<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [ ] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
PRENTISS PROPERTIES TRUST
(NAME OF REGISTRANT AS SPECIFIED IN ITS DECLARATION OF TRUST)
PRENTISS PROPERTIES TRUST
(NAME OF PERSON(S) FILING PROXY STATEMENT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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:
<PAGE>
PRENTISS PROPERTIES TRUST
3890 WEST NORTHWEST HIGHWAY, SUITE 400
DALLAS, TEXAS 75220
March 31, 1997
Dear Shareholder:
Your Board of Trustees joins me in extending an invitation to attend the 1997
Annual Meeting of Shareholders which will be held on Tuesday, May 6, 1997 at the
Embassy Suites Hotel, 3880 West Northwest Highway, Dallas, Texas 75220. The
meeting will start promptly at 12:00 Noon, local time.
We sincerely hope you will be able to attend and participate in the meeting. We
will report on the Company's progress and respond to questions you may have
about the Company's business. There will also be important items which are
required to be acted upon by shareholders.
Whether or not you plan to attend, it is important that your shares be
represented and voted at the meeting, and, therefore, we urge you to complete,
sign, date and return the enclosed proxy card in the envelope provided for this
purpose.
Very sincerely yours,
/s/ MICHAEL V. PRENTISS
MICHAEL V. PRENTISS
Chairman of the Board and
Chief Executive Officer
<PAGE>
PRENTISS PROPERTIES TRUST
3890 WEST NORTHWEST HIGHWAY
DALLAS, TEXAS 75220
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 1997
----------------------
NOTICE IS HEREBY GIVEN, that the 1997 Annual Meeting of Shareholders
(the "Annual Meeting") of Prentiss Properties Trust (the "Company") will be held
on Tuesday, May 6, 1997 at the Embassy Suites Hotel at 3880 W. Northwest
Highway, Dallas, Texas 75220 at 12:00 Noon, local time, for the following
purposes:
1. To elect one Class I trustee of the Company to serve until the 2000
Annual Meeting of Shareholders and until his respective successor is duly
elected and qualified;
2. To approve the amendment to the Company's 1996 Share Incentive Plan (the
1996 "Plan") to, among other things, increase the number of the Company's
common shares, $0.01 par value per share (the "Common Shares"), subject to
issuance under the Plan by 950,000 shares;
3. To consider and act upon any other matters that may properly be brought
before the Annual Meeting and at any adjournments or postponements thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned, or to which the Annual Meeting
be postponed.
The Board of Trustees has fixed the close of business on March 19, 1997 as
the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting and at any adjournments or postponements thereof.
Only shareholders of record of the Company's Common Stock at the close of
business on that date will be entitled to notice of and to vote at the Annual
Meeting and at any adjournments or postponements thereof.
You are requested to fill in and sign the enclosed form of proxy, which is
being solicited by the Board of Trustees, and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy may be revoked by delivery of a
later dated proxy. Shareholders of record who attend the Annual Meeting may
vote in person, even if they have previously delivered a signed proxy.
BY ORDER OF THE BOARD OF TRUSTEES
/s/ GREGORY S. IMHOFF
GREGORY S. IMHOFF
Secretary
Dallas, Texas
March 31, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED . IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
PRENTISS PROPERTIES TRUST
3890 W. NORTHWEST HIGHWAY, SUITE 400
DALLAS, TEXAS 75220
---------------------------------------------------
PROXY STATEMENT
---------------------------------------------------
GENERAL INFORMATION
FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 1997
March 31, 1997
This Proxy Statement and the accompanying Form of Proxy and Notice of
Annual Meeting is provided in connection with the solicitation of proxies by the
Board of Trustees of Prentiss Properties Trust, a Maryland real estate
investment trust (the "Company"), for use at the annual meeting of shareholders
to be held at the Embassy Suites Hotel, 3880 W. Northwest Highway, Dallas, Texas
75220, on Tuesday, May 6, 1997 at 12:00 Noon, local time (the "Annual Meeting")
and any adjournments thereof. The mailing address of the principal executive
offices of the Company is 3890 W. Northwest Highway, Suite 400, Dallas, Texas
75220. This Proxy Statement and the Proxy Form and Notice of Annual Meeting,
all enclosed herewith, are first being mailed to the shareholders of the Company
on or about March 31, 1997.
THE COMPANY
Prentiss Properties Trust (the "Company") was formed under the laws of
the state of Maryland on July 12, 1996, to be a self-administered and self-
managed real estate investment trust ("REIT"). The Company acquired a sole
general partnership interest in Prentiss Properties Acquisition Partners, L.P.
(the "Operating Partnership") through the Company's wholly-owned subsidiary
Prentiss Properties I, Inc., a Delaware corporation and owns an approximate
86.0% limited partnership interest in the Operating Partnership.
The Company has been formed to succeed to substantially all of the
interests of Prentiss Properties Limited, Inc. ("PPL") and its affiliates in (i)
a portfolio of office and industrial properties and (ii) the national
acquisition, property management, leasing, development and construction
businesses of PPL and its affiliates (the "Prentiss Group"). The acquisition,
property management, leasing, development and construction businesses will be
carried out by the Operating Partnership and the Company's majority-owned
affiliates, Prentiss Properties Limited, Inc. and Prentiss Properties Limited
II, Inc. (collectively, the "Manager").
On October 22, 1996, the Company commenced operations after completing an
initial public offering of 16,000,000 common shares of beneficial interest,
$0.01 par value per share ("Common Shares"). The Company issued an additional
2,400,000 common shares on November 1, 1996, pursuant to the exercise of the
underwriters' over-allotment option. The combined 18,400,000 Common Shares were
issued at a price per share of $20.00 (the "Offering"). The Company used
approximately $87.4 million of the net proceeds of the Offering and issued
1,879,897 Common Shares of the Company for a total consideration of
approximately $125.0 million to purchase certain limited partners' interests in
the Operating Partnership. The Company contributed the remaining net proceeds
of the Offering to the Operating Partnership. Subsequent to these transactions,
the Company held an approximate 86.0% interest in the Operating Partnership.
The Prentiss Group members, who, prior to the Offering, collectively served
as the general partner of the Operating Partnership, contributed to the
Operating Partnership all of their interests in the Operating Partnership, the
Initial Properties (as defined below) that were not owned by the Operating
Partnership, and certain management
<PAGE>
contracts of PPL (the "Contracts") in exchange for 3,295,995 limited partnership
units in the Operating Partnership ("Units").
Upon completion of the Offering and certain related transactions
(collectively, the "Formation Transactions"), the Company owned 87 properties
(the "Initial Properties"), which consisted of 28 office (the "Initial Office
Properties") and 59 industrial (the "Initial Industrial Properties") containing
an aggregate of 8.9 million net rentable square feet. Between the closing of
the Offering and December 31, 1996, the Company has acquired eight additional
properties, (the "1996 Acquired Properties"). As of December 31, 1996, the
Company owned 95 properties, 33 office and 62 industrial (the "Properties")
containing 9.9 million square feet and located in 12 major markets throughout
the U.S.
The 1996 Acquired Properties consist of five Class "A" suburban office
properties (the "1996 Acquired Office Properties") totaling approximately
850,000 square feet and three suburban industrial properties totaling
approximately 226,000 square feet. The 1996 Acquired Office Properties are
located in the Chicago, Illinois; Denver, Colorado; and Northern Virginia
markets. The 1996 Acquired Industrial Properties are located in the Chicago,
Illinois market. The purchase price of the 1996 Acquired Properties totaled
approximately $116.6 million (excluding closing costs) - which was funded
principally with borrowings under the Line of Credit totaling $72.8 million,
other indebtedness incurred or assumed directly by the Company totaling $35.0
million and approximately $8.8 million of cash reserves.
THE PROXY
The solicitation of proxies is being made primarily by the use of the
mails. The cost of preparing and mailing this Proxy Statement and the
accompanying material, and the cost of any supplementary solicitations, which
may be made by mail, telephone, telegraph or personally by officers and
employees of the Company, will be borne by the Company.
The shareholder of record giving the proxy has the power to revoke it
either by delivering written notice of such revocation to the Secretary of the
Company before the Annual Meeting or by attending the Annual Meeting and voting
in person. The proxy will be voted as specified by the shareholder in the
spaces provided on the Proxy Form or, if no specification is made, it will be
voted in favor of the proposals. In voting by proxy in regard to the election
of one Class I trustee to serve until the 2000 annual meeting of shareholders or
until his successor is duly elected and qualified, shareholders may vote in
favor of the nominee or withhold their votes as to the nominee ("Proposal One").
