e424b3
Filed
Pursuant to Rule 424(b)(3)
Registration No. 333-132616
A filing fee of $38,375, calculated in accordance with Rule
457(r),
has been transmitted to the SEC in connection with the
securities offered from
the Registration Statement (File No. 333-132616) by means of
this prospectus supplement.
PROSPECTUS
SUPPLEMENT
(to Prospectus dated August 21, 2006)
$1,250,000,000
2.25% Convertible Senior
Notes due 2037
and Common Shares of Beneficial
Interest
ProLogis issued a total of $1,250,000,000 aggregate principal
amount of its 2.25% Convertible Senior Notes due 2037 in a
private placement in March 2007.
The notes bear interest at a rate of 2.25% per year. Interest on
the notes is payable on April 1 and October 1 of each year,
beginning on October 1, 2007.
Holders may at their option convert their notes into ProLogis
common shares on any day prior to the close of business on the
trading day immediately preceding the final maturity date of the
notes only under the following circumstances: (1) during
the five business day period after any ten consecutive trading
day period (the measurement period) in which the
trading price per note for each day of that measurement period
was less than 98% of the product of the last reported sale price
per ProLogis common share and the conversion rate on each such
day; (2) during any calendar quarter beginning after
March 31,2007 if the closing sale price per ProLogis common
share for at least 20 trading days in the 30 consecutive trading
days ending on the last day of the preceding calendar quarter is
more than 130% of the conversion price per ProLogis common share
on the last day of such preceding calendar quarter; (3) if
we have called such notes for redemption, at any time prior to
the close of business on the day that is two business days prior
to the redemption date; (4) upon the occurrence of
specified corporate events; (5) if ProLogis common
shares are not listed on a U.S. national securities
exchange; or (6) at any time on or after February 1,
2012.
The initial conversion rate is 13.0576 ProLogis common shares
per $1,000 principal amount of notes (equivalent to an initial
conversion price of approximately $76.58 per ProLogis common
share). The conversion price will be subject to adjustment in
some events but will not be adjusted for accrued interest. In
addition, if a fundamental change (as defined
herein) occurs on or prior to April 5, 2012, we will
increase the conversion rate for a holder that elects to convert
its notes in connection with such fundamental change.
Upon the occurrence of any of the circumstances described above,
holders may convert any outstanding notes into cash, ProLogis
common shares or a combination of cash and ProLogis common
shares, at our election. We will inform you through the trustee
of the method we will choose to satisfy our conversion
obligations within two trading days after our receipt of your
conversion notice; provided, however, that at any time on or
prior to February 1, 2012, we may irrevocably elect, in our
sole discretion without the consent of the holders of the notes,
to settle all of our future conversion obligations entirely in
ProLogis common shares, and, provided further, that we are
required to settle all conversions with a conversion date
occurring on or after February 1,2012 in the same manner,
and we will notify holders of the manner of settlement on or
before such date. If we do not elect otherwise, we shall satisfy
our conversion obligations pursuant to a net share settlement
method as described in this prospectus supplement.
On or after April 5, 2012, we may at our option redeem all
or part of the notes for cash, provided that, subject to our
rights under the next sentence, we must make at least 10
semi-annual interest payments (including the interest payments
on October 1, 2007 and April 1, 2012) in the full
amount required by the indenture before redeeming any notes at
our option. We may also redeem all of the notes at any time
prior to maturity to the extent necessary to preserve
ProLogis status as a real estate investment trust. Holders
may require us to repurchase the notes for cash in full on April
1 of 2012, 2017, 2022, 2027 and 2032 and at any time prior to
their maturity upon a fundamental change, in each case at a
price equal to 100% of the principal amount of the notes being
repurchased plus any accrued and unpaid interest up to, but
excluding, the repurchase date.
The notes are our senior obligations which, together with our
obligations under our global credit facility and certain of our
other indebtedness, are secured by a pledge of certain
intercompany loans. The notes are 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 this prospectus supplement under Description
of Debt Securities Security and Sharing
Arrangements, the notes are 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.
The ProLogis common shares are listed on the New York Stock
Exchange under the symbol PLD. On July 10, 2007
the last reported sale price of ProLogis common shares on the
New York Stock Exchange was $57.44 per share.
The selling securityholders identified in this prospectus
supplement may offer from time to time up to $1,250,000,000
aggregate principal amount of the notes and any ProLogis common
shares issuable upon conversion of the notes. The notes and the
ProLogis common shares may be offered in market transactions, in
negotiated transactions or otherwise, and at prices and on terms
which will be determined by the then prevailing market price or
at negotiated prices directly or through a broker or brokers,
who may act as agent or as principal or by a combination of such
methods of sale. See Plan of Distribution on
page 53 for additional information on the methods of sale.
Investing in these securities involves risks. See Risk
Factors beginning on page 5 for risks relating to an
investment in our securities and beginning on page 16 of
our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, which is
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 is
truthful or complete. Any representation to the contrary is a
criminal offense.
July 11, 2007
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 selling
securityholders have not, authorized anyone to provide you with
different information. We are not, and the selling
securityholders are not, making an offer of these securities in
any jurisdiction where the offer is not permitted. You should
not assume that the information contained in this prospectus
supplement or the accompanying prospectus is accurate as of any
date other than the date on the front of this prospectus
supplement. Our business, financial condition, results of
operations and prospects may have changed since that date.
TABLE OF
CONTENTS
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Prospectus Supplement
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S-1
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S-5
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S-11
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S-12
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S-12
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S-40
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S-47
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S-53
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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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RATIOS
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1
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USE OF PROCEEDS
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1
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DESCRIPTION OF DEBT SECURITIES
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2
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DESCRIPTION OF PREFERRED SHARES
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23
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DESCRIPTION OF COMMON SHARES
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28
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FEDERAL INCOME TAX CONSIDERATIONS
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31
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PLAN OF DISTRIBUTION
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43
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EXPERTS
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43
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LEGAL MATTERS
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45
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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
SUMMARY
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. For a more
detailed description of the notes, see Description of
Notes. 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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$1,250,000,000 principal amount of 2.25% convertible senior
notes due 2037. |
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Maturity Date |
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April 1, 2037, unless earlier repurchased, converted or
redeemed. |
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Interest |
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2.25% per year. Interest will be payable semiannually in arrears
in cash on April 1 and October 1 of each year, beginning
October 1, 2007. |
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Optional Redemption |
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Prior to April 5, 2012, we may not redeem the notes except
to preserve our status as a real estate investment trust or
REIT as described below. On or after April 5,
2012, we may at our option redeem all or part of the notes for
cash at a price equal to 100% of the principal amount of the
notes being redeemed, plus accrued and unpaid interest. We must
make at least 10 semiannual interest payments (including the
interest payment on October 1, 2007 and April 1,
2012) in the full amount required by the indenture before
redeeming any notes at our option. |
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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 prior to the close of business
on the trading day immediately preceding the final maturity date
of the notes, in multiples of $1,000 principal amount, at the
option of the holder under the following circumstances: |
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during the five business day period after any ten
consecutive trading day period (the measurement
period) in which the trading price per note for each day
of such measurement period was less than 98% of the product of
the last reported sale price per ProLogis common share and the
conversion rate on each such day;
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during any calendar quarter beginning after
March 31, 2007, if the closing sale price per ProLogis
common share for at least 20 trading days in the 30 consecutive
trading days ending on the last day of the preceding calendar
quarter is more than 130% of the conversion price per ProLogis
common share on the last day of such preceding calendar quarter;
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if we have called such notes for redemption, at any
time prior to the close of business on the day that is two days
prior to the redemption date;
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upon the occurrence of specified corporate
transactions described under Description of
Notes Conversion Rights;
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if the ProLogis common shares are not listed on a
U.S. national securities exchange; or
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any time on or after February 1, 2012.
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S-1
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The initial conversion rate is 13.0576 ProLogis common shares
per $1,000 principal amount of notes (equivalent to an initial
conversion price of approximately $76.58 per ProLogis common
share), subject to adjustment. |
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Upon the occurrence of any of the circumstances described above,
holders may convert any outstanding notes into cash, ProLogis
common shares or a combination of cash and ProLogis common
shares, at our election. We will inform you through the trustee
of the method we will choose to satisfy our conversion
obligations within two trading days after our receipt of your
conversion notice; provided, however, that at any time on or
prior to February 1, 2012, we may irrevocably elect, in our
sole discretion without the consent of the holders of the notes,
to settle all of our future conversion obligations entirely in
ProLogis common shares, and, provided further, that we are
required to settle all conversions with a conversion date
occurring on or after February 1, 2012 in the same manner
and we will notify holders of the manner of settlement on or
before such date. If we do not elect otherwise, our conversion
obligations will be settled in a combination of cash and
ProLogis common shares as follows: (i) we will pay cash in
an amount equal to the lesser of the principal amount of the
notes to be converted and the conversion value of the notes to
be converted, calculated as described in this prospectus
supplement, and (ii) to the extent that the conversion
value of the notes to be converted exceeds the principal amount
of the notes to be converted (such difference being referred to
as the excess amount), we will issue ProLogis common
shares or, at our election, cash, equivalent to the excess
amount. The number of shares to be delivered will be determined
based on a daily conversion value, as described in this
prospectus supplement, calculated on a proportionate basis for
each day of a 20 trading day observation period, as described in
this prospectus supplement. However, we may elect to deliver
cash in settlement of all or a portion of the excess amount or
we may elect to settle our conversion obligations entirely in
ProLogis common shares. 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 the cash and ProLogis common shares, if
any, issued to you upon conversion. |
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Repurchase at Holders Option |
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Holders may require us to repurchase the notes on April 1 of
2012, 2017, 2022, 2027 and 2032 at a price equal to 100% of the
principal amount of the notes being repurchased plus any accrued
and unpaid interest up to, but excluding, the repurchase date.
We will pay cash for all notes so repurchased. |
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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 Fundamental Change Permits Holders to Require
Us to Repurchase Notes), 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 |
S-2
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interest to, but excluding, the fundamental change purchase
date. We will pay cash for all notes so purchased. |
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In addition, if a fundamental change occurs prior to
April 5, 2012, 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 are our senior obligations which, together with our
obligations under our global credit facility and certain of our
other indebtedness, are secured by a pledge of certain
intercompany loans. The notes are 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 this prospectus supplement under Description
of Notes Security and Sharing Arrangements,
the notes are 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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Registration Rights |
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We agreed to file with the SEC or otherwise make available a
shelf registration statement relating to the resale of the notes
and the ProLogis common shares that may be issuable upon
conversion of the notes, and to use our best efforts to cause
the shelf registration statement to become effective under the
Securities Act, no later than 180 days after the first date
of original issuance of the notes. See Description of
Notes Registration Rights; Additional Interest
in this prospectus supplement. |
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If we fail to comply with specified obligations under the
registration rights agreement, additional interest will be
payable on the notes. See Description of Notes
Registration Rights; Additional Interest in this
prospectus supplement. |
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Use of Proceeds |
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We will not receive any proceeds from the sale of the notes
offered by this prospectus supplement or the ProLogis common
shares into which such notes are converted. |
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Risk Factors |
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You should read carefully the Risk Factors beginning
on page 5 of this prospectus supplement, together with
those included in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, 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 rules or under the laws of any |
S-3
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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. |
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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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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, 2006, which is incorporated
by reference into this prospectus supplement. See Where
You Can Find More Information in 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 loans to Bank
of America, N.A., as collateral agent, for the benefit of the
Credit Parties under and as defined in the Amended
and Restated Security Agency Agreement dated as of
October 6, 2005 (the Security Agency Agreement)
among us, the collateral agent, Bank of America, N.A., as global
administrative agent under our global senior credit facility,
and various other of our creditors. The Credit Parties under the
Security Agency Agreement include the holders of our specified
credit obligations, including all obligations arising under our
global credit facility, other Designated Senior Debt
specified therein, as well as any of our 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 holders of the notes are entitled to a pro
rata share in the proceeds of the collateral granted under the
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
S-5
subordinated to the debt and other liabilities, including trade
payables, of our subsidiaries. As of March 31, 2007, the
notes offered hereby ranked:
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equally with approximately $8.0 billion of our debt secured
equally and ratably by the pledged intercompany loans, which
amount includes our guarantee of approximately $2.9 billion
of debt of our subsidiaries;
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effectively subordinated to approximately $199 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 $4.3 billion of
debt of our subsidiaries, which includes the approximately
$2.9 billion 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 $2.9 billion 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 our global
credit facility, the acceleration of indebtedness under the
global credit facility or 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 toward the
credit obligations held by such Credit Parties in such a manner
that all Credit Parties receive payment of substantially the
same percentage of their respective credit obligations. These
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 credit obligations than other Credit
Parties that do not have the benefit of such arrangements.
Within 45 days after a triggering event, the collateral
agent will deliver a notice of such event to the trustee. 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 the 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 which 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 in the
preceding paragraph.
The Security Agency Agreement allows us to: (i) designate
our other senior debt as Designated Senior Debt;
(ii) specify which Credit Parties are entitled to vote on
issues arising under the Security Agency Agreement (and the
holders of the notes will be non-voting Credit Parties);
and/or
(iii) revoke our designation of 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. In the event that we elect to revoke our
designation of the notes as Designated Senior Debt under the
Security Agency Agreement, the holders of the notes will cease
to be Credit Parties and will no longer be entitled to any
benefit of the security and sharing arrangements contemplated by
the Security Agency Agreement and the related pledge agreements.
In addition, a majority of the voting Credit Parties under the
Security Agency Agreement may elect (a) to release some or
all of the collateral held pursuant to the Security Agency
Agreement
and/or
(b) under certain circumstances, to defer payments to
Credit Parties pursuant to the sharing arrangements either
(i) generally for various reasons or (ii) specifically
to certain holders of debt (including the holders of the notes)
if the collateral agent or the voting Credit Parties determine,
in their sole discretion, that such holders might receive more
than their share of payments and other recoveries pursuant to
the Security Agency Agreement. Without notice to or consent of
the holders of the notes, the Security Agency
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Agreement may be amended by us, the collateral agent and a
majority of the voting Credit Parties, even if such amendment is
adverse to the interests of the holders of the notes.
The Security Agency Agreement provides that whenever the
majority voting Credit Parties are granted and exercise 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 voting Credit Parties
have no obligation or duty (including implied obligations of
reasonableness, good faith or fair dealing) to any holder of
notes 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 acts as 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.
The
conditional conversion feature of the notes could result in your
receiving less than the value of ProLogis common shares into
which a note would otherwise be convertible.
The notes are convertible into cash, ProLogis common shares or a
combination of both, at our election, only if specified
conditions are met. If the specific conditions for conversion
are not met, until February 1, 2012, you will not be able
to convert your notes, and you may not be able to receive the
value of the cash
and/or
ProLogis common shares into which the notes would otherwise be
convertible.
The
settlement feature of the notes may have adverse
consequences.
Unless we elect to satisfy our conversion obligations entirely
in ProLogis common shares, the notes will be subject to net
share settlement, which means that we will satisfy our
conversion obligation to holders by paying cash in settlement of
the lesser of the principal amount and the daily conversion
value of the notes and by delivering ProLogis common shares, or,
at our election, cash, in settlement of any and all conversion
obligations in excess of the principal amount of the notes, as
described under Description of Notes
Conversion Rights Payment upon Conversion.
Accordingly, upon conversion of a note, holders might not
receive any ProLogis common shares, or they might receive fewer
ProLogis common shares relative to the daily conversion value of
the note. In addition, any settlement of a conversion of notes
will be delayed until at least the 25th trading day
following our receipt of the holders conversion notice.
Accordingly, you may receive less proceeds than expected because
the value of any ProLogis common shares that you receive may
decline (or fail to appreciate as much as you may expect)
between the day that you exercise your conversion right and the
day the daily conversion value of your notes is determined.
Our failure to convert the notes into ProLogis common shares, a
combination of cash and ProLogis common shares, or, if we so
elect, cash, upon exercise of a holders conversion right
in accordance with the provisions of the indenture would
constitute a default under the indenture. In addition, a default
under the indenture could lead to a default under existing and
future agreements governing our indebtedness. If, due to a
default, the repayment of related indebtedness were to be
accelerated after any applicable notice or grace periods, we may
not have sufficient funds to repay such indebtedness and amounts
owing in respect of the conversion of any notes.
S-7
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.
There is currently no established public trading market for the
notes. Although the initial purchasers of the notes 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 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 conversion
conditions and the lack of certain financial and other
restrictive covenants. Furthermore, even if the conversion
conditions are met, since the daily conversion value of the
notes is dependent on the closing sale price of ProLogis common
shares, volatile or depressed market prices for such shares are
likely to have a similar effect on the trading prices of the
notes. 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
and ProLogis Annual Report on
Form 10-K
for the year ended December 31, 2006, 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 on the specified dates or upon the
occurrence of a fundamental change.
