,000 $3,782
Executive Vice President 1996 $106,010 $ 4,658 <F1><F2> - - $3,302
and Chief Operating Officer 1995 $ 87,109 $ 5,676 <F1><F2> 3,000 $3,665
<FN>
<F1>
Excludes certain personal benefits, the total value of which was less than 10%
of the total annual salary paid or accrued by the Company for services
rendered by him during the fiscal years ended December 31, 1997, 1996 and
1995.
<F2>
The following table sets forth certain information concerning additional
compensation in the form of restricted common shares issued under the
Incentive Plan during the fiscal year ended December 31, 1997 to the Named
Executives. The shares issued vest one-half per year, commencing on July 1,
1998 and entitle the holder to any current dividends.
</FN>
</TABLE>
<TABLE>
Restricted Common Shares Issued in Last Fiscal Year
<CAPTION>
Percent of Total Restricted
Number of Shares to Employees Price at Value at
Name Shares Issued In Fiscal Year Date of Issue Date of Grant
- ------------------- ------------- ----------------------- ------------- -------------
<S> <C> <C> <C> <C>
Norman M. Kranzdorf 1,846 24% $16.25 $29,998
Robert H. Dennis 962 12% $16.25 $15,633
Edmund Barrett 865 11% $16.25 $14,056
</TABLE>
The following table sets forth certain information concerning options granted
during the fiscal year ended December 31, 1997 to the Named Executives. The
Company did not grant any share appreciation rights during 1997.
<TABLE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
Number of Percent of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise of Expiration Grant Date
Name Granted <F1> Fiscal Year Base Price Date Present Value <F2>
- ----------- ----------- ------------ ----------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Norman M. Kranzdorf 20,000 20% $16.25 07/01/07 $21,600
Robert H. Dennis 10,000 10% $16.25 07/01/07 $10,800
Edmund Barrett 13,000 13% $16.25 07/01/07 $14,040
<FN>
<F1>
Options granted to Mr. Kranzdorf, Mr. Dennis and 10,000 of the options
granted to Mr. Barrett in the fiscal year ended December 31, 1997 vest and
become exercisable over two years and 3,000 of the options granted to Mr.
Barrett vest and become exercisable on the date of grant.
<F2>
Based upon the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, that the Named Executive
receives will depend on the excess of the stock price at the time of exercise
over the exercise or base price on the date the option is exercised. There is
no assurance that the value realized by the Named Executive will be at or near
the value estimated by the Black-Scholes model. The estimated values under
the model are based on arbitrary assumptions such as interest rates, stock
price volatility and future dividend yields.
</FN>
</TABLE>
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
END AND FISCAL YEAR END OPTION VALUES
During the fiscal year ended December 31, 1997, none of the Named Executives
exercised any options granted to them. The following table sets forth certain
information with respect to the unexercised options held as of the end of such
fiscal year by the Named Executives.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
Name Held at December 31, 1997 at December 31, 1997<F1>
- --------------- ------------------------------ ------------------------
Exercisable / Unexercisable Exercisable / Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Norman M. Kranzdorf 358,800 20,000 $18,375 $58,750
Robert H. Dennis 60,000 10,000 $11,063 $29,375
Edmund Barrett 24,000 10,000 $11,250 $29,375
<FN>
<F1>
The fair market value on December 31, 1997 of the Common Shares underlying
the options was $19.1875 per Common Share.
</FN>
</TABLE>
TRUSTEE PLAN AND EMPLOYEE PLAN
Prior to the Company's initial public offering in November 1992, the Option
Plans were adopted by the Board and all of the then current shareholders. The
Option Plans are administered by the Option Plans Committee established for
such purpose. The current members of such committee are Messrs. Kranzdorf and
Barrett (the "Administrators").
