<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X] 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):
[X] No Fee Required.
[_] $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, 1998
Dear Shareholder:
Your Board of Trustees joins me in extending an invitation to attend the 1998
Annual Meeting of Shareholders which will be held on Tuesday, May 5, 1998 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,
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 5, 1998
------------------------
NOTICE IS HEREBY GIVEN, that the 1998 Annual Meeting of Shareholders (the
"Annual Meeting") of Prentiss Properties Trust (the "Company") will be held on
Tuesday, May 5, 1998 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 two Class II trustees and one Class I trustee of the Company to
serve until the 2001 and 2000 Annual Meetings of Shareholders,
respectively, and until the respective successor of each is duly elected
and qualified;
2. To approve an 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 of beneficial interest, $0.01 par value per share (the
"Common Shares"), subject to issuance under the Plan by 1,520,000 shares;
3. To approve an amendment to the Company's Trustees' Share Incentive Plan
(the "Trustees Plan") to increase the annual compensation to the
Independent Trustees from $10,000 per year, paid in Common Shares, to
$20,000 per year, paid in Common Shares, and to provide for the annual
grant to the Independent Trustees of 5,000 options to purchase Common
Shares.
4. 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, 1998 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 holders of record of the Company's Common Shares 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
GREGORY S. IMHOFF
Secretary
Dallas, Texas
March 31, 1998
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 REVOKE YOUR PROXY AT ANY
TIME PRIOR TO THE TIME IT IS VOTED, INCLUDING BY VOTING IN PERSON AT THE
MEETING, 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 5, 1998
March 31, 1998
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 5, 1998 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, 1998.
The Company
The Company is a self-administered and self-managed real estate investment
trust that acquires, owns, manages, leases, develops and builds office and
industrial properties throughout the United States. The Company operates
principally through Prentiss Properties Acquisition Partners, L.P. (the
"Operating Partnership") and its subsidiaries, and Prentiss Properties Limited,
Inc. (the "Manager") (collectively referred to herein as the "Company"). As of
March 1, 1998, the Company owned interests in a diversified portfolio of 229
primarily suburban Class A office and suburban industrial properties containing
approximately 19.9 million net rentable square feet. The properties are located
in 18 major U.S. markets and consist of 98 office buildings (the "Office
Properties") containing approximately 10.4 million net rentable square feet and
131 industrial buildings (the "Industrial Properties" and together with the
Office Properties, the "Properties") containing approximately 9.4 million net
rentable square feet. As of March 1, 1998, the Office Properties were
approximately 96% leased to approximately 850 tenants and the Industrial
Properties were approximately 94% leased to approximately 400 tenants. The
Company manages approximately 48.7 million net rentable square feet in 485
office and industrial properties in 23 U.S. markets that are owned by the
Company and by third parties and that are leased to approximately 3,000 tenants.
The Company also has six office properties and four industrial properties under
development, which together will contain approximately 1.3 million net rentable
square feet.
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 two Class II trustees and one Class I trustee to serve until the 2001 and
2000 annual meetings of shareholders or
1
<PAGE>
until the successor of each is duly elected and qualified, shareholders may vote
in favor of all of the nominees or withhold their votes as to any nominee
("Proposal One"). Shareholders may not abstain with respect to the election of
trustees. With regard to the proposals to amend the Company's 1996 Share
Incentive Plan (the "1996 Plan") ("Proposal Two") and to amend the Company's
Trustee's Plan ("Proposal Three"), shareholders may vote in favor of the
proposal, against the proposal or abstain from voting with respect to the
proposal.
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, 1998
(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,
1998, the Company had outstanding 39,861,270 Common Shares.
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 II trustees, a plurality of all the
votes cast will elect each nominee for trustee and (2) with respect to Proposals
Two and Three, 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.
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." "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.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL ONE,
---
PROPOSAL TWO, AND PROPOSAL THREE.
2
<PAGE>
BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON SHARES
Security Ownership of Certain Beneficial Owners
The following table sets forth information, as of March 19, 1998, 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.
Amount and
Nature of
Name and Address Beneficial Percent of
Of Beneficial Owner Ownership Class/(a)/
------------------------------------ -------------- -----------
Scudder Kemper Investments, Inc. 2,000,000/(b)/ 5.02%
345 Park Avenue
New York, New York 10154
(a) Based on 39,861,270 Common Shares outstanding as of March 19, 1998.
(b) Based solely upon information contained in the Schedule 13G/A, filed with
the SEC on February 12, 1998.