You have the right to require us to repurchase your notes on
specified dates and upon the occurrence of a fundamental change
as described under Description of Notes
Repurchase of Notes at Your Option on Specified Dates and
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 on the specified dates or if a fundamental change
event occurs. In addition, future debt we incur may limit our
ability to repurchase the notes on the specified dates or upon a
fundamental change. Moreover, if you or other investors in our
notes exercise the
S-8
repurchase right on the specified dates or 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 prior to April 5, 2012, may in certain
circumstances make it more difficult 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 prior to April 5, 2012, 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 price of ProLogis common shares in the
transaction is greater than $170.00 per share or less than
$63.82 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 15.6691
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 Internal Revenue Code of 1986, as
amended, which we refer to as 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.
S-9
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 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. In such case,
such holder would receive cash upon conversion, as provided
herein.
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 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.
In addition, holders of notes may not have the right to convert
their notes upon the occurrence of such a transaction. The
fundamental change conversion provisions of the notes will not
afford holders the right to convert their notes in the event of
a consolidation, merger, share exchange, sale or other
transaction that does not constitute a fundamental change, even
if ProLogis common shares would be converted into cash,
securities or other property in such transaction.
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
S-10
shares of beneficial interest, indebtedness, or assets, cash
dividends and certain issuer tender or exchange offers as
described under Description of Notes
Conversion Rights Conversion Rate Adjustments.
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 United States Holders of the
Notes Adjustments to Conversion Rate. 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
Non-United
States Holders of the Notes Adjustments to
Conversion Rate.
We
cannot assure you that we will not be required to withhold on
payments to
Non-United
States 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 in Certain U.S. Federal
Income Tax Considerations) 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
Non-United
States Holders of the Notes Sale, Conversion or
Other Dispositions of the Notes.
USE OF
PROCEEDS
We will not receive any proceeds from the sale of the notes
offered by this prospectus supplement or the ProLogis common
shares into which such notes are convertible.
S-11
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, minority interest 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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Three Months
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Three Months
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Ended
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Ended
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Year Ended
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Year Ended
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Year Ended
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Year Ended
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Year Ended
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March 31,
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March 31,
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December 31,
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December 31,
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December 31,
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December 31,
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December 31,
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2007
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2006
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2006
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2005
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2004
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2003
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2002
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3.0x
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2.6x
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2.7x
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2.1x
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2.2x
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2.2x
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2.3x
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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. The notes are referred to in the accompanying prospectus
as debt securities. To the extent the following
description is inconsistent with the description of the general
terms and provisions of the debt securities in the accompanying
prospectus, the following description controls.
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, and a Fourth
Supplemental Indenture, dated March 26, 2007. We
collectively refer to the Original Indenture as amended and
supplemented by the First Supplemental Indenture, Second
Supplemental Indenture, Third Supplemental Indenture and Fourth
Supplemental Indenture 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 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 March 31, 2007, we had $4.7 billion
aggregate principal amount of debt securities outstanding under
the Indenture.
As described in this prospectus supplement in the section
entitled Security and Sharing Arrangements,
pursuant to various pledge agreements, ProLogis and certain of
its 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 ProLogis, including
all obligations arising under ProLogis global credit
facility, other Designated Senior Debt specified
therein, as well as any other senior debt of ProLogis designated
from time to time by ProLogis as Designated Senior
Debt in accordance with the Security Agency Agreement. The
notes are included within the definition of Designated
Senior Debt and holders of the notes are entitled to a pro
rata share in the proceeds of the collateral granted under the
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. 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.
S-12
The notes will be limited initially to $1,250,000,000 aggregate
principal amount. 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 are a single, distinct
series of debt securities. The specific terms of each other
series may differ from those of the notes. 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.
When we refer to a series of debt securities, we
mean a series of debt securities, such as the series of notes
that are being offered by means of this prospectus supplement,
issued under the Indenture. When we refer to the
notes or these notes, we mean the 2.25%
convertible senior notes due 2037 that are being offered by
means of this prospectus supplement.
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 2.25% per year and
will mature on April 1, 2037. Interest on the notes will
accrue from March 26, 2007 and will be payable
semi-annually in arrears on April 1 and October 1 of each year,
commencing on October 1, 2007 (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 15 or September 15, 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 cash payment for accrued and unpaid
interest, including additional interest, if any, upon
conversion, except as described under
Conversion Rights
Conversion
Rights
General
Upon the occurrence of any of the conditions described under the
headings Conversion upon Satisfaction of
Trading Price Condition, Conversion
Based upon ProLogis Common Shares Price,
Conversion upon Notice of Redemption,
Conversion upon Specified Corporate
Transactions, Conversion on or after
February 1, 2012 and Conversion upon
ProLogis Common Shares No Longer Being Listed, holders may
convert each of their notes at an initial conversion rate of
13.0576 ProLogis common shares per $1,000 principal amount of
notes (equivalent to a conversion price of approximately $76.58
per 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
S-13
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.
Upon conversion, we will have the right to deliver cash,
ProLogis common shares, or a combination of cash and ProLogis
common shares, in each case as described under
Payment Upon Conversion. We will inform
you through the trustee of the method we will choose to satisfy
our conversion obligations within two trading days after our
receipt of your conversion notice; provided, however, that at
any time on or prior to February 1, 2012, we may
irrevocably elect, in our sole discretion without the consent of
the holders of the notes, to satisfy all of our future
conversion obligations entirely in ProLogis common shares, and,
provided further, that we are required to settle all conversions
with a conversion date occurring on or after February 1,
2012 in the same manner and we will notify holders of the manner
of settlement on or before such date. If we do not elect
otherwise, our conversion obligations will be settled in a
combination of cash and ProLogis common shares as follows:
(i) we will pay cash in an amount equal to the lesser of
the principal amount of the notes to be converted and the
conversion value of the notes to be converted, calculated as
described in this prospectus supplement, and (ii) to the
extent that the conversion value of the notes to be converted
exceeds the principal amount of the notes to be converted, we
will issue ProLogis common shares. The number of shares to be
delivered will be determined based on a daily conversion value,
as described below under Payment Upon
Conversion Net Share Settlement, calculated on
a proportionate basis for each day of a 20 trading day
observation period, as described in this prospectus supplement.
However, we may elect to deliver cash in settlement of all or a
portion of the amount by which the conversion value of the notes
to be converted exceeds the principal amount of such notes or we
may elect to settle our conversion obligations entirely in
ProLogis common shares.
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 including additional interest, if
any, 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:
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if we have called the notes for redemption; 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 repurchase
notice or 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.
S-14
Conversion
upon Satisfaction of Trading Price Condition
A holder may convert notes during the five business day period
after any ten consecutive trading day period (the
measurement period) in which the trading
price per $1,000 principal amount of notes was less than
98% of the product of the last reported sale price per ProLogis
common share and the conversion rate for such date, subject to
compliance with the procedures and conditions described below
concerning our obligation to make a trading price determination.
The trading price of the notes on any date of
determination means the average of the secondary market bid
quotations obtained by the trustee for $2.0 million
principal amount of the notes at approximately 3:30 p.m.,
New York City time, on such determination date from three
independent nationally recognized securities dealers we select;
provided that, if three such bids cannot reasonably be obtained,
but two such bids are obtained, then the average of the two bids
shall be used, and if only one such bid can reasonably be
obtained, that one bid shall be used. If we cannot reasonably
obtain at least one bid for $2.0 million principal amount
of the notes from a nationally recognized securities dealer to
provide to the trustee, then the trading price per $1,000
principal amount of notes will be deemed to be less than 98% of
the product of the last reported sale price per
ProLogis common share and the conversion rate.
In connection with any conversion upon satisfaction of the above
trading pricing condition, and we shall have no obligation to
make such request for a determination of the trading price
unless a holder or holders of at least $1,000,000 aggregate
principal amount of notes provides us with reasonable evidence
that the trading price per $1,000 principal amount of notes
would be less than 98% of the product of the last reported sale
price per ProLogis common share and the conversion rate. At such
time, we shall select three independent nationally recognized
securities dealers to determine the trading price of the notes
beginning on the next trading day and on each successive trading
day until the trading price per $1,000 principal amount of notes
is greater than or equal to 98% of the product of the last
reported sale price per ProLogis common share and the conversion
rate.
If the trading price condition has been met, we shall so notify
the holders of the notes. If, at any point after the trading
price condition has been met, the trading price per $1,000
principal amount of notes is greater than 98% of the product of
the last reported sale price per ProLogis common share and the
conversion rate for such date, we shall so notify the holders of
notes.
The last reported sale price per ProLogis common
share on any date means the closing sale price per share (or if
no closing sale price is reported, the average of the bid and
ask prices or, if more than one in either case, the average of
the average bid and the average ask prices) on that date as
reported in composite transactions for the principal
U.S. securities exchange on which ProLogis common shares
are traded. If ProLogis common shares are not listed for trading
on a United States national or regional securities exchange on
the relevant date, the last reported sale price will
be the last quoted bid price per ProLogis common share in the
over-the-counter market on the relevant date as reported by the
National Quotation Bureau or similar organization. If ProLogis
common shares are not so quoted, the last reported sale price
will be the average of the mid-point of the last bid and ask
prices per ProLogis common share on the relevant date from each
of at least three nationally recognized independent investment
banking firms selected by us for this purpose. The last reported
sale price will be determined without reference to extended or
after-hours
trading.
Trading day means a day during which
(i) trading in ProLogis common shares generally occurs,
(ii) there is no market disruption event (as defined below)
and (iii) a last reported sale price per ProLogis common
share (other than a last reported sale price referred to in the
next to last sentence of such definition) is available for such
day; provided that if ProLogis common shares are not admitted
for trading or quotation on or by any exchange, bureau or other
organization referred to in the preceding paragraph (excluding
the next to last sentence of that paragraph), trading
day will mean any business day.
Market disruption event means the occurrence
or existence for more than one-half hour period in the aggregate
on any scheduled trading day for ProLogis common shares of any
suspension or limitation imposed on trading (by reason of
movements in price exceeding limits permitted by the stock
exchange or otherwise) in ProLogis common shares or in any
options, contracts or future contracts relating to ProLogis
common shares, and such suspension or limitation occurs or
exists at any time before 1:00 p.m. (New York City time) on
such day.
S-15
Conversion
Based upon ProLogis Common Shares Price
Holders may surrender notes for conversion in any calendar
quarter commencing at any time after March 31, 2007, and
only during such calendar quarter, if the closing price of
ProLogis common shares for at least 20 trading days in a period
of 30 consecutive trading days ending on the last trading day of
the preceding calendar quarter is more than 130% of the
conversion price per ProLogis common share on the last day of
such preceding calendar quarter, which we refer to as the
conversion trigger price.
The conversion trigger price immediately following issuance of
the notes is approximately $99.56, which is 130% of the initial
conversion price per ProLogis common share. The foregoing
conversion trigger price assumes that no events have occurred
that would require an adjustment to the conversion rate.
The conversion agent will, on our behalf, determine at the
beginning of each calendar quarter whether the notes are
convertible as a result of the price of ProLogis common shares
and notify us and the trustee.
Conversion
upon Notice of Redemption
A holder may convert any note called for redemption at any time
prior to the close of business on the day that is two business
days prior to the redemption date, even if the notes are not
otherwise convertible at such time. However, if a holder has
already delivered a fundamental change repurchase notice with
respect to a note, the holder may not convert until the holder
has withdrawn the notice in accordance with the terms of the
note.
Conversion
upon Specified Corporate Transactions
If ProLogis elects to:
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distribute to all or substantially all holders of ProLogis
common shares certain rights entitling them to purchase, for a
period expiring within 60 days, ProLogis common shares at
less than the last reported sale price of a ProLogis common
share on the trading day immediately preceding the declaration
date of the distribution; or
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distribute to all or substantially all holders of ProLogis
common shares ProLogis assets, debt securities or certain
rights to purchase ProLogis securities, which distribution
has a per share value as determined by our board of trustees
exceeding 15% of the last reported sale price per ProLogis
common share on the day preceding the declaration date for such
distribution.
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We must notify the holders of the notes at least 35 business
days prior to the ex-dividend date (defined below) for such
distribution. Once we have given such notice, holders may
surrender their notes for conversion at any time until the
earlier of 5:00 p.m., New York City time, on the business
day immediately prior to the ex-dividend date or our
announcement that such distribution will not take place, even if
the notes are not otherwise convertible at such time. The
ex-dividend date is the first date upon which a sale of ProLogis
common shares does not automatically transfer the right to
receive the relevant dividend from the seller of the common
shares to its buyer. In addition, if we are party to any
transaction or event that constitutes a fundamental change, a
holder may surrender notes for conversion at any time from and
after the 30th scheduled trading day prior to the
anticipated effective date of such transaction or event until
the corresponding fundamental change repurchase date. Holders
who convert notes in connection with any such fundamental change
occurring prior to April 5, 2012, will also be entitled to
an increase in the conversion rate to the extent described below
under Adjustment to Shares Delivered upon
Conversion upon Fundamental Change. Upon the occurrence of
a fundamental change, holders will also have the right to
require us to repurchase their notes as set forth below under
Fundamental Change Permits Holders to Require
Us to Repurchase Notes. We will notify holders of the
occurrence of a fundamental change and issue a press release no
later than 30 scheduled trading days prior to the anticipated
effective date of such transaction.
A holder will also have the right to convert notes if ProLogis
is a party to a consolidation, merger, binding share exchange or
sale or conveyance of all or substantially all of its property
and assets, in each case pursuant to which ProLogis common
shares would be converted into cash, securities
and/or other
property, even if such transaction does not also constitute a
fundamental change. A holder may exercise this conversion right
at any time beginning on the 15th calendar day prior to the
anticipated effective date of such transaction and ending on the
15th calendar day
S-16
following the effective date of such transaction. We will notify
holders of any such transaction at least 20 calendar days prior
to the anticipated effective date of such transaction.
Conversion
upon ProLogis Common Shares No Longer Being Listed
A holder may surrender notes for conversion at any time
beginning on the first business day after any 30 consecutive
trading day period during which ProLogis common shares are not
listed on a U.S. national securities exchange.
Conversion
on or after February 1, 2012
On or after February 1, 2012, a holder may surrender notes
for conversion at any time prior to the close of business on the
trading day immediately preceding the final maturity date of the
notes.
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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if required, pay all transfer or similar taxes; and
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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
In satisfaction of our obligation upon conversion of notes, we
may elect to deliver cash, ProLogis common shares or a
combination of cash and ProLogis common shares, if applicable.
We will inform the holders through the trustee of the method we
choose to satisfy our obligation upon conversion no later than
the second trading day immediately following our receipt of a
notice of conversion, provided, however, that we may irrevocably
elect, in our sole discretion and without the consent of the
holders of the notes, on or prior to February 1, 2012, to
settle all of our future conversion obligations entirely in
ProLogis shares, and provided further, that we are required to
settle all conversions with a conversion date occurring on or
after February 1, 2012 in the same manner and will notify
holders through the trustee of the manner of settlement on or
before such date.
If we do not give notice, as described above, as to how we
intend to settle, we will satisfy our conversion obligation in
cash and ProLogis common shares or, at our option, cash in
accordance with the net share settlement upon conversion method
as described below under Net Share
Settlement. We will treat all holders of notes converting
on the same trading day in the same manner. We will not,
however, have any obligation to settle our conversion
obligations arising on different trading days in the same
manner, except for conversions with a conversion date occurring
on or after February 1, 2012. That is, we may choose on one
trading date to settle in ProLogis common shares only and choose
on another trading day to settle in cash or a combination of
cash and
S-17
ProLogis common shares, provided that we will settle all
conversions with a conversion date occurring on or after
February 1, 2012 in the same manner.
Settlement in Shares. If we elect to satisfy
our conversion obligation entirely in ProLogis common shares, 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 deliver such shares as
soon as practicable after we have informed you that we have
elected to satisfy our conversion obligations entirely in
ProLogis common shares.
Net Share Settlement. If we do not elect
otherwise, we will settle each $1,000 principal amount of notes
being converted by delivering, on the third trading day
immediately following the last day of the related observation
period (as defined below), cash and ProLogis common shares or,
at our option, cash, equal to the sum of the daily settlement
amounts (as defined below) for each of the 20 trading days
during the related observation period.
The observation period with respect to any note
means the 20 consecutive trading day period beginning on and
including the second trading day after you deliver your
conversion notice to the conversion agent.
The daily settlement amount, for each of the 20
trading days during the observation period, shall consist of:
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cash equal to the lesser of $50 and the daily conversion value
relating to such day, and
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if such daily conversion value exceeds $50, a number of ProLogis
common shares equal to (i) the difference between such
daily conversion value and $50, divided by (ii) the daily
VWAP of ProLogis common shares for such day,
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subject to our right to deliver cash in lieu of all or a portion
of such ProLogis common shares as described below under
Cash Settlement.
