SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
KONOVER PROPERTY TRUST, INC.
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(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
[X] No fee required.
[ ] 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:
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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 is
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[ ] 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.
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<PAGE>
KONOVER PROPERTY TRUST, INC.
11000 Regency Parkway, Suite 300
Cary, North Carolina 27511
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 3, 1999
----------------------------------------
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders of
Konover Property Trust, Inc., a Maryland corporation (the "Company"), will be
held at 11000 Regency Parkway, Atrium level, Cary, North Carolina 27511, on June
3, 1999, at 10:00 a.m. to elect directors to serve until the 2000 annual meeting
of stockholders or until their successors are duly elected and qualified and to
transact such other business as may properly come before the meeting and any
adjournment thereof.
Only stockholders of record at the close of business on March 15, 1999 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
/s/ Robin W. Malphrus
-----------------------------
ROBIN W. MALPHRUS, Esq.
Secretary
Dated: April 30, 1999
<PAGE>
KONOVER PROPERTY TRUST, INC.
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 3, 1999
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Konover Property Trust, Inc., a Maryland corporation
(the "Company"), of proxies from the holders of the Company's common stock for
use at the 1999 Annual Meeting of Stockholders to be held at 11000 Regency
Parkway, Atrium level, Cary, North Carolina 27511, on June 3, 1999 at 10:00
a.m., and at any adjournments or postponements thereof (the "Annual Meeting").
At the Annual Meeting, the stockholders will consider and vote upon the
election of directors to serve until the 2000 annual meeting of stockholders or
until their successors are duly elected and qualified and such other business as
may properly come before the meeting and any adjournment thereof.
This Proxy Statement and the accompanying form of proxy are first being
sent to stockholders on or about April 30, 1999.
This solicitation is made on behalf of the Board of Directors of the
Company. Costs of the solicitation will be borne by the Company. The Company
will reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to stockholders. Directors, officers and employees of the Company may also
solicit proxies by telephone, telegraph, fax or personal interview.
Holders of record of common stock of the Company (the "Common Stock") as of
the close of business on March 15, 1999 are entitled to receive notice of, and
to vote at, the Annual Meeting. The outstanding Common Stock constitutes the
only class of securities of the Company entitled to vote at the Annual Meeting,
and each share of Common Stock entitles the holder thereof to one vote. At the
close of business on March 15, 1999, there were 30,916,240 shares of Common
Stock issued and outstanding.
Unless contrary instructions are indicated on the proxy, all shares
represented by valid proxies received pursuant to this solicitation (and not
revoked before they are voted) will be voted at the Annual Meeting FOR the
election of the nine nominees. A stockholder may revoke his or her proxy at any
time before exercise by delivering to the Secretary of the Company a written
notice of such revocation, by filing with the Secretary of the Company a duly
executed proxy bearing a later date, or by voting in person at the Annual
Meeting.
The election of the directors of the Company requires the vote of a
plurality of all of the votes cast at the Annual Meeting provided a quorum is
present. For purposes of the election of directors, abstentions will not be
counted as votes cast and will have no effect on the result of the vote.
1
<PAGE>
PROPOSAL ONE:
ELECTION OF DIRECTORS
The Company's bylaws authorize the Board of Directors to set the number of
directors at no less than three nor more than fifteen. The number of directors
is currently set at nine. The nine nominees named below have been nominated for
election for one-year terms expiring at the 2000 annual meeting of stockholders
or until their successors are duly elected and qualified.
Unless marked otherwise, proxies received will be voted for the election of
each of the nominees named below. If any nominee becomes unable or unwilling to
serve before the Annual Meeting, the shares represented by proxy will be voted
for a substitute nominee designated by the Board of Directors. Alternatively,
the vacancy may be filled by the Board after the Annual Meeting. The Board of
Directors has no reason to believe that any of the nominees will be unwilling or
unable to serve if elected as a director. The nominees for election at the
Annual Meeting are set forth below.
<TABLE>
<CAPTION>
Name Age Principal Occupation Director Since
- ------------------------- ----- ------------------------------------------------------------- ---------------
<S> <C> <C> <C>
Simon Konover 76 Chairman of the Board 1998
C. Cammack Morton 47 President and Chief Executive Officer of the Company 1996
Patrick M. Miniutti 51 Executive Vice President and Chief Financial Officer of the 1996
Company
William D. Eberle 75 Chairman of Manchester Associates, Ltd. 1997
J. Richard Futrell, Jr. 68 Former Chairman and Chief Executive Officer of Centura 1993
Banks, Inc.
John W. Gildea 55 Managing Director of Gildea Management Company and 1996
Advisor for The Network Funds
Klaus P. Kretschmann 46 Principal of Lazard Fr-res Real Estate Investors LLC 1998
Jonathan O'Herron 69 Managing Director of Lazard Fr-res & Co. LLC NA
Mark S. Ticotin 50 Chief Operating Officer of Lazard Fr-res Real Estate NA
Investors LLC
</TABLE>
Simon Konover is the founder of Konover & Associates, a $500 million-plus
real estate enterprise located in West Hartford, Connecticut. The organization
includes shopping centers, office buildings, hotels and residential communities.
The shopping center portfolio includes over 100 centers and 11 million square
feet. In the mid-1960s, Mr. Konover began developing retail centers in South
Florida and in late 1989 founded Konover & Associates South, located in Boca
Raton, Florida. The Company purchased Konover & Associates South in 1998 and, in
connection with the acquisition, committed to appoint Mr. Konover as Chairman of
the Board. Mr. Konover's nomination for election to the Board at the Annual
Meeting was also agreed to as part of the acquisition. For a discussion of the
transaction with Mr. Konover, see "Certain Relationships and Related
Transactions -- Konover Transaction" below.
C. Cammack Morton joined the Company in December 1995 as Chief Operating
Officer and was elected President and a Director in January 1996. Effective
January 1, 1997, Mr. Morton became the Company's Chief Executive Officer. Prior
to his affiliation with the Company, Mr. Morton served as Managing Director of
Rothschild Realty, Inc. ("Rothschild") and President and Chief Executive Officer
of the Charter Oak Group, Ltd., a subsidiary of Rothschild engaged in the
development and management of factory outlet centers. He joined Rothschild in
1987 as Vice President, was promoted to Senior Vice President in 1989 and to
Managing Director in 1991.
Patrick M. Miniutti joined the Company as Executive Vice President, Chief
Financial Officer and Director in August 1996. Prior to his affiliation with the
Company, Mr. Miniutti served for three years as Executive Vice President, Chief
Financial Officer and Trustee of Crown American Realty Trust, a public REIT that
owns regional shopping malls. Prior thereto, Mr. Miniutti held senior financial
positions for a combined 12 years with New Market Companies, Inc., Western
Development Corporation (predecessor to The Mills Corporation) and Cadillac
Fairview Corporation Limited, which was preceded by ten years in public
accounting, principally with national firms. Mr. Miniutti is a member of the
American Institute of Certified Public Accountants and a former member of its
Real Estate Accounting Committee, which was responsible for promulgating most of
the real estate accounting rules in practice today.
William D. Eberle was a founder of Boise Cascade and is Chairman of
Manchester Associates, Ltd., a venture capital and international consulting
firm and Of Counsel to the law firm of Kaye, Scholer, Fierman, Hays & Handler.
Mr. Eberle
2
<PAGE>
also serves as a director of the Board of America Service Group Inc., a health
care services company, Showscan Entertainment, Inc., a movie-based software and
technology company, Ampco Pittsburgh Corporation, a steel fabrication equipment
company, Mitchell Energy & Development Corp., a gas and oil company, and Sirrom
Capital Corporation, a venture financing company.
J. Richard Futrell, Jr. is the retired Chairman of Centura Banks, Inc., a
position he held from 1989 to 1993.
John W. Gildea has been Managing Director of Gildea Management Company, an
investment advisory firm, since 1990. From 1986 to 1990, he was Senior Vice
President of Donaldson, Lufkin & Jenrette Securities Corporation. He is a
director of America Service Group, Inc. and The General Chemical Group, Inc.
Klaus P. Kretschmann is a principal of Lazard Fr-res Real Estate Investors,
LLC ("LFREI"), which manages several realty investment funds including
Prometheus Southeast Retail, LLC, which indirectly owns a controlling interest
in the Company. Prior to joining LFREI, Mr. Kretschmann was Senior Vice
President of Hyperian Credit Services Corporation where he was responsible for a
loan workout portfolio totaling $435 million. Mr. Kretschmann also serves as
chairman of The Fortress Group, Inc., a publicly traded national homebuilding
company.
