<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
Cornerstone Properties Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Cornerstone Properties Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
CORNERSTONE PROPERTIES INC.
126 East 56th Street
New York, New York 10022
April 30, 1997
Dear Stockholder:
The Annual Meeting of Stockholders of Cornerstone Properties Inc., a
Nevada corporation (the "Company"), will be held on Monday, June 2, 1997, at
2:00 p.m. (local time) in Room E-2 at the head office of Deutsche Bank AG,
Taunusanlage 12, Frankfurt (Main) Germany, for the purposes identified below.
Your Board of Directors urges you to please complete, date and sign your voting
instructions and proxy and return them in the enclosed envelope no later than
May 29, 1997.
At the Annual Meeting, stockholders will vote upon the following
proposals:
1. Election of eight directors by the holders of the Common
Stock for the ensuing year.
2. Election of one director by the holders of the 8%
Cumulative Convertible Preferred Stock, Series A, for the ensuing year.
3. Election of one director by the holders of the 8%
Cumulative Convertible Preferred Stock for the ensuing year.
4. Ratification of the appointment of Coopers & Lybrand L.L.P.
as the Company's independent public accountants for the fiscal year
1997.
5. The transaction of such other business as may properly come
before the meeting or any adjournment thereof.
YOUR BOARD STRONGLY URGES YOU TO VOTE IN FAVOR OF ALL OF THE PROPOSALS
ON YOUR PROXY CARD.
Sincerely,
Dr. Rolf-E. Breuer John S. Moody
Chairman President
THE COMPANY IS SUBJECT TO UNITED STATES SECURITIES LAWS
RELATING TO THE SOLICITATION OF PROXIES FROM ITS COMMON STOCKHOLDERS.
<PAGE> 3
TABLE OF CONTENTS
INTRODUCTION................................................................ 3
ELECTION OF COMMON STOCK DIRECTORS
(Item 1 on Common Stock Proxy Card)....................................... 4
Information Concerning Nominees.................................. 5
Board of Directors Committees, Meetings and Remuneration......... 5
ELECTION OF 8% PREFERRED STOCK, SERIES A, DIRECTOR.......................... 6
ELECTION OF 8% PREFERRED STOCK DIRECTOR..................................... 7
OFFICERS.................................................................... 8
EXECUTIVE COMPENSATION...................................................... 9
Summary Compensation Table....................................... 9
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values............................. 10
Supplemental Pension Benefit.................................... 10
Report of the Compensation Committee............................ 10
Stockholder Return Graph........................................ 11
CERTAIN TRANSACTIONS....................................................... 12
Hines Interests Limited Partnership............................. 12
Deutsche Bank AG................................................ 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT..................................................... 13
SELECTION OF AUDITORS (Item 2 on Common Stock Proxy Card).................. 15
OTHER MATTERS (Item 3 on Common Stock Proxy Card).......................... 15
2
<PAGE> 4
CORNERSTONE PROPERTIES INC.
126 EAST 56TH STREET
NEW YORK, NEW YORK 10022
PROXY STATEMENT
ANNUAL MEETING - JUNE 2, 1997
INTRODUCTION. The Board of Directors of the Company is soliciting
proxies from the holders of the Company's outstanding shares of Common Stock,
without par value, from the holders of the Company's outstanding 8% Cumulative
Convertible Preferred Stock, Series A (the "8% Preferred Stock, Series A"), and
from the holders of the Company's outstanding 8% Cumulative Convertible
Preferred Stock (the "8% Preferred Stock") for voting at its Annual Meeting of
Stockholders, which is to be held on Monday, June 2, 1997, at 2:00 p.m. (local
time) in Room E-2 at the head office of Deutsche Bank AG, Taunusanlage 12,
Frankfurt (Main) Germany. This Proxy Statement and related form of proxy are
first being mailed to the stockholders on or about April 30, 1997.
THE BOARD OF DIRECTORS URGES YOU TO PLEASE COMPLETE, DATE AND SIGN YOUR
VOTING INSTRUCTIONS AND PROXY AND RETURN THEM IN THE ENCLOSED ENVELOPE NO LATER
THAN MAY 29, 1997. For holders of Common Stock in Germany: in the event the bank
holding your Common Stock has not provided you with a return envelope, please
return your proxy directly to your depository bank.
SOLICITATION OF PROXIES. Solicitation will be by mail, which may be
supplemented by telephone or other personal contact, to be made without special
compensation by regular officers or other representatives of the Company or the
Transfer Agent. The Company will reimburse banks and other custodians, nominees
and agents of the stockholders for the costs incurred in obtaining from their
principals authorization to execute a Proxy Card. The entire cost of
solicitation will be borne by the Company. If a stockholder has not received a
copy of the Proxy Statement, the Company, upon request, will furnish such
stockholder a copy free of charge, as soon as practicable.
