def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.)
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement |
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Confidential, for use of the Commission only |
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(as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Soliciting Material Pursuant to Rule 14a-12 |
ProLogis
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Per unit price or other underlying value of transaction computed pursuant to
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Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing. |
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Form, Schedule or Registration Statement No.: |
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Date Filed: |
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Notice of 2006 |
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Annual Meeting |
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and |
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Proxy Statement |
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4545 Airport Way
Denver, Colorado 80239
Dear Shareholder,
You are cordially invited to attend the annual meeting of
shareholders of ProLogis, which will take place on May 26,
2006, at our world headquarters in Denver, Colorado.
Details of the business to be conducted at the meeting are
set forth in the accompanying notice of annual meeting and proxy
statement.
Whether or not you plan to attend, it is important that your
shares be represented and voted at the meeting. I urge you to
promptly vote and authorize your proxy instructions by phone,
via the Internet, or by completing, signing, dating, and
returning your proxy card in the enclosed envelope. If you
decide to attend the annual meeting, you will be able to vote in
person, even if you have previously submitted your proxy.
On behalf of the Board of Trustees, I would like to express
our appreciation for your continued interest in ProLogis.
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Sincerely, |
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K. Dane Brooksher |
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Chairman of the Board |
TABLE OF CONTENTS
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A-1 |
Every shareholders vote is important. Please complete,
sign,
date and return your proxy form, or authorize your proxy
by
phone or via the Internet.
NOTICE OF 2006 ANNUAL MEETING
OF SHAREHOLDERS
10:30 a.m., May 26, 2006
ProLogis World Headquarters
4545 Airport Way
Denver, Colorado 80239
March 29,
2006
To our Shareholders:
The 2006 Annual Meeting of Shareholders of ProLogis, a Maryland
real estate investment trust, will be held at ProLogiss
World Headquarters, 4545 Airport Way, Denver, Colorado 80239, on
Friday, May 26, 2006, at 10:30 a.m. for the following
purposes:
1. To elect twelve trustees to
serve until the 2007 annual meeting;
2. To approve and adopt the 2006
Long-Term Incentive Plan;
3. To ratify the appointment of
KPMG LLP as our independent registered public accounting firm
for 2006; and
4. To consider any other matters
that may properly come before the meeting.
Shareholders of record at the close of business on
March 16, 2006, are entitled to notice of, and to vote at,
the meeting and any adjournments.
For the Board of Trustees,
Edward S. Nekritz
Secretary
PROXY STATEMENT
ProLogis, 4545 Airport Way, Denver, Colorado 80239
This proxy statement is furnished in connection with the
solicitation of proxies by ProLogis on behalf of the board of
trustees for the 2006 annual meeting of shareholders.
Distribution of this proxy statement and a proxy card to
shareholders is scheduled to begin on or about March 29,
2006.
You can ensure that your shares are voted at the meeting by
authorizing your proxy by phone, via the Internet, or by
completing, signing, dating and returning the enclosed proxy or
voting registration form in the envelope provided. You may still
attend the meeting and vote despite authorizing your proxy by
any of these methods. A shareholder who gives a proxy may revoke
it at any time before it is exercised by voting in person at the
annual meeting, by delivering a subsequent proxy, by notifying
the inspector of election in writing of such revocation or, if
previous instructions were given by phone or via the Internet,
by providing new instructions by the same means.
1
SUMMARY OF PROPOSALS SUBMITTED FOR VOTE
Proposal 1:
Election of Trustees
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Nominees: At the annual meeting you will elect
twelve trustees to the board. The trustees will be elected to a
one-year term and will hold office until the 2007 annual meeting
and until their successors have been elected and have qualified. |
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Vote Required: You may vote for or withhold your
vote from any of the trustee nominees. Assuming a quorum is
present, the trustees receiving a majority of the votes cast in
person or by proxy at the meeting will be elected. For this
purpose, a majority of the votes cast means that the number of
common shares that are cast and are voted For the
election of a trustee must exceed the number of common shares
that are withheld from his or her election. |
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Proposal 2: Approval of 2006 Long-Term Incentive Plan |
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2006 Long-Term Incentive Plan: At the annual
meeting you will be asked to approve and adopt the 2006
Long-Term Incentive Plan. |
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Vote Required: You may vote for, vote against or
abstain from voting on the approval and adoption of the 2006
Long-Term Incentive Plan. Assuming a quorum is present, the
affirmative vote of a majority of the common shares voted at the
meeting or by proxy, provided that the total votes cast
represent at least a majority of the votes entitled to be cast,
will be required to approve and adopt the 2006 Long-Term
Incentive Plan. |
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Proposal 3: Ratification of the Appointment of
Independent Registered Public Accounting Firm |
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Independent Registered Public Accounting Firm: At
the annual meeting you will be asked to ratify the audit
committees appointment of KPMG LLP as the companys
independent registered public accounting firm for 2006. |
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Vote Required: You may vote for, vote against, or
abstain from voting on ratifying the appointment of the
independent registered public accounting firm. Assuming a quorum
is present, the affirmative vote of a majority of the common
shares voted at the meeting or by proxy will be required to
ratify the audit committees appointment of the independent
registered public accounting firm. |
Your board of trustees unanimously recommends that you
vote FOR each of the proposals listed above.
The foregoing are only summaries of the proposals. You
should review the full discussion of each proposal in this
proxy statement before casting your vote.
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ELECTION OF TRUSTEES |
Proposal 1 |
At the 2006 annual meeting, all twelve nominees are to be
elected to hold office until the 2007 annual meeting and until
their successors have been elected and have qualified. The
twelve nominees for election at the 2006 annual meeting, all
proposed by the board of trustees, are listed below with brief
biographies. They are all now ProLogis trustees. We do not know
of any reason why any nominee would be unable to serve as a
trustee. If a nominee is unable to serve, however, proxies will
be voted for the election of such other person as the board may
recommend. Irving F. Lyons, III and Kenneth N. Stensby,
after many years of outstanding service to the company, are not
standing for re-election to the board of trustees at the 2006
annual meeting. In connection with the decision by
Messrs. Lyons and Stensby not to stand for re-election, the
size of the board will be decreased to 12 trustees effective
immediately after the 2006 annual meeting.
Under a recently adopted amendment to our bylaws, trustees in
non-contested elections must receive a majority of affirmative
votes cast for election. For this purpose, a majority of the
votes cast means that the number of common shares that are cast
and are voted For the election of a trustee must
exceed the number of common shares that are withheld from his or
her election. If a trustee fails to obtain a majority, he or she
must tender his or her resignation to the board. The board,
through a process managed by the board governance and nomination
committee, will decide whether to accept the resignation no
later than 90 days after it is received. The board will
then explain its decision to accept or reject the tendered
resignation in a
Form 8-K which
will be filed promptly.
The board unanimously recommends that the shareholders
vote FOR the election of each nominee.
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K. Dane Brooksher. Trustee since October 1993
Mr. Brooksher, 67, has been Chairman of the Board of
ProLogis since March 1999 and he was Chief Executive Officer of
ProLogis from March 1999 to December 2004. From November 1993 to
March 1999, he was Co-Chairman and Chief Operating Officer of
ProLogis. Prior to joining ProLogis, Mr. Brooksher spent
more than 32 years with KPMG Peat Marwick (now KPMG LLP),
an independent public accounting firm. He is a Director of
Pactiv Corporation, Qwest Communications International, Inc.,
CarrAmerica, and Cass Information Systems, Inc. |
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Stephen L. Feinberg. Trustee since January 1993
Mr. Feinberg, 61, has been Chairman of the Board and Chief
Executive Officer of Dorsar Investment Co., a diversified
holding company with interests in real estate and venture
capital, since 1970. He is also a Director of Security Capital
Preferred Growth and Continental Transmission Corporation. |
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George L. Fotiades. Trustee since December 2001
Mr. Fotiades, 52, is President and Chief Operating Officer
of Cardinal Health, Inc., a provider of services supporting the
health care industry. He was previously President and Chief
Executive Officer of Life Sciences Products and Services, a unit
of Cardinal Health, Inc. and has been with Cardinal Health or
its predecessor in varying capacities since 1996. |
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Christine N. Garvey. Trustee since September 2005
Ms. Garvey, 60, has served as a consultant to Deutsche Bank
AG since May 2004. From May 2001 to May 2004, Ms. Garvey
served as Global Head of Corporate Real Estate Services at
Deutsche Bank AG London. Ms. Garvey has been a member of
the board of directors of Hilton Hotels Corporation since May
2005 and was a member of the board of Catellus Development
Corporation (Catellus) from 1995 to September 2005
when it was merged with and into a subsidiary of ProLogis. |
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Donald P. Jacobs. Trustee since February 1996
Mr. Jacobs, 78, is the Gaylord Freeman Distinguished
Professor of Banking and Dean Emeritus of the Kellogg School of
Management and has been a member of the Kellogg faculty since
1957. He serves on the Board of Directors of CDW Corporation and
Terex Corporation. |
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Walter C. Rakowich. Trustee since August 2004
Mr. Rakowich, 48, has been President and Chief Operating
Officer of ProLogis since January 2005. Mr. Rakowich has
been with ProLogis in varying capacities since 1994, and from
1998 to September 2005 he was a Managing Director and its Chief
Financial Officer. |
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Nelson C. Rising. Trustee since September 2005
Mr. Rising, 64, was Chairman and Chief Executive Officer of
Catellus from 2000 to 2005 and was President and Chief Executive
Officer of Catellus from 1994 to 2000. |
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Jeffrey H. Schwartz. Trustee since August 2004
Mr. Schwartz, 46, has been Chief Executive Officer of
ProLogis since January 2005 and has been with ProLogis in
varying capacities since 1994. He was President of International
Operations of ProLogis from March 2003 to December 2004 and
President and Chief Operating Officer Asia from
March 2002 to December 2004. Mr. Schwartz was President and
Chief Executive Officer of Vizional Technologies, Inc.,
previously an unconsolidated investee of ProLogis from September
2000 to February 2002. |
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D. Michael Steuert. Trustee since September 2003
Mr. Steuert, 57, has been Senior Vice President and Chief
Financial Officer of Fluor Corporation, a publicly owned
engineering and construction firm since 2001. He was Senior Vice
President and Chief Financial Officer of Litton Industries Inc.
from 1999 to 2001. Mr. Steuert is a Director of
Weyerhaeuser Corporation. |
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J. André Teixeira. Trustee since February
1999
Mr. Teixeira, 53, is a founding partner and President of
eemPOK, a management consulting firm in Belgium and, since 2001
he has been Chairman and Senior Partner with BBL Partners, a
consulting and trading company in Moscow, Russia. He was a Vice
President, Global Innovation and Development of InBev, formerly
Interbrew, a publicly traded brewer in Belgium, from February
2003 to October 2004, and prior to that was with Coca-Cola in
varying capacities between 1978 and 2001. Mr. Teixeira is a
Director of ESKO, a world leader in packaging pre-production
solutions of key product lines based in Belgium. |
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William D. Zollars. Trustee since June 2001
Mr. Zollars, 58, has been Chairman, President and Chief
Executive Officer of YRC Worldwide Inc. (YRC)
(formerly Yellow Roadway Corporation), a holding company
specializing in the transportation of industrial, commercial and
retail goods, since 1999 and has been with YRC in varying
capacities since 1996. He is a Director of CIGNA Corporation and
Cerner Corporation. |
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Andrea M. Zulberti. Trustee since May 2005
Ms. Zulberti, 54, retired in August 2003 as a Managing
Director for Barclays Global Investors (BGI), one of
the worlds leading investment management firms.
Ms. Zulberti was with BGI in varying capacities since 1989
and was Head of Global Operations/ Global Chief Administrative
Officer from 2000 until her retirement. |
CORPORATE GOVERNANCE
ProLogis remains committed to furthering meaningful corporate
governance practices and maintaining a business environment of
uncompromising integrity. We continue enhancing these objectives
through our governance policies and compliance with the
Sarbanes-Oxley Act of 2002 and the rules of the New York Stock
Exchange (NYSE). Our board has formalized several
policies, procedures and standards of corporate governance
reflected in our governance guidelines. These governing
principles, some of which we touch on below, can be viewed
together with any future changes on the ProLogis website at
www.prologis.com.
Trustee Independence. We require that a majority
of our board be independent under listing standards adopted by
the NYSE. To determine whether a trustee is independent, the
board must affirmatively determine that there is no direct or
indirect material relationship between the company and the
trustee. The board has determined that trustees Feinberg,
Fotiades, Garvey, Jacobs, Stensby, Steuert, Teixeira, Zollars
and Zulberti are independent. The board reached its decision
after reviewing trustee questionnaires, considering transactions
and relationships between each trustee or any member of his or
her immediate family and the company, examining transactions and
relationships between trustees or their affiliates and members
of our senior management and their affiliates, and considering
all other relevant facts and circumstances. The board has also
determined that all members of the audit, management and
development and compensation and board governance and nomination
committees are independent in accordance with NYSE and
Securities and Exchange Commission (SEC) rules and
that all members of the audit committee are financially literate.
Presiding Trustee. Our outside trustees, meaning
those who are not officers or employees of ProLogis, meet in
regular executive sessions without management being present. The
chair of these executive sessions is the Chairman of the Board.
Communicating with Trustees. You can communicate
with any of the trustees, individually or as a group, by writing
to them c/o Edward S. Nekritz, Secretary, ProLogis, 4545
Airport Way, Denver, Colorado 80239. All communications should
prominently indicate on the outside of the envelope that they
are intended for the full board, for outside trustees only, or
for any particular group or member of the board. Each
communication intended for the board and received by the
secretary which is related to the operation of the company and
is not
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otherwise commercial in nature will be forwarded to the
specified party following its clearance through normal security
procedures. The outside trustees will be advised of any
communications that were excluded through normal security
procedures and they will be made available to any outside
trustee who wishes to review them.
Shareholder Recommended Nominees for Trustee. The
board governance and nomination committee considers shareholder
recommended nominees for trustees and screens all potential
candidates in the same manner regardless of the source of the
recommendation. Recommended nominees should be submitted to the
committee following the same requirements as shareholder
proposals generally and, like all proposals, must satisfy and
will be subject to our bylaws and applicable rules and
regulations. Submittals should also contain a brief biographical
sketch of the candidate, a document indicating the
candidates willingness to serve if elected, and evidence
of the nominating persons share ownership. The committee
will consider shareholder recommendations for board candidates,
which should be sent to the Board Governance and Nomination
Committee, c/o Edward S. Nekritz, Secretary, ProLogis, 4545
Airport Way, Denver, Colorado 80239. For more information on
procedures for submitting nominees, refer to shareholder
nominations under Additional Information on page 33.
The committee reviews its recommendations with the board, which
in turn selects the final nominees. The committee may look at a
variety of factors in identifying potential candidates and may
request interviews or additional information as it deems
necessary. There are no minimum qualifications that the
committee believes must be met by a nominee. In the course of
identifying and evaluating candidates, the committee will
sometimes retain executive search firms to identify candidates
for the board who are then screened following the same
procedures as all other candidates. In addition to shareholder
nominees, the committee will consider candidates recommended by
trustees, officers, third party search firms, employees and
others.
Code of Ethics and Business Conduct. We have
adopted a code of ethics and business conduct entitled A
Commitment to Excellence and Integrity which can be viewed
on the ProLogis website at www.prologis.com. In addition,
copies of our code of ethics and business conduct can be
obtained, free of charge, upon written request to Edward S.
Nekritz, Secretary, ProLogis, 4545 Airport Way, Denver, Colorado
80239. Our code details the expected behavior of all employees
in routinely applying our institutional and personal values of
honesty, integrity and fairness to everything we do at ProLogis.
The code outlines in great detail the key principles of ethical
conduct expected of ProLogis employees, officers and trustees,
including matters related to conflicts of interest, use of
company resources, fair dealing and financial reporting and
disclosure. The code also establishes formal procedures for
reporting illegal or unethical behavior. In addition, it permits
employees to report on a confidential or anonymous basis if
desired, any concerns about the companys accounting,
internal accounting controls, or auditing matters to the ethics
administrator by
e-mail, in writing to a
special address or to a toll-free telephone number. Any
significant concerns are reported to the audit committee.
BOARD OF TRUSTEES AND COMMITTEES
Our board of trustees currently consists of fourteen trustees,
nine of whom are independent under the requirements of the NYSE
listing rules. The board held ten meetings during 2005 and all
trustees attended 75% or more of the board meetings and meetings
of the committees on which they served during the periods they
served. Each trustee is expected to attend annual meetings of
shareholders of the company absent cause, and all trustees
attended the annual meeting last year. This year, we have three
trustees proposed for nomination to the board of trustees who
have not previously stood for election by the shareholders.
Ms. Garvey and Mr. Rising were elected to the board in
connection with the merger of Catellus with and into a
subsidiary of ProLogis in September 2005. Ms. Zulberti was
appointed by the board in May 2005 to fill a vacancy created by
the resignation of a former trustee. Messrs. Lyons and
Stensby will not stand for re-election to the board. Because
Messrs. Lyons and Stensby are not standing for re-election,
the size of the board will be decreased to 12 trustees
effective immediately after the 2006 annual meeting.
The four standing committees of the board are an audit
committee, an investment committee, a management development and
compensation committee, and a board governance and nomination
committee.
Audit Committee. The members of the audit
committee are trustees Steuert, who chairs the committee,
Fotiades, Garvey, Stensby, and Zulberti, each of whom is
independent under the rules of the NYSE. This
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committees primary duties and responsibilities include:
(1) selecting and overseeing our independent registered
public accounting firm, and monitoring the quality and integrity
of the accounting, auditing, and reporting practices of the
company in general, (2) approving audit and non-audit
services provided to the company, (3) monitoring our
internal audit function, internal controls and disclosure
controls, and (4) reviewing the adequacy of its charter on
an annual basis. The board has determined that Mr. Steuert
is qualified as an audit committee financial expert within the
meaning of the SEC regulations. There were eight meetings of the
committee in 2005 and its report appears on page 30. The
audit committees responsibilities are stated more fully in
its charter which was adopted by the board. The charter can be
viewed, together with any future changes, on the ProLogis
website at www.prologis.com.
Investment Committee. The members of the
investment committee are trustees Lyons, who chairs the
committee, Feinberg, Stensby and Zollars. This committee is
responsible for approving material acquisitions, dispositions
and other investment decisions of the company between meetings
of the full board. Any decisions made by the committee are
reported to the full board at its next quarterly meeting. There
were eight meetings of the committee in 2005.
Management Development and Compensation Committee.
The members of the management development and compensation
committee are trustees Jacobs, who chairs the committee,
Feinberg, and Zollars, each of whom is independent under the
rules of the NYSE. The primary responsibilities of this
committee, which we typically refer to as our compensation
committee, are to: (1) review executive compensation and
make recommendations to the board, (2) oversee and advise
the board on compensation and benefits programs, succession
planning and executive development, and (3) review the
adequacy of its charter on an annual basis. There were six
meetings of the committee in 2005 and its report appears on
page 21. The committees responsibilities are stated
more fully in its charter which can be viewed, together with any
future changes, on the ProLogis website at
www.prologis.com.
Board Governance and Nomination Committee. The
members of the board governance and nomination committee are
trustees Fotiades, who chairs the committee, Jacobs, and
Teixeira, each of whom is independent under the rules of the
NYSE. The primary responsibilities of this committee, which we
typically refer to as our governance committee, are to:
(1) review potential board nominees and give candidate
recommendations to the board, (2) assess and make
recommendations to the board on corporate governance matters and
develop and recommend governance principles to the board,
(3) assist with annual self-evaluations of the board and
its committees and make recommendations to the board concerning
committee appointments, and (4) review the adequacy of its
charter on an annual basis. There were two meetings of the
committee in 2005. The committees responsibilities are
stated more fully in its charter which can be viewed, together
with any future changes, on the ProLogis website at
www.prologis.com.
