Prologis, Inc. 10-K 2011
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Amendment No. 1)
For the fiscal year ended December 31, 2010
Commission File Number: 001-13545 (AMB Property Corporation)
001-14245 (AMB Property, L.P.)
AMB Property Corporation
AMB Property, L.P.
(Exact Name of Registrant as Specified in Its Charter)
(Registrants Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
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 the registrants 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. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
AMB Property Corporation:
AMB Property, L.P.:
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The aggregate market value of common shares held by non-affiliates of AMB Property Corporation (based upon the closing sale price on the New York Stock Exchange) on June 30, 2010 was $3,889,698,154.
As of February 16, 2011, there were 169,409,343 shares of AMB Property Corporations common stock, $0.01 par value per share, outstanding.
TABLE OF CONTENTS
This Annual Report on Form 10-K for AMB Property Corporation and AMB Property, L.P. for the year ended December 31, 2010 is being amended to include Part III, Items 10-14.
The Companys Board of Directors is comprised of the following nine individuals, each of whom has also been nominated for re-election as a director at the 2011 Annual Meeting: Hamid R. Moghadam, T. Robert Burke, David A. Cole, Lydia H. Kennard, J. Michael Losh, Frederick W. Reid, Jeffrey L. Skelton, Thomas W. Tusher and Carl B. Webb. All members of the Board serve a one-year term, which expires at the following annual meeting of stockholders when their successors are duly elected and qualified.
Information about each directors share ownership is set forth under the table entitled Security Ownership of Certain Beneficial Owners and Management in Part III, Item 12 below. The principal occupation and certain other information regarding our director nominees are set forth below as of March 2, 2011.
The following is a biographical summary of the experience of our executive officers as of March 2, 2011:
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who are owners or beneficial owners of more than 10% of a registered class of our equity securities, to file with the U.S. Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock and other of our equity securities. Insiders are required by regulation of the U.S. Securities and Exchange Commission to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on review of the copies of such reports furnished to us or written representations that no other reports or amendments were required, during the year ended December 31, 2010, all of these executive officers, directors and beneficial owners of more than 10% of a registered class of our equity securities complied with all Section 16(a) filing requirements applicable to them.
CODE OF BUSINESS CONDUCT
We have adopted a Code of Business Conduct that applies to our directors, officers and employees. Our Code of Business Conduct, as well as our Corporate Governance Principles, are available on our website at http://www.amb.com and in print at the request of any of our stockholders upon request. Requests for such copies should be addressed to: AMB Property Corporation, Pier 1, Bay 1,
San Francisco, California 94111, Attn: Investor Relations, telephone (415) 394-9000. We will promptly disclose on our website any amendments to, and waivers from, our Code of Business Conduct relating to any of these specified directors, officers and employees.
Our Board of Directors has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. Our Board of Directors has determined that we have three audit committee financial experts, J. Michael Losh, Jeffrey L. Skelton and Carl B. Webb, serving on our Audit Committee. Our Board has determined that Messrs. Losh, Skelton and Webb are independent as this term is defined by the New York Stock Exchanges listing standards. Our Board has determined that Mr. Loshs simultaneous service on the audit committees of more than two other public companies would not impair his ability to effectively serve on the Audit Committee of our Board of Directors. In reaching this determination, the Board considered that Mr. Loshs substantial ability, experience and expertise in public financial reporting and management while serving as Chief Financial Officer of General Motors, a Fortune 100 company, among other similar positions, significantly benefits the Board and the company. The Board also determined that Mr. Loshs service on the other companies audit committees did not hinder his ability to serve on our Audit Committee as he is currently retired and not serving in an executive officer capacity for another company.
Item 11. Executive Compensation
COMPENSATION DISCUSSION AND ANALYSIS
General Overview of AMB Pay Practices
Our compensation program is founded on the principle of pay-for-performance that is tied to long-term stockholder value creation. The objectives of our compensation program are to:
All of our employees and executives are compensated similarly, with a cash base salary, annual bonus opportunity and potential for long-term equity incentive awards. The annual bonus and long-term equity incentive awards are discretionary. We do not offer different types of compensation packages to different groups within our company, nor do we have employment contracts binding us to pay certain bonus or long-term equity incentive amounts.
As an employee becomes more senior and his/her responsibilities grow broader in scope, an increasingly greater portion of his/her total annual compensation consists of variable bonus and incentive pay compared to the employees base salary. In addition, a larger portion of his/her annual compensation is delivered in the form of equity. We believe this compensation structure aligns such employees interests with that of our stockholders. Accordingly, as the role of an employee expands within the company, the portion of such employees compensation that is at risk also increases.
We monitor and evaluate our pay practices on a regular basis and strive for alignment of our pay practices with our stockholders interests for long-term value and growth. Accordingly, we compare our compensation standards against those guidelines published by selected institutional investor organizations, such as Green Street Advisors.