Approximately 54% of the outstanding shares of Common Stock are held
through Deutsche Auslandskassenverein AG, Frankfurt ("AKV"). The Company has
issued to AKV a share certificate for shares of Common Stock registered in AKV's
name. AKV has issued a global (or collective) certificate representing such
shares that has been deposited by AKV with the collective depository for
securities, the Deutscher Kassenverein AG, Frankfurt. For co-owners of such
global certificate, the following procedure for communicating their voting
instruction to AKV has been instituted: each bank totals the votes received from
its clients holding the Company's shares and then notifies AKV of the number of
such votes, which AKV will then transmit by June 2, 1997 to the Company.
REVOCABILITY OF PROXIES. Your proxy may be revoked at any time prior to
the exercise thereof either by filing with the Secretary of the Company a
written instrument of revocation or later dated proxy prior to the Annual
Meeting or if the person executing the proxy is present at the meeting and
elects to vote in person.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF. Only stockholders of
record at the close of business on April 30, 1997 will be entitled to notice of
and to vote at the meeting. The Common Stockholders are entitled to notice of
and to vote on Items 1, 4 and 5 of the Notice of Annual Meeting, on which they
will vote as a class. The holders of the 8% Preferred Stock, Series A, and 8%
Preferred Stock are entitled to notice of and to vote only on Item 2 (in the
case of the 8% Preferred Stock, Series A) and Item 3 (in the case of the 8%
Preferred Stock), on which they will vote as respective separate classes. Each
share of Common Stock and Preferred Stock is entitled to one vote as to the
matters on which it votes. On the record date set forth above, 37,198,186 shares
of Common Stock,458,621 shares of 8% Preferred Stock, Series A, and 689,655
shares of 8% Preferred Stock of the Company were issued and outstanding.
QUORUM; APPRAISAL RIGHTS. Under the Bylaws of the Company, twenty
percent of the outstanding shares of Common Stock entitled to vote, whether
represented in person or by proxy, shall constitute a quorum at the Annual
Meeting. Proxies marked "abstain" and broker non-votes will be considered
present at the
3
<PAGE> 5
meeting for quorum purposes, but will not be counted for the purpose of
determining the number of votes cast with respect to any matter. However,
abstentions and broker non-votes will have the effect of a "no" vote if the vote
required is a majority of the shares outstanding and entitled to be voted. Such
a vote is not required for any of the matters to be voted upon this year. The
Common Stock directors will be elected by a favorable vote of a plurality of the
shares of Common Stock present and entitled to vote, in person or by proxy at
the meeting. Similarly, each Preferred Stock director will be elected by a
favorable vote of a plurality of the shares of each series of Preferred Stock
voted at the meeting. Under the General Corporation Law of Nevada, stockholders
are not entitled to any dissenters' rights of appraisal in respect of any of the
proposals to be voted upon at the Annual Meeting.
ELECTION OF COMMON STOCK DIRECTORS
(Item 1 on Common Stock Proxy Card)
At the Annual Meeting of Stockholders, ten directors will be elected,
each to hold office from the date of election until the next Annual Meeting of
Stockholders and until his successor shall have been elected and qualified. Each
current director of the Company is nominated for election, and all of the
nominees, except Messrs. Conlee and Davis, were previously elected by the
stockholders. The Company's charter provides that the holders of the 8%
Preferred Stock, Series A, and the 8% Preferred Stock each have the right,
subject to expansion in certain situations, to elect one member of the Board of
Directors annually; the holders of Common Stock have the right to elect the
remaining directors. The following eight persons have been nominated by the
Board of Directors for election by the Common Stockholders. UNLESS INSTRUCTED
OTHERWISE, THE ENCLOSED COMMON STOCK PROXY WILL BE VOTED IN FAVOR OF THE
ELECTION OF ALL OF SUCH NOMINEES.
The Board of Directors has no reason to believe that any of these
nominees will not be available, but in the event that a vacancy among the
original nominees occurs prior to the meeting or any of the nominees named
should for any reason be unable to serve, the Common Stock proxy will be voted
for a substitute nominee or nominees designated by the Board of Directors and
for the remaining nominees named below.
The table below sets forth the names, principal occupations during the
last five years, positions held at the Company, and ages and length of
continuous service as a director of the nominees for election by the Common
Stockholders.
