<PAGE>
SCHEDULE 14A
(RULE 14a-101)
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 Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CORNERSTONE PROPERTIES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(1)
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:
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(4) Date Filed:
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<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
CORNERSTONE PROPERTIES INC.
126 EAST 56TH STREET
NEW YORK, NEW YORK 10022
April 26, 1999
Dear Stockholder:
The Annual Meeting of Stockholders of Cornerstone Properties Inc., a Nevada
corporation (the "Company"), will be held on Tuesday, May 25, 1999, at 10:00
a.m. (local time) at the Four Seasons Hotel New York, 57 East 57th Street, New
York, NY 10022, 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 20, 1999.
At the Annual Meeting, stockholders will vote upon the following proposals:
1. Election of fourteen directors by the holders of the Common Stock for
the ensuing year.
2. Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent public accountants for the fiscal year 1999.
3. 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,
<TABLE>
<S> <C>
[LOGO] [LOGO]
William Wilson III John S. Moody
CHAIRMAN OF THE BOARD CHIEF EXECUTIVE OFFICER AND PRESIDENT
</TABLE>
THE COMPANY IS SUBJECT TO UNITED STATES SECURITIES LAWS RELATING TO THE
SOLICITATION OF PROXIES FROM ITS COMMON STOCKHOLDERS.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROXY STATEMENT..................................................................... 1
ELECTION OF DIRECTORS............................................................... 2
(Item 1 on Proxy Card)............................................................ 2
Information Concerning Nominees................................................... 2
Board of Directors Committees, Meetings and Remuneration.......................... 4
EXECUTIVE OFFICERS.................................................................. 5
EXECUTIVE COMPENSATION.............................................................. 7
Summary Compensation Table........................................................ 7
Option Grants in Last Fiscal Year................................................. 8
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values.......................................................................... 8
Retention Agreements.............................................................. 9
Supplemental Pension Benefit...................................................... 10
Report of the Compensation Committee.............................................. 10
Stockholder Return Graph.......................................................... 12
Compensation Committee Interlocks and Insider Participation....................... 12
CERTAIN TRANSACTIONS................................................................ 13
Wilson Acquisition................................................................ 13
PGGM and DIHC..................................................................... 13
Hines Interests Limited Partnership............................................... 14
Deutsche Bank AG.................................................................. 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.................................................................... 15
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
ACT OF 1934....................................................................... 16
SELECTION OF AUDITORS
(Item 2 on Proxy Card)............................................................ 17
OTHER MATTERS
(Item 3 on Proxy Card)............................................................ 17
</TABLE>
<PAGE>
CORNERSTONE PROPERTIES INC.
126 EAST 56TH STREET
NEW YORK, NEW YORK 10022
PROXY STATEMENT
ANNUAL MEETING--MAY 25, 1999
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, for voting at its Annual Meeting of Stockholders (the "Annual
Meeting"), which is to be held on Tuesday, May 25, 1999, at 10:00 a.m. (local
time) at the Four Seasons Hotel New York, 57 East 57th Street, New York, NY
10022. The date of this Proxy Statement is April 23, 1999. This Proxy Statement
and related form of proxy are first being mailed to the stockholders on or about
April 26, 1999.
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 20, 1999. 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
Boston EquiServe, the Company's 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.
REVOCABILITY OF PROXIES. You may revoke your proxy at any time prior to the
vote at the Annual Meeting by (a) notifying the Secretary of the Company in
writing prior to the start of the Annual Meeting, (b) signing and dating a later
proxy and returning the new proxy in time to be counted for the Annual Meeting
or (c) by attending the Annual Meeting and voting contrary to the submitted
proxy at the time the votes are requested. Any written notice revoking a proxy
should be sent to Cornerstone Properties Inc., 126 East 56th Street, New York,
New York 10022, Attention: Thomas P. Loftus, Secretary.
VOTING SECURITIES. Only stockholders of record at the close of business on
April 9, 1999 will be entitled to notice of and to vote at the meeting. On the
record date set forth above, 128,210,784 shares of Common Stock of the Company
were issued and outstanding, entitled to one vote per share on matters submitted
to the stockholders at the meeting.
QUORUM. Under the Bylaws of the Company, 20 percent of the outstanding
shares of Common Stock entitled to vote, whether represented in person or in
proxy, shall constitute a quorum at the Annual Meeting. Proxies marked "abstain"
and broker non-votes will be considered present at the 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 to approve a particular
proposal is a majority of the shares outstanding and entitled to be voted.
1
<PAGE>
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
At the Annual Meeting of Stockholders, a board of fourteen 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. All
of the nominees, except Messrs. Wilson, Fisher, and Hack, were elected by the
stockholders at the 1998 Annual Meeting. The fourteen persons listed in the
table below have been nominated by the Board of Directors for election by
stockholders. UNLESS INSTRUCTED OTHERWISE, THE ENCLOSED 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 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, if any, held at the Company, and ages and length of
continuous service as a director, of the nominees for election.
INFORMATION CONCERNING NOMINEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING
DIRECTORS/NOMINEES(1) THE LAST FIVE YEARS(2) AGE DIRECTOR SINCE
- ------------------------------------ ------------------------------------------------------ --- ---------------
<S> <C> <C> <C>
Cecil D. Conlee..................... Chairman of CGR Advisors, Atlanta, Georgia. 62 1996
Rodney C. Dimock.................... Executive Vice President of the Company since April 52 1998
1999; Co-Chief Operating Officer of the Company from
December 1998 to March 1999; President and Chief
Operating Officer of the Company from February 1998 to
December 1998; Executive Vice President and Chief
Operating Officer of the Company from October 1995 to
February 1998. President of Aetna Realty Investors
from April 1991 to September 1995.
