SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
SAUL CENTERS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the 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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(2) Aggregate number 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 calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
[LOGO OF SAUL CENTERS]
8401 Connecticut Avenue
Chevy Chase, Maryland 20815
(301) 986-6200
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 27, 2001
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 27, 2001, 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 four directors to serve until the annual meeting of
stockholders in 2004, 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 23, 2001 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
/s/Scott V. Schneider
Scott V. Schneider
Chief Financial Officer and Secretary
March 20, 2001
Chevy Chase, Maryland
[LOGO OF SAUL CENTERS]
8401 Connecticut Avenue
Chevy Chase, Maryland 20815
(301) 986-6200
------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 2001
------------------------------
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 27, 2001, 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 23, 2001 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 $4,500 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 20, 2001.
As of the record date, February 23, 2001, 13,997,302 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 26.1%
of the outstanding shares of Common Stock, excluding 7.3% 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.
2
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. From June 1993 until June 1997, the Board of Directors was
composed of nine directors, and in June 1997 two additional directors, Mark
Sullivan III and B. Francis Saul III, were elected. The other nine directors
have served on the Board of Directors since June 1993. The Board of Directors is
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 2001 will serve until the annual meeting of stockholders in
2004. 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, Chevy Chase Bank, B.
F. Saul Company and certain affiliated entities (collectively, "The Saul
Organization"). Messrs. Jackson, Kelley, Longsworth, Noonan, Sullivan 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. Nominees Kelley, Longsworth, Noonan and Saul III are presently
directors of the Company. Nominees Kelley, Longsworth and Noonan have served as
such since June 1993, and nominee Saul III has served as such since June 1997.
All shall, if elected, continue to serve as a director until his successor has
been duly elected and qualified.
Name Age Principal Occupation and Current Directorships
- ---- --- ----------------------------------------------
Class Two Directors-Term Ends at 2004 Annual Meeting
General Paul X. Kelley 72 Director of the Company. Partner of J.F. Lehman
& Company since 1998. Vice Chairman of Cas-
sidy & Associates from 1989 to 1998. Comman-
dant of the Marine Corps and member of the
Joint Chiefs of Staff from 1983 to 1987. Direc-
tor of Park Place Entertainment Corporation,
Sturm Ruger & Company, Inc., UST, Inc., and
The Wackenhut Corporation.
Charles R. Longsworth 71 Director of the Company. Chairman Emeritus of
Colonial Williamsburg Foundation. Chairman
and Trustee of Colonial Williamsburg Founda-
tion from 1977 through 1994. President Emeri-
tus, Hampshire College. Chairman Emeritus,
Trustees of Amherst College. Director of
Houghton Mifflin, Inc. and the Center for
Public Resources.
Patrick F. Noonan 58 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, and Rushmore Mutual Funds.
B. Francis Saul III 39 Vice Chairman of the Company. Senior Vice
President of the B. F. Saul Company since 1991.
Senior Vice President and a Trustee of the B.F.
Saul Real Estate Investment Trust. Director of
Chevy Chase Bank. Vice Chairman of the Greater
Washington Boys & Girls Clubs, Director of
Children's National Medical Center.
3
Name Age Principal Occupation and Current Directorships
- ---- --- ----------------------------------------------
Class Three Directors-Term Ends at 2002 Annual Meeting
B. Francis Saul II 68 Chairman and Chief Executive Officer of the
Company. President and Chairman of the Board
of Directors of the B.F. Saul Company since
1969. Chairman of the Board of Trustees of the
B.F. Saul Real Estate Investment Trust since
1969 and a Trustee since 1964. Chairman of the
Board and Chief Executive Officer of Chevy
Chase Bank since 1969. Member of National
Gallery of Art Trustees Council. Trustee of the
National Geographic Society, Trustee of the
Johns Hopkins Medicine Board and an Honorary
Trustee of the Brookings Institution. Director of
Board of Visitors & Governors of Washington
College.