Jonathan O'Herron is a Managing Director in the Banking Group of Lazard
Fr-res & Co. LLC. He is a leading investment banker, serving as financial
advisor to major U.S. and multinational corporations. Prior to joining Lazard
in 1971, Mr. O'Herron was Executive Vice President - Finance for the Penn
Central Company. Mr. O'Herron is a Trustee Emeritus of Middlebury College, a
Trustee of St. Vincent's Hospital and Medical Center and Chairman of the Board
of Trustees of the American Red Cross in Greater New York.
Mark S. Ticotin is acting Chief Operating Officer of LFREI. Before joining
Lazard, he was Senior Executive Vice President of Simon Property Group, Inc., a
publicly traded real estate investment trust ("SPG"), after SPG acquired
Corporate Property Investors ("CPI") in September 1998. Mr. Ticotin had been
President and Chief Operating Officer of CPI when it merged with SPG. The
portfolios of CPI and SPG consisted primarily of regional shopping centers. From
1988 to 1997, Mr. Ticotin was Senior Vice President of CPI and responsible for
its Leasing, Legal and Marketing Departments. Prior to joining CPI in 1983, he
was an attorney with the law firm of Cravath, Swaine & Moore.
Messrs. Kretschmann, O'Herron and Ticotin are nominated for election at the
Annual Meeting pursuant to the Company's Stockholder's Agreement with Prometheus
Southeast Retail, LLC entered into in connection with the issuance of a
controlling interest in the Company to Prometheus in 1998. See "Certain
Relationships and Related Transactions -- Prometheus Transaction" below.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ALL OF THE
ABOVE-LISTED NOMINEES FOR ELECTION AS DIRECTORS.
Information Regarding Meetings and Committees of the Board of Directors
The Board of Directors has an Audit Committee, an Executive Compensation
Committee and a Nominating Committee. During the year ended December 31, 1998,
the Board of Directors held nine meetings, the Audit Committee held four
meetings, the Executive Compensation Committee held four meetings and the
Nominating Committee held one meeting. Each director attended at least 75% of
the Board of Directors meetings and assigned committee meetings held during
1998.
AUDIT COMMITTEE. The Audit Committee, which consists of Messrs. Eberle
(Chairman), Kretschmann and Futrell, makes recommendations concerning the
engagement of independent public accountants, reviews the plans and results of
the audit engagement, approves professional services provided and fees charged
by the independent public accountants, reviews the independence of the
independent public accountants and determines the adequacy of the Company's
internal accounting controls.
EXECUTIVE COMPENSATION COMMITTEE. The Executive Compensation Committee,
which consists of Mr. Murry N. Gunty and Messrs. Gildea (Chairman) and Eberle,
determines the compensation of the executive officers and administers the
Company's 1993 Employee Stock Incentive Plan, its 1996 Restricted Stock Plan
and its 1995 Outside Directors' Stock Award Plan.
NOMINATING COMMITTEE. The Nominating Committee, which consist of Mr.
Arthur P. Solomon and Messrs. Futrell (Chairman) and Miniutti, determines the
slate of nominees for election to the Board of Directors by vote of the
stockholders. The Nominating Committee does not generally consider nominees
recommended by security holders.
3
<PAGE>
Compensation of Directors
The Company pays an annual fee of $12,000 to directors who are not
employees of the Company, plus a fee of $1,000 for each Board of Directors or
assigned committee meeting attended. The annual fee is payable in equal
installments semi-annually. Under the Company's 1995 Outside Directors' Stock
Award Plan, as amended by the Board, up to $20,000 of a director's annual
compensation is paid in shares of Common Stock or options to purchase shares of
Common Stock and the remainder paid in cash, at the direction of the director.
The shares are issued semiannually at a purchase price equal to 85% of the lower
of the market price on the date of issuance or six months earlier. Each
non-employee director also is reimbursed for expenses incurred in attending
meetings of the Board of Directors and assigned committees. Employees of the
Company who are directors receive no additional compensation for their service
as directors.
In addition, Mr. Konover receives $10,000 per month during his term on the
board pursuant to the Company's acquisition agreement relating to the Konover &
Associates South portfolio. See "Certain Relationships and Related Transactions
- -- Konover Transaction" below.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
current executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
- --------------------------- ----- ---------------------------------------------------------
<S> <C> <C>
C. Cammack Morton 47 President and Chief Executive Officer
Patrick M. Miniutti 51 Executive Vice President and Chief Financial Officer
William H. Neville 54 Executive Vice President and Chief Operating Officer
Christopher G. Gavrelis 45 Executive Vice President - Management and Administration
Connell L. Radcliff 44 Executive Vice President - Development
Fred P. Steinmark 51 Executive Vice President
Robin Malphrus 38 Senior Vice President, General Counsel and Secretary
Linda M. Swearingen 34 Senior Vice President - Finance/Investor Relations
Sona A. Thorburn 33 Vice President and Chief Accounting Officer
</TABLE>
See the biographical information for Messrs. Morton and Miniutti under
"Proposal One: Election of Directors."
William H. Neville, has served as Executive Vice President and Chief
Operating Officer since September 1997. Before joining the Company, Mr. Neville
was Regional President of Horizon Group Realty, a real estate investment trust
specializing in outlet centers, from January 1996 to July 1997. Prior to joining
Horizon, Mr. Neville held various positions with Charter Oak Partners, a
privately held outlet center developer, from January 1993 to December 1995, at
which time he was the President of the company.
Christopher G. Gavrelis joined the Company in December 1995. Mr. Gavrelis
was named Senior Vice President of Management and Administration in January 1996
and promoted to Executive Vice President in January 1998. Prior to his
affiliation with the Company, Mr. Gavrelis was Vice President - Property
Management of the Charter Oak Group for approximately four years. From 1989 to
1991, Mr. Gavrelis served as regional property manager for McArthur/Glen Realty
Corp. (now HGI Realty, Inc.), a company engaged in the development and operation
of factory outlet centers. Mr. Gavrelis is responsible for the Company's
management and administration activities.
Connell L. Radcliff has served as Senior Vice President of Development
since its organization in April 1993 and was promoted to Executive Vice
President in January 1999. Mr. Radcliff joined North-South Management
Corporation (a predecessor company) as Vice President - Leasing in 1989. From
1987 to 1989, Mr. Radcliff was a real estate broker for The Shopping Center
Group, a real estate brokerage firm specializing in national tenant
representation. Mr. Radcliff is responsible for the Company's development
activities.
Fred P. Steinmark was named Executive Vice President in July 1998 in
connection with the Company's acquisition of Konover & Associates South, of
which he served as President and Chief Operating Officer since 1990. The
acquisition agreement for Konover & Associates South provided for Mr.
Steinmark's appointment as Executive Vice President. See "Certain Relationships
and Related Transactions -- KONOVER TRANSACTION" below.
4
<PAGE>
Linda M. Swearingen was promoted from Vice President to Senior Vice
President in January 1998. Prior to being named Vice President of
Finance/Investor Relations in May 1996, Ms. Swearingen was Director of Leasing
for the Company, a position she had held since July 1993. From 1990 to 1993, Ms.
Swearingen served as Assistant Vice President - Commercial Real Estate for Bank
One Dayton.
Robin W. Malphrus was promoted from Vice President, Secretary and General
Counsel to Senior Vice President, Secretary and General Counsel in January
1999. Prior to being named Vice President, Secretary and General Counsel in
August 1998, Ms. Malphrus was Vice President and Secretary, a position she had
held since June 1996. Ms. Malphrus joined the Company in August 1994 as
Corporate Counsel, and prior to joining the Company, Ms. Malphrus was Corporate
Counsel for North Hills, Inc. for five years.
Sona A. Thorburn has served as Vice President and Chief Accounting Officer
since joining the Company in 1997. Prior to joining the Company, Ms. Thorburn
was a manager with the accounting firm of Ernst & Young LLP, where she was
employed for eight years. At Ernst & Young, Ms. Thorburn supervised audits for a
variety of clients, including the Company.