With regard to the proposal to amend the Company's 1996 Share Incentive Plan
(the "1996 Plan") ("Proposal Two"), shareholders may vote in favor of the
proposal, against the proposal or abstain from voting with respect to the
proposal. Shareholders may not abstain with respect to the election of
trustees.
Management of the Company requests that each shareholder promptly vote,
sign and return a proxy card as soon as possible. Beneficial owners of the
Company's Common Shares held in the name of a broker or other intermediary may
vote and revoke a previous vote only through, and in accordance with, procedures
established by the record holder(s) or their agent(s).
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement and, if given or made, such
information or representation should not be relied upon as having been
authorized. This Proxy Statement does not constitute the solicitation of a
proxy, in any jurisdiction, from any person to whom it is unlawful to make such
proxy solicitation in such jurisdiction. The delivery of this Proxy Statement
shall not, under any circumstances, imply that there has not been any change in
the information set forth herein since the date of the Proxy Statement.
Each outstanding share of the Company's Common Shares is entitled to one
vote. Only shareholders of record at the close of business on March 19, 1997
(the "Shareholders") will be entitled to notice of, and to vote at, the Annual
Meeting and any adjournments thereof. At the close of business on March 19,
1997, the Company had outstanding 20,280,397 Common Shares.
<PAGE>
REQUIRED VOTE
Under Maryland law and the Company's Declaration of Trust and Bylaws,
if a majority of the votes entitled to be cast are present at the Annual
Meeting, in person or by proxy, so as to constitute a quorum, (1) with respect
to Proposal One concerning the election of the Class I trustee, a plurality of
all the votes cast will elect the nominee for trustee and (2) with respect to
Proposal Two, if the votes cast in favor of the proposal exceed the votes cast
in opposition to the proposal, the proposal will be approved. Shareholders may
not abstain from voting with respect to the election of trustees.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL ONE AND
---
PROPOSAL TWO.
No specific provisions of Maryland law or the Company's Declaration of
Trust or Bylaws address the issue of abstentions or broker non-votes.
Abstentions will not be counted "for" or "against" proposals, but abstentions
will be counted for the purpose of determining the existence of a quorum.
Brokers holding shares for beneficial owners must vote those shares according to
the specific instructions they receive from the owners. However, brokers or
nominees holding shares for a beneficial owner may not have discretionary voting
power and may not have received voting instructions from the beneficial owner of
the shares. In such cases, absent specific voting instructions from the
beneficial owner, the broker may not vote on these proposals. This results in
what is known as a "broker non-vote." A "broker non-vote" has the effect of a
negative vote when a majority of the shares outstanding and entitled to vote is
required for approval of a proposal, and "broker non-votes" will not be counted
as votes cast but will be counted for the purpose of determining the existence
of a quorum. Because the election of trustees is a routine matter for which
specific instructions from beneficial owners will not be required, no "broker
non-votes" will arise in the context of the proposal relating to the election of
trustees. Votes "withheld" from a trustee-nominee also have the effect of a
negative vote since a plurality of the shares cast at the Annual Meeting is
required for the election of each director.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT OF 1934
Section 16 (a) of the Exchange Act requires officers and Trustees, and
persons who beneficially own more than ten percent (10%) of the Company's
shares, to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission ("SEC"). Officers, Trustees and
greater than ten percent (10%) beneficial owners are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies furnished to the Company and
representations from the officers and Trustees, the Company believes that all
Section 16(a) filing requirements for the year ended December 31, 1996
applicable to its officers, Trustees and greater than ten percent (10%)
beneficial owners were satisfied, with the exception of the following:
On October 22, 1996, Mr. Mark Doran acquired beneficial ownership of
400 shares of the Company's common shares. Mr. Doran reported his acquisition
of the 400 shares of the Company's common shares on his Form 5 which was filed
on February 3, 1997.
<PAGE>
Based on written representations from the officers and Trustees, the
Company believes that no other Forms 5 for Trustees, officers and greater than
ten percent (10%) beneficial owners were required to be filed with the SEC for
the period ended December 31, 1996.
OWNERSHIP OF THE COMPANY'S COMMON STOCK
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of March 19, 1997, regarding
each person known to the Company to be the beneficial owner of more than five
percent (5%) of its Common Shares. Unless otherwise indicated, such Common
Shares are owned directly and the indicated person has sole voting and
investment power with respect thereto.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS/1/
------------------- ---------- ----------
<S> <C> <C>
Cohen & Steers Capital Management, Inc. 2,551,900/2/ 12.58%
757 Third Avenue
New York, New York 10017
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common Shares as
of March 19, 1997, by (i) each person who is a trustee or executive officer of
the Company and (ii) the trustees and executive officers of the Company as a
group. Unless otherwise indicated in the footnotes, all of such interests are
owned directly, and the indicated person or entity has sole voting and
investment power. The number of shares represents the number of Common Shares
the person is expected to hold plus the number of shares for which Units
expected to be held by the person are redeemable (if the Company elects to issue
Common Shares rather than pay cash upon such redemption). The extent to which
the persons will hold Common Shares as opposed to Units is set forth in the
notes.
___________________________
/1/ Based upon 20,280,397 shares of outstanding as of March 4, 1997.
/2/ Based solely upon information contained in Schedule 13G/A, dated February
2, 1997.
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES AND
UNITS BENEFICIALLY
OWNED AFTER PERCENT OF ALL COMMON PERCENT OF ALL
NAME OF BENEFICIAL OWNER THE OFFERING SHARES AND UNITS(1) COMMON SHARES(1)
----------------------------- --------------------- --------------------- ----------------
<S> <C> <C> <C>
Michael V. Prentiss (2)(3) .............. 2,583,698 10.96% 11.30%
Thomas F. August (2)(4) ................. 342,423 1.45% 1.66%
Thomas J. Hynes, Jr.(5) ................. 1,100 * *
Barry J.C. Parker (5) ................... 5,100 * *
Dr. Leonard Riggs, Jr. (5) .............. 7,600 * *
Ronald G. Steinhart (5) ................. 5,100 * *
Lawrence A. Wilson (5) .................. 100 * *
Dennis J. DuBois (2)(6) ................. 210,582 .89% 1.03%
Richard J. Bartel (7) ................... 1,100 * *
Mark R. Doran (8) ....................... 400 * *
Lawrence J. Krueger (7) ................. 1,000 * *
James B. Meyer (9) ...................... 700 * *
David Robertson (9) ..................... 10,000 * *
Robert K. Wiberg (9) .................... 1,000 * *
All Trustees and executive officers (11
persons) .............................. 3,169,903 13.45% 13.45%
</TABLE>
* Less than 1%.
(1) Assumes that all Units held by the person are redeemed for Common Shares.
The total number of Common Shares outstanding used in calculating the
percentage of all Common Shares and Units assumes that all of the Units held
by other persons are redeemed for Common Shares. The total number of Common
Shares outstanding used in calculating the percentage of all Common Stock
assumes that none of the Units held by other persons are redeemed for Common
Shares.
(2) Includes the principal's allocable share of Units held by PPL and various
other Prentiss Group entities (including the trust discussed in 3 below)
which received units in the Formation Transactions, in exchange for
interests in Properties or the Prentiss Properties Service Business.
(3) Excludes 386,762 Common Shares issuable upon the exercise of options granted
under the 1996 Plan, which vest in equal installments on each of the first
three anniversaries of the date of the grant. Includes Units redeemable for
336,000 Common Shares which are held in a trust of which Mr. Prentiss is a
trustee, and in which Mr. Prentiss disclaims beneficial ownership.
(4) Excludes 173,944 Common Shares issuable upon the exercise of options granted
under the 1996 Plan, which vest in equal installments on each of the first
three anniversaries of the date of the grant.
(5) The Independent Trustees receive a fee of $10,000 per year payable quarterly
in Common Shares. The table includes the shares to be issued as of March 19,
1997, based upon the price at January 1, 1997 of $25.00. Excludes 10,000
Common Shares issuable upon the exercise of options granted under the
Trustees' Plan, which vest in equal installments over a four-year period on
the anniversary date of the grant.
