UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
(Amendment No.1)
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ____________to____________
Commission File Number 1-12846
------------------
PROLOGIS TRUST
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction
of incorporation or organization)
74-2604728
(I.R.S. employer identification no.)
14100 East 35th Place
Aurora, Colorado 80011
(Address of principal executive offices and zip code)
(303) 375-9292
(Registrant's telephone number including area
code) Securities registered pursuant to Section
12(b) of the Act:
Title of Each Class Name of each exchange On
which registered
------------------- ------------------------
Common Shares of Beneficial Interest, par value
$0.01 per share New York Stock Exchange
Series A Cumulative Redeemable Preferred Shares
of Beneficial Interest, par value $0.01 per
share New York Stock Exchange
Series B Cumulative Convertible Redeemable
Preferred Shares of Beneficial Interest, par
value $0.01 per share New York Stock Exchange
Series D Cumulative Redeemable Preferred
Shares of Beneficial Interest, par
value $0.01 per share New York Stock Exchange
Series E Cumulative Redeemable Preferred
Shares of Beneficial Interest, par
value $0.01 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Based on the closing price of the registrant's Common Shares on April
28, 1999, the aggregate market value of the Common Shares held by non-affiliates
of the registrant was $2,243,049,620.
At April 28, 1999, there were 161,186,798 shares of the registrant's
Common Shares outstanding.
<PAGE>
TABLE OF CONTENTS
Item Description Page
- ---- ----------- ----
PART III*
Item 10. Trustees and Executive Officers of the Registrant............. 2
Item 11. Executive Compensation........................................ 2
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................... 9
Item 13. Certain Relationships and Related Transactions................ 12
* Note: the purpose of this Amendment No.l is to include the information
required by Items 10, 11, 12 and 13 of the ProLogis Trust Annual Report on Form
10-K for the year ended December 31, 1998.
1
<PAGE>
PART III
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information regarding ProLogis' executive officers and Trustees,see
"Item 1. Business - Officers and Trustees of ProLogis."
Security Capital Group Incorporated ("Security Capital") has the right
to nominate up to three Trustees, depending upon its level of beneficial
ownership of Common Shares. See Item 13 "Certain Relationships and Relationships
and Related Transactions - Amended and Restated Investor Agreement." Thomas G.
Wattles is the only existing nominee of Security Capital. Under the Agreement
and Plan of Merger, dated November 16, 1998, as amended, pursuant to which
Meridian Industrial Trust, Inc. ("Meridian") was merged with and into ProLogis,
ProLogis agreed that two Meridian directors would be added to the Board of
Trustees of ProLogis (the "Board"). Messrs. John S. Moody and Kenneth N.
Stensby, prior directors of Meridian, were elected as Trustees by the Board upon
completion of the merger in March 1999. The Declaration of Trust requires that a
majority of the Trustees be independent trustees.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires ProLogis'
Trustees, officers and beneficial owners of more than 10% of the outstanding
Common Shares of Beneficial Interest, par value $0.01 per share (the "Common
Shares"), to file reports of ownership and changes in ownership of the Common
Shares with the Securities and Exchange Commission ("SEC") and to send copies of
such reports to ProLogis. Based solely on a review of those reports and
amendments thereto furnished to ProLogis and on written representations of
certain of such persons that they were not required to file certain of those
reports, ProLogis believes that no such person failed to file any such report on
a timely basis during 1998, except Robin P.R. von Weiler filed one late report
with respect to one transaction; Irving F. Lyons, III, filed one late report
with respect to one transaction and each of Edward F. Long, Edward S. Nekritz,
Paul C. Congleton and J. Andre Teixeira each filed a late initial report.
ITEM 11. EXECUTIVE COMPENSATION
The following table presents the compensation for 1998, 1997 and 1996 of
each of the Chairman, President and these other most highly compensated officers
of ProLogis (the "Named Executive Officers"). Each Named Executive Officer was
an employee of Security Capital Industrial Incorporated, ProLogis' former REIT
Manager, which was a wholly owned subsidiary of Security Capital, and was
compensated by Security Capital during 1996 and from January 1, 1997, through
September 8, 1997, the closing date of the merger in which the REIT Manager and
SCI Client Services Incorporated, the former ProLogis Property Manager and
wholly owned subsidiary of Security Capital, merged into subsidiaries of
ProLogis.