8
INFORMATION RELATING TO TRUSTEES, NOMINEES
AND EXECUTIVE OFFICERS
The following table shows the number of shares beneficially
owned as of March 16, 2006, by each of our trustees, the
persons who were the five most highly paid executive officers as
of the end of 2005 and one other officer who resigned in 2005,
each person known to us to be beneficial owners of five percent
or more, in the aggregate, of our outstanding common shares, and
our trustees and executive officers as a group.
Common Shares Beneficially Owned
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Shares (2) |
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The Vanguard Group,
Inc.(3)
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14,264,826 |
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5.83% |
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100 Vanguard Blvd.
Malvern, PA 19355 |
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FMR
Corp.(4)
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13,459,066 |
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5.50% |
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82 Devonshire Street
Boston, MA 02109 |
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Barclays Global Investors,
NA(5)
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12,522,135 |
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5.12% |
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Murray House
1 Royal Mint Court
London, EC3N 4HH |
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Dessa M. Bokides
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0 |
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* |
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K. Dane
Brooksher(6)
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1,806,902 |
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* |
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Stephen L.
Feinberg(7)
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270,872 |
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* |
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George L. Fotiades
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27,598 |
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* |
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Donald P.
Jacobs(8)
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54,711 |
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* |
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Christine N. Garvey
|
|
|
28,675 |
|
|
|
* |
|
Irving F.
Lyons, III(9)
|
|
|
1,194,221 |
|
|
|
* |
|
Steven K. Meyer
|
|
|
280,969 |
|
|
|
* |
|
Walter C.
Rakowich(10)
|
|
|
507,957 |
|
|
|
* |
|
Nelson C.
Rising(11)
|
|
|
224,499 |
|
|
|
* |
|
Jeffrey H.
Schwartz(12)
|
|
|
636,323 |
|
|
|
* |
|
John W.
Seiple, Jr.(13)
|
|
|
105,341 |
|
|
|
* |
|
Kenneth N. Stensby
|
|
|
15,881 |
|
|
|
* |
|
D. Michael Steuert
|
|
|
16,198 |
|
|
|
* |
|
J. André Teixeira
|
|
|
37,515 |
|
|
|
* |
|
Robert J.
Watson(14)
|
|
|
334,381 |
|
|
|
* |
|
William D. Zollars
|
|
|
19,234 |
|
|
|
* |
|
Andrea M. Zulberti
|
|
|
10,682 |
|
|
|
* |
|
All trustees and executive officers as a group (22 total) were
5,810,065, 2.38% of total.
(*) Less
than 1%
(1) Unless
otherwise indicated, the principal address is c/o ProLogis,
4545 Airport Way, Denver, Colorado 80239.
(2) This
column includes shares that may be acquired within 60 days
through the exercise of nonvoting options and conversion of
restricted share units, and associated dividend equivalent units
for each, as follows: Ms. Bokides (0/0); Mr. Brooksher
(1,374,264/241,351); Mr. Lyons (523,502/95,539);
Mr. Meyer (196,125/55,165); Mr. Rakowich
(356,678/60,585); Mr. Schwartz (323,139/78,050);
Mr. Seiple (0/0); and Mr. Watson (258,161/72,654). The
foregoing were granted under the 1997 share plan and also
include shares under our 401(k) plan and non-qualified savings
plan. Also reflects shares that may be acquired within
60 days through the exercise of options and associated
dividend equivalent units, deferred share units and associated
dividend equivalent units, and shares for deferred trustees
fees, as follows: Mr. Brooksher (0/1,237/1,101);
Mr. Feinberg (28,615/3,008/15,633); Mr. Fotiades
(8,750/3,008/6,282); Mr. Jacobs (28,615/3,008/14,622);
Ms. Garvey (10,000/0/321); Mr. Lyons (0/1,237/1,222);
Mr. Rising (0/0/266); Mr. Stensby (0/3,008/12,854);
Mr. Steuert (10,000/3,008/3,190); Mr. Teixeira
(23,615/3,008/0); Mr. Zollars (8,750/3,008/7,476);
Ms. Zulberti (10,000/0/682). The foregoing were granted
under the outside trustee option plans discussed in detail
below. Unless indicated otherwise, all interests are owned
directly and the indicated person has sole voting and investment
power.
(3) Information
regarding beneficial ownership of common shares by The Vanguard
Group, Inc. is included herein based on a Schedule 13G
filed with the SEC on February 13, 2006. The Vanguard
Group, Inc. has sole power to vote or to direct the vote with
respect to 243,550 of the shares reported and has sole power to
dispose of or the direct the disposition with respect to all of
the shares reported. The Vanguard Group, Inc. has represented
that the shares reported were acquired in the ordinary course of
business and were not acquired for the purpose of and do not
have the effect of changing or influencing the control of
ProLogis and were not acquired in connection with or as a
participant in any transaction having such purpose or effect.
(4) Information
regarding beneficial ownership of common shares by FMR Corp. is
included herein based on a Schedule 13G filed with the SEC
on February 14, 2006. FMR Corp. has sole power to vote or
to direct the vote with respect to 1,302,592 of the shares
reported and has sole power to dispose of or the direct the
disposition with respect to all of the shares reported. FMR
Corp. has represented that the shares reported were acquired in
the ordinary course of business and were not acquired for the
purpose of and do not have the effect of changing or influencing
the control of ProLogis and were not acquired in connection with
or as a participant in any transaction having such purpose or
effect.
(5) Information
regarding beneficial ownership of common shares by Barclays
Global Investors, NA is included herein based on a
Schedule 13G filed with the SEC on January 26, 2006.
Barclays Global Investors, NA has sole power to vote or to
direct the vote with respect to 11,459,535 of the shares
reported and has sole power to dispose of or the direct the
disposition with respect to all of the shares reported. Barclays
Global Investors, NA has represented that the shares reported
were acquired in the ordinary course of
9
business and were not acquired for the purpose of and do not
have the effect of changing or influencing the control of
ProLogis and were not acquired in connection with or as a
participant in any transaction having such purpose or effect.
(6) Includes
1,724 shares held by Mr. Brookshers wife.
(7) Includes
70,000 shares owned by Dorsar Partners, LP, and
55,000 shares owned by Dorsar Investment Company, all of
which Mr. Feinberg may be deemed to share voting and
dispositive power. Includes 26,000 shares in two trusts,
one in which Mr. Feinberg is a beneficiary and the other,
in which he is trustee, a relative is the beneficiary.
(8) Includes
300 shares held in trust for the benefit of
Mr. Jacobss children.
(9) Includes
129,314 shares in a trust for Mr. Lyonss family
of which he is trustee and beneficiary and 418 shares owned
by his children. Also includes 436,471 shares which are
issuable upon exchange of limited partnership units. The limited
partnership interest is explained further below under the
section titled Certain Relationships and Related
Transactions.
(10) Includes
82,970 shares in a trust for Mr. Rakowichs
family of which he is a beneficiary, 872 shares owned by
his children, and 504 shares in a trust in which
Mr. Rakowich is trustee and for which he disclaims
beneficial ownership.
(11) Includes
8,793 shares held by the Rising Family Foundation, a
non-profit charitable foundation of which Mr. Rising and
his wife are sole directors.
(12) Includes
128,265 shares which are issuable upon exchange of limited
partnership units. The limited partnership interest is explained
further below under the section titled Certain
Relationships and Related Transactions.
(13) Mr. Seiple
resigned as President and Chief Executive Officer
North America of ProLogis effective August 4, 2005.
(14) Includes
866 shares held in trust for Mr. Watsons family
and 450 shares held by the estate of Mr. Watsons
late father.
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Outside Trustee Compensation |
Annual Retainer and Meeting Fees. In addition to
reimbursement of expenses incurred while attending board and
committee meetings, outside trustees receive an annual retainer
of $35,000, $1,000 for attendance at board meetings, $1,000 for
attendance at their respective committee meetings (except for
investment committee and earnings review calls with the audit
committee), $5,000 for serving on the investment committee and
$2,000 per committee for serving on the audit, compensation
or governance committees. The chair of each committee except the
investment committee receives an additional annual retainer of
$1,000. The retainer and fees are paid in common shares
quarterly based on the then current market price set by the
ProLogis 1999 Dividend Reinvestment and Share Purchase Plan
(DRPP). Unless payment is deferred by an outside
trustee, the fees are paid into, and the common shares purchased
remain in, the DRPP. The common shares cannot be transferred
while the outside trustee remains a trustee. An outside trustee
may elect to defer his or her retainer and fees for a minimum of
two years. Trustees who are also members of management are not
entitled to receive any trustees fees.
Options. An independent trustee is granted an
option award on the date of his or her initial election to the
board. The board will determine the number of shares subject to
the option award and the option price will equal the average of
the highest and lowest sale prices of our shares on the NYSE on
the date of grant. The option award is fully vested on the grant
date and will expire ten years thereafter, subject to earlier
termination in certain instances as set forth in the plan.
Options were granted to trustees Garvey, Steuert, and Zulberti
in 2005.
Deferred Share Units. Each outside trustee may be
granted deferred share units on such dates determined by the
board. The units are credited with dividend equivalent units
(DEUs) at the end of each year and those DEUs
accumulate additional DEUs based on such dates determined by the
board. All DEUs are paid as common shares at a rate of one share
per DEU and vest using the same schedule as the underlying unit.
They are calculated at the end of each year by taking our annual
dividend, multiplying the number of shares underlying the
associated grant, and dividing by the annual average share
price. An outside trustees deferred share units and DEUs
will be paid in the form of common shares when the outside
trustees service terminates. On May 18, 2005, each
outside trustee who was a trustee on such date was granted
deferred share units totaling $50,000 based on our grant date
closing price on the NYSE.
Other Awards. Outside trustees may be granted
other awards permitted under our 2006 Long-Term Incentive Plan
(the Plan) in accordance with the terms of the Plan,
as determined from time to time by the board. The Plan is
described in greater detail below.
Chairman of the Board and Vice Chairman.
Mr. Brooksher and Mr. Lyons resigned from their
management positions with the company in December 2004.
Mr. Brooksher serves as Chairman of the Board and
Mr. Lyons serves as Vice Chairman of the Board and chairman
of the investment committee of the board.
10
In his role as Chairman of the Board, Mr. Brooksher serves
as presiding trustee, and served on the European and Asian
advisory boards for the company. In addition to the trustee fees
described above, in 2005 Mr. Brooksher received $300,000 in
cash, paid in equal quarterly installments. Mr. Brooksher
will receive the same compensation and perform the same duties
in 2006. In 2005, Mr. Brooksher was also paid a bonus of
$140,000 for his performance on behalf of the company and
$247,900 on his restricted share award given in 2000, which
amount is equal to our quarterly dividend multiplied by the
outstanding restricted share units on the relevant record dates.
In his role as Vice Chairman of the Board and chairman of the
investment committee of the board, Mr. Lyons among other
things, reviewed and approved for submission to the board
investment committee all investments which required its approval
and held discussions with senior management on investment
strategy, development and market exposure. In addition to the
trustees fees described above, in 2005 Mr. Lyons received
$250,000 in cash, paid in equal quarterly installments. In 2005,
Messrs. Brooksher and Lyons were provided office space,
administrative assistance, computer and
e-mail accessibility,
cellular phone, travel assistance, reimbursement for business
expenses, and similar support and Mr. Brooksher will
receive the same in 2006.
11
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|
|
Approval of 2006 Long-Term Incentive
Plan Proposal 2 |
At the annual meeting, shareholders will be asked to approve and
adopt the ProLogis 2006 Long-Term Incentive Plan (the
Plan). The Plan was approved by the board on
March 15, 2006. A summary of the material provisions of the
Plan is set forth below and a complete copy is set forth in
Appendix A.
Subject to the approval of our shareholders at the annual
meeting, the Plan will become effective as of the date of such
approval (the Effective Date) and, if approved, will
continue in effect until terminated by the board. No awards may
be granted under the Plan after the ten-year anniversary of the
boards approval. Any awards that are outstanding after
Plan termination, however, will remain subject to the terms of
the Plan.
Purpose. We have established the Plan to attract
and retain employees and other persons providing services to us
and our subsidiaries; to attract and retain as outside trustees
the highly competent individuals upon whose judgment,
initiative, leadership and continued efforts our success
depends; to motivate participants, by means of appropriate
incentives, to achieve long-range goals, to provide incentive
compensation opportunities that are competitive with those of
other corporations and real estate investment trusts; and to
further identify participants interests with our other
shareholders through compensation that is based on the value of
our common shares, and thereby to promote our long-term
financial interest, including the growth in value of our equity
and enhancement of long-term shareholder return.
We are proposing the Plan to further link overall executive
compensation to the enhancement of long-term shareholder return
and in rewarding our outside trustees for valuable service. We
use equity-based compensation, such as options and other
equity-based awards, as key elements of our executives
compensation packages. Because we believe it is important for
our employees and trustees, and the employees and directors of
our subsidiaries, to have an equity interest in ProLogis, the
board has approved the Plan, and is recommending it to
shareholders for approval. Approval of the Plan will help
achieve our goals and enable us to continue making equity awards
to employees and trustees at competitive levels.
Administration. The Plan is administered by a
committee (the Committee) of two or more trustees
(or a greater number if required for compliance with
Rule 16b-3 issued
under the Securities Exchange Act of 1934 (the Exchange
Act)) who are independent for purposes of NYSE
listing requirements. If an award is intended to constitute
performance-based compensation (as described below), including
options and SARs, the Committee will consist solely of two or
more outside directors within the meaning of
section 162(m) of the Internal Revenue Code and applicable
regulations. In the case of awards to outside trustees, the
Committee is the board. The Committee selects award recipients
under the Plan (called Participants), the types of
awards to be granted and the applicable terms, conditions,
performance criteria, restrictions and other provisions of such
awards. Subject to NYSE rules and applicable law, the Committee
may delegate all or any portion of its responsibilities or
powers under the Plan to persons selected by it. The board may,
in its discretion, take any action under the Plan that would
otherwise be the responsibility of the Committee.
Shares Reserved. The shares with respect to which
awards may be made under the Plan are (i) common shares
currently authorized but unissued or, as permitted by applicable
law, currently held or acquired by us as treasury shares,
including common shares purchased in the open market or in
private transactions. At the discretion of the Committee, an
award under the Plan may be settled in cash rather than common
shares. The closing price with respect to a common share on
March 16, 2006, was $55.49 per share.
The maximum number of common shares that may be delivered under
the Plan is equal to the sum of (i) 5,750,000 common
shares; plus (ii) any common shares that are available as
of the Effective Date for issuance under our existing
1997 share plan and the 2000 trustee option plan (the
Prior Plans); plus (iii) common shares that are
subject to outstanding awards granted under the Prior Plans that
expire or are forfeited, canceled or settled for cash after the
Effective Date without delivery of common shares or which result
in the forfeiture of the common shares to the extent that such
common shares would have been added back to the reserve under
the terms of the applicable Prior Plans. Any common shares
covered by an award under the Plan that expires or is forfeited
or terminated without issuance of common shares (including
common shares that are attributable to awards that are settled
in cash or used to satisfy the applicable tax withholding
obligation) will again be available for awards under the Plan.
12
The following additional limits apply to awards under the Plan:
(i) no more than 5,750,000 common shares may be subject to
ISOs granted under the Plan; (ii) the maximum number of
common shares that may be covered by options and SARs granted to
any one Participant in any one calendar year may not exceed
500,000 common shares; (iii) with respect to full value
awards that are intended to be performance-based compensation,
the maximum number of common shares that may be delivered
pursuant to any such award granted to any one Participant during
any calendar year, regardless of whether settlement of the award
is to occur prior to, at the time of, or after the time of
vesting, may not exceed 200,000 common shares; and (iv) in
the case of cash incentive awards that are intended to be
performance-based compensation, the maximum amount payable to
any one Participant with respect to any performance period of
twelve months (pro rated for performance periods of greater or
lesser than 12 months) is $10,000,000. In the case of full
value awards and cash incentive awards that are intended to be
performance-based compensation, if the award is denominated in
shares but an equivalent amount of cash is delivered (or vice
versa), the foregoing limitations will be applied based on the
methodology used by the Committee to convert common shares to
cash (or vice versa). If delivery of cash or common shares is
deferred until after the cash or common shares are earned, any
adjustment in the amount delivered to reflect actual or deemed
investment experience after the cash or common shares are earned
will be disregarded.
In the event of a corporate transaction involving ProLogis
(including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination or
exchange of common shares), the Committee may adjust awards to
preserve the benefits or potential benefits of the awards.
Action by the Committee may include: (i) adjustment of the
number and kind of common shares which may be delivered under
the Plan (including adjustments to the limitations described
above); (ii) adjustment of the number and kind of common
shares subject to outstanding awards; (iii) adjustment of
the exercise price of outstanding options and SARs; and
(iv) any other adjustments that the Committee determines to
be equitable, which may include, without limitation,
(I) replacement of awards with other awards which the
Committee determines have comparable value and which are based
on stock of a company resulting from the transaction, and
(II) cancellation of the award in return for cash payment
of the current value of the award, determined as though the
award is fully vested at the time of payment, provided that in
the case of an option or SAR, the amount of such payment may be
the excess of the value of the common shares subject to the
option or SAR at the time of the transaction over the exercise
price.
Awards under the Plan are not transferable except as designated
by the Participant by will or by laws of descent and
distribution or, to the extent provided by the Committee,
pursuant to a qualified domestic relations order or to or for
the benefit of the Participants family (including, without
limitation, to a trust or partnership for the benefit of a
Participants family).
Eligibility. All employees and trustees of
ProLogis or its subsidiaries are eligible to become Participants
in the Plan, except that trustees may not be granted ISOs. As of
March 16, 2006, ProLogis and its subsidiaries had
approximately 1,055 employees.
Types of Awards. The Plan provides for the grant
of nonqualified share options (NQOs), incentive
share options (ISOs), share appreciation rights
(SARs), full value awards and cash incentive awards.
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Options. The Committee may grant ISOs or
NQOs to purchase common shares, at an exercise price that is no
less than the fair market value of a common share on the date
the option is granted. ISOs may only be granted to employees of
ProLogis or its subsidiaries. Except for reductions approved by
our shareholders or adjustment for business combinations, the
exercise price of an option may not be decreased after the date
of grant nor may an option be surrendered to us as consideration
for the grant of a replacement option with a lower exercise
price. |
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|
Options will be exercisable in accordance with the terms
established by the Committee provided that no option granted to
an employee will be exercisable prior to the first anniversary
of the grant date (subject to acceleration of exercisability and
vesting, to the extent permitted by the Committee, in the event
of the Participants death, disability, retirement or
involuntary termination or a change in control (as defined |
13
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|
|
below)). The full purchase price of each common share purchased
upon the exercise of any option must be paid at the time of
exercise of the option (except if the exercise price is payable
through the use of cash equivalents, the exercise price may be
paid as soon as practicable after exercise). Subject to
applicable law, the purchase price of an option may be payable
in cash or cash equivalents, common shares (valued at fair
market value as of the day of exercise), or a combination
thereof. The Committee, in its discretion, may impose such
conditions, restrictions, and contingencies on the common shares
acquired pursuant to the exercise of an option as the Committee
determines to be desirable. |
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|
Except as provided by the Committee at the time of grant, an
option will expire on the earliest to occur of the following
(i) the tenth anniversary of the grant date, (ii) the
one-year anniversary after the Participants employment or
service terminates for death, disability (as defined in the
Plan) or retirement (age 60 and 5 years of service for
employees; age 60 and 5 years of service as a trustee
for trustees), (iii) the three-month anniversary after the
Participants employment or service terminates other than
for retirement, death, disability or cause (as defined in the
Plan), or (iv) the date the Participants employment
or service terminates for cause. |
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|
SARs. An SAR entitles the Participant to
receive the amount (in cash or common shares) by which the fair
market value of a specified number of common shares on the
exercise date exceeds an exercise price established by the
Committee, which exercise price may not be less than the fair
market value of the common shares at the time the SAR is
granted. The Committee may grant an SAR independent of or in
tandem with any option grant. The exercise price of a tandem
option and SAR will be the same and a Participant will not be
permitted to exercise both the tandem option and the tandem SAR.