(6) Excludes 64,366 Common Shares issuable upon the exercise of options granted
under the 1996 Plan, which vest in equal installments on each of the first
three anniversaries of the date of the grant.
<PAGE>
(7) Excludes 125,000 for Mr. Krueger and 85,000 for Mr. Bartel of Common Shares
issuable upon the exercise of options granted under the 1996 Plan, which
vest in equal installments on each of the first three anniversaries of the
date of the grant.
(8) Excludes 75,000 Common Shares issuable upon the exercise of options granted
under the 1996 Plan, which vest in equal installments on each of the first
three anniversaries of the date of the grant.
(9) Excludes 50,000 Common Shares issuable upon the exercise of options granted
under the 1996 Plan, which vest in equal installments on each of the first
three anniversaries of the date of the grant.
PROPOSAL ONE - ELECTION OF CLASS I TRUSTEE
COMMITTEES AND MEETINGS OF THE BOARD OF TRUSTEES
Trustee Meetings. The business of the Company is under the general
management of its Board of Trustees as required by the Company's Declaration of
Trust, Bylaws and the laws of Maryland, the Company's state of formation.
Nominations of persons for election to the Board of Trustees may be made at an
annual meeting of shareholders (i) pursuant to the Trust's notice of meeting,
(ii) by or at the direction of the Trustees or (iii) by any shareholder of the
Trust who was a shareholder of record at the time of giving of notice provided
for in the Company's Bylaws, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in the Company's Bylaws. Only
such person who are nominated in accordance with the procedures set forth in the
Company's Bylaws shall be eligible to serve as Trustees. The Company's
Declaration of Trust requires that a majority of the Company's trustees must not
be officers or employees of the Company or Affiliates of any subsidiary of the
Company or any partnership which is an affiliate of the Company ("Independent
Trustees"). There are presently seven trustees, including five Independent
Trustees. The Board of Trustees held two meetings during 1996, and all of the
Company's trustees attended those meetings.
The Company presently has an Audit Committee and a Compensation
Committee of its Board of Trustees. The Company has no standing Nominating
Committee of the Board of Trustees, with the entire Board of Trustees acting in
such capacity. The Company may, from time to time, form other committees as
circumstances warrant. Such committees have authority and responsibility as
delegated by the Board of Trustees.
Audit Committee. The Board of Trustees has established an Audit
Committee which currently consists of the three Independent Trustees, Messrs.
Steinhart, Riggs, and Parker. The Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews with the
independent public accountants the plans and results of the audit engagement,
approves professional services provided by the independent public accountants,
reviews the independence of the independent public accountants, considers the
range of audit and non-audit fees and reviews the adequacy of the Company's
internal accounting controls. The Audit Committee had no meetings in 1996.
Compensation Committee. The Board of Trustees has established a
Compensation Committee which currently consists of the three Independent
Trustees, Messrs. Riggs, Wilson and Hynes. The Compensation Committee
determines compensation for the Company's executive officers, establishes
salaries of and awards of performance-based bonuses to the Company's executive
officers, and determines awards of restricted shares and grants of share options
under the Company's share plans. The Compensation Committee met once in 1996,
and all of its members attended that meeting.
<PAGE>
COMPENSATION OF TRUSTEES
The Company pays its Trustees who are not officers of the Company fees for
their services as trustees. Each such Trustee will receive annual compensation
of $10,000 in Common Shares payable quarterly and a fee of $1,250 plus expenses
for attendance in person at each meeting of the Board of Trustees, $250 for each
telephonic meeting of the Board of Trustees and $500 for each committee meeting
attended. In addition, each such Trustee received options under the 1996
Trustees' Share Incentive Plan (the "Trustees' Plan") to purchase 10,000
Common Shares at an exercise price equal to the initial public offering price of
the Offering, which options will vest in equal installments over a four-year
period on the anniversary of the date of grant. Officers of the Company who are
Trustees will not be paid any trustee fees.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL ONE.
---
NOMINEE FOR CLASS I TRUSTEE.
The Company's Declaration of Trust divides the Board of Trustees into three
classes as nearly equal in number as possible, with each class serving a term of
three years. One class of trustees is elected by a majority of the shareholders
of the Company at each annual meeting. The Board of Trustees has set at seven
the number of trustees constituting the current Board of Trustees, one of whom
will be elected at the Annual Meeting.
The Company has no Nominating Committee of its Board of Trustees, with the
entire Board of Trustees acting in such a capacity. The Board of Trustees has
nominated the present Class I trustee, Lawrence A. Wilson, to serve as Class I
trustee for a three-year term expiring at the Company's annual meeting in 2000.
The remaining members of the Board of Trustees will continue as members thereof
until their respective terms expire, as indicated below, or until their
successors are elected and qualified.
If any nominee becomes unavailable or unwilling to serve the Company as a
trustee for any reason, the persons named as proxies in the Proxy Form are
expected to consult with management of the Company in voting the shares
represented by them. The Board of Trustees has no reason to doubt the
availability of the nominee, and he has indicated his willingness to serve as a
trustee of the Company if elected by the shareholders at the Annual Meeting.
NOMINEE FOR ELECTION AS CLASS I TRUSTEE
(TERM EXPIRING 2000)
- --------------------------------------------------------------------------------
LAWRENCE A. WILSON, age 61, currently serves as an Independent Trustee of
the Company and has served in such capacity since the Company's formation in
October 1996. Mr. Wilson is President and Chief Executive Officer of HCB
Contractors, a construction and project management company that is a subsidiary
of the Beck Group. Mr. Wilson also serves as a director of TU Electric. Mr.
Wilson holds a L.L.B. degree from the Woodrow Wilson College of Law in Atlanta,
Georgia and is a graduate of the Emory University Advanced Management Program.
COMMITTEES: Compensation
INCUMBENT TRUSTEES
Mr. Wilson is the only Class I Trustee at this time. The Company's remaining
six trustees have terms that expire in 1998 or 1999.
- --------------------------------------------------------------------------------
<PAGE>
INCUMBENT TRUSTEE -- CLASS II
(TERM EXPIRING 1998)
- --------------------------------------------------------------------------------
DR. LEONARD M. RIGGS, JR., age 54, serves as an Independent Trustee of the
Company and has served in such capacity since the Company's formation in October
1996. Dr. Riggs is Chairman and Chief Executive Officer of EmCare, Holdings
Inc., a publicly-held physician practice management company specializing in
emergency medicine. Dr. Riggs founded EmCare Holdings, Inc. as Emergency Health
Service Associates in 1972. Dr. Riggs has also served as the Director of
Emergency Medicine at Baylor University Medical Center since 1974. Dr. Riggs is
past president of the American College of Emergency Physicians and is a director
and member of the compensation committee of American Oncology Resources, Inc. He
holds a B.S. degree from Centenary College of Shreveport, Louisiana and an M.D.
degree from the University of Texas Southwestern Medical School in Dallas,
Texas.
COMMITTEES: Audit and Compensation
- --------------------------------------------------------------------------------
INCUMBENT TRUSTEE -- CLASS II
(TERM EXPIRING 1998)
- --------------------------------------------------------------------------------
RONALD G. STEINHART, age 56, serves as an Independent Trustee of the
Company and has served in such capacity since the Company's formation in October
1996. Mr. Steinhart is Chairman and Chief Executive Officer of Banc One Texas,
N.A. and has served in that capacity since 1995. He was also appointed as
Regional Executive for Banc One Corporation's operations in Oklahoma, Arizona,
Colorado and Utah in 1995. Prior to 1995, Mr. Steinhart served as President and
Chief Operating Officer of Banc One Texas, N.A. to which he was appointed in
1992 in connection with the merger of Team Bank into Banc One Texas, N.A. Prior
to that merger, Mr. Steinhart served as Chairman and Chief Executive Officer of
Team Bank, which he founded as Deposit Guaranty Bank in 1988. Mr. Steinhart
served as President and Chief Operating Officer of InterFirst Corporation from
1981 to 1987. Prior to joining InterFirst Corporation in 1980, Mr. Steinhart
organized investors to charter and purchase six banks. Mr. Steinhart holds a
B.A. degree in accounting and a M.S. in finance from the University of Texas in
Austin. He is also a Certified Public Accountant.