4
<PAGE> 6
<TABLE>
<CAPTION>
INFORMATION CONCERNING NOMINEES
PRINCIPAL OCCUPATIONS
DURING THE LAST DIRECTOR
DIRECTORS/NOMINEES (1) FIVE YEARS (2) AGE SINCE
- ---------------------- -------------- --- -----
<S> <C> <C> <C>
Dr. Rolf-E. Breuer Chairman of the Board of the Company; Member of the Board of 59 1986
Managing Directors of Deutsche Bank AG, Frankfurt (Main)
Blake Eagle Chairman, since January 1994, of the MIT Center for Real Estate, 63 1995
Cambridge, Massachusetts; Senior Real Estate Consultant from
January 1992 to December 1993 and President of Real Estate
Consulting from 1985 to December 1991 of the Frank Russell
Company, Tacoma, Washington
Dr. Karl-Ludwig Hermann Independent financial consultant, Greenwich, Connecticut 62 1981
Hans C. Mautner Chairman and Chief Executive Officer of Corporate Property 59 1992
Investors (real estate investments), New York City
John S. Moody President and Chief Executive Officer of the Company since June 48 1991
1991, President and Chief Executive Officer, from April 1991 to
July 1995, of Deutsche Bank Realty Advisors, Inc., New York City
Gerald Rauenhorst Chairman of Opus U.S. Corporation and Opus U.S. L.L.C 69 1993
(construction and development), Minneapolis, Minnesota
Michael J. G. Topham Executive Vice President of Hines Interests Limited Partnership 49 1995
(real estate investment and management), Houston, Texas
Berthold T. Wetteskind Chief Executive Officer of Deutsche Immobilien Anlagegesellschaft 59 1992
mbH (real estate investments), Frankfurt (Main)
</TABLE>
- --------------------
(1) Information not of record with the Company is based upon the
information furnished to the Company by said persons.
(2) Except as otherwise indicated, each of the above-named individuals has
been engaged in the principal occupation set forth opposite his name or
has held a similar position with the same company for more than the
last five years.
Dr. Breuer is also a director of The Central European Equity Fund,
Inc., The Germany Fund, Inc. and The New Germany Fund, Inc.; Mr. Eagle is also a
director of Storage Trust Realty; Mr. Mautner is also a director of Julius Baer
Investment Management and of eight funds managed by Dreyfus Service Corporation;
Mr. Rauenhorst is also a director of ConAgra, Inc.; and Mr. Moody is also a
director of Meridian Industrial Trust.
See "Certain Transactions" below for information regarding transactions
between the Company and entities associated with certain director nominees.
Deutsche Immobilien Anlagegesellschaft mbh is a wholly-owned subsidiary of
Deutsche Bank AG.
BOARD OF DIRECTORS COMMITTEES, MEETINGS AND REMUNERATION
The Board of Directors met seven times during 1996, and each director
attended all of the meetings of the Board and of any committee thereof on which
he served held during the period he was a director, except for Messrs. Conlee,
Rauenhorst, Topham and Wetteskind, who were each absent from one meeting. In
1996, each director of the Company, other than Messrs. Conlee, Davis, and Moody
received an annual retainer fee of $10,000, paid one-half in cash and one-half
in the form of restricted stock, and an annual cash fee of $5,000 for service on
a Board standing committee. Messrs. Conlee and Davis joined the Board on
November 27, 1996 and received no compensation for 1996. The Company either
reimburses each director for his expenses incurred in attending any meeting of
the Board or a committee thereof or pays such expenses directly. If a member of
the Board of Directors travels to inspect a property proposed to be acquired by
the Company, such director is reimbursed for his travel expenses.
The Board of Directors has a standing Administrative Committee
comprised of Dr. Breuer, Mr. Mautner and Mr. Moody. To the extent permitted by
law, the Administrative Committee may take action with the same force and effect
as if the entire Board of Directors had acted in such situation where time is of
the essence and it would be impractical and not in the best interests of the
Company to convene a meeting of the entire Board of Directors.
5
<PAGE> 7
The Board of Directors has a standing Audit Committee, chaired by Mr.
Eagle with Dr. Hermann and Mr. Wetteskind as its other members. The Audit
Committee, which met once in 1996, recommends an independent auditor for the
Company, meets with the independent auditor to review the annual statements and
accounts and the scope of the audit of the Company and reviews the internal
controls and financial structure of the Company.
The Board of Directors has a standing Compensation Committee, chaired
by Mr. Mautner. Its others members are Dr. Hermann and Mr. Topham. The
Compensation Committee met once in 1996. Its primary function is to review and
make recommendations to the Board of Directors with respect to the compensation
of each of the principal corporate officers.
The Board of Directors has a standing Board Affairs Committee, chaired
by Mr. Mautner with Messrs. Eagle and Topham as its other members. The Board
Affairs Committee did not meet during 1996. Its primary function is to review
all persons recommended to serve on the Board of Directors and to make
recommendations to the Board regarding those persons and to review and make
other recommendations to the Board as to the composition, organization, work,
compensation and affairs of the Board and its committees. The Committee will
consider persons recommended for membership on the Board when suggested in good
faith by a stockholder (with the consent of the nominee).
The Board of Directors has a standing Investment Committee, chaired by
Mr. Rauenhorst. Its other members are Messrs. Conlee, Davis, Moody and
Wetteskind. The Investment Committee met once in 1996. It reviews potential
investments for the Company.
