<PAGE>
SAUL CENTERS, INC.
8401 Connecticut Avenue
Chevy Chase, Maryland 20815
(301) 986-6000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 18, 1997
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of SAUL
CENTERS, INC., a Maryland corporation, will be held at 11:00 a.m. local time, on
April 18, 1997, at the Embassy Suites Chevy Chase Pavilion, 4300 Military Road,
N.W., Washington, D.C. (at the intersection of Western and Wisconsin Avenues,
adjacent to Friendship Heights Metro Stop on the Metro Red Line), for the
following purposes.
1. To elect three directors to serve until the annual meeting of
stockholders in 2000, or until their successors are duly elected and qualified.
2. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Stockholders of record at the close of business on February 20, 1997 will
be entitled to notice of and to vote at the annual meeting or at any adjournment
thereof.
Stockholders are cordially invited to attend the meeting in person. WHETHER
OR NOT YOU NOW PLAN TO ATTEND THE MEETING, YOU ARE ASKED TO COMPLETE, DATE, SIGN
AND MAIL PROMPTLY THE ENCLOSED PROXY CARD FOR WHICH A POSTAGE PAID RETURN
ENVELOPE IS PROVIDED. If you decide to attend the meeting, you may revoke your
proxy and vote your shares in person. It is important that your shares be voted.
By Order of the Board of Directors
Scott V. Schneider
Chief Financial Officer and Secretary
March 7, 1997
Chevy Chase, Maryland
<PAGE>
SAUL CENTERS, INC.
8401 Connecticut Avenue
Chevy Chase, Maryland 20815
(301) 986-6000
---------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 18, 1997
---------------------------------------------
GENERAL
This Proxy Statement is furnished by the Board of Directors of Saul
Centers, Inc. (the "Company") in connection with the solicitation by the Board
of Directors of proxies to be voted at the annual meeting of stockholders to be
held on April 18, 1997, and at any adjournment or adjournments thereof, for the
purposes set forth in the accompanying notice of such meeting. All stockholders
of record at the close of business on February 20, 1997 will be entitled to
vote.
Any proxy, if received in time, properly signed and not revoked, will be
voted at such meeting in accordance with the directions of the stockholder. If
no directions are specified, the proxy will be voted for the Proposal set forth
in this Proxy Statement. Any stockholder giving a proxy has the power to revoke
it at any time before it is exercised. A proxy may be revoked (i) by delivery of
a written statement to the Secretary of the Company stating that the proxy is
revoked, (ii) by presentation at the annual meeting of a subsequent proxy
executed by the person executing the prior proxy, or (iii) by attendance at the
annual meeting and voting in person.
Votes cast in person or by proxy at the annual meeting will be tabulated
and a determination will be made as to whether or not a quorum is present. The
Company will treat abstentions as shares that are present and entitled to vote
for purposes of determining the presence or absence of a quorum, but as unvoted
for purposes of determining the approval of any matter submitted to the
stockholders. If a broker submits a proxy indicating that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to such matter.
Solicitation of proxies will be primarily by mail. However, directors and
officers of the Company also may solicit proxies by telephone or telegram or in
person. The Company has retained Corporate Investor Communications, Inc. to
assist with distribution of soliciting materials and solicitation of proxies.
Corporate Investor Communications, Inc. will be paid a fee of $4,000 for its
services, plus reasonable and customary expenses. All of the expenses of
preparing, assembling, printing and mailing the materials used in the
solicitation of proxies will be paid by the Company. Arrangements may be made
with brokering houses and other custodians, nominees and fiduciaries to forward
soliciting materials, at the expense of the Company, to the beneficial owners of
shares held of record by such persons. It is anticipated that this Proxy
Statement and the enclosed proxy card first will be mailed to stockholders on or
about March 7, 1997.
<PAGE>
As of February 20, 1997, 12,184,433 shares of Common Stock of the Company,
$0.01 par value per share ("Common Stock"), were outstanding. Each share of
Common Stock entitles the holder thereof to one vote on each of the matters to
be voted upon at the annual meeting. As of the record date, officers and
directors of the Company had the power to vote approximately 19.4 percent of the
outstanding shares of Common Stock, excluding 5.6 percent of the outstanding
Common Stock held by the B.F. Saul Company Employees' Profit Sharing Retirement
Trust, two of five trustees of which, are officers and directors of the Company.
