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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Prentiss Properties Trust
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRENTISS PROPERTIES TRUST
3890 West Northwest Highway, Suite 400
Dallas, Texas 75220
March 31, 1999
Dear Shareholder:
Your Board of Trustees joins me in extending an invitation to attend the 1999
Annual Meeting of our shareholders which will be held on Tuesday, May 4, 1999 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 our 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 SHAREHOLDERS
TO BE HELD ON MAY 4, 1999
To the Shareholders
of Prentiss Properties Trust:
The 1999 Annual Meeting of the shareholders (the "Annual Meeting") of
Prentiss Properties Trust (the "Company") will be held on Tuesday, May 4, 1999
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 three Class III trustees of the Company to serve until the
2002 Annual Meeting of our shareholders, and until the respective
successor of each is duly elected and qualified;
2. To approve an amendment to the Company's Trustees' Share Incentive Plan
(the "Trustees Plan") to fix the maximum number of the Company's common
shares of beneficial interest, par value $0.01 per share (the "Common
Shares"), issuable under the Trustees Plan at 200,000 Common Shares;
and
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
may be postponed.
The Board of Trustees has fixed the close of business on March 19, 1999 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 Common Shares at the close of business on the
record date (the "Shareholders") will be entitled to notice of and to vote at
the Annual Meeting and at any adjournments or postponements thereof. A complete
list of Shareholders entitled to vote at the Annual Meeting will be available
for examination by any Shareholder at the Company's principal executive offices
at 3890 W. Northwest Highway, Suite 400, Dallas, Texas 75220, for purposes
pertaining to the Annual Meeting.
We have included along with this notice a Proxy Statement and 1998 Annual
Report, which describe certain of the Company's activities during 1998 and
contain the Company's financial statements for the year ended December 31, 1998.
The Annual Report does not form any part of the material for solicitation of
proxies.
Whether or not you plan to attend the Annual 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
Annual Meeting, even if you have previously returned your proxy card.
By Order of the Board of Trustees
/s/ GREGORY S. IMHOFF
Gregory S. Imhoff
Secretary
Dallas, Texas
March 31, 1999
<PAGE>
PRENTISS PROPERTIES TRUST
3890 W. Northwest Highway, Suite 400
Dallas, Texas 75220
___________________________________________________
PROXY STATEMENT
___________________________________________________
1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 1999
INTRODUCTION
This proxy statement and the accompanying proxy card 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 4, 1999 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 card and notice of Annual Meeting, all enclosed
herewith, are first being mailed to the shareholders of record of the Company on
or about March 31, 1999. The date of this proxy statement is March 31, 1999.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, the holders of record (the "Shareholders") of common
shares of beneficial interest, par value $0.01 per share (the "Common Shares"),
of the Company on March 19, 1999 will vote upon the following matters:
(1) The proposal to elect three Class III trustees of the Company to serve
until the 2002 Annual Meeting of the Company's shareholders and until
the respective successor of each is duly elected and qualified
("Proposal One");
(2) The proposal to amend the Company's Trustees' Share Incentive Plan (the
"Trustees Plan") to fix the maximum number of Common Shares issuable
under the Trustees Plan at 200,000 Common Shares ("Proposal Two"); and
(3) The transaction of such other matters that may properly be brought
before the Annual Meeting and at any adjournments or postponements
thereof.
The Board of Trustees recommends that you vote "FOR" each of Proposal One
and Proposal Two.
RECORD DATE AND VOTING
Record Date and Shareholders List
The Board of Trustees has established the close of business on March 19,
1999 as the record date (the "Record Date"). Only shareholders of record at the
close of business on March 19, 1999 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, 1999, the Company had outstanding 37,856,595 Common Shares.
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A list of Shareholders entitled to vote at the Annual Meeting, which will
be arranged in alphabetical order and which will show each Shareholder's address
and the number of shares registered in his or her name, will be open to any
Shareholder to examine for any purpose related to the Annual Meeting. Any
Shareholder may examine this list during ordinary business hours commencing
March 19, 1999, and continuing through the date of the Annual Meeting at the
principal office of the Company, at 3890 West Northwest Highway, Dallas, Texas
75220.
The Proxy
The solicitation of proxies is being made primarily by mail. 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 Board of Trustees has selected Gregory S. Imhoff and J. Kevan Dilbeck
as proxies, and they are named as such on the proxy card. The proxy will be
voted as specified by the Shareholder in the spaces provided on the proxy card,
or if no specification is made, it will be voted in favor of the proposals. A
Shareholder giving a 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.
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).
In voting by proxy in regard to Proposal One, Shareholders may vote in
favor of all of the nominees, withhold their votes as to all of the nominees, or
withhold their votes as to any specified nominee. Shareholders may not abstain
with respect to the election of trustees. With regard to Proposal Two,
Shareholders may vote in favor of the proposal, against the proposal or abstain
from voting with respect to the proposal.