Our Compensation Committee and Audit Committee monitor our risk management objectives to ensure that our compensation policies and practices do not materially increase our risk profile with respect to incentivizing our employees, and meet to discuss such objectives. In addition, our management provides a quarterly report to the Board regarding how the company is performing compared to our business plan and performance measure objectives.
We award an employee with incentive pay after the end of our fiscal year based on the prior years performance. In determining the amount of incentive pay awarded, the Compensation Committee reviews the prior years corporate performance, as well as, group and individual performance. Corporate performance is determined based on certain pre-established performance objectives aligned with our business plan. The Compensation Committee also applies sound judgment to determine executive compensation. Long-term equity incentive awards for our executives are based on our total stockholder return relative to our peers over a three-year period. More detail on the specific corporate performance objectives used in determining 2010 annual bonus and long-term incentive payments follows in the Executive Compensation Program Annual Bonus Program and Long-Term Equity Incentive Program sections below.
Group and individual performance is measured on the basis of quantitative and qualitative performance objectives that gauge a groups and individuals contribution to our success. Group performance goals, which are aligned with the business plan, are allocated to each executive by the Chairman and CEO. Group heads and managers then use the business plan and group performance goals to develop individual goals and objectives for the employees in their groups. We strongly believe that, by providing a pay-for-performance compensation program, we establish and maintain a performance and achievement-oriented environment throughout the organization and attract and retain exceptional talent.
The following provides a more detailed analysis of the reasoning utilized in our decision-making on executive compensation-related matters.
Executive Compensation Program
Consistent with our compensation philosophy and program for all employees, our executive compensation program offers three main elements of compensation:
In determining base salary amounts and annual bonus and long-term equity incentive award ranges and targets for our executives, the Compensation Committee uses the following tools, from time to time, to assist in its determinations:
Compensation Tally Sheets. Management prepares tally sheets for each executive detailing compensation components for Compensation Committee review when setting and/or awarding compensation. The information contained on the tally sheets for each executive includes the prior years base salary, actual and target bonus, and actual and target long-term equity incentive award amounts. In addition, a comparison is made between the prior years total remuneration and target remuneration for the current compensation year. The target compensation for a current compensation year is based on benchmarking data.
Benchmarking Data. The current executive compensation program targets cash compensation (base salary and annual bonus) at the 50th percentile of compensation for executive officers in our peer group (plus a 10% geographical adjustment) and total remuneration (base salary, annual bonus and long-term equity incentives) at approximately the 60th percentile of compensation for executive officers in our peer group. For 2010, the actual total compensation awarded to the Companys Named Executive Officers, or NEOs, was in line with their pre-established target total compensation. Our peer group is established by the Compensation Committee and currently
consists of companies that comprise the Cohen & Steers Realty Majors, as set out below, which we believe is the most appropriate peer group because it consists of major publicly traded real estate companies.
Generally, in determining each component of target compensation, we benchmark our top executives with the NEOs of the companies in our peer group. With respect to our long-term equity incentive program, we use the methodology described below in the respective long-term equity incentive section.
In 2010, the Compensation Committee reviewed an analysis comparing the companys total remuneration paid to our executives over the last three years to our peer groups total remuneration paid to their executives over the last three years against each companys corresponding three-year total stockholder return. This analysis helped us to gauge pay versus performance levels and to confirm consistency of our executive compensation program with our pay-for-performance philosophy.
Role of Compensation Consultant. The Compensation Committee has retained Towers Watson as its independent compensation consultant to assist with the formulation and administration of the executive compensation program at the company. Towers Watson does not provide any other services to the company. On an annual basis, Towers Watson reviews the executive compensation program with the Compensation Committee and assesses the competitiveness of compensation levels for the executive officers to ensure that the compensation is aligned with AMBs executive compensation philosophy. Towers Watson provides the Compensation Committee with a compensation analysis of our peer group using information found in current proxy data and values each component of compensation awarded including base salary, bonus, equity awards and perquisites. Towers Watson also shares with the Compensation Committee its observations on competitive market trends. The Compensation Committee considers this analysis along with company business strategies, objectives and financial condition when setting annual compensation values for each component of total remuneration for the executives.
Other compensation components. We also offer a limited amount of perquisite benefits to our executives, as well as the opportunity to participate in health, welfare and benefit programs generally available to our employees. In addition, along with our other U.S.-based officers, we offer executives the opportunity to participate in our nonqualified deferred compensation program. We also provide certain benefits upon termination of an executives employment in the event of death, disability or change in control of the company under change in control and non-competition agreements, which are discussed more fully under Executive Compensation Change in Control and Noncompetition Agreements below.
Base salaries for our executives are intended to be competitive in the market for the scope and responsibilities of the jobs performed and are targeted at the median level of compensation in the market for similar positions. The base salaries for our executive officers are reviewed annually by the Compensation Committee and adjustments may be made based on the executives experience, responsibilities, individual performance and company affordability.