The Company's officers and directors have advised the Company that they intend
to vote their shares of Common Stock in favor of the Proposal set forth in this
Proxy Statement.
ELECTION OF DIRECTORS
Nominees and Directors
The First Amended and Restated Articles of Incorporation and the Amended
and Restated Bylaws of the Company provide that there shall be no fewer than
three, nor more than fifteen directors, as determined from time to time by the
directors in office. Since June 1993, the Board of Directors has been composed
of nine directors, divided into three classes with staggered three-year terms.
The term of each class expires at the annual meeting of stockholders, which is
expected to be held in April of each year. The directors elected at the annual
meeting of stockholders in 1997 will serve until the annual meeting of
stockholders in 2000. Under the Company's First Amended and Restated Articles of
Incorporation, a majority of the directors must be independent directors, who
are directors unaffiliated with B.F. Saul Real Estate Investment Trust (the
"Saul Trust"), Chevy Chase Bank, F.S.B., B.F. Saul Company (the "Saul Company")
and certain affiliated entities (collectively, "The Saul Organization"). Messrs.
Jackson, Kelley, Longsworth, Noonan and Symington are independent directors.
The Company's officers and directors have advised the Company that they
intend to vote their shares of Common Stock for the election of each of the
nominees. Proxies will be voted FOR the election of the nominees listed below
unless authority is withheld.
The following list sets forth the name, age, position with the Company,
present principal occupation or employment and material occupations, positions,
offices or employment during the past five years of each nominee and director of
the Company. Each of the nominees is presently a director of the Company, has
served as such since June 1993 and shall, if elected, continue to serve as a
director until his successor has been duly elected and qualified.
Class One Directors-Term Ends at 2000 Annual Meeting (If Elected)
Principal Occupation and
Name Age Current Directorships
- ---- --- ---------------------
Philip D. Caraci 58 President and a Director of the Company.
Senior Vice President and Secretary of the
Saul Trust since 1987. Executive Vice
President of the Saul Company with which he
has been associated since 1972. President of
Franklin Property Company ("Franklin") since
1986.
Gilbert M. Grosvenor 65 Director of the Company. President (1980
through 1996) and Chairman of the Board of
Trustees since 1987 of the National
Geographic Society, with which he has been
associated since 1954. Director of Chevy
Chase Bank, F.S.B., Marriott International
Corporation, Ethyl Corp., and a Trustee of
the Saul Trust.
2
<PAGE>
Philip C. Jackson, Jr. 68 Director of the Company. Adjunct Professor
at Birmingham-Southern College since 1989.
Member of the Thrift Depositors' Protection
Oversight Board from 1990 until 1993. Vice
Chairman and a Director of Central
Bancshares of the South from 1980 to 1989.
Member of the Board of Governors of the
Federal Reserve System from 1975 to 1978.
Director of USG Corporation, International
Realty Corporation and Jackson Insurance
Agency.
Class Two Directors-Term Ends at 1998 Annual Meeting
Principal Occupation and
Name Age Current Directorships
- ---- --- ------------------------
General Paul X. Kelley 68 Director of the Company. Vice Chairman of
Cassidy & Associates since 1989. Commandant
of the Marine Corps and member of the Joint
Chiefs of Staff from 1983 to 1987. Director
of Allied-Signal, Inc., GenCorp, Inc.,
Sturm, Ruger Company, Inc., UST Inc., London
Insurance Group, London Life Insurance
Company, and The Wackenhut Corporation.
Charles R. Longsworth 67 Director of the Company. Chairman Emeritus
of Colonial Williamsburg Foundation.
Chairman and Trustee of Colonial
Williamsburg Foundation from 1977 through
1994. Chairman, Trustees of Amherst College.
Director of Crestar Financial Corporation,
Public Radio International, Houghton
Mifflin, Inc., FlightSafety International,
Inc., Roadway Services, Inc. and Virginia
Eastern Shore Economic Development Corp.