Security Ownership of Management and Certain Beneficial Owners
The following table sets forth the beneficial ownership of Common Shares as of
March 19, 1998, 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.
Number of Shares
----------------
Beneficially Percent of All
------------- --------------
Name of Beneficial Owner Owned(1) Common Shares (1)
- - ----------------------------------------- --------- -----------------
Michael V. Prentiss (2)................... 1,679,853 4.21%
Thomas F. August (3)...................... 220,653 *
Thomas J. Hynes, Jr.(4)................... 1,471 *
Barry J.C. Parker (4)..................... 5,471 *
Dr. Leonard Riggs, Jr. (4)................ 7,971 *
Ronald G. Steinhart (4)................... 5,471 *
Lawrence A. Wilson (4).................... 471 *
Dennis J. DuBois (5)...................... 141,809 *
Richard J. Bartel (6)..................... 14,531 *
Mark R. Doran (7)......................... 10,400 *
Lawrence J. Krueger (6)................... 19,500 *
David Robertson (8)....................... 18,014 *
Robert K. Wiberg (9)...................... 6,960 *
--------- ----------
All Trustees and executive
officers (13 persons) ................ 2,132,575 5.35%
* Less than 1%.
(1) Assumes that all units of the partnership interest in the Operating
Partnership ("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.
(2) Excludes 586,762 Common Shares issuable upon the exercise of options granted
under the 1996 Plan, 386,762 of which vest in equal installments on each of
the first three anniversaries of the date of the grant and 200,000 which
vest in equal installments on each of the third, fourth and fifth
anniversaries of the date of grant. Includes Units redeemable for 336,000
Common Shares which are held in a trust of which Mr. Prentiss is a trustee,
and of which Mr. Prentiss disclaims beneficial ownership. Includes Units
redeemable for 262,733 Common Shares.
3
<PAGE>
Excludes 881,095 Common Shares owned by certain Grantor Retained Annuity
Trusts, of which Mr. Prentiss does not have beneficial ownership.
(3) Excludes 323,944 Common Shares issuable upon the exercise of options granted
under the 1996 Plan, 173,944 of which vest in equal installments on each of
the first three anniversaries of the date of the grant and 150,000 which
vest in equal installments on each of the third, fourth and fifth
anniversaries of the date of grant. Includes Units redeemable for 88,576
Common Shares. Excludes 114,468 Common Shares owned by certain Grantor
Retained Annuity Trusts, of which Mr. August does not have beneficial
ownership.
(4) The Independent Trustees receive a fee of $20,000 per year payable quarterly
in Common Shares and 5,000 share options which vest immediately. The table
does not include the shares to be issued as of April 1, 1998, and 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. Includes 5,000 Common Shares issuable
upon the exercise of options granted under the Trustee's Plan on February 6,
1998, which were fully vested.
(5) 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. Includes Units redeemable for
58,274 Common Shares. Excludes 63,258 Common Shares owned by certain Grantor
Retained Annuity Trusts, of which Mr. DuBois does not have beneficial
ownership.
(6) Excludes 125,000 and 85,000 Common Shares for Mr. Krueger and Mr. Bartel,
respectively, 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.
(7) 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.
(8) 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.
(9) Excludes 100,000 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 TRUSTEES
Nominees for Election as Trustees
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, three 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 two of the present Class II trustees, Dr. Leonard M. Riggs, Jr. and
Ronald G. Steinhart, to serve as Class II trustees for a three-year term
expiring at the Company's annual meeting in 2001 and one of the present Class II
trustees, Thomas F. August, to serve as a Class I trustee for a two-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 nominees, and each has indicated his willingness to serve as
a trustee of the Company if reelected by the shareholders at the Annual Meeting.
4
<PAGE>
- - --------------------------------------------------------------------------------
NOMINEES FOR ELECTION AS CLASS II TRUSTEE
(TERM EXPIRING 2001)
- - --------------------------------------------------------------------------------
DR. LEONARD M. RIGGS, JR., age 55, 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 Chief Executive Officer of EmCare, 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
RONALD G. STEINHART, 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. Steinhart is Chairman and Chief Executive Officer of Banc One Corporation
Commercial Banking Group and has served in that capacity since January 1997.
Previously, Mr. Steinhart was Chairman and Chief Executive Officer of Bank One
Texas, N.A. and 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 Bank One Texas, N.A. to which he was appointed in
1992 in connection with the merger of Team Bank into Bank 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.B.A. degree in accounting and a M.B.A. in finance from the University of Texas
in Austin. He is also a Certified Public Accountant.
Committees: Audit
- - --------------------------------------------------------------------------------
NOMINEE FOR ELECTION AS CLASS I TRUSTEE
(TERM EXPIRING 2000)
- - --------------------------------------------------------------------------------
THOMAS F. AUGUST, age 49, 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
5
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THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL ONE.
---
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 persons 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 nine meetings during 1997, and all of the
Trustees attended at least 75% of those meetings.
The Board of Trustees presently has an Audit Committee and a Compensation
Committee. The Board of Trustees has no standing Nominating Committee and the
entire Board acts in such capacity. The Board may, from time to time, form
other committees as circumstances warrant. Such committees will 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 held two meetings during 1997 and all
of the Committee Trustees attended each of those meetings.
Compensation Committee. The Board of Trustees has established a
Compensation Committee which currently consists of Messrs. Riggs, Wilson and
Hynes, who are Independent Trustees. 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 held two meetings during
1997, and all of its members attended those meetings.
TRUSTEES, EXECUTIVE OFFICERS AND COMPENSATION
6
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Trustees and Executive Officers of the Company
The following table sets forth certain information with respect to the
Trustees and executive officers of the Company. The Board of Trustees currently
consists of seven members, five of whom are Independent Trustees.
Name Age Position
- - --------------------------- --- --------------------------------------------
Michael V. Prentiss 54 Chief Executive Officer and Chairman of the
Board of Trustees (Term
will expire in 1999)
Thomas F. August 49 President, Chief Operating Officer and
Trustee (Term will expire in 1998)*
Thomas J. Hynes, Jr. 58 Independent Trustee (Term will expire in
1999)
Barry J. C. Parker 50 Independent Trustee (Term will expire in
1999)
Dr. Leonard M. Riggs, Jr. 55 Independent Trustee (Term will expire in
1998)*
Ronald G. Steinhart 57 Independent Trustee (Term will expire in
1998)*
Lawrence A. Wilson 62 Independent Trustee (Term will expire in
2000)
Dennis J. DuBois 52 Executive Vice President and Managing
Director, Southwest Region
Richard J. Bartel 47 Executive Vice President--Financial
Operations and Administration, and
Chief Operating Officer--Property Management
Mark R. Doran 43 Executive Vice President and Chief
Financial Officer
Lawrence J. Krueger 42 Executive Vice President and Managing
Director, Midwest Region
Robert K. Wiberg 41 Executive Vice President and Managing
Director, Mid-Atlantic and Southeast Regions
David C. Robertson 40 Senior Vice President and Managing
Director, Western Region
*Messrs. August, Riggs and Steinhart have been nominated for re-election at
the Annual Meeting on May 5, 1998.
The following are biographical summaries of the executive officers of the
Company and the Trustees not standing for re-election:
Michael V. Prentiss, age 54, 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
26 years experience in real estate development, acquisitions, and investment
management and has acquired or developed properties with an aggregate value in
excess of $4 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 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.
Thomas J. Hynes, Jr., age 58, 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.
Barry J. C. Parker, age 50, 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 President and Chief Executive Officer of Luby's Cafeteria,
Inc. a national chain of restaurants. Mr. Parker is also a 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
7
<PAGE>
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.
Lawrence A. Wilson, age 62, 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.
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 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 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 and a Certified Commercial Investment Manager.
Mark R. Doran serves as Executive Vice President and Chief Financial
Officer 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.
Robert K. Wiberg serves as Executive Vice President and the Managing
Director of the Company's Mid-Atlantic and Southeast regions. 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 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
8
<PAGE>
Berkeley; a Masters degree in City and Regional Planning from Harvard
University, and a B.A. degree from Cornell University.
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.
Terms of Office
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.
Executive Compensation
Compensation Committee Interlocks And Insider Participation On Compensation
Decisions
During 1997, 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 such persons had any relationships
requiring disclosure under applicable rules and regulations. The Company did
not have a policy during 1997 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 and participating in the deliberations of
the Board of Trustees regarding executive compensation during 1997. However,
Messrs. Prentiss and August did not vote with respect to such actions by the
Trustees and the Compensation Committee.
Compensation Committee Report On Executive Compensation
To the Board of Trustees of Prentiss Properties Trust:
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.
Base Compensation and Bonuses
9
<PAGE>
Pursuant to the directive of the Compensation Committee and the Trustees of
the Company, the compensation of the executive officers for 1997 was established
as follows:
Executive Officer Annual Base Salary
----------------- ------------------
Michael V. Prentiss, Chairman of the Board, Trustee, and CEO $225,000 (1)
Thomas F. August, President and COO 200,000 (1)
Richard J. Bartel, Executive Vice President 166,400 (2)
Mark R. Doran, Executive Vice President and CFO 156,000 (1)
Lawrence J. Krueger, Executive Vice President 166,400 (3)
- - -----------------------
(1) The base salary for Messrs. Prentiss, August and Doran is paid by the
Partnership.
(2) The base salary for Mr. Bartel is split between the Partnership and the
Manager.
(3) The base salary for Mr. Krueger is paid by the Manager.
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 the 1996 Plan
The Compensation Committee approved the grant of share options to the
following executive officers pursuant to the 1996 Plan, as follows:
<TABLE>
<CAPTION>
Executive Officer Number of Shares Subject to Options
- - ----------------- -----------------------------------
1996 1997
Awards Awards
------ ------
<S> <C> <C>
Michael V. Prentiss, Chairman of the Board, Trustee, and CEO 386,762 200,000
Thomas F. August, President and COO 173,944 150,000
Richard J. Bartel, Executive Vice President 85,000 --
Mark R. Doran, Executive Vice President and CFO 75,000 --
Lawrence J. Krueger, Executive Vice President 125,000 --
</TABLE>
The 1996 Award 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 represent the price
of the Common Shares in the Company's initial public offering (the "IPO")
Offering Price for the share options granted at October 16, 1996,
10
<PAGE>
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.
The 1997 Award options were granted on May 6, 1997, for Messrs. Prentiss
and August and vest at the rate of 33 1/3% per year over a three-year period
commencing on the third anniversary of the date the date of grant. The exercise
price for each option is $23.625 which represents the closing price for the
Common Shares on the New York Stock Exchange on May 6, 1997, the effective date
of the grant.
Subsequent to year end, on February 6, 1998, Mr. Wiberg, Executive Vice
President and Managing Director of the Mid-Atlantic and Southeast Regions, was
granted 50,000 options to purchase shares which vest at the rate of 33 1/3% per
year over a three-year period commencing on the date of grant. The exercise
price is $27.3125 which represents the closing price for the Common Shares on
the New York Stock Exchange on February 6, 1998, the effective date of grant.
To date, none of the above-referenced options have been exercised. The
Compensation Committee may also award shares of restricted shares, performance
shares or stock appreciation rights ("SARs") to the Company's executive officers
pursuant to the 1996 Plan. To date, no such awards have been made.
CEO and COO Compensation
In determining the appropriate compensation for the Company's chief
executive and chief operating officers, 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 and chief operating officers are considered
concurrently with similar adjustments made for the Company's other executive
officers.
Messrs. Prentiss' and August's compensation was adjusted to $225,000 and
$200,000 respectively in 1997 for 1997. In addition, each received bonuses in
March 1998 for the 1997 year of $235,913 and $209,700, respectively. No bonuses
were paid in 1997 for 1996 or 1997. In determining these amounts, the
Compensation Committee reviewed cash compensation levels for executive officers
of other publicly traded REITs with approximately comparable levels of
capitalization as the Company and for various other REITs as reported by the
National Association of Real Estate Investment Trust's annual Study of Executive
Compensation, prepared by FPL Associates, an independent executive compensation
consulting firm based in Chicago, Illinois.
This report has been furnished by the members of the Compensation
Committee.
Thomas J. Hynes, Jr.
Leonard J. Riggs, Jr.
Lawrence A. Wilson
Summary Compensation Table
The following table sets forth the cash compensation paid during the fiscal
years ending December 31, 1996 and 1997.
11
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------------- ---------------------------------------
Securities
Other Annual Restricted Underlying All Other
Compensation Stock Options, Compensation
Name and Principal Position Year Salary($)(1) Bonus(1) ($) Awards ($) SARs (#) ($)(2)
- - --------------------------- ---- ------------ -------- ----------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael V. Prentiss, Chairman of 1997 $209,683 None $10,000 None 200,000 None
the Board, Trustee, and CEO 1996 35,014 None 5,283 None 386,762 None
Thomas F. August, President and 1997 191,490 None None None 150,000 None
COO 1996 34,041 None None None 173,944 None
Richard J. Bartel, Executive Vice
President 1997 167,030 $13,600 14,250 None None None
1996 31,123 None None None 85,000 None
Mark R. Doran, Executive
Vice President and CFO 1997 155,000 17,000 3,000 None None None
1996 29,178 None None None 75,000 None
Lawrence J. Krueger, Executive
Vice President 1997 170,013 12,750 5,000 None None None
1996 31,123 None None None 125,000 None
</TABLE>
(1) Bonuses represent amounts paid in 1997. The Company historically pays
bonuses each March for the prior year.