Mark Sullivan III 59 Director of the Company. Attorney. President from
1996 to 1999 of the Small Business Funding
Corporation. Attorney advising senior management
of financial institutions on legal and policy
matters from 1989 to 1996.
James W. Symington 73 Director of the Company. Of Counsel in the law
firm of O'Connor & Hannan since 1986. Mem-
ber of Congress from 1969 to 1977. Chairman
Emeritus of National Rehabilitation Hospital.
John R. Whitmore 67 Director of the Company. Senior Advisor to
the Bessemer Group, Inc. since 1998. Formerly
President and Chief Executive Officer of the
Bessemer Group and its Bessemer Trust Compa-
ny subsidiaries (a financial management and
banking group) and director of Bessemer Securi-
ties Corporation from 1975 to 1998. Director of
the B.F. Saul Company and Chevy Chase Proper-
ty Company. Trustee of the B.F. Saul Real Estate
Investment Trust. Director of Chevy Chase Bank.
Chairman of the Board of Directors of ASB
Capital and Chevy Chase Trust Company.
4
Name Age Principal Occupation and Current Directorships
- ---- --- ----------------------------------------------
Class One Directors-Term Ends at 2003 Annual Meeting
Philip D. Caraci 62 President and a Director of the Company. Senior
Vice President and Secretary of the B.F. Saul Real
Estate Investment Trust since 1987. Executive
Vice President of the B.F. Saul Company with
which he has been associated since 1972. Presi-
dent of Franklin Property Company since 1986.
Gilbert M. Grosvenor 69 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, Marriott
International Corporation, Ethyl Corp., and a
Trustee of the B.F. Saul Real Estate Investment
Trust.
Philip C. Jackson, Jr. 72 Director of the Company. Adjunct Professor
at Birmingham-Southern College from 1989
to 1999. Member of the Thrift Depositors' Pro-
tection Oversight Board from 1990 until 1993.
Vice Chairman and a Director of Central Banc-
shares of the South (Compass Bancshares, Inc.)
from 1980 to 1989. Member of the Board of
Governors of the Federal Reserve System from
1975 to 1978.
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 2000. Each member of the Board
attended at least 80% of the aggregate meetings of the Board and of the
Committees of the Board on which he served.
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 related party transactions, 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. All of these functions are performed
under the guidelines of the company's Audit Committee Charter (a copy of which
is attached as Exhibit A). This Committee met three times during 2000.
Additionally, the Audit Committee Chairman conducted three telephonic meetings
with management and the independent public accountants.
The Compensation Committee is composed of Messrs. Grosvenor and Whitmore.
It determines compensation for the Company's executive officers, reviews and
approves management's recommendations for the annual salaries of all Company
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 2000.
The Executive Committee is composed of Messrs. Caraci, Jackson and Saul II.
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 2000.
5
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 2000. Gilbert M. Grosvenor, a director of
the Company and a member of the Company's Compensation Committee during 2000,
serves as Chairman of the Board of Trustees of the National Geographic Society.
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, and are
annually awarded 100 shares of the Company's common stock. The shares are issued
on the date of each Annual Meeting of Stockholders to each director serving on
the Board of Directors as of the record date of such meeting, and their issuance
may not be deferred and transfer of the shares is restricted for a period of
twelve months following the date of issue. Directors from outside the
Washington, D.C. area also are reimbursed for out-of-pocket expenses in con-
nection with their attendance at meetings. For the year ended December 31, 2000,
the Company paid its directors total compensation of $285,981, of which
$93,500 was paid in cash, $175,500 was paid in deferred stock compensation (as
described below), and $16,981 was paid through annual common stock awards.
In addition, directors may elect to participate in the Deferred
Compensation Plan discussed below. For the year ended December 31, 2000, 19,803
shares were credited to the directors' deferred fee accounts.
Deferred Compensation Plan
A Deferred Compensation and Stock Plan for Directors was established by the
Company, effective January 1, 1994 and amended March 18, 1999, 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 both 1996 and 2000, 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 and Stock Plan for Directors. Through
February 23, 2000, 96,249 of these 120,000 shares have been credited to the
directors' deferred fee accounts.
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% 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, reviews and approves management's recommendations for the
annual salaries of all Company 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.
6
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 II is not eligible to
participate in the plan.
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 2000, the Compensation Committee did not grant any options.
Gilbert M. Grosvenor
John R. Whitmore
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 ten 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.
Name Age Position and Background
- ---- --- --------------------------------------------------
Christopher H. Netter 46 Senior Vice President - Leasing. Vice President of
the B.F. Saul Company and Franklin Property
Company and Assistant Vice President of the B.F.
Saul Real Estate Investment Trust from 1987 to
1993.
Scott V. Schneider 43 Senior Vice President - Chief Financial Officer,
Treasurer and Secretary. Vice President of the B.F.
Saul Company and Franklin Property Company
and Assistant Vice President of the B.F. Saul Real
Estate Investment Trust from 1985 to 1993.
Charles W. Sherren, Jr. 47 Senior Vice President - Management. Vice Presi-
dent of the B.F. Saul Company and Franklin
Property Company and Assistant Vice President
of the B.F. Saul Real Estate Investment Trust
from 1981 to 1993.
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 Company's Chief
Executive Officer and each of its four other most highly compensated executive
officers, who were serving as of December 31, 2000, ("named executive officers")
for, or with respect to, the fiscal periods ended December 31, 2000, 1999, and
1998.
7
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------ All
Annual Compensation Stock Option Other
Name and Principal Position Year Salary Bonus Awards (Shs) Compensation (1)
- --------------------------- ---- ------ ----- ------------ ----------------
B. Francis Saul II 2000 $ 125,000 $ 10,000 -- $ --
Chairman and 1999 125,000 10,000 -- --
Chief Executive Officer 1998 125,000 10,000 -- --
B. Francis Saul III 2000 201,667 16,800 -- --
Vice Chairman 1999 171,667 12,950 -- --
1998 138,333 10,150 -- --
Philip D. Caraci 2000 306,667 25,200 -- --
President 1999 281,667 23,200 -- --
1998 258,333 21,200 -- --
Christopher H. Netter 2000 211,667 15,400 -- 14,798
Senior Vice President 1999 188,333 13,650 -- 14,397
Leasing 1998 167,809 12,250 -- 11,297
Scott V. Schneider 2000 203,333 14,700 -- 14,561
Senior Vice President 1999 183,333 13,300 -- 12,537
Chief Financial Officer 1998 165,154 11,900 -- 11,987
(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.
Options Exercised and Fiscal Year-End Values
The following table sets forth certain information with respect to
unexercised stock options held by the named executive officers at December 31,
2000. None of such officers exercised any stock options during the year ended
December 31, 2000.
VALUE OF UNEXERCISED OPTIONS (1)
Number of Securities Underlying
Unexercised Options
at December 31, 2000 (2)
------------------------
Name and Principal Position Exercisable Unexercisable
- --------------------------- ----------- -------------
B. Francis Saul II -- --
Chairman and Chief Executive Officer
B. Francis Saul III -- --
Vice Chairman
Philip D. Caraci 100,000 --
President
Christopher H. Netter 25,000 --
Senior Vice President, Leasing
Scott V. Schneider 25,000 --
Senior Vice President and Chief Financial Officer
(1) All options were "out-of-the-money" at December 31, 2000.
"Out-of-the-money" options are options with exercise prices above the
market price of the Common Stock on December 31, 2000.
(2) All unexercised options are fully vested, have an exercise price of $20
per share and expire on September 23, 2003, with earlier expiration to
occur at employment termination.
8
AUDIT COMMITTEE REPORT
The information contained in the report shall not be deemed to be
"solicitating material" or to "filed" with the SEC, nor shall such information
be incorporated by reference into any previous or future filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that the Company incorporates it by specific
reference. The Audit Committee is comprised of Messrs. Kelley, Longsworth,
Noonan and Symington, all of which are independent directors of the Company. The
Audit Committee has adopted a written Audit Committee Charter, a copy of which
is attached as Exhibit A.
Review and Discussion with Management. The Company has reviewed and
discussed the Company's financial statements for the year ended December 31,
2000 with management.
Review and Discussion with Independent Auditors. The Company has discussed
with the independent auditors those items required by SAS 61, which includes
among other things, matters related to the conduct of the audit of the Company's
financial statements. The committee has received a written report required by
Independence Standards Board Standard No. 1 from the auditors regarding their
independence, and has discussed this report with the auditors.
Fiscal 2000 Audit Firm Fee Summary. During fiscal year 2000, the Company
retained its principal auditor, Arthur Andersen LLP, to provide services in the
following categories and amounts:
Audit Fees: $ 150,700
Financial Information Systems Design
and Implementation Fees $ --
All Other Fees (Tax Services, Registration
Statements and Debt Compliance Letter) $ 109,000
The Audit Committee has determined that the provision of non-audit services
by the Company's principal auditor is compatible with maintaining auditor
independence.
Conclusion. Based on the review and discussions referred to above, the
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 2000 for filing with the SEC.
Paul X. Kelley, Committee Chairman
Charles R. Longsworth
Patrick F. Noonan
James W. Symington
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.
9
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. 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"), the S&P 500 Index ("S&P 500") and the Russell 2000 Index ("Russell
2000"). The graph assumes the investment of $100 on January 1, 1996.
Comparison of Cumulative Total Return
[GRAPH]
Dec 1995 Dec 1996 Dec 1997 Dec 1998 Dec 1999 Dec 2000
Saul Centers, Inc. $100 $128 $159 $154 $159 $211
S&P 500 $100 $123 $164 $211 $255 $232
NAREIT Equity $100 $135 $163 $134 $128 $162
Russell 2000 $100 $116 $143 $139 $168 $164
Section 16(a) Beneficial Ownership Reporting Compliance
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% 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% 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%
beneficial holders, no person was late filing SEC Forms 3, 4 or 5 during the
period January 1, 2000 through December 31, 2000.
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of February 23, 2001,
concerning shares of Common Stock beneficially owned by all persons (if any)
known by the Company to own more than 5% 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.
Aggregate
Number of
Shares Percent
Name of Beneficially of
Beneficial Owner (1) Owned (2) Class (2)
- -------------------- --------- ---------
B. Francis Saul II 3,434,900 (3) 24.2%
Philip D. Caraci 141,712 (4) 1.0%
Gilbert Grosvenor 16,070 *
Philip C. Jackson, Jr. 58,013 (5) *
Paul X. Kelley 3,459 *
Charles R. Longsworth 18,696 *
Patrick F. Noonan 23,158 (6) *
B. Francis Saul III 18,097 *
Mark Sullivan III 7,397 *
James W. Symington 5,316 *
John R. Whitmore 18,397 (7) *
Scott V. Schneider 25,698 (8) *
Christopher H. Netter 25,000 (9) *
Charles W. Sherren, Jr. 20,500 (10) *
All directors and officers as
a group (17 persons) 3,819,143 27.0%
* Less than 1 percent
(1) The address of each beneficial owner listed is c/o Saul Centers, Inc., 8401
Connecticut Avenue, Chevy Chase, MD 20815.
(2) Beneficial ownership and percent of class are calculated pursuant to Rule
13d-3 under the Securities Exchange Act of 1934, as amended. Includes
96,249 shares earned by directors in the Deferred Compensation Plan.
(3) Includes 2,805,425 shares owned by the B. F. Saul Real Estate Investment
Trust, 179,248 shares owned by Franklin Property Co., 374,030 shares owned
by Westminster Investing Corporation, 85 shares owned by Van Ness Square
Corp., 20,794 shares owned by various family trusts for which Mr. Saul II
is either the sole trustee or sole custodian for a child, and 49,071 shares
owned by Mr. Saul II's spouse. Mr. Saul II disclaims beneficial ownership
of 49,071 shares owned by his spouse. Pursuant to Rule 13d-3, the Common
Stock described above is considered to be beneficially owned by Mr. Saul II
because he has or may be deemed to have sole or shared voting and/or
investment power in respect thereof. Excludes 1,024,082 shares owned by the
B. F. Saul Company Employees' Profit Sharing Retirement Trust, (the
"Employee Trust"). Mr. Saul II is one of five Trustees for the Employee
Trust and has an interest in the Employee Trust as one of the participating
employees.
(4) Includes 27,097 shares owned in trust by Mr. Caraci's spouse for which Mr.
Caraci is a co-trustee with his spouse, and 100,000 shares subject to
currently exercisable options held by Mr. Caraci. Mr. Caraci disclaims
beneficial ownership of 27,097 shares owned by his spouse. Excludes
1,024,082 shares owned by the Employee Trust. Mr. Caraci is one of five
Trustees for the Employee Trust and has an interest in the Employee Trust
as one of the participating employees.
(5) Mr. Jackson disclaims beneficial ownership of 2,800 shares owned by his
spouse.
(6) Mr. Noonan disclaims beneficial ownership of 5,516 shares owned by his
spouse.
(7) 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.
(8) Includes 25,000 shares subject to currently exercisable options held by Mr.
Schneider and 698 shares owned by Mr. Schneider's children. Mr. Schneider
disclaims beneficial ownership of 698 shares owned by his children.
(9) Represents 25,000 shares subject to currently exercisable options held by
Mr. Netter.
(10) Includes 500 shares owned jointly by Mr. Sherren and his spouse and 20,000
shares subject to currently exercisable options held by Mr. Sherren.
11
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, 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 these properties.
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 six of the eleven members of the Board of Directors. Included in
general and administrative expenses for the year ended December 31, 2000 are
charges totalling $2,091,000 related to such shared services, of which
$2,056,000 was paid prior to December 31, 2000. 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 leases space in several of the
shopping centers owned by the Company and its subsidiaries. The total rental
income from Chevy Chase Bank from January 1, 2000 through December 31, 2000 was
$1,223,000. The Company believes that all of the leases with Chevy Chase Bank
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 Vice Chairman and the President of the Company are 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, certain
members of 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, 2000, the maximum potential
obligation of The Saul Organization and its subsidiaries under the agreement was
$225,616,000. The Company believes that the Partnerships will be able to make
all payments due with respect to their debt obligations.
Property Acquisitions. In August 2000, the Company purchased, through the
Operating Partnership, a 7.11 acre land parcel located adjacent to its Ashburn
Village shopping center in Loudoun County, Virginia. The $1,580,000 purchase
price was paid in cash. A third party appraisal was relied upon to determine the
price. The seller was a member of The Saul Organization. In October 2000, the
Company purchased, through the Operating Partnership, Avenel VI, a 30,000 square
foot office/flex property located adjacent to its Avenel Business Park office
property in Gaithersburg, Maryland. The $4,200,000 purchase price was paid in
cash. A third party appraisal was relied upon to determine the price. The seller
was a member of The Saul Organization.
12
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 2002 annual meeting of stockholders
will be held in mid-April 2002. 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 2002 must be received at the Company's
office at 8401 Connecticut Avenue, Chevy Chase, Maryland 20815, no later than
November 20, 2001.
Under the Amended and Restated Bylaws of the Company, a stockholder must
comply with certain procedures to submit stockholder proposals to be considered
at an annual meeting of stockholders. These procedures provide that stockholders
must do so by notice timely delivered to the Secretary of the Company. The
Secretary of the Company generally must receive notice of any such proposal not
less than sixty days nor more than ninety days prior to the anniversary of the
preceding year's annual meeting of stockholders. In the case of proposals for
the 2002 annual meeting of stockholders, the Secretary of the Company must
receive notice of any such proposal no earlier than January 27, 2002 and no
later than February 26, 2002 (other than proposals intended to be included in
the proxy statement and form of proxy, which, as noted above, the Company must
receive by November 16, 2001). The stockholder notice must meet the applicable
requirements that are imposed by the Amended and Restated Bylaws. The chairman
of the annual meeting shall have the power to declare that any proposal not
meeting these and any other applicable requirements that the Amended and
Restated Bylaws impose shall be disregarded. A copy of the Bylaws are on file
with the Securities and Exchange Commission.
In addition, the form of proxy that the Board of Directors will solicit in
connection with the Company's 2002 annual meeting of stockholders will confer
discretionary authority to vote on any proposal, unless the Secretary of the
Company receives notice of that proposal no earlier than January 27, 2002 and no
later than February 26, 2002, and the notice complies with the other
requirements described in the preceding paragraph.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 2000 accompanies this Proxy Statement.
By order of the Board of Directors
/s/ Scott V. Schneider
Scott V. Schneider
Chief Financial Officer and Secretary
March 20, 2001
Chevy Chase, Maryland
13
EXHIBIT A: AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to assist the
Board of Directors in fulfilling its oversight responsibilities by reviewing:
the financial reports and other financial information provided by Saul Centers,
Inc. (the "Company") to the public; the Company's systems of internal controls
regarding finance, accounting, legal compliance and ethics that management of
the Board have established; and the Company's auditing, accounting and financial
reporting processes generally. Consistent with this function, the Audit
Committee should encourage continuous improvement of, and should foster
adherence to, the Company's policies, procedures and practices at all levels.
The Audit Committee's primary duties and responsibilities are to:
. Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
. Review and appraise the audit efforts of the Company's independent
accountants.
. Provide an open avenue of communication among the independent accountants,
financial and senior management, and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be an independent director. An independent
director is one who is not an employee of the Company, who is not involved in
the Company's day-to-day activities and who otherwise has no relationship to the
company that, in the opinion of the Board, may interfere with the exercise of
such Director's independence from the Company. All members of the Audit
Committee shall have a working familiarity with basic finance and accounting
practices, and at least one member of the Audit Committee shall have accounting
or related financial management expertise. Audit Committee members may enhance
their familiarity with finance and accounting by participating in educational
programs conducted by the Company or an outside consultant.
The members of the Audit Committee shall be elected by the Board at least
annually at a meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the members
of the Audit Committee may designate a Chair by majority vote of the full
Audit Committee membership.
III. MEETINGS
The Audit Committee shall meet at least three times a year, or more frequently
as circumstances dictate. As part of its job to foster open communication, the
Audit Committee should meet at least annually with management and the
independent accountants in separate sessions to discuss any matters that the
Audit Committee or either of these groups believe should be discussed privately.
In addition, the Audit Committee, or at least its Chair, should meet with the
independent accountants and management quarterly to review the Company's
financials consistent with IV.3 below prior to the filing of the Company's Form
10-Q. When deemed appropriate, meetings may be held in person or by telephone.
Minutes or other records of meetings and activities of the Audit Committee shall
be maintained.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Audit Committee shall:
Document Reports/Reviews
1. Review and/or reassess this Charter periodically, at least annually, as
conditions dictate and submit revisions to the full Board of Directors for
approval.
2. Review the Company's annual and quarterly financial statements released to
the public, including any certification, report, opinion or review rendered by
the independent accountants. Review filings with the SEC and other published
documents containing the Company's financial statements and consider whether
the information contained in these documents is consistent with the information
contained in the financial statements.
3. Review with financial management and the independent accountants, the 10-Q
prior to its filing. The chair of the Audit Committee may represent the entire
Committee for purposes of this review.
14
Independent Accountants
4. The Audit Committee has the responsibility to evaluate and recommend to the
Board of Directors the selection or replacement of the outside auditor. The
Audit Committee will consider the auditor's independence and effectiveness and
approve the fees and other compensation to be paid to the independent
accountants.
5. On an annual basis, obtain a written statement from the independent
accountants describing all relationships between the Company and the independent
accountants and review and discuss with the independent accountants all
significant relationships the accountants have with the Company to determine
the accountants' independence.
6. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances warrant.
7. Periodically consult with the independent accountants out of the presence of
management about internal controls and quality, acceptability, fullness and
accuracy of the Company's financial statements.
Financial Reporting Process
8. In consultation with the independent accountants, review the integrity of the
Company's financial reporting process, both internal and external.
9. Consider the independent accountants' judgments about the quality and
appropriateness (not just acceptability) of the Company's accounting principles
and the clarity of financial disclosure practices as applied in its financial
reporting.
10. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the independent
accountants or management.
Process Improvement
11. Discuss, at least annually, with management and the independent accountants
regarding any significant judgments made in management's preparation of the
financial statements and the view of each as to appropriateness of such
judgments.
12. Following completion of the annual audit, review separately with management
and the independent accountants any significant difficulties encountered during
the course of the audit, including any restrictions on the scope of work or
access to required information.
13. Review any significant disagreement among management and the independent
accountants in connection with the preparation of the financial statements.
14. Review with the independent accountants and management the extent to which
changes or improvements in financial or accounting practices, as approved by the
Audit Committee, have been implemented. (This review should be conducted at an
appropriate period of time subsequent to implementation of changes or
improvements, as decided by the Audit Committee.)
Ethics and Legal Compliance
15. Review management's monitoring of the Company's compliance with applicable
laws and management's exercise of ethical practices and ensure that management
has the proper review system in place to ensure that the Company's financial
statements, reports and other financial information disseminated to governmental
organizations and the public satisfy legal requirements.
16. Review, with the Company's counsel, applicable legal compliance matters
including securities trading activities.
17. Review, with the Company's counsel, any legal matter that could have a
significant impact on the Company's financial statements.
18. Perform any other activities consistent with this Charter, the Company's
Declaration or Bylaws and governing law, as the Audit Committee or the Board
deems necessary or appropriate.
19. Conduct or authorize investigations into any matters within the Committee's
scope of responsibilities. The Committee shall be empowered to retain
independent counsel and other professionals to assist in the conduct of any
investigation.
Internal Audit
20. Review with management its plan to address the internal audit function.
21. Review with management the results of internal audit work performed and
management's plans to address and resolve any findings.
Reports of the Audit Committee
22. Prepare and approve the Company's disclosure required by the Securities
Exchange Commission in its annual proxy statement and review the Company's
disclosure in the annual proxy statement regarding whether the audit committee
has a written charter.
SAUL CENTERS, INC
A Proxy for Annual Meeting of Stockholders
April 27,2001
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 27, 2001, 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 20, 2001, a copy of which has been received by the
undersigned as follows:
1. TO ELECT FOUR DIRECTORS TO SERVE UNTIL THE ANNUAL MEETING OF
STOCKHOLDERS IN 2004
/ / GRANT AUTHORITY to vote for all nominees listed below.
/ / WITHHOLD AUTHORITY to vote for all nominees listed below.
General Paul X. Kelley; Charles R. Longsworth; Patrick E. Noonan;
B. Francis Saul III
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below
- ----------------------------------------------------------------------------
(Please sign on reverse side)
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: , 2001
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Signature(s) of Stockholder(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.