Patrick F. Noonan 54 Director of the Company. Chairman of The
Conservation Fund since 1985. Trustee of the
National Geographic Society. On the Board of
Advisors of Duke University School of the
Environment. Director of Ashland,
International Paper, American Gas Index Fund
and Rushmore Funds.
3
<PAGE>
Class Three Directors-Term Ends at 1999 Annual Meeting
Principal Occupation and
Name Age Current Directorships
- ---- --- ------------------------
B. Francis Saul II 64 Chairman and Chief Executive Officer of the
Company. Chairman of the Board of Trustees
of the Saul Trust since 1969 and a Trustee
since 1964. President and Chairman of the
Board of Directors of the Saul Company since
1969. Chairman of the Board and Chief
Executive Officer of Chevy Chase Bank,
F.S.B. since 1969. Member of National
Gallery of Art Trustees Council. Trustee of
the National Geographic Society and the
Brookings Institution. Director of Board of
Visitors & Governors of Washington College.
James W. Symington 69 Director of the Company. Partner in the law
firm of O'Connor & Hannan since 1986. Member
of Congress from 1969 to 1977. Director of
National Rehabilitation Hospital and Riggs
National Bank.
John R. Whitmore 63 Director of the Company. President and Chief
Executive Officer of the Bessemer Group,
Inc. and its Bessemer Trust Company
subsidiaries (a financial management and
banking group), with which he has been
associated since 1975. Director of Bessemer
Securities Corporation, the Saul Company and
Chevy Chase Property Company. Trustee of the
Saul Trust.
In the event that any nominee(s) should be unable to accept the office of
director, which is not anticipated, it is intended that the persons named in the
proxy will vote for the election of such other person in the place of such
nominee(s) for the office of director as the Board of Directors may recommend.
The affirmative vote of a plurality of the shares of Common Stock present is
required for the election of directors.
The Board of Directors met five times during 1996. Each member of the Board
attended at least 83 percent of the aggregate of the meetings of the Board and
of the Committees of the Board on which he served.
4
<PAGE>
Compensation of Directors
Directors of the Company are currently paid an annual retainer of $18,000
and a fee of $1,000 for each Board or Committee meeting attended. Directors from
outside the Washington, D.C. area also are reimbursed for out-of-pocket expenses
in connection with their attendance at meetings. For the year ended December 31,
1996, the Company paid its directors total compensation of $218,000, of which
$99,050 was paid in cash and $118,950 was paid in deferred stock compensation
(as described below).
In addition, directors may elect to participate in the Deferred
Compensation Plan discussed below. For the year ended December 31, 1996, 10,848
shares were credited to the directors' deferred fee accounts.
Committees of the Board of Directors
The Board of Directors has three standing committees: the Audit Committee,
the Compensation Committee and the Executive Committee.
The Audit Committee is composed of Messrs. Kelley, Longsworth, Noonan and
Symington. It makes recommendations concerning the engagement of independent
public accountants, reviews with the independent public accountants the plans
and results of each audit engagement, approves professional services provided by
the independent public accountants, considers the range of audit and non-audit
fees, reviews the Company's financial statements, evaluates the performance of
the independent public accountants and the Company's financial and accounting
personnel, and reviews the adequacy of the Company's internal accounting
controls. This Committee met three times during 1996.
The Compensation Committee is composed of Messrs. Grosvenor and Whitmore.
It determines compensation for the Company's executive officers and administers
any stock, incentive or other compensation plans adopted by the Company,
including the Company's 1993 Stock Option Plan (the "Stock Option Plan"). This
Committee met once during 1996.
The Executive Committee is composed of Messrs. Caraci, Jackson and Saul. It
has such authority as is delegated to it by the Board of Directors and advises
the Board of Directors from time to time with respect to such matters as the
Board of Directors directs. This Committee did not meet during 1996.
The Company does not have a nominating committee.
Compensation Committee Interlocks and Insider Participation
B.Francis Saul II, Chairman of the Board and Chief Executive Officer of the
Company, served on the Board of Trustees and the Compensation Committee of the
National Geographic Society during 1996. Gilbert M. Grosvenor, a director of the
Company and a member of the Company's Compensation Committee during 1996, serves
as Chairman of the Board of Trustees of the National Geographic Society.