Generally, an SAR will be exercisable in accordance with the
terms established by the Committee provided that no SAR granted
to an employee will be exercisable prior to the first
anniversary of the grant date (subject to acceleration of
exercisability and vesting, to the extent permitted by the
Committee, in the event of the Participants death,
disability, retirement or involuntary termination or a change in
control). The Committee, in its discretion, may impose such
conditions, restrictions, and contingencies on common shares
acquired pursuant to the exercise of an SAR as the Committee
determines to be desirable. The expiration date of an SAR is
subject to the same provisions as an option, as discussed above. |
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|
Full Value Awards. A full value award is
the grant of one or more common shares or a right to receive one
or more common shares in the future, subject to one or more of
the following as determined by the Committee: |
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|
The Committee may grant common shares in consideration of a
Participants previously performed services or in return
for the Participant surrendering other compensation that may be
due. |
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|
The Committee may grant common shares that are contingent on the
achievement of performance or other objectives during a
specified period. |
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|
The Committee may grant common shares subject to a risk of
forfeiture or other restrictions that lapse upon the achievement
of one or more goals relating to completion of service by the
Participant, or the achievement of performance or other
objectives. |
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|
Any full value awards will be subject to such other conditions,
restrictions and contingencies as the Committee determines. If
the vesting of a full value award is conditioned on the
completion of a specified period of service with ProLogis or the
subsidiaries, without achievement of performance measures (as
described below) or other performance objectives being required
as a condition of vesting, and without it being granted in lieu
of other compensation, then the required period of service for
full vesting will not be less than three years (subject, to the
extent provided by the Committee, to pro rated vesting over the
course of such three-year period and to accelerated vesting in
the event of the Participants death, disability,
retirement or involuntary termination or a change of control). |
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Cash Incentive Awards. A cash incentive
award is the grant of a right to receive a payment of cash (or,
in the discretion of the Committee, common shares having an
equivalent value to the cash otherwise |
14
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|
payable) that is contingent on achievement of the performance
objectives over a period established by the Committee. The grant
of cash incentive awards may also be subject to such other
conditions, restrictions and contingencies as determined by the
Committee. |
Performance-Based Compensation. ProLogis will
generally not be entitled to a U.S. income tax deduction
for annual compensation in excess of $1 million paid to its
chief executive officer and the four next most highly
compensated officers. However, amounts that constitute
performance-based compensation are not counted
toward the $1 million limit. It is expected that, in
general, options and SARs granted under the Plan will satisfy
the requirements for performance-based compensation.
The Committee may designate whether any full value awards or
cash incentive awards being granted to any Participant are
intended to be performance-based compensation as
that term is used in section 162(m) of the Internal Revenue
Code. Any such awards designated as intended to be
performance-based compensation will be conditioned
on the achievement of one or more performance measures, to the
extent required by Internal Revenue Code section 162(m).
The performance measures that may be used for such awards will
be based on any one or more of the following performance
criteria as selected by the Committee: (i) earnings
including operating income, earnings before or after taxes,
earnings before or after interest, depreciation, amortization,
or extraordinary or special items or book value per share (which
may exclude nonrecurring items) or net earnings;
(ii) pre-tax income or after-tax income;
(iii) earnings per share (basic or diluted);
(iv) operating profit; (v) revenue, revenue growth or
rate of revenue growth; (vi) return on assets (gross or
net), return on investment (including cash flow return on
investment), return on capital (including return on total
capital or return on invested capital), or return on equity;
(vii) returns on sales or revenues; (viii) operating
expenses; (ix) stock price appreciation; (x) cash flow
(before or after dividends), free cash flow, cash flow return on
investment (discounted or otherwise), net cash provided by
operations, cash flow in excess of cost of capital or cash flow
per share (before or after dividends); (xi) implementation
or completion of critical projects or processes;
(xii) economic value created; (xiii) cumulative
earnings per share growth; (xiv) operating margin or profit
margin; (xv) share price or total shareholder return;
(xvi) cost targets, reductions and savings, productivity
and efficiencies; (xvii) strategic business criteria,
consisting of one or more objectives based on meeting specified
market penetration, geographic business expansion, customer
satisfaction, employee satisfaction, human resources management,
supervision of litigation, information technology, and goals
relating to acquisitions, divestitures, joint ventures and
similar transactions, and budget comparisons;
(xviii) personal professional objectives, including any of
the foregoing performance targets, the implementation of
policies and plans, the negotiation of transactions, the
development of long-term business goals, formation of joint
ventures, research or development collaborations, and the
completion of other corporate transactions; (xix) funds
from operations (FFO) or funds available for distribution (FAD);
(xx) economic value added (or an equivalent metric);
(xxi) share price performance; (xxii) improvement in
or attainment of expense levels or working capital levels; or
(xxiii) any combination of, or a specified increase in, any
of the foregoing.
Where applicable, the performance targets may be expressed in
terms of attaining a specified level of the particular criteria
or the attainment of a percentage increase or decrease in the
particular criteria, and may be applied to one or more of
ProLogis, an affiliate of ProLogis, or a division or strategic
business unit of ProLogis or may be applied to the performance
of ProLogis relative to a market index, a group of other
companies or a combination thereof, all as determined by the
Committee. The performance targets may include a threshold level
of performance below which no payment will be made (or no
vesting will occur), levels of performance at which specified
payments will be made (or specified vesting will occur), and a
maximum level of performance above which no additional payment
will be made (or at which full vesting will occur). Performance
targets will be determined in accordance with generally accepted
accounting principles and will be subject to certification by
the Committee, provided that the Committee will have the
authority to exclude, impact of charges for restructurings,
discontinued operations, extraordinary items and other unusual
or non-recurring events and the cumulative effects of tax or
accounting principles and identified in financial statements,
notes to financial statements, managements discussion and
analysis or other SEC filings.
Change of Control. In the event that (a) a
Participants employment or service, as applicable, is
terminated by us, our successor or one of our affiliates that is
the Participants employer for reasons other than cause (as
defined in the Plan) within 24 months following a Change in
Control, or (b) the Plan is terminated by us or our
successor following a Change in Control without provision for
the continuation of outstanding awards
15
under the Plan, all options and related awards which have not
otherwise expired will become immediately exercisable and all
other awards will become fully vested. For purposes of the Plan,
a Change in Control generally occurs on the first to
occur of the following: (1) the consummation of a
transaction, approved by our shareholders, to merge ProLogis
into or consolidate ProLogis with another entity, sell or
otherwise dispose of all or substantially all of its assets or
adopt a plan of liquidation, provided, however, that a Change in
Control will not be deemed to have occurred by reason of a
transaction, or a substantially concurrent or otherwise related
series of transactions, upon the completion of which 50% or more
of the beneficial ownership of the voting power of ProLogis, the
surviving corporation or corporation directly or indirectly
controlling ProLogis or the surviving corporation, as the case
may be, is held by the same persons (although not necessarily in
the same proportion) as held the beneficial ownership of the
voting power of ProLogis immediately prior to the transaction or
the substantially concurrent or otherwise related series of
transactions, except that upon the completion thereof, employees
or employee benefit plans of ProLogis may be a new holder of
such beneficial ownership; (2) the beneficial
ownership (as defined in
Rule 13d-3 under
the Exchange Act) of securities representing 50% or more of the
combined voting power of ProLogis is acquired, other than from
ProLogis, by any person as defined in
Sections 13(d) and 14(d) of the Exchange Act (other than
any trustee or other fiduciary holding securities under an
employee benefit or other similar equity plan of ProLogis); or
(3) at any time during any period of two consecutive years,
individuals who at the beginning of such period were members of
the board cease for any reason to constitute at least a majority
thereof (unless the election, or the nomination for election by
ProLogiss shareholders, of each new trustee was approved
by a vote of at least two-thirds of the trustees still in office
at the time of such election or nomination who were trustees at
the beginning of such period).
Generally, a Participants employment or service will be
deemed to be terminated by ProLogis or the successor to ProLogis
if the Participant terminates employment or service after
(I) a substantial adverse alteration in the nature of the
Participants status or responsibilities from those in
effect immediately prior to the Change in Control, or
(II) a material reduction in the Participants annual
base salary and target bonus, if any, or, in the case of a
Participant who is an outside trustee, the Participants
annual compensation, as in effect immediately prior to the
Change in Control. If, upon a Change in Control, awards in other
shares or securities are substituted for outstanding awards, and
immediately following the Change in Control the Participant
becomes employed (if the Participant was an employee immediately
prior to the Change in Control) or a trustee or board member (if
the Participant was an outside trustee immediately prior to the
Change in Control) of the entity into which ProLogis merged, or
the purchaser of substantially all of the assets of ProLogis, or
a successor to such entity or purchaser, the Participant will
not be treated as having terminated employment or service for
these purposes until such time as the Participant terminates
employment or service with the merged entity or purchaser (or
successor), as applicable.
Amendment and Termination. The board may, at any
time, amend or terminate the Plan, and the board or the
Committee may amend any award, provided that no amendment or
termination may affect the rights of any Participant without the
Participants written consent. Adjustments to the Plan and
awards on account of business transactions (as described above)
are not subject to the foregoing prohibition. The provisions of
the Plan that prohibit repricing of options and SARs cannot be
amended unless the amendment is approved by our shareholders.
The Plan also permits the board to amend the Plan and any awards
that are subject to section 409A of the Internal Revenue
Code (relating to nonqualified deferred compensation) as it
deems necessary to conform to section 409A.
16
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United States Income Tax Considerations. |
IRS CIRCULAR 230 NOTICE: The following discussion is not
intended or written by us to be used, and cannot be used, by any
person for the purpose of avoiding tax penalties that may be
imposed under U.S. tax laws. The discussion is written as
part of the disclosure in this proxy, which is being used by us
in connection with the promotion or marketing of the
transactions addressed herein and each taxpayer should seek
advice based on the taxpayers particular circumstances
from an independent tax advisor.
Under present federal income tax laws, options granted under the
Plan should have the following tax consequences:
Nonqualified Share Options. The grant of an
NQO 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 common shares acquired over the
exercise price for those common shares, and ProLogis will be
entitled to a corresponding deduction. Gains or losses realized
by the Participant upon disposition of such common shares will
be treated as capital gains and losses, with the basis in such
common shares equal to the fair market value of the common
shares at the time of exercise.
The exercise of an NQO through the delivery of previously
acquired stock will generally be treated as a non-taxable,
like-kind exchange as to the number of common shares surrendered
and the identical number of common shares received under the
option. That number of common shares will take the same basis
and, for capital gains purposes, the same holding period as the
common shares that are given up. The value of the common 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 common
shares will have a new holding period for capital gain purposes
and a basis equal to the value of such common shares determined
at the time of exercise.
Incentive Share Options. The grant of an
ISO will not result in taxable income to the Participant. The
exercise of an ISO will not result in taxable income to the
Participant provided that the Participant was, without a break
in service, an employee of ProLogis or a subsidiary during the
period beginning on the date of the grant of the option and
ending on the date three months prior to the date of exercise
(one year prior to the date of exercise if the Participant is
disabled, as that term is defined in the Internal Revenue Code).
The excess of the fair market value of the common shares at the
time of the exercise of an ISO over the exercise price is an
adjustment that is included in the calculation of the
Participants alternative minimum taxable income for the
tax year in which the ISO is exercised. For purposes of
determining the Participants alternative minimum tax
liability for the year of disposition of the common shares
acquired pursuant to the ISO exercise, the Participant will have
a basis in those common shares equal to the fair market value of
the common shares at the time of exercise.
If the Participant does not sell or otherwise dispose of the
common shares within two years from the date of the grant of the
ISO or within one year after receiving the transfer of such
common shares, then, upon disposition of such common shares, any
amount realized in excess of the exercise price will be taxed to
the Participant as capital gain, and ProLogis will not be
entitled to any deduction for Federal income tax purposes. A
capital loss will be recognized to the extent that the amount
realized is less than the exercise price.
If the foregoing holding period requirements are not met, the
Participant will generally realize ordinary income, and a
corresponding deduction will be allowed to ProLogis, at the time
of the disposition of the common shares, in an amount equal to
the lesser of (i) the excess of the fair market value of
the common shares on the date of exercise over the exercise
price, or (ii) the excess, if any, of the amount realized
upon disposition of the common shares over the exercise price.
If the amount realized exceeds the value of the common shares on
the date of exercise, any additional amount will be capital
gain. If the amount realized is less than the exercise price,
the Participant will recognize no income, and a capital loss
will be recognized equal to the excess of the exercise price
over the amount realized upon the disposition of the common
shares.
17
The exercise of an ISO through the exchange of previously
acquired stock will generally be treated in the same manner as
such an exchange would be treated in connection with the
exercise of an NQO; that is, as a non-taxable, like-kind
exchange as to the number of common shares given up and the
identical number of common shares received under the option.
That number of common shares will take the same basis and, for
capital gain purposes, the same holding period as the common
shares that are given up. However, such holding period will not
be credited for purposes of the one-year holding period required
for the new common shares to receive ISO treatment. Common
shares received in excess of the number of common shares given
up will have a new holding period and will have a basis of zero
or, if any cash was paid as part of the exercise price, the
excess common shares received will have a basis equal to the
amount of the cash. If a disqualifying disposition (a
disposition before the end of the applicable holding period)
occurs with respect to any of the common shares received from
the exchange, it will be treated as a disqualifying disposition
of the common shares with the lowest basis.
If the exercise price of an ISO is paid with common shares of
stock of ProLogis acquired through a prior exercise of an ISO,
gain will be realized on the common shares given up (and will be
taxed as ordinary income) if those common shares have not been
held for the minimum ISO holding period (two years from the date
of grant and one year from the date of transfer), but the
exchange will not affect the tax treatment, as described in the
immediately preceding paragraph, of the common shares received.
The board unanimously recommends that the shareholders
vote FOR the approval of the 2006 Long-Term Incentive
Plan.
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Certain Relationships and Related Transactions |
Those familiar with our history will remember that we made
significant strides in the companys growth by acquiring
two sizeable portfolios from entities in which Mr. Lyons
and Mr. Schwartz, respectively, were principal officers.
Their transactions were negotiated at arms length before
either was affiliated with ProLogis. As a result of those
transactions, Mr. Lyons owned an indirect 3.03% interest as
of December 31, 2005 in ProLogis Limited Partnership-I
(equal to 436,471 units) valued at $20,391,925 based on our
December 31, 2005 closing price. Mr. Schwartz owned
5.01% of ProLogis Limited Partnership-III (equal to
78,678 units) valued at $3,675,836, and owned an indirect
1.02% interest in ProLogis Limited Partnership-IV (equal to
49,587 units) valued at $2,316,704, all based on our
December 31, 2005 closing price.
In 2003, ProLogis Limited Partnership-I refinanced a
$26 million secured loan with Prudential Life Insurance
Company. In connection with the refinancing, Mr. Lyons,
through his indirect interest in the limited partnership,
entered into a guaranty of the debt. Also in 2003,
Mr. Schwartz guaranteed $235,000 of the debt of ProLogis
Limited Partnership-III. The guaranties were neither required by
nor did they affect the company, but were entered into for
reasons personal to Mr. Lyons and Mr. Schwartz.
Former executive officers and directors of Catellus who are
current executive officers or trustees of ProLogis had interests
in the Catellus merger that were different from, or in addition
to, the interests of Catellus stockholders generally. Those
interests are described below.
Representation on ProLogiss Board of
Trustees. Pursuant to the merger agreement,
Mr. Rising, the former Chairman of the Board and Chief
Executive Officer of Catellus, and Ms. Garvey, a former
member of Catelluss board of directors, were appointed to
ProLogiss board of trustees as of the effective time of
the merger.
Employment Agreement with Mr. Rising.
Catellus entered into an employment agreement with
Mr. Rising which provided that, if Mr. Rising was
constructively discharged or terminated without cause within
12 months after a change in control of Catellus (which
included the completion of the Catellus merger), he would
receive a lump sum payment equal to three times his average
annual salary and bonus for the three full preceding calendar
years. In addition, all of his Catellus stock options and all of
his shares of Catellus restricted stock, restricted stock units
and any other outstanding equity-based awards immediately
vested. Mr. Rising was entitled to an accelerated credit of
the supplemental retirement benefit annual credits to his
account in Catelluss
18
Deferred Compensation Plan, in an amount equal to the product of
the annual credit amount (as defined in the employment
agreement) and the number of years between January 1 of the year
in which his termination occurs and January 1, 2008,
subject to a maximum limit of an additional $3 million on
the total amount of annual credits made to
Mr. Risings account. In addition, Mr. Rising was
entitled to payment of accrued but unpaid obligations, a
pro-rata bonus at target for the fiscal year in which his
employment terminates and all other amounts to which was then
entitled under the Catellus employee benefit plans in which he
participates. If Mr. Rising incurs an excise tax under
Section 4999 of the Internal Revenue Code (relating to
excess parachute payments) with respect to any
payments he received from Catellus (including the payments
attributable to the acceleration of the vesting of his
equity-based awards) and if his excess parachute
payments are at least 110% of the amount of the parachute
payments that he could have received without being subject to
any excise tax under Section 4999 of the Internal Revenue
Code, Mr. Rising is entitled to a gross-up
payment to make him whole for this excise tax and any income and
employment taxes which apply to the
gross-up payment. The
cash amount of the severance payments paid to Mr. Rising
under his employment agreement (excluding payments attributable
to accelerated vesting of equity awards, accrued obligations and
any applicable gross-up
payments), was $10,836,575 of which $3,000,000 was deferred into
the Catellus Development Deferred Compensation Plan.
Memorandum of Understanding with
Mr. Antenucci. Catellus entered into a memorandum
of understanding with Ted R. Antenucci which provided that
if Mr. Antenucci is terminated without cause or resigns for
good reason within 12 months after a change in
control of Catellus (which included the completion of the
Catellus merger), he would receive a lump sum payment equal to
three times his average annual salary and bonus for the three
full preceding calendar years. In addition, all of
Mr. Antenuccis outstanding Catellus stock options and
all of his shares of Catellus restricted stock, restricted stock
units, and any other equity awards vested immediately. In
addition, Mr. Antenucci was entitled to payment of accrued
but unpaid obligations (including pro rata bonus) and all other
amounts to which he was then entitled under the Catellus
compensation plans in which he participated. Mr. Antenucci
is also entitled to receive a
gross-up payment for
any excise tax liability under Section 4999 of the Internal
Revenue Code (relating to excess parachute payments)
that he may incur on the same terms and conditions as provided
under Mr. Risings employment agreement.
Mr. Antenucci was President of Catellus Commercial
Development Corporation, a subsidiary of Catellus, and is now
our President of Global Development.
Under the terms of the merger agreement, provision was made for
the payment to all Catellus employees entitled to receive a
bonus, including Catelluss executive officers who are now
ProLogis executive officers or trustees, of a full-year bonus
for 2005. Messrs. Rising and Antenucci received bonus
payments of $1,555,053 and $787,500, respectively.