The Option Plans provide for the grant of options to purchase Common Shares to
eligible participants. The persons entitled to participate in the Trustee
Plan are those trustees of the Company or trustees or directors of any of the
Company's subsidiaries or affiliates as the Administrators of the Option Plans
shall select from time to time. Eligible participants of the Employee Plan
consist of those key employees (other than trustees or directors) of the
Company, or any of its subsidiaries or affiliates, as the Administrators shall
select from time to time. Options are granted by the Administrators based
upon such factors as the Administrators may deem proper and relevant. The
Option Plans were designed to attract, retain and motivate key employees by
granting them options to purchase Common Shares. The Option Plans provide for
the grant of a maximum of 700,000 Common Shares under the Trustee Plan and
300,000 Common Shares under the Employee Plan, and permit the granting of
share options to employees which are either Incentive Options or Non-Qualified
Options.
Subject to the terms of Option Plans, the Administrators determine the
recipients of options and the number of options to be granted under the Option
Plans. As of December 31, 1997 options to purchase 430,800 and 191,550 Common
Shares were outstanding under the Trustee Plan and Employee Plan,
respectively, all of which were exercisable as of December 31, 1997. During
the fiscal year ended December 31, 1997, 20,000, 13,000 and 10,000 options
were issued to Messrs. Kranzdorf, Barrett and Dennis, respectively from the
Trustee Plan. During the fiscal year ended December 31, 1997, 59,500 options
were issued to employees of the Company from the Employee Plan.
1995 INCENTIVE PLAN
The Incentive Plan was approved by the shareholders of the Company at the
Company's 1995 annual meeting of shareholders held in June 1995. The
Incentive Plan is administered by the Incentive Plan Committee which consists
of Messrs. Linneman and Selonick. In general, it is intended that members of
the Incentive Plan Committee will not be employees of the Company.
The purpose of the Incentive Plan is to align the interests of the Company's
trustees, executive officers, key employees, advisors and consultants with
those of the shareholders and to enable the Company to attract, compensate and
retain trustees, executive officers, key employees, advisors and consultants
and provide them with appropriate incentives and rewards for their
performance. Awards to trustees, executive officers, key employees and other
individuals under the Incentive Plan may take the form of options to purchase
Common Shares, including corresponding share appreciation rights and reload
options, and in the case of employees, restricted share awards and share
purchase awards.
All employees, trustees, and certain other key individuals are currently
eligible to participate in the Incentive Plan subject to certain restrictions
that apply to members of the Incentive Plan Committee. Awards under the
Incentive Plan may be granted in combination with other awards, including
options granted under the Option Plans. The maximum number of Common Shares
that may be the subject of awards under the Incentive Plan is 1,000,000 Common
Shares. The Incentive Plan provides that in any given year, the maximum
number of Common Shares with respect to which options or share appreciation
rights may be granted to any employee is 100,000 Common Shares. As of
December 31, 1997, options to purchase 303,000 Common Shares were outstanding
under the Incentive Plan. During the fiscal year ended December 31, 1997,
1,500 options were issued to each of Messrs. Korman, Linneman, Selonick and
Shapiro, in accordance with the Incentive Plan.
BOARD AND EXECUTIVE COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Executive compensation is paid by the Company in the form of cash or through
grants of awards under the Option Plans or the Incentive Plan. All final
decisions regarding the cash component of executive compensation are made by
the Board which, in making such determinations, takes into consideration the
recommendations of the Executive Compensation Committee as well as the matters
considered by, and the philosophy applied by such committee as set forth
below. All final decisions regarding grants of awards under the Option Plans
and Incentive Plan are made by the plans' respective administrators (the "Plan
Administrators") who, in making such compensation decisions, take into
consideration recommendations made by the Board and/or its Executive
Compensation Committee. In making its recommendations to the Board or the
Plan Administrators, as the case may be, the Executive Compensation Committee
reviews compensation plans, programs and policies and monitors the performance
and compensation of executive officers.