2
<TABLE>
<CAPTION>
- --------------------------------------------------------- ------------------------------------- -----------
Annual Compensation Long-Term Compensation Awards
- --------------------------------------------------------- ------------------------------------- -----------
- ------------------ ------ ---------- --------- ---------- ---------- -------------- ----------- -----------
Shares of
Security
Capital
Class A
Other Restricted Common Common
Annual Stock Shares Stock All Other
Name and Compensation Awards Underlying Underlying Compensation
Principal Year Salary($) Bonus ($)(1) (#) Options(#)(2) Options ($)(4)
Position ($) (#)(3)
- ------------------ ------ ---------- --------- ---------- ---------- -------------- ----------- -----------
- ------------------ ------ ---------- --------- ---------- ---------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
K. Dane Brooksher 1998 242,628 602,000 --- (5)60,000 202,111 --- 21,936
Chairman 1997 250,000 350,000 --- --- 202,650 469 9,326
1996 207,000 268,000 --- --- --- 658 224
- ------------------ ------ ---------- --------- ---------- ---------- -------------- ----------- -----------
- ------------------ ------ ---------- --------- ---------- ---------- -------------- ----------- -----------
Irving F. Lyons, 1998 242,628 502,000 --- (5)50,000 161,111 --- 27,869
III 1997 250,000 275,000 --- --- 202,650 892 9,326
President 1996 145,000 230,000 --- --- --- 571 157
- ------------------ ------ ---------- --------- ---------- ---------- -------------- ----------- -----------
- ------------------ ------ ---------- --------- ---------- ---------- -------------- ----------- -----------
Jeffrey H. 1998 317,988(6) 352,000 --- (5)40,000 47,407 --- 18,733
Schwartz 1997 227,462 250,000 99,113 --- 122,531 208 5,660
Senior 1996 150,000 140,000 --- --- --- 417 162
Managing
Director
- ------------------ ------ ---------- --------- ---------- ---------- -------------- ----------- -----------
- ------------------ ------ ---------- --------- ---------- ---------- -------------- ----------- -----------
Robert J. Watson 1998 194,103 302,000 --- (5)40,000 47,407 --- 18,701
Managing 1997 200,000 215,000 --- --- 122,531 219 5,650
Director 1996 162,000 125,000 --- --- --- 439 175
- ------------------ ------ ---------- --------- ---------- ---------- -------------- ----------- -----------
- ------------------ ------ ---------- --------- ---------- ---------- -------------- ----------- -----------
John W. Seiple 1998 194,103 252,000 --- (5)40,000 35,555 --- 16,921
Managing 1997 200,000 200,000 --- --- 103,681 208 4,744
Director 1996 135,000 165,000 --- --- --- 527 146
- ------------------ ------ ---------- --------- ---------- ---------- -------------- ----------- -----------
<FN>
(1) Includes reimbursement of relocation costs.
(2) The ProLogis 1997 Long-Term Incentive Plan provides that participants who
are awarded options will also receive dividend equivalent units with
respect to the options awarded. (See "1997 Long-Term Incentive Plan.")
(3) These options to acquire shares of Security Capital's Class A Common Stock
(the "Class A Common Stock") were awarded by Security Capital under
Security Capital's 1995 Option Plan. At the time of the award of these
options, each of the Named Executive Officers was an employee of the REIT
Manager.
3
<PAGE>
(4) Includes contributions made by ProLogis in 1998 under its 401(k) Savings
Plan and the Non-Qualified Savings Plan, consisting of $4,800 to each of
Messrs. Brooksher, Schwartz, Watson and Seiple, and $4,791 to Mr. Lyons.
Beginning in 1998, ProLogis has matched up to 50% of the first 6% of
compensation contributed by the employee under the 401(k) Savings Plan.
Also includes the dollar value of insurance premiums paid by ProLogis with
respect to term life insurance for the benefit of Named Executive Officer
as follows: Mr. Brooksher $270 in 1998 and 1997 and $224 in 1996; Mr.
Lyons, $270 in 1998 and 1997, and $157 in 1996; Mr. Schwartz, $248 in 1998,
$226 in 1997, and $162 in 1996; Mr. Watson, $216 in 1998 and 1997 and $175
in 1996; Mr. Seiple, $216 in 1998 and 1997 and $146 in 1996. Also includes
imputed interest income deemed incurred on loans from ProLogis having an
interest rate lower than the rate mandated by the Internal Revenue Service.
There were no imputed interest payments in 1996. Mr. Brooksher received
imputed interest payments of $16,866 in 1998 and $9,056 in 1997. Mr. Lyons
received imputed interest payments of $22,808 in 1998 and $9,056 in 1997.
Mr. Schwartz received imputed interest payments of $13,685 in 1998 and
$5,434 in 1997. Mr. Watson received imputed interest payments of $13,685 in
1998 and $5,434 in 1997. Mr. Seiple received imputed interest payments of
$11,905 in 1998 and $4,528 in 1997.
(5) Amounts shown represent restricted share awards made in 1998 under the 1997
Long-Term Incentive Plan. These awards are comprised of units which will
vest 25% on each December 31, beginning December 31, 1999, and may be
converted into the number of shares indicated on December 31, 2002. The
recipients are also credited with dividend equivalent units with respect
to these awards. (See "1997 Long-Term Incentive Plan".)
(6) Includes amounts paid as salary to offset additional tax charges resulting
from Mr. Schwartz's residence in The Netherlands.
</FN>
</TABLE>
1997 Long-Term Incentive Plan
General
The 1997 Long-Term Incentive Plan (the "1997 Incentive Plan") authorizes
the award of options or other rights to acquire up to 9,410,000 Common Shares in
the aggregate. No individual may be granted awards with respect to more than
500,000 Common Shares in any one-year period. In the event of certain
transactions affecting the type or number of outstanding shares, the number or
type of shares subject to outstanding awards and the exercise price thereof may
be appropriately adjusted. The 1997 Incentive Plan authorizes the establishment
of one or more option programs and share purchase programs and authorizes the
award of share grants (any of which may be subject to restrictions). All
employees of ProLogis or any of its affiliates are eligible to participate in
the 1997 Incentive Plan. The Compensation Committee of the Board of Trustees
(the "Compensation Committee") administers the 1997 Incentive Plan.