Quorum, Required Vote and Voting Rights
Quorum. The presence, in person or by proxy, of Shareholders holding a
majority of the outstanding Common Shares on the Record Date will constitute a
quorum at the Annual Meeting. Shares that are represented at the Annual Meeting
but abstain from voting on any or all matters and shares that are "broker non-
votes" (shares held by brokers or nominees as to which they have no
discretionary power to vote on a particular matter and have received no
instructions from the beneficial owners thereof or persons entitled to vote
thereon) will be counted as shares present and entitled to vote in determining
whether a quorum is present at the Annual Meeting. The election inspectors
appointed for the Annual Meeting will determine the number of Common Shares
present at the meeting, determine the validity of proxies and ballots, determine
whether or not a quorum is present, and count all votes and ballots. Unless a
quorum is present at the Annual Meeting, no action may be taken at the meeting
except the adjournment thereof until a later time.
Required Vote. With respect to Proposal One, a plurality of all the votes
cast by Shareholders, in person or by proxy, will elect each nominee for
trustee. 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 trustee. Shareholders may not abstain from
voting with respect to the election of trustees. "Broker non-votes" relate to
shares held by brokers or nominees as to which they have no discretionary power
to vote on a particular matter and have received no instructions from the
beneficial owners thereof or person entitled to vote thereon. 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 Proposal One.
Approval of Proposal Two requires the majority of the votes cast at the
Annual Meeting by Shareholders present in person or by proxy. Abstentions from
voting on Proposal Two will not be counted as votes cast and therefore will have
no effect on the outcome of the proposal. Broker non-votes will not be treated
as a vote cast with respect to Proposal Two and therefore will have no effect on
the outcome of such proposal.
Voting Rights. With respect to each proposal, each Shareholder will be
entitled to one vote per Common Share held by the Shareholders as of the Record
Date.
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PROPOSAL ONE
ELECTION OF TRUSTEES
Nominees for Election to the Board of 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. A plurality of all the votes cast by Shareholders, in person or by
proxy, will elect each nominee for trustee. The Board of Trustees has set the
number of trustees constituting the current Board of Trustees at seven, 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 three of the present Class III trustees, Thomas J. Hynes, Jr., Barry
J.C. Parker, and Michael V. Prentiss, to serve as Class III trustees until the
Company's annual meeting in 2002 and until the respective successor of each is
duly elected and qualified. The remaining members of the Board of Trustees will
continue as members thereof until their respective terms expire, as indicated
below, or until their respective successors are duly 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 card 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.
________________________________________________________________________________
NOMINEES FOR ELECTION AS CLASS III TRUSTEE
(TERM EXPIRING 2002)
________________________________________________________________________________
Thomas J. Hynes, Jr., age 59, serves as an Independent Trustee, hereinafter
defined, of the Company and has served in such capacity since the Company's
formation in October 1996. Mr. Hynes is President of Meredith & Grew
Incorporated, a Boston-based real estate brokerage firm, and has served in that
capacity since 1988. Mr. Hynes has been employed by Meredith & Grew
Incorporated since 1965 during which time he has held various offices. Mr.
Hynes holds a B.A. degree from Boston College.
Committees: Compensation
Barry J. C. Parker, age 51, 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, Inc., a
regional restaurant chain. 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 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
Michael V. Prentiss, age 55, 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 Prentiss
Properties Limited, Inc. (the "Manager"), 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
3
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of $4 billion. From 1987 to 1992, he served as President and Chief Executive
Officer of the Manager, and since 1992, he has served as its Chairman and Chief
Executive Officer. From 1978 to 1987, Mr. Prentiss served as President of
Cadillac Fairview Urban Development, Inc. ("Cadillac Urban"), Executive Vice
President and member of the Board of Directors of The Cadillac Fairview
Corporation Limited ("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.
Committees: None
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. 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 Company 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
eleven meetings during 1998, 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 of Trustees 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 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 1998 and all of the
Audit Committee Trustees attended each of those meetings.
Compensation Committee. The Board of Trustees has established a
Compensation Committee which currently consists of 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 incentive plans. The Compensation Committee held two meetings
in February and October of 1998, and all of its members attended those meetings,
except that Mr. Riggs was unable to attend the February 1998 meeting.
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TRUSTEES AND EXECUTIVE OFFICERS OF THE COMPANY
Trustees and Executive Officers
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.