EXECUTIVE COMPENSATION
The following table sets forth the compensation of the Chief Executive
Officer and the four most highly compensated executive officers other than the
Chief Executive Officer who were serving as executive officers at December 31,
1998 (collectively, the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
---------------------------------- -----------------------------------
Restricted Securities
Stock Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Awards($)(4) Options(#)(10) Compensation ($)
- -------------------------------- ------ --------------- ----------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
C. Cammack Morton 1998 330,826 (3) 726,133(5) -- 4,280(11)
President and Chief 1997 336,072 (3) 670,538(5) -- 33,467(12)
Executive Officer 1996 287,692 (3) 1,019,250(5) 300,000 3,570(13)
Patrick M. Miniutti 1998 233,858 (3) 426,532(6) -- 4,464(11)
Executive Vice President and 1997 230,871 (3) 346,726(6) -- 19,000(12)
Chief Financial Officer 1996 70,769(1) (3) 819,313(6) 200,000 50,000(13)
William H. Neville 1998 237,203 (3) 196,425(7) -- 4,227(11)
Executive Vice President and 1997 65,059(2) (3) 205,800(7) 50,000 --
Chief Operating Officer 1996 -- -- -- -- --
Christopher G. Gavrelis 1998 173,996 (3) 134,156(8) -- 2,645(11)
Executive Vice President 1997 160,962 (3) 94,163(8) -- 11,915(12)
1996 129,742 (3) 214,750(8) 35,000 1,163(13)
Connell L. Radcliff 1998 193,979 (3) 105,806(9) 50,000 4,527(11)
Executive Vice President 1997 185,555 (3) 101,138(9) -- 13,712(12)
1996 181,923 (3) 39,750(9) -- 3,750(13)
</TABLE>
- ---------
(1) Mr. Miniutti joined the Company in August 1996 and, therefore, his salary
for 1996 represents only a portion of the year.
(2) Mr. Neville joined the Company in September 1997 and, therefore, his salary
for 1997 represents only a portion of the year.
(3) Bonuses for all of the officers of the Company for 1998, 1997 and 1996 were
paid in the form of shares of restricted Common Stock ("Restricted Stock")
and are reported under the Restricted Stock Award column of this table. The
shares of Restricted Stock paid as bonuses vest all at once ("cliff
vesting") after three years. The number of shares awarded is based on the
market price of a share of Common Stock on the last day of the applicable
calendar year. In consideration of the three-year vesting period,
Restricted Stock bonus amounts are set at 150% of an equivalent cash bonus
determined under the Company's MBO Plan. See " -- Executive Compensation
Committee Report -- BONUSES."
5
<PAGE>
(4) Unless otherwise indicated, all Restricted Stock reported here has been
exchanged for options to purchase shares of Restricted Stock at a purchase
price equal to 10% of the market value of a share on the date of grant
("Repurchase Rights"). The vesting schedule for all Repurchase Rights
mirrors that of the exchanged Restricted Stock.
(5) Mr. Morton receives a portion of his base annual salary, his periodic
increases in base annual salary, his annual bonus and his long-term
incentive compensation in the form of Restricted Stock as follows:
(a) 18,000 shares, with a value of $119,250 ($6.625 per share), were
granted as of December 31, 1996, subject to a three-year cliff vest,
as Mr. Morton's 1996 bonus;
(b) 90,000 shares, with a value of $900,000 ($10.00 per share), were
granted in 1996 to Mr. Morton as long-term incentive compensation.
These shares were replaced with a grant of 150,000 shares, with a
value of $993,750 ($6.625 per share), on March 1, 1997. The difference
in value is reported as 1997 compensation. These shares vest in ten
equal installments commencing March 1, 1997;
(c) 30,000 shares, with a value of $198,750 ($6.625 per share), were
granted on March 1, 1997, subject to a one-year cliff vest, as part of
Mr. Morton's base annual salary;
(d) 6,000 shares, with a value of $39,750 ($6.625 per share), were granted
on March 1, 1997, subject to a three-year cliff vest, as an increase
in Mr. Morton's base annual salary;
(e) On November 11, 1997, Mr. Morton was awarded an additional 21,000
shares of Restricted Stock, and each unvested share of Restricted
Stock then owned by Mr. Morton was exchanged for a Repurchase Right.
The additional 21,000 shares of Restricted Stock were awarded so that,
after taking into account the exercise price of the Repurchase Rights,
the value of such options would equal the value of Mr. Morton's
unvested Restricted Stock prior to the exchange. See " -- Executive
Compensation Committee Report -- RESTRICTED STOCK";
(f) 48,500 shares, with a value of $338,288 ($7.75 per share) net of a 10%
exercise price, were granted as of December 31, 1997, subject to a
three-year cliff vest, as Mr. Morton's 1997 bonus;
(g) 12,550 shares, with a value of $87,537 ($7.75 per share) net of a 10%
exercise price, subject to a three-year cliff vest, were awarded March
1, 1998 as an increase in Mr. Morton's base salary;
(h) 28,700 shares, with a value of $200,183 ($7.75 per share) net of a 10%
exercise price, subject to a one-year cliff vest, were awarded March
1, 1998 as part of Mr. Morton's base salary;
(i) 86,600 shares, with a value of $438,413 ($5.625 per share) net of a
10% exercise price, subject to a three-year cliff vest, were awarded
February 22, 1999 as Mr. Morton's 1998 bonus.
As of December 31, 1998, Mr. Morton owned 307,250 shares of Restricted
Stock (or Repurchase Rights) worth $1,942,897 ($7.0625 per share, net of a
10% exercise price for the Repurchase Rights). Dividends or dividend
equivalents are payable on such Restricted Stock and shares underlying such
Repurchase Rights.
(6) Mr. Miniutti receives a portion of his base annual salary, his periodic
increases in base annual salary, his annual bonus and his long-term
incentive compensation in the form of Restricted Stock as follows:
(a) 6,500 shares, with a value of $43,063 ($6.625 per share), were granted
as of December 31, 1996, subject to a three-year cliff vest, as Mr.
Miniutti's 1996 bonus;
(b) 90,000 shares, with a value of $776,250 ($8.625 per share), were
granted in 1996 to Mr. Miniutti as long-term incentive compensation.
These shares were replaced with a grant of 120,000 shares, with a
value of $795,000 ($6.625 per share), on March 1, 1997. The difference
in value is reported as 1997 compensation. These shares vest in ten
equal installments commencing March 1, 1997;
(c) 15,000 shares, with a value of $99,375 ($6.625 per share), were
granted on March 1, 1997, subject to a one-year cliff vest, as part of
Mr. Miniutti's base annual salary;
(d) 4,500 shares, with a value of $29,813 ($6.625 per share), were granted
on March 1, 1997, subject to a three-year cliff vest, as an increase
in Mr. Miniutti's base annual salary;
(e) On November 11, 1997, Mr. Miniutti was awarded an additional 15,000
shares of Restricted Stock, and each unvested share of Restricted
Stock then owned by Mr. Miniutti was exchanged for a Repurchase Right.
The additional 15,000 shares of Restricted Stock were awarded so that,
after taking into account the exercise price
6
<PAGE>
of the Repurchase Rights, the value of such options would equal the
value of Mr. Miniutti's unvested Restricted Stock prior to the
exchange. See " -- Executive Compensation Committee Report --
RESTRICTED STOCk";
(f) 28,500 shares, with a value of $198,788 ($7.75 per share) net of a 10%
exercise price, were granted as of December 31, 1997, subject to a
three-year cliff vest, as Mr. Miniutti's 1997 bonus;
(g) 9,350 shares, with a value of $65,216 ($7.75 per share) net of a 10%
exercise price, subject to a three-year cliff vest, were awarded March
1, 1998 as an increase in Mr. Miniutti's base salary;
(h) 14,350 shares, with a value of $100,091 ($7.75 per share) net of a 10%
exercise price, subject to a one-year cliff vest, were awarded March
1, 1998 as part of Mr. Miniutti's base salary;
(i) 51,600 shares, with a value of $261,225 ($5.625 per share) net of a
10% exercise price, subject to a three-year cliff vest, were awarded
February 22, 1999 as Mr. Miniutti's 1998 bonus.
As of December 31, 1998, Mr. Miniutti owned 207,200 shares of Restricted
Stock (or Repurchase Rights) worth $1,311,145 ($7.0625 per share, net of a
10% exercise price for the Repurchase Rights). Dividends or dividend
equivalents are payable on such Restricted Stock and shares underlying such
Repurchase Rights.