Options expire on the date determined by the Compensation Committee which
shall not be later than the tenth anniversary of the grant date. The 1997
Incentive Plan provides generally that participants who are awarded options will
also receive dividend equivalent units with respect to the options. The dividend
equivalent units will be subject to the same vesting schedule as the options and
will be payable when the options are exercised, unless the participant elects to
defer receipt, or the options expire. Generally, each participant will be
credited with dividend equivalent units at the end of each calendar year in an
amount equal to (i) the average dividend yield during such year with respect to
a Common Share that is in excess of the Standard & Poor's 500 Stock Index
average dividend yield for such year, multiplied by (ii) the number of Common
Shares underlying the participant's outstanding options that were granted with
dividend equivalent units. Each dividend equivalent unit also accumulates
additional dividend equivalent units on an annual basis. All dividend equivalent
units are paid in the form of Common Shares at the rate of one Common Share per
dividend equivalent unit.
4
<PAGE>
The 1997 Incentive Plan provides that the Compensation Committee may award
participants performance shares, the distribution of which is subject to
achievement of performance objectives. The number of shares and the performance
measures and periods shall be established by the Compensation Committee at the
time the award is made, provided that any performance period shall be at least
one year.
Share Purchase Program
The 1997 Incentive Plan also provides that the Compensation Committee may
allow participants to purchase shares, the purchase and distribution of which is
subject to the satisfaction of conditions established by the Compensation
Committee. The number of shares and the conditions will be established by the
Compensation Committee at the time the award is made, provided that any
performance period will be at least one year and no more than 500,000 Common
Shares may be used for share awards.
Restricted Share Units
The Compensation Committee also may award restricted share units. Each
restricted share unit awarded represents an interest in one Common Share as of
the date of the award. Outstanding restricted share units are generally credited
with dividend equivalent units at the end of each year. The dividend equivalent
units are provided in an amount equal to the average dividend yield during such
year with respect to a Common Share, multiplied by the number of Common Shares
underlying the participant's outstanding restricted share units that were
granted with dividend equivalent units. The restricted share units together with
the applicable dividend equivalent units vest in equal portions on each of the
first four anniversaries of the award of the restricted share units so long as
the recipient remains an employee of ProLogis or one of its affiliates.
Option Grants in 1998
The following table sets forth certain information with respect to
individual grants of options during 1998 to each of the Named Executive
Officers.
5
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Option Grants
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Individual Grants
- ------------------------------------------------------------------------------------------------------------
- ---------------------------- ---------------- ---------------- --------------- --------------- -------------
Common Shares
Underlying Percent of
Options Total Options Exercise
Granted Granted to or Base Grant Date
(#)(1) Employees Price Expiration Present
Name in 1998 ($/share) Date (2) Value ($)(3)
- ---------------------------- ---------------- ---------------- --------------- --------------- -------------
- ---------------------------- ---------------- ---------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
K. Dane Brooksher (4) 202,111 13.13% (4) (4) $560,181
- ---------------------------- ---------------- ---------------- --------------- --------------- -------------
- ---------------------------- ---------------- ---------------- --------------- --------------- -------------
Irving F. Lyons, III (5) 161,111 10.46% (5) (5) $446,840
- ---------------------------- ---------------- ---------------- --------------- --------------- -------------
- ---------------------------- ---------------- ---------------- --------------- --------------- -------------
Jeffrey H. Schwartz 47,407 3.08% $21.09375 10/15/08 $132,029
- ---------------------------- ---------------- ---------------- --------------- --------------- -------------
- ---------------------------- ---------------- ---------------- --------------- --------------- -------------
Robert J. Watson 47,407 3.08% $21.09375 10/15/08 $132,029
- ---------------------------- ---------------- ---------------- --------------- --------------- -------------
- ---------------------------- ---------------- ---------------- --------------- --------------- -------------
John W. Seiple 35,555 2.31% $21.09375 10/15/08 $99,021
- ---------------------------- ---------------- ---------------- --------------- --------------- -------------
<FN>
(1) All of the options granted to the Named Executive Officers in 1998 have
dividend equivalent units.
(2) The options vest 25% on the first anniversary of the date of grant and an
additional 25% on each of the second, third, and fourth anniversaries of
the date of grant. However, such options may be exercised earlier in the
event of the optionee's retirement, disability or death, or upon
termination of an optionee's employment due to a change of control of
ProLogis.
(3) The amounts shown are based on the Black-Scholes option pricing model. The
material assumptions incorporated in the Black-Scholes model in estimating
the value of the options include the following: an expected option life of
6.75 years; a risk-free interest rate of 4.74%; an expected dividend yield
of 7.36%; and expected volatility of 27.37%. The actual value, if any, an
optionee will realize upon exercise of an option will depend on the excess
of the market value of the Common Shares over the exercise price on the
date the option is exercised. There can be no assurance that the value
realized by an optionee will be at or near the value estimated by using the
Black-Scholes model.
(4) Mr. Brooksher received two option grants in 1998: On October 15, 1998, he
received a grant to acquire 71,111 Common Shares at a price of $21.09375.
The grant date present value was $198,044 and the grant expires on October
15, 2008. On December 17, 1998, Mr. Brooksher received a grant to acquire
131,000 Common Shares at a price of $20.9375. The grant date present value
was $362,137 and the grant expires on December 17, 2008.
6
<PAGE>
(5) Mr. Lyons received two option grants in 1998: On October 15, 1998, he
received a grant to acquire 71,111 Common Shares at a price of $21.09375.
The grant date present value was $198,044 and the grant expires on October
15, 2008. On December 17, 1998, Mr. Lyons received a grant to acquire
90,000 Common Shares at a price of $20.9375. The grant date present value
was $248,796 and the grant expires on December 17, 2008.