COMMITTEES: Audit
- --------------------------------------------------------------------------------
<PAGE>
INCUMBENT TRUSTEE -- CLASS II
(TERM EXPIRING 1998)
- --------------------------------------------------------------------------------
THOMAS F. AUGUST, age 48, serves as President and Chief Operating Officer
and Trustee of the Company and has served in such capacity since the Company's
formation in October 1996. Mr. August has served as President and Chief
Operating Officer of PPL since 1992. From 1987 to 1992, Mr. August served as
Executive Vice President and Chief Financial Officer of PPL. From 1985 to 1987,
Mr. August served in executive capacities with Cadillac Urban. Prior to joining
Cadillac Urban in 1985, Mr. August was Senior Vice President of Finance for
Oxford Properties, Inc., in Denver, Colorado, an affiliate of a privately-held
Canadian real estate firm. Previously, he was a Vice President of Citibank,
responsible for real estate lending activities in the upper Midwest. Mr. August
holds a B.A. degree from Brandeis University and an M.B.A. degree from Boston
University.
COMMITTEES: None
- --------------------------------------------------------------------------------
INCUMBENT TRUSTEE -- CLASS III
(TERM EXPIRING 1999)
- --------------------------------------------------------------------------------
BARRY J. C. PARKER, age 49, serves as an Independent Trustee of the
Company and has served in such capacity since the Company's formation in October
1996. Mr. Parker is the immediate past Chairman of the Board, President and
Chief Executive Officer of County Seat, Inc., a nationwide chain of 750
specialty apparel stores. Prior to joining County Seat, Inc. in 1985, Mr. Parker
worked for the Children's Place, Inc. for 10 years and held various offices with
that company including Senior Vice President and Chief Financial Officer, and
Vice President and General Merchandising Manager. Mr. Parker worked for
Federated Department Stores, Inc. prior to 1975 and held various management
positions with that company's F&R Lazarus Department Store division. Mr. Parker
holds a B.A. degree from Washington University in St. Louis and an M.B.A. degree
from the University of Pennsylvania's Wharton School of Finance and Commerce.
COMMITTEES: Audit
- --------------------------------------------------------------------------------
INCUMBENT TRUSTEE -- CLASS III
(TERM EXPIRING 1999)
- --------------------------------------------------------------------------------
THOMAS J. HYNES, JR., age 57, serves as an Independent Trustee of the
Company and has served in such capacity since the Company's formation in October
1996. Mr. Hynes, Jr. is President and Chief Executive Officer of Meredith & Grew
Incorporated, a Boston-based real estate brokerage firm, and has served in that
capacity since 1988. Mr. Hynes, Jr. has been employed by Meredith & Grew
Incorporated since 1965 in which time he has held various offices. Mr. Hynes,
Jr. holds a B.A. degree from Boston College.
COMMITTEES: Compensation
- --------------------------------------------------------------------------------
<PAGE>
INCUMBENT TRUSTEE -- CLASS III
(TERM EXPIRING 1999)
- --------------------------------------------------------------------------------
MICHAEL V. PRENTISS, age 53, serves as Chairman of the Board and Chief
Executive Officer of the Company and has served in such capacity since the
Company's formation in October 1996. Mr. Prentiss, the founder of PPL, has over
25 years experience in real estate development, acquisitions, and investment
management and has acquired or developed properties with an aggregate value in
excess of $2 billion. From 1987 to 1992 he served as President and Chief
Executive Officer of PPL, and since 1992, he has served as its Chairman and
Chief Executive Officer. From 1978 to 1987, Mr. Prentiss served as President of
Cadillac Urban, Executive Vice President and member of the Board of Trustees of
Cadillac Fairview, and a member of Cadillac Fairview's Executive Committee.
Cadillac Urban was the largest business unit of Cadillac Fairview, responsible
for all of its office, mixed-use and suburban office park development activity
in the U.S. and Canada. Prior to 1978, Mr. Prentiss was President of Ackerman
Development Company. Mr. Prentiss is a Baker Scholar graduate of the Harvard
Graduate School of Business Administration. He holds a Bachelor of Science
degree in Civil Engineering and a B.A. degree in Business Administration from
Washington State University.
COMMITTEES: None
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN BUSINESS RELATIONSHIPS BETWEEN COMPANY AND TRUSTEE
None.
BENEFITS TO RELATED PARTIES
The Prentiss Group, including the Prentiss Principals, realized certain
benefits as a result of the Offering and the Formation Transactions, including
the following:
Receipt of Units by the Prentiss Group. Members of the Prentiss Group
received a total of 3,295,995 Units in consideration for their interests in the
Properties, the Development Parcels, the Options and the Prentiss Properties
Service Business in connection with the Formation Transactions. These Units
(representing approximately 14% of the equity interests in the Company on a
consolidated basis) have a total value of approximately $82.4 million based on
the December 31, 1996 closing price of $25.00 per Common Share, compared to a
net tangible book value of the assets contributed to the Operating Partnership
by the Prentiss Group of approximately $4.7 million. The Company believes that
the net tangible book value of the individual assets contributed to the
Operating Partnership by the Prentiss Group (which reflects the historical cost
of such assets less accumulated depreciation), is less than the aggregate
current market value of such assets. Any time after two years following the
Closing Date, the members of the Prentiss Group holding Units may, in accordance
with the Operating Partnership Agreement, exchange all or a portion of such
Units for cash or, at the election of the Company, Common Shares on a one-for-
one basis. The Company currently expects that it will not elect to pay cash for
Units in connection with any such exchange request, but instead will exchange
Common Shares for such Units. The Units may provide the members of the Prentiss
Group with increased liquidity and, until disposition of certain assets
contributed to the Company, with continued deferral of the taxable gain
associated with those assets.
<PAGE>
Increase in Prentiss Group's Net Tangible Investment. Members of the
Prentiss Group realized an immediate increase of $60.7 million in the net
tangible book value of their original $5.2 million investment in the Company.
The immediate increase is derived from the difference between the net tangible
assets per share before and after the Formation Transactions multiplied by the
3,295,995 Units of to be received as consideration. See ''Dilution.''
Messrs. Prentiss and August Employment Agreements. Messrs. Prentiss and
August entered into employment agreements with the Company. Each agreement is
for an initial term of three years, which will be automatically renewed for
successive one-year periods unless otherwise terminated. The agreements provide
for base annual compensation (as set forth in ''--Executive Compensation''
above) and incentive compensation to be determined by the Compensation Committee
(within the terms set forth in ''--Incentive Compensation'' above). Each
employment agreement provides that the Compensation Committee may approve
increases in the base salaries. Each of the employment agreements provides for
certain severance payments in the event of disability or termination by the
Company without cause or by the employee with cause. No other employee of the
Company will be employed pursuant to an employment agreement.
The terms of Messrs. Prentiss's and August's employment agreements require
that Messrs. Prentiss and August devote substantially all of their business time
to the affairs of the Company. These agreements also, subject to certain
exceptions, prohibit them from engaging, directly or indirectly, during the term
of their employment or the Noncompetition Period (as defined below), in any
activity anywhere in the U.S. that competes with the Company (the "Competitive
Activities"). These provisions of each employment agreement survive the
termination of such agreement until the expiration of the Noncompetition Period.
The "Noncompetition Period" is the period beginning on the date of the
termination of employment with the Company and ending on the second anniversary
of such date.
Mr. DuBois entered into a noncompetition agreement with the Company that,
subject to certain limited exceptions, prohibits him from engaging, directly or
indirectly, in Competitive Activities in the Southeastern U.S. and Southwestern
U.S. , during the Noncompetition Period. In the event of an involuntary
termination of Mr. DuBois' employment, this agreement does not prohibit him from
engaging in Competitive Activities, but, during the Noncompetition Period, does
prohibit him form (1) soliciting any employee of the Company to leave his or her
job and (ii) soliciting any client or identified potential client of the Company
during the Noncompetition Period.
Options Granted. The Company granted to 70 employees of the Company,
including the Prentiss Principals, and the Independent Trustees, options to
purchase an aggregate of 1,651,938 Common Shares under the Company's 1996 Share
Incentive Plan at the closing price on the date of grant, subject to certain
vesting requirements.
Maintenance of Debt for Benefit of Prentiss Principals. In connection with
the Formation Transactions, the Company agreed to maintain at least $1.3 million
of indebtedness secured by certain of the Properties outstanding for three years
and to permit certain Prentiss Group members to guaranty such debt through
December 31, 1998 in order to defer certain tax consequences associated with the
Formation Transactions.