Executive Officers Who Are Not Directors
The following list sets forth the name, age, position with the Company,
present principal occupation or employment and material occupations, positions,
offices or employment during the past five years of each executive officer who
is not a director of the Company. Each listed individual has held an office with
the Company since its inception in June 1993.
5
<PAGE>
Name Age Position and Background
- ---- --- -----------------------
Christopher H. Netter 42 Vice President - Leasing. Vice President of
the Saul Company and Franklin and Assistant
Vice President of the Saul Trust from 1987
to 1993.
Scott V. Schneider 39 Vice President - Chief Financial Officer,
Treasurer and Secretary. Vice President of
the Saul Company and Franklin and Assistant
Vice President of the Saul Trust from 1985
to 1993.
Charles W. Sherren, Jr. 43 Vice President - Management. Vice President
of the Saul Company and Franklin and
Assistant Vice President of the Saul Trust
from 1981 to 1993.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than 10 percent 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 (the "SEC") and the New York
Stock Exchange. Officers, directors and greater than 10 percent stockholders are
required by SEC regulations to furnish the Company with copies of all Forms 3, 4
and 5 which they file.
To the best of the Company's knowledge, based upon copies of forms
furnished to it and written representations from officers, directors and 10
percent beneficial holders, no person was late filing SEC Forms 3, 4 or 5 during
the period January 1, 1996 through December 31, 1996.
Deferred Compensation Plan
A Deferred Compensation Plan was established by the Company, effective
January 1, 1994, for the benefit of its directors and their beneficiaries.
Before the beginning of any calendar year, a director may elect to defer all or
part of his or her director's fees to be earned in that year and the following
years. A director has the option to have deferred fees paid in cash, in shares
of Common Stock or in a combination of cash and Common Stock. If the director
elects to have the deferred fees paid in stock, the number of shares allocated
to the director is determined based on the market value of the Common Stock on
the day the deferred director's fees were earned.
In connection with the Company's initial public offering of its Common
Stock in 1993, 20,000 shares of Common Stock were authorized for a deferred
compensation plan and were reserved for listing with the New York Stock Exchange
upon issuance. In 1996, the Company reserved for listing with the New York Stock
Exchange an additional 50,000 shares of Common Stock in connection with the
Deferred Compensation Plan. Through December 31, 1996, 27,066 of these 70,000
shares have been credited to the directors' deferred fee accounts.
6
<PAGE>
EXECUTIVE COMPENSATION
Annual Compensation
The Company pays compensation to its executive officers for their services
in such capacity. The following Summary Compensation Table sets forth the annual
and long-term compensation paid by the Company to the executive officers for, or
with respect to, the fiscal periods ended December 31, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term
------------------- Compensation
------------ All
Stock Option Other
Name and Principal Position Year Salary Bonus Awards (Shs) Compensation (1)
- --------------------------- ------- --------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
B. Francis Saul II 1996 $125,000 $10,000 -- --
Chairman and 1995 125,000 10,000 -- --
Chief Executive Officer 1994 125,000 -- -- --
Philip D. Caraci 1996 218,333 18,000 -- --
President 1995 198,333 16,400 -- --
1994 181,667 14,800 -- --
Christopher H. Netter 1996 140,084 9,905 -- $10,338
Vice President 1995 135,769 9,625 -- 10,817
Leasing 1994 129,904 9,275 -- 10,627
Scott V. Schneider 1996 141,151 10,115 -- 10,349
Vice President 1995 129,835 9,450 -- 10,345
Chief Financial Officer 1994 112,126 8,400 -- 9,066
Charles W. Sherren, Jr. 1996 110,596 7,875 -- 8,165
Vice President 1995 104,619 7,490 -- 8,308
Management 1994 96,539 7,000 -- 7,861
</TABLE>
(1) Amounts paid represent Company's contribution to Employees' Profit Sharing
Retirement Trust and Company's payment of life insurance premiums for the
benefit of the named executive officers.