</FN>
</TABLE>
Option Exercises in 1998 and Year-End Option Values
None of the Named Executive Officers exercised options for Common
Shares or shares of Security Capital Class A Common Stock in 1998. The following
table sets forth certain information as to the year-end value of unexercised
options owned by those executive officers.
<TABLE>
<CAPTION>
ProLogis Common Shares Shares of Security Capital Class A Common Stock
---------------------- ---------------------------------------------------
Securities Underlying Value of Unexercised Securities Underlying Value of Unexercised
Unexercised Options at in-the-Money Options at Unexercised Options at In-the-Money Options
Year-End (#) Year-End ($)(1) Year-End (#) at Year-End ($) (2)
-------------- ---------------- ------------- ---------------------
Name Exercisable Unexercisable Exercisable Unexercisable Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
K. Dane Brooksher --- 404,761 --- --- 4,723 1,553 1,387,597 ---
Irving F. Lyons, III --- 363,761 --- --- 196 1,288 --- ---
Jeffrey H. Schwartz --- 169,938 --- --- 995 913 2,505 18,370
Robert J. Watson --- 169,938 --- --- 1,795 1,304 483,098 135,568
John W. Seiple --- 139,236 --- --- 178 998 2,088 18,788
<FN>
(1) Based on the December 31, 1998, New York Stock Exchange ("NYSE") closing
price of $20.75 per share.
(2) Based on the December 31, 1998, NYSE closing price of $660.00 per share.
</FN>
</TABLE>
Employment Contracts, Termination of Employment and Change-in-Control Arrange-
ments
ProLogis has no employment contracts with any executive officer and no
plans or arrangements by which any such executive officer will be compensated as
a result of his resignation or retirement or any other termination of his
employment with ProLogis or in connection with a change in control of ProLogis,
except that in the event a "Change in Control," as such term is defined in
either the 1997 Incentive Plan or the Outside Trustees Plan, occurs, options to
purchase Common Shares granted under either of the plans become immediately
exercisable and restrictions on purchased Common Shares lapse.
7
<PAGE>
Trustee Compensation
During 1998 and for the first three months of 1999, ProLogis paid an annual
retainer of $20,000 to Trustees who were not officers of ProLogis or employees
of Security Capital ("Outside Trustees"). As of April 1, 1999, the annual
retainer was raised to $25,000. These fees are paid to the Trustees in Common
Shares (quarterly on each dividend payment date) based on the then current
market price of the Common Shares pursuant to ProLogis' Dividend Reinvestment
and Share Purchase Plan (the "Share Purchase Plan"). Outside Trustees also
receive $1,000 for each meeting attended, which is also paid in Common Shares.
Members of the Investment Committee who are Outside Trustees receive an
additional annual retainer of $4,000 and members of the Audit and Compensation
Committees receive an additional annual retainer of $2,000, which retainers are
also paid in Common Shares. Unless payment is deferred at the option of the
Outside Trustee, both the retainer and meeting fees payable to Outside Trustees
are paid directly into the Share Purchase Plan on behalf of the Outside Trustees
as optional cash payments, and the Common Shares purchased remain in the Share
Purchase Plan. Common Shares purchased with the retainer and committee fees may
not be sold or otherwise transferred so long as the Outside Trustee remains a
Trustee. The Board may grant an individual Outside Trustee a waiver of the
requirement that Outside Trustees' fees be used to purchase Common Shares or
that such Common Shares be held so long as the Outside Trustee remains a
Trustee.
Each Outside Trustee may defer the payment of fees from the date such fees
were originally to be received for a minimum of two years or for so long as the
Outside Trustee remains a Trustee. During the period of deferral, ProLogis
credits on ProLogis' records the Outside Trustee with fees designated for
payment and dividends which would have been paid on the Common Shares previously
credited as fees. However, no payment is actually made, nor are any Common
Shares or funds actually set aside until the deferral period terminates.
Outside Trustees are reimbursed for any out-of-town travel expenses
incurred in connection with attendance at Board meetings.
Outside Trustees Plan
During 1998, ProLogis made awards to its Outside Trustees under the
ProLogis Common Share Option Plan for Outside Trustees (the "Outside Trustee
Plan"). A total of 200,000 Common Shares are authorized for issuance under the
Outside Trustee Plan. Through 1998 each Outside Trustee was entitled to receive
an option to purchase 2,000 Common Shares at a price per share equal to the
closing price for Common Shares on the NYSE on such date. Options granted before
1999 under the Outside Trustee Plan had a five-year term and were immediately
exercisable. The Secretary of ProLogis administers the Outside Trustee Plan.
Commencing in 1999, on the date of each annual meeting of shareholders of
ProLogis, each Outside Trustee will be granted an option to purchase 5,000
Common Shares at an exercise price equal to the average of the highest and
lowest sales price of the Common Shares on the NYSE on that date. The options
vest at the rate of 25% per year on each anniversary of the date of the award
for the four succeeding years after the award. In the event of changes in the
outstanding Common Shares, the administrator may make appropriate adjustments to
the aggregate number of Common Shares available under the Outside Trustees Plan
and the terms of the options for Common Shares subject to the Outside Trustee
Plan.