Restriction on Certain Transfers of The Plaza on Bachman Creek. The Company
has agreed that it shall not dispose of The Plaza on Bachman Creek prior to
December 31, 1999, unless such disposition is structured as a tax-deferred like-
kind exchange under Section 1031 of the Code, in order to defer certain tax
consequences associated with the transfer of the Property to the Company by the
Prentiss Group.
REPAYMENT OF TERMINATION FEE NOTE
PPL held a note from PCIG which was paid with the proceeds of sales of
properties owned by PCIG. The Company acquired the PGC, 155 Alexandra Way and
Wood Dale 1 & 2 Properties from PCIG and subsequent to the Offering, PPL
received a payment from the seller of approximately $500,000 of the sale
proceeds from those Properties under the note.
<PAGE>
SHARING OF OFFICES AND EMPLOYEES
The Company shares the executive offices and certain employees with the
Manager. Each company bears its share of costs including allocable portions of
rent, salaries, office expenses, employee benefits and various fixtures and
equipment. To the extent that services are provided between the companies, such
services are charged at cost plus a mark up of 15%. The total of these charges
paid by the Company from October 22, 1996 throughout December 31, 1996 totaled
$198 thousand.
TRUSTEES, EXECUTIVES AND COMPENSATION
TRUSTEES AND EXECUTIVE OFFICERS OF THE COMPANY
The Board of Trustees currently consists of seven members (the
"Trustees"), five of whom are independent of the Company (the "Independent
Trustees"). The Independent Trustees are those Trustees of the Company who are
not officers or employees of the Company, nor do they have any affiliation to an
officer or employee or any affiliate of (i) any subsidiary of the Company, or
(ii) any partnership which is an affiliate of the Company. The Board of
Trustees is divided into three classes who serve staggered three-year terms with
the term of each trustee expiring at the annual meeting of shareholders held
three years after his election.
The following table sets forth certain information with respect to the
Trustees and executive officers of the Company.
NAME AGE POSITION
- --------------------------- --- --------------------------------------------
Michael V. Prentiss 53 Chief Executive Officer and Chairman of the
Board of Trustees (Term
will expire in 1999)
Thomas F. August 48 President, Chief Operating Officer and
Trustee (Term will expire in 1998)
Thomas J. Hynes, Jr. 57 Independent Trustee (Term will expire in
1999)
Barry J. C. Parker 49 Independent Trustee (Term will expire in
1999)
Dr. Leonard M. Riggs, Jr. 54 Independent Trustee (Term will expire in
1998)
Ronald G. Steinhart 56 Independent Trustee (Term will expire in
1998)
Lawrence A. Wilson 61 Independent Trustee (Term will expire in
1997)*
Dennis J. DuBois 51 Executive Vice President and Managing
Director, Southwest Region
Richard J. Bartel 46 Executive Vice President--Financial
Operations and Administration, and
Chief Operating Officer--Property Management
Mark R. Doran 42 Executive Vice President, Chief Financial
Officer and Treasurer
Lawrence J. Krueger 41 Executive Vice President and Managing
Director, Midwest Region
James B. Meyer 37 Senior Vice President and Managing
Director, Southeast Region
David C. Robertson 40 Senior Vice President and Managing
Director, Western Region
Robert K. Wiberg 41 Senior Vice President and Managing
Director, Mid-Atlantic Region
*Mr. Wilson was nominated for re-election which will be voted on at the Annual
meeting on May 6, 1997.
The following are biographical summaries of the executive officers of the
Company:
Dennis J. DuBois serves as Executive Vice President and the Managing
Director of the Company's Southwest Region. He is also responsible for
development and construction activities for the approximately 1.6 million square
foot Park West Office Park, and Park West Commerce Center, a 366-acre industrial
park, both in suburban Dallas. Mr. DuBois served as Executive Vice President of
PPL since 1994 and from 1987 to 1993 as its General Counsel. He has more than 22
years of real estate experience in acquisitions, development and leasing of
major buildings and mixed-use urban properties. Beginning in 1981, Mr. DuBois
served as General Counsel for Cadillac Urban. Before joining Cadillac Urban in
1981, Mr. DuBois was a partner in a prominent Baltimore law firm. Mr. DuBois
holds a
<PAGE>
B.A. degree from the University of Massachusetts and a J.D. from the University
of Maryland Law School. He is a member of the Order of the Coif and a member of
the Bar in the state of Maryland.
Richard J. Bartel serves as Executive Vice President--Financial Operations
and Administration and Chief Operating Officer--Property Management of the
Company. Since 1995, Mr. Bartel has served in similar capacities for PPL,
overseeing the operating aspects of its property management business, including
quality control, management training and day-to-day operations. He also directs
financial operations and administration, including accounting and reporting,
taxes, insurance and human resources. Mr. Bartel served as Senior Vice President
of Financial Operations of PPL from 1989 to 1995, Vice President of Financial
Operations of PPL from 1987 to 1989 and Vice President of Financial Operations
of Cadillac Urban from 1986 to 1987. Mr. Bartel holds a B.S. degree in
Accounting from the University of Illinois and a Masters in Management from
Northwestern University's Kellogg Graduate School of Management. He is also a
Certified Public Accountant.
Mark R. Doran serves as Executive Vice President, Chief Financial Officer
and Treasurer of the Company. Mr. Doran is responsible for securing interim and
long-term financing and establishing and maintaining relationships with project
financing sources. In 1992 and 1993, Mr. Doran served as Senior Vice President
and Treasurer of PPL, and in 1990 and 1991 he served as its Vice President and
Treasurer. Prior to joining PPL in 1990, Mr. Doran served as Senior Vice
President for Lincoln Property Company, where he was responsible for the
financing of Lincoln's commercial projects throughout the United States. Mr.
Doran holds an M.B.A. degree and a B.B.A. degree in Accounting from Baylor
University and is a member of the Urban Land Institute.
Lawrence J. Krueger serves as Executive Vice President and the Managing
Director of the Company's Midwest region. Mr. Krueger has served in that
capacity for PPL since 1994. He also has primary responsibility for the
development and construction of the 525-acre Continental Executive Parke office
and light industrial complex in suburban Chicago. He served as Senior Vice
President--Development of PPL from 1990 to 1994, Vice President--Development of
PPL from 1987 to 1990 and Vice President--Development Cadillac Urban from 1986
to 1997. Mr. Krueger holds a B.A. degree in Business from Indiana University and
a Masters degree in Urban Land Economics and Real Estate Investment Analysis
from the University of Wisconsin, Madison. He is a member of the National
Association of Industrial and Office Parks, the Industrial Development Research
Council and the Japan-American Society of Chicago.
James B. Meyer serves as Senior Vice President and the Managing Director of
the Company's Southeast region. Mr. Meyer has served as Senior Vice President
and Managing Director of PPL since 1995, was Senior Vice President from 1994 to
1995 and was a Vice President from 1990 to 1994. Mr. Meyer was also responsible
for the acquisition of the 500,000 square foot Cumberland Office Park in Atlanta
and the development and sale of One Atlantic Center (IBM Tower), a 1.1 million
net rentable square foot landmark building in Midtown Atlanta. Prior to 1990,
Mr. Meyer worked in various capacities for Cadillac Fairview, which he joined in
1984. Mr. Meyer holds an M.B.A. from the University of Pennsylvania's Wharton
School of Finance and Commerce and a B.S. degree in civil engineering from
Purdue University. He has served on the Boards of the Midtown Alliance, Downtown
Atlanta Partnership, and numerous other civic and professional organizations.
David C. Robertson serves as Senior Vice President and the Managing
Director of the Company's Western region. Mr. Robertson has served as a Senior
Vice President and Managing Director of PPL since 1995, a Vice President since
1993 and a General Manager since 1990. From 1986 to 1990, he worked in various
capacities for Cadillac Fairview. Before joining Cadillac Fairview in 1986, Mr.
Robertson was responsible for the management of various properties for Gerald D.
Hines Interests and Henry S. Miller Management Corporation in Dallas. Mr.
Robertson holds a California Real Estate License, and is a candidate for the
Certified Property Manager designation from the Institute of Real Estate
Management. He received a B.S. in banking and finance from Mississippi State
University, and is actively involved in the Institute of Real Estate Management
and the Building Owners and Managers Association.