ELECTION OF 8% PREFERRED STOCK, SERIES A, DIRECTOR
The Board of Directors has nominated the following person for election
as a director by the holders of the 8% Preferred Stock, Series A. Mr. Conlee was
elected a director by the Board on November 27, 1996 in connection with the sale
of the 8% Preferred Stock, Series A, to Hexalon Real Estate, Inc. and has been
chosen by such company pursuant to a contractual right for nomination by the
Board. Hexalon Real Estate, Inc., through a wholly-owned subsidiary, is the
owner of all of the outstanding 8% Preferred Stock, Series A. UNLESS INSTRUCTED
OTHERWISE, THE 8% PREFERRED STOCK, SERIES A, PROXY WILL BE VOTED IN FAVOR OF THE
ELECTION OF SUCH NOMINEE.
The Board of Directors has no reason to believe that this nominee will
not be available, but in the event he becomes unavailable prior to the meeting
or should for any reason be unable to serve, the 8% Preferred Stock, Series A,
proxy will be voted for a substitute nominee designated to the Board of
Directors by Hexalon Real Estate, Inc.
The table below sets forth the name, principal occupations during the
last five years, and age and length of continuous service as a director of the
nominee for election by the 8% Series A Preferred Stockholders.
<TABLE>
<CAPTION>
INFORMATION CONCERNING NOMINEE
PRINCIPAL OCCUPATION
DURING THE LAST DIRECTOR
DIRECTOR/NOMINEE (1) FIVE YEARS AGE SINCE
- -------------------- ---------- --- -----
<S> <C> <C> <C>
Cecil D. Conlee Chairman of CGR Advisors and The Conlee Company (real 60 1996
estate investments), Atlanta, Georgia, for more than the last five
years
</TABLE>
- --------------------
(1) Information not of record with the Company is based upon the
information furnished to the Company by said person.
6
<PAGE> 8
Mr. Conlee is also a director of Oxford Industries Inc. and Central
Parking Systems.
See "Certain Transactions" below for information regarding transactions
between the Company and entities associated with Mr. Conlee.
ELECTION OF 8% PREFERRED STOCK DIRECTOR
The Board of Directors has nominated the following person for election
as a director by the holders of the 8% Preferred Stock. Mr. Davis was elected a
director by the Board on November 27, 1996 in connection with the sale of the 8%
Preferred Stock to the New York State Teachers' Retirement System (NYSTERS) and
has been chosen by NYSTERS pursuant to a contractual right for nomination by the
Board. NYSTERS is the owner of all of the outstanding 8% Preferred Stock. UNLESS
INSTRUCTED OTHERWISE, THE 8% PREFERRED STOCK PROXY WILL BE VOTED IN FAVOR OF THE
ELECTION OF SUCH NOMINEE.
The Board of Directors has no reason to believe that this nominee will
not be available, but in the event he becomes unavailable prior to the meeting
or should for any reason be unable to serve, the 8% Preferred Stock proxy will
be voted for a substitute nominee designated to the Board of Directors by
NYSTERS.
The table below sets forth the name, principal occupations during the
last five years, and age and length of continuous service as a director of the
nominee for election by the 8% Preferred Stockholders.
<TABLE>
<CAPTION>
INFORMATION CONCERNING NOMINEE
PRINCIPAL OCCUPATION
DURING THE LAST DIRECTOR
DIRECTOR/NOMINEE (1) FIVE YEARS AGE SINCE
- -------------------- ---------- --- -----
<S> <C> <C> <C>
George A. Davis Real Estate Investment Officer, since 1993, for NYSTERS, 58 1996
Albany, New York; Chairman from 1989 to 1993 of Associated
Real Estate Advisors, Inc. (real estate consulting), New York,
New York
</TABLE>
- --------------------
(1) Information not of record with the Company is based upon the
information furnished to the Company by said person.
See "Certain Transactions" below for information regarding transactions
between the Company and entities associated with Mr. Davis.
7
<PAGE> 9
OFFICERS
The officers of the Company are elected by the Board of Directors to
serve for a term of one year or until their successors are elected and
qualified. The table below sets forth the name, principal occupations during the
last five years, and ages and length of continuous service as an officer of the
Company. The individuals listed below are all executive officers of the Company.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING
OFFICERS THE LAST FIVE YEARS AGE
- -------- ------------------- ---
<S> <C> <C>
John S. Moody President and Chief Executive Officer of the Company since June 1991 48
and President and Chief Executive Officer of Deutsche Bank Realty
Advisors, Inc. from April 1991 to July 1995.
Scott M. Dalrymple Vice President of the Company since July 1991. Vice President from 38
December 1993 to July 1995 and Assistant Vice President from July
1991 to December 1993 of Deutsche Bank Realty Advisors, Inc.
Rodney C. Dimock Executive Vice President and Chief Operating Officer of the Company 50
since October 1995. President of Aetna Realty Investors from April
1991 to October 1995.
Thomas P. Loftus Vice President and Controller of the Company since June 1992 and 38
Secretary of the Company since June 1993. Director-Fund
Administration from December 1993 to July 1995, Vice President-Fund
Administration from June 1992 to December 1993, and Vice President-
Controller from April 1991 to June 1992 of Deutsche Bank Realty
Advisors, Inc.