8
<PAGE>
The Outside Trustees also receive dividend equivalent units with respect to
the options awarded. Generally, each Outside Trustee will be credited with
dividend equivalent units at the end of each calendar year in an amount equal to
(i) the average dividend yield during such year with respect to a Common Share
which is in excess of the Standard & Poor's 500 Stock Index average dividend
yield for such year, multiplied by (ii) the number of Common Shares underlying
the Outside Trustee's outstanding options. Each dividend equivalent unit
accumulates additional dividend equivalent units. All dividend equivalent units
are paid in Common Shares at a rate of one Common Share per dividend equivalent
unit. The dividend equivalent units are subject to the same vesting schedule as
the options and will be payable when the options are exercised.
Each Outside Trustee may defer the award of options under the Outside
Trustee Plan from the date such awards are originally made for a minimum of two
years or for so long as the Outside Trustee remains a Trustee. During the period
of deferral, ProLogis credits on ProLogis' records the Outside Trustees with
their awards and dividend equivalent units on the options underlying such
awards. However, no awards are actually made until the deferral period
terminates.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of
Common Shares as of April 28, 1999, by (i) each person known to ProLogis to have
been the beneficial owner of more than five percent of the outstanding Common
Shares on such date, (ii) each Trustee, (iii) the Named Executive Officers and
(iv) all Trustees and executive officers as a group. Unless otherwise indicated
in the footnotes, all of such interests are owned directly and the indicated
person or entity has sole voting and dispositive power. The following table
assumes that, for the purpose of calculating the number and percent of Common
Shares beneficially owned by a person, (i) all Series B Cumulative Convertible
Redeemable Preferred Shares of Beneficial Interest, par value $.01 per share, of
ProLogis ("Series B Preferred Shares") and limited partnership interests in
ProLogis Limited Partnership--I, ProLogis Limited Partnership--II, ProLogis
Limited Partnership--III and ProLogis Limited Partnership--IV owned by such
person (but not any other such securities held by others) have been converted
into or exchanged for Common Shares and (ii) all options or other convertible
securities held by that person which are exercisable within 60 days have been
exercised, but that no options or convertible securities held by other persons
have been exercised, converted or exchanged. Fractional Common Shares have been
rounded to the nearest whole Common Share in the table below and elsewhere in
this Proxy Statement.
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------- -------------
Number of
Common Shares Percent of
Name and Address of Beneficial Owner Beneficially Owned Common Shares
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
<S> <C> <C>
Security Capital Group Incorporated 49,903,814(1) 31.0%
125 Lincoln Avenue
Santa Fe, New Mexico 87501
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
Scudder Kemper Investments, Inc. 9,938,613(2) 6.0%
Two International Place
Boston, Massachusetts 02110-4103
9
<PAGE>
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
Ameritech Pension Trust 9,777,457 6.1%
225 West Randolph Street, HQ13A
Chicago, IL 60606
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
K. Dane Brooksher 126,364(3) *
14100 East 35th Place
Aurora, Colorado 80011
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
Stephen L. Feinberg 173,635(4)(5) *
4855 North Mesa, Suite 120
El Paso, Texas 79912
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
Donald P. Jacobs 8,318(4) *
J.L. Kellogg Graduate School of Management
Northwestern University
2001 Sheridan Road
Evanston, Illinois 60208-2003
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
Irving F. Lyons, III 359,241(6) *
47775 Fremont Boulevard
Fremont, California 94538
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
John S. Moody 35,094(7) *
Cornerstone Properties, Inc.
Tower 56, 126 East 56th Street
New York, NY 10022
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
William G. Myers 165,151(4)(8) *
1114 State Street, Suite 232
Santa Barbara, California 93101
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
John E. Robson 27,836(4)(9) *
Robertson, Stephens & Co.
555 California Street, 26th Floor
San Francisco, CA 94104
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
Jeffrey H. Schwartz 185,917(10) *
Capronilaan 25-27
1119 NP Schiphol - Rijk
Amsterdam, The Netherlands
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
John W. Seiple 51,016(11) *
14100 East 35th Place
Aurora, Colorado 80011
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
Kenneth N. Stensby 29,104(12) *
7112 Shannon Drive
Edina, MN 55439
10
<PAGE>
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
J. Andre Texeira -0- *
Coca-Cola Ukraine, Ltd.
P.O. Box 398
Brovary 255020, Ukraine
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
Robert J. Watson 65,393(13) *
Capronilaan 25-27
1119 NP Schiphol - Rijk
Amsterdam, The Netherlands
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
Thomas G. Wattles 26,373(14) *
125 Lincoln Avenue
Santa Fe, New Mexico 87501
- --------------------------------------------- ------------------- -------------
- --------------------------------------------- ------------------- -------------
All Trustees and Executive Officers
as a Group (24 persons) 1,498,705 *
- --------------------------------------------- ------------------- -------------
* Less than 1%
<FN>
(1) These Common Shares are owned of record by SC Realty Incorporated, a
wholly owned subsidiary of Security Capital.
(2) Information with respect to beneficial ownership of Scudder Kemper
Investments, Inc. is included herein in reliance on two Schedule 13G's
dated February 11, 1999,filed with the Securities and Exchange Commission
("SEC"). The Schedule 13G indicates that Scudder Kemper Investments, Inc.
has sole power to vote or direct the vote of 2,034,278 Common Shares,
shared power to vote or direct the vote of 6,580,586 Common Shares and
sole power to dispose or direct the disposition of 9,938,613 Common
Shares, including 831,633 Common Shares which are issuable upon
conversion of 648,700 Series B Convertible Preferred Shares. Scudder
Kemper Investments, Inc. disclaims beneficial ownership of these Common
Shares.
