e424b5
Filed
Pursuant to Rule 424(b)(5)
Registration No. 333-157818
A filing fee of $32,798, calculated in accordance
with Rule 457(r), has been transmitted to the SEC in
connection with the securities offered from the
registration statement (Reg. No. 333-157818)
by means of this prospectus supplement
PROSPECTUS SUPPLEMENT
March 9, 2010
(To Prospectus dated October 27, 2009)
$400,000,000
3.25% Convertible Senior
Notes due 2015
The notes will bear interest at a rate of 3.25% per year.
Interest on the notes is payable on March 15 and September 15 of
each year, beginning on September 15, 2010. Unless earlier
repurchased, converted or redeemed, the notes will mature on
March 15, 2015.
The notes are not redeemable by us prior to maturity except to
the extent necessary to preserve our status as a real estate
investment trust. Upon the occurrence of a fundamental
change (as defined herein) on or prior to the maturity
date, holders may require us to repurchase notes in whole or in
part for cash at 100% of the principal amount of the notes to be
repurchased plus accrued and unpaid interest, if any, to, but
excluding, the date of repurchase.
The notes are convertible by holders into ProLogis common shares
at an initial conversion rate of 57.8503 shares per $1,000
principal amount of notes, equivalent to an initial conversion
price of approximately $17.29 per share, subject to adjustment
upon the occurrence of certain events, at any time prior to the
close of business on the trading day preceding the maturity date
of the notes.
The notes will be our senior obligations which, together with
our obligations under our global credit facility and certain of
our other indebtedness, will be secured by a pledge of certain
intercompany loans. The notes will be effectively subordinated
to any of our debt that is secured by assets, other than the
pledged intercompany loans, to the extent of the value of the
assets securing such debt. In addition, except to the extent the
notes become entitled to the benefits of the sharing agreements
described in the accompanying prospectus under Description
of Debt Securities Security and Sharing
Arrangements, the notes will be effectively subordinated
to the debt and other liabilities, including trade payables, of
our subsidiaries.
The notes will not be listed on any securities exchange or
quoted on any automated quotation system. Currently, there is no
public market for the notes.
We have granted the underwriters the right to purchase for
30 days up to an additional $60,000,000 principal amount of
notes, solely to cover over-allotments.
The ProLogis common shares are listed on the New York Stock
Exchange under the symbol PLD. On March 9, 2010
the last reported sale price of ProLogis common shares on the
New York Stock Exchange was $13.40 per share.
Concurrently with this offering, we are also conducting a
separate registered public offering of $300 million
aggregate principal amount of 6.250% notes due 2017 (the
2017 notes) and $800 million aggregate
principal amount of 6.875% notes due 2020 (the 2020
notes). The 2017 notes and 2020 notes will be offered
pursuant to a separate prospectus supplement. This offering is
not conditioned upon the successful completion of the offering
of the 2017 notes or 2020 notes.
Investing in the notes involves risks. See Risk
Factors beginning on
page S-5
for risks relating to an investment in the notes and beginning
on page 13 of our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, which are
incorporated herein by reference, for risks relating to our
business.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement and the
accompanying prospectus are truthful or complete. Any
representation to the contrary is a criminal offense.
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Per Note
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Total
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Public offering price
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100.00
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%
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$
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400,000,000
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Underwriting discount
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2.00
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%
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$
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8,000,000
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Proceeds, before expenses, to ProLogis
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98.00
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%
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$
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392,000,000
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Interest on the notes will accrue from March 16, 2010 to
the date of delivery. The underwriters expect to deliver the
notes to purchasers on or about March 16, 2010.
Joint Book-Running Managers
Citi Barclays Capital Deutsche Bank Securities J.P. Morgan Morgan Stanley
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Daiwa
Securities America Inc. ING Wholesale |
RBC Capital Markets |
Co-Managers
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Credit
Agricole Securities (USA) Inc. |
Mitsubishi
UFJ Securities |
Scotia Capital |
TABLE OF
CONTENTS
Prospectus
Supplement
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Page
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S-1
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S-5
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S-13
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S-13
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S-14
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S-15
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S-16
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S-37
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S-43
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S-47
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S-47
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Prospectus
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Where You Can Find More Information
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ii
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Forward-Looking Statements
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iv
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ProLogis
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1
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Risk Factors
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1
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Ratios
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1
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Use of Proceeds
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2
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Description of Debt Securities
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3
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Description of Preferred Shares
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24
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Description of Common Shares
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30
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Federal Income Tax Considerations
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32
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Plan of Distribution
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46
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Experts
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47
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Legal Matters
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48
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You should rely only on the information contained or
incorporated by reference in this prospectus supplement and the
accompanying prospectus. We have not, and the underwriters have
not, authorized anyone to provide you with different
information. We are not, and the underwriters are not, making an
offer of these notes in any jurisdiction where the offer is not
permitted. You should not assume that the information contained
in this prospectus supplement, the accompanying prospectus or
the documents incorporated by reference is accurate as of any
date other than their respective dates. Our business, financial
condition, results of operations and prospects may have changed
since that date.
References to we, us, and
our in this prospectus supplement and the
accompanying prospectus are to ProLogis and its consolidated
subsidiaries, unless the context otherwise requires.
S-i
PROSPECTUS
SUPPLEMENT SUMMARY
ProLogis
We are a leading global provider of industrial distribution
facilities. We are a Maryland real estate investment trust and
have elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the Code). Our world
headquarters is located at 4545 Airport Way, Denver, Colorado
80239 and our phone number is
(303) 567-5000.
Our European headquarters is located in the Grand Duchy of
Luxembourg with our European customer service headquarters
located in Amsterdam, the Netherlands. Our primary office in
Asia is located in Tokyo, Japan.
We were formed in 1991, primarily as a long-term owner of
industrial distribution space operating in the United States.
Over time, our business strategy evolved to include the
development of properties for contribution to property funds in
which we maintain an ownership interest and the management of
those property funds and the properties they own. Originally, we
sought to differentiate ourselves from our competition by
focusing on our corporate customers distribution space
requirements on a national, regional and local basis and
providing customers with consistent levels of service throughout
the United States. However, as our customers needs
expanded to markets outside the United States, so did our
portfolio and our management team. Today we are an international
real estate company with operations in North America, Europe and
Asia. Our business strategy is to integrate international scope
and expertise with a strong local presence in our markets,
thereby becoming an attractive choice for our targeted customer
base, the largest global users of distribution space, while
achieving long-term sustainable growth in cash flow.
S-1
The
Offering
The following summary of the offering is provided solely for
your convenience. This summary is not intended to be complete.
You should read the full text and more specific details
contained elsewhere in this prospectus supplement under the
heading Description of Notes and in the accompanying
prospectus under the heading Description of Debt
Securities. For purposes of this section entitled
The Offering and the Description
of Notes, references to we, us,
and our refer only to ProLogis and not to its
subsidiaries.
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Securities Offered |
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$400,000,000 principal amount of 3.25% convertible senior notes
due 2015 plus up to an additional $60,000,000 principal amount
available for purchase by the underwriters, solely to cover
over-allotments. |
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Maturity Date |
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March 15, 2015, unless earlier repurchased, converted or
redeemed. |
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Interest |
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3.25% per year. Interest will be payable semiannually in arrears
in cash on March 15 and September 15 of each year,
beginning September 15, 2010. |
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Optional Redemption |
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We may not redeem the notes prior to maturity except to preserve
our status as a REIT. If at any time we determine it is
necessary to redeem the notes in order to preserve our status as
a REIT, we may redeem all, but not less than all, of the notes
then outstanding for cash at a price equal to 100% of the
principal amount of the notes being redeemed, plus accrued and
unpaid interest, if any, to the redemption date. |
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Conversion Rights |
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Holders may convert their notes based upon the applicable
conversion rate at any time prior to the close of business on
the trading day immediately preceding the maturity date, unless
the notes have been previously redeemed or purchased by us. See
Description of Notes Conversion
Rights Payment Upon Conversion. |
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You will not receive any additional cash payment or additional
shares representing accrued and unpaid interest upon conversion
of a note, except in limited circumstances. Instead, interest
will be deemed paid by ProLogis common shares issued to you upon
conversion. |
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Conversion Rate |
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The initial conversion rate will be 57.8503 ProLogis common
shares per $1,000 principal amount of notes (equivalent to a
conversion rate of approximately $17.29 per ProLogis common
share). The conversion rate will be subject to adjustment in
some events but will not be adjusted for accrued interest. See
Description of Notes Conversion
Rights Conversion Rate Adjustments. |
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Fundamental Change |
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If we undergo a fundamental change (as defined in
this prospectus supplement under Description of
Notes Conversion Rights Adjustment to
Shares Delivered upon Conversion upon Fundamental Change),
you will have the option to require us to purchase all or any
portion of your notes. |
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The fundamental change purchase price will be 100% of the
principal amount of the notes to be purchased plus any accrued
and unpaid interest to, but excluding, the fundamental change
purchase date. We will pay cash for all notes so purchased. |
S-2
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In addition, if a fundamental change occurs, we will
increase the conversion rate for a holder who elects to convert
its notes in connection with such a fundamental change upon
conversion in certain circumstances as described under
Description of Notes Conversion
Rights Adjustment to Shares Delivered upon
Conversion upon Fundamental Change. |
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Ranking |
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The notes will be our senior obligations which, together with
our obligations under our global credit facility and certain of
our other indebtedness, will be secured by a pledge of certain
intercompany loans. The notes will be effectively subordinated
to any of our debt that is secured by assets, other than the
pledged intercompany loans, to the extent of the value of the
assets securing such debt. In addition, except to the extent the
notes become entitled to the benefits of the sharing agreements
described in the accompanying prospectus under Description
of Debt Securities Security and Sharing
Arrangements, the notes will be effectively subordinated
to the debt and other liabilities, including trade payables, of
our subsidiaries. See Risk Factors The notes
are effectively subordinated to our debt that is secured by
assets, other than intercompany loans that are pledged to secure
the notes, and to the liabilities of our subsidiaries. |
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Use of Proceeds |
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The net proceeds from the sale of the notes are estimated to be
approximately $391.2 million after deducting the
underwriters discount and estimated offering expenses
(assuming the underwriters do not exercise their option to
purchase additional notes to cover over-allotments). If the
underwriters exercise their over-allotment option to purchase
additional notes in full, we estimate our net proceeds after
deducting the underwriters discount and estimated offering
expenses from this offering will be approximately
$450.0 million. |
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We intend to use the net proceeds from the sale of the notes and
the concurrent offering of the 2017 notes and 2020 notes for the
repayment of borrowings under our Global Credit Agreement (as
defined below). We expect to reborrow under our Global Credit
Agreement to fund the cash purchase of certain of our senior
notes that are tendered pursuant to our offer to purchase such
notes, which commenced on March 8, 2010, the repayment or
repurchase of other indebtedness and for general corporate
purposes. |
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Risk Factors |
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You should read carefully the Risk Factors beginning
on
page S-5
of this prospectus supplement, together with those included in
our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, for certain
considerations relevant to an investment in the notes and the
ProLogis common shares. |
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U.S. Federal Income Taxation |
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The notes and the ProLogis common shares into which the notes
may be converted are subject to special and complex U.S. federal
income tax rules. Holders are urged to consult their respective
tax advisors with respect to the application of the U.S. federal
income tax laws to their own particular situation as well as any
tax consequences of the ownership and disposition of the notes
and ProLogis common shares arising under the federal estate or
gift tax |
S-3
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rules or under the laws of any state, local, foreign or other
taxing jurisdiction or under any applicable treaty. See
Certain U.S. Federal Income Tax Considerations in
this prospectus supplement and Federal Income Tax
Considerations in the accompanying prospectus. |
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Trading |
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The notes are a new issue of securities, and there is currently
no established trading market for the notes. An active or liquid
market may not develop for the notes or, if developed, may not
be maintained. We have not applied and do not intend to apply
for the listing of the notes on any securities exchange or for
quotation on any automated dealer quotation system. |
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New York Stock Exchange Symbol for ProLogis Common Shares |
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PLD |
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Restriction of Ownership |
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In order to assist us in maintaining our qualification as a REIT
for U.S. federal income tax purposes, no person may own more
than 9.8% of the outstanding ProLogis common shares, with
certain exceptions. Notwithstanding any other provision of the
notes, no holder of notes will be entitled to convert such notes
for ProLogis common shares to the extent that receipt of such
shares would cause such holder (together with such holders
affiliates) to exceed the ownership limit contained in the
declaration of trust of ProLogis. See Description of
Common Shares Restriction on Size of Holdings
in the accompanying prospectus. |
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No Shareholder Rights for Holders of Notes |
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Holders of notes, as such, will not have any rights as
shareholders of ProLogis (including, without limitation, voting
rights and rights to receive dividends or other distributions on
ProLogis common shares). |
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Concurrent Public Offering of Notes |
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Concurrently with this offering, we are offering the 2017 notes
and 2020 notes in a registered public offering. The 2017 notes
and 2020 notes will be offered pursuant to a separate prospectus
supplement. There is no assurance that the concurrent offering
of 2017 notes and 2020 notes will be completed or, if completed,
that it will be completed for the amount contemplated. |
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The completion of this offering is not conditioned on the
completion of the concurrent offering of 2017 notes and 2020
notes. |
S-4
RISK
FACTORS
Before you decide to invest in the notes, you should consider
the factors set forth below as well as the risk factors
discussed in our Annual Report on
Form 10-K
for the year ended December 31, 2009 which is incorporated
by reference into this prospectus supplement and the
accompanying prospectus.
The
market price of the notes may be volatile.
The market price of the notes will depend on many factors that
may vary over time and some of which are beyond our control,
including:
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our financial performance;
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the amount of indebtedness we and our subsidiaries have
outstanding;
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market interest rates;
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the market for similar securities;
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competition;
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the size and liquidity of the market for the notes; and
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general economic conditions.
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As a result of these factors, you may only be able to sell your
notes at prices below those you believe to be appropriate,
including prices below the price you paid for them.
An
increase in interest rates could result in a decrease in the
relative value of the notes.
In general, as market interest rates rise, notes bearing
interest at a fixed rate generally decline in value because the
premium, if any, over market interest rates will decline.
Consequently, if you purchase these notes and market interest
rates increase, the market value of your notes may decline. We
cannot predict the future level of market interest rates.
Our
financial performance and other factors could adversely impact
our ability to make payments on the notes.
Our ability to make scheduled payments with respect to our
indebtedness, including the notes, will depend on our financial
and operating performance, which, in turn, is subject to
prevailing economic conditions and to financial, business and
other factors beyond our control.
The notes
are effectively subordinated to our debt that is secured by
assets, other than the intercompany loans that are pledged to
secure the notes, and to the liabilities of our
subsidiaries.
Pursuant to various pledge agreements, we and certain of our
subsidiaries have pledged specified intercompany indebtedness to
Bank of America, N.A., as collateral agent, for the benefit of
the Credit Parties under and as defined in the
Security Agency Agreement. We refer to the Amended and Restated
Security Agency Agreement dated as of October 6, 2005 among
us, the collateral agent, Bank of America, N.A., as global
administrative agent under the Global Credit Agreement (referred
to below), and various other creditors of ours, as amended by
Amendment and Supplement No. 1 dated as of August 21,
2009, as the Security Agency Agreement. The Credit
Parties under the Security Agency Agreement are the holders of
our senior debt, including debt arising under certain
guarantees, that we have designated as Designated Senior
Debt, including (i) all obligations arising under the
Global Senior Credit Agreement among us, various of our
affiliates and various lenders and agents (the Global
Credit Agreement), (ii) certain of our hedging
obligations, (iii) certain other senior debt specified in
the Security Agency Agreement and (iv) any other senior
debt designated from time to time by us as Designated
Senior Debt in accordance with the Security Agency
Agreement. The notes are included within the definition of
Designated Senior Debt and, unless we
S-5
revoke the designation of the notes as Designated Senior
Debt as described below, holders of the notes are entitled
to a pro rata share of the proceeds of the collateral granted
under the various pledge agreements.
The notes will be effectively subordinated to any of our debt
that is secured by assets, other than the pledged intercompany
loans, to the extent of the value of the assets securing such
debt. In addition, except to the extent that the notes become
entitled to the benefits of the sharing arrangements described
below, the notes will be effectively subordinated to the debt
and other liabilities, including trade payables, of our
subsidiaries. As of December 31, 2009, on a pro forma
basis, after giving effect to this offering of notes and the
concurrent offering of the 2017 notes and 2020 notes and the
application of the proceeds from both offerings, the notes
offered hereby would have ranked:
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equally with approximately $7.9 billion of our debt secured
equally and ratably by the pledged intercompany loans, which
amount includes the aggregate principal amount of the notes and
our guarantee of approximately $155.2 million of debt of
our subsidiaries (or equally with approximately
$8.0 billion of our debt, assuming all approximately
$542.9 million aggregate principal amount of certain series
of our senior notes are tendered pursuant to our offer to
purchase such notes, which commenced on March 8, 2010);
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effectively subordinated to approximately $197.9 million of
our debt that is secured by assets, other than the pledged
intercompany loans, to the extent of the value of the assets
securing such secured debt; and
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effectively subordinated to approximately $1.1 billion of
debt of our subsidiaries, which includes the approximately
$155.2 million of debt of our subsidiaries that we have
guaranteed and is subject to the sharing arrangements described
below.
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To the extent the notes become entitled to the benefits of the
sharing arrangements described below, the notes will be entitled
to share ratably in any recoveries received by the holders of
the $155.2 million of subsidiary debt subject to such
arrangements, so as to effectively eliminate or mitigate the
consequence of any structural subordination of the notes that
might otherwise exist.
The Security Agency Agreement also provides that, upon the
occurrence of a triggering event (which includes bankruptcy or
insolvency events of us or any other borrower under the Global
Credit Agreement, the acceleration of indebtedness under the
Global Credit Agreement or any other indebtedness in excess of
$50 million and similar events), the Credit Parties will,
subject to certain exceptions and limitations (including, in the
case of the holders of the notes, the requirements set forth in
the following paragraph), share payments and other recoveries
received from us and our subsidiaries to be applied to
Designated Senior Debt in a manner such that all Credit Parties
receive payment of substantially the same percentage of their
respective credit obligations. The sharing arrangements are
intended to eliminate or mitigate structural subordination
issues that otherwise might entitle some Credit Parties (such as
Credit Parties that lend directly to one of our subsidiaries or
that have the benefit of guarantees from one or more of our
subsidiaries) to recover a higher percentage of their Designated
Senior Debt than other Credit Parties that do not have the
benefit of such arrangements.
The trustee (or another representative of the holders of the
notes issued under the Indenture) must take certain actions in
order for the holders of the notes to participate in the sharing
arrangements described in the preceding paragraph. If a
triggering event occurs under the Security Agency Agreement,
then the collateral agent is required to give notice of such
event to the trustee (or such other representative) within
45 days. As promptly as practicable, but in any event
within 90 days after receiving any notice from the
collateral agent with respect to the occurrence of a triggering
event, the trustee will (x) forward such notice to holders
of the notes, (y) execute and deliver, on behalf of the
holders, an acknowledgment entitling the holders to participate
in the sharing arrangements described in the preceding paragraph
and (z) take such further actions as a majority of the
holders (voting as a single class) may request with respect
thereto and with respect to any rights such holders or the
trustee may have under the Security Agency Agreement; provided
that, in the case of this clause (z), such holders shall have
offered the trustee reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction. Upon delivery of such
acknowledgment by the trustee, the holders of the notes will be
entitled to participate in the sharing arrangements described
above. Not later than 120 days after its receipt of such
notice, the trustee (or
S-6
such other representative) must deliver to the collateral agent
an acknowledgement pursuant to which it would agree (i) to
be subject to the obligations applicable to all Credit Parties
under the Security Agency Agreement (including obligations to
indemnify the collateral agent) and (ii) to turn over to
the collateral agent, for sharing in accordance with the
Security Agency Agreement, any payment received directly from us
or any of our affiliates that should have been paid to the
collateral agent as provided in the Security Agency Agreement.
The trustee (or such other representative) likely would require
reasonable indemnity or security against the costs, expenses and
liabilities that it might incur in connection with its becoming
a party to, and acting on behalf of the holders of the notes in
connection with, the Security Agency Agreement.
We and other parties have the right to take actions under
various provisions of the Security Agency Agreement that could
affect the rights of the holders of the notes with respect to,
or the value of, the security and sharing arrangements described
above, including the following:
(1) We may designate other senior debt of ours as
Designated Senior Debt, thereby increasing the
amount of debt that has the benefit of the security sharing
arrangements.
(2) Except as described below in connection with a proposed
amendment to the Security Agency Agreement, we may revoke our
designation of the notes or all or one or more series of the
debt securities issued under the indenture governing the notes
as Designated Senior Debt effective not less than 90 days
after disclosing such revocation (in a footnote or otherwise) in
a Form 10-Q
or
Form 10-K
filed with the SEC. If we revoked our designation of the notes
as Designated Senior Debt, the holders of the notes would cease
to be Credit Parties under the Security Agency Agreement and
would no longer be entitled to any benefit from the security and
sharing arrangements contemplated by the Security Agency
Agreement and the related pledge agreements.
(3) Except as described below in connection with a proposed
amendment to the Security Agency Agreement, notwithstanding the
foregoing clause (2), we may agree that we will not, at any time
prior to a specified date, revoke the Designated Senior Debt
status from the notes or all or one or more series of debt
securities issued under the indenture governing the notes (or
certain other senior debt) until a particular future date.
(4) Subject to certain limitations, we may specify which
Credit Parties are entitled to vote on issues arising under the
Security Agency Agreement (and all holders of notes are
non-voting Credit Parties).
(5) A majority of the voting Credit Parties under the
Security Agency Agreement may instruct the collateral agent to
release some or all of the collateral held pursuant to the
Security Agency Agreement.
(6) The collateral agent or a majority of the voting Credit
Parties may, under certain circumstances, defer payments to
Credit Parties pursuant to the sharing arrangements either
(a) generally for various reasons or (b) specifically
with respect to certain holders of Designated Senior Debt (which
could include the holders of the notes) if the majority voting
Credit Parties determine that such holders might receive more
than their pro rata share of payments and other recoveries
pursuant to the Security Agency Agreement.
(7) We may grant additional collateral (Specified
Collateral) to the holders of some, but not all, of the
Designated Senior Debt (Specified DS Debt) and
exclude the proceeds of such collateral from the sharing
arrangements with other holders of Designated Senior Debt;
provided that no property that is pledged pursuant to the pledge
agreements described above may become Specified Collateral. No
proceeds from Specified Collateral received by any holder of
Specified DS Debt would be deducted or otherwise taken into
consideration when calculating the amount of proceeds to be
allocated among all Credit Parties pursuant to the sharing
arrangements under the Security Agency Agreement. Accordingly,
the holders of any Specified DS Debt would receive a higher
percentage (but not more than 100%) recovery on their Designated
Senior Debt than other Credit Parties.
(8) We, the collateral agent and a majority of the voting
Credit Parties may amend the Security Agency Agreement without
notice to or consent of the holders of the notes, even if such
amendment were adverse to the interests of the holders of the
notes.
S-7
The Security Agency Agreement provides that whenever the
majority voting Credit Parties have the right to make decisions
under the Security Agency Agreement, including decisions with
respect to pledged collateral or how and when recoveries are
shared, such decisions will be made in their sole and complete
discretion. The Security Agency Agreement states that the voting
Credit Parties have no obligation or duty (including implied
obligations of reasonableness, good faith or fair dealing) to,
and have no obligation or duty to take into consideration the
interests of, the holders of the notes when taking any action or
making any determination contemplated by the Security Agency
Agreement. By accepting the benefits of the Security Agency
Agreement, each holder of notes expressly waives and disclaims
any claim or cause of action based upon any vote, decision or
determination (including the giving or withholding of consent)
made by the majority voting Credit Parties in accordance with
the terms of the Security Agency Agreement. Bank of America,
N.A., which is the collateral agent under the Security Agency
Agreement and under the various pledge agreements, is also a
voting Credit Party under the Security Agency Agreement and its
interests in such capacity may conflict with the interests of
the holders of the notes.
Notwithstanding any benefit to which a holder of notes may
become entitled pursuant to the security and sharing
arrangements referred to above, the notes will be effectively
subordinated to: (1) our indebtedness that is secured by
collateral other than the intercompany loans referred to above,
to the extent of the value of such collateral, and
(2) liabilities of our subsidiaries that are not subject
to, or are owing to creditors not parties to, the sharing
arrangements.
We have proposed that the lenders under our Global Credit
Agreement approve an amendment to the Security Agency Agreement.
If the proposed amendment becomes effective:
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we will not be permitted to have one series of senior debt under
a particular indenture (or other instrument) constitute
Designated Senior Debt unless all indebtedness under
such indenture (or other instrument) also has the benefit of
such status;
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a designation of (or agreement not to revoke the status of)
senior debt as Designated Senior Debt may be either
to a specified future date or to a future date on which a
particular event occurs; and
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we will agree not to revoke the Designated Senior
Debt status of our indebtedness under the Indenture or
under our guarantee of certain indebtedness of PLD International
Finance LLC until the earlier of (i) August 21, 2012
or (ii) the date on which the Global Credit Agreement
terminates.
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No assurances can be given that the terms of the Security Agency
Agreement will be amended as outlined above.
There is
no public market for the notes, which could limit their market
price or the ability to sell them for an amount equal to, or
higher than, their initial offering price.
The notes are a new issue of securities, and there is currently
no existing trading market for the notes. Although the
underwriters have advised us that they intend to make a market
in the notes, they are not obligated to do so and may
discontinue any market-making at any time without notice.
Accordingly, an active public trading market may not develop for
the notes and, even if one develops, may not be maintained. If
an active public trading market for the notes does not develop
or is not maintained, the market price and liquidity of the
notes is likely to be adversely affected and holders may not be
able to sell their notes at desired times and prices, or at all.
If any of the notes are traded after their purchase, they may
trade at a discount from their purchase price.
The liquidity of the trading market, if any, and future trading
prices of the notes will depend on many factors, including,
among other things, the market price of the ProLogis common
shares, prevailing interest rates, the financial condition,
results of operations, business, prospects and credit quality of
ProLogis and its subsidiaries, and other comparable entities,
the market for similar securities, the overall securities market
and the tax treatment of the notes. The liquidity of the trading
market, if any, and future trading prices of the notes may be
adversely affected by unfavorable changes in any of these
factors, some of which are beyond our control and others of
which would not affect debt that is not convertible or
exchangeable into capital stock. Historically, the market for
convertible or exchangeable debt has been volatile. Market
volatility could
S-8
materially and adversely affect the notes, regardless of the
financial condition, results of operations, business, prospects
or credit quality of ProLogis and its subsidiaries.
The notes have a number of features that may adversely affect
the value and trading prices of the notes, including the lack of
certain financial and other restrictive covenants. It is
impossible to assure holders of notes that future closing sale
prices of the ProLogis common shares will not have an adverse
effect on the trading prices of the notes.
If the
market price of ProLogis common shares decreases, the market
price of our notes may similarly decrease.
We expect that the market price of our notes will be
significantly affected by the market price of ProLogis common
shares. This may result in greater volatility in the market
price of the notes than would be expected for non- convertible
debt securities. The market price of ProLogis common shares will
likely continue to fluctuate in response to factors, including
the factors discussed elsewhere in this prospectus supplement,
the accompanying prospectus and ProLogis Annual Report on
Form 10-K
for the year ended December 31, 2009, many of which are
beyond our control. For instance, the price of ProLogis common
shares could be affected by possible sales of ProLogis common
shares by investors who view the notes as a more attractive
means of equity participation in our company and by hedging or
arbitrage trading activity that may develop involving ProLogis
common shares. The hedging or arbitrage could, in turn, affect
the trading prices of the notes. In addition, anticipated
conversion of the notes issued in this offering into ProLogis
common shares could depress the price of ProLogis common shares
to the extent that any such conversion would result in the
issuance by ProLogis of a significant number of additional
ProLogis common shares. Future issuances of ProLogis common
shares in other circumstances could likewise have a similar
effect on the market price of the ProLogis common shares and
therefore the market price of our notes.
We may be
unable to repurchase notes upon the occurrence of a fundamental
change.
You have the right to require us to repurchase your notes upon
the occurrence of a fundamental change as described under
Description of Notes Fundamental Change
Permits Holders to Require Us to Repurchase Notes. We
cannot assure you that we will have enough funds to repurchase
all the notes if a fundamental change event occurs. In addition,
future debt we incur may limit our ability to repurchase the
notes upon a fundamental change. Moreover, if you or other
investors in our notes exercise the repurchase right upon a
fundamental change, it may cause a default under that debt, even
if the fundamental change itself does not cause a default owing
to the financial effect of such a repurchase on us.
A change
in control or a fundamental change may adversely affect us or
the notes.
A fundamental change or change in control transaction involving
us could have a negative effect on us and the trading price of
ProLogis common shares and could negatively impact the trading
price of the notes. Furthermore, the fundamental change
provisions, including the provisions requiring the increase to
the conversion rate for conversions in connection with a
fundamental change, may in certain circumstances make it more
difficult to complete or discourage a takeover of our company
and the removal of incumbent management.
The
adjustment to the conversion rate for notes converted in
connection with a fundamental change may not adequately
compensate you for any lost value of your notes as a result of
such transaction.
If a fundamental change occurs, we will increase the conversion
rate by a number of additional ProLogis common shares for notes
converted in connection with such fundamental change. The
increase in the conversion rate will be determined based on the
date on which the fundamental change becomes effective and the
price paid per ProLogis common share in such transaction, as
described below under Description of Notes
Conversion Rights Adjustment to
Shares Delivered upon Conversion upon Fundamental
Change. The adjustment to the conversion rate for notes
converted in connection with a fundamental change may not
adequately compensate you for any lost value of your notes as a
result of such transaction. In addition, if the
S-9
price of ProLogis common shares in the transaction is greater
than $40.00 per share or less than $13.40 per share (in each
case, subject to adjustment), no adjustment will be made to the
conversion rate. Moreover, in no event will the total number of
ProLogis common shares issuable upon conversion as a result of
this adjustment exceed 74.6268 per $1,000 principal amount of
notes, subject to adjustments in the same manner as the
conversion rate as set forth under Description of
Notes Conversion Rights Conversion Rate
Adjustments. Our obligation to increase the conversion
rate in connection with a fundamental change could be considered
a penalty, in which case the enforceability thereof would be
subject to general principles of reasonableness of economic
remedies.
A change
in control involving us may not constitute a fundamental
change for purposes of the notes.
The indenture, as amended with respect to the notes, contains no
covenants or other provisions to afford protection to holders of
the notes in the event of a change in control involving us
except to the extent described under Description of
Notes Fundamental Change Permits Holders to Require
Us to Repurchase Notes, and Description of
Notes Conversion Rights Adjustment to
Shares Delivered upon Conversion upon Fundamental
Change. However, the term fundamental change
is limited and may not include every change in control event
that might cause the market price of the notes to decline. As a
result, your rights under the notes upon the occurrence of a
fundamental change may not preserve the value of the notes in
the event of a change in control involving us. In addition, any
change in control involving us may negatively affect the
liquidity, value or volatility of ProLogis common shares,
negatively impacting the value of the notes.
Ownership
limitations in the declaration of trust of ProLogis may impair
the ability of holders to convert notes for ProLogis common
shares.
Our declaration of trust restricts beneficial ownership of
outstanding shares of beneficial interest by a single person, or
persons acting as a group, to 9.8% of such shares. The purposes
of the restriction are to assist in protecting and preserving
our REIT status under the Code and to protect the interest of
shareholders in takeover transactions by preventing the
acquisition of a substantial block of shares without the prior
consent of the board of trustees. For us to qualify as a REIT
under the Code, not more than 50% in value of our outstanding
shares of beneficial interest may be owned by five or fewer
individuals at any time during the last half of any taxable
year. The restriction permits five persons to acquire up to a
maximum of 9.8% each, or an aggregate of 49% of the outstanding
shares, and, thus, assists the board of trustees in protecting
and preserving our REIT status under the Code.
Excess shares of beneficial interest owned by a person or group
of persons in excess of 9.8% of the outstanding shares of
beneficial interest, other than, 30% in the case of shareholders
who acquired shares prior to our initial public offering, are
subject to redemption by us, at our option, upon
30 days notice, at a price equal to the average daily
per share closing sale price during the
30-day
period ending on the business day prior to the redemption date.
We may make payment of the redemption price at any time or times
up to the earlier of five years after the redemption date or
liquidation. We may refuse to effect the transfer of any shares
of beneficial interest which would make the transferee a holder
of excess shares. Shareholders are required to disclose, upon
demand of the board of trustees, such information with respect
to their direct and indirect ownership of shares as the board of
trustees deems necessary to comply with the provisions of the
Code pertaining to qualification, for tax purposes, of REITs, or
to comply with the requirements of any other appropriate taxing
authority.
Notwithstanding any other provision of the notes, no holder of
notes will be entitled to receive ProLogis common shares upon a
conversion of notes to the extent that receipt of such ProLogis
common shares would cause such holder (together with such
holders affiliates) to exceed the ownership limit
contained in the declaration of trust of ProLogis.
If you
hold notes, you will not be entitled to any rights with respect
to ProLogis common shares, but you will be subject to all
changes made with respect to ProLogis common shares.
If you hold notes, you will not be entitled to any rights with
respect to ProLogis common shares (including, without
limitation, voting rights and rights to receive any dividends or
other distributions on ProLogis common
S-10
shares), but if you subsequently convert your notes for ProLogis
common shares, you will be subject to all changes affecting the
ProLogis common shares. You will have rights with respect to
ProLogis common shares only if and when we deliver ProLogis
common shares to you upon conversion of your notes and, to a
limited extent, under the conversion rate adjustments applicable
to the notes. For example, in the event that an amendment is
proposed to ProLogis declaration of trust or bylaws
requiring shareholder approval and the record date for
determining the shareholders of record entitled to vote on the
amendment occurs prior to delivery of ProLogis common shares to
you, you will not be entitled to vote on the amendment, although
you will nevertheless be subject to any changes in the powers or
rights of ProLogis common shares if you are issued shares upon
conversion of your notes.
The value
of the conversion right associated with the notes may be
substantially lessened or eliminated if we are party to a
merger, consolidation, or other similar transaction.
If we are party to a consolidation, merger, binding share
exchange or sale of all or substantially all of our assets
pursuant to which ProLogis common shares are converted into the
right to receive cash, securities or other property, at the
effective time of the transaction, the right to convert the
notes into ProLogis common shares will be changed into a right
to convert the notes into the kind and amount of cash,
securities or other property which the holder would have
received if the holder had converted its notes immediately prior
to the transaction. This change could substantially lessen or
eliminate the value of the conversion privilege associated with
the notes in the future. For example, if all of the outstanding
ProLogis common shares were acquired for cash in a merger
transaction, each note would become convertible solely into cash
and would no longer be convertible into securities whose value
would vary depending on our future prospects and other factors.
The
conversion rate of the notes may not be adjusted for all
dilutive events, which may adversely affect the trading price of
the notes.
The conversion rate of the notes is subject to adjustment for
certain events, including, but not limited to, the issuance of
share dividends or payment of certain cash dividends, whether
quarterly or special, on ProLogis common shares, the issuance of
certain rights or warrants, subdivisions, combinations,
distributions of common shares of beneficial interest,
indebtedness, or assets and certain issuer tender or exchange
offers as described under Description of Notes
Conversion Rights Conversion Rate Adjustments
in this prospectus supplement. However, the conversion rate will
not be adjusted for other events, such as certain exchange
offers or an issuance of ProLogis common shares for cash, that
may adversely affect the trading price of the notes or the
ProLogis common shares. An event that adversely affects the
value of the notes may occur, and that event may not result in
an adjustment to the conversion rate.
You may
be deemed to have received taxable income if the conversion rate
of the notes is adjusted, even if you do not receive any
cash.
If we pay a cash dividend on ProLogis common shares over a set
dividend threshold amount described below under clause (4)
of the heading Description of Notes Conversion
Rights Conversion Rate Adjustments
Adjustment Events, an adjustment to the conversion rate
may result, and you may be deemed to have received a taxable
dividend subject to U.S. federal income tax without the
receipt of any cash. In addition, adjustments (or failures to
make adjustments) that have the effect of increasing a
holders proportionate share in our assets or earnings may,
in some circumstances, result in a deemed distribution to such
holder. For example, if the conversion rate is increased at our
discretion or in certain other circumstances (including in
connection with the payment of a dividend to ProLogis
common shareholders that results in an adjustment to the
conversion rate and that is taxable to the ProLogis common
shareholders), such increase may result in a deemed payment of a
taxable dividend to holders of the notes, notwithstanding the
fact that the holders do not receive a cash payment. See
Certain U.S. Federal Income Tax
Considerations Taxation of Noteholders
United States Holders of the Notes Constructive
Dividends. If you are a
Non-United States
Holder (as defined in Certain U.S. Federal Income Tax
Considerations), such deemed dividend may be subject to
U.S. federal withholding tax at a 30% rate or such lower
rate as may be specified by an applicable treaty. See
Certain U.S. Federal Income Tax
Considerations Taxation of Noteholders
Non-United
States Holders of the Notes Adjustments to
Conversion Rate.