The key elements of the Company's executive compensation package are base
salary, annual bonus and long-term incentives. The policies with respect to
each of these elements, as well as the compensation paid to the executive
officers of the Company during the fiscal year ended December 31, 1997, are
discussed below.
BASE SALARIES
Base salaries for executive officers are determined by evaluating the
responsibilities of the position held and the experience of the individual,
and by reference to the competitive marketplace for executive talents,
including a comparison to base salaries for comparable positions at other real
estate investment trusts ("REITs") in the comparison peer group. The base
salaries currently are intended to be fixed at the average level of the base
salaries paid to executive officers with comparable qualifications, experience
and responsibilities at other REITs in the comparison peer group.
Increases in the base salaries of certain of the Company's executive officers
were recommended by the Executive Compensation Committee and approved by the
Board, effective as of July 1, 1997 (for Mr Kranzdorf, Mr. Dennis and Mr.
Barrett). Annual salary adjustments are determined based on an evaluation of
executive officers' responsibilities and performance, as well as a review of
the amount of base salaries paid to executive officers with comparable
qualifications, experience and responsibilities by other REITs that would
compete in the Company's shopping center business and the performance of the
Company.
ANNUAL BONUS
In 1994, the Executive Compensation Committee proposed, and the Board
approved, an incentive compensation plan effective for the 1994 fiscal year,
setting forth guidelines pursuant to which each executive officer would be
entitled, at the sole discretion of the Board, to receive incentive
compensation consisting of an annual bonus equal to a percentage of each
executive officer's base salary for the applicable year so long as the
Company achieved certain increases in funds from operations, as defined, per
Common Share for the prior calendar year. The table below sets forth the
percentage increases in funds from operations per Common Share necessary to
trigger the incentive payments. The incentive payments may be less than the
applicable percentage but may not exceed it.
Percentage Increases Maximum
In Funds From Operations Percentage of Incentive
Per Common Share From Prior Year Compensation Payable
- ------------------------------- --------------------
5% or more 100.00 %
4 to 4.99% 33.33 %
3 to 3.99% 16.66 %
Below 2.99% 0.00 %
The Executive Compensation Committee, in recommending the amount of annual
bonuses, if any, to be paid to executive officers pursuant to the incentive
compensation plan or otherwise with respect to a fiscal year, reviews the
performance of the Company and, if appropriate, the Common Shares during such
fiscal year, and non-financial performance measures such as the respective
executive's performance, effort and role in promoting the long-term strategic
growth of the Company, as well as such other matters as the Executive
Compensation Committee may deem appropriate.
With respect to the fiscal year 1997, the Company paid to each of its
executive officers a cash bonus of approximately 2% of such officer's base
salary plus an additional bonus equal to 12.5% of such officer's base salary,
payable in the form of restricted Common Shares which vest over a two-year
period. The restricted Common Shares were granted under the Incentive Plan.
Although such bonuses were not paid to the executive officers pursuant to the
Company's incentive compensation plan adopted in 1994, the Executive
Compensation Committee, in determining whether to recommend such bonuses,
applied the criteria set forth in the preceding paragraph.
LONG-TERM INCENTIVES
Long-term incentives are designed to align the interests of the Company's
employees, trustees and other key individuals with those of the Company's
shareholders. In (i) awarding options and share appreciation rights under the
Incentive Plan to its employees, trustees and other key individuals, (ii)
making grants of restricted Common Shares, and (iii) making loans to employees
for the purchase of Common Shares in connection with a share purchase award,
consideration is given to the amount of options previously granted to them and
whether any long-term incentives have previously been awarded.
Share options and related share appreciation rights are generally granted with
an exercise price equal to the market price of the Common Shares on the date
of grant and vest and become exercisable over a period of years based upon
continued employment. This creates shareholder value over the long term since
the full benefit of the compensation package cannot be realized unless share
price appreciation occurs over a number of years.