(3) Includes 784 Common Shares held by Mr. Brooksher's wife.
(4) Includes for Messrs. Feinberg, Jacobs, Myers and Robson beneficial
ownership of 8,000, 6,000, 8,000 and 8,000 Common Shares, respectively,
that are issuable upon exercise of options granted under the Share Option
Plan for Outside Trustees. See Item 11 "Executive Compensation - Trustee
Compensation."
(5) Dorsar Partners, L.P. beneficially owns 50,000 of these Common Shares and
an aggregate of 26,922 Common Shares which are issuable upon conversion
of 21,000 Series B Preferred Shares. As a result of his position with
Dorsar Partners, L.P., Mr. Feinberg may be deemed to share voting and
dispositive power with respect to Common Shares owned by this entity.
6,000 of these Common Shares are owned by a trust for the benefit of Mr.
Feinberg, and an additional 6,000 of these Common Shares are owned by a
trust for the benefit of a relative of which Mr. Feinberg is a trustee.
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(6) 7,627 of these Common Shares are owned by trusts for the benefit of Mr.
Lyons and other family members of which Mr. Lyons is a trustee and 286 of
these Common Shares are owned by Mr. Lyons' daughters. 256,530 of these
Common Shares are issuable upon exchange of units in SCI Limited
Partnership--I. Mr. Lyons is a partner of certain limited partners of
such partnership. By virtue of such position, Mr. Lyons may be deemed to
beneficially own these Common Shares.
(7) Includes beneficial ownership of 27,504 Common Shares that are issuable
upon exercise of options granted as a result of the conversion of
Meridian options into ProLogis options upon the March 30, 1999, closing
of the merger of Meridian with and into ProLogis.
(8) 34,813 of these Common Shares are owned by an entity with which Mr. Myers
may be deemed to share voting and dispositive power with respect to
Common Shares as a result of his position with this entity. 118,181 of
these Common Shares are owned by Mr. Myers' IRA.
(9) 5,993 of these Common Shares are owned by Mr. Robson's IRA, 5,453 of
these Common Shares are owned by the John and Margaret Robson Living
Trust and 7,946 are owned by Mr. Robson's pension account. Mrs. Robson
owns 444 of these Common Shares.
(10) 128,264 of these Common Shares are issuable upon exchange of units in a
partnership owned by Mr. Schwartz.
(11) Mr. Seiple's shareholdings include 817 Common Shares owned by his
children.
(12) Includes beneficial ownership of 27,504 Common Shares that are issuable
upon exercise of options granted as a result of the conversion of
Meridian options into ProLogis options upon the March 30, 1999, closing
of the merger of Meridian with and into ProLogis.
(13) Includes 866 Common Shares held in trust accounts for Mr. Watson's child-
ren and 1,150 Common Shares held by the estate of Mr. Watson's late
father.
(14) 7,424 of these Common Shares are held by Mr. Wattles' IRA, 2,213 of these
Common Shares are held by Mr. Wattles' children and 6 Common Shares are
held by Mr. Wattles' wife.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Acquisition of REIT Manager and Property Manager
In September, 1997 ProLogis acquired Security Capital Industrial
Incorporated and SCI Client Services Incorporated, the REIT Manager and the
Property Manager, respectively. To acquire the companies ProLogis issued to
Security Capital 3,692,023 Common Shares, which number was based on the average
closing price of the Common Shares over the five-day period immediately
preceding the transaction, which was $22.175 per Common Share.
ProLogis also conducted a rights offering entitling its shareholders (other
than Security Capital) to purchase up to approximately $104.4 million of
additional Common Shares. A total of 4,970,352 Common Shares were purchased by
shareholders of ProLogis pursuant to this rights offering. In addition, Security
Capital issued warrants to purchase 3,608,202 shares of Security Capital's Class
B Common Stock to ProLogis' equity security holders other than Security Capital.
The warrants expired on September 18, 1998.
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Amended and Restated Investor Agreement
ProLogis and Security Capital are parties to a Third Amended and Restated
Investor Agreement, dated as of September 9, 1997 (the "Investor Agreement").
Pursuant to the Investor Agreement, Security Capital has the right, so long as
it owns between 10% and 25% of the Common Shares, to nominate one person to the
Board. So long as Security Capital owns 25% or more of the Common Shares,
Security Capital will be entitled to nominate a proportionate number of persons
to the Board subject to a maximum of three nominees if the size of the Board
does not increase above the current size of ten Trustees. In addition, ProLogis
is required to consult with Security Capital's nominees to the Board prior to
taking any action with respect to the following: (i) finalization of the annual
budget and substantial deviations therefrom; (ii) the acquisition or sale of
assets in a single transaction or group of related transactions where the price
exceeds $25 million; (iii) any contract for investment, property management or
leasing services and (iv) any service contract providing for payments in excess
of $1.0 million. ProLogis has no obligation to follow the advice of Security
Capital with respect to the foregoing matters.