S-11
We cannot
assure you that we will not be required to withhold on payments
to Non-U.S.
Holders of notes in connection with a sale, exchange,
redemption, repurchase, conversion, or other disposition of
notes based on the facts and circumstances at the
time.
Although we believe that currently the notes do not constitute
U.S. real property interests and we therefore
do not currently intend to withhold under the Foreign Investment
in Real Property Tax Act, or FIRPTA, we cannot assure you that
the notes will not constitute U.S. real property interests
depending on the facts in existence at the time of any sale,
exchange, redemption, repurchase, conversion or other
disposition of a note. If the notes were to constitute
U.S. real property interests, withholding on payments to
Non-United States
Holders (as defined below) in connection with such a sale,
exchange, redemption, repurchase, conversion or other
disposition of notes may be required regardless of whether such
Non-United
States Holders provided certification documenting their
non-U.S. status.
See Certain U.S. Federal Income Tax
Considerations Taxation of Noteholders
Non-United
States Holders of the Notes Sale, Conversion or
Other Dispositions of the Notes in this prospectus
supplement.
S-12
USE OF
PROCEEDS
The net proceeds from the sale of the notes are estimated to be
approximately $391.2 million, after deducting the
underwriters discount and estimated offering expenses
(assuming the underwriters do not exercise their option to
purchase additional notes to cover over-allotments). If the
underwriters exercise their over-allotment option to purchase
additional notes in full, we estimate our net proceeds from this
offering will be approximately $450.0 million. We will use
the net proceeds from the sale of the notes and the concurrent
offering of the 2017 notes and 2020 notes for the repayment of
borrowings under our Global Credit Agreement. We expect to
reborrow under our Global Credit Agreement to fund the cash
purchase of certain of our senior notes having an aggregate
principal amount of approximately $542.9 million that are
tendered pursuant to our offer to purchase any and all of such
notes, which commenced on March 8, 2010, the repayment or
repurchase of other indebtedness and for general corporate
purposes.
As of December 31, 2009, we had approximately
$736.6 million outstanding and the ability to borrow an
additional approximately $1.1 billion under our Global
Credit Agreement. Amounts repaid under the Global Credit
Agreement may be reborrowed and we expect to make additional
borrowings under the Global Credit Agreement following this
offering for the development of industrial distribution
properties, for the repayment or repurchase of outstanding
indebtedness, including the senior notes described above, and
for general corporate purposes. Affiliates of certain of the
underwriters participating in this offering are lenders under
the Global Credit Agreement and therefore will receive proceeds
from the offering to the extent that proceeds are used to repay
borrowings under our Global Credit Agreement. Based on our
public debt ratings and a pricing grid, interest on the
borrowings under the Global Credit Agreement accrues at a
variable rate based upon the interbank offered rate in each
respective jurisdiction in which the borrowings are outstanding
and we pay utilization fees that are calculated on the
outstanding balance. The interest and utilization fees result in
a weighted average borrowing rate of 2.27% per annum at
December 31, 2009 using local currency rates. The Global
Credit Agreement is scheduled to mature August 21, 2012.
RATIO OF
EARNINGS TO FIXED CHARGES
The following table sets forth our ratios of earnings to fixed
charges for the periods indicated. For this purpose,
earnings consist of earnings from continuing
operations, excluding income taxes, noncontrolling interests
share in earnings and fixed charges, other than capitalized
interest, and fixed charges consist of interest on
borrowed funds, including amounts that have been capitalized,
and amortization of capitalized debt issuance costs, debt
premiums and debt discounts.
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Year Ended December 31,
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2009(a)
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2008(a)(b)
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2007(b)
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2006
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2005
|
|
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0.2x
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0.3x
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2.7x
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2.6x
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2.0x
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(a) |
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The loss from continuing operations for 2009 and 2008 includes
impairment charges of $495.2 million and
$901.8 million, respectively, that are discussed in our
Consolidated Financial Statements in Item 8 of our Annual
Report on
Form 10-K
for the year ended December 31, 2009. Due to these
impairment charges, our fixed charges exceed our earnings as
adjusted by $353.2 million and $383.1 million for 2009
and 2008, respectively. |
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(b) |
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These periods have been restated to reflect the retroactive
adoption of the new accounting standard for interest expense
related to our convertible debt. |
S-13
PRICE
RANGE OF PROLOGIS COMMON SHARES
The common shares of ProLogis are listed on the New York Stock
Exchange (the NYSE) under the symbol
PLD. On March 9, 2010, the closing price per
ProLogis common share on the NYSE was $13.40, and there were
approximately 7,900 holders of record. The table below sets
forth the historical quarterly high and low sales prices per
ProLogis common share as reported on the NYSE and the
distribution paid per share with respect to each period.
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High
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Low
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Distribution
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2008
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First Quarter
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$
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64.00
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$
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54.01
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$
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0.5175
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Second Quarter
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$
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66.51
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$
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53.42
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$
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0.5175
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Third Quarter
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$
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54.89
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$
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34.61
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$
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0.5175
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Fourth Quarter
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$
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39.85
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$
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2.20
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$
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0.5175
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2009
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First Quarter
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$
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16.68
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$
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4.87
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$
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0.25
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Second Quarter
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$
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9.77
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$
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6.10
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$
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0.15
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Third Quarter
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$
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13.30
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$
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6.54
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$
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0.15
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Fourth Quarter
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$
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15.04
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$
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10.76
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$
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0.15
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2010
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|
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First Quarter (through March 9)
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$
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14.12
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$
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11.32
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$
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0.15
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(1)
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(1) |
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Declared on February 1, 2010 and paid on February 26,
2010 to holders of record on February 12, 2010 |
S-14
CAPITALIZATION
The following table sets forth our actual consolidated cash and
cash equivalents and capitalization as of December 31,
2009, and as adjusted to give effect to this offering (assuming
no exercise by the underwriters of their over-allotment option),
the concurrent offering of $300,000,000 aggregate principal
amount of 2017 notes and $800,000,000 aggregate principal amount
of 2020 notes and the application of the estimated net proceeds
from both offerings as set forth under Use of
Proceeds in this prospectus supplement. The following
table does not give effect to the cash purchase of certain of
our senior notes having an aggregate principal amount of up to
approximately $542.9 million that are tendered pursuant to
our offer to purchase any and all of such notes, which commenced
on March 8, 2010.
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As of December 31, 2009
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Actual
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|
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As Adjusted
|
|
|
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(In thousands, except
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per share amounts)
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Cash and cash equivalents
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$
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34,362
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$
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777,149
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|
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|
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|
|
|
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|
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Debt:
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|
|
|
|
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Global Credit Agreement(1)
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$
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736,591
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$
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Convertible notes offered hereby
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400,000
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Senior notes offered in the concurrent offering
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1,097,031
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Senior and other notes(1)
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|
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4,047,905
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|
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4,047,905
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Convertible debt
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|
|
2,078,441
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|
|
|
2,078,441
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Secured mortgage debt and assessment bonds
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|
|
1,114,841
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|
|
|
1,114,841
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|
|
|
|
|
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Total debt
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|
|
7,977,778
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|
|
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8,738,218
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Equity:
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ProLogis shareholders equity:
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|
|
|
|
|
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Series C Preferred Shares at stated liquidation preference
of $50.00 per share
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100,000
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|
|
100,000
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Series F Preferred Shares at stated liquidation preference
of $25.00 per share
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|
|
125,000
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|
|
|
125,000
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Series G Preferred Shares at stated liquidation preference
of $25.00 per share
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|
|
125,000
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|
|
125,000
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Common Shares at $.01 par value per share
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|
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4,742
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|
|
|
4,742
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Additional paid-in capital
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|
|
8,524,867
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8,524,867
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Accumulated other comprehensive income
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42,298
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42,298
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Distributions in excess of net earnings
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(934,583
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)
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(934,583
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)
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|
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Total ProLogis shareholders equity
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7,987,324
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|
|
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7,987,324
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Noncontrolling interests
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|
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19,962
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|
|
|
19,962
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|
|
|
|
|
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Total equity
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|
|
8,007,286
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|
|
|
8,007,286
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|
|
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|
|
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Total Capitalization
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$
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15,985,064
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|
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$
|
16,745,504
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(1) |
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On March 8, 2010, we announced an offer to purchase for
cash any and all of approximately $542.9 million aggregate
principal amount of certain of our outstanding senior notes. As
discussed in Use of Proceeds, we expect to fund the
purchase of those senior notes with borrowings under our Global
Credit Agreement. Assuming all $542.9 million aggregate
principal amount of those senior notes are tendered, the
As Adjusted amounts for Global Credit
Agreement in the table above would increase to
$579.1 million, and Senior and other notes in
the table above would decrease to $3.5 billion. |
S-15
DESCRIPTION
OF NOTES
The following description is a summary of the material
provisions of the notes and the indenture (as defined below) and
does not purport to be complete. This summary is subject to and
is qualified by reference to all the provisions of the notes and
the indenture, including the definitions of certain terms used
in the indenture. We urge you to read the indenture because it,
and not this description, defines your rights as a holder of the
notes.
General
The notes constitute a separate series of debt securities to be
issued pursuant to an Indenture, dated as of March 1, 1995
(the Original Indenture), between us and
U.S. Bank National Association (as successor in interest to
State Street Bank and Trust Company), as trustee. The
Indenture has been supplemented by a First Supplemental
Indenture, dated February 9, 2005, a Second Supplemental
Indenture, dated November 2, 2005, a Third Supplemental
Indenture, dated November 2, 2005, a Fourth Supplemental
Indenture, dated March 26, 2007, a Fifth Supplemental
Indenture, dated November 8, 2007, a Sixth Supplemental
Indenture, dated May 7, 2008, a Seventh Supplemental
Indenture, dated May 7, 2008, an Eighth Supplemental
Indenture, dated August 14, 2009, and a Ninth Supplemental
Indenture, dated October, 1, 2009, and will be further
supplemented by a Tenth Supplemental Indenture to be entered
into concurrently with the delivery of the notes. We
collectively refer to the Original Indenture as amended and
supplemented as the Indenture. The terms of the
notes include those provisions contained in the Indenture,
portions of which are described in this prospectus supplement
and the accompanying prospectus, and those made part of the
Indenture by reference to the Trust Indenture Act of 1939.
The notes are subject to all of these terms, and holders of
notes are referred to the Indenture and the Trust Indenture
Act for a statement of those terms. As of December 31,
2009, we had $6.2 billion aggregate principal amount of
debt securities outstanding under the Indenture.
Capitalized terms used but not defined under the caption
Description of Notes have the meaning given to them
in the Original Indenture.
As described in the accompanying prospectus in the section
entitled Description of Debt Securities
Security and sharing arrangements, pursuant to various
pledge agreements, we and certain of our subsidiaries have
pledged specified intercompany loans to Bank of America, N.A.,
as collateral agent, for the benefit of the Credit Parties under
the Security Agency Agreement. The Credit Parties under the
Security Agency Agreement include the holders of specified
credit obligations of ours, including (i) all obligations
arising under the Global Credit Agreement among us, various of
our affiliates and various lenders and agents, (ii) certain
of our hedging obligations, (iii) certain other senior debt
specified in the Security Agency Agreement and (iv) any
other senior debt designated from time to time by us as
Designated Senior Debt in accordance with the
Security Agency Agreement. The notes are included within the
definition of Designated Senior Debt and, unless we
revoke the designation of the notes as Designated Senior
Debt as described in the accompanying prospectus, holders
of the notes are entitled to a pro rata share of the proceeds of
the collateral granted under the various pledge agreements. The
notes will be effectively subordinated to any of our debt that
is secured by assets, other than the pledged intercompany loans,
to the extent of the value of the assets securing such debt. In
addition, except to the extent that the notes become entitled to
the benefits of the sharing arrangements described in the
accompanying prospectus, the notes will be effectively
subordinated to the debt and other liabilities, including trade
payables, of our subsidiaries. See Risk
Factors The notes are effectively subordinated to
our debt that is secured by assets, other than the intercompany
loans that are pledged to secure the notes, and to the
liabilities of our subsidiaries.
We have proposed that the lenders under our Global Credit
Agreement approve an amendment to the Security Agency Agreement.
If the proposed amendment becomes effective:
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we will not be permitted to have one series of senior debt under
a particular indenture (or other instrument) constitute
Designated Senior Debt unless all indebtedness under
such indenture (or other instrument) also has the benefit of
such status;
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a designation of (or agreement not to revoke the status of)
senior debt as Designated Senior Debt may be either
to a specified future date or to a future date on which a
particular event occurs; and
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we will agree not to revoke the Designated Senior
Debt status of our indebtedness under the Indenture or
under our guarantee of certain indebtedness of PLD International
Finance LLC until the earlier of (i) August 21, 2012
or (ii) the date on which the Global Credit Agreement
terminates.
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No assurances can be given that the terms of the Security Agency
Agreement will be amended as outlined above.
The notes will be limited initially to $400,000,000 aggregate
principal amount (or $460,000,000 in the event the underwriters
exercise their over-allotment option in full). We may in the
future, without the consent of holders, issue additional notes
on the same terms and conditions and with the same CUSIP number
as the notes being offered hereby. The notes and any additional
notes subsequently issued under the Indenture would be treated
as a single series for all purposes under the Indenture,
including without limitation, waivers, amendments, redemptions
and offers to purchase.
The Indenture permits us to issue different series of debt
securities from time to time. The notes we are offering will be
a single, distinct series of debt securities. The specific terms
of each other series may differ from those of the notes. Except
as described in the accompanying prospectus under
Description of Debt Securities
Covenants, the Indenture does not limit the aggregate
amount of debt securities that may be issued under the
Indenture, nor does it limit the number of other series or the
aggregate amount of any particular series, although the
covenants described under Description of Debt
Securities Covenants in the accompanying
prospectus do not apply to these notes. When we refer to a
series of debt securities, we mean a series of debt
securities, such as the series of notes we are offering by means
of this prospectus supplement and the accompanying prospectus,
issued under the Indenture. When we refer to the
notes or these notes, we mean the 3.25%
convertible senior notes due 2015 we are offering by means of
this prospectus supplement and the accompanying prospectus. The
notes will be issued only in denominations of $1,000 and
integral multiples of $1,000. The registered holder of a note
will be treated as the owner of it for all purposes.
Other than the restrictions described under
Fundamental Change Permits Holders to Require
us to Repurchase Notes and Merger,
Consolidation or Sale below, and except for the provisions
set forth under Conversion Rights
Adjustment to Shares Delivered upon Conversion upon
Fundamental Change, the Indenture as supplemented with
respect to the notes contains no other provisions that would
limit our ability to incur indebtedness or that would afford
holders of the notes protection in the event of a highly
leveraged or similar transaction involving us or in the event of
a change of control or a decline in our credit rating as the
result of a takeover, recapitalization, highly leveraged
transaction or similar restructuring involving us that could
adversely affect such holders.
Principal
and Interest
The notes will bear interest at the rate of 3.25% per year and
will mature on March 15, 2015, unless earlier converted,
repurchased or redeemed. Interest on the notes will accrue from
March 16, 2010 and will be payable semi-annually in arrears
on March 15 and September 15 of each year, commencing on
September 15, 2010 (each such date being an interest
payment date), to the persons in whose names the notes are
registered in the security register on the preceding March 1 or
September 1, whether or not a business day, as the case may
be (each such date being a regular record date).
Interest on the notes will be computed on the basis of a
360-day year
consisting of twelve
30-day
months.
If any interest payment date or the maturity date falls on a day
that is not a business day, the required payment shall be made
on the next business day as if it were made on the date the
payment was due and no interest shall accrue on the amount so
payable for the period from and after the interest payment date
or the maturity date, as the case may be, until the next
business day. A business day means any day, other than a
Saturday or Sunday, or legal holidays on which banks in The City
of New York or The City of Boston are not required or authorized
by law or executive order to be closed. In addition, you will
not receive any separate
S-17
cash payment for accrued and unpaid interest, if any, upon
conversion, except as described under
Conversion Rights.
Optional
Redemption by Us
We may not redeem the notes prior to maturity except to preserve
ProLogis status as a REIT. If at any time we determine it
is necessary to redeem the notes in order to preserve
ProLogis status as a REIT, we may, on at least
30 days and no more than 60 days notice,
redeem all of the notes then outstanding for cash at a price
equal to 100% of the principal amount of the notes being
redeemed, plus accrued and unpaid interest, if any, to the
redemption date. You may convert notes or portions of notes
called for redemption until the close of business on the day
that is two business days prior to the redemption date.
We or a third party may, to the extent permitted by applicable
law, at any time purchase notes in the open market, by tender at
any price or by private agreement. Any notes so purchased may,
to the extent permitted by applicable law and subject to
restrictions contained in the underwriting agreement with the
underwriters, be reissued or resold or may, at our or such third
partys option, be surrendered to the trustee for
cancellation. Any notes surrendered for cancellation may not be
reissued or resold and will be canceled promptly.
We may deduct and withhold, from the amount payable upon
redemption, any amounts required to be deducted and withheld
under applicable law.
No sinking fund is provided for the notes.
Fundamental
Change Permits Holders to Require Us to Repurchase
Notes
If a fundamental change (as defined below) occurs at any time,
you will have the right, at your option, to require us to
repurchase all of your notes, or any portion of the principal
amount thereof that is equal to $1,000 or an integral multiple
of $1,000, on a date (the fundamental change repurchase
date) of our choosing that is not less than 20 nor more
than 35 business days after the date of our notice of the
fundamental change. The price we are required to pay is equal to
100% of the principal amount of the notes to be purchased plus
accrued and unpaid interest to, but excluding, the fundamental
change repurchase date. Any notes purchased by us will be paid
for in cash.
On or before the 20th day after the occurrence of a
fundamental change, we will provide to all holders of the notes,
the trustee and the paying agent a notice of the occurrence of
the fundamental change and of the resulting repurchase right.
Such notice shall state, among other things:
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the events causing the fundamental change;
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the date of the fundamental change;
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the last date on which a holder may exercise the repurchase
right;
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the fundamental change repurchase price;
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the fundamental change repurchase date;
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the name and address of the paying agent and the conversion
agent, if applicable;
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the applicable conversion rate and any adjustments to the
applicable conversion rate;
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that the notes with respect to which a fundamental change
repurchase notice has been delivered by a holder may be
converted only if the holder withdraws the fundamental change
repurchase notice in accordance with the terms of the
indenture; and
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the procedures that holders must follow to require us to
repurchase their notes.
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Simultaneously with providing such notice, we will publish a
notice containing this information in a newspaper of general
circulation in New York City or publish the information on our
website or through such other public medium as we may use at
that time.
S-18
To exercise the repurchase right, you must deliver, on or before
the fundamental change repurchase date, the notes to be
purchased, duly endorsed for transfer, together with a written
repurchase notice and the form entitled Form of
Fundamental Change Repurchase Notice on the reverse side
of the notes duly completed, to the paying agent. Your
repurchase notice must state:
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if certificated, the certificate numbers of your notes to be
delivered for repurchase;
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the portion of the principal amount of notes to be purchased,
which must be $1,000 or an integral multiple thereof; and
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that the notes are to be purchased by us pursuant to the
applicable provisions of the notes and the indenture.
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You may withdraw any repurchase notice (in whole or in part) by
a written notice of withdrawal delivered to the paying agent
prior to the close of business on the business day prior to the
fundamental change repurchase date. The notice of withdrawal
shall state:
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the principal amount of the withdrawn notes;
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if certificated notes have been issued, the certificate numbers
of the withdrawn notes, or if not certificated, your notice must
comply with appropriate DTC procedures; and
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the principal amount, if any, which remains subject to the
repurchase notice.
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We will be required to repurchase the notes on the fundamental
change repurchase date. You will receive payment of the
fundamental change repurchase price promptly following the later
of the fundamental change repurchase date or the time of
book-entry transfer or the delivery of the notes. If the paying
agent holds money or securities sufficient to pay the
fundamental change repurchase price of the notes on the second
business day following the fundamental change repurchase date,
then:
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the notes will cease to be outstanding and interest will cease
to accrue (whether or not book-entry transfer of the notes is
made or whether or not the note is delivered to the paying
agent); and
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all other rights of the holder will terminate (other than the
right to receive the fundamental change repurchase price and
previously accrued and unpaid interest upon delivery or transfer
of the notes).
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The repurchase rights of the holders could discourage a
potential acquirer of us. The fundamental change repurchase
feature, however, is not the result of managements
knowledge of any specific effort to obtain control of us by any
means or part of a plan by management to adopt a series of
anti-takeover provisions.
If a fundamental change were to occur, we may not have enough
funds to pay the fundamental change repurchase price. See
Risk Factors in this prospectus supplement under the
caption We may be unable to repurchase notes upon the
occurrence of a fundamental change. If we fail to
repurchase the notes when required following a fundamental
change, we will be in default under the indenture. In addition,
we have incurred, and may in the future incur, other
indebtedness with change in control provisions permitting the
holders thereof to accelerate or to require us to repurchase
such indebtedness upon the occurrence of specified change in
control events or on some specific dates.
Certain of our debt agreements may limit our ability to
repurchase notes.
No notes may be purchased at the option of holders upon a
fundamental change if there has occurred and is continuing an
event of default other than an event of default that is cured by
the payment of the fundamental change repurchase price.
Conversion
Rights
General
Subject to the restrictions on ownership of ProLogis common
shares and the further conditions described below, holders may
convert each of their notes at an initial conversion rate of
57.8503 ProLogis common shares per $1,000 principal amount of
notes (equivalent to a conversion price of approximately $17.29
per
S-19
ProLogis common share) at any time prior to the close of
business on the trading day immediately preceding the final
maturity date of the notes.
The conversion rate and the equivalent conversion price in
effect at any given time are referred to as the applicable
conversion rate and the applicable conversion
price, respectively, and will be subject to adjustment as
described below. The conversion price at any given time will be
computed by dividing $1,000 by the applicable conversion rate at
such time. A holder may convert fewer than all of such
holders notes so long as the notes converted are an
integral multiple of $1,000 principal amount.
Except as described below, you will not receive any separate
cash payment for accrued and unpaid interest upon conversion.
Our settlement of conversions as described below under
Payment upon Conversion will be deemed
to satisfy our obligation to pay:
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the principal amount of the note; and
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accrued and unpaid interest to, but not including, the
conversion date.
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As a result, accrued and unpaid interest to, but not including,
the conversion date will be deemed to be paid in full rather
than cancelled, extinguished or forfeited.
Notwithstanding the preceding paragraph, if notes are converted
after 5:00 p.m., New York City time, on a record date,
holders of such notes at 5:00 p.m., New York City time, on
the record date will receive the interest payable on such notes
on the corresponding interest payment date notwithstanding the
conversion. Notes surrendered for conversion during the period
from 5:00 p.m., New York City time, on any regular record
date to 9:00 a.m., New York City time, on the immediately
following interest payment date must be accompanied by funds
equal to the amount of interest payable on such notes on such
interest payment date; provided that no such payment need be
made with respect to notes surrendered for conversion:
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if we have called the notes for redemption and the redemption
date falls within such period;
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in connection with a fundamental change if we have specified a
fundamental change repurchase date that falls within such period;
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after 5:00 p.m., New York City time on the record date
immediately preceding the maturity date; or
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to the extent of any overdue interest, if any overdue interest
exists at the time of conversion with respect to such notes.
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If a holder converts notes, we will pay any documentary, stamp
or similar issue or transfer tax due on the issue of any
ProLogis common shares upon the conversion, unless the tax is
due because the holder requests any shares to be issued in a
name other than the holders name, in which case the holder
will pay that tax.
Notes in respect of which a holder has delivered a notice of
exercise of its option to require us to repurchase its notes
upon the occurrence of a fundamental change (defined below) may
not be surrendered for conversion until the holder has withdrawn
the notice in accordance with the indenture.
Conversion
Procedures
If you hold a beneficial interest in a global note, to exercise
your conversion right you must comply with The Depository
Trust Companys (DTC) procedures for
converting a beneficial interest in a global note and, if
required, pay funds equal to interest payable on the next
interest payment date and, if required, pay all taxes or duties,
if any.
If you hold a certificated note, to convert you must:
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complete and manually sign the conversion notice on the back of
the note, or a facsimile of the conversion notice;
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deliver the conversion notice, which is irrevocable, and the
note to the conversion agent;
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if required, furnish appropriate endorsements and transfer
documents;
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S-20
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if required, pay all transfer or similar taxes; and if required,
pay funds equal to interest payable on the next interest payment
date.
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The date you comply with these requirements is the
conversion date under the Indenture. If a holder has
already delivered a repurchase notice as described under
Fundamental Change Permits Holders to Require
Us to Repurchase Notes with respect to a note, the holder
may not surrender that note for conversion until the holder has
withdrawn the notice in accordance with the Indenture.
Payment
upon Conversion
We will deliver to you a number of shares equal to (i) the
aggregate principal amount of notes to be converted divided by
$1,000, multiplied by (ii) the applicable conversion rate
(which will include any increases to reflect any additional
shares which you may be entitled to receive as described
Adjustment to Shares Delivered upon
Conversion upon Fundamental Change). We will not issue
fractional common shares upon conversion of notes. A holder of a
note otherwise entitled to a fractional share will receive cash
equal to such fraction multiplied by the last reported sale
price of our common shares on the trading day immediately
preceding the conversion date.
In respect of any conversion, we will be obligated to deliver
the common shares to which you are entitled, and any cash
payment for a fractional share, on the third business day
following the conversion date. Notwithstanding the preceding
sentence, if any calculation required in order to determine the
number of common shares we must deliver in respect of a
particular conversion is based upon data that will not be
available to us on the conversion date, we will delay settlement
of that conversion until the third business day after the
relevant data become available. This will be the case, in
particular, for any conversion immediately following a spin-off
described in paragraph (3) of Conversion
Rate Adjustments below, or a tender offer or exchange
offer described in paragraph (5) of
Conversion Rate Adjustments below.
Conversion
Rate Adjustments
The conversion rate will be adjusted as described below, except
that we will not make any adjustments to the conversion rate if
holders of the notes participate, as a result of holding the
notes, in any of the transactions described below without having
to convert their notes.
Adjustment
Events
(1) If ProLogis issues common shares as a dividend or
distribution on ProLogis common shares, or if ProLogis effects a
share split or share combination, the conversion rate will be
adjusted based on the following formula:
where,
CR0
= the conversion rate in effect immediately prior to the
ex-date for such dividend or distribution or the
effective date of such share split or combination, as the case
may be;
CR = the conversion rate in effect as of the
ex-date for such dividend or distribution or the
effective date of such share split or combination, as the case
may be;
OS0
= the number of ProLogis common shares outstanding immediately
prior to such event; and
OS = the number of ProLogis common shares outstanding
immediately after such event.
(2) If ProLogis issues to all or substantially all holders
of ProLogis common shares any rights, warrants or convertible
securities entitling them, for a period of not more than 60
calendar days, to subscribe for or purchase ProLogis common
shares at a price per share less than the last reported sale
price per ProLogis common share on the business day immediately
preceding the date of announcement of such issuance, the
conversion rate will be
S-21
adjusted based on the following formula (provided that the
conversion rate will be readjusted to the extent that such
rights, warrants or convertible securities are not exercised
prior to their expiration):
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CR=
CR0
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×
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OS0
+ X
OS0
+ Y
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where,
CR0
= the conversion rate in effect immediately prior to the
ex-date for such distribution;
CR = the conversion rate in effect as of the
ex-date for such distribution;
OS0
= the number of ProLogis common shares outstanding immediately
prior to such event;
X = the total number of ProLogis common shares issuable pursuant
to such rights; and
Y = the number of ProLogis common shares equal to the aggregate
price payable to exercise such rights, warrants or convertible
securities divided by the average of the last reported sale
prices per ProLogis common share over the ten consecutive
trading day period ending on the business day immediately
preceding the record date (or, if later, the ex-date
relating such distribution) for the issuance of such rights,
warrants or convertible securities.
(3) If ProLogis distributes shares of beneficial interest,
evidences of indebtedness or other assets or property of
ProLogis to all or substantially all holders of ProLogis common
shares, excluding:
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dividends or distributions and rights or warrants referred to in
clause (1) or (2) above;
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dividends or distributions paid exclusively in cash; and
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spin-offs to which the provisions set forth below in this
paragraph (3) shall apply;
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then the conversion rate will be adjusted based on the following
formula:
where,
CR0
= the conversion rate in effect immediately prior to the
ex-date for such distribution;
CR = the conversion rate in effect as of the
ex-date for such distribution;
SP0
= the average of the last reported sale prices of ProLogis
common shares over the ten consecutive trading day period ending
on the business day immediately preceding the record date for
such distribution (or, if earlier, the ex-date
relating to such distribution); and
FMV = the fair market value (as determined by the board of
trustees of ProLogis) of the shares of beneficial interest,
evidences of indebtedness, assets or property distributed with
respect to each outstanding ProLogis common shares on the record
date for such distribution (or, if earlier, the
ex-date relating to such distribution).
With respect to an adjustment pursuant to this clause (3)
where there has been a payment of a dividend or other
distribution on ProLogis common shares in shares of beneficial
interest of any class or series, or similar equity interest, of
or relating to a subsidiary or other business unit, which we
refer to as a spinoff, unless we distribute such
shares of beneficial interest or equity interests to holders of
the notes on the same basis as they would have received had they
converted their notes solely into ProLogis common shares
immediately prior to such dividend or distribution, the
conversion rate in effect immediately before 5:00 p.m., New
York City time, on the record date fixed for determination of
shareholders entitled to receive the distribution will be
increased based on the following formula:
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CR=
CR0
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×
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FMV0
+
MP0
MP0
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where,
CR0
= the conversion rate in effect immediately prior to the
effective date of such distribution;
CR = the conversion rate in effect as of the effective
date of such distribution;
FMV0
= the average of the last reported sale prices of the shares of
beneficial interest or similar equity interest distributed to
holders of ProLogis common shares applicable to one ProLogis
common share over the first ten consecutive trading day period
after the effective date of the spin-off; and
MP0
= the average of the last reported sale prices of ProLogis
common shares over the first ten consecutive trading day period
after the effective date of the spin-off.
The adjustment to the conversion rate under the preceding
paragraph will occur on the tenth trading day from, and
including, the effective date of the spin-off; provided that in
respect of any conversion within the ten trading days following
any spin-off, references within this paragraph (3) to ten
days shall be deemed replaced with such lesser number of trading
days as have elapsed between such spin-off and the conversion
date in determining the applicable conversion rate.
(4) If ProLogis pays any cash dividend or distribution to
all or substantially all holders of ProLogis common shares, to
the extent that the aggregate of all such cash dividends or
distributions paid in any quarter exceeds the dividend threshold
amount (as defined below) for such quarter, the conversion rate
will be adjusted based on the following formula:
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CR=
CR0
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×
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SP0
− T
SP0
− C
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where,
CR0
= the conversion rate in effect immediately prior to the
ex-date for such distribution;
CR = the conversion rate in effect as of the
ex-date for such distribution;
SP0
= the average of the last reported sale prices of ProLogis
common shares over the ten consecutive
trading-day
period ending on the business day immediately preceding the
record date for such distribution (or, if earlier, the
ex-date relating to such distribution);
T = the dividend threshold amount, which shall initially be
$0.15 per quarter and which amount shall be appropriately
adjusted from time to time for any share dividends on, or
subdivisions or combinations of, ProLogis common shares;
provided, that if a conversion rate adjustment is required to be
made as a result of a distribution that is not a quarterly
dividend either in whole or in part, the dividend threshold
amount shall be deemed to be zero; and
C = the amount in cash per share that ProLogis distributes to
holders of ProLogis common shares.
(5) If ProLogis or any of its subsidiaries makes a payment
in respect of a tender offer or exchange offer for ProLogis
common shares, if the cash and value of any other consideration
included in the payment per ProLogis common share exceeds the
last reported sale price per ProLogis common share on the
trading day next succeeding the last date on which tenders or
conversions may be made pursuant to such tender or exchange
offer, the conversion rate will be increased based on the
following formula:
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CR=
CR0
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×
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AC + (SP × OS)
SP
×
OS0
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where,
CR0
= the conversion rate in effect on the date such tender or
exchange offer expires;
CR = the conversion rate in effect on the day next
succeeding the date such tender or exchange offer expires;
AC = the aggregate value of all cash and any other consideration
(as determined by the board of trustees of ProLogis) paid or
payable for shares purchased in such tender or exchange offer;
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OS0
= the number of ProLogis common shares outstanding immediately
prior to the date such tender or exchange offer expires;
OS = the number of ProLogis common shares outstanding
immediately after the date such tender or exchange offer
expires; and
SP = the average of the last reported sale prices per
ProLogis common share over the ten consecutive
trading-day
period commencing on the trading day next succeeding the date
such tender or exchange offer expires.
If, however, the application of the foregoing formula would
result in a decrease in the conversion rate, no adjustment to
the conversion rate will be made.
As used in this section, ex-date means the first
date on which the ProLogis common shares trade on the applicable
conversion or in the applicable market, regular way, without the
right to receive the issuance or distribution in question.
Except as stated herein, we will not adjust the conversion rate
for the issuance of ProLogis common shares or any securities
convertible into or convertible for ProLogis common shares or
the right to purchase ProLogis common shares or such convertible
or convertible securities.
Notwithstanding the foregoing, in no event will the conversion
rate exceed 74.6268 shares per $1,000 principal amount of
notes, subject to adjustment in the same manner as the
conversion rate as set forth in sections (1) through
(3) above.
Events
That Will Not Result in Adjustments
The applicable conversion rate will not be adjusted:
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upon the issuance of any ProLogis common shares pursuant to any
present or future plan providing for the reinvestment of
dividends or interest payable on ProLogis securities and the
investment of additional optional amounts in ProLogis common
shares under any plan;
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upon the issuance of any ProLogis common shares or options or
rights to purchase those shares pursuant to any present or
future employee, director or consultant benefit plan or program
of or assumed by us or any of our subsidiaries;
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upon the issuance of any ProLogis common shares pursuant to any
option, warrant, right or exercisable, exchangeable or
convertible security not described in the second bullet above
and outstanding as of the date the notes were first issued;
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upon the issuance of any ProLogis common shares pursuant to any
option, warrant or exercisable, exchangeable or convertible
security not described in the second bullet above issued after
the date the notes were first issued so long as those securities
are not issued to all or substantially all holders of ProLogis
common shares;
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for a change in the par value of ProLogis common shares;
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for accrued and unpaid interest; or
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for the avoidance of doubt, for (i) the issuance of units
that may be exchangeable for ProLogis common shares by any of
our subsidiaries (other than to all or substantially all holders
of ProLogis common shares) or (ii) the payment of cash or
the issuance of ProLogis common shares by ProLogis upon
exchange, redemption or repurchase of notes.
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Adjustments to the applicable conversion rate will be calculated
to the nearest 1/10,000th of a share. We will not be
required to make an adjustment in the conversion rate unless the
adjustment would require a change of at least 1% in the
conversion rate. However, we will carry forward any adjustments
that are less than 1% of the conversion rate and make such
carried forward adjustments, regardless of whether the aggregate
adjustment is less than 1% within one year of the first such
adjustment carried forward, upon a
S-24
fundamental change, upon any call of the notes for redemption or
upon maturity. Except as described in this section, we will not
adjust the conversion rate.
Treatment
of Reference Property
In the event of any of the following (each, a
reorganization event):
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any reclassification of ProLogis common shares; or
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a consolidation, merger or combination involving
ProLogis; or
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a sale or conveyance to another person of all or substantially
all of the property and assets of ProLogis, in which holders of
the outstanding ProLogis common shares would be entitled to
receive cash, securities or other property for their ProLogis
common shares;
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in each case as a result of which holders of our common shares
are entitled to receive stock, other securities, other property,
assets or cash (or any combination thereof) with respect to or
in exchange for our common shares, then from and after the
effective date of the reorganization event, the consideration
for the settlement of the conversion obligation will be based
on, and each share deliverable upon conversion in respect of any
settlement will consist of, the kind and amount of shares of
stock, other securities or other property, assets or cash (or
any combination thereof) that such holder of notes would have
owned immediately after such reorganization event if such holder
had converted the notes immediately prior to such reorganization
event (such consideration, the reference property).