In comparison with total compensation for our non-executive officers and other employees, base salaries for our executives comprise a smaller portion of our executives total compensation. In 2010, the base salary of our executives as a percentage of total target compensation (including base salary, target annual bonus and target long-term equity incentive amount) ranged from 16.1% to 25.8% of total target compensation.
Annual Bonus Program
Our annual bonus program is a formal, organization-wide incentive program that is intended to encourage teamwork and innovation, focus attention on specific business objectives and award the achievement of these objectives. It is intended to provide incentives to create value for our stockholders and to establish and maintain a performance and achievement-oriented environment throughout the organization. Each executive has an opportunity to earn higher bonuses for outstanding performance and, conversely, each executive is penalized for below target performance. The annual bonus is discretionary.
Executives are eligible to receive an annual bonus calculated as a percentage of their base salary. Annual bonuses provide executives with the opportunity to earn cash compensation in excess of their annual target compensation level, but only in the event that corporate, group and individual goals have been exceeded. Conversely, if corporate, group and individual performance do not meet the pre-established objectives, annual bonuses may be reduced below the target level. In determining an annual bonus where performance does not meet the pre-established objectives, the Compensation Committee looks at whether corporate goals were met, whether the group or individual performance goals were met, and for any goals not met, the discrepancy between the actual performance achievement and the goal.
The annual bonuses for executives are weighted between corporate, group and individual performance objectives. The following table provides the target bonus percentages and weightings for executive management for 2010:
We set performance targets based on historical and projected results, market expectations and peer performance, as well as key business priorities. In establishing the targets for measuring performance the Compensation Committee assesses the difficulty of achieving each target. The Compensation Committee attempts to ensure that the targets are motivational and that they inspire the participants to exceed their goals. Over the last five years, the company has performed below target in two years and exceeded target in three years.
The Compensation Committee approved the measurement of the companys performance on the following four key performance measures and targets derived from our 2010 business plan.
In 2010, we exceeded our goal for our adjusted recurring FFO per share, private equity raised and business process optimization performance measures; however, we ended our year below plan with respect to our other performance measure, development portfolio leased or sold.
At the end of 2010, our Chairman and CEO assessed our achievements compared to the 2010 business plan as well as our achievement of our key business priorities, which were to realize the full potential of our assets; deploy capital profitably into a mix of acquisitions, fund investments and developments; run our business with best in class operations and management reporting and to fully integrate our private capital business. Based upon the achievement of these goals, our Chairman recommended to the Compensation Committee, and the Compensation Committee approved a corporate performance rating above target. The corporate performance rating determined the size of the companys bonus pool and that rating was used to calculate the corporate performance portion of the executives bonus payment. The amount of the Companys organization-wide bonus pool for 2010 was determined by aggregating the target bonus amounts to be awarded to each employee and adjusted upwards by the Compensation Committee to reflect above target corporate performance for the year. As a result, the organization-wide bonus pool was funded at 122.4% of the target amount (or 61.4% of the maximum amount). The amount of the bonus pool awarded to our Named Executive Officers was $3,041,000.
The Compensation Committee evaluates the individual performance of the Chairman and CEO and determines his annual bonus. The Chairman and CEO does not participate in or influence the decisions of the Compensation Committee with respect to his annual bonus. Based on recommendations by the Chairman and CEO, the Compensation Committee determines the annual bonus of the other executive officers. At the direction of the Compensation Committee, Towers Watson reviews the bonus calculations for the executive officers and confirms that the bonuses have been calculated in accordance with the terms and conditions of the annual bonus program and to ensure compliance with the philosophy of the executive compensation program.
Our executives may choose to receive all or a portion of their annual bonuses in cash, shares of restricted stock (valued at 125% of the cash bonus, with three-year vesting), stock options (valued at 150% of the cash bonus, with three-year vesting on the portion attributable to the value above 100% of the cash bonus and vesting on the portion attributable to the 100% value of the cash bonus within one year), or any combination of the foregoing, subject to certain limits with respect to the equity awards. In 2010, we set the limit so that no more than a total of 800,000 shares could be distributed under the bonus exchange program and no individual could receive more than 400,000 shares. While this program may result in additional compensation for our executives, it gives our executives an opportunity to increase their ownership in the company by exchanging their cash compensation for equity. This program further aligns the interests of our executives with the interests of our stockholders and increases the likelihood of retention of our executives through the vesting periods.
Long-Term Equity Incentive Program
The long-term equity incentive program is intended to provide our executives with incentives to maximize our long-term performance and to promote the interests of our stockholders by providing the opportunity for our executives to receive additional grants of stock options, restricted stock or other equity-based awards upon approval of the Compensation Committee. Consequently, long-term equity comprises a significant portion of total compensation for our executives.
