PARKWAY PROPERTIES INC, DEF 14A, 1999-04-28

PARKWAY PROPERTIES INC
DEF 14A, 1999-04-28
OPERATORS OF NONRESIDENTIAL BUILDINGS

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SCHEDULE 14A
(RULE 14a)
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 [ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>

PARKWAY PROPERTIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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: ...........................................................

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<PAGE> 2

PARKWAY PROPERTIES, INC.
ONE JACKSON PLACE
SUITE 1000
188 EAST CAPITOL STREET
JACKSON, MISSISSIPPI 39201-2195

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1999

To the Stockholders:

Notice is hereby given that the 1999 Annual Meeting of Stockholders (the
"Meeting"), of Parkway Properties, Inc. (the "Company"), will be held at the 111
Capitol Building, 111 East Capitol Street, Jackson, Mississippi, at 1:30 p.m.,
Jackson time, on June 3, 1999 for the following purposes:

1. To elect nine directors to serve until the next Annual Meeting of
Stockholders and until their successors are elected and qualified; and

2. To consider and take action on amendments to the 1994 Stock Option Plan,
as amended; and

3. To consider and take action upon such other matters as may properly come
before the Meeting or any adjournment thereof.

Only stockholders of record at the close of business on April 15, 1999 are
entitled to notice of and to vote at the Meeting or any adjournment thereof.

BY ORDER OF THE BOARD OF DIRECTORS

SARAH P. CLARK
Senior Vice President, Chief Financial
Officer
and Secretary

Dated: April 30, 1999

STOCKHOLDERS ARE URGED TO VOTE BY SIGNING, DATING AND RETURNING THE ENCLOSED
PROXY IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES
<PAGE> 3

April 30, 1999

PARKWAY PROPERTIES, INC.
ONE JACKSON PLACE
SUITE 1000
188 EAST CAPITOL STREET
JACKSON, MISSISSIPPI 39201-2195
------------------------

PROXY STATEMENT
FOR

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 1999

The following information is furnished in connection with the Annual
Meeting of Stockholders (the "Meeting"), of Parkway Properties, Inc. (the
"Company"), to be held on June 3, 1999 at 1:30 p.m., Jackson time, at the 111
Capitol Building, 111 East Capitol Street, Jackson, Mississippi. A copy of the
Company's Annual Report to Stockholders for the fiscal period ended December 31,
1998 accompanies this Proxy Statement. Additional copies of the Annual Report,
Notice, Proxy Statement and Form of Proxy may be obtained from the Company's
Secretary, P.O. Box 24647, Jackson, Mississippi 39225-4647. This Proxy
Statement, Annual Report, and Form of Proxy will first be sent to stockholders
on or about April 30, 1999.

SOLICITATION AND REVOCABILITY OF PROXIES

The enclosed proxy for the Meeting is being solicited by the directors of
the Company. The proxy may be revoked by a stockholder at any time prior to the
exercise thereof by filing with the Secretary of the Company a written
revocation or duly executed proxy bearing a later date. The proxy may also be
revoked by a stockholder attending the Meeting, withdrawing such proxy and
voting in person. The cost of soliciting the proxies on the enclosed form will
be paid by the Company. In addition to the use of the mails, proxies may be
solicited by the directors and their agents (who will receive no additional
compensation therefor) by means of personal interview, telephone or facsimile,
and it is anticipated that banks, brokerage houses and other institutions,
nominees or fiduciaries will be requested to forward the soliciting material to
their principals and to obtain authorization for the execution of proxies. The
Company may, upon request, reimburse banks, brokerage houses and other
institutions, nominees and fiduciaries for their expenses in forwarding proxy
material to their principals. The Company has retained Beacon Hill Partners,
Inc. ("Beacon Hill") to assist with the solicitation of proxies and will pay
Beacon Hill a fee of $2,500 (subject to increase for additional services such as
telephone solicitation) plus reimbursement for out-of-pocket expenses for its
services.

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

The record date for determining shares of common stock, par value $0.001
per share, of the Company ("Common Stock"), entitled to vote at the Meeting has
been fixed at the close of business on April 15, 1999. On such date there were
9,986,829 shares of Common Stock outstanding, entitled to one vote each.
<PAGE> 4

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

To the best of the Company's knowledge, no person or group (as those terms
are used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), beneficially owned, as of April 1, 1999 more than five
percent of the Common Stock outstanding, except as set forth in the following
table.

<TABLE>
<CAPTION>
PERCENT
AMOUNT OF
NAME AND ADDRESS BENEFICIALLY COMMON
OF BENEFICIAL OWNER OWNED STOCK (1)
------------------- ------------ ---------
<S> <C> <C>
Perkins, Wolf, McDonnell & Company
53 W. Jackson Boulevard, Suite 722
Chicago, Illinois 60604................................... 676,800(2) 6.7%
T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, Maryland 21202................................. 548,400(3) 5.4
</TABLE>

- ---------------

(1) Based on the number of shares of Common Stock outstanding on April 1, 1999
which was 10,088,445 shares.

(2) Based upon a Statement on Schedule 13G filed with the Securities and
Exchange Commission (the "SEC"), which indicated that Perkins, Wolf,
McDonnell & Company had shared voting and dispositive power with respect to
such shares.

(3) Based upon a Statement on Schedule 13G filed with the SEC, which indicated
that T. Rowe Price Associates, Inc. had sole voting power with respect to
95,900 shares of Common Stock and sole dispositive power with respect to
548,400 shares of Common Stock.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth the shares of Common Stock beneficially
owned, as of April 1, 1999, by each director, nominee for director and executive
officer of the Company. Unless otherwise stated, each person has sole voting and
investment power with respect to the shares of Common Stock set forth in the
table.

<TABLE>
<CAPTION>
PERCENT
AMOUNT OF COMMON
NAME BENEFICIALLY OWNED STOCK (1)
---- ------------------ ---------
<S> <C> <C>
Daniel C. Arnold......................................... 41,902(2) *
Roger P. Friou........................................... 32,751(3) *
Martin L. Garcia......................................... 12,100(4) *
Michael J. Lipsey........................................ 11,100(5) *
Joe F. Lynch............................................. 68,217(6) *
C. Herbert Magruder...................................... 68,914(7) *
W. Lincoln Mossop, Jr.................................... 41,950(8) *
Leland R. Speed.......................................... 186,059(9) 1.8%
Steven G. Rogers......................................... 127,691(10) 1.3
Sarah P. Clark........................................... 28,884(11) *
</TABLE>

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<PAGE> 5

<TABLE>
<CAPTION>
PERCENT
AMOUNT OF COMMON
NAME BENEFICIALLY OWNED STOCK (1)
---- ------------------ ---------
<S> <C> <C>
David R. Fowler.......................................... 14,417(12) *
James M. Ingram.......................................... 18,575(13) *
G. Mitchel Mattingly..................................... 24,436(14) *
Regina P. Shows.......................................... 7,500(15) *
Directors, nominees and executive officers as a group.... 684,496(16) 6.6
</TABLE>

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* Less than 1%.

(1) Based on the number of shares of Common Stock outstanding on April 1, 1999
which was 10,088,445 shares.

(2) Includes 20,250 shares of Common Stock Mr. Arnold has the right to acquire
under the 1991 Directors Stock Option Plan, as amended (the "Directors
Plan").

(3) Includes 3,000 shares of Common Stock Mr. Friou has the right to acquire
under the 1991 Directors Plan.

(4) Includes (i) 7,500 shares of Common Stock Mr. Garcia has the right to
acquire under the 1991 Directors Plan; (ii) 1,000 shares of Common Stock
held in trust for Mr. Garcia's children, of which Mr. Garcia is the
trustee; and (iii) 1,300 shares of Common Stock held by Garcia Enterprises,
a company of which Mr. Garcia is President and a shareholder.

(5) Includes 10,500 shares of Common Stock Mr. Lipsey has the right to acquire
under the Directors Plan.

(6) Includes 20,250 shares of Common Stock Mr. Lynch has the right to acquire
under the 1991 Directors Plan. Mr. Lynch also owns 2,300 shares of 8.75%
Series A Cumulative Preferred Stock, par value $0.001 per share, of the
Company ("Series A Preferred Stock"), that do not have voting rights at the
Meeting.

(7) Includes 20,250 shares of Common Stock Dr. Magruder has the right to
acquire under the 1991 Directors Plan. Does not include 450 shares of
Common Stock beneficially owned by Dr. Magruder's wife, as to which he
disclaims beneficial ownership. Dr. Magruder also owns 8,000 shares of
Series A Preferred Stock that do not have voting rights at the Meeting.

(8) Includes 20,250 shares of Common Stock Mr. Mossop has the right to acquire
under the 1991 Directors Plan.

(9) Includes 35,747 shares of Common Stock Mr. Speed has the right to acquire
pursuant to exercisable options granted under the 1994 Stock Option Plan.
Does not include 21,157 shares of Common Stock owned by Mr. Speed's wife,
as to all of which Mr. Speed disclaims beneficial ownership.

(10) Includes 42,789 shares of Common Stock Mr. Rogers has the right to acquire
pursuant to exercisable options granted under the 1994 Stock Option Plan.
Does not include 12,040 shares of Common Stock beneficially owned by Mr.
Rogers' wife as to which he disclaims beneficial ownership.

(11) Includes 15,584 shares of Common Stock Ms. Clark has the right to acquire
pursuant to exercisable options granted under the 1994 Stock Option Plan
and 500 shares of Common Stock Ms. Clark owns as custodian for her
children.

(12) Includes 6,175 shares of Common Stock Mr. Fowler has the right to acquire
pursuant to exercisable options granted under the 1994 Stock Option Plan.

3
<PAGE> 6

(13) Includes 12,575 shares of Common Stock Mr. Ingram has the right to acquire
pursuant to exercisable options granted under the 1994 Stock Option Plan.

