<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 [ ] Confidential, For Use of the Commission
[x] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
Prentiss Properties Trust
(Name of Registrant as Specified In Its Declaration of Trust)
___________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(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:
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(4) Date Filed:
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<PAGE>
PRENTISS PROPERTIES TRUST
3890 West Northwest Highway, Suite 400
Dallas, Texas 75220
March 31, 2000
Dear Shareholder:
Your Board of Trustees joins me in extending an invitation to attend the 2000
Annual Meeting of our shareholders which will be held on Wednesday, May 10, 2000
at the Embassy Suites Hotel, 3880 West Northwest Highway, Dallas, Texas 75220.
The meeting will start promptly at 11:00 a.m., 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
<PAGE>
Prentiss Properties Trust
3890 West Northwest Highway
Dallas, Texas 75220
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON May 10, 2000
To the Shareholders
of Prentiss Properties Trust:
The 2000 Annual Meeting of the shareholders (the "Annual Meeting") of
Prentiss Properties Trust (the "Company") will be held on Wednesday, May 10,
2000 at the Embassy Suites Hotel at 3880 W. Northwest Highway, Dallas, Texas
75220 at 11:00 a.m., local time, for the following purposes:
1. To elect two Class I trustees of the Company to serve until the 2003
Annual Meeting of our shareholders, and until the respective successor
of each is duly elected and qualified;
2. To approve amendments to the Company's Trustees' Share Incentive Plan
(the "Trustees Plan") to increase (i) the annual fee of the Company's
Independent Trustees to $25,000 per year payable in quarterly grants of
the Company's common shares of beneficial interest, par value $0.01 per
share (the "Common Shares") and (ii) the number of options to purchase
Common Shares granted annually to the Independent Trustees to 7,500;
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 17, 2000 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, the 1999 Annual
Report to Shareholders and the Company's Form 10-K, which describe certain of
the Company's activities during 1999 and contain the Company's financial
statements for the year ended December 31, 1999. The Annual Report and Form 10-
K do 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
Senior Vice President and Secretary
Dallas, Texas
March 31, 2000
<PAGE>
PRENTISS PROPERTIES TRUST
3890 W. Northwest Highway, Suite 400
Dallas, Texas 75220
___________________________________________________
PROXY STATEMENT
___________________________________________________
2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON May 10, 2000
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
Wednesday, May 10, 2000 at 11:00 a.m., 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, 2000. The date of this proxy statement is March 31, 2000.
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 17, 2000 will vote upon the following matters:
(1) The proposal to elect two Class I trustees of the Company to serve
until the 2003 Annual Meeting of the Company's shareholders and until
the respective successor of each is duly elected and qualified
("Proposal One");
(2) To approve amendments to the Company's Trustees' Share Incentive Plan
(the "Trustees Plan") to increase (i) the annual fee of the Company's
Independent Trustees to $25,000 per year payable in quarterly grants of
Common Shares and (ii) the number of options to purchase Common Shares
granted annually to the Independent Trustees to 7,500 ("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 17,
2000 as the record date (the "Record Date"). Only shareholders of record at the
close of business on the Record Date will be entitled to notice of, and to vote
at, the Annual Meeting and any adjournments or postponements thereof. At the
close of business on the Record Date, the Company had 36,073,247 Common Shares
outstanding.
<PAGE>
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 31, 2000, 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 and Internet.
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.
2
<PAGE>
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, two 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 I trustees, Thomas F. August and Lawrence A.
Wilson, to serve as Class I trustees until the Company's annual meeting in 2003
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 I TRUSTEE
(TERM EXPIRING 2003)
________________________________________________________________________________
THOMAS F. AUGUST, age 51, serves as President and Chief Executive Officer and
Trustee of the Company and has served in such capacity since October of 1999
when he became Chief Executive Officer. Prior to that time he was President and
Chief Operating Officer since the Company's formation in October 1996. Mr.
August had served as President and Chief Operating Officer of Prentiss
Properties Limited, Inc., an affiliate of the Company (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 Fairview Urban Development, Inc. ("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 MBA degree from Boston University.
Committees: None
LAWRENCE A. WILSON, age 64, 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 HCBECK, Inc., 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.
Committees: Compensation
3
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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. 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
8 meetings during 1999, 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 Board of Trustees has adopted a written charter for the Audit
Committee attached hereto as Exhibit A. 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 4 meetings during 1999.
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 2 meetings
during 1999.