Grants of restricted Common Shares to employees also form a part of the
Company's long-term incentive package. Typically some portion of such grants
vest annually over a period of several years, so long as the executive officer
remains employed by the Company. In making grants of restricted Common
Shares, the Incentive Plan Committee considers and gives approximately equal
weight to an individual's scope of responsibilities, experience, past
contributions to the Company and anticipated contributions to the Company's
long-term success.
Another component of the Company's long-term incentive package may include
making loans to employees for the purchase of Common Shares in connection with
a share purchase award under the Incentive Plan. These loans typically will be
secured by the Common Shares purchased and otherwise will be non-recourse.
The loans may be interest-free and may be forgiven in part over time provided
that the executive officer has not resigned as an employee of the Company and
may be forgiven in full in the event employment terminates by reason of death,
disability, termination with "cause" or a "change of control." In making such
loans, the Incentive Plan Committee will consider the same factors it
considers in making grants of restricted Common Shares.
The Executive Compensation Committee believes that share options, share
appreciation rights, grants of restricted shares and loans to purchase shares
promote loyalty to the Company and encourage recipients to coordinate their
interests with those of the shareholders. The Executive Compensation
Committee may consider additional types of long-term incentives in the future.
Mr. Kranzdorf, Mr. Dennis and Mr. Barrett were granted options (20,000,
10,000 and 10,000 respectively) to purchase common shares. These options vest
over a two year period. The options were granted under the Trustee Plan.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Kranzdorf's compensation is determined after consideration of his
long-term qualifications, responsibilities and experience in the real estate
industry, and the compensation package awarded to chief executive officers of
other comparable REITs. The Company believes that Mr. Kranzdorf's base salary
is less than the average base salary for chief executive officers of such
other similar REITs based on the NAREIT survey and other sources.
In 1997, Mr. Kranzdorf received a base salary of $256,692 and an annual cash
bonus of $5,288. Mr. Kranzdorf's salary and cash bonus was based on a review
of the salary and bonus paid to other chief executive officers by similar size
and type real estate investment trusts. The results of various studies from
leading compensation firms, NAREIT and the Company's auditors were considered
by the Executive Compensation Committee. After such study, it was determined
that Mr. Kranzdorf's base salary and bonus were less than industry
benchmarks.
For the long-term incentive component of Mr. Kranzdorf's compensation, in 1997
the Incentive Plan Committee granted to Mr. Kranzdorf 1,846 restricted Common
Shares under the Incentive Plan. Such shares vest over a two-year period
commencing on the date of grant. The Executive Compensation Committee also
granted to Mr. Kranzdorf 20,000 options under the Trustee Plan. Such options
vest over a two-year period commencing on July 1, 1998. See the table above
captioned "Summary Compensation Table." Mr. Kranzdorf's long-term incentive
compensation was based on the same factors and considerations as those of the
Company's other executive officers, namely the desire to properly compensate
its executives and to promote loyalty to the Company. His long-term incentive
compensation reflects the Executive Compensation Committee's desire to create
incentives for him and focus him on maximizing shareholder value, and the
practice of the Company's primary competitors for executive talent
(particularly REITs) of making long-term incentive grants to chief executive
officers.
OMNIBUS BUDGET RECONCILIATION ACT IMPLICATIONS FOR EXECUTIVE COMPENSATION
It is the responsibility of the Executive Compensation Committee to address
the issues raised by the provisions in the tax laws which make certain
non-performance-based compensation to executives of public companies in excess
of $1,000,000 non-deductible to the Company beginning in 1994. In this
regard, the Executive Compensation Committee considers whether any actions
with respect to this limit should be taken by the Company. No executive
officer of the Company received any such compensation in excess of this limit
during 1997. The Incentive Plan has been designed in a manner to allow
certain grants of options and share appreciation rights to be treated as
performance based and, therefore, not subject to the $1,000,000 limitation.
The Executive Compensation Committee will continue to monitor the $1,000,000
limitation and will make necessary recommendations if it is warranted in the
future.