In determining whether to award executive officers any long-term equity incentive grants for the prior years performance, the Compensation Committee reviews and analyzes the companys three-year total stockholder return (TSR) relative to a peer group comprised of 60% of the Cohen & Steers Realty Majors and 40% of our four industrial real estate peers, including two companies that are not part of the Cohen & Steers Realty Majors, First Industrial and EastGroup Properties, Inc. The Company includes the additional non-Cohen & Steers Realty Majors industrial real estate companies because it believes that its performance goals for long-term equity incentive pay should be weighted more heavily towards its peers in the industrial real estate sector with similar business goals. In addition, the Compensation Committee considers each executives individual performance and may in its discretion modify such long-term equity incentive awards by reducing or increasing the final awards based on group and/or individual performance.
The Compensation Committee has set the following measures to determine the value of the long-term equity incentive awards:
2010 Performance. For the three-year period ended December 31, 2010, our peer group three-year weighted average total stockholder return was -10.93%. Our total stockholder return for such three-year period of -14.39% was 346 basis points below the peer group weighted average. Therefore our performance was considered to be below target as our total stockholder return was below the 200 bps range.
The Compensation Committee evaluates the individual performance of the Chairman and CEO and determines his long-term equity award. The Chairman and CEO does not participate in or influence the decisions of the Compensation Committee with respect to the Chairman and CEOs long-term equity award. Based on recommendations by the Chairman and CEO, the Compensation Committee determines the value of the long-term equity awards of the other executive officers. At the direction of the Compensation Committee, Towers Watson reviews the value of the long-term equity awards for the Chairman and CEO and other executive officers to ensure compliance with the philosophy of the executive compensation program.
Members of executive management receiving a long-term equity incentive award may choose to receive stock options, restricted stock or a combination of both with the restriction that no more than 40% of the award is in the form of stock options. All shares of restricted stock granted with respect to the long-term equity incentive program generally vest over a period of four or five years, at a rate of one-fourth or one-fifth of such grant, respectively, on February 1st of each year, thereby encouraging the retention of our executives. Stock options awarded under the long-term equity incentive program are granted with an exercise price set at the fair market value of our common stock on the date of the grant and generally vest over a period of three years, at a rate of one-third of such grant, on
February 1st and each option has a term of ten years, thereby encouraging the retention of our executives. Please see the discussion under Stock Option Grant Timing Practices below for a discussion regarding the grant date of such awards.
Stock option grants will only be of value to our executives if our stock price increases over time. The Compensation Committee uses the Black-Scholes model to calculate the number of underlying shares of stock in a stock option grant that an individual would receive under either the annual bonus and/or long-term equity incentive program.
2010 Chairman and Chief Executive Officer and Other Named Executive Officers Compensation
Our Named Executive Officers for 2010 are Mr. Moghadam, our Chairman and CEO, Mr. Olinger, our Chief Financial Officer, and Messrs. Jaquier and Reilly. Our Named Executive Officers compensation for 2010 was determined using the framework discussed under General Overview of AMB Pay Practices and Executive Compensation Program above. Specifically, to determine the executives annual bonuses, the Compensation Committee evaluated their performance measured against our 2010 business plan, their achievement of individual pre-established goals, as well as achievements resulting from unanticipated business activities during the year, and relative pay versus that of our peer companies similarly held positions.
In making the award determinations the Compensation Committee considered the following achievements for each executive:
After assessing the overall performance of the company and then applying judgment, the Committee determined the final bonus and long-term incentive awards. The long-term incentive awards were adjusted upwards from the amounts the program would otherwise have awarded in order to reflect the Companys outperformance in the industrial REIT sector for the year.
We successfully executed and resolved the near-term priorities we identified in early 2010, which positioned us to take advantage of emerging opportunities in 2011. Based on these results the Named Executive Officers were awarded bonuses and long term incentive awards as detailed in the Total Remuneration table. The total compensation awarded to chief executive officers in the peer group has been higher than that for other executive officers in the peer group. As a result, Mr. Moghadams total compensation awarded is comparatively higher than the total compensation awarded to our other NEOs. Because the Companys officers have the discretion to choose whether a portion of their bonus is paid in cash or equity in the form of restricted stock or options, with equity including a premium, as explained earlier, the total compensation for each NEO differs depending on their bonus elections. As described above, Mr. Olingers total compensation is slightly lower than that of Messrs. Moghadam, Jaquier and Reilly because his target compensation was initially set lower as a result of benchmarking comparisons with other similarly situated executives in the peer group, such as other CFOs.
The Summary Compensation Table below details total annual compensation for each of our Named Executive Officers as required by applicable securities rules and regulations. The value of the stock option and restricted stock awards as reported in the Summary Compensation Table for each of 2010, 2009 and 2008 reflects the awards granted in each of those years for the prior years performance, but the reported value does not reflect the actual value earned by our Named Executive Officers for performance in those years. As such, the Summary Compensation Table does not report the total compensation earned by our Named Executive Officers for performance in 2010, 2009 and 2008.