For purposes of the foregoing, where a reorganization event
involves consideration based upon any form of stockholder
election, the consideration will be deemed to be the weighted
average of the types and amounts of consideration received by
the holders of our common shares that affirmatively make such an
election. We may not become party to any transaction of that
type unless its terms are materially consistent with the
preceding. None of the foregoing provisions shall affect the
right of a holder of notes to convert its notes prior to the
effective date of the reorganization event. For the avoidance of
doubt, adjustments to the conversion rate set forth under
Conversion Rate Adjustments do not apply
to distributions to the extent that the right to convert notes
has been changed into the right to convert into reference
property.
Treatment of Rights. To the extent that
we have a rights plan in effect upon conversion of the notes
into ProLogis common shares, you will receive, in addition to
ProLogis common shares, the rights under the rights plan, unless
prior to any conversion, the rights have separated from the
ProLogis common shares, in which case the conversion rate will
be adjusted at the time of separation as if we distributed to
all holders of ProLogis common shares, our shares of beneficial
interest, evidences of indebtedness or assets as described in
clause (3) under Adjustment Events
above, subject to readjustment in the event of the expiration,
termination or redemption of such rights.
Voluntary Increases of Conversion
Rate. We are permitted to the extent
permitted by law and subject to the applicable rules of the NYSE
to increase the conversion rate of the notes by any amount for a
period of at least 20 days if our board of trustees
determines that such increase would be in our best interest. We
may also (but are not required to) increase the conversion rate
to avoid or diminish income tax to holders of ProLogis common
shares or rights to purchase ProLogis common shares in
connection with a dividend or distribution of shares (or rights
to acquire shares) or similar event.
Tax Effect. A holder may, in certain
circumstances, including the distribution of cash dividends to
holders of ProLogis common shares, be deemed to have received a
dividend subject to U.S. federal income tax as a result of
an adjustment or the nonoccurrence of an adjustment to the
conversion rate. For a discussion of the U.S. federal
income tax treatment of an adjustment to the conversion rate,
see Certain U.S. Federal Income Tax
Considerations in this prospectus supplement.
Adjustment
to Shares Delivered upon Conversion upon Fundamental
Change
If a fundamental change (as defined below) occurs at any time,
and if you elect to convert your notes at any time on or after
the 30th scheduled trading day prior to the anticipated
effective date of such fundamental change until the related
fundamental change repurchase date, the conversion rate will be
increased by an additional number of ProLogis common shares (the
additional shares) as described below. We will
notify
S-25
holders of the occurrence of any such fundamental change and
issue a press release no later than 30 scheduled trading days
prior to the anticipated effective date of such transaction. We
will settle conversions of notes as described above under
Payment Upon Conversion.
A fundamental change means a change of control or a
termination of trading. A change of control shall be
deemed to occur upon the consummation of any transaction or
event (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) in connection
with which more than 50% of ProLogis common shares are exchanged
for, converted into, acquired for or constitutes solely the
right to receive, consideration which is not at least 90% common
stock (or American Depositary Shares representing common shares)
that is:
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listed on, or immediately after consummation of such transaction
or event will be listed on, a United States national securities
exchange; or
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approved, or immediately after the transaction or event will be
approved, for listing or quotation any United States system of
automated dissemination of quotations of securities prices.
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A termination of trading shall be deemed to occur if
shares of our common stock, or any shares of common stock (or
American Depositary Receipts in respect of common shares) into
which the notes are convertible pursuant to the terms of the
Indenture, are not listed for trading on any of the New York
Stock Exchange, the NASDAQ Global Market or the NASDAQ Global
Select Market (or any of their respective successors).
The term fundamental change is limited to specified transactions
and may not include other events that might adversely affect our
financial condition. In addition, the requirement that we offer
to repurchase the notes upon a fundamental change may not
protect holders in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving us.
The number of additional shares by which the conversion rate
will be increased will be determined by reference to the table
below, based on the date on which the fundamental change occurs
or becomes effective (the effective date) and the
price (the share price) paid per ProLogis common
share in the fundamental change. If holders of ProLogis common
shares receive only cash in the fundamental change, the share
price will be the cash amount paid per share. Otherwise, the
share price will be the average of the last reported sale prices
per ProLogis common share over the five
trading-day
period ending on the trading day preceding the effective date of
the fundamental change.
The share prices set forth in the first row of the table below
(i.e., column headers) will be adjusted as of any date on which
the conversion rate of the notes is otherwise adjusted. The
adjusted share prices will equal the share prices applicable
immediately prior to such adjustment, multiplied by a fraction,
the numerator of which is the conversion rate immediately prior
to the adjustment giving rise to the share price adjustment and
the denominator of which is the conversion rate as so adjusted.
The number of additional shares will be adjusted in the same
manner as the conversion rate as set forth under
Conversion Rate Adjustments.
The following table sets forth the share price and the number of
additional shares by which the conversion rate per $1,000
principal amount of notes will be increased:
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Stock Price
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Effective Date
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$13.40
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$15.00
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$17.50
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$20.00
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$22.50
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$25.00
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$27.50
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$30.00
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$32.50
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$35.00
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$37.50
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$40.00
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03/16/10
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16.7765
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13.1608
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8.1976
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5.1554
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3.2512
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2.0393
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1.2602
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0.7572
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0.4334
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0.2282
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0.1038
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0.0349
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03/15/11
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16.7765
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12.9280
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7.8232
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4.7552
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2.8834
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1.7279
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1.0108
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0.5662
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0.2937
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0.1328
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0.0455
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0.0055
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03/15/12
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16.7765
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12.4979
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7.2319
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4.1631
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2.3658
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1.3110
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0.6940
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0.3377
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0.1397
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0.0396
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0.0000
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0.0000
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03/15/13
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16.7765
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11.7694
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6.3041
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3.2875
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1.6518
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0.7814
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0.3305
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0.1106
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0.0174
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0.0000
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0.0000
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0.0000
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03/15/14
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16.7765
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10.5088
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4.7035
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1.8907
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0.6585
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0.1765
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0.0207
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0.0000
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0.0000
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0.0000
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0.0000
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0.0000
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03/15/15
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16.7765
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8.8164
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0.0000
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0.0000
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0.0000
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0.0000
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0.0000
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0.0000
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0.0000
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0.0000
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0.0000
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0.0000
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The exact share prices and effective dates may not be set forth
in the table above, in which case:
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If the share price is between two share price amounts in the
table or the effective date is between two effective dates in
the table, the number of additional shares will be determined by
a straight-line
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interpolation between the number of additional shares set forth
for the higher and lower share price amounts and the two dates,
as applicable, based on a
365-day year.
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If the share price is greater than $40.00 per share (subject to
adjustment), the conversion rate will not be adjusted.
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If the share price is less than $13.40 per share (subject to
adjustment), the conversion rate will not be adjusted.
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Notwithstanding the foregoing, in no event will the total number
of ProLogis common shares issuable upon conversion exceed
74.6268 per $1,000 principal amount of notes, subject to
adjustments in the same manner as the conversion rate as set
forth under sections (1) through (3) of
Conversion Rate Adjustments.
Our obligation to increase the conversion rate as described
above could be considered a penalty, in which case the
enforceability thereof would be subject to general principles of
economic remedies.
Ownership
Limit
In order to assist ProLogis in maintaining its qualification as
a REIT for U.S. federal income tax purposes, no person may
own more than 9.8% of the ProLogis common shares, subject to
certain exceptions. Notwithstanding any other provision of the
notes, no holder of notes will be entitled to convert such notes
for ProLogis common shares to the extent that receipt of such
shares would cause such holder (together with such holders
affiliates) to exceed the ownership limit contained in the
declaration of trust of ProLogis. Moreover, the holders of the
notes will have no right to receive cash or other consideration
in lieu of ProLogis common shares upon the conversion of their
notes to the extent such conversion would otherwise result in
their aggregate ownership of ProLogis common shares, options,
warrants, convertible securities or other rights to acquire
ProLogis common shares exceeding 9.8% of the value of the
outstanding ProLogis common shares (provided that such holders
will be entitled to receive on the same basis as all other note
holders cash we pay to redeem or repurchase the notes for cash
as described herein). See Description of Common
Shares Restrictions on Size of Holdings in the
accompanying prospectus.
Calculations
in Respect of the Notes
Except as explicitly specified otherwise herein, we will be
responsible for making all calculations required under the
notes. These calculations include, but are not limited to,
determinations of the conversion price and conversion rate
applicable to the notes. We will make all these calculations in
good faith and, absent manifest error, our calculations will be
final and binding on holders of the notes. We will provide a
schedule of our calculations to the trustee, and the trustee is
entitled to rely upon the accuracy of our calculations without
independent verification. The trustee will forward our
calculations to any holder of notes upon request.
No
Personal Liability
No past, present or future trustee, officer, employee or
shareholder of ours or any successor to us will have any
liability for any of our obligations under the notes or the
Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each holder of debt
securities by accepting the debt securities waives and releases
all such liability. The waiver and release are part of the
consideration for the issue of debt securities.
No
Shareholder Rights for Holders of Notes
Holders of notes, as such, will not have any rights as
shareholders of ProLogis (including, without limitation, voting
rights and rights to receive any dividends or other
distributions on ProLogis common shares).
S-27
Merger,
Consolidation or Sale
We may consolidate with or merge with or into another entity, or
sell, lease or convey all or substantially all of our assets to
another entity, provided that the following three conditions are
met:
(1) After the transaction, we are, or a person organized
and existing under the laws of the United States or one of the
fifty states is, the continuing entity. If the continuing entity
is an entity other than us, that entity must also assume our
payment obligations under the Indenture, as well as, the due and
punctual performance and observance of all of the covenants
contained in the Indenture;
(2) After giving effect to the transaction and treating any
indebtedness which became an obligation of ours or any of our
subsidiaries as a result of the transaction as having been
incurred by us or such subsidiary at the time of such
transaction, an event of default (or an event which, with notice
or lapse of time or both, would become an event of default) has
not occurred under the Indenture. Additionally, the transaction
may not cause an event which, after notice or a lapse of time,
or both, would become an event of default; and
(3) The continuing entity delivers an officers
certificate and legal opinion covering (1) and
(2) above.
Events of
Default, Notice and Waiver
Each of the following is an event of default with respect to the
notes:
(1) default in the payment of any installment of interest
or additional amounts payable on the notes which continues for
30 days;
(2) default in the payment of the principal or premium, if
any, on the notes at its maturity or redemption date;
(3) failure by us to comply with our obligation to convert
the notes into ProLogis common shares upon exercise of a
holders conversion right, and such failure continues for a
period of 10 days;
(4) failure by us to issue a fundamental change notice when
due, and such failure continues for a period of two days;
(5) default in the performance of any other of our
covenants contained in the Indenture relating to the notes,
which continues for 60 days after written notice as
provided in the Indenture;
(6) default in the payment of an aggregate principal amount
exceeding $50,000,000 under any bond, note or other evidence of
indebtedness or any mortgage, indenture or other instrument
under which such indebtedness is issued or by which such
indebtedness is secured (or any such indebtedness of any of our
subsidiaries, which we have guaranteed), such default having
occurred after the expiration of any applicable grace period and
having resulted in the acceleration of the maturity of such
indebtedness, but only if such indebtedness is not discharged or
such acceleration is not rescinded or annulled within
10 days after written notice as provided in the Indenture;
(7) the entry by a court of competent jurisdiction of one
or more judgments, orders or decrees against us or any of our
subsidiaries in an aggregate amount, excluding amounts fully
covered by insurance, in excess of $50,000,000 and such
judgments, orders or decrees remain undischarged, unstayed and
unsatisfied in an aggregate amount, excluding amounts fully
covered by insurance, in excess of $50,000,000 for a period of
30 consecutive days; and
(8) events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee for us or
any significant subsidiary or for all or substantially all of
our or our significant subsidiarys property.
The term significant subsidiary means each of our significant
subsidiaries, as defined in
Regulation S-X
promulgated under the Securities Act.
S-28
If an event of default under the Indenture with respect to the
notes occurs and is continuing, then in every such case, unless
the principal of the notes shall already have become due and
payable, the trustee or the holders of not less than 25% in
principal amount of the notes may declare the principal on the
notes to be due and payable immediately by written notice to us
that payment of the notes is due, and to the trustee if given by
the holders. However, at any time after such a declaration of
acceleration with respect to the notes has been made, but before
a judgment or decree for payment of the money due has been
obtained by the trustee, the holders of not less than a majority
in principal amount of the notes may rescind and annul such
declaration and its consequences if we shall have deposited with
the trustee all required payments of the principal of, and
premium and interest on, the notes, plus fees, expenses,
disbursements and advances of the trustee and all events of
default, other than the nonpayment of accelerated principal, and
the interest, with respect to the notes have been cured or
waived as provided in the Indenture. The Indenture also provides
that the holders of not less than a majority in principal amount
of the notes may waive any past default with respect to such
series and its consequences, except a default in the payment of
the principal of, or interest payable on the notes or in respect
of a covenant or provision contained in the Indenture that
cannot be modified or amended without the consent of the holder
of each outstanding note affected the proposed modification or
amendment.
The trustee is required to give notice to the holders of the
notes within 90 days of a default under the Indenture;
provided, however, that the trustee may withhold notice to the
holders of the notes of any default except a default in the
payment of the principal of, or interest payable on the notes if
the responsible officers of the trustee consider such
withholding to be in the interest of such holders.
The Indenture provides that no holders of the notes may
institute any proceedings, judicial or otherwise, with respect
to the Indenture or for any remedy which the Indenture provides,
except in the case of failure of the trustee, for 60 days,
to act after it has received a written request to institute
proceedings in respect of an event of default from the holders
of not less than 25% in principal amount of the outstanding
notes, as well as an offer of reasonable indemnity. This
provision will not prevent, however, any holder of the notes
from instituting suit for the enforcement of payment of the
principal of, or interest on, the notes at the due date of the
notes.
Subject to provisions in the Indenture relating to its duties in
case of default, the trustee is under no obligation to exercise
any of its rights or powers under the Indenture at the request
or direction of any holders of notes then outstanding under the
Indenture, unless such holders shall have offered to the trustee
reasonable security or indemnity. The holders of not less than a
majority in principal amount of the outstanding notes shall have
the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee, or of
exercising any trust or power conferred upon the trustee.
However, the trustee may refuse to follow any direction which is
in conflict with any law or the Indenture, which may involve the
trustee in personal liability or which may be unduly prejudicial
to the holders of the notes not joining in the proceeding.
Within 120 days after the close of each fiscal year, we
must deliver to the trustee a certificate, signed by one of
several specified officers, stating whether or not such officer
has knowledge of any default under the Indenture and, if so,
specifying each such default and the nature and status of the
default.
Modification
of the Indenture
Modifications and amendments of the Indenture may be made with
the consent of the holders of not less than a majority in
principal amount of all outstanding debt securities issued under
the indenture, including the notes, which are affected by such
modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the holder
of each debt security affected by the modification or amendment:
(1) change the stated maturity of the principal of, or
premium or make-whole amounts, if any, or any installment of
principal of or interest or additional amounts payable on, any
such debt security;
(2) reduce the principal amount of, or the rate or amount
of interest on, or any premium or make-whole amounts payable on
redemption of, or any additional amounts payable with respect
to, any such
S-29
debt security, or reduce the amount of principal of an original
issue discount security or make-whole amount, if any, that would
be due and payable upon declaration of acceleration of the
maturity of the security or would be provable in bankruptcy, or
adversely affect any right of repayment of the holder of any
such debt security;
(3) change the place of payment, or the coin or currency,
for payment of principal of, and premium or make-whole amounts,
if any, or interest on, or any additional amounts payable with
respect to, any such debt security;
(4) impair the right to institute suit for the enforcement
of any payment on or with respect to any such debt security;
(5) reduce the above-stated percentage of outstanding debt
securities of any series, including the notes, necessary to
modify or amend the Indenture, to waive compliance with a
provisions of the debt security or defaults and consequences
under the Indenture or to reduce the quorum or voting
requirements set forth in the Indenture; or
(6) modify any of the provisions relating to modification
of the Indenture or any of the provisions relating to the waiver
of past defaults or covenants, except to increase the required
percentage to effect such action or to provide that other
provisions may not be modified or waived without the consent of
the holder of the affected debt security.
In addition, with respect to the notes, without the consent of
each holder of an outstanding note affected, no amendment may
make any change that adversely affects the conversion rights of
any notes, or reduce the fundamental change repurchase price or
redemption price of any note or amend or modify in any manner
adverse to the holders of notes our obligation to make such
payments or the provisions relating to redemption or repurchase
of the notes, whether through an amendment or waiver of
provisions in the covenants, definitions or otherwise.
The holders of not less than a majority in principal amount of
outstanding notes have the right to waive our compliance with
covenants in the Indenture applicable to the notes other than
those covenants which require the consent of each affected note
holder with respect to modifications or amendments to such
covenant.
Modifications and amendments of the Indenture may be made by us
and the trustee without the consent of any holder of debt
securities for any of the following purposes:
(1) to evidence the succession of another person to us as
obligor under the Indenture;
(2) to add to our covenants for the benefit of the holders
of all or any series of debt securities or to surrender any
right or power conferred upon us in the Indenture;
(3) to add events of default for the benefit of the holders
of all or any series of debt securities;
(4) to add or change any provisions of the Indenture to
facilitate the issuance of, or to liberalize terms of, debt
securities in bearer form, or to permit or facilitate the
issuance of debt securities in uncertificated form, provided
that such action shall not adversely affect the interests of the
holders of the debt securities of any series in any material
respect;
(5) to change or eliminate any provisions of the Indenture,
provided that any such change or elimination will become
effective only when there are no debt securities outstanding of
any series created prior to such change which are entitled to
the benefit of that provision;
(6) to secure the debt securities;
(7) to establish the form or terms of debt securities of
any series and any related coupons;
(8) to provide for the acceptance of appointment by a
successor trustee or facilitate the administration of the trust
under the Indenture by more than one trustee;
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(9) to cure any ambiguity, defect or inconsistency in the
Indenture or to make any other changes, provided that in each
case, the action shall not adversely affect the interests of
holders of debt securities of any series in any material respect;
(10) to close the Indenture with respect to the
authentication and delivery of additional series of debt
securities or to qualify, or maintain qualification of, the
Indenture under the Trust Indenture Act of 1939; or
(11) to supplement any of the provisions of the Indenture
to the extent necessary to permit or facilitate defeasance and
discharge of any series of such debt securities, provided that
the action shall not adversely affect the interests of the
holders of the debt securities of any series in any material
respect.
The Indenture provides that in determining whether the holders
of the requisite principal amount of outstanding debt securities
of a series have given any request, demand, authorization,
direction, notice, consent or waiver under the Indenture or
whether a quorum is present at a meeting of holders of debt
securities:
(1) the principal amount of an original issue discount
security that will be deemed to be outstanding shall be the
amount of the principal of the security that would be due and
payable as of the date of the determination upon declaration of
acceleration of the maturity of the debt security; the principal
amount of a debt security denominated in a foreign currency that
will be deemed outstanding shall be the United States dollar
equivalent, determined on the issue date for the debt security,
of the principal amount, or, in the case of an original issue
discount security, the United States dollar equivalent on the
issue date of the debt security of the amount determined as
provided in (1) above;
(2) the principal amount of an indexed security that shall
be deemed outstanding will be the principal face amount of the
indexed security at original issuance, unless otherwise provided
with respect to the indexed security pursuant to
Section 301 of the Indenture; and
(3) debt securities owned by us or any other obligor upon
the debt securities or any of our affiliates or of the other
obligor will be disregarded.
The Indenture contains provisions for convening meetings of the
holders of debt securities of a series. A meeting may be called
at any time by the trustee, and also, upon request, by us or the
holders of at least 10% in principal amount of the outstanding
debt securities of that series, in any such case upon notice
given as provided in the Indenture.
Except for any consent that must be given by the holder of each
debt security affected by modifications and amendments of the
Indenture, any resolution presented at a meeting or at an
adjourned meeting duly reconvened, at which a quorum is present,
may be adopted by the affirmative vote of the holders of a
majority in principal amount of the outstanding debt securities
of that series; provided, however, that, except as referred to
above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other
action that may be made, given or taken by the holders of a
specified percentage, which is less than a majority, in
principal amount of the outstanding debt securities of a series
may be adopted at a meeting or adjourned meeting duly reconvened
at which a quorum is present by the affirmative vote of the
holders of the specified percentage in principal amount of the
outstanding debt securities of that series. Any resolution
passed or decision taken at any meeting of holders of debt
securities of any series duly held in accordance with the
Indenture will be binding on all holders of debt securities of
that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons
holding or representing a majority in principal amount of the
outstanding debt securities of a series; provided, however, that
if any action is to be taken at the meeting with respect to a
consent or waiver which may be given by the holders of not less
than a specified percentage in principal amount of the
outstanding debt securities of a series, the persons holding or
representing the specified percentage in principal amount of the
outstanding debt securities of that series will constitute a
quorum.
Notwithstanding the foregoing provisions, if any action is to be
taken at a meeting of holders of debt securities of any series
with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that the Indenture
expressly provides may be made, given or taken by the holders of
a specified
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percentage in principal amount of all outstanding debt
securities affected the action, or of the holders of that series
and one or more additional series:
(1) there shall be no minimum quorum requirement for the
meeting; and
(2) the principal amount of the outstanding debt securities
of that series that vote in favor of the request, demand,
authorization, direction, notice, consent, waiver or other
action will be taken into account in determining whether the
request, demand, authorization, direction, notice, consent,
waiver or other action has been made, given or taken under the
Indenture.
Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by the Indenture to be given or
taken by a specified percentage in principal amount of the
holders of any or all series of debt securities may be embodied
in and evidenced by one or more instruments of substantially
similar tenor signed by the specified percentage of holders in
person or by agent duly appointed in writing; and, except as
otherwise expressly provided in the Indenture, the action will
become effective when the instrument or instruments are
delivered to the trustee. Proof of execution of any instrument
or of a writing appointing any the agent will be sufficient for
any purpose of the Indenture and, subject to the Indenture
provisions relating to the appointment of any such agent,
conclusive in favor of the trustee and us, if made in the manner
specified above.
Registration
and Transfer
Subject to limitations imposed upon debt securities issued in
book-entry form, the debt securities of any series, including
the notes, will be exchangeable for other debt securities of the
same series and of a like aggregate principal amount and tenor
of different authorized denominations upon surrender of the debt
securities at the corporate trust office of the trustee. In
addition, subject to the limitations imposed upon debt
securities issued in book-entry form, the debt securities of any
series may be surrendered for conversion or registration of
transfer of the security at the corporate trust office of the
trustee. Every debt security surrendered for registration of
transfer or exchange will be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made
for any registration of transfer or exchange of any debt
securities, but we may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection
therewith. We may at any time designate a transfer agent, in
addition to the trustee, with respect to any series of debt
securities. If we have designated such a transfer agent or
transfer agents, we may at any time rescind the designation of
any such transfer agent or approve a change in the location at
which any such transfer agent acts, except that we will be
required to maintain a transfer agent in each place of payment
for the series.
Neither we nor the trustee will be required to
(1) issue, register the transfer of or exchange debt
securities of any series during a period beginning at the
opening of business 15 days before any selection of debt
securities of that series to be redeemed and ending at the close
of business on the day of mailing of the relevant notice of
redemption;
(2) register the transfer of or exchange any debt security,
or portion of security, called for redemption, except the
unredeemed portion of any debt security being redeemed in
part; or
(3) issue, register the transfer of or exchange any debt
security which has been surrendered for repayment at the option
of the holder, except the portion, if any, of such debt security
not to be so repaid.
Discharge
We may satisfy and discharge our obligations under the Indenture
by delivering to the trustee for cancellation all outstanding
notes or by depositing with the trustee, the paying agent or the
conversion agent, if applicable, after the notes have become due
and payable, whether at stated maturity or a fundamental change
purchase date or upon conversion or otherwise, cash or common
shares (as applicable under the terms of the Indenture)
sufficient to pay all of the outstanding notes and paying all
other sums payable under the Indenture. Such discharge is
subject to terms contained in the Indenture. See
Description of Debt Securities Discharge,
defeasance and covenant defeasance in the accompanying
prospectus.
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Covenants
The items under the heading Description of Debt
Securities Covenants in the accompanying
prospectus will not apply to the notes. Instead, only the
following covenants will apply to the notes:
Existence
Except as permitted under Merger,
consolidation or sale, we will do or cause to be done all
things necessary to preserve and keep in full force and effect
our and our subsidiaries existence, rights, both charter
and statutory, and franchises; provided, however, that we will
not be required to preserve any right or franchise if we
determine that the preservation of the right or franchise is no
longer desirable in the conduct of our business and that the
loss of the right or franchise is not disadvantageous in any
material respect to the holders of the debt securities.
Payment
of taxes and other claims
We will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, all taxes, assessments
and governmental charges levied or imposed upon us or any
subsidiary or upon our income, profits or property or any
subsidiary and all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon our
property or any subsidiary; provided, however, that we will not
be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good
faith by appropriate proceedings.
Provision
of financial information
Whether or not we are subject to Section 13 or 15(d) of the
Exchange Act, we will file with the SEC, to the extent permitted
under the Exchange Act, the annual reports, quarterly reports
and other documents which we would have been required to file
with the SEC pursuant to Section 13 or 15(d) if we were so
subject. We will file the documents with the SEC on or prior to
the respective filing dates by which we would have been required
so to file the documents if we were so subject. We will also in
any event within 15 days of each required filing date
transmit to all holders of debt securities issued under the
indenture, including the notes as their names and addresses
appear in the security register, without cost to such holders,
copies of the annual reports and quarterly reports which we
would have been required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act if we were subject
to Section 13 or 15(d). Additionally, we will provide the
trustee with copies of the annual reports, quarterly reports and
other documents which we would have been required to file with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act
if we were subject to such sections. If filing the documents by
us with the SEC is not permitted under the Exchange Act, we will
promptly upon written request and payment of the reasonable cost
of duplication and delivery, supply copies of such documents to
any prospective holder.
Trustee
U.S. Bank National Association will be the trustee,
registrar, conversion agent, bid solicitation agent and paying
agent. Under the Indenture, the trustee may resign or be removed
with respect to the notes, and a successor trustee may be
appointed to act with respect to the notes. If an event of
default occurs and is continuing, the trustee will be required
to use the degree of care and skill of a prudent man in the
conduct of his own affairs. The trustee will become obligated to
exercise any of its powers under the Indenture at the request of
any of the holders of any notes only after those holders have
offered the trustee indemnity satisfactory to it. If the trustee
becomes one of our creditors, it will be subject to limitations
on its rights to obtain payment of claims or to realize on some
property received for any such claim, as security or otherwise.
The trustee is permitted to engage in other transactions with
us. If, however, it acquires any conflicting interest, it must
eliminate that conflict or resign.
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Book-Entry
System
DTC will act as securities depository for the notes. The notes
will be issued as fully-registered securities registered in the
name of Cede & Co., which is DTCs nominee. One
or more fully-registered global notes in book-entry form will be
issued with respect to the notes.
Except as described below, each global note may be transferred,
in whole and not in part, only to DTC, to another nominee of DTC
or to a successor of DTC or its nominee. Beneficial interests in
global notes will be represented, and transfers of such
beneficial interests will be made, through accounts of financial
institutions acting on behalf of beneficial owners either
directly as account holders, or indirectly through account
holders, at DTC. Beneficial interests will be in minimum
denominations of $1,000 and integral multiples of $1,000.
So long as DTC or its nominee is the registered owner of a
global note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the debt securities
represented by the global note for all purposes under the
indenture. Owners of beneficial interests in a global note will
not be entitled to have debt securities represented by such
global note registered in their names, will not receive or be
entitled to receive physical delivery of certificated notes, and
will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving
of any direction, instruction or approval to the trustee
thereunder. Accordingly, each holder owning a beneficial
interest in a global note must rely on the procedures of DTC
and, if such holder is not a participant or an Indirect
Participant, on the procedures of the participant through which
such holder owns its interest, to exercise any rights of a
holder of debt securities under the Indenture or such global
note. We understand that under existing industry practice, in
the event that we request any action of holders of debt
securities, or a holder that is an owner of a beneficial
interest in a global note desires to take any action that DTC,
as the holder of such global note, is entitled to take, DTC
would authorize the participants to take such action and the
participants would authorize holders owning through such
participants to take such action or would otherwise act upon the
instruction of such holders. Neither we nor the trustee will
have any responsibility or liability for any aspect of the
records relating to or payments made on account of debt
securities by DTC, or for maintaining, supervising or reviewing
any records of DTC relating to such debt securities.
Exchanges
Among the Global Notes
Any beneficial interest in one of the global notes that is
transferred to a person who takes delivery in the form of an
interest in another global note will, upon transfer, cease to be
an interest in such global note and become an interest in the
other global note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other global note for
as long as it remains such an interest.
Definitive
Notes
A global note is exchangeable for definitive securities in
registered certificated form (certificated notes) if
(1) DTC (a) notifies the issuer that it is unwilling
or unable to continue as depositary for the global notes or
(b) has ceased to be a clearing agency registered under the
Exchange Act, and in each cash the issuer fails to appoint a
successor depositary; we issuer, at our option, notifies the
trustee in writing that we elects to cause the issuance of the
certificated notes; or
(2) there shall have occurred and be continuing a default
or event of default with respect to the debt securities.
In all cases, certificated notes delivered in exchange for any
global note or beneficial interests in global notes will be
registered in the names, and issued in any approved
denominations, requested by or on behalf of DTC (in accordance
with its customary procedures).
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Certain
Book-Entry Procedures for the Global Notes
The descriptions of the operations and procedures of DTC set
forth below are provided solely as a matter of convenience.
These operations and procedures are solely within the control of
the DTC and are subject to change by them from time to time.
Neither we nor the underwriters take any responsibility for
these operations or procedures, and investors are urged to
contact the relevant system or its participants directly to
discuss these matters.
DTC has advised us that it is:
(1) a limited-purpose trust company organized under the New
York State Banking Law;
(2) a banking organization within the meaning
of the New York State Banking Law;
(3) a member of the Federal Reserve System;
(4) a clearing corporation within the meaning
of the New York Uniform Commercial Code, as amended; and
(5) a clearing agency registered pursuant to
Section 17A of the Exchange Act.
DTC was created to hold securities for its participants and
facilitates the clearance and settlement of securities
transactions between participants through electronic book-entry
changes to the accounts of its participants, thereby eliminating
the need for physical transfer and delivery of certificates.
DTCs participants include securities brokers and dealers
(including one or more of the underwriters), banks and trust
companies, clearing corporations and certain other
organizations. Indirect access to DTCs system is also
available to other entities such as banks, brokers, dealers and
trust companies (collectively, the Indirect
Participants) that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Investors who are not participants may beneficially own
securities held by or on behalf of DTC only through participants
or Indirect Participants.
We expect that pursuant to procedures established by DTC
(1) upon deposit of each global note, DTC will credit the
accounts of participants designated by the underwriters with an
interest in the global note and (2) ownership of the debt
securities will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC
(with respect to the interests of participants) and the records
of participants and the Indirect Participants (with respect to
the interests of persons other than participants).
The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such
securities in definitive form. Accordingly, the ability to
transfer interests in the debt securities represented by a
global note to such persons may be limited. In addition, because
DTC can act only on behalf of its participants, who in turn act
on behalf of persons who hold interests through participants,
the ability of a person having an interest in debt securities
represented by a global note to pledge or transfer such interest
to persons or entities that do not participate in DTCs
system, or to otherwise take actions in respect of such
interest, may be affected by the lack of a physical definitive
security in respect of such interest.
Payments with respect to the principal of, and premium, if any,
and interest on, any debt securities represented by a global
note registered in the name of DTC or its nominee on the
applicable record date will be payable by the trustee to or at
the direction of DTC or its nominee in its capacity as the
registered holder of the global note representing such debt
securities under the Indenture. Under the terms of the
indenture, we and the trustee may treat the persons in whose
names the debt securities, including the global notes, are
registered as the owners hereof for the purpose of receiving
payment thereon and for any and all other purposes whatsoever.
Accordingly, neither we nor the trustee has or will have any
responsibility or liability for the payment of such amounts to
owners of beneficial interests in a global note (including
principal, premium, if any, and interest). We understand that it
is DTCs current practice, upon DTCs receipt of any
payment of principal of, or any interest or premium on, global
securities such as the global notes, to credit the accounts of
the applicable direct participants on the applicable payment
date with payment in amounts proportionate to their respective
beneficial interests in the principal amount of a global note as
shown on the records of DTC. Payments by the participants and
the Indirect Participants to the owners of beneficial interests
in a global note
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will be governed by standing instructions and customary industry
practice and will be the responsibility of the participants or
the Indirect Participants and DTC.
Transfers between participants in DTC will be effected in
accordance with DTCs procedures, and will be settled in
same-day
funds.
Although DTC has agreed to the foregoing procedures to
facilitate transfers of interests in global notes among
participants in DTC, DTC is under no obligation to perform or to
continue to perform such procedures, and such procedures may be
discontinued at any time. Neither we nor the trustee will have
any responsibility for the performance by DTC or its respective
participants or indirect participants of their respective
obligations under the rules and procedures governing their
operations.
Settlement
and Payment
Settlement for the notes will be made by the underwriters in
immediately available funds. All payments of principal and
interest will be made by us in immediately available funds or
the equivalent, so long as DTC continues to make its
Same-Day
Funds Settlement System available to us.
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CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
General
The following is a discussion of certain material
U.S. federal income tax consequences of the purchase,
ownership and disposition of the notes. This discussion is based
on the Code, the Treasury regulations under the Code (the
Treasury Regulations), and administrative and
judicial interpretations of the Code, as of the date of this
prospectus supplement, all of which are subject to change,
possibly on a retroactive basis. This summary is for general
information only and does not consider all aspects of
U.S. federal income taxation that may be relevant to the
purchase, ownership and disposition of the notes and the
ownership and disposition of the ProLogis common shares for
which the notes may be converted by a prospective investor in
light of his, her or its personal circumstances.
This discussion generally is limited to the U.S. federal
income tax consequences to investors who are beneficial owners
of the notes and who hold the notes as capital assets within the
meaning of Section 1221 of the Code. This discussion does
not address the U.S. federal income tax consequences to
investors subject to special treatment under the
U.S. federal income tax laws, such as dealers in securities
or foreign currency, tax exempt entities, financial
institutions, insurance companies, cooperatives, persons who
hold the notes as part of a straddle, a
conversion transaction or other integrated
transaction, persons that have a functional currency
other than the U.S. dollar, persons that are liable for
alternative minimum tax, certain expatriates or former long-term
residents of the United States, and investors in pass-through
entities (such as partnerships) that hold the notes. In
addition, except as specifically discussed below, this
discussion is generally limited to the tax consequences to
initial holders that purchase the notes at the issue
price, within the meaning of Section 1273 of the
Code, and does not describe any tax consequences arising out of
the tax laws of any state, local or foreign jurisdiction, or any
possible applicability of U.S. laws other than income tax
laws.
If a partnership (or other entity treated as a partnership for
U.S. federal income tax purposes) holds the notes, the tax
treatment of a partner generally will depend on the status of
the partner and the activities of the partnership. If you are a
partner of a partnership holding the notes, you are particularly
urged to consult your tax advisors.
We have not sought any rulings from the Internal Revenue Service
(the IRS) with respect to the U.S. federal
income tax consequences discussed below. The discussion below is
not binding on the IRS or the courts. Accordingly, there can be
no assurance that the IRS will not take, or that a court will
not sustain, a position concerning the tax consequences of the
purchase, ownership or disposition of the notes, the
qualification and taxation of ProLogis as a REIT or the
ownership or disposition of the ProLogis common shares for which
the notes may be converted that is different from that discussed
below and in the accompanying prospectus.
Persons considering the purchase of notes or the conversion
of notes for the ProLogis common shares should consult their own
tax advisors concerning the application of U.S. federal
income and other tax laws, as well as the law of any state,
local or foreign taxing jurisdiction, to their particular
situations.
Taxation
of Noteholders
As used in this discussion, the term United States
Holder means any beneficial owner of notes or ProLogis
common shares for which the notes may be converted who is:
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a citizen or resident of the United States for U.S. federal
income tax purposes;
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a corporation (or other entity taxable as a corporation) created
or organized in or under the laws of the United States, any
state thereof or the District of Columbia;
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an estate, the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust if (1) a court within the United States is able to
exercise primary supervision over the administration of the
trust and one or more United States persons have the authority
to control all
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substantial decisions of the trust or (2) the trust has in
effect a valid election to be treated as a domestic trust for
U.S. federal income tax purposes.
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A
Non-United
States Holder is any beneficial owner of notes or ProLogis
common shares for which the notes may be converted that is an
individual, corporation, estate or trust and is not a United
States Holder and who is not, by reason of being either a United
States expatriate or a former long-term resident, taxable under
Section 877 of the Code.
United
States Holders of the Notes
Interest. Stated interest received on
the notes by a United States Holder generally will be included
in income and will be taxable as ordinary income: (1) when
it accrues, if the holder uses the accrual method of accounting
for U.S. federal income tax purposes; or (2) when the
holder receives or is treated as receiving it, if the holder
uses the cash method of accounting for U.S. federal income
tax purposes.