4
<PAGE>
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
---- --- ---------------------
<S> <C> <C>
Michael V. Prentiss 56 Chairman of the Board of Trustees (Class III - Term will expire in 2002)
Thomas F. August 51 President, Chief Executive Officer and Trustee (Class I - Term will expire in
2003 if the Proposal is approved)*
Thomas J. Hynes, Jr. 60 Independent Trustee (Class III - Term will expire in 2002)
Barry J.C. Parker 52 Independent Trustee (Class III - Term will expire in 2002)
Dr. Leonard M. Riggs, Jr. 57 Independent Trustee (Class II - Term will expire in 2001)
Ronald G. Steinhart 59 Independent Trustee (Class II - Term will expire in 2001)
Lawrence A. Wilson 64 Independent Trustee (Class I - Term will expire in 2003 if the Proposal is
approved)*
Dennis J. DuBois 54 Executive Vice President and Managing Director, Southwest Region
Lawrence J. Krueger 44 Executive Vice President and Managing Director, Midwest Region
Robert K. Wiberg 43 Executive Vice President and Managing Director, Mid-Atlantic and Southeast
Regions
Christopher M. Hipps 38 Senior Vice President and Managing Director, Western Region
Peter O. Hausmann 57 Executive Vice President and Managing Director, Northeast Region
Richard J. Bartel 49 Executive Vice President and Chief Administrative Officer
Michael A. Ernst 39 Senior Vice President and Chief Financial Officer
</TABLE>
_________________
*Messrs. August and Wilson have been nominated for re-election at the Annual
Meeting to be held on May 10, 2000.
The following are biographical summaries of the executive officers of the
Company and the Trustees not standing for re-election:
THOMAS J. HYNES, JR. 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.
BARRY J.C. PARKER 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
5
<PAGE>
that company's F&R Lazarus Department Store division. Mr. Parker holds a B.A.
degree from Washington University in St. Louis and an MBA degree from the
University of Pennsylvania's Wharton School of Finance and Commerce.
MICHAEL V. PRENTISS serves as Chairman of the Board of the Company. Prior to
October of 1999, Mr. Prentiss also held the position of Chief Executive Officer
of the Company and had served in such capacity since the Company's formation in
October 1996. Mr. Prentiss, the founder of 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 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 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.
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, Inc., a publicly-held physician
practice management company specializing in emergency medicine. Dr. Riggs
founded EmCare, 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.
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 Vice Chairman of Bank One Texas, N.A. and has served in that
capacity since January 2000. Prior to January 2000, 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 MBA
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
6
<PAGE>
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.
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 of 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. Prior to 1998, Mr. Wiberg
served as a Senior Vice President and Managing Director. From 1990 to 1995 he
served as Vice President for Development and Acquisitions. 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 MBA 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.
CHRISTOPHER M. HIPPS serves as the Senior Vice President and Managing Director
of the Company's West Region. Mr. Hipps is responsible for leasing, development,
construction, property management, facilities management, acquisition, and
business development in the West Region. His duties include overseeing contract
and lease administration, personnel staffing and development, implementation of
annual business plans and providing current information on operating expenses
for the Company's West Region. Mr. Hipps started his career in the Washington,
D.C. offices of Cadillac Fairview. In Washington, he was involved in the leasing
of the award-winning 1001 Pennsylvania Avenue. He subsequently was responsible
for marketing activities for the Company's master-planned development, Fairview
Park, located in Northern Virginia. In 1992, Mr. Hipps moved to the Company's
corporate office in Dallas, Texas. While in Dallas, he has held various
responsibilities, including CBD leasing assignments, the Company's acquisitions
in Houston, regional marketing of the Company's property management business and
worked on the development of properties in Austin, Texas. Mr. Hipps holds a
Texas real estate license and has been involved in various organizations such as
NAIOP and the Real Estate Council. He received a BBA from Southern Methodist
University.
PETER O. HAUSMANN serves as Executive Vice President and Managing Director of
the Company's Northeast Region. Mr. Hausmann was a General Partner of Terramics
Property Company which he founded in 1983 before it merged with the Company in
October 1997. Mr. Hausmann has been in the real estate business for thirty
years. Mr. Hausmann received a B.A. degree from Hamilton College and an MBA from
Rutgers University before serving as a First Lieutenant in the U.S. Army with
service in Vietnam. Mr. Hausmann is currently Chairman of Natural Lands Trust, a
Board Member of The Nature Conservancy in Pennsylvania and serves on several
other non-profit Boards. He recently retired as Chairman of Chester County
Planning Commission.
7
<PAGE>
RICHARD J. BARTEL serves as Executive Vice President and the Chief
Administrative Officer. Prior to March 1999, Mr. Bartel was President of the
Company's property management business, including quality control, management
training and day-to-day operations. 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.