CONCLUSION
The Executive Compensation Committee's goal is to enhance the profitability of
the Company and, thus, shareholder value, by aligning closely the financial
interests of the Company's key executives with those of its shareholders.
Specifically, the Executive Compensation Committee has sought, and will
continue to seek, to enhance the Company's ability to attract and retain
qualified executive officers, to motivate such executives and to achieve the
goals inherent in the Company's business strategy and to emphasize share
ownership by such executives and, thereby, tie long-term compensation to
increases in shareholder value.
To permit ongoing evaluation of the link between the Company's performance and
its executive compensation, the Executive Compensation Committee intends to
conduct a full review of the Company's executive compensation program each
year. This review will include a review of such executive's responsibilities
and efforts and a comparison of the Company's executive compensation, Company
performance, share appreciation and total return to shareholders primarily to
other retail shopping center-oriented REITs that represent the Company's most
direct competitors for executive talents. The Executive Compensation
Committee will also continually review the selection of peer companies used
for compensation analysis. Since the peer group index in the Performance Graph
included in this Proxy Statement includes all equity REITs and not just those
which are retail shopping center oriented, the peer group used for
compensation analysis will consist only of certain of the REITs included in
the peer group index in the Performance Graph.
In addition, while the elements of compensation described above will be
considered separately, the Executive Compensation Committee will take into
account the full compensation package afforded by the Company to the
individual, including pension benefits, supplemental retirement benefits,
severance plans, insurance and other benefits. In this regard, it should be
noted that the Company has implemented a 401(k) retirement plan covering
substantially all officers and employees of the Company. The 401(k) plan
permits participants to defer up to a maximum of 10% of their compensation,
which deferrals may, in the Company's sole discretion, be matched by the
Company in an amount equal to 50% of the first 5% of the employee's salary.
Under the terms of the 401(k) plan, the Company may also, in its sole
discretion, make additional profit sharing contributions to such plan. For the
year 1997, the Company made total contributions of $70,000 to the 401(k) plan.
Through the programs described above, a very significant portion of the
Company's executive compensation is linked to individual and corporate
performance.
The foregoing report has been furnished by the Board and the Executive
Compensation Committee.
March 31, 1998
Edmund Barrett
Robert H. Dennis
Bernard J. Korman
Norman M. Kranzdorf
Dr. Peter D. Linneman
James B. Selonick
E. Donald Shapiro
<PAGE>
SHARE PRICE PERFORMANCE GRAPH
The following table compares the cumulative total shareholder return on the
Common Shares for the period commencing November 19, 1992 through December 31,
1997 with the cumulative total return on the Standard & Poor's 500 Stock Index
("S&P 500") and the NAREIT Equity REIT Total Return Index ("NAREIT Index")
over the same period. Total return values for the S&P 500, the NAREIT Index
and the Common Shares were calculated based on cumulative total return
assuming the investment of $100 in the S&P 500 and the NAREIT Index on
November 1, 1992, and in the Common Shares on November 19, 1992, and assuming
reinvestment of dividends. The shareholder return shown on the graph below is
not necessarily indicative of future performance.
Date Common Shares NAREIT Equity Index S&P 500
- ------------------------------------------------------------
11/1/92 $0.00 $100.00 $100.00
11/19/92 $100.00
12/31/92 $108.00 $104.00 $102.75
12/31/93 $113.14 $121.82 $111.43
12/31/94 $109.02 $125.68 $112.89
12/31/95 $94.49 $144.86 $155.14
12/31/96 $115.43 $192.77 $184.77
12/31/97 $146.75 $229.26 $231.57
(1) Since the Company did not commence operation until November 19, 1992,
which is the date the Company's initial public offering was completed, no data
prior thereto is available.