Original Issue Discount. In general, if
the terms of a debt instrument entitle a United States Holder to
receive payments, other than fixed periodic interest, that
exceed the issue price of an instrument by an amount equal to or
greater than a statutory de minimis amount
(1/4
of 1% of the stated redemption price at maturity times the
number of complete years from issuance to maturity), such holder
will be required to recognize as interest such original issue
discount (OID) in advance of receipt as it accrues
on a constant yield method.
Because the notes mature on March 15, 2015, the statutory
de minimis amount with respect to the notes is 1.0%.
If the notes are issued at a discount greater than 1.0%, the
notes will be subject to the OID rules. A United States Holder
calculates the amount of OID that it must include in income by
adding the daily portions of OID with respect to the notes for
each day during the taxable year or portion of the taxable year
that such holder holds the notes. The United States Holder
determines the daily portion of OID by allocating to each day in
any accrual period a pro rata portion of the OID allocable to
that accrual period. A United States Holder determines the
amount of OID allocable to an accrual period by multiplying the
notes adjusted issue price at the beginning of the accrual
period by the notes yield to maturity. A United States
Holder must determine the notes yield to maturity on the
basis of compounding at the close of each accrual period and
adjusting for the length of each accrual period. Further, a
United States Holder determines the Notes adjusted issue
price at the beginning of any accrual period by (1) adding
the notes issue price and any accrued OID for each prior
accrual period and (2) subtracting any payments previously
made on the note.
Sale or Other Disposition of the
Notes. A United States Holder will recognize
taxable gain or loss on the sale, redemption, repurchase,
retirement or other taxable disposition of a note. The amount of
a United States Holders gain or loss will equal the
difference between the amount of cash and the fair market value
of any property received for the note, minus the amount
attributable to accrued interest on the note (which will be
taxable as interest income if not previously included in gross
income), and the United States Holders adjusted tax basis
in the note. A United States Holders initial tax basis in
a note equals the price paid for the note and will be increased
by any OID previously included in income with respect to the
note and decreased by the amount of payments (other than stated
interest payments) received with respect to the note. Special
rules may apply to notes redeemed in part.
Any gain or loss on a taxable disposition of a note as described
in the foregoing paragraph will generally constitute capital
gain or loss and will be long-term capital gain or loss if such
note was held by the United States Holder for more than one year
at the time of the disposition. Under current law, net long-term
capital gains of non-corporate holders, including individuals,
generally are taxed at a maximum rate of 15% through 2010, and
20% thereafter. Capital gain of a non-corporate holder,
including an individual, that is not long-term capital gain will
be taxed at ordinary income tax rates. The deduction of capital
losses is subject to certain limitations.
Conversion. A United States Holder will
not recognize taxable gain or loss on the conversion of a note
for ProLogis common shares (excluding shares allocable to
interest, which will be taxable as ordinary income if not
previously included in such holders income, and cash, if
any, received in lieu of a fractional ProLogis common share).
The United States Holders tax basis in the ProLogis common
shares will equal the United States
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Holders adjusted tax basis in the notes (reduced by any
tax basis allocable to a fractional ProLogis common share). The
United States Holders holding period for the ProLogis
common shares received will include the holding period for the
notes (except for any ProLogis common shares received allocable
to accrued but unpaid interest, which will have a holding period
beginning on the day after receipt). Cash, if any, received in
lieu of a fractional ProLogis common share upon conversion of
the notes will generally be treated as a payment in exchange for
such fractional share. Accordingly, any receipt of cash in lieu
of a fractional ProLogis common share generally will result in
capital gain or loss measured by the difference between the cash
received for the fractional share and the United States
Holders adjusted tax basis allocable to such fractional
share.
Constructive Dividends. The conversion
rate of the notes will be adjusted in certain circumstances.
Under Section 305(c) of the Code, adjustments (or failures
to make adjustments) that have the effect of increasing your
proportionate interest in our assets or earnings may in some
circumstances result in a deemed distribution to you.
Adjustments to the conversion rate made pursuant to a bona fide
reasonable adjustment formula that has the effect of preventing
the dilution of the interest of the holders of the notes,
however, will generally not be considered to result in a deemed
distribution to you. Certain of the possible conversion rate
adjustments provided in the notes (including, without
limitation, adjustments in respect of taxable dividends to
holders of ProLogis common shares) will not qualify as being
pursuant to a bona fide reasonable adjustment formula. If such
adjustments are made, you may be deemed to have received a
distribution even though you have not received any cash or
property as a result of such adjustments. Any deemed
distributions will be taxable as a dividend, return of capital,
or capital gain in accordance with the earnings and profits
rules under the Code. The U.S. federal income tax treatment
of the constructive dividend is described in Federal
Income Tax Considerations Taxation of ProLogis
shareholders in the accompanying prospectus. It is
possible that any such deemed distribution under Code
Section 305(c) may be treated as a non-pro-rata
distribution (i.e., a preferential dividend) for purposes of the
REIT distribution requirements, which could affect the amount of
distributions that are treated as made by ProLogis for purposes
of the REIT distribution requirements. See Federal Income
Tax Considerations Taxation of ProLogis
Annual distribution requirements contained in the
accompanying prospectus.
Information Reporting and Backup
Withholding. A United States Holder will
generally be subject to information reporting and may also be
subject to backup withholding tax, currently at a rate of 28%
(but scheduled to increase to 31% after December 31, 2010),
when such holder receives payments of stated interest and
accruals of OID, if any, on the note. Certain United States
Holders (including, among others, corporations and certain
tax-exempt organizations) are generally not subject to
information reporting or backup withholding. In addition, the
backup withholding tax will not apply to a United States Holder
if such holder provides his taxpayer identification number
(TIN) in the prescribed manner unless:
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the IRS notifies us or our agent that the TIN the United States
Holder provides is incorrect;
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the United States Holder fails to report interest and dividend
payments that the holder receives on his tax return and the IRS
notifies us or our agent that withholding is required; or
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the United States Holder fails to certify under penalties of
perjury that (1) the holder provided to us his correct TIN,
(2) the holder is not subject to backup withholding and
(3) the holder is a U.S. person (including a
U.S. resident alien).
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Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding tax rules from a payment
to a United States Holder may be refunded or credited against
the United States Holders U.S. federal income tax
liability, provided the required information is furnished to the
IRS in a timely manner.
Non-United
States Holders of the Notes
This section applies to
Non-United
States Holders of the notes. For purposes of the discussion
below, interest and gain on the sale, exchange, redemption or
repayment of the notes will be considered to be
U.S. trade or business income if such income or
gain is (1) effectively connected with the
Non-United
States Holders conduct of a U.S. trade or business or
(2) in the case of a treaty resident, attributable to a
U.S. permanent establishment (or, in the case of an
individual, a fixed base) in the United States.
S-39
Interest. Subject to the discussion
below regarding backup withholding, interest paid on the notes
(including OID, if any) to a
Non-United
States Holder generally will not be subject to U.S. federal
income or withholding tax if such interest is not
U.S. trade or business income and is portfolio
interest. Generally, interest on the notes will qualify as
portfolio interest if the
Non-United
States Holder (1) does not actually or constructively own
10% or more of the common shares of ProLogis, (2) is not a
controlled foreign corporation with respect to which ProLogis is
a related person within the meaning of the Code,
(3) is not a bank that is receiving the interest on a loan
made in the ordinary course of its trade or business and
(4) certifies, under penalties of perjury on a
Form W-8BEN
(or such successor form as the IRS designates), prior to the
payment that such holder is not a United States person and
provides such holders name and address, or a financial
institution holding the note on behalf of the holder certifies,
under penalty of perjury, that such statement has been received
by it and furnishes us or our paying agent with a copy thereof.
The gross amount of payments of interest that do not qualify as
portfolio interest and that are not U.S. trade or business
income will be subject to U.S. withholding tax at a rate of
30% unless a treaty applies to reduce or eliminate withholding.
U.S. trade or business income will be taxed at regular,
graduated U.S. federal income tax rates rather than the 30%
gross rate. In the case of a
Non-United
States Holder that is a corporation, such U.S. trade or
business income may also be subject to the branch profits tax
equal to 30% (or a lower rate under an applicable income tax
treaty) of such amount, subject to certain adjustments. To claim
the benefits of a treaty exemption from or reduction in
withholding, a
Non-United
States Holder must provide a properly executed
Form W-8BEN
(or such successor form as the IRS designates), and to claim an
exemption from withholding because income is U.S. trade or
business income, a
Non-United
States Holder must provide a properly executed
Form W-8ECI
(or such successor form as the IRS designates), as applicable
prior to the payment of interest. In general, these forms must
be periodically updated. A
Non-United
States Holder that is claiming the benefits of a treaty may be
required in certain instances to obtain and to provide a
U.S. TIN on a
Form W-8BEN.
As an alternative to providing a
Form W-8BEN,
in certain circumstances, a
Non-United
States Holder may provide certain documentary evidence issued by
foreign governmental authorities to prove residence in the
foreign country. Also, under applicable Treasury Regulations,
special procedures are provided for payments through qualified
intermediaries or certain financial institutions that hold
customers securities in the ordinary course of their trade
or business.
Sale, Conversion or Other Disposition of the
Notes. Subject to the discussion below
concerning backup withholding, a
Non-United
States Holder will generally not be subject to U.S. federal
income tax on any gain recognized on a sale, conversion,
redemption or repayment of a note (other than any amount
representing accrued but unpaid interest, which will be treated
as such) unless (1) the gain is U.S. trade or business
income (in which case the branch profits tax may also apply to a
corporate
Non-United
States Holder), (2) the
Non-United
States Holder is an individual who is present in the United
States for 183 or more days in the taxable year of the
disposition and certain other requirements are met or
(3) the notes constitute U.S. real property
interests within the meaning of the Foreign Investment in
Real Property Tax Act of 1980 (FIRPTA). Special
rules may apply to notes redeemed in part.
We currently anticipate that we constitute a domestically
controlled REIT (defined generally as a REIT in which at
all times during a specified testing period less than 50% in
value of the shares was held directly or indirectly by foreign
persons), in which case gain recognized by a
Non-United
States Holder will not be taxable under FIRPTA. However, because
ProLogis common shares are publicly traded, there can be no
assurance that we have or will retain that status. Even if we do
not qualify as a domestically-controlled REIT at the time a
Non-United
States Holder disposes of the notes, gain arising from such
disposition still generally would not be subject to FIRPTA tax
if any class of our interests is considered regularly traded
under applicable Treasury Regulations on an established
securities market, such as the New York Stock Exchange, and
either (1) if the notes are not regularly traded, on the
date the notes were acquired by the
Non-United
States Holder, the
Non-United
States Holder did not own, actually or constructively, notes
with a fair market value greater than the fair market value on
that date of 5% of outstanding ProLogis common shares (or,
possibly, of the regularly traded class of ProLogis common
shares with the lowest fair market value) or (2) if the
notes are regularly traded, the
Non-United
States Holder did not own, actually or constructively, more than
5% of the total fair market value of the notes throughout the
shorter of the period during which the
Non-United
States Holder held
S-40
the notes being sold or the five-year period ending on the date
of the sale or exchange. If the gain on the sale of the notes
were to be subject to taxation under FIRPTA, a
Non-United
States Holder would be subject to the same treatment as United
States Holders with respect to the gain (subject to applicable
alternative minimum tax and a special alternative minimum tax in
the case of nonresident alien individuals and except in the case
of certain conversions of notes described above in
United States Holders of the Notes
Conversion of Notes). Further, with respect to
Non-United
States Holders, withholding tax at a rate of 10% of the gross
amount payable would apply, although any withholding tax
withheld pursuant to these rules would be creditable against
such
Non-United
States Holders U.S. federal income tax liability.
Again, we currently anticipate that we are a domestically
controlled REIT. Accordingly, we do not intend to withhold
FIRPTA taxes from amounts payable upon a redemption, repurchase
or conversion of the notes. However, because ProLogis common
shares are currently publicly traded, there can be no assurance
that we in fact are qualified or will continue to qualify as a
domestically controlled REIT. Even if we do not qualify as a
domestically controlled REIT, and as indicated immediately
above, exemptions from FIRPTA may nonetheless apply depending on
the level of ownership by a
Non-United
States Holder of notes and ProLogis common shares. If a sale,
exchange, redemption, repurchase, conversion or other
disposition of a note for shares of ProLogis common shares are
exempt from U.S. federal income tax under FIRPTA, any
amounts nonetheless withheld from payments with respect to such
sale, exchange, repurchase, conversion or other disposition to a
Non-United
States Holders federal income tax liability may be
refunded or credited against such
Non-United
States Holders federal income tax liability, if any, if
such
Non-United
States Holder timely files the required forms with the IRS.
Non-United
States Holders are urged to consult their own tax advisors as to
whether they will be subject to tax under FIRPTA upon a
disposition of their notes.
You are urged to consult your tax advisor as to whether the
sale, redemption, repurchase or conversion of a note for common
shares is exempt from U.S. federal income tax under FIRPTA.
Adjustments to Conversion Rate. The
conversion rate is subject to adjustment in certain
circumstances. Any such adjustment could, in certain
circumstances, give rise to a deemed distribution to
Non-United
States Holders of the notes. See United States
Holders of the Notes Constructive Dividends
above. In such circumstances, we intend to take the position
that
Non-United
States Holders will be deemed to have received constructive
distributions from us even though
Non-United
States Holders have not received any cash or property as a
result of such adjustments. The deemed distribution would be
subject to the rules described under Federal Income Tax
Considerations Taxation of ProLogis
Shareholders Taxation of foreign shareholders
in the accompanying prospectus.
In the case of a deemed distribution, because such deemed
distribution will not give rise to any cash from which any
applicable U.S. federal withholding tax can be satisfied,
the indenture provides that we may set off any withholding tax
that we are required to collect with respect to any such deemed
distribution against cash payments of interest or from cash or
shares of ProLogis common shares otherwise deliverable to a
Non-United
States Holder upon a conversion of notes or a redemption or
repurchase of a note. Until such time as judicial, legislative,
or regulatory guidance becomes available that would, in our
reasonable determination, permit us to treat such deemed
distributions as other than deemed dividend distributions
treated as ordinary income, we in general intend to withhold on
such distributions at a 30% rate (or lower applicable treaty
rate), to the extent such dividends are made out of our current
or accumulated earnings and profits. A
Non-United
States Holder who is subject to withholding tax under such
circumstances is particularly urged to consult its own tax
advisor as to whether it can obtain a refund for all or a
portion of the withholding tax.
Information Reporting and Backup
Withholding. We must report annually to the
IRS and to each
Non-United
States Holder any interest (including OID, if any) paid to the
Non-United
States Holder. Copies of these information returns may also be
made available under the provisions of a specific treaty or
other agreement to the tax authorities of the country in which
the
Non-United
States Holder resides.
Treasury Regulations provide that the backup withholding tax
(currently at a rate of 28%, but scheduled to increase to 31%
after December 31, 2010) and certain information
reporting will not apply to such payments of interest with
respect to which either the requisite certification that the
Non-United
States Holder
S-41
is not a U.S. person, as described above, has been received
or an exemption has otherwise been established; provided that
neither we nor our paying agent has actual knowledge, or reason
to know, that the holder is a U.S. person or that the
conditions of any other exemption are not in fact satisfied. The
payment of the gross proceeds from the sale, conversion,
redemption or repayment of notes to or through the United States
office of any broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding unless the
owner certifies as to its
non-U.S. status
under penalty of perjury or otherwise establishes an exemption,
provided that the broker does not have actual knowledge, or
reason to know, that the holder is a U.S. person or that
the conditions of any other exemption are not, in fact,
satisfied. The payment of the gross proceeds from the sale,
conversion, redemption or repayment of notes to or through a
non-U.S. office
of a
non-U.S. broker
will not be subject to information reporting or backup
withholding unless the
non-U.S. broker
has certain types of relationships with the United States (we
refer to such a broker as a United States Related
Person).
In the case of the gross payment of proceeds from the sale,
conversion, redemption or repayment of notes to or through a
non-United
States office of a broker that is either a U.S. person or a
United States Related Person, the Treasury Regulations require
information reporting (but not backup withholding) on the
payment unless the broker has documentary evidence in its files
that the owner is a
Non-United
States Holder and the broker has no knowledge, or reason to
know, to the contrary.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules from a payment to a
Non-United
States Holder may be refunded or credited against the
Non-United
States Holders U.S. federal income tax liability,
provided that the required information is furnished to the IRS
in a timely manner.
Legislative Developments. Proposed
legislation recently introduced in the United States Congress
and passed by the House of Representatives, if enacted in its
current form, among other changes to current law, would
generally (i) impose new diligence and reporting
requirements on foreign financial institutions and
(ii) require non-financial foreign entities to certify that
they are not beneficially owned by U.S. persons or identify
the direct and indirect U.S. owners of the entity. If a
foreign financial institution or non-financial foreign entity
did not satisfy the requirements, payors of certain passive
income, such as interest or dividends, or proceeds of the sale
of certain assets, would be required to withhold tax at a rate
of 30%. Interest on the notes and proceeds of the sale of the
notes would be a category of income subject to withholding under
such proposed legislation. Under certain circumstances, a
Non-United States Holder might be eligible for refunds or
credits of such withheld amounts. The proposed legislation also
imposes new U.S. return disclosure obligations (and related
penalties for failure to disclose) on U.S. individuals that hold
certain specified foreign financial assets (which include
financial accounts in foreign financial institutions). It is
unclear whether, or in what form, this proposed legislation may
be enacted. Non-United States Holders are encouraged to consult
with their tax advisors regarding the possible implications of
the proposed legislation.
You are advised to consult with your own tax advisor
regarding the specific tax consequences to you of the ownership
and sales of ProLogis debt securities and common shares,
including the U.S. federal, state, local, foreign, and
other tax consequences of such purchase and ownership and of
potential changes in applicable tax laws.
S-42
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement dated the date of this prospectus supplement, we have
agreed to sell to the underwriters named below, and the
underwriters, for whom Citigroup Global Markets Inc., Barclays
Capital Inc., Deutsche Bank Securities Inc., J.P. Morgan
Securities Inc. and Morgan Stanley & Co. Incorporated are
acting as representatives, have severally agreed to purchase,
the respective principal amount of notes appearing opposite
their names below:
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Principal
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Amount
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Underwriters
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of Notes
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Citigroup Global Markets Inc.
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$
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52,000,000
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Barclays Capital Inc.
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52,000,000
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Deutsche Bank Securities Inc.
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52,000,000
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J.P. Morgan Securities Inc.
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52,000,000
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Morgan Stanley & Co. Incorporated
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52,000,000
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Daiwa Securities America Inc.
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26,667,000
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ING Financial Markets LLC
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26,667,000
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RBC Capital Markets Corporation
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26,666,000
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Credit Agricole Securities (USA) Inc.
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20,000,000
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Mitsubishi UFJ Securities (USA), Inc.
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20,000,000
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Scotia Capital (USA) Inc.
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20,000,000
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Total
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$
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400,000,000
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The underwriters have agreed to purchase all of the notes shown
in the above table if any of those notes are purchased. If an
underwriter defaults, the underwriting agreement provides that
the purchase commitments of the non-defaulting underwriters may
be increased or the underwriting agreement may be terminated.
The notes are being offered by the underwriters, subject to
prior sale, when, as and if issued to and accepted by them,
subject to approval of legal matters by counsel for the
underwriters and other conditions. The underwriters reserve the
right to withdraw, cancel or modify the offer and to reject
orders in whole or in part.
Commissions
and Discounts
The underwriters have advised us that they propose to offer the
notes to the public at the public offering price appearing on
the cover page of this prospectus supplement and to certain
dealers at that price less a concession of not more than 1.2% of
the principal amount of notes. After the initial offering, the
public offering price and concession to dealers may be changed.
The following table shows the public offering price,
underwriting discounts and commissions and proceeds, before
expenses, to us, both on a per note basis and in total, assuming
either no exercise or full exercise by the underwriters of their
over-allotment option.
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Total
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Per
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No
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Full
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Note
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Exercise
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Exercise
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Public offering price
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$
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1,000.00
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$
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400,000,000
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$
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460,000,000
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Underwriting discounts and commissions
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$
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20.00
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$
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8,000,000
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$
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9,200,000
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Proceeds, before expenses, to us
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$
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980.00
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$
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392,000,000
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$
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450,800,000
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We estimate that the expenses of this offering payable by us,
not including underwriting discounts and commissions, will be
approximately $800,000.
S-43
Over-Allotment
Option
We have granted to the underwriters an option, exercisable
during the
30-day
period after the date of this prospectus supplement, to purchase
up to an additional $60,000,000 aggregate principal amount of
notes at the public offering price per note less the
underwriting discounts and commissions per note shown on the
cover page of this prospectus supplement. To the extent that the
underwriters exercise this option, each underwriter will have a
firm commitment, subject to conditions, to purchase
approximately the same percentage of those additional notes that
the principal amount of notes to be purchased by that
underwriter as shown in the above table represents as a
percentage of the total number of notes shown in that table.
Indemnity
We have agreed to indemnify the underwriters against specified
liabilities, including liabilities under the Securities Act of
1933, as amended, or to contribute to payments that the
underwriters may be required to make in respect of those
liabilities.
Lock-Up
Agreements
We and certain of our executive officers and trustees have
agreed that, for a period of 30 days from the date of this
prospectus supplement and subject to certain exceptions, we and
they will not, without the prior written consent of Citigroup
Global Markets Inc., Deutsche Bank Securities Inc. and J.P.
Morgan Securities Inc.:
(1) offer, pledge, sell, contract to sell, lend, or
otherwise transfer or dispose of, directly or indirectly, any
ProLogis common shares or any securities convertible into or
exercisable or exchangeable for ProLogis common shares,
(2) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic
consequences of ownership of ProLogis common shares, or
(3) in the case of the company, file with the SEC a
registration statement under the Securities Act relating to any
additional shares of ProLogis common shares or securities
convertible into, or exchangeable for, any ProLogis common
shares,
whether any such transaction described in clauses (1) or
(2) above is to be settled by delivery of ProLogis common
shares or such other securities, in cash or otherwise. Citigroup
Global Markets Inc., in its sole discretion, may release any of
the securities subject to these
lock-up
agreements at any time without notice.
Stabilization
In order to facilitate this offering of notes, the underwriters
may engage in transactions that stabilize, maintain or otherwise
affect the market price of the notes. Specifically, the
underwriters may sell more notes than they are obligated to
purchase under the underwriting agreement, creating a short
position. A short sale is covered if the short position is no
greater than the principal amount of notes available for
purchase by the underwriters under the over-allotment option.
The underwriters may close out a covered short sale by
exercising the over-allotment option or purchasing notes in the
open market. In determining the source of notes to close out a
covered short sale, the underwriters may consider, among other
things, the market price of notes compared to the price payable
under the over-allotment option. The underwriters may also sell
notes in excess of the over-allotment option, creating a naked
short position. The underwriters must close out any naked short
position by purchasing notes in the open market. A naked short
position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of
the notes in the open market after the date of pricing of this
offering that could adversely affect investors who purchase in
this offering.
As an additional means of facilitating this offering, the
underwriters may bid for, and purchase, notes in the open market
to stabilize the price of the notes. The underwriting syndicate
may also reclaim selling
S-44
concessions allowed to an underwriter or a dealer for
distributing notes in this offering if the syndicate repurchases
previously distributed notes to cover syndicate short positions
or to stabilize the price of the notes.
The foregoing transactions, if commenced, may raise or maintain
the market price of the notes above independent market levels or
prevent or retard a decline in the market price of the notes.
The representative of the underwriters has advised us that these
transactions, if commenced, may be effected on the New York
Stock Exchange or otherwise. Neither we nor any of the
underwriters makes any representation that the underwriters will
engage in any of the transactions described above and these
transactions, if commenced, may be discontinued without notice.
Neither we nor any of the underwriters makes any representation
or prediction as to the direction or magnitude of the effect
that the transactions described above, if commenced, may have on
the market price of the notes.
Other
The notes are a new issue of securities with no established
trading market. The notes will not be listed on any securities
exchange or on any automated dealer quotation system. The
underwriters may make a market in the notes after completion of
the offering, but will not be obligated to do so and may
discontinue any market-making activities at any time without
notice. No assurance can be given as to the liquidity of the
trading market for the notes or that an active public market for
the notes will develop. If an active public market for the notes
does not develop, the market price and liquidity of the notes
may be adversely affected.
ProLogis common shares are quoted on the New York Stock Exchange
under the symbol PLD. We intend to list the ProLogis
common shares issuable upon conversion of the notes, as
described herein, on the New York Stock Exchange.
The underwriters and certain of their affiliates have provided
from time to time, and may provide in the future, investment and
commercial banking (including acting as a lender under our
global credit facility) and financial advisory services to us
and our affiliates in the ordinary course of business, for which
they have received and may continue to receive customary fees
and commissions. In the ordinary course of their business, the
underwriters and their affiliates may actively trade or hold our
securities or loans for their own accounts or for the accounts
of customers and, accordingly, may at any time hold long or
short positions in these securities or loans. In addition, from
time to time, as a result of market making activities, the
underwriters may own our common shares or other equity or debt
securities issued by us or our affiliates. In addition,
Citigroup Global Markets Inc. and its affiliates own a 63%
equity interest in and are lenders to North American Industrial
Fund II, a joint venture property fund sponsored by us.
Citigroup Global Markets Inc. is also an underwriter for our
concurrent offering of the 2017 notes and 2020 notes. Citigroup
Global Markets Inc. is also a dealer manager for our offer to
purchase certain of our outstanding senior notes, which we
commenced on March 8, 2010.
Sales Outside the United States. No action has
been taken in any jurisdiction (except in the United States)
that would permit a public offering of the notes, or the
possession, circulation or distribution of this prospectus or
any other material relating to us or the notes in any
jurisdiction where action for that purpose is required.
Accordingly, the notes may not be offered or sold, directly or
indirectly, and neither this prospectus supplement, the
accompanying prospectus nor any other offering material or
advertisements in connection with the notes may be distributed
or published, in or from any country or jurisdiction except in
compliance with any applicable rules and regulations of any such
country or jurisdiction.
Each of the underwriters may arrange to sell notes offered
hereby in certain jurisdictions outside the United States
through affiliates, either directly where they are permitted to
do so or through affiliates.
In relation to each Member State of the European Economic Area
that has implemented the Prospectus Directive (each, a
Relevant Member State), each underwriter has
represented and agreed that with effect from and including the
date on which the Prospectus Directive is implemented in that
Relevant Member State (the Relevant Implementation
Date) it has not made and will not make an offer of
securities to the public in that Relevant Member State prior to
the publication of a prospectus in relation to the securities
which has been
S-45
approved by the competent authority in that Relevant Member
State or, where appropriate, approved in another Relevant Member
State and notified to the competent authority in that Relevant
Member State, all in accordance with the Prospectus Directive,
except that it may, with effect from and including the Relevant
Implementation Date, make an offer of securities to the public
in that Relevant Member State at any time:
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to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
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to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000;
and (3) an annual net turnover of more than
50,000,000, as shown in its last annual or consolidated
accounts;
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to fewer than 100 natural or legal persons (other than qualified
investors as defined in the Prospectus Directive) subject to
obtaining the prior consent of the representatives for any such
offer; or
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in any other circumstances that do not require the publication
by the issuer of a prospectus according to Article 3 of the
Prospectus Directive.
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For the purposes of this provision, the expression an
offer of the securities to the public in relation to
the securities in any Relevant Member State means the
communication in any form and by any means of sufficient
information on the terms of the offer and the securities to be
offered so as to enable an investor to decide to purchase or
subscribe for the securities, as the same may be varied in the
Relevant Member State by any measure implementing the Prospectus
Directive in that Relevant Member State, and the expression
Prospectus Directive means Directive 2003/71/EC and
includes any relevant implementing measure in each Relevant
Member State.
Each underwriter has represented and agreed that:
(a) it has only communicated or caused to be communicated
and will only communicate or cause to be communicated an
invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the Financial Services
and Markets Act 2000 (FSMA) received by it in
connection with the issue or sale of the securities in
circumstances in which Section 21(1) of the FSMA does not
apply to us; and
(b) it has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in
relation to the securities in, from or otherwise involving the
United Kingdom.
S-46
EXPERTS
The consolidated financial statements and related financial
statement schedule of ProLogis as of December 31, 2009 and
2008, and for each of the years in the three-year period ended
December 31, 2009, and managements assessment of the
effectiveness of internal control over financial reporting as of
December 31, 2009 have been incorporated by reference
herein in reliance upon the reports of KPMG LLP, independent
registered public accounting firm, incorporated by reference
herein, and upon the authority of said firm as experts in
accounting and auditing.
LEGAL
MATTERS
The validity of the notes will be passed upon for us by Mayer
Brown LLP, Chicago, Illinois. Certain legal matters will be
passed upon for the underwriters by Shearman &
Sterling LLP, New York, New York.
S-47
DEBT
SECURITIES
PREFERRED SHARES
COMMON SHARES
We may offer and sell from time to time debt securities, common
shares of beneficial interest, preferred shares of beneficial
interest and rights to purchase common shares of beneficial
interest covered by this prospectus independently, or together
in any combination that may include other securities set forth
in an accompanying prospectus supplement, in one or more
offerings, for sale directly to purchasers or through
underwriters, dealers or agents to be designated at a future
date. Our outstanding common shares, Series F cumulative
redeemable preferred shares of beneficial interest and
Series G cumulative redeemable preferred shares of
beneficial interest, are listed on the New York Stock Exchange
under the symbols PLD,
PLD-PRF
and PLD-PRG, respectively. This prospectus provides
you with a general description of the securities we may offer.
We may sell securities to or through underwriters, dealers or
agents. For additional information on the method of sale, you
should refer to the section entitled Plan of
Distribution. The names of any underwriters, dealers or
agents involved in the sale of any securities and the specific
manner in which they may be offered will be set forth in the
prospectus supplement covering the sale of those securities.
This prospectus contains summaries of certain provisions
contained in some of the documents described herein, but
reference is made to the actual documents for complete
information. All of the summaries are qualified in their
entirety by the actual documents. Copies of some of the
documents referred to herein have been filed or will be filed or
incorporated by reference as exhibits to the registration
statement of which this prospectus is a part, and you may obtain
copies of those documents as described below under Where
You Can Find More Information.
Investment in any securities offered by this prospectus
involves risk. See Risk Factors on page 1 of
this prospectus, in our periodic reports filed from time to time
with the Securities and Exchange Commission and in the
applicable prospectus supplement.
These securities have not been approved or disapproved by the
Securities and Exchange Commission or any state securities
commission, nor has the securities and exchange commission or
any state securities commission passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary
is a criminal offense.
The date of this Prospectus is October 27, 2009.
TABLE OF
CONTENTS
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ii
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iv
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1
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24
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32
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46
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47
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48
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i
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission (which we
refer to in this prospectus as the SEC) utilizing a
shelf registration process. Under this shelf
process, we may sell any combination of our securities, as
described in this prospectus, from time to time and in one or
more offerings. This prospectus provides you with a general
description of the securities we may offer. When we sell
securities, we may provide a prospectus supplement that will
contain specific information about the terms of that offering.
The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both
this prospectus and any prospectus supplement and any free
writing prospectus prepared by or on behalf of us together with
additional information described below under Where You Can
Find More Information.
WHERE YOU
CAN FIND MORE INFORMATION
We are subject to the informational requirements of the
Securities Exchange Act of 1934 (which we refer to herein as the
Exchange Act) and, in accordance therewith, file reports, proxy
statements and other information with the SEC. Such reports,
proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the SEC
at 100 F Street NE, Washington, D.C. 20549. You
may obtain information on the operation of the Public Reference
Room by calling
1-800-SEC-0330.
This material can also be obtained from the SECs worldwide
web site at
http://www.sec.gov.,
and all such reports, proxy statements and other information
filed by us with the New York Stock Exchange may be inspected at
the New York Stock Exchanges offices at 20 Broad
Street, New York, New York 10005. You can also obtain
information about us at our web site, www.prologis.com.
Information available on or through our web site is not intended
to constitute part of the prospectus.
We have filed with the SEC a registration statement on
Form S-3
under the Securities Act of 1933 (which we refer to herein as
the Securities Act) with respect to our securities being
offered. This prospectus, which constitutes part of the
registration statement, does not contain all of the information
set forth in the registration statement. Parts of the
registration statement are omitted from this prospectus in
accordance with the rules and regulations of the SEC. For
further information, your attention is directed to the
registration statement. Statements made in this prospectus
concerning the contents of any documents referred to herein are
not necessarily complete, and in each case are qualified in all
respects by reference to the copy of such document filed with
the SEC.
The SEC allows us to incorporate by reference the
information we file with the SEC, which means that we can
disclose important information to you by referring you to those
documents. The information incorporated by reference is an
important part of this prospectus, and information that we file
later with the SEC will automatically update and supersede this
information.
We incorporate by reference the documents listed below:
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(a)
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Our annual report on
Form 10-K
for the year ended December 31, 2008, filed on
March 2, 2009;
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(b)
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Our quarterly reports on
Form 10-Q
for the quarters ended March 31, 2009 and June 30,
2009, filed on May 7, 2009 and August 4, 2009,
respectively;
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(c)
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Our periodic reports on
Form 8-K
filed January 7, 2009, January 13, 2009,
February 9, 2009 and February 13, 2009, April 7,
2009 (filed with respect to Item 8.01 and Item 9.01),
April 14, 2009, June 2, 2009, August 14, 2009,
August 26, 2009, September 16, 2009 and
October 2, 2009;
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(d)
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The description of our common shares contained or incorporated
by reference in our registration statement on
Form 8-A
filed February 23, 1994;
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(e)
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The description of Series F cumulative redeemable preferred
shares of beneficial interest contained or incorporated by
reference in our registration statement on
Form 8-A
filed November 26, 2003; and
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(f)
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The description of Series G cumulative redeemable preferred
shares of beneficial interest contained or incorporated by
reference in our registration statement on
Form 8-A
filed December 24, 2003.
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The SEC has assigned file number 1-12846 to the reports and
other information that ProLogis files with the SEC.
All documents subsequently filed (other than any portions of the
respective filings that were furnished, under applicable SEC
rules, rather than filed) by us pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of the offering, shall be deemed to be incorporated by reference
into this prospectus.
Any statement contained in a document incorporated or deemed to
be incorporated herein shall be deemed modified or superseded
for purposes of this prospectus to the extent that a statement
contained herein or in any other subsequently filed document
that is deemed to be incorporated herein modifies or supersedes
such statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
You should rely only on the information contained in this
document or to which we have referred you. We have not
authorized anyone to provide you with information that is
inconsistent with information contained in this document or any
document incorporated herein. This prospectus is not an offer to
sell these securities in any state where the offer and sale of
these securities is not permitted. The information in this
prospectus is current as of the date it is mailed to security
holders, and not necessarily as of any later date. If any
material change occurs during the period that this prospectus is
required to be delivered, this prospectus will be supplemented
or amended.
You may request a copy of each of the above-listed ProLogis
documents at no cost, by writing or telephoning us at the
following address or telephone number.
Investor Relations Department
ProLogis
4545 Airport Way
Denver, Colorado 80239
(800) 820-0181
http://ir.prologis.com
iii
FORWARD-LOOKING
STATEMENTS
This prospectus, the prospectus supplement, the documents
incorporated by reference in this prospectus and other written
reports and oral statements made from time to time by the
company may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements may include:
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(1)
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statements, including our possible or assumed future results of
operations including any forecasts, projections and descriptions
of anticipated cost savings or other synergies referred to in
such statements, and any such statements incorporated by
reference from documents filed with the SEC by us, including any
statements contained in such documents or this prospectus
regarding the development or possible or assumed future results
of operations of our businesses, the markets for our services
and products, anticipated capital expenditures or competition;
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(2)
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any statements preceded by, followed by or that include the
words believes, expects,
anticipates, intends, plans,
seeks, estimates or similar
expressions; and
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(3)
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other statements contained or incorporated by reference in this
prospectus regarding matters that are not historical facts.
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Because such statements are subject to risks and uncertainties,
actual results may differ materially from those expressed or
implied by such forward-looking statements. Investors are
cautioned not to place undue reliance on such statements, which
speak only as of the date the statements were made.
Among the factors that could cause actual results to differ
materially are: national, international, regional and local
economic climates, changes in financial markets, interest rates
and foreign currency exchange rates, increased or unanticipated
competition for our properties, risks associated with
acquisitions, maintenance of real estate investment trust
status, availability of financing and capital, changes in demand
for developed properties, and other risks detailed from time to
time in the reports filed with the SEC by us.