(2) The executive officers, receive health and disability insurance benefits
which do not exceed 10% of their respective salaries. These benefits are also
provided to all other employees of the Company.
Option Grants and Exercises
The following table sets forth information regarding grants of share
options to the Company's executive officers during the 1997 fiscal year. The
options were granted pursuant to the Company's 1996 Plan, which is described
under Proposal Two. No SARs were granted during the 1997 fiscal year.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rate of Share
Price Appreciation for Option
Individual Grants Term
------------------------------------------------------------------------------ ------------------------------
Number of
Securities
Underlying Options Exercise Market Price
Options % of Granted to or Base on Date of
Granted Options Employee in Price Grant Expiration
Name (#) Granted(1) Fiscal Year ($/share) ($/share) Date 0% ($) 5% ($) 10% ($)
- - ---- --- ---------- ------------- ----------- --------- --------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Michael V. Prentiss 200,000 50.0% 200,000 $23.625 $23.625 05/06/07 0 2,971,527 7,530,433
Thomas F. August 150,000 37.5% 150,000 $23.625 $23.625 05/06/07 0 2,228,645 5,647,825
</TABLE>
(1) Represents the percentage of options granted to all employees during the
year.
The following table sets forth certain information regarding the exercise
of stock options during the last completed year and the fiscal year-end value of
unexercised options. No options were exercised in 1997.
12
<PAGE>
<TABLE>
<CAPTION>
Value of Unexercised Options at
Shares Number of Securities Underlying Year End
Acquired Value Unexercised Options at Year End -------------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- - --------------------------- ----------- -------- ---------------- --------------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael V. Prentiss 128,921 257,841 $1,023,310 $2,046,613
Michael V. Prentiss - 200,000 - 862,500
Thomas F. August 57,981 115,963 460,224 920,456
Thomas F. August - 150,000 - 646,875
Richard J. Bartel 25,000 50,000 198,438 396,875
Richard J. Bartel 3,333 6,667 15,207 30,418
Mark R. Doran 16,667 33,333 132,294 264,581
Mark R. Doran 8,333 16,667 38,019 76,043
Dennis J. DuBois 13,122 26,244 104,156 208,312
Dennis J. DuBois 8,333 16,667 38,019 76,043
Lawrence J. Krueger 25,000 50,000 198,438 396,875
Lawrence J. Krueger 16,667 33,333 76,043 152,082
</TABLE>
Savings Plan
The Company, the Operating Partnership and designated subsidiaries,
including the Manager (each, a "Participating Employer"), have adopted, the
Employee Savings Plan & Trust (the "401(k) Plan") of PPL, which was originally
adopted in 1987. Prior service with PPL is credited in full as service with the
Company or a Participating Employer for all purposes under the 401(k) Plan,
including eligibility and vesting.
Each employee of the Company and a Participating Employer may enroll in the
401(k) Plan on March 1, June 1, September 1, and December 1 after completing one
year and 1,000 hours of service and attaining age 21 (an enrolled employee is a
"Plan Participant"). Plan Participants are immediately vested in their pre-tax
and after-tax contributions, matching and discretionary Company contributions,
and earnings thereon.
The 401(k) Plan permits each Plan Participant to elect to defer up to 15%
of base compensation, subject to the annual statutory limitation ($9,500 for
1997 and 1996) prescribed by Section 402(g) of the Code, on a pre-tax basis.
Plan Participants may also elect to make an after-tax contribution of up to 8%
of their base compensation. The Company and the Participating Employers will
make matching contributions equal to 25% of amounts deferred up to 6% of the
Participant's compensation.
Share Purchase Plan
The Company has adopted a "Share Purchase Plan." Under the Share Purchase
Plan, employees of the Company, the Operating Partnership, and designated
subsidiaries, including the Manager, will be able to purchase Common Shares
directly from the Company at a 15% discount to the then-current market value at
the date of purchase. Purchases may be made by any employee with more than one
full year of continuous employment on the last business day each of June and
December. An employee's purchases, on an annual basis, under the Share Purchase
Plan will be limited to the lesser of 15% of the employee's base salary or
$25,000. The maximum number of Common Shares that may be purchased under the
Share Purchase Plan is 500,000. Employees who participate in the plan described
in the preceding sentence will recognize income, and the Company will be allowed
a business expense deduction, equal to the discount at the time of a purchase.
Employment Agreements
Messrs. Prentiss and August entered into employment agreements with the
Company on October 22, 1996. These agreements were amended (effective January
1, 1998) by the Compensation Committee of the Board of Trustees. Each agreement
(as amended) is for an initial term of three years, which will be automatically
renewed for
13
<PAGE>
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. 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 a change in control of the Company,
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' 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 (i) 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.
Certain Relationships and Related Transactions
Share Exchange and Merger Transactions
In connection with the Company's IPO, certain entities affiliated with the
Company (the "Merged Entities") received Units in exchange for certain assets
they contributed to the Operating Partnership. In February 1998 (i) the Merged
Entities distributed 113,500 Units to certain employees of the Merged Entities
(the "Merged Entity Employees"), (ii) the Company issued 2,432,541 Common Shares
in exchange for all of the capital stock of the Merged Entities to the owners of
the Merged Entities (the "Merged Entity Owners," which include Messrs. Prentiss,
August and Bartel), and (iii) the Merged Entity Employees redeemed their 113,500
Units in exchange for an equal number of Common Shares. These transactions were
approved by all of the Independent Trustees. The Common Shares issued to the
Merged Entity Owners and Merged Entity Employees are "restricted," and the
Company has agreed to register those Common Shares under the Securities Act
after October 22, 1998. The Merged Entity Employees either are employees of the
Company or have been employees of the Company within the past three years.
Sharing of Offices and Employees
The Company shares 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 the mark up
paid by the Company from January 1, 1997 throughout December 31, 1997 totaled
$195,000.
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.
14
<PAGE>
Performance Graph
The following graph compares the change in 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, 1997, 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 Inc.
Total Return Performance
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Period Ending
-----------------------------------------------------------
Index 10/16/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prentiss Properties Trust Inc. 100.00 126.57 130.30 133.72 152.77 149.98
S&P 500 100.00 105.54 108.37 127.29 136.83 140.77
SNL Office/Industrial REITs 100.00 119.60 121.88 124.40 146.67 150.15
NAREIT All Equity REIT Index 100.00 117.06 117.87 123.73 138.35 140.77
</TABLE>
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.
Based on written representations from the officers and Trustees, the
Company believes that no 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, 1997.
PROPOSAL TWO - AMENDMENT TO 1996 PLAN
Increase Maximum Share Authorization from 2,980,000 Shares to 4,500,000 Shares
The Board of Trustees proposes that the shareholders approve an increase in
the maximum number of Common Shares issuable under the 1996 Plan from 2,980,000
to 4,500,000.
The Board 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 Board has determined that there are not sufficient Common
Shares currently available for grant under the 1996 Plan to meet these goals.
Accordingly, the Board of Trustees has determined, subject to shareholder
approval, to increase the number of Common Shares available under the 1996 Plan
to 4,500,000. The benefits or amounts that may be allocated to specific
Participants (as defined herein) as a result of this Amendment are not
determinable, nor would the Amendment to the 1996 Plan, if in effect prior to
the distributions for 1997, have had a determinable effect to the distributions
pursuant to the Plan in 1997.
The following paragraphs summarize the material 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 Company's initial public 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
15
<PAGE>
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 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).
The 1996 Plan currently authorizes the issuance of up to 2,980,000 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. 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. 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 IPO, 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 of which 37,500 were granted
at an exercise price equal to $20.625 per share through December 31, 1996. 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. On May 6, 1997, the Board of Trustees authorized the grant of
350,000 options in total to the Chairman and President of the Company (as shown
herein above) at an exercise price equal to $23.625 per share. On October 22,
1997, the Board of Trustees authorized the grant of 249,999 options in total to
three officers who were the Sellers of the Terramics portfolio and joined the
Company at the closing of such acquisition, at an exercise price equal to
$27.0625.
16
<PAGE>
Option Grants
The following table sets forth information regarding grants of share
options to the Company's executive officers outstanding as of December 31, 1997,
pursuant to the Company's 1996 Plan. No SARs have been granted. As of March 19,
1998 the last trading price per share for the Common Shares was $25.4375.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rate of Share
Price Appreciation for Option
Individual Grants Term
-------------------------------------------------------------------------- -----------------------------
Number of Options
Securities Granted to Exercise Market Price
Underlying % of Employee or Base on Date of
Options Options in Fiscal Price Grant Expiration
Name Granted Granted(1) Year $/share) ($/share) Date 0% ($) 5% ($) 10% ($)
---- ------- ---------- --------- --------- ---------- ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Michael V. Prentiss 386,762 N/A 386,762 $20.00 $20.00 10/16/06 0 4,864,651 12,327,961
Michael V. Prentiss 200,000 N/A 200,000 $23.625 $23.625 05/06/07 0 2,971,527 7,530,433
Thomas F. August 173,944 N/A 173,944 $20.00 $20.00 10/16/06 0 2,187,833 5,544,430
Thomas F. August 150,000 N/A 150,000 $23.625 $23.625 05/06/07 0 2,228,645 5,647,825
Richard J. Bartel 75,000 N/A 75,000 $20.00 $20.00 10/16/06 0 943,335 2,390,610
Richard J. Bartel 10,000 N/A 10,000 $23.375 $23.375 12/17/06 0 147,003 372,537
Mark R. Doran 50,000 N/A 50,000 $20.00 $20.00 10/16/06 0 628,890 1,593,740
Mark R. Doran 25,000 N/A 25,000 $23.375 $23.375 12/17/06 0 367,508 931,342
Dennis J. DuBois 39,366 N/A 39,366 $20.00 $20.00 10/16/06 0 495,138 1,254,783
Dennis J. DuBois 25,000 N/A 25,000 $23.375 $23.375 12/17/06 0 367,508 931,342
Lawrence J. Krueger 75,000 N/A 75,000 $20.00 $20.00 10/16/06 0 943,335 2,390,610
Lawrence J. Krueger 50,000 N/A 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.
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 UNANIMOUSLY RECOMMENDS A VOTE FOR ADOPTION OF
---
PROPOSAL TWO.
PROPOSAL THREE - AMENDMENT OF THE TRUSTEES' PLAN
Proposal to Amend the Trustees' Plan to Increase the Annual Compensation to
Independent Trustees from $10,000 per year paid in Common Shares, to $20,000 per
year, paid in Common Shares and to Provide for the Annual Grant to the
Independent Trustees of 5,000 Options to Purchase Common Shares.
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The Board of Trustees proposes that the shareholders approve an amendment
to the Trustees' Plan (i) to increase the annual compensation payable to the
Independent Trustees under the Trustees' Plan from $10,000 per year, paid in
Common Shares, to $20,000 per year paid in Common Shares and (ii) to provide for
the annual grant to the Independent Trustees of 5,000 options to purchase Common
Shares. The text of the proposed amendment is attached hereto as Annex A.
The Board believes that increase in annual compensation is necessary to
maintain a competitive package of compensation for its Independent Trustees and
that the payment of that increase in the form of Common Shares and additional
options to purchase Common Shares further align the interests of the Independent
Trustees with the interests of the holders of the Company's Common Shares.
The following paragraphs summarize the material features of the Trustees'
Plan. The summary is subject, in all respects, to the terms of the Trustees'
Plan. The Company will provide promptly, upon request and without charge, a
copy of the full text of the Trustees' 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 Trustees' Plan
The Company pays its Trustees who are not officers of the Company fees for
their services as trustees. Currently, 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.
If this Proposal Three is approved, beginning in 1998, each Independent
Trustee will receive annual compensation of $20,000 payable quarterly in Common
Shares 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
and $500 for each committee meeting attended. In addition, each Independent
Trustee will receive options to purchase 5,000 Common Shares at an exercise
price equal to the closing price on the date of grant.
Officers of the Company who are Trustees will not be paid any trustee fees.
For 1997 the Independent Trustees received the following compensation in shares
and cash:
Trustee Compensation
------- ------------
Thomas J. Hynes, Jr. $17,738.75
Barry J.C. Parker $17,738.75
Dr. Leonard M. Riggs, Jr. $17,988.75
Ronald G. Steinhart $16,488.75
Lawrence A. Wilson $17,738.75
The Trustees' Plan also provides that each Independent Trustee who was a
member of the Board of Trustees on the effective date of the IPO (a "Founding
Trustee") was granted an option for 10,000 Common Shares at an exercise price
equal to the price to public in the IPO, $20.00. Each Independent Trustee who is
not a Founding Trustee will receive an option for 10,000 Common Shares on the
date of the first Board of Trustees meeting following the annual meeting of
shareholders at which the Independent Trustee is first elected to the Board of
Trustees; provided, however, that an Independent Trustee (other than a Founding
Trustee) who is first elected or appointed to the Board of Trustees other than
at an annual meeting of shareholders shall receive an option for 10,000 Common
Shares on the date of such election or appointment. The exercise price of
options granted in accordance with the preceding sentence shall be the fair
market value of a Common Share on the date of grant. The exercise price of
18
<PAGE>
options granted under the Trustees' Plan may be paid in cash, acceptable cash
equivalents, Common Shares or a combination thereof. Options issued under the
Trustees' Plan are exercisable for ten years from the date of grant.