MICHAEL A. ERNST serves as Senior Vice President and Chief Financial Officer of
the Company and has responsibility for capital planning, financial strategy,
corporate accounting, raising capital, evaluating new investment opportunities
and investor relations. Mr. Ernst joined the Company in 1997 as Vice President
and Treasurer and was promoted to Chief Financial Officer in March 1999. Prior
to joining the Company, Mr. Ernst served as a Senior Vice President in Bank of
America's Real Estate Finance Group where he managed a team of lenders covering
national accounts including many public real estate companies. Mr. Ernst holds
an MBA with a focus on Real Estate and Finance, and a B.A. in American
Government, both from the University of Virginia. Mr. Ernst has been a member of
the Associate Leadership Council of the Real Estate Council and is currently a
member of the executive committee of the Board of Directors of the Dallas Area
Habitat for Humanity.
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, 1999
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, 1999.
8
<PAGE>
EXECUTIVE COMPENSATION
Compensation Committee Interlocks and Insider Participation
During 1999, 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 1999 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 1999. However, Messrs. Prentiss and August did not vote with respect to
such actions by the Board of 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 1999, 1998
and 1997.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------------- ---------------------------------
Other Securities
Annual Restricted Underlying
Name and Principal Compen- Stock Awards Options
Position Year Salary ($) Bonus($)(1) sation($) ($) SARs (#)(7)
-------- ---- ---------- ----------- --------- --- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael V. Prentiss....................... 1999 $297,917 $363,000 $ 1,746 $514,063(6) 75,000
Chairman of the Board 1998 266,666 299,063 -- -- --
1997 209,683 235,913 -- -- 200,000
Thomas F. August.......................... 1999 $265,417 $269,500(2) $ 15,538 $370,125(6) 55,000
President and 1998 237,500 221,113 -- -- --
Chief Executive Officer 1997 191,490 209,700 -- -- 150,000
Lawrence J. Krueger....................... 1999 $182,292 $140,000 $144,165 $158,886(6) 22,725
Executive Vice President 1998 180,112 100,761 33,425(3) 477,969(5) --
and Managing Director, 1997 170,013 125,382 -- -- --
Midwest Region
Robert K. Wiberg.......................... 1999 $171,875 $141,150(2) $ 4,228 $166,310(6) 23,790
Executive Vice President 1998 164,167 112,000 5,224 136,563(5) 50,000
and Managing Director, 1997 145,867 54,556 1,727 -- --
Mid-Atlantic and
Southeast Regions
Christopher M. Hipps...................... 1999 $156,667 $ 50,000(2) $ 98,385(4) $101,990(6) 34,600
Senior Vice President and 1998 125,000 75,000 259,408(4) 136,563(5) 5,000
Managing Director, 1997 95,000 -- 292,099(4) -- --
Western Region
________________________
</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) These amounts represent bonuses for 1999, however, Messrs. August, Wiberg
and Hipps elected to defer all or a portion pursuant to the KEYSOP Deferred
Compensation Plan.
9
<PAGE>
(3) 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.
(4) Represents amounts paid to Mr. Hipps in his capacity as a leasing agent
prior to his promotion to Senior Vice President and Managing Director of the
Western Region in April 1999.
(5) Represents the value, as of the grant date on February 6, 1998, of 17,500,
5,000 and 5,000 Common Shares granted to Messrs. Krueger, Wiberg and Hipps,
respectively.
(6) Represents the value, as of the grant date on March 1, 2000 of 25,000,
18,000, 7,727, 8,088, and 4,960 Common Shares granted to Messrs. Prentiss,
August, Krueger, Wiberg and Hipps, respectively, as incentive compensation
awards under the 1996 Share Incentive Plan based on the Company's
performance in 1999. As of March 1, 2000, Messrs. Prentiss, August, Krueger,
Wiberg and Hipps had no other restricted stock holdings other than the
grants on March 1, 2000.
(7) All options referenced in 1999 were granted on March 1, 2000 as incentive
compensation awards under the 1996 Share Incentive Plan based on the
Company's performance in 1999, except that 20,000 of Mr. Hipps' options were
granted to Mr. Hipps in April of 1999 in connection with his promotion to
Senior Vice President and Managing Director of the Western Region.
Option Grants in Last Fiscal Year
The following table sets forth information regarding grants of options to
the Company's named executive officers during the 1999 fiscal year. The options
were granted pursuant to the Company's 1996 Share Incentive Plan. No SARs were
granted during the 1999 fiscal year. For additional information on and certain
terms of options, see "--1996 Share Incentive Plan."