(7) Mr. Neville receives his annual bonus and his long-term incentive
compensation in the form of Restricted Stock as follows:
(a) 20,000 shares, with a value of $150,000 ($7.50 per share), were
granted on September 8, 1997 to Mr. Neville as long-term incentive
compensation. These shares vest in three equal installments commencing
March 1, 1998;
(b) On November 11, 1997, Mr. Neville was awarded an additional 2,250
shares of Restricted Stock, and each unvested share of Restricted
Stock then owned by Mr. Neville was exchanged for a Repurchase Right.
The additional 2,250 shares of Restricted Stock were awarded so that,
after taking into account the exercise price of the Repurchase Rights,
the value of such options would equal the value of Mr. Neville's
unvested Restricted Stock prior to the exchange. See " -- Executive
Compensation Committee Report -- RESTRICTED STOCK";
(c) 8,000 shares, with a value of $55,800 ($7.75 per share) net of a 10%
exercise price, were granted as of December 31, 1997, subject to a
three-year cliff vest, as Mr. Neville's 1997 bonus;
(d) 38,800 shares, with a value of $196,425 ($5.625 per share) net of a
10% exercise price, subject to a three-year cliff vest, were awarded
February 22, 1999 as Mr. Neville's 1998 bonus.
As of December 31, 1998, Mr. Neville owned 30,250 Repurchase Rights worth
$190,753 ($7.0625 per share, net of a 10% exercise price). Dividend
equivalents are payable on all of the shares underlying Mr. Neville's
Repurchase Rights.
(8) Mr. Gavrelis receives his annual bonus and his long-term incentive
compensation in the form of Restricted Stock as follows:
(a) 16,667 shares, with a value of $175,000 ($10.50 per share), were
granted on February 28, 1996 to Mr. Gavrelis as long-term incentive
compensation. These shares vest in three equal installments commencing
January 1, 1997;
(b) 6,000 shares, with a value of $39,750 ($6.625 per share), were granted
as of December 31, 1996, subject to a three-year cliff vest, as Mr.
Gavrelis' 1996 bonus;
(c) On November 11, 1997, Mr. Gavrelis was awarded an additional 1,350
shares of Restricted Stock, and each unvested share of Restricted
Stock then owned by Mr. Gavrelis was exchanged for a Repurchase Right.
The additional 1,350 shares of Restricted Stock were awarded so that,
after taking into account the exercise price of the Repurchase Rights,
the value of such options would equal the value of Mr. Gavrelis'
unvested Restricted Stock prior to the exchange. See " -- Executive
Compensation Committee Report -- RESTRICTED STOCK";
(d) 13,500 shares, with a value of $94,163 ($7.75 per share) net of a 10%
exercise price, were granted as of December 31, 1997, subject to a
three-year cliff vest, as Mr. Gavrelis' 1997 bonus;
(e) 26,500 shares, with a value of $134,156 ($5.625 per share) net of a
10% exercise price, subject to a three-year cliff vest, were awarded
February 22, 1999 as Mr. Gavrelis' 1998 bonus.
7
<PAGE>
As of December 31, 1998, Mr. Gavrelis owned 31,961 shares of Restricted
Stock (or Repurchase Rights) worth $205,583 ($7.0625 per share, net of a
10% exercise price for the Repurchase Rights). Dividends or dividend
equivalents are payable on all of such Restricted Stock and the shares
underlying Mr. Gavrelis' Repurchase Rights.
(9) Mr. Radcliff receives his annual bonus in the form of Restricted Stock as
follows:
(a) 6,000 shares, with a value of $39,750 ($6.625 per share), were granted
as of December 31, 1996, subject to a three-year cliff vest, as Mr.
Radcliff's 1996 bonus;
(b) On November 11, 1997, Mr. Radcliff was awarded an additional 700
shares of Restricted Stock, and each unvested share of Restricted
Stock then owned by Mr. Radcliff was exchanged for a Repurchase Right.
The additional 700 shares of Restricted Stock were awarded so that,
after taking into account the exercise price of the Repurchase Rights,
the value of such options would equal the value of Mr. Radcliff's
unvested Restricted Stock prior to the exchange. See " -- Executive
Compensation Committee Report -- RESTRICTED STOCK";
(c) 14,500 shares, with a value of $101,138 ($7.75 per share) net of a 10%
exercise price, were granted as of December 31, 1997 subject to a
three-year cliff vest, as Mr. Radcliff's 1997 bonus;
(d) 20,900 shares, with a value of $105,806 ($5.625 per share) net of a
10% exercise price, subject to a three-year cliff vest, were awarded
February 22, 1999 as Mr. Radcliff's 1998 bonus.
As of December 31, 1998, Mr. Radcliff owned 21,200 Repurchase Rights worth
$133,463 ($7.0625 per share, net of a 10% exercise price). Dividend
equivalents are payable on all of the shares underlying Mr. Radcliff's
Repurchase Rights.
(10) In November 1998 the Company exchanged all options reported in this column
for Repurchase Rights (with an identical exercise price and vesting
schedule). The only economic effect of such exchange is the dividend
equivalent right associated with the Repurchase Rights. All amounts
reported in 1996 were replaced in 1997. This table excludes shares
underlying Repurchase Rights that have a 10% exercise price, the value of
which shares are reported under the Restricted Stock Award column.
(11) Amounts shown represent matching contributions to the Company's 401(k)
Retirement and Savings Plan.
(12) In 1997 Messrs. Morton, Miniutti, Gavrelis and Radcliff received
distributions from the cancellation of a Split Dollar Insurance Plan in the
amounts of $29,746, $15,000, $10,000 and $10,000, respectively, as well as
matching contributions to the Company's 401(k) Retirement and Savings Plan
of $3,721, $4,000, $1,915 and $3,712, respectively.
(13) In 1996 Messrs. Morton, Gavrelis and Radcliff received matching
contributions to the Company's 401(k) Retirement and Savings Plan of
$3,570, $1,163 and $3,750, respectively. In addition, in 1996, Mr. Miniutti
received an allowance for relocation expenses of $50,000.
The following table provides information regarding the stock options
granted during 1998 to the Named Executive Officers:
Option Grants in Last Fiscal Year(1)
<TABLE>
<CAPTION>
Individual Grants
- ----------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Number of Percent of Total Annual Rates of Stock
Securities Underlying Options Granted Price Appreciation for
Options to Employees Exercise Option Term ($)(2)
Granted in Fiscal Year Price --------------------------
<S> <C> <C> <C> <C> <C> <C>
Expiration
Name (#) (%) ($) Date 5%($) 10%($)
- ------------------------- ----------------------- ----------------- --------- ------------- --------- ----------
C. Cammack Morton -- -- -- -- -- --
Patrick M. Miniutti -- -- -- -- -- --
William H. Neville -- -- -- -- -- --
Christopher G. Gavrelis 50,000(3) 33% $ 7.50 11/11/2008 235,835 597,653
</TABLE>
- ---------
(1) Excludes Repurchase Rights, which are reported under the "Restricted Stock
Awards" column of the Summary Compensation Table.
8
<PAGE>
(2) In accordance with SEC rules, these columns show gains that might exist for
the respective options, assuming the market price of the Company's Common
Stock appreciates from the date of grant over a period of ten years at
annualized rates of five and ten percent, respectively. The actual value,
if any, on stock option exercises will depend on the future performance of
the Company's Common Stock, as well as the option holders' continued
employment through the four-year vesting period. There can be no assurance
that the value, if any, ultimately realized by the executive will be at or
near the values shown above.
(3) 20% vested upon grant with the remainder at 25% per year. The Named
Executive Officer is entitled to an amount equal to the dividends that
would have been paid on the shares underlying such options had they been
outstanding.
The following table sets forth certain information concerning the number of
shares of Common Stock underlying options held by each of the Named Executive
Officers and the value of such options at December 31, 1998:
Fiscal Year-End Option Values(1)
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities Underlying In-the-money
Unexercised Options Options at
at Fiscal Fiscal Year-End
Year-End (#) ($)
Exercisable/ Exercisable/
Name Unexercisable (2) Unexercisable (3)
- ---- ----------------------- ---------------------
<S> <C> <C>
C. Cammack Morton 150,000/150,000 215,625/215,625
Patrick M. Miniutti 80,000/120,000 115,000/172,500
William H. Neville 20,000/30,000 -- / --
Christopher G. Gavrelis 14,000/21,000 20,125/30,188
Connell L. Radcliff 10,000/59,650 -- / --
</TABLE>
- ---------
(1) Excludes Repurchase Options, which are reported under the "Restricted Stock
Awards" column of the Summary Compensation Table.