<TABLE>
<CAPTION>
Name Age Position with Company
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<S> <C> <C>
Michael V. Prentiss 55 Chief Executive Officer and Chairman of the Board of Trustees (Term
will expire in 2002 if Proposal One is approved)*
Thomas F. August 50 President, Chief Operating Officer and Trustee (Term will expire in 2000)
Thomas J. Hynes, Jr. 59 Independent Trustee (Term will expire in 2002 if Proposal One is approved)*
Barry J. C. Parker 51 Independent Trustee (Term will expire in 2002 if Proposal One is approved)*
Dr. Leonard M. Riggs, Jr. 56 Independent Trustee (Term will expire in 2001)
Ronald G. Steinhart 58 Independent Trustee (Term will expire in 2001)
Lawrence A. Wilson 63 Independent Trustee (Term will expire in 2000)
Dennis J. DuBois 53 Executive Vice President and Managing Director, Southwest Region
Richard J. Bartel 48 Executive Vice President--Chief Administrative Officer and President, Prentiss
Property Services
Lawrence J. Krueger 43 Executive Vice President and Managing Director, Midwest Region
Robert K. Wiberg 42 Executive Vice President and Managing Director, Mid-Atlantic and Southeast
Regions
David C. Robertson 41 Senior Vice President and Managing Director, Western Region
</TABLE>
_________________
*Messrs. Prentiss, Hynes and Parker have been nominated for re-election at the
Annual Meeting to be held on May 4, 1999.
The following are biographical summaries of the executive officers of the
Company and the Trustees not standing for re-election:
Thomas F. August 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 the Manager since 1992. From 1987 to 1992, Mr. August
served as Executive Vice President and Chief Financial Officer of the Manager.
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.
Lawrence A. Wilson 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 Chairman of The Beck Company and President and Chief
Executive Officer of BECK, a construction and real estate services company, each
of which are members of The Beck Group. Mr. Wilson also serves as a director of
TU Electric. Mr. Wilson holds an 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.
Dr. Leonard M. Riggs, Jr. 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 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. 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.
5
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Ronald G. Steinhart 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 Bank 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 an M.B.A. in finance from the University of
Texas in Austin. He is also a Certified Public Accountant.
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
the Manager 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 and the Chief
Administrative Officer and President of Prentiss Property Services. Since 1995,
Mr. Bartel has served in similar capacities for the Manager, 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 the Manager
from 1989 to 1995, Vice President of Financial Operations of the Manager 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.
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 the Manager 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 the Manager from 1990 to 1994, Vice President--
Development of the Manager 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 the Manager 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 the Manager'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.
6
<PAGE>
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 the Manager 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 before 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.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires executive officers and Trustees, and persons who
beneficially own more than 10% of the Common Shares, to file initial reports of
ownership and reports of changes in ownership with the SEC. Officers, Trustees
and greater than 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 executive officers and Trustees, the Company believes
that all Section 16(a) filing requirements for the year ended December 31, 1998
applicable to its executive officers, Trustees and greater than 10% beneficial
owners were satisfied. Based on written representations from the executive
officers and Trustees, the Company believes that no Forms 5 for Trustees,
officers and greater than 10% beneficial owners were required to be filed with
the SEC for the period ended December 31, 1998.
7
<PAGE>
EXECUTIVE COMPENSATION
Compensation Committee Interlocks and Insider Participation
During 1998, the Company's Compensation Committee of the Board of Trustees
consisted of Messrs. Hynes, Riggs and Wilson, all of whom are Independent
Trustees. The Company did not have a policy during 1998 prohibiting its
executive officers from participating in deliberations of the Board of Trustees
regarding executive compensation. Consequently, Messrs. Prentiss and August,
who are also trustees of the Company, were present during, and participated in,
the deliberations of the Board of Trustees regarding executive compensation
during 1998. However, Messrs. Prentiss and August did not vote with respect to
such actions by the Trustees and the Compensation Committee.
Summary Compensation Table
The following table sets forth the annual and long-term compensation with
respect to the Chief Executive Officer of the Company and the Company's four
most highly compensated executive officers other than the Chief Executive
Officer (the "named executive officers") for services rendered during 1998, 1997
and 1996.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------- ----------------------------
Restricted Securities
Other Annual Stock Underlying
Compensation Awards Options,
Name and Principal Position Year Salary ($) Bonus (1) ($) (s) ($) (3) SARs (#)
- --------------------------- ---- --------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael V. Prentiss....................... 1998 $266,666 $299,063 -- -- --
Chairman of the Board, Trustee, and Chief 1997 209,683 235,913 -- -- 200,000
Executive Office 1996 35,014 -- -- -- 386,762
Thomas F. August.......................... 1998 $237,500 $221,113 -- -- --
President and Chief Operating Officer 1997 191,490 209,700 -- -- 150,000
1996 34,041 -- -- -- 173,944
Richard J. Bartel......................... 1998 $174,086 $103,794 $23,875 $341,406 --
Executive Vice President 1997 167,030 105,028 -- -- --
1996 31,123 13,600 -- -- 85,000
Mark R. Doran (4)......................... 1998 $171,833 $117,605 $19,100 $273,125 --
Executive Vice President and Chief 1997 155,000 107,874 -- -- --
Financial Officer 1996 29,178 17,000 -- -- 75,000
Lawrence J. Krueger....................... 1998 $180,112 $100,761 $33,425 $477,969 --
Executive Vice President 1997 170,013 125,382 -- -- --
1996 31,123 12,750 -- -- 125,000
</TABLE>
________________________
(1) Bonuses represent amounts earned by the respective executive officers during
the referenced year, although paid subsequent to such year. The Company
historically pays bonuses each March for the prior year.