Robert K. Wiberg serves as Senior Vice President and the Managing Director
of the Company's Mid-Atlantic region. Mr. Wiberg has served as a Senior Vice
President and Managing Director of PPL since 1995 and a Vice President for
Development and Acquisitions since 1990. Prior to joining Cadillac Fairview in
1984, Mr. Wiberg was
<PAGE>
employed by Coldwell Banker in its Los Angeles office. As Vice President of
Development and Acquisitions, Mr. Wiberg was responsible for PPL's development
in Washington, D.C. and Northern Virginia, including the Fairview Park project.
Mr. Wiberg holds an M.B.A. degree from the University of California, at
Berkeley; a Masters degree in City and Regional Planning from Harvard
University, and a B.A. degree from Cornell University.
TERMS OF OFFICE; RELATIONSHIPS
The officers of the Company are elected annually by the Board of Trustees
at a meeting held preceding each annual meeting of shareholders, or as soon
thereafter as necessary and convenient in order to fill vacancies or newly
created offices. Each officer holds office until his successor is duly elected
and qualified or until death, resignation or removal, if earlier. Any officer or
agent elected or appointed by the Board of Trustees may be removed by the Board
of Trustees whenever in its judgment the best interests of the Company will be
served thereby, but such removal shall be without prejudice to the contractual
rights, if any, of the person so removed.
There are no family relationships among any of the Trustees or executive
officers of the Company. Except as described above, none of the Company's
Trustees hold trusteeships in any company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934 (the "Exchange
Act") or pursuant to Section 15(d) of the Exchange Act or any company registered
as an investment company under the Investment Company Act of 1940. There are no
arrangements or understandings between any Trustee or officer and any other
person pursuant to which that Trustee was nominated or officer was selected.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION ON
COMPENSATION DECISIONS
During 1996, the Company's Compensation Committee of the Board of Trustees
consisted of Thomas J. Hynes, Jr., Leonard M. Riggs, Jr., and Lawrence A Wilson,
all being Independent Trustees, none of whom was, prior to or during 1996, an
officer or employee of the Company. None of such persons had any relationships
requiring disclosure under applicable rules and regulations. The Company did
not have a policy during 1996 prohibiting its executive officers from
participating in deliberation of the Board of Trustees regarding executive
compensation. Consequently, Messrs. Prentiss and August, who are also trustees
of the Company, were present during deliberations of the Board of Trustees
regarding executive compensation during 1996. Messrs. Prentiss and August, in
their capacities as trustees, participated in such deliberations.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for establishing and
administering compensation policies, establishing salaries of and awarding
performance-based bonuses to the Company's executive officers, and determining
awards of restricted shares and grants of share options under the Company's
stock plans. The Compensation Committee's policy is to devise and implement
compensation for the Company's officers and employees which shall be
commensurate with their position and determined with reference to compensation
paid to similarly situated employees and officers of companies which are deemed
by the Compensation Committee to be comparable to the Company. The Compensation
Committee of the Board of Trustees is comprised of Messrs. Hynes, Riggs and
Wilson. None of the members of the Compensation Committee is an employee or
officer of the Company.
<PAGE>
BASE COMPENSATION AND BONUSES
Pursuant to the Offering and the Formation Transactions, the
compensation of the executive officers for 1996 was established as follows:
<TABLE>
<CAPTION>
Executive Officer Annual Base Salary
----------------- ------------------
<S> <C>
Michael V. Prentiss, Chairman of the
Board, Trustee, and CEO 180,000 (1)
Thomas F. August, President and COO 175,000 (1)
Richard J. Bartel, Executive Vice
President 160,000 (3)
Mark R. Doran, Executive Vice President
and CFO 150,000 (1)
Dennis J. DuBois, Executive Vice
President 150,000 (2)
Lawrence J. Krueger, Executive Vice
President 160,000 (2)
James B. Meyer, Senior Vice President 140,000 (2)
David C. Robertson, Senior Vice
President 144,000 (2)
Robert K. Wiberg, Senior Vice President 140,000 (2)
</TABLE>
________________________
(1) The base salary for Messrs. Prentiss, August and Doran is paid by the
Partnership.
(2) The base salary for Messrs. DuBois, Krueger, Meyer, Robertson and Wiberg is
paid by the Management Company.
(3) The base salary for Mr. Bartel is split between the Partnership and the
Management Company.
The Compensation Committee will determine annually a bonus plan for
the Company's officers, with any future share bonus awards to be issued to the
executive officers through the 1996 Plan.
SHARE OPTIONS UNDER 1996 PLAN
The Compensation Committee has previously approved the grant of share
options to the Company's executive officers pursuant to the 1996 Plan, as
follows:
<TABLE>
<CAPTION>
Executive Officer Number of Shares Subject to Options
----------------- -----------------------------------
<S> <C>
Michael V. Prentiss, Chairman of the
Board, Trustee, and CEO 386,762
Thomas F. August, President and COO 173,944
Richard J. Bartel, Executive Vice
President 85,000
Mark R. Doran, Executive Vice President
and CFO 75,000
Dennis J. DuBois, Executive Vice
President 64,366
Lawrence J. Krueger, Executive Vice
President 125,000
James B. Meyer, Senior Vice President 50,000
David C. Robertson, Senior Vice
President 50,000
Robert K. Wiberg, Senior Vice President 50,000
</TABLE>
<PAGE>
The options vest with each officer at the rate of 33 1/3% per year
over a three-year period commencing on the date of grant. The exercise price
for each option is $20.00 for the options granted on October 16, 1996, and
$23.375 for the options granted on December 17, 1996, which represents the
Offering Price for the share options granted at October 16, 1996, and the
closing price for the Common Shares on the New York Stock Exchange on December
17, 1996, the effective date of the second grant. To date, none of the options
has been exercised. The Compensation Committee may also award shares of
restricted shares, performance shares or SARs to the Company's executive
officers pursuant to the 1996 Plan. To date, no such awards have been made.
CHIEF EXECUTIVE OFFICER COMPENSATION
In determining the appropriate compensation for the Company's chief
executive officer, the Compensation Committee is guided by the Company's
performance, competitive practices, and the Compensation Committee's policy, as
discussed above, of determining compensation with reference to the compensation
paid to similarly situated executives of comparable companies. Appropriate
adjustments in the compensation of the Company's chief executive officer are
considered concurrently with similar adjustments made for the Company's other
executive officers.
Due to the formation of the Company in late 1996, no adjustment to Mr.
Prentiss' compensation was made for 1997. No bonus was paid. In future years,
the Compensation Committee will review cash compensation levels for chief
executive officers of other publicly traded REITs with approximately comparable
levels of capitalization as the Company and for various other REITs as reported
by the National Association of Real Estate Investment Trust's annual Study of
Executive Compensation.
This report has been furnished by the members of the Compensation
Committee.
Thomas J. Hynes, Jr.
Leonard J. Riggs, Jr.
Lawrence A. Wilson
<PAGE>
PERFORMANCE GRAPH
The following graph compares the change in the Company's shareholder
return on the Company's Common Shares for the period October 22, 1996, which was
the first day the Company's Common Shares traded on the New York Stock Exchange,
through December 31, 1996, with the changes in the Standard & Poor's 500 Stock
Index (the "S&P 500 Index"), the SNL Securities Office/Industrial REIT Index
(the "SNL Office/Industrial REIT Index") and the National Association of Real
Estate Investment Trusts Equity Index (the "NAREIT Equity Index") for the same
period, assuming a base share price of $100 for the Common Shares and each index
for comparative purposes. Total return equals appreciation in share price plus
dividends paid, and assumes that all dividends are reinvested. The performance
graph is not necessarily indicative of future investment performance.