Kevin P. Mahoney Vice President and Treasurer of the Company since September 1992. 36
Vice President from December 1993 to July 1995 and Assistant Vice
President from July 1991 to December 1993 of Deutsche Bank Realty
Advisors, Inc.
Thomas A. Nye Vice President of the Company since July 1995. Vice President from 32
December 1993 to July 1995 and Assistant Vice President from July
1991 to December 1993 of Deutsche Bank Realty Advisors, Inc.
Francis H. Shields, Jr. Vice President of the Company since December 1996. Assistant Vice 32
President of the Company from March 1994 to December 1996.
Assistant Vice President of Deutsche Bank Realty Advisors, Inc. from
March 1994 to July 1995. Asset Manager from May 1992 to March
1994 at the Edward S. Gordon Company.
</TABLE>
8
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
of the Company's Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company at the end of 1996, for the past
year and for the period July 1, 1995 through December 31, 1995. Prior to July 1,
1995, the Company was managed pursuant to an advisory agreement with Deutsche
Bank Realty Advisors, Inc. and paid no compensation to its officers, who were
compensated by Deutsche Bank Realty Advisors, Inc. for services to it, including
the payment of bonuses. Except for Messrs. Moody and Dimock, none of the
following officers' salary and bonus from the Company exceeded $100,000 in 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1) LONG-TERM AWARDS
----------------------------------- -------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(3) OPTIONS(#) COMPENSATION(4)
- --------------------------- ---- ------ ----- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John S. Moody, President and Chief 1996 $350,000 $300,000 $ -- -- $20,659
Executive Officer 1995 175,000 100,000 825,000 300,000 17,783
Rodney C. Dimock, Executive Vice 1996 275,000 200,000 -- -- 17,525
President and Chief Operating Officer 1995(2) 57,291 100,000 600,000 150,000 77,550
Kevin P. Mahoney, Vice President and 1996 95,000 100,000 -- -- 7,255
Treasurer
Thomas P. Loftus, Vice President, 1996 125,000 55,000 -- -- 8,576
Controller and Secretary
Scott M. Dalrymple, Vice President 1996 95,000 75,000 -- -- 8,452
</TABLE>
- ------------
(1) See the lead-in paragraph to the Table.
(2) Mr. Dimock commenced employment with the Company on October 16, 1995.
(3) Dollar value calculated by multiplying the closing market price on the
Frankfurt Stock Exchange on the date of grant by the number of shares
awarded. The aggregate number of restricted shares held and their value
as of December 31, 1996 were as follows: Mr. Moody -- 57,692
shares/$879,803; Mr. Dimock -- 41,958 shares/$639,860; Mr. Mahoney --
13,846 shares/$211,152; Mr. Loftus -- 18,042 shares/$275,140; and Mr.
Dalrymple -- 13,846 shares/ $211,152. The 1995 awards fully vested with
respect to 13.333% on June 30, 1996, and will fully vest with respect
to 13.333% on June 30, 1997, 1998 and 1999, and with respect to 46.668%
on June 30, 2000. Regular dividends are paid on restricted stock.
(4) "All Other Compensation" includes Company contributions to the Profit
Sharing Plan on behalf of the named individuals in the following
amounts for 1996: Mr. Moody -- $16,500; Mr. Dimock -- $16,500; Mr.
Mahoney -- $6,204; Mr.Loftus -- $7,304; and Mr.Dalrymple -- $7,304. It
also includes premiums paid by the Company for life insurance for the
benefit of the named individuals in the following amounts: Mr. Moody --
$4,159; Mr. Dimock -- $1,025; Mr. Mahoney -- $1,051; Mr. Loftus --
$1,272; and Mr. Dalrymple -- $1,148.
9
<PAGE> 11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
ACQUIRED OPTIONS AT FY-END(#) MONEY OPTIONS AT FY-END ($)(1)
NAME ON EXERCISES(#) VALUE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ----------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
John S. Moody 0 $0 60,000/240,000 57,000/$228,000
Rodney C. Dimock 0 0 30,000/120,000 28,500/114,000
Kevin P. Mahoney 0 0 15,000/60,000 14,250/57,000
Thomas P. Loftus 0 0 15,000/60,000 14,250/57,000
Scott M. Dalrymple 0 0 15,000/60,000 14,250/57,000
</TABLE>
- ------------
(1) Market value of stock on the Frankfurt Stock Exchange at year-end less
option price.
SUPPLEMENTAL PENSION BENEFIT
The Company has entered into a contract with Mr. Moody whereby amounts
are accrued under an unfunded arrangement to pay Mr. Moody a supplemental
pension. Under the contract, his supplemental pension account was established
with a credit of $250,000 as of July 1, 1995, and the Company is obligated to
credit the account in the amount of $60,000 each subsequent July 1 during the
continuance of Mr. Moody's employment. The account is also credited with any
deemed income, gains or losses which would be attributable to a corresponding
investment of an equal cash amount in such investment as the Company, taking
into account Mr. Moody's views, shall deem the account to be invested. In
general, unless his employment is terminated by the Company for cause (as
defined), Mr. Moody will receive in a lump sum the total amount credited to his
supplemental pension account when he retires or his employment otherwise ceases.