(14) Includes 2,750 shares of Common Stock Mr. Mattingly has the right to
acquire pursuant to exercisable options granted under the 1994 Stock Option
Plan.

(15) Includes 2,500 shares of Common Stock Ms. Shows has the right to acquire
pursuant to exercisable options granted under the 1994 Stock Option Plan.

(16) Includes 102,000 shares of Common Stock that the directors of the Company
have the right to acquire under the 1991 Directors Plan and 118,120 shares
of Common Stock that officers of the Company have the right to acquire
pursuant to exercisable options granted under the Company's 1994 Stock
Option Plan.

PROPOSAL NO. 1
ELECTION OF DIRECTORS

NOMINEES

In accordance with the Bylaws of the Company, the Board of Directors has by
resolution fixed the number of directors to be elected at the Meeting at nine.
All nine positions on the Board are to be filled by the vote of the stockholders
at the Meeting. Each person so elected shall serve until the next Annual Meeting
of Stockholders and until his successor is elected and qualified.

The directors of the Company recommend a vote FOR the nominees listed
below. All nominees are currently serving as directors of the Company and were
elected at the 1998 Annual Meeting of Stockholders.

Unless instructed otherwise, proxies will be voted FOR the nominees listed
below. Although the directors do not contemplate that any of the nominees will
be unable to serve prior to the Meeting, if such a situation arises, the
enclosed proxy will be voted in accordance with the best judgment of the person
or persons voting the proxy.

The table below sets forth certain information regarding the nominees for
election to the Company's Board of Directors.

4
<PAGE> 7

<TABLE>
<CAPTION>
NAME, POSITION AND PRINCIPAL OCCUPATION AND BUSINESS
TENURE WITH THE COMPANY AGE EXPERIENCE FOR PAST FIVE YEARS (1)
----------------------- --- ----------------------------------
<S> <C> <C>
Joe F. Lynch...................... 66 Chairman of the Board and Chief Executive Officer of
Director since 1994 First Continental Corporation (a real estate company)
since 1994; Limited Partner and Manager of the
General Partner of First Continental Investment Co.,
Ltd. since 1996; Chairman of the Board and Chief
Executive Officer of First Continental Real Estate
Investment Trust from 1989 to 1994; Vice Chairman of
the Board of Farm & Home Financial Corporation and of
Farm & Home Savings Association from 1991 to 1994.
C. Herbert Magruder............... 66 Private investor since 1998; Physician and a partner
Director since 1988 in the medical firm of Carolina Pathology Associates
until 1998.
W. Lincoln Mossop, Jr............. 65 General Partner, President and Chief Executive
Director since 1986 Officer of Barrett & Co. (securities brokers and
dealers and a member firm of the Boston Stock
Exchange, Inc.)
Steven G. Rogers.................. 44 Chief Executive Officer of the Company since 1997,
Director since 1996; President President since 1993, Director since 1996, Chief
since 1993; Chief Executive Operating Officer from 1993 until 1997, and Senior
Officer since 1997 Vice President of the Company from 1988 to 1993;
Senior Vice President of LNH REIT, Inc. ("LNH") from
1992 to 1996; Senior Vice President of Congress
Street Properties, Inc. ("Congress Street"), Eastover
Corporation ("Eastover"), EastGroup Properties, Inc.
("EastGroup") and Rockwood National Corporation
("Rockwood") until 1994 and EB, Inc. ("EB") until
1995.
Leland R. Speed................... 66 Chairman of the Board of the Company and EastGroup;
Director since 1978 and Chairman Chief Executive Officer of the Company and EastGroup
since 1980 until 1997; Chief Executive Officer of LNH from 1992
to 1996; Chief Executive Officer of Congress Street,
Eastover and Rockwood until 1994 and EB until 1995.
</TABLE>

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(1) Unless otherwise stated, each nominee has held the position indicated for at
least the past five years.

OTHER DIRECTORSHIPS AND TRUSTEESHIPS

Members of, and nominees to, the Board of Directors serve on the Boards of
Directors or the Boards of Trustees of the following publicly held companies:

<TABLE>
<CAPTION>
NOMINEE COMPANY
------- -------
<S> <C>
Daniel C. Arnold................... U.S. Physical Therapy, Inc.
Belco Oil & Gas Corp.
Roger P. Friou..................... Jitney Jungle Stores of America, Inc.
Leland R. Speed.................... ChemFirst Inc.
EastGroup Properties, Inc.
Farm Fish, Inc.
KLLM Transport Services, Inc.
</TABLE>

5
<PAGE> 8

COMMITTEES AND MEETING DATA

The Audit Committee of the Board of Directors currently consists of Messrs.
Garcia, Lynch and Mossop. The functions performed by this committee consist
principally of conferring with and reviewing the reports of the Company's
independent accountants and bringing to the entire Board of Directors for review
those items relating to audits or accounting practices which the Audit Committee
believes merit such review. The Audit Committee met twice during the year ended
December 31, 1998.

The Compensation Committee of the Board, which currently consists of
Messrs. Arnold, Friou and Magruder, met twice during the year ended December 31,
1998. The committee's function is to review compensation levels for officers and
recommend compensation levels for officers and administer the 1994 Stock Option
Plan.

The Investment Committee of the Board currently consists of Messrs. Lipsey,
Lynch and Magruder. Its function is to act on behalf of the full Board of
Directors to authorize property purchases between regularly scheduled quarterly
Board of Directors meetings. The Investment Committee met twice during the year
ended December 31, 1998.

The Company does not have a standing nominating committee or any committee
performing a similar function.

During the year ended December 31, 1998, the full Board of Directors met on
six occasions. Each director attended at least 75% of the aggregate of the total
number of meetings of the Board and meetings held by all committees of the Board
on which he served.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires that directors, officers and
more than 10 percent stockholders of the Company file reports with the SEC
within the first 10 days of the month following any purchase or sale of shares
of Common Stock. During 1998, no officer or director of the Company was late in
filing a report under Section 16(a).

EXECUTIVE OFFICERS

The following is a list of the Company's executive officers:

<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION AND BUSINESS
WITH THE COMPANY AGE EXPERIENCE FOR PAST FIVE YEARS (1)
----------------- --- ----------------------------------
<S> <C> <C>
Leland R. Speed................... 66 See table under "Nominees."
Chairman
Steven G. Rogers.................. 44 See table under "Nominees."
President and
Chief Executive Officer
</TABLE>

6
<PAGE> 9

<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION AND BUSINESS
WITH THE COMPANY AGE EXPERIENCE FOR PAST FIVE YEARS (1)
----------------- --- ----------------------------------
<S> <C> <C>
Sarah P. Clark.................... 39 Senior Vice President of the Company since 1997, Vice
Senior Vice President, Chief President since 1992, Chief Financial Officer and
Financial Officer and Secretary Secretary of the Company since 1994, Treasurer from
1996 to 1999 and Controller from 1986 to 1992; Vice
President and Assistant Secretary of Congress Street,
Eastover, EastGroup and Rockwood from 1992 to 1994
and of EB from 1992 to 1995; Vice President of LNH
from 1992 to 1996.
David R. Fowler................... 41 Senior Vice President of the Company since 1997, Vice
Senior Vice President President from 1996 to 1997 and an Asset Manager
since 1983; Vice President of Parkway Realty
Services, LLC ("Parkway Realty") since 1998;
Executive Vice President of EB from 1995 to 1996.
James M. Ingram................... 42 Senior Vice President of the Company since 1997, Vice
Senior Vice President President from 1994 to 1997 and an Asset Manager
since 1989; President of Parkway Realty since 1998.
G. Mitchel Mattingly.............. 43 Senior Vice President of the Company since 1997 and
Senior Vice President Vice President from 1996 to 1997; President of
Parkway Texas Corporation from 1994 to 1997; Vice
President of Parkway Realty since 1998; President of
First Continental Real Estate Investment Trust from
1990 to 1994.
Regina P. Shows................... 32 Senior Vice President and Treasurer of the Company
Senior Vice President and since 1999, Vice President from 1998 to 1999 and
Treasurer Controller from 1992 to 1999.
</TABLE>

- ---------------

(1) Unless otherwise stated, the indicated person has held the position
indicated for at least the past five years.

Ms. Clark, Senior Vice President, Chief Financial Officer and Secretary of
the Company, is the sister of Ms. Shows, Senior Vice President and Treasurer of
the Company. There are no other family relationships between any of the
directors or executive officers of the Company.

EXECUTIVE COMPENSATION

The following table summarizes, for the fiscal years ended December 31,
1998, 1997 and 1996, the amount of compensation paid by the Company to its Chief
Executive Officer and all other executive officers

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<PAGE> 10

whose cash compensation during the year ended December 31, 1998 exceeded
$100,000 (the "Named Officers").

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
--------------------
ANNUAL COMPENSATION SECURITIES
---------------------------------- UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION SARS (2) PAYOUTS COMPENSATION (3)
------------------ ---- ------ ----- ------------ ---------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Leland R. Speed.............. 1998 $141,077 $84,000 -- 15,000 $0 $15,792
Chairman 1997 140,000 84,000 -- 8,000 0 18,570
1996 130,000(1) 78,000 -- 10,943 0 9,082
Steven G. Rogers............. 1998 196,500 195,000 -- 37,000 0 13,714
President and Chief 1997 152,250 152,250 -- 8,000 0 14,464
Executive Officer 1996 145,000 145,000 -- 8,208 0 13,564
Sarah P. Clark............... 1998 115,885 80,500 -- 28,000 0 13,367
Senior Vice President, 1997 99,000 49,500 -- 8,000 0 13,526
Chief Financial Officer 1996 90,600 45,000 -- 6,840 0 12,282
and Secretary
David R. Fowler.............. 1998 105,808 45,000 -- 13,000 0 34,793(4)
Senior Vice President 1997 73,185 27,128 -- 4,000 0 20,396(5)
1996 57,828 15,000 -- 1,500 0 25,902(6)
James M. Ingram.............. 1998 105,808 45,000 -- 13,000 0 47,769(7)
Senior Vice President 1997 73,185 22,500 -- 4,000 0 57,216(8)
1996 57,874 10,000 -- 1,500 0 124,235(9)
G. Mitchel Mattingly......... 1998 122,485 45,000 -- 13,000 0 13,153
Senior Vice President 1997 115,762 27,720 -- 4,000 0 12,852
1996 110,250 10,000 -- 1,500 0 12,426
</TABLE>

- ---------------

(1) For 1996, Mr. Speed's salary was paid one-half by the Company and one-half
by EastGroup, of which he was also Chief Executive Officer until September
1997. For 1996, this amount is the Company's share of Mr. Speed's
compensation.