7
<PAGE>
Stock Option Grants in Last Fiscal Year
The following table sets forth certain information with respect to stock
option grants, pursuant to the Stock Option Plan, made to the Chief Executive
Officer and named executive officers during the year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL PERIOD (1)
<TABLE>
<CAPTION>
Potential Realizable Value
Percentage of @ Assumed Annual Rate of
No. of Shares Total Options Stock Price Appreciation
Underlying Granted to Exercise Until Fully Vested
Name and Options Employees in Price Expiration -------------------------
Principal Position Granted 1996 ($/Share) Date 5% 10%
- ------------------ ---------- ------------ --------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
B. Francis Saul II -- -- -- -- -- --
Chairman and
Chief Executive
Officer
Philip D. Caraci -- -- -- -- -- --
President
Christopher H. Netter -- -- -- -- -- --
Vice President
Leasing
Scott V. Schneider -- -- -- -- -- --
Vice President
Chief Financial
Officer
Charles W. Sherren, Jr. -- -- -- -- -- --
Vice President
Management
</TABLE>
(1) The Company is authorized under the Stock Option Plan to grant options to
purchase 400,000 shares of Common Stock. Options to purchase a total of 20,000
shares of Common Stock were terminated in 1995. Options to purchase 30,000
shares were granted in 1994, options to purchase 17,500 shares were terminated
in 1994, and options to purchase 187,500 shares were granted in 1993, leaving
220,000 shares available for grant at December 31, 1996. No options were granted
in 1996.
Options Exercised and Fiscal Year-End Values
The following table sets forth certain information with respect to
unexercised stock options held by the Chief Executive Officer and the named
executive officers at December 31, 1996. None of such officers exercised any
stock options during the year ended December 31, 1996.
8
<PAGE>
VALUE OF UNEXERCISED OPTIONS (1)
<TABLE>
<CAPTION>
Number of
Unexercised Options
at December 31, 1996 (2)
--------------------------
Name and Principal Position Exercisable Unexercisable
- --------------------------- ----------- -------------
<S> <C> <C>
B. Francis Saul II -- --
Chairman and
Chief Executive Officer
Philip D. Caraci 75,000 25,000
President
Christopher H. Netter 18,750 6,250
Vice President
Leasing
Scott V. Schneider 18,750 6,250
Vice President
Chief Financial Officer
Charles W. Sherren, Jr. 15,000 5,000
Vice President
Management
</TABLE>
(1) No options were in-the-money at December 31, 1996.
(2) All unexercised options carry a vesting privilege of 25% per year over a
four year period, which commenced vesting September 22, 1994. All options have
an exercise price of $20 per share and expire on September 23, 2003, with
earlier expiration to occur at employment termination.
9
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee is comprised of Messrs. Grosvenor and Whitmore.
Members of the Compensation Committee are selected each year by the full Board
of Directors. All members of the Compensation Committee must be "outside
directors," who are not (i) officers or former officers of the Company; (ii)
employees of the Company or any of its subsidiaries; (iii) relatives of the
Chief Executive Officer; (iv) holders of more than 5 percent of the Company's
voting stock; (v) members of an organization acting as an advisor, legal counsel
or in similar capacity with respect to the Company and receiving compensation
therefor on an ongoing basis from the Company, in addition to director's fees;
or (vi) with reference to a particular transaction, interested directors within
the meaning of Section 2-419 of the Maryland General Corporation Law.
The Compensation Committee determines compensation for the Company's
executive officers and administers any stock incentive or other compensation
plans adopted by the Company, including the Stock Option Plan. The Compensation
Committee believes that the Company's compensation package must be structured in
a manner that will help the Company attract and retain qualified executives and
will align compensation of such executives with the interests of stockholders.
The compensation package currently consists of salary, bonus and long-term
compensation in the form of stock options issued pursuant to the Stock Option
Plan.
Salary and Bonus
Salary and bonus are determined by the Compensation Committee using a
subjective evaluation process. In making determinations of salary and bonus for
particular officers, including the Chief Executive Officer, the Compensation
Committee considers the general performance of the Company, the officer's
position, level and scope of responsibility, the officer's anticipated
performance and contributions to the Company's achievement of its long-term
goals, and the salary and bonus for the officer recommended by management.