The daily conversion value means, for each of the 20
consecutive trading days during the observation period,
one-twentieth (1/20) of the product of (1) the applicable
conversion rate and (2) the daily VWAP of ProLogis common
shares (or the consideration into which ProLogis common shares
have been converted in connection with certain corporate
transactions) on such day.
The daily VWAP of ProLogis common shares means, for
each of the 20 consecutive trading days during the observation
period, the per share volume-weighted average price as displayed
under the heading Bloomberg VWAP on Bloomberg
page PLD <equity> AQR in respect of the period
from 9:30 a.m. to 4:00 p.m. (New York City time) on
such trading day (or if such volume-weighted average price is
unavailable, the market value of one ProLogis common share on
such trading day as our board of trustees determines in good
faith using a volume-weighted method).
We will deliver cash in lieu of any fractional ProLogis common
share issuable in connection with payment of the amounts above
(based on the last reported sale price per ProLogis common share
on the last day of the applicable observation period).
Cash Settlement. If we so elect, as described
in the second paragraph of this Payment Upon
Conversion section, we may specify a percentage of the
amount by which the daily conversion value exceeds $50 that will
be settled in cash, or the cash percentage, and we
will notify you of such cash percentage in the applicable time
period as described in the second paragraph of this
Payment Upon Conversion section, which notice we refer to
as the cash percentage notice (such settlement
method is being referred to herein as the cash settlement
method upon conversion.) If we elect to specify a cash
percentage, the amount of cash that we will deliver in respect
of each trading day in the applicable observation period will
equal to the product of (1) the cash percentage and
(2) the amount by which the daily conversion value exceeds
$50 for such trading day. The number of ProLogis common shares
deliverable in respect of each trading day in the applicable
observation period will equal (i) the product of
(a) 100% minus the cash percentage and (b) the amount
by which the daily conversion value exceeds $50 for such trading
day, divided by (ii) the daily VWAP of ProLogis common
shares for such trading day. If we do not specify a cash
percentage, we must settle the entire amount by which the daily
conversion value exceeds $50 with ProLogis common shares as
described under Net Share Settlement above;
provided, however, that we will
S-18
deliver cash in lieu of any fractional Prologis common shares
issuable in connection with payment of the settlement amount as
described above.
Except as described in this paragraph, no holder of notes will
be entitled, upon conversion of the notes, to any cash payment
or adjustment on account of accrued and unpaid interest,
including additional interest, if any, on a converted note, or
on account of dividends or distributions on ProLogis common
shares issued on connection with the conversion. If notes are
converted after the close of business on a record date and prior
to the opening of business on the next interest payment date,
including the date of maturity, holders of such notes at the
close of business on the record date will receive interest,
including additional interest, if any, payable on such notes on
the corresponding interest payment date notwithstanding the
conversion. In such event, when the holder surrenders the note
for conversion, the holder must deliver payment to us of an
amount equal to the interest payable on the interest payment
date, including additional interest, if any, on the principal
amount to be converted. The foregoing sentence shall not apply
to notes called for redemption on a redemption date within the
period between the close of business on the record date and the
opening of business on the interest payment date, to notes
surrendered for conversion in connection with a fundamental
change in which we have specified a fundamental change
repurchase date that is after a record date and on or prior to
the next interest payment date, to notes surrendered for
conversion after the record date immediately preceding the
maturity date or to notes surrendered for conversion on the
interest payment date.
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 such event;
CR = the conversion rate in effect immediately after
such event;
OS0 =
the number of ProLogis common shares outstanding immediately
prior to such event; and
OS = the number 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 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):
where,
CR0 =
the conversion rate in effect immediately prior to such event;
CR = the conversion rate in effect immediately after
such event;
OS0 =
the number of ProLogis common shares outstanding immediately
prior to such event;
S-19
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; 24
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then the conversion rate will be adjusted based on the following
formula:
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CR
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=
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CR0
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x
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SP0
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SP0
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−
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FMV
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where,
CR0 =
the conversion rate in effect immediately prior to such
distribution;
CR = the conversion rate in effect immediately after
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
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=
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CR0
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x
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FMV0
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+
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MP0
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MP0
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where,
CR0 =
the conversion rate in effect immediately prior to such
distribution;
CR = the conversion rate in effect immediately after
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.
S-20
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
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=
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CR0
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x
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SP0
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−
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T
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SP0
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−
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C
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where,
CR0 =
the conversion rate in effect immediately prior to the record
date for such distribution;
CR = the conversion rate in effect immediately after
the record 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
$0.46 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
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=
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CR0
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x
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AC
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+
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(SP
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x
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OS)
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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;
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.
S-21
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.
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 preceding bullet and
outstanding as of the date the notes were first issued;
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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 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:
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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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S-22
you will be entitled thereafter to convert your notes, subject
to our successors right to deliver cash, ProLogis common
shares or common stock of our successor or a combination of cash
and ProLogis common shares, as described under
Payment Upon Conversion, into:
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cash up to the aggregate principal amount thereof; and
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in lieu of the ProLogis common shares otherwise deliverable, the
same type (in the same proportions) of consideration received by
holders of ProLogis common shares in the relevant event
(reference property).
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The amount of cash and any reference property you receive will
be based on the daily conversion values of reference property
and the applicable conversion rate, as described above.
For purposes of the foregoing, the type and amount of
consideration that a holder of ProLogis common shares would have
been entitled to in the case of reclassifications,
consolidations, mergers, sales or transfers of assets or other
transactions that cause ProLogis common shares to be converted
into the right to receive more than a single type of
consideration (determined based in part upon any form of
shareholder election) will be deemed to be the weighted average
of the types and amounts of consideration received by the
holders of ProLogis common shares that affirmatively make such
an election.
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.
Adjustment
to Shares Delivered upon Conversion upon Fundamental
Change
If a fundamental change (as defined below) occurs prior to
April 5, 2012, 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 (subject to our right to satisfy all or any part
of our conversion obligations in cash as described under
Payment Upon Conversion). We will notify
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 below under
Settlement of Conversions in a Fundamental
Change.
A fundamental change 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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S-23
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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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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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Share Price
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Effective Date
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$63.82
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$70.00
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$80.00
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$90.00
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$100.00
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$110.00
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$120.00
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$130.00
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$140.00
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$150.00
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$160.00
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$170.00
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March 26, 2007
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2.6115
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1.6953
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0.9250
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0.4917
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0.2418
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0.1080
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0.0414
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0.0076
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0.0024
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0.0017
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0.0011
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0.0006
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April 1, 2008
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2.6115
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1.6853
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0.9113
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0.4569
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0.2236
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0.0917
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0.0290
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0.0056
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0.0017
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0.0011
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0.0005
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0.0000
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April 1, 2009
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2.6115
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1.6804
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0.8637
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0.4109
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0.1781
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0.0633
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0.0165
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0.0039
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0.0007
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0.0005
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0.0004
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0.0000
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April 1, 2010
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2.6115
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1.6240
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0.7610
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0.3214
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0.1168
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0.0328
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0.0059
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0.0032
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0.0003
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0.0000
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0.0000
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0.0000
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April 1, 2011
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2.6115
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1.4809
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0.5642
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0.1748
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0.0384
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0.0060
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0.0027
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0.0024
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0.0003
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0.0000
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0.0000
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0.0000
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April 1, 2012
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2.6115
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1.2281
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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 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 $170.00 per share (subject to
adjustment), the conversion rate will not be adjusted.
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If the share price is less than $63.82 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
15.6691 per $1,000 principal amount of notes, subject to
adjustments in the same manner as the conversion rate as set
forth under 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.
Settlement
of Conversions in a Fundamental Change
As described above under Conversion Rate
Adjustments Treatment of Reference Property,
upon effectiveness of any fundamental change, the notes will be
convertible into cash or cash and reference property, as
S-24
applicable. If, as described above, we are required to increase
the conversion rate by the additional shares as a result of the
fundamental change, notes surrendered for conversion will be
settled as follows:
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If the last day of the applicable observation period related to
notes surrendered for conversion is prior to the third trading
day preceding the effective date of the fundamental change, we
will settle such conversion as described under
Payment upon Conversion above by
delivering the amount of ProLogis common shares or cash and
ProLogis common shares, if any (based on the conversion rate
without regard to the number of additional shares to be added to
the conversion rate as described above), on the third trading
day immediately following the last day of the applicable
observation period. In addition, as soon as practicable
following the effective date of the fundamental change, we will
deliver the increase in such amount of cash and reference
property deliverable in lieu of ProLogis common shares, if any,
as if the conversion rate had been increased by such number of
additional shares during the related observation period (and
based upon the related daily VWAP prices during such observation
period). If such increased amount results in an increase to the
amount of cash to be paid to holders, we will pay such increase
in cash, and if such increased settlement amount results in an
increase to the number of ProLogis common shares, we will
deliver such increase by delivering reference property based on
such increased number of shares.
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If the last day of the applicable observation period related to
notes surrendered for conversion is on or following the third
scheduled trading day preceding the effective date of the
fundamental change, we will settle such conversion as described
under Payment upon Conversion above
(based on the conversion rate as increased by the additional
shares described above) on the later to occur of (1) the
effective date of the transaction and (2) the third trading
day immediately following the last day of the applicable
observation period.
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Ownership
Limit
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 ProLogis common shares, subject to certain
exceptions. Notwithstanding any other provision of the notes, no
holder of notes will be entitled to conversion of 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 our
declaration of trust. 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.
Optional
Redemption by Us
Prior to April 5, 2012, we may not redeem the notes except
to preserve ProLogis status as a REIT as described below.
On or after April 5, 2012, we may at our option redeem all
or part of the notes for cash at a price equal to 100% of the
principal amount of the notes being redeemed, plus accrued and
unpaid interest, on at least 30 days and no more than
60 days notice. We may not provide notice of a
redemption of notes at our option that specifies that we will
settle conversions of notes prior to such redemption in cash and
ProLogis common shares unless, at the time of such notice, we
have available to us sufficient registered ProLogis common
shares to satisfy our obligations in respect of any such notes
that are converted into cash and ProLogis common shares.
You may convert notes or portions of notes called for redemption
even if the notes are not otherwise convertible at that time,
until the close of business on the day that is two business days
prior to the redemption date.
S-25
If we decide to redeem fewer than all of the notes, the trustee
will select the notes to be redeemed by lot, or in its
discretion, on a pro rata basis. If any note is to be redeemed
in part only, a new note in principal amount equal to the
unredeemed principal portion will be issued. If a portion of
your notes is selected for partial redemption and you convert a
portion of your notes, the converted portion will be deemed to
be part of the portion selected for redemption.
If at any time we determine it is necessary to redeem the notes
in order to preserve ProLogis status as a REIT, we may
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.
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 purchase agreement with the
initial purchasers, 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.
Repurchase
of Notes at Your Option on Specified Dates
On April 1 of 2012, 2017, 2022, 2027, and 2032, you may require
us to repurchase any outstanding notes for which you have
properly delivered and not withdrawn a written repurchase
notice, subject to certain additional conditions. You may submit
your notes for repurchase to the paying agent at any time from
the opening of business on the date that is 25 business days
prior to the repurchase date until the close of business on the
fifth business day prior to the repurchase date.
We will repurchase each outstanding note for which you have
properly delivered and not withdrawn a written repurchase notice
at a repurchase price equal to 100% of the principal amount of
the notes being redeemed, plus accrued and unpaid interest up
to, but excluding, the repurchase date.
We will pay the repurchase price in cash. For a discussion of
the tax treatment of a holder receiving cash, see Certain
U.S. Federal Income Tax Considerations United
States Holders of Notes Sale, Conversion or
Redemption of Notes.
Fundamental
Change Permits Holders to Require Us to Repurchase
Notes
If a fundamental change (as defined above in this section)
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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S-26
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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.
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 under the caption We may be
unable to repurchase notes on the specified dates or 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.
S-27
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.
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).
Security
and Sharing Arrangements
Pursuant to various pledge agreements, ProLogis and certain of
its subsidiaries have pledged specified intercompany loans 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. The Credit Parties under the Security
Agency Agreement include the holders of specified credit
obligations of ProLogis, including, all obligations arising
under ProLogis global credit facility, certain hedging
obligations of ProLogis, other Designated Senior
Debt specified therein, as well as any other senior debt
of ProLogis designated from time to time by ProLogis as
Designated Senior Debt in accordance with the
Security Agency Agreement.
The notes are included within the definition of Designated
Senior Debt and holders of the notes will be entitled to
share ratably in any recoveries received by the holders of the
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 ProLogis or any other borrower under its
global credit facility, the acceleration of indebtedness under
the global credit facility or 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 ProLogis and its subsidiaries to be
applied toward the credit obligations held by such Credit
Parties in such a manner that all Credit Parties receive payment
of substantially the same percentage of their respective credit
obligations. These 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 ProLogis or that
have the benefit of guarantees from one or more subsidiaries of
ProLogis) to recover a higher percentage of their credit
obligations than other Credit Parties that do not have the
benefit of such arrangements.
Within 45 days after a triggering event, the collateral
agent will deliver a notice of such event to the trustee. 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 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.
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The Security Agency Agreement allows ProLogis to
(i) designate other senior debt of ProLogis as Designated
Senior Debt; (ii) specify which Credit Parties are entitled
to vote on issues arising under the Security Agency Agreement
(and the holders of the debt securities will be non-voting
Credit Parties);
and/or
(iii) revoke its designation 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. In the event that ProLogis elects to revoke
its designation of the debt securities as Designated Senior Debt
under the Security Agency Agreement, the holders of the debt
securities will cease to be Credit Parties and will no longer be
entitled to any benefit of the security and sharing arrangements
contemplated by the Security Agency Agreement and the related
pledge agreements. In addition, a majority of the voting Credit
Parties under the Security Agency Agreement may elect
(a) to release some or all of the collateral held pursuant
to the Security Agency Agreement
and/or
(b) under certain circumstances, to defer payments to
Credit Parties pursuant to the sharing arrangements either
(i) generally for various reasons or (ii) specifically
to certain holders of debt (including the holders of the debt
securities) if the collateral agent or the voting Credit Parties
determine, in their sole discretion, that such holders might
receive more than their share of payments and other recoveries
pursuant to the Security Agency Agreement. Without notice to or
consent of the holders of the debt securities, the Security
Agency Agreement may be amended by ProLogis, the collateral
agent and a majority of the voting Credit Parties, even if such
amendment is adverse to the interests of the holders of the debt
securities.
The Security Agency Agreement provides that whenever the
majority voting Credit Parties are granted and exercise 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 voting Credit Parties
will have no obligation or duty (including implied obligations
of reasonableness, good faith or fair dealing) to any holder of
debt securities 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 acts as
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 right 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:
(1) After the transaction, we, or a person organized and
existing under the laws of the United States or one of the fifty
states or 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) 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.
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.
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 cash, ProLogis common shares or combination
thereof, as applicable, 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 $10,000,000 ($50,000,000 with respect to debt
securities issued after the date of the Second Supplemental
Indenture, after such time as any debt securities issued under
the Indenture prior to the date of the Second Supplemental
Indenture are no longer outstanding) 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 $10,000,000 ($50,000,000 with
respect to debt securities issued after the date of the Second
Supplemental Indenture after such time as any debt securities
issued under the Indenture prior to the date of the Second
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Supplemental Indenture are no longer outstanding) and such
judgments, orders or decrees remain undischarged, unstayed and
unsatisfied in an aggregate amount, excluding amounts fully
covered by insurance, in excess of $10,000,000 ($50,000,000 with
respect to debt securities issued after the date of the Second
Supplemental Indenture after such time as any debt securities
issued under the Indenture prior to the date of the Second
Supplemental Indenture are no longer outstanding) 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.
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.
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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 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,
redemption price or repurchase 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;
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(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;
(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;
(2) 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;
(3) 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
(4) 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;
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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 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.
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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.
Governing
Law
The indenture provides that it and the notes will be governed
by, and construed in accordance with, the laws of the State of
New York.
Registration
Rights; Additional Interest
We and the initial purchasers of the notes entered into a
registration rights agreement on March 26, 2007. Pursuant
to the registration rights agreement, we agreed:
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(x) to file with the SEC, or otherwise have on file with
the SEC, a shelf registration statement (which shall be an
automatic shelf registration statement if we are eligible to use
an automatic shelf registration at the time of filing) to cover
resales of registrable securities (as described below) by the
holders who satisfy certain conditions and provide the
information described below for use with the shelf registration
statement; or (y) if we are not eligible to use an
automatic shelf registration statement, to use our best efforts
to cause a shelf registration statement covering resales of the
registrable securities to be filed with the SEC and to be
declared effective under the Securities Act, in each case as
promptly as practicable thereafter, but in any event, by the
180th day
after the date we first issue the notes or otherwise make
available for use by selling securityholders an effective shelf
registration statement no later than such date; and
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to use our best efforts to keep the shelf registration statement
continuously effective under the Securities Act, until there are
no registrable securities outstanding.