Under the Investor Agreement, so long as it owns at least 25% of the Common
Shares, Security Capital also has the right of prior approval with respect to
the following matters: (i) the issuance of equity securities or securities
convertible into equity securities (other than issuances in connection with
option, dividend reinvestment and similar plans) for less than the fair market
value of such securities; (ii) the issuance of any preferred shares which would
result in the Fixed Charge Coverage Ratio (as defined therein) being less than
1.4 to 1.0; (iii) adopting any employee benefit plans under which Common Shares
may be issued; (iv) the compensation of senior officers of ProLogis; (v) the
incurrence of additional indebtedness which would result in the Interest Expense
Coverage Ratio (as defined therein) being less than 2.0 to 1.0.
Administrative Services Agreement
ProLogis and a subsidiary of Security Capital entered into an
administrative services agreement, pursuant to which Security Capital provides
ProLogis with certain administrative and other services with respect to certain
aspects of ProLogis' business, as selected from time to time by ProLogis at its
option. These services include, but are not limited to, payroll and tax
administrative services, cash management and accounts payable services, data
processing and other computer services, research, and insurance administration.
The fees payable to Security Capital are based on negotiated rates for each
service provided. The administrative services agreement is automatically renewed
each December 31, for consecutive one-year terms, subject to approval by a
majority of the independent members of the Board of Trustees. ProLogis believes
that the terms and conditions of the Administrative Services Agreement are as
favorable as those that could have been obtained from unaffiliated third
parties.
Protection of Business Agreement
Security Capital and ProLogis are parties to a protection of business
agreement (the "Protection Agreement") dated as of September 9, 1997, which
prohibited Security Capital and its affiliates from providing, anywhere within
the United States, directly or indirectly, substantially the same services as
those previously provided by the REIT Manager and the Property Manager to any
entity that owns or operates real property that is or is planned to be used
primarily for distribution and light manufacturing properties. The Protection
Agreement does not prohibit Security Capital or its affiliates from owning the
securities of any class of ProLogis. The Protection Agreement will terminate in
the event of an acquisition, directly or indirectly, (other than by purchase
from Security Capital or any of its affiliates) by any person (or group of
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persons acting in concert), other than Security Capital or any of its
affiliates, of the greater of (i) 25% or more of the outstanding shares of
voting securities of ProLogis and (ii) the percentage of outstanding voting
securities of ProLogis owned directly or indirectly by Security Capital and its
affiliates, in either case without the prior written consent of the Board of
Trustees. Subject to earlier termination pursuant to the preceding sentence, the
Protection Agreement will terminate on September 9, 2000.
Security Capital Markets Group Incorporated Financial Advisory Fee
Following completion of the merger of Meridian with and into ProLogis,
ProLogis paid a fee of $650,000 to Security Capital Markets Group Incorporated
("Capital Markets"), a subsidiary of Security Capital, for financial advisory
services. Capital Markets assisted ProLogis with the financial analysis of
Meridian and of the combined entity that was ultimately created with the
successful completion of the merger. ProLogis believes that the terms and
conditions of the foregoing transaction were as favorable as those that could
have been obtained from unaffiliated third parties.
Partnership Affiliations
As part of its acquisition program of industrial facilities, ProLogis has
consummated four transactions pursuant to which it contributed cash, and
third-party partnerships contributed a portfolio of facilities, to ProLogis
Limited Partnership--I, ProLogis Limited Partnership--II, ProLogis Limited
Partnership--III and ProLogis Limited Partnership--IV. Irving F. Lyons, III,
President and Chief Investment Officer and Trustee of ProLogis, is a partner in
ProLogis Limited Partnership--I. Mr. Lyons also owns minority interests in a
substantial amount of undeveloped industrial land near ProLogis' industrial
parks in the San Francisco Bay Area.ProLogis has purchased options and rights of
first refusal with respect to all sales of land and build-to-suit opportunities
involving this property. The ProLogis Limited Partnership--I transaction and the
prices for such options (which are fixed or determined pursuant to formulas)
were negotiated at arms' length prior to Mr. Lyons' affiliation with ProLogis.
Jeffrey H. Schwartz, a Senior Managing Director of ProLogis, has an ownership
interest in partnerships that are limited partners in ProLogis Limited
Partnership--III and ProLogis Limited Partnership--IV. The ProLogis Limited
Partnership--III and ProLogis Limited Partnership--IV transactions were
negotiated at arms' length prior to Mr.
Schwartz's affiliation with ProLogis.
Frigoscandia
In the first quarter of 1998, Frigoscandia S.A., a Luxembourg corporation,
of which ProLogis holds all of the preferred shares which represent 95% of the
contributed equity, and of which Security Capital held all of the ordinary or
common shares which represent 5% of the contributed equity, acquired
Frigoscandia AB, one of the largest refrigeration distribution companies in
Europe. The acquisition was funded through equity and debt with Security
Capital, through Frigoscandia S.A., providing $50,000 initially.
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On September 30, 1998, Security Capital and three independent third parties
formed a Delaware limited liability company ("Frigoscandia LLC") to which
Security Capital contributed its interest in Frigoscandia S.A. and $443,000. The
three independent parties contributed $699,000 in the aggregate to Frigosandia
LLC. Security Capital holds 100% of the Class B membership interest, which is a
nonvoting interest, in Frigoscandia LLC, and the three independent parties hold
100% of the Class A membership interest, which is a voting interest, in
Frigoscandia LLC. Security Capital and the three independent parties are the
only members of Frigoscandia LLC.