In the event Mr. Moody's employment is terminated by the Company other than for
cause, or if he resigns for good reason (as defined), in either case following a
change in control (as defined), the Company is obligated to credit his
supplemental pension account with an amount equal to $60,000 times the number of
years (and fractions) remaining between his age on the date his employment
ceases and age 60.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of the Company is
responsible for administering officers' compensation and makes recommendations
to the Board in connection therewith. All the members of the Committee are
independent, nonemployee directors who are not eligible to participate in the
programs which the Committee oversees.
In early 1995, in anticipation of becoming self-administered on July 1,
the Company engaged Coopers & Lybrand L.L.P. to make recommendations with
respect to compensation. The resulting Coopers & Lybrand L.L.P. study
recommended the continuation of a short-term incentive compensation program for
officers in the form of cash bonuses and a long-term incentive program in the
form of restricted stock and stock option grants. The Compensation Committee
agreed with these recommendations and proposed, and the Board of Directors
adopted, programs to implement them.
As to short-term compensation, the Committee believes that a large part
of officers' compensation should consist of annual bonuses based on Company
performance relative to predetermined goals and individual performance relative
to predetermined objectives. Under the bonus program as adopted, a target bonus
pool is established each year. Each officer's share of the pool is fixed based
on his/her level of responsibility, his/her performance relative to the
pre-established objectives and the President's evaluation of the officer's
performance. As a result of this process, target bonus levels for individuals
may range from 25% to 60% of base salary, with the weighted average for all
officers being 48%.
10
<PAGE> 12
The target pool will be awarded if the Company meets the pre-set goals.
For lesser, but still acceptable, performance, less than the target will be
awarded. For outstanding performance, more than the target will be awarded. As
in effect for 1996, the most important factors in evaluating performance are
funds from operations per share and subjective Board assessment, each weighted
at 34%. The other two factors are share price performance measured against the
NAREIT office building universe and total return as measured against the NACREIF
office building universe, both weighted at 16%. The President and CEO of the
Company participates in the bonus program on the same basis as other officers.
In awarding bonuses for 1996, the Committee took into account, among other
things, the success of the Company in increasing earnings, the raising of
substantial additional capital through private placements, the making of new
investments and the efforts of the officers in preparing for the Company's
initial public offering in the U.S.
The Committee believes that, in general, executive compensation -- base
salaries plus annual incentive for meeting targets -- should be aimed at the
70th percentile of peer companies as provided by professional compensation
consultants. Company performance does not affect base salaries appreciably.
Submitted by the Compensation Committee
of the Board of Directors.
Mr. H.C. Mautner, Chairman
Dr. K.-L. Hermann
Mr. M.J.G. Topham
STOCKHOLDER RETURN GRAPH
The following graph compares the yearly percentage change in the
Company's cumulative total stockholder return on its Common Stock (assuming
reinvestment of distributions at date of payment into Common Stock of the
Company) with the cumulative total return on the published Standard & Poor's 500
Stock Index and the cumulative total return on the published NAREIT All Equity
Index over the preceding five year period. The following graph is presented
pursuant to U.S. Securities and Exchange Commission rules.
11
<PAGE> 13
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG CORNERSTONE PROPERTIES INC., S&P 500 INDEX AND
THE NAREIT ALL EQUITY INDEX**
[Cornerstone Performance Graph]
Assumes $100 invested on December 31, 1991 in Cornerstone Common Stock,
S&P 500 Index and NAREIT All Equity Index.
* Total return assumes reinvestment of dividends and distributions.
** Fiscal year ending December 31.
CERTAIN TRANSACTIONS
HINES INTERESTS LIMITED PARTNERSHIP
Through an affiliate, Hines Interests Limited Partnership ("HLIP"), of
which Mr. Topham is an Executive Vice President, held a 49% managing general
partnership interest and a 1% limited partnership interest in the limited
partnership which owns Norwest Center in Minneapolis, Minnesota. The Company,
through a subsidiary, holds a 50% general partnership interest in such limited
partnership. HILP has a management agreement with such partnership with an
initial term expiring December 31, 2001 pursuant to which it was paid
approximately $926,000 for 1996. It was also paid approximately $1,001,000 by
this limited partnership for other services rendered during 1996. HILP has a
management agreement for One Norwest Center in Denver, Colorado which expires
December 31, 2005 pursuant to which it was paid a management fee of
approximately $624,000 for 1996. It was also paid approximately $1,054,000 by
the Company for other services rendered to this property during 1996. HILP has a
management agreement for 125 Summer Street in Boston with an initial term
expiring December 31, 1999, and was paid approximately $496,000 by the Company
in 1996 pursuant to this agreement. It was also paid approximately $494,000 by
the Company for other services rendered to this property during 1996. HILP has a
management agreement for One Lincoln Centre in Oakbrook Terrace, Illinois which
was acquired by the Company in the Fall of 1996. The management agreement is
cancellable with 30 days' notice, and HILP was paid
12
<PAGE> 14
approximately $31,000 by the Company in 1996 pursuant to this agreement. HILP
has similar arrangements with respect to three other properties in Houston,
Texas for which the Company is the real estate adviser. In addition, HILP or its
affiliates manage and own properties in the Minneapolis, Denver, Boston,
Oakbrook Terrace and New York markets which compete with the Company's
properties and in the Houston market which compete with the advised properties.