(2) Future exercisability is subject to vesting and the optionee remaining
employed by the Company.
(3) Value is calculated by subtracting the exercise price from the fair market
value of the securities underlying the option at fiscal year-end and
multiplying the results by the number of in-the-money options held. Fair
market value was based on closing market price of the Common Stock at
December 31, 1998 ($7 1/16th).
Employment Agreements
ANNUAL COMPENSATION AND BASIC TERMS. The Company is a party to employment
agreements with Messrs. Morton, Miniutti, Gavrelis and Neville. The agreements
with Messrs. Morton, Miniutti and Neville currently continue through February
29, 2004. These agreements originally had a three-year term, but were extended
to five years in connection with the change in control of the Company as a
result of the issuance of a controlling interest in the Company to Prometheus
Southeast Retail Trust in 1998 (see "Certain Relationships and Related
Transactions -- PROMETHEUS TRANSACTION" below). The agreement with Mr. Gavrelis
currently continues through February 28, 2002. The term of each of the four
employment agreements is automatically extended for an additional year on March
1, 2000 and each year thereafter, subject to the right of either party to
terminate as of the end of the then-existing term by giving written notice at
least 30 days before the March 1 extension date. If the employment of any
executive is terminated due to the change of control of the Company, an
additional two years will be added to the unexpired term of the respective
agreements. Pursuant to their respective agreements, each executive is required
to devote his entire business time to the Company and is prohibited from
competing with the Company for a period of one year following termination of
employment. The employment agreements provide for base annual cash salaries as
follows: Mr. Morton -- $330,000; Mr. Miniutti -- $225,000; Mr. Neville --
$225,000; and Mr. Gavrelis -- $185,700. In addition, Messrs. Morton and Miniutti
receive Restricted Stock as part of their base annual compensation, based on an
equivalent cash value of approximately $200,000 and $100,000, respectively. The
number of restricted shares issued annually is adjusted on March 1st of each
year based on the previous year-end market price of the stock. Such Restricted
Stock is subject to a one-year cliff vest. The base annual salaries are subject
to periodic increases based upon the performance of the Company and the
executive. Messrs. Morton and Miniutti agreed to take all raises in the form of
Restricted Stock subject to a three-year cliff vest. If the employment of any
executive is terminated without cause (as defined in the respective agreements),
such executive will be entitled to (i) the greater of the base salary payable to
the executive for the remainder of the then-existing employment term or one
year's base salary, (ii) the product of the number of years
9
<PAGE>
representing the unexpired term of the agreement and an amount equal to the
average bonus paid to such executive over the three years immediately prior to
termination and (iii) certain other accrued benefits.
LONG-TERM COMPENSATION. As of March 1, 1997, in recognition of the
increases in their responsibilities and after consultation with an independent
executive compensation consultant, the Independent Directors replaced the
previous long-term incentive plan awards of 90,000 shares of Restricted Stock
for Messrs. Morton and Miniutti with grants of 150,000 shares and 120,000
shares, respectively. These grants were issued pursuant to the Company's 1996
Restricted Stock Plan. These restricted shares vest in ten equal annual
installments commencing on March 1, 1997, provided each executive continues to
be employed by the Company. If the Company terminates the executive without
cause (as defined in their respective employment agreements) all unvested shares
of Restricted Stock will become fully vested. Mr. Neville was awarded 20,000
shares of Restricted Stock, which vests in three equal annual installments
commencing March 1, 1998, provided he continues to be employed by the Company.
Mr. Gavrelis was awarded 16,667 shares of Restricted Stock, which vest in three
equal annual installments commencing December 14, 1996, provided that he
continues to be employed by the Company.
In addition, the employment agreements for Messrs. Morton, Miniutti,
Neville and Gavrelis provide for the grant of options to purchase 300,000,
200,000, 50,000 and 35,000 shares of Common Stock, respectively. For information
regarding such options as well as the Restricted Stock described in the
preceding paragraph, see the Summary Compensation Table above.
Change in Control Arrangements
Under the employment agreements, termination without cause includes any
termination resulting from a change in control of the Company. The term "change
in control" generally is defined under the employment agreements to include the
first to occur of the following: (i) any person or group owns or controls 50% or
more of the outstanding Common Stock, (ii) any person or group who owned less
than 5% of the outstanding Common Stock on the date of the agreement owns 50% or
more of the outstanding Common Stock or (iii) the stockholders of the Company
approve a business combination that will result in a change in ownership of 50%
or more of the outstanding Common Stock. Upon the occurrence of a change in
control of the Company, all non-vested Restricted Stock will become immediately
vested.
In addition, upon the occurrence of a change in control of the Company (as
defined in the Stock Incentive Plan), all non-vested stock options granted
thereunder become immediately vested and exercisable in full. "Change in
control" generally is defined under the Stock Incentive Plan to occur at such
time as any person or group beneficially owns at least 25% of the outstanding
Common Stock.
Executive Compensation Committee Report
EXECUTIVE OFFICER COMPENSATION POLICIES. The goals of the Executive
Compensation Committee (the "Committee") with respect to the compensation of the
Company's executive officers are to (i) provide a competitive total compensation
package that enables the Company to attract and retain qualified executives,
(ii) align the compensation of such executives with the Company's overall
business strategies and (iii) provide each executive officer with a significant
equity stake in the Company, which serves to align compensation with the
interests of stockholders. To this end, the Committee determines executive
compensation consistent with a philosophy of compensating executive officers
based on their responsibilities and the Company's performance in attaining
financial and non-financial objectives.
The primary components of the Company's executive compensation program are:
(i) base salaries, (ii) performance-based annual bonuses, (iii) stock options
and (iv) Restricted Stock. The more senior the position, the greater the
compensation that varies with performance and the greater the portion that is in
the form of options or Restricted Stock.
BASE SALARIES. Base salaries for the Company's Named Executive Officers, as
well as changes in such salaries, are based upon recommendations of the Chief
Executive Officer, taking into account such factors as competitive industry
salaries; a subjective assessment of the nature of the position; the
contribution and experience of the officer; and the length of the officer's
service. Under the Chief Executive Officer's direction, the Chief Operating
Officer reviews all salary recommendations with the Committee, which then
approves or disapproves such recommendations. The Chief Executive Officer
reviews any salary recommendations for the Chief Operating Officer with the
Committee. The Committee has engaged a national executive compensation
consultant for the purpose of obtaining comparative information and advice on
each of the components of executive compensation. The Committee believes that
the majority of the Company's executive officers are at or near the average for
base salaries and total compensation as compared to that of the Company's peers.
The Committee would like to increase base salaries to the 75th percentile level
in the future. See " -- Employment Agreements -- ANNUAL COMPENSATION AND BASIC
TERMS."
BONUSES. Annual bonuses are determined under a Management By Objectives
(MBO) plan based on Company and individual performance. The weighting between
Company performance and individual performance is determined on the
10
<PAGE>
basis of position and responsibilities. Performance targets are determined for
both Company performance and individual performance. Achieving the targets would
ordinarily result in bonuses ranging from 5% to 60% of base salary, with maximum
bonuses ranging from 10% to 70% of base salary for performance achievements
greater than the targets. All officers of the Company receive 100% of their
bonus in the form of Restricted Stock with a three-year cliff vest. In
consideration therefor, each officer receives shares of Restricted Stock equal
to 150% of the value of the appropriate cash bonus.
STOCK OPTIONS. The Company established an Employee Stock Incentive Plan
(the "Stock Incentive Plan") in 1993 for the purpose of attracting and retaining
the Company's executive officers and other employees. A maximum of 2,800,000
shares of Common Stock are issuable under the Stock Incentive Plan. The Stock
Incentive Plan allows for the grant of incentive and nonqualified options
(within the meaning of the Internal Revenue Code) that are exercisable at a
price equal to the closing price of the Common Stock on the New York Stock
Exchange on the trading day immediately preceding the date of grant. All of the
Company's executive officers are eligible to receive options to purchase shares
of Common Stock granted under the Stock Incentive Plan. The Committee believes
that stock option grants are a valuable motivating tool and provide a long-term
incentive to management. The Committee also believes that issuing stock options
to executives benefits the Company's stockholders by encouraging executives to
own the Company's stock, thus aligning executive compensation with stockholder
interests. Options for 150,000 shares were granted during 1998. In November
1998, certain holders exchanged 735,000 options for Repurchase Rights (with
identical exercise prices and vesting schedules). The only economic effect of
such exchange is the dividend equivalent right associated with the Repurchase
Rights. See " -- RESTRICTED STOCK AND REPURCHASE RIGHTS" below.