Frigoscandia LLC also has certain rights if ProLogis alters its ownership
interest in Frigoscandia S.A. If (i) ProLogis converts all or a portion of
ProLogis' preferred shares in Frigoscandia S.A. into ordinary or common shares
or (ii) sells all or a portion of such preferred shares without the consent of
Frigoscandia LLC, ProLogis must offer to purchase Frigoscandia LLC's equity
interest in Frigoscandia S.A. at fair market value or arrange for the party
acquiring ProLogis' preferred shares to acquire Frigoscandia LLC's interest on
substantially the same terms.
In addition, Frigoscandia LLC provides administrative and financial
consulting services to Frigoscandia S.A. for which Frigoscandia LLC receives an
annual fee of $55,000.
ProLogis believes that the terms and conditions of the transactions entered
into with Frigoscandia LLC are as favorable as those that could have been
obtained from an unaffiliated party.
Kingspark
In August 1998, Kingspark Holding S.A., a Luxembourg corporation, of which
ProLogis holds all of the preferred shares which represent 95% of the
contributed equity, and of which Security Capital held all of the ordinary or
common shares which represent 5% of the contributed equity, acquired Kingspark
Group Holding Limited, a leading industrial developer in the United Kingdom. The
acquisition was funded through equity and debt with Security Capital, through
Kingspark Holding S.A., providing $750,000 initially.
In March 1999, Security Capital and three independent third parties formed
a Delaware limited liability company ("Kingspark LLC") to which Security Capital
contributed its interest in Kingspark Holding S.A. The three independent parties
contributed $765,500 in the aggregate to Kingspark LLC, including $253,500
issued by Kingspark LLC to refund Security Capital. Security Capital holds 100%
of the Class B membership interest, which is a nonvoting interest, in Kingspark
LLC, and the three independent parties hold 100% of the Class A membership
interest, which is a voting interest, in Kingspark LLC. Security Capital and the
three independent parties are the only members of Kingspark LLC.
Kingspark LLC also has certain rights if ProLogis alters its ownership
interest in Kingspark Holding S.A. If (i) ProLogis converts all or a portion of
ProLogis' preferred shares in Kingspark Holding S.A. into ordinary or common
shares or (ii) sells all or a portion of such preferred shares without the
consent of Kingspark LLC, ProLogis must offer to purchase Kingspark LLC's equity
interest in Kingspark Holding S.A. at fair market value or arrange for the party
acquiring ProLogis' preferred shares to acquire Kingspark LLC's interest on
substantially the same terms.
In addition, Kingspark LLC provides administrative and financial consulting
services to Kingspark Holding S.A. for which Kingspark LLC receives an annual
fee of $55,000.
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ProLogis believes that the terms and conditions of the transactions entered
into with Kingspark LLC are as favorable as those that could have been obtained
from an unaffiliated third party.
Garonor
In December 1998 Garonor Holdings S.A. ("GSA") acquired Garonor S.A., one
of Europe's leading owners and operators of distribution facilities. GSA is a
Luxembourg corporation in which Security Capital and certain independent parties
own approximately 5% of the outstanding shares. ProLogis holds the remaining
outstanding shares. Security Capital acquired its shares for $1,000,000.
Beginning January 1, 2000, Security Capital has the right to require ProLogis to
acquire Security Capital's shares in Garonor S.A. for $1.08 million (the "Put
Price"). The Put Price increases each month until ProLogis acquires the shares.
In addition, Security Capital has agreed to provide administrative and financial
consulting services to ProLogis in connection with the Garonor S.A. acquisition.
ProLogis paid Security Capital a one time fee of $70,000 for such services.
Loans to Executive Officers
Security Capital has entered into an unsecured, full recourse promissory
note with K. Dane Brooksher, Chairman and Chief Executive Officer of ProLogis.
Under the terms of the promissory note, Security Capital lent Mr. Brooksher
$249,997, which amount is due on the earlier of January 4, 2005 or 120 days
after Mr. Brooksher is no longer an officer of ProLogis. Interest on the unpaid
balance accrues at a floating rate per annum equal to the lowest rate charged by
Morgan Guaranty Trust Company of New York to its most creditworthy corporate
customers for unsecured loans having a maturity of ninety days or less, in
effect from time to time, plus .25%, and is payable semi-annually on each July 4
and January 4. The proceeds of the promissory note were used by Mr.
Brooksher to purchase Common Shares.
In addition, in 1997 ProLogis made the following loans to the Named
Executive Officers for the purchase price of Common Shares pursuant to the share
purchase program which loans remain outstanding (balances as of March 31, 1999):
Mr. Brooksher, $1,893,515; Mr. Lyons, $1,893,515; Mr. Schwartz, $1,136,096; Mr.
Watson, $1,136,096; and Mr. Seiple, $946,757. Each loan is full recourse to the
executive officer and is secured by the purchased Common Shares. The loans bear
interest at the lower of ProLogis' annual dividend yield on Common Shares or
6.0% per annum, and have a ten-year term. The loans will become due and payable
(i) immediately upon the sale of the purchased Common Shares or ProLogis'
termination of the executive officer's employment for cause, (ii) 180 days after
ProLogis' termination of the executive officer's employment following a change
in control, (iii) 365 days after termination of the executive officer's
employment by reason of death, disability or retirement or (iv) 90 days after
termination of the executive officer's employment for any other reason.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 and pursuant to the authorization granted by that certain
Power of Attorney filed by the registrant with its Annual Report on Form 10-K
for the year ended December 31, 1998, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
PROLOGIS TRUST
By: /s/ EDWARD S. NEKRITZ
-----------------------------------
Its: Senior Vice President and Secretary
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