Except for our ongoing obligations to disclose material
information as required by the federal securities laws, we do
not undertake any obligation to release publicly any revisions
to any forward-looking statements to reflect events or
circumstances after the date of the filing of this prospectus or
to reflect the occurrence of unanticipated events.
iv
PROLOGIS
We are a leading global provider of industrial distribution
facilities. We are a Maryland real estate investment trust and
have elected to be taxed as a REIT under the Internal Revenue
Code. Our world headquarters is located at 4545 Airport Way
Denver, Colorado 80239 and our phone number is
(303) 567-5000. Our European headquarters is located in the
Grand Duchy of Luxembourg with our European customer service
headquarters located in Amsterdam, the Netherlands. Our primary
office in Asia is located in Tokyo, Japan.
We were formed in 1991, primarily as a long-term owner of
industrial distribution space operating in the United States.
Over time, our business strategy evolved to include the
development of property for contribution to property funds in
which we maintain an ownership interest and the management of
those property funds and the properties they own. Originally, we
sought to differentiate ourselves from our competition by
focusing on our corporate customers distribution space
requirements on a national, regional and local basis and
providing customers with consistent levels of service throughout
the United States. However, as our customers needs
expanded to markets outside the United States, so did our
portfolio and our management team. Today we are an international
real estate company with operations in North America, Europe and
Asia. Our business strategy is to integrate international scope
and expertise with a strong local presence in our markets,
thereby becoming an attractive choice for our targeted customer
base, the largest global users of distribution space, while
achieving long-term sustainable growth in cash flow.
RISK
FACTORS
Investment in any securities offered pursuant to this prospectus
involves risks. You should carefully consider the risk factors
incorporated by reference to our most recent Annual Report on
Form 10-K
and our subsequent Quarterly Reports on
Form 10-Q
and the other information contained in this prospectus, as
updated by our subsequent filings under the Exchange Act and the
risk factors and other information contained in the applicable
prospectus supplement before acquiring any of such securities.
RATIOS
For purposes of computing these ratios:
(i) earnings consist of earnings from
continuing operations, excluding income taxes, minority interest
share in earnings and fixed charges, other than capitalized
interest, and (ii) fixed charges consist of
interest on borrowed funds, including amounts that have been
capitalized, and amortization of capitalized debt issuance
costs, debt premiums and debt discounts.
The following table shows our ratio of earnings to fixed charges
for each of the periods indicated:
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Six Months Ended June 30,
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Year Ended December 31,
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2009
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2008(a)
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2008(a)(b)
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2007(a)
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2006
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2005
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2004
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1.8x
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2.3x
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0.4x
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2.8x
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2.7x
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2.1x
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2.2x
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(a)
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These periods have been restated to
reflect the retroactive adoption of FSP
APB 14-1,
also known as
ASC 470-20,
for interest expense related to our convertible debt.
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(b)
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The loss from continuing operations
for 2008 includes impairment charges of $901.8 million. Due
to these impairment charges, our fixed charges exceed our
earnings as adjusted by $339.3 million.
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The following table shows our ratio of earnings to combined
fixed charges and preferred share dividends for each of the
periods indicated:
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Six Months Ended June 30,
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Year Ended December 31,
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2009
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2008(a)
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2008(a)(b)
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2007(a)
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2006
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2005
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2004
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1.7x
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2.2x
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0.4x
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2.6x
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2.5x
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1.9x
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1.9x
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(a)
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These periods have been restated to
reflect the retroactive adoption of FSP
APB 14-1,
also known as
ASC 470-20,
for interest expense related to our convertible debt.
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(b)
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The loss from continuing operations
for 2008 includes impairment charges of $901.8 million. Due
to these impairment charges, our combined fixed charges and
preferred share dividends exceed our earnings as adjusted by
$364.7 million.
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USE OF
PROCEEDS
Unless otherwise described in the applicable prospectus
supplement, the net proceeds from the sale of the offered
securities will be used for the acquisition and development of
properties as suitable opportunities arise, for the repayment of
any outstanding indebtedness, for capital improvements to
properties and for general corporate purposes.
2
DESCRIPTION
OF DEBT SECURITIES
The debt securities are to be issued under an Indenture, dated
as of March 1, 1995, (the Original Indenture)
between us and U.S. Bank National Association (successor in
interest to State Street Bank and Trust Company), as
trustee. The Indenture has been supplemented by a First
Supplemental Indenture dated February 9, 2005, a Second
Supplemental Indenture dated November 2, 2005, a Third
Supplemental Indenture dated November 2, 2005, a Fourth
Supplemental Indenture dated March 26, 2007, a Fifth
Supplemental Indenture dated November 8, 2007, a Sixth
Supplemental Indenture dated May 7, 2008, a Seventh
Supplemental Indenture dated May 7, 2008, an Eighth
Supplemental Indenture dated August 14, 2009 and a Ninth
Supplemental Indenture dated October 1, 2009. We
collectively refer to the Original Indenture as amended and
supplemented by the First Supplemental Indenture, Second
Supplemental Indenture, Third Supplemental Indenture, Fourth
Supplemental Indenture, Fifth Supplemental Indenture, Sixth
Supplemental Indenture, Seventh Supplemental Indenture, Eighth
Supplemental Indenture and Ninth Supplemental Indenture as the
Indenture. The Indenture has been incorporated by
reference as an exhibit to the registration statement of which
this prospectus is a part and is available for inspection at the
corporate trust office of the trustee at 100 Wall Street,
Suite 1600, New York, New York 10005 or as described above
under Where You Can Find More Information. The
Indenture is subject to, and governed by, the
Trust Indenture Act of 1939. The statements made in this
prospectus relating to the Indenture and the debt securities to
be issued pursuant to the Indenture are summaries of some of the
provisions of the Indenture and do not purport to be complete.
The statements are subject to and are qualified in their
entirety by reference to all the provisions of the Indenture and
the debt securities. As used in this section, Description
of Debt Securities, the terms we,
our, and us refer to ProLogis and not to
any of its subsidiaries.
General
The debt securities will be our direct, unsubordinated
obligations and will rank equally with all of our other
unsubordinated indebtedness outstanding from time to time,
unless otherwise stated in the prospectus supplement relating to
the series of debt securities being offered. Additionally,
unless otherwise stated in the prospectus supplement relating to
the debt securities being offered, the debt securities will be
included as Designated Senior Debt and the holders
of the debt securities will be included as Credit
Parties that receive the benefit of the Security Agency
Agreement described below under Security and
Sharing Agreements. The Indenture provides that the debt
securities may be issued without limit as to aggregate principal
amount, in one or more series. Each series may be as established
from time to time in or pursuant to authority granted by a
resolution of our board of trustees or as established in one or
more indentures supplemental to the Indenture. All debt
securities of one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened for
issuances of additional debt securities of that series without
the consent of the holders of the debt securities of that series.
Please refer to the prospectus supplement relating to the series
of debt securities being offered for the specific terms of the
securities, including:
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(1)
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the title of the series of debt securities;
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(2)
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the aggregate principal amount of the series of debt securities
and any limit on the principal amount;
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(3)
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the percentage of the principal amount at which the debt
securities of the series will be issued and, if other than the
full principal amount of the debt securities, the portion of the
principal amount of the debt securities payable upon declaration
of acceleration of the maturity of the securities, or the method
by which any portion will be determined;
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(4)
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the date or dates, or the method by which the date or dates will
be determined, on which the principal of the debt securities of
the series will be payable and the amount of principal payable
on the debt securities;
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(5)
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the rate or rates at which the debt securities will bear
interest, if any which may be fixed or
variable or the method by which the rate or rates
will be determined;
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the date or dates, or the method by which the date or dates will
be determined, from which any interest will accrue, the interest
payment dates on which any interest will be payable, the regular
record dates for the interest payment dates, or the method by
which the dates will be determined, the person to whom, and the
manner in which, the interest will be payable, and the basis
upon which interest will be calculated if other than that of a
360-day year
comprised of twelve
30-day months;
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the place or places where the principal of and
premium or make-whole amounts, if any and interest
and additional amounts, if any, on the debt securities of the
series will be payable, where the debt securities may be
surrendered for registration of transfer or exchange and where
notices or demands to or upon us in respect of the debt
securities and the Indenture may be served;
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the period or periods within which, the price or prices,
including the premium or make-whole amounts, if any, at which,
the currency or currencies in which, and the other terms and
conditions upon which the debt securities of the series may be
redeemed, as a whole or in part, at our option, if we are to
have such an option;
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(9)
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our obligation, if any, to redeem, repay or purchase the debt
securities of the series pursuant to any sinking fund or
analogous provision or at the option of a holder of the debt
securities, and the period or periods within which, the date or
dates upon which, the price or prices at which, the currency or
currencies, currency unit or units or composite currency or
currencies in which, and the other terms and conditions upon
which the debt securities shall be redeemed, repaid or
purchased, as a whole or in part, pursuant to that obligation;
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if other than United States dollars, the currency or currencies
in which the debt securities of the series are denominated and
payable, which may be a foreign currency or units of two or more
foreign currencies or a composite currency or currencies, and
the terms and conditions relating to the currency;
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whether the amount of payments of principal and
premium or make-whole amounts, if any or interest,
if any, on the debt securities of the series may be determined
with reference to an index, formula or other method, and the
manner in which those amounts will be determined; the index,
formula or method may be, but need not be, based on a currency,
currencies, currency unit or units or composite currency or
currencies;
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(12)
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whether the principal and premium or make-whole
amounts, if any or interest or additional amounts,
if any, on the debt securities of the series are to be payable,
at our election or at the election of a holder of debt
securities, in a currency or currencies, currency unit or units
or composite currency or currencies, other than that in which
the debt securities are denominated or stated to be payable, the
period or periods within which, and the terms and conditions
upon which, the election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility
for, determining the exchange rate between the currency or
currencies in which the debt securities are denominated or
stated to be payable and the currency or currencies in which the
debt securities are to be so payable;
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(13)
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any deletions from, modifications of or additions to the terms
of the series of debt securities with respect to the events of
default or covenants set forth in the Indenture;
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(14)
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whether the debt securities of the series will be issued in
certificated or book-entry form;
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(15)
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whether the debt securities of the series will be in registered
or bearer form and, if in registered form, the denominations of
the debt securities if other than $1,000 and any integral
multiple of the debt securities and, if in bearer form, the
denominations of the debt securities if other than $5,000 and
the terms and conditions relating to the debt securities;
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(16)
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the applicability, if any, of the defeasance and covenant
defeasance provisions of Article Fourteen of the Indenture
to the series of debt securities and any additions to or
substitutions of the provisions;
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(17)
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if the debt securities of the series are to be issued upon the
exercise of debt warrants, the time, manner and place for the
debt securities to be authenticated and delivered;
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(18)
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whether and under what circumstances we will pay additional
amounts as contemplated in the Indenture on the debt securities
of the series in respect of any tax, assessment or governmental
charge and, if so, whether we will have the option to redeem the
debt securities rather than pay the additional amounts; and
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(19)
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any other terms of the series of debt securities not
inconsistent with the provisions of the Indenture.
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We may issue original issue discount securities. Original
issue discount securities refer to debt securities which
may provide that less than the entire principal amount of the
debt securities will be paid if their maturity is accelerated,
or bear no interest or bear interest at a rate which at the time
of issuance is below market rates. Special U.S. federal
income tax, accounting and other considerations apply to
original issue discount securities and will be described in the
applicable prospectus supplement.
Under the Indenture, in addition to the ability to issue debt
securities with terms different from those of debt securities
previously issued, we will have the ability to reopen a previous
issue of a series of debt securities and issue additional debt
securities of the series without the consent of the holders.
Except as set forth below under
Covenants Limitations on
incurrence of debt, the Indenture does not contain any
other provisions that would limit our ability to incur
indebtedness or that would afford holders of debt securities
protection in the event of a highly leveraged or similar
transaction involving us or in the event of a change of control.
However, our Declaration of Trust restricts beneficial ownership
of our outstanding shares of beneficial interest by a single
person, or persons acting as a group, to 9.8% of such shares,
with exceptions. See Description of Common
Shares Restriction on size of holdings.
Additionally, the articles supplementary relating to the
Series C preferred shares, Series F preferred shares
and Series G preferred shares restrict beneficial ownership
of such shares by a person, or persons acting as a group, to 25%
of the Series C preferred shares, Series F preferred
shares and Series G preferred shares, respectively, with
limited exceptions. Similarly, the articles supplementary for
each other series of preferred shares will contain specific
provisions restricting the ownership and transfer of the
preferred shares. See Description of Preferred
Shares Restrictions on ownership. These
restrictions are designed to preserve our status as a real
estate investment trust under the Internal Revenue Code and may
act to prevent or hinder a change of control. Refer to the
applicable prospectus supplement for information with respect to
any deletions from, modifications of or additions to the events
of default or covenants that are described below, including any
addition of a covenant or other provision providing event risk
or similar protection.
Denominations
Unless otherwise described in the applicable prospectus
supplement, the debt securities of any series issued in
registered form will be issuable in denominations of $1,000 and
integral multiples of $1,000. Unless otherwise described in the
applicable prospectus supplement, the debt securities of any
series issued in bearer form will be issuable in denominations
of $5,000.
Principal
and interest
Unless otherwise specified in the applicable prospectus
supplement, the principal of and premium or
make-whole amounts, if any and interest on any
series of debt securities will be payable at the corporate trust
office of U.S. Bank National Association, initially located
at 100 Wall Street, Suite 1600, New York, New York 10005;
provided that, at our option, payment of interest may be made by
check mailed to the address of the person entitled to the
payment as it appears in the security register or by wire
transfer of funds to the person to an account maintained within
the United States.
5
If any interest payment date, principal payment date or the
maturity date falls on a day that is not a business day, the
required payment will be made on the next business day as if it
were made on the date the payment was due and no interest will
accrue on the amount so payable for the period from and after
the interest payment date, principal payment date or the
maturity date, as the case may be. Business day
means any day, other than a Saturday, Sunday or holiday, on
which banks in Boston, Massachusetts or New York, New York are
not authorized or required by law or executive order to close.
Any interest not punctually paid or duly provided for on any
interest payment date with respect to a debt security, will
cease to be payable to the holder on the applicable regular
record date and either may be paid to the person in whose name
the debt security is registered at the close of business on a
special record date for the payment of the defaulted interest to
be fixed by the trustee, notice of which will be given to the
holder of the debt security not less than 10 days prior to
the special record date, or may be paid at any time in any other
lawful manner, all as more completely described in the Indenture.
Security
and sharing arrangements
Pursuant to various pledge agreements, we and certain of our
subsidiaries have pledged specified intercompany indebtedness to
Bank of America, N.A., as collateral agent, for the benefit of
the Credit Parties under and as defined in the
Security Agency Agreement. We refer to the Amended and Restated
Security Agency Agreement dated as of October 6, 2005 among
us, the collateral agent, Bank of America, N.A., as global
administrative agent under our Global Senior Credit Agreement
(the Global Credit Agreement), and various other
creditors of ours, as amended by Amendment and Supplement
No. 1 dated as of August 21, 2009, as the
Security Agency Agreement. The Credit Parties under
the Security Agency Agreement are the holders of our senior
debt, including debt arising under certain guarantees, that we
have designated as Designated Senior Debt, including
(i) all obligations arising under the Global Credit
Agreement among us, various of our affiliates and various
lenders and agents, (ii) certain of our hedging
obligations, (iii) certain other senior debt specified in
the Security Agency Agreement and (iv) any other senior
debt designated from time to time by us as Designated
Senior Debt in accordance with the Security Agency
Agreement. Unless otherwise stated in the applicable prospectus
supplement relating to any series of debt securities, and
subject to the revocation provisions described below, all debt
securities issued under the Indenture are included within the
definition of Designated Senior Debt and the holders
of such debt securities will be Credit Parties under
the Security Agency Agreement and will be entitled to a pro rata
share of the proceeds of the collateral granted under the
various pledge agreements.
The Security Agency Agreement also provides that, upon the
occurrence of a triggering event (which includes bankruptcy or
insolvency events of us or any other borrower under the Global
Credit Agreement, the acceleration of indebtedness under the
Global Credit Agreement or any other indebtedness in excess of
$50 million, and similar events), the Credit Parties will,
subject to certain exceptions and limitations (including, in the
case of the holders of the debt securities, the requirements set
forth in the following paragraph), share payments and other
recoveries received from us and our subsidiaries to be applied
to Designated Senior Debt in a manner such that all Credit
Parties receive payment of substantially the same percentage of
their respective credit obligations. The sharing arrangements
are intended to eliminate or mitigate structural subordination
issues that otherwise might entitle some Credit Parties (such as
Credit Parties that lend directly to a subsidiary of us or that
have the benefit of guarantees from one or more of our
subsidiaries) to recover a higher percentage of their Designated
Senior Debt than other Credit Parties that do not have the
benefit of such arrangements.
The trustee (or another representative of the holders of the
debt securities issued under the Indenture) must take certain
actions in order for the holders of the debt securities to
participate in the sharing arrangements described in the
preceding paragraph. If a triggering event occurs under the
Security Agency Agreement, then the collateral agent is required
to give notice of such event to the trustee (or such other
representative) within 45 days. As promptly as practicable,
but in any event within 90 days after receiving any notice
from the collateral agent with respect to the occurrence of a
triggering event, the trustee will (x) forward such notice
to holders of the debt securities, (y) execute and deliver,
on behalf of the holders, an acknowledgment entitling the
holders to participate in the sharing arrangements described in
the preceding
6
paragraph and (z) take such further actions as a majority
of the holders (voting as a single class) may request with
respect thereto and with respect to any rights such holders or
the trustee may have under the Security Agency Agreement;
provided that, in the case of this clause (z), such holders
shall have offered the trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
Upon delivery of such acknowledgement by the trustee, the
holders of the debt securities will be entitled to participate
in the sharing arrangements described above. Not later than
120 days after its receipt of such notice, the trustee (or
such other representative) must deliver to the collateral agent
an acknowledgement pursuant to which it would agree (i) to
be subject to the obligations applicable to all Credit Parties
under the Security Agency Agreement (including obligations to
indemnify the collateral agent) and (ii) to turn over to
the collateral agent, for sharing in accordance with the
Security Agency Agreement, any payment received directly from us
or any of our affiliates that should have been paid to the
collateral agent as provided in the Security Agency Agreement.
The trustee (or such other representative) likely would require
reasonable indemnity or security against the costs, expenses and
liabilities that it might incur in connection with its becoming
a party to, and acting on behalf of the holders of the debt
securities in connection with, the Security Agency Agreement.
We and other parties have the right to take actions under
various provisions of the Security Agency Agreement that could
affect the rights of the holders of the debt securities with
respect to, or the value of, the security and sharing
arrangements described above, including the following:
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(1)
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We may designate other senior debt of ProLogis as
Designated Senior Debt, thereby increasing the
amount of debt that has the benefit of the security and sharing
arrangements.
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(2)
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We may revoke our designation of all or one or more series of
the debt securities as Designated Senior Debt effective not less
than 90 days after disclosing such revocation (in a
footnote or otherwise) in a
Form 10-Q
or
Form 10-K
filed with the SEC. If we revoked our designation of any debt
securities issued under the indenture governing such debt
securities as Designated Senior Debt, the holders of such debt
securities would cease to be Credit Parties under the Security
Agency Agreement and would no longer be entitled to any benefit
from the security and sharing arrangements contemplated by the
Security Agency Agreement and the related pledge agreements.
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(3)
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Notwithstanding the foregoing clause (2), we may agree that we
will not, at any time prior to a specified date, revoke the
Designated Senior Debt status from all or one or more series of
debt securities issued under the indenture governing such debt
securities (or certain other senior debt) until a particular
future date.
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(4)
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Subject to certain limitations, we may specify which Credit
Parties are entitled to vote on issues arising under the
Security Agency Agreement (and all holders of debt securities
are non-voting Credit Parties).
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(5)
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A majority of the voting Credit Parties under the Security
Agency Agreement may instruct the collateral agent to release
some or all of the collateral held pursuant to the Security
Agency Agreement.
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(6)
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The collateral agent or a majority of the voting Credit Parties
may, under certain circumstances, defer payments to Credit
Parties pursuant to the sharing arrangements either
(a) generally for various reasons or (b) specifically
with respect to certain holders of Designated Senior Debt (which
could include the holders of the debt securities) if the
majority voting Credit Parties determine that such holders might
receive more than their pro rata share of payments and other
recoveries pursuant to the Security Agency Agreement.
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(7)
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We may grant additional collateral (Specified
Collateral) to the holders of some, but not all, of the
Designated Senior Debt (Specified DS Debt) and
exclude the proceeds of such collateral from the sharing
arrangements with other holders of Designated Senior Debt;
provided that no property that is pledged pursuant to the pledge
agreements described above may become Specified Collateral. No
proceeds from Specified Collateral received by any holder of
Specified
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DS Debt would be deducted or otherwise taken into consideration
when calculating the amount of proceeds to be allocated among
all Credit Parties pursuant to the sharing arrangements under
the Security Agency Agreement. Accordingly, the holders of any
Specified DS Debt would receive a higher percentage (but not
more than 100%) recovery on their Designated Senior Debt than
other Credit Parties.
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(8)
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The collateral agent, a majority of the voting Credit Parties
and we may amend the Security Agency Agreement without notice to
or consent of the holders of the debt securities, even if such
amendment were adverse to the interests of the holders of the
debt securities.
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The Security Agency Agreement provides that whenever the
majority voting Credit Parties have the right to make decisions
under the Security Agency Agreement, including decisions with
respect to pledged collateral or how and when recoveries are
shared, such decisions will be made in their sole and complete
discretion. The Security Agency Agreement states that the voting
Credit Parties have no obligation or duty (including implied
obligations of reasonableness, good faith or fair dealing) to,
and have no obligation or duty to take into consideration the
interests of, the holders of the debt securities when taking any
action or making any determination contemplated by the Security
Agency Agreement. By accepting the benefits of the Security
Agency Agreement, each holder of debt securities expressly
waives and disclaims any claim or cause of action based upon any
vote, decision or determination (including the giving or
withholding of consent) made by the majority voting Credit
Parties in accordance with the terms of the Security Agency
Agreement. Bank of America, N.A., which is the collateral agent
under the Security Agency Agreement and under the various pledge
agreements, is also a voting Credit Party under the Security
Agency Agreement and its interests in such capacity may conflict
with the interests of the holders of the debt securities.
Notwithstanding any benefit to which a holder of notes may
become entitled pursuant to the security and sharing
arrangements referred to above, the notes will be effectively
subordinated to (1) our indebtedness that is secured by
collateral other than the intercompany loans referred to above,
to the extent of the value of such collateral, and
(2) liabilities of our subsidiaries that are not subject
to, or are owing to creditors not parties to, the sharing
arrangements.
Investors in Designated Senior Debt should refer to the Security
Agency Agreement for further information regarding the
collateral subject thereto, the sharing arrangements set forth
therein and the restrictions and limitations on the rights of
the holders of the debt securities thereunder. By purchasing a
debt security that falls within the definition of Designated
Senior Debt, each investor will be deemed to acknowledge that
its rights to share in the benefits of such collateral and
participate in such sharing arrangements are limited as
described above and as more fully set forth in the Security
Agency Agreement.
Merger,
consolidation or sale
We may consolidate with or merge with or into another entity, or
sell, lease or convey all or substantially all of our assets to
another entity, provided that the following three conditions are
met:
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(1)
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After the transaction, we, or a person organized and existing
under the laws of the United States or one of the fifty states
are the continuing entity. If the continuing entity is an entity
other than us, that entity must also assume our payment
obligations under the Indenture, as well as, the due and
punctual performance and observance of all of the covenants
contained in the Indenture;
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(2)
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After giving effect to the transaction and treating any
indebtedness which became an obligation of ours or any of our
subsidiaries as a result of the transaction as having been
incurred by us or such subsidiary at the time of such
transaction, an event of default (or an event which, with notice
or lapse of time or both, would become an event of default) has
not occurred under the Indenture. Additionally, the transaction
may not cause an event which, after notice or a lapse of time,
or both, would become an event of default; and
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(3)
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The continuing entity delivers an officers certificate and
legal opinion covering (1) and (2) above.
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8
Covenants
This section describes covenants we make in the Indenture, as
modified and amended through the Ninth Supplemental Indenture,
for the benefit of the holders of the debt securities. The
covenants described below apply to all of our outstanding debt
securities (other than our convertible debt securities) and to
future issuances of debt securities, unless the Indenture is
further modified or supplemented.
Limitations
on incurrence of debt
We will not, and will not permit any Subsidiary to, incur any
Debt if, immediately after giving effect to the incurrence of
such additional Debt and the application of the proceeds of the
additional Debt, the aggregate principal amount of all our
outstanding Debt and that of our Subsidiaries on a consolidated
basis as determined in accordance with GAAP is greater than 60%
of the sum of (without duplication):
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(1)
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our Total Assets as of the end of the calendar quarter covered
in our Annual Report on
Form 10-K
or Quarterly Report on
Form 10-Q,
as the case may be, most recently filed with the Securities and
Exchange Commission (or, if such filing is not permitted under
the Exchange Act, with the trustee) prior to the incurrence of
such additional Debt; and
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(2)
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the purchase price of any real estate assets or mortgages
receivable acquired, and the amount of any securities offering
proceeds received (to the extent such proceeds were not used to
acquire real estate assets or mortgages receivable or used to
reduce Debt), by us or any Subsidiary since the end of such
calendar quarter, including those proceeds obtained in
connection with the incurrence of such additional Debt.
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Additionally, we will not, and will not permit any Subsidiary
to, incur any Debt if the ratio of Consolidated Income Available
for Debt Service to the Annual Service Charge for the four
consecutive fiscal quarters most recently ended prior to the
date on which such additional Debt is to be incurred shall have
been less than 1.5, on a pro forma basis after giving effect
thereto and to the application of the proceeds therefrom, and
calculated on the assumption that:
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(1)
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such Debt and any other Debt incurred by us and our Subsidiaries
since the first day of such four-quarter period and the
application of the proceeds therefrom, including to refinance
other Debt, had occurred at the beginning of such period;
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(2)
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the repayment or retirement of any other Debt by us and our
Subsidiaries since the first day of such four-quarter period had
been incurred, repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Debt
under any revolving credit facility shall be computed based upon
the average daily balance of such Debt during such period);
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(3)
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in the case of Acquired Debt or Debt incurred in connection with
any acquisition since the first day of such four-quarter period,
the related acquisition had occurred as of the first day of such
period with the appropriate adjustments with respect to such
acquisition being included in such pro forma
calculation; and
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(4)
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in the case of any acquisition or disposition by us or our
Subsidiaries of any asset or group of assets since the first day
of such four-quarter period, whether by merger, stock purchase
or sale, or asset purchase or sale, such acquisition or
disposition or any related repayment of Debt had occurred as of
the first day of such period with the appropriate adjustments
with respect to such acquisition or disposition being included
in such pro forma calculation.
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No Subsidiary may incur any Unsecured Debt; provided, however,
that we or a Subsidiary may acquire an entity that becomes a
Subsidiary that has Unsecured Debt if the incurrence of such
Debt (including any guarantees of such Debt assumed by us or any
Subsidiary) was not intended to evade the foregoing restrictions
and the incurrence of such Debt (including any guarantees of
such Debt assumed by us or any Subsidiary) would otherwise be
permitted under the Indenture.
9
We and our Subsidiaries may not at any time own Total
Unencumbered Assets equal to less than 150% of the aggregate
outstanding principal amount of the Unsecured Debt and Pari
Passu Debt of us and our Subsidiaries on a consolidated basis.
In addition to the foregoing limitations on the incurrence of
Debt, we will not, and will not permit any Subsidiary to,
incur any Debt for borrowed money secured by any mortgage, lien,
charge, pledge, encumbrance or security interest upon any of our
property or the property of any Subsidiary, whether owned
at the date hereof or hereafter acquired (other than Pari
Passu Debt), if, immediately after giving effect to the
incurrence of such additional Debt and the application of the
proceeds thereof, the aggregate principal amount of all of our
outstanding Debt and the outstanding Debt of our Subsidiaries on
a consolidated basis for borrowed money which is secured by any
mortgage, lien, charge, pledge, encumbrance or security interest
on our property or the property of any Subsidiary (excluding any
Pari Passu Debt) is greater than 40% of the sum of (without
duplication):
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(1)
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our Total Assets as of the end of the calendar quarter covered
in our Annual Report on
Form 10-K
or Quarterly Report on
Form 10-Q,
as the case may be, most recently filed with the Securities and
Exchange Commission (or, if such filing is not permitted under
the Exchange Act, with the Trustee) prior to the incurrence of
such additional Debt and
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(2)
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the purchase price of any real estate assets or mortgages
receivable acquired, and the amount of any securities offering
proceeds received (to the extent that such proceeds were not
used to acquire real estate assets or mortgages receivable or
used to reduce Debt), by us or any Subsidiary since the end of
such calendar quarter, including those proceeds obtained in
connection with the incurrence of such additional Debt.
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For purposes of the covenants described under this
Limitations on incurrence of debt, Debt
shall be deemed to be incurred by us or a Subsidiary
whenever we or such Subsidiary shall create, assume, guarantee
or otherwise become liable in respect thereof.
Nothing in the above covenants shall prevent: (i) the
incurrence by us or any Subsidiary of Debt between or among us,
any Subsidiary or any Equity Investee or (ii) us or any
Subsidiary from incurring Refinancing Debt.
For purposes of the foregoing covenants the following
definitions apply:
Acquired Debt means Debt of a Person
(i) existing at the time such Person becomes a Subsidiary
or (ii) assumed in connection with the acquisition of
assets from such Person, in each case, other than Debt incurred
in connection with, or in contemplation of, such Person becoming
a Subsidiary or such acquisition. Acquired Debt shall be deemed
to be incurred on the date of the related acquisition of assets
from any Person or the date the acquired Person becomes a
Subsidiary.
Annual Service Charge as of any date means the
maximum amount which is payable in any period for interest on,
and original issue discount of, our or our subsidiaries
Debt and the amount of dividends which are payable in respect of
any Disqualified Stock.
Consolidated Income Available for Debt Service for
any period means Earnings from Operations of us and our
Subsidiaries plus amounts which have been deducted, and minus
amounts which have been added, for the following (without
duplication):
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(A)
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interest on Debt of us and our Subsidiaries,
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(B)
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provision for taxes of us and our Subsidiaries based on income,
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(C)
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amortization of debt discount,
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(D)
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provisions for unrealized gains and losses, depreciation and
amortization, and the effect of any other non-cash items,
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(E)
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extraordinary, non-recurring and other unusual items (including,
without limitation, any costs and fees incurred in connection
with any debt financing or amendments thereto, any acquisition,
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10
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disposition, recapitalization or similar transaction (regardless
of whether such transaction is completed)),
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(F)
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the effect of any noncash charge resulting from a change in
accounting principles in determining Earnings from Operations
for such period,
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(G)
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amortization of deferred charges, and
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(H)
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any of the items described in clauses (D) and
(E) above that were included in Earnings From Operations on
account of an Equity Investee.
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Debt of us or any Subsidiary means any indebtedness
of us or any Subsidiary, excluding any accrued expense or trade
payable, whether or not contingent, in respect of
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(1)
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borrowed money evidenced by bonds, notes, debentures or similar
instruments,
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(2)
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indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property owned
by us or any Subsidiary,
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(3)
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the reimbursement obligations, contingent or otherwise, in
connection with any letters of credit actually issued or amounts
representing the balance deferred and unpaid of the purchase
price of any property or services, or all conditional sale
obligations or obligations under any title retention agreement,
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(4)
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the principal amount of all obligations of us or any Subsidiary
with respect to redemption, repayment or other repurchase of any
Disqualified Stock or
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(5)
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any lease of property by us or any Subsidiary as lessee which is
reflected on our consolidated balance sheet as a capitalized
lease in accordance with GAAP
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and to the extent, in the case of items of indebtedness under
(1) through (3) above, that any such items (other than
letters of credit) would appear as a liability on our
Consolidated Balance Sheet in accordance with GAAP, and also
includes, to the extent not otherwise included, any obligation
by us or any Subsidiary to be liable for, or to pay, as obligor,
guarantor or otherwise (other than for purposes of collection in
the ordinary course of business), Debt of another Person (other
than us or any Subsidiary).
Disqualified Stock means, with respect to any
person, any capital stock of such person which by the terms of
such capital stock (or by the terms of any security into which
it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise,
(i) matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, (ii) is convertible
into or exchangeable or exercisable for Debt or Disqualified
Stock or (iii) is redeemable at the option of the holder
thereof, in whole or in part, in each case on or prior to the
stated maturity of a series of debt securities.
Earnings from Operations for any period means net
earnings excluding gains and losses on sales of investments,
net, as reflected in the financial statements of us and our
Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP.
Encumbrance means any mortgage, pledge, lien,
charge, encumbrance or any security interest existing on
property owned by us or any Subsidiary securing indebtedness for
borrowed money, other than a Permitted Encumbrance.
Equity Investee means any Person in which we or any
Subsidiary hold an ownership interest that is accounted for by
us or a Subsidiary under the equity method of accounting.
GAAP means generally accepted accounting principles
as used in the United States applied on a consistent basis as in
effect from time to time; provided, that solely for purposes of
calculating these financial covenants, GAAP means
generally accepted accounting principles as used in the United
States on August 14, 2009 consistently applied.
Pari Passu Debt means (i) any Debt of us or a
Subsidiary that is secured only by Encumbrances that also secure
the debt securities issued under the Indenture on an equal and
ratable basis and (ii) any series of
11
debt securities issued under the Indenture that is secured only
by Encumbrances that also secure all other series of debt
securities issued under the Indenture on an equal and ratable
basis.
Permitted Encumbrances means leases, Encumbrances
securing taxes, assessments and similar charges, mechanics liens
and other similar Encumbrances.
Person means any individual, corporation,
partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated
organization or government or any agency or political
subdivision thereof.
Refinancing Debt means Debt issued in exchange for,
or the net proceeds of which are used to refinance or refund,
then outstanding Debt (including the principal amount, accrued
interest and premium, if any, of such Debt plus any fees and
expenses incurred in connection with such refinancing); provided
that (a) if such new Debt, or the proceeds of such new
Debt, are used to refinance or refund Debt that is subordinated
in right of payment to the notes, such new Debt shall only be
permitted if it is expressly made subordinate in right of
payment to the notes at least to the extent that the Debt to be
refinanced is subordinated to the notes and (b) such new
Debt does not mature prior to the stated maturity of the Debt to
be refinanced or refunded, and the weighted average life of such
new Debt is at least equal to the remaining weighted average
life of the Debt to be refinanced or refunded.
Subsidiary means, with respect to any Person, any
corporation or other entity of which a majority of (a) the
voting power of the voting equity securities or (b) in the
case of a partnership or any other entity other than a
corporation, the outstanding equity interests of which are
owned, directly or indirectly, by such Person. For the purposes
of this definition, voting equity securities means
equity securities having voting power for the election of
directors, whether at all times or only so long as no senior
class of security has such voting power by reason of any
contingency.
Total Assets means, as of any date, the sum of
(i) Undepreciated Real Estate Assets and (ii) all of
our and our Subsidiaries other assets, but excluding
accounts receivable and intangibles, determined in accordance
with GAAP.
Total Unencumbered Assets means the sum of our and
our Subsidiaries Undepreciated Real Estate Assets and the
value determined in accordance with GAAP of all our and our
Subsidiaries other assets, other than accounts receivable
and intangibles, in each case not subject to an Encumbrance.
Undepreciated Real Estate Assets as of any date
means the cost (original cost plus capital improvements) of real
estate assets of us and our Subsidiaries on such date, before
depreciation, amortization and impairment charges determined on
a consolidated basis in accordance with GAAP.
Unsecured Debt means Debt of the types described in
clauses (1), (3) and (4) of the definition thereof
which is not secured by any mortgage, lien, charge, pledge or
security interest of any kind upon any of the properties of us
or any Subsidiary.
Existence
Except as permitted under Merger,
consolidation or sale, we will do or cause to be done all
things necessary to preserve and keep in full force and effect
our and our subsidiaries existence, rights, both charter
and statutory, and franchises; provided, however, that we will
not be required to preserve any right or franchise if we
determine that the preservation of the right or franchise is no
longer desirable in the conduct of our business and that the
loss of the right or franchise is not disadvantageous in any
material respect to the holders of the debt securities.
Maintenance
of properties
We will cause all of our properties used or useful in the
conduct of our business or the business of any subsidiary to be
maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments
and improvements of our properties, all as in our judgment may
be necessary so that the business carried on in
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connection therewith may be properly and advantageously
conducted at all times; provided, however, that we and our
subsidiaries will not be prevented from selling or otherwise
disposing for value our properties in the ordinary course of
business.
Insurance
We will, and will cause each of our subsidiaries to, keep all of
our insurable properties insured against loss or damage at least
equal to their then full insurable value with financially sound
and reputable insurance companies.