PRENTISS PROPERTIES TRUST
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
PERIOD ENDING
-----------------------------------------------------
INDEX 10/16/96 10/31/96 11/15/96 11/30/96 12/15/96 12/31/96
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRENTISS PROPERTIS TRUST 100.00 103.13 112.50 111.88 120.00 126.57
S&P 500 100.00 100.18 104.88 107.68 103.74 105.54
SNL OFFICE/
INDUSTRIAL REIT INDEX 100.00 100.07 103.75 105.68 111.14 120.38
NAREIT EQUITY INDEX 100.00 101.36 103.67 105.98 111.49 117.00
</TABLE>
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the base compensation in effect during the fiscal
year ending December 31, 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------------- ------------------------------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPENSATION STOCK OPTIONS, COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($)/(1)/ BONUS ($) AWARDS ($) SARS(#) ($)/(2) /
- --------------------------- ---- -------------- ----- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael V. Prentiss,
Chairman of the Board,
Trustee, and CEO 1996 35,014 N/A 5,283 None 386,762 None
Thomas F. August,
President and COO 1996 34,041 N/A None None 173,944 None
Richard J. Bartel,
Executive Vice President 1996 31,123 N/A None None 85,000 None
Mark R. Doran, Executive
Vice President and CFO 1996 29,178 N/A None None 75,000 None
Dennis J. DuBois,
Executive Vice President 1996 29,178 N/A None None 64,366 None
Lawrence J. Krueger,
Executive Vice President 1996 31,123 N/A None None 125,000 None
</TABLE>
(1) Salaries presented represent the amounts paid to the respective executive
officers for the period October 22, 1996 (inception of operations) through
December 31, 1996.
(2) The executive officers, receive health and disability insurance benefits
which do not exceed 10% of their respective salaries. These benefits are
also provided to all other employees of the Company.
Option Grants
The following table sets forth information regarding grants of share
options to the Company's executive officers during the 1996 fiscal year. The
options were granted pursuant to the Company's 1996 Plan. No stock appreciation
rights ("SARs") were granted during the 1996 fiscal year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
ASSUMED ANNUAL RATE OF SHARE
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
------------------------------------------------------------------------ ----------------------------
OPTIONS
GRANTED
NUMBER OF TO MARKET
SECURITIES EMPLOYEE EXERCISE PRICE
UNDERLYING % OF IN OR BASE ON DATE
OPTIONS OPTIONS FISCAL PRICE OF GRANT EXPIRATION 0%
NAME GRANTED(#) GRANTED(1) YEAR ($/SHARE) ($/SHARE) DATE ($) 5% ($) 10% ($)
---- ---------- ---------- -------- --------- --------- ---------- --- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Michael V. Prentiss 386,762 23.4% 386,762 $ 20.00 $ 20.00 10/16/06 0 4,864,615 12,327,961
Thomas F. August 173,944 10.5% 173,944 $ 20.00 $ 20.00 10/16/06 0 2,187,833 5,544,430
Richard J. Bartel 75,000 4.5% 75,000 $ 20.00 $ 20.00 10/16/06 0 943,335 2,390,610
Richard J. Bartel 10,000 .6% 10,000 $23.375 $23.375 12/17/06 0 147,003 372,537
Mark R. Doran 50,000 3.0% 50,000 $ 20.00 $ 20.00 10/16/06 0 628,890 1,593,740
Mark R. Doran 25,000 1.5% 25,000 $23.375 $23.375 12/17/06 0 367,508 931,342
Dennis J. DuBois 39,366 2.4% 39,366 $ 20.00 $ 20.00 10/16/06 0 495,138 1,254,783
Dennis J. DuBois 25,000 1.5% 25,000 $23.375 $23.375 12/17/06 0 367,508 931,342
Lawrence J. Krueger 75,000 4.5% 75,000 $ 20.00 $ 20.00 10/16/06 0 943,335 2,390,610
Lawrence J. Krueger 50,000 3.0% 50,000 $23.375 $23.375 12/17/06 0 735,015 1,862,684
</TABLE>
(1) Represents the percentage of options granted to all employees during the
year.
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED OPTIONS AT
SHARES UNEXERCISED OPTIONS AT YEAR END YEAR END
ACQUIRED VALUE ------------------------------- -------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael V. Prentiss - - - 386,762 - 1,933,810
Thomas F. August - - - 173,944 - 869,720
Richard J. Bartel - - - 75,000 - 375,000
Richard J. Bartel - - - 10,000 - 16,250
Mark R. Doran - - - 50,000 - 250,000
Mark R. Doran - - - 25,000 - 40,625
Dennis J. DuBois - - - 39,366 - 196,830
Dennis J. DuBois - - - 25,000 - 40,625
Lawrence J. Krueger - - - 75,000 - 375,000
Lawrence J. Krueger - - - 50,000 - 81,250
</TABLE>
EMPLOYMENT AGREEMENTS
Messrs. Prentiss and August entered into employment agreements with the
Company on October 22, 1996. Each agreement is for an initial term of three
years, which will be automatically renewed for successive one-year periods
unless otherwise terminated. The agreements provide for base annual compensation
(as set forth in "--Executive Compensation" above) and incentive compensation
to be determined by the Compensation Committee (within the terms set forth in
"--Incentive Compensation" below). Each employment agreement provides that the
Compensation Committee may approve increases in the base salaries. Each of the
employment agreements provides for certain severance payments in the event of
disability or termination by the Company without cause or by the employee with
cause. No other employee of the Company is employed pursuant to an employment
agreement.
The terms of Messrs. Prentiss's and August's employment agreements require
that Messrs. Prentiss and August devote substantially all of their business time
to the affairs of the Company. These agreements also, subject to certain
exceptions, prohibit them from engaging, directly or indirectly, during the term
of their employment or the Noncompetition Period (as defined below), in any
activity anywhere in the U.S. that competes with the Company (the "Competitive
Activities"). These provisions of each employment agreement survive the
termination of such agreement until the expiration of the Noncompetition Period.
The "Noncompetition Period" is the period beginning on the date of the
termination of employment with the Company and ending on the second anniversary
of such date.
Mr. DuBois entered into a noncompetition agreement with the Company that,
subject to certain limited exceptions, prohibits him from engaging, directly or
indirectly, in Competitive Activities in the Southeastern U.S. and the
Southwestern U.S., respectively, during the Noncompetition Period. In the event
of an involuntary termination of Mr. DuBois' employment, the agreement does not
prohibit him from engaging in Competitive Activities, but, during the
Noncompetition Period, does prohibit him from (1) soliciting any employee of the
Company to leave his or her job and (ii) soliciting any client or identified
potential client of the Company during the Noncompetition Period.
<PAGE>
PROPOSAL TWO - AMENDMENT TO 1996 PLAN
INCREASE MAXIMUM SHARE AUTHORIZATION FROM 2,030,000 SHARES TO 2,980,000 SHARES
The Board of Trustees approved the 1996 Plan to provide incentives to
attract and retain executive officers and key employees. The 1996 Plan was
adopted by the Board of Trustees and approved by the Company's sole shareholder
prior to the Offering on October 16, 1996. The Board of Trustees proposes that
the shareholders approve an increase in the maximum number of Common Shares
issuable under the 1996 Plan from 2,030,000 to 2,980,000.
The proposed amendment to the 1996 Plan will be approved by the
shareholders, if a quorum is present at the Annual Meeting, if the number of
votes cast in favor of the amendment (Proposal Three) exceeds the number of
votes cast in opposition to the amendment.
The Board of Trustees believes that share options and other share-
based awards play an important role in the success of the Company and that this
role must increase if the Company is to continue to attract, motivate and retain
the caliber of Trustees, officers and other employees necessary to the Company's
future growth and success. The amendment is necessary because there are not
sufficient Common Shares currently available for grant under the 1996 Plan.
The Board of Trustees believes that adding more Common Shares to the
1996 Plan will help the Company to achieve its goals by keeping the Company's
incentive compensation program competitive with those of other companies.
Accordingly, the Board of Trustees has voted, subject to shareholder approval,
to increase the number of Common Shares available under the 1996 Plan to
2,980,000.
The following paragraphs summarize the more significant features of
the 1996 Plan. The summary is subject, in all respects, to the terms of the
1996 Plan. The Company will provide promptly, upon request and without charge,
a copy of the full text of the 1996 Plan to each person to whom a copy of this
proxy statement is delivered. Requests should be directed to Prentiss
Properties Trust, 3890 W. Northwest Highway, Suite 400, Dallas, Texas, 75220,
Attention: Corporate Secretary.
SUMMARY OF THE 1996 PLAN
Prior to the Offering, the Board of Trustees adopted, and the sole
shareholder of the Company approved, the 1996 Plan for the purpose of attracting
and retaining executive officers, Trustees and employees. The 1996 Plan is
administered by the Compensation Committee of the Board of Trustees, or its
delegate. The Compensation Committee may not delegate its authority with respect
to grants and awards to individuals subject to Section 16 of the Exchange Act.