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Equity Compensation Awards. |
Stock Options. The merger agreement
provided that, as of the effective time of the merger, all
vested and unvested Catellus stock options outstanding
immediately prior to the effective time of the merger, including
those held by Catelluss directors and executive officers,
were canceled, and each holder of a canceled option received a
payment in an amount equal to (1) the total number of
shares of Catellus common stock subject to the canceled options
held by the owner multiplied by (2) the excess of $33.81
over the exercise price per share subject to the canceled
option, less any applicable withholding taxes. The payment was
made in the form of 65% ProLogis common shares and 35% cash.
Restricted Stock. Each share of Catellus
restricted stock outstanding immediately prior to the effective
time of the merger, including those held by Catelluss
directors and executive officers, were canceled, and each holder
of any such canceled restricted stock received $33.81 per
canceled share, less any applicable withholding taxes, in the
form of 65% ProLogis common shares and 35% cash.
Restricted Stock Units. Each Catellus
restricted stock unit (which includes all director stock units,
director restricted stock units, performance units granted
pursuant to Catelluss Long-Term Incentive Plan, or LTIP,
and all performance units granted under Catelluss
Transition Incentive Plan), including those held by
Catelluss directors and executive officers, outstanding
immediately prior to the effective time of the merger were
canceled,
19
and each holder of any such canceled restricted stock unit
received $33.81 per share subject to the canceled
restricted stock unit, less any applicable withholding taxes, in
the form of 65% ProLogis common shares and 35% cash.
Summary of Equity Compensation Payments.
Based on equity compensation holdings as of August 8, 2005,
Messrs. Rising and Antenucci received the following
payments with respect to shares of vested and unvested
restricted stock, stock options and restricted stock units held
by them, payable in the form of 65% ProLogis common shares and
35% cash:
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Unvested |
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Restricted |
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Vested Stock |
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Unvested Stock |
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Vested Restricted |
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Unvested Restricted |
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Stock |
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Options |
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Options |
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Stock Units(1) |
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Stock Units(1) |
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Nelson C. Rising
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$ |
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$ |
10,434,437 |
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$ |
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$ |
5,582,369 |
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$ |
11,496,173 |
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Ted R. Antenucci
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2,855,153 |
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961,320 |
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8,690,161 |
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(1) |
Where applicable, the TIP and LTIP amounts do not include
dividend equivalents for the third quarter of 2005 that were
paid on August 31, 2005. |
Indemnification; Directors and Officers
Insurance. Under the merger agreement, ProLogis agreed
to indemnify Catelluss directors and officers to the same
extent as they were previously indemnified by Catellus. ProLogis
agreed that all rights to indemnification that exist in favor
of, and all limitations of the personal liability of,
Catelluss directors and officers provided for in
Catelluss certificate of incorporation or bylaws, as then
in effect, with respect to matters occurring prior to the
effective time of the merger, including the merger, will
continue in full force and effect from and after the effective
time of the merger. Catellus agreed to purchase, prior to the
effective time of the merger, an extended reporting period
endorsement under Catelluss existing directors and
officers liability insurance coverage for a period of six
years following the effective time of the merger with coverage
on terms that are not materially less favorable on the whole to
Catelluss directors and officers as those provided by
Catellus to these directors and officers.
Change of Control Severance Plans. In connection
with the merger, Catellus adopted a Change of Control Severance
Plan and a Supplemental Change of Control Severance Plan. The
Change of Control Severance Plans were intended to provide for
continuity in the management and operations of Catellus and its
employees in connection with a change in control of Catellus.
Under the Change of Control Severance Plans, all full- and
part-time (but not temporary) employees of Catellus and its
affiliates who incurred a qualifying termination
received a single cash lump sum payment equal to their monthly
compensation amount (which included the monthly rate of base
salary plus a specified bonus amount) multiplied by their years
of service, subject to the minimum and maximum benefits and
other exceptions described below. An eligible employee with
fewer than two years of service received a minimum benefit equal
to three times his or her monthly compensation amount. An
eligible employee with two or more years of service received a
minimum benefit equal to six times his or her monthly
compensation amount. An eligible employee was entitled to
benefits under only one of the Change of Control Severance
Plans. The maximum benefit payable to an eligible employee was
24 times his or her monthly compensation amount. An eligible
employee who (1) performed services for FOCIL Holdings LLC,
or FOCIL, the purchaser of a significant portion of
Catelluss urban and residential development assets, or one
of its affiliates while employed by Catellus or one of its
affiliates and (2) began, within 90 days following his
or her qualifying termination, to perform services for FOCIL or
its affiliates as an employee of FOCIL or one of its affiliates
or another entity performing services for FOCIL or its
affiliates, was entitled to only one-half the severance benefit
to which he or she otherwise would have been entitled.
Under the Change of Control Severance Plans, the amounts that
were otherwise payable to employees, including
Messrs. Rising and Antenucci, were offset by any severance
benefits payable to them under their respective employment
agreement and memorandum of understanding with Catellus
described above.
20
COMPENSATION COMMITTEE REPORT
Notwithstanding anything to the contrary set forth in any of
our previous or future filings under the Securities Act of 1933
or the Exchange Act that might incorporate this proxy statement
or future filing with the SEC, in whole or in part, the
following report shall not be deemed incorporated by reference
into any such filing.
The compensation committee is responsible for recommending to
the board the salaries and other compensation of certain
executive officers of the company, including the chief executive
officer. Each member of our compensation committee is an
independent trustee under the NYSE listing requirements. The
committees function is more fully described in its charter
which has been approved by our board. The charter can be viewed,
together with any future changes that may occur, on the ProLogis
website at www.prologis.com.
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Executive Compensation Philosophy |
Our compensation philosophy is to reward superior executive
performance and to attract and retain executives who will drive
ProLogiss success and industry leadership. We review and
recommend all executive compensation policies, review the
performance of senior executives, and evaluate the effectiveness
of our executive compensation programs in hiring, motivating,
and retaining key employees while creating long-term shareholder
value. The programs are primarily designed to:
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Provide executives with compensation balanced between cash and
shares, with a significant portion of total compensation at
risk, tied to performance of the company and the individual
officer; |
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Align executives with shareholders by providing an equity stake
in the company; and |
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Achieve these goals through salary and bonus, share options,
restricted share units, and long-term performance awards. |
All share option grants and awards have been made under the
ProLogis 1997 Long-Term Incentive Plan which the shareholders
approved in 1997 and again in 2000 and 2002. Each component is
discussed in greater detail below, as well as other steps used
in rewarding, creating incentives for and retaining our key
executives. Upon shareholder approval of the 2006 Long-Term
Incentive Plan, share options and awards will then be made under
the new plan.
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Compensation Elements for Executive Officers |
The basic elements of our compensation approach are:
Salary and Bonus. Salary is paid for ongoing
performance throughout the year and we generally pay at
mid-market levels, as confirmed annually by our compensation
consultant. Bonuses are paid in January for prior year
performance and are based upon individually established
performance goals and the performance of the company. Bonus
awards have historically equaled an amount which achieves a
targeted level of competitive total compensation consistent with
performance.
Options. We believe that share options are an
effective incentive for executive officers and other key
employees in performance and retention, and they promote a close
identity of interests between the executives and the
shareholders. The executive benefits only when the share price
rises for all shareholders and the awards in general vest
ratably over four years. Options have an exercise price equal to
the average of the high and low price of our shares on the grant
date. The size of share option grants was based on various
factors relating to the responsibilities of the executive
officers and their expected future contributions. Options cannot
continue beyond the first of (i) ten years from the date
they were granted, and (ii) up to one year after employment
is terminated and services are no longer provided, the timing of
which varies based on the reason for termination. DEUs have not
been awarded with options after 2001. The number of share
options granted to our six most highly paid officers are shown
in the summary compensation table below.
Performance Share Awards (PSAs). We periodically
grant PSAs to some executives because, like options, we believe
they promote a close identity of interests between executives
and shareholders. PSAs are contingent target awards given before
the annual performance period begins and are successfully earned
over a defined time period only if certain criteria established
by the committee are satisfied. We can award a greater or lesser
number of PSAs if an executive exceeds or falls short of the
established performance criteria. Each award is
21
worth one common share and, if earned, has typically vested at
the end of or two years after the performance period. Beginning
with the 2005 grants, awards will vest at the end of the
three-year performance period, as described on page 25
below. PSAs encourage continued service because unvested PSAs
are forfeited if the executive leaves the company before
restrictions have lapsed. The committee typically grants DEUs
with the awards which in turn accumulate additional DEUs. The
market value as of the date the PSAs were earned in the last
three years to the six most highly paid executive officers is
shown in the summary compensation table on page 23.
Restricted Share Units (RSUs). We also grant RSUs
to certain officers and other key employees. Each unit is worth
one common share and the awards typically vest ratably over four
years. The committee typically grants DEUs with the awards which
in turn accumulate additional DEUs. As with PSAs, unvested RSUs
are forfeited when an employees service with the company
is terminated. The market value as of the grant date of RSUs
awarded in the last three years is also shown in the summary
compensation table on page 23.
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How Executive Pay Levels are Determined |
As an executives level of responsibility increases, a
greater portion of total compensation is based on annual and
long-term performance-based incentive compensation and less on
salary and employee benefits, creating the potential for greater
variability in the individuals compensation level from
year to year. The mix, level and structure of performance-based
incentive elements reflect market industry practices as well as
the positions role and relative impact on business results
consistent with ProLogiss variable pay-for-performance
philosophy.
Executive compensation last year was determined after we
assessed the nature and scope of the executive officers
responsibilities, their effectiveness in enhancing the long-term
interests of our shareholders, their success within applicable
practice areas, and their demonstrated focus on promoting
integrity within the company. We also retained an independent
compensation consultant to assess our programs and ascertain
their relative competitiveness against a comparison group of
companies that are most likely to compete with us for the
services of the executive officers (which group is not the same
group of companies comprising our peer group for purposes of our
performance graph). After analyzing the consultants
findings, we have concluded that our compensation packages are
generally competitive with market practices for most senior
executives.
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Basis for Chief Executive Officer Compensation |
For 2005, we paid Mr. Schwartz a salary of $500,000 and a
cash bonus of $660,000. We considered this level of pay and
bonus appropriate for the following reasons: his performance in
providing the vision and strategic direction of the company;
completing the $5.3 billion merger with Catellus; growing
annual fee income from property funds from $50.8 million in
2004 to $66.9 million in 2005 and our funds from operations
from ProLogis property funds from $80.5 million in 2004 to
$96.3 million in 2005; continuing to expand our presence in
North America, Europe, and Asia; commencing development of a
record $2.15 billion of new facilities; increasing our
funds from operations by 11.5% to $2.71 per share; and
increasing the dividend for a twelfth consecutive year. We also
granted Mr. Schwartz 145,604 share options and 21,229
restricted share units, both of which vest in equal installments
over four years and Mr. Schwartz earned 30,000 performance
shares which vest on December 31, 2007.
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Tax Deductibility under Section 162(m) |
As noted above, the companys compensation policy is
largely based upon the practice of pay-for-performance.
Section 162(m) of the Internal Revenue Code imposes a
limitation on the deductibility of nonperformance-based
compensation in excess of $1 million paid to certain senior
executives. We believe that the company should be able to
continue to manage the executive compensation program for these
officers so as to preserve the related federal income tax
deductions, although individual exceptions may occur.
The foregoing report on executive compensation for 2005 is
provided by the following trustees, who constituted the
management development and compensation committee at the end of
2005.
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Donald P. Jacobs (Chair) |
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Stephen L. Feinberg |
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William D. Zollars |
22
SUMMARY COMPENSATION TABLE
The following table shows the compensation paid by us to our
chief executive officer and the four other most highly paid
executive officers during 2005 and one officer who resigned in
2005.
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Annual Compensation |
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Long-Term Compensation Awards |
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LTIP |
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All Other |
Name and Principal Position |
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Bonus |
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Compensation 1 |
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Awards 2 |
|
Options 3 |
|
Payout 4 |
|
Compensation 5 |
Jeffrey H. Schwartz
|
|
|
2005 |
|
|
$ |
500,000 |
|
|
$ |
660,000 |
|
|
$ |
91,808 |
|
|
$ |
2,366,070 |
|
|
|
145,604 |
|
|
$ |
719,940 |
|
|
$ |
7,835 |
|
Chief Executive Officer
|
|
|
2004 |
|
|
|
463,077 |
|
|
|
460,000 |
|
|
|
443,041 |
|
|
|
779,940 |
|
|
|
200,000 |
|
|
|
0 |
|
|
|
7,770 |
|
|
|
|
2003 |
|
|
|
340,000 |
|
|
|
350,000 |
|
|
|
0 |
|
|
|
1,764,950 |
|
|
|
75,000 |
|
|
|
176,540 |
|
|
|
7,305 |
|
Walter C. Rakowich
|
|
|
2005 |
|
|
$ |
450,000 |
|
|
$ |
600,000 |
|
|
$ |
0 |
|
|
$ |
1,923,116 |
|
|
|
99,912 |
|
|
$ |
719,940 |
|
|
$ |
7,835 |
|
President and
|
|
|
2004 |
|
|
|
413,077 |
|
|
|
400,000 |
|
|
|
0 |
|
|
|
779,940 |
|
|
|
175,000 |
|
|
|
311,318 |
|
|
|
7,700 |
|
Chief Operating Officer
|
|
|
2003 |
|
|
|
340,000 |
|
|
|
300,000 |
|
|
|
0 |
|
|
|
1,540,320 |
|
|
|
75,000 |
|
|
|
277,420 |
|
|
|
13,547 |
|
Robert J. Watson
|
|
|
2005 |
|
|
$ |
370,000 |
|
|
$ |
408,000 |
|
|
$ |
0 |
|
|
$ |
1,000,672 |
|
|
|
45,294 |
|
|
$ |
719,940 |
|
|
$ |
7,835 |
|
North America President
|
|
|
2004 |
|
|
|
345,962 |
|
|
|
357,500 |
|
|
|
819,279 |
|
|
|
649,950 |
|
|
|
75,000 |
|
|
|
311,318 |
|
|
|
7,700 |
|
and Chief Operating Officer
|
|
|
2003 |
|
|
|
346,216 |
|
|
|
250,000 |
|
|
|
118,490 |
|
|
|
1,219,420 |
|
|
|
70,000 |
|
|
|
252,200 |
|
|
|
12,348 |
|
Dessa M. Bokides
|
|
|
2005 |
|
|
$ |
129,808 |
|
|
$ |
496,000 |
6 |
|
$ |
157,244 |
|
|
$ |
1,610,158 |
|
|
|
53,110 |
|
|
$ |
0 |
|
|
$ |
1,535 |
|
Chief Financial Officer
|
|
|
2004 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
2003 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Steven K. Meyer
|
|
|
2005 |
|
|
$ |
295,944 |
|
|
$ |
318,000 |
|
|
$ |
499,116 |
|
|
$ |
794,655 |
|
|
|
35,346 |
|
|
$ |
281,160 |
|
|
$ |
7,835 |
|
Europe President and
|
|
|
2004 |
|
|
|
285,109 |
|
|
|
275,000 |
|
|
|
215,744 |
|
|
|
433,300 |
|
|
|
60,000 |
|
|
|
123,984 |
|
|
|
7,700 |
|
Chief Operating Officer
|
|
|
2003 |
|
|
|
294,077 |
|
|
|
155,000 |
|
|
|
39,959 |
|
|
|
834,340 |
|
|
|
50,000 |
|
|
|
138,710 |
|
|
|
13,305 |
|
John W.
Seiple, Jr.7
|
|
|
2005 |
|
|
$ |
409,231 |
|
|
$ |
350,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
5,769,390 |
|
|
$ |
53,989 |
8 |
|
|
|
2004 |
|
|
|
388,077 |
|
|
|
357,500 |
|
|
|
0 |
|
|
|
779,940 |
|
|
|
90,000 |
|
|
|
311,318 |
|
|
|
7,700 |
|
|
|
|
2003 |
|
|
|
340,000 |
|
|
|
300,000 |
|
|
|
0 |
|
|
|
1,492,185 |
|
|
|
75,000 |
|
|
|
277,420 |
|
|
|
13,547 |
|
1 Amounts
in this column reflect incremental costs to the company for
certain officers working abroad. Amounts reflect reimbursement
of Mr. Schwartz for foreign tax payments made in 2004 and
2005 ($443,041 and $75,194) and taxable relocation and tax gross
up on relocation in 2005 ($16,614), reimbursement of
Mr. Watson for foreign tax payments made in 2003 and 2004
($36,062 and $819,279) and payment of housing and car allowance
to Mr. Watson in 2003 ($82,428), reimbursement of
Mr. Meyer for housing and car allowance and tax gross up on
each ($19,565) and for taxable relocation and tax gross up in
2003 ($20,394) and reimbursement for foreign tax payments made
in 2004 and 2005 ($215,744 and $396,629) and housing and car
allowance and tax gross up on each for 2005 ($102,487) and for
Ms. Bokides ($157,244) taxable relocation and tax gross up
on relocation in 2005.
2 This
column shows the market value of the restricted share units on
the date of grant and performance share awards on the date the
awards are earned. Our closing price per share as of
December 31, 2003 was $32.09, December 31, 2004 was
$43.33, and December 31, 2005 was $46.72. The aggregate
holdings and market value of the unvested restricted shares held
as of December 31, 2005, by the individuals listed are:
Mr. Schwartz (86,729 shares, $4,051,979);
Mr. Rakowich (74,567 shares, $3,483,770);
Mr. Watson (49,103 shares, $2,294,092);
Ms. Bokides (36,098 shares, $1,686,499);
Mr. Meyer (37,153 shares, $1,735,788) and
Mr. Seiple (0 shares, $0). The value is
calculated according to SEC rules assuming all shares are vested
as of December 31, 2005, which in fact they have not.
Performance awards vest two years after they are earned and
restricted share units in general vest ratably over four years
after they are granted. All awards and units are forfeited by
the executive if employment terminates before vesting. Awards
are granted under our 1997 share plan and earn DEUs.
3 Option
grants in 2003, 2004 and 2005 do not receive DEUs. Options are
granted under our 1997 share plan.
4 Represents
performance share awards earned in 2000, 2001 and 2002 paid out
in January 2003, January 2004, and January 2005, respectively,
pursuant to our 1997 share plan. In addition, in 2005
Mr. Seiple was distributed 40,000 restricted share units
granted in 1998, 30,000 restricted share units granted in 2003,
a performance share award of 16,500 earned in 2003, a
performance share award of 18,000 earned in 2004, and a
performance share award of 18,000 earned in 2005 paid out on
August 9, 2005 at a distribution price of $41.22 and a
performance share award of 16,900 earned in 2002 paid out on
January 3, 2005 at a distribution price of $42.60.
5 Amounts
include contributions we made under the company 401(k) plan in
2005, 2004, and 2003 as follows: Mr. Schwartz $6,300,
$6,150, $0; Mr. Rakowich $6,300, $6,150, $6,000;
Mr. Watson $6,300, $6,150, $6,000; Ms. Bokides $0, $0,
and $0; Mr. Meyer $6,300, $6,150, $6,000 and
Mr. Seiple $6,300, $6,150, $6,000;. Also reflects the cost
of term life and life insurance (approximately $1,535 per
individual in 2005, $1,550 per individual in 2004, and
$1,311 in 2003). And includes value and tax offset payment for
grants of Macquarie ProLogis Trust stock in 2003 as follows:
Mr. Schwartz $5,994; Mr. Rakowich $6,236;
Mr. Watson $5,037; Ms. Bokides $0; Mr. Meyer
$5,994 and Mr. Seiple $6,236.
6 Includes
a $125,000 signing bonus.
23
7 Mr. Seiple
resigned as President and Chief Executive Officer
North America on August 4, 2005.
8 Includes
$46,154 paid to Mr. Seiple for vacation time accrued as of
his resignation date as President and Chief Executive
Officer North America on August 4, 2005.