(2) The NAREIT Equity REIT Total Return Index is maintained by the National
Association of Real Estate Investment Trusts.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases from Norman and Hermina Kranzdorf a three-story building
containing approximately 20,000 square feet located at 128 Fayette Street,
Conshohocken, Pennsylvania, which serves as the Company's headquarters. The
lease for the Company's headquarters expires on January 15, 1999 and provides
that the Company will pay a rental of $153,720 per annum. The lease also
provides that the Company will pay for all real estate taxes, utilities,
repairs and other costs and expenses in connection with the use and occupancy
of the building.
The Company has announced that it has entered into a letter of intent with New
America Network, Inc, which conducts business under the name New America
International ("NAI"), and Gerald C. Finn and Jeffrey Finn, its principal
shareholders. Gerald C. Finn (a nominee for Class II Trustee) is Chairman and
Chief Executive Officer and the owner of approximately 75% of NAI's
outstanding shares of common stock. The proposed transaction involves an
exchange offer by the Company for 80% of NAI's outstanding common shares for
the Company's subordinated notes which are convertible into the Company's
common shares. The Company will then spin-off the shares of NAI's common
stock to its shareholders on a one-for-one basis and retain a 9.8% interest.
On March 19, 1997 the Company entered into Severance Benefits Agreements with
Norman M. Kranzdorf, Robert H. Dennis, Edmund Barrett, Bengt Danielsson,
Michael Warrington and Michael Kranzdorf pursuant to which such individuals
are entitled to certain compensation upon a change in control of the Company.
Each agreement provides that upon a change in control and so long as such
individual is an employee of the Company immediately prior to such a change in
control, (a) the individual shall receive a lump sum severance payment equal
to a multiple of the individual's annual compensation during the calendar year
preceding the calendar year during which the change in control has occurred;
the multiple is three, two and one, with respect to (i) Norman M. Kranzdorf,
(ii) Robert H. Dennis and Edmund Barrett, and (iii) Bengt Danielsson, Michael
Warrington and Michael Kranzdorf, respectively, (b) all restricted Common
Shares then owned by the individual shall immediately vest and no longer be
subject to repurchase or other forfeiture restrictions, (c) the Company will
continue to provide life, accident, medical and dental insurance to the
individual for a period of 18 months after the change in control, and (d) in
the event the individual holds any options to purchase Common Shares on the
date of the change in control, such individual shall be entitled to receive an
amount equal to, generally, the number of options to purchase Common Shares
then owned by the individual multiplied by the amount, if any, that (i) the
exercise price of the options or the closing price of the Common Shares on the
date of the change in control, whichever is less, exceeds (ii) the average
closing price of the Common Shares during the six months prior to the date of
the change in control ("Closing Share Value"). If the closing price of the
Common Shares as of the date of the change in control is greater than the
exercise price of such option, then the individual can retain the option or
receive in exchange therefore cash equal to the number of shares underlying
the options multiplied by the amount by which the Closing Share Value exceeds
the exercise prices of the options. In addition, Norman M. Kranzdorf is
entitled to receive an additional sum to cover certain resulting income and
excise tax liabilities that may be incurred on all of the foregoing.
Furthermore, the Severance Benefits Agreement of each individual other than
Norman M. Kranzdorf provides that, to the extent that any of the foregoing
benefits granted to such individual would cause him to be liable for excise
tax liabilities, the benefits available to him shall be reduced to an amount
which would not require the payment of any such excise tax, but only if doing
so yields a greater after tax amount to such individual.
In addition, on March 19, 1997, the Company entered into Severance Benefits
Agreements with Peter Linneman, E. Donald Shapiro and James Selonick, trustees
of the Company, pursuant to which, if such individual is a trustee immediately
prior to a change in control, upon such a change in control and, in the event
the trustee holds any options to purchase Common Shares on the date of the
change in control, such individual shall be entitled to receive an amount
based on the formula described in clause (d) of the preceding paragraph. In
addition, the Severance Benefits Agreement of each trustee provides that, to
the extent that the foregoing benefits granted to such trustee would cause him
to be liable for excise tax liabilities, the benefits available to him shall
be reduced to an amount which would not require the payment of any such excise
tax, but only if doing so yields a greater after tax amount to such trustee.