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The registration rights agreement permits us to prohibit offers
and sales of registrable securities pursuant to the shelf
registration statement for a period not to exceed an aggregate
of 45 days in any three-month period and not to exceed an
aggregate of 90 days in any
12-month
period, under certain circumstances relating to pending
corporate developments, public filings with the SEC and similar
events and subject to certain conditions. We refer to any such
period during which we may prohibit offers and sales as a
suspension period. We need not specify the nature of
the event giving rise to a suspension in any notice to holders
of the registrable securities of the existence of such a
suspension. Each holder, by its acceptance of the notes, agrees
to hold any such suspension notice in response to a notice of a
proposed sale in confidence. However, if the suspension relates
to a proposed or pending material business transaction, the
disclosure of which our board of trustees determines in good
faith would be reasonably likely to impede our ability to
consummate such transaction, or would otherwise be seriously
detrimental to us and our subsidiaries taken as a whole, we may
extend the suspension period from 45 days to 60 days
in any three-month period or from 90 days to 120 days
in any
12-month
period.
In addition, if we deem it necessary to file a post-effective
amendment to the registration statement in order to make changes
to the information in the prospectus regarding the selling
holders or the plan of distribution, we may suspend sales under
the registration statement until the date on which the
post-effective amendment is declared effective by the SEC;
provided, however, that any days in any such suspension period
shall count towards the 45- and
90-day
periods (or the extended
60-day and
120-day
periods, if applicable) referred to in the previous paragraph.
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Registrable securities means each note and any
ProLogis common shares delivered upon conversion of the notes;
however, that they will cease being registrable securities upon
the earlier of:
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the date the notes and any such ProLogis common shares have been
effectively registered under the Securities Act and disposed of
in accordance with the shelf registration statement; and
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the date when the notes or any such ProLogis common shares are
eligible for sale by a holder that is not an affiliate of ours
pursuant to Rule 144(k) under the Securities Act or any
similar provision then in effect.
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Holders of registrable securities must deliver to us certain
information to be used in connection with, and to be named as
selling securityholders in, the shelf registration statement in
order to have their registrable securities included in the shelf
registration statement. Any holder that does not duly complete
and deliver a questionnaire or provide the information it
requires will not be named as a selling securityholder in the
shelf registration statement and will not be permitted to sell
any registrable securities held by that holder pursuant to the
shelf registration statement. We cannot assure you that we will
be able to maintain an effective and current shelf registration
statement as required. The absence of an effective shelf
registration statement is likely to limit a holders
ability to sell its registrable securities and adversely affect
the price, if any, at which it may sell its registrable
securities.
If:
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the shelf registration statement has not become or been declared
effective under the Securities Act by the
180th day
after the first issue date of the notes or an effective shelf
registration statement covering resales of the registrable
securities is otherwise not made available for use by selling
securityholders by such date;
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a holder supplies the questionnaire described below after the
effective date of the shelf registration statement or the date
after which we first make available an effective shelf
registration statement for use by selling securityholders, and
we fail to supplement or amend the shelf registration statement,
or file a new shelf registration statement, in accordance with
the terms of the registration rights agreement, in order to add
such holder as a selling securityholder;
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the shelf registration statement is filed and has become
effective under the Securities Act, but then ceases to be
effective (without being succeeded immediately by an additional
shelf registration statement that is filed and immediately
becomes effective) or usable for the offer and sale of
registrable securities, other than as a result of a requirement
to file a post-effective amendment or prospectus supplement to
the registration statement in order to make changes to the
information in the prospectus forming part of the shelf
registration statement regarding the selling securityholders or
the plan of distribution, and (1) we do not cure the lapse
of effectiveness or usability of the registration statement
within ten business days (or, if a suspension period is then in
effect, the tenth business day following the expiration of such
suspension period) by a post-effective amendment, prospectus
supplement or report filed pursuant to the Exchange Act, or
(2) if suspension periods exceed an aggregate of
45 days in any three-month period or an aggregate of
90 days in any
12-month
period (or the extended
60-day and
120-day
periods described above, if applicable); or
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we fail to name as a selling securityholder, in the shelf
registration statement or any amendment to the shelf
registration statement, at the time it becomes effective under
the Securities Act, or in any prospectus relating to the shelf
registration statement, at the time we file the prospectus or,
if later, the time the related shelf registration statement or
amendment becomes effective under the Securities Act, any holder
that is entitled to be so named as a selling securityholder
within the prescribed time periods;
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then we will pay additional interest to each holder of notes
then outstanding that constitute registrable securities as set
forth below.
We refer to each event described in the bullet points above as a
registration default.
Additional interest will accrue on the notes then outstanding
that constitute registrable securities, from, and including, the
day following the registration default to, but excluding, the
day on which the registration default has been cured. Additional
interest will be paid semi-annually in arrears, with the first
semi-annual payment due on the
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first interest payment date, as applicable, following the date
on which such additional interest begins to accrue, and will
accrue at a rate per year equal to:
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an additional 0.25% of the principal amount to, and including,
the
90th day
following such registration default; and
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an additional 0.50% of the principal amount from and after the
91st day
following such registration default.
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In no event will additional interest accrue at a rate per year
exceeding 0.50%.
We will not pay any additional interest on any note after it has
been converted for ProLogis common shares. If a note ceases to
be outstanding during a registration default, we will prorate
the additional interest to be paid with respect to that note. So
long as a registration default continues, we will pay additional
interest in cash on April 1 and October 1 of each year to each
holder who is entitled to receive additional interest in respect
to registrable securities of which the holder was the holder of
record at the close of business on the immediately preceding
March 15 and September 15, respectively. Following the cure
of a registration default, additional interest will cease to
accrue with respect to that registration default. In addition,
no additional interest will accrue after the period we must keep
the shelf registration statement effective under the Securities
Act or on any note that ceases to be a registrable security.
However, we will remain liable for any previously accrued
additional interest. Other than our obligation to pay additional
interest, we will not have any liability for damages with
respect to a registration default on any registrable securities.
We agreed in the registration rights agreement to give notice to
all holders of the filing and effectiveness of the initial shelf
registration statement by release through a reputable national
newswire service; provided that if we designate a previously
filed and effective shelf registration statement for use by
holders of registrable securities, in lieu of the foregoing
notice we will provide notice of our designation of such shelf
registration statement and the date on which we will first make
available for use by selling securityholders a prospectus
thereunder.
A holder of registrable securities that does not provide us with
a completed questionnaire or the information called for by it on
or prior to the tenth business day before the date the initial
shelf registration statement becomes effective will not be named
as a selling security holder in the shelf registration statement
when it becomes effective and will not able to use the shelf
registration statement to resell registrable securities.
Similarly, if we designate an effective shelf registration
statement for use by selling securityholders, a holder of
registrable securities that does not provide us with a completed
questionnaire or the information called for by it on or prior to
the tenth business day before the date of the initial prospectus
made available to selling securityholders will not be named as a
selling securityholder in the prospectus and will not able to
use the shelf registration statement to resell registrable
securities. However, in either case, such a holder of
registrable securities may thereafter provide us with a
completed questionnaire, following which we will, as promptly as
reasonable practicable after the date we receive the completed
questionnaire, but in any event within ten business days after
that date (except as described below), file a supplement to the
prospectus relating to the shelf registration statement or, if
required, file a post-effective amendment or a new shelf
registration statement in order to permit resales of such
holders registrable securities. However, if we receive the
questionnaire during a suspension period, or we initiate a
suspension period within five business days after we receive the
questionnaire, then we will except as described below, make the
filing within ten business days after the end of the suspension
period. We will not be required to file more than three such
amendments or supplements for all holders during a fiscal
quarter. If we file a post-effective amendment or a new shelf
registration statement, then we will use our respective
reasonable best efforts to cause the post-effective amendment or
new shelf registration statement to be declared effective under
the Securities Act, as promptly as practicable, but in any event
by the 30th day in the case of a post-effective amendment
and the
60th day
in the case of a new shelf registration statement, after the
date the registration rights agreement requires us to file the
post-effective amendment or new registration statement, as
applicable.
If a holder does not deliver a duly completed questionnaire on
or before the tenth business day before the effective date of
the original shelf registration statement or on or before the
tenth business day before the date the prospectus is first made
available for use by selling securityholders, the holder could
experience significant additional delay. To the extent that any
holder of registrable securities identified in the shelf
registration statement is a broker-dealer, or is an affiliate of
a broker-dealer that did not acquire its registrable securities
in the ordinary
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course of its business or that at the time of its purchase of
registrable securities had an agreement or understanding,
directly or indirectly, with any person to distribute the
registrable securities, we understand that the SEC may take the
view that such holder is, under the SECs interpretations,
an underwriter within the meaning of the Securities
Act.
This summary of the registration rights agreement is not
complete and is qualified in its entirety by reference to the
registration rights agreement.
Book-Entry
System
The Depository Trust Company, New York, New York
(DTC), is acting as securities depository for the
notes. The notes have been issued as fully-registered securities
registered in the name of Cede & Co., which is
DTCs nominee. Fully-registered global notes in book-entry
form have been 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;
(2) we issuer, at our option, notifies the trustee in
writing that we elects to cause the issuance of the certificated
notes; or
(3) there shall have occurred and be continuing a default
or event of default with respect to the debt securities.
S-38
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).
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 initial purchasers 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 initial purchasers), 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 initial purchasers
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,
additional interest, 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, additional interest, 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
S-39
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 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.
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 Internal Revenue Code of 1986, as amended (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 or ProLogis common shares for which the notes may
be converted and who hold the notes or ProLogis common shares
for which the notes may be converted 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 or ProLogis common shares for which the notes may
be converted as part of a straddle, a
conversion transaction or other integrated
transaction, persons that have a functional currency
other than the U.S. dollar, person 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 or ProLogis
common shares for which the notes may be converted.
If a partnership (or other entity treated as a partnership for
U.S. federal income tax purposes) holds the notes or
ProLogis common shares for which the notes may be converted, 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 or ProLogis common
shares for which the notes may be converted, 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.
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.
S-40
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 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, subject to the exception described below under
Amortizable Bond Premium..
Market Discount. If a United States Holder
purchases a note for an amount that is less than its stated
redemption price at maturity (i.e. the par amount of the note),
the amount of the difference will be treated as market discount
for U.S. federal income tax purposes, unless this
difference is less than a specified de minimis amount.
A United States Holder will be required to treat any principal
payment on, or any gain on the sale, exchange, retirement or
other disposition of, a note as ordinary income to the extent of
the market discount accrued on the note at the time of the
payment or disposition. In general, the amount of market
discount that has accrued is determined on a ratable basis, with
an equal amount of market discount allocated to each day of
every accrual period, unless this market discount has been
previously included in income by the United States Holder
pursuant to an election by the United States Holder to include
market discount in income as it accrues, or pursuant to a
constant yield election by the United States Holder as described
below Original Issue Discount. Market
discount that is included in income as it accrueswill result in
an increase in the United States Holders tax basis in the
note. An election to include market discount currently applies
to all debt instruments acquired by the United States Holder on
or after the first day of the first taxable year to which the
election applies, and is irrevocable without the consent of the
IRS. If the note is disposed of in certain nontaxable
transactions (not including its conversion into common stock),
accrued market discount will be included as ordinary income to
the United States Holder as if such United States Holder had
sold the note in a taxable transaction at its then fair market
value. In addition, the United States Holder may be required to
defer, until the maturity of the note or its earlier disposition
(including certain nontaxable transactions, but not including
its conversion into Common Stock), the deduction of all or a
portion of the interest expense on any indebtedness incurred or
maintained to purchase or carry such note.
Upon conversion of a note acquired at a market discount, any
market discount not previously included in income (including as
a result of the conversion) will carryover to the common stock
received. Any such market discount that is carried over to
common stock received upon conversion will be taxable as
ordinary income upon the sale or other disposition of the common
stock. Whether a United States Holder that converts a note with
market discount into cash and shares of our common stock is
required to recognize income with respect to all or a portion of
its accrued market discount not previously included in income is
uncertain. Prospective purchasers should consult their own tax
advisors as to the tax treatment of the conversion of a note for
cash and shares of our common stock.
S-41
Amortizable Bond Premium. If a United States
Holders tax basis in a note, immediately after the
purchase, is greater than the stated redemption price at
maturity of the note, the holder will be considered to have
purchased the note with amortizable bond premium. In general,
amortizable bond premium with respect to any note will be equal
in amount to the excess, if any, of the tax basis (reduced as
set forth in the following sentence) over the stated redemption
price at maturity of the note. For this purpose only, a
holders tax basis in a note is reduced by an amount equal
to the value of the option to convert the note into common
stock; the value of this conversion option may be determined
under any reasonable method. The United States Holder may elect
to amortize any such bond premium, using a constant yield
method, over the remaining term of the note. A United States
Holder may generally use the amortizable bond premium allocable
to an accrual period to offset qualified stated interest
required to be included in such Holders income with
respect to the note in that accrual period, and any excess over
the stated interest may be deductible over the term of the note.
A United States Holder who elects to amortize bond premium must
reduce its tax basis in the note by the amount of the premium
amortized in any year. An election to amortize bond premium
applies to all taxable debt obligations then owned and
thereafter acquired by the United States Holder and may be
revoked only with the consent of the IRS.
If a United States Holder makes a constant yield election (as
described below under Original Issue
Discount) for a note with amortizable bond premium, such
election will result in a deemed election to amortize bond
premium for all of the holders debt instruments with
amortizable bond premium and may be revoked only with the
permission of the IRS with respect to debt instruments acquired
after revocation.
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 (1) holders of the notes have the right to require
ProLogis to repurchase their notes on April 1, 2012 for
cash equal to 100 percent of the principal amount of the
notes to be repurchased plus any accrued but unpaid interest and
(2) the exercise of this put option on April 1, 2012
would maximize the yield to the holder, this put option will be
deemed exercised for purposes of determining the maturity date
of the notes and whether the statutory de minimis amount is
equaled or exceeded. As a result, the statutory de minimis
amount with respect to the notes is 1.25%.
Because the notes were issued at a discount greater than 1.25%,
the notes are 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.
Notwithstanding that the put option will be deemed exercised for
purposes of determining the maturity date of the notes, as
discussed above, if in fact this put option is not exercised by
holders of the notes on April 1, 2012, then, solely for
purposes of determining the OID accrual on the notes, the yield
and maturity of the notes are redetermined by treating the notes
as retired and then reissued on such date for an amount equal to
the adjusted issued price of the notes on that date.
A United States Holder may make an election to include in gross
income all interest that accrues on a note (including stated
interest, market discount and de minimis market discount, as
adjusted by any amortizable bond premium) as original issue
discount in accordance with a constant yield method based on the
compounding of interest (a constant yield election).
Such election applies on a
note-by-note
basis, and may be revoked only with the permission of the IRS.
S-42
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 the
amount of any OID or market discount, if any, previously
included in income with respect to the note, and decreased by
the amount of amortized bond premium and the amount of payments
(other than stated interest payments) received with respect to
the note Special rules may apply to notes redeemed in part
Subject to the market discount rules described above, 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
of the Notes.
Conversion Entirely for Cash. In the event
that ProLogis satisfies the conversion obligation entirely in
cash, a United States Holder will recognize gain or loss equal
to the difference between the proceeds received by such holder
(excluding amounts attributable to accrued but unpaid interest,
which will be taxable as ordinary income if not previously
included in such holders income) and the United States
Holders adjusted tax basis in the note. See
Sale or Other Disposition of the Notes above.
Conversion Entirely for ProLogis Common
Shares. If ProLogis satisfies the conversion
obligation entirely in ProLogis common shares, a United States
Holder will not recognize taxable gain or loss on the conversion
(excluding shares allocable to interest, which will be taxable
as ordinary income if not previously included in such
holders income, and cash 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
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 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, the 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.
Conversion for a Combination of Cash and ProLogis Common
Shares. If ProLogis satisfies the conversion
obligation for a combination of cash and ProLogis common shares,
the U.S. federal income tax treatment will depend upon
whether the conversion is characterized as a recapitalization or
as in part a conversion and in part a redemption of the notes.
If the conversion of the notes constitutes a recapitalization, a
United States Holder will recognize as taxable income any gain
realized in the conversion to the extent of the cash received
(excluding amounts or shares allocable to interest, which will
be taxable as ordinary income if not previously included in such
holders income, and cash received in lieu of a fractional
ProLogis common share), but no loss will be recognized on such
conversion. The United States Holders tax basis in the
ProgLogis common shares permitted to be received tax-free will
equal the United States Holders tax basis in the notes
(reduced by any tax basis allocable to a fractional ProLogis
common share), less the amount of cash received (excluding
amounts allocable to accrued but unpaid interest and cash
received in lieu of a fractional ProLogis common share), plus
the amount of taxable gain recognized on the conversion. The
United States Holders holding period for the ProLogis
common shares will be as described above in
Conversion Entirely for ProLogis Common Shares. Cash
received in lieu of a fractional ProLogis common share will be
treated as described above in Conversion Entirely
for ProLogis Common Shares.