SHARE OPTIONS GRANTED IN 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants |
|
Grant Date Value |
|
|
|
|
|
|
|
# of Shares |
|
% of Total |
|
|
|
|
Name of |
|
Underlying |
|
Options Granted |
|
Base Price |
|
Expiration |
|
Grant Date |
Executive |
|
Options Granted (1) |
|
in Fiscal Year |
|
Per Share |
|
Date |
|
Present Value (2) |
Jeffrey H. Schwartz
|
|
|
145,604 |
|
|
|
12.92 |
|
|
$ |
45.46 |
|
|
|
12/20/15 |
|
|
$ |
1,090,152 |
|
Walter C. Rakowich
|
|
|
99,912 |
|
|
|
8.86 |
|
|
$ |
45.46 |
|
|
|
12/20/15 |
|
|
$ |
748,051 |
|
Robert J. Watson
|
|
|
45,294 |
|
|
|
4.02 |
|
|
$ |
45.46 |
|
|
|
12/20/15 |
|
|
$ |
339,121 |
|
Dessa M. Bokides
|
|
|
25,000 |
|
|
|
2.22 |
|
|
$ |
43.565 |
|
|
|
09/22/15 |
|
|
$ |
166,360 |
|
|
|
|
28,110 |
|
|
|
2.49 |
|
|
$ |
45.46 |
|
|
|
12/20/15 |
|
|
$ |
210,462 |
|
Steven K. Meyer
|
|
|
35,346 |
|
|
|
3.14 |
|
|
$ |
45.46 |
|
|
|
12/20/15 |
|
|
$ |
264,639 |
|
John W. Seiple, Jr.
(3)
|
|
|
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
|
|
|
$ |
0 |
|
(1) All
options were granted pursuant to our 1997 share plan.
Option exercise prices were at market price when granted. The
options have a term of 10 years and vest over four years.
DEUs were not given with the 2005 grants.
(2) The
estimated hypothetical values are based on the Black-Scholes
option pricing model in accordance with SEC rules. We used the
following assumptions in estimating these values: weighted
average option life, 5.9 years; risk-free rate of return,
4.33%; expected volatility, 20.33%; and expected dividend yield,
3.92%.
(3) Mr. Seiple
resigned as President and Chief Executive Officer
North America on August 4, 2005.
OPTION EXERCISES IN 2005 AND YEAR-END VALUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# Securities Underlying |
|
Value of Unexercised |
|
|
Unexercised Options at |
|
In-the-Money Options at |
|
|
Year-End |
|
Year-End (1) |
|
|
# Shares |
|
|
|
|
|
|
Name of |
|
Acquired on |
|
$ Value |
|
|
|
|
Executive |
|
Exercise |
|
Realized |
|
Exercisable |
|
Unexercisable |
|
Exercisable |
|
Unexercisable |
Jeffrey H. Schwartz
|
|
|
0 |
|
|
$ |
0 |
|
|
|
264,696 |
|
|
|
350,854 |
|
|
$ |
5,760,448 |
|
|
$ |
2,980,684 |
|
Walter C. Rakowich
|
|
|
0 |
|
|
$ |
0 |
|
|
|
307,329 |
|
|
|
286,412 |
|
|
$ |
6,727,884 |
|
|
$ |
2,690,862 |
|
Robert J. Watson
|
|
|
59,804 |
|
|
$ |
905,761 |
|
|
|
203,431 |
|
|
|
242,544 |
|
|
$ |
4,940,095 |
|
|
$ |
3,450,454 |
|
Dessa M. Bokides
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
|
53,110 |
|
|
$ |
0 |
|
|
$ |
114,294 |
|
Steven K. Meyer
|
|
|
0 |
|
|
$ |
0 |
|
|
|
189,642 |
|
|
|
111,596 |
|
|
$ |
4,233,556 |
|
|
$ |
1,130,592 |
|
John W. Seiple, Jr.
(2)
|
|
|
383,829 |
|
|
$ |
6,564,645 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
(1) Based
on the December 31, 2005, closing price for the
companys common shares of $46.72 per share.
(2) Mr. Seiple
resigned as President and Chief Executive Officer
North America on August 4, 2005.
24
CONTINGENT PERFORMANCE AWARDS FOR 2005
|
|
|
|
|
|
|
|
|
Awards Granted in 2005 for the Performance Period |
Beginning January 1, 2006 and Ending December 31, 2008 |
|
|
Number of Shares, |
|
Performance or Other Period |
Name |
|
Units or Other Rights 1 |
|
Until Maturation or Payout 1 |
Jeffrey H. Schwartz
|
|
|
21,229 |
|
|
|
12/31/08 |
|
Walter C. Rakowich
|
|
|
14,567 |
|
|
|
12/31/08 |
|
Robert J. Watson
|
|
|
6,603 |
|
|
|
12/31/08 |
|
Dessa M. Bokides
|
|
|
4,098 |
|
|
|
12/31/08 |
|
Steven K. Meyer
|
|
|
5,153 |
|
|
|
12/31/08 |
|
John W.
Seiple, Jr. 2
|
|
|
0 |
|
|
|
0 |
|
1 All
performance share awards were granted under our 1997 share
plan. The 12/31/08 date is when such awards may be earned and
when they will be fully vested. Awards are earned based on
ProLogiss total three-year return measured against a
defined subset of companies in the National Association of Real
Estate Investment Trusts published index. The compensation
committee can award more or less than the target award if the
companys performance exceeds or falls short of the
criteria. Awards are forfeited if the executive is not employed
by the company at the time the award vests.
2 Mr. Seiple
resigned as President and Chief Executive Officer
North America on August 4, 2005.
EQUITY COMPENSATION PLANS
We have three equity compensation plans: (1) the ProLogis
1997 Long-Term Incentive Plan as amended and restated in 2002,
referred to in the proxy statement as our 1997 share plan,
(2) the Share Option Plan for Outside Trustees, as amended,
(3) and the 2000 Share Option Plan for Outside
Trustees, as amended and restated on May 18, 2004, referred
to in the proxy statement as our 2000 trustee option plan. The
1997 share plan and the 2000 trustee option plan are our
primary vehicles for awarding equity-based compensation to our
executives and outside trustees. The total amounts under all
three plans are identified in the following table as of
December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# of Securities Remaining |
|
|
# of Securities to be Issued |
|
Weighted-Average Exercise |
|
Available for Future Issuance |
|
|
Upon Exercise of |
|
Price of Outstanding |
|
Under Equity Compensation |
|
|
Outstanding Options, |
|
Options, Warrants and |
|
Plans (Excluding Securities |
Plan Category |
|
Warrants and Rights(a) 1 |
|
Rights(b) 1 |
|
Reflected in Column (a))(c) 1 |
Equity compensation plans approved by security holders
|
|
|
11,646,1132 |
|
|
$ |
29.19 |
|
|
|
2,610,010 |
|
Equity compensation plans not approved by security holders
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
1 Does
not include 89,945 outstanding common shares that have been
purchased by employees under the Employee Share Purchase Plan
(ESPP) and 4,871,926 common shares that are
reserved for future issuance under the ESPP, which was approved
by the shareholders on May 17, 2001.
2 Includes
DEUs issuable upon the exercise of options.
25
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
Mr. Antenucci entered into an employment agreement with us
commencing on September 15, 2005 and ending on
December 31, 2007, with automatic one-year extensions of
the term unless we or Mr. Antenucci give notice of
non-renewal at least three months prior to the last day of the
then-current term. Pursuant to the employment agreement,
Mr. Antenucci serves as the President of Global Development
for ProLogis and reports to our Chief Executive Officer. Under
the employment agreement, Mr. Antenucci agreed to waive his
rights under his memorandum of understanding with Catellus
(except with respect to indemnification and tax
gross-up payments). See
Certain Relationships and Related Transactions
Memorandum of Understanding with Mr. Antenucci.
During the term of his employment agreement while he is employed
by us, Mr. Antenucci will:
|
|
|
|
|
receive an annual base salary of at least $525,000; |
|
|
|
be eligible for an annual target bonus of up to $787,500, with
the actual amount of the bonus earned based on the satisfaction
of applicable performance targets; |
|
|
|
participate in ProLogiss employee benefit plans made
available to similarly situated senior management
employees; and |
|
|
|
receive monthly allowances for car, health club and country club
benefits. |
We also paid Mr. Antenucci a $3.8 million lump sum
cash payment on September 15, 2005, the date the merger
with Catellus was completed.
The employment agreement provides that Mr. Antenucci will
or may be granted the following equity-based awards under the
ProLogis 1997 Long-Term Incentive Plan (the 2006 Long-Term
Incentive Plan if approved by shareholders):
|
|
|
|
|
As of the effective time of the merger, Mr. Antenucci was
granted a non-qualified share option with respect to 80,000
common shares and, for each 12-consecutive-month period during
the term of the employment agreement beginning on the first
anniversary of the effective time of the merger, he will be
eligible for grants of non-qualified share options with respect
to up to an additional 80,000 common shares. Generally, on each
of the first through fourth anniversaries of the grant date, the
non-qualified share options awarded to Mr. Antenucci
pursuant to the employment agreement will vest and become
exercisable with respect to 25% of the common shares subject to
such options if Mr. Antenucci remains employed on the
applicable vesting date. The non-qualified share options,
however, will vest and become immediately exercisable if
Mr. Antenuccis employment with us is terminated on
account of death or permanent disability (each as defined in the
employment agreement). In addition, if Mr. Antenuccis
employment terminates prior to December 31, 2007, as a
result of termination by us for cause (as defined in the
employment agreement and as discussed in greater detail below)
or as a result of his voluntary termination, then on such
termination date all of his then-outstanding non-qualified share
options will be forfeited. |
|
|
|
As of the effective time of the merger, Mr. Antenucci was
granted a performance share award with respect to
16,000 common shares. This award will vest on
December 31, 2007, unless Mr. Antenuccis
employment with us is terminated prior to that date by us for
cause or as a result of Mr. Antenuccis voluntary
termination, in which case the award will be forfeited. |
|
|
|
For each year of the term of the agreement, Mr. Antenucci
will be eligible for grants of performance share awards with
respect to 16,000 common shares. Any such awards that are
made to Mr. Antenucci will become earned based on the
satisfaction of performance targets specified at the time of
grant, and any earned common shares will become vested on the
second annual anniversary of the date on which |
26
|
|
|
|
|
they are earned if he remains employed on the vesting date. If,
however, Mr. Antenuccis termination of employment
occurs prior to December 31, 2007, as a result of
termination by us for cause or as a result of
Mr. Antenuccis voluntary termination, all
then-outstanding performance share awards will be forfeited. |
The foregoing equity-based awards may be forfeited prior to
vesting if Mr. Antenuccis employment terminates for
certain reasons such as termination for cause or voluntary
termination. If, following a change in control (as defined in
the employment agreement), Mr. Antenuccis employment
is terminated by us for reasons other than for cause or if
Mr. Antenucci terminates his employment for good reason (as
defined in the employment agreement and as discussed in greater
detail below), or if the ProLogis 1997 Long-Term Incentive Plan
is terminated without provision for the continuation of
outstanding non-qualified share options or performance share
awards granted to Mr. Antenucci pursuant to the employment
agreement, then the awards will become fully vested and/or
exercisable.
If Mr. Antenucci is terminated during the term of the
employment agreement for any reason, he will be entitled to:
|
|
|
|
|
his salary for the period ending on the termination date; |
|
|
|
payment of any earned target bonuses; and |
|
|
|
payment for unused vacation days and other payments or benefits
due under any ProLogis employee benefit plan or arrangement. |
However, if Mr. Antenuccis termination occurs by
reason of death, permanent disability, voluntary resignation or
cause, we have no obligation to make payments for periods after
the termination date.
If Mr. Antenucci is terminated during the term of the
employment agreement as a result of a constructive discharge or
without cause, then Mr. Antenucci will be entitled to:
|
|
|
|
|
payment of his base salary for the period from the termination
date through the end of the then current term of the employment
agreement or, if later, the six-month anniversary of the
termination date; and |
|
|
|
continued coverage under our employment benefit plans for the
same period. |
All of the foregoing payments and benefits terminate on
Mr. Antenuccis death prior to the end of the
severance period.
For purposes of the employment agreement, cause
means in the reasonable judgment of our board (1) the
willful and continued failure by Mr. Antenucci to
substantially perform his duties after written notification,
(2) the willful engaging by Mr. Antenucci in conduct
that is demonstrably injurious to us or any of our subsidiaries,
monetarily or otherwise, or (3) the engaging by
Mr. Antenucci in egregious misconduct involving serious
moral turpitude. A constructive discharge under the
employment agreement means the resignation for good reason by
Mr. Antenucci after the failure by us to remedy (or the
absence of any indication to remedy) the occurrence of a good
reason. A good reason includes, among other things,
the assignment of any duties inconsistent with
Mr. Antenuccis position and status as
President Global Development, a reduction in salary,
a relocation outside of specified geographic areas or the
failure of us to obtain a satisfactory agreement from any
successor to assume and agree to perform the obligations under
the employment agreement.
Mr. Antenucci is required to keep confidential our
proprietary information. In addition, Mr. Antenucci has
agreed, during a restricted period, not to engage
in, invest in or provide services to any business that is
competitive (as defined in the employment agreement) with us or
purchase any property that could reasonably be used to provide
or develop a business that is competitive with us. For purposes
of the employment agreement, the restricted period
means the period during which Mr. Antenucci is employed by
us and, if his termination occurs for cause prior to
December 31, 2007, the period following the termination
date and ending on
27
December 31, 2007. Mr. Antenucci also agreed not to
solicit or employ any of our employees during any period in
which he is employed by us and, if his termination occurs prior
to December 31, 2008, for any reason, the period following
such termination and ending on December 31, 2008.
Other than Mr. Antenuccis employment agreement as
described above, we do not have employment contracts with any of
our executive officers. If a change in control occurs, however,
both our 1997 share plan and outside trustee plans do
provide that all options become immediately exercisable and
restrictions on purchased shares lapse, subject to certain
conditions. We also have agreements with 10 officers that if a
change in control occurs, certain benefits will inure to those
officers.
The agreements provide that if within 24 months after a
change in control occurs a covered officer is terminated without
cause or resigns due to a material change in duties or the
companys failure to provide compensation or benefits in
accordance with the agreement, then that officer is entitled to
a lump-sum payment. Depending on the seniority of the officer,
the payment ranges from base salary and target bonus to 3x that
amount plus prorated amounts for the year of termination. The
officers would also be entitled to receive medical and dental
insurance for up to 36 months following termination
depending upon the officers level of responsibility with
the company and certain other benefits. A change in
control is defined as the happening of any of the
following:
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|
The consummation of a transaction, approved by the shareholders
of ProLogis, to merge ProLogis into or consolidate ProLogis with
another entity, sell or otherwise dispose of all or
substantially all of its assets or adopt a plan of liquidation,
provided, however, that a change in control is not deemed to
have occurred by reason of a transaction, or a substantially
concurrent or otherwise related series of transactions, upon the
completion of which 50% or more of the beneficial ownership of
the voting power of ProLogis, the surviving corporation or
corporation directly or indirectly controlling ProLogis or the
surviving corporation, as the case may be, is held by the same
persons (although not necessarily in the same proportion) as
held the beneficial ownership of the voting power of ProLogis
immediately prior to the transaction or the substantially
concurrent or otherwise related series of transactions, except
that upon the completion thereof, employees or employee benefit
plans of ProLogis may be a new holder of such beneficial
ownership. |
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|
The beneficial ownership (as defined in
Rule 13d-3 under
the Exchange Act) of securities representing 50% or more of the
combined voting power of ProLogis is acquired, other than from
ProLogis, by any person as defined in
Sections 13(d) and 14(d) of the Exchange Act (other than
any trustee or other fiduciary holding securities under an
employee benefit or other similar stock plan of ProLogis). |
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|
|
At any time during any period of two consecutive years,
individuals who at the beginning of such period were members of
the board of trustees of ProLogis cease for any reason to
constitute at least a majority thereof (unless the election, or
the nomination for election by ProLogiss shareholders, of
each new trustee was approved by a vote of at least two-thirds
of the trustees still in office at the time of such election or
nomination who were trustees at the beginning of such period). |
Under the agreements, Messrs. Schwartz, Rakowich, Watson,
and Meyer would have been entitled to receive payments in the
amount of $3,480,000, $3,150,000, $1,556,000, and $1,227,888,
respectively, if their positions had been terminated on
December 31, 2005, following a change in control.
|
|
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Special Equity Agreements |
We entered into special equity agreements with
Mr. Brooksher in 2000 (amended in 2003 and 2005) and
Mr. Lyons in 2003 (amended in 2005) whereby they agreed to
continue employment through 2004 and we agreed to extend the
expiration date of their options, existing and to be granted,
under the 1997 share plan to no earlier than five years
after their respective retirement, disability or death but no
later than ten years from the
28
grant date. We further agreed that any DEUs accumulating under
any options would continue to accrue until five years after
their respective retirement, disability or death. We also agreed
with Mr. Lyons that, for purposes of our 1997 share
plan, he would be treated as if he reached retirement age
thereunder at the end of 2004. Under Mr. Brookshers
agreement we also granted 167,500 RSUs, which will settle in
equal installments from 2005 through 2008. Dividend equivalent
payments will be paid in an amount equal to our quarterly
dividend multiplied by the outstanding RSUs as of the applicable
record date. The RSUs will be ultimately settled in common
shares.
Mr. Brooksher and Mr. Lyons also agreed that until
December 2009 they would not serve on a board or be an officer
or employee of any public industrial real estate investment
trust or be employed or otherwise provide services to any of our
competitors, if such services would be substantially similar to
those they respectively provided to ProLogis during their final
24 months with the company. They also agreed that until
December 2009 they would not directly or indirectly own an
interest in any of our competitors other than up to 5% of the
stock of any publicly traded company. Mr. Lyonss
interest in King & Lyons, L.P., however, is excluded
from the above limitations as to specified properties it owns.
29
FIVE-YEAR PERFORMANCE GRAPH: 2001-2005
The chart below compares the five-year cumulative total return,
assuming the reinvestment of dividends, on ProLogis common
shares with that of the S&P 500 Index and the National
Association of Real Estate Investment Trust, Inc. Equity Index.
The graph assumes $100 was invested on December 31, 2000.
The total cumulative dollar returns shown on the graph represent
the value that such investments would have had on
December 31, 2005, assuming the reinvestment of dividends.
We caution that the share price performance shown below should
not be considered indicative of future price performance.
CUMULATIVE TOTAL RETURN
Based upon an initial investment of $100 on December 31,
2000
with dividends reinvested
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| |
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|
Dec-00 | |
|
Dec-01 | |
|
Dec-02 | |
|
Dec-03 | |
|
Dec-04 | |
|
Dec-05 | |
| |
ProLogis
|
|
$ |
100 |
|
|
$ |
103 |
|
|
$ |
128 |
|
|
$ |
173 |
|
|
$ |
243 |
|
|
$ |
272 |
|
S&P©
500 Index
|
|
$ |
100 |
|
|
$ |
88 |
|
|
$ |
69 |
|
|
$ |
88 |
|
|
$ |
98 |
|
|
$ |
103 |
|
NAREIT Equity REIT Index
|
|
$ |
100 |
|
|
$ |
114 |
|
|
$ |
118 |
|
|
$ |
162 |
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|
$ |
213 |
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$ |
239 |
|
Copyright
©
2006, Standard & Poors, a division of The McGraw-Hill
Companies, Inc. All rights reserved. |
AUDIT COMMITTEE REPORT
Notwithstanding anything to the contrary set forth in any of
our previous or future filings under the Securities Act of 1933
or the Exchange Act that might incorporate this proxy statement
or future filing with the SEC, in whole or in part, the
following report shall not be deemed incorporated by reference
into any such filing.