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On April 20, 1993, the Board established an Executive Compensation Committee,
the function of which is to review and make recommendations to the Board and
the Plan Administrators regarding compensation for the executive officers of
the Company. The Executive Compensation Committee consists of Messrs.
Kranzdorf, Selonick and Shapiro. Other than Mr. Kranzdorf, who is the
President and Chief Executive Officer of the Company, none of the members of
the Executive Compensation Committee are employees of the Company.
Prior to the Company's initial public offering in November 1992, the Option
Plans were adopted by the Board and all of the then current shareholders of
the Company. In connection with the creation of the Option Plans, the Board
established the Option Plans Committee to administer the Option Plans. The
Option Plans Committee, which determines those key employees entitled to
grants of options under the Option Plans, is composed of Messrs. Kranzdorf and
Barrett, each of whom is an employee of the Company.
On June 6, 1995, the shareholders approved the Incentive Plan. The Board then
established the Incentive Plan Committee to administer the plan. The
Incentive Plan Committee, the function of which is to determine the trustees,
executive officers, key employees and other individuals who will be eligible
for awards under the plan, consists of Messrs. Linneman and Selonick, neither
of whom are employees of the Company.
To the Company's knowledge, there were no other interrelationships involving
the trustees of the Company and compensation decisions requiring disclosure in
this Proxy Statement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership
of the Common Shares, including Common Shares as to which a right to acquire
ownership exists (for example, through the exercise of stock options) within
the meaning of rule 13d-3(d)(1) under the Securities Exchange Act, as amended,
by each person known by the Company to own beneficially more than 5% of the
Common Shares, each trustee and Named Executive, and all trustees and
executive officers as a group as of March 1, 1998 (unless otherwise
indicated). As permitted by applicable Securities and Exchange Commission
rules, no separate information with respect to the Common Shares beneficially
owned by each of the other executive officers of the Company is given because
no such officer earned $100,000 or more in compensation in the fiscal year
ended December 31,1997.
Amount Percent
Name and Address Beneficially of
of Beneficial Owner (1) Owned Class (2)
- ----------------------- ------------ ---------
Norman M. Kranzdorf 614,594 (3) 5.6%
Edmund Barrett 41,339 (4) *
Robert H. Dennis 87,783 (5) *
Bernard J. Korman 6,050 (6) *
Graduate Health System, Inc.
22nd and Chestnut Streets
Philadelphia, PA 19103
Dr. Peter D. Linneman 12,633 (7) *
University of Pennsylvania
Wharton School of Business
Philadelphia, PA 19104
James B. Selonick 12,633 (8) *
11 Corbin Drive
Cincinnati, OH 45208
E. Donald Shapiro 22,633 (9) *
New York Law School
57 Worth St.
New York, NY 10013-2960
First Union Corporation 744,700 (10) 7.15%
One First Union Center
Charlotte, NC 28288
All trustees and executive
officers as a group (8 persons) 797,665 7.3%
- -----------
(1) Unless otherwise indicated, the address for each individual is 128 Fayette
Street, Conshohocken, PA 19428.
(2) Calculated based on 10,415,427 Common Shares outstanding and assuming,
with respect to each of the individuals listed above, the exercise of all
currently exercisable options to purchase Common Shares held by such
individual.
(3) Includes (a) 14,206 shares owned directly by Mr. Kranzdorf's wife, (b)
36,000 shares owned by her as trustee for the benefit of Michael Kranzdorf and
Betty Kranzdorf, (c) options to purchase 378,800 shares granted to him under
the Trustee Plan and (d) options to purchase 21,250 shares granted to Mrs.
Kranzdorf under the Employee Plan. All options were granted under either the
Employee Plan or the Trustee Plan and were exercisable immediately.