<TABLE>
<CAPTION>
Individual Grants
-----------------
Potential Realizable
Value at
Number of Options Assumed Annual Rates of
Securities % of Granted to Exercise Stock Price Appreciation
Underlying Options Employee or Base for Option Term ($)(2)
Options Granted (1) in Fiscal Price Expiration ----------------------
Name Granted (1) Year ($/share) Date 5% ($) 10% ($)
- ---- ----------- ------ -------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Christopher M. Hipps 20,000 4.3% 4/15/99 $19.8750 4/15/09 249,986 633,512
Michael V. Prentiss 75,000 16.2% 3/01/00 $19.9375 3/01/10 940,387 2,375,669
Thomas F. August 55,000 11.9% 3/01/00 $19.9375 3/01/10 689,617 1,742,157
Christopher M. Hipps 14,600 3.1% 3/01/00 $19.9375 3/01/10 183,062 462,464
Lawrence J. Krueger 22,725 4.9% 3/01/00 $19.9375 3/01/10 284,937 719,827
Robert K. Wiberg 23,790 5.1% 3/01/00 $19.9375 3/01/10 298,290 753,562
</TABLE>
________________________
(1) Represents the percentage of options granted to all employees during 1999.
Options to purchase a total of 463,875 Common Shares were granted in 1999.
(2) In accordance with the rules of the SEC, the amounts shown on this table
represent hypothetical gains that could be achieved for the respective
options if exercised at the end of the option term. These gains are based on
the assumed rates of stock appreciation of 5.0% and 10.0% compounded
annually from the date the respective options were granted to their
expiration date and do not reflect the Company's estimates or projections of
future prices of our Common Shares. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the Common Shares, the
option holder's continued employment through the option period, and the date
on which the options are exercised.
10
<PAGE>
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,
1999. For additional information on and certain terms of options, see "--1996
Share Incentive Plan." No options were exercised in 1999.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-Money Options at
Options at Fiscal Year-End Fiscal Year-End(1)
--------------------------------------- -------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- ------------------ ------------------- ---------------------- -------------------------
<S> <C> <C> <C> <C>
Michael V. Prentiss....... 386,762 200,000 $531,798 $0
Thomas F. August.......... 173,944 150,000 239,173 0
Lawrence J. Krueger....... 125,000 0 103,125 0
Robert K. Wiberg.......... 66,667 33,333 34,375 0
Christopher M. Hipps...... 21,667 23,333 27,500 0
</TABLE>
________________________
(1) Value for "in-the-money" options represents the positive spread between the
respective exercise prices of outstanding options and the closing price of
the Common Shares on the New York Stock Exchange of $21.375 per Common Share
on December 31, 1999.
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
1999 and 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, are 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 the plan will recognize income,
and the Company will be allowed a business expense deduction, equal to the
discount at the time of a purchase.
11
<PAGE>
KEYSOP Deferred Compensation Plan
The Company has adopted a Key Employee Share Option Plan (the "KEYSOP Deferred
Compensation Plan"). Pursuant to the KEYSOP Deferred Compensation Plan,
officers and other employees of the Company, the Operating Partnership and
designated subsidiaries, including the Manager, who earn bonuses have the option
of deferring the payment of such bonuses. Such deferred compensation may be
used to purchase Common Shares at a 15% discount to the then-current market
value at the date of the purchase, which is the same discount available to all
employees under the Share Purchase Plan, or other investments offered through
the KEYSOP Deferred Compensation Plan. If a participant elects to purchase
Common Shares with the deferred bonus compensation, the Company would purchase
Common Shares on the open market and place them in a trust for the benefit of
such participant. Such trust may deliver Common Shares held for the benefit of a
participant beginning 6 months from the date they were placed in the trust. The
purpose of the KEYSOP Deferred Compensation Plan is to provide a vehicle for the
payment of compensation otherwise payable to the participants, in a form that
will provide incentives and rewards for meritorious performance and encourage
the participants' continuance as employees. The KEYSOP Deferred Compensation
Plan is administered by the Compensation Committee.
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.
The Company's incentive compensation awards are designed to reward and
motivate key employees for achieving financial and operational objectives and
increasing long term value of the Common Shares. Incentive compensation is paid
annually through a combination of stock option and restricted stock awards based
upon the achievement of target objectives for certain performance measures for
the most recently completed fiscal year. The Administrator uses equal
weightings of total shareholder return and the Company's performance relative to
its peer group of REITs as its primary performance measures for determining
incentive compensation awards. To a lesser degree, such determination will also
be influenced by growth in funds from operations per share, and for certain
participants, the performance of the employee's department or division.