2010 Annual Salary and Incentive Compensation
The following chart provides a detailed description of the total salary and incentive compensation paid to our Named Executive Officers, which includes base salary, annual bonus and long-term equity incentive awards for performance in 2010. The compensation discussed in this Compensation Discussion and Analysis section differs from that disclosed in the Summary Compensation Table because:
The Company cautions that the actual amount ultimately realized by a Named Executive Officer from the disclosed equity awards under both the bonus exchange and long-term equity incentive award columns may vary based on various factors, including stock price fluctuations, differences from the valuation assumptions used, the timing of exercise or applicable vesting and our operating performance.
2010 Perquisites and Other Compensation
Each executive officer is provided company-paid parking. Executive officers also are eligible to receive financial planning assistance. Each executive is required to pay 30% of the financial planning fee. AMBs health care, insurance and other welfare programs are the same for all eligible employees. AMB has no outstanding loans to its executive officers, and since our initial public offering in 1997, has not made any loans to its executive officers. In addition, we will continue to comply with federal laws enacted in 2002 which prohibit the company from making any new loans to its executive officers.
The table below provides a more detailed description of the value of each perquisite or other compensation component earned by each named executive officer in 2010.
The company does not provide to any of its employees, including the Chairman and CEO and other executives, with any of the following: severance plans other than the change in control and non-competition agreements described herein, or supplemental retirement benefits other than our non-qualified deferred compensation plans.
2010 Total Remuneration
The following chart shows the total remuneration for our Named Executive Officers awarded for 2010 performance, and details the amount awarded for the following components of remuneration: (i) Salary and incentive compensation; (ii) perquisites; and (iii) other compensation.
Impact of Accounting and Tax Treatment
In designing our executive compensation program, we consider the tax treatment of compensation paid to our executive officers, including bonuses and long-term equity incentive awards, while also seeking to appropriately reward our executives for their performance. Section 162(m) of the Internal Revenue Code limits the tax deduction for compensation paid to the chief executive officer and any of the three most highly compensated executive officers, other than the chief financial officer, employed by publicly held corporations at fiscal year-end to $1.0 million per year, subject to certain performance, disclosure and stockholder requirements. Grants of stock options and restricted stock under our Amended and Restated 2002 Stock Option and Incentive Plan are intended to qualify as performance based compensation, which is not subject to the Section 162(m) deduction limitation. The Compensation Committee presently intends that, so long as it is consistent with our overall compensation objectives, to the extent reasonable, all executive compensation will be deductible for federal income tax purposes and, for the year ended December 31, 2010, there were no exceptions. The Compensation Committee, however, may design programs that recognize a full range of performance criteria important to our success, even where compensation payable under such programs may not be deductible. Because we intend to qualify as a real estate investment trust under the Internal Revenue Code, we generally distribute at least 100% of our net taxable income each year and therefore do not pay U.S. federal income tax. As a result, and based on the level of cash compensation paid to our executive officers, the possible loss of a federal tax deduction would not be expected to have a material impact on us.
In addition, we have also structured our executive compensation program with the intention that it is either exempt from or complies with Section 409A of the Internal Revenue Code, which may impose additional taxes on our executive officers for certain compensatory arrangements that provide for the payment of deferred compensation which is not either exempt from or in compliance with Section 409A.
Accounting considerations also play a role in the design of our executive compensation program, in particular, Financial Accounting Standards Boards Accounting Standard Codification (ASC) Topic 718, Stock Compensation, or ASC Topic 718. Currently, we expense our base salary in the year it is earned. We also expense our annual bonus cash compensation in the year it is earned. In accordance with ASC Topic 718, we expense our stock option and restricted stock grants awarded as part of our annual bonus exchange program and long-term equity incentive program over the vesting period of such grants.
Stock Option Grant Timing Practices
We award grants of stock options, restricted stock or deferred stock to certain employees at various times, including when an employee begins employment; when an employee is promoted to the officer level; when an officer exchanges his/her annual cash bonus into equity; and as an award under the long-term equity incentive program. The majority of our equity awards in any year are made in conjunction with our annual bonuses, generally, sometime in February or March. Awards with respect to new employees and promotions are generally made each Friday after the close of the market. New executive grants are approved by the Compensation Committee and made on the first day of employment. Our fiscal year earnings results are generally announced at the end of January, and we do not time the February or March Compensation Committee meeting to coincide with the announcement of any other material non-public information. All stock option awards have an exercise price equal to the closing sales price of our common stock on the date of grant.