Blake Eagle......................... Chairman, since January 1994, of the MIT Center for 65 1995
Real Estate, Cambridge, Massachusetts.
Donald G. Fisher(3)................. Founder and Chairman of The Gap, Inc; Chief Executive 70 1998
Officer of The Gap, Inc. from 1969 to 1995.
Randall A. Hack(3).................. Senior Managing Director and Member of Nassau Capital 51 1998
L.L.C. (investment management); President and Chief
Executive Officer of Princeton University Investment
Company, from 1990 to January 1995.
Dr. Karl-Ludwig Hermann............. Independent financial consultant, Greenwich, 64 1981
Connecticut.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING
DIRECTORS/NOMINEES(1) THE LAST FIVE YEARS(2) AGE DIRECTOR SINCE
- ------------------------------------ ------------------------------------------------------ --- ---------------
<S> <C> <C> <C>
Hans C. Mautner..................... Vice Chairman of Simon Property Group since September 61 1992
1998; Chairman and Chief Executive Officer of
Corporate Property Investors (real estate
investments), New York City from March 1994 to
September 1998.
Dr. Lutz Mellinger.................. Member of the Divisional Board Corporate and Real 57 1997
Estate, Deutsche Bank AG.
John S. Moody....................... President and Chief Executive Officer of the Company 50 1991
since December 1998; Chairman, Chief Executive Officer
and President of the Company from November 1997 to
February 1998; Chairman and Chief Executive Officer of
the Company from February 1998 to December 1998;
President and Chief Executive Officer of the Company
from June 1991 to February 1998; President and Chief
Executive Officer from April 1991 to July 1995 of
Deutsche Bank Realty Advisors, Inc., New York City.
Craig R. Stapleton.................. President of Marsh & McLennan Real Estate Advisors, 53 1998
Inc., New York, New York.
Michael J.G. Topham................. Executive Vice President and Managing Director of 51 1995
Hines Interests Limited Partnership (real estate
investment and management), Houston, Texas.
Dick van den Bos.................... Consultant to Stichting Pensioenfonds voor de 58 1997
Gezondheid, Geestelijke en Maatschappelijke Belangen
("PGGM").
Jan van der Vlist................... Director of Real Estate Investments for PGGM. 44 1997
William Wilson III(3)............... Chairman of the Company since December 1998; President 62 1998
and Chairman of William Wilson & Associates from its
founding in 1978 to December 1998.
</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 individuals listed 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.
(3) Appointed by the Board of Directors at its meeting held on December 10,
1998, as a nominee of William Wilson III pursuant to Contribution Agreement
and Agreement and Plan of Merger dated as of June 22, 1998, as amended (the
"Merger Agreement"), in connection with the Wilson Acquisition, to fill one
of the three vacancies created from the expansion of the Board to a total of
fourteen directors on December 16, 1998. See "Certain Transactions--Wilson
Acquisition."
3
<PAGE>
Mr. Conlee is also a director of Oxford Industries, Inc. and Central Parking
Corporation. Mr. Eagle is also a director of Storage Trust Realty. Mr. Mautner
is also a director of each of Simon Property Group, Julius Baer Investment
Management and eight funds managed by Dreyfus Service Corporation. Mr. Moody is
also a director of Meridian Industrial Trust. Mr. Stapleton is also a director
of each of Allegheny Properties, Inc., Cendant Corp., Vacu Dry, Inc. and T.B.
Woods. Mr. Fisher is also a director each of The Gap, Inc., the Charles Schwab
Corporation and AirTouch Communications. Mr. Hack is also a director of each of
Crown Castle International Corp., KMC Telecom, Inc., SWWT Inc., OmniCell
Technologies, Inc. and Acacia Capital Corp.
See "Certain Transactions" below for information regarding transactions
between the Company and entities associated with certain directors and nominees.
BOARD OF DIRECTORS, COMMITTEES, MEETINGS AND REMUNERATION
The Board of Directors met 12 times during 1998. Except for Dr. Mellinger,
all of the directors attended at least 75% of the meetings of the Board and its
committees. In 1998, each director of the Company, other than Messrs. Moody and
Dimock received an annual retainer fee of $20,000, paid in cash, and a cash fee
of $1,000 per meeting attended. Messrs. Fisher, Hack, and Wilson joined the
Board on December 16, 1998 and received no compensation for 1998. 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, chaired by
Mr. Moody with Messrs. Wilson, van den Bos and Mautner as its other members. The
Committee met one time in 1998. 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.
The Board of Directors has a standing Audit Committee, chaired by Mr. Eagle
with Messrs. Fisher, Hermann and Mellinger as its other members. The Committee
met one time in 1998. The Audit Committee 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 with Messrs. Fisher, Hack, Stapleton and Topham as its other members.
Dr. Hermann was a member of the Committee during 1998. The Committee met four
times in 1998. 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. Wilson, Moody, Eagle and van den Bos as its other
members. The Committee met two times in 1998. 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.
Conlee, with Messrs. Dimock, Moody, van der Vlist, van den Bos and Wilson as its
other members. The Committee three times in 1998. The Committee reviews
potential investments for the Company.
4
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company are elected by the Board of Directors
to serve at the pleasure of the Board or until their successors are elected and
qualified. The table below sets forth for each executive officer of the Company
the name, principal occupations during the last five years, age and length of
continuous service as an executive officer of the Company.
<TABLE>
<CAPTION>
OFFICERS PRINCIPAL OCCUPATIONS DURING THE LAST FIVE YEARS AGE
- ----------------------------------- ---------------------------------------------------------------------- ---
<S> <C> <C>
William Wilson III................. Chairman of the Company since December 1998. President and Chairman of 62
William Wilson & Associates from its founding in 1978 to December
1998.