The primary purpose of the audit committee is to assist the
board of trustees in its general oversight of the companys
financial reporting process and to approve the selection of our
independent registered public accounting firm. Since the
appointment of Christine Garvey on September 22, 2005, and
Andrea Zulberti on May 18, 2005, the committee is comprised
of the five trustees named below. Each member of the committee
is independent as defined by the SEC and NYSE listing standards.
In addition, our board has determined that D. Michael Steuert is
both independent and an audit committee financial expert as
defined by SEC rules. Management is responsible for the
companys internal audit controls and the financial
reporting process. The companys independent registered
public accounting firm is responsible for performing an
independent audit of
30
the companys consolidated financial statements and the
effectiveness of the companys internal control over
financial reporting in accordance with the standards of the
Public Company Accounting Oversight Board (United States) and
issuing reports thereon. The committee is responsible for
overseeing the conduct of these activities. The committees
function is more fully described in its charter which has been
approved by our board. The charter can be viewed, together with
any future changes that may occur, on the ProLogis website at
www.prologis.com.
We have reviewed and discussed the companys audited
financial statements for the fiscal year ended December 31,
2005, and unaudited financial statements for the quarters ended
March 31, June 30, and September 30, 2005, with
management and KPMG LLP, the companys independent
registered public accounting firm. We also reviewed and
discussed managements assessment of the effectiveness of
the companys internal control over financial reporting.
The committee has discussed with KPMG LLP the matters that are
required to be discussed by Statement on Auditing Standards
No. 61 (Communication With Audit Committees) as
amended by Statement on Auditing Standards No. 90 (Audit
Committee Communications). KPMG LLP has provided to the
company the written disclosures and the letter required by
Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the
committee has discussed with KPMG LLP its independence. The
committee also concluded that KPMG LLPs performance of
non-audit services, as described in the next section, to
ProLogis and its affiliates is compatible with KPMG LLPs
independence.
Based on the considerations referred to above, the committee
recommended to our board of trustees that the audited financial
statements be included in our Annual Report on
Form 10-K for 2005
and that KPMG LLP be appointed the independent registered public
accounting firm for the company for 2006. The foregoing report
is provided by the following independent trustees, who
constitute the committee.
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D. Michael Steuert (Chair) |
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George L. Fotiades |
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Christine N. Garvey |
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Kenneth N. Stensby |
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Andrea M. Zulberti |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
In addition to retaining KPMG LLP to audit our consolidated
financial statements for 2005, we retained KPMG LLP to provide
certain advisory services in 2005. In the course of KPMG
LLPs providing services on our behalf, we recognize the
importance of KPMG LLPs ability to maintain objectivity
and independence in its audit of our financial statements and
the importance of minimizing any relationships that could appear
to impair that objectivity. To that end, the audit committee has
adopted policies and procedures governing the pre-approval of
audit and non-audit work performed by our independent registered
public accounting firm. The independent registered public
accounting firm is authorized to perform specified pre-approved
services up to certain annual amounts which vary by the type of
service provided. Individual engagements anticipated to exceed
pre-established thresholds must be separately approved. All of
the fees reflected in 2005 were either specifically pre-approved
by the audit committee or pre-approved pursuant to the audit
committees Audit and Non-Audit Services Pre-Approval
Policy. The policies and procedures also detail certain services
which the independent registered public accounting firm is
prohibited from providing to the company.
31
The following table represents fees for professional audit
services rendered by KPMG LLP for the audit of the
companys annual financial statements for 2005 and 2004 and
fees billed for other services rendered by KPMG LLP:
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Types of Fees |
|
2005 | |
|
2004 | |
|
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| |
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Audit Fees
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$ |
2,277,017 |
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$ |
1,995,466 |
|
Audit-Related Fees
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|
$ |
225,000 |
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|
$ |
31,000 |
|
Tax Fees
|
|
$ |
243,730 |
|
|
$ |
280,753 |
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All Other Fees
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|
$ |
30,000 |
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|
$ |
38,000 |
|
|
|
|
|
|
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Total
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|
$ |
2,775,747 |
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|
$ |
2,345,219 |
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In the above table, audit fees consisted of fees for
professional services for the audit of ProLogiss
consolidated financial statements included in
Form 10-K and
review of financial condensed statements included in
Form 10-Qs,
including all services required to comply with standards of the
Public Company Accounting Oversight Board (United States), fees
associated with performing the integrated audit of internal
controls over financial reporting (Sarbanes-Oxley
Section 404 work), comfort letters, statutory audits, and
review of documents filed with the SEC (fees for registration
statements and comfort letters in 2005 were $235,150 and 2004
were $121,250); audit-related fees consisted of fees
for assurance and related services that are traditionally
performed by KPMG LLP, including employee benefit plan audits,
attest services that are not required by statute or regulation,
consultation services performed in 2004 related to compliance
with the Sarbanes-Oxley Act of 2002, and other items reasonably
related to the performance of the audit or review of our
financial statements; tax fees are fees for tax
compliance, tax advice, and tax planning; and all other
fees include fees billed by KPMG LLP to ProLogis for any
services not included in the foregoing categories.
|
|
RATIFICATION OF THE APPOINTMENT OF |
Proposal 3 |
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
KPMG LLP has been approved by the audit committee of the board
for reappointment as our independent registered public
accounting firm. KPMG LLP was our independent registered public
accounting firm for the year ended December 31, 2005.
Subject to your approval, the audit committee has appointed KPMG
LLP as our independent registered public accounting firm for the
year 2006. In the event shareholders do not approve the
appointment, the appointment will be reconsidered by the audit
committee.
KMPG LLP representatives are expected to attend the 2006 annual
meeting. They will have an opportunity to make a statement if
they desire to do so and will be available to respond to
appropriate shareholder questions.
The board unanimously recommends that the shareholders
vote FOR the ratification of the appointment of KPMG LLP as
our independent registered public accounting firm.
32
ADDITIONAL INFORMATION
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Shareholder Proposals for Inclusion in Next Years Proxy
Statement |
To be considered for inclusion in next years proxy
statement, shareholder proposals must be received at our
principal executive offices no later than the close of business
on November 29, 2006. Proposals should be addressed to
Edward S. Nekritz, Secretary, ProLogis, 4545 Airport Way,
Denver, CO 80239.
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Shareholder Nominations and Other Shareholder Proposals for
Presentation at Next Years Annual Meeting |
For any shareholder nomination or proposal that is not submitted
for inclusion in next years proxy statement, but is
instead sought to be presented directly at the 2007 annual
meeting, our bylaws permit such a presentation if (1) a
shareholders notice of the proposal or nominee and any
required supporting information is received by our secretary
during the period from 90 to 120 days before the
anniversary date of the previous years annual meeting, and
(2) it meets the bylaws and SEC requirements for submittal.
For consideration at the 2007 annual meeting, therefore, any
shareholder nominee or proposals not submitted by the deadline
for inclusion in the proxy must be received by us between
January 20, 2007 and February 24, 2007. Notices of
intention to present proposals at the 2007 annual meeting should
be addressed to Edward S. Nekritz, Secretary, ProLogis, 4545
Airport Way, Denver, CO 80239.
Common shareholders of record at the close of business on
March 16, 2006, will be eligible to vote at the meeting on
the basis of one vote for each share held. On such date there
were 244,563,822 common shares outstanding. There is no right to
cumulative voting and a majority of the outstanding shares
represented in person or by proxy will constitute a quorum.
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Vote Required for Approval |
Assuming the presence of a quorum:
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(1) trustees must be elected by the vote of a majority of
all the votes cast by shareholders entitled to vote. For this
purpose, a majority of the votes cast means that the number of
common shares that are cast and are voted for the
election of a trustee must exceed the number of common shares
that are withheld from his or her election. |
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|
(2) the approval of the 2006 Long-Term Incentive Plan must
be approved by the affirmative vote of a majority of the common
shares voted at the meeting or by proxy, provided that the total
votes cast represent at least a majority of the votes entitled
to be cast. |
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|
(3) the ratification of the independent registered public
accounting firm must be approved by the affirmative vote of a
majority of the common shares voted at the meeting or by proxy. |
Abstentions and broker non-votes, if any, will have no effect on
the outcome of the matters to be voted on at the meeting, except
that if at least a majority of shares entitled to vote do not
vote on Proposal 2, abstentions and broker non-votes will
have the effect of a vote against the proposal.
Abstentions and broker non-votes are counted for purposes of
determining whether a quorum is reached.
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Manner for Voting Proxies |
The shares represented by all valid proxies received by phone,
by Internet, or by mail will be voted in the manner specified.
Where specific choices are not indicated, the shares represented
by all valid proxies received will be voted (1) for the
nominees for trustee named earlier in this proxy statement;
(2) for approval of the amendment to the declaration of
trust to eliminate the classified board; (3) for
ratification of the appointment of our independent registered
public accounting firm; and (4) as otherwise recommended by
the board. The board knows of no other matters which may be
presented to the meeting.
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Solicitation of Proxies |
Proxies may be solicited on behalf of the board by mail,
telephone, other electronic means, or in person. Copies of proxy
material and of the annual report may be supplied to brokers,
dealers, banks and voting trustees, or
33
their nominees, for the purpose of soliciting proxies from
beneficial owners, and we will reimburse such record holders for
their reasonable expenses. Proxies may be solicited by officers
or employees of the company, none of whom will receive
additional compensation. We have engaged Georgeson Shareholder
Communications, Inc. to assist in the solicitation of proxies
from shareholders at a fee of approximately $10,000 plus
reimbursement of reasonable
out-of-pocket expenses.
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Attendance at the Meeting |
If you are a registered owner and plan to attend the meeting in
person, just detach and retain the admission ticket attached to
your proxy card. Beneficial owners whose ownership is registered
under another partys name and who plan to attend the
meeting in person may obtain admission tickets in advance by
sending written requests, along with proof of ownership, such as
a bank or brokerage firm account statement, to Edward S.
Nekritz, Secretary, ProLogis, 4545 Airport Way, Denver, CO
80239. Record owners and beneficial owners (including holders of
valid proxies) who do not present admission tickets at the
meeting will be admitted upon verification of ownership at the
admissions counter at the annual meeting.
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Electronic Access to Proxy Statement and Annual Report |
This proxy statement and our 2005 annual report may be viewed
online at http://ir.prologis.com. Shareholders can
receive future annual reports and proxy statements
electronically by registering at
http://www.icsdelivery.com/pld. Once registered, you will
be notified by e-mail
when materials are available electronically for your review. You
will also be given a website link to authorize your proxy via
the Internet. If your shares are held through a bank, broker, or
other holder of record, they can instruct you on selecting this
option. You can notify us at any time if you want to resume mail
delivery by calling our investor relations group at
(800) 820-0181.
Our current annual report and annual report on
Form 10-K, which
include consolidated financial statements, are being mailed to
shareholders concurrently with this proxy statement. We will
provide additional complete copies of the annual report to
requesting shareholders, free of charge. Just send your written
request to ProLogis Investor Relations, 4545 Airport Way,
Denver, CO 80239.
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Delivery of Documents to Shareholders Sharing an Address |
If you share an address with any of our other shareholders, your
household might receive only one copy of the annual report and
proxy statement. To request individual copies of the annual
report and proxy statement for each shareholder in your
household, please contact the Investor Relations Department,
ProLogis, 4545 Airport Way, Denver, CO 80239 (telephone:
800-820-0181). We will deliver copies of the annual report and
proxy statement promptly following your written or oral request.
To ask that only one set of the documents be mailed to your
household, please contact your broker.
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Section 16(a) Beneficial Ownership Reporting
Compliance |
Section 16(a) of the Exchange Act requires our trustees,
officers and certain beneficial owners to file reports of
holdings and transactions in ProLogis shares with the SEC and
the NYSE. Based on our records and other information we believe
that in 2005 all of the above met all applicable SEC filing
requirements.
We do not anticipate any other business being brought before the
meeting. In addition to the scheduled items, however, the
meeting may consider properly presented shareholder proposals
and matters relating to the conduct of the meeting. As to any
other business, it is intended that proxies will be voted in the
discretion of the persons voting such proxies.
March 29, 2006
Denver, Colorado
34
APPENDIX A
2006 LONG-TERM INCENTIVE PLAN
SECTION 1
GENERAL
1.1 Purpose.
ProLogis, a Maryland real estate investment trust, has
established the Plan to:
(a) attract and retain employees and other persons
providing services to ProLogis and the Related Companies;
(b) attract and retain as Outside Trustees the highly
competent individuals upon whose judgment, initiative,
leadership and continued efforts the success of ProLogis depends;
(c) motivate Participants, by means of appropriate
incentives, to achieve long-range goals;
(d) provide incentive compensation opportunities that are
competitive with those of other corporations and real estate
investment trusts; and
(e) further identify Participants interests with
those of ProLogiss other shareholders through compensation
that is based on the value of ProLogiss common shares;
and thereby to promote the long-term financial interest of
ProLogis and the Related Companies, including the growth in
value of ProLogiss equity and enhancement of long-term
shareholder return.
1.2 Defined
Terms. The meaning of capitalized terms used in the
Plan are set forth in Section 8.
1.3 Participation.
For purposes of the Plan, a Participant is any
person to whom an Award is granted under the Plan. Subject to
the terms and conditions of the Plan, the Committee shall
determine and designate, from time to time, from among the
Eligible Individuals those persons who will be granted one or
more Awards under the Plan and, subject to the terms and
conditions of the Plan, a Participant may be granted any Award
permitted under the provisions of the Plan and more than one
Award may be granted to a Participant. Except as otherwise
agreed by ProLogis and the Participant, or except as otherwise
provided in the Plan, an Award under the Plan shall not affect
any previous Award under the Plan or an award under any other
plan maintained by ProLogis or the Related Companies.
SECTION 2
OPTIONS
2.1 Definitions.
(a) The grant of an Option under the Plan
entitles the Participant to purchase Shares at an Exercise Price
fixed by the Committee at the time the Option is granted.
Options granted under this Section 2 may be either
Incentive Share Options or Non-Qualified Share Options, as
determined in the discretion of the Committee. Options granted
to Outside Trustees shall be Non-Qualified Share Options.
(b) A grant of a share appreciation right or
SAR entitles the Participant to receive, in cash or
Shares (as determined in accordance with the terms of the Plan)
value equal to the excess of: (a) the Fair Market Value of
a specified number of Shares at the time of exercise; over
(b) an Exercise Price established by the Committee at the
time of grant.
(c) An Option may but need not be in tandem with an SAR,
and an SAR may but need not be in tandem with an Option (in
either case, regardless of whether the original award was
granted under this Plan or another plan or arrangement). If an
Option is in tandem with an SAR, the exercise price of both the
Option and SAR shall be the same, and the exercise of the Option
or SAR with respect to a Share shall cancel the corresponding
tandem SAR or Option right with respect to such share. If an SAR
is in tandem with an Option but is granted after the grant of
the Option, or if an Option is in tandem with an SAR but is
granted after the grant of the SAR, the later granted tandem
Award shall have the same exercise price as the earlier granted
Award, but in no event less than the Fair Market Value of a
Share at the time of such grant.
A-1
2.2 Eligibility.
The Committee shall designate the Participants to whom Options
or SARs are to be granted under this Section 2 and shall
determine the number of Shares subject to each such Option or
SAR and the other terms and conditions thereof, not inconsistent
with the Plan. Without limiting the generality of the foregoing,
the Committee may grant dividend equivalents (current or
deferred) with respect to any Option or SAR granted under the
Plan.
2.3 Limits on Incentive
Share Options. If the Committee grants Incentive
Share Options, then to the extent that the aggregate fair market
value of Shares with respect to which Incentive Share Options
are exercisable for the first time by any individual during any
calendar year (under all plans of ProLogis and all subsidiaries
of ProLogis within the meaning of section 424(f) of the
Code) exceeds $100,000, such Options shall be treated as
Non-Qualified Share Options to the extent required by
section 422 of the Code.
2.4 Exercise
Price. The Exercise Price of an Option
or SAR shall be established by the Committee at the time the
Option or SAR is granted; provided, however, that in no event
shall such price be less than 100% of the Fair Market Value of a
Share on such date (or, if greater, the par value of a Share on
such date).
2.5 Exercise/
Vesting. Except as otherwise expressly provided in
the Plan, an Option or SAR granted under the Plan shall be
exercisable in accordance with the following:
(a) The terms and conditions relating to exercise and
vesting of an Option or SAR shall be established by the
Committee to the extent not inconsistent with the Plan, and may
include, without limitation, conditions relating to completion
of a specified period of service, achievement of performance
standards prior to exercise or the achievement of Share
ownership objectives by the Participant. Notwithstanding the
foregoing, in no event shall an Option or SAR granted to any
employee become exercisable or vested prior to the first
anniversary of the date on which it is granted (subject to
acceleration of exercisability and vesting, to the extent
permitted by the Committee, in the event of the
Participants death, Disability, Retirement, Change in
Control or involuntary termination).
(b) No Option or SAR may be exercised by a Participant
after the Expiration Date applicable to that Option or SAR.
2.6 Payment of Exercise
Price. The payment of the Exercise Price of an
Option granted under this Section 2 shall be subject to the
following:
(a) Subject to the following provisions of this
subsection 2.6, the full Exercise Price of each Share
purchased upon the exercise of any Option shall be paid at the
time of such exercise (except that, in the case of an exercise
through the use of cash equivalents, payment may be made as soon
as practicable after the exercise) and, as soon as practicable
thereafter, a certificate representing the Shares so purchased
shall be delivered to the person entitled thereto.
(b) Subject to applicable law, the Exercise Price shall be
payable in cash or cash equivalents, by tendering, by actual
delivery or by attestation, Shares valued at Fair Market Value
as of the day of exercise or by a combination thereof.
2.7 Post-Exercise
Limitations. The Committee, in its discretion, may
impose such restrictions on Shares acquired pursuant to the
exercise of an Option as it determines to be desirable,
including, without limitation, restrictions relating to
disposition of the shares and forfeiture restrictions based on
service, performance, Share ownership by the Participant and
such other factors as the Committee determines to be appropriate.
2.8 No
Repricing. Except for either adjustments pursuant to
subsection 4.3 (relating to the adjustment of shares), or
reductions of the Exercise Price approved by ProLogiss
shareholders, the Exercise Price for any outstanding Option or
SAR may not be decreased after the date of grant nor may an
outstanding Option or SAR granted under the Plan be surrendered
to ProLogis as consideration for the grant of a replacement
Option or SAR with a lower exercise price. In addition, no
repricing of an Option or SAR shall be permitted without the
approval of ProLogiss shareholders if such approval is
required under the rules of any stock exchange on which Shares
are listed.
2.9 Tandem Grants of
Options and SARs. An Option may but need not be in
tandem with an SAR, and an SAR may but need not be in tandem
with an Option (in either case, regardless of whether the
original award was granted under this Plan or another plan or
arrangement). If an Option is in tandem with an SAR, the
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exercise price of both the Option and SAR shall be the same, and
the corresponding tandem SAR or Option shall cancel the
corresponding tandem SAR or Option right with respect to such
share.
2.10 Expiration
Date. The Expiration Date with respect
to an Option or SAR means the date established as the Expiration
Date by the Committee at the time of the grant; provided,
however, that unless determined otherwise by the Committee at
the time of grant, the Expiration Date with respect to any
Option or SAR shall not be later than the earliest to occur of:
(a) the ten-year anniversary of the date on which the
Option or SAR is granted;
(b) if the Participants Termination Date occurs by
reason of death, Disability or Retirement, the one-year
anniversary of such Termination Date;
(c) if the Participants Termination Date occurs for
reasons other than Retirement, death, Disability or Cause, the
three-month anniversary of such Termination Date; or
(d) if the Participants Termination Date occurs for
reasons of Cause, such Termination Date.