S-43
If the conversion of the notes is instead treated as in part a
conversion into ProLogis common shares and in part a payment in
redemption of the notes, a United States Holder would not
recognize any taxable gain or loss with respect to the portion
of the notes considered to be converted into ProLogis common
shares, as described above in Conversion
Entirely for ProLogis Common Shares. The U.S. federal
income tax treatment to United States Holders with respect to
cash received in lieu of a fractional ProLogis common share, the
United States Holders tax basis in the ProLogis common
shares received, and the United States Holders holding
period for the ProLogis common shares received will be as
described above in Conversion Entirely for
ProLogis Common Shares. The cash received with respect to
the portion of the notes considered to be redeemed would likely
be treated as received in redemption of such portion. In that
event, a United States Holder would generally recognize gain or
loss as described above in Conversion Entirely
for Cash.
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 the accompanying
prospectus under the heading Federal Income Tax
Considerations Tax of ProLogis Shareholders.
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%,
when such holder receives payments of stated interest and
accruals of OID 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.
Interest. Subject to the discussion below
regarding backup withholding, interest paid on the notes
(including OID) 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
S-44
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. 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 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
Sale, Conversion or Other Disposition 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
S-45
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, if any, if
such
Non-United
States. Holder 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 sale,
redemption, repurchase, conversion or other disposition of their
notes.
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 in the accompanying prospectus
under the heading Federal Income Tax
Considerations Taxation of ProLogis
Shareholders Taxation of Foreign Shareholders.
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) 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%) 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 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
S-46
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.
SELLING
SECURITYHOLDERS
We originally issued the notes to J.P. Morgan Securities
Inc., Morgan Stanley & Co. Incorporated and
UBS Securities LLC in a private placement in March 2007.
The notes were immediately resold by the initial purchasers to
persons reasonably believed by the initial purchasers to be
qualified institutional buyers within the meaning of
Rule 144A under the Securities Act in transactions exempt
from registration under the Securities Act. Selling
securityholders, including their transferees, pledgees or donees
or their successors, may from time to time offer and sell the
notes and the ProLogis common shares into which the notes are
convertible in certain circumstances pursuant to this prospectus
supplement. Our registration of the notes and the ProLogis
common shares issuable, in certain circumstances, upon
conversion of the notes does not necessarily mean that the
selling securityholders will sell all or any of the notes or the
ProLogis common shares. Unless set forth below, none of the
selling securityholders has had within the past three years any
material relationship with us or any of our predecessors or
affiliates.
The following table sets forth certain information concerning
the principal amount of notes beneficially owned by each selling
securityholder and the number of ProLogis common shares that may
be offered from time to time by each selling securityholder
under this prospectus supplement. The information is based on
information provided to us by or on behalf of the selling
securityholders on or prior to July 10, 2007. The number of
ProLogis common shares issuable upon conversion of the notes
shown in the table below represents the maximum number of
ProLogis common shares issuable upon conversion of the notes
assuming conversion of the full amount of notes held by each
holder at the initial exchange rate of 13.0576 ProLogis common
shares per $1,000 principal amounts of the notes. This
conversion rate is subject to adjustments in certain
circumstances. Because the selling securityholders may offer all
or some portion of the notes or ProLogis common shares issuable
upon exchange of the notes, we have assumed for purposes of the
table below that the named selling securityholders will sell all
of the notes or convert all of the notes and sell all of the
ProLogis common shares issuable upon exchange of the notes
offered pursuant to this prospectus supplement. In addition, the
selling securityholders identified below may have sold,
transferred or otherwise disposed of all or a portion of their
notes since the date on which they provided the information
regarding their notes in transactions exempt from the
registration requirements of the Securities Act. Information
about the selling securityholders may change over time. Any
changed information given to us by the selling securityholders
will be set forth in prospectus supplements if and when
necessary or, if appropriate, a post-effective amendment to the
registration statement of which this prospectus supplement is a
part. Because the selling securityholders may offer all or some
of their notes or the underlying ProLogis common shares from
time to time, we cannot estimate the amount of notes or
underlying ProLogis common shares that will be held by the
selling securityholders upon the termination of any particular
offering. See Plan of Distribution for further
information.
To our knowledge, except as described below, the selling
securityholders have sole voting and investment power with
respect to all of the securities shown as beneficially owned by
them.
S-47
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Other ProLogis
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Aggregate
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Common Shares
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Principal
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Number of
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Owned Before
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Amounts of
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ProLogis
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the Offering
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Percentage
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Notes
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Common
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and Assumed
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of ProLogis
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Beneficially
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Percentage
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Shares
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to be Owned
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Common
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Owned That
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of Notes
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That may
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Following
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Shares
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Name
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may be Sold
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Outstanding(1)
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be Sold
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the Offering
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Outstanding(2)
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(In dollars)
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ACE Tempest Reinsurance Ltd.
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1,285,000
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16,779
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AHFP Context
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650,000
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8,487
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Alabama Childrens Hospital
Foundation
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150,000
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1,958
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Alexandra Global Master
Fund LTD.
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5,000,000
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65,288
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Allstate Insurance Company
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1,000,000
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13,057
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293,358
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Allstate Life Insurance Company
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1,000,000
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13,057
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293,358
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Altma Fund SICAV PLC in
respect of the Grafton Sub Fund
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2,850,000
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37,214
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American Health and Life
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400,000
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5,223
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Amerisure Mutual Insurance Company
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1,050,000
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13,710
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Argent Classic Convertible
Arbitrage Fund Ltd.
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37,240,000
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3.0
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486,265
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Argent Classic Convertible
Arbitrage Fund II, L.P.
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1,460,000
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19,064
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Argent Classic Convertible
Arbitrage Fund L. P.
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6,410,000
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83,699
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Argent LowLev Convertible
Arbitrage Fund Ltd.
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3,000,000
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39,172
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Argent LowLev Convertible
Arbitrage Fund II, LLC
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120,000
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1,566
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Argentum Multistrategy Fund 1
LP Classic
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200,000
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2,611
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Argentum Multi-Strategy
Fund Ltd Classic
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680,000
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8,879
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Aristeia International Limited
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54,378,000
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4.4
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710,046
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Aristeia Partners LP
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622,000
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8,121
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|
|
Arkansas PERS
|
|
|
1,055,000
|
|
|
|
|
|
|
|
13,775
|
|
|
|
|
|
|
|
|
|
Arlington County Employees
Retirement System
|
|
|
1,330,000
|
|
|
|
|
|
|
|
17,366
|
|
|
|
|
|
|
|
|
|
Attorneys
Title Insurance Fund
|
|
|
260,000
|
|
|
|
|
|
|
|
3,394
|
|
|
|
|
|
|
|
|
|
Bancroft Fund LTD.
|
|
|
1,000,000
|
|
|
|
|
|
|
|
13,057
|
|
|
|
|
|
|
|
|
|
Bank of America Pension Plan
|
|
|
1,500,000
|
|
|
|
|
|
|
|
19,586
|
|
|
|
|
|
|
|
|
|
Basso Fund Ltd.
|
|
|
280,000
|
|
|
|
|
|
|
|
3,656
|
|
|
|
|
|
|
|
|
|
Basso Holdings Ltd.
|
|
|
3,690,000
|
|
|
|
|
|
|
|
48,182
|
|
|
|
|
|
|
|
|
|
Basso Multi-Strategy Holding
Fund Ltd.
|
|
|
830,000
|
|
|
|
|
|
|
|
10,837
|
|
|
|
|
|
|
|
|
|
Black Diamond Convertible Offshore
LDC
|
|
|
2,500,000
|
|
|
|
|
|
|
|
32,644
|
|
|
|
|
|
|
|
|
|
Black Diamond Offshore Ltd.
|
|
|
831,000
|
|
|
|
|
|
|
|
10,850
|
|
|
|
|
|
|
|
|
|
Boilermakers Blacksmith Pension
Trust
|
|
|
1,155,000
|
|
|
|
|
|
|
|
15,081
|
|
|
|
|
|
|
|
|
|
Brookline Avenue Master Fund,
L.P.
|
|
|
2,000,000
|
|
|
|
|
|
|
|
26,115
|
|
|
|
|
|
|
|
|
|
S-48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other ProLogis
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
Number of
|
|
|
Owned Before
|
|
|
|
|
|
|
Amounts of
|
|
|
|
|
|
ProLogis
|
|
|
the Offering
|
|
|
Percentage
|
|
|
|
Notes
|
|
|
|
|
|
Common
|
|
|
and Assumed
|
|
|
of ProLogis
|
|
|
|
Beneficially
|
|
|
Percentage
|
|
|
Shares
|
|
|
to be Owned
|
|
|
Common
|
|
|
|
Owned That
|
|
|
of Notes
|
|
|
That may
|
|
|
Following
|
|
|
Shares
|
|
Name
|
|
may be Sold
|
|
|
Outstanding(1)
|
|
|
be Sold
|
|
|
the Offering
|
|
|
Outstanding(2)
|
|
|
|
(In dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASAM Argent Classic Convertible
Arbitrage Fund Limited
|
|
|
1,860,000
|
|
|
|
|
|
|
|
24,287
|
|
|
|
|
|
|
|
|
|
CASAM Context Offshore Advantage
Fund Limited
|
|
|
2,050,000
|
|
|
|
|
|
|
|
26,768
|
|
|
|
|
|
|
|
|
|
CBARB, a segregated acct. of Geode
Capital Master Fund Ltd.
|
|
|
4,000,000
|
|
|
|
|
|
|
|
52.230
|
|
|
|
|
|
|
|
|
|
CC Arbitrage, Ltd.
|
|
|
2,000,000
|
|
|
|
|
|
|
|
26,115
|
|
|
|
|
|
|
|
|
|
Chrysler Corporation Master
Retirement Trust
|
|
|
5,730,000
|
|
|
|
|
|
|
|
74,820
|
|
|
|
|
|
|
|
|
|
Class C Trading Company,
Ltd.
|
|
|
2,030,000
|
|
|
|
|
|
|
|
26,506
|
|
|
|
|
|
|
|
|
|
CNHCA Master Account, L.P.
|
|
|
4,000,000
|
|
|
|
|
|
|
|
52,230
|
|
|
|
|
|
|
|
|
|
Columbia Convertible Securities
Fund
|
|
|
4,000,000
|
|
|
|
|
|
|
|
52,230
|
|
|
|
|
|
|
|
|
|
Context Advantage Master Fund,
L.P.
|
|
|
9,600,000
|
|
|
|
|
|
|
|
125,352
|
|
|
|
|
|
|
|
|
|
Continental Assurance Company
|
|
|
2,500,000
|
|
|
|
|
|
|
|
32,644
|
|
|
|
|
|
|
|
|
|
CQS Convertible and Quantitative
Strategies Master Fund Limited
|
|
|
20,000,000
|
|
|
|
1.6
|
|
|
|
261,152
|
|
|
|
|
|
|
|
|
|
Credit Suisse Securities LLC, USA
|
|
|
4,000,000
|
|
|
|
|
|
|
|
52,230
|
|
|
|
|
|
|
|
|
|
D.E. Shaw Valence Portfolios,
L.L.C.
|
|
|
12,500,000
|
|
|
|
1.0
|
|
|
|
163,220
|
|
|
|
|
|
|
|
|
|
Daimler Chrysler Corp Emp #1
Pension Plan Dtd 4.1.89
|
|
|
3,782,000
|
|
|
|
|
|
|
|
49,383
|
|
|
|
|
|
|
|
|
|
DBAG London
|
|
|
131,257,000
|
|
|
|
10.5
|
|
|
|
1,713.901
|
|
|
|
|
|
|
|
|
|
DeepRock & Co.
|
|
|
400,000
|
|
|
|
|
|
|
|
5,223
|
|
|
|
|
|
|
|
|
|
Delaware Public Employees
Retirement System
|
|
|
3,225,000
|
|
|
|
|
|
|
|
42,110
|
|
|
|
|
|
|
|
|
|
Delta Air Lines Master
Trust CV
|
|
|
851,000
|
|
|
|
|
|
|
|
11,112
|
|
|
|
|
|
|
|
|
|
Delta Pilots
Disability & Survivorship Trust CV
|
|
|
685,000
|
|
|
|
|
|
|
|
8,944
|
|
|
|
|
|
|
|
|
|
DKR Sound Shore Oasis Holding
Fund Ltd.
|
|
|
7,500,000
|
|
|
|
|
|
|
|
97,932
|
|
|
|
|
|
|
|
|
|
Double Black Diamond Offshore LDC
|
|
|
6,669,000
|
|
|
|
|
|
|
|
87,081
|
|
|
|
|
|
|
|
|
|
Ellsworth Fund LTD.
|
|
|
1,000,000
|
|
|
|
|
|
|
|
13,057
|
|
|
|
|
|
|
|
|
|
Equity Overlay Fund, LLC
|
|
|
600,000
|
|
|
|
|
|
|
|
7,834
|
|
|
|
|
|
|
|
|
|
F.M. Kirby Foundation, Inc.
|
|
|
990,000
|
|
|
|
|
|
|
|
12,927
|
|
|
|
|
|
|
|
|
|
FFVA Mutual Insurance Company
|
|
|
87,000
|
|
|
|
|
|
|
|
1,136
|
|
|
|
|
|
|
|
|
|
Finch Tactical Plus Class B
|
|
|
400,000
|
|
|
|
|
|
|
|
5,223
|
|
|
|
|
|
|
|
|
|
Five Sticks, LP
|
|
|
200,000
|
|
|
|
|
|
|
|
2,611
|
|
|
|
|
|
|
|
|
|
Florida Power and Light
|
|
|
2,434,000
|
|
|
|
|
|
|
|
31,782
|
|
|
|
|
|
|
|
|
|
Florida Power And Light Group
Employee Pension Plan
|
|
|
1,461,000
|
|
|
|
|
|
|
|
19,077
|
|
|
|
|
|
|
|
|
|
Fore Convertible Master
Fund Ltd.
|
|
|
95,311,000
|
|
|
|
7.6
|
|
|
|
1,244,532
|
|
|
|
|
|
|
|
|
|
Fore ERISA Fund, Ltd.
|
|
|
6,689,000
|
|
|
|
|
|
|
|
87,342
|
|
|
|
|
|
|
|
|
|
FPL Group Employees Pension Plan
|
|
|
560,000
|
|
|
|
|
|
|
|
7,312
|
|
|
|
|
|
|
|
|
|
S-49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other ProLogis
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
Number of
|
|
|
Owned Before
|
|
|
|
|
|
|
Amounts of
|
|
|
|
|
|
ProLogis
|
|
|
the Offering
|
|
|
Percentage
|
|
|
|
Notes
|
|
|
|
|
|
Common
|
|
|
and Assumed
|
|
|
of ProLogis
|
|
|
|
Beneficially
|
|
|
Percentage
|
|
|
Shares
|
|
|
to be Owned
|
|
|
Common
|
|
|
|
Owned That
|
|
|
of Notes
|
|
|
That may
|
|
|
Following
|
|
|
Shares
|
|
Name
|
|
may be Sold
|
|
|
Outstanding(1)
|
|
|
be Sold
|
|
|
the Offering
|
|
|
Outstanding(2)
|
|
|
|
(In dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franklin and Marshall College
|
|
|
90,000
|
|
|
|
|
|
|
|
1,175
|
|
|
|
|
|
|
|
|
|
Georgia Healthcare Foundation
|
|
|
155,000
|
|
|
|
|
|
|
|
2,023
|
|
|
|
|
|
|
|
|
|
Georgia Municipal Employee Benefit
System
|
|
|
1,313,000
|
|
|
|
|
|
|
|
17,144
|
|
|
|
|
|
|
|
|
|
Governing Board Employees Benefit
Plan of the City of Detroit
|
|
|
32,000
|
|
|
|
|
|
|
|
417
|
|
|
|
|
|
|
|
|
|
HFR CA Global Select Master
Trust Account
|
|
|
400,000
|
|
|
|
|
|
|
|
5,223
|
|
|
|
|
|
|
|
|
|
Innovest Finanzdienstle
|
|
|
5,850,000
|
|
|
|
|
|
|
|
76,386
|
|
|
|
|
|
|
|
|
|
Institutional Benchmarks Series
(Master Feeder) Limited in Respect of Alcor Series
|
|
|
500,000
|
|
|
|
|
|
|
|
6,528
|
|
|
|
|
|
|
|
|
|
International Truck &
Engine Corporation Non-Contributory Retirement Plan Trust
|
|
|
560,000
|
|
|
|
|
|
|
|
7,312
|
|
|
|
|
|
|
|
|
|
International Truck &
Engine Corporation Retiree Health Benefit Trust
|
|
|
335,000
|
|
|
|
|
|
|
|
4,374
|
|
|
|
|
|
|
|
|
|
International Truck &
Engine Corporation Retirement Plan for Salaried Employees Trust
|
|
|
305,000
|
|
|
|
|
|
|
|
3,982
|
|
|
|
|
|
|
|
|
|
Investcorp Silverback Arbitrage
Master Fund Limited
|
|
|
4,000,000
|
|
|
|
|
|
|
|
52,230
|
|
|
|
|
|
|
|
|
|
JMG Triton Offshore Fund,
Ltd.