John S. Moody...................... President and Chief Executive Officer of the Company since December 50
1998. Chairman, Chief Executive Officer, and President of the Company
from November 1997 to February 1998. Chairman and Chief Executive
Officer of the Company from February 1998 to December 1998. President
and Chief Executive Officer of the Company from June 1991 to February
1998. President and Chief Executive Officer of Deutsche Bank Realty
Advisors, Inc. from April 1991 to July 1995.
Rodney C. Dimock................... Executive Vice President of the Company since April 1999. Co-Chief 52
Operating Officer of the Company from December 1998 to March 1999.
President and Chief Operating Officer from February 1998 to December
1998. Executive Vice President and Chief Operating Officer of the
Company from October 1995 to February 1998. President of Aetna Realty
Investors from April 1991 to September 1995.
H. Lee Van Boven................... Chief Operating Officer and General Counsel of the Company since April 60
1999. General Counsel and Co-Chief Operating Officer from December
1998 to March 1999. Chief Operating Officer of William Wilson &
Associates from February 1997 to December 1998. General Counsel and
Executive Vice President of William Wilson & Associates from September
1996 to December 1998. Prior to September 1996, partner with the law
firm of Farella Braun & Martel LLP, San Francisco, California.
Kevin P. Mahoney................... Senior Vice President and Chief Financial Officer of the Company since 38
December 1998. Chief Financial Officer of the Company since February
1998. Vice President and Treasurer of the Company from September 1992
to February 1998. Vice President from December 1993 to July 1995 and
Assistant Vice President from July 1991 to December 1993 of Deutsche
Bank Realty Advisors, Inc.
R. Matthew Moran................... Chief Investment Officer of the Company since December 1998. Vice 36
President of William Wilson & Associates from February 1993 to
December 1998.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
OFFICERS PRINCIPAL OCCUPATIONS DURING THE LAST FIVE YEARS AGE
- ----------------------------------- ---------------------------------------------------------------------- ---
<S> <C> <C>
John J. Hamilton III............... Chief Development Officer of the Company since December 1998. 42
Executive Vice President of William Wilson & Associates from March
1993 to December 1998.
Thomas P. Loftus................... Secretary of the Company since June 1993 and Chief Administrative 40
Officer of the Company since February 1998. Vice President and
Controller of the Company from June 1992 to December 1998.
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.
Stephen J. Pilch................... Senior Vice President of the Company since December 1998. Senior Vice 37
President--Investment Management of William Wilson & Associates from
March 1998 to December 1998. Vice President--Investment Management of
William Wilson & Associates from May 1997 to March 1998. Managing
Director of Aetna Life Insurance Company from August 1993 to May 1997.
James W. Arce...................... Senior Vice President of the Company since December 1998. Senior Vice 45
President--Asset Management of William Wilson & Associates from August
1995 to December 1998. Vice President--Asset Management of William
Wilson & Associates from September 1994 to August 1995.
A. Robert Paratte.................. Senior Vice President of the Company since December 1998. Senior Vice 32
President of William Wilson & Associates from December 1997 to
December 1998. Vice President of William Wilson & Associates from
November 1994 to December 1997. Prior to joining William Wilson &
Associates, Vice President of Wells Fargo Bank.
Scott M. Dalrymple................. Senior Vice President of the Company since February 1999. Vice 40
President of the Company from July 1991 to January 1999. 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 and Treasurer of the 34
Company since April 1999. Vice President from December 1993 to July
1995 and Assistant Vice President from July 1991 to December 1993 of
Deutsche Bank Realty Advisors, Inc.
</TABLE>
6
<PAGE>
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 1998 (the "Named
Officers") for the past three years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM AWARDS
-----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION RESTRICTED SECURITIES
--------------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS(2) OPTIONS(#) COMPENSATION(3)
- ----------------------------------------------- --------- ---------- ---------- ---------- ----------- ----------------
John S. Moody.................................. 1998 $ 350,000 $ 790,000 -- 750,000 $ 24,642
President and Chief 1997 350,000 350,000 $ 579,000 325,000 24,935
Executive Officer 1996 350,000 300,000 -- -- 24,659
Rodney C. Dimock............................... 1998 $ 275,000 $ 545,000 -- 400,000 $ 24,520
Executive Vice President 1997 275,000 225,000 247,000 160,000 24,720
1996 275,000 200,000 -- -- 21,525
Kevin P. Mahoney............................... 1998 $ 225,000 $ 380,000 -- 305,000 $ 11,269
Senior Vice President and Chief Financial 1997 110,000 115,000 167,000 78,000 11,355
Officer 1996 95,000 100,000 -- -- 11,251
Thomas A. Nye.................................. 1998 $ 133,000 $ 190,000 -- 95,000 $ 9,816
Vice President and Treasurer 1997 110,000 75,000 167,000 78,000 9,898
1996 95,000 45,000 -- -- 9,835
Scott M. Dalrymple............................. 1998 $ 140,000 $ 155,000 -- 115,000 $ 12,476
Senior Vice President 1997 110,000 90,000 167,000 78,000 12,592
1996 95,000 75,000 -- -- 12,447
</TABLE>
- ------------------------
(1) Bonus includes 1998 Bonus and 1998 Merger Bonus in connection with the
Merger Agreement with William Wilson & Associates entered into in June 1998.