In no event shall the Expiration Date of an Option or SAR be
later than the ten-year anniversary of the date on which the
Option or SAR is granted.
SECTION 3
FULL VALUE AWARDS AND CASH INCENTIVE AWARDS
3.1 Definitions.
(a) A Full Value Award is a grant of one or
more Shares or a right to receive one or more Shares in the
future, with such grant subject to one or more of the following,
as determined by the Committee:
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(i) The grant shall be in consideration of a
Participants previously performed services, or surrender
of other compensation that may be due. |
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(ii) The grant shall be contingent on the achievement of
performance or other objectives during a specified period. |
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(iii) The grant shall be subject to a risk of forfeiture or
other restrictions that will lapse upon the achievement of one
or more goals relating to completion of service by the
Participant or achievement of performance or other objectives. |
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(iv) The grant of Full Value Awards may also be subject to
such other conditions, restrictions and contingencies, as
determined by the Committee, including provisions relating to
dividend or dividend equivalent rights and deferred payment or
settlement. |
(b) A Cash Incentive Award is the grant of a right to
receive a payment of cash (or in the discretion of the
Committee, Shares having value equivalent to the cash otherwise
payable) that is contingent on achievement of performance
objectives over a specified period established by the Committee.
The grant of Cash Incentive Awards may also be subject to such
other conditions, restrictions and contingencies, as determined
by the Committee, including provisions relating to deferred
payment.
3.2 Special Vesting
Rules. If an employees right to become vested in a
Full Value Award is conditioned on the completion of a specified
period of service with ProLogis or the Related Companies,
without achievement of performance targets or other performance
objectives (whether or not related to performance measures)
being required as a condition of vesting, and without it being
granted in lieu of other compensation, then the required period
of service for full vesting shall be not less than three years
(subject, to the extent provided by the Committee, to pro rated
vesting over the course of such three-year period and to
acceleration of vesting in the event of the Participants
death, Disability, Retirement, Change in Control or involuntary
termination). The foregoing requirements shall not apply to
(a) grants made to newly eligible Participants to replace
awards from a prior employer and (b) grants that are a form
of payment of earned performance awards or other incentive
compensation.
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3.3 Performance-Based
Compensation. The Committee may designate a Full Value
Award or Cash Incentive Award granted to any Participant as
Performance-Based Compensation within the meaning of
section 162(m) of the Code and regulations thereunder. To
the extent required by section 162(m) of the Code, any Full
Value Award or Cash Incentive Award so designated shall be
conditioned on the achievement of one or more performance
targets as determined by the Committee and the following
additional requirements shall apply:
(a) The performance targets established for the performance
period established by the Committee shall be objective (as that
term is described in regulations under section 162(m) of
the Code), and shall be established in writing by the Committee
not later than 90 days after the beginning of the
performance period (but in no event after 25% of the performance
period has elapsed), and while the outcome as to the performance
targets is substantially uncertain. The performance targets
established by the Committee may be with respect to corporate
performance, operating group or sub-group performance,
individual company performance, other group or individual
performance, or division performance, and shall be based on one
or more of the Performance Criteria.
(b) A Participant otherwise entitled to receive a Full
Value Award or Cash Incentive Award for any performance period
shall not receive a settlement or payment of the Award until the
Committee has determined that the applicable performance
target(s) have been attained. To the extent that the Committee
exercises discretion in making the determination required by
this subsection 3.3(b), such exercise of discretion may not
result in an increase in the amount of the payment.
(c) Except as otherwise provided by the Committee, if a
Participants employment terminates because of death or
Disability, or if a Change in Control occurs prior to the
Participants Termination Date, the Participants Full
Value Award or Cash Incentive Award shall become vested without
regard to whether the Full Value Award or Cash Incentive Award
would be Performance-Based Compensation.
Nothing in this Section 3 shall preclude the Committee from
granting Full Value Awards or Cash Incentive Awards under the
Plan or the Committee, ProLogis or any Related Company from
granting any Cash Incentive Awards outside of the Plan that are
not intended to be Performance-Based Compensation; provided,
however, that, at the time of grant of Full Value Awards or Cash
Incentive Awards by the Committee, the Committee shall designate
whether such Awards are intended to constitute Performance-Based
Compensation. To the extent that the provisions of this
Section 3 reflect the requirements applicable to
Performance-Based Compensation, such provisions shall not apply
to the portion of the Award, if any, that is not intended to
constitute Performance-Based Compensation.
SECTION 4
OPERATION AND ADMINISTRATION
4.1 Effective Date,
Approval Date and Effect on Prior Plans. The Plan
will be effective as of the date it is adopted by the Board (the
Effective Date); provided, however, that Awards
granted under the Plan prior to the Approval Date will be
contingent on approval of the Plan by ProLogiss
shareholders. The Plan shall be unlimited in duration and, in
the event of Plan termination, shall remain in effect as long as
any Shares awarded under it are outstanding and not fully
vested; provided, however, that no new Awards shall be made
under the Plan on or after the tenth anniversary of the date on
which the Plan is adopted by the Board Upon the Approval Date,
no further awards will be made under the Prior Plans. Any awards
made under the Prior Plans prior to the Approval Date shall
continue to be subject to the terms and conditions of the
applicable Prior Plan. If the Approval Date does not occur,
awards may continue to be made under the Prior Plans subject to
the terms and conditions thereof.
4.2 Shares and Other
Amounts Subject to the Plan. The Shares for which
Awards may be granted under the Plan shall be subject to the
following:
(a) The Shares with respect to which Awards may be made
under the Plan shall be shares currently authorized but unissued
or currently held or subsequently acquired by ProLogis as
treasury shares, including shares purchased in the open market
or in private transactions.
(b) Subject to the provisions of subsection 4.3, the
number of Shares which may be issued with respect to Awards
under the Plan shall be equal to the sum of:
(i) 5,750,000 Shares; (ii) any Shares available
for issuance
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as of the Approval Date under the Prior Plans and (iii) any
shares that are represented by awards granted under the Prior
Plans that are forfeited, expired, canceled or settled for cash
after the Approval Date without delivery of Shares or which
result in the forfeiture of the Shares to the extent that such
Shares would have been added back to the reserve under the terms
of the applicable Prior Plan. Except as otherwise provided
herein, any Shares subject to an Award which for any reason is
forfeited, expires or is terminated without issuance of Shares
(including Shares that are not issued because Shares are
tendered pursuant to subsection 4.7 and Shares attributable
to Awards that are settled in cash) shall again be available
under the Plan. Shares issued by ProLogis in connection with
awards that are assumed or substituted in connection with a
merger, acquisition or other corporate transaction shall not be
counted against the number of Shares that may be issued with
respect to Awards under the Plan.
(c) Except as expressly provided by the terms of this Plan,
the issue by ProLogis of shares of stock of any class, or
securities convertible into shares of stock of any class, for
cash or property or for labor or services, either upon direct
sale, upon the exercise of rights or warrants to subscribe
therefor or upon conversion of shares or obligations of the
Trust convertible into such shares or other securities, shall
not affect, and no adjustment by reason thereof, shall be made
with respect to Awards then outstanding hereunder.
(d) To the extent provided by the Committee, any Award may
be settled in cash rather than in Shares.
(e) Subject to the following provisions of this
subsection 4.2, the maximum number of Shares that may be
delivered to Participants and their Beneficiaries with respect
to incentive share options under the Plan shall be 5,750,000;
provided, however, that to the extent that shares not delivered
must be counted against this limit as a condition of satisfying
the rules applicable to incentives stock options, such rules
shall apply to the limit on Incentive Share Options granted
under the Plan.
(f) The maximum number of shares that may be covered by
Awards granted to any one Participant during any one
calendar-year period pursuant to Section 2 (relating to
Options and SARs) shall be 500,000 shares. For purposes of
this subsection 4.2(f), if an Option is in tandem with an
SAR, such that the exercise of the Option or SAR with respect to
a Share cancels the tandem SAR or Option right, respectively,
with respect to such share, the tandem Option and SAR rights
with respect to each Share shall be counted as covering but one
Share for purposes of applying the limitations of this
subsection 4.2(f).
(g) For Full Value Awards that are intended to be
Performance-Based Compensation, no more than 200,000 Shares
may be delivered pursuant to such Awards granted to any one
Participant during any one-calendar-year period (regardless of
whether settlement of the Award is to occur prior to, at the
time of, or after the time of vesting); provided that Awards
described in this 4.2(g) that are intended to be
Performance-Based Compensation shall be subject to the following:
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(i) If the Awards are denominated in Shares but an
equivalent amount of cash is delivered in lieu of delivery of
Shares, the foregoing limit shall be applied based on the
methodology used by the Committee to convert the number of
Shares into cash. |
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(ii) If delivery of Shares or cash is deferred until after
Shares have been earned, any adjustment in the amount delivered
to reflect actual or deemed investment experience after the date
the shares are earned shall be disregarded. |
(h) For Cash Incentive Value Awards that are intended to be
Performance-Based Compensation, the maximum amount payable to
any Participant with respect to any twelve-month performance
period shall equal $10,000,000 (pro rated for performance
periods that are greater or lesser than twelve months); provided
that Awards described in this subsection 4.2(h) that are
intended to be Performance-Based Compensation, shall be subject
to the following:
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(i) If the Awards are denominated in cash but an equivalent
amount of Shares is delivered in lieu of delivery of cash, the
foregoing limit shall be applied to the cash based on the
methodology used by the Committee to convert the cash into
Shares. |
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(ii) If delivery of Shares or cash is deferred until after
cash has been earned, any adjustment in the amount delivered to
reflect actual or deemed investment experience after the date
the cash is earned shall be disregarded. |
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4.3 Adjustments to
Shares. In the event of a corporate transaction
involving ProLogis (including, without limitation, any stock
dividend, stock split, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation,
split-up, spin-off, sale of assets or subsidiaries, combination
or exchange of shares), the Committee may adjust Awards to
preserve the benefits or potential benefits of the Awards.
Action by the Committee may include: (a) adjustment of the
number and kind of shares which may be delivered under the Plan
(including adjustments to the number and kind of shares that may
be granted to an individual during any specified time as
described in subsection 4.2); (b) adjustment of the
number and kind of shares subject to outstanding Awards;
(c) adjustment of the Exercise Price of outstanding Options
and SARs; and (d) any other adjustments that the Committee
determines to be equitable (which may include, without
limitation, (i) replacement of Awards with other Awards
which the Committee determines have comparable value and which
are based on stock of a company resulting from the transaction,
and (ii) cancellation of the Award in return for cash
payment of the current value of the Award, determined as though
the Award is fully vested at the time of payment, provided that
in the case of an Option or SAR, the amount of such payment may
be the excess of value of the Shares subject to the Option or
SAR at the time of the transaction over the exercise price).
4.4 Change in
Control. In the event that (a) a
Participants employment or service, as applicable, is
terminated by ProLogis or the successor to ProLogis (or a
Related Company which is his or her employer) for reasons other
than Cause within 24 months following a Change in Control,
or (b) the Plan is terminated by ProLogis or its successor
following a Change in Control without provision for the
continuation of outstanding Awards hereunder, all Options and
related Awards which have not otherwise expired shall become
immediately exercisable and all other Awards shall become fully
vested. For purposes of this subsection 4.4, a
Participants employment or service shall be deemed to be
terminated by ProLogis or the successor to ProLogis (or a
Related Company) if the Participant terminates employment or
service after (I) a substantial adverse alteration in the
nature of the Participants status or responsibilities from
those in effect immediately prior to the Change in Control, or
(II) a material reduction in the Participants annual
base salary and target bonus, if any, or, in the case of a
Participant who is an Outside Trustee, the Participants
annual compensation, as in effect immediately prior to the
Change in Control. If, upon a Change in Control, awards in other
shares or securities are substituted for outstanding Awards
pursuant to subsection 4.3, and immediately following the
Change in Control the Participant becomes employed (if the
Participant was an employee immediately prior to the Change in
Control) or a trustee or board member (if the Participant was an
Outside Trustee immediately prior to the Change in Control) of
the entity into which ProLogis merged, or the purchaser of
substantially all of the assets of ProLogis, or a successor to
such entity or purchaser, the Participant shall not be treated
as having terminated employment or service for purposes of this
subsection 4.4 until such time as the Participant
terminates employment or service with the merged entity or
purchaser (or successor), as applicable.
4.5 Limit on
Distribution. Distribution of Shares or other
amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan,
ProLogis shall have no liability to deliver any Shares under the
Plan or make any other distribution of benefits under the Plan
unless such delivery or distribution would comply with all
applicable laws and the applicable requirements of any
securities exchange or similar entity.
(b) In the case of a Participant who is subject to
Section 16(a) and 16(b) of the Exchange Act, the Committee
may, at any time, add such conditions and limitations to any
Award to such Participant, or any feature of any such Award, as
the Committee, in its sole discretion, deems necessary or
desirable to comply with Section 16(a) or 16(b) and the
rules and regulations thereunder or to obtain any exemption
therefrom.
(c) To the extent that the Plan provides for issuance of
certificates to reflect the transfer of Shares, the transfer of
such Shares may be effected on a non-certificated basis, to the
extent not prohibited by applicable law or the rules of any
stock exchange.
4.6 Liability for Cash
Payments. Subject to the provisions of this
Section 4, each Related Company shall be liable for payment
of cash due under the Plan with respect to any Participant to
the extent that such benefits are attributable to the service
rendered for that Related Company by the Participant. Any
disputes relating to liability of a Related Company for cash
payments shall be resolved by the Committee.
4.7 Withholding.
All Awards and other payments under the Plan are subject to
withholding of all applicable taxes, which withholding
obligations may be satisfied, with the consent of the Committee,
through the
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surrender of Shares which the Participant already owns or to
which a Participant is otherwise entitled under the Plan;
provided, however, previously-owned Shares that have been held
by the Participant or Shares to which the Participant is
entitled under the Plan may only be used to satisfy the minimum
tax withholding required by applicable law (or other rates that
will not have a negative accounting impact).
4.8 Transferability.
Awards under the Plan are not transferable except as designated
by the Participant by will or by the laws of descent and
distribution or, to the extent provided by the Committee,
pursuant to a qualified domestic relations order (within the
meaning of the Code and applicable rules thereunder). To the
extent that the Participant who receives an Award under the Plan
has the right to exercise such Award, the Award may be exercised
during the lifetime of the Participant only by the Participant.
Notwithstanding the foregoing provisions of this
subsection 4.8, the Committee may permit Awards under the
Plan to be transferred to or for the benefit of the
Participants family (including, without limitation, to a
trust or partnership for the benefit of a Participants
family), subject to such procedures as the Committee may
establish. In no event shall an Incentive Share Option be
transferable to the extent that such transferability would
violate the requirements applicable to such option under
section 422 of the Code.
4.9 Notices.
Any notice or document required to be filed with the Committee
under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to the Committee, in care of
ProLogis or the Related Company, as applicable, at its principal
executive offices. The Committee may, by advance written notice
to affected persons, revise such notice procedure from time to
time. Any notice required under the Plan (other than a notice of
election) may be waived by the person entitled to notice.
4.10 Form and Time of
Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or
other person entitled to benefits under the Plan, and any
permitted modification or revocation thereof, shall be in
writing filed with the applicable Committee at such times, in
such form, and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall
require.
4.11 Agreement With
ProLogis or Related Company. At the time of an Award
to a Participant under the Plan, the Committee may require a
Participant to enter into an agreement with ProLogis or the
Related Company, as applicable (the Agreement), in a
form specified by the Committee, agreeing to the terms and
conditions of the Plan and to such additional terms and
conditions, not inconsistent with the Plan, as the Committee
may, in its sole discretion, prescribe.
4.12 Limitation of Implied
Rights.
(a) Neither a Participant nor any other person shall, by
reason of the Plan, acquire any right in or title to any assets,
funds or property of ProLogis or any Related Company whatsoever,
including, without limitation, any specific funds, assets, or
other property which ProLogis or any Related Company, in its
sole discretion, may set aside in anticipation of a liability
under the Plan. A Participant shall have only a contractual
right to the amounts, if any, payable under the Plan, unsecured
by any assets of ProLogis and any Related Company. Nothing
contained in the Plan shall constitute a guarantee by ProLogis
or any Related Company that the assets of such companies shall
be sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment
or continued service, and selection as a Participant will not
give any employee the right to be retained in the employ or
service of ProLogis or any Related Company, nor any right or
claim to any benefit under the Plan, unless such right or claim
has specifically accrued under the terms of the Plan. Except as
otherwise provided in the Plan, no Award under the Plan shall
confer upon the holder thereof any right as a shareholder of
ProLogis prior to the date on which he fulfills all service
requirements and other conditions for receipt of such rights and
Shares are registered in his name.
4.13 Evidence.
Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the
person acting on it considers pertinent and reliable, and
signed, made or presented by the proper party or parties.
4.14 Action by ProLogis or
Related Company. Any action required or permitted to
be taken by ProLogis or any Related Company shall be by
resolution of its board of trustees or directors, as applicable,
or by action of one or more members of the board (including a
committee of the board) who are duly authorized to
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act for the board or (except to the extent prohibited by
applicable law or the rules of any stock exchange) by a duly
authorized officer of ProLogis.
4.15 Gender and
Number. Where the context admits, words in any
gender shall include any other gender, words in the singular
shall include the plural and the plural shall include the
singular.
4.16 Applicable
Law. The provisions of the Plan shall be construed
in accordance with the laws of the State of Maryland, without
giving effect to choice of law principles.
4.17 Foreign
Employees. Notwithstanding any other provision of
the Plan to the contrary, the Committee may grant Awards to
eligible persons who are foreign nationals on such terms and
conditions different from those specified in the Plan as may, in
the judgment of the Committee, be necessary or desirable to
foster and promote achievement of the purposes of the Plan. In
furtherance of such purposes, the Committee may make such
modifications, amendments, procedures and subplans as may be
necessary or advisable to comply with provisions of laws in
other countries or jurisdictions in which ProLogis or a Related
Company operates or has employees.
SECTION 5
COMMITTEE
5.1 Administration.
The authority to control and manage the operation and
administration of the Plan shall be vested in the committee
described in subsection 5.2 (the Committee) in
accordance with this Section 5. If the Committee does not
exist, or for any other reason determined by the Board, the
Board may take any action under the Plan that would otherwise be
the responsibility of the Committee.
5.2 Selection of
Committee. So long as ProLogis is subject to
Section 16 of the Exchange Act, the Committee shall be
selected by the Board and shall consist of not fewer than two
members of the Board or such greater number as may be required
for compliance with
Rule 16b-3 issued
under the Exchange Act and shall be comprised of persons who are
independent for purposes of applicable stock exchange listing
requirements. Any Award granted under the Plan which is intended
to constitute Performance-Based Compensation (including Options
and SARs) shall be granted by a Committee consisting solely of
two or more outside directors within the meaning of
section 162(m) of the Code and applicable regulations.
Notwithstanding any other provision of the Plan to the contrary,
with respect to any Awards to Outside Trustees, the Committee
shall be the Board.
5.3 Powers of
Committee. The authority to manage and control the
operation and administration of the Plan shall be vested in the
Committee, subject to the following:
(a) Subject to the provisions of the Plan, the Committee
will have the authority and discretion to select individuals who
shall be Eligible Individuals and who, therefore are eligible to
receive Awards under the Plan. The Committee shall have the
authority to determine the time or times of receipt, to
determine the types of Awards and the number of Shares covered
by the Awards, to establish the terms, conditions, performance
targets, restrictions, and other provisions of such Awards, to
cancel or suspend Awards, and to accelerate the exercisability
or vesting of any Award under circumstances designated by it at
the time the Award is granted or thereafter. In making such
Award determinations, the Committee may take into account the
nature of services rendered by the respective employee, the
individuals present and potential contribution to
ProLogiss or a Related Companys success and such
other factors as the Committee deems relevant.