Prior to calendar year end, as part of our annual bonus exchange program, our executives and certain other officers elect whether to receive a portion of their current year bonus in stock option grants or restricted stock grants to be awarded in February or March of the following year. Stock options awarded as a result of the executives or officers participation in the annual bonus exchange program or under the long-term equity incentive program are approved and granted by the Compensation Committee on the day the Compensation Committee meets in February or March, and accordingly the exercise price of those stock options is the closing sales price of our common stock on that day. The vesting date of each yearly non-vested installment of these awards is February 1 of each succeeding year during the vesting period, and not the annual anniversary of the grant date of the awards. Annual long-term equity grants are also awarded to non-officer employees at the same meeting. These stock option grant timing practices are applied consistently to executive officers and our other employees.
Stock Ownership Guidelines
Because the Board of Directors of the company believes strongly in linking the interests of our non-employee directors, senior officers and stockholders, the Board has established stock ownership guidelines for our non-employee directors and senior officers. The ownership guidelines specify a number of shares and/or partnership units that AMBs non-employee directors and U.S.-based senior officers (Senior Vice Presidents and above) must accumulate and hold, which may include the value attributed to unvested shares of restricted stock. Non-employee directors are expected to own or acquire, by the later of September 2007 or three years after first becoming a director, shares having a market value of at least $175,000. Senior officers are expected to own or acquire a certain amount of shares or limited partnership units of AMB Property, L.P. by the later of September 2010 or five years after the officers appointment to a senior position. The specific share and unit requirements for senior officers are based on the equity market value of a multiple of annual base salary, with the higher multiples applying to executive officers having the highest levels of responsibility. Our Chairman and CEO is expected to hold shares and/or units worth at least five times his base salary; other executive officers are expected to hold shares and/or units worth at least three times their base salary; and our senior vice presidents are expected to hold shares and/or units worth at least one time their base salary. Compliance with the guidelines is monitored by our human resources department.
We believe the compensation programs for our executive officers are reasonable and are competitive with compensation programs provided to similarly situated officers at our peer companies. We believe the annual bonus and equity incentive payments made to the executive officers named in the Summary Compensation Table in respect of the year 2010 are appropriate and commensurate with our 2010 financial and strategic performance and their individual achievements during the year. We believe the long-term equity incentive opportunities provided to our executive officers, in the form of stock options and restricted stock, are also appropriate and are awarded in a manner consistent with our philosophy of aligning our executives interests with that of our stockholders for long-term value and growth.
EXECUTIVE COMPENSATION TABLES
Summary Compensation Table
The following table sets forth the annual base salary, bonus, long-term equity incentive awards and other compensation earned by or granted with respect to our Named Executive Officers during 2010, 2009 and 2008.
Grants of Plan-Based Awards
The following table shows certain information relating to restricted shares of common stock and options to purchase shares of our common stock granted to the Named Executive Officers in 2010 under our Amended and Restated 2002 Stock Option and Incentive Plan.
All such 2010 grants were made in connection with performance in 2009. For information on 2011 grants made in connection with performance in 2010, please see the Summary Compensation Table.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information concerning exercised and unexercised options held by the Named Executive Officers at December 31, 2010.
Option Exercises and Stock Vested
The following table discloses stock option exercises and vesting of restricted stock awards for our Named Executive Officers in 2010.
Such deferred compensation will be distributed in accordance with the respective individuals elections and the applicable plan provisions.
Pension Benefits, Nonqualified Deferred Compensation and Post-Termination and
The company does not maintain a defined benefit pension plan.
Nonqualified Deferred Compensation
The following Named Executive Officers participate in our nonqualified deferred compensation plans. With respect to 2010 compensation, Mr. Moghadam elected to defer under the plans 100% of the restricted stock portion of his bonus and long-term equity incentive awards; and Mr. Jaquier elected to defer under the plans 100% of the restricted stock portion of his bonus and long-term equity incentive awards.
The following table discloses the amount of contributions to our nonqualified deferred compensation program and aggregate earnings, withdrawals and distributions for our Named Executive Officers in 2010.
In 2010, we maintained two nonqualified deferred compensation plans: (i) the Amended and Restated AMB 2005 Nonqualified Deferred Compensation Plan and (ii) the Amended and Restated Nonqualified Deferred Compensation Plan.
The Amended and Restated Nonqualified Deferred Compensation Plan allowed our directors and a select group of management and highly compensated employees, namely, our officers and the officers of certain of our affiliates, to defer receiving certain of their compensation earned and vested on or prior to December 31, 2004. It also enabled participants who are employees to defer up to 100% of their annual base pay and up to 100% of the cash portion of their annual bonuses on a pre-tax basis, participants who are non-employee members of our Board of Directors to defer all or a portion of their meeting fees and/or committee chairmanship fees, and participants who participate in our stock option and incentive plans to defer the receipt of stock option gains and restricted stock awards that they receive under such plans which were earned and vested on or prior to December 31, 2004, subject to restrictions. In accordance with an exemption permitted under Section 409A of the Internal Revenue Code and the related rules, regulations and guidance issued by the Department of Treasury and Internal Revenue Service, our Board of Directors further amended and restated the Amended and Restated Nonqualified Deferred Compensation Plan in 2006 to provide that the plan will only be maintained with respect to deferrals for compensation amounts and investment credits on such amounts earned and vested on or prior to December 31, 2004. The amendment and restatement to the Amended and Restated Nonqualified Deferred Compensation Plan was adopted to confirm the grandfathered status of this plan under Section 409A of the Internal Revenue Code.