(2) The options granted in 1996 were granted on July 1, 1996, the options
granted in 1997 were granted on July 1, 1997, and the options granted in
1998 were granted on June 5, 1998, all under the Company's 1994 Stock Option
Plan. The options granted in 1996 and 1997 vest one-half on the first
anniversary date of grant and one-half on the second anniversary date of
grant. One-third of the options granted in 1998 vest on the second
anniversary of the date of grant, one-third on the third anniversary of the
date of grant and one-third on the fourth anniversary of the date of grant.

(3) This is the Company's contribution to its 401(k) Plan for the Named
Officer's benefit and the amount of premium paid by the Company for group
term life insurance on the Named Officer's life.

(4) For 1998, includes $21,563 Mr. Fowler earned in commissions.

(5) For 1997, includes $2,106 paid pursuant to Mr. Fowler's agreement with
Parkway Realty and $6,008 Mr. Fowler earned in commissions.

(6) For 1996, includes $3,978 paid pursuant to Mr. Fowler's agreement with
Parkway Realty and $12,309 Mr. Fowler earned in commissions.

8
<PAGE> 11

(7) For 1998, includes $27,802 paid pursuant to Mr. Ingram's agreement with
Parkway Realty and $6,270 Mr. Ingram earned in commissions.

(8) For 1997, includes $6,317 paid pursuant to Mr. Ingram's agreement with
Parkway Realty and $37,905 Mr. Ingram earned in commissions.

(9) For 1996, includes $11,933 paid pursuant to Mr. Ingram's agreement with
Parkway Realty and $98,644 Mr. Ingram earned in commissions.

Option Grants. The following table gives information with respect to
options granted to the Named Officers during the year ended December 31, 1998.
The "Potential Realizable Value" columns assume that the price of the shares of
Common Stock will appreciate at annual rates of 5% and 10%, respectively, during
the term of the options. There can be no assurance that such appreciation will
take place.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- ------------------------------------------------------------------------------------------ ---------------------------
(a) (b) (c) (d) (e) (f) (g)
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SARS EXERCISE
SARS GRANTED TO OR BASE
GRANTED EMPLOYEES PRICE EXPIRATION
NAME (#)(1) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- -------------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leland R. Speed...................... 15,000 4.06% $31.125 6/4/08 $294,131 $ 742,331
Steven G. Rogers..................... 37,000 10.01 31.125 6/4/08 725,524 1,831,084
Sarah P. Clark....................... 28,000 7.57 31.125 6/4/08 549,045 1,385,685
David R. Fowler...................... 13,000 3.52 31.125 6/4/08 254,914 643,354
James M. Ingram...................... 13,000 3.52 31.125 6/4/08 254,914 643,354
G. Mitchel Mattingly................. 13,000 3.52 31.125 6/4/08 254,914 643,354
</TABLE>

- ---------------

(1) These options were granted on June 5, 1998. They become exercisable
one-third on the second anniversary of the date of grant, one-third on the
third anniversary of the date of grant and one-third on the fourth
anniversary of the date of grant.

Option Exercises and Year End Values. The following table shows the value
realized by the Named Officers upon the exercise of options and the year end
value of unexercised in-the-money options held by the Named Officers. Year end
values are based upon the closing price of shares of Common Stock on the New
York Stock Exchange, Inc., on December 31, 1998 ($31.25).

9
<PAGE> 12

AGGREGATED OPTIONS/SAR EXERCISES WITH LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
ACQUIRED VALUE --------------------- ------------------------
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Leland R. Speed............. 0 N/A 35,747/19,000 $551,987/$20,375
Chairman
Steven G. Rogers............ 10,418 $221,009 42,789/41,000 $689,412/$23,125
President and Chief
Executive Officer
Sarah P. Clark.............. 0 N/A 16,584/32,000 $201,005/$22,000
Senior Vice President,
Chief Financial Officer
and Secretary
David R. Fowler............. 750 $ 16,406 7,175/15,000 $105,807/$10,875
Senior Vice President
James M. Ingram............. 0 N/A 12,575/15,000 $220,280/$10,875
Senior Vice President
G. Mitchel Mattingly........ 0 N/A 2,750/15,000 $ 20,875/$10,875
Senior Vice President
</TABLE>

Compensation Committee Report. The Compensation Committee of the Board of
Directors consists of Messrs. Arnold and Friou and Dr. Magruder. The
Compensation Committee believes that the main purpose of base compensation is to
provide sufficient base compensation to the executive officers of the Company in
relation to salary levels for other real estate companies and the officer's
level of responsibility. The Compensation Committee considered a number of
factors in setting the compensation of Mr. Rogers, the Company's Chief Executive
Officer, the most important of which were the level of compensation paid to the
chief executive officers of other real estate companies the same relative size
as the Company, the success of the Company's program of increasing its market
capitalization and acquiring office properties and his importance in delineating
and implementing the Company's strategic plans. In setting the base compensation
of Mr. Speed for 1998, the Compensation Committee took account of the fact that
Mr. Speed was also a salaried officer of EastGroup, another real estate
investment trust.

The Compensation Committee has determined that the primary goals of the
Company's compensation policies should be as follows:

- To provide total compensation opportunities for executive officers
which are competitive with those provided to persons in similar
positions with which the Company competes for employees.

- To strengthen the mutuality of interest between management and
stockholders through the use of incentive compensation directly
related to corporate performance and through the use of stock-based
incentives that result in increased Common Stock ownership by
executive officers.

The Compensation Committee believes that incentive compensation payable to
the executive officers of the Company should be based upon the Company's
performance and align the interests of management and the Company's
stockholders. In 1998, the Compensation Committee, in conjunction with an
independent

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<PAGE> 13

compensation consultant, formulated targets for funds from operations per share
("FFO"), upon which the executive officers' incentive compensation would be
based. In 1998, the targets were FFO of $2.93 per basic share of Common Stock
before accrual for bonuses for the executive officers to earn the target bonus
set forth below (an 18.2% increase over 1997 FFO of $2.48 per basic share) and
FFO of $3.09 per basic share of Common Stock before accrual for bonuses for the
executive officers to earn a bonus of two times the target bonus amount (a 24.6%
increase over 1997 FFO of $2.48 per basic share). The target bonus amounts were
30% of total base salary for Mr. Speed, 50% of base salary for Mr. Rogers and
35% of base salary for Ms. Clark. The Compensation Committee determined the FFO
targets with the advice of an independent compensation consultant based upon an
analysis of the Company's internal projected financial results for 1998 and the
estimates of 1998 FFO prepared by independent securities analysts who followed
the Company. The Compensation Committee believed that the stockholders of the
Company would be benefitted significantly if the FFO goal were met and would be
further benefitted if such goal were exceeded, and that management should be
compensated for the benefits derived by the Company's stockholders.

The bonus targets for the Company's other executive officers (Messrs.
Fowler, Ingram and Mattingly) were based upon two factors -- FFO and the
performance of the properties managed by each individual relative to budget. The
FFO targets were the same as those set forth above, and the target bonus to be
paid to each of these officers was $15,000 if the FFO target of $2.93 was
achieved and $30,000 if the FFO target of $3.09 was achieved. Each was also
entitled to an additional target bonus of $15,000 if the financial performance
of the buildings managed by the individuals met budget. The financial
performance of the properties managed by each of these officers at least met
budget.

The Company's 1998 FFO per basic share of Common Stock was $3.11 before
taking account of bonus accruals. After consideration, the Compensation
Committee believed that each of the Company's executive officers should be paid
the amount of incentive compensation provided by the above formula, under which
Messrs. Speed, Rogers, Fowler, Ingram and Mattingly and Ms. Clark received
bonuses with respect to 1998 of $84,000, $195,000, $45,000, $45,000, $45,000 and
$80,500, respectively.

The Compensation Committee also believes that stock based incentive
compensation in the form of stock options helps to align the interest of the
Company and its stockholders. During 1998, the Compensation Committee granted
options to the Named Officers as set forth under "-- Option Grants." In
determining the number of options to be granted, the Compensation Committee took
into account the executive's current salary, the amount of stock-based
compensation previously granted to the executive, the executive's duties and
performance, and competitive industry practices.

The Compensation Committee has also approved a new incentive compensation
plan to compensate the Company's officers if the Company attains certain
increases in FFO per basic share by the end of 2002. See "Proposal No. 2
Amendments to 1994 Stock Option Plan, as Amended."

DANIEL C. ARNOLD
ROGER P. FRIOU
C. HERBERT MAGRUDER

This Compensation Committee Report shall not be deemed incorporated by
reference by any general statement incorporating by reference this document or
any portion thereof into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, and shall not
otherwise be deemed filed under such acts.

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<PAGE> 14

Performance Comparison. Set forth below is a line graph comparing the
percentage change in the cumulative return to stockholders on shares of Common
Stock over the five years ending December 31, 1998 against the cumulative return
of the Standard & Poor's 500 ("S&P 500"), and the Equity REIT Index prepared by
the National Association of Real Estate Investment Trusts ("NAREIT Equity").