An option granted under the Trustees' Plan shall become exercisable for
2,500 shares on each of the first through fourth anniversaries of the date of
grant, provided that Trustee is a member of the Board of Trustees on such
anniversary date. To the extent an option has become exercisable under the
Trustees' Plan, it may be exercised whether or not the Trustee is a member of
the Board on the date or dates of exercise. An option may be exercised for any
number of whole shares less than the full number for which the option could be
exercised. A Trustee will have no rights as a shareholder with respect to Common
Shares subject to his or her option until the option is exercised.
The Trustees' Plan provides that the Board of Trustees may amend or
terminate the Trustees' Plan, but the Trustees' Plan may not be amended more
than once every six months other than to comply with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act of 1974, or the rules
thereunder. An amendment will not become effective without shareholder approval
if the amendment materially changes the eligibility requirements or increases
the benefits that may be provided under the Trustees' Plan. No options for
Common Shares may be granted and no Common Shares may be awarded under the
Trustees' Plan after December 31, 2002.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR ADOPTION OF
---
PROPOSAL THREE.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
The Board of Trustees will provide for presentation of proposals by
shareholders at the 1999 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 1999 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 December 1, 1998, for inclusion in the Company's proxy statement and the
form of proxy relating to the 1999 annual meeting; provided, however, that if
the 1999 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 1998 annual meeting,
such written notice must be received by the Company no earlier than the 90th day
prior to the date of the 1999 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.
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, 1997 and will continue to so serve
for the year ending December 31, 1998 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.
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<PAGE>
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 on Form 10-K for the fiscal year ended December 31,
1997, including the financial statements and financial statement schedules filed
by the Company with the SEC.
BY ORDER OF THE BOARD OF TRUSTEES
MICHAEL V. PRENTISS,
Chairman of the Board and Chief
Executive Officer
March 31, 1998
20
<PAGE>
Annex A
-------
FIRST AMENDMENT TO THE
TRUSTEES' SHARE INCENTIVE PLAN OF
PRENTISS PROPERTIES TRUST
The Trustees' Share Incentive Plan of Prentiss Properties Trust shall be
amended as follows:
1. Article V, Section 5.01 shall be struck, and the following shall be
inserted in its place:
5.01 Grants. On each Quarterly Award Date, each Participant will be
---- ------
awarded a whole number of Shares having an aggregate Fair Market Value on
that date as nearly as possible equals, but does not exceed, $5,000.
2. Article IV shall be amended to add a new Section 4.09, which shall
provide as follows :
4.09 Annual Grant. Annually, on a date to be set by the Committee, the
------------
Company shall distribute to the Participants an Option to purchase 5,000
Shares, which Option shall be immediately exercisable.
21
<PAGE>
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0231
[X] Please mark your
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, 2 and 3.
- - --------------------------------------------------------------------------------
The Board of Trustees recommends a vote FOR such nominee, FOR amendment
to the 1996 Share Incentive Plan and FOR amendment to the Trustees' Plan.
- - --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of [_] [_]
Trustees (see
reverse)
For, except vote withheld from the following nominee(s):
- - ------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Amendment to the 1996 Share [_] [_] [_]
Incentive Plan
3. Amendment to the Trustees' [_] [_] [_]
Plan
- - --------------------------------------------------------------------------------
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.
- - -----------------------------------
- - -----------------------------------
SIGNATURE(S) DATE
- - --------------------------------------------------------------------------------
PRENTISS PROPERTIES TRUST
Proxy Solicited on Behalf of the Board of Trustees of the Company
for the Annual Meeting on May 5, 1998
The undersigned hereby constitutes and appoint Gregory S. Imhoff, Secretary and
J. Kevan Dilbeck, General 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 5, 1998, 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, 1998, is
acknowledged. The following items of business will be considered at the
aforesaid annual meeting.
1. Election of Three Trustee Nominees:
Dr. Leonard M. Riggs, Jr., Ronald G. Steinhart, Thomas F. August
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 1,520,000 Shares.
3. Approve the amendment to the Company's Trustees' Share Incentive Plan to
increase the annual compensation to Independent Trustees from $10,000 per
year paid in Common Shares to $20,000 per year paid in Common Shares and to
provide for the annual grant to the Independent Trustees of 5,000 options to
purchase Common 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.
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