(b) Subject to the provisions of the Plan, the Committee
will have the authority and discretion to determine the extent
to which Awards under the Plan will be structured to conform to
the requirements applicable to Performance-Based Compensation,
and to take such action, establish such procedures, and impose
such restrictions at the time such Awards are granted as the
Committee determines to be necessary or appropriate to conform
to such requirements.
(c) Subject to the provisions of the Plan, the Committee
will have the authority and discretion to conclusively interpret
the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan, to determine the terms and
provisions of any agreements made pursuant to the Plan and to
make all other determinations that may be necessary or advisable
for the administration of the Plan.
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(d) Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is final and binding on all
persons.
(e) Except as otherwise expressly provided in the Plan,
where the Committee is authorized to make a determination with
respect to any Award, such determination shall be made at the
time the Award is made, except that the Committee may reserve
the authority to have such determination made by the Committee
in the future (but only if such reservation is made at the time
the Award is granted, is expressly stated in the Agreement
reflecting the Award and is permitted by applicable law).
Without limiting the generality of the foregoing, it is the
intention of ProLogis that, to the extent that any provisions of
this Plan or any Awards granted hereunder are subject to
section 409A of the Code, the Plan and the Awards comply
with the requirements of section 409A of the Code and that
the Plan and Awards be administered in accordance with such
requirements and the Committee shall have the authority to amend
any outstanding Awards to conform to the requirements of
section 409A.
5.4 Delegation by
Committee. Except to the extent prohibited by
applicable law or the rules of any stock exchange or NASDAQ (if
appropriate), the Committee may allocate all or any portion of
its responsibilities and powers to any one or more of its
members and may delegate all or any part of its responsibilities
and powers to any person or persons selected by it. Any such
allocation or delegation may be revoked by the Committee at any
time.
5.5 Information to be
Furnished to Committee. ProLogis and the Related
Companies shall furnish the Committee such data and information
as may be required for it to discharge its duties. The records
of ProLogis and the Related Companies as to an employees
or Participants employment or provision of services,
termination of employment or cessation of the provision of
services, leave of absence, reemployment and compensation shall
be conclusive on all persons unless determined to be incorrect.
Participants and other persons entitled to benefits under the
Plan must furnish the Committee such evidence, data or
information as the Committee consider desirable to carry out the
terms of the Plan.
5.6 Liability and
Indemnification of Committee. No member or
authorized delegate of the Committee shall be liable to any
person for any action taken or omitted in connection with the
administration of the Plan unless attributable to his own fraud
or willful misconduct; nor shall ProLogis or any Related Company
be liable to any person for any such action unless attributable
to fraud or willful misconduct on the part of a trustee,
director or employee of ProLogis or Related Company. The
Committee, the individual members thereof, and persons acting as
the authorized delegates of the Committee under the Plan, shall
be indemnified by ProLogis against any and all liabilities,
losses, costs and expenses (including legal fees and expenses)
of whatsoever kind and nature which may be imposed on, incurred
by or asserted against the Committee or its members or
authorized delegates by reason of the performance of a Committee
function if the Committee or its members or authorized delegates
did not act dishonestly or in willful violation of the law or
regulation under which such liability, loss, cost or expense
arises. This indemnification shall not duplicate but may
supplement any coverage available under any applicable insurance.
SECTION 6
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, and the
Board or the Committee may amend any Award Agreement, provided
that no amendment or termination may, in the absence of written
consent to the change by the affected Participant (or, if the
Participant is not then living, the affected Beneficiary),
adversely affect the rights of any Participant or Beneficiary
under any Award granted under the Plan prior to the date such
amendment is adopted by the Board (or the Committee, if
applicable); and further provided that adjustments pursuant to
subsection 4.3 shall not be subject to the foregoing
limitations of this Section 6; and further provided that
the provisions of subsection 2.8 (relating to Option and
SAR repricing) cannot be amended unless the amendment is
approved by ProLogiss shareholders. It is the intention of
ProLogis that, to the extent that any provisions of this Plan or
any Awards granted hereunder are subject to section 409A of
the Code, the Plan and the Awards comply with the requirements
of section 409A of the Code and that the Board shall have
the authority to amend the Plan as it deems necessary to conform
to section 409A.
A-9
SECTION 7
DEFINED TERMS
(a) Agreement has the meaning set forth in
subsection 4.11.
(b) Approval Date means the date on which the
Plan is approved by ProLogiss shareholders.
(c) Award means any award described in
Section 2 or 3 of the Plan.
(d) Beneficiary means the person or persons the
Participant designates to receive the balance of his or her
benefits under the Plan in the event the Participants
Termination Date occurs on account of death. Any designation of
a Beneficiary shall be in writing, signed by the Participant and
filed with the Committee prior to the Participants death.
A Beneficiary designation shall be effective when filed with the
Committee in accordance with the preceding sentence. If more
than one Beneficiary has been designated, the balance of the
Participants benefits under the Plan shall be distributed
to each such Beneficiary per capita. In the absence of a
Beneficiary designation or if no Beneficiary survives the
Participant, the Beneficiary shall be the Participants
estate.
(e) Board means the Board of Trustees of
ProLogis.
(f) Cause shall mean (i) the willful and
continued failure by the Participant to substantially perform
his duties with ProLogis or any Related Company after written
notification by ProLogis or the Related Company, (ii) the
willful engaging by the Participant in conduct which is
demonstrably injurious to ProLogis or any Related Company,
monetarily or otherwise, or (iii) the engaging by the
Participant in egregious misconduct involving serious moral
turpitude, determined in the reasonable judgment of the
Committee. For purposes hereof, no act, or failure to act, on
the Participants part shall be deemed willful
unless done, or omitted to be done, by the Participant not in
good faith and without reasonable belief that such action was in
the best interest of ProLogis or Related Company.
(g) Change in Control means the first to occur
of any of the following:
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(i) the consummation of a transaction, approved by the
shareholders of ProLogis, to merge ProLogis into or consolidate
ProLogis with another entity, sell or otherwise dispose of all
or substantially all of its assets or adopt a plan of
liquidation, provided, however, that a Change in Control shall
not be deemed to have occurred by reason of a transaction, or a
substantially concurrent or otherwise related series of
transactions, upon the completion of which 50% or more of the
beneficial ownership of the voting power of ProLogis, the
surviving corporation or corporation directly or indirectly
controlling ProLogis or the surviving corporation, as the case
may be, is held by the same persons (although not necessarily in
the same proportion) as held the beneficial ownership of the
voting power of ProLogis immediately prior to the transaction or
the substantially concurrent or otherwise related series of
transactions, except that upon the completion thereof, employees
or employee benefit plans of ProLogis may be a new holder of
such beneficial ownership; or |
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(ii) the beneficial ownership (as defined in
Rule 13d-3 under
the Exchange Act) of securities representing 50% or more of the
combined voting power of ProLogis is acquired, other than from
ProLogis, by any person as defined in
Sections 13(d) and 14(d) of the Exchange Act (other than
any trustee or other fiduciary holding securities under an
employee benefit or other similar equity plan of
ProLogis); or |
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(iii) at any time during any period of two consecutive
years, individuals who at the beginning of such period were
members of the Board cease for any reason to constitute at least
a majority thereof (unless the election, or the nomination for
election by ProLogiss shareholders, of each new trustee
was approved by a vote of at least two-thirds of the trustees
still in office at the time of such election or nomination who
were trustees at the beginning of such period). |
(h) Code means the Internal Revenue Code of
1986, as amended.
(i) Committee has the meaning set forth in
subsection 5.1.
(j) Termination Date means the date on which a
Participant both ceases to be an employee of ProLogis and the
Related Companies and ceases to perform material services for
ProLogis and the Related Companies (whether as a trustee or
otherwise), regardless of the reason for the cessation; provided
that a Termination
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Date shall not be considered to have occurred during the
period in which the reason for the cessation of services is a
leave of absence approved by ProLogis or the Related Company
which was the recipient of the Participants services; and
provided, further that, with respect to an Outside Trustee,
Termination Date means date on which the Outside
Trustees service as an Outside Trustee terminates for any
reason.
(k) Disability means, except as otherwise
provided by the Committee, the Participants inability, by
reason of a medically determinable physical or mental
impairment, to engage in the material and substantial duties of
his regular occupation, which condition is expected to be
permanent; provided, however, that in the case of an Outside
Trustee, Disability means an injury or illness
which, as determined by the Committee, renders the Participant
unable to serve as a trustee of ProLogis.
(l) Effective Date has the meaning set forth in
subsection 4.1.
(m) Eligible Individual means any employee or
trustee of ProLogis or a Related Company, including any member
of the Board who is not an employee of ProLogis or a Related
Company.
(n) Exchange Act means the Securities Exchange
Act of 1934, as amended.
(o) Expiration Date has the meaning set forth
in subsection 2.10.
(p) Fair Market Value of a Share means, as of
any date, the value determined in accordance with the following
rules:
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(i) If the Shares are at the time listed or admitted to
trading on any stock exchange, then the Fair Market Value shall
be the average of the highest and lowest sales price per Share
on such date on the principal exchange on which the Shares are
then listed or admitted to trading or, if no such sale is
reported on that date, on the last preceding date on which a
sale was so reported. |
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(ii) If the Shares are not at the time listed or admitted
to trading on a stock exchange, the Fair Market Value shall be
the average of the lowest reported bid price and highest
reported asked price of the Shares on the date in question in
the over-the-counter
market, as such prices are reported in a publication of general
circulation selected by the Committee and regularly reporting
the market price of Shares in such market. |
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(iii) If the Shares are not listed or admitted to trading
on any stock exchange or traded in the
over-the-counter
market, the Fair Market Value shall be as determined by the
Committee in good faith. |
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(iv) For purposes of determining the Fair Market Value of
Shares that are sold pursuant to a cashless exercise program,
Fair Market Value shall be the price at which such Shares are
sold. |
(q) Full Value Award has the meaning set forth
in Section 3.1.
(r) Incentive Share Option means an Option that
is intended to satisfy the requirements applicable to an
incentive stock option described in section 422
of the Code.
(s) Non-Qualified Share Option means an Option
that is not intended to be an Incentive Share Option.
(t) Option has the meaning set forth in
subsection 2.1(a).
(u) Outside Trustee means a trustee of ProLogis
who is not an officer or employee of ProLogis or the Related
Companies.
(v) Participant shall have the meaning set
forth in subsection 1.3.
(w) Performance-Based Compensation shall have
the meaning set forth in subsection 3.3.
(x) Performance Criteria means performance
targets based on one or more of the following criteria:
(i) earnings including operating income, earnings before or
after taxes, earnings before or after interest, depreciation,
amortization, or extraordinary or special items or book value
per share (which may exclude nonrecurring items) or net
earnings; (ii) pre-tax income or after-tax income;
(iii) earnings per share (basic or diluted);
(iv) operating profit; (v) revenue, revenue growth or
rate of revenue growth; (vi) return on assets (gross or
net), return on investment (including cash flow return on
investment), return on capital (including return on total
capital or return on invested capital), or return on equity;
(vii) returns on sales or revenues; (viii) operating
expenses; (ix) stock price appreciation; (x) cash flow
(before or after dividends), free cash flow, cash flow return
A-11
on investment (discounted or otherwise), net cash provided by
operations, cash flow in excess of cost of capital or cash flow
per share (before or after dividends); (xi) implementation
or completion of critical projects or processes;
(xii) economic value created; (xiii) cumulative
earnings per share growth; (xiv) operating margin or profit
margin; (xv) share price or total shareholder return; (xvi)
cost targets, reductions and savings, productivity and
efficiencies; (xvii) strategic business criteria,
consisting of one or more objectives based on meeting specified
market penetration, geographic business expansion, customer
satisfaction, employee satisfaction, human resources management,
supervision of litigation, information technology, and goals
relating to acquisitions, divestitures, joint ventures and
similar transactions, and budget comparisons; (xviii) personal
professional objectives, including any of the foregoing
performance targets, the implementation of policies and plans,
the negotiation of transactions, the development of long-term
business goals, formation of joint ventures, research or
development collaborations, and the completion of other
corporate transactions; (xix) funds from operations
(FFO) or funds available for distribution (FAD);
(xx) economic value added (or an equivalent metric); (xxi)
share price performance; (xxii) improvement in or
attainment of expense levels or working capital levels; or
(xxiii) any combination of, or a specified increase in, any
of the foregoing. Where applicable, the performance targets may
be expressed in terms of attaining a specified level of the
particular criteria or the attainment of a percentage increase
or decrease in the particular criteria, and may be applied to
one or more of ProLogis, a Related Company, or a division or
strategic business unit of ProLogis, or may be applied to the
performance of ProLogis relative to a market index, a group of
other companies or a combination thereof, all as determined by
the Committee. The performance targets may include a threshold
level of performance below which no payment will be made (or no
vesting will occur), levels of performance at which specified
payments will be made (or specified vesting will occur), and a
maximum level of performance above which no additional payment
will be made (or at which full vesting will occur). Each of the
foregoing performance targets shall be determined in accordance
with generally accepted accounting principles and shall be
subject to certification by the Committee; provided that the
Committee shall have the authority to exclude impact of charges
for restructurings, discontinued operations, extraordinary items
and other unusual or non-recurring events and the cumulative
effects of tax or accounting principles and identified in
financial statements, notes to financial statements,
managements discussion and analysis or other SEC filings.
(y) Prior Plans means ProLogis 1997 Long-Term
Incentive Plan and ProLogis 2000 Share Option Plan for
Outside Trustees.
(z) Related Company means any corporation,
partnership, joint venture or other entity during any period in
which a controlling interest in such entity is owned, directly
or indirectly, by ProLogis (or by any entity that is a successor
to ProLogis), and any other business venture designated by the
Committee in which ProLogis (or any entity that is a successor
to ProLogis) has, directly or indirectly, a significant interest
(whether through the ownership of securities or otherwise), as
determined in the discretion of the Committee.
(aa) Retirement means, with respect to any
Participant, the occurrence of a Participants Termination
Date after the Participant has attained at least age 60 and
provided at least five years of service to ProLogis or the
Related Companies; provided, however, that with respect to any
Award granted to a Participant who is an Outside Trustee,
Retirement shall mean the Termination Date after
attaining at least age 60 and providing at least five years
of service as a trustee to ProLogis.
(bb) SAR or Share Appreciation
Right has the meaning set forth in subsection 2.1(b).
(cc) Shares means common shares of beneficial
interest of ProLogis.
A-12
Computershare
P.O. BOX 43010
Providence, RI 02940-3010
YOUR VOTE IS IMPORTANT!
AUTHORIZE YOUR PROXY BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information. Have your proxy card in hand when you
access the web site and follow the instructions to obtain your
records and to create an electronic voting instruction form.
Please see the reverse side of this card for specific voting cutoff information.
ELECTRONIC DELIVERY OF
FUTURE SHAREHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by ProLogis in mailing proxy materials, you can consent to
receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions
above to authorize your proxy using the internet and, when prompted, indicate that you agree to receive or
access shareholder communications electronically in future years.
AUTHORIZE YOUR PROXY BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions.
Have your proxy card in hand when you call and
then follow the instructions.
Please see the reverse side of this card for specific voting cutoff information.
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 ProLogis, c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.
Do not return your Proxy Card if you
are authorizing your proxy by Telephone or Internet.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS |
DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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Election of Trustees: |
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Election of the following persons as Trustees |
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Withhold |
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For All |
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Nominees: |
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Except |
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K. Dane Brooksher |
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Nelson C. Rising |
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02) |
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Stephen L. Feinberg |
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Jeffrey H. Schwartz |
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George L. Fotiades |
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D. Michael Steuert |
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04) |
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Christine N. Garvey |
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J. André Teixeira |
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Donald P. Jacobs |
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William D. Zollars |
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06) |
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Walter C. Rakowich |
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Andrea M. Zulberti |
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To
withhold authority to vote, mark For All Except
and write the nominees number on the line below.
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For |
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Against |
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Abstain |
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2.
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Approval and adoption
of the 2006 Long-Term Incentive Plan. |
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3.
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Ratify the appointment of the independent
registered public accounting firm for 2006. |
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4.
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To vote and otherwise represent the undersigned
on any other matter that may properly come before the
meeting or any
adjournment or postponement thereof in the discretion
of the Proxy holder. |
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For
address changes and/or comments, please check this box and write them
on the back where indicated. |
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Yes |
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No |
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HOUSEHOLDING
ELECTION Please indicate if you consent
to receive certain future investor communications in a single package per household. |
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Please sign exactly as your name(s) appear(s) hereon.
If shares are held jointly, each joint tenant
should sign. If signing as attorney, executor, administrator, trustee or guardian or as officer of
a corporation or other entity, please give full title or capacity in which you are signing.
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Signature (PLEASE SIGN WITHIN BOX)
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Signature (Joint Owners)
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Annual Meeting of Shareholders
ADMISSION TICKET
Friday, May 26, 2006
10:30 a.m. (Mountain Time)
ProLogis
4545 Airport Way
Denver, CO 80239
Please present this ticket for admittance.
CONSENT TO OBTAIN FUTURE SHAREHOLDER-RELATED MATERIALS
ELECTRONICALLY INSTEAD OF BY MAIL
You
now have the option to receive future shareholder communications (annual reports, proxy
statements, etc.) electronically via the Internet instead of printed
materials through the mail.
This service is being provided to you as a convenience while representing a cost savings for
ProLogis.
If you elect this
option, you will be notified by email when materials are available electronically
for your review. In the case of proxy materials, you will be provided a link to a designated web
site with instructions on how to give your proxy via the Internet.
You can register
for this program by giving your proxy through www.proxyvote.com or by
going to www.investordelivery.com and following the instructions provided. To withdraw your
participation in the program or to receive printed copies of any of the companys materials, please
contact ProLogis Investor Relations at 1-800-820-0181 or via email at
ir@prologis.com.
PROXY
PROLOGIS
THE PROXY IS SOLICITED BY AND ON BEHALF OF
THE BOARD OF TRUSTEES
2006 ANNUAL MEETING OF SHAREHOLDERS
The undersigned
hereby appoints each of Jeffrey H. Schwartz, Walter C. Rakowich and Edward S.
Nekritz, as proxies for the undersigned with full power of substitution in each of them, to
represent the undersigned at the annual meeting of shareholders to be held on May 26, 2006, and at
any and all adjournments or postponements thereof with all powers
possessed by the undersigned if personally present at the meeting, and to cast at such meeting all votes that the undersigned is
entitled to cast at such meeting in accordance with the instructions indicated on the reverse side
of this card; if no instructions are indicated, the shares represented by this proxy will be voted
FOR the election of the listed nominees for Trustee, FOR the approval
and adoption of the 2006 Long-Term Incentive Plan and FOR the
ratification of the appointment of the independent registered public
accounting firm for 2006.
The
instruction and proxy card is also solicited by ProLogis for persons who participate in the Burlington Northern ESPP.
The cutoff for phone and Internet voting for participants in this Plan is 11:59 pm EDT on May 24, 2006.
The
undersigned acknowledges receipt of the Notice of Annual Meeting and the Proxy Statement
accompanying the Notice, together with this Proxy.
Please sign, date and
return this proxy card promptly using the enclosed postage-paid envelope
whether or not you plan to attend the meeting. 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 proxies cannot vote the shares unless
you sign and return this card.
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Address
Changes/Comments:
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) |
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SEE REVERSE SIDE
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CONTINUED AND TO BE SIGNED ON REVERSE SIDE
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SEE REVERSE SIDE |