(2) Dollar value calculated by multiplying the closing market price on the New
York Stock Exchange with respect to years 1998 and 1997 and on the Frankfurt
Stock Exchange with respect to year 1996 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, 1998 were as follows: Mr. Moody--93,000
shares/$1,395,000; Mr. Dimock--57,000 shares/$855,000; Mr. Mahoney--24,000
shares/$360,000; Mr. Nye--24,000 shares/$360,000; and Mr. Dalrymple--24,000
shares/$360,000. The 1997 awards fully vest with respect to 13.333% on June
30, 1998, 1999, 2000, and 2001, and with respect to 46.668% on June 30,
2002. Regular dividends are paid on restricted stock.
(3) "All Other Compensation" includes Company contributions of $4,000 for each
of the Named Officers to the Company's 401(k) Retirement Plan and
contributions to the Company's Profit Sharing Plan on behalf of the named
individuals in the following amounts for 1998: Mr. Moody--$16,000; Mr.
Dimock--$16,000; Mr. Mahoney--$6,012; Mr. Nye--$4,707; and Mr.
Dalrymple--$7,077. It also includes premiums paid by the Company for life
insurance for the benefit of the named individuals in the following amounts:
Mr. Moody--$4,642; Mr. Dimock--$4,520; Mr. Mahoney--$1,257; Mr. Nye--
$1,109; and Mr. Dalrymple--$1,399.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER % OF TOTAL RATES OF STOCK PRICE
OF SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM(1)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION ------------------------
NAME GRANTED(#)(2) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ------------------------------- ------------- --------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
John S. Moody.................. 150,000 3.8% $ 18.25 02/04/08 1,736,850 4,387,200
600,000 15.5 17.25 12/16/08 7,547,400 18,148,800
Rodney C. Dimock............... 100,000 2.6 18.25 02/04/08 1,157,900 2,924,800
300,000 7.8 17.25 12/16/08 3,773,700 9,074,400
Kevin P. Mahoney............... 75,000 1.9 18.25 02/04/08 868,425 2,193,600
230,000 6.0 17.25 12/16/08 2,893,170 6,957,040
Thomas A. Nye.................. 45,000 1.2 18.25 02/04/08 521,055 1,316,160
50,000 1.3 17.25 12/16/08 628,950 1,512,400
Scott M. Dalrymple............. 45,000 1.2 18.25 02/04/08 521,055 1,316,160
70,000 1.8 17.25 12/16/08 880,530 2,117,360
</TABLE>
- ------------------------
(1) Such values are calculated based on the requirements promulgated by the
Securities and Exchange Commission and are not intended to forecast future
stock appreciation of the Common Stock. There can be no assurance that such
values will be achieved.
(2) Such options vest in increments of 33 1/3% on each of the first three
anniversaries of the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS AT FY-END
SHARES ACQUIRED VALUE OPTIONS AT FY-END (#) ($)(1)
NAME ON EXERCISES (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------- ------------------- ----------------- ----------------------- -----------------------------
<S> <C> <C> <C> <C>
John S. Moody.............. -- -- 408,333/966,666 $ 519,375/$243,749
Rodney C. Dimock........... -- -- 192,833/506,667 306,713/120,000
Kevin P. Mahoney........... -- -- 101,000/357,000 128,625/58,500
Thomas A. Nye.............. -- -- 101,000/147,000 128,625/58,500
Scott M. Dalrymple......... -- -- 101,000/167,000 128,625/58,500
</TABLE>
- ------------------------
(1) Market value of stock on the New York Stock Exchange at December 31, 1998
less the option exercise price.
EMPLOYMENT AGREEMENTS
Messrs. Wilson and Moody have employment agreements with the Company. The
employment agreements were executed in connection with the Wilson Acquisition.
Mr. Moody's employment agreement provides for Mr. Moody to serve as Chief
Executive Officer and President of the Company for a three-year term commencing
on December 16, 1998. The agreement provides for an annual salary of $350,000
per year, subject to upward adjustment annually as the Board or the Compensation
Committee may determine, and for Mr. Moody's participation in the Company's
executive bonus and incentive programs, including stock option and restrictive
stock programs, in a manner comparable to other senior executives of the Company
as determined by the Compensation Committee.
Mr. Wilson's employment agreement provides that Mr. Wilson will serve as
Chairman of the Board in accordance with the Amended and Restated Bylaws of the
Company for a three-year term commencing on
8
<PAGE>
December 16, 1998. The agreement provides for an annual salary of $400,000 per
year, subject to upward adjustment annually as the Board or the Compensation
Committee may determine, and for Mr. Wilson's participation in the Company's
executive bonus and incentive programs, including stock option and restrictive
stock programs, in a manner comparable to other senior executives of the Company
as determined by the Compensation Committee. Mr. Wilson's employment agreement
also obligates Mr. Wilson to comply with the non-competition provisions of the
Contribution Agreement pursuant to which the Wilson Acquisition was consummated.
RETENTION AGREEMENTS
The Company has entered into retention agreements with each of its executive
officers, including the Named Officers, to address the terms and conditions of
their employment in the event of a change in control. A "change in control" is
generally said to occur when: (i) any person becomes the owner of 25% or more of
the Company's voting securities; (ii) directors who constitute the Board at the
beginning of any two-year period, and any new directors whose election or
nomination for election was approved by a vote of at least three-quarters of the
directors then in office who either were directors at the beginning of such
period or whose election or nomination for election was previously so approved,
cease to constitute a majority; (iii) a merger, consolidation or reorganization
in which the Company's voting securities do not continue to represent at least
50% of the surviving entity; or (iv) a reorganization, liquidation, or sale of
all or substantially all of the Company's assets.
In the event of termination of employment by the Company without cause, or
by the employee for good reason, within two years following a change in control,
the Company will make a lump sum payment of (i) the pro rata portion of the
annual bonus for the year termination occurred, calculated on the basis of the
target bonus and on the assumption that all performance goals have been or will
be achieved, and (ii) three times annual compensation in the case of Messrs.
Moody, Dimock, Wilson and Van Boven and two times annual compensation in the
case of all other officers. Annual compensation is generally defined as the
higher of (A) the average of the three annual bonuses paid prior to termination,
(B) the average of the three annual bonuses paid prior to the change in control
or (C) the target annual bonus for the year during which termination occurs,
plus the higher of the salary in effect immediately prior to termination or
change in control.
An officer may be terminated for "cause" if he is convicted of a felony,
reveals confidential information about the Company or refuses to substantially
perform his duties. An officer can terminate for "good reason" if the Company
reduces his salary or benefits, relocates his office more than 25 miles from the
present location, detrimentally alters his title or position, fails to get a
successor to agree to assume the obligations under the retention agreement or
materially breaches any provision of the agreement.
In addition, the officer and his eligible dependents will continue to be
eligible to participate during the benefit continuation period in the medical,
dental, health, life and other welfare benefit plans and arrangements applicable
to him immediately prior to his/her termination of employment, on the same terms
and conditions in effect immediately prior to such termination. As defined in
the agreements, "benefit continuation period" means the period beginning on the
day of termination and ending on the earlier to occur of (i) the third
anniversary of the date of termination in the case of Messrs. Moody, Dimock,
Wilson and Van Boven and the second anniversary of the date of termination in
the case of all other officers and (ii) the date that the officer is eligible
and elects coverage under the plans of a subsequent employer which provide
substantially equivalent or greater benefits to the officer and his dependents.
If the payments to an officer under the retention agreement constitute
"parachute payments" (as defined in Section 280G of the Internal Revenue Code of
1986, as amended (the "Code")), and the officer would receive more value after
taxes if the payments to be made to the officer were capped at three times the
"base amount" less $1.00, then the payments to the officer will be reduced to
that amount.
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business or assets of the Company expressly to assume
9
<PAGE>
and to agree to perform its obligations under the retention agreements in the
same manner and to the same extent that the Company would be required to perform
such obligations if no such succession had taken place.
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 Compensation
Committee are independent, nonemployee directors who are not eligible to
participate in the programs which the Compensation Committee oversees.
EXECUTIVE COMPENSATION COMPONENTS
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 Compensation Committee continues to
believe 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 level of responsibility, his performance
relative to the pre-established objectives and the Chief Executive Officer's
evaluation of the officer's performance. As a result of this process, target
bonus levels for individuals may range from 30% to 60% of base salary, with the
weighted average for all officers being 48%.
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 1998, the most important factors in evaluating performance are growth in
funds from operations per share and the subjective assessment of members of the
Committee, each weighted at 34%. The other two factors are the price performance
of shares of the Company's Common Stock measured against the NAREIT office
building universe and total return as measured against the NACREIF office
building universe, both weighted at 16%. The Chief Executive Officer of the
Company participates in the bonus program on the same basis as other officers.
In awarding bonuses for 1998, the Compensation Committee took into account,
among other things, the successful completion of the Wilson
10
<PAGE>
Acquisition, the success of the Company in increasing earnings and funds from
operations, and the making of other new investments, all while keeping staff
size and overhead at efficient levels.
As to long-term compensation, the Compensation Committee recommended, and
the Board of Directors and stockholders of the Company approved, the Incentive
Plan in February 1998. Prior to such time, the Compensation Committee had
approved individual grants of options and restricted stock to certain of the
Company's officers. The Incentive Plan permits the Compensation Committee to
grant a wide array of stock-based awards in order to achieve its objectives of
attracting and retaining officers and key employees and of creating stockholder
value. Such stock-based awards include, without limitation, nonqualified and
incentive stock options, stock appreciation rights, and restricted stock and
performance units. Upon completion of the Wilson Acquisition, the Compensation
Committee granted nonqualified options for an aggregate of 3,000,000 shares of
Common Stock.
In 1998, the Compensation Committee also recommended, and the Board of
Directors also approved, the retention agreements described in this Proxy
Statement for the officers joining the Company as a result of the Wilson
Acquisition. Such agreements are designed to provide security to the Company's
officers in the event of an actual or potential change in control in order to
encourage such officers to remain with the Company and to ensure that they will
not be distracted from the performance of their duties to the detriment of the
Company and its stockholders.
The Compensation Committee believes that, in general, executive
compensation--base salaries plus annual incentive for meeting targets--should be
aimed at the 75th percentile of peer companies as provided by professional
compensation consultants. Company performance does not affect base salaries
appreciably.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Moody's compensation for 1998 consisted of a salary of $350,000, a bonus
of $790,000 and option grants. Under the existing executive bonus program, Mr.
Moody has the opportunity to earn an annual bonus which is based both on Company
and individual performance. Mr. Moody's bonus comes from a target bonus pool in
which his share is based on the level of his responsibility and his performance
relative to the pre-established objectives and the Committee's evaluation of his
performance. In 1998, Mr. Moody earned a bonus payout of $790,000 which included
his 1998 Bonus and 1998 Merger Bonus in connection with the Merger Agreement
with William Wilson and Associates entered into in June 1998.
Mr. Moody will continue to participate in the annual bonus plan as to
short-term compensation and will also participate in the Incentive Plan approved
in February 1998.
COMPLIANCE WITH SECTION 162(M) OF THE CODE
Section 162(m) of the Code generally disallows a tax deduction to public
companies for compensation over $1 million paid to the Chief Executive Officer
and the four other most highly compensated executive officers unless certain
conditions are satisfied. The Company's Incentive Plan is designed to comply
with the requirements of Section 162(m). Accordingly, options, stock
appreciation rights and performance awards granted thereunder should generally
be fully deductible by the Company. The Company does not presently anticipate
that any compensation paid or payable to the Named Officers will exceed the
limit on deductible compensation.
Submitted by the Compensation
Committee
of the Board of Directors.
Mr. H.C. Mautner, Chairman
Dr. K.L. Hermann
Mr. Craig R. Stapleton
Mr. M.J.G. Topham
11
<PAGE>
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
Securities and Exchange Commission rules.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG CORNERSTONE PROPERTIES INC., S&P 500 INDEX AND
THE NAREIT ALL EQUITY INDEX THROUGH DECEMBER 31, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CORNERSTONE COMMON STOCK S&P 500 INDEX NAREITALL EQUITY INDEX
<S> <C> <C> <C>
1993 100 100 100
1994 100 101 103
1995 102 139 119
1996 111 167 161
1997 149 222 193
1998 132 285 160
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------
1993 1994 1995 1996
--------- ----- ----- -----
<S> <C> <C> <C> <C>
Cornerstone Common Stock........................................................ $ 100 100 102 111
S&P 500 Index................................................................... 100 101 139 167
NAREIT All Equity Index......................................................... 100 103 119 161
<CAPTION>
1997 1998
----- -----
<S> <C> <C>
Cornerstone Common Stock........................................................ 149 132
S&P 500 Index................................................................... 222 285
NAREIT All Equity Index......................................................... 193 160
</TABLE>
Assumes $100 invested on December 31, 1993 in Cornerstone Common Stock, S&P 500
Index and NAREIT All Equity Index. Amounts are rounded to the nearest dollar.
- ------------------------
* Total return assumes reinvestment of dividends and distributions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, Messrs. Mautner, Hermann, Stapleton and Topham served as
members of the Compensation Committee. No member of the Compensation Committee
was an officer or employee of the Company or any of its subsidiaries during 1998
or at any time prior thereto. See "Certain Transactions-- Hines Interest Limited
Partnership" and "--Deutsche Bank AG" below.
12
<PAGE>
CERTAIN TRANSACTIONS
WILSON ACQUISITION
On December 16, 1998, the Company completed the acquisition of 69 properties
(the "Wilson Properties") and certain development, construction management,
property management and leasing, and tenant improvement services businesses from
William Wilson & Associates ("WW&A") and related entities (the "Wilson
Acquisition"). In connection with the Wilson Acquisition, the Company and
Cornerstone Properties Limited Partnership (the "Operating Partnership"), paid
an aggregate of approximately $386.6 million in cash and issued an aggregate of
14,884,417 shares of Common Stock and 16,187,724 Units of limited partner
interest in the Operating Partnership ("Units") to the former owners of the
Wilson Properties and WW&A.
The following table shows the amounts of cash, shares of Common Stock and
Units received in connection with the Wilson Acquisition by persons who, upon
completion of the Wilson Acquisition, became executive officers and directors of
the Company and members of their respective immediate families.
<TABLE>
<CAPTION>
NAME CASH SHARES UNITS
- ----------------------------------------------------- ------------- ---------- ----------
<S> <C> <C> <C>
William Wilson III................................... $ 26,881,090 2,493,900 2,200,830
Donald G. Fisher..................................... 11,534,329 -- 668,656
H. Lee Van Boven..................................... 1,610,707 163,869 117,438
R. Matthew Moran..................................... 4,016,014 98,333 600,815
John J. Hamilton III................................. 7,328,211 327,738 950,041
Stephen J. Pilch..................................... 67,497 27,135 11,398
James W. Arce........................................ 276,795 -- 48,138
A. Robert Paratte.................................... 419,985 27,135 47,329
</TABLE>
In addition, in connection with the Wilson Acquisition, the Company repaid
approximately $1.1 million in indebtedness which Mr. Wilson had guaranteed.
PGGM AND DIHC
After receiving stockholder approval on December 14, 1998, the Company
issued 11,594,203 shares of Common Stock to PGGM at $17.25 per share for an
aggregate purchase price of $200,000,000 (the "PGGM Investment"). The proceeds
of the PGGM Investment were used to pay a portion of the cash consideration for
the Wilson Acquisition. As of April 9, 1999, the shares of Common Stock owned by
PGGM constituted approximately 35.7% of the Company's outstanding Common Stock.
See "Security Ownership of Certain Beneficial Owners and Management" below.
WCP SERVICES, INC.
In connection with the Wilson Acquisition, certain third-party services
business of WW&A was acquired by WCP Services, Inc., a Delaware corporation
("WCP Services"). The Operating Partnership owns 100% of the nonvoting common
stock and 1% of the voting common stock of WCP Services. Mr. Wilson and Mr.
Moody each own 49.5% of the voting common stock of WCP Services. To fund the
purchase of such shares of voting common stock, the Operating Partnership loaned
$178,750 to each of Mr. Wilson and Mr. Moody. The notes accrue interest at a
rate equal to 140 basis points plus the one-year London Interbank Offered Rate,
which rate is adjusted annually. The notes are due and payable on or before
December 16, 2008.
13
<PAGE>
HINES INTERESTS LIMITED PARTNERSHIP
Through an affiliate, Hines Interests Limited Partnership ("HILP"), of which
Mr. Topham is an executive vice president, holds 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 HILP was paid
approximately $1,042,000 in 1998. It was also paid approximately $1,304,000 by
this limited partnership for other services rendered during 1998.
HILP has a management agreement for One Norwest Center in Denver, Colorado
which expires December 31, 2005, pursuant to which HILP was paid a management
fee of approximately $617,000 for 1998. HILP was also paid approximately
$131,000 by the Company for other services rendered to this property during
1998.
HILP has a management agreement for 125 Summer Street in Boston with an
initial term expiring December 31, 1999, pursuant to which it was paid a
management fee of approximately $531,000 in 1998. HILP was also paid
approximately $63,000 by the Company for other services rendered to this
property during 1998.
HILP has a management agreement for One Lincoln Centre in Oakbrook Terrace,
Illinois, which is cancelable with 30 days' notice, and was paid a management
fee of approximately $237,000 in 1998 pursuant to this agreement. HILP was also
paid approximately $70,000 by the Company for other services rendered to this
property during 1998.
An affiliate of HILP held an 8.5% interest in the joint venture that owns
Two Twenty Two Berkeley in Boston, Massachusetts. HILP has a management and
leasing agreement with such joint venture with an expiration date of April 13,
2064, pursuant to which HILP was paid approximately $600,000 in 1998. HILP was
also paid approximately $452,000 by the joint venture for other services
rendered to this property during 1998.
An affiliate of HILP held an 8.5% interest in the joint venture that owns
Five Hundred Boylston in Boston, Massachusetts. HILP has a management and
leasing agreement with such joint venture with an expiration date in May 2061,
pursuant to which HILP was paid approximately $915,000 in 1998. HILP was also
paid approximately $551,000 by the joint venture for other services rendered to
this property during 1998.
An affiliate of HILP holds a $12,926,000 note which is convertible into
903,916 shares of Common Stock at $14.30 per share. During 1998, the Company
incurred approximately $790,000 in interest expense on this convertible note.
DEUTSCHE BANK AG
Deutsche Bank and its affiliates hold $50,000,000 of non-voting 7%
Cumulative Preferred Stock of the Company convertible into Common Stock
commencing in the year 2000 at a conversion price of $16.50 per share. During
1998, the Company incurred $3,500,000 of dividends payable on this Cumulative
Preferred Stock. Dr. Mellinger is a Managing Director of Deutsche Bank.
14
<PAGE>
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 issued and
outstanding Common Stock of the Company as of April 9, 1999.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
---------------------------
<S> <C> <C>
NUMBER OF PERCENTAGE
NAME AND ADDRESS SHARES OF CLASS
- -------------------------------------------------------------------- ------------ -------------
PGGM................................................................ 45,779,703 35.7%
P.O. Box 117
3700 AC Zeist
The Netherlands
New York State Teachers' Retirement System.......................... 6,896,550 5.4%
10 Corporate Woods Drive
Albany, NY 12211-2395
</TABLE>
Following are the shares of the Company's Common Stock beneficially owned as
of April 9, 1999 (i) by all directors and nominees, (ii) by each of the Named
Officers, and (iii) 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.
<TABLE>
<CAPTION>
NAME SHARES(1) PERCENT(12)
- --------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Cecil D. Conlee................................................ 4,586,210(2) 3.6%
Blake Eagle.................................................... 10,349(3) *
Donald G. Fisher............................................... 539,196(4) *
Randall A. Hack................................................ 2,520,375(5) 2.0
Dr. Karl-Ludwig Hermann........................................ 10,000(3) *
Hans C. Mautner................................................ 50,924(3) *
Dr. Lutz Mellinger............................................. -- *
John S. Moody.................................................. 670,639(6) *
Craig R. Stapleton............................................. 116,900(7) *
Michael J.G. Topham............................................ 10,349(3) *
Dick van den Bos............................................... -- *
Jan van der Vlist.............................................. -- *
William Wilson III............................................. 3,565,707(8) 2.8
Scott M. Dalrymple............................................. 166,000(9) *
Rodney C. Dimock............................................... 320,019 10) *
Kevin P. Mahoney............................................... 176,000 11) *
Thomas A. Nye.................................................. 166,000(9) *
All directors and executive officers as a group
(24 persons)................................................. 17,336,399 13.2
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes the number of shares of Common Stock into which Units beneficially
owned by the persons are redeemable (if the Company elects to issue shares
rather than pay cash upon such redemption). Units are redeemable for shares
or cash, at the option of the Company. All of the Units beneficially owned
by the persons listed below were issued in connection with the Wilson
Acquisition. The Units generally are redeemable beginning on December 16,
1999 or upon an earlier "change in control" of the Company. "Change in
control" means an event in which either: (i) any person becomes the owner of
25% or more of Cornerstone's voting securities; (ii) directors who
constitute the Cornerstone
15
<PAGE>
Board at the beginning of any two-year period, and any new directors whose
election or nomination for election was approved by a vote of at least three
quarters of the directors then in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved, cease to constitute a majority; (iii) a merger,
consolidation or reorganization in which Cornerstone's voting securities do
not continue to represent at least 50% of the surviving entity; or (iv) a
reorganization, liquidation, or sale of all or substantially all of
Cornerstone's assets.
(2) Shares held by HRE Finance, Inc. Mr. Conlee serves as a director of Hexalon
Real Estate, the sole shareholder of HRE Finance, Inc., and shares voting
and dispositive power for such shares.
(3) Includes 10,000 shares subject to options currently exercisable.
(4) Includes 226,146 shares (assuming redemption of 226,146 Units) owned jointly
with Mr. Fisher's spouse and 313,050 shares (assuming redemption of 313,050
Units) deemed beneficially owned by Mr. Fisher as a result of his control of
DDRWJ Investment Company.
(5) Includes 1,538,597 shares owned by Nassau Capital Funds, L.P. and 981,778
shares owned by Nassau Capital Real Estate Partners, L.P. which may be
deemed to be beneficially owned by Mr. Hack solely as a result of his
position as a member of Nassau Capital L.L.C., the sole general partner of
such limited partnerships. Mr. Hack disclaims beneficial ownership of such
shares.
(6) Includes 566,666 shares subject to options currently exercisable.
(7) Includes 29,000 shares held by Mr. Stapleton's spouse and 17,000 shares held
by Mr. Stapleton as trustee.
(8) Includes (i) 155,568 shares (assuming redemption of 22,845 Units) held by
Mr. Wilson as trustee for three trusts for the benefit of his children, (ii)
2,815,332 shares (assuming redemption of 602,697 Units) owned directly by
Mr. Wilson, (iii) 294,630 shares (assuming redemption of 294,630 Units)
deemed beneficially owned by Mr. Wilson as a result of his control of Wilson
Investment Associates, Ltd., and (iv) 225,906 shares (assuming redemption of
225,906 Units) beneficially owned by Mr. Wilson through a family
partnership. Does not include 3,191,771 shares (assuming redemption of
3,191,771 Units) which may be deemed beneficially owned by Mr. Wilson as a
result of his control of five entities and of which Mr. Wilson may be deemed
to share voting and dispositive power with other executive officers of the
Company.
(9) Includes 142,000 shares subject to options currently exercisable.
(10) Includes 279,499 shares subject to options currently exercisable.
(11) Includes 152,000 shares subject to options currently exercisable.
(12) Based on 128,210,784 shares issued and outstanding as of April 9, 1999.
Assumes that all options exercisable within 60 days that are beneficially
owned by the person are exercised and all Units beneficially owned by the
person are redeemed for shares of Common Stock. The total number of shares
used in calculating this percentage assumes that none of the options
beneficially owned by other persons are exercised and none of the Units
beneficially owned by other persons are redeemed for shares of Common Stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than ten
percent of the Company's Common Stock, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission (the
"SEC") and the New York Stock Exchange. Executive officers, directors and
greater than ten percent beneficial owners are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
16
<PAGE>
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company or written representations from the Company's
executive officers, directors and greater than ten percent beneficial owners,
all applicable filing requirements of the Company's executive officers and
directors were complied with in 1998, except that each of the individuals who
became executive officers or directors upon the completion of the Wilson
Acquisition, Messrs. Wilson, Fisher, Hack, Van Boven, Hamilton, Moran, Pilch,
Paratte and Arce, were late in filing their Form 3s. In addition, Mr. Moran was
late in filing a Form 4 to report a purchase of shares of Common Stock.
SELECTION OF AUDITORS
(ITEM 2 ON PROXY CARD)
The Audit Committee has recommended and the Board of Directors has selected
PricewaterhouseCoopers LLP as independent auditors for the Company for the
fiscal year ending December 31, 1999. PricewaterhouseCoopers LLP has audited the
accounts of the Company for the fiscal year 1998. This selection is being
presented to the stockholders for ratification, although the Board of Directors
may terminate the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors without the approval of the stockholders of the Company.
The Company has been advised that the representatives of PricewaterhouseCoopers
LLP 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 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 December 28, 1999 in order
to be included in the Company's proxy materials for the 2000 Annual Meeting of
Stockholders. Any stockholder proposals intended to be presented from the floor
at the 2000 Annual Meeting of Stockholders must be received by the Company on or
before March 7, 2000 or the persons appointed as proxies may exercise their
discretionary voting authority with respect to such stockholder proposal.
The Company's Annual Report to Stockholders for the year ended December 31,
1998, including audited financial statements, accompanies this Proxy Statement.
The Annual Report does not form any part of the material for the solicitation of
proxies.
Upon written request to Cornerstone Properties Inc., 126 East 56th Street,
New York, New York 10022, Attention: Thomas P. Loftus, Secretary, any
stockholder may obtain a copy of the Company's Annual Report on Form 10-K filed
with the SEC for the year ended December 31, 1998.
17
<PAGE>
CORNERSTONE PROPERTIES INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 25, 1999
The undersigned stockholder of Cornerstone Properties Inc., hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement with respect to the Annual Meeting of Stockholders of Cornerstone
Properties Inc. to be held at the Four Seasons Hotel New York, 57 East 57th
Street, New York, New York 10022 on Tuesday, May 25, 1999, at 10:00 a.m. (local
time), and hereby appoints Kevin P. Mahoney and Thomas P. Loftus, and each of
them, proxies and attorneys-in-fact, each with power of substitution and
revocation, and each with all powers that the undersigned would possess if
personally present, to vote the Cornerstone Properties Inc. Common Stock of the
undersigned at such meeting and any postponements or adjournments of such
meeting, as set forth below, and in their discretion upon any other business
that may properly come before the meeting (and any such postponements or
adjournments).
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, FOR THE
ELECTION OF THE NOMINEES, FOR PROPOSAL 2 AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY POSTPONEMENTS
OR ADJOURNMENTS THEREOF.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
/X/ Please mark votes as in this example
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS INDICATED, THE
PROXY WILL BE VOTED FOR THE FOLLOWING PROPOSALS.
1. To elect fourteen (14) directors:
NOMINEES: Cecil D. Conlee, Rodney C. Dimock, Blake Eagle, Donald G. Fisher,
Randall A. Hack, Dr. Karl-Ludwig Hermann, Hans C. Mautner, Dr. Lutz
Mellinger, John S. Moody, Craig R. Stapleton, Michael J.G. Topham, Dick van
den Bos, Jan van der Vlist, William Wilson III
/ / FOR all nominees / / WITHHOLD AUTHORITY to vote for all nominees
/ / _________________________________________________
FOR ALL NOMINEES EXCEPT AS LISTED ABOVE
2. To ratify the appointment of PricewaterhouseCoopers LLP as independent
public accountants of the Company for fiscal year 1999.
/ / FOR / / AGAINST / / ABSTAIN
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING ON MAY 25, 1999.
IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
MARK HERE FOR ADDRESS CHANGE AND
NOTE BELOW / /
Please sign exactly as your name or
names appear hereon. For more than
one owner as shown above, each
should sign. When signing in a
fiduciary or representative
capacity, please give full title.
If this proxy is submitted by a
corporation, it should be executed
in the full corporate name by a
duly authorized officer, if a
partnership, please sign in
partnership name by authorized
person.
Signature: __________ Date: __________ Signature: _________ Date: _________