RESTRICTED STOCK AND REPURCHASE RIGHTS. The Company established a
restricted stock plan (the "Restricted Plan") in 1996, reserving 350,000 shares
of Common Stock for issuance thereunder, to give the Committee more flexibility
in designing equity-based compensation arrangements to attract, motivate and
retain executives and other key employees. Such equity-based compensation is
designed to align more closely the financial interests of management with that
of the stockholders. In 1997 and 1998, the Company reserved in the aggregate an
additional 1,900,000 shares of Common Stock for issuance under the Restricted
Plan. The Restricted Plan, which is administered by the Committee, provides for
the grant of Restricted Stock awards to any new or existing employee of the
Company, including executive officers. Awards under the Restricted Plan
typically will be subject to various vesting schedules ranging from one to ten
years from the date of grant. The Restricted Plan permits the Committee to
customize the vesting schedule by deferring the commencement date, lengthening
the vesting period and/or conditioning vesting upon the achievement of specified
performance goals. During 1998, the Company granted 338,052 shares of Restricted
Stock to officers and other key employees.
In 1997, the Company supplemented the Restricted Plan so that officers
would not have to sell their shares of Restricted Stock to meet their tax
obligations incurred upon the vesting of such shares. The Restricted Plan as
supplemented provides that Restricted Stock may be replaced by Repurchase
Rights, which entitle the holder to purchase Restricted Stock at an exercise
price equal to 10% of the value of a share on the date of grant of the
Repurchase Right. The Repurchase Rights vest on the same schedule as the shares
of Restricted Stock that they replaced. Under the supplemented Restricted Plan,
holders of Repurchase Rights will also be entitled to cash payments equal to the
value of the dividends that would have been paid on the shares underlying the
Repurchase Rights. The executives may exercise the Repurchase Rights at any time
after vesting and within 15 years of the date of grant.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. C. Cammack Morton's compensation
for 1998 as the Company's President and Chief Executive Officer consisted of an
annual base salary, pursuant to his above-described employment agreement, of
$617,720 ($287,720 of which was paid in the form of Restricted Stock, subject to
one-year and three-year cliff vesting), which is subject to periodic increases
to be determined by the Committee in its discretion based upon the Committee's
or the Board's subjective determination of the performance of the Company and
Mr. Morton. Mr. Morton's base salary was increased effective March 1, 1998 by
$47,787, paid in the form of Restricted Stock with a three-year cliff vest. The
increase was based in part on Mr. Morton's successful negotiation of the
Prometheus and Konover transactions (see "Certain Relationships and Related
Transactions" below). In addition, consistent with the intent of the bonus plan
discussed above, the Committee granted a bonus to Mr. Morton for 1998 in the
form of 86,600 Repurchase Rights subject to a three-year cliff vest, which had a
market value at date of grant of $438,413, net of a 10% exercise price. Eighty
percent of the bonus was based on the Company's exceeding the target increase in
FFO for 1998; the remaining 20% was not based on any specific criteria but was
awarded in the subjective discretion of the Committee.
SECTION 162(M) OF THE INTERNAL REVENUE CODE. The Company does not expect
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), to
affect the deductibility for federal income tax purposes of the compensation of
the Company's executive officers in 1998. In the future, the Company intends to
review periodically the applicability of Section 162(m) to the Company's
compensation programs, including its potential impact on stock options and
Restricted
11
<PAGE>
Stock awarded to executive officers, and, if considered appropriate, to develop
a policy with respect to the Company's compliance with Section 162(m).
The Executive Compensation Committee is pleased to submit this report to
the stockholders.
John W. Gildea, Chairman
Murry N. Gunty
William D. Eberle
THE FOREGOING REPORT SHOULD NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE AND SHALL NOT OTHERWISE
BE DEEMED FILED UNDER SUCH ACTS.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the following individuals (none of whom was or had been an
officer or employee of the Company) served on the Executive Compensation
Committee: Messrs. Gildea, Gunty and Eberle. No member of the Executive
Compensation Committee was or is an officer or employee of the Company.
Mr. Gunty was (until recently) a principal of the general partner of the
parent entities of Prometheus Southeast Trust ("Prometheus") and was also on the
Board of Trustees of Prometheus. The Company sold 21,052,631 shares of common
stock to Prometheus during 1998 for $200 million. See "Certain Relationships and
Related Transactions -- PROMETHEUS TRANSACTION" below.
BENEFICIAL OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of March 19, 1999 by: (a) each Named
Executive Officer; (b) each director and nominee; (c) current executive officers
and directors as a group; and (d) each person or group known by the Company to
beneficially own more than five percent of the Common Stock. Except as otherwise
described in the notes below, the following beneficial owners have sole voting
power and sole investment power with respect to all shares of Common Stock set
forth opposite their name.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Beneficial Ownership(1) of Class(2)
------------------------- ------------
<S> <C> <C>
C. Cammack Morton ........................................... 312,016(3) 1.0%
Patrick M. Miniutti ......................................... 189,921(4) *
William H. Neville .......................................... 46,216(5) *
Christopher G. Gavrelis ..................................... 36,034(6) *
Connell L. Radcliff ......................................... 154,791(7) *
William D. Eberle ........................................... 6,095 *
J. Richard Futrell, Jr. ..................................... 5,044(8) *
John W. Gildea .............................................. 914,877(9) 2.9%
Murry N. Gunty .............................................. 21,052,631(10) 68.1%
Simon Konover ............................................... --(11) --
Klaus P. Kretschmann ........................................ 21,052,631(10) 68.1%
Jonathan O'Herron ........................................... 21,052,631(10) 68.1%
Arthur P. Solomon ........................................... 21,052,631(10) 68.1%
Mark S. Ticotin ............................................. 21,052,631(10) 68.1%
All current executive officers and directors as a group (16) 22,747,542(12) 70.1%
Prometheus Southeast Retail Trust ........................... 21,052,631(10) 68.1%
</TABLE>
- ---------
(1) Includes shares issuable upon exercise or conversion of other securities
within the next 60 days.
(2) An asterisk (*) indicates less than one percent. Shares issuable upon
exercise or conversion of other securities within the next 60 days are
deemed outstanding for the purpose of computing the percentage of
outstanding securities owned by the person or group named but are not
deemed to be outstanding for the purpose of computing the percentage of the
class by any other person.
12
<PAGE>
(3) Includes 295,400 shares issuable upon exercise of vested Repurchase Rights.
See " -- Executive Compensation -- Summary Compensation Table" and " --
Executive Compensation Committee Report" for a discussion of Repurchase
Rights.
(4) Includes 177,700 shares issuable upon exercise of vested Repurchase Rights.
(5) Includes 44,834 shares issuable upon exercise of vested Repurchase Rights.
(6) Includes 30,172 shares issuable upon exercise of vested Repurchase Rights.
(7) Includes 10,000 shares issuable upon exercise of vested Repurchase Rights
and 59,650 shares issuable upon exercise of vested stock options.
(8) Includes 2,000 shares issuable upon exercise of vested stock options.
(9) Includes (i) 4,000 shares held by Mr. Gildea's spouse as custodian for
their children as to which Mr. Gildea has sole voting power only and as to
which he disclaims beneficial ownership, (ii) 111,111 shares of Common
Stock presently issuable upon conversion of Preferred Stock as to which Mr.
Gildea has sole voting and dispositive power, (iii) 20,000 shares issuable
upon exercise of warrants as to which Mr. Gildea has sole voting power and
sole dispositive power, (iv) 766,666 shares of Common Stock presently
issuable upon conversion of Preferred Stock and warrants owned by Network
Fund III, Ltd. ("Network"), with respect to which Mr. Gildea has shared
dispositive power only and (v) 18,100 shares of Common Stock owned by
Network, with respect to which Mr. Gildea has shared dispositive power
only. Mr. Gildea is a director of Network and a Managing Director of Gildea
Management Company, which has an investment advisory agreement with
Network.