An affiliate of HILP owns 349,650 shares of the Company's Common Stock
and holds a $12,926,000 note, convertible into 903,916 shares of Common Stock at
$14.30 per share. During 1996, the Company incurred approximately $769,000 in
interest expense on the convertible note.
DEUTSCHE BANK AG
During 1996, the Company incurred an aggregate expense of approximately
$2,103,000 to Deutsche Bank AG New York Branch as interest on loans and fees
related to interest rate hedges. In addition, the Company had, until March, 1997
when it was repaid in full, a $32,500,000 term loan with Deutsche Bank AG
London. All such fees and the agreements providing therefor were established
after arm's-length negotiations and were on terms that the Board believes to be
reasonable and similar to or better than those available to comparable customers
of Deutsche Bank.
Deutsche Bank holds $50,000,000 of non-voting 7% Cumulative Preferred
Stock of the Company convertible into Common Stock commencing in 2000 at a
conversion price of $16.50. During 1996, the Company incurred $3,500,000 of
dividends payable on this Cumulative Preferred Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to persons
known by the Company to be the beneficial owner of 5% or more of the Common
Stock, the 8% Preferred Stock, Series A, and the 8% Preferred Stock. If these
two series of Preferred Stock were converted into Common Stock as of the date
hereof, the holders of such series would together own 23.6% of the Common Stock
on a fully diluted basis.
COMMON STOCK
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
--------------------------------
NUMBER OF PERCENTAGE
NAME AND ADDRESS SHARES OF CLASS
---------------- ------ --------
<S> <C> <C>
Deutsche Bank AG ............................................................... 3,310,388(1) 8.9%
Taunusanlage 12
Frankfurt (Main) Germany
Hexalon Real Estate, Inc........................................................ 4,586,210(2) 9.4%
950 East Paces Ferry Road, Suite 2275
Atlanta, GA 30326-1119
New York State Teachers' Retirement System...................................... 6,896,550(3) 14.2%
10 Corporate Woods Drive
Albany, NY 12211-2395
</TABLE>
- --------------------
(1) Based on information supplied by Deutsche Bank at April 30, 1997.
Deutsche Bank has advised the Company that it has investment discretion
with respect to these shares, which are owned by investors in Germany.
(2) Deemed to be beneficially owned because the investor has the right to
acquire such shares within 60 days through conversion of the 8%
Preferred Stock, Series A, referred to in the next table.
(3) Deemed to be beneficially owned because the investor has the right to
acquire such shares within 60 days through conversion of the 8%
Preferred Stock referred to in the second following table.
13
<PAGE> 15
<TABLE>
<CAPTION>
8% PREFERRED STOCK, SERIES A BENEFICIAL OWNERSHIP
---------------------------------
NUMBER OF PERCENTAGE
SHARES(1) OF SERIES
--------- ---------
<S> <C> <C>
Hexalon Real Estate, Inc. ..................................................... 458,621 100%
950 East Paces Ferry Road, Suite 2275
Atlanta, GA 30326-1119
8% PREFERRED STOCK
New York State Teachers' Retirement System..................................... 689,655 100%
10 Corporate Woods Drive
Albany, NY 12211-2395
</TABLE>
- -----------------------
(1) Each of these investors has sole voting and dispositive power over its
shares. Hexalon Real Estate, Inc. holds its shares through a wholly-
owned subsidiary.
Following are the shares of the Company's Common Stock beneficially
owned as of April 30, 1997 by all directors and nominees, by each of the named
executive officers, and by the directors and executive officers as a group.
Except as footnoted, each named individual has sole voting and investment power
over the shares listed by that individual's name. As of April 30, 1997, no
nominee for director owned more than 1.0% of the outstanding shares of the
Company's Common Stock. All 16 directors and executive officers as a group owned
1.3% of the outstanding shares of Common Stock at April 30, 1997.
<TABLE>
<CAPTION>
Name Shares
---- ------
<S> <C>
Dr. Rolf-E. Breuer.............................................................. 1,749(1)
Cecil D. Conlee................................................................. ---
George A. Davis................................................................. ---
Blake Eagle..................................................................... 349(1)
Dr. Karl-Ludwig Hermann......................................................... ---
Hans C. Mautner................................................................. 19,194(1)
John S. Moody................................................................... 163,873(2)
Gerald Rauenhorst............................................................... 349(1)
Michael J. G. Topham............................................................ 349(1)
Berthold T. Wetteskind.......................................................... 349(1)
Scott M. Dalrymple.............................................................. 40,250(3)
Rodney C. Dimock................................................................ 98,232(4)
Thomas P. Loftus................................................................ 40,000(3)
Kevin P. Mahoney................................................................ 39,300(3)
Thomas A. Nye................................................................... 41,800(3)
Francis H. Shields, Jr.......................................................... 29,122(5)
All directors and executive officers as a group (16 persons).................... 474,916
</TABLE>
- ------------------------
(1) Includes 349 restricted shares received as director compensation.