Payment
of taxes and other claims
We will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, all taxes, assessments
and governmental charges levied or imposed upon us or any
subsidiary or upon our income, profits or property or any
subsidiary and all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon our
property or any subsidiary; provided, however, that we will not
be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good
faith by appropriate proceedings.
Provision
of financial information
Whether or not we are subject to Section 13 or 15(d) of the
Exchange Act, we will file with the SEC, to the extent permitted
under the Exchange Act, the annual reports, quarterly reports
and other documents which we would have been required to file
with the SEC pursuant to Section 13 or 15(d) if we were so
subject. We will file the documents with the SEC on or prior to
the respective filing dates by which we would have been required
so to file the documents if we were so subject. We will also in
any event within 15 days of each required filing date
transmit to all holders of debt securities, as their names and
addresses appear in the security register, without cost to such
holders, copies of the annual reports and quarterly reports
which we would have been required to file with the SEC pursuant
to Section 13 or 15(d) of the Exchange Act if we were
subject to Section 13 or 15(d). Additionally, we will
provide the trustee with copies of the annual reports, quarterly
reports and other documents which we would have been required to
file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act if we were subject to such sections. If filing the
documents by us with the SEC is not permitted under the Exchange
Act, we will promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of
such documents to any prospective holder.
Events of
default, notice and waiver
The Indenture provides that the following events are events of
default with respect to any series of debt securities issued
pursuant to it:
(1) default in the payment of any installment of interest
or additional amounts payable on any debt security of such
series which continues for 30 days;
(2) default in the payment of the principal, or premium or
make-whole amount, if any, on, any debt security of such series
at its maturity or redemption date;
(3) default in making any sinking fund payment as required
for any debt security of such series;
(4) default in the performance of any other of our
covenants contained in the Indenture, other than a covenant
added to the Indenture solely for the benefit of another series
of debt securities issued under the Indenture, which continues
for 60 days after written notice as provided in the
Indenture;
(5) default in the payment of an aggregate principal amount
exceeding $50,000,000 under any bond, note or other evidence of
indebtedness or any mortgage, indenture or other instrument
under which such indebtedness is issued or by which such
indebtedness is secured (or any such indebtedness
13
of any of our subsidiaries, which we have guaranteed), such
default having occurred after the expiration of any applicable
grace period and having resulted in the acceleration of the
maturity of such indebtedness, but only if such indebtedness is
not discharged or such acceleration is not rescinded or annulled
within 10 days after written notice as provided in the
Indenture;
(6) the entry by a court of competent jurisdiction of one
or more judgments, orders or decrees against us or any of our
subsidiaries in an aggregate amount, excluding amounts fully
covered by insurance, in excess of $50,000,000 and such
judgments, orders or decrees remain undischarged, unstayed and
unsatisfied in an aggregate amount, excluding amounts fully
covered by insurance, in excess of $50,000,000 for a period of
30 consecutive days;
(7) events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee for us or
any significant subsidiary or for all or substantially all of
our or our significant subsidiarys property; and
(8) any other event of default provided with respect to a
particular series of debt securities.
The term significant subsidiary means each of our significant
subsidiaries, as defined in
Regulation S-X
promulgated under the Securities Act.
If an event of default under the Indenture with respect to a
series of debt securities occurs and is continuing, then in
every such case, unless the principal of all of the debt
securities shall already have become due and payable, the
trustee or the holders of not less than 25% in principal amount
of a particular series of debt securities may declare the
principal and the make-whole amount on the debt securities of
that series to be due and payable immediately by written notice
to us that payment of the debt securities is due, and to the
trustee if given by the holders. However, at any time after such
a declaration of acceleration with respect to a series of debt
securities has been made, but before a judgment or decree for
payment of the money due has been obtained by the trustee, the
holders of not less than a majority in principal amount of the
debt securities may rescind and annul such declaration and its
consequences if we shall have deposited with the trustee all
required payments of the principal of, and premium or make-whole
amount and interest, on the debt securities, plus fees,
expenses, disbursements and advances of the trustee and all
events of default, other than the nonpayment of accelerated
principal, and the make-whole amount or interest, with respect
to debt securities have been cured or waived as provided in the
Indenture. The Indenture also provides that the holders of not
less than a majority in principal amount of the debt securities
may waive any past default with respect to such series and its
consequences, except a default in the payment of the principal
of, or premium or make-whole amount or interest payable on the
debt securities or in respect of a covenant or provision
contained in the Indenture that cannot be modified or amended
without the consent of the holder of each outstanding debt
security affected by the proposed modification or amendment.
The trustee is required to give notice to the holders of the
debt securities within 90 days of a default under the
Indenture known to the trustee, unless the default has been
cured or waived; provided, however, that the trustee may
withhold notice to the holders of the debt securities of any
default with respect to such series, except a default in the
payment of the principal of, or premium or make-whole amount, if
any, or interest payable on the debt securities if the
responsible officers of the trustee consider such withholding to
be in the interest of such holders.
The Indenture provides that no holders of the debt securities
may institute any proceedings, judicial or otherwise, with
respect to the Indenture or for any remedy which the Indenture
provides, except in the case of failure of the trustee, for
60 days, to act after it has received a written request to
institute proceedings in respect of an event of default from the
holders of not less than 25% in principal amount of the
outstanding debt securities, as well as an offer of reasonable
indemnity. This provision will not prevent, however, any holder
of the debt securities from instituting suit for the enforcement
of payment of the principal of, and premium or make-whole
amount, or interest on the debt securities at the due date of
the debt securities.
Subject to provisions in the Indenture relating to its duties in
case of default, the trustee is under no obligation to exercise
any of its rights or powers under the Indenture at the request
or direction of any holders of any series of debt securities
then outstanding under the Indenture, unless such holders shall
have offered to
14
the trustee reasonable security or indemnity. The holders of not
less than a majority in principal amount of the debt securities
of a series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to
the trustee, or of exercising any trust or power conferred upon
the trustee with respect to that series. However, the trustee
may refuse to follow any direction which is in conflict with any
law or the Indenture, which may involve the trustee in personal
liability or which may be unduly prejudicial to the holders of
the debt securities not joining in the proceeding.
Within 120 days after the close of each fiscal year, we
must deliver to the trustee a certificate, signed by one of
several specified officers, stating whether or not such officer
has knowledge of any default under the Indenture and, if so,
specifying each such default and the nature and status of the
default.
Modification
of the Indenture
Modifications and amendments of the Indenture may be made with
the consent of the holders of not less than a majority in
principal amount of all outstanding debt securities which are
affected by such modification or amendment; provided, however,
that no such modification or amendment may, without the consent
of the holder of each debt security affected by the modification
or amendment:
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(1)
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change the stated maturity of the principal of, or premium or
make-whole amounts, if any, or any installment of principal of
or interest or additional amounts payable on, any such debt
security;
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(2)
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reduce the principal amount of, or the rate or amount of
interest on, or any premium or make-whole amounts payable on
redemption of, or any additional amounts payable with respect
to, any such debt security, or reduce the amount of principal of
an original issue discount security or make-whole amount, if
any, that would be due and payable upon declaration of
acceleration of the maturity of the security or would be
provable in bankruptcy, or adversely affect any right of
repayment of the holder of any such debt security;
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(3)
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change the place of payment, or the coin or currency, for
payment of principal of, and premium or make-whole amounts, if
any, or interest on, or any additional amounts payable with
respect to, any such debt security;
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(4)
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impair the right to institute suit for the enforcement of any
payment on or with respect to any such debt security;
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(5)
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reduce the above-stated percentage of outstanding debt
securities of any series necessary to modify or amend the
Indenture, to waive compliance with a provisions of the debt
security or defaults and consequences under the Indenture or to
reduce the quorum or voting requirements set forth in the
Indenture; or
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(6)
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modify any of the provisions relating to modification of the
Indenture or any of the provisions relating to the waiver of
past defaults or covenants, except to increase the required
percentage to effect such action or to provide that other
provisions may not be modified or waived without the consent of
the holder of the effected debt security.
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The holders of not less than a majority in principal amount of
outstanding debt securities have the right to waive our
compliance with covenants in the Indenture.
Modifications and amendments of the Indenture may be made by us
and the trustee without the consent of any holder of debt
securities for any of the following purposes:
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(1)
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to evidence the succession of another person to us as obligor
under the Indenture;
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(2)
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to add to our covenants for the benefit of the holders of all or
any series of debt securities or to surrender any right or power
conferred upon us in the Indenture;
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(3)
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to add events of default for the benefit of the holders of all
or any series of debt securities;
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(4)
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to add or change any provisions of the Indenture to facilitate
the issuance of, or to liberalize terms of, debt securities in
bearer form, or to permit or facilitate the issuance of debt
securities in uncertificated form, provided that such action
shall not adversely affect the interests of the holders of the
debt securities of any series in any material respect;
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(5)
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to change or eliminate any provisions of the Indenture, provided
that any such change or elimination will become effective only
when there are no debt securities outstanding of any series
created prior to such change which are entitled to the benefit
of that provision;
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(6)
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to secure the debt securities;
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(7)
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to establish the form or terms of debt securities of any series
and any related coupons;
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(8)
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to provide for the acceptance of appointment by a successor
trustee or facilitate the administration of the trust under the
Indenture by more than one trustee;
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(9)
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to cure any ambiguity, defect or inconsistency in the Indenture
or to make any other changes, provided that in each case, the
action shall not adversely affect the interests of holders of
debt securities of any series in any material respect;
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(10)
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to close the Indenture with respect to the authentication and
delivery of additional series of debt securities or to qualify,
or maintain qualification of, the Indenture under the
Trust Indenture Act of 1939; or
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(11)
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to supplement any of the provisions of the Indenture to the
extent necessary to permit or facilitate defeasance and
discharge of any series of such debt securities, provided that
the action shall not adversely affect the interests of the
holders of the debt securities of any series in any material
respect.
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The Indenture provides that in determining whether the holders
of the requisite principal amount of outstanding debt securities
of a series have given any request, demand, authorization,
direction, notice, consent or waiver under the Indenture or
whether a quorum is present at a meeting of holders of debt
securities:
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(1)
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the principal amount of an original issue discount security that
will be deemed to be outstanding shall be the amount of the
principal of the security that would be due and payable as of
the date of the determination upon declaration of acceleration
of the maturity of the debt security;
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(2)
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the principal amount of a debt security denominated in a foreign
currency that will be deemed outstanding shall be the United
States dollar equivalent, determined on the issue date for the
debt security, of the principal amount, or, in the case of an
original issue discount security, the United States dollar
equivalent on the issue date of the debt security of the amount
determined as provided in (1) above;
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(3)
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the principal amount of an indexed security that shall be deemed
outstanding will be the principal face amount of the indexed
security at original issuance, unless otherwise provided with
respect to the indexed security pursuant to Section 301 of
the Indenture; and
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(4)
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debt securities owned by us or any other obligor upon the debt
securities or any of our affiliates or of the other obligor will
be disregarded.
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The Indenture contains provisions for convening meetings of the
holders of debt securities of a series. A meeting may be called
at any time by the trustee, and also, upon request, by us or the
holders of at least 10% in principal amount of the outstanding
debt securities of that series, in any such case upon notice
given as provided in the Indenture.
Except for any consent that must be given by the holder of each
debt security affected by modifications and amendments of the
Indenture, any resolution presented at a meeting or at an
adjourned meeting duly reconvened, at which a quorum is present,
may be adopted by the affirmative vote of the holders of a
majority in principal amount of the outstanding debt securities
of that series; provided, however, that, except as referred to
above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver
16
or other action that may be made, given or taken by the holders
of a specified percentage, which is less than a majority, in
principal amount of the outstanding debt securities of a series
may be adopted at a meeting or adjourned meeting duly reconvened
at which a quorum is present by the affirmative vote of the
holders of the specified percentage in principal amount of the
outstanding debt securities of that series. Any resolution
passed or decision taken at any meeting of holders of debt
securities of any series duly held in accordance with the
Indenture will be binding on all holders of debt securities of
that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons
holding or representing a majority in principal amount of the
outstanding debt securities of a series; provided, however, that
if any action is to be taken at the meeting with respect to a
consent or waiver which may be given by the holders of not less
than a specified percentage in principal amount of the
outstanding debt securities of a series, the persons holding or
representing the specified percentage in principal amount of the
outstanding debt securities of that series will constitute a
quorum.
Notwithstanding the foregoing provisions, if any action is to be
taken at a meeting of holders of debt securities of any series
with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that the Indenture
expressly provides may be made, given or taken by the holders of
a specified percentage in principal amount of all outstanding
debt securities affected by the action, or of the holders of
that series and one or more additional series:
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(1)
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there shall be no minimum quorum requirement for the
meeting; and
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(2)
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the principal amount of the outstanding debt securities of that
series that vote in favor of the request, demand, authorization,
direction, notice, consent, waiver or other action will be taken
into account in determining whether the request, demand,
authorization, direction, notice, consent, waiver or other
action has been made, given or taken under the Indenture.
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Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by the Indenture to be given or
taken by a specified percentage in principal amount of the
holders of any or all series of debt securities may be embodied
in and evidenced by one or more instruments of substantially
similar tenor signed by the specified percentage of holders in
person or by agent duly appointed in writing; and, except as
otherwise expressly provided in the Indenture, the action will
become effective when the instrument or instruments are
delivered to the trustee. Proof of execution of any instrument
or of a writing appointing any the agent will be sufficient for
any purpose of the Indenture and, subject to the Indenture
provisions relating to the appointment of any such agent,
conclusive in favor of the trustee and us, if made in the manner
specified above.
Discharge,
defeasance and covenant defeasance
We may discharge various obligations to holders of any series of
debt securities that have not already been delivered to the
trustee for cancellation and that either have become due and
payable or will become due and payable within one year, or that
are scheduled for redemption within one year. The discharge will
be completed by irrevocably depositing with the trustee the
funds needed to pay the principal, any make-whole amounts,
interest and additional amounts payable to the date of deposit
or to the date of maturity, as the case may be.
If the defeasance provisions are applicable to a series of debt
securities, we may take either of the following actions with
respect to that series of debt securities:
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(1)
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We may elect to defease and be discharged from any and all
obligations with respect to that series of debt securities.
However, we would continue to be obligated to pay any additional
amounts resulting from tax events, assessment or governmental
charges with respect to payments on the series of debt
securities and the obligations to register the transfer or
exchange of the series of debt securities. Additionally, we
would remain responsible for replacing temporary or mutilated,
destroyed, lost or stolen debt securities, for maintaining an
office or agency in respect of the series of debt securities and
for holding moneys for payment in trust.
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(2)
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With respect to the series of debt securities, we may elect to
effect covenant defeasance and be released from our obligations
to fulfill the covenants contained under the heading
Covenants in this prospectus. Further,
we may elect to be released from our obligations with respect to
any other covenant in the Indenture, if such a provision is
included in the series of debt securities at the time that they
are issued. Once we have made this election, any omission to
comply with those covenants shall not constitute a default or an
event of default with respect to the series of debt securities.
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In either case, we must irrevocably deposit the needed funds in
trust, with the trustee.
The trust may only be established if, among other things, we
have delivered an opinion of counsel to the trustee. The opinion
of counsel shall state that the holders of the series of debt
securities will not recognize income, gain or loss for United
States federal income tax purposes as a result of the defeasance
or covenant defeasance and will be subject to United States
federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if the defeasance
or covenant defeasance had not occurred. The opinion of counsel,
in the case of defeasance, must refer to and be based upon a
ruling of the Internal Revenue Service or a change in applicable
United States federal income tax law occurring after the date of
the Indenture.
Unless otherwise provided in the applicable prospectus
supplement, if after we have deposited funds
and/or
government obligations to effect defeasance or covenant
defeasance with respect to debt securities of any series and
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(1)
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the holder of a series of debt securities is entitled to and
elects to receive payment in a currency, currency unit or
composite currency other than that in which the deposit has been
made in respect of the debt security or
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(2)
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a conversion event occurs in respect of the currency, currency
unit or composite currency in which such deposit has been made,
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the indebtedness represented by the debt security will be deemed
to have been, and will be, fully discharged. The indebtedness
will be satisfied through the payment of the principal of, and
premium or any make-whole amount and interest on, the debt
security as they become due out of the proceeds yielded by
converting the amount so deposited in respect of the debt
security into the currency, currency unit or composite currency
in which the debt security becomes payable as a result of the
holders election or the cessation of usage based on the
applicable market exchange rate.
Conversion event means the cessation of use of:
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(1)
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a currency, currency unit or composite currency, other than the
European Community Unit or other currency unit, both by the
government of the country which issued such currency and for the
settlement of transactions by a central bank or other public
institutions of or within the international banking community;
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(2)
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the European Community Unit both within the European Monetary
System and for the settlement of transactions by public
institutions of or within the European Communities; or
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(3)
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any currency unit or composite currency other than the European
Community Unit for the purposes for which it was established.
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Unless otherwise provided in the applicable prospectus
supplement, all payments of principal of, and premium or any
make-whole amount and interest on any debt security that is
payable in a foreign currency that ceases to be used by its
government of issuance shall be made in United States dollars.
In the event we effect covenant defeasance with respect to any
debt securities and the debt securities are declared due and
payable because of the occurrence of any event of default, other
than the events of default that would no longer be applicable
because of the covenant defeasance or an event of default
triggered by an event of bankruptcy or other insolvency
proceeding, the amount of funds on deposit with the trustee,
will be sufficient to pay amounts due on the debt securities at
the time of their stated maturity, but may not be
18
sufficient to pay amounts due on the debt securities at the time
of the acceleration resulting from the event of default.
However, we would remain liable to make payment of the amounts
due at the time of acceleration.
The applicable prospectus supplement may further describe the
provisions, if any, permitting such defeasance or covenant
defeasance, including any modifications to the provisions
described above, with respect to the debt securities of or
within a particular series.
Registration
and transfer
Subject to limitations imposed upon debt securities issued in
book-entry form, the debt securities of any series will be
exchangeable for other debt securities of the same series and of
a like aggregate principal amount and tenor of different
authorized denominations upon surrender of the debt securities
at the corporate trust office of the trustee referred to above.
In addition, subject to the limitations imposed upon debt
securities issued in book-entry form, the debt securities of any
series may be surrendered for conversion or registration of
transfer of the security at the corporate trust office of the
trustee referred to above. Every debt security surrendered for
registration of transfer or exchange will be duly endorsed or
accompanied by a written instrument of transfer. No service
charge will be made for any registration of transfer or exchange
of any debt securities, but we may require payment of a sum
sufficient to cover any tax or other governmental charge payable
in connection therewith. We may at any time designate a transfer
agent, in addition to the trustee, with respect to any series of
debt securities. If we have designated such a transfer agent or
transfer agents, we may at any time rescind the designation of
any such transfer agent or approve a change in the location at
which any such transfer agent acts, except that we will be
required to maintain a transfer agent in each place of payment
for the series.
Neither we nor the trustee will be required to:
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(1)
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issue, register the transfer of or exchange debt securities of
any series during a period beginning at the opening of business
15 days before any selection of debt securities of that
series to be redeemed and ending at the close of business on the
day of mailing of the relevant notice of redemption;
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(2)
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register the transfer of or exchange any debt security, or
portion of security, called for redemption, except the
unredeemed portion of any debt security being redeemed in
part; or
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(3)
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issue, register the transfer of or exchange any debt security
which has been surrendered for repayment at the option of the
holder, except the portion, if any, of such debt security not to
be so repaid.
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Global
securities
The debt securities of a series may be issued in whole or in
part in the form of one or more global securities that will be
deposited with, or on behalf of, a depository identified in the
applicable prospectus supplement relating to the series. Global
securities, if any, are expected to be deposited with The
Depository Trust Company (DTC) as depository.
Each global security will be issued:
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only in fully registered form; and
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without interest coupons.
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You may hold your beneficial interests in the global securities
directly through DTC if you have an account at DTC, or
indirectly through organizations that have accounts at DTC.
What is a global security? A global security is a special type
of indirectly held security in the form of a certificate held by
a depository for the investors in a particular issue of
securities. If we choose to issue the debt securities in the
form of a global security, the ultimate beneficial owners can
only be indirect holders. We do this by requiring that the
global securities be registered in the name of a financial
institution we select and by requiring that the debt securities
included in the global securities not be transferred to the name
of any other direct holder unless the special circumstances
described below occur. The financial institution that acts
19
as the sole direct holder of the global securities is called the
Depository. Any person wishing to own a debt
security must do so indirectly by virtue of an account with a
broker, bank or other financial institution that in turn has an
account with the Depository.
Except as described below, each global security may be
transferred, in whole and not in part, only to DTC, to another
nominee of DTC or to a successor of DTC or its nominee.
Beneficial interests in global securities will be represented,
and transfers of such beneficial interests will be made, through
accounts of financial institutions acting on behalf of
beneficial owners either directly as account holders, or
indirectly through account holders, at DTC.
Special
investor considerations for global securities.
As an indirect holder, an investors rights relating to
global securities will be governed by the account rules of the
investors financial institution and of the Depository,
DTC, as well as general laws relating to securities transfers.
We do not recognize this type of investor as a holder of debt
securities and instead deal only with DTC, the Depository that
holds global securities.
An investor in global securities should be aware that because
the debt securities are issued only in the form of global
securities:
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The investor cannot get debt securities registered in his or her
own name.
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The investor cannot receive physical certificates for his or her
interest in the debt securities.
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The investor will be a street name holder and must
look to his or her own bank or broker for payments on the debt
securities and protection of his or her legal rights relating to
the debt securities.
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The investor may not be able to sell interests in the debt
securities to some insurance companies and other institutions
that are required by law to own their securities in the form of
physical certificates.
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DTCs policies will govern payments, transfers, exchanges
and other matters relating to the investors interest in
the global notes. We and the trustee have no responsibility for
any aspect of DTCs actions or for its records of ownership
interests in the global securities. We and the trustee also do
not supervise DTC in any way.
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Exchanges
among the global securities
Any beneficial interest in one of the global securities that is
transferred to a person who takes delivery in the form of an
interest in another global security will, upon transfer, cease
to be an interest in such global note and become an interest in
the other global security and, accordingly, will thereafter be
subject to all transfer restrictions, if any, and other
procedures applicable to beneficial interests in such other
global security for as long as it remains such an interest.
Certain
book-entry procedures for the global securities
The descriptions of the operations and procedures of DTC,
Euroclear and Clearstream set forth below are provided solely as
a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems
and are subject to change by them from time to time. Neither we
nor the underwriters take any responsibility for these
operations or procedures, and investors are urged to contact the
relevant system or its participants directly to discuss these
matters.
Beneficial interests in the global securities will be
represented through book-entry accounts of financial
institutions acting on behalf of beneficial owners as direct and
indirect participants in DTC. Investors may elect to hold
interests in the global securities through DTC either directly
if they are participants in DTC or indirectly through
organizations that are participants in DTC.
20
Clearstream. Clearstream is incorporated under the
laws of the Grand Duchy of Luxembourg as a professional
depositary. Clearstream holds securities for its participating
organizations (Clearstream Participants) and
facilitates the clearance and settlement of securities
transactions between Clearstream Participants through electronic
book-entry changes in accounts of Clearstream Participants,
thereby eliminating the need for physical movement of
certificates. Clearstream provides Clearstream Participants
with, among other things, services for safekeeping,
administration, clearance and establishment of internationally
traded securities and securities lending and borrowing.
Clearstream interfaces with domestic markets in several
countries. As a professional depositary, Clearstream is subject
to regulation by the Luxembourg Monetary Institute. Clearstream
Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers,
banks, trust companies, clearing corporations and certain other
organizations, and may include the underwriters. Indirect access
to Clearstream is also available to others, such as banks,
brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Clearstream Participant
either directly or indirectly.
Distributions with respect to debt securities held beneficially
through Clearstream will be credited to cash accounts of
Clearstream Participants in accordance with its rules and
procedures to the extent received by the U.S. Depositary
for Clearstream.
Euroclear. Euroclear was created in 1968 to hold
securities for participants of Euroclear (Euroclear
Participants) and to clear and settle transactions between
Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the
need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Euroclear
includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several
markets in several countries. Euroclear is operated by Euroclear
Bank S.A./N.V. (the Euroclear Operator), under
contract with Euro-clear Clearance Systems S.C., a Belgian
cooperative corporation (the Cooperative). All
operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on
behalf of Euroclear Participants. Euroclear Participants include
banks (including central banks), securities brokers and dealers
and other professional financial intermediaries and may include
the underwriters. Indirect access to Euroclear is also available
to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or
indirectly.
The Euroclear Operator is regulated and examined by the Belgian
Banking Commission.
DTC. DTC has advised us that it is:
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(1)
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a limited-purpose trust company organized under the New York
State Banking Law;
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(2)
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a banking organization within the meaning of the New
York State Banking Law;
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(3)
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a member of the Federal Reserve System;
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(4)
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a clearing corporation within the meaning of the New
York Uniform Commercial Code, as amended; and
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(5)
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a clearing agency registered pursuant to
Section 17A of the Exchange Act.
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DTC was created to hold securities for its participants and
facilitates the clearance and settlement of securities
transactions between participants through electronic book-entry
changes to the accounts of its participants, thereby eliminating
the need for physical transfer and delivery of certificates.
DTCs participants include securities brokers and dealers,
banks and trust companies, clearing corporations and certain
other organizations. Indirect access to DTCs system is
also available to other entities such as banks, brokers, dealers
and trust companies (collectively, the Indirect
Participants) that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Investors who are not participants may beneficially own
securities held by or on behalf of DTC only through participants
or Indirect Participants.
We expect that pursuant to procedures established by DTC
(1) upon deposit of each global security, DTC will credit
the accounts of participants with an interest in the global
security and (2) ownership of the
21
debt securities will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC
(with respect to the interests of participants) and the records
of participants and the Indirect Participants (with respect to
the interests of persons other than participants).
The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such
securities in definitive form. Accordingly, the ability to
transfer interests in the debt securities represented by a
global security to such persons may be limited. In addition,
because DTC can act only on behalf of its participants, who in
turn act on behalf of persons who hold interests through
participants, the ability of a person having an interest in debt
securities represented by a global security to pledge or
transfer such interest to persons or entities that do not
participate in DTCs system, or to otherwise take actions
in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a
global security, DTC or such nominee, as the case may be, will
be considered the sole owner or holder of the debt securities
represented by the global note for all purposes under the
Indenture. Owners of beneficial interests in a global security
will not be entitled to have debt securities represented by such
global security registered in their names, will not receive or
be entitled to receive physical delivery of certificated notes,
and will not be considered the owners or holders thereof under
the Indenture for any purpose, including with respect to the
giving of any direction, instruction or approval to the trustee
thereunder. Accordingly, each holder owning a beneficial
interest in a global security must rely on the procedures of DTC
and, if such holder is not a participant or an Indirect
Participant, on the procedures of the participant through which
such holder owns its interest, to exercise any rights of a
holder of debt securities under the Indenture or such global
security. We understand that under existing industry practice,
in the event that we request any action of holders of debt
securities, or a holder that is an owner of a beneficial
interest in a global security desires to take any action that
DTC, as the holder of such global security, is entitled to take,
DTC would authorize the participants to take such action and the
participants would authorize holders owning through such
participants to take such action or would otherwise act upon the
instruction of such holders. Neither we nor the trustee will
have any responsibility or liability for any aspect of the
records relating to or payments made on account of debt
securities by DTC, or for maintaining, supervising or reviewing
any records of DTC relating to such debt securities.
Payments with respect to the principal of, and premium, if any,
additional interest, if any, and interest on, any debt
securities represented by a global security registered in the
name of DTC or its nominee on the applicable record date will be
payable by the trustee to or at the direction of DTC or its
nominee in its capacity as the registered holder of the global
note representing such debt securities under the Indenture.
Under the terms of the Indenture, we and the trustee may treat
the persons in whose names the debt securities, including the
global securities, are registered as the owners thereof for the
purpose of receiving payment thereon and for any and all other
purposes whatsoever. Accordingly, neither we nor the trustee has
or will have any responsibility or liability for the payment of
such amounts to owners of beneficial interests in a global
security (including principal, premium, if any, additional
interest, if any, and interest). Payments by the participants
and the Indirect Participants to the owners of beneficial
interests in a global security will be governed by standing
instructions and customary industry practice and will be the
responsibility of the participants or the Indirect Participants
and DTC.
Transfers between participants in DTC will be effected in
accordance with DTCs procedures, and will be settled in
same-day
funds. Transfers between participants in Euroclear or
Clearstream will be effected in the ordinary way in accordance
with their respective rules and operating procedures. Subject to
compliance with the transfer restrictions applicable to the debt
securities, cross-market transfers between the participants in
DTC, on the one hand, and Euroclear or Clearstream participants,
on the other hand, will be effected through DTC in accordance
with DTCs rules on behalf of Euroclear or Clearstream, as
the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions
to Euroclear or Clearstream, as the case may be, by the
counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels,
Belgium time) of such system. Euroclear or Clearstream, as the
case may be, will, if the transaction meets its settlement
requirements, deliver instructions to DTC to take action to
effect final settlement on its behalf by delivering or receiving
interests in the relevant
22
global securities in DTC, and making or receiving payment in
accordance with normal procedures for
same-day
funds settlement applicable to DTC. Euroclear participants and
Clearstream participants may not deliver instructions directly
to the depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a
Euroclear or Clearstream participant purchasing an interest in a
global security from a participant in DTC will be credited, and
any such crediting will be reported to the relevant Euroclear or
Clearstream participant, during the securities settlement
processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC.
Cash received in Euroclear or Clearstream as a result of sales
of interests in a global security by or through a Euroclear or
Clearstream participant to a participant in DTC will be received
with value on the settlement date of DTC but will be available
in the relevant Euroclear or Clearstream cash account only as of
the business day for Euroclear or Clearstream following
DTCs settlement date.
Although DTC, Euroclear and Clearstream have agreed to the
foregoing procedures to facilitate transfers of interests in
global securities among participants in DTC, Euroclear and
Clearstream, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be
discontinued at any time. Neither we nor the trustee will have
any responsibility for the performance by DTC, Euroclear or
Clearstream or their respective participants or indirect
participants of their respective obligations under the rules and
procedures governing their operations.
Definitive
securities
A global security is exchangeable for definitive securities in
registered certificated form (Certificated
Securities) if:
(1) DTC (a) notifies the issuer that it is unwilling
or unable to continue as depositary for the global securities or
(b) has ceased to be a clearing agency registered under the
Exchange Act, and in each cash the issuer fails to appoint a
successor depositary;
(2) the issuer, at its option, notifies the trustee in
writing that it elects to cause the issuance of the Certificated
Securities; or
(3) there shall have occurred and be continuing a default
or event of default with respect to the debt securities.
In all cases, Certificated Securities delivered in exchange for
any global security or beneficial interests in global securities
will be registered in the names, and issued in any approved
denominations, requested by or on behalf of DTC (in accordance
with its customary procedures).
No
personal liability
No past, present or future trustee, officer, employee or
shareholder of ours or any successor to us will have any
liability for any of our obligations under the debt securities
or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of
debt securities by accepting the debt securities waives and
releases all such liability. The waiver and release are part of
the consideration for the issue of debt securities.
Trustee
The Indenture provides that there may be more than one trustee,
each with respect to one or more series of debt securities. Any
trustee under the Indenture may resign or be removed with
respect to one or more series of debt securities, and a
successor trustee may be appointed to act with respect to the
series. In the event that two or more persons are acting as
trustee with respect to different series of debt securities,
each such trustee will be a trustee of a trust under the
Indenture separate and apart from the trust administered by any
other trustee. Except as otherwise indicated in this prospectus,
any action described in this prospectus to be taken by the
trustee may be taken by each such trustee with respect to, and
only with respect to, the one or more series of debt securities
for which it is trustee under the Indenture.
23
DESCRIPTION
OF PREFERRED SHARES
General
Subject to limitations prescribed by Maryland law and the
declaration of trust, the board of trustees is authorized to
issue, from the authorized but unissued shares of beneficial
interest, preferred shares in series and to establish from time
to time the number of preferred shares to be included in the
series and to fix the designation and any preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and
conditions of redemption of the shares of each series, and such
other subjects or matters as may be fixed by resolution of the
board of trustees or one of its duly authorized committees. At
December 31, 2008, 2,000,000 Series C preferred shares
were issued and outstanding, 5,000,000 Series F preferred
shares were issued and outstanding and 5,000,000 Series G
preferred shares were issued and outstanding.
Reference is made to the prospectus supplement relating to the
series of preferred shares being offered in such prospectus
supplement for the specific terms of the series, including:
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(1)
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the title and stated value of the series of preferred shares;
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(2)
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the number of shares of the series of preferred shares offered,
the liquidation preference per share and the offering price of
such preferred shares;
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(3)
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the dividend rate(s), period(s)
and/or
payment date(s) or the method(s) of calculation for those values
relating to the preferred shares of the series;
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(4)
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the date from which dividends on preferred shares of the series
shall cumulate, if applicable;
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(5)
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the procedures for any auction and remarketing, if any, for
preferred shares of the series;
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(6)
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the provision for a sinking fund, if any, for preferred shares
of the series;
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(7)
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the provision for redemption, if applicable, of preferred shares
of the series;
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(8)
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any listing of the series of preferred shares on any securities
exchange;
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(9)
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the terms and conditions, if applicable, upon which preferred
shares of the series will be convertible into common shares,
including the conversion price, or manner of calculating the
conversion price;
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(10)
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whether interests in preferred shares of the series will be
represented by global securities;
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(11)
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any other specific terms, preferences, rights, limitations or
restrictions of the series of preferred shares;
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(12)
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a discussion of federal income tax considerations applicable to
preferred shares of the series;
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(13)
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the relative ranking and preferences of preferred shares of the
series as to dividend rights and rights upon liquidation,
dissolution or winding up of our affairs;
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(14)
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any limitations on issuance of any series of preferred shares
ranking senior to or on a parity with the series of preferred
shares as to dividend rights and rights upon liquidation,
dissolution or winding up of our affairs; and
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(15)
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any limitations on direct or beneficial ownership and
restrictions on transfer of preferred shares of the series, in
each case as may be appropriate to preserve our status as a real
estate investment trust under the Internal Revenue Code.
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24
Rank
Unless otherwise specified in the applicable prospectus
supplement, the preferred shares of each series will rank with
respect to dividend rights and rights upon liquidation,
dissolution or winding up of our affairs:
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senior to all classes or series of common shares, and to all
equity securities ranking junior to the series of preferred
shares;
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on a parity with all equity securities issued by us the terms of
which specifically provide that such equity securities rank on a
parity with preferred shares of the series; and
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junior to all equity securities issued by us the terms of which
specifically provide that such equity securities rank senior to
preferred shares of the series.
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Dividends
Holders of preferred shares of each series shall be entitled to
receive cash dividends at such rates and on such dates as will
be set forth in the applicable prospectus supplement. When and
if declared by the board of trustees, dividends shall be payable
out of our assets legally available for payment of dividends.
Each such dividend shall be payable to holders of record as they
appear on our share transfer books on such record dates as shall
be fixed by the board of trustees.
Dividends on any series of the preferred shares may be
cumulative or noncumulative, as provided in the applicable
prospectus supplement. Dividends, if cumulative, will be
cumulative from and after the date set forth in the applicable
prospectus supplement. If the board of trustees fails to declare
a dividend payable on a dividend payment date on any series of
the preferred shares for which dividends are noncumulative, then
the holders of the series of the preferred shares will have no
right to receive a dividend in respect of the dividend period
ending on such dividend payment date, and we will have no
obligation to pay the dividend accrued for such period, whether
or not dividends on the series are declared payable on any
future dividend payment date.
If preferred shares of any series are outstanding, no full
dividends shall be declared or paid or set apart for payment on
the preferred shares of any other series ranking, as to
dividends, on a parity with or junior to the preferred shares of
the series for any period unless full dividends, including
cumulative dividends if applicable, for the then current
dividend period have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment of the
dividend set apart for such payment on the preferred shares of
the series. When dividends are not paid in full, or a sum
sufficient for the full payment is not so set apart, upon the
preferred shares of any series and the shares of any other
series of preferred shares ranking on a parity as to dividends
with the preferred shares of the series, all dividends declared
upon preferred shares of the series and any other series of
preferred shares ranking on a parity as to dividends with the
preferred shares shall be declared pro rata so that the amount
of dividends declared per share on the preferred shares of the
series and the other series of preferred shares shall in all
cases bear to each other the same ratio that accrued dividends
per share on the preferred shares of the series and the other
series of preferred shares bear to each other. The pro rata
amount shall not include any cumulation in respect of unpaid
dividends for prior dividend periods if the series of preferred
shares does not have a cumulative dividend. No interest, or sum
of money in lieu of interest, shall be payable in respect of any
dividend payment or payments on preferred shares of the series
which may be in arrears.