<TABLE>
<CAPTION>
THE COMPANY S&P 500 NAREIT EPUITY
----------- ------- -------------
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 109.39 101.31 103.17
1995 167.21 139.23 118.92
1996 351.77 171.19 160.86
1997 483.20 228.32 193.45
1998 463.29 293.57 159.59
</TABLE>

Directors' Fees. Under the Company's standard compensation arrangement with
directors (other than Mr. Speed and Mr. Rogers who are salaried officers),
directors receive an annual stock award of 300 shares of Common Stock (valued at
$9,338 on the date of the 1998 award) on the date of the annual meeting of
stockholders as an annual retainer fee plus $1,000 and reimbursement of expenses
for each meeting of the Board of Directors and $750 and reimbursement of
expenses for each meeting of a committee established by the Board of Directors.

Directors Plan. The Company's 1991 Directors Plan authorizes the issuance
of options for up to 250,000 shares of Common Stock to directors of the Company
who are not, and have not been for at least one year prior to the date of
determination, employees of the Company ("Non-Employee Directors"). Under the
1991 Directors Plan, each Non-Employee Director of the Company on September 13,
1991 was automatically granted an option to purchase 7,500 shares of Common
Stock. Each person who first becomes a Non-Employee Director after September 13,
1991 will automatically be granted an option to purchase 7,500 shares of Common
Stock on the date the person becomes a Non-Employee Director, if such shares of
Common Stock are available. Each Non-Employee Director will also be granted an
option to purchase an additional 3,000 shares of Common Stock on the date of any
annual meeting at which such Non- Employee Director is re-elected to the Board.
The option exercise price is the closing price of a share of Common Stock if the
shares of Common Stock are listed on an exchange or the average between the bid
and the asked price for that date if the shares of Common Stock are traded
over-the-counter (or, if no shares of Common Stock were publicly traded on that
date, the next preceding date that such shares of Common Stock were so traded).
Such options are exercisable in full on the date of grant and expire ten years
after the date of grant or, if earlier, six months

12
<PAGE> 15

after the termination of the optionee's service as a Non-Employee Director,
unless such service is terminated by reason of death, in which case the
optionee's legal representative shall have one year in which to exercise the
option.

One director exercised options under the 1991 Directors Plan during 1998.
On January 6, 1998, Mr. Friou exercised an option to purchase 1,500 shares of
Common Stock at an exercise price of $25.875. On June 5, 1998, Messrs. Arnold,
Friou, Lipsey, Lynch, Magruder and Mossop were each granted options to purchase
3,000 shares of Common Stock at an exercise price of $31.125 per share and Mr.
Garcia was granted an option to purchase 7,500 shares of Common Stock at an
exercise price of $31.125 per share.

CERTAIN TRANSACTIONS AND RELATIONSHIPS

Cost Sharing Arrangement with EastGroup. EastGroup and the Company
currently share the services and expenses of the Chairman of the Board of
Directors and his administrative assistant.

PROPOSAL NO. 2
AMENDMENTS TO THE 1994 STOCK OPTION PLAN, AS AMENDED

At the Meeting, the stockholders will be asked to vote on a proposal to
ratify the adoption of amendments to the 1994 Stock Option Plan. The amendments
would (i) allow the grant of restricted shares of Common Stock to employees of
the Company, (ii) increase the number of shares of Common Stock available under
the plan, and (iii) change the name of the plan to the "Parkway Properties, Inc.
1994 Stock Option and Long Term Incentive Plan." The affirmative vote of the
holders of a majority of the shares of Common Stock entitled to vote on the
matter is required for ratification of the amendments to the 1994 Stock Option
Plan. The directors recommend a vote FOR ratification of the amendments to the
1994 Stock Option Plan. Unless otherwise instructed, proxies will be voted FOR
ratification of the amendments to the 1994 Stock Option Plan.

Appendix A to the Proxy Statement sets forth the text of the 1994 Stock
Option Plan as restated to include the proposed amendments. The following
description of the 1994 Stock Option Plan and the proposed amendments to the
1994 Stock Option Plan contains summaries of certain provisions of the 1994
Stock Option Plan and is qualified in its entirety by reference to the restated
1994 Stock Option Plan itself.

SUMMARY OF THE 1994 STOCK OPTION PLAN, AS AMENDED AND RESTATED

The 1994 Stock Option Plan authorizes the grant of options to purchase
shares of Common Stock to employees of the Company and the grant of options to
Parkway Properties LP (the "Operating Partnership") and Parkway Realty in
connection with their grant of options to their own employees under the Parkway
Properties LP and Parkway Realty Services, LLC 1998 Stock Option Plan (the
"Operating Partnership Plan"). The amendments to the 1994 Stock Option Plan for
which stockholder ratification is sought would also authorize the grant of
restricted shares of Common Stock to employees of the Company.

As originally adopted on September 23, 1994, the 1994 Stock Option Plan
authorized the issuance of 225,000 shares of Common Stock pursuant to options
granted under the plan. In accordance with the 1994 Stock Option Plan, on each
July 1 the number of shares available under the plan increases automatically by
1 percent of the number of shares of Common Stock outstanding on that date,
provided that the maximum number of shares available under the 1994 Stock Option
Plan will never exceed 12.5 percent of outstanding shares. On March 27, 1998,
the number of shares of Common Stock available was increased by 250,000 shares.
As of April 15, 1999, the aggregate number of shares available under the 1994
Stock Option Plan was

13
<PAGE> 16

540,528, of which 9,906 shares remained for future grants. The amendments for
which ratification is sought would increase the aggregate number of shares
available by 250,000 on June 3, 1999, and would authorize the issuance of 20
percent of the aggregate number of shares available as restricted shares. The
1994 Stock Option Plan provides that when an option expires or terminates
unexercised, the shares subject to the option are again available under the
plan. The amendments for which ratification is sought also provide that upon the
forfeiture of restricted shares, the number forfeited will again be available
under the plan, as will the number of shares tendered in payment of the option
exercise price or retained by the Company in satisfaction of its tax withholding
obligations. The amendments would increase the total number of shares of Common
Stock that an individual might purchase under all options and incentive
restricted shares granted under the 1994 Stock Option Plan from 175,000 shares
to 400,000 shares.

It is the Company's policy to grant stock options to all employees of the
Company, the Operating Partnership and Parkway Realty following the completion
of six months of employment. As of April 15, 1999, 348,384 stock options are
outstanding and held by the 14 officers of the Company and 182,238 stock options
are outstanding and held by employees of the Operating Partnership and Parkway
Realty.

The 1994 Stock Option Plan is administered by a committee of the Board of
Directors (the "Plan Committee") composed of not less than two directors. The
Plan Committee is currently the Compensation Committee.

The Plan Committee selects the employees of the Company to whom options are
granted under the 1994 Stock Option Plan and determines the number of shares
that may be issued under options, the terms, conditions, and periods of
exercisability of such options, and whether such options shall be incentive
stock options ("ISOs") under section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or options that are not ISOs. The exercise price per
share of Common Stock for an option granted under the 1994 Stock Option Plan
will not be less than the fair market value of a share on the date of grant.
Options are exercisable no earlier than twelve months after the date of grant
and expire no later than ten years after the date of grant.

Upon an employee's termination of employment before retirement, disability,
or death, options exercisable at the date of termination remain exercisable for
three months and all other options expire at the date of termination. Upon an
employee's termination of employment by reason of retirement (as defined in the
1994 Stock Option Plan), options exercisable at retirement remain exercisable
for a year and all other options expire at retirement, except that the Plan
Committee may accelerate the exercisability of an option in whole or part upon
the employee's retirement. In the event of the disability (as defined in the
1994 Stock Option Plan) or death of an active employee, the employee or the
employee's legal representative, as the case may be, may exercise the option in
full within one year following disability or death. Options are nontransferable
except by will or by the laws of descent and distribution. No options may be
granted under the 1994 Stock Option Plan after September 22, 2004.

The Operating Partnership Plan is similar to the 1994 Stock Option Plan and
authorizes the Operating Partnership and Parkway Realty to grant to their own
employees options to purchase shares of Common Stock of the Company. When the
Operating Partnership or Parkway Realty grants an option under the Operating
Partnership Plan, the Plan Committee determines whether the Company will grant
an option under the 1994 Stock Option Plan to the Operating Partnership or
Parkway Realty, which option would allow the Operating Partnership or Parkway
Realty to acquire shares of Common Stock to be delivered to its own employee
upon the employee's exercise of the option granted under the Operating
Partnership Plan.

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<PAGE> 17

Under the 1994 Stock Option Plan as amended subject to stockholder
ratification, the Plan Committee may select employees of the Company to whom
restricted shares will be granted and the number of restricted shares to be
granted. Restricted shares will be forfeitable and not assignable or
transferable until the satisfaction of one or more, or alternative, conditions
prescribed by the Plan Committee. The conditions may relate to the Company's
performance, the continuation of the employment of the employee, or other
matters. Unless the Plan Committee provides otherwise, the employee will be
entitled to receive dividends on and vote restricted shares during the period
the restricted shares are forfeitable. An employee will forfeit restricted
shares upon termination of employment while the shares remain forfeitable,
unless the Plan Committee provides otherwise in the case of death or disability.

On March 4, 1999, the Plan Committee granted restricted shares to all
officers of the Company, subject to stockholder ratification of the amendments
to the 1994 Stock Option Plan. Mr. Speed was granted 20,000 shares, Mr. Rogers
was granted 39,000 shares, Ms. Clark was granted 18,000 shares, Messrs. Fowler,
Ingram and Mattingly were each granted 12,000 shares and Ms. Shows was granted
8,000 shares. Under these grants of restricted shares, employees' rights to the
restricted shares are conditioned on the Company's achievement of specified
performance goals set forth in the Company's 5 IN 50 PLAN and, alternatively,
the employee's continued employment. The 5 IN 50 PLAN is the Company's strategic
plan to increase FFO per basic share from $3.05 for 1998 to $5.00 per basic
share for the year ended December 31, 2002 (a compounded annual growth in FFO
per basic share of approximately 13%). If the Company achieves FFO per basic
share before taking into account any expense accruals for grants of incentive
restricted shares of $5.00 by December 31, 2002, the employees' interest in 100
percent of the restricted shares will become nonforfeitable as of December 31 of
the year in which that goal is met. Alternatively, if the Company's FFO per
basic share before taking into account any expense accruals for grants of
incentive restricted shares for the year 2002 is at least $4.75 but not more
than $4.99, the employees' interest in 50 percent of the restricted shares will
become nonforfeitable; or, if the FFO per basic share before taking into account
any expense accruals for grants of incentive restricted shares for 2002 is at
least $4.50 but not more than $4.74, 25 percent will become nonforfeitable. If
an employee remains employed on March 4, 2009, the employee's interest in all
restricted shares will become nonforfeitable, to the extent they are not already
nonforfeitable. If an employee's employment terminates before March 4, 2009, by
reason of death or disability, the employee's interest in any forfeitable
restricted shares will become nonforfeitable according to a graded schedule
based on years elapsed after the date of grant. Dividends on the restricted
shares will be retained by the Company, to be paid only when the related shares
become nonforfeitable.

Outstanding option and restricted share grants are subject to adjustment in
the event of a subdivision or consolidation of shares of Common Stock, a share
dividend, a recapitalization, or other change in the Company's capital
structure. Under the 1994 Stock Option Plan as amended subject to stockholder
ratification, if the Company is merged or consolidated with another corporation,
the Plan Committee is authorized to adjust outstanding option and restricted
share grants to give effect to the merger or consolidation on an equitable
basis. Upon a change in control of the Company (as defined in the 1994 Stock
Option Plan), all options will become immediately exercisable and all restricted
shares will become nonforfeitable, provided, however, that if the acceleration
of exercisability or nonforfeitability would result in a less favorable
after-tax position for an employee (taking into account income taxes and golden
parachute excise taxes) than would no or limited acceleration or
nonforfeitability, then acceleration or nonforfeitability will be limited to the
extent required to achieve an optimum after-tax position for the employee.

The 1994 Stock Option Plan is subject to amendment by the Board of
Directors, except that, without stockholder approval, the Board of Directors
cannot increase the number of shares of Common Stock

15
<PAGE> 18

available under the 1994 Stock Option Plan, decrease the minimum option purchase
price per share, materially increase the benefits accruing to employees, extend
the term of the 1994 Stock Option Plan, change the classes of employees to whom
options may be granted, provide for administration other than by the Plan
Committee, or materially increase the cost of the 1994 Stock Option Plan to the
Company.

The Company believes that under present law the federal income tax
consequences of options granted to employees of the Company under the 1994 Stock
Option Plan will generally be the following: The grant of an option will have no
tax consequences for the employee or the Company. Upon the exercise of an option
that is not an ISO, the employee will recognize ordinary income in an amount
equal to the excess of the fair market value of the acquired shares on the
exercise date over the option price, and the Company will be entitled to a
deduction in the same amount. Upon the exercise of an ISO, the employee will not
recognize any ordinary income, nor will the Company be entitled to a deduction.
However, the alternative minimum tax may apply, because the excess of the fair
market value of ISO shares on the date of exercise over the option price is an
adjustment to the employee's alternative minimum taxable income. If there is no
disposition of ISO shares before the later of two years from the date of grant
and one year from the date of exercise, then the employee will realize a capital
gain or loss upon a sale of the ISO shares. If the ISO shares are sold before
the later of two years from the date of grant and one year from the date of
exercise, the amount of gain realized on the sale or, if less, the excess of the
fair market value on the exercise date over the option price, will be ordinary
income for the employee and deductible by the Company; any balance of the gain
or loss recognized by the employee on the sale will be a capital gain or loss.

The federal income tax consequences of the grant of restricted shares to
employees will generally be the following: provided the employee makes no
election under section 83(b) of the Code, the grant of restricted shares will
have no tax consequences for the employee or the Company, but on the date the
restricted shares become nonforfeitable, the employee will recognize ordinary
income in an amount equal to the fair market value of the shares on that date,
and the Company will be entitled to a deduction in the same amount. If the
employee files an election under section 83(b) of the Code with the Internal
Revenue Service within 30 days of the grant of restricted shares, the employee
will recognize ordinary income on the date of grant in an amount equal to the
fair market value of the shares on that date, and the Company will be entitled
to a deduction in the same amount on that date, and there will be no tax
consequences for the employee or the Company if the employee subsequently
forfeits the shares. Upon a sale of the shares, the employee will recognize a
capital gain (or loss) to the extent the proceeds of the sale exceed (or are
less than) the fair market value of the shares determined either as of the date
the shares became nonforfeitable or, if the employee made an election under
section 83(b) of the Code, as of the date of grant.

The Company may not deduct compensation of more than $1,000,000 that is
paid in one taxable year to an individual who is, on the last day of the year,
the chief executive officer or one of its four other highest paid officers. The
deduction limit, however, does not apply to certain types of performance-based
compensation. The Company believes that compensation attributable to options
granted under the 1994 Stock Option Plan will be treated as qualified
performance-based compensation and thus will not be subject to the deduction
limit. Compensation attributable to the grant or vesting of restricted shares
will not be treated as qualified performance based compensation and will be
subject to the deduction limit.

The Board of Directors adopted the proposed amendments to the 1994 Stock
Option Plan on March 4, 1999, subject to ratification by the stockholders at the
Meeting.

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<PAGE> 19

PROPOSAL NO. 3
OTHER MATTERS

So far as Management is aware, no matters other than those outlined in this
Proxy Statement will be presented to the Meeting for action on the part of the
stockholders. If any other matters are properly brought before the Meeting, it
is the intention of the persons named in the accompanying proxy to vote thereon
the shares of Common Stock to which the proxy relates in accordance with their
best judgment.

APPOINTMENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors has appointed Ernst & Young LLP, independent public
accountants, to act as auditors for the fiscal year ending December 31, 1999.
Ernst & Young LLP has audited the accounts of the Company since 1986. A
representative of Ernst & Young LLP is expected to be present at the Meeting and
will have an opportunity to make a statement, if he so desires, and will be
available to respond to appropriate questions.

STOCKHOLDER PROPOSALS

PROPOSALS IN THE COMPANY'S PROXY STATEMENT

Stockholder proposals submitted for inclusion as a stockholder proposal in
the Company's proxy materials for the 2000 Annual Meeting of Stockholders must
be received at the Company's offices no later than December 31, 1999.

PROPOSALS TO BE INTRODUCED AT THE MEETING BUT NOT INTENDED TO BE INCLUDED IN THE
COMPANY'S PROXY MATERIAL

For any stockholder proposal to be presented in connection with the 2000
Annual Meeting of Stockholders, including any proposal relating to the
nomination of a director to be elected to the Board of Directors of the Company,
a stockholder must give timely written notice thereof in writing to the
Secretary of the Company in compliance with the advance notice and eligibility
requirements contained in the Company's Bylaws. To be timely, a stockholder's
notice must be delivered to the Secretary at the principal executive offices of
the Company not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the 90(th) day
prior to such annual meeting and not later than the close of business on the
later of the 60(th) day prior to such annual meeting or the 10(th) day following
the day on which public announcement of the date of such meeting is first made.
The notice must contain specified information about each nominee or the proposed
business and the stockholder making the nomination or proposal.

In the event that the number of directors to be elected to the Board of
Directors is increased and there is no public announcement naming all of the
nominees for director or specifying the size of the increased Board of Directors
made by the Company at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice will be considered
timely, but only with respect to nominees for any new positions created by such
increase, if the notice is delivered to the Secretary at the principal executive
offices of the Company not later than the close of business on the 10(th) day
following the day on which such public announcement is first made by the
Company.

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<PAGE> 20

Based upon an initial mailing date of April 30, 1999 for this Proxy
Statement, a qualified stockholder intending to introduce a proposal or nominate
a director at the 2000 Annual Meeting of Stockholders should give written notice
to the Company's Secretary not later than April 14, 2000 and not earlier than
March 5, 2000.

The advance notice provisions in the Company's Bylaws also provide that in
the case of a special meeting of stockholders called for the purpose of electing
one or more directors, a stockholder may nominate a person or persons (as the
case may be) for election to such position if the stockholder's notice is
delivered to the Secretary at the principal executive offices of the Company not
earlier than the 90(th) day prior to the special meeting and not later than the
close of business on the later of the 60(th) day prior to the special meeting or
the 10(th) day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.

The specific requirements of these advance notice and eligibility
provisions are set forth in Article II, Section 11 of the Company's Bylaws, a
copy of which is available upon request. Such requests and any stockholder
proposals should be sent to the Secretary of the Company at One Jackson Place,
Suite 1000, 188 East Capitol Street, Jackson, Mississippi 39201.

BY ORDER OF THE BOARD OF DIRECTORS

SARAH P. CLARK
Senior Vice President, Chief
Financial Officer
and Secretary

Jackson, Mississippi

18
<PAGE> 21

APPENDIX A

PARKWAY PROPERTIES, INC.
1994 STOCK OPTION AND
LONG TERM INCENTIVE PLAN
AS RESTATED TO INCLUDE PROPOSED AMENDMENTS

1. INTRODUCTION.

The Parkway Company, predecessor by merger to Parkway Properties, Inc. (the
"Company") established The Parkway Company 1994 Stock Option Plan (the "Plan"),
effective September 23, 1994. The Company amended the Plan effective December
31, 1997, and March 27, 1998, and restated the Plan to incorporate those
amendments, effective March 27, 1998. The Company renamed and amended the Plan
effective March 4, 1999, and has incorporated the new name and the amendment
into this restatement of the Plan, effective March 4, 1999.

2. PURPOSE.

The purposes of this Plan as restated are to provide strong incentive for
management Employees to exert their best efforts on behalf of the Company, to
further the identity of the interests of management with those of the Company's
shareholders, and to facilitate the grant of options for Shares in the Company
to Employees of certain Subsidiaries in order to further the identity of the
interests of the Subsidiaries and their Employees with those of the Company.
Towards these objectives, the Plan provides for the grant of Options and
Incentive Restricted Shares to Employees and for the grant of Options to certain
Subsidiaries on the basis of Underlying Options issued by the Subsidiaries to
their Employees.

3. DEFINITIONS.

As used in this Plan:

(a) "Board of Directors" or "Board" shall mean the Board of Directors
of the Company.

(b) "Committee" shall mean a committee of the Board of Directors of
the Company, which committee shall be composed of those members of the
Compensation Committee of the Board of Directors who are non-employee
directors within the meaning of Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934 ("non-employee
directors"), provided that, should there be fewer than two members of the
Compensation Committee who are non-employee directors, the Committee shall
be composed of two or more members of the Board of Directors who are
non-employee directors, including any who is a member of the Compensation
Committee.

(d) "Fair Market Value" of a Share shall mean, on any date, (i) if the
Shares are traded in the over-the-counter market, the mean between the
closing bid and asked prices of the Shares or the price of Shares quoted on
that date, or, if no prices are so quoted on that date, on the next
preceding date on which such prices are so quoted, or, (ii) if the Shares
are traded on a national securities exchange, the closing price of the
Shares as reported on such exchange or under any composite transaction
report of such exchange on that date, or, if no prices are so reported on
that date, on the next preceding date on which such prices are so reported.

A-1
<PAGE> 22

(e) "Incentive Restricted Share" shall mean a Share granted to an
Employee pursuant to an Incentive Restricted Share agreement and subject to
the terms and conditions determined by the Committee.

(f) "Internal Revenue Code" or "Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.

(g) "Option" shall mean an option granted pursuant to the Plan to
purchase a Share and may refer to an incentive stock option as defined in
section 422 of the Internal Revenue Code, or a non-qualified stock option
(that is, an option that is not an incentive stock option), or an option
granted to a Subsidiary pursuant to Section 9.

(h) "Permanent Disability" shall mean a medically determinable
physical or mental impairment that may be expected to result in death or to
last at least a year and that renders an Employee incapable of performing
that Employee's duties with the Company. A determination of disability
shall be made by the Committee in a uniform, nondiscriminatory manner on
the basis of medical evidence.

(i) "Restricted Period" shall mean the period described in Section
4.2(a)(1).

(j) "Retirement" shall mean the termination of employment with the
Company and its Subsidiaries after the attainment of age 65 or after the
attainment of age 55 and the completion of 6 years of service with the
Company or its Subsidiaries.

(k) "Shares" shall mean the shares of common stock, $0.001 par value,
of the Company.

(l) "Subsidiary" shall mean any present or future subsidiary
corporation of the Company as defined in section 425(f) of the Internal
Revenue Code. "Subsidiary" shall also mean, with respect to Options granted
after December 31, 1997, Parkway Properties LP and Parkway Realty Services,
LLC. The Committee may, in its discretion, amend any or all Options granted
before January 1, 1998, to include Parkway Properties LP and Parkway Realty
Services, LLC, within the definition of Subsidiary for the purpose of
determining the exercisability and expiration date of an Option with
respect to all or a portion of the shares of stock covered by the Option.

(m) "Underlying Option" shall mean an option to purchase Shares
granted by a Subsidiary, which option is the basis for the Subsidiary's
application to the Company for the grant of an Option pursuant to Section
9(c) of this Plan.

4. ADMINISTRATION.

The Committee shall administer the Plan. The Committee shall have all the
powers vested in it by the terms of the Plan. The Committee shall have full
authority to interpret the Plan and the Option and Incentive Restricted Share
agreements under the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, and to make any determinations it believes
necessary or advisable for the administration of the Plan. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any Option or Incentive Restricted Share agreement in the manner and
to the extent the Committee deems desirable. Any decision of the Committee in
the administration of the Plan shall be in its sole discretion and conclusive.
The Committee may act only by a majority of its members in office, except that
the members of the Committee may authorize any one or more of its members or any
officer of the Company to execute and deliver documents on behalf of the
Committee.

A-2
<PAGE> 23

5. SHARES AVAILABLE.

On September 23, 1994, there were 225,000 Shares available for grant under
the Plan (as adjusted for the three-for-two stock split effected April 30,
1996). On July 1 of each year, beginning with July 1, 1995, the number of Shares
available for grant has been and shall be automatically increased by 1 percent
of the number of Shares outstanding on that date, provided, however, that the
number of Shares available for grant shall never exceed 12.5 percent of the
number of Shares outstanding. The number of Shares available for grant on March
27, 1998, as determined under the preceding sentences, was increased by 250,000
Shares as of that date. The number of Shares available for grant on June 3,
1999, as determined under the preceding sentences, shall be increased by 250,000
Shares as of that date.

The aggregate Shares made subject to Options that are incentive stock
options under the Plan, including Options granted before June 3, 1999, shall not
exceed 400,000 of the number of Shares determined under the preceding sentences.
The aggregate number of Shares that may be purchased pursuant to Option shall
not exceed the available number of Shares. The aggregate number of Shares made
subject to grant as Incentive Restricted Shares shall not exceed 20 percent of
the number of Shares available for grant under the Plan or, if less, 700,000
Shares. Upon the expiration, termination, or forfeiture in whole or part of any
unexercised Option or any Incentive Restricted Shares, the Shares subject to
such Option or forfeited grant of Incentive Restricted Shares shall again be
available for grant under the Plan. Further, any Shares tendered (by surrender
or attestation) in payment of the purchase price under an Option or of the
Company's tax withholding obligation, and any Shares retained by the Company to
satisfy its tax withholding obligation shall again be available for grant under
the Plan. No Employee shall be granted Options under the Plan that, combined
with all other Options and Underlying Options granted to that Employee, will
entitle that Employee to purchase more than 400,000 Shares minus the number of
Incentive Restricted Shares granted to such Employees.

6. GRANT OF OPTIONS TO EMPLOYEES.

(a) The Company may from time to time grant Options to Employees to
purchase Shares under the Plan.

(b) The Committee shall determine and designate the Employees to whom
Options are to be granted and shall determine when Options are to be
granted and the number of Shares to be subject to each Option.

7. TERMS OF OPTIONS GRANTED TO EMPLOYEES.

Each Option granted to an Employee pursuant to Section 6 of the Plan shall
be evidenced by an agreement signed by the Employee to whom the Option is
granted and by an officer of the Company. The Option agreement shall set forth
such terms and conditions as the Committee shall determine and as are consistent
with the provisions of the Plan, including the following:

(a) The Committee shall determine the purchase price of each Share
subject to an Option, which price shall not be less than the Fair Market
Value of a Share on the date the Option is granted.

A-3
<PAGE> 24

(c) An Option may require that the holder represent at the time of
each exercise of the Option that the Shares purchased are being acquired
for investment and not with a view to distribution.

(d) The purchase price of the Shares with respect to which an Option
is exercised shall be payable in full on the date the Option is exercised,
in cash or, to the extent authorized by the Committee at the time the
Option is granted, in Shares (by surrender or attestation to ownership) or
in a combination of cash and Shares. The value of a Share used in payment
of the purchase price shall be its Fair Market Value on the date the Option
is exercised. The Committee may provide that payment of the purchase price
may be made by delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to deliver promptly to the
Company the appropriate amount of sale or loan proceeds, subject to any
conditions the Committee may impose, and may establish other methods for
payment of the purchase price.

(e) An Option shall not be assignable or transferable by the Employee
to whom granted except by will or the laws of descent and distribution and
shall be exercisable, during the Employee's lifetime, only by the Employee.

(f) Unless the Committee shall specify otherwise, the right of an
Option holder to exercise an Option to purchase the number of Shares to
which the Option initially related shall accrue on a cumulative basis as
follows:

(i) One year after the Option is granted: 1/2

(ii) Two years after the Option is granted: 1/2

(g) Each agreement relating to an Option granted to an Employee shall
state the extent to which the Option is intended to be either an incentive
stock option or a nonqualified stock option.

(h) Any Option that has not already expired, shall expire upon the
termination of the holder's employment with the Company and its
Subsidiaries, whether by death or otherwise, and no Shares may thereafter
be purchased pursuant to the Option, except that:

(i) If an Option holder's employment is terminated by reason of
Permanent Disability or death, the Option holder's right to exercise the
Option in full shall automatically be accelerated as of the date
preceding the Option holder's Permanent Disability or death. The Option
holder or, in the case of the Option holder's death while in the employ
of the Company or a Subsidiary, the Option holder's estate or the person
to whom the Option holder's rights under the Option are transferred by
will or the law of descent and distribution may, within one year of the
date of the Option holder's Permanent Disability or death, purchase all
the of Shares remaining subject to the Option.

(ii) If an Option holder's employment is terminated by reason of
Retirement, the Option holder may, within twelve months after the date
of his Retirement, purchase any Shares the Option holder was entitled to
purchase under the Option on the date of his Retirement. The Committee
may, in its discretion, determine to accelerate, in whole or in part,
the right of an Option holder to exercise the Option upon Retirement, in
which case the number of Shares with respect to which the Option holder
may exercise the Option shall be adjusted accordingly.

(iii) If an Option holder's employment is terminated for any reason
other than Retirement, Permanent Disability, or death, the Option holder
may, within three months after the termination of his employment,
purchase any Shares the Option holder was entitled to purchase under the
Option on the date of the termination of his employment.
A-4
<PAGE> 25

(iv) If the Option holder dies within the twelve month period
following his Retirement or Permanent Disability or within the three
month period following the termination of his employment for any other
reason, the Option holder's estate or the person to whom the Option
holder's rights are transferred by will or under the law of descent and
distribution may, within one year of the Option holder's death, purchase
any Shares the Option holder was entitled to purchase under the Option
on the date of his death.

Nothing in this Section 7(h) shall authorize the exercise of an Option
after the expiration of the exercise period provided in the Option, nor later
than ten years after the date of the grant of the Option.

8. ADDITIONAL TERMS OF INCENTIVE STOCK OPTIONS.

Each incentive stock option granted under the Plan shall be subject to the
following terms and conditions in addition to the terms and conditions described
in Section 7 above:

(a) The purchase price of each Share subject to an incentive stock
option granted to an Employee who, at the time the Option is granted, owns
(directly and within the meaning of section 424(d) of the Code) Shares
possessing more than 10 percent of the combined voting power of all classes
of Shares of the Company shall not be less than 110 percent of the Fair
Market Value of a Share on the date the Option is granted, and the Option
shall not be exercisable more than five years after the date of grant.

(b) To the extent the aggregate Fair Market Value (determined as of
the date an Option is granted) of the Shares for which any Employee is
granted Options designated incentive stock options first exercisable in any
calendar year (under this Plan and under all plans of the Company and its
Subsidiaries) exceeds $100,000, the Option shall be treated as an Option
that is not an incentive stock option.

(c) If an Option holder disposes of Shares acquired pursuant to the
exercise of an incentive stock option in a disqualifying disposition within
the time periods identified in section 422(a)(1) of the Code, the Option
holder shall notify the Company of such disposition and provide the Company
with information as to the date of disposition, sales price, number of
Shares involved, and any other information about the disposition that the
Company may reasonably request.

9. GRANT OF OPTIONS TO CERTAIN SUBSIDIARIES.

(a) The Company may from time to time under circumstances described in
Section 9(c) grant Options to the Subsidiaries identified in Section 9(b)
to purchase Shares under the Plan.

(b) The Subsidiaries to which the Company may grant Options pursuant
this Plan are Parkway Properties LP (the "Operating Partnership") and
Parkway Realty Services, LLC ("Realty Services").

(c) The Operating Partnership adopted a plan under which it and Realty
Services or either of them may grant to their employees options to purchase
Shares ("Underlying Options"). Upon the grant of such an option, the
Operating Partnership or Realty Services may apply to the Company for a
grant to the Operating Partnership or Realty Services of an Option to
purchase a number of Shares that is the same as the number of Shares for
which the Underlying Option was granted. The Committee shall determine
whether the Company shall grant such an Option to the Operating Partnership
or Realty Services.

A-5
<PAGE> 26

10. TERMS OF OPTIONS GRANTED TO A SUBSIDIARY.

Each Option granted to a Subsidiary pursuant to Section 9 of the Plan shall
be evidenced by a notice to the Subsidiary executed on behalf of the Company, in
such form as the Committee shall determine and upon terms and conditions that
reflect those of the Underlying Option, provided the terms and conditions are
consistent with the provisions of the Plan, including the following:

(a) The purchase price of each Share subject to an Option shall not be
less than the Fair Market Value of a Share on the date the Option is
granted.

(b) An Option may be exercised in whole or in part from time to time
during such period as the Option shall specify, provided that no Option
shall be exercisable within one year after, or more than ten years after,
the date of the grant of the Option, and further provided that no Option
shall be exercisable except to the extent of the number of Shares for which
the Underlying Option is exercised.

(c) The purchase price of the Shares with respect to which an Option
is exercised shall be payable in full on the date the Option is exercised,
in cash or, to the extent authorized by the Committee, in Shares or in a
combination of cash and Shares. The value of a Share delivered in payment
of the purchase price shall be its Fair Market Value on the date the Option
is exercised.

(d) An Option shall not be assignable or transferable by the
Subsidiary to which it is granted.

11. GRANT OF INCENTIVE RESTRICTED SHARES.

(a) The Company may from time to time grant Incentive Restricted
Shares to Employees under the Plan.

(b) The Committee shall determine and designate the Employees to whom
Incentive Restricted Shares are to be granted and shall determine when
Incentive Restricted Shares are to be granted and the number of Incentive
Restricted Shares to be granted.

12. TERMS OF INCENTIVE RESTRICTED SHARES.

(a) The grant of Incentive Restricted Shares to an Employee shall be
evidenced by an agreement signed by the Employee to whom the Incentive
Restricted Shares are granted and by an officer of the Company. The
Incentive Restricted Share agreement shall set forth such terms,
conditions, restrictions, and limits on the Incentive Restricted Shares as
the Committee shall determine and as are consistent with the provisions of
the Plan, including the following:

(1) During a period of time established by the Committee, the
Employee's interest in the Incentive Restricted Shares shall be
forfeitable, and the Incentive Restricted Shares shall not be assignable
or otherwise transferable. The Committee may stipulate that these
restrictions on the Incentive Restricted Shares shall lapse only upon
the satisfaction of one or more, or alternative, prescribed conditions.
The conditions may relate to the Company's performance, the continuation
of the Employee's employment with the Company, or other matters. The
Committee may establish a period of time by which or upon the expiration
of which each condition shall have been satisfied, and shall specify the
extent to which the restrictions shall then lapse. The period during
which Incentive Restricted Shares remain subject to such restrictions
and conditions shall be referred to as the "Restricted Period."

A-6
<PAGE> 27

(2) The Company shall register a certificate in the Employee's name
for the number of Shares subject to the grant of Incentive Restricted
Shares, but the Company shall retain custody of the certificate during
the Restricted Period.

(3) Unless otherwise provided by the Committee in the Incentive
Restricted Share agreement, the Employee to whom Incentive Restricted
Shares have been granted shall be entitled, during the Restricted
Period, to vote those Shares and to receive the dividends payable with
respect to those Shares.

(4) Upon the expiration or termination of the Restricted Period
with respect to specified Incentive Restricted Shares, either because of
the satisfaction of conditions prescribed by the Committee, or at the
time and to the extent provided by the Committee in accordance with
Section 4.2(a)(5) (regarding death or Permanent Disability), the
restrictions applicable to those Incentive Restricted Shares shall lapse
and the certificate for those Shares shall be delivered to the Employee
or to the Employee's estate or the person to whom the Employee's rights
are transferred by will or under the laws of descent and distribution,
as the case may be, free of all restrictions, provided, however, that no
Share shall be delivered before the Employee, the Employee's estate, or
such other person has provided, in the manner described in Section 5.9,
for satisfaction of any federal, state, and local income and employment
tax withholding obligation incurred by the Company in connection with
the delivery of the Shares, termination of the Restricted Period, or
lapse of the conditions and restrictions on the Shares.

(5) The Committee may provide that upon the termination of the
Employee's employment during the Restricted Period by reason of death or
Permanent Disability, the conditions and restrictions on all or a
portion of the Incentive Restricted Shares shall lapse and the
Restricted Period with respect to those Shares shall expire.

(6) Except as provided by the Committee in accordance with Section
4.2(a)(5), the Employee shall forfeit all Incentive Restricted Shares
upon (i) the termination of the Employee's employment with the Company
and its Subsidiaries during the Restricted Period or (ii) the expiration
of the Restricted Period without the satisfaction of any conditions
prescribed by the Committee.

Upon such a forfeiture, all of the Employee's interest in the
Incentive Restricted Shares shall automatically revert to the Company.

(7) The Committee may provide in the Incentive Restricted Share
agreement that the Employee shall receive, rather than the dividends
payable with respect to Incentive Restricted Shares, a credit equivalent
to the amount of such dividends, which shall be payable to the Employee
only if and at the time the Incentive Restricted Shares to which the
dividend equivalents are attributable are delivered to the Employee; if
the Employee forfeits Incentive Restricted Shares, the Employee shall
simultaneously forfeit the dividend equivalents attributable to such
Incentive Restricted Shares.

(b) Limitations on Incentive Restricted Shares. The Company shall
grant no more than 75,000 Incentive Restricted Shares to any one individual
under this Plan.

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<PAGE> 28

13. RECAPITALIZATION OR REORGANIZATION.

The existence of the Plan and the grant of Options and Incentive Restricted
Shares under the Plan shall not affect the right or power of the Board or the
shareholders of the Company to make or authorize the adjustment,
recapitalization, reorganization, or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference stocks ahead of or affecting
Shares or the rights of Shares, the dissolution or liquidation of the Company or
any sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding.

Any Shares with respect to which Options and Incentive Restricted Shares
may be granted are Shares as presently constituted, but if, and whenever, before
the expiration of an Option or before the expiration of the Restricted Period
with respect to Incentive Restricted Shares, the Company shall effect a
subdivision or consolidation of Shares or the payment of a Share dividend on
Shares without receipt of consideration by the Company, the number of Shares
subject to the grant (i) in the event of an increase in the number of
outstanding Shares shall be proportionately increased and (in the case of an
Option) the purchase price per Share shall be proportionately reduced, and (ii)
in the event of a reduction in the number of outstanding Shares shall be
proportionately reduced (in the case of an Option) the purchase price per Share
shall be proportionately increased, and the number of Shares available under
Section 5 for grant shall be adjusted accordingly.

If the Company shall effect a recapitalization or other change in its
capital structure, the number of Shares subject to an outstanding grant shall be
the number and class of Shares to which the holder would have been entitled
pursuant to the terms of such recapitalization if, immediately prior to such
recapitalization, the holder had been the holder of record of the number of
Shares subject to the grant, and the number of Shares available under Section 5
for grant shall be adjusted accordingly. If the Company is merged or
consolidated with a corporation, the Committee shall make appropriate
adjustments to outstanding Option and Incentive Restricted Share grants to give
effect to the merger or consolidation on an equitable basis in terms of issuance
of shares of the corporation surviving the merger or the consolidated
corporation.

Except as expressly provided in this Section, the issuance by the Company
of shares of any class or securities convertible into shares of any class, for
cash, property, labor or services, upon direct sale, upon the exercise of rights
or warrants, or upon the conversion of shares or obligations of the Company
convertible into such shares or other securities, and in any case whether or not
for fair value, shall not affect, and no adjustment shall be made with respect
to, the number of Shares subject to Options previously granted or the purchase
price per Share or the number of Incentive Restricted Shares subject to a grant.

14. CHANGE IN CONTROL.

For purpose of this Plan, a "Change in Control" of the Company shall mean a
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the
Company is then subject to such reporting requirements; provided that, without
limitation, such a Change in Control shall be deemed to have occurred if (a) any
"person" (as such term is used in section 13(d) and 14(d) of the Exchange Act)
is or becomes "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 30
percent or more of the combined voting power of the Company's then outstanding
securities; or (B) during any period of two consecutive years, the following
persons (the "Continuing Directors") cease for any reason to constitute a
majority of the Board: individuals who at the beginning of such period
constitute the Board and new Directors

A-8
<PAGE> 29

each of whose election to the Board or nomination for election to the Board by
the Company's security holders was approved by a vote of at least two-thirds of
the Directors then still in office who either were Directors at the beginning of
the period or whose election or nomination for election was previously so
approved; or (C) the security holders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (i) a merger
or consolidation that would result in the voting securities of the Company
outstanding immediately before the merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of such surviving entity) more than 50 percent of the combined voting
power of the voting securities of the Company or of such surviving entity
outstanding immediately after such merger or consolidation or (ii) a merger of
consolidation that is approved by a Board having a majority of its members
persons who are Continuing Directors, of which Continuing Directors not less
than two-thirds have approved the merger or consolidation; or (D) the security
holders of the Company approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all or substantially
all of the Company's assets.

Notwithstanding any contrary provision of this Plan, all outstanding
Options shall become immediately exercisable in full upon a Change in Control.
Similarly, upon a Change in Control all restrictions otherwise applicable with
respect to Incentive Restricted Shares shall lapse, the Restriction Period shall
expire, and any prescribed conditions shall be deemed to be satisfied, so that
the Employee to whom the Incentive Restricted Shares were granted shall be
entitled to the delivery of a certificate for Shares, subject to satisfaction of
the Company's withholding obligation as described in Section 12(a)(4).

If the excise tax imposed by section 4999 of the Internal Revenue Code
would apply with respect to any payments to which an Employee is entitled,
whether or not in connection with this Plan, and if limiting the effect of the
provisions of the preceding paragraph would result in the Employee's realization
of a net amount from such payments, after taking into account income taxes and
such excise taxes, that is greater than the net after-tax amount the Employee
would realize from such payments if the provisions of the preceding paragraph
were given full effect, then the provisions of the preceding paragraph shall be
given effect to the extent, but only to the extent, required to maximize the net
after-tax amount to be realized by the Employee. All determinations required to
be made for the purposes of this paragraph, including determinations of the net
after-tax amount realizable by the Employee, the result of giving full or
limited effect to the provisions of the preceding paragraph, and whether, the
extent to which, and how the effectiveness of the preceding paragraph shall be
limited, shall be made by tax counsel chosen as follows: the Employee and the
Company may each propose a candidate; if the Employee and the Company do not
agree on a choice within 10 days of the Change in Control, the proposed
candidates shall choose a third party who shall act as tax counsel; if either
the Company or the Employee fails to propose a candidate within 10 days of the
Change in Control, the candidate proposed by the other shall act as tax counsel.
All determinations of the tax counsel so chosen shall be final and binding on
the Company and the Employee. The Company shall pay all reasonable expenses of
employing the tax counsel.

15. AMENDMENT.

The Board of Directors may amend the Plan in any respect, provided,
however, that without the approval of the shareholders of the Company the Board
may not (i) except as provided in Section 13, increase the maximum number of
Shares that may be issued under the Plan as set forth in Section 5 or decrease
the minimum purchase price of Shares subject to an Option, as set forth in
Sections 7(a) and 10(a); (ii) materially increase the benefits accruing to
Employees under the Plan; (iii) extend the term of the Plan; (iv) change the
classes of Employees to whom Options may be granted under the Plan; (v) provide
for the

A-9
<PAGE> 30

administration of the Plan otherwise than by a Committee composed entirely of
non-employee directors as set forth in Section 3(b); or (vi) materially increase
the cost of the Plan to the Company. No amendment shall adversely affect any
right of the holder of an Option or of an Employee to whom a Incentive
Restricted Share has been granted without the holder's or the Employee's written
consent.

16. TERMINATION OF PLAN.

The Board of Directors may terminate the Plan at any time with respect to
any Shares for which Options or Incentive Restricted Shares have not already
been granted. Unless terminated earlier by the Board of Directors, the Plan
shall terminate on September 22, 2004.

17. NO RIGHT TO CONTINUED EMPLOYMENT.

Nothing in the Plan or in any Option or Incentive Restricted Share grant
pursuant to the Plan shall confer upon any Employee the right to continue in the
employ of the Company or restrict the right of the Company to terminate the
employment of any Employee.

18. RESTRICTIONS ON ISSUANCE OF SHARES; RIGHTS AS SHAREHOLDERS.

Should the Board of Directors determine that the listing, registration, or
qualification of Shares upon any securities exchange or under any state or
federal law or the consent or approval of any governmental regulatory body is
necessary or desirable as a condition to or in connection with the issuance or
delivery of Shares under the Plan, no such Shares shall be issued or delivered
unless such listing, registration, qualification, consent, or approval has been
effected or obtained free of any conditions not acceptable to the Board of
Directors.

The certificates representing Shares issued by the Company under the Plan
may bear a legend describing any restrictions on resale of such Shares under
applicable securities laws, and stop transfer orders with respect to such
certificates may be entered on the Company's stock transfer records.

An Option holder shall have no rights as a shareholder of the Company with
respect to any Shares to be issued in connection with the exercise of an Option
until the date of issuance of the certificate for such Shares. No adjustment
shall be made for dividends or other rights for which the record date precedes
the date the certificate is issued.

19. CONSTRUCTION.

The Plan shall be construed in accordance with the law of the State of
Maryland. With respect to any Options granted under the Plan that are intended
to qualify as incentive stock options as defined in section 422 of the Code, the
terms of the Plan and of each incentive stock option granted pursuant to the
Plan shall be construed to give effect to such intention.

20. SATISFACTION OF TAX LIABILITIES.

Whenever under the Plan Shares are to be issued or delivered upon the
exercise of Options, the grant of Incentive Restricted Shares, or the lapse of
restrictions on Incentive Restricted Shares, the Company shall have a right to
require the holder of the Option or Incentive Restricted Share grant to remit to
the Company an amount sufficient to satisfy federal, state, and local
withholding tax requirements, if any, before the issuance of delivery of any
certificate for such Shares. In the holder's discretion, such requirements shall
be satisfied through the retention of Shares otherwise issuable on the exercise
of the Option or by the delivery of

A-10
<PAGE> 31

Shares to the Company by the holder (by surrender or attestation to ownership),
under such terms as the Committee finds appropriate. The value of a Share used
to satisfy withholding requirements shall be its Fair Market Value on the date
the withholding obligation is calculated. The Committee may also provide that
provision for the tax withholding obligation may be made, in connection with the
exercise of an Option, in any manner provided pursuant to Section 6(d) for the
payment of the purchase price.

21. APPROVAL OF SHAREHOLDERS.

This Plan is adopted on September 23, 1994, subject to the approval of the
Company's shareholders. If such approval is not obtained within twelve months of
September 23, 1994, this Plan and all Options granted pursuant to this Plan
shall be void.

A-11
<PAGE> 32
[Parkway logo] PROXY
-----

PARKWAY PROPERTIES, INC.
One Jackson Place, Suite 1000
188 East Capitol Street
Jackson, Mississippi 39201

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Leland R. Speed and Steven G. Rogers,
and each or either of them, Proxies for the undersigned, with full power of
substitution, to vote all shares of common stock, $0.001 par value per share
("Shares"), of Parkway Properties, Inc. (the "Company") which the undersigned
would be entitled to vote at the Annual Meeting of Stockholders (the "Meeting")
to be held at the 111 Capitol Building, 111 East Capitol Street, Jackson,
Mississippi on June 3, 1999, at 1:30 p.m., Jackson time, and directs that the
Shares represented by this Proxy shall be voted as indicated on the reverse
side.

PLEASE SIGN, DATE AND RETURN THIS PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES.

(continued and to be signed on the reverse side)

(FRONT)

<PAGE> 33

1. ELECTION OF DIRECTORS

[ ] FOR All [ ] WITHHOLD ALL [ ] FOR ALL EXCEPT

Nominees: Daniel C. Arnold; Roger P. Friou; Martin L. Garcia; Michael J.
Lipsey; Joe F. Lynch; C. Herbert Magruder; W. Lincoln Mossop, Jr.; Steven G.
Rogers; and Leland R. Speed.

-----------------------------------------------------------------------------
(Except Nominee(s) written above)

2. AMENDMENTS TO THE 1994 STOCK OPTION PLAN, AS AMENDED

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournment
thereof.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED
BY THE STOCKHOLDER. THE BOARD OF DIRECTORS FAVORS A VOTE FOR PROPOSALS
1 AND 2. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED FOR PROPOSALS
1 AND 2 ABOVE AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES NAMED
HEREIN WITH RESPECT TO ANY MATTER REFERRED TO IN 3 ABOVE. YOU ARE
ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.

Dated:____________________, 1999

Signature(s)________________________________

____________________________________________

PLEASE SIGN EXACTLY AS NAME(S) APPEAR ON
STOCK CERTIFICATE(S). A corporation is
requested to sign its name by its President
or other authorized officer, with the office
held so designated. A partnership should
sign in the partnership name by an
authorized person. Executors,
administrators, trustees, guardians and
corporate officers are requested to indicate
the capacity in which they are signing.
JOINT TENANTS SHOULD BOTH SIGN.

YOUR VOTE IS IMPORTANT!

PLEASE SIGN, DATE AND RETURN THIS PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES.

(BACK)