Stock Option Grants
The Compensation Committee is responsible for administering the Stock
Option Plan, which includes determining the individuals to be granted stock
option awards and defining the terms of such awards, including the number of
shares subject to each option, exercise price, vesting schedule and expiration
date.
The purpose of the Stock Option Plan is to provide compensation to persons
whose services are considered essential to the Company. By linking this
compensation to the market performance of the Company's Common Stock, the
Company intends to provide additional incentive for officers and key employees
to enhance the value and success of the Company and align the long-term
interests of the officers and key employees with the interests of the Company.
Under the terms of the Stock Option Plan, Mr. Saul is not eligible to
participate in the plan.
10
<PAGE>
The Compensation Committee uses a subjective evaluation process to
determine whether an officer or key employee should receive an option grant and
the number of shares subject to stock options granted to such officer or key
employee, and has not set specific objective goals or standards that an officer
or key employee must meet to receive a stock option grant. The factors
considered by the Compensation Committee include the general performance of the
company, the position, level and scope of responsibility of the respective
officer or key employee and the officer's or key employee's anticipated
performance and contributions to the Company's achievement of its long-term
goals.
During 1996, the Compensation Committee did not grant any options.
Gilbert M. Grosvenor
John R. Whitmore
PERFORMANCE GRAPH
Rules promulgated under the Exchange Act require the Company to present a
graph comparing the cumulative total stockholder return on its Common Stock with
the cumulative total stockholder return of (i) a broad equity market index, and
(ii) a published industry index or peer group. Although the graph would normally
be for a five-year period, the Common Stock has been publicly traded only since
August 27, 1993, and as a result, the following graph commences as of August 31,
1993. The graph compares the cumulative total stockholder return of the
Company's Common Stock ("BFS"), based on the market price of the Common Stock
and assuming reinvestment of dividends, with the National Association of Real
Estate Investment Trust Equity Index ("NAREIT") and the S&P 500 Index
("S&P 500"). The graph assumes the investment of $100 on August 31, 1993.
Comparison of Total Return
[LINE GRAPH APPEARS HERE]
Total Return
Comparative Indices
<TABLE>
<CAPTION>
BFS S & P NAREIT
Index 500 Equity
----- ----- ------
<S> <C> <C> <C>
Aug-93 100.000 100.000 100.000
Dec-93 96.398 101.561 97.138
Apr-94 100.343 98.954 102.154
Aug-94 94.302 105.454 102.097
Dec-94 82.096 102.881 100.220
Apr-95 96.974 116.191 100.021
Aug-95 94.862 128.076 109.054
Dec-95 85.352 141.394 115.522
Apr-96 93.848 151.179 118.746
Aug-96 88.876 151.934 129.224
Dec-96 106.339 173.862 156.259
</TABLE>
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of February 20, 1997,
concerning shares of Common Stock beneficially owned by all persons (if any)
known by the Company to own more than 5 percent of the Company's outstanding
Common Stock, by each director and nominee, by each executive officer named in
"Executive Compensation" above, and by all directors and executive officers as a
group, according to information provided to the Company by each such person.
Unless otherwise noted, each person named has sole voting and sole investment
power with respect to all shares beneficially owned by such person.
<TABLE>
<CAPTION>
Aggregate
Number of
Shares Percent
Name of Beneficially of
Beneficial Owner Owned (1) Class (1)
- ---------------- ------------ ----------
<S> <C> <C>
B. Francis Saul II 2,182,119(2) 17.9%
Philip D. Caraci 98,373(3) *
Philip C. Jackson, Jr. 18,500(4) *
Paul X. Kelley 3,000 *
Charles R. Longsworth 1,700 *
Patrick F. Noonan 5,000(5) *
James W. Symington 200 *
John R. Whitmore 2,500(6) *
Scott V. Schneider 18,980(7) *
Christopher H. Netter 18,750(8) *
Charles W. Sherren, Jr. 15,000(9) *
All directors and officers as
a group (18 persons) 2,364,432 19.4%
</TABLE>
* Less than 1 percent
(1) Beneficial ownership and percent of class are calculated pursuant to Rule
13d-3 under the Securities Exchange Act of 1934, as amended.