Except as provided in the immediately preceding paragraph,
unless full dividends, including cumulative dividends, if
applicable, on the preferred shares of the series have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment of the dividend set apart for payment
for the then current dividend period, and any past period, if
any, no dividends shall be declared or paid or set aside for
payment or other distribution shall be declared or made upon the
common shares or any other capital shares ranking junior to or
on a parity with the preferred shares of the series as to
dividends or upon liquidation. Additionally, shares ranking
junior to or in parity with the series of preferred shares may
not be redeemed, purchased or otherwise acquired for any
consideration in such circumstances, except by conversion into
or exchange for other capital shares ranking junior to the
preferred shares of the series as to dividends and upon
liquidation. We also may not pay any money or make any money
available for a sinking fund for the
25
redemption of junior or parity shares in such circumstances.
Notwithstanding the preceding sentences, we may make dividends
of common shares or other capital shares ranking junior to the
preferred shares of the series of preferred shares, although
full dividends may not have been paid or set aside.
Any dividend payment made on a series of preferred shares shall
first be credited against the earliest accrued but unpaid
dividend due with respect to shares of the series which remains
payable.
Redemption
If so provided in the applicable prospectus supplement, the
preferred shares of a series will be subject to mandatory
redemption or redemption at our option, as a whole or in part,
in each case upon the terms, at the times and at the redemption
prices set forth in such prospectus supplement.
The prospectus supplement relating to a series of preferred
shares that is subject to mandatory redemption will specify the
number of preferred shares of the series that shall be redeemed
by us in each year commencing after a date to be specified, at a
redemption price per share to be specified, together with an
amount equal to all accrued and unpaid dividends thereon, which
shall not, if the series of preferred shares does not have a
cumulative dividend, include any cumulation in respect of unpaid
dividends for prior dividend periods, to the date of redemption.
The redemption price may be payable in cash or other property,
as specified in the applicable prospectus supplement. If the
redemption price for preferred shares of any series is payable
only from the net proceeds of the issuance of capital shares,
the terms of the series of preferred shares may provide that, if
no such capital shares shall have been issued or to the extent
the net proceeds from any issuance are insufficient to pay in
full the aggregate redemption price then due, preferred shares
of the series shall automatically and mandatorily be converted
into shares of the applicable capital shares pursuant to
conversion provisions specified in the applicable prospectus
supplement.
If full dividends on all preferred shares of any series,
including cumulative dividends if applicable, have not been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment of the dividend set apart for payment
for the then current dividend period and any past dividends, if
any, we may not redeem preferred shares of any series unless all
outstanding preferred shares of the series are simultaneously
redeemed. This shall not prevent, however, the purchase or
acquisition of preferred shares of the series pursuant to a
purchase or exchange offer made on the same terms to holders of
all outstanding preferred shares of the series, and, unless full
dividends, including cumulative dividends if applicable, on all
preferred shares of any series shall have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment of the dividend set apart for payment
for the then current dividend period and any past period, if
any, we will not purchase or otherwise acquire directly or
indirectly any preferred shares of the series, except by
conversion into or exchange for capital shares ranking junior to
the preferred shares of the series as to dividends and upon
liquidation.
If fewer than all of the outstanding preferred shares of any
series are to be redeemed, the number of shares to be redeemed
will be determined by us and such shares may be redeemed pro
rata from the holders of record of preferred shares of the
series in proportion to the number of preferred shares of the
series held by such holders with adjustments to avoid redemption
of fractional shares or by lot in a manner determined by us.
Notice of redemption will be mailed at least 30 days but
not more than 90 days before the redemption date to each
holder of record of preferred shares of any series to be
redeemed at the address shown on our share transfer books. Each
notice shall state:
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(1)
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the redemption date;
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(2)
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the number of shares and series of the preferred shares to be
redeemed;
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(3)
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the redemption price;
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(4)
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the place or places where certificates for such preferred shares
are to be surrendered for payment of the redemption price;
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(5)
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that dividends on the preferred shares to be redeemed will cease
to accrue on such redemption date; and
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(6)
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the date upon which the holders conversion rights, if any,
as to such preferred shares shall terminate.
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If fewer than all the preferred shares of any series are to be
redeemed, the notice mailed to each such holder of the series
shall also specify the number of preferred shares to be redeemed
from each such holder. If notice of redemption of any preferred
shares has been given and if the funds necessary for such
redemption have been set aside by us in trust for the benefit of
the holders of any preferred shares so called for redemption,
then from and after the redemption date dividends will cease to
accrue on such preferred shares, and all rights of the holders
of such preferred shares will terminate, except the right to
receive the redemption price.
Liquidation
preference
Upon any voluntary or involuntary liquidation, dissolution or
winding up of our affairs, then, before any distribution or
payment shall be made to the holders of any common shares or any
other class or series of shares of beneficial interest ranking
junior to the series of preferred shares in the distribution of
assets upon any liquidation, dissolution or winding up, the
holders of each series of preferred shares shall be entitled to
receive out of our assets legally available for distribution to
shareholders liquidating distributions in the amount of the
liquidation preference per share, set forth in the applicable
prospectus supplement, plus an amount equal to all dividends
accrued and unpaid thereon, which shall not include any
cumulation in respect of unpaid dividends for prior dividend
periods if the series of preferred shares does not have a
cumulative dividend. After payment of the full amount of the
liquidating distributions to which they are entitled, the
holders of preferred shares of the series will have no right or
claim to any of our remaining assets.
In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, our available assets are
insufficient to pay the amount of the liquidating distributions
on all outstanding preferred shares of the series and the
corresponding amounts payable on all shares of other classes or
series of capital shares ranking on a parity with preferred
shares of the series in the distribution of assets, then the
holders of preferred shares of the series and all other such
classes or series of capital shares shall share ratably in any
such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be
respectively entitled.
If liquidating distributions shall have been made in full to all
holders of preferred shares of the series, our remaining assets
shall be distributed among the holders of any other classes or
series of capital shares ranking junior to the preferred shares
of the series upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each
case according to their respective number of shares. For such
purposes, the consolidation or merger of us with or into any
other entity, or the sale, lease or conveyance of all or
substantially all of our property or business, shall not be
deemed to constitute a liquidation, dissolution or winding up of
us.
Voting
rights
Holders of the preferred shares of each series will not have any
voting rights, except as set forth below or in the applicable
prospectus supplement or as otherwise required by applicable
law. The following is a summary of the voting rights that,
unless provided otherwise in the applicable prospectus
supplement, will apply to each series of preferred shares.
If six quarterly dividends, whether or not consecutively payable
on the preferred shares of the series or any other series of
preferred shares ranking on a parity with the series of
preferred shares with respect in each case to the payment of
dividends, amounts upon liquidation, dissolution and winding up
are in arrears, whether or not earned or declared, the number of
trustees then constituting the board of trustees will be
increased by two, and the holders of preferred shares of the
series, voting together as a class with the holders of any other
series of shares ranking in parity with such shares, will have
the right to elect two additional trustees to serve
27
on the board of trustees at any annual meeting of shareholders
or a properly called special meeting of the holders of preferred
shares of the series and other preferred shares ranking in
parity with such shares and at each subsequent annual meeting of
shareholders until all such dividends and dividends for the
current quarterly period on the preferred shares of the series
and other preferred shares ranking in parity with such shares
have been paid or declared and set aside for payment. Such
voting rights will terminate when all such accrued and unpaid
dividends have been declared and paid or set aside for payment.
The term of office of all trustees so elected will terminate
with the termination of such voting rights.
The approval of two-thirds of the outstanding preferred shares
of the series and all other series of preferred shares similarly
affected, voting as a single class, is required in order to:
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(1)
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amend the declaration of trust to affect materially and
adversely the rights, preferences or voting power of the holders
of the preferred shares of the series or other preferred shares
ranking in parity with such shares;
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(2)
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enter into a share exchange that affects the preferred shares of
the series, consolidate with or merge into another entity, or
permit another entity to consolidate with or merge into us,
unless in each such case each preferred share of the series
remains outstanding without a material and adverse change to its
terms and rights or is converted into or exchanged for preferred
shares of the surviving entity having preferences, conversion or
other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms or conditions of redemption
of the series identical to that of a preferred share of the
series, except for changes that do not materially and adversely
affect the holders of the preferred shares of the series; or
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(3)
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authorize, reclassify, create, or increase the authorized amount
of any class of shares having rights senior to the preferred
shares of the series with respect to the payment of dividends or
amounts upon liquidation, dissolution or winding up.
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However, we may create additional classes of parity shares and
other series of preferred shares ranking junior to the series of
preferred shares with respect in each case to the payment of
dividends, amounts upon liquidation, dissolution and winding up
junior shares, increase the authorized number of parity shares
and junior shares and issue additional series of parity shares
and junior shares without the consent of any holder of preferred
shares of the series.
Except as provided above and as required by law, the holders of
preferred shares of each series will not be entitled to vote on
any merger or consolidation involving us or a sale of all or
substantially all of our assets.
Conversion
rights
The terms and conditions, if any, upon which preferred shares of
any series are convertible into common shares will be set forth
in the applicable prospectus supplement relating to the series.
Such terms will include the number of common shares into which
the preferred shares of the series are convertible, the
conversion price, or manner of calculation of the conversion
price, the conversion period, provisions as to whether
conversion will be at the option of the holders of the preferred
shares of the series or us, the events requiring an adjustment
of the conversion price and provisions affecting conversion in
the event of the redemption of the preferred shares of the
series.
Restrictions
on ownership
As discussed below under Description of Common
Shares Restriction on size of holdings, for us
to qualify as a real estate investment trust under the Internal
Revenue Code, not more than 50% in value of our outstanding
shares of beneficial interest may be owned by five or fewer
individuals at any time during the last half of any taxable
year. Therefore, the articles supplementary for each series of
preferred shares will contain various provisions restricting the
ownership and transfer of the preferred shares. Except as
otherwise described in the applicable prospectus supplement
relating to the relevant series of preferred shares, the
provisions of each articles supplementary relating to the
preferred shares ownership limit will provide, as in
28
the case of the Series C preferred shares, Series F
preferred shares and Series G preferred shares, ownership
restriction similar to the ownership restrictions described
below.
The preferred shares ownership limit provision will provide
that, subject to the exceptions contained in such articles
supplementary, no person, or persons acting as a group, may
beneficially own more than 25% of the series of preferred shares
outstanding at any time, except as a result of our redemption of
preferred shares. Shares acquired in excess of the preferred
shares ownership limit provision must be redeemed by us at a
price equal to the average daily per share closing sale price
during the
30-day
period ending on the business day prior to the redemption date.
Such redemption is not applicable if a persons ownership
exceeds the limitations due solely to our redemption of
preferred shares; provided that thereafter any additional
preferred shares acquired by such person shall be excess shares.
See Description of Common Shares Restriction
on size of holdings. From and after the date of notice of
such redemption, the holder of the preferred shares thus
redeemed shall cease to be entitled to any distribution, other
than distributions declared prior to the date of notice of
redemption, voting rights and other benefits with respect to
such shares except the right to receive payment of the
redemption price determined as described above. The preferred
shares ownership limit provision may not be waived with respect
to some of our affiliates.
All certificates representing shares of preferred shares will
bear a legend referring to the restrictions described above.
29
DESCRIPTION
OF COMMON SHARES
General
The declaration of trust authorizes us to issue up to
750,000,000 shares of beneficial interest, par value $0.01
per share, consisting of 737,580,000 common shares, par value
$0.01 per share, 2,300,000 Series C preferred shares, par
value $0.01 per share, 5,060,000 Series F preferred shares,
par value $0.01 per share, and 5,060,000 Series G preferred
shares, par value $0.01 per share. At September 30, 2009,
approximately 473,201,000 common shares were issued and
outstanding and held of record by approximately
8,060 shareholders.
The following description sets forth general terms and
provisions of the common shares to which any prospectus
supplement may relate, including a prospectus supplement which
provides for common shares issuable pursuant to subscription
offerings or rights offerings or upon conversion of preferred
shares which are offered pursuant to such prospectus supplement
and convertible into common shares for no additional
consideration. The statements below describing the common shares
are in all respects subject to and qualified in their entirety
by reference to the applicable provisions of the declaration of
trust and our bylaws.
The outstanding common shares are fully paid and, except as set
forth below under Shareholder liability,
non-assessable. Each common share entitles the holder to one
vote on all matters requiring a vote of shareholders, including
the election of trustees. Holders of common shares do not have
the right to cumulate their votes in the election of trustees,
which means that the holders of a majority of the outstanding
common shares can elect all of the trustees then standing for
election. Holders of common shares are entitled to such
distributions as may be declared from time to time by the board
of trustees out of funds legally available therefor. Holders of
common shares have no conversion, redemption, preemptive or
exchange rights to subscribe to any of our securities. In the
event of a liquidation, dissolution or winding up of our
affairs, the holders of the common shares are entitled to share
ratably in our assets remaining after provision for payment of
all liabilities to creditors and payment of liquidation
preferences and accrued dividends, if any, on the Series C
preferred shares, Series F preferred shares and
Series G preferred shares, and subject to the rights of
holders of other series of preferred shares, if any. The right
of holders of the common shares are subject to the rights and
preferences established by the board of trustees for the
Series C preferred shares, Series F preferred shares
and Series G preferred shares and any other series of
preferred shares which may subsequently be issued by us. See
Description of Preferred Shares.
Transfer
agent
The transfer agent and registrar for the common shares is
Computershare Trust Company, N.A., 150 Royall Street,
Canton, Massachusetts 02021. The common shares are listed on the
New York Stock Exchange under the symbol PLD.
Restriction
on size of holdings
The declaration of trust restricts beneficial ownership of our
outstanding shares of beneficial interest by a single person, or
persons acting as a group, to 9.8% of such shares. The purposes
of the restriction are to assist in protecting and preserving
our real estate investment trust status under the Internal
Revenue Code and to protect the interest of shareholders in
takeover transactions by preventing the acquisition of a
substantial block of shares without the prior consent of the
board of trustees. For us to qualify as a real estate investment
trust under the Internal Revenue Code, not more than 50% in
value of our outstanding shares of beneficial interest may be
owned by five or fewer individuals at any time during the last
half of any taxable year. The restriction permits five persons
to acquire up to a maximum of 9.8% each, or an aggregate of 49%
of the outstanding shares, and, thus, assists the board of
trustees in protecting and preserving our real estate investment
trust status under the Internal Revenue Code.
Excess shares of beneficial interest owned by a person or group
of persons in excess of 9.8% of the outstanding shares of
beneficial interest, other than, 30% in the case of shareholders
who acquired shares prior to our initial public offering, are
subject to redemption by us, at our option, upon
30 days notice, at a price
30
equal to the average daily per share closing sale price during
the 30-day
period ending on the business day prior to the redemption date.
We may make payment of the redemption price at any time or times
up to the earlier of five years after the redemption date or
liquidation. We may refuse to effect the transfer of any shares
of beneficial interest which would make the transferee a holder
of excess shares. Shareholders are required to disclose, upon
demand of the board of trustees, such information with respect
to their direct and indirect ownership of shares as the board of
trustees deems necessary to comply with the provisions of the
Internal Revenue Code pertaining to qualification, for tax
purposes, of real estate investment trusts, or to comply with
the requirements of any other appropriate taxing authority.
The 9.8% restriction does not apply to acquisitions by an
underwriter in a public offering and sale of shares of
beneficial interest or to any transaction involving the issuance
of shares of beneficial interest in which a majority of the
board of trustees determines that our eligibility to qualify as
a real estate investment trust for federal income tax purposes
will not be jeopardized or our disqualification as a real estate
investment trust under the Internal Revenue Code is advantageous
to the shareholders. The board of trustees has permitted the
shareholders who acquired shares prior to our initial public
offering to acquire up to 30% of the outstanding shares of
beneficial interest.
Trustee
liability
The declaration of trust provides that trustees shall not be
individually liable for any obligation or liability incurred by
or on our behalf or by trustees for our benefit and on our
behalf. Under the declaration of trust and Maryland law
governing real estate investment trusts, trustees are not liable
to us or the shareholders for any act or omission except for
acts or omissions which constitute bad faith, willful
misfeasance or gross negligence in the conduct of their duties.
Shareholder
liability
Both Maryland statutory law governing real estate investment
trusts organized under the laws of that state and the
declaration of trust provide that shareholders shall not be
personally or individually liable for any debt, act, omission or
obligation of ProLogis or the board of trustees. The declaration
of trust further provides that we shall indemnify and hold each
shareholder harmless from all claims and liabilities to which
the shareholder may become subject by reason of his being or
having been a shareholder and that we will reimburse each
shareholder for all legal and other expenses reasonably incurred
by the shareholder in connection with any such claim or
liability, except to the extent that such claim or liability
arises out of the shareholders bad faith, willful
misconduct or gross negligence and provided that such
shareholder gives us prompt notice of any such claim or
liability and permits us to conduct the defense of the
shareholder. Nevertheless, with respect to tort claims,
contractual claims where shareholder liability is not so
negated, claims for taxes and statutory liability, the
shareholders may, in some jurisdictions, be personally liable to
the extent that such claims are not satisfied by us. Inasmuch as
we carry public liability insurance which we consider adequate,
any risk of personal liability to our shareholders is limited to
situations in which our assets plus our insurance coverage would
be insufficient to satisfy the claims against us and our
shareholders.
31
FEDERAL
INCOME TAX CONSIDERATIONS
ProLogis intends to operate in a manner that permits it to
satisfy the requirements for qualification and taxation as a
real estate investment trust under the applicable provisions of
the Internal Revenue Code. No assurance can be given, however,
that such requirements will be met. The following is a
description of (a) the U.S. federal income tax
consequences to ProLogis and its shareholders of the treatment
of ProLogis as a real estate investment trust and (b) the
U.S. federal income tax consequences of the ownership and
disposition of ProLogis shares. The tax consequences of
owning and disposing of debt securities are not summarized in
this discussion. Since these provisions are highly technical and
complex, each prospective purchaser of debt securities,
preferred shares or common shares is urged to consult his, her
or its own tax advisor with respect to the U.S. federal,
state, local, foreign and other tax consequences of the
purchase, ownership and disposition of the debt securities,
preferred shares or common shares.
Based upon representations of ProLogis with respect to the facts
as set forth and explained in the discussion below, in the
opinion of Mayer Brown LLP, counsel to ProLogis, ProLogis has
been organized and has operated in conformity with the
requirements for qualification as a real estate investment trust
beginning with its taxable year ended December 31, 2000
through and including its taxable year ended December 31,
2008, and its actual and proposed method of operation described
in this prospectus and as represented by management will enable
it to satisfy the requirements for qualification and taxation as
a real estate investment trust commencing with its taxable year
ending on December 31, 2009 and each year thereafter.
This opinion is based on representations made by ProLogis as to
factual matters relating to ProLogis organization and its
actual and intended or expected manner of operation. In
addition, this opinion is based on the law existing and in
effect on the date of this prospectus. ProLogis
qualification and taxation as a real estate investment trust
will depend upon ProLogis ability to meet on a continuing
basis, through actual operating results, asset composition,
distribution levels and diversity of share ownership, the
various qualification tests imposed under the Internal Revenue
Code discussed below. Mayer Brown LLP will not review compliance
with these tests on a continuing basis. No assurance can be
given that ProLogis will satisfy such tests on a continuing
basis.
In brief, if the conditions imposed by the real estate
investment trust provisions of the Internal Revenue Code are
met, entities, such as ProLogis, that invest primarily in real
estate and that otherwise would be treated for U.S. federal
income tax purposes as corporations, are allowed a deduction for
dividends paid to shareholders. This treatment substantially
eliminates the double taxation at both the corporate
and shareholder levels that generally results from the use of
corporations. However, as discussed in greater detail below,
entities, such as ProLogis, remain subject to tax in certain
circumstances even if they qualify as a real estate investment
trust.
If ProLogis fails to qualify as a real estate investment trust
in any year, however, it will be subject to U.S. federal
income taxation as if it were a domestic corporation, and its
shareholders will be taxed in the same manner as shareholders of
ordinary corporations. In this event, ProLogis could be subject
to potentially significant tax liabilities, and therefore the
amount of cash available for distribution to its shareholders
would be reduced or eliminated. In addition, ProLogis would not
be obligated to make distributions to shareholders.
ProLogis elected real estate investment trust status effective
beginning with its taxable year ended December 31, 1993,
and the ProLogis board of trustees believes that ProLogis has
operated and currently intends that ProLogis will operate in a
manner that permits it to qualify as a real estate investment
trust in each taxable year thereafter. There can be no
assurance, however, that this expectation will be fulfilled,
since qualification as a real estate investment trust depends on
ProLogis continuing to satisfy numerous asset, income and
distribution tests described below, which in turn will be
dependent in part on ProLogis operating results.
The following summary is based on the Internal Revenue Code, its
legislative history, administrative pronouncements, judicial
decisions and Treasury regulations, subsequent changes to any of
which may affect the tax consequences described in this
prospectus, possibly on a retroactive basis. The following
summary is not exhaustive of all possible tax considerations and
does not give a detailed discussion of any state, local, or
32
foreign tax considerations, nor does it discuss all of the
aspects of U.S. federal income taxation that may be
relevant to a prospective shareholder in light of his, her or
its particular circumstances or to various types of
shareholders, including insurance companies, tax-exempt
entities, financial institutions or broker-dealers, foreign
corporations and persons who are not citizens or residents of
the United States, subject to special treatment under the
U.S. federal income tax laws.
The following summary applies only to shareholders who hold
preferred shares or common shares as capital assets. For
purposes of the following summary, a U.S. shareholder is a
beneficial owner of preferred shares or common shares that for
U.S. federal income tax purposes is: a citizen of the
United States or an individual who is a resident of the United
States, a corporation (or other entity treated as a corporation)
created or organized under the laws of the United States or any
political subdivision thereof, an estate, the income of which is
subject to U.S. federal income taxation regardless of its
source, or a trust, if either (i) it was in existence on
August 20, 1996, and has a valid election in effect under
applicable Treasury regulations to be treated as a
U.S. trust or (ii) a court within the United States is
able to exercise primary supervision over the administration of
the trust and one or more U.S. persons have the authority
to control all substantial decisions of the trust. A foreign
shareholder is any shareholder that is not a
U.S. shareholder. For U.S. federal income tax
purposes, income earned through a foreign or domestic
partnership or other flow-through entity is generally attributed
to its partners or owners. Accordingly, the U.S. federal
income tax treatment of a partner in a partnership or owner in a
flow-through entity that holds shares will generally depend on
the status of the partner or other owner and the activities of
the partnership or other flow-through entity.
Prospective shareholders that are partnerships or flow-through
entities should consult their tax advisers concerning the
U.S. federal income tax consequences to their partners or
owners of the acquisition, ownership and disposition of ProLogis
debt securities, preferred shares and common shares.
Taxation
of ProLogis
General
In any year in which ProLogis qualifies as a real estate
investment trust, in general it will not be subject to
U.S. federal income tax on that portion of its real estate
investment trust taxable income or capital gain that is
distributed to shareholders. ProLogis may, however, be subject
to U.S. federal income tax at normal corporate rates upon
any taxable income or capital gain not distributed.
A real estate investment trust is permitted to designate in a
notice mailed to shareholders within 60 days of the end of
the taxable year, or in a notice mailed with its annual report
for the taxable year, such amount of undistributed net long-term
capital gains it received during the taxable year, which its
shareholders are to include in their taxable income as long-term
capital gains. Thus, if ProLogis made this designation, the
shareholders of ProLogis would include in their income as
long-term capital gains their proportionate share of the
undistributed net capital gains as designated by ProLogis and
ProLogis would have to pay the tax on such gains within
30 days of the close of its taxable year. Each shareholder
of ProLogis would be deemed to have paid such shareholders
share of the tax paid by ProLogis on such gains, which tax would
be credited or refunded to the shareholder. A shareholder would
increase his, her or its tax basis in such shareholders
ProLogis shares by the difference between the amount of income
to the holder resulting from the designation less the
holders credit or refund for the tax paid by ProLogis.
Notwithstanding its qualification as a real estate investment
trust, ProLogis may also be subject to taxation in other
circumstances. If ProLogis should fail to satisfy either the 75%
or the 95% gross income test, as discussed below, and
nonetheless maintains its qualification as a real estate
investment trust because other requirements are met, it will be
subject to a 100% tax on the greater of the amount by which
ProLogis fails to satisfy either the 75% or the 95% gross income
test, multiplied by a fraction intended to reflect
ProLogis profitability. Furthermore, if ProLogis fails to
satisfy the 5% asset test or the 10% vote and value test (and
does not qualify for a de minimis safe harbor) or fails to
satisfy the other asset tests, each of which are discussed
below, and nonetheless maintains its qualification as a real
estate investment trust because certain other requirements are
met, ProLogis will be subject to a tax equal to the greater of
$50,000 or an amount determined (pursuant to regulations
prescribed by the Treasury) by multiplying the highest corporate
tax rate
33
by the net income generated by the assets that caused the
failure for the period beginning on the first date of the
failure to meet the tests and ending on the date (which must be
within 6 months after the last day of the quarter in which
the failure is identified) that ProLogis disposes of the assets
or otherwise satisfies the tests. If ProLogis fails to satisfy
one or more real estate investment trust requirements other than
the 75% or the 95% gross income tests and other than the asset
tests, but nonetheless maintains its qualification as a real
estate investment trust because certain other requirements are
met, ProLogis will be subject to a penalty of $50,000 for each
such failure. ProLogis will also be subject to a tax of 100% on
net income from any prohibited transaction, as
described below, and if ProLogis has net income from the sale or
other disposition of foreclosure property which is
held primarily for sale to customers in the ordinary course of
business or other nonqualifying income from foreclosure
property, it will be subject to tax on such income from
foreclosure property at the highest corporate rate. ProLogis
will also be subject to a tax of 100% on the amount of any rents
from real property, deductions or excess interest that would be
reapportioned under Internal Revenue Code Section 482 to
one of its taxable REIT subsidiaries in order to
more clearly reflect income of the taxable REIT subsidiary. A
taxable REIT subsidiary is any corporation for which a joint
election has been made by a real estate investment trust and
such corporation to treat such corporation as a taxable REIT
subsidiary with respect to such real estate investment trust.
See Other Tax Considerations
Investments in taxable REIT subsidiaries. In addition, if
ProLogis should fail to distribute during each calendar year at
least the sum of:
(1) 85% of its real estate investment trust ordinary income
for such year;
(2) 95% of its real estate investment trust capital gain
net income for such year, other than capital gains ProLogis
elects to retain and pay tax on as described below; and
(3) any undistributed taxable income from prior years,
ProLogis would be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually
distributed. To the extent that ProLogis elects to retain and
pay income tax on its long-term capital gain, such retained
amounts will be treated as having been distributed for purposes
of the 4% excise tax. ProLogis may also be subject to the
corporate alternative minimum tax, as well as tax in
various situations and on some types of transactions not
presently contemplated. ProLogis will use the calendar year both
for U.S. federal income tax purposes and for financial
reporting purposes.
In order to qualify as a real estate investment trust, ProLogis
must meet, among others, the following requirements:
Share
ownership test
ProLogis shares must be held by a minimum of
100 persons for at least 335 days in each taxable year
or a proportional number of days in any short taxable year. In
addition, at all times during the second half of each taxable
year, no more than 50% in value of the ProLogis shares may be
owned, directly or indirectly and by applying constructive
ownership rules, by five or fewer individuals, which for this
purpose includes some tax-exempt entities. For this purpose, any
shares held by a qualified domestic pension or other retirement
trust will be treated as held directly by its beneficiaries in
proportion to their actuarial interest in such trust rather than
by such trust. If ProLogis complies with the Treasury
regulations for ascertaining its actual ownership and did not
know, or exercising reasonable diligence would not have reason
to know, that more than 50% in value of its outstanding shares
was held, actually or constructively, by five or fewer
individuals, then it will be treated as meeting such requirement.
In order to ensure compliance with the 50% test, ProLogis has
placed restrictions on the transfer of its shares to prevent
additional concentration of ownership. Moreover, to evidence
compliance with these requirements under Treasury regulations,
ProLogis must maintain records which disclose the actual
ownership of its outstanding shares and such regulations impose
penalties against ProLogis for failing to do so. In fulfilling
its obligations to maintain records, ProLogis must and will
demand written statements each year from the record holders of
designated percentages of its shares disclosing the actual
owners of such shares as prescribed by Treasury regulations. A
list of those persons failing or refusing to comply with such
demand
34
must be maintained as a part of ProLogis records. A
shareholder failing or refusing to comply with ProLogis
written demand must submit with his, her or its tax returns a
similar statement disclosing the actual ownership of
ProLogis shares and other information. In addition,
ProLogis declaration of trust provides restrictions
regarding the transfer of shares that are intended to assist
ProLogis in continuing to satisfy the share ownership
requirements. ProLogis intends to enforce the percentage
limitations on ownership of its shares to assure that its
qualification as a real estate investment trust will not be
compromised.
Asset
tests
At the close of each quarter of ProLogis taxable year,
ProLogis must satisfy tests relating to the nature of its assets
determined in accordance with generally accepted accounting
principles. Where ProLogis invests in a partnership or other
business entity taxed as a partnership or disregarded entity,
ProLogis will be deemed to own a proportionate share of the
partnerships or other business entitys assets. In
addition, when ProLogis owns 100% of a corporation that is not a
taxable REIT subsidiary, it will be deemed to own 100% of the
corporations assets. First, at least 75% of the value of
ProLogis total assets must be represented by interests in
real property, interests in mortgages on real property, shares
in other real estate investment trusts, cash, cash items,
government securities, and qualified temporary investments. For
this purpose, cash includes foreign currency if (i) the
real estate investment trust or its qualified business unit uses
such foreign currency as its functional currency, (ii) the
foreign currency is held for use in the normal course of the
activities of the real estate investment trust or the qualified
business unit giving rise to income or gain described in the
gross income tests below or directly related to acquiring or
holding assets described in the asset test herein, and
(iii) it is not held in connection with a trade or business
of trading or dealing with securities. Second, although the
remaining 25% of ProLogis assets generally may be invested
without restriction, ProLogis is prohibited from owning
securities representing more than 10% of either the vote or
value of the outstanding securities of any non-government issuer
other than a qualified real estate investment trust subsidiary,
another real estate investment trust or a taxable REIT
subsidiary. Further, no more than 25% of the value of
ProLogis total assets may be represented by securities of
one or more taxable REIT subsidiaries, and no more than 5% of
the value of ProLogis total assets may be represented by
securities of any non-government issuer other than a qualified
real estate investment trust subsidiary, another real estate
investment trust or a taxable REIT subsidiary. Finally, if a
real estate investment trust has met the asset tests as of the
close of any quarter it will not fail them in a subsequent
quarter solely because of a discrepancy due to variations in
value that are not attributable to the acquisition of
investments but rather caused solely by the change in the
foreign currency exchange rate used to value a foreign asset.
As discussed above, ProLogis generally may not own more than 10%
by vote or value of any one issuers securities and no more
than 5% of the value of the total assets of ProLogis generally
may be represented by the securities of any issuer. If ProLogis
fails to meet either of these tests at the end of any quarter
and such failure is not cured within 30 days thereafter,
ProLogis would fail to qualify as a real estate investment
trust. After the
30-day cure
period, ProLogis could dispose of sufficient assets to cure such
a violation that does not exceed the lesser of 1% of
ProLogis assets at the end of the relevant quarter or
$10,000,000 if the disposition occurs within 6 months after
the last day of the calendar quarter in which ProLogis
identifies the violation. For violations of these tests that are
larger than this amount and for violations of the other asset
tests described above, where such violations are due to
reasonable cause and not willful neglect, ProLogis can avoid
disqualification as a real estate investment trust, after the
30-day cure
period, by taking steps including the disposition of sufficient
assets to meet the asset tests (within 6 months after the
last day of the calendar quarter in which ProLogis identifies
the violation) and paying a tax equal to the greater of $50,000
or an amount determined (pursuant to Treasury regulations) by
multiplying the highest corporate tax rate by the net income
generated by the non-qualifying assets for the period beginning
on the first date of the failure to meet the tests and ending on
the date that ProLogis disposes of the assets or otherwise
satisfies the asset tests.
35
Gross
income tests
There are currently two separate percentage tests relating to
the sources of ProLogis gross income that must be
satisfied for each taxable year. For purposes of these tests,
where ProLogis invests in a partnership or other business entity
taxed as a partnership or disregarded entity, ProLogis will be
treated as receiving its share of the income and loss of the
partnership or other business entity, and the gross income of
the partnership or other business entity will retain the same
character in the hands of ProLogis as it has in the hands of the
partnership or other business entity. The two tests are as
follows:
1. The 75% Gross Income Test. At least 75% of
ProLogis gross income for the taxable year must be
qualifying income. Qualifying income generally
includes:
(1) rents from real property, except as modified below;
(2) interest on obligations secured by mortgages on, or
interests in, real property;
(3) gains from the sale or other disposition of
non-dealer property, which means interests in real
property and real estate mortgages, other than gain from
property held primarily for sale to customers in the ordinary
course of ProLogis trade or business;
(4) dividends or other distributions on shares in other
real estate investment trusts, as well as gain from the sale of
such shares;
(5) abatements and refunds of real property taxes;
(6) income from the operation, and gain from the sale, of
foreclosure property, which means property acquired
at or in lieu of a foreclosure of the mortgage secured by such
property;
(7) commitment fees received for agreeing to make loans
secured by mortgages on real property, or to purchase or lease
real property; and
(8) certain qualified temporary investment income
attributable to the investment of new capital received by
ProLogis in exchange for its shares or certain publicly offered
debt, which income is received or accrued during the one-year
period following the receipt of such capital.
Rents received from a tenant will not, however, qualify as rents
from real property in satisfying the 75% gross income test, or
the 95% gross income test described below, if ProLogis, or an
owner of 10% or more of ProLogis, directly or constructively
owns 10% or more of such tenant, unless the tenant is a taxable
REIT subsidiary of ProLogis and certain other requirements are
met with respect to the real property being rented. In addition,
if rent attributable to personal property leased in connection
with a lease of real property is greater than 15% of the total
rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as rents
from real property. Moreover, an amount received or accrued will
not qualify as rents from real property or as interest income
for purposes of the 75% and 95% gross income tests if it is
based in whole or in part on the income or profits of any
person, although an amount received or accrued generally will
not be excluded from rents from real property or
interest solely by reason of being based on a fixed
percentage or percentages of receipts or sales. Finally, for
rents received to qualify as rents from real property, ProLogis
generally must not furnish or render services to tenants, other
than through a taxable REIT subsidiary, or an independent
contractor from whom ProLogis derives no income, except
that ProLogis may directly provide services that are
usually or customarily rendered in connection with
the rental of properties for occupancy only, or are not
otherwise considered rendered to the occupant for his
convenience. A real estate investment trust is permitted
to render a de minimis amount of impermissible services to
tenants, or in connection with the management of property, and
still treat amounts received with respect to that property
(other than the amounts attributable to the provision of the de
minimis impermissible services) as rent from real property. The
amount received or accrued by the real estate investment trust
during the taxable year for the impermissible services with
respect to a property may not exceed 1% of all amounts received
or accrued by the real estate investment trust directly or
indirectly from the property. If this 1% threshold is exceeded,
none of the amounts received with respect to that property will
qualify as rent from real property. The amount received for any
service or management operation for this purpose shall be deemed
to
36
be not less than 150% of the direct cost of the real estate
investment trust in furnishing or rendering the service or
providing the management or operation. Furthermore, ProLogis may
furnish such impermissible services to tenants through a taxable
REIT subsidiary and still treat amounts otherwise received with
respect to the property as rent from real property.
2. The 95% Gross Income Test. In addition to
deriving 75% of its gross income from the sources listed above,
at least 95% of ProLogis gross income for the taxable year
must be derived from the above-described qualifying income, or
from dividends, interest or gains from the sale or disposition
of stock or other securities that are not dealer property.
Dividends, other than on real estate investment trust shares,
and interest on any obligations not secured by an interest in
real property are included for purposes of the 95% gross income
test, but not for purposes of the 75% gross income test.