Incentive compensation amounts actually paid are determined based on whether the
"threshold," "target" or "maximum" pre-determined levels for each performance
measure are met. If target performance is achieved each participant's total
compensation will be between the median and 75th percentile of the market
competitive incentive remuneration practices found among the Company's peer
group of REITs. Should the Company exceed its target performance levels the
total compensation to each participant should approximate the 75th percentile of
such competitive practices, while if less than target
12
<PAGE>
performance is achieved the total compensation will be substantially below the
median of such competitive practices. Annual incentives will not be awarded if
the "threshold" levels of performance are not realized.
The Company believes that its incentive award program further aligns the
interests of its executives with those of the Company's shareholders since
share-related compensation is directly tied to shareholder value. Stock options
and restricted shares awarded under this aspect of the 1996 Share Incentive Plan
vest 33.3% per annum beginning one year following the anniversary of the award
grant.
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.
As of March 17, 2000 there were 7 Trustees and approximately 675 employees
of the Company eligible to receive options under the 1996 Share Incentive Plan.
As of March 17, 2000, 3,294,812 options had been granted under the 1996 Share
Incentive Plan, 75,668 of which had been exercised, 480,578 of which had been
forfeited and 2,738,566 of which remained outstanding as of such date. A total
of 1,685,766 Common Shares remain available for grant as of March 17, 2000. To
see a table setting forth information regarding grants of options to the
Company's executive officers during the 1999 fiscal year, see "-Option Grants in
Last Fiscal Year." No SARs were granted under the 1996 Share Incentive Plan in
1999.
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)
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 Board of Trustees has approved, and
is submitting to the Shareholders for their approval, an amendment to the
Trustees' Plan that increases (i) the annual fee of the Company's Independent
Trustees from $20,000 to $25,000 per year payable in quarterly grants of Common
Shares and (ii) the number of options to purchase Common Shares granted annually
to the Independent Trustees from 5,000 to 7,500. See "Proposal Two - Amendment
of the Trustees' Share Incentive Plan."
13
<PAGE>
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 maximum number of
Common Shares issuable under the Trustees Plan is 200,000 Common Shares.
Trustee Compensation
Currently, 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,
$500 for each telephonic meeting of the Board of Trustees and $750 for each
committee meeting attended. The fee for attending committee meetings is only
paid when a committee meeting is not held on the same day as a meeting of the
Board of Trustees. 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 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.
14
<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 1999 was
established as follows:
<TABLE>
<CAPTION>
Executive Officer Annual Base Salary
- ---------------------------------------------------------------- ----------------------------
<S> <C> <C>
Michael V. Prentiss, Chairman of the Board $302,500 (1)
Thomas F. August, President and CEO 269,500 (1)
Lawrence J. Krueger, Executive Vice President 183,750 (2)
Robert K. Wiberg, Executive Vice President 173,250 (2)
Christopher M. Hipps, Senior Vice President 172,500 (2)
</TABLE>
_______________________
(1) The base salary for Messrs. Prentiss and August is paid by the Operating
Partnership.
(2) The base salary for Messrs. Krueger, Wiberg and Hipps 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 1999
Executive Officer Awards Awards Awards Awards
----------------- -------------- --------------- ------------ ---------
<S> <C> <C> <C> <C>
Michael V. Prentiss, Chairman of the Board 386,762 200,000 -- 75,000
Thomas F. August, President and CEO 173,944 150,000 -- 55,000
Lawrence J. Krueger, Executive Vice President 125,000 -- -- 22,725
Robert K. Wiberg, Executive Vice President 50,000 -- 50,000 23,790
Christopher M. Hipps, Senior Vice President 20,000 -- 5,000 34,600
</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 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.
15
<PAGE>
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.
On November 30, 1998, Mr. Hipps, Senior Vice President and Managing
Director of the West Region was granted 5,000 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 $23.375, which represents the closing price
for the Common Shares on the New York Stock Exchange on November 30, 1998. Also,
on April 15, 1999, Mr. Hipps was granted 20,000 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 the grant. The exercise price is $19.8750, which represents the closing
price for the Common Shares on the New York Stock Exchange on April 15, 1999.
Based upon the Company's performance for the 1999 fiscal year, the
Company's named executive officers were awarded incentive compensation in the
form of stock options and restricted stock grants on March 1, 2000. The options
and restricted stock were granted pursuant to the Company's 1996 Share Incentive
Plan and are listed in the long-term compensation columns of the Summary
Compensation Table.
