-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Aa8n7G+/2AN8TVShZpUxlwNvRBGGcAZAqlGXXWUeM93BXJJqEvJBdJkM3GksRM1I W5pnTQNhaTZvTx70xKKJjw== 0000928385-98-000472.txt : 19980317 0000928385-98-000472.hdr.sgml : 19980317 ACCESSION NUMBER: 0000928385-98-000472 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980417 FILED AS OF DATE: 19980316 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAUL CENTERS INC CENTRAL INDEX KEY: 0000907254 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 521833074 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-12254 FILM NUMBER: 98566317 BUSINESS ADDRESS: STREET 1: 8401 CONNECTICUT AVE CITY: CHEVY CHASE STATE: MD ZIP: 20815 BUSINESS PHONE: 3019866207 MAIL ADDRESS: STREET 1: 8401 CONNECTICUT AVE CITY: CHEVY CHASE STATE: MD ZIP: 20815 DEF 14A 1 NOTICE & PROXY SCHEDULE 14A INFORMATION 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: ------------------------------------------------------------------------ (2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------------ (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): ------------------------------------------------------------------------ (4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------ (5) Total fee paid: ------------------------------------------------------------------------ [_] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ----------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ----------------------------------------------------------------------- (3) Filing Party: ----------------------------------------------------------------------- (4) Date Filed: ----------------------------------------------------------------------- Notes: SAUL CENTERS, INC. 8401 Connecticut Avenue Chevy Chase, Maryland 20815 (301) 986-6000 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held April 17, 1998 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 17, 1998, 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 2001, 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, 1998 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 13, 1998 Chevy Chase, Maryland SAUL CENTERS, INC. 8401 Connecticut Avenue Chevy Chase, Maryland 20815 (301) 986-6000 -------------------------- PROXY STATEMENT ANNUAL MEETING OF STOCKHOLDERS APRIL 17, 1998 -------------------------- 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 17, 1998, 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, 1998 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 13, 1998. 2 As of February 20, 1998, 12,483,842 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 22.5 percent of the outstanding shares of Common Stock, excluding 6.1 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. From June 1993 until June 1997, the Board of Directors was composed of nine directors, and in June 1997 two additional directors were elected. 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 1998 will serve until the annual meeting of stockholders in 2001. 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, 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 and Noonan are presently directors of the Company and have served as such since June 1993. Nominee Saul III is presently a director of the Company and 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. Class Two Directors-Term Ends at 2001 Annual Meeting (If Elected) Principal Occupation and Name Age Current Directorships - ------ ----- -------------------------- General Paul X. Kelley 69 Director of the Company. Partner of J.F. Lehman & Company since 1998. Vice Chairman of Cassidy & Associates from 1989 to 1998. 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., and The Wackenhut Corporation. 3 Charles R. Longsworth 68 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, Houghton Mifflin, Inc., and Virginia Eastern Shore Economic Development Corp. Patrick F. Noonan 55 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. B. Francis Saul III 36 Vice President and a Director of the Company. Vice President and a Trustee of the B. F. Saul Real Estate Investment Trust. Director of Chevy Chase Bank, F.S.B., Senior Vice President of the B. F. Saul Company since 1991. Director of the Greater Washington Boys & Girls Club and The Heights School. Class Three Directors-Term Ends at 1999 Annual Meeting Principal Occupation and Name Age Current Directorships - ------ ----- ------------------------- B. Francis Saul II 65 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. Mark Sullivan III 56 Director of the Company. President since 1996 and Co-founder of the Small Business Funding Corporation, a company providing a secondary market facility for the purchase and securitization of small business loans. Practiced law in Washington, D.C., advising senior management of financial institutions on legal and policy matters from 1989 to 1996. Director of Bank Plus Corporation (a unitary thrift holding company). 