Pursuant to the Amended and Restated AMB 2005 Nonqualified Deferred Compensation Plan, certain eligible employees and non-employee directors of the company, AMB Property, L.P. and our participating subsidiaries may elect to defer up to 100% of their eligible compensation, such as annual salary, bonus, restricted stock and directors fees, earned or vested on or after January 1, 2005. The terms of this plan are materially similar to the terms of the Amended and Restated Nonqualified Deferred Compensation Plan except for changes necessary to comply with Section 409A of the Internal Revenue Code and the related rules, regulations and guidance issued by the Department of Treasury and the Internal Revenue Service to date. Amounts deferred under the Amended and Restated Nonqualified Deferred Compensation Plan, but not vested as of December 31, 2004, were automatically transferred to the Amended and Restated AMB 2005 Nonqualified Deferred Compensation Plan. Distributions to our officers under this plan in the event of termination or retirement commence six months after such event in accordance with the terms of their deferral elections.
The deferred compensation under each of these plans is our unsecured obligation. Participants select from various investment options available under the plans to invest their elective deferrals. There are no guaranteed returns for any of the investment options or for any participants in the plans. The amount of earnings that a participant receives depends on the participants investment elections for their deferrals on cash amounts deferred and dividends deferred on company stock and on the performance of company stock when a participant defers receipt of equity-based compensation. The non-qualified deferred compensation plans offer a variety of investment choices. Company stock is not an investment option available to either employees who elect to defer a portion of their annual base pay or their cash bonus or non-employee directors who elect to defer all or a portion of their meeting fees and/or chairmanship fees. When a participant defers the receipt of equity-based compensation, the amounts must be deferred in our company stock, and at no time can these deferrals into company stock be reinvested in any other investment option. Deferred equity compensation is distributed only in the form of shares of company stock. On the other hand, dividends earned on deferred equity-based compensation must be invested in investment options other than our common stock. Distributions under these plans are made either in a lump sum or installment payments up to 10 years upon either a fixed date or retirement, as elected by the participant in their deferral election form or re-deferral form under plan provisions. In the event of a participants termination, death, disability or a change in control of the company occurring earlier than the elected distribution date, deferred amounts would be distributed commencing upon the earlier event in accordance with the plan provisions.
We have reserved the right under the nonqualified deferred compensation plans to make discretionary matching contributions to participant accounts from time to time. We have never made discretionary contributions to the plans. The participants elective deferrals and any matching contributions are 100% vested immediately. We pay all of the administrative costs of the plan.
EMPLOYEE BENEFIT PLANS AND AGREEMENTS
Third Amended and Restated 1997 Stock Option and Incentive Plan
The Third Amended and Restated 1997 Stock Option and Incentive Plan, as amended, was adopted by the Board of Directors and approved by the stockholders to enable executive officers, employees and consultants of AMB Property Corporation and certain subsidiaries, and directors of AMB Property Corporation, to participate in the ownership of AMB Property Corporation. The 1997 plan was designed to attract and retain our executive officers, other key employees and directors, and to provide incentives to such persons to maximize our performance. The 1997 plan covered an aggregate of 8,950,000 shares of our common stock and expired in 2007. The 1997 plan does not permit re-pricing of stock options without stockholder approval.
Employees and consultants of AMB Property Corporation and certain subsidiaries, and directors of AMB Property Corporation, were eligible to receive options, stock payments, performance awards, restricted stock, dividend equivalents, deferred stock and stock appreciation rights under the 1997 plan. Our employees and consultants also were eligible to receive stock appreciation rights under the 1997 plan. In addition, non-employee directors and our employees and consultants were eligible to receive options to purchase shares of our common stock under the 1997 plan.
However, because the plan expired in November 2007 and we did not elect to submit such plan for re-approval by our stockholders, we are no longer issuing new equity grants from this plan. As of December 31, 2010, we have approximately 431,426 shares reserved for issuance upon exercise of outstanding option grants made prior to 2007 under this plan.
Amended and Restated 2002 Stock Option and Incentive Plan
The Amended and Restated 2002 Stock Option and Incentive Plan was originally adopted by the Board of Directors on February 26, 2002 and approved by the stockholders on May 30, 2002, to enable executive officers, employees and consultants of AMB Property Corporation and certain subsidiaries, and directors of AMB Property Corporation, to participate in the ownership of AMB Property Corporation, and was amended and restated by the Board of Directors on February 16, 2007 and approved by the stockholders on May 10, 2007. The 2002 plan is designed to attract and retain our executive officers, other employees and directors, and to provide incentives to such persons to maximize our performance. The 2002 plan currently covers an aggregate of 17,500,000 shares of our common stock and will expire in 2017. The 2002 plan does not permit re-pricing of stock options without stockholder approval.