(10) Prometheus Southeast Retail Trust ("Prometheus") is the direct owner of
this interest in the Company. Prometheus Southeast Retail LLC owns all of
the common equity interests in Prometheus. Prometheus Southeast Retail LLC
has three managing members: LF Strategic Realty Investors II L.P. ("LFSRI
II") is a 86.1% managing member, LFSRI II Alternative Partnership L.P.
("Alternative") is a 10.4% managing member and LFSRI II-CADIM Alternative
Partnership L.P. ("CADIM") is a 3.5% managing member. Lazard Fr-res Real
Estate Investors LLC ("LFREI"), which is controlled by Lazard Fr-res & Co.
LLC, is the general partner of each of LFSRI II, Alternative and CADIM. Mr.
O'Herron is a Managing Director of Lazard Fr-res & Co. LLC, Mr. Kretschmann
is a principal of LFREI and Mr. Ticotin is the Chief Operating Officer of
LFREI. (Until recently, Messrs. Gunty and Solomon were also principals of
LFREI.) As a consequence of the foregoing, Messrs. Gunty, Kretschmann,
O'Herron, Solomon and Ticotin each have (or had) an indirect beneficial
ownership interest in the Company, as well as indirect shared investment
power and indirect shared voting power. Messrs. Gunty, Kretschmann,
O'Herron, Solomon and Ticotin hereby disclaim beneficial ownership of the
shares of the Company held by Prometheus except to the extent of their
pecuniary interests therein.
(11) Excludes (i) shares issuable upon exercise of warrants owned by adult
children living outside of Mr. Konover's home and (ii) shares issuable (at
the Company's option) upon redemption of partnership interests in KPT
Properties, L.P., which partnership interests are not redeemable within the
next 60 days.
(12) In addition to the information set forth at footnotes 3-9 of this table,
the Company's executive officers who are not separately listed in this
table beneficially own 19,027 shares, of which 16,029 are issuable upon
exercise of vested Repurchase Rights.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PROMETHEUS TRANSACTION. Prometheus Southeast Retail Trust, which is
indirectly controlled by LFREI, acquired its interest in the Company during 1998
pursuant to the shareholder-approved Stock Purchase Agreement with the Company.
The purchases were made on the dates and in the amounts set forth below:
<TABLE>
<CAPTION>
No. of Shares
--------------
<S> <C>
March 23, 1998 2,350,000
August 10, 1998 2,913,157
August 28, 1998 5,263,158
September 29, 1998 10,526,316
----------
21,052,631
==========
</TABLE>
All issuances were at $9.50 per share for an aggregate purchase price of $200
million. The Company believes that Prometheus used its own funds for the
purchase.
13
<PAGE>
Pursuant to a Stockholders Agreement entered into between Prometheus and
the Company, the Company is obligated to take all actions necessary to cause the
Board of Directors to consist of at least nine members, three of which are
designated by Prometheus (the "Prometheus Nominees"). Two of the Prometheus
Nominees are chosen at the sole discretion of Prometheus; the third is subject
to the reasonable approval of the Company. Of the nine individuals nominated for
election at the Annual Meeting, the Prometheus Nominees are Messrs.
Kretschmann, O'Herron and Ticotin.
The number of Prometheus Nominees that Prometheus is entitled to nominate
decreases as the value of its ownership interest in the Company decreases, as
set forth below:
<TABLE>
<CAPTION>
Investment Value Number of Prometheus Nominees
- ---------------- -----------------------------
<S> <C>
$50 million or more Three or proportional one-third share of the Board if
Board size over nine
$25 million to $50 million Two or proportional two-ninths share of the Board if
Board size over nine
$10 million to $25 million One or proportional one-ninth share of the Board if
Board size over nine
Less than $10 million None
</TABLE>
Mr. Kretschmann is, and Messrs. Gunty and Solomon were, principals of
LFREI, the general partner of the parent entities of Prometheus, and Mr.
Ticotin is an executive officer of LFREI. Mr. O'Herron is a Managing Director
of Lazard Fr-res & Co. LLC, which indirectly controls LFREI and Prometheus.
Until recently, Mr. Gunty was a member of the Board of Trustees and the Vice
President of Prometheus; Mr. Kretschmann is a member of the Board of Trustees
of Prometheus. (See footnote 10 under "Beneficial Ownership.")
The Company and Prometheus Southeast Retail L.L.C. also entered into (i) a
Registration Rights Agreement with respect to such shares, (ii) a Stockholders
Agreement pursuant to which, among other things, Messrs. Gunty, Kretschmann and
Solomon were appointed to the Board of Directors of the Company and (iii) a
Contingent Value Right Agreement, which provides that if Prometheus Southeast
Retail L.L.C. has not doubled its investment (through stock appreciation,
dividends, or both) by January 1, 2004, the Company will pay it in cash or
stock, an amount necessary to achieve such a return, subject to a maximum
payment of 4,500,000 shares or the cash value thereof.
KONOVER TRANSACTION. Between August 13, 1998 and January 12, 1999 the
Company purchased nine community shopping centers from affiliates of Konover &
Associates South, a privately held real estate development firm based in Boca
Raton, Florida (the "Konover Transaction"). Simon Konover, who became Chairman
of the Board of Directors in connection with the Konover Transaction, and Fred
Steinmark, who became an Executive Vice President, were affiliates of the
sellers in the transaction.
The purchase price for the Konover Transaction consisted of the assumption
of $55.2 million of fixed rate indebtedness, $26.8 million in cash and the
issuance of 369,073 limited partnership units ("Units") of KPT Properties, L.P.
The purchase price for the acquisition was determined as a result of arms-length
negotiation between the Company and the sellers, with the Units being valued at
$9.50 per share. The price to be paid was determined by the Company's board of
directors.
Only one of the acquired shopping centers, Lake Point Centre, was developed
or acquired by the sellers within two years of its sale to the Company. The
total development cost (including land acquisition) was approximately $13.9
million. The amount paid by the Company for the property was $14.5 million;
however, the sellers are obligated to repay up to approximately $1.8 million of
the purchase price to the extent the property fails to meet certain leasing
percentages.
Mr. Konover, his immediate family members and entities with which they have
a direct or indirect material interest (the "Simon Konover Entities") have
received approximately $8,630,756 in cash, $1,109,410 in Units (116,780 Units
valued at $9.50 each). In addition, Mr. Konover and his immediate family members
have received a total of 400,000 warrants in consideration for the use of Mr.
Konover's name and also as consideration for his agreeing to serve as Chairman.
The warrants vest and are exercisable as set forth below:
--100,000 warrants exercisable at $9.50 per share with 20,000 warrants
vesting on July 1 of 1999, 2000, 2001, 2002 and 2003;
--100,000 warrants exercisable at $12.50 per share with 20,000 warrants
vesting on July 1 of 1999, 2000, 2001, 2002 and 2003;
--200,000 warrants exercisable at $9.50 per share that were fully vested
on issuance.
14
<PAGE>
Additionally, as part of the assumption of debt, certain of the Simon Konover
Entities have been released from guaranties and other obligations relating to
the assumed debt.
Mr. Steinmark received approximately $115,586 in cash and $256,016 in Units
(26,949 Units valued at $9.50 each) for his interests in two of the community
shopping centers acquired in the transaction.
LOAN TO AFFILIATE OF SIMON KONOVER. In December 1997 the Company issued an
$8.5 million note to Davie Plaza Limited Partnership, a Florida limited
partnership, of which Simon Konover, Chairman of the Company, is a 49% owner.
The loan is secured by a first mortgage position on a 299,778-square foot retail
shopping center located in Davie, Florida. In January 1999 the Company received
a $2 million paydown. The outstanding balance of $6.5 million carries interest
at 8.0% payable monthly and matures on June 30, 1999. The loan was made in
anticipation of the Company's acquisition of the center in connection with the
Konover Transaction and to take advantage of the ability to repay the previous
debt instrument at a discount. The center was ultimately not acquired by the
Company.
LOAN TO PATRICK M. MINIUTTI. On June 12, 1998, the Company issued a
$125,000 note to Patrick M. Miniutti, Executive Vice President, Chief Financial
Officer and Director. The loan matures June 30, 2003 and carries an interest
rate of 7.75%. The loan is secured by his vested Restricted Stock. The purpose
was to allow Mr. Miniutti to raise funds without selling his Restricted Stock.