4 James W. Symington 70 Director of the Company. Partner in the law firm of O'Connor & Hannan since 1986. Member of Congress from 1969 to 1977. Chairman Emeritus of National Rehabilitation Hospital. John R. Whitmore 64 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. Class One Directors-Term Ends at 2000 Annual Meeting Principal Occupation and Name Age Current Directorships - ------ ----- ------------------------- Philip D. Caraci 59 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 66 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. Philip C. Jackson, Jr. 69 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. 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 1997. Each member of the Board attended at least 87 percent of the aggregate of the meetings of the Board and of the Committees of the Board on which he served. 5 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, 1997, the Company paid its directors total compensation of $241,000, of which $96,500 was paid in cash and $144,500 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, 1997, 11,541 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 1997. 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 1997. 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 1997. 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 1997. Gilbert M. Grosvenor, a director of the Company and a member of the Company's Compensation Committee during 1997, 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. 6 Name Age Position and Background - ----- ----- ----------------------- Christopher H. Netter 43 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 40 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. 44 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, 1997 through December 31, 1997. 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, 1997, 38,607 of these 70,000 shares have been credited to the directors' deferred fee accounts. 7 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, 1997, 1996 and 1995. SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term -------------------- Compensation ------------ All Stock Option Other Name and Principal Position Year Salary Bonus Awards (Shs) Compensation (1) ---- -------- ------ ------------ ---------------- B. Francis Saul II 1997 $125,000 $10,000 -- -- Chairman and 1996 125,000 10,000 -- -- Chief Executive Officer 1995 125,000 10,000 -- -- Philip D. Caraci 1997 238,333 19,600 -- -- President 1996 218,333 18,000 -- -- 1995 198,333 16,400 -- -- Christopher H. Netter 1997 149,028 10,850 $10,921 Vice President 1996 140,084 9,905 -- 10,338 Leasing 1995 135,769 9,625 -- 10,817 Scott V. Schneider 1997 150,584 10,850 11,013 Vice President 1996 141,151 10,115 -- 10,349 Chief Financial Officer 1995 129,835 9,450 -- 10,345 Charles W. Sherren, Jr. 1997 115,610 8,260 8,462 Vice President 1996 110,596 7,875 -- 8,165 Management 1995 104,619 7,490 -- 8,308
(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. 8 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, 1997. None of such officers exercised any stock options during the year ended December 31, 1997. VALUE OF UNEXERCISED OPTIONS (1) Number of Unexercised Options at December 31, 1997(2) --------------------------------- Name and Principal Position Exercisable Unexercisable ----------- ------------- B. Francis Saul II -- -- Vice President Philip D. Caraci 100,000 -- President Christopher H. Netter 25,000 -- Vice President Leasing Scott V. Schneider 25,000 -- Vice President Chief Financial Officer Charles W. Sherren, Jr. 20,000 -- Vice President Management (1) No options were in-the-money at December 31, 1997. (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. 9 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 II is not eligible to participate in the plan. 10 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 1997, 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&P500"). The graph assumes the investment of $100 on August 31, 1993. Comparison of Total Return [LINE GRAPH APPEARS HERE] Total Return $100 Invested ----------------------------------------- BFS S&P NAREIT Index 500 Equity ----------------------------------------- Aug-1993 100.000 100.000 100.000 Sep-1993 96.894 99.262 104.881 Oct-1993 98.261 101.278 102.883 Nov-1993 90.807 100.326 97.308 Dec-1993 96.398 101.561 97.138 Jan-1994 96.487 104.957 99.965 Feb-1994 95.866 102.127 104.307 Mar-1994 93.381 97.685 100.446 Apr-1994 100.343 98.954 102.154 May-1994 94.753 100.566 104.428 Jun-1994 92.269 98.079 102.295 Jul-1994 91.818 101.329 101.792 Aug-1994 94.302 105.454 102.097 Sep-1994 90.575 102.907 100.205 Oct-1994 83.960 105.265 96.727 Nov-1994 80.854 101.406 93.404 Dec-1994 82.096 102.881 100.220 Jan-1995 90.441 105.557 98.030 Feb-1995 88.577 109.656 100.453 Mar-1995 92.925 112.898 100.050 Apr-1995 96.974 116.191 100.021 May-1995 88.899 120.779 104.272 Jun-1995 92.626 123.617 105.930 Jul-1995 93.620 127.733 107.758 Aug-1995 94.862 128.076 109.054 Sep-1995 92.377 133.445 