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.
Chairman of the Board and CEO Compensation
In determining the appropriate compensation for the Company's Chairman of
the Board and Chief Executive Officer, the Compensation Committee is guided by
the Company's performance, competitive practices, and the Compensation
Committee's policy, as discussed above, of determining compensation with
reference to the compensation paid to similarly situated executives of
comparable companies. Appropriate adjustments in the compensation of the
Company's Chairman of the Board and Chief Executive Officer are considered
concurrently with similar adjustments made for the Company's other executive
officers.
[Specifically, the Company's Chairman of the Board and Chief Executive
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 $302,500 and
$269,500, respectively, in 1999 for 1999. In addition, Messrs. Prentiss and
August received a bonus in March 2000 for the 1999 year of $363,000 and
$269,500, respectively. Bonuses were paid in 1999 for 1998 to Mr. Prentiss in
the amount of $299,063 and to Mr. August in the amount of $221,113 and 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.
16
<PAGE>
This report has been furnished by the members of the Compensation
Committee.
Thomas J. Hynes, Jr.
Leonard M. Riggs, Jr.
Lawrence A. Wilson
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, 1999, 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. Information in the performance
graph was compiled by SNL Securities L.C.
[GRAPH]
<TABLE>
<CAPTION>
Period Ending
INDEX 10/16/1996 12/31/1996 6/30/1997 12/31/1997 6/30/1998 12/31/1998 6/30/1999 12/31/1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prentiss Properties Trust Inc. 100.00 126.57 133.72 149.98 134.84 128.32 141.33 133.33
S&P 500 100.00 105.54 127.29 140.77 165.70 180.95 203.35 219.03
SNL Office/Industrial REITs 100.00 119.60 124.40 150.15 139.61 124.24 135.49 127.77
NAREIT All Equity REIT Index 100.00 117.04 123.71 140.75 133.67 116.11 121.66 110.75
</TABLE>
17
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth information, as of March 17, 2000, 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 2,945,504 (2) 8.2%
259 N. Radnor Chester Road
Suite 205
Radnor, PA 19087
Scudder Kemper Investments, Inc. 2,994,600 (3) 8.3%
345 Park Avenue
New York, New York 10154
</TABLE>
____________________
(1) Based on 36,073,247 Common Shares outstanding as of March 17, 2000.
(2) Based solely upon information contained in the Schedule 13G/A, filed with
the SEC on February 14, 2000.
(3) Based solely upon information contained in the Schedule 13G/A, filed with
the SEC on January 28, 2000.
Security Ownership of Management
The following table sets forth the beneficial ownership of Common Shares as of
March 17, 2000, 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.
<TABLE>
<CAPTION>
Number of Shares
----------------
Beneficially Percent of All
------------ ---------------
Name of Beneficial Owner Owned(1) Common Shares (1)
- ------------------------ -------- -----------------
<S> <C> <C>
Michael V. Prentiss..................................... 3,023,492 (2) 8.148%
Thomas F. August........................................ 558,488 (3) 1.505%
Thomas J. Hynes, Jr..................................... 20,849 (4) *
Barry J.C. Parker....................................... 24,849 (4) *
Dr. Leonard M. Riggs, Jr................................ 27,349 (4) *
Ronald G. Steinhart..................................... 29,849 (4) *
Lawrence A. Wilson...................................... 19,849 (4) *
Michael A. Ernst........................................ 39,225 *
Dennis J. DuBois........................................ 293,445 *
Lawrence J. Krueger..................................... 167,528 *
Robert K. Wiberg........................................ 97,520 *
Christopher M. Hipps.................................... 40,579 *
Richard J. Bartel....................................... 113,626 *
--------------------------------------------------------
All Trustees and executive officers as a group (13 4,452,648 12.000%
persons)
</TABLE>
____________________
* Less than 1%.
18
<PAGE>
(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. 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 386,762 of the 661,762 Common Shares issuable upon the exercise of
options granted under the 1996 Share Incentive Plan, 461,762 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 and includes 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. Includes 896,878 Common Shares owned by certain Grantor Retained
Annuity Trusts established by Mr. Prentiss, of which Mr. Prentiss disclaims
beneficial ownership.
(3) Includes 173,944 of the 378,944 Common Shares issuable upon the exercise of
options granted under the 1996 Share Incentive Plan, 228,944 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. Includes 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, 1999, which were fully vested.
19
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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, 1999 throughout December 31, 1999 totaled $3,500,000.