Employees and consultants of AMB Property Corporation and certain subsidiaries, and directors of AMB Property Corporation, may receive options, stock payments, performance awards, restricted stock, dividend equivalents, deferred stock and stock appreciation rights under the 2002 plan. Only employees of AMB Property Corporation or certain of its subsidiaries may receive incentive stock options under the 2002 plan. New employees employed in our U.S. offices generally receive initial grants of stock options or restricted stock under the 2002 plan when such employees begin employment with us, which vest over a number of years, assuming continued employment.
Effective November 26, 1997, we established our Section 401(k) Savings and Retirement Plan to cover our eligible employees. Eligible employees are permitted to defer up to 75% of their annual compensation (as adjusted under the terms of the plan), subject to certain limitations imposed by the Internal Revenue Code of 1986, as amended. Employees at least 50 years of age by the end of 2010 were eligible to make additional 401(k) catch-up contributions to a maximum of $5,500. The employees elective deferrals are immediately vested and non-forfeitable upon contribution to the 401(k) plan. We currently make matching cash contributions to the 401(k) account of each eligible employee in an amount equal to 50% of the first 6.0% of annual compensation deferred by each employee, up to a maximum match by the company of the amount permitted by law to each participating employee per year; however, in addition, we have reserved the right to make greater matching contributions in the form of discretionary contributions. Participants vest fully in the matching contributions one year after the commencement of their employment with us. We made no discretionary contributions to the 401(k) plan in 2010. Our employees are eligible to participate in the 401(k) plan upon commencement of their employment with us. In connection with the 401(k) plan, we paid approximately $966,000 in cash with respect to our matching contribution during the year ended December 31, 2010. Our common stock is not an investment option available to employees pursuant to the terms of the 401(k) plan. The 401(k) plan is intended to qualify under Section 401 of the Internal Revenue Code of 1986, as amended, so that contributions by employees to the 401(k) plan, and income earned on plan contributions, are not subject to income tax until withdrawn from the 401(k) plan.
Change in Control and Noncompetition Agreements
Each of our executive officers, including the Named Executive Officers, has entered into a Change in Control and Noncompetition Agreement with us which replaced the employment agreements that generally had been entered into at the time of our initial public offering. Mr. Moghadam entered into a Change in Control and Noncompetition Agreement at the time of our initial public offering. Mr. Jaquier entered into such an agreement with us on June 20, 2000, his first day of employment; Mr. Reilly entered into such an agreement with us on October 7, 2003, his first day of employment; and Mr. Olinger entered into such an agreement with us on February 23, 2007, his first day of employment. In September 2007, each of our executive officers, including the Named Executive Officers, executed an amended and restated Change in Control and Noncompetition Agreement with us. The amended and restated agreements had an initial expiration date of November 26, 2008, but are subject to automatic one-year extensions following the expiration of the initial terms. Each of our executive officers entered into partial waivers of these change in control agreements in connection with our proposed merger with ProLogis, however, those waivers will not become effective until the proposed merger is completed.
As amended and restated, the agreements provide for severance payments during the term of the agreement in the event of a termination of the executive officers employment resulting from death, disability or termination without cause or voluntary termination
for good reason within two years following a change in control (as defined in the agreements), and certain severance payments resulting upon a change in control.
Upon death or disability, severance benefits include base compensation, for a period of 12 months following the termination of employment, and a bonus based on the most recent amount received or entitled to be received. In the event of death, such benefits are paid monthly to the executive officers estate for a period of 12 months; in the event of disability, such benefits are paid in a single payment to the executive officer. We believe it is the companys obligation to provide reasonable assistance to our executives and their dependents from the loss resulting from an executives death or disability. After reviewing practices for similarly situated executives in other companies, our Compensation Committee determined that the benefits outlined are reasonable in size and scope.
The only other unforeseen event that our Compensation Committee believes warrants a severance for executives is in the event of a change in control. The purpose of a severance program under these circumstances is to keep our executives focused on running and growing the business and removing uncertainties around the post-change in control employment and environment that could arise in the marketplace. In the event of a change in control, severance benefits are payable upon termination for good reason or termination without cause following the change in control, and include an amount, payable in a lump sum in cash within 30 days of the date of termination, equal to twice (i) the annual base compensation and (ii) a bonus calculated based on the average of the most recent amounts received or entitled to be received over the last three years, as well as certain continuing insurance, reimbursement of COBRA premiums and other benefits. The amended and restated agreements provide that, among other things, following a change in control and upon a termination for good reason or a termination without cause, we are required to reimburse the executive for COBRA premiums until the earlier of 24 months or the end of the COBRA continuation period, if the executive elects COