SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of the
Securities Exchange Act of 1934
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[ ] Definitive Additional Materials
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Prentiss Properties Trust
(Name of Registrant as Specified In Its Declaration of Trust)
-------------------------------------------
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statement number, or the Form or Schedule and the date of its filing.
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PRENTISS PROPERTIES TRUST
3890 West Northwest Highway, Suite 400
Dallas, Texas 75220
April 5, 2002
Dear Shareholder:
Your board of trustees joins me in extending a cordial invitation to attend the
2002 Annual Meeting of our shareholders which will be held on Wednesday, May
15, 2002 at the Embassy Suites Hotel, 3880 West Northwest Highway, Dallas,
Texas 75220. The meeting will start promptly at 11:00 a.m., local time.
We sincerely hope you will be able to attend and participate in the meeting. We
will report on our progress and respond to questions you may have about our
business. There will also be important items which are required to be acted
upon by our shareholders.
Whether or not you plan to attend the 2002 Annual Meeting it is important that
your shares be represented and voted at the meeting. Therefore, please act
promptly to vote your shares with respect to the proposals described below. You
may grant a proxy to vote your shares by marking, signing and dating the
enclosed proxy card and returning it in the postage-paid envelope provided. You
may also grant a proxy to vote your shares by telephone or through the Internet
by following the instructions set forth on the proxy card.
Very sincerely yours,
/s/ Michael V. Prentiss
Michael V. Prentiss
Chairman of the Board
PRENTISS PROPERTIES TRUST
3890 West Northwest Highway
Dallas, Texas 75220
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 2002
To the Shareholders
of Prentiss Properties Trust:
We will hold the 2002 Annual Meeting of our shareholders on Wednesday, May
15, 2002 at the Embassy Suites Hotel at 3880 W. Northwest Highway, Dallas,
Texas 75220 at 11:00 a.m., local time, for the following purposes:
1. To elect three Class III trustees to serve until our 2005 Annual
Meeting of shareholders, and until the respective successor of each is
duly elected and qualified;
2. To approve and adopt an amended and restated Trustees' Share Incentive
Plan which (1) increases the aggregate number of our common shares of
beneficial interest, par value $0.01 per share that may be issued
under the current Trustees' Share Incentive Plan by 300,000 common
shares, (2) extends the term of the current plan by an additional 10
years, and (3) gives us broader authority in terms of the types,
amounts and dates of share grants that we may authorize than we are
given under the current Trustees' Share Incentive Plan. The full text
of the amended and restated Trustees' Share Incentive Plan is attached
to this proxy statement as Annex A;
3. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent accountants for 2002; and
4. To consider and act upon any other matters that may properly be
brought before the annual meeting and at any adjournments or
postponements thereof.
Any action may be taken on the foregoing matters at the annual meeting on
the date specified above, or on any date or dates to which, by original or
later adjournment, the annual meeting may be adjourned, or to which the annual
meeting may be postponed.
The board of trustees has fixed the close of business on March 15, 2002 as
the record date for determining the shareholders entitled to receive notice of
and to vote at the annual meeting and at any adjournments or postponements
thereof. Only holders of record of our common shares of beneficial interest at
the close of business on the record date will be entitled to receive notice of
and to vote at the annual meeting and at any adjournments or postponements
thereof.
We have included along with this notice a Proxy Statement, the 2001 Annual
Report to Shareholders and our Form 10-K, which describe certain of our
activities during 2001 and contain our financial statements for the year ended
December 31, 2001. The Annual Report and Form 10-K do not form any part of the
material for solicitation of proxies.
Whether or not you plan to attend the annual meeting, please complete,
sign, date and promptly return the enclosed proxy card in the postage-prepaid
envelope provided or grant a proxy to vote your shares by telephone or through
the Internet by following the instructions set forth on the enclosed proxy
card. If you attend our annual meeting of shareholders, you may revoke your
proxy at any time prior to the time it is voted, including by voting in person
at the annual meeting, even if you have previously returned your proxy card.
By Order of the board of trustees
/s/ Gregory S. Imhoff
Gregory S. Imhoff
Senior Vice President and Secretary
Dallas, Texas
April 5, 2002
PRENTISS PROPERTIES TRUST
3890 W. Northwest Highway, Suite 400
Dallas, Texas 75220
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PROXY STATEMENT
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2002 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 2002
INTRODUCTION
We have provided this proxy statement and the accompanying proxy card and
notice of annual meeting in connection with the solicitation of proxies by the
board of trustees of Prentiss Properties Trust, a Maryland real estate
investment trust, for use at our annual meeting of shareholders to be held at
the Embassy Suites Hotel, 3880 W. Northwest Highway, Dallas, Texas 75220, on
Wednesday, May 15, 2002 at 11:00 a.m., local time and any adjournments thereof.
The mailing address of our principal executive office is 3890 W. Northwest
Highway, Suite 400, Dallas, Texas 75220. We are mailing this proxy statement
and the proxy card and notice of annual meeting, all enclosed herewith, to our
shareholders of record on or about April 5, 2002. The date of this proxy
statement is April 5, 2002.
PURPOSES OF THE ANNUAL MEETING
At the 2002 Annual Meeting, the holders of record of our common shares of
beneficial interest, par value $0.01 per share, on March 15, 2002 will vote
upon the following matters:
(1) The proposal to elect three Class III trustees to serve until our 2005
Annual Meeting of our shareholders and until the respective successor of
each is duly elected and qualified ("Proposal One");
(2) The proposal to approve and adopt an amended and restated Trustees'
Share Incentive Plan which (1) increases the aggregate number of our
common shares of beneficial interest, par value $0.01 per share that may
be issued under the current Trustees' Share Incentive Plan by 300,000
shares, (2) extends the term of the current plan by an additional 10
years and (3) gives us broader authority in terms of the types, amounts
and dates of share grants that we may authorize than we are given under
the current Trustees' Share Incentive Plan. The full text of the amended
and restated Trustees' Share Incentive Plan is attached to this proxy
statement as Annex A ("Proposal Two");
(3) The proposal to ratify the appointment of PricewaterhouseCoopers LLP as
our independent accountants for 2002 ("Proposal Three"); and
(4) The transaction of such other matters that may properly be brought
before the 2002 Annual Meeting and at any adjournments or postponements
thereof.
The board of trustees recommends that you vote "FOR" each of Proposal One,
Proposal Two and Proposal Three.
RECORD DATE AND VOTING
Record Date and Shareholders List
The board of trustees has established the close of business on March 15,
2002 as the record date. Only our shareholders of record at the close of
business on the record date will be entitled to receive notice of, and to vote
at, the annual meeting and any adjournments or postponements thereof. At the
close of business on the record date, we had 37,811,019 common shares
outstanding.
The Proxy
We are making the solicitation of proxies primarily by mail and Internet.
We will bear the cost of preparing and mailing this proxy statement and the
accompanying material, and the cost of any supplementary solicitations, which
may be made by mail, telephone, telegraph, facsimile, electronically or
personally by our officers and employees. We do not expect that specially
engaged employees or paid solicitors will make the solicitation. Although we
might use such employees or solicitors if we deem them necessary, we have not
made arrangements or contracts with any such employees or solicitors as of the
date of this proxy statement.
The board of trustees has selected Gregory S. Imhoff and J. Kevan Dilbeck
as proxies, and they are named as such on the proxy card. The proxy will be
voted as specified by the shareholder in the spaces provided on the proxy card,
or if no specification is made, it will be voted in favor of the proposals. A
shareholder giving a proxy has the power to revoke it either by delivering
written notice of such revocation to our corporate secretary before the annual
meeting or by attending the annual meeting and voting in person. Beneficial
owners of our common shares held in the name of a broker or other intermediary
may vote and revoke a previous vote only through, and in accordance with,
procedures established by the record holder(s) or their agent(s).
In voting by proxy in regard to Proposal One, shareholders may vote in
favor of all of the nominees, withhold their votes as to all of the nominees,
or withhold their votes as to any specified nominee. Shareholders may not
abstain with respect to the election of trustees. With regard to Proposals Two
and Three, shareholders may vote in favor of the proposals, vote against the
proposals, or abstain from voting with respect to the proposals.
How You Can Vote
You may attend the annual meeting and vote your shares in person. You also
may choose to submit your proxies by any of the following methods:
Authorizing a Proxy by Mail. If you choose to vote by mail, simply
complete the enclosed proxy card, date and sign it, and return it in the
postage-paid envelope provided
Authorizing a Proxy by Telephone. You may authorize a proxy to vote your
shares by telephone by calling the toll-free telephone number provided on the
proxy card. Telephone proxy authorization is available 24 hours a day, and the
procedures are designed to authenticate votes cast by using a Control Number
located on the proxy card. The procedures allow you to appoint a proxy to vote
your shares and to confirm that your instructions have been properly recorded.
If you authorize a proxy to vote by telephone, you should not return your proxy
card.
Authorizing a Proxy by Internet. You may also authorize a proxy to vote
through the Internet by signing on to the web site identified on the proxy card
and following the procedures described in the web site. Internet proxy
authorization is available 24 hours a day, and the procedures are designed to
authenticate proxies authorized by using a Control Number located on the proxy
card. The procedures allow you to appoint a proxy to vote your shares and to
confirm that your instructions have been properly recorded. If you authorize a
proxy to vote through the Internet, you should not return your proxy card.
Quorum, Required Vote and Voting Rights
Quorum. Unless a quorum is present at the annual meeting, no action may be
taken at the meeting except the adjournment thereof until a later time. The
presence, in person or by proxy, of shareholders holding a majority of the
outstanding common shares on the record date, March 15, 2002, will constitute a
quorum for
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the transaction of business at the annual meeting. Shares that are represented
at the annual meeting but abstain from voting on any or all matters and shares
that are "broker non-votes" (shares held by brokers or nominees as to which
they have no discretionary power to vote on a particular matter and have
received no instructions from the beneficial owners thereof or persons entitled
to vote thereon) will be counted as shares present and entitled to vote in
determining whether a quorum is present at the annual meeting. The election
inspectors appointed for the annual meeting will determine the number of common
shares present at the meeting, determine the validity of proxies and ballots,
determine whether or not a quorum is present, and count all votes and ballots.
Required Vote. With respect to Proposal One, if a quorum is present, a
vote of a plurality of all the votes cast by shareholders on the matter, in
person or by proxy, will elect each nominee for trustee. Votes marked "For"
Proposal One will be counted in favor of all nominees, except to the extent the
proxy withholds authority to vote for, a specified nominee. Votes "withheld"
from a trustee-nominee also have no effect on the vote since a plurality of the
shares cast at the annual meeting is required for the election of each trustee.
Shareholders may not abstain from voting with respect to the election of
trustees. "Broker non-votes" relate to shares held by brokers or nominees as to
which they have no discretionary power to vote on a particular matter and have
received no instructions from the beneficial owners thereof or person entitled
to vote thereon. Because the election of trustees is a routine matter for which
specific instructions from beneficial owners will not be required, no "broker
non-votes" will arise in the context of Proposal One.
Approval of Proposal Two requires the majority of all the votes cast on
the matter at the annual meeting by shareholders at which a quorum is present
in person or by proxy. Abstentions from voting on Proposal Two will not be
counted as votes cast and therefore will have no effect on the outcome of the
proposal. Broker non-votes will not be treated as a vote cast with respect to
Proposal Two and therefore will have no effect on the outcome of the proposal.
Approval of Proposal Three requires the majority of all the votes cast on
the matter at the annual meeting by shareholders at which a quorum is present
in person or by proxy. Abstentions from voting on Proposal Three will not be
counted as votes cast and thus, will have no effect on the results of the vote
with respect to such proposal.
Voting Rights. With respect to each proposal, each shareholder will be
entitled to one vote per common share held by the shareholders as of the record
date.
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PROPOSAL ONE
ELECTION OF TRUSTEES
Nominees for Election to the Board of Trustees
Our declaration of trust divides the board of trustees into three classes
as nearly equal in number as possible, with each class serving a term of three
years. If a quorum is present, a vote of a plurality of all the shares cast by
shareholders, in person or by proxy, will elect each nominee for trustee. The
board of trustees has set the number of trustees constituting the current board
of trustees at seven, three of whom will be elected at the annual meeting.
We have no Nominating Committee of our board of trustees, with the entire
board of trustees acting in such a capacity. The board of trustees has
nominated three of the present Class III trustees, Michael V. Prentiss, Thomas
J. Hynes, Jr. and Barry J.C. Parker, to serve as Class III trustees until our
annual meeting in 2005 and until the respective successor of each is duly
elected and qualified. The remaining members of the board of trustees will
continue as members thereof until their respective terms expire, as indicated
below, or until their respective successors are duly elected and qualified.
If any nominee becomes unavailable or unwilling to serve us as a trustee
for any reason, the persons named as proxies in the proxy card are expected to
consult with our management in voting the shares represented by them. The board
of trustees has no reason to doubt the availability of the nominees, and each
has indicated his willingness to serve us as a trustee if reelected by the
shareholders at the annual meeting.
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NOMINEES FOR ELECTION AS CLASS III TRUSTEE
(TERM EXPIRING 2005)
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[PHOTO OF MICHAEL V. PRENTISS]
MICHAEL V. PRENTISS serves as our Chairman of the Board. Prior to October
of 1999, Mr. Prentiss was our Chief Executive Officer and had served in
such capacity since our initial public offering in October 1996. Mr.
Prentiss, our founder, has over 28 years experience in real estate
development, acquisitions, and investment management and has acquired or
developed properties with an aggregate value in excess of $4 billion. From
1987 to 1992, he served as President and Chief Executive Officer of our
predecessor company, and from 1992 to 1999, he served as its Chairman and
Chief Executive Officer. From 1978 to 1987, Mr. Prentiss served as
President of Cadillac Urban Development, Inc., Executive Vice President and
member of the Board of Directors of The Cadillac Fairview Corporation
Limited, and a member of Cadillac Fairview's Executive Committee. Cadillac
Urban was the largest business unit of Cadillac Fairview, responsible for
all of its office, mixed-use and suburban office park development activity
in the U.S. and Canada. Prior to 1978, Mr. Prentiss was President of
Ackerman Development Company. Mr. Prentiss is a Baker Scholar graduate of
Harvard Graduate School of Business Administration. He holds a Bachelor of
Science degree in Civil Engineering and a B.A. degree in Business
Administration from Washington State University.
[PHOTO OF THOMAS J. HYNES, JR.]
THOMAS J. HYNES, JR. is an independent trustee on our board of trustees and
has served in such capacity since our initial public offering in October
1996. Mr. Hynes is President of Meredith & Grew Incorporated, a
Boston-based real estate brokerage firm, and has served in that capacity
since 1988. Mr. Hynes has been employed by Meredith & Grew Incorporated
since 1965 during which time he has held various offices. Mr. Hynes holds a
B.A. degree from Boston College.
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Committees: Compensation
[PHOTO OF BARRY J.C. PARKER]
BARRY J.C. PARKER is an independent trustee on our board of trustees and
has served in such capacity since our initial public offering in October
1996. Mr. Parker is a private investor and is a past President and Chief
Executive Officer of Luby's, Inc., a chain of 538 restaurants. Mr. Parker
is also a past Chairman of the Board, President and Chief Executive Officer
of County Seat, Inc., a nationwide chain of 750 specialty apparel stores.
Prior to joining County Seat, Inc. in 1985, Mr. Parker worked for the
Children's Place, Inc. for 10 years and held various offices with that
company including Senior Vice President and Chief Financial Officer. Mr.
Parker worked for Federated Department Stores, Inc. prior to 1975 and held
various management positions with that company's F&R Lazarus Department
Store division. Mr. Parker holds a B.A. degree from Washington University
in St. Louis and an MBA degree from the University of Pennsylvania's
Wharton School of Finance and Commerce.
Committees: Audit
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL ONE.
Committees and Meetings of the Board of Trustees
Trustee Meetings. Our business is under the general management of our
board of trustees as required by our declaration of trust, bylaws and the laws
of Maryland. Nominations of persons for election to the board of trustees may
be made at an annual meeting of shareholders (i) pursuant to our notice of
meeting, (ii) by or at the direction of the trustees or (iii) by any of our
shareholders who was a shareholder of record at the time of giving of notice
provided for in our bylaws, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in our bylaws. Only such persons
who are nominated in accordance with the procedures set forth in our bylaws
shall be eligible to serve as trustees. Our declaration of trust requires that
a majority of our trustees must not also be officers, employees or affiliates
of any of our subsidiaries or any partnership which is one of our affiliates.
There are presently seven trustees on our board of trustees, including five
independent trustees. The board of trustees held eight meetings during 2001,
and each of the trustees attended at least 75% of the aggregate of the board of
trustees' and applicable committee meetings.
The board of trustees presently has an Audit Committee and a Compensation
Committee. The board of trustees has no standing Nominating Committee and the
entire board of trustees acts in such capacity. The Board may, from time to
time, form other committees as circumstances warrant. Such committees will have
authority and responsibility as delegated by the board of trustees.
Audit Committee. The board of trustees has established an Audit Committee
which currently consists of three independent trustees, Messrs. Steinhart,
Riggs and Parker, each of whom are independent as defined in Section 303.01 of
the listing standards of the New York Stock Exchange. The Audit Committee's
charter was adopted by the full board of trustees, and a copy of the charter
was attached as Annex A to our 2001 proxy statement. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the independent public accountants the plans and results of the
audit engagement, approves professional services provided by the independent
public accountants, reviews the independence of the independent public
accountants, considers the range of audit and non-audit fees and reviews the
adequacy of our internal accounting controls. The Audit Committee held three
meetings during 2001.
Compensation Committee. The board of trustees has established a
Compensation Committee which currently consists of three independent trustees,
Messrs. Riggs, Wilson and Hynes. The Compensation Committee determines
compensation for our executive officers, establishes salaries of and awards of
performance-based bonuses to our executive officers, and determines awards of
restricted shares and grants of share options under our share incentive plans.
The Compensation Committee held one meeting during 2001.
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TRUSTEES AND EXECUTIVE OFFICERS
Trustees and Executive Officers
The following table sets forth certain information with respect to our
trustees and executive officers. The board of trustees currently consists of
seven members, five of whom are independent trustees.
Name Age Position with Company
---- --- ---------------------
Michael V. Prentiss 58 Chairman of the board of trustees (Class III -- Term will expire
in 2005 if Proposal One is approved)*
Thomas F. August 53 President, Chief Executive Officer and Trustee (Class I--Term
will expire in 2003)
Thomas J. Hynes, Jr. 62 Independent Trustee (Class III--Term will expire in 2005 if
Proposal One is approved)*
Barry J.C. Parker 54 Independent Trustee (Class III--Term will expire in 2005 if
Proposal One is approved)*
Dr. Leonard M. Riggs, Jr. 59 Independent Trustee (Class II--Term will expire in 2004)
Ronald G. Steinhart 61 Independent Trustee (Class II--Term will expire in 2004)
Lawrence A. Wilson 66 Independent Trustee (Class I--Term will expire in 2003)
Lawrence J. Krueger 46 Executive Vice President and Managing Director, Midwest
Region
Robert K. Wiberg 45 Executive Vice President and Managing Director, Mid-Atlantic
Region
Christopher M. Hipps 40 Executive Vice President and Managing Director, Southwest
Region
Daniel K. Cushing 41 Senior Vice President and Managing Director, Northern
California Region
Christopher B. Mahon 53 Senior Vice President and Managing Director, Southern
California Region
Michael A. Ernst 41 Executive Vice President and Chief Financial Officer
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* Messrs. Prentiss, Hynes and Parker have been nominated for re-election at the
annual meeting to be held on May 15, 2002.
The following are biographical summaries of our executive officers and the
trustees not standing for re-election:
[PHOTO OF THOMAS F. AUGUST]
THOMAS F. AUGUST serves as our President and is a trustee on our board of
trustees. He is also our Chief Executive Officer. Mr. August has served in
such capacities since October of 1999 when he became Chief Executive
Officer. Prior to that time he had been our President and Chief Operating
Officer since our initial public offering in October 1996. From 1992 to
1996 Mr. August served as President and Chief Operating Officer of one of
our affiliates, Prentiss Properties Limited, Inc. From 1987 to 1992, Mr.
August served as Executive Vice President and Chief Financial Officer of
our predecessor company. From 1985 to 1987, Mr. August served in executive
capacities with Cadillac Fairview Urban Development, Inc. Prior to joining
Cadillac Urban in 1985, Mr. August was Senior Vice President of Finance for
Oxford Properties, Inc., in Denver, Colorado, an affiliate of a
privately-held Canadian real estate firm. Previously, he was a Vice
President of Citibank, responsible for real estate lending activities in
the upper Midwest. Mr. August holds a B.A. degree from Brandeis University
and an MBA degree from Boston University.
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[PHOTO OF DR. LEONARD M. RIGGS, JR.]
DR. LEONARD M. RIGGS, JR. is an independent trustee on our board of
trustees and has served in such capacity since our initial public offering
in October 1996. Dr. Riggs is a private investor and until recently was
Chairman and Chief Executive Officer of EmCare, Inc., a publicly-held
outsourced healthcare business services company specializing in emergency
medicine. EmCare manages over 300 hospital emergency departments and
provides the business services for the practices of over 3,000 physicians.
Dr. Riggs has also served as the Director of Emergency Medicine at Baylor
University Medical Center from 1974 until 1998. Dr. Riggs is a former
president of the American College of Emergency Physicians. He holds a B.S.
degree from Centenary College of Shreveport, Louisiana and an M.D. degree
from the University of Texas Southwestern Medical School in Dallas, Texas.
Committees: Audit and Compensation
[PHOTO OF RONALD G. STEINHART]
RONALD G. STEINHART is an independent trustee on our board of trustees and
has served in such capacity since our initial public offering in October
1996. Mr. Steinhart served as Chairman and Chief Executive Officer,
Commercial Banking Group of Bank One Corporation from December 1996 until
his retirement in January, 2000. From January, 1995 to December, 1996, Mr.
Steinhart was Chairman and Chief Executive Officer of Bank One Texas, N.A.
Mr. Steinhart joined Bank One in connection with the merger of Team Bank,
which he founded in 1988. Mr. Steinhart serves as a Director of NCH
Corporation, United Auto Group, Inc. and Carreker Corporation and as a
trustee of MFS/Sun Life Series Trust and Compass Variable Accounts. Mr.
Steinhart holds BBA and MBA degrees from the University of Texas at Austin
and is a Certified Public Accountant. Mr. Steinhart served as President and
Chief Operating Officer of InterFirst Corporation from 1981 to 1987. Prior
to joining InterFirst Corporation in 1980, Mr. Steinhart organized
investors to charter and purchase six banks.
Committees: Audit (Chairman)
[PHOTO OF LAWRENCE A. WILSON]
LAWRENCE A. WILSON is an independent trustee on our board of trustees and
has served in such capacity since our initial public offering in October
1996. Mr. Wilson is Chairman of The Beck Company and Managing Director and
Chief Executive Officer of HCBECK, Inc., a construction and real estate
services company, each of which are members of The Beck Group. Mr. Wilson
also serves as a director of TU Electric. Mr. Wilson holds an L.L.B. degree
from the Woodrow Wilson College of Law in Atlanta, Georgia and is a
graduate of the Emory University Advanced Management Program.
Committees: Compensation
[PHOTO OF LAWRENCE J. KRUEGER]
LAWRENCE J. KRUEGER serves as Executive Vice President and Managing
Director of our Midwest Region. Mr. Krueger has served in such capacity for
us since 1994. He served as Senior Vice President--Development from 1990 to
1994, Vice President--Development of one of our affiliates, Prentiss
Properties Limited, Inc., from 1987 to 1990 and Vice President--
Development of Cadillac Urban from 1986 to 1987. Mr. Krueger holds a B.A.
degree in Business from Indiana University and a Masters degree in Urban
Land Economics and Real Estate Investment Analysis from the University of
Wisconsin. He is a member of the National Association of Industrial and
Office Parks and the Industrial Development Research Council.
[PHOTO OF ROBERT K. WIBERG]
ROBERT K. WIBERG serves as Executive Vice President and Managing Director
of our Mid-Atlantic Region. His responsibilities include the development,
acquisitions, leasing, construction, property management and asset
management activities in this region. The portfolio of properties Mr.
Wiberg oversees includes 5.2 million square feet of owned property and
another 7.5 million square feet of managed properties. Mr. Wiberg has
worked in our Washington D.C. office since 1988, and prior to that served
as a Development Officer in our Los Angeles, Atlanta and Dallas offices.
Mr. Wiberg holds an MBA from the University of California at Berkeley, a
Master of City and Regional Planning degree from Harvard
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University, and a B.A. degree from Cornell University. He has served on the
Board of Directors of the Northern Virginia Chapter of the National Association
of Industrial and Office Parks and holds a Virginia real estate license.
[PHOTO OF CHRISTOPHER M. HIPPS]
CHRISTOPHER M. HIPPS serves as Executive Vice President and Managing
Director of our Southwest Region. Mr. Hipps has served as Managing Director
of our Southwest Region since January 1, 2002 and was promoted from Senior
Vice President to Executive Vice President in March 2002. Prior to becoming
Managing Director of the Southwest Region, Mr. Hipps served as the Managing
Director of the former West Region. Mr. Hipps was responsible for all
business activities of the West Region including acquisitions, development,
strategic planning and implementation of the annual business plan. Mr.
Hipps started his career in the Washington, D.C. offices of Cadillac Urban
leasing the award-winning 1001 Pennsylvania Avenue. He subsequently was
responsible for marketing activities for our master-planned development,
Fairview Park, located in Northern Virginia. In 1992, Mr. Hipps moved to
our corporate office in Dallas, Texas. While in Dallas, he has held various
responsibilities, including CBD leasing assignments, our acquisitions in
Houston, regional marketing of our property management business and work on
the development of properties in Austin, Texas. Mr. Hipps holds a Texas
real estate license and has been involved in various organizations such as
the National Association of Industrial and Office Parks and the Real Estate
Council. He received a BBA from Southern Methodist University.
[PHOTO OF DANIEL K. CUSHING]
DANIEL K. CUSHING serves as the Senior Vice President and Managing Director
of our Northern California Region and has served in such capacity since
January 1, 2002. His responsibilities include acquisitions, development,
leasing, construction, property management, facilities management, and
business development. Mr. Cushing joined us in 1985 and has held a variety
of increasingly senior roles in Dallas, Washington, DC and Chicago. Prior
to his appointment as the Managing Director of the Northern California
Region, Mr. Cushing was instrumental in the growth of our Midwest Region.
As our Senior Vice President of Development/Acquisitions he was responsible
for various suburban development projects and acquisitions. Mr. Cushing
holds a real estate license and is a Director of Evanston Inventure and a
member of the Real Estate Investment Advisory Council and the National
Association of Industrial and Office Parks. He holds a Bachelor of Science
degree in Civil Engineering from the University of Illinois.
[PHOTO OF CHRISTOPHER B. MAHON]
CHRISTOPHER B. MAHON serves as Senior Vice President and Managing Director
of our Southern California Region and has served in such capacity since
January 1, 2002. Mr. Mahon joined us in 1999. Mr. Mahon is responsible for
all business management activities, most particularly guidance of property
operations and implementation of acquisition, development and disposition
strategies that enhance earnings and portfolio value. Mr. Mahon started his
career in New York in the commercial construction industry. Since coming to
California in 1977, Mr. Mahon has worked in various capacities, including
management, acquisitions, development, marketing and leasing with diverse
property portfolios at The Irvine Company, Ferguson Partners, Shuwa
Investments Corporation and Equity Office. Mr. Mahon graduated Phi Beta
Kappa from St. Lawrence University in Canton, New York, is a former
President of the Orange County chapter of BOMA and is a licensed California
real estate broker.
[PHOTO OF MICHAEL A. ERNST]
MICHAEL A. ERNST serves as an Executive Vice President and as our Chief
Financial Officer. In such capacities Mr. Ernst has responsibility for
capital planning, financial strategy, corporate accounting, raising
capital, evaluating new investment opportunities and investor relations.
Mr. Ernst joined us in 1997 as Vice President and Treasurer and was
promoted to Chief Financial Officer in March 1999. Mr. Ernst was promoted
from Senior Vice President to Executive Vice President in March 2002. Prior
to joining us, Mr. Ernst served as a Senior Vice President in Bank of
America's Real Estate Finance Group where he managed a team of lenders
covering national accounts including many public real estate companies. Mr.
Ernst holds an MBA with a focus on Real Estate and Finance, and a B.A. in
American Government, both from the University of Virginia. Mr. Ernst has
been a member of the Associate Leadership Council of the Real Estate
8
Council and is currently a member of the executive committee of the Board of
Directors of the Dallas Area Habitat for Humanity.
Terms of Office
Our board of trustees elects our officers annually at a meeting held after
each annual meeting of shareholders, or as soon thereafter as necessary and
convenient in order to fill vacancies or newly created offices. Each officer
holds office until his successor is duly elected and qualified or until death,
resignation or removal, if earlier. The board of trustees may remove any
officer or agent elected or appointed by the board of trustees whenever in its
judgment our best interests will be served thereby, but such removal shall be
without prejudice to the contractual rights, if any, of the person so removed.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
executive officers, trustees and persons who beneficially own more than 10% of
our common shares to file initial reports of ownership and reports of changes
in ownership with the SEC. Officers, trustees and greater than 10% beneficial
owners are required by SEC regulations to furnish us with copies of all Section
16(a) forms they file.
Based solely on a review of the copies furnished to us and representations
from our executive officers and trustees, we believe that all Section 16(a)
filing requirements for the year ended December 31, 2001 applicable to our
executive officers, trustees and greater than 10% beneficial owners were
satisfied. Based on written representations from the executive officers and
trustees, we believe that no Forms 5 for trustees, officers and greater than
10% beneficial owners were required to be filed with the SEC for the period
ended December 31, 2001.
9
EXECUTIVE COMPENSATION
Compensation Committee Interlocks and Insider Participation
During 2001, the Compensation Committee of our board of trustees consisted
of Messrs. Hynes, Riggs and Wilson, all of whom are independent trustees. We
did not have a policy during 2001 prohibiting our executive officers from
participating in deliberations of our board of trustees regarding executive
compensation. Consequently, Messrs. Prentiss and August, who also serve us as
trustees, were present during, and participated in, the deliberations of the
board of trustees regarding executive compensation during 2001. However,
Messrs. Prentiss and August did not vote with respect to such actions by the
board of trustees and the Compensation Committee.
Summary Compensation Table
The following table sets forth the annual and long-term compensation with
respect to our Chief Executive Officer and our four most highly compensated
executive officers other than the Chief Executive Officer for services rendered
during 2001, 2000 and 1999.
Annual Compensation
------------------------------------------------
Other
Annual
Compen-
Name and Principal Position Year Salary ($) Bonus($)(1) sation($)
------------------------------ ------ ------------ ---------------- ------------------
Michael V. Prentiss .......... 2001 $ 344,500 $ 256,515 $ 86,139
Chairman of the Board 2000 314,584 418,400 179,581(4)
1999 297,917 363,000 --
Thomas F. August ............. 2001 $ 326,667 $ 241,857 $ --
President and Chief 2000 303,250 410,861 86,934(8)
Executive Officer 1999 265,417 269,500(9) --
Lawrence J. Krueger .......... 2001 $ 198,833 $ 132,689 $ --
Executive Vice President 2000 191,289 160,000 46,775
and Managing Director, 1999 182,292 140,000 143,586
Midwest Region
Robert K. Wiberg ............. 2001 $ 188,667 $ 131,955 $ --
Executive Vice President 2000 180,307 145,000 --
and Managing Director, 1999 171,875 141,150(9) --
Mid-Atlantic Region
Christopher M. Hipps ......... 2001 $ 187,667 $ 117,291 $ 42,876
Executive Vice President 2000 194,426 117,804 131,731
and Managing Director, 1999 156,667 50,000(9) 101,682(11)
Southwest Region
Long-Term
Compensation
--------------------------------
Securities
Restricted Underlying All Other
Stock Options, Compen-
Name and Principal Position Awards ($) SARs (#)(2) sation($)
------------------------------ ------------------ ------------- ----------------
Michael V. Prentiss .......... $ -- -- $ 6,100(3)
Chairman of the Board 1,190,625(5) 150,000 5,820(3)
514,063(6) 75,000 3,700(3)
Thomas F. August ............. $ 345,630(7) 36,900 $ 15,369(3)
President and Chief 1,190,625(5) 150,000 15,198(3)
Executive Officer 370,125(6) 55,000 13,327(3)
Lawrence J. Krueger .......... $ 112,000(7) 11,800 $ 4,847(3)
Executive Vice President 395,200(10) 46,000 4,624(3)
and Managing Director, 158,886(6) 22,725 2,493(3)
Midwest Region
Robert K. Wiberg ............. $ 118,020(7) 12,500 $ 4,841(3)
Executive Vice President 395,200(10) 48,000 4,689(3)
and Managing Director, 166,310(6) 23,790 2,597(3)
Mid-Atlantic Region
Christopher M. Hipps ......... $ 112,400(7) 11,800 $ 3,501(3)
Executive Vice President 335,920(10) 40,000 4,611(3)
and Managing Director, 101,990(6) 34,600 2,504(3)
Southwest Region
------------
(1) Bonuses represent amounts earned by the respective executive officers
during the referenced year, although paid subsequent to such year. The
Company historically pays bonuses each March for the prior year. Bonuses
earned in 2001 were deferred by Messrs. Prentiss, August and Krueger
pursuant to the KEYSOP Plan. Bonuses earned in 2000 were deferred by
Messrs. Prentiss, August, Krueger, Wiberg and Hipps pursuant to the KEYSOP
Plan.
(2) All options referenced in 2001 were granted on February 28, 2002 as
incentive compensation awards under the 1996 Share Incentive Plan based on
our performance in 2001. All options, with the exception of those granted
to Messrs. Prentiss and August, referenced in 2000 were granted on
February 28, 2001 as incentive compensation awards under our 1996 Share
Incentive Plan based on our performance in 2000. The options referenced in
2000 for Messrs. Prentiss and August were granted on May 26, 2000. All
options referenced in 1999 were granted on March 1, 2000, as incentive
compensation awards under the 1996 Share Incentive Plan based on our
performance in 1999, except that 20,000 of Mr. Hipps'
10
options that were granted to Mr. Hipps in April of 1999 were in connection
with his promotion to Senior Vice President and Managing Director of the
West Region.
(3) Represents our matching 401(k) plan contributions and insurance payments as
follows:
Name and Principal Position Year 401(k) Match Insurance Premiums
---------------------------------- ------ -------------- -------------------
Michael V. Prentiss .............. 2001 $4,591 $ 1,519
Chairman of the 2000 4,454 1,366
Board 1999 2,400 1,300
Thomas F. August ................. 2001 $4,591 $10,778
President and Chief Executive 2000 4,454 10,744
Officer 1999 2,400 10,927
Lawrence J. Krueger .............. 2001 $4,591 $ 256
Executive Vice President and 2000 4,454 170
Managing Director, Midwest Region 1999 2,279 214
Robert K. Wiberg ................. 2001 $4,591 $ 250
Executive Vice President and 2000 4,454 235
Managing Director, Mid-Atlantic 1999 2,400 197
Region
Christopher M. Hipps ............. 2001 $3,336 $ 165
Executive Vice President and 2000 4,454 157
Managing Director, Southwest 1999 2,400 104
Region
(4) Includes Share Purchase Plan share purchase discounts of $73,835.
(5) Represents the value, as of the grant date, May 26, 2000, of 50,000 and
50,000 common shares granted to Messrs. Prentiss and August, respectively
as incentive compensation awards based on our performance in 2000.
(6) Represents the value, as of the grant date of 25,000, 18,000, 7,727,
8,088, and 4,960 common shares granted to Messrs. Prentiss, August,
Krueger, Wiberg and Hipps, respectively, as incentive compensation awards
under the 1996 Share Incentive Plan based on our performance in 1999. As
of March 30, 2002, Messrs. Prentiss, August, Krueger, Wiberg and Hipps had
no other restricted stock holdings other than in the amounts shown in the
table above.
(7) Represents the value, as of the grant date of 12,300, 4,000, 4,200, and
4,000 common shares granted to Messrs. August, Krueger, Wiberg and Hipps,
respectively, as incentive compensation awards under our 1996 Share
Incentive Plan based on our performance in 2001.
(8) Includes Share Purchase Plan share purchase discounts of $83,012.
(9) These amounts represent bonuses for 1999, however, Messrs. August, Hipps
and Wiberg elected to defer all or a portion pursuant to the Key Employee
Share Option Plan.
(10) Represents the value, as of the grant date of 16,000, 16,000 and 13,600
common shares granted to Messrs. Krueger, Wiberg and Hipps, respectively,
as incentive compensation awards under the 1996 Plan based on our
performance in 2000.
(11) Includes amounts totaling $98,385 paid to Mr. Hipps in his capacity as a
leasing agent prior to his promotion to Senior Vice President and Managing
Director of the West Region in April 1999.
11
Option/SAR Grants in Last Fiscal Year
The following table sets forth information regarding grants of options to
our named executive officers during the 2001 fiscal year. During 2001 we
granted options to our executive officers pursuant our 1996 Share Incentive
Plan. No SARs were granted during 2001. For additional information on and
certain terms of options, see "--1996 Share Incentive Plan."
Individual Grants
---------------------------------------------------------------
Potential Realizable
Percentage Value at Assumed
Number of of Total Annual Rates of Stock
Securities Options Price Appreciation for
Underlying Granted to Exercise Option Term ($)(2)
Options Employees or Base Expiration ------------------------
Name Granted (#) in Fiscal Year(1) Price ($/share) Date 5% ($) 10% ($)
------------------------------ ------------- ------------------- ----------------- ----------- ---------- ------------
Michael V. Prentiss .......... -- 0% $ -- -- $ -- $ --
Thomas F. August ............. 36,900 15.3% 28.1 02/28/12 652,023 1,652,382
Lawrence J. Krueger .......... 11,800 4.9% 28.1 02/28/12 208,506 528,404
Robert K. Wiberg ............. 12,500 5.2% 28.1 02/28/12 220,875 559,750
Christopher M. Hipps ......... 11,800 4.9% 28.1 02/28/12 208,506 528,404
------------
(1) Represents the percentage of options granted to all employees during 2001.
Options to purchase a total of 241,000 common shares were granted during
2001.
(2) In accordance with the rules of the SEC, the amounts shown on this table
represent hypothetical gains that could be achieved for the respective
options if exercised at the end of the option term. These gains are based
on the assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date and do not reflect our estimates or projections of future
prices of our common shares. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of our common shares, the
option holder's continued employment through the option period, and the
date on which the options are exercised.
Option Exercises in Last Fiscal Year
The following table sets forth certain information regarding the exercise
of stock options during the last completed year and the fiscal year-end value
of unexercised options held by the named executive officers as of December 31,
2001. For additional information on and certain terms of options, see "--1996
Share Incentive Plan." The below-named executive officers exercised options to
purchase 668,606 common shares during 2001.
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
Fiscal Year-End(#) at Fiscal Year-End($)(1)
----------------------------- ----------------------------
Shares
Acquired On Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------------------------ -------------- -------------- ------------- --------------- ------------- --------------
Michael V. Prentiss .......... 386,762 $2,699,599 208,333 216,667 $879,688 $994,375
Thomas F. August ............. 173,944 1,212,390 168,333 186,667 564,375 968,188
Lawrence J. Krueger .......... 75,000 581,138 57,575 61,150 260,657 240,314
Robert K. Wiberg ............. 32,900 181,445 50,030 63,860 7,100 251,148
Christopher M. Hipps ......... -- -- 31,200 56,400 217,536 233,622
------------
(1) Value for "in-the-money" options represents the positive spread between the
respective exercise prices of outstanding options and the closing price of
our common shares on the New York Stock Exchange of $27.45 per share on
December 31, 2001.
12
Savings Plan
Along with our operating partnership Prentiss Properties Acquisition
Partners, L.P., and designated subsidiaries, including Prentiss Properties
Limited, Inc., we have adopted, the Employee Savings Plan & Trust of our
predecessor company, which originally adopted the Employee Savings Plan & Trust
in 1987. Prior service with the predecessor company is credited in full as
service with us or Prentiss Properties Acquisition Partners, L.P. and
designated subsidiaries for all purposes under the Employee Savings Plan &
Trust, including eligibility and vesting.
The Employee Savings Plan & Trust is a defined contribution plan that is
qualified under Section 401(k) of the Internal Revenue Code of 1986.
Contributions made by employees or by us to the plan, and income earned on
these contributions, are not taxable to employees until withdrawn from the
plan. Our employees may enroll in the Employee Savings Plan & Trust on March 1,
June 1, September 1, and December 1 after completing one year of employment
with us and attaining age 21. Plan participants are immediately vested in their
pre-tax contributions, matching and our discretionary contributions, and
earnings thereon.
The Employee Savings Plan & Trust permits each plan participant to elect
to defer up to 15% of base compensation, subject to the annual statutory
limitation ($10,500 for 2001, $10,500 for 2000, $10,000 for 1999 and 1998 and
$9,500 for 1997 and 1996) prescribed by Section 402(g) of the Internal Revenue
Code, on a pre-tax basis. Along with Prentiss Properties Acquisition Partners,
L.P., and designated subsidiaries, we will make matching contributions for our
respective plan participants equal to 25% of amounts deferred up to 6% of the
participant's compensation.
For the years 2000 and 2001, we made an additional matching contribution
in a total amount of $600,000 for both years combined to the Employee Savings
Plan & Trust. This matching contribution will be in addition to the match
participating employees currently receive. The first portion of the additional
match was $300,000 and was available to all employees who made contributions to
their account during the calendar year 2000 and were employees as of December
31, 2000. The second additional match was $300,000 and was available to all
employees who made contributions to their accounts during 2001 and were
employees as of December 31, 2001. The second match was made in January 2002.
Share Purchase Plan
Under our Share Purchase Plan, and with respect only to year 2001, our
employees were able to purchase our common shares directly from us at a 25%
discount to the then-current market value at the date of purchase for the first
$10,000 of an individual employee's payroll deduction. Employees may make
subsequent purchases, including purchases in all subsequent years, of our
common shares at a 15% discount. An employee's purchases, on an annual basis,
under the Share Purchase Plan will be limited to the lesser of 20% of the
employee's base salary or $25,000. The maximum number of our common shares that
may be purchased under the Share Purchase Plan is 500,000. Employees who
participate in the plan will recognize income, and we will be allowed a
business expense deduction, equal to the discount at the time of a purchase. As
of March 15, 2002, a total of 216,920 of our common shares have been issued
under the Share Purchase Plan with approximately 200 individuals participating
in 2001.
Key Employee Share Option Plan
We have adopted a Key Employee Share Option Plan. Pursuant to the Key
Employee Share Option Plan, our officers and other selected employees who earn
bonuses have the option of deferring the payment of such bonuses. Participants
may use such deferred compensation to purchase various mutual funds. In
addition, if we so provide, participants may purchase our common shares at a
15% discount to the then-current market value at the date of the purchase,
which is the same discount available to all employees under the Share Purchase
Plan, or other investments offered through the Key Employee Share Option Plan.
For 2001 bonuses payable in March 2002, we have suspended the 15% discount. If
a participant elects to purchase our common shares with the deferred bonus
compensation, we will purchase our common shares on the open market and place
them in a trust for the benefit of such participant. Such trust may deliver
common shares held for the benefit of a participant beginning six months from
the date they were placed in the trust. The purpose of the Key Employee Share
Option Plan is to provide a vehicle for the payment of compensation otherwise
payable
13
to the participants, in a form that will provide incentives and rewards for
meritorious performance and encourage the participants' continuance as
employees. The Compensation Committee administers the Key Employee Share Option
Plan.
1996 Share Incentive Plan
Prior to our initial public offering, the board of trustees adopted, and
our then sole shareholder approved, the 1996 Share Incentive Plan for the
purpose of attracting and retaining executive officers, trustees and employees.
The Compensation Committee of the board of trustees administers the 1996 Share
Incentive Plan. The Compensation Committee may not delegate its authority with
respect to grants and awards to individuals subject to Section 16 of the
Exchange Act.
Our officers and employees generally will be eligible to participate in
the 1996 Share Incentive Plan. The Compensation Committee selects the
individuals who will participate in the 1996 Share Incentive Plan. The
Compensation Committee may not grant to a participant in the 1996 Share
Incentive Plan, in any calendar year, options to purchase more than 390,000 of
our common shares or SARs that cover more than 390,000 common shares. Options
granted with tandem SARs shall be treated as a single award for purposes of
applying the limitation in the preceding sentence. No participant in the 1996
Share Incentive Plan may be issued, in any calendar year, more than 50,000
common shares pursuant to an award of Restricted Shares (defined below) or
Performance Shares (defined below).
The 1996 Share Incentive Plan currently authorizes the issuance of up to
5,000,000 common shares. The 1996 Share Incentive Plan provides for the grant
of (i) share options not intended to qualify as incentive share options under
Section 422 of the Internal Revenue Code, (ii) Performance Shares, (iii) SARs,
issued alone or in tandem with options, (iv) Restricted Shares, which are
contingent upon the attainment of performance goals or subject to vesting
requirements or other restrictions and (v) incentive awards. The Compensation
Committee prescribes the conditions that must occur for Restricted Shares to
vest or for Performance Shares to vest and incentive awards to be earned.
Our incentive compensation awards are designed to reward and motivate key
employees for achieving financial and operational objectives and increasing
long term value of our common shares. We pay incentive compensation annually
through a combination of stock option and restricted stock awards based upon
the achievement of target objectives for certain performance measures for the
most recently completed fiscal year. The Compensation Committee uses equal
weightings of total shareholder return and our performance relative to our peer
group of REITs as our primary performance measures for determining incentive
compensation awards. To a lesser degree, growth in funds from operations per
share, and for certain participants, the performance of the employee's
department or division will influence such determinations. Incentive
compensation amounts actually paid are determined based on whether the
"threshold," "target" or "maximum" pre-determined levels for each performance
measure are met. If target performance is achieved, each participant's total
compensation will be between the median and 75th percentile of the market
competitive incentive remuneration practices found among our peer group of
REITs. Should we exceed our target performance levels, the total compensation
to each participant should approximate the 75th percentile of such competitive
practices, while if less than target performance is achieved, the total
compensation will be substantially below the median of such competitive
practices. Annual incentives will not be awarded if the "threshold" levels of
performance are not realized.
We believe that our incentive award program further aligns the interests
of our executives with those of our shareholders since share-related
compensation is directly tied to shareholder value. Stock options and
restricted shares awarded under this aspect of the 1996 Share Incentive Plan
vest 33.3% per annum beginning one year following the anniversary of the award
grant.
In connection with the grant of options under the 1996 Share Incentive
Plan, the Compensation Committee will determine the option exercise period and
any vesting requirements. An option may be exercised for any number of whole
shares less than the full number for which the option could be exercised. A
plan participant will have no rights as a shareholder with respect to our
common shares subject to his or her option until the option is exercised. To
the extent an option has not become exercisable at the time of a plan
participant's termination of employment, the plan participant will forfeit the
option unless the
14
Compensation Committee exercises its discretion to accelerate vesting for the
plan participant. If a plan participant is terminated due to dishonesty or
similar reasons, all unexercised options, whether vested or unvested, will be
forfeited. Any common shares subject to options which are forfeited (or expire
without exercise) pursuant to the vesting requirement or other terms
established at the time of grant will again be available for grant under the
1996 Share Incentive Plan. The exercise price of options granted under the 1996
Share Incentive Plan may not be less than the fair market value of our common
shares on the date of grant. Payment of the exercise price of an option granted
under the 1996 Share Incentive Plan may be made in cash, cash equivalents
acceptable to the Compensation Committee or, if permitted by the option
agreement, by exchanging common shares having a fair market value equal to the
option exercise price.
As of March 15, 2002 all trustees on our board of trustees and
approximately 570 of our employees were eligible to receive options under the
1996 Share Incentive Plan. As of March 15, 2002, we had granted 4,212,312
options under the 1996 Share Incentive Plan, 1,995,761 of which had been
exercised, 516,746 of which had been forfeited and 1,699,805 of which remained
outstanding as of such date. A total of 817,634 common shares remain available
for grant as of March 15, 2002. To see a table setting forth information
regarding grants of options to our executive officers during the 2001 fiscal
year, see "--Option Grants in Last Fiscal Year." We did not grant SARs under
the 1996 Share Incentive Plan in 2001.
We may not grant options, SARs, Restricted Shares, incentive award or
performance shares under the 1996 Share Incentive Plan after December 31, 2006.
The board of trustees may amend or terminate the 1996 Share Incentive Plan at
any time, but an amendment will not become effective without shareholder
approval if the amendment materially (i) increases the number of shares that
may be issued under the 1996 Share Incentive Plan (other than adjustments
provided in the 1996 Share Incentive Plan); (ii) changes the eligibility
requirements; or (iii) increases the benefits that may be provided under the
1996 Share Incentive Plan. No amendment will affect a participant's outstanding
award without the participant's consent.
Trustees' Share Incentive Plan
Pursuant to our Trustees' Share Incentive Plan, we may grant nonqualified
options to purchase our common shares to our independent trustees. Pursuant to
the Trustees' Share Incentive Plan, each independent trustee receives quarterly
grants of our common shares having a fair market value of approximately $6,250
on the date of issuance. Each independent trustee automatically receives an
option for 10,000 common shares on the date of the first board of trustees
meeting following the annual meeting of shareholders at which the independent
trustee is first elected to the board of trustees. However, an independent
trustee who is first elected or appointed to the board of trustees other than
at an annual meeting of shareholders will receive an option for 10,000 of our
common shares on the date of such election or appointment. Independent trustees
are granted options to purchase 7,500 common shares annually on July 1.
The exercise price of options granted under the Trustees' Share Incentive
Plan is the fair market value of our common shares on the date of grant.
Options granted under the Trustees' Share Incentive Plan upon election or
appointment of an independent trustee become exercisable for 2,500 shares on
each of the first through fourth anniversaries of the date of grant, provided
that the trustee is a member of the board of trustees on such anniversary date.
Annual options granted to an independent trustee are fully vested and
exercisable when granted. The maximum number of our common shares that we may
issue under the Trustees' Share Incentive Plan is 200,000.
As of March 15, 2002, five of our trustees were eligible to receive
options under the Trustees' Share Incentive Plan. As of March 15, 2002, 175,000
options had been granted under the Trustees' Share Incentive Plan, none of
which had been exercised, none of which had been forfeited and all of which
remained outstanding as of such date. A total of 25,000 of our common shares
remain available for grant as of March 15, 2002. To see a table setting forth
information regarding grants of options to our executive officers during the
2001 fiscal year, see "Executive Compensation -- Option Grants in Last Fiscal
Year." We did not grant SARs under the Trustees' Share Incentive Plan in 2001.
The board of trustees has approved, and is submitting to the shareholders
for their approval, the amended and restated Trustees' Share Incentive Plan
which increases by 300,000 shares the aggregate number of our common shares
that may be issued under the current Trustees' Share Incentive Plan, extends
the duration of
15
the current Trustees' Share Incentive Plan by 10 years, and gives us broader
authority in terms of the types, amounts and dates of share grants that we may
authorize than we are given under the current Trustees' Share Incentive Plan.
See "Proposal 2--Amendment of the Trustees' Share Incentive Plan."
Effective January 1, 2002, the board of trustees approved, subject to
shareholder approval of the amended and restated Trustees' Share Incentive
Plan, an award of up to 10,000 shares to each independent trustee, to increase
each independent trustees' compensation and to reward each trustee for five
years of service on our board of trustees. Each award will vest subject to our
performance as discussed below at the end of fiscal 2006. The exact amount of
each award will depend on the total return to our shareholders over the five
year award period, with the full 10,000 shares being awarded to each trustee if
the total return to our shareholders over the five-year period has been greater
than 14%. No shares will be awarded if the total return to our shareholders
over the five-year period is less than 8%.
Trustee Compensation
Currently, each of our trustees who is also one of our executive officers
or employees receives no compensation as such for service as members of either
the board of trustees or committees thereof. Independent trustees receive a fee
of $1,250 plus expenses for attendance in person at each meeting of the board
of trustees, $500 for each telephonic meeting of the board of trustees and $750
for each committee meeting attended. We pay the fee for attending committee
meetings only when a committee meeting is not held on the same day as a meeting
of the board of trustees. Each member of the Audit Committee receives $3,000
annually. Independent trustees are also eligible to receive our common shares
and options to purchase our common shares pursuant to the Trustees' Share
Incentive Plan as discussed above. See "--Trustees' Share Incentive Plan."
Employment Agreements
We entered into employment agreements with Messrs. Prentiss and August on
October 22, 1996. Mr. Prentiss' agreement was amended and restated effective
February 14, 2001 and has an initial employment term of five years. Mr.
Prentiss' agreement is renewable upon mutual agreement of both parties. Mr.
August's agreement was amended and restated effective May 10, 2000 and has an
initial employment term of three years. Mr. August's agreement will
automatically be renewed for successive one-year periods unless otherwise
terminated pursuant to the agreement. Messrs. Prentiss' and August's agreements
provide for 2001 base annual compensation of $350,000 for Mr. Prentiss and
$330,000 for Mr. August. Incentive compensation for Messrs. Prentiss and August
is to be determined by the Compensation Committee. Mr. Prentiss' employment
agreement provides for an annual $50,000 increase in base salary. Mr. Prentiss
waived his 2002 salary increase as part of our plan to reduce overhead and
other expenses. Mr. August's agreement provides that the Compensation Committee
may approve increases in his base salary. Each of the employment agreements
provides for certain severance payments in the event of a change in control of
Prentiss Properties Trust, disability or termination by us without cause or by
the employee with cause. We employ no other individuals pursuant to an
employment agreement.
The terms of Messrs. Prentiss' and August's employment agreements require
that Messrs. Prentiss and August devote substantially all of their business
time to our affairs. These agreements also, subject to certain exceptions,
prohibit them from engaging, directly or indirectly, during the term of their
employment plus the period beginning on the date of the termination of
employment with us and ending on the second anniversary of such date, in any
activity anywhere in the U.S. in which we compete.
16
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
To the board of trustees of Prentiss Properties Trust:
The Compensation Committee is responsible for establishing and
administering compensation policies, establishing salaries of and awarding
performance-based bonuses to our executive officers, and determining awards of
restricted shares and grants of share options under our share plans. The
Compensation Committee's policy is to devise and implement compensation for our
officers and employees which shall be commensurate with their position and
determined with reference to compensation paid to similarly situated employees
and officers of companies that the Compensation Committee deems to be
comparable to ours. Messrs. Hynes, Riggs and Wilson comprise the Compensation
Committee of the board of trustees. We do not employ any of the members of the
Compensation Committee.
Base Compensation and Bonuses
Pursuant to the directive of the Compensation Committee and our board of
trustees, the compensation of the executive officers for 2001 was established
as follows:
Executive Officer Annual Base Salary
----------------- ------------------
Michael V. Prentiss, Chairman of the Board ............ $350,000
Thomas F. August, President and CEO ................... 330,000
Lawrence J. Krueger, Executive Vice President ......... 200,000
Robert K. Wiberg, Executive Vice President ............ 190,000
Christopher M. Hipps, Senior Vice President .......... 189,000
The Compensation Committee will determine annually a bonus plan for our
officers, with any future common share bonus awards to be issued to the
executive officers through the 1996 Share Incentive Plan.
Share Options under the 1996 Share Incentive Plan
The Compensation Committee approved the grant of share options to the
following executive officers pursuant to the 1996 Share Incentive Plan, as
follows:
Number of Shares Subject to Options
-------------------------------------------
1998 1999 2000 2001
Executive Officer Awards Awards Awards Awards
----------------- ------ ------ ------ ------
Michael V. Prentiss, Chairman of the Board ............ -- 75,000 150,000 --
Thomas F. August, President and CEO ................... -- 55,000 150,000 36,900
Lawrence J. Krueger, Executive Vice President ......... -- 22,725 46,000 11,800
Robert K. Wiberg, Executive Vice President ............ 50,000 23,790 48,000 12,500
Christopher M. Hipps, Senior Vice President ........... 5,000 34,600 40,000 11,800
On February 6, 1998, we granted 50,000 options to Mr. Wiberg, Executive
Vice President and Managing Director of the Mid-Atlantic Region, to purchase
shares which vest at the rate of 33 1/3% per year over a three-year period
commencing on the date of grant. The exercise price is $27.312, which
represents the closing price for our common shares on the New York Stock
Exchange on February 6, 1998.
On November 30, 1998, we granted 5,000 options to Mr. Hipps, the then
Senior Vice President and Managing Director of the West Region to purchase
shares which vest at the rate of 33 1/3% per year over a three year period
commencing on the date of grant. The exercise price is $23.375, which
represents the closing price for our common shares on the New York Stock
Exchange on November 30, 1998. Also, on April 15, 1999, we granted 20,000
options to Mr. Hipps to purchase shares which vest at the rate of 33 1/3% per
year over a three-year period commencing on the date of the grant. The exercise
price is $19.8750, which represents the closing price for our common shares on
the New York Stock Exchange on April 15, 1999.
Based upon our performance for the 1999 fiscal year, we awarded to our
named executive officers incentive compensation in the form of stock options
and restricted stock grants on March 1, 2000. The
17
options and restricted stock were granted pursuant to our 1996 Share Incentive
Plan and are listed in the long-term compensation columns of the Summary
Compensation Table.
Based upon our performance for the 2000 fiscal year, we awarded to our
executive officers named in this Proxy Statement, incentive compensation in the
form of stock options and restricted stock grants. We granted the options and
restricted stock pursuant to our 1996 Share Incentive Plan and such grants are
listed in the long-term compensation columns of the Summary Compensation Table.
Based upon our performance for the 2001 fiscal year, we awarded to our
executive officers named in this Proxy Statement, incentive compensation in the
form of stock options and restricted stock grants. We granted the options and
restricted stock pursuant to our 1996 Share Incentive Plan and such grants are
listed in the long-term compensation columns of the Summary Compensation Table.
Messrs. Prentiss, August, Krueger and Wiberg exercised options during
2001. See "Executive Compensation--Option Exercises in Last Fiscal Year." The
Compensation Committee may also award shares of Restricted Shares, performance
shares or SARs to our executive officers pursuant to the 1996 Share Incentive
Plan. All such awards have been reflected herein.
Chairman of the Board and CEO Compensation
In determining the appropriate compensation for our Chairman of the Board
and Chief Executive Officer, the Compensation Committee uses as its guide our
performance, competitive practices, and the Compensation Committee's policy, as
discussed above, of determining compensation with reference to the compensation
paid to similarly situated executives of comparable companies. The Compensation
Committee considers appropriate adjustments in the compensation of our Chairman
of the Board and Chief Executive Officer concurrently with similar adjustments
it makes for our other executive officers.
We adjusted Messrs. Prentiss' and August's compensation to $350,000 and
$330,000, respectively, in 2001 for 2001. In addition, Messrs. Prentiss and
August received a bonus in March 2002 for the 2001 year of $256,515 and
$241,857, respectively. As of March 15, 2002, the Board agreed that the
executive officers should receive no raises for 2002.
We adjusted Messrs. Prentiss' and August's compensation to $317,000 and
$310,000, respectively, in 2000 for 2000. In addition, Messrs. Prentiss and
August received a bonus in March 2001 for the 2000 year of $418,400 and
$410,861, respectively.
We adjusted Messrs. Prentiss' and August's compensation to $302,500 and
$269,500, respectively, in 1999 for 1999. In addition, Messrs. Prentiss and
August received a bonus in March 2000 for the 1999 year of $363,000 and
$269,500, respectively. We paid bonuses in 1999 for 1998 to Mr. Prentiss in the
amount of $299,063 and to Mr. August in the amount of $221,113 and in 1998 for
1997 to Mr. Prentiss in the amount of $235,913 and to Mr. August in the amount
of $209,700. In determining these amounts, the Compensation Committee reviewed
cash compensation levels for executive officers of other publicly traded REITs
with approximately comparable levels of capitalization to ours and for various
other REITs as reported by the National Association of Real Estate
Investment Trust's annual Study of Executive Compensation, prepared by FPL
Associates, an independent executive compensation consulting firm based in
Chicago, Illinois.
This report has been furnished by the members of the Compensation
Committee.
Thomas J. Hynes, Jr.
Leonard M. Riggs, Jr.
Lawrence A. Wilson
18
PERFORMANCE GRAPH
The following performance graph compares the change in the cumulative
total shareholder return on our common shares for the period October 22, 1996,
which was the first day our common shares traded on the New York Stock
Exchange, through December 31, 2001, with the changes in the S&P 500 Index, the
SNL Securities Office/Industrial REIT Index and the National Association of
Real Estate Investment Trusts Equity Index (the "NAREIT Equity Index") for the
same period. The performance graph assumes a base share price of $100 for our
common shares on October 22, 1996 and each index for comparative purposes.
Total return equals appreciation in share price plus dividends paid, and
assumes that all dividends are reinvested. The performance graph is not
necessarily indicative of future investment performance. Information in the
performance graph was compiled by SNL Securities L.C.
Prentiss Properties Trust
Total Return Performance
[THE FOLLOWING INFORMATION WAS ALSO REPRESENTED AS A LINE CHART IN THE PRINTED
MATERIAL]
Period Ending
---------------------------------------------------------------------------------------------------------------------
Index 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
---------------------------------------------------------------------------------------------------------------------
Prentiss Properties Trust 100.00 118.50 101.39 105.35 143.41 158.11
---------------------------------------------------------------------------------------------------------------------
S&P 500 100.00 133.37 171.44 207.52 188.62 166.22
---------------------------------------------------------------------------------------------------------------------
SNL Office/ Industrial REITs 100.00 125.55 103.88 106.83 144.72 152.72
---------------------------------------------------------------------------------------------------------------------
NAREIT All Equity REIT Index 100.00 120.26 99.21 94.63 119.59 136.24
---------------------------------------------------------------------------------------------------------------------
19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth information, as of March 15, 2002,
regarding each person that we know to be the beneficial owner of more than 5%
of our outstanding common shares. Unless otherwise indicated, such common
shares are owned directly and the indicated entity has sole voting and
investment power with respect thereto.
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class (1)
---------------------------------------- ---------------------- -----------
European Investors, Inc. ............... 2,051,800(2) 5.4%
717 5th Avenue
New York, NY 10022
CRA Real Estate Securities, LP ......... 2,275,325(3) 6.0%
259 N. Radnor Chester Road
Suite 205
Radnor, PA 19087
Security Capital Group, Inc. ........... 3,773,585(4) 9.9%
125 Lincoln Avenue
Santa Fe, NM 87501
------------
(1) Based on 37,811,019 of our common shares outstanding as of March 15, 2002.
(2) European Investors, Inc. beneficially owns 581,200 of our common shares of
beneficial interest. ERI Realty Securities, Inc., a wholly owned subsidiary
of European Investors, Inc., beneficially owns 1,470,600 of our common
shares of beneficial interest.
(3) Based solely upon information contained in the Schedule 13G, filed with the
SEC on February 22, 2002.
(4) Includes 3,773,585 of our common shares issuable upon conversion of Series
D Cumulative Convertible Redeemable Preferred Shares of Beneficial interest
upon 60 days prior written notice.
20
Security Ownership of Management
The following table sets forth the beneficial ownership of our common
shares as of March 15, 2002, by (1) each of our trustees; (2) each of our named
executive officers; and (3) our trustees and executive officers as a group.
Unless otherwise indicated in the footnotes, all of such interests are owned
directly, and the indicated person has sole voting and investment power.
Number of Shares Percent of All
Name of Beneficial Owner Beneficially Owned(1) Common Shares (1)
-------------------------------------------------------- ----------------------- ------------------
Michael V. Prentiss (2) ................................ 2,808,623 7.1%
Thomas F. August (3) ................................... 567,544 1.4%
Thomas J. Hynes, Jr. (4) ............................... 40,071 *
Barry J.C. Parker (4) .................................. 44,071 *
Dr. Leonard M. Riggs, Jr. (4) .......................... 46,571 *
Ronald G. Steinhart (4) ................................ 49,071 *
Lawrence A. Wilson (4) ................................. 39,071 *
Michael A. Ernst ....................................... 48,588 *
Christopher B. Mahon ................................... 3,530 *
Daniel K. Cushing ...................................... 22,403 *
Lawrence J. Krueger .................................... 96,772 *
Robert K. Wiberg ....................................... 114,728 *
Christopher M. Hipps ................................... 88,578 *
All Trustees and Executive Officers as a Group ......... 3,969,621 10.1%
------------
* Less than 1%
(1) In computing the number of common shares beneficially owned by a person,
common shares subject to options held by that person that are currently
exercisable or that become exercisable within 60 days of the record date
are deemed outstanding for such person but are not deemed to be
outstanding for purposes of computing the ownership percentage for any
other person. In addition, the computation of the number of common shares
beneficially owned by a person assumes that all units of beneficial
interest in our operating partnership held by the person are redeemed for
common shares. The total number of common shares outstanding used in
calculating the percentage of all common shares and units assumes that all
of the units held by other persons are redeemed for common shares.
(2) Includes 116,667 of the 241,667 common shares issuable upon the exercise of
options granted under the 1996 Share Incentive Plan, 50,000 of which are
currently exercisable, 66,667 of which are exercisable within 60 days, and
the remainder of which are exercisable at subsequent dates. Also includes
units redeemable for 262,733 common shares, units redeemable for 333,387
common shares which are held in a trust of which Mr. Prentiss is not a
trustee, and of which Mr. Prentiss disclaims beneficial ownership and
896,878 common shares owned by certain Grantor Retained Annuity Trusts
established by Mr. Prentiss, of which Mr. Prentiss disclaims beneficial
ownership.
(3) Includes 100,000 of the 255,233 common shares issuable upon the exercise of
options granted under the 1996 Share Incentive Plan, 50,000 of which are
currently exercisable, 50,000 of which are exercisable within 60 days, and
the remainder of which are exercisable at subsequent dates. Includes units
redeemable for 88,576 common shares. Also includes 116,518 common shares
owned by certain Grantor Retained Annuity Trusts established by Mr.
August, of which Mr. August disclaims beneficial ownership.
(4) The independent trustees receive a fee of $25,000 per year payable
quarterly in common shares and options to purchase 7,500 common shares
which vest immediately. The table includes the vested portion of the
10,000 common shares issuable upon the exercise of options granted under
the Trustees' Share Incentive Plan, which vested in equal installments
over a four-year period on the anniversary date of the grant and includes
5,000, 5,000, 7,500 and 7,500 common shares issuable upon the exercise of
options granted under the Trustees' Share Incentive Plan on July 1, 1998,
July 1, 1999, July 3, 2000 and July 2, 2001, respectively, which were
fully vested when granted.
21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sharing of Offices and Employees
We share executive offices and certain employees with one of our
affiliates, Prentiss Properties Limited, Inc. We each bear our share of costs
including allocable portions of rent, salaries, office expenses, employee
benefits and various fixtures and equipment. To the extent that services are
provided between the companies, we allocate such estimated costs to the related
party. The total estimated costs allocated between the Prentiss Properties
Trust and Prentiss Properties Limited, Inc. from January 1, 2001 throughout
December 31, 2001 totaled $4,000,000.
Officer Loan Program
In June 1999, we granted loans to certain of our employees. Each unsecured
loan has a term of five years, accrues interest at 7% per annum and is with
recourse as to each borrower. Borrowers will make payments to us quarterly at a
rate equal to the original principal amount of the loans multiplied by the
percentage obtained by dividing the amount of the quarterly dividend per common
share that we declare by the closing price of one of our common shares on the
date(s) amounts were advanced.
The loans contain loan forgiveness provisions with the purpose of securing
the continued and future employment services of the borrowers. One-third of the
unpaid principal amount of each loan will be forgiven on the third, fourth and
fifth anniversaries of the loan grant, provided that there has been no default
by the borrower, including termination of the borrower's employment.
Unsecured Moving Incentive Loans
We loaned $74,375 to Christopher M. Hipps on June 1, 1999. We loaned
$74,583 to Daniel K. Cushing on January 1, 2002. Each of the loans were entered
into to assist Messrs. Hipps and Cushing with moving expenses incurred when
they re-located. The loans contain loan forgiveness provisions with the purpose
of securing the continued and future employment services of the borrowers.
One-fifth of the unpaid principal amount of each loan will be forgiven on the
first, second, third, fourth and fifth anniversaries of the loan grant,
provided that there has been no default by the borrower, including termination
of the borrower's employment.
Home Loan
On June 28, 1999, we loaned Christopher M. Hipps $500,000 at 0% interest
to purchase a home in California. We entered into the loan to help induce Mr.
Hipps to accept the position of Managing Director of our West Region and to
compensate Mr. Hipps for the high cost of living in California. The loan is
non-recourse, is secured by the home Mr. Hipps purchased in California and is
due on the earlier of (1) the termination of Mr. Hipps' employment with us, (2)
the sale of Mr. Hipps' California residence and (3) June 28, 2009.
Current Loan Balances
The highest aggregate amount of all loans described above since January 1,
2001 was $4,121,052. The amount of indebtedness of our executive officers as of
March 15, 2002 is set forth in the table below.
Name Loan Principal Balance
------------------------------------------ -----------------------
Thomas F. August ....................... $ 429,074
Robert K. Wiberg ....................... 333,724
Lawrence J. Krueger .................... 333,724
Michael A. Ernst ....................... 190,696
Christopher M. Hipps ................... 735,445
Daniel K. Cushing ...................... 265,279
22
Formation of Taxable REIT Subsidiary
Tax legislation prohibits us from owning more than 10% of the voting
common stock of an issuer or more than 10% of the value of an issuer, except
for our interests in our operating partnership, our non-corporate subsidiaries,
taxable REIT subsidiaries, or any qualified REIT subsidiary. To comply with
this legislation, in March 2001, our operating partnership, through the
following related transactions, formed Prentiss Properties Resources, Inc. to
act as a taxable REIT subsidiary under the Real Estate Investment Trust
Modernization Act which allows a corporation, other than a REIT, in which a
REIT directly or indirectly owns stock, to perform services for tenants without
disqualifying the rents received:
o Our operating partnership contributed to Prentiss Properties
Resources, among other things, (1) $1 million, (2) all of the
outstanding non-voting common stock of our third-party service
provider, Prentiss Properties Limited, Inc., (3) two promissory notes
with a combined original principal amount of $34.7 million issued by
Prentiss Properties Limited to our operating partnership and (4) real
property located in Dallas, Texas and in return Prentiss Properties
Resources issued to our operating partnership 958.5 shares of its
non-voting common stock and a promissory note in the amount of $5
million.
o Ampulla, LLC, which is wholly-owned by Michael V. Prentiss,
contributed all of its voting common stock of Prentiss Properties
Limited to Prentiss Properties Resources in return for 21.5 shares of
non-voting common stock of Prentiss Properties Resources.
o Our operating partnership purchased Ampulla's 21.5 shares of the
non-voting common stock of Prentiss Properties Resources for
approximately $72,000.
After giving effect to the above series of transactions, our operating
partnership became the owner of all of the outstanding non-voting common stock
of Prentiss Properties Resources and Ampulla became the owner of all of the
outstanding voting common stock of Prentiss Properties Resources, and Prentiss
Properties Limited became a wholly-owned subsidiary of Prentiss Properties
Resources.
23
PROPOSAL TWO
AMENDMENT OF THE TRUSTEES' SHARE INCENTIVE PLAN
Proposed Amendment
On January 1, 2002 the board of trustees voted to amend and restate our
Trustees' Share Incentive Plan and is recommending that the shareholders
approve and adopt the amended and restated Trustees' Share Incentive Plan. The
amended and restated Trustees' Share Incentive Plan increases the aggregate
number of our common shares that may be issued under the Trustees' Share
Incentive Plan by 300,000 shares. In addition, the amended and restated
Trustee's Share Incentive Plan extends the duration of the original Trustee's
Share Incentive Plan by 10 years and gives us broader authority in terms of the
types, amounts and dates of share grants that we may authorize than we are
given under the current Trustees' Share Incentive Plan. The full text of the
amended and restated Trustees' Share Incentive Plan is attached to this proxy
statement as Annex A.
Recommendation
The Board believes that increasing the aggregate number of our common
shares that may be issued under the Trustees' Share Incentive Plan, extending
the duration of the Trustees' Share Incentive Plan and giving us broader
authority in terms of the types, amounts and dates of share grants that we may
authorize than we are given under the current Trustees' Share Incentive Plan is
necessary to recruit and retain trustees now and in the future and to promote a
greater identity of interest between trustees and shareholders by enabling such
persons to participate in our future success. THE BOARD OF TRUSTEES UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR ADOPTION OF THE AMENDED AND RESTATED
TRUSTEES' SHARE INCENTIVE PLAN.
Comparison of the Current Trustees Share Incentive Plan and the Amended and
Restated Trustees' Share Incentive Plan
The amended and restated Trustees' Share Incentive Plan, if approved by
the shareholders, will give our board of trustees broad authority to issue
shares, options, or restricted shares to our independent trustees. The
following is a comparison of the material terms of our current Trustees' Share
Incentive Plan and the proposed amended and restated Trustees' Share Incentive
Plan.
Shares Available for Issuance
As of March 15, 2002, five of our trustees were eligible to receive
options under the current Trustees' Share Incentive Plan. As of March 15, 2002,
175,000 options had been granted under the current Trustees' Share Incentive
Plan, none of which had been exercised, none of which had been forfeited and
all of which remained outstanding as of such date. A total of 25,000 of our
common shares remain available for grant as of March 15, 2002. To see a table
setting forth information regarding grants of options to our executive officers
during the 2001 fiscal year, see "Executive Compensation -- Option Grants in
Last Fiscal Year." We did not grant SARs under the Trustees' Share Incentive
Plan in 2001. The maximum number of our common shares that we may issue under
the current Trustees' Share Incentive Plan is 200,000. A total of 300,000
shares, plus any remaining available for issuance under the current Trustees'
Share Incentive Plan will be available for issuance under the amended and
restated plan if it is approved by our shareholders.
Share Grants
Pursuant to the current Trustees' Share Incentive Plan, each independent
trustee receives quarterly grants of our common shares having a fair market
value of approximately $6,250 on the date of issuance. If the amended and
restated Trustees' Share Incentive Plan is approved by our shareholders we will
be able to issue common shares to our independent trustees in amounts and at
dates within our discretion, subject to the terms of the amended and restated
plan.
24
Option Grants
Under the current Trustees' Share Incentive Plan, each independent trustee
automatically receives an option for 10,000 common shares on the date of the
first board of trustees meeting following the annual meeting of shareholders at
which the independent trustee is first elected to the board of trustees.
However, an independent trustee who is first elected or appointed to the board
of trustees other than at an annual meeting of shareholders will receive an
option for 10,000 of our common shares on the date of such election or
appointment. Options granted under the current Trustees' Share Incentive Plan
upon election or appointment of an independent trustee become exercisable for
2,500 shares on each of the first through fourth anniversaries of the date of
grant, provided that the trustee is a member of the board of trustees on such
anniversary date. Also, under the current Trustees' Share Incentive Plan,
independent trustees are granted options to purchase 7,500 common shares
annually on July 1.
If the amended and restated Trustees' Share Incentive Plan is approved by
our shareholders, we will no longer be required to issue options in the amounts
and at the dates specified above. Rather, we will have the authority to issue
options under the amended plan in amounts, on dates and upon terms within our
sole discretion subject to the terms of the amended plan. Under the amended and
restated plan, options will be exercisable in accordance with the option
agreements by and between us and our independent trustees.
The exercise price of options granted under both the current Trustees'
Share Incentive Plan and the proposed amended and restated Trustees' Share
Incentive Plan is the fair market value of our common shares on the date of
grant. Annual options granted to an independent trustee under the current
Trustees' Share Incentive Plan are fully vested and exercisable when granted.
Other Share Grants
The current Trustees' Share Incentive Plan only contemplates the issuance
under the plan of options and shares. Under the amended and restated Trustees'
Share Incentive Plan, we may issue restricted shares and any other types of
share grants in our sole discretion subject to the terms of the amended and
restated plan.
Tax Consequences
The grant of a non-qualified option under the current Trustees' Share
Incentive Plan or under the amended and restated Trustees' Share Incentive Plan
will not result in taxable income to the participant. Except as described
below, the participant will realize ordinary income at the time of exercise in
an amount equal to the excess of the fair market value of the shares acquired
over the exercise price for those shares, and we will be entitled to a
corresponding deduction. Gains or losses realized by the participant upon
disposition of such shares will be treated as capital gains and losses, with
the basis in such shares equal to the fair market value of the shares at the
time of exercise.
The exercise of non-qualified options through the delivery of previously
acquired stock will generally be treated as a non-taxable, like-kind exchange
as to the number of shares surrendered and the identical number of shares
received under the option. That number of shares will take the same basis and,
for capital gains purposes, the same holding period as the shares that are
given up. The value of the shares received upon such an exchange that are in
excess of the number given up will be includible as ordinary income to the
participant at the time of the exercise. The excess shares will have a new
holding period for capital gain purposes and a basis equal to the value of such
shares determined at the time of exercise.
If the Committee or Board establishes share deferral procedures, and the
participant chooses to defer receipt of the shares upon exercise, the
participant will not recognize ordinary income upon exercise but will recognize
ordinary income at the end of the deferral period in the amount of the full
value of the shares with respect to which the deferral has ended. At such time
we will generally be entitled to a corresponding deduction.
An award of shares under the current Trustees' Share Incentive Plan or
under the amended and restated Trustees' Share Incentive Plan will result in
taxable ordinary income at the time of the award in the amount of the fair
market value of the shares awarded. We will be entitled to a deduction in the
amount of such ordinary income.
25
Unless the participant makes an election under section 83(b) of the
Internal Revenue Code, the lapse of restrictions with respect to an award of
restricted shares under the amended and restated Trustees' Share Incentive Plan
will result in taxable ordinary income to the participant at the time of the
lapse in the amount of the fair market value of the shares with respect to
which the restrictions have lapsed. We will be entitled to a deduction in the
amount of such ordinary income. If the participant makes the section 83(b)
election, he or she will realize ordinary income at the time of the grant of
the award in the amount of the full value of the restricted stock and we will
be entitled to a corresponding deduction
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL TWO.
PROXIES SOLICITED BY THE BOARD OF TRUSTEES WILL BE SO VOTED UNLESS OTHERWISE
SPECIFIED.
26
PROPOSAL THREE
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
We have appointed PricewaterhouseCoopers LLP as our independent
accountants for the fiscal year ending December 31, 2002.
PricewaterhouseCoopers LLP (formerly Coopers & Lybrand LLP) has served as our
independent accountants since 1996.
The fees billed to us by PricewaterhouseCoopers LLP for fiscal year 2001
were as follows:
Audit Fees. The total fees for professional services rendered in
connection with the audit of our annual financial statements included in our
annual report on Form 10-K and the review of the financial statements included
in our quarterly reports on Form 10-Q totaled $191,175 for fiscal year 2001.
All Other Fees. Aggregate fees billed for all other services rendered by
PricewaterhouseCoopers LLP for fiscal year 2001 totaled $166,903. Fees included
in "Other Fees" are the following: $22,000 for our 1999 Tax Review, $36,389 for
our 2000 Tax Review, $87,706 for separate audits of several of our properties
and other SEC filings, $8,150 for audit of our Employee Savings Plan & Trust,
$842 for a German Tax Representation Fee pursuant to registration of our shares
in Germany, $154 for a compensation survey, $2,111 for a 2000 tax return
review, $7,000 for an audit of Security Capital Group, Inc. related documents,
and $2,550 for miscellaneous work.
Our board of trustees has decided to afford our shareholders the
opportunity to express their opinions on the matter of our auditors, and,
accordingly, is submitting to our shareholders at the annual meeting a proposal
to ratify our board of trustees' appointment of PricewaterhouseCoopers LLP as
our independent auditors for fiscal 2002. In the event shareholders do not
ratify the appointment, the appointment will be reconsidered by the Audit
Committee and the board of trustees.
Representatives of PricewaterhouseCoopers LLP will be present at the
annual meeting to respond to appropriate questions and to make such statements
as they may desire.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL THREE.
PROXIES SOLICITED BY THE BOARD OF TRUSTEES WILL BE SO VOTED UNLESS OTHERWISE
SPECIFIED.
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
The board of trustees will provide for the presentation of proposals by
shareholders at the 2003 annual meeting of shareholders, provided that such
proposals are submitted by eligible shareholders who have complied with the
relevant regulations of the SEC regarding shareholder proposals, and our
bylaws, a copy of which is available upon written request from our corporate
secretary. Shareholder proposals intended to be submitted for presentation at
our 2003 annual meeting of shareholders must be in writing and must be received
by us at our executive offices on or before November 29, 2002, for inclusion in
our proxy statement and the form of proxy relating to the 2003 annual meeting.
REPORT OF THE AUDIT COMMITTEE
The board of trustees has established an Audit Committee which currently
consists of three independent trustees, Messrs. Steinhart, Riggs and Parker.
The board of trustees has adopted a written charter for the Audit Committee.
The Audit Committee makes recommendations concerning the engagement of
independent public accountants, reviews with the independent public accountants
the plans and results of the audit engagement, approves professional services
provided by the independent public accountants, reviews the independence of the
independent public accountants, considers the range of audit and non-audit fees
and reviews the adequacy of our internal accounting controls. The Audit
Committee held three meetings during 2001. In performing its
26
duties, the Audit Committee meets with the independent accountants without the
presence of any of the other members of the board of trustees and meets with
the full board of trustees without the presence of PricewaterhouseCoopers LLP,
to help ensure the independence of PricewaterhouseCoopers LLP.
Our management has the primary responsibility for the financial statements
and the reporting process including the systems of internal controls. Our
independent public accountants are responsible for expressing an opinion on the
conformity of our audited financial statements with accounting principles
generally accepted in the United States.
PricewaterhouseCoopers LLP has served as our and our subsidiaries'
independent auditor for the year ended December 31, 2001 and will, pending
ratification by our shareholders at the annual meeting, continue to so serve
for the year ending December 31, 2002 until and unless changed by action of the
board of trustees. A representative of PricewaterhouseCoopers LLP is expected
to be present at the annual meeting, will have the opportunity to make a
statement if he desires to do so, and is expected to be available to respond to
appropriate questions.
In connection with the fiscal year 2001 financial statements, the Audit
Committee (1) reviewed and discussed the audited financial statements with
management; (2) discussed with the auditors the matters required by Statement
on Auditing Standards No. 61; (3) received and discussed with the auditors the
matters required by Independence Standards Board Statement No. 1; (4) discussed
the auditor's independence with the auditors; and (5) considered whether the
provision of services by the auditors for matters other than the annual audit
and quarterly reviews is compatible with maintaining the auditor's
independence. Based on these reviews and discussions, the Audit Committee has
recommended to the board of trustees, and the board of trustees has resolved
that our audited financial statements be included in the Securities and
Exchange Commission Annual Report on Form 10-K for the fiscal year ended
December 31, 2001. The Audit Committee believes that the provision of services
by PricewaterhouseCoopers LLP to us is compatible with maintaining the
principal accountant's independence.
Audit Fees. The total fees for professional services rendered in
connection with the audit of our annual financial statements included in our
annual report on Form 10-K and the review of the financial statements included
in our quarterly reports on Form 10-Q totaled $191,175 for fiscal year 2001.
Financial Information Systems Design and Implementation Fees.
PricewaterhouseCoopers LLP did not render any services related to financial
information systems design and implementation for the fiscal year 2001.
All Other Fees. Aggregate fees billed for all other services rendered by
PricewaterhouseCoopers LLP for fiscal year 2001 totaled $166,903. Fees included
in "Other Fees" are the following: $22,000 for our 1999 Tax Review, $36,389 for
our 2000 Tax Review, $87,706 for separate audits of several of our properties
and other SEC filings, $8,150 for audit of our Employee Savings Plan & Trust,
$842 for a
German Tax Representation Fee pursuant to registration of our shares in
Germany, $154 for a compensation survey, $2,111 for a 2000 tax return review,
$7,000 for an audit of Security Capital Group, Inc. related documents, and
$2,550 for miscellaneous work.
This Report has been furnished by the members of the Audit Committee.
Barry J.C. Parker
Dr. Leonard M. Riggs, Jr.
Ronald G. Steinhart
26
INCORPORATION BY REFERENCE
With respect to any future filings with the SEC into which this Proxy
Statement is incorporated by reference, the material under the headings
"Compensation Committee Report on Executive Compensation" and "Performance
Graph" shall not be incorporated into such future filings.
ANNUAL REPORT AND FORM 10-K
Accompanying this Proxy Statement is a copy of our Annual Report to
Shareholders for the year ended December 31, 2001, which contains financial and
other information pertaining to us. Each Annual Report to Shareholders includes
our Form 10-K for the year ended December 31, 2001, including the financial
statements and financial statement schedules filed by us with the SEC. The
Annual Report and the Form 10-K do not form any part of the materials for the
solicitation of proxies.
We will furnish to each beneficial owner of our common shares entitled to
vote at the annual meeting, upon written request to Thomas F. August, our
President and Chief Executive Officer, at 3890 W. Northwest Highway, Suite 400,
Dallas, Texas, 75220, telephone (214) 654-0886, an additional copy of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2001,
including the financial statements and financial statement schedules filed by
us with the SEC.
OTHER MATTERS
The board of trustees knows of no other business to be brought before the
annual meeting. If any other matters properly come before the annual meeting,
the proxies will be voted on such matters in accordance with the judgment of
the persons named as proxies therein, or their substitutes, present and acting
at the meeting.
By Order of the board of trustees
/s/ Michael V. Prentiss,
Michael V. Prentiss,
Chairman of the Board
Dallas, Texas
April 5, 2002
27
Annex A
AMENDED AND RESTATED
PRENTISS PROPERTIES TRUST
TRUSTEES' SHARE INCENTIVE PLAN
(Effective ____________ , 2002)
PREAMBLE
This Amended and Restated Prentiss Properties Trust Trustees' Share
Incentive Plan (Effective ______ , 2002) (the "Plan") is an amendment and
restatement of the Prentiss Properties Trust Trustees' Share Incentive Plan that
was adopted by the Board of the Company on October 15, 1996 (the "Prior Plan").
All grants of Options on or after ______ , 2002, shall be governed by the terms
of the Plan. All grants of Options prior to ______ , 2002, shall be governed by
the terms of the Prior Plan, except to the extent provisions of the Plan are
expressly made applicable to grants or awards under the Prior Plan. The purpose
of the Plan is to (i) assist the Company in recruiting and retaining trustees
and (ii) promote a greater identity of interest between Participants and
shareholders by enabling Participants to participate in the Company's future
success.
ARTICLE I
DEFINITIONS
1.01 Administrator means the Committee, or in the absence of a properly
constituted Committee, the Board.
1.02 Affiliate means any "subsidiary" or "parent" corporation (within the
meaning of Section 424 of the Code) of the Company, including an entity that
becomes an Affiliate after the adoption of this Plan.
1.03 Award means a grant of Options, Restricted Stock or Shares.
1.04 Award Date means the date the Committee grants an Award.
1.05 Board means the Board of Trustees of the Company.
1.06 Code means the Internal Revenue Code of 1986 and the Treasury
Regulations promulgated thereunder.
1.07 Committee means the committee consisting of two or more Trustees who
(i) are appointed by the Board to administer the Plan, and (ii) qualify as
Non-Employee Directors under Rule 16b-3 promulgated under the Securities
Exchange Act of 1934.
1.08 Company means Prentiss Properties Trust.
1.09 Effective Date means the date of shareholder approval of the Plan.
1.10 Eligible Director means a member of the Board who is not an employee
or officer of the Company or an Affiliate.
1.11 Exchange Act means the Securities Exchange Act of 1934, as amended.
1.12 Fair Market Value means, on any given date, the current fair market
value of a Share as determined pursuant to the following: if the Shares are
listed on an established stock exchange or exchanges, Fair Market Value shall be
deemed to be the highest closing price of a Share reported on that stock
exchange or exchanges or, if no sale of Shares shall be made on any stock
exchange on that day, then the next preceding day on which there was a sale; or
if the Shares are not listed on an established stock exchange, the Fair Market
Value shall be the reported "closing" price of a Share in the New York
over-the-counter market as reported by the National Association of Securities
Dealers, Inc.; provided, however, that if the Shares are not publicly traded,
Fair Market Value shall mean, as of any date, the Fair Market Value on such date
as determined in good faith by the Board in its sole discretion.
1.13 Nonemployee Director means a director of the Company who is a
"nonemployee director" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.
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1.14 Option means an option that entitles the holder to purchase Shares
from the Company on the terms set forth in Article IV of this Plan.
1.15 Participant means an Eligible Director who has been granted an Award
hereunder.
1.16 Plan means this Amended and Restated Prentiss Properties Trust
Trustees' Share Incentive Plan (Effective __________, 2002).
1.17 Prior Plan shall have the meaning given it in the Preamble to the
Plan.
1.18 Restricted Stock means Shares issued or transferred to a Participant
pursuant to Article VI hereof.
1.19 Shares means the common shares of the Company.
1.20 Trustee means a member of the Board of Trustees of the Company.
ARTICLE II
SHARES SUBJECT TO PLAN; ADJUSTMENTS
2.01 Shares Subject to Plan. The total number of Shares that may be issued
pursuant to Awards granted hereunder shall not exceed in the aggregate the sum
of 300,000 Shares plus the number of Shares which, as of the Effective Date,
remain available for issuance under the Prior Plan. If any Award, under this
Plan or the Prior Plan, is forfeited, or if it terminates, expires, or lapses
without being exercised, any Shares subject to such Award shall again be
available for issuance in connection with Awards under the Plan. Shares issued
pursuant to the terms of any Award granted hereunder may be authorized or
unissued Shares or Shares held in the Company's treasury.
2.02 The provisions of this Plan and/or the provisions of the Prior Plan,
and the terms of any outstanding Awards (granted under the Plan or the Prior
Plan), may be revised as the Administrator may determine to be equitably
required in the event that (a) the Company (i) effects one or more Share
dividends, Share split-ups, subdivisions or consolidations of Shares or other
changes in capitalization or (ii) engages in a transaction described in Section
424 of the Code or (b) there occurs any other event which, in the judgment of
the Administrator, necessitates such action. Any determination made under this
Article II by the Administrator shall be final and conclusive.
2.03 The issuance by the Company of shares of any class, or securities
convertible into shares of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares of obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number of
Shares that will be issued under the Plan.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Administrator. The Administrator
shall have authority to grant Awards upon such terms (not inconsistent with the
provisions of the Plan) as the Administrator may consider appropriate. In
addition, the Administrator shall have complete authority to construe and
interpret all provisions of the Plan and Awards granted hereunder; to adopt,
amend, and rescind rules and regulations pertaining to the administration of
the Plan, including, but not limited to, correcting any defect or supplying any
omission, or reconciling any inconsistency in the Plan or in any Agreement, in
the manner and to the extent it shall deem necessary or advisable so that the
Plan complies with applicable law, and otherwise to make the Plan fully
effective; exercise its discretion with respect to the powers and rights
granted to it as set forth in the Plan; except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, allocate all or any
part of its responsibilities and powers to any one or more of its members and
delegate all or any part of its responsibilities and powers to any person or
persons selected by it, which allocation or
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delegation may be revoked by the Committee at any time; and generally, to
exercise such powers and to perform such acts as are deemed necessary or
advisable to promote the best interests of the Company with respect to the
Plan. The express grant in the Plan of any specific power to the Administrator
shall not be construed as limiting any power or authority of the Administrator.
Any decision made, or action taken, by the Administrator in connection with the
administration of the Plan shall be final and conclusive. No member of the
Administrator shall be liable for any act done in good faith with respect to
the Plan. All expenses of administering the Plan shall be borne by the Company.
ARTICLE IV
OPTIONS
4.01 Grant of Options. In its sole discretion, the Administrator may grant
Options to Eligible Directors pursuant to any policy established by the
Administrator or upon the occurrence of any event (for example, but not by way
of limitation, election of a new director; annual meeting; specific dates
chosen by the Administrator, etc.). Options shall be evidenced by an agreement
between the Company and the Participant. Subject to the terms of this Plan,
each agreement shall contain such restrictions, terms and conditions as the
Administrator may, in its discretion, determine.
4.02 Option Price and Payment. The price per Share for Shares purchased on
the exercise of an Option shall be the Fair Market Value on the Award Date.
Payment of the Option price shall be made in cash, cash equivalent acceptable
to the Administrator; attestation of ownership, or delivery, of Shares held by
the Participant for at least six (6) months prior to exercise (or such longer
or shorter period as may be required to avoid a charge to earnings for
financial accounting purposes); or a combination thereof. If Shares are
attested to or surrendered in payment of the Option price, the Shares
surrendered must have an aggregate Fair Market Value (determined as of the day
preceding the exercise date) that, together with any cash or cash equivalent
paid, is not less than the Option price for the number of Shares for which the
Option is being exercised.
4.03 Exercise. To the extent that an Option has become exercisable in
accordance with its terms, as applicable, it may be exercised whether or not
the Participant is a member of the Board on the date or dates of exercise, as
long as the Option has not expired, been cancelled or forfeited. An Option may
be exercised with respect to any number of whole Shares less than the full
number for which the Option could be exercised. A partial exercise of an Option
shall not affect the right to exercise the Option from time to time in
accordance with this Plan with respect to the remaining Shares subject to the
Option. All Options shall be evidenced by agreements that shall be subject to
the applicable provisions of this Plan and to such other provisions as the
Administrator may adopt that are consistent with the provisions of the Plan.
4.04 Maximum Option Period. The period during which an Option may be
exercised shall be ten years from the Award Date. In the event of the
Participant's death, the Option may be exercised by the Participant's estate or
by such person or persons who succeed to the Participant's rights by will or
the laws of descent and distribution following the Participant's death until
the expiration of the Option period, in the case of an Option that provides for
its cancellation prior to the end of the Option period, until the date of such
cancellation. The Participant's estate or such person or persons may exercise
the Option with respect to all or part of the number of Shares for which the
Participant could have exercised the Option on the date of his or her death.
4.05 Nontransferability. An Option granted under this Plan shall be
nontransferable except by will or by the laws of descent and distribution.
During the lifetime of the Participant to whom an Option is granted, the Option
may be exercised only by the Participant or his or her guardian or legal
representative. No right or interest of a Participant in any Option shall be
liable for, or subject to, any lien, obligation, or liability of such
Participant.
4.06 Shareholder Rights. No Participant shall have any rights as a
shareholder with respect to Shares subject to his or her Option until the date
of exercise of such Option.
4.07 Deferral of Receipt of Shares. The Administrator may from time to
time establish procedures pursuant to which a Participant may elect to defer,
until a time or times later than the exercise of an Option, receipt of all or a
portion of the Shares subject to such Option and/or to receive cash at such
later time or
A-3
times in lieu of such deferred Shares, all on such terms and conditions as the
Administrator shall determine. If any such deferrals are permitted, then
notwithstanding Section 4.06 above, a Participant who elects such deferral
shall not have any rights as a shareholder with respect to such deferred Shares
unless and until Shares are actually delivered to the Participant with respect
thereto, except to the extent otherwise determined by the Administrator.
ARTICLE V
SHARE AWARDS
5.01 Grants. In its sole discretion, the Administrator may grant Awards of
Shares to Eligible Directors pursuant to any policy established by the
Administrator or upon the occurrence of any event (for example, but not by way
of limitation, election of a new director; annual meeting; specific dates
chosen by the Administrator, etc.).
5.02 Vesting. All Shares issued to a Participant under this Article V
shall be immediately and fully vested when granted.
5.03 Transferability. All Shares issued to a Participant under this
Article V shall be immediately transferable, subject only to restrictions
imposed by federal and state securities and other laws.
5.04 Shareholder Rights. A Participant shall have all rights as a
shareholder with respect to Shares awarded pursuant to this Article V.
ARTICLE VI
RESTRICTED STOCK
6.01 Grant. In its sole discretion, the Administrator may grant Awards of
Restricted Stock to Eligible Directors pursuant to any policy established by
the Administrator or upon the occurrence of any event (for example, but not by
way of limitation, election of a new director; annual meeting; specific dates
chosen by the Administrator, etc.). Awards of Restricted Stock shall be
evidenced by an agreement between the Company and the Participant. Subject to
the terms of this Plan, each agreement shall contain such restrictions, terms
and conditions as the Administrator may, in its discretion, determine and
(without limiting the generality of the foregoing) such agreements may require
that an appropriate legend be placed on Share certificates. Awards of
Restricted Stock shall be subject to the terms and provisions set forth below
in this Article VI.
6.02 Rights of Participant. Shares of Restricted Stock granted pursuant to
an Award hereunder shall be issued in the name of the Participant as soon as
reasonably practicable after the Award is granted provided that the Participant
has executed an agreement evidencing the Award, the appropriate blank stock
powers and, in the discretion of the Administrator, an escrow agreement and any
other documents which the Administrator may require as a condition to the
issuance of such Shares. If a Participant shall fail to execute the agreement
evidencing a Restricted Stock Award, the appropriate blank stock powers and, in
the discretion of the Administrator, an escrow agreement and any other
documents which the Administrator may require within the time period prescribed
by the Administrator at the time the Award is granted, the Award shall be null
and void. At the discretion of the Administrator, Shares issued in connection
with a Restricted Stock Award shall be deposited together with the stock powers
with an escrow agent (which may be the Company) designated by the
Administrator. Unless the Administrator determines otherwise and as set forth
in the agreement, upon delivery of the Shares to the escrow agent, the
Participant shall have all of the rights of a shareholder with respect to such
Shares, including the right to vote the Shares and to receive all dividends or
other distributions paid or made with respect to the Shares.
6.03 Non-transferability. Until all restrictions upon the Shares of
Restricted Stock awarded to a Participant shall have lapsed in the manner set
forth in Section 6.04, such Shares shall not be sold, transferred or otherwise
disposed of and shall not be pledged or otherwise hypothecated, nor shall they
be delivered to the Participant.
A-4
6.04 Lapse of Restrictions.
(a) Generally. Restrictions upon Shares of Restricted Stock awarded
hereunder shall lapse at such time or times and on such terms and
conditions as the Administrator may determine. The agreement
evidencing the Award shall set forth any such restrictions.
(b) Modification or Substitution. Subject to the terms of the Plan, the
Administrator may modify outstanding Awards of Restricted Stock or
accept the surrender of outstanding Shares of Restricted Stock (to the
extent the restrictions on such Shares have not yet lapsed) and grant
new Awards in substitution for them. Notwithstanding the foregoing, no
modification of an Award shall adversely alter or impair any rights or
obligations under the agreement without the Participant's consent.
(c) Treatment of Dividends. At the time an Award of Shares of Restricted
Stock is granted, the Administrator may, in its discretion, determine
that the payment to the Participant of dividends, or a specified
portion thereof, declared or paid on such Shares by the Company shall
be (i) deferred until the lapsing of the restrictions imposed upon
such Shares, and (ii) held by the Company for the account of the
Participant until such time. In the event that dividends are to be
deferred, the Administrator shall determine whether such dividends are
to be reinvested in Shares (which shall be held as additional Shares
of Restricted Stock) or held in cash. If deferred dividends are to be
held in cash, there may be credited at the end of each year (or
portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum as the Administrator, in its
discretion, may determine. Payment of deferred dividends in respect of
Shares of Restricted Stock (whether held in cash or as additional
Shares of Restricted Stock), together with interest accrued thereon,
if any, shall be made upon the lapsing of restrictions imposed on the
Shares in respect of which the deferred dividends were paid, and any
dividends deferred (together with any interest accrued thereon) in
respect of any Shares of Restricted Stock shall be forfeited upon the
forfeiture of such Shares.
(d) Delivery of Shares. Upon the lapse of the restrictions on Shares of
Restricted Stock, the Administrator shall cause a stock certificate to
be delivered to the Participant with respect to such Shares, free of
all restrictions hereunder.
ARTICLE VII
OTHER SHARE-BASED AWARDS
Subject to such terms and conditions as the Committee may determine, other
Awards based on the value of Shares may be granted either alone or in addition
to other Awards granted under the Plan. Any Awards under this Article VII and
any Shares covered by any such Award may be forfeited to the extent so provided
in the Award agreement, as determined by the Committee. Payment of Awards made
under this Article VII which are based on the value of Shares may be made in
Shares or in cash or in a combination thereof (based upon the Fair Market Value
of the Shares on the date of payment), all as determined by the Committee in
its sole discretion.
ARTICLE VIII
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Shares shall be issued and no certificates for Shares shall be
delivered under the Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, the requirement to
withhold taxes or other amounts), any listing agreement to which the Company is
a party, and the rules of all domestic stock exchanges on which the Company's
Shares may be listed. The Company shall have the right to rely on an opinion of
its counsel as to such compliance. Any certificate issued to evidence Shares
issued under the Plan may bear such legends and statements as the Administrator
may deem advisable to assure compliance with federal and state laws and
regulations. No Shares shall be issued and no certificate for Shares shall be
delivered under the Plan until the Company has obtained such consent or
approval as the Administrator may deem advisable from regulatory bodies having
jurisdiction over such matters. Upon approval by the Administrator, any
withholding requirements arising upon the issuance of Shares under the
A-5
Plan may be satisfied by the surrender or withholding, at their then current
Fair Market Value, of Shares otherwise issuable.
ARTICLE IX
GENERAL PROVISIONS
9.01 Unfunded Plan. The Plan, insofar as it provides for Awards, shall be
unfunded, and the Company shall not be required to segregate any assets that
may at any time be represented by Awards under the Plan. Any liability of the
Company to any person with respect to any Award to be made under the Plan shall
be based solely upon any contractual obligations that may be created pursuant
to the Plan. No such obligation of the Company shall be deemed to be secured by
any pledge of, or other encumbrance on, any property of the Company.
9.02 Rules of Construction. Headings are given to the articles and
sections of the Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
9.03 Notice. Unless specifically required by the terms of this Plan,
notice to the Company's shareholders, the Participants, or any other person or
entity of an action by the Board, the Committee, or the Administrator with
respect to the Plan is not required before or after such action occurs.
ARTICLE X
AMENDMENT
The Board may amend from time to time or terminate the Plan at any time;
provided, however, that no amendment shall become effective without shareholder
approval, in accordance with applicable law, regulation: (a) to the extent
necessary under any applicable law, regulation or exchange requirement, or (b)
if the amendment materially (i) increases the aggregate number of Shares that
may be issued under this Plan (other than an adjustment authorized under
Article II); (ii) changes the class of individuals eligible to become
Participants; or (iii) increases the benefits that may be provided under the
Plan. In addition; no such amendment or termination shall impair or adversely
alter any Awards theretofore granted under the Plan, except with the consent of
the Participant, nor shall any amendment or termination deprive any Participant
of any Shares which he or she may have acquired through or as a result of the
Plan. Awards may be modified by the Administrator provided that no modification
of outstanding Award shall adversely alter or impair any rights or obligations
under the Award without the consent of the Participant.
ARTICLE XI
DURATION OF PLAN
No Awards may be granted under the Plan after the day prior to the tenth
anniversary of the Effective Date. An Award granted pursuant to the Plan shall
remain in effect in accordance with its terms notwithstanding the expiration of
the Plan.
ARTICLE XII
EFFECTIVE DATE OF PLAN
Shares may be issued under the Plan, provided that the Plan has been
approved by a majority of the votes cast by the Company's shareholders, voting
either in person or by proxy, at a duly held shareholders' meeting at which a
quorum representing a majority of all outstanding Shares is present, either in
person or by proxy.
A-6
Annex B
PROXY CARD
[LOGO]
PRENTISS PROPERTIES TRUST
3880 W. NORTHWEST HIGHWAY
SUITE 400
DALLAS, TEXAS 75220
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site. You will be prompted to enter your 12-digit Control Number which is
located below to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call. You will be prompted to enter your 12-digit
Control Number which is located below and then follow the simple instructions
the Vote Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Prentiss Properties Trust, c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
PRNTSS KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
RENTISS PROPERTIES TRUST
The Board of Trustees recommends a vote FOR such nominee, FOR amendment to
the Trustees' Share Incentive Plan and FOR ratification of the appointment
of PricewaterhouseCoopers LLP as independent accountants for 2002.
For Withhold For All
All All Except
1. Election of three Class III members to
the Board of Trustees: 01) Michael V.
Prentiss, 02) Thomas J. Hynes, Jr., 03)
Barry J.C. Parker 0 0 0
To withhold authority to vote, mark "For All Except" and write the
nominee's number on the line below.
---------------------------------------------------------------------------
For Against Abstain
2. Approval of Prentiss Properties Trust's
amended and restated Trustees' Share
Incentive Plan (the "Amended Plan") which
increases the aggregate number of common
shares of beneficial interest, par value
$0.01 per share (the "Common Shares") that
may be issued under the current Trustees'
Share Incentive Plan (the "Original Plan") by
300,000 Common Shares, extends the term of
the Original Plan by 10 years and gives the
Board of Trustees broader authority in terms
of the types, amounts and dates of share
grants that it may authorize than it was
given under the Original Plan. 0 0 0
3. Ratification of the appointment of
PricewaterhouseCoopers LLP as Prentiss
Properties Trust's independent accountants
for 2002. 0 0 0
This proxy when executed will be voted in the manner directed herein. If no
direction is made, this proxy will be voted FOR Items 1, 2 and 3. This
proxy will be voted, in the discretion of proxy holders, upon such other
business as may properly come before the Annual Meeting or any adjournment
or postponement thereof.
For address changes and/or comments, please check this box
and write them on the back where indicated. 0
If you plan on attending the meeting, please check box to the right. 0
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
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Signature [PLEASE SIGN WITHIN BOX] Date
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Signature (Joint Owners) Date
PRENTISS PROPERTIES TRUST
Proxy Solicited on Behalf of Trustees of the Company
For the Annual Meeting on May 15, 2002
The undersigned hereby constitutes and appoints Gregory S. Imhoff,
Secretary and J. Kevan Dilbeck, General Counsel and each of them (the "Proxy
Committee"), his or her true and lawful agents and proxies, with full power of
substitution in each to represent the undersigned at the annual meeting of
shareholders of Prentiss Properties Trust to be held at the Embassy Suites
Hotel, 3880 W. Northwest Highway, Dallas, Texas 75220, on Wednesday, May 15,
2002, and at any adjournments or postponements thereof, on all matters coming
before said meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
and Proxy Statement dated April 5, 2002 and hereby revokes any proxy or proxies
heretofore given to vote at said meeting or any adjournment or postponement
thereof.
You are encouraged to specify your choice by marking the appropriate boxes
(SEE REVERSE SIDE) but you need not mark any boxes if you wish to vote in
accordance with the Board of Trustees' recommendations. The Proxy Committee
cannot vote your shares unless you sign and return this card. However, if you
vote over the telephone or via the Internet, you do not need to sign and return
this card. Action taken pursuant to this proxy card will be effective as to all
the shares (whether common or preferred, and if preferred, of any class or
series) that you own.
Address Changes/Comments:
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--------------------------------------------------------------------------------
(If you noted Address Changes/Comments above,
please mark corresponding box on the reverse side.)