(2) Other annual compensation represents amounts paid by the predecessor of the
Manager (the "Predecessor Company") to the indicated named executive
officers for services rendered to the Predecessor Company prior to the
initial public offering.
(3) Represents the value, as of the grant date on February 6, 1998, of 12,500,
10,000 and 17,500 Common Shares granted to Messrs. Bartel, Doran and
Krueger, respectively. As of December 31, 1998, Messrs. Doran and Krueger
held all of such Common Shares whose value was $223,125 and $390,469,
respectively, based upon a price of $22.3125 per Common Share. As of
December 31, 1998, Mr. Bartel held 8,500 of such Common Shares whose value
was $189,656, based upon a price of $22.3125 per Common Share.
(4) Effective March 19, 1999, Mr. Doran resigned as Executive Vice President and
Chief Financial Officer of the Company.
8
<PAGE>
Option Grants in Last Fiscal Year
The Company did not grant any options or SARs to the named executive
officers during 1998.
Option Exercises in Last Fiscal 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 held by the named executive officers as of December 31,
1998. For additional information on and certain terms of options, see "--1996
Share Incentive Plan." No options were exercised in 1998.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-
Unexercised Options at Year End Money Options at Year End (1)
------------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael V. Prentiss.. 257,841 328,921 $596,257 $298,130
Thomas F. August..... 115,963 27,981 268,164 134,082
Richard J. Bartel.... 56,667 28,333 115,625 57,813
Mark R. Doran........ 50,000 25,000 77,083 38,542
Dennis J. DuBois..... 42,911 21,455 60,689 30,345
Lawrence J. Krueger.. 83,333 41,667 115,625 57,813
</TABLE>
__________________
(1) Based upon the closing price of the Common Shares of $22.3125 on December
31, 1998.
Savings Plan
The Company, Prentiss Properties Acquisition Partners, L.P. (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 the Predecessor Company, which originally adopted the 401(k)
Plan in 1987. Prior service with the Predecessor Company 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 ($10,000 for
1998 and 9,500 for 1997 and 1996) prescribed by Section 402(g) of the Internal
Revenue 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 of each June and
December. An employee's purchases, on an annual basis, under the Share Purchase
Plan will be limited to the lesser of 20% 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
9
<PAGE>
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.
1996 Share Incentive Plan
Prior to the Company's initial public offering, the Board of Trustees
adopted, and the sole shareholder of the Company approved, the 1996 Share
Incentive Plan for the purpose of attracting and retaining executive officers,
Trustees and employees. The 1996 Share Incentive Plan is administered by the
Compensation Committee (the "Administrator") 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.
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 Share Incentive Plan. The Administrator selects the
individuals who will participate in the 1996 Share Incentive Plan (the
"Participants"). No Participant may be granted, in any calendar year, options to
purchase 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 Share Incentive Plan currently authorizes the issuance of up to
4,500,000 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
Internal Revenue 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 prescribes the
conditions that 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 Share Incentive
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 Share Incentive Plan. The exercise price of options granted under
the 1996 Share Incentive 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 Share Incentive 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 November 30, 1998, the Board of Trustees authorized non-senior officers
to elect to re-price options to $23.375 (subject to restarting their vesting
schedule). All 36 eligible employees elected to re-price options covering all
129,500 shares. As of March 19, 1999 there were five Trustees and approximately
80 employees of the Company eligible to receive options under the 1996 Share
Incentive Plan. As of March 19, 1999, 2,423,527 options had been granted under
the 1996 Share Incentive Plan, 50,168 of which had been exercised and 2,373,359
of which remained outstanding as of such date. A total of 2,076,473 Common
Shares remain available for grant as of March 19, 1999. No options or SARs were
granted under the 1996 Share Incentive Plan in 1998.
No option, SAR, Restricted Shares, incentive award or Performance Shares
may be granted under the 1996 Share Incentive Plan after December 31, 2006. The
Board of Trustees may amend or terminate the 1996 Share Incentive 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 Share Incentive Plan (other than adjustments provided in the 1996
share Incentive Plan); (ii) changes the eligibility requirements; or (iii)
10
<PAGE>
increases the benefits that may be provided under the 1996 Share Incentive Plan.
No amendment will affect a Participant's outstanding award without the
Participant's consent.