As used in this summary, the term "Administrator" means the Compensation
Committee or its delegate, as appropriate.
Officers and other employees of the Company, the Operating Partnership and
designated subsidiaries, including the Manager, generally will be eligible to
participate in the 1996 Plan. The Administrator selects the individuals who will
participate in the 1996 Plan (the "Participants"). No Participant may be
granted, in any calendar year, options that cover more than 390,000 common
shares or share appreciation rights ("SARs") that cover more than 390,000
common shares. Options granted with tandem SARs shall be treated as a single
award for purposes of applying the limitation in the preceding sentence. No
Participant may be issued, in any calendar year, more than 50,000 common shares
pursuant to an award of Restricted Shares (defined below) or Performance Shares
(defined below) for more than 50,000 common shares.
The 1996 Plan authorizes the issuance of up to 2,030,000 common shares. The
Plan provides for the grant of (i) share options not intended to qualify as
incentive share options under Section 422 of the Code, (ii) Performance Shares,
(iii) SARs, issued alone or in tandem with options, (iv) Restricted Shares,
which are contingent upon the attainment of performance goals or subject to
vesting requirements or other restrictions and (v) incentive awards.
<PAGE>
The Administrator shall prescribe the conditions which must occur for Restricted
Shares to vest or for Performance Shares to vest and incentive awards to be
earned.
In connection with the grant of options under the 1996 Plan, the
Administrator will determine the option exercise period and any vesting
requirements. The initial options granted under the Plan will have 10-year terms
and will become exercisable for one-third of the covered shares (disregarding
fractional shares, if any) on the first and second anniversaries of the date of
grant, and for the balance of the shares on the third anniversary of the date of
grant subject to acceleration of vesting upon a change in control of the Company
(as defined in the 1996 Plan). An option may be exercised for any number of
whole shares less than the full number for which the option could be exercised.
A Participant will have no rights as a shareholder with respect to common shares
subject to his or her option until the option is exercised. To the extent an
option has not become exercisable at the time of a Participant's termination of
employment, it will be forfeited unless the Administrator exercises its
discretion to accelerate vesting for the Participant. If a Participant is
terminated due to dishonesty or similar reasons, all unexercised options,
whether vested or unvested, will be forfeited. Any common shares subject to
options which are forfeited (or expire without exercise) pursuant to the vesting
requirement or other terms established at the time of grant will again be
available for grant under the 1996 Plan. The exercise price of options granted
under the 1996 Plan may not be less than the fair market value of the common
shares on the date of grant. Payment of the exercise price of an option granted
under the 1996 Plan may be made in cash, cash equivalents acceptable to the
Compensation Committee or, if permitted by the option agreement, by exchanging
Common Shares having a fair market value equal to the option exercise price.
On the effective date of the Offering, options for 1,291,439 common shares
were granted to employees and officers, including the officers named in
"Executive Compensation" above, at an exercise price equal to $20.00. On
November 4, 1996, the Board of Trustees authorized the grant of 1,500 options to
employees with ten or more years of service with the Company. Through December
31, 1996, 37,500 options were granted at an exercise price equal to $20.625 per
share. On December 17, 1996, the Board of Trustees authorized the grant of
395,000 options in total to various officers and employees at an exercise price
equal to $23.375 per share.
No option, SAR, Restricted Shares, incentive award or Performance Shares
may be granted under the 1996 Plan after December 31, 2006. The Board may amend
or terminate the 1996 Plan at any time, but an amendment will not become
effective without shareholder approval if the amendment materially (i) increases
the number of shares that may be issued under the 1996 Plan (other than an
adjustment or automatic increase described above); (ii) changes the eligibility
requirements; or (iii) increases the benefits that may be provided under the
1996 Plan. No amendment will affect a Participant's outstanding award without
the Participant's consent.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR ADOPTION OF PROPOSAL TWO.
---
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
The Board of Trustees will provide for presentation of proposals by
shareholders at the 1998 annual meeting of shareholders, provided that such
proposals are submitted by eligible shareholders who have complied with the
relevant regulations of the SEC regarding shareholder proposals, and the
Company's By-Laws, a copy of which is available upon written request from the
Secretary of the Company. Shareholder proposals intended to be submitted for
presentation at the 1998 annual meeting of shareholders of the Company must be
in writing and must be received by the Company at its executive offices on or
before March 7, 1998 for inclusion in the Company's proxy statement and the form
of proxy relating to the 1998 annual meeting; provided, however, that if the
1998 annual meeting is advanced by more than 30 days or delayed for more than 60
days from the date of the first anniversary of the 1997 annual meeting, such
written notice must be received by the Company no earlier than the 90th day
prior to the date of the 1998 annual meeting and no later than the later of the
60th day prior to such meeting or the tenth day after the first public
announcement of the date of such meeting.
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand, L.L.P. has served as auditors for the Company and
its subsidiaries for the year ended December 31, 1996 and will continue to so
serve for the year ending December 31, 1997 until and unless changed by action
of the Board of Trustees.
A representative of Coopers & Lybrand, L.L.P. is expected to be
present at the Annual Meeting, will have the opportunity to make a statement if
he desires to do so, and is expected to be available to respond to appropriate
questions.
OTHER MATTERS
The Board of Trustees knows of no other business to be brought before
the Annual Meeting. If any other matters properly come before the Annual
Meeting, the proxies will be voted on such matters in accordance with the
judgment of the persons named as proxies therein, or their substitutes, present
and acting at the meeting.
The Company will furnish to each beneficial owner of Common Shares
entitled to vote at the Annual Meeting, upon written request to Thomas F.
August, the Company's President and Chief Operating Officer, at 3890 W.
Northwest Highway, Suite 400, Dallas, Texas, 75220, telephone (214) 654-0886, a
copy of the Company's Annual Report or Form 10-K for the fiscal year ended
December 31, 1996, including the financial statements and financial statement
schedules filed by the Company with the SEC.
BY ORDER OF THE BOARD OF TRUSTEES
/s/ MICHAEL V. PRENTISS
MICHAEL V. PRENTISS,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
March 31, 1997
<PAGE>
PRENTISS PROPERTIES TRUST
Proxy Solicited on Behalf of the Board of Trustees of the Company
for the Annual Meeting on May 6, 1997
The undersigned hereby constitutes and appoint Gregory S. Imhoff, Secretary and
J. Kevan Dilbeck, Corporate Counsel and each of them (the "Proxy Committee"),
his or her true and lawful agents and proxies, with full power of substitution
in each to represent the undersigned at the annual meeting of shareholders of
Prentiss Properties Trust to be held at the Embassy Suites Hotel, 3880 W.
Northwest Highway, Dallas, Texas, 75220, on Tuesday, May 6, 1997, and at any
adjournments thereof, on all matters coming before said meeting. Receipt of the
notice of the meeting and the proxy statement, both dated March 31, 1997, is
acknowledged. The following items of business will be considered at the
aforesaid annual meeting.
1. Election of One Trustee Nominee:
Lawrence A. Wilson
2. Approve the amendment to the Company's 1996 Share Incentive Plan to increase
the number of the Company's Common Shares, $0.01 par value per share subject
to issuance under the plan by 950,000 Shares.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOXES (SEE
REVERSE SIDE) BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF TRUSTEE'S RECOMMENDATIONS. THE PROXY COMMITTEE CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD. ACTION TAKEN PURSUANT TO THIS
PROXY CARD WILL BE EFFECTIVE AS TO ALL THE SHARES (WHETHER COMMON OR PREFERRED,
AND IF PREFERRED, OF ANY CLASS OR SERIES) THAT YOU OWN.
<PAGE>
Please mark your
[X] votes as in this
example.
This proxy when executed will be voted in the manner directed herein. If no
direction is made, this proxy will be voted FOR Items 1 and 2.
- --------------------------------------------------------------------------------
The Board of Trustees recommends a vote FOR such nominee, and FOR amendment to
the 1996 Share Incentive Plan.
- --------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
___ ___ ___ ___ ___
1. Election of | | | | 2. Amendment to the 1996 | | | | | |
Trustees |___| |___| Share Incentive Plan |___| |___| |___|
(See reverse)
For, except vote withheld from the
following nominee(s):
- ----------------------------------
- --------------------------------------------------------------------------------
NOTE: Please sign exactly as name
appears hereon. Joint owners should each
sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such.
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SIGNATURES(S) DATE