(2) Includes 1,623,674 shares owned by the B.F. Saul Real Estate Investment
Trust, 120,363 shares owned by Franklin Property Co., 374,030 shares owned
by Westminster Investing Corporation, 57 shares owned by Van Ness Square
Corp., 31,045 shares owned by various family trusts and as custodian for a
child, and 32,950 shares owned by Mr. Saul's spouse. Pursuant to Rule 13d-3,
the Common Stock described above is considered to be beneficially owned by
Mr. Saul because he has or may be deemed to have sole or shared voting
and/or investment power in respect thereof. Excludes 687,657 shares owned by
the B.F. Saul Company Employees' Profit Sharing Retirement Trust, (the
"Employee Trust"). Mr Saul is one of five Trustees for the Employee Trust
and has a pecuniary interest in the Employee Trust as one of the
participating employees.
(3) Includes 15,666 shares owned jointly by Mr. Caraci and his spouse, 2,638
shares owned by Mr. Caraci's spouse, and 75,000 shares subject to currently
exercisable options held by Mr. Caraci. Mr. Caraci disclaims beneficial
ownership of 2,638 shares owned by his spouse. Excludes 687,657 shares owned
by the Employee Trust. Mr Caraci is one of five Trustees for the Employee
Trust and has a pecuniary interest in the Employee Trust as one of the
participating employees.
(4) Mr. Jackson disclaims beneficial ownership of 1,500 shares owned by his
spouse.
(5) Mr. Noonan disclaims beneficial ownership of 2,500 shares owned by his
spouse.
(6) Mr. Whitmore disclaims beneficial ownership of 1,500 shares owned by a
trust, of which he serves as trustee, for the benefit of his mother.
(7) Includes 18,750 shares subject to currently exercisable options held by Mr.
Schneider and 230 shares owned by Mr. Schneider's children. Mr. Schneider
disclaims beneficial ownership of 230 shares owned by his children.
(8) Represents 18,750 shares subject to currently exercisable options held by
Mr. Netter.
(9) Represents 15,000 shares subject to currently exercisable options held by
Mr. Sherren.
12
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company began operations in August 1993. On August 26, 1993, The Saul
Organization transferred to Saul Holdings Limited Partnership, a Maryland
limited partnership (the "Operating Partnership") and two newly formed
subsidiary limited partnerships (the "Subsidiary Partnerships," and collectively
with the Operating Partnership, the "Partnerships"), 26 shopping center
properties, one office property, one research park and one office/retail
property (collectively, the "Portfolio Properties"), located primarily in the
Washington, D.C./Baltimore metropolitan area and the Mid-Atlantic region of the
United States, and the management functions related to the Portfolio Properties
(the "Management Functions").
Certain relationships exist among the Company and its subsidiaries, the
members of The Saul Organization and the Partnerships and are discussed below.
Management of the Current Portfolio Properties. The Company and its
subsidiaries share with The Saul Organization certain ancillary functions, such
as computer and payroll services, benefits administration and in-house legal
services. The Saul Organization also subleases office space to the Company. The
terms of all sharing arrangements, including payments related thereto, are
reviewed periodically by the independent directors of the Company, who
constitute five of the nine members of the Board of Directors. Included in
general and administrative expenses for the year ended December 31, 1996 are
charges totalling $1,229,000 related to such shared services, of which
$1,073,000 was paid prior to December 31, 1996. The Company believes that the
amounts allocated to it for such shared services represent a fair allocation
between The Saul Organization and the Company and it subsidiaries. The Company
believes that sharing these expenses with The Saul Organization results in a
savings from the expenses that would be incurred if such services were obtained
from independent third parties.
Related Party Rents. Chevy Chase Bank, F.S.B leases space in several of the
shopping centers owned by the Company and its subsidiaries. The total rental
income from Chevy Chase Bank, F.S.B. from January 1, 1996 through December 31,
1996 was $1,063,000. The Company believes that all of the leases with Chevy
Chase Bank, F.S.B have comparable terms to leases that would have been obtained
from unrelated third parties.
Management Personnel. The Chairman and Chief Executive Officer as well as
the President of the Company remain officers of various members of The Saul
Organization, but devote a substantial amount of time to the management of the
Company. The annual compensation for these officers is fixed by the Compensation
Committee of the Board of Directors each year.