Trustees' Share Incentive Plan
Pursuant to the Trustees Plan, the Company may grant nonqualified options
to purchase Common Shares to the Company's Independent Trustees. Pursuant to the
Trustees Plan, each Independent Trustee receives quarterly grants of Common
Shares having a fair market value of approximately $5,000 on the date of
issuance. Each Independent Trustee automatically receives 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. However, an Independent Trustee who is first elected
or appointed to the Board of Trustees other than at an annual meeting of
shareholders will receive an option for 10,000 Common Shares on the date of such
election or appointment. Independent Trustees are granted options to purchase
5,000 Common Shares annually on July 1.
The exercise price of options granted under the Trustees Plan is the fair
market value of a Common Share on the date of grant. Options granted under the
Trustees Plan upon election or appointment of an Independent Trustee become
exercisable for 2,500 shares on each of the first through fourth anniversaries
of the date of grant, provided that the Trustee is a member of the Board of
Trustees on such anniversary date. Annual options granted to an Independent
Trustee are fully vested and exercisable when granted.
The Board of Trustees has approved, and is submitting to the Shareholders
for their approval, an amendment to the Trustees Plan that establishes the
maximum number of Common Shares issuable under the Trustees Plan at 200,000
Common Shares. See "Proposal Two--Amendment of the Trustees Share Incentive
Plan."
Trustee Compensation
Trustees who are executive officers or employees of the Company receive no
compensation as such for service as members of either the Board of Trustees or
committees thereof. Independent Trustees receive 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. Independent Trustees are also eligible to receive Common Shares and
options to purchase Common Shares pursuant to the Trustees Plan as discussed
above. See "--Trustees' Share Incentive Plan" and "Proposal Two--Amendment of
the Trustees Share Incentive Plan."
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 successive one-year periods unless otherwise
terminated. The agreements provide for 1998 base annual compensation of $275,000
for Mr. Prentiss and $245,000 for Mr. August 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
11
<PAGE>
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 on
October 22, 1996 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. 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.
12
<PAGE>
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
share 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 that 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
Pursuant to the directive of the Compensation Committee and the Board of
Trustees of the Company, the compensation of the executive officers for 1998 was
established as follows:
<TABLE>
<CAPTION>
Executive Officer Annual Base Salary
----------------- ------------------
<S> <C> <C>
Michael V. Prentiss, Chairman of the Board, Trustee, and CEO $275,000 (1)
Thomas F. August, President and COO 245,000 (1)
Richard J. Bartel, Executive Vice President 175,000 (2)
Mark R. Doran, Executive Vice President and CFO 175,000 (1)
Lawrence J. Krueger, Executive Vice President 175,000 (3)
</TABLE>
_______________________
(1) The base salary for Messrs. Prentiss, August and Doran is paid by the
Operating Partnership. Effective March 19, 1999, Mr. Doran resigned as
Executive Vice President and Chief Financial Officer of the Company.
(2) The base salary for Mr. Bartel is split between the Operating 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 Common Share bonus awards to be issued to
the executive officers through the 1996 Share Incentive Plan.
Share Options under the 1996 Share Incentive Plan
The Compensation Committee approved the grant of share options to the
following executive officers pursuant to the 1996 Share Incentive Plan, as
follows:
<TABLE>
<CAPTION>
Number of Shares Subject to Options
-----------------------------------
1996 1997 1998
Executive Officer Awards Awards Awards
----------------- ------ ------ ------
<S> <C> <C> <C>
Michael V. Prentiss, Chairman of the Board, Trustee, 386,762 200,000 --
and CEO
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 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
13
<PAGE>
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 on October 16, 1996, and the closing price for the Common Shares on the
New York Stock Exchange on December 17, 1996, respectively.
The 1997 options were granted on May 6, 1997 to Messrs. Prentiss and August
and vest at the rate of 331/3% per year over a three-year period commencing on
the third anniversary of 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.
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 $27.312, which
represents the closing price for the Common Shares on the New York Stock
Exchange on February 6, 1998.
None of the above-referenced options have 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 Share Incentive Plan.
No such awards have been made.
CEO and COO Compensation
In determining the appropriate compensation for the Company's Chief
Executive Officer and Chief Operating 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 and Chief Operating Officer are considered
concurrently with similar adjustments made for the Company's other executive
officers.
Specifically, the Company's Chief Executive Officer and Chief Operating
Officer receive annual incentive compensation 80% of which is based upon
minimal, threshold, target and high levels set for per share funds from
operations and total shareholder return and 20% of which is based upon the
achievement of goals established by the Compensation Committee and performance
relative to industry peers.