Any income from (i) a hedging transaction that is clearly
and timely identified and that hedges indebtedness incurred or
to be incurred to acquire or carry real estate assets or
(ii) a clearly and timely identified transaction entered
into primarily to manage the risk of currency fluctuations with
respect to any item of income that would qualify under the 75%
or the 95% gross income tests, will not constitute gross income
(rather than being treated either as qualifying income or
non-qualifying income) for purposes of the 75% and the 95% gross
income tests. Income from such transactions that does not meet
these requirements will be treated as non-qualifying income for
purposes of the 75% and the 95% gross income tests. Any income
from foreign currency gain that is real estate foreign
exchange gain as defined in the Internal Revenue Code will
not constitute gross income for purposes of the 75% gross income
test. Real estate foreign exchange gain includes
foreign currency gains attributable to (i) any item of
income or gain that would qualify under the 75% gross income
test, (ii) the acquisition or ownership of obligations
secured by mortgages on real property or interests in real
property, (iii) becoming or being the obligor under
obligations secured by mortgages on real property or on
interests in real property, (iv) remittances from qualified
business units that meet the 75% gross income test for the
taxable year and the 75% asset test at the close of each
quarter, and (v) any other foreign currency gain as
determined by the Internal Revenue Service. Other foreign
currency gain, if such foreign currency gain is passive
foreign exchange gain as defined in the Internal Revenue
Code, will not constitute gross income for purposes of the 95%
gross income test (but will be treated as income that does not
qualify under the 75% gross income test). Passive foreign
exchange gain includes foreign currency gains attributable
to (i) real estate foreign exchange gain, (ii) any
item of income or gain that would qualify under the 95% gross
income test, (iii) the acquisition or ownership of
obligations, (iv) becoming or being the obligor under
obligations, and (v) any other foreign currency gain as
determined by the Internal Revenue Service.
For purposes of determining whether ProLogis complies with the
75% and 95% gross income tests, gross income does not include
income from prohibited transactions. A prohibited
transaction is a sale of property held primarily for sale
to customers in the ordinary course of a trade or business,
excluding foreclosure property (described below), unless such
property is held by ProLogis for at least two years and other
requirements relating to the number of properties sold in a
year, their tax bases or fair market values, and the cost of
improvements made to the property are satisfied. See
Taxation of ProLogis General.
Foreclosure property is real property (including interests in
real property) and any personal property incident to such real
property (i) that is acquired by a real estate investment
trust as a result of the real estate investment trust having bid
in the property at foreclosure, or having otherwise reduced the
property to ownership or possession by agreement or process of
law, after there was a default (or default was imminent) on a
lease of the property or a mortgage loan held by the real estate
investment trust and secured by the property, (ii) for
which the related loan or lease was made, entered into or
acquired by the real estate investment trust at a time when
default was not imminent or anticipated and (iii) for which
such real estate investment trust makes an election to treat the
property as foreclosure property. Real estate investment trusts
generally are subject to tax at the maximum corporate tax rate
(currently 35%) on any net income from foreclosure property,
including any gain from the disposition of the foreclosure
property, other than income that would otherwise be qualifying
income for purposes of the 75% gross income test. Any gain from
the sale of property for which a foreclosure property election
has been made will not be subject to the 100% penalty
37
tax on gains from prohibited transactions described below, even
if the property was held primarily for sale to customers in the
ordinary course of a trade or business.
Even if ProLogis fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may still qualify as
a real estate investment trust for such year if it is entitled
to relief under provisions of the Internal Revenue Code. These
relief provisions will generally be available if:
(1) following ProLogis identification of the failure,
it files a schedule with a description of each item of gross
income that caused the failure in accordance with regulations
prescribed by the Treasury; and
(2) ProLogis failure to comply was due to reasonable
cause and not due to willful neglect.
If these relief provisions apply, however, ProLogis will
nonetheless be subject to a special tax equal to the greater of
the amount by which it fails either the 75% or 95% gross income
test for that year multiplied by a fraction the numerator of
which is the real estate investment trust taxable income for the
taxable year (adjusted for certain items) and the denominator of
which is the gross income for the taxable year (adjusted for
certain items).
Annual
distribution requirements
In order to qualify as a real estate investment trust, ProLogis
is required to make distributions, other than capital gain
dividends, to its shareholders each year in an amount at least
equal to the sum of 90% of ProLogis real estate investment
trust taxable income, computed without regard to the dividends
paid deduction and real estate investment trust net capital
gain, plus 90% of its net income after tax, if any, from
foreclosure property, minus the sum of some items of excess
non-cash income. Such distributions must be paid in the taxable
year to which they relate, or in the following taxable year if
declared before ProLogis timely files its tax return for such
year and if paid on or before the first regular dividend payment
after such declaration. To the extent that ProLogis does not
distribute all of its net capital gain or distributes at least
90%, but less than 100%, of its real estate investment trust
taxable income, as adjusted, it will be subject to tax on the
undistributed amount at regular capital gains or ordinary
corporate tax rates, as the case may be. A real estate
investment trust is permitted, with respect to undistributed net
long-term capital gains it received during the taxable year, to
designate in a notice mailed to shareholders within 60 days
of the end of the taxable year, or in a notice mailed with its
annual report for the taxable year, such amount of such gains
which its shareholders are to include in their taxable income as
long-term capital gains. Thus, if ProLogis made this
designation, the shareholders of ProLogis would include in their
income as long-term capital gains their proportionate share of
the undistributed net capital gains as designated by ProLogis
and ProLogis would have to pay the tax on such gains within
30 days of the close of its taxable year. Each shareholder
of ProLogis would be deemed to have paid such shareholders
share of the tax paid by ProLogis on such gains, which tax would
be credited or refunded to the shareholder. A shareholder would
increase his, her or its tax basis in his, her or its ProLogis
shares by the difference between the amount of income to the
holder resulting from the designation less the
shareholders credit or refund for the tax paid by ProLogis.
ProLogis intends to make timely distributions sufficient to
satisfy the annual distribution requirements. It is possible
that ProLogis may not have sufficient cash or other liquid
assets to meet the 90% distribution requirement, due to timing
differences between the actual receipt of income and actual
payment of expenses on the one hand, and the inclusion of such
income and deduction of such expenses in computing
ProLogis real estate investment trust taxable income on
the other hand. To avoid any problem with the 90% distribution
requirement, ProLogis will closely monitor the relationship
between its real estate investment trust taxable income and cash
flow and, if necessary, may borrow funds in order to satisfy the
distribution requirement. However, there can be no assurance
that such borrowing would be available at such time.
Additionally, the Internal Revenue Service has recently issued a
revenue procedure in which it provided that certain stock
distributions declared by a publicly-traded real estate
investment trust with respect to a taxable year ending on or
before December 31, 2009 may qualify as dividends for
purposes of the distribution requirement so long as shareholders
are given the choice of receiving stock or cash distributions,
the aggregate amount of cash distributions are not limited to
less than 10% of the aggregate distribution, and certain other
requirements are
38
met. ProLogis may declare a share distribution in 2009 that
would meet the requirements set out in the revenue procedure for
treatment as a dividend.
ProLogis generally must make distributions during the taxable
year to which they relate. ProLogis may pay dividends in the
following year in two circumstances. First, ProLogis may declare
and pay dividends in the following year if the dividends are
declared before it timely files its tax return for the year and
if it pays the dividends before the first regular dividend
payment made after such declaration. Second, if ProLogis
declares a dividend in October, November, or December of any
year with a record date in one of these months and pays the
dividend on or before January 31 of the following year, it will
be treated as having paid the dividend on December 31 of the
year in which the dividend was declared. To the extent that
ProLogis does not distribute all of its net capital gain or if
it distributes at least 90%, but less than 100% of its real
estate investment trust taxable income, as adjusted, it will be
subject to tax on the undistributed amount at regular capital
gains or ordinary corporate tax rates, as the case may be.
If ProLogis fails to meet the 90% distribution requirement as a
result of an adjustment to ProLogis tax return by the
Internal Revenue Service, or if ProLogis determines that it has
failed to meet the 90% distribution requirement in a prior
taxable year, ProLogis may retroactively cure the failure by
paying a deficiency dividend, plus applicable
penalties and interest, within a specified period.
Tax
aspects of ProLogis investments in partnerships
A portion of ProLogis investments are owned through
business entities treated as partnerships for U.S. federal
income tax purposes. As previously mentioned, ProLogis will
include its proportionate share of (i) each
partnerships income, gains, losses, deductions and credits
for purposes of the various real estate investment trust gross
income tests and in its computation of its real estate
investment trust taxable income and (ii) the assets held by
each partnership for purposes of the real estate investment
trust asset tests.
ProLogis interest in the partnerships involves special tax
considerations, including the possibility of a challenge by the
Internal Revenue Service of the status of the partnerships as
partnerships, as opposed to associations taxable as
corporations, for U.S. federal income tax purposes. If a
partnership were to be treated as an association, such
partnership would be taxable as a corporation and therefore
subject to an entity-level tax on its income, in the case of a
U.S. corporation or a foreign corporation with
U.S. source income or income that is effectively connected
with the conduct of a U.S. trade or business. In such a
situation, regardless of whether or not the corporation would be
treated as U.S. or foreign, the character of ProLogis
assets and items of gross income would change, which may
preclude ProLogis from satisfying the real estate investment
trust asset tests and may preclude ProLogis from satisfying the
real estate investment trust gross income tests. See
Failure to qualify below, for a
discussion of the effect of ProLogis failure to meet such
tests.
Failure
to qualify
If ProLogis fails to qualify for taxation as a real estate
investment trust in any taxable year and relief provisions do
not apply, ProLogis will be subject to tax, including applicable
alternative minimum tax, on its taxable income at regular
corporate rates. Distributions to shareholders in any year in
which ProLogis fails to qualify as a real estate investment
trust will not be deductible by ProLogis, nor generally will
they be required to be made under the Internal Revenue Code. In
such event, to the extent of current or accumulated earnings and
profits, all distributions to shareholders will be taxable as
ordinary income, and subject to limitations in the Internal
Revenue Code, corporate distributees may be eligible for the
dividends-received deduction. Unless entitled to relief under
specific statutory provisions, ProLogis also will be
disqualified from re-electing taxation as a real estate
investment trust for the four taxable years following the year
during which qualification was lost.
In the event that ProLogis fails to satisfy one or more
requirements for qualification as a real estate investment
trust, other than the 75% and the 95% gross income tests and
other than the asset tests, each of which is subject to the cure
provisions described above, ProLogis will retain its real estate
investment trust
39
qualification if (i) the violation is due to reasonable
cause and not willful neglect and (ii) ProLogis pays a
penalty of $50,000 for each failure to satisfy the provision.
Taxation
of ProLogis shareholders
Taxation
of U.S. shareholders
As long as ProLogis qualifies as a real estate investment trust,
distributions made to ProLogis U.S. shareholders out
of current or accumulated earnings and profits, and not
designated as capital gain dividends, will be taken into account
by them as ordinary dividends and will not be eligible for the
dividends-received deduction for corporations. Ordinary
dividends will be taxable to ProLogis domestic
shareholders as ordinary income, except that prior to
January 1, 2011, such dividends will be taxed at the rate
applicable to long-term capital gains to the extent that such
dividends are attributable to dividends received by ProLogis
from non-real estate investment trust corporations (such as
U.S. and certain qualifying foreign taxable REIT
subsidiaries) or are attributable to income upon which ProLogis
has paid corporate income tax (e.g., to the extent that ProLogis
distributes less than 100% of its taxable income). Distributions
and undistributed amounts that are designated as capital gain
dividends will be taxed as long-term capital gains, to the
extent they do not exceed ProLogis actual net capital gain
for the taxable year, without regard to the period for which the
shareholder has held his, her or its shares. However, corporate
shareholders may be required to treat up to 20% of some capital
gain dividends as ordinary income. To the extent that ProLogis
makes distributions in excess of current and accumulated
earnings and profits, these distributions are treated first as a
tax-free return of capital to its shareholders, reducing the tax
basis of a shareholders shares by the amount of such
distribution, but not below zero, with distributions in excess
of the shareholders tax basis taxable as capital gains, if
the shares are held as a capital asset. In addition, any
dividend declared by ProLogis in October, November or December
of any year and payable to a shareholder of record on a specific
date in any such month shall be treated as both paid by ProLogis
and received by the shareholder on December 31 of such year,
provided that the dividend is actually paid by ProLogis during
January of the following calendar year. Shareholders may not
include in their individual income tax returns any net operating
losses or capital losses of ProLogis. Instead, ProLogis will
generally carry over these losses for potential offset against
its future taxable income. U.S. federal income tax rules
may also require that minimum tax adjustments and preferences be
apportioned to ProLogis shareholders.
In general, any loss upon a sale or exchange of shares by a
shareholder who has held such shares for six months or less,
after applying holding period rules, will be treated as a
long-term capital loss, to the extent of distributions from
ProLogis required to be treated by such shareholder as long-term
capital gains. In addition, under the so-called wash
sale rules, all or a portion of any loss that a
shareholder realizes upon a taxable disposition of ProLogis
common shares may be disallowed if the shareholder purchases
other common shares within 30 days before or after the
disposition. A non-corporate taxpayer may deduct capital losses
not offset by capital gains against ordinary income only up to a
maximum annual amount of $3,000. A non-corporate taxpayer may
carry forward unused capital losses indefinitely. A corporate
taxpayer must pay tax on its net capital gain at ordinary
corporate rates. A corporate taxpayer may deduct capital losses
only to the extent of capital gains, with unused losses being
carried back three years and forward five years.
Gain from the sale or exchange of shares held for more than one
year is taxed as long-term capital gain. Net long-term capital
gains of non-corporate taxpayers are taxed at a maximum capital
gain rate of 15% for sales or exchanges occurring prior to
January 1, 2011 (and 20% for sales or exchanges occurring
thereafter). Pursuant to Internal Revenue Service guidance,
ProLogis may classify portions of its capital gain dividends as
gains eligible for the 15% (or 20%) maximum capital gains rate
or as unrecaptured Internal Revenue Code Section 1250 gain
taxable at a maximum rate of 25%.
Shareholders of ProLogis should consult their tax advisors with
respect to taxation of capital gains and capital gain dividends
and with regard to state, local and foreign taxes on capital
gains.
Taxable distributions that ProLogis pays and gain from the
disposition of its common shares will not be treated as passive
activity income and, therefore, shareholders generally will not
be able to apply any passive activity losses, such
as losses from certain types of limited partnerships in which
the shareholder is a
40
limited partner, against such income or gain. In addition,
taxable distributions that ProLogis pays and gain from the
disposition of its common shares generally will be treated as
investment income for purposes of the investment interest
limitations. ProLogis will notify shareholders after the close
of its taxable year as to the portions of the distributions
attributable to that year that constitute ordinary income,
return of capital and capital gain.
If a domestic shareholder recognizes a loss upon a subsequent
disposition of ProLogis common shares in an amount that
exceeds a prescribed threshold, it is possible that the
provisions of Treasury regulations involving reportable
transactions could apply, with a resulting requirement to
separately disclose the loss generating transactions to the
Internal Revenue Service. While these regulations are directed
towards tax shelters, they are written quite
broadly, and apply to transactions that would not typically be
considered tax shelters. Significant penalties apply for failure
to comply with these requirements. You should consult your tax
advisor concerning any possible disclosure obligation with
respect to the receipt or disposition of ProLogis common
shares, or transactions that might be undertaken directly or
indirectly by ProLogis. Moreover, you should be aware that
ProLogis and other participants in transactions involving
ProLogis (including their advisors) might be subject to
disclosure or other requirements pursuant to these regulations.
Information
and reporting and backup withholding
ProLogis will report to its domestic shareholders and to the
Internal Revenue Service the amount of distributions paid during
each calendar year, and the amount of tax withheld, if any, with
respect to the paid distributions. Under the backup withholding
rules, a shareholder may be subject to backup withholding at
applicable rates with respect to distributions paid unless such
shareholder is a corporation or comes within other exempt
categories and, when required, demonstrates this fact or
provides a taxpayer identification number, certifies as to no
loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding
rules. A shareholder that does not provide ProLogis with its
correct taxpayer identification number may also be subject to
penalties imposed by the Internal Revenue Service. Any amount
paid as backup withholding will be credited against the
shareholders income tax liability. In addition, ProLogis
may be required to withhold a portion of capital gain
distributions made to any shareholders who fail to certify their
non-foreign status to ProLogis.
Taxation
of tax-exempt shareholders
The Internal Revenue Service has issued a revenue ruling in
which it held that amounts distributed by a real estate
investment trust to a tax-exempt employees pension trust
do not constitute unrelated business taxable income. Subject to
the discussion below regarding a pension-held real estate
investment trust, based upon the ruling, the analysis in
the ruling and the statutory framework of the Internal Revenue
Code, distributions by ProLogis to a shareholder that is a
tax-exempt entity should also not constitute unrelated business
taxable income, provided that the tax-exempt entity has not
financed the acquisition of its shares with acquisition
indebtedness within the meaning of the Internal Revenue
Code, that the shares are not otherwise used in an unrelated
trade or business of the tax-exempt entity, and that ProLogis,
consistent with its present intent, does not hold a residual
interest in a real estate mortgage investment conduit. Social
clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts, and qualified group legal services
plans that are exempt from taxation under special provisions of
the U.S. federal income tax laws are subject to different
unrelated business taxable income rules, which generally will
require them to characterize distributions that they receive
from ProLogis as unrelated business taxable income.
However, if any pension or other retirement trust that qualifies
under Section 401(a) of the Internal Revenue Code holds
more than 10% by value of the interests in a pension-held
real estate investment trust at any time during a taxable
year, a portion of the dividends paid to the qualified pension
trust by such real estate investment trust may constitute
unrelated business taxable income. For these purposes, a
pension-held real estate investment trust is defined
as a real estate investment trust if such real estate investment
trust would not have qualified as a real estate investment trust
but for the provisions of the Internal Revenue Code which look
through such a qualified pension trust in determining ownership
of shares of the real estate investment trust and at least one
qualified pension trust holds more than 25% by value of the
interests of such
41
real estate investment trust or one or more qualified pension
trusts, each owning more than a 10% interest by value in the
real estate investment trust, hold in the aggregate more than
50% by value of the interests in such real estate investment
trust. ProLogis believes that it is not a pension-held
real estate investment trust.
Taxation
of foreign shareholders
Distributions of cash generated by ProLogis real estate
operations, but not by its sale or exchange of such properties,
that are paid to foreign persons generally will be subject to
U.S. withholding tax at a rate of 30%, unless an applicable
tax treaty or statutory provision reduces that tax and the
foreign shareholder files an Internal Revenue Service
Form W-8BEN
(or other acceptable substitute or applicable form) with
ProLogis or unless the foreign shareholder files an Internal
Revenue Service
Form W-8ECI
with ProLogis claiming that the distribution is
effectively connected income. Under applicable
Treasury regulations, foreign shareholders generally must
provide the Internal Revenue Service
Form W-8ECI
or
Form W-8BEN
(or other acceptable substitute or applicable form) beginning
January 1, 2000 and every three years thereafter unless the
information on the form changes before that date. However, if
such form includes a taxpayer identification number, the form
will remain in effect until a change in circumstances makes the
information incorrect provided the withholding agent reports on
Form 1042 at least one payment annually to the foreign
shareholder. If a distribution is treated as effectively
connected with a foreign shareholders conduct of a
U.S. trade or business, the foreign shareholder generally
will be subject to U.S. federal income tax on the
distribution at graduated rates, in the same manner as domestic
shareholders are taxed on distributions, and also may be subject
to the 30% branch profits tax (or reduced tax treaty rate, if
applicable) in the case of a foreign shareholder that is a
corporation.
A foreign shareholder will not incur tax on a distribution in
excess of ProLogis current and accumulated earnings and
profits if the excess portion of the distribution does not
exceed the adjusted tax basis of the shareholders common
shares. Instead, the excess portion of the distribution will
reduce the foreign shareholders adjusted tax basis for its
common shares. A foreign shareholder will be subject to tax on a
distribution that exceeds both ProLogis current and
accumulated earnings and profits and the adjusted tax basis for
its common shares, if the foreign shareholder otherwise would be
subject to tax on gain from the disposition of its common shares
as described herein. Because ProLogis generally cannot determine
at the time it makes a distribution whether or not the
distribution will exceed its current and accumulated earnings
and profits, it generally will withhold tax on the entire amount
of any distribution at the same rate at which it would withhold
on a dividend. However, a foreign shareholder may obtain a
refund of amounts that ProLogis withholds if it is subsequently
determined that a distribution was in excess of ProLogis
current and accumulated earnings and profits.
Distributions of proceeds attributable to the sale or exchange
by ProLogis of U.S. real property interests are subject to
income and withholding taxes pursuant to the Foreign Investment
in Real Property Tax Act of 1980, (FIRPTA). Under
FIRPTA, gains are considered effectively connected with a
U.S. trade or business of the foreign shareholder and are
taxed at the normal graduated rates applicable to
U.S. shareholders. Moreover, gains may be subject to branch
profits tax in the hands of a shareholder that is a foreign
corporation if it is not entitled to treaty relief or exemption.
However, distributions of proceeds attributable to the sale or
exchange by ProLogis of U.S. real property interests will
not be subject to tax under FIRPTA or the branch profits tax,
and will instead be taxed in the same manner as distributions of
cash generated by ProLogis real estate operations other
than the sale or exchange of properties (as described above) if
(i) the distribution is made with regard to a class of
shares that is regularly traded on an established securities
market in the United States and (ii) the recipient
shareholder does not own more than 5% of that class of shares at
any time during the
1-year
period ending on the date the distribution is received. ProLogis
is required to withhold 35% (or less to the extent provided in
applicable Treasury regulations) of any distribution to a
foreign person owning more than 5% of the relevant class of
shares (or otherwise has held more than 5% at any time during
the 1-year
period ending on the date the distribution is received) that
could be designated by ProLogis as a capital gain dividend; this
amount is creditable against the foreign shareholders
FIRPTA tax liability.
ProLogis will qualify as a domestically controlled
qualified investment entity so long as it qualifies as a
real estate investment trust and less than 50% in value of its
shares is held by foreign persons (e.g.,
42
nonresident aliens and foreign corporations). It is currently
anticipated that ProLogis will qualify as a domestically
controlled qualified investment entity. Under these
circumstances, except as described in the next sentence, gain
from the sale of the shares of ProLogis by a foreign person
should not be subject to U.S. taxation, unless such gain is
effectively connected with such persons U.S. trade or
business or, in the case of an individual foreign person, such
person is present within the U.S. for 183 days or more
in such taxable year. Even if ProLogis is a domestically
controlled qualified investment entity, upon a foreign
shareholders disposition of its common shares (subject to
the 5% exception applicable to regularly traded
shares described above), such foreign shareholder may be treated
as having taxable gain from the sale or exchange of a
U.S. real property interest (within the meaning of FIRPTA)
if the foreign shareholder (i) disposes of ProLogis
common shares within a
30-day
period preceding the ex-dividend date of a distribution, any
portion of which, but for the disposition, would have been
treated as gain from the sale or exchange of a U.S. real
property interest (within the meaning of FIRPTA) and
(ii) acquires, or enters into a contract or option to
acquire, other common shares of ProLogis within 30 days
after such ex-dividend date.
In the event that ProLogis does not constitute a domestically
controlled qualified investment entity, a foreign
shareholders sale of its common shares nonetheless will
generally not be subject to tax under FIRPTA as a sale of a
U.S. real property interest (within the meaning of FIRPTA)
provided that (i) ProLogis common shares are
regularly traded (as defined by applicable Treasury
regulations) on an established securities market and
(ii) the selling foreign shareholder held (taking into
account constructive ownership rules) 5% or less of
ProLogis outstanding common shares at all times during a
specified testing period. If gain on a foreign
shareholders sale of ProLogis common shares were
subject to taxation under FIRPTA, the foreign shareholder would
be subject to the same treatment as a domestic shareholder with
respect to such gain (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of
nonresident alien individuals). In addition, the purchaser of
the common shares could be required to withhold 10% of the
purchase price and remit such amount to the Internal Revenue
Service.
The U.S. federal income taxation of foreign shareholders is
a highly complex matter that may be affected by many other
considerations. Accordingly, foreign investors in ProLogis
should consult their own tax advisors regarding the income and
withholding tax considerations with respect to their investment
in ProLogis.
Tax
Rates
Long-term capital gains and qualified dividends
received by an individual are generally subject to
U.S. federal income tax at a maximum rate of 15%. Because
ProLogis is not generally subject to U.S. federal income
tax on the portion of its real estate investment trust taxable
income or capital gains distributed to its shareholders,
ProLogis dividends generally are not eligible for the 15%
maximum tax rate on dividends. As a result, ProLogis
ordinary real estate investment trust dividends are taxed at the
higher tax rates applicable to ordinary income. However, the 15%
maximum tax rate for long-term capital gains and qualified
dividends generally applies to:
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a shareholders long-term capital gains, if any, recognized
on the disposition of ProLogis shares;
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ProLogis distributions designated as long-term capital
gain dividends (except to the extent attributable to real estate
depreciation, in which case such distributions continue to be
subject to a 25% tax rate);
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ProLogis distributions attributable to dividends received
by ProLogis from non-real estate investment trust corporations,
such as U.S. and certain qualifying foreign taxable REIT
subsidiaries; and
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ProLogis distributions to the extent attributable to
income upon which ProLogis has paid corporate income tax (e.g.,
to the extent that ProLogis distributes less than 100% of its
taxable income).
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Without future congressional action, the maximum tax rate on
long-term capital gains will increase to 20% in 2011, and the
maximum rate on qualified dividends will increase to 39.6% in
2011.
43
Other Tax
Considerations
Investments
in taxable REIT subsidiaries
Several ProLogis subsidiaries have made timely elections to be
treated as taxable REIT subsidiaries of ProLogis. As taxable
REIT subsidiaries of ProLogis, these entities will pay
U.S. federal and state income taxes at the full applicable
corporate rates on their income prior to payment of any
dividends to the extent such entities are either
U.S. taxable REIT subsidiaries or foreign taxable REIT
subsidiaries earning income that is effectively connected with
the conduct of a U.S. trade or business. ProLogis
taxable REIT subsidiaries will attempt to minimize the amount of
such taxes, but there can be no assurance whether or the extent
to which measures taken to minimize taxes will be successful. To
the extent a taxable REIT subsidiary of ProLogis is required to
pay U.S. federal, state or local taxes, the cash available
for distribution by such taxable REIT subsidiary to its
shareholders, including ProLogis, will be reduced accordingly.
While taxable REIT subsidiaries may be subject to full corporate
level taxation on their earnings, they are permitted to engage
in certain types of activities that cannot be performed directly
by real estate investment trusts without jeopardizing their real
estate investment trust status. Taxable REIT subsidiaries are
subject to limitations on the deductibility of payments made to
the associated real estate investment trust that could
materially increase the taxable income of the taxable REIT
subsidiary and are subject to prohibited transaction taxes on
certain other payments made to the associated real estate
investment trust. ProLogis will be subject to a tax of 100% on
the amount of any rents from real property, deductions or excess
interest that would be reapportioned under Section 482 of
the Internal Revenue Code to one of its taxable REIT
subsidiaries in order to more clearly reflect income of the
taxable REIT subsidiary.
Under the taxable REIT subsidiary provision, ProLogis and any
taxable entity in which ProLogis owns an interest are allowed to
jointly elect to treat such entity as a taxable REIT
subsidiary. In addition, if any of ProLogis taxable
REIT subsidiaries owns, directly or indirectly, securities
representing 35% or more of the vote or value of an entity
treated as a corporation for tax purposes, that subsidiary will
also automatically be treated as a taxable REIT subsidiary of
ProLogis. As described above, taxable REIT subsidiary elections
have been made for certain entities in which ProLogis owns an
interest. Additional taxable REIT subsidiary elections may be
made in the future for additional entities in which ProLogis
owns an interest.
Tax on
built-in gain
ProLogis has previously acquired assets from taxable
U.S. C-corporations (and in one instance a foreign
corporation holding a U.S. real property interest) in
carry-over basis transactions, and may acquire additional assets
in such manner in the future. As a result of such acquisitions,
ProLogis could be liable for specified liabilities that are
inherited from such C-corporations. If ProLogis recognizes gain
on the disposition of such assets during the
10-year
period beginning on the date on which such assets were acquired
by ProLogis, then to the extent of such assets
built-in gains (in other words, the excess of the
fair market value of such assets at the time of the acquisition
by ProLogis over the adjusted basis of such assets, determined
at the time of such acquisition), ProLogis will be subject to
tax on such gain at the highest corporate rate applicable. The
results described above with respect to the recognition of
built-in gain assume that the
C-corporation
whose assets are acquired does not make an election to recognize
such built-in gain at the time of such acquisition.
Affiliated
real estate investment trust
Palmtree Acquisition Corporation is a corporate subsidiary of
ProLogis which intends to qualify as a real estate investment
trust for U.S. federal income tax purposes. Palmtree
Acquisition Corporation therefore needs to satisfy the real
estate investment trust tests discussed in this prospectus. The
failure of Palmtree Acquisition Corporation to qualify as a real
estate investment trust could cause ProLogis to fail to qualify
as a real estate investment trust because ProLogis would then
own more than 10% of the securities of an issuer that was not a
real estate investment trust, a qualified real estate investment
trust subsidiary or a taxable REIT subsidiary. ProLogis believes
that Palmtree Acquisition Corporation has been organized and
operated in a manner that will permit it to qualify as a real
estate investment trust. As a real estate investment trust,
44
Palmtree Acquisition Corporation will be subject to the built-in
gain rules discussed in the section entitled Tax on
built-in gain above. Palmtree Acquisition Corporation is
the successor of Catellus Development Corporation, which was a
C-corporation that elected to be treated as a real estate
investment trust for U.S. federal income tax purposes
effective January 1, 2004. Therefore, Palmtree Acquisition
Corporation could be subject to a U.S. federal corporate
level tax at the highest regular corporate rate (currently 35%)
on any gain recognized within ten years of Catellus Development
Corporations conversion to a real estate investment trust
from the sale of any assets that Catellus Development
Corporation held at the effective time of its election to be a
real estate investment trust, but only to the extent of the
built-in gain based on the fair market value of those assets as
of the effective date of the real estate investment trust
election. ProLogis does not currently expect Palmtree
Acquisition Corporation to dispose of any assets if such
disposition would result in the imposition of a material tax
liability unless ProLogis can effect a tax-deferred exchange of
the property. However, certain assets are subject to third party
purchase options that may require Palmtree Acquisition
Corporation to sell such assets, and those assets may carry
deferred tax liabilities that would be triggered on such sales.
Possible
legislative or other actions affecting tax
consequences
Prospective shareholders should recognize that the present
U.S. federal income tax treatment of an investment in
ProLogis may be modified by legislative, judicial or
administrative action at any time and that any such action may
affect investments and commitments previously made. The rules
dealing with U.S. federal income taxation are constantly
under review by persons involved in the legislative process and
by the Internal Revenue Service and the Treasury, resulting in
revisions of regulations and revised interpretations of
established concepts as well as statutory changes. Revisions in
federal tax laws and interpretations of these laws could
adversely affect the tax consequences of an investment in
ProLogis.
State and
local taxes
ProLogis and its shareholders may be subject to state or local
taxation in various jurisdictions, including those in which it
or they transact business or reside. The state and local tax
treatment of ProLogis and its shareholders may not conform to
the U.S. federal income tax consequences discussed above.
Consequently, prospective shareholders should consult their own
tax advisors regarding the effect of state and local tax laws on
an investment in the offered securities of ProLogis.
Foreign
taxes
Various ProLogis subsidiaries and entities in which ProLogis and
its subsidiaries invest may be subject to taxation in various
foreign jurisdictions. Each of the parties will pay any such
foreign taxes prior to payment of any dividends. Each entity
will attempt to minimize the amount of such taxes, but there can
be no assurance whether or the extent to which measures taken to
minimize taxes will be successful. To the extent that any of
these entities is required to pay foreign taxes, the cash
available for distribution to ProLogis shareholders will be
reduced accordingly.
You are advised to consult with your own tax advisor
regarding the specific tax consequences to you of the ownership
and sales of ProLogis debt securities, preferred shares and
common shares, including the U.S. federal, state, local,
foreign, and other tax consequences of such purchase and
ownership and of potential changes in applicable tax laws.
45
PLAN OF
DISTRIBUTION
We may sell the offered securities to one or more underwriters
for public offering and sale by them or may sell the offered
securities to investors directly or through agents, which agents
may be affiliated with us. Direct sales to investors may be
accomplished through subscription offerings or through
subscription rights distributed to our shareholders. In
connection with subscription offerings or the distribution of
subscription rights to shareholders, if all of the underlying
offered securities are not subscribed for, we may sell such
unsubscribed offered securities to third parties directly or
through agents and, in addition, whether or not all of the
underlying offered securities are subscribed for, we may
concurrently offer additional offered securities to third
parties directly or through agents, which agents may be
affiliated with us. Any underwriter or agent involved in the
offer and sale of the offered securities will be named in the
applicable prospectus supplement.
The distribution of the offered securities may be effected from
time to time in one or more transactions at a fixed price or
prices, which may be changed, or at prices related to the
prevailing market prices at the time of sale, such as an
at the market offering, or at negotiated prices, any
of which may represent a discount from the prevailing market
price. We also may, from time to time, authorize underwriters
acting as our agents to offer and sell the offered securities
upon the terms and conditions set forth in the applicable
prospectus supplement. In connection with the sale of offered
securities, underwriters may be deemed to have received
compensation from us in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of
offered securities for whom they may act as agent. Underwriters
may sell offered securities to or through dealers, and such
dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters
and/or
commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by us to underwriters or
agents in connection with the offering of offered securities,
and any discounts, concessions or commissions allowed by
underwriters to participating dealers, will be set forth in the
applicable prospectus supplement. Underwriters, dealers and
agents participating in the distribution of the offered
securities may be deemed to be underwriters, and any discounts
and commissions received by them and any profit realized by them
on resale of the offered securities may be deemed to be
underwriting discounts and commissions, under the Securities
Act. Underwriters, dealers and agents may be entitled, under
agreements entered into with us, to indemnification against and
contribution toward civil liabilities, including liabilities
under the Securities Act. Any such indemnification agreements
will be described in the applicable prospectus supplement.
If so indicated in the applicable prospectus supplement, we will
authorize dealers acting as our agents to solicit offers by
institutions to purchase offered securities from us at the
public offering price set forth in such prospectus supplement
pursuant to delayed delivery contracts providing for payment and
delivery on the date or dates stated in such prospectus
supplement. Each contract will be for an amount not less than,
and the aggregate principal amount of offered securities sold
pursuant to contracts shall be not less nor more than, the
respective amounts stated in the applicable prospectus
supplement. Institutions with whom contracts, when authorized,
may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and
charitable institutions, and other institutions but will in all
cases be subject to our approval.
Contracts will not be subject to any conditions except the
purchase by an institution of the offered securities covered by
its contracts shall not at the time of delivery be prohibited
under the laws of any jurisdiction in the United States to which
such institution is subject, and if the offered securities are
being sold to underwriters, we shall have sold to such
underwriters the total principal amount of the offered
securities less the principal amount of the securities covered
by contracts. Some of the underwriters and their affiliates may
be customers of, engage in transactions with and perform
services for us and our subsidiaries in the ordinary course of
business.
46
EXPERTS
The consolidated balance sheets of ProLogis as of
December 31, 2008 and 2007, and the related consolidated
statements of earnings, shareholders equity and
comprehensive income (loss) and cash flows, for each of the
years in the three-year period ended December 31, 2008, the
related financial statement schedule and the effectiveness of
internal control over financial reporting of ProLogis as of
December 31, 2008, and the consolidated balance sheets of
ProLogis North American Industrial Fund, LP and subsidiaries as
of December 31, 2007 and 2006, and the related consolidated
statements of earnings, partners capital and comprehensive
loss, and cash flows for the year ended December 31, 2007
and for the period from March 1, 2006 (inception) through
December 31, 2006, have been incorporated by reference
herein in reliance upon the reports of KPMG LLP, independent
registered public accounting firm on such financial statements,
incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
With respect to the unaudited interim financial information of
ProLogis for the periods ended June 30, 2009 and 2008, and
March 31, 2009 and 2008, incorporated by reference in this
prospectus, the independent registered public accounting firm
has reported that they applied limited procedures in accordance
with professional standards for a review of such information.
However, their separate reports included in ProLogis
quarterly reports on
Form 10-Q
for the quarters ended June 30, 2009 and March 31,
2009, incorporated by reference in this prospectus, state that
they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of
reliance on their reports on such information should be
restricted in light of the limited nature of the review
procedures applied. The accountant is not subject to the
liability provisions of Section 11 of the Securities Act of
1933 for their report on the unaudited interim financial
information because their report is not a report or
a part of the registration statement prepared or
certified by the accountants within the meaning of
Sections 7 and 11 of the Securities Act of 1933.
47
LEGAL
MATTERS
The validity of the offered securities will be passed upon for
us by Mayer Brown LLP Chicago, Illinois.
48
$400,000,000
3.25% Convertible Senior
Notes due 2015
PROSPECTUS SUPPLEMENT
March 9, 2010
Joint Book-Running Managers
Citi
Barclays Capital
Deutsche Bank
Securities
J.P. Morgan
Morgan Stanley
Senior Co-Managers
Daiwa Securities America
Inc.
ING Wholesale
RBC Capital Markets
Co-Managers
Credit Agricole Securities
(USA) Inc.
Mitsubishi UFJ
Securities
Scotia Capital