(2) Includes 93,000 restricted shares awarded to him in his capacity as an
executive officer of the Company and 60,000 shares subject to options
exercisable within 60 days.
(3) Includes 24,000 restricted shares awarded to him in his capacity as an
executive officer of the Company and 15,000 shares subject to options
exercisable within 60 days.
(4) Includes 57,000 restricted shares awarded to him in his capacity as an
executive officer of the Company and 30,000 shares subject to options
exercisable within 60 days.
(5) Includes 21,622 restricted shares awarded to him in his capacity as an
executive officer of the Company and 7,500 shares subject to options
exercisable within 60 days.
14
<PAGE> 16
SELECTION OF AUDITORS
(Item 2 on Common Stock Proxy Card)
The Audit Committee has recommended and the Board of Directors has
selected Coopers & Lybrand L.L.P. as independent auditors for the Company for
the fiscal year ending December 31, 1997. This selection is being presented to
the stockholders for ratification, although the Board of Directors may terminate
the appointment of Coopers & Lybrand L.L.P. as the Company's independent
auditors without the approval of the stockholders of the Company. The Company
has been advised that representatives of Coopers & Lybrand L.L.P. are expected
to be present at the Annual Meeting, will have the opportunity to make a
statement and will be available to respond to appropriate questions.
OTHER MATTERS
(Item 3 on Common Stock Proxy Card)
The Board of Directors does not currently intend to present any matter
for action at the Annual Meeting other than the matters described in this Proxy
Statement and does not know of any other matter to be brought before the
meeting. If any other matter should properly come before the meeting, the
persons named in the enclosed proxy will vote in regard thereto according to
their discretion, unless otherwise directed in the proxy.
***
Proposals of stockholders of the Company must be received by the
Secretary of the Company at its principal office not later than January 2, 1998
in order to be included in the Company's proxy materials for the 1998 Annual
Meeting of Stockholders.
Upon written request to Cornerstone Properties Inc., 126 East 56th
Street, New York, New York 10022, Attention: Mr. Thomas P. Loftus, Vice
President, any stockholder may obtain a copy of the Company's Annual Report on
Form 10-K filed with the United States Securities and Exchange Commission for
the fiscal year ended December 31, 1996.
April 30, 1997
15
<PAGE> 17
DETACH HERE
CORNERSTONE PROPERTIES INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned stockholder of Cornerstone Properties Inc. (the
P "Company") hereby appoints John S. Moody and Claudia H. Steckler, and
each of them, as Proxies, each with the power of substitution, to vote all
R of the shares of Common Stock the undersigned may be entitled to vote upon
all matters at the Company's Annual Meeting of Stockholders to be held on
O Monday, June 2, 1997, at 2:00 p.m. (local time) in Room E-2 at the head
office of Deutsche Bank AG, Taunusanlage 12, Frankfurt (Main) Germany, and
X at all adjournments thereof, with all powers the undersigned would possess
if then and there personally present. Without limiting the general
Y authorization and power hereby given, the undersigned directs said Proxes to
cast the undersigned's vote as specified on the reverse side hereof. IF NOT
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR APPROVAL OF EACH OF THE
PROPOSALS LISTED ON THE REVERSE SIDE HEREOF. Stockholders who plan to attend
the Annual Meeting may revoke their proxy by casting their vote at the
meeting in person.
---------------
(Continued and to be dated and signed on the reverse side.) | SEE REVERSE |
| SIDE |
---------------
<PAGE> 18
DETACH HERE
[ X ] Please mark
votes as in
this example. ___
|
1. Election of Directors:
FOR AGAINST ABSTAIN
Nominees: R. E. Breuer, 2. To ratify the [ ] [ ] [ ]
B. Eagle, K.L. Hermann, appointment of
H.C. Mautner, J.S. Moody, Coopers & Lybrand
G. Rauenhorst, M.J.G. L.L.P. as the
Topham, B.T. Wetteskind Company's inde-
pendent public
FOR WITHHELD accountants for
[ ] [ ] the fiscal year
1997.
[ ]__________________________
(To withhold authority to 3. To vote at the
vote for any nominee write discretion of
the nominee's name on the the Proxies
line above) upon such other
matters as may
properly come
before the
meeting or any
adjourment
thereof.
MARK HERE [ ] MARK HERE [ ]
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
PLEASE DATE, SIGN AND MAIL THIS PROXY
TODAY IN THE ENCLOSED ENVELOPE.
Signature________________ Date______ Signature________________ Date______