Officer Loan Program
In June 1999, the Operating Partnership granted certain employees (the
"Borrowers") of the Company, the Operating Partnership, and designated
subsidiaries, including the Manager, loans (the "Loans"). Each unsecured Loan
has a term of five years, accrues interest at 7% per annum and is with recourse
as to the Borrower. Borrowers will make payments to the Operating Partnership
quarterly at a rate equal to the original principal amount of the Loans
multiplied by the percentage obtained by dividing the amount of the quarterly
dividend declared by the Company per Common Share by the closing price of a
Common share on the date(s) amounts were advanced.
The Loans contain loan forgiveness provisions with the purpose of securing
the continued and future employment services of the Borrowers. One-third of the
unpaid principal amount of each Loan will be forgiven on the third, fourth and
fifth anniversaries of the Loan grant, provided that there has been no default
by the Borrower, including termination of the Borrower's employment.
The aggregate amount of all Loans was $4,200,000. The amount of
indebtedness of the executive officers of the Company is set forth in the table
below.
<TABLE>
<CAPTION>
Name Loan Balance
---- ------------
<S> <C>
Thomas F. August $450,000.00
Robert K. Wiberg 350,000.00
Lawrence J. Krueger 350,000.00
Dennis J. DuBois 350,000.00
Richard J. Bartel 300,000.00
Michael A. Ernst 200,000.00
Christopher M. Hipps 200,000.00
Peter O. Hausmann 200,000.00
</TABLE>
20
<PAGE>
PROPOSAL TWO
AMENDMENT OF THE TRUSTEES SHARE INCENTIVE PLAN
Proposed Amendment
On February 9, 2000, the Board of Trustees approved the Third Amendment to
the Trustees Plan (the "Third Amendment"), subject to Shareholder approval at
the Annual Meeting. The Third Amendment increases (i) the annual fee of the
Company's Independent Trustees to $25,000 per year payable in quarterly grants
of Common Shares and (ii) the number of options to purchase Common Shares
granted annually to the Independent Trustees to 7,500. The Third 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 of Trustees believes that increasing the fair market value of the
quarterly grants of Common Shares and increasing the number of Common Share
options granted annually 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.
21
<PAGE>
As of March 17, 2000, options to purchase a total of 100,000 Common Shares
have been granted under the Trustees Plan, and a total of 100,000 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 100,000 options remain outstanding. As of March 17,
2000, a total of 100,000 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 17, 2000. 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.
22
<PAGE>
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
The Board of Trustees will provide for the presentation of proposals by
shareholders at the 2001 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 2001 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, 2000, for inclusion in the Company's proxy statement and the
form of proxy relating to the 2001 annual meeting.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP has served as independent auditors for the
Company and its subsidiaries for the year ended December 31, 1999 and will
continue to so serve for the year ending December 31, 2000 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 AND FORM 10-K
Accompanying this Proxy Statement is a copy of the Company's Annual Report
to Shareholders for the year ended December 31, 1999, which contains financial
and other information pertaining to the Company. Each Annual Report to
Shareholders includes the Company's Form 10-K for the year ended December 31,
1999, including the financial statements and financial statement schedules filed
by the Company with the SEC. The Annual Report and the Form 10-K do not form any
part of the materials for the solicitation of proxies.
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 Executive Officer, at 3890 W. Northwest Highway,
Suite 400, Dallas, Texas, 75220, telephone (214) 654-0886, an additional copy of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, 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
Dallas, Texas
March 31, 2000
23
<PAGE>
Annex A
THIRD 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 _______, 2000:
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, $6,250."
2. Article IV, Section 4.09 shall be struck, and the following shall be
inserted in its place:
"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 7,500
Shares, which Option shall be immediately exercisable."
3. As amended by the foregoing, the Plan shall remain in full force and
effect.
Dated: ____________, 2000
PRENTISS PROPERTIES TRUST
By:
------------------------------
Thomas F. August
President and Chief Executive Officer
<PAGE>
Annex B
PRENTISS PROPERTIES TRUST
AUDIT COMMITTEE CHARTER
Organization
There shall be a committee of the Board of Trustees to be known as the audit
committee. The audit committee shall be composed of Trustees who are financially
literate, independent of the management of the corporation and are free of any
relationship that, in the opinion of the Board of Trustees, would interfere with
their exercise of independent judgment as an audit committee member.
Statement of Policy
The audit committee shall provide assistance to the corporate Trustees in
fulfilling their responsibility to the shareholders, potential shareholders, and
investment community relating to corporate accounting, reporting practices of
the corporation, and the quality and integrity of the financial reports of the
corporation. In so doing, it is the responsibility of the audit committee to
maintain free and open means of communication between the Trustees, the
independent auditors, and the financial management of the corporation.