|
|
|
2,500,000
|
|
|
|
|
|
|
|
32,644
|
|
|
|
|
|
|
|
|
|
John Deere Pension Trust
|
|
|
400,000
|
|
|
|
|
|
|
|
5,223
|
|
|
|
|
|
|
|
|
|
KBC Financial Products USA
Inc.
|
|
|
5,500,000
|
|
|
|
|
|
|
|
65,288
|
|
|
|
|
|
|
|
|
|
LDG Limited
|
|
|
1,334,000
|
|
|
|
|
|
|
|
17,418
|
|
|
|
|
|
|
|
|
|
Lehman Brothers
|
|
|
5,000,000
|
|
|
|
|
|
|
|
65,288
|
|
|
|
|
|
|
|
|
|
Lehman Brothers Inc.
|
|
|
5,000,000
|
|
|
|
|
|
|
|
65,288
|
|
|
|
|
|
|
|
|
|
Louisiana CCRF
|
|
|
445,000
|
|
|
|
|
|
|
|
5,810
|
|
|
|
|
|
|
|
|
|
Lydian Global Opportunities Master
Fund Limited
|
|
|
19,000,000
|
|
|
|
1.5
|
|
|
|
248,094
|
|
|
|
|
|
|
|
|
|
Lydian Overseas Partners Master
Fund, LTD.
|
|
|
71,000,000
|
|
|
|
5.7
|
|
|
|
927,089
|
|
|
|
|
|
|
|
|
|
Lyxor Master Fund (Ref:
Argent/LowLev CB/
c/o Argent
|
|
|
1,380,000
|
|
|
|
|
|
|
|
18,019
|
|
|
|
|
|
|
|
|
|
Lyxor/Context Fund LTD.
|
|
|
3,300,000
|
|
|
|
|
|
|
|
43,090
|
|
|
|
|
|
|
|
|
|
Medical Liability
Convertible Mutual Insurance Co.
|
|
|
6,800,000
|
|
|
|
|
|
|
|
88,791
|
|
|
|
|
|
|
|
|
|
Microsoft Capital Group, L.P.
|
|
|
575,000
|
|
|
|
|
|
|
|
7,508
|
|
|
|
|
|
|
|
|
|
National Benefits Life Insurance
Co.
|
|
|
200,000
|
|
|
|
|
|
|
|
2,611
|
|
|
|
|
|
|
|
|
|
National Railroad Retirement
Investment Trust
|
|
|
3,030,000
|
|
|
|
|
|
|
|
39,564
|
|
|
|
|
|
|
|
|
|
OCM Convertible Trust
|
|
|
1,820,000
|
|
|
|
|
|
|
|
23,764
|
|
|
|
|
|
|
|
|
|
S-50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other ProLogis
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
Number of
|
|
|
Owned Before
|
|
|
|
|
|
|
Amounts of
|
|
|
|
|
|
ProLogis
|
|
|
the Offering
|
|
|
Percentage
|
|
|
|
Notes
|
|
|
|
|
|
Common
|
|
|
and Assumed
|
|
|
of ProLogis
|
|
|
|
Beneficially
|
|
|
Percentage
|
|
|
Shares
|
|
|
to be Owned
|
|
|
Common
|
|
|
|
Owned That
|
|
|
of Notes
|
|
|
That may
|
|
|
Following
|
|
|
Shares
|
|
Name
|
|
may be Sold
|
|
|
Outstanding(1)
|
|
|
be Sold
|
|
|
the Offering
|
|
|
Outstanding(2)
|
|
|
|
(In dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OCM Global Convertible Securities
Fund
|
|
|
725,000
|
|
|
|
|
|
|
|
9,466
|
|
|
|
|
|
|
|
|
|
Partners Group Alternative
Strategies PCC LTD.
|
|
|
1,170,000
|
|
|
|
|
|
|
|
15,277
|
|
|
|
|
|
|
|
|
|
PBGC Maintenance
|
|
|
324,000
|
|
|
|
|
|
|
|
4,230
|
|
|
|
|
|
|
|
|
|
Pendragon (Convertibles)
Fund Ltd.
|
|
|
10,000,000
|
|
|
|
|
|
|
|
130,576
|
|
|
|
|
|
|
|
|
|
Peoples Benefit Life Insurance
Company Teamsters
|
|
|
4,900,000
|
|
|
|
|
|
|
|
63,982
|
|
|
|
|
|
|
|
|
|
Platinum Grove Contingent Capital
Master Fund Ltd.
|
|
|
30,000,000
|
|
|
|
2.4
|
|
|
|
391,728
|
|
|
|
|
|
|
|
|
|
Primerica Life
|
|
|
800,000
|
|
|
|
|
|
|
|
10,446
|
|
|
|
|
|
|
|
|
|
Princeton Medical Mutual Insurance
Co.
|
|
|
1,200,000
|
|
|
|
|
|
|
|
15,669
|
|
|
|
|
|
|
|
|
|
Qwest Occupational Health Trust
|
|
|
395,000
|
|
|
|
|
|
|
|
5,157
|
|
|
|
|
|
|
|
|
|
Qwest Pension Trust
|
|
|
2,405,000
|
|
|
|
|
|
|
|
31,403
|
|
|
|
|
|
|
|
|
|
Rampart Enhanced Convertible
Investors, LLC
|
|
|
667,000
|
|
|
|
|
|
|
|
8,709
|
|
|
|
|
|
|
|
|
|
Raytheon Phoenix
|
|
|
2,017,000
|
|
|
|
|
|
|
|
26,337
|
|
|
|
|
|
|
|
|
|
RCG Latitude Master Fund,
Ltd.
|
|
|
22,400,000
|
|
|
|
1.8
|
|
|
|
292,490
|
|
|
|
|
|
|
|
|
|
RCG PB, Ltd.
|
|
|
10,850,000
|
|
|
|
|
|
|
|
141,674
|
|
|
|
|
|
|
|
|
|
Redbourn Partners Ltd.
|
|
|
1,200,000
|
|
|
|
|
|
|
|
15,669
|
|
|
|
|
|
|
|
|
|
Retail Clerks Pension Trust #1
|
|
|
600,000
|
|
|
|
|
|
|
|
7,834
|
|
|
|
|
|
|
|
|
|
Retail Clerks Pension Trust #2
|
|
|
400,000
|
|
|
|
|
|
|
|
5,223
|
|
|
|
|
|
|
|
|
|
Royal Bank of Canada
|
|
|
12,000,000
|
|
|
|
|
|
|
|
156,691
|
|
|
|
|
|
|
|
|
|
S.A.C. Arbitriage Fund, LLC
|
|
|
10,000,000
|
|
|
|
|
|
|
|
130,576
|
|
|
|
|
|
|
|
|
|
Sage Capital Management, LLC
|
|
|
800,000
|
|
|
|
|
|
|
|
10,446
|
|
|
|
|
|
|
|
|
|
Sailfish Multi Strategy Fixed
Income Master Fund (G2) Ltd.
|
|
|
31,889,000
|
|
|
|
2.6
|
|
|
|
416,393
|
|
|
|
|
|
|
|
|
|
Seattle City Employees Retirement
System
|
|
|
225,000
|
|
|
|
|
|
|
|
2,937
|
|
|
|
|
|
|
|
|
|
South Dakota Retirement System
|
|
|
3,000,000
|
|
|
|
|
|
|
|
39,172
|
|
|
|
|
|
|
|
|
|
Stark Master Fund Ltd.
|
|
|
45,000,000
|
|
|
|
3.6
|
|
|
|
587,592
|
|
|
|
|
|
|
|
|
|
Steelhead Pathfinder Master LP
|
|
|
2,500,000
|
|
|
|
|
|
|
|
32,644
|
|
|
|
|
|
|
|
|
|
SuttonBrook Capital Portfolio LP
|
|
|
37,500,000
|
|
|
|
3.0
|
|
|
|
489,660
|
|
|
|
|
|
|
|
|
|
Teachers Retirement System of the
City of New York
|
|
|
3,137,000
|
|
|
|
|
|
|
|
40,961
|
|
|
|
|
|
|
|
|
|
Tewksbury Investment
Fund Ltd.
|
|
|
1,000,000
|
|
|
|
|
|
|
|
13,057
|
|
|
|
339,626
|
|
|
|
|
|
The Travelers Indemnity Company
|
|
|
2,300,000
|
|
|
|
|
|
|
|
30,032
|
|
|
|
|
|
|
|
|
|
TQA Master Fund LTD.
|
|
|
7,865,000
|
|
|
|
|
|
|
|
102,698
|
|
|
|
|
|
|
|
|
|
TQA Master Plus
Fund LTD.
|
|
|
5,333,000
|
|
|
|
|
|
|
|
69,636
|
|
|
|
|
|
|
|
|
|
Tribeca Convertibles LP
|
|
|
16,000,000
|
|
|
|
1.3
|
|
|
|
208,921
|
|
|
|
|
|
|
|
|
|
S-51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other ProLogis
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
Number of
|
|
|
Owned Before
|
|
|
|
|
|
|
Amounts of
|
|
|
|
|
|
ProLogis
|
|
|
the Offering
|
|
|
Percentage
|
|
|
|
Notes
|
|
|
|
|
|
Common
|
|
|
and Assumed
|
|
|
of ProLogis
|
|
|
|
Beneficially
|
|
|
Percentage
|
|
|
Shares
|
|
|
to be Owned
|
|
|
Common
|
|
|
|
Owned That
|
|
|
of Notes
|
|
|
That may
|
|
|
Following
|
|
|
Shares
|
|
Name
|
|
may be Sold
|
|
|
Outstanding(1)
|
|
|
be Sold
|
|
|
the Offering
|
|
|
Outstanding(2)
|
|
|
|
(In dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust for the Defined Benefit
Plans of ICI American Holdings, Inc.
|
|
|
495,000
|
|
|
|
|
|
|
|
6,463
|
|
|
|
|
|
|
|
|
|
UBS OConnor LLC F/B/O:
OConnor Global Convertible Arbitrage II Master Limited
|
|
|
4,050,000
|
|
|
|
|
|
|
|
52,883
|
|
|
|
|
|
|
|
|
|
UBS OConnor LLC F/B/O:
OConnor Global Convertible Arbitrage Master Limited
|
|
|
45,950,000
|
|
|
|
3.7
|
|
|
|
599,996
|
|
|
|
|
|
|
|
|
|
UBS Securities LLC
|
|
|
8,650,000
|
|
|
|
|
|
|
|
112,948
|
|
|
|
30,756
|
|
|
|
|
|
United Healthcare AARP
|
|
|
300,000
|
|
|
|
|
|
|
|
3,917
|
|
|
|
|
|
|
|
|
|
United Healthcare Insurance Company
|
|
|
300,000
|
|
|
|
|
|
|
|
3,917
|
|
|
|
|
|
|
|
|
|
UnumProvident Corporation
|
|
|
935,000
|
|
|
|
|
|
|
|
12,208
|
|
|
|
|
|
|
|
|
|
Vanguard Convertible Securities
Fund, Inc.
|
|
|
9,090,000
|
|
|
|
|
|
|
|
118,693
|
|
|
|
|
|
|
|
|
|
Vicis Capital Master Fund
|
|
|
9,000,000
|
|
|
|
|
|
|
|
117,518
|
|
|
|
|
|
|
|
|
|
Virginia Retirement System
|
|
|
5,765,000
|
|
|
|
|
|
|
|
75,277
|
|
|
|
|
|
|
|
|
|
Waterstone Market Neutral Mac51
Fund, Ltd.
|
|
|
12,780,000
|
|
|
|
1.0
|
|
|
|
166,876
|
|
|
|
|
|
|
|
|
|
Waterstone Market Neutral Master
Fund, Ltd.
|
|
|
23,220,000
|
|
|
|
1.9
|
|
|
|
303,197
|
|
|
|
|
|
|
|
|
|
Wells Fargo & Company
|
|
|
27,500,000
|
|
|
|
2.2
|
|
|
|
359,084
|
|
|
|
|
|
|
|
|
|
Worldwide Transactions Limited
|
|
|
650,000
|
|
|
|
|
|
|
|
8,487
|
|
|
|
|
|
|
|
|
|
Xavex Convertible Arbitrage 10 Fund
|
|
|
2,310,000
|
|
|
|
|
|
|
|
30,163
|
|
|
|
|
|
|
|
|
|
Xavex Convertible Arbitrage 2 Fund
|
|
|
400,000
|
|
|
|
|
|
|
|
5,223
|
|
|
|
|
|
|
|
|
|
Xavex Convertible Arbitrage 5
|
|
|
1,750,000
|
|
|
|
|
|
|
|
22,850
|
|
|
|
|
|
|
|
|
|
Zurich Institutional Benchmarks
Master Fund LTD.
|
|
|
468,000
|
|
|
|
|
|
|
|
6,110
|
|
|
|
|
|
|
|
|
|
Additional Selling
Securityholders(3)
|
|
|
214,664,000
|
|
|
|
|
|
|
|
2,802,996
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Unless otherwise noted, none of these selling securityholders
beneficially owns 1% or more of the outstanding notes. |
|
(2) |
|
Calculated based on
Rule 13d-3
of the Exchange Act using 256,879,781 ProLogis common shares
outstanding as of July 1, 2007. In calculating these
percentages for each holder of notes, we also treated as
outstanding that number of ProLogis common shares issuable upon
conversion of that holders notes. However, we did not
assume the conversion of any other holders notes. Based on
the foregoing, unless otherwise noted, none of these selling
securityholders would beneficially own 1% or more of the
outstanding ProLogis common shares following the sale of
securities hereunder. |
|
(3) |
|
Additional selling securityholders will be named pursuant to a
supplement to this prospectus supplement with respect to
$214,664,000 principal amount of notes and 2,802,996 ProLogis
common shares upon our receipt of a questionnaire from the
relevant selling securityholder with respect to any such note. |
S-52
PLAN OF
DISTRIBUTION
The selling securityholders and their successors, which includes
their pledgees, donees, partnership distributees and other
transferees receiving the notes or ProLogis common shares from
the selling securityholders in non-sale transfers, may sell the
notes and the underlying ProLogis common shares directly to
purchasers or through underwriters, broker-dealers or agents.
Underwriters, broker-dealers or agents may receive compensation
in the form of discounts, concessions or commissions from the
selling securityholders or the purchasers. These discounts,
concessions or commissions may be in excess of those customary
in the types of transactions involved.
The notes and the underlying ProLogis common shares may be sold
in one or more transactions at:
|
|
|
|
|
fixed prices that may be changed;
|
|
|
|
prevailing market prices at the time of sale;
|
|
|
|
prices related to the prevailing market prices;
|
|
|
|
varying prices determined at the time of sale; or
|
|
|
|
negotiated prices.
|
These sales may be effected in a variety of transactions,
including the following:
|
|
|
|
|
on any national securities exchange or quotation service on
which the notes or the ProLogis common shares may be listed or
quoted at the time of sale, including the New York Stock
Exchange in the case of ProLogis common shares;
|
|
|
|
in the over-the-counter-market;
|
|
|
|
in transactions otherwise than on these exchanges or services or
in the over-the-counter market (privately negotiated
transactions);
|
|
|
|
through the writing and exercise of options (including the
issuance of derivative securities), whether these options or
such other derivative securities are listed on an options or
other exchange or otherwise;
|
|
|
|
through the settlement of short sales; or
|
|
|
|
through any combination of the foregoing, or by any legally
available means.
|
These transactions may include block transactions or crosses.
Crosses are transactions in which the same broker acts as an
agent on both sides of the transaction.
Selling securityholders may enter into hedging transactions with
broker-dealers or other financial institutions which may in turn
engage in short sales of the notes or the underlying ProLogis
common shares and deliver these securities to close out short
positions. In addition, the selling securityholders may sell the
notes and the underlying ProLogis common shares short and
deliver the notes and underlying ProLogis common shares to close
out short positions or loan or pledge the notes or the
underlying ProLogis common shares to broker-dealers or other
financial institutions that in turn may sell such securities.
Selling securityholders may also enter into option or other
transactions with broker- dealers or other financial
institutions that require the delivery to the broker-dealers or
other financial institutions of the notes or the underlying
ProLogis common shares or enter into transactions in which a
broker-dealer makes purchases as a principal for resale for its
own account or through other types of transactions.