INFORMATION REGARDING INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed the accounting firm of Arthur Andersen LLP ("Arthur Andersen") to
serve as independent auditors of the Company for the fiscal year ending December
31, 1999. Arthur Andersen has served as independent auditors of the Company
since September 1997 and is considered by management of the Company to be well
qualified. The Company has been advised by that firm that neither it nor any
member thereof has any financial interest, direct or indirect, in the Company or
any of its subsidiaries in any capacity. Representatives of Arthur Andersen will
be present at the Annual Meeting, will have the opportunity to make a statement
if they so desire, and will be available to respond to appropriate questions.
Effective September 9, 1997, the Company retained Arthur Andersen LLP as
its new certifying accountants, replacing its prior certifying accountants,
Ernst & Young LLP ("Ernst & Young").
Ernst & Young's reports on the Company's financial statements during the
two most recent fiscal years contained no adverse opinion or disclaimer of
opinion, nor were qualified or modified as to uncertainty, audit scope or
accounting principles.
During the two most recent fiscal years and all subsequent interim periods
preceding September 9, 1997, there were no disagreements between the Company and
Ernst & Young on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Ernst & Young, would have caused Ernst & Young
to make reference to the subject matter of disagreement in connection with Ernst
& Young's reports.
15
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the Company's cumulative total return on the Common Stock with the cumulative
total return of a hypothetical investment in each of the Standard & Poor's
Composite - 500 Index and the index of equity real estate investment trusts
prepared by the National Association of Real Estate Investment Trusts ("NAREIT")
based on the respective market prices of each such investment on the dates shown
below, assuming an initial investment of $100 in the Common Stock on December
31, 1993 and the reinvestment of dividends. Equity real estate investment trusts
are defined as those which derive more than 75% of their income from equity
investments in real estate assets. The NAREIT equity index includes all tax
qualified real estate investment trusts listed on the New York Stock Exchange,
the American Stock Exchange or the NASDAQ National Market System.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Konover Property Trust 100 94 65 36 42 38
S&P 500 Index 100 101 139 171 229 294
NAREIT Equity Index 100 103 119 161 193 160
</TABLE>
THE STOCK PRICE PERFORMANCE GRAPH SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933, OR AMENDED, OR UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE EXTENT THAT THE
COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT
OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each director and officer of the Company and each beneficial owner of 10%
or more of the Company's Common Stock is required to file with the Securities
and Exchange Commission and the New York Stock Exchange, by a specified date,
reports of Common Stock ownership and changes in Common Stock ownership. To the
Company's knowledge, based solely on copies of such filings furnished to the
Company and written representations that no reports on Form 5 were required,
during the fiscal year ended December 31, 1998, all such filings were timely
made, except that (i) Messrs. Morton, Miniutti, Neville, Gavrelis, Radcliff and
Ms. Swearingen and Ms. Thorburn each filed or amended late a report disclosing
one transaction; (ii) Mr. Neville additionally amended late a report disclosing
one transaction; (iii) Mr. Morton additionally filed late a report disclosing
one transaction; (iv) Mr. Steinmark filed late a report disclosing one
transaction; (v) Mr. Konover filed
16
<PAGE>
late a report disclosing one transaction; (v) and each of Messrs. Gunty,
Kretschmann and Soloman reported late an indirect beneficial ownership in the
Company.
ADDITIONAL INFORMATION
The Board of Directors knows of no other business to be brought before the
Annual Meeting. If, however, any other business should properly come before the
Annual Meeting, including matters incident to the Annual Meeting, the persons
named in the accompanying proxy will vote proxies as they deem appropriate with
respect to such matters if permitted by the rules promulgated under the
Securities Exchange Act of 1934.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any stockholder proposals intended to be presented at the Company's 2000
annual meeting of stockholders must be received by the Company at 11000 Regency
Parkway, Suite 300, Cary, North Carolina 27511, on or before January 1, 2000 for
inclusion in the Company's proxy statement and form of proxy relating to the
2000 annual meeting of stockholders. Under the Company's bylaws, no shareholder
proposal may be presented at the annual meeting, whether or not included in the
proxy statement, unless written notice of the proposal is received by the
Secretary of the Company not later than March 5, 2000 nor prior to December 6,
1999. If, however, the annual meeting is postponed or advanced so that it is not
held between May 4 and August 2, 2000, notice must be received not earlier than
180 days prior to the 2000 annual meeting and not later than the later of (i) 90
days before the 2000 annual meeting and (ii) the tenth day following the day on
which public announcement of the postponement or advancement of the date of the
meeting is first made by the Company.
By Order of the Board of Directors
/s/ Robin W. Malphrus
------------------------------
ROBIN W. MALPHRUS, ESQ.
Secretary
Dated: April 30, 1999
17
<PAGE>
APPENDIX
Dear Shareholder:
1998 was a year of outstanding achievements for our Company. We have done what
we said we would do. In 1998, we continued to pursue our growth strategy by:
o adding nearly $163 million in community shopping center assets to our
portfolio,
o increasing our capital by raising $200 million,
o reducing our exposure to the interest rate market with a lower percentage
of floating rate debt (only 10% of our total debt outstanding), and
o increasing Funds From Operations (FFO) by 7.6 million.
In addition, we reinstated the dividend. Clearly, we are on track to become the
preeminent consolidator of neighborhood and community shopping centers in the
Southeast. We owe our success in large part to our willingness to change and
improve -- not only as a Company, but also as a team of individual players, all
equally determined to advance the goals of Konover Property Trust. You can be
certain that we are building something of enduring value for the future.
Your vote is of the greatest importance to us, and on behalf of the Board of
Directors, I thank you for your participation.
Sincerely,
/s/ C. Cammack Morton
- ----------------------------
C. Cammack Morton
President and Chief Executive Officer
{FOLD AND DETACH HERE]
KONOVER PROPERTY TRUST, INC.
For Annual Meeting of Stockholders, June 3, 1999
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints C. Cammack Morton and Patrick M. Miniutti,
or either of them, with full power of substitution, the attorney and proxy of
the undersigned, to appear and to vote all of the shares of common stock of
Konover Property Trust, Inc. (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
the Company to be held at 11000 Regency Parkway, Aturim Level, Cary, North
Carolina, 27511, on June 3, 1999 at 10:00 a.m., and any adjournment thereof.
Receipt of copies of the Annual Report to Stockholders, the Notice of the Annual
Meeting of Stockholders and the Proxy Statement is hereby acknowledged.
This Proxy will be voted in accordance with the Instructions marked
herein, and in accordance with the recommendation of the Board of Directors if
no instructions to the contrary are marked herein. If any other business is
transacted at the Annual Meeting (including matters incident to the conduct of
the Annual Meeting), this Proxy wil be voted in the discretion of, and in
accordance with, the best judgement of the proxies (no other business is
currently known).
1. Election of nine directors to serve until the 2000 annual meeting or
until their successors are duly elected and qualified (Proposal One); Nominees:
Simon Konover, C. Cammack Morton, Patrick M. Miniutti, William D. Eberle, J.
Richard Futrell, Jr., John W. Gildea, Klaus P Kretschmann, Jonathan O'Herron and
Mark S. Ticotin.
[ ] FOR ALL (except as noted below) [ ] WITHHOLD AUTHORITY AS TO ALL
(Instruction: To withhold authority to vote for any individual nominee,
print the nominee's name for which authority is withheld below.)
<PAGE>
[MAP APPEARS HERE]
FROM THE AIRPORT
Take 1-40 East to
Exit 293 (HWY 64 West).
Continue to Exit 98A (Tryon Road).
Then Turn Right at First Light.
FROM RALEIGH
Take U.S. 1 South to
Exit 98A (Tryon Road).
Then Turn Right at First Light.
Note: Please date and sign exactly as the name appears on this proxy. Joint
owners should each sign. If the signer is a corporation, please sign full
corporate name by a duly authorized officer. Executors, trustees, etc. should
give full title as such.
Dated:_______________________________
Signature:__________________________
Signature:__________________________
Please mark boxes in blue or black ink.
Please return promptly in the enclosed
envelope which requires no postage if
mailed in the U.S.A.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING. THIS IS IMPORTANT WHETHER
YOU OWN FEW OR MANY SHARES. DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE
COMPANY TO ADDITIONAL EXPENSE.
<PAGE>