Messrs. Prentiss' and August's compensation was adjusted to $275,000 and
$245,000, respectively, in 1998 for 1998. In addition, Messrs. Prentiss and
August received a bonus in March 1999 for the 1998 year of $299,063 and
$221,113, respectively. Bonuses were paid in 1998 for 1997 to Mr. Prentiss in
the amount of $235,913 and to Mr. August in the amount of $209,700. 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
14
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the change in the cumulative total
shareholder return on the Common Shares for the period October 22, 1996, which
was the first day the Common Shares traded on the New York Stock Exchange,
through December 31, 1998, with the changes in the S&P 500 Index, the SNL
Securities Office/Industrial REIT Index and the National Association of Real
Estate Investment Trusts Equity Index (the "NAREIT Equity Index") for the same
period. The performance graph assumes a base share price of $100 for the Common
Shares on October 22, 1996 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.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Period Ending
---------------------------------------------------------------------
10/16/96 12/31/96 6/30/97 12/31/97 6/30/98 12/31/98
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prentiss Properties Trust Inc. 100.00 126.57 133.72 149.98 134.84 128.32
S&P 500 100.00 105.54 127.29 140.77 165.70 180.99
SNL Office/Industrial REITs 100.00 119.60 124.40 150.15 139.61 124.24
NAREIT All Equity REIT Index 100.00 117.70 124.70 142.60 135.53 118.89
</TABLE>
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth information, as of March 19, 1999, regarding
each person known to the Company to be the beneficial owner of more than 5% of
its Common Shares outstanding. Unless otherwise indicated, such Common Shares
are owned directly and the indicated entity 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>
CRA Real Estate Securities, LP 2,146,300 (2) 5.5%
259 N. Radnor Chester Road
Suite 205
Radnor, PA 19087
AMVESCAP PLC (3) 2,136,182 (2) 5.4%
11 Devonshire Square
London EC2M 4YR
England
Scudder Kemper Investments, Inc. 3,205,825 (2) 8.2%
345 Park Avenue
New York, New York 10154
</TABLE>
____________________
(1) Based on 37,856,595 Common Shares outstanding as of March 19, 1999.
(2) Based solely upon information contained in the Schedule 13G/A, filed with
the SEC on February 12, 1999.
(3) Shared voting power with: AVZ, Inc., A I M Management Group, Inc., AMVESCAP
Group Services, Inc., INVESCO, Inc., INVESCO North American Holdings, Inc.,
INVESCO Capital Management, Inc., INVESCO Funds Group, Inc., INVESCO
Management & Research, Inc., INVESCO Realty Advisers, Inc., INVESCO (NY)
Asset Management, Inc.,
Security Ownership of Management
The following table sets forth the beneficial ownership of Common Shares as of
March 19, 1999, 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 has sole voting and investment power.
16
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
----------------
Beneficially Percent of All
------------ --------------
Name of Beneficial Owner Owned(1) Common Shares (1)
- ------------------------ -------- -----------------
<S> <C> <C>
Michael V. Prentiss..................................... 1,654,406 (2) 4.4%
Thomas F. August........................................ 335,858 (3) *
Thomas J. Hynes, Jr..................................... 12,402 (4) *
Barry J.C. Parker....................................... 16,402 (4) *
Dr. Leonard Riggs, Jr................................... 18,902 (4) *
Ronald G. Steinhart..................................... 21,402 (4) *
Lawrence A. Wilson...................................... 11,402 (4) *
Dennis J. DuBois........................................ 184,720 (5) *
Richard J. Bartel....................................... 67,298 (6) *
Lawrence J. Krueger..................................... 103,586 (6) *
David Robertson......................................... 45,626 (7) *
Robert K. Wiberg........................................ 58,217 (8) *
------------ ------------------------
All Trustees and executive officers as a group (12 2,530,221 6.68%
persons)
</TABLE>
____________________
* Less than 1%.
(1) In computing the number of Common Shares beneficially owned by a person,
Common Shares subject to options held by that person that are currently
exercisable or that become exercisable within 60 days of the record date are
deemed outstanding for such person but are not deemed to be outstanding for
purposes of computing the ownership percentage for any other person. A
person who is not a beneficiary of a trust is not the beneficial owner of
Common Shares held by such trust if he or she does not have investment
control, dispositive power or voting power over such Common Shares. In
addition, the computation of the number of Common Shares beneficially owned
by a person assumes that all units of beneficial interest in the Operating
Partnership (the "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) Includes 257,841 of the 586,762 Common Shares issuable upon the exercise of
options granted under the 1996 Share Incentive 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 Common Shares which vest in equal installments on
each of the third, fourth and fifth anniversaries of the date of grant.
Includes Units redeemable for 262,733 Common Shares. Excludes Units
redeemable for 333,387 Common Shares which are held in a trust of which Mr.
Prentiss is not a trustee, and of which Mr. Prentiss disclaims beneficial
ownership. Excludes 896,878 Common Shares owned by certain Grantor Retained
Annuity Trusts established by Mr. Prentiss, of which Mr. Prentiss disclaims
beneficial ownership.
(3) Includes 115,963 of the 323,944 Common Shares issuable upon the exercise of
options granted under the 1996 Share Incentive 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 116,518 Common Shares owned by
certain Grantor Retained Annuity Trusts established by Mr. August, of which
Mr. August disclaims 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
includes the vested portion of the 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
and includes 5,000 Common Shares issuable upon the exercise of options
granted under the Trustee's Plan on July 1, 1998, which were fully vested.
(5) Includes 42,911 of the 64,366 Common Shares issuable upon the exercise of
options granted under the 1996 Share Incentive 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 64,392
Common Shares owned by
17
<PAGE>
certain Grantor Retained Annuity Trusts established by Mr. DuBois, of which
Mr. DuBois disclaims beneficial ownership
(6) Includes 83,333 and 56,667 of the 125,000 and 85,000 Common Shares for Mr.
Krueger and Mr. Bartel, respectively, issuable upon the exercise of options
granted under the 1996 Share Incentive Plan, which vest in equal
installments on each of the first three anniversaries of the date of the
grant.
(7) Includes 33,333 of the 50,000 Common Shares issuable upon the exercise of
options granted under the 1996 Share Incentive Plan, which vest in equal
installments on each of the first three anniversaries of the date of the
grant.
(8) Includes 50,000 of the 100,000 Common Shares issuable upon the exercise of
options granted under the 1996 Share Incentive Plan, which vest in equal
installments on each of the first three anniversaries of the date of the
grant.
18
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Share Exchange and Merger Transactions
In connection with the Company's initial public offering, 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 included Messrs. Prentiss, August and DuBois), 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 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 of the Company and the Manager 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 estimated costs are allocated to the related party.
The total estimated costs allocated between the Company and the Manager from
January 1, 1998 throughout December 31, 1998 totaled $990,000.
19
<PAGE>
PROPOSAL TWO
AMENDMENT OF THE TRUSTEES SHARE INCENTIVE PLAN
Proposed Amendment
On March 17, 1999, the Board of Trustees approved the Second Amendment to
the Trustees Plan (the "Second Amendment"), subject to Shareholder approval at
the Annual Meeting. The Second Amendment establishes the maximum number of
Common Shares that may be issued under the Trustees Plan at 200,000 Common
Shares. The Second Amendment will not be implemented if it is not approved by a
majority of the votes cast at the Annual Meeting by Shareholders present in
person or by proxy.
Recommendation
The Board believes that establishing the maximum number of Common Shares
that may be issued under the Trustees Plan at 200,000 Common Shares is necessary
to maintain a competitive package of compensation for its Independent Trustees
and that grants of options to purchase Common Shares align the interests of the
Independent Trustees with the interests of the holders of the Company's Common
Shares. THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE AMENDMENT OF THE TRUSTEES PLAN AND BELIEVES THAT SUCH AMENDMENT IS
APPROPRIATE TO COMPENSATE THE COMPANY'S INDEPENDENT TRUSTEES.
Summary of the Trustees Plan
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.
Pursuant to the Trustees Plan, each Independent Trustee receives quarterly
grants of Common Shares having a fair market value of approximately $5,000 on
the date of issuance. Each Independent Trustee automatically receives 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. However, an Independent Trustee who is
first elected or appointed to the Board of Trustees other than at an annual
meeting of shareholders will receive an option for 10,000 Common Shares on the
date of such election or appointment. Independent Trustees are granted options
to purchase 5,000 Common Shares annually on July 1.
The exercise price of options granted under the Trustees Plan is the fair
market value of a Common Share on the date of grant. The exercise price of
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.
Options granted under the Trustees Plan upon election or appointment of an
Independent Trustee become exercisable for 2,500 shares on each of the first
through fourth anniversaries of the date of grant, provided that the Trustee is
a member of the Board of Trustees on such anniversary date. Annual options
granted to an Independent Trustee are fully vested and exercisable when granted.
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 all or 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 maximum period
during which an option may be exercised is ten years from the date of grant.
20
<PAGE>
As of March 19, 1999, options to purchase a total of 75,000 Common Shares
have been granted under the Trustees Plan, and a total of 7,010 Common Shares
have been granted under the Trustees Plan to Messrs. Hynes, Parker, Riggs,
Steinhart and Wilson. Of the options granted under the Trustees Plan, none have
been exercised and all 75,000 options remain outstanding. As of March 19, 1999,
a total of 117,990 Common Shares remain available for grant under the Trustees
Plan.
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.
Effect of Federal Income Taxation on the Trustees Plan
Stock options granted under the Trustees Plan are non-qualified stock
options. The following summary of tax consequences with respect to the options
that may be granted under the Trustees Plan is not comprehensive and is based
upon laws and regulations in effect on March 19, 1999. Such laws and
regulations are subject to change.
There are generally no federal income tax consequences either to the option
holder or to the Company upon the grant of an option. On exercise of a non-
qualified option, the amount by which the fair market value of the shares on the
date of exercise exceeds the option exercise price will generally be taxable to
the participant as compensation income and will generally be deductible for tax
purposes by the Company. The disposition of shares acquired upon exercise of a
non-qualified stock option generally will result in a capital gain or loss for
the option holder, but will have no tax consequences for the Company.
In the event any payments or rights accruing to an option holder upon a
"change in control" constitute "parachute payments" under Section 280G of the
Internal Revenue Code, depending upon the amount of such payments or rights
accruing and the other income of the option holder from the Company, the option
holder may be subject to an excise tax (in addition to ordinary income tax) and
the Company may be disallowed a deduction to the extent such payments might
constitute "excess parachute payments" under Section 280G of the Internal
Revenue Code.
21
<PAGE>
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
The Board of Trustees will provide for the presentation of proposals by
shareholders at the 2000 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 bylaws, 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 2000 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, 1999, for inclusion in the Company's proxy statement and the
form of proxy relating to the 2000 annual meeting.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP (succesor to Coopers & Lybrand, L.L.P.) has
served as independent auditors for the Company and its subsidiaries for the year
ended December 31, 1998 and will continue to so serve for the year ending
December 31, 1999 until and unless changed by action of the Board of Trustees. A
representative of PricewaterhouseCoopers, LLP 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.
INCORPORATION BY REFERENCE
With respect to any future filings with the SEC into which this Proxy
Statement is incorporated by reference, the material under the headings
"Compensation Committee Report on Executive Compensation" and "Performance
Graph" shall not be incorporated into such future filings.
ANNUAL REPORT
Accompanying this Proxy Statement is a copy of the Company's Annual Report for
the year ended December 31, 1999, which contains financial and other information
pertaining to the Company. The Annual Report does not form any part of the
materials for the solicitation of proxies.
FORM 10-K
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,
1998, including the financial statements and financial statement schedules filed
by the Company with the SEC.
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.
By Order of the Board of Trustees
/s/ MICHAEL V. PRENTISS
--------------------------------------------------
Michael V. Prentiss,
Chairman of the Board and Chief Executive Officer
Dallas, Texas
March 31, 1999
22
<PAGE>
Annex A
-------
SECOND AMENDMENT
TO
THE PRENTISS PROPERTIES TRUST
TRUSTEES' SHARE INCENTIVE PLAN
The Trustees' Share Incentive Plan of Prentiss Properties Trust shall
be amended as follows effective as of March 1, 1999:
1. Article IV shall be amended by adding to the end of such article the
following paragraph:
"The total number of Shares for which Options may be granted pursuant
to Article IV hereof or Share awards that may be made pursuant to Article V
hereof shall not exceed in the aggregate 200,000 Shares (subject to
adjustment as provided in Article VI hereof). If, on any date upon which
Options or Shares are to be granted hereunder, the number of Shares
remaining available for issuance under the Plan is insufficient for the
grant of the total number of Options or Shares to all Participants
otherwise entitled thereto pursuant to Article IV or Article V, then each
Participant shall receive Options or Shares, as the case may be, in
proportion to the number of the available number of Shares remaining
(rounded down to the greatest number of whole Shares available)."
2. As amended by the foregoing, the Plan shall remain in full force and
effect.
Dated: March ___, 1999
PRENTISS PROPERTIES TRUST
By:
--------------------------------------
Thomas F. August
President and Chief Operating Officer
<PAGE>
[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 and 2. This proxy will
be voted, in the discretion of proxyholders, upon such other business as may
properly come before the Annual Meeting or any adjournment thereof.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
The Board of Trustees recommends a vote FOR such nominee, and FOR amendment to the Trustees' Plan.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Election of three FOR WITHHELD 2. Amendment to the Trustees' Plan FOR AGAINST ABSTAIN
Class III members [ ] [ ] to fix the maximum number of [ ] [ ] [ ]
to the Board of Common Shares issuable under
Trustees: the Trustees' Plan at 200,000
Common Shares:
Nominees: Thomas J. Hynes, Jr.
Barry J.C. Parker
Michael V. Prentiss
For each of the nominees other than the following, for
which vote is withheld:
- ------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
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)
-------------------------------------------------------------
NAME (Please Print) DATE
</TABLE>
PRENTISS PROPERTIES TRUST
Proxy Solicited on Behalf of Trustees of the Company
For the Annual Meeting on May 4, 1999
The undersigned hereby constitutes and appoints 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 4, 1999,
and at any adjournments thereof, on all matters coming before said meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement dated March 31, 1999 and hereby revokes any proxy
or proxies heretofore given to vote at said meeting or any adjournment thereof.
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.