Selling securityholders may decide not to sell all or a portion
of the notes and the underlying ProLogis common shares offered
by them pursuant to this prospectus or may decide not to sell
notes or the underlying ProLogis common shares under this
prospectus supplement. In addition, selling securityholders may
sell or transfer their notes and ProLogis common shares issuable
upon exchange of the notes other than by means of this
prospectus supplement. In particular, any securities covered by
this prospectus supplement that qualify for sale pursuant to
Rule 144, Rule 144A or Regulation S under the
Securities Act may be sold thereunder, rather than pursuant to
this prospectus supplement.
The aggregate proceeds to the selling securityholders from the
sale of the notes or underlying ProLogis common shares will be
the purchase price of the notes or ProLogis common shares less
any discounts and commissions. A selling securityholder reserves
the right to accept and, together with their agents, to reject
any
S-53
proposed purchase of notes or ProLogis common shares to be made
directly or through agents. We will not receive any of the
proceeds from this offering.
In order to comply with the securities laws of some
jurisdictions, if applicable, the holders of notes and ProLogis
common shares into which the notes are exchangeable may sell in
some jurisdictions through registered or licensed broker
dealers. In addition, under certain circumstances in some
jurisdictions, the holders of notes and the ProLogis common
shares into which the notes are exchangeable may be required to
register or qualify the securities for sale or comply with an
available exemption from the registration and qualification
requirements.
The ProLogis common shares are listed on the New York Stock
Exchange under the symbol PLD. We do not intend to
apply for listing of the notes on any securities exchange or for
quotation through Nasdaq. No assurance can be given as to the
development of liquidity or any trading market for the notes.
The selling securityholders and any underwriters, broker-dealers
or agents who participate in the distribution of the notes and
the underlying ProLogis common shares may be deemed to be
underwriters within the meaning of the Securities
Act. As a result, any profits on the sale of the notes or the
underlying ProLogis common shares by selling securityholders and
any discounts, commissions or concessions received by any such
broker-dealers or agents may be deemed to be underwriting
discounts and commissions under the Securities Act. If the
selling securityholders were deemed to be underwriters, the
selling securityholders will be subject to the prospectus
delivery requirements of the Securities Act and may be subject
to liabilities including, but not limited to, those of
sections 11, 12 and 17 of the Securities Act and
Rule 10b-5
under the Exchange Act.
If the notes and the underlying ProLogis common shares are sold
through underwriters or broker-dealers, the selling
securityholders will be responsible for underwriting discounts
or commissions or agents commissions.
Any selling securityholder who is a broker-dealer
may be deemed to be an underwriter within the
meaning of Section 2(11) of the Securities Act. As a
result, such selling securityholders are an underwriter in
connection with the sale of the notes or the ProLogis common
shares issuable upon exchange of the notes covered by this
prospectus supplement. Such selling securityholders have
informed us that they have purchased their notes in the open
market and in the ordinary course of business, not directly from
us, and we are not aware of any underwriting plan or agreement,
underwriters or dealers compensation, or passive
market-making or stabilization transactions involving the
purchase or distribution of these securities by such
securityholders.
The selling securityholders and any other persons participating
in the distribution of the notes or underlying ProLogis common
shares will be subject to the Exchange Act. The Exchange Act
rules include, without limitation, Regulation M, which may
limit the timing of purchases and sales of any of the notes and
the underlying ProLogis common shares by the selling
securityholders and any such other person. In addition,
Regulation M of the Exchange Act may restrict the ability
of any person engaged in the distribution of the notes and the
underlying ProLogis common shares to engage in market making
activities with respect to the particular notes and underlying
ProLogis common shares being distributed for a period of up to
five business days prior to the commencement of such
distribution. This may affect the marketability of the notes and
the underlying ProLogis common shares and the ability to engage
in market making activities with respect to the notes and the
underlying ProLogis common shares.
If required, the specific notes or ProLogis common shares to be
sold, the names of the selling securityholders, the respective
purchase prices and public offering prices, the names of any
agent, dealer or underwriter and any applicable commissions or
discounts with respect to a particular offer will be set forth
in an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of which
this prospectus is a part.
ProLogis entered into a registration rights agreement for the
benefit of the holders of the notes to register the notes and
ProLogis common shares into which the notes are convertible
under applicable federal securities laws under specific
circumstances and specific times. Under the registration rights
agreement, the selling securityholders and ProLogis have agreed
to indemnify each other and our respective controlling persons
against, and in certain circumstances to provide contribution
with respect to, specific liabilities in connection with the
offer and sale of the notes and the ProLogis common shares,
including liabilities under the Securities Act. We will pay
substantially all of the expenses incident to the registration
of the notes and the ProLogis common shares, except that the
selling securityholders will pay all brokers commissions
and, in connection with an underwritten offering, if any,
underwriting discounts and commissions. See Registration
Rights above.
S-54
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.
Each time securities are sold using this prospectus, we will
provide a supplement to this prospectus or possibly other
offering material containing specific information about the
offering. The supplement or other offering material may also
add, update or change information contained in this prospectus.
This prospectus may not be used to offer or sell any securities
unless accompanied by a prospectus supplement. You should read
this prospectus and any supplement and/or other offering
material carefully before you invest.
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.
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 August 21, 2006.
TABLE OF
CONTENTS
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ii
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iv
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1
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1
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1
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2
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23
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28
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31
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43
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43
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45
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i
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 Securities Exchange Act) and, in accordance therewith, file
reports, proxy statements and other information with the
Securities and Exchange Commission (which we refer to herein as
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 our 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, 2005, filed on
March 16, 2006;
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(b)
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Our quarterly reports on Form 10-Q for the fiscal quarters
ended March 31, 2006 and June 30, 2006;
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(c)
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Our periodic reports on
Form 8-K
filed September 20, 2005, January 10, 2006
March 13, 2006, March 17, 2006, March 21, 2006,
March 27, 2006, April 6, 2006, June 2, 2006, and
July 3, 2006;
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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 Securities 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.
ii
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
(REIT) 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 their 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 REIT that operates a global network of real estate
properties, primarily industrial distribution properties. Our
business strategy is designed to achieve long-term sustainable
growth in cash flow and sustain a high level of return for our
shareholders. We manage our business by utilizing the ProLogis
Operating
System®,
an organizational structure and service delivery system that we
built around our customers. When combined with our international
network of distribution properties, the ProLogis Operating
System enables us to meet our customers distribution space
needs on a global basis. We believe that by integrating
international scope and expertise with a strong local presence
in our markets, we have become an attractive choice for our
targeted customer base, the largest global users of distribution
space.
We are organized under Maryland law and have elected to be taxed
as a REIT under the Internal Revenue Code of 1986, as amended
(the Code). Our world headquarters are located in
Denver, Colorado. Our European headquarters are located in the
Grand Duchy of Luxembourg with our European customer service
headquarters located in Amsterdam, the Netherlands. Our regional
offices in Asia are located in Tokyo, Japan and Shanghai, China.
Our common shares were first listed on the New York Stock
Exchange (NYSE) in March 1994 and now trade under
the ticker symbol PLD. Our 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-PRF and PLD-PRG,
respectively.
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 our
last five fiscal years:
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Six Months Ended
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June 30,
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Year Ended December 31,
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2006
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2005
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2005
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2004
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2003
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2002
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2001
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2.6
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2.5
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2.2
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2.3
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2.2
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2.3
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1.6
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The following table shows our ratio of earnings to combined
fixed charges and preferred share dividends for each of our last
five fiscal years:
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Six Months Ended
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June 30,
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Year Ended December 31,
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2006
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2005
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2005
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2004
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2003
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2002
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2001
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2.4
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2.2
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2.0
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2.0
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1.9
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2.0
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1.3
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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
additional distribution properties as suitable opportunities
arise, for the repayment of any outstanding indebtedness at such
time as it is due, for capital improvements to properties and
for general corporate purposes.
1
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 and a Third Supplemental
Indenture dated November 2, 2005. We collectively refer to
the Original Indenture as amended and supplemented by the First
Supplemental Indenture, Second Supplemental Indenture and Third
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, 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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(6)
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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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(7)
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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
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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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(8)
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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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(10)
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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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(11)
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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
3
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 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.
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, ProLogis and certain of
its subsidiaries have pledged specified intercompany loans 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. The Credit Parties under the Security
Agency Agreement include the holders
4
of specified credit obligations of ProLogis, including, all
obligations arising under ProLogis global credit facility,
certain hedging obligations of ProLogis, other Designated
Senior Debt specified therein, as well as any other senior
debt of ProLogis designated from time to time by ProLogis as
Designated Senior Debt in accordance with the
Security Agency Agreement. Please refer to the applicable
prospectus supplement relating to the debt securities being
offered for an explanation of whether the debt securities are
included within the definition of Designated Senior
Debt and holders of the debt securities are entitled to a
pro rata share in the proceeds of the collateral granted under
the pledge agreements.
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 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 ProLogis or any other borrower under its
global credit facility, the acceleration of indebtedness under
the global credit facility or 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 ProLogis and its subsidiaries to be
applied toward the credit obligations held by such Credit
Parties in such a manner that all Credit Parties receive payment
of substantially the same percentage of their respective credit
obligations. These 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 ProLogis or that
have the benefit of guarantees from one or more subsidiaries of
ProLogis) to recover a higher percentage of their credit
obligations than other Credit Parties that do not have the
benefit of such arrangements.
Within 45 days after a triggering event, the collateral
agent will deliver a notice of such event to the trustee. 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 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.
The Security Agency Agreement allows ProLogis to
(i) designate other senior debt of ProLogis as Designated
Senior Debt; (ii) specify which Credit Parties are entitled
to vote on issues arising under the Security Agency Agreement
(and the holders of the debt securities will be non-voting
Credit Parties); and/or (iii) revoke its designation 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. In the event that ProLogis elects to revoke
its designation of the debt securities as Designated Senior Debt
under the Security Agency Agreement, the holders of the debt
securities will cease to be Credit Parties and will no longer be
entitled to any benefit of the security and sharing arrangements
contemplated by the Security Agency Agreement and the related
pledge agreements. In addition, a majority of the voting Credit
Parties under the Security Agency Agreement may elect
(a) to release some or all of the collateral held pursuant
to the Security Agency Agreement and/or (b) under certain
circumstances, to defer payments to Credit Parties pursuant to
the sharing arrangements either (i) generally for various
reasons or (ii) specifically to certain holders of debt
(including the holders of the debt securities) if the collateral
agent or the voting Credit Parties determine, in their sole
discretion, that such holders might receive more than their
share of payments and other recoveries pursuant to the Security
Agency Agreement. Without notice to or consent of the holders of
the debt securities, the Security Agency Agreement may be
amended by ProLogis, the collateral agent and a majority of the
voting Credit Parties, even if such amendment is adverse to the
interests of the holders of the debt securities.
The Security Agency Agreement provides that whenever the
majority voting Credit Parties are granted and exercise 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 voting Credit Parties
will have no obligation or duty (including implied obligations
of reasonableness, good faith or fair
5
dealing) to any holder of debt securities 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 acts as 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 right 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
or 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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Covenants
This section describes covenants we make in the Indenture for
the benefit of the holders of the debt securities. The covenants
contained in the Original Indenture, as amended by the First
Supplemental Indenture, are described under the caption
Limitations on incurrence of debt. Additional
covenants are contained in the Second Supplemental Indenture and
that are applicable to debt securities issued on and after
November 2, 2005. These additional covenants are described
below under the caption Debt covenants contained in
the Second Supplemental Indenture.
As explained below, the covenants contained in the Original
Indenture, as amended by the First Supplemental Indenture, apply
to all debt securities issued under the Indenture for so long as
any debt securities issued under the Indenture prior to
November 2, 2005 remain outstanding. Following the
repayment in full of each series of debt securities issued under
the Indenture prior to November 2, 2005, only the covenants
contained in the Second Supplemental Indenture will be the only
covenants limiting our incurrence of Debt, unless the Indenture
is further modified or supplemented.
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Limitations
on incurrence of debt
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As noted above, the following covenants will apply to the debt
securities issued under the Indenture but only for so long as
any of our debt securities issued prior to November 2,
2005, the date of the Second Supplemental Indenture, that are
currently outstanding remain outstanding. The covenants provide
that 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 determined in accordance with generally accepted
accounting principles is greater than 60% of the sum (without
duplication) of:
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(1)
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our Total Assets,
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(2)
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the purchase price of any real estate assets or mortgages
receivable acquired, and
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(3)
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the amount of any securities offering proceeds received by us or
any subsidiary since the end of the last calendar quarter,
including those proceeds obtained in connection with the
incurrence of the additional Debt.
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Our Total Assets will be measured at 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 SEC. If such
filing is not permitted under the Securities Exchange Act, we
will provide this information to the trustee, prior to the
incurrence of such additional Debt. To the extent that any real
estate assets or mortgages had been previously included in our
Total Assets, or the proceeds from a securities offering were
used to purchase real estate assets, their accounting will not
be duplicated.
In addition to this limitation on the incurrence of Debt, we and
our subsidiaries will not allow our outstanding Debt that is
secured by any mortgage, lien, charge, pledge, encumbrance or
security interest of any kind upon any of our property or the
property of any of our subsidiaries, if the aggregate principal
amount of all of our outstanding Debt and that of our
subsidiaries so secured would be greater than 40% of the sum of
our Total Assets, and the purchase price of real estate or
mortgage receivables acquired, and proceeds from the sale of
securities, determined as described above. This ratio will be
measured immediately after giving effect to the incurrence of
such additional Debt and the application of the proceeds of the
additional Debt. In making this calculation, we are not required
to include the amount of the debt securities issued under the
Indenture if the debt securities are equally and ratably secured
and the mortgage, lien, charge, pledge, encumbrance or security
interest securing the debt securities arises under the Security
Agency Agreement described above under
Security and sharing arrangements.
In addition to these limitations on the incurrence of Debt, no
subsidiary may incur any Unsecured Debt other than intercompany
Debt subordinate to the debt securities; 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 restrictions on
incurring Unsecured Debt 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.
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 our Unsecured Debt and that of
our subsidiaries on a consolidated basis.
In addition to these limitations on the incurrence of Debt, 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 or 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 the incurrence of such
Debt and to the application of the proceeds therefrom, and
calculated on the assumption that:
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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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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
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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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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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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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For purposes of the foregoing covenants, the following
definitions apply:
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 (defined as net
earnings, excluding gains and losses on sales of investments,
net, as reflected in our consolidated financial statements),
plus amounts which have been deducted, and minus amounts which
have been added, for the following, without duplication:
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interest on Debt;
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provision for taxes based on income;
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amortization of debt discount;
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provisions for gains and losses on properties and property
depreciation and amortization;
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the effect of any noncash charge resulting from a change in
accounting principles in determining earnings from operations
for the applicable period and
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amortization of deferred charges.
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Debt means any of our or our subsidiaries
indebtedness, whether or not contingent, in respect of:
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borrowed money or evidenced by bonds, notes, debentures or
similar instruments to the extent it appears as a liability on
our consolidated balance sheet,
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indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property that
we own to the extent it appears as a liability on our
consolidated balance sheet,
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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, except any such balance that
constitutes an accrued expense or trade payable, or all
conditional sale obligations or obligations under any title
retention agreement to the extent it (other than a letter of
credit) appears as a liability on our consolidated balance sheet,
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the principal amount of all of our and our subsidiaries
obligations with respect to redemption, repayment or other
repurchase of any Disqualified Stock,
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any lease of property by us or any of our subsidiaries as lessee
which is reflected on our consolidated balance sheet as a
capitalized lease to the extent not otherwise included, any
obligation by us or any of our subsidiaries 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 of our subsidiaries.
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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.
Encumbrance means any mortgage, pledge, lien,
charge, encumbrance or any security interest existing on
property owned by us or any of our subsidiaries securing
indebtedness for borrowed money, other than a Permitted
Encumbrance.
Permitted Encumbrances means leases, Encumbrances
securing taxes, assessments and similar charges, mechanics liens
and other similar Encumbrances.
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 generally accepted
accounting principles in the United States (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 our
real estate assets and those of our subsidiaries, before
depreciation and amortization determined on a consolidated basis
in accordance with GAAP.
Unsecured Debt means Debt of the types described in
the first, third and fourth points of the definition of Debt
which is not secured by any mortgage, lien, charge, pledge or
security interest of any kind upon any of or properties or those
of our subsidiaries.
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Debt
covenants contained in the Second Supplemental
Indenture
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The Second Supplemental Indenture contains covenants that are
currently in effect, and which are in addition to the covenants
contained in the Original Indenture, as amended by the First
Supplemental Indenture, and described in this prospectus. From
and after the time that no debt securities issued pursuant to
the Indenture prior to November 2, 2005, the date of the
Second Supplemental Indenture, remain outstanding, the covenants
contained in the Second Supplemental Indenture will be the only
covenants limiting our incurrence of Debt, unless the Indenture
is further modified or supplemented.