Responsibilities
In carrying out its responsibilities, the audit committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the Trustees and shareholders that the corporate
accounting and reporting practices of the corporation are in accordance with all
requirements and are of the highest quality.
In carrying out these responsibilities, the audit committee will:
. Meet with the independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current
year and the audit procedures to be utilized, and at the conclusion
thereof review such audit, including any comments or recommendations
of the independent auditors.
. Review with the independent auditors, and financial and accounting
personnel, the adequacy and effectiveness of the accounting and
financial controls of the corporation, and elicit any recommendations
for the improvement of such internal control procedures or particular
areas where new or more detailed controls or procedures are desirable.
Particular emphasis should be given to the adequacy of such internal
controls to expose any payments, transactions, or procedures that
might be deemed illegal or otherwise improper. Further, the audit
committee periodically should review company policy statements to
determine their adherence to the code of conduct.
. Review the financial statements contained in the annual report to shareholders
with management and the independent auditors to determine that the independent
auditors are satisfied with the disclosure and content of the financial
statements to be presented to the shareholders. Any changes in accounting
principles should be reviewed.
. Provide sufficient opportunity for the independent auditors to meet with the
members of the audit committee without members of management present. Among
the items to be discussed in these
<PAGE>
meetings are the independent auditors evaluation of the corporation's
financial and accounting personnel, and the cooperation that the independent
auditors received during the course of the audit.
. Provide opportunity for Management to discuss directly with the members of
the audit committee the independent auditors' performance.
. Review accounting and financial human resources and succession planning
within the company.
. Discuss quarterly earnings results by telephone with the audit committee
Chairman prior to their release to the public each quarter and review annual
earnings with the audit committee prior to their release to the public.
. Submit the minutes of all meetings of the audit committee to, or discuss the
matters discussed at each audit committee meeting with, the Board of Trustees.
. Investigate any matter brought to its attention within the scope of
its duties, with the power to retain outside counsel for this purpose
if, in its judgment, that is appropriate.
. Review the performance of the independent auditors and make recommendations to
the Board of Trustees regarding the appointment, termination and independence
of the independent auditors.
. Reviewing with management and the independent auditors significant risks and
exposures, audit activities and significant audit findings and include a
discussion of the auditor's opinion regarding quality of numbers and
disclosure.
. Reviewing the powers of the audit committee annually and reporting and making
recommendations to the Board of Trustees on these responsibilities.
. Holding such regular meetings as may be necessary (anticipate having four each
year with each meeting taking place immediately preceding the quarterly board
meetings) and such special meetings as may be called by the Chairman of the
audit committee.
. Considering such other matters in relation to the financial affairs of the
Company and its accounts, and in relation to the external audit of the Company
as the audit committee may, in its discretion, determine to be advisable.
. Elect the Chairman of the audit committee annually.
. Discuss annually with management and the independent auditors the Company's
current property market values and how such values compare to the current
property book carrying values. Discuss any accounting and reporting issues
resulting from such review.
. Meet once annually with the Company's General Counsel to discuss legal
matters that may have a significant impact on the financial statements.
. Instruct the independent auditors that the audit committee expects to be
advised immediately of any areas that require its special attention.
. Request management to advise the audit committee when it seeks a second
opinion on a significant accounting issue and when independent auditors other
than the primary independent auditor are to be used and the rationale for
using them.
. Review the Company's Policy Guide on Standards of Conduct and management's
procedures for monitoring and ensuring compliance.
. Annually review this Charter for its adequacy.
<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 or postponement
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 two FOR WITHHELD 2. Amendment to the Trustees Plan FOR AGAINST ABSTAIN
Class 1 members to [ ] [ ] to increase (i) the annual fee of [ ] [ ] [ ]
the Board of the Company's Independent
Trustees. Trustees to $25,000 per year
payable in quarterly grants of
Nominees: Thomas F. August Common Shares and (ii) the
Lawrence A. Wilson number of options to purchase
Common Shares granted annually
to the Independent Trustees to
For each of the nominees other than the following, for 7,500.
which vote is withheld:
- ----------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Please sign exactly as name apears 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
PRENTISS PROPERTIES TRUST
Proxy Solicited on Behalf of Trustees of the Company
For the Annual Meeting on May 10, 2000
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 Wednesday, May 10,
2000, and at any adjournments or postponements 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, 2000 and hereby revokes any proxy or
proxies heretofore given to vote at said meeting or any adjournment or
postponement 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.