110.925 Oct-1995 89.079 132.973 108.544 Nov-1995 86.594 138.830 109.536 Dec-1995 85.352 141.394 115.522 Jan-1996 92.674 146.205 117.421 Feb-1996 93.917 147.560 118.796 Mar-1996 93.295 148.984 118.144 Apr-1996 93.848 151.179 118.746 May-1996 90.121 155.081 121.814 Jun-1996 91.364 155.673 123.401 Jul-1996 89.498 148.795 124.336 Aug-1996 88.876 151.934 129.224 Sep-1996 91.982 160.484 131.477 Oct-1996 100.128 164.909 135.381 Nov-1996 103.234 177.369 141.552 Dec-1996 106.339 173.862 156.259 Jan-1997 112.069 184.720 158.010 Feb-1997 114.554 186.170 157.690 Mar-1997 107.100 178.520 157.360 Apr-1997 110.408 189.180 153.030 May-1997 114.135 200.690 157.530 Jun-1997 118.482 209.680 165.190 Jul-1997 122.478 226.370 170.290 Aug-1997 122.478 213.690 169.880 Sep-1997 130.553 225.400 184.710 Oct-1997 125.914 217.870 179.730 Nov-1997 125.914 227.950 183.610 Dec-1997 128.709 231.870 187.940 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information as of February 20, 1998, 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. Aggregate Number of Shares Percent Name of Beneficially of Beneficial Owner Owned (1) Class (1) - ------------------ -------------- ----------- B. Francis Saul II 2,557,172 (2) 20.5% Philip D. Caraci 126,115 (3) 1.0% Philip C. Jackson, Jr. 24,500 (4) * Paul X. Kelley 3,000 * Charles R. Longsworth 1,700 * Patrick F. Noonan 5,000 (5) * B. Francis Saul III 12,000 * Mark Sullivan 5,000 * James W. Symington 200 * John R. Whitmore 2,500 (6) * Scott V. Schneider 25,386 (7) * Christopher H. Netter 25,000 (8) * Charles W. Sherren, Jr. 20,000 (9) * All directors and officers as a group (19 persons) 2,808,199 22.5% * 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 1,996,676 shares owned by the B. F. Saul Real Estate Investment Trust, 132,290 shares owned by Franklin Property Co., 374,030 shares owned by Westminster Investing Corporation, 63 shares owned by Van Ness Square Corp., 17,898 shares owned by various family trusts and as custodian for a child, and 36,215 shares owned by Mr. Saul II's spouse. Mr. Saul II disclaims beneficial ownership of 36,215 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 755,800 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 a pecuniary interest in the Employee Trust as one of the participating employees. (3) Includes 17,218 shares owned jointly by Mr. Caraci and his spouse, 2,888 shares owned by Mr. Caraci's spouse, and 100,000 shares subject to currently exercisable options held by Mr. Caraci. Mr. Caraci disclaims beneficial ownership of 2,888 shares owned by his spouse. Excludes 755,800 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 25,000 shares subject to currently exercisable options held by Mr. Schneider and 386 shares owned by Mr. Schneider's children. Mr. Schneider disclaims beneficial ownership of 386 shares owned by his children. (8) Represents 25,000 shares subject to currently exercisable options held by Mr. Netter. (9) Represents 20,000 shares subject to currently exercisable options held by Mr. Sherren. 12 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 six of the eleven members of the Board of Directors. Included in general and administrative expenses for the year ended December 31, 1997 are charges totalling $1,624,000 related to such shared services, of which $1,436,000 was paid prior to December 31, 1997. 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, 1997 through December 31, 1997 was $1,181,000. 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 and a Vice President (Mr. Saul III) 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, 1997, the maximum potential obligation of The Saul Organization and its subsidiaries under the agreement was $209.1 million. The Company believes that the Partnerships will be able to make all payments due with respect to their debt obligations. 13 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 1999 annual meeting of stockholders will be held in mid-April 1999. 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 1999 must be received at the Company's office at 8401 Connecticut Avenue, Chevy Chase, Maryland 20815, no later than November 6, 1998. 14 ANNUAL REPORT A copy of the Company's Annual Report to Stockholders for the year ended December 31, 1997 accompanies this Proxy Statement. By order of the Board of Directors Scott V. Schneider Chief Financial Officer and Secretary March 13, 1998 Chevy Chase, Maryland 15 SAUL CENTERS, INC. A Proxy for Annual Meeting of Stockholders April 17, 1998 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 17, 1998, 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 13, 1998, 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 2001 [_] 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 F. 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: ,1998 ------------ ------------------------------- ------------------------------- 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. -----END PRIVACY-ENHANCED MESSAGE-----