The covenants contained in the Second Supplemental Indenture
provide that 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
net proceeds of the additional Debt, the aggregate principal
amount of all our outstanding Debt and that of our subsidiaries
on a consolidated basis determined in accordance with generally
accepted accounting principles is greater than 65% of the sum of
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(1)
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our Total Assets,
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(2)
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the purchase price of any assets or mortgages receivable
acquired, and
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(3)
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the amount of any securities offering proceeds received by us or
any subsidiary since the end of the last calendar quarter,
including those proceeds obtained in connection with the
incurrence of the additional Debt.
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Our Total Assets will be measured at 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 SEC. If such
filing is not permitted under the Securities Exchange Act, we
will provide this information to the trustee, prior to the
incurrence of such additional Debt. To the extent that any
assets or mortgage receivables had been previously included in
our Total Assets, or
9
the proceeds from a securities offering were used to purchase
assets or mortgage receivables, their accounting will not be
duplicated.
In addition to this limitation on the incurrence of Debt, we and
our subsidiaries will not allow our outstanding Debt that is
secured by an Encumbrance to be greater than 40% of the sum
(without duplication) of our Total Assets, real estate or
mortgage receivables, and proceeds from the sale of securities,
determined as described above. This ratio will be measured
immediately after giving effect to the incurrence of such
additional Debt and the application of the proceeds of the
additional Debt. In making this calculation, we are not required
to include the amount of any Pari Passu Debt.
We and our subsidiaries may not at any time own Total
Unencumbered Assets equal to less than 125% of the aggregate
outstanding principal amount of our Unsecured Debt and that of
our subsidiaries on a consolidated basis.
In addition to these limitations on the incurrence of Debt, we
will not, and will not permit any subsidiary to, incur any
additional Debt if the ratio of Consolidated Income Available
for Debt Service to the Annual Service Charge or 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 to 1.0 on a pro forma basis after giving
effect the incurrence of such Debt and to the application of the
net proceeds therefrom, and calculated on the assumption that:
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the additional Debt had been incurred at the beginning of the
relevant period; and
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any assets acquired, or to be acquired, with the additional Debt
and projected income from those assets had been acquired at the
beginning of the relevant period.
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For purposes of the covenants described under this caption the
following definitions apply (all other terms used but not
defined have the meanings as described above under
Limitations on incurrence of debt):
Annual Service Charge for any period means interest
expense that is recognized in our consolidated statement of
earnings 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.
CDFS means our business segment described in our
annual report on
Form 10-K
and referred to as the corporate distribution facilities
services or CDFS segment (or successor
descriptions).
Consolidated Income Available for Debt Service for
any period means earnings from our operations and from the
operations of our subsidiaries before preferred share dividends
determined in accordance with GAAP plus amounts which have been
deducted, and minus amounts which have been added, for the
following, without duplication:
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losses (gains) from the disposition or impairment of
properties that are not classified in our consolidated financial
statements as (i) gains and losses on dispositions of
CDFS business assets (or successor descriptions) (which
includes dispositions of CDFS properties to property funds in
which we or one of our subsidiaries maintains an interest,
dispositions to third parties under
build-to-suit
contracts and dispositions of land);
(ii) discontinued operations CDFS
business assets (or successor descriptions) (which
includes dispositions of CDFS business properties to third
parties); or (iii) gains and losses on dispositions or
impairments of investments in property funds, other
Unconsolidated Affiliates or intangible assets (including
goodwill), in each case to the extent included in our net
earnings and the net earnings of our subsidiaries;
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losses (gains) resulting from (i) foreign currency
exchange effects of settlement of intercompany Debt and
mark-to-market
adjustments associated with intercompany Debt between us and our
foreign subsidiaries and our foreign Unconsolidated Affiliates,
(ii) foreign currency effects from the remeasurement of
third party Debt of our foreign subsidiaries and our foreign
Unconsolidated Affiliates and
(iii) mark-to-market
adjustments to foreign exchange hedge contracts (or other
derivatives), in each case to the extent included in our net
earnings and the net earnings of our subsidiaries;
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losses (gains) from early extinguishment of Debt;
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excess (deficit) of redemption value over carrying value of
preferred shares redeemed;
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extraordinary losses (extraordinary gains) determined in
accordance with GAAP; and
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cumulative charges (benefits) from a change in accounting
principle;
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plus all amounts deducted in calculating net earnings in
accordance with GAAP, for interest expense, income taxes,
depreciation and amortization. The foregoing shall be adjusted
accordingly to take into account our interests in our
Unconsolidated Affiliates.
Debt means any of our or our subsidiaries
indebtedness (without duplication), in respect of:
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money or evidenced by bonds, notes, mortgages, debentures or
similar instruments, but excluding any
mark-to-market
increase or decrease in indebtedness due to the purchase
accounting impact of corporate or portfolio acquisitions and
from the remeasurement of intercompany indebtedness of our
subsidiaries or Unconsolidated Affiliates, to the extent it
appears as a liability on our consolidated balance sheet,
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indebtedness secured by an Encumbrance existing on any of our
property or that of any subsidiary, whether or not such
obligation shall have been assumed by us or any subsidiary;
provided that the amount of any Debt under this clause that has
not been assumed by us or any subsidiary shall be equal to the
lesser of the stated amount of such Debt or the fair market
value of the property securing such Debt, in each case, to the
extent it appears as a liability on our consolidated balance
sheet,
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the principal amount of all our or any of our subsidiaries
obligations with respect to redemption, repayment or other
repurchase of any Disqualified Stock,
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any capitalized lease of property by us or any of our
subsidiaries, as lessee, to the extent it appears as a liability
on our consolidated balance sheet, or
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to the extent not otherwise included, any obligation of ours or
any of our subsidiaries to be liable for, or to pay, as obligor
or guarantor, other than for purposes of collection in the
ordinary course of business, Debt of another person other than
us or any of our subsidiaries, excluding, in each case,
indemnification obligations, capital contribution obligations
and similar obligations that are not required to be reflected on
our consolidated balance sheet.
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Debt shall be adjusted accordingly to take into account our
interests in our Unconsolidated Affiliates by eliminating that
portion of Debt that is not our obligation or the obligation of
our subsidiaries.
Encumbrance means any mortgage, pledge, lien,
charge, encumbrance or any security interest existing on
property owned by us or any of our subsidiaries securing
indebtedness for borrowed money, other than a Permitted
Encumbrance.
GAAP means generally accepted accounting principles
as in effect from time to time in the United States; provided
that if the cumulative effect of changes in generally accepted
accounting principles after December 31, 2004 would result
in our failing to be in compliance with any of the financial
covenants contained in the Indenture, but we would have been in
compliance with any such financial covenant calculated in
accordance with generally accepted accounting principles as
applied in the preparation of our audited financial statements
as at December 31, 2004 (2004 GAAP), then,
solely for purposes of calculating such financial covenant,
GAAP means 2004 GAAP. In the event that we are
required to make any such adjustments in order to so comply with
any of the financial covenants contained in the Indenture, we
will, concurrently with delivery by us to the trustee of any
certificate required by the Indenture as to our compliance with
all conditions and covenants under the Indenture, deliver to the
trustee a summary in reasonable detail of the adjustments made
to our publicly filed financial statements in order to calculate
such financial covenant in accordance with 2004 GAAP.
Pari Passu Debt means any of our or our
subsidiaries unsubordinated Debt that is unsecured, is
secured only by Encumbrances on property that secure the debt
securities issued under the Indenture on an equal and ratable
basis with such Debt or the debt securities provided the debt
securities are equally and ratably secured.
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Permitted Encumbrances means
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pledges or deposits made to secure payment of workers
compensation, or to participate in any fund in connection with
workers compensation insurance, unemployment insurance,
pensions, or social security programs,
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Encumbrances consisting of zoning restrictions, easements, or
other restrictions on the use of real property, provided that
such items do not materially impair the use of such property for
the purposes intended and none of which is violated in any
material respect by existing or proposed structures or land use,
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Encumbrances imposed by mandatory provisions of law such as for
materialmens, mechanics, warehousemens, and
other like Encumbrances arising in the ordinary course of
business, securing payment of any liability whose payment is not
yet due,
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Encumbrances for taxes not yet due and payable or for taxes,
assessments, and governmental charges or assessments that are
being contested in good faith by appropriate proceedings
diligently conducted,
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Encumbrances on properties where we or the applicable subsidiary
is insured against such Encumbrances by title insurance or other
similar arrangements,
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Encumbrances securing assessments or charges payable to a
property owner association or similar entity, which assessments
are not yet due and payable or are being contested in good faith
by appropriate proceedings diligently conducted,
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Encumbrances securing assessment bonds and similar facilities
district bonds so long as we or the applicable subsidiary is not
in material default under the terms thereof,
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Encumbrances granted to us by any of our subsidiaries,
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leases to tenants of space in properties that are entered into
in the ordinary course of business,
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any netting or set-off arrangement entered into by us or any of
our subsidiaries in the normal course of its banking
arrangements for the purpose of netting debit and credit
balances, or any set-off arrangement which arises by operation
of law as a result of us or any of our subsidiaries opening a
bank account,
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any title transfer or retention of title arrangement entered
into by us or any of our subsidiaries in the normal course of
its trading activities on the counterpartys standard or
usual terms,
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Encumbrances over goods and documents of title to goods arising
out of letter of credit transactions entered into in the
ordinary course of business, and
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any Encumbrance which secures the Pari Passu Debt.
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Total Assets as of any date means the sum of total
assets, before accumulated depreciation and amortization, as
reflected on our consolidated balance sheet for such date
adjusted accordingly to take into account our interests in our
Unconsolidated Affiliates by eliminating that portion of assets
that are not our or our subsidiaries assets, and property
management and other property fund fees set forth in our
most recent consolidated financial statements for the four
fiscal quarters immediately preceding the relevant determination
divided by 0.08.
Total Unencumbered Assets means Total Assets,
determined on a basis not including any assets that are subject
to an Encumbrance.
Unconsolidated Affiliate means any entity in which
we, directly or indirectly, hold an ownership interest, the
operations and results of which are not consolidated in our
financial statements included in our annual report on
Form 10-K
or quarterly report on
Form 10-Q
or any entity in which we, directly or indirectly, hold a 50% or
less equity ownership interest notwithstanding that the
operations and results of that entity are consolidated with our
operations and results in our financial statements included in
our annual report on
Form 10-K
or quarterly report on
Form 10-Q.
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Unsecured Debt means Debt, including Pari Passu
Debt, which is not otherwise secured by an Encumbrance upon any
of our or our subsidiaries properties.
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.
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Maintenance
of properties
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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 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.
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.
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Payment
of taxes and other claims
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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.
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Provision
of financial information
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Whether or not we are subject to Section 13 or 15(d) of the
Securities Exchange Act, we will file with the SEC, to the
extent permitted under the Securities 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 Securities 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 Securities 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;
13
(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 $10,000,000 ($50,000,000
with respect to debt securities issued after the date of the
Second Supplemental Indenture, after such time as any debt
securities issued under the Indenture prior to the date of the
Second Supplemental Indenture are no longer outstanding) 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;
(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 $10,000,000 ($50,000,000 with respect to debt securities
issued after the date of the Second Supplemental Indenture after
such time as any debt securities issued under the Indenture
prior to the date of the Second Supplemental Indenture are no
longer outstanding) and such judgments, orders or decrees remain
undischarged, unstayed and unsatisfied in an aggregate amount,
excluding amounts fully covered by insurance, in excess of
$10,000,000 ($50,000,000 with respect to debt securities issued
after the date of the Second Supplemental Indenture after such
time as any debt securities issued under the Indenture prior to
the date of the Second Supplemental Indenture are no longer
outstanding) 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 series of debt securities may declare the principal and the
make-whole amount on the debt securities 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 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; 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.
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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, 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 the trustee reasonable security or indemnity.
The holders of not less than a majority in principal amount of
the outstanding series of debt securities 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 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.
15
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 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 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 board of trustees has resolved to incorporate the
defeasance provisions into 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
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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 our board of trustees
has included such a provision in the series of debt securities
at the time that they are issued. Once we have made this
election, any omission to comply with these obligations shall
not constitute a default or an event of default with respect to
the series of debt securities. In either case, we must
irrevocably deposit the needed funds in trust, with the trustee,
as described above.
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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 sufficient to
pay amounts due on the debt securities at the
18
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 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.
19
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.
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Special
Investor Considerations for Global Securities.
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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
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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.
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Certain
Book-Entry Procedures for the Global Securities
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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.
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
20
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 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
(including one or more of the initial purchasers), 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 designated by the initial
purchasers with an interest in the Global Security 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 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
21
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 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
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 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.
22
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.
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.
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
March 1, 2006, 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.
23
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 Code.
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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
24
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 and any past period, if any, 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, 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
redemption of junior or parity shares. 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.
25
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
26
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 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.
27
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 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 the case of the Series C preferred
shares, Series F preferred shares and Series G
preferred shares, ownership restriction similar to the ownership
restrictions of the series 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.
DESCRIPTION
OF COMMON SHARES
General
The declaration of trust authorizes us to issue up to
375,000,000 shares of beneficial interest, par value
$0.01 per share, consisting of 362,580,000 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 March 6, 2006, approximately
244,562,300 common shares were issued and outstanding and held
of record by approximately 11,100 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
28
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 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 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 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 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 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 the 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.
29
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. In addition, we are required to, and as a matter of
practice do, insert a clause in our management and other
contracts providing that shareholders assume no personal
liability for obligations entered into on our behalf.
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.
30
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, Rowe & Maw 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, 2005, 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,
2006 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 stock ownership, the
various qualification tests imposed under the Internal Revenue
Code discussed below. Mayer, Brown, Rowe & Maw 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
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.
31
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 it is eligible to elect and has
validly elected to continue to be treated as a U.S. person
under prior law or 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 attributed to its
owners. Accordingly, if a partnership or other flow-through
entity holds stock, the tax treatment of the shareholder will
generally depend on the status of the partner or other owner and
the activities of the partnership or other entity.
Taxation
of ProLogis
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 tax basis in his 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 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
32
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:
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. Any stock 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 the shares of its stock
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 of stock 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 shares of its stock
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 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 shares of ProLogis stock 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 shares of its stock to
assure that its qualification as a real estate investment trust
will not be compromised.
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 limited
liability company taxed as a partnership or disregarded entity,
ProLogis will be deemed to own a proportionate share of the
partnerships or limited liability companys 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,
and government securities, and qualified temporary investments.
Second, although the remaining 25% of ProLogis assets
generally may be invested without restriction,
33
ProLogis is prohibited from owning securities representing more
than 10% of either the vote or value of the outstanding
securities of any issuer other than a qualified real estate
investment trust subsidiary, another real estate investment
trust or a taxable REIT subsidiary. Further, no more than 20% 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 taxable REIT subsidiary.
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 test (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.
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 limited liability
company taxed as a partnership or disregarded entity, ProLogis
will be treated as receiving its share of the income and loss of
the partnership or limited liability company, and the gross
income of the partnership or limited liability company will
retain the same character in the hands of ProLogis as it has in
the hands of the partnership or limited liability company. 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% or the 95% gross income
test described below, if ProLogis, or an owner of 10% or more of
ProLogis, directly or constructively
34
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 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 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 a hedging transaction that is clearly and timely
identified and hedges indebtedness incurred or to be incurred to
acquire or carry real estate assets will not constitute gross
income, rather than being treated as qualifying income or
non-qualifying income, for purposes of the 95% gross income
test. Income from a hedging transaction that does not meet these
requirements will be treated as non-qualifying income for
purposes of the 95% gross income test.
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 four years and other
requirements relating to the number of properties sold in a
year, their tax bases, 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 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.
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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, as modified by the 2004 Act, will generally
be available if:
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(1)
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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
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(2)
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ProLogis failure to comply was due to reasonable cause and
not due to willful neglect.
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If these relief provisions apply, however, ProLogis will
nonetheless be subject to a special tax upon the greater of the
amount by which it fails either the 75% or 95% gross income test
for that year.
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Annual
distribution requirements
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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, intends to borrow funds in order to
satisfy the distribution requirement. However, there can be no
assurance that such borrowing would be available at such time.
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.
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Tax
aspects of ProLogis investments in partnerships
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A portion of ProLogis investments are owned through
various partnerships. 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 such a
situation, 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.
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 and 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 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
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Taxation
of U.S. shareholders
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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
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 the shareholder, 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
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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 stock 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 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 recently adopted 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.
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Information
and reporting and backup withholding
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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.
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Taxation
of tax-exempt shareholders
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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, and 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 stock of the real estate investment trust and at least one
qualified pension trust holds more than 25% by value of the
interests of such 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.
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Taxation
of foreign shareholders
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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 reduces that tax and the foreign shareholder files an
Internal Revenue Service Form W-8BEN 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 have to
provide the Internal Revenue Service Form W-8ECI or
Form W-8BEN beginning January 1, 2000 and every three
years thereafter unless the information on the form changes
before that date. 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 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
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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 year within which
the distribution is received. ProLogis is required by applicable
Treasury regulations to withhold 35% of any distribution to a
foreign person owning more than 5% of the relevant class of
shares that could be d