(4) Includes (a) options to purchase 18,000 Common Shares granted to him under
the Employee Plan, (b) options to purchase 16,000 Common Shares granted to him
under the Trustee Plan and (c) 3,642 Common Shares owned directly by Mr.
Barrett's spouse.
(5) Includes (a) options to purchase 54,000 Common Shares granted to him under
the Employee Plan, (b) options to purchase 13,000 Common Shares granted to him
under the Trustee Plan, (c) 169 Common Shares owned directly by Mr. Dennis's
spouse and (d) options to purchase 1,100 Common Shares granted to her under
the Employee Plan.
(6) Includes (a) options to purchase 1,500 Common Shares granted to him under
the Incentive Plan and (b) 3,900 Common Shares owned solely by his spouse.
(7) Includes (a) options to purchase 6,000 Common Shares granted to him under
the Trustee Plan, (b) options to purchase 4,500 Common Shares granted to him
under the Incentive Plan and (c) 400 Common Shares owned solely by his spouse.
(8) Includes options to purchase 5,000 Common Shares granted to him under the
Trustee Plan and options to purchase 4,500 Common Shares granted to him under
the Incentive Plan.
(9) Includes (a) options to purchase 3,000 Common Shares granted to him under
the Trustee Plan, (b) options to purchase 4,500 Common Shares granted to him
under the Incentive Plan and (c) 10,000 shares owned directly by Mr. Shapiro's
spouse.
(10) Reflects information as of December 31, 1997, obtained by the Company
from a Schedule 13G Statement dated February 11, 1998, filed by First Union
Corporation with the Securities and Exchange Commission pursuant to Section
13(g) of the Securities Exchange Act of 1934, as amended. First Union
Corporation is the parent holding company of Evergreen Asset Management Group
and Lieber and Company. First Union Corporation has sole voting and
dispositive power with respect to 744,700 of such Common Shares.
* Less than 0.1 percent.
<PAGE>
SECTION 16(a)
BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's trustees, executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission. Trustees, executive officers and greater than 10%
beneficial owners are required by regulation of the Securities and Exchange
Commission to furnish the Company with copies of all Section 16(a) Forms 3, 4
and 5 they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that all filing requirements
with respect to transactions during 1997 for all of its trustees, executive
officers, and greater than 10% beneficial owners were complied with.
SHAREHOLDERS PROPOSALS
Proposals of shareholders intended to be presented at the 1999 Annual Meeting
of Shareholders must be received by the Company at its principal executive
offices not later than December 1, 1998 for inclusion in the Company's proxy
statement and form of proxy relating to that meeting.
In addition, the Bylaws of the Company provide that in order for a shareholder
to nominate a candidate for election as a trustee at an annual meeting of
shareholders or propose business for consideration at such a meeting, notice
must be given to the secretary of the Company no more than 90 days nor less
than 60 days prior to the first anniversary of the preceding year's annual
meeting. The fact that the Company may not insist upon compliance with these
requirements should not be construed as a waiver by the Company of its right
to do so at any time in the future.
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report for the fiscal year ended December 31, 1997,
including financial statements, was previously sent to shareholders. The
Annual Report is not a part of the proxy solicitation materials.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Brokers and
nominees should forward soliciting materials to the beneficial owners of the
Common Shares held of record by such persons, and the Company will reimburse
them for their reasonable forwarding expenses. In addition to the use of the
mails, proxies may be solicited by trustees, officers and regular employees of
the Company, who will not be specially compensated for such services, by means
of personal calls upon, or telephonic or telegraphic communications with
shareholders or their personal representatives.
OTHER MATTERS
The Board knows of no matters other than those described in this Proxy
Statement which are likely to come before the Annual Meeting. If any other
matters properly come before the Annual Meeting, the persons named in the
accompanying form of proxy intend to vote the proxies in accordance with their
best judgment.