Exclusivity Agreement and Right of First Refusal. The Company has entered
into an Exclusivity Agreement (the "Exclusivity Agreement") with, and has been
granted a right of first refusal (the "Right of First Refusal") by, The Saul
Organization. The purpose of these agreements is to minimize potential conflicts
of interest between The Saul Organization and the Company and it subsidiaries.
The Exclusivity Agreement and Right of First Refusal generally require The Saul
Organization to conduct its shopping center business exclusively through the
Company and its subsidiaries and to grant the Company a right of first refusal
to purchase commercial properties and development sites that become available to
The Saul Organization in the District of Columbia or adjacent suburban Maryland.
Reimbursement Agreement. Pursuant to a reimbursement agreement among the
partners in the Partnerships, The Saul Organization and those of its
subsidiaries that are partners in the Partnerships have agreed to reimburse the
Company and the other partners in the event the Partnerships fail to make
payments with respect to certain portions of the Partnerships' debt obligations
and the Company or any such other partners personally make payments with respect
to such debt obligations. As of December 31, 1996, the maximum potential
obligation of The Saul Organization and its subsidiaries under the agreement was
$195.9 million. The Company believes that the Partnerships will be able to make
all payments due with respect to their debt obligations.
13
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INDEPENDENT AUDITORS
Upon recommendation of and approval by the Audit Committee, Arthur Andersen
LLP has been selected to act as independent certified public accountants for the
Company during the current fiscal year.
A representative of Arthur Andersen LLP will be present at the annual
meeting and will be provided with the opportunity to make a statement if
desired. Such representative also will be available to respond to appropriate
questions.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
annual meeting other than those stated above. If any other business should come
before the annual meeting, the persons named in the enclosed proxy will vote
thereon as they determine to be in the best interests of the Company.
PROPOSALS FOR NEXT ANNUAL MEETING
It is presently contemplated that the 1998 annual meeting of stockholders
will be held in mid-April 1998. Any stockholder proposal to be considered for
inclusion in the Company's proxy statement and form of proxy for the annual
meeting of stockholders to be held in 1998 must be received at the Company's
office at 8401 Connecticut Avenue, Chevy Chase, Maryland 20815, no later than
November 7, 1997.
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ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1996 accompanies this Proxy Statement.
By order of the Board of Directors
Scott V. Schneider
Chief Financial Officer and Secretary
March 7, 1997
Chevy Chase, Maryland
15
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SAUL CENTERS, INC.
A Proxy for Annual Meeting of Stockholders
April 18, 1997
This Proxy is solicited by the Board of Directors
The undersigned hereby appoints B. Francis Saul II and Philip D. Caraci, and
each of them, as proxies, with full power of substitution in each, to vote all
shares of the common stock of Saul Centers, Inc. (the "Company") which the
undersigned is entitled to vote, at the Annual Meeting of Stockholders of the
Company to be held on April 18, 1997, at 11:00 a.m. local time, and at any
adjournment thereof, on all matters set forth in the Notice of Meeting and Proxy
Statement, dated March 7, 1997, a copy of which has been received by the
undersigned as follows:
1. TO ELECT THREE DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING OF
STOCKHOLDERS IN 2000.
[_] GRANT AUTHORITY to vote for all nominees listed below.
[_] WITHHOLD AUTHORITY to vote for all nominees listed below
Philip D. Caraci, Gilbert M. Grosvenor; Philip C. Jackson, Jr.
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.
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(Please sign on reverse side)
<PAGE>
2. OTHER MATTERS.
GRANT AUTHORITY upon such other matters as may come before the meeting as
they determine to be in the best interest of the Company.
[_] FOR [_] AGAINST [_] ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED
"FOR" THE MATTERS STATED.
Dated: , 1997
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Signature(s) of Stockholders(s)
IMPORTANT: Please mark this Proxy, date it, sign it exactly as your name(s)
appear(s) and return it in the enclosed postage paid envelope. Joint owners
should each sign personally. Trustees and others signing in a representative or
fiduciary capacity should indicate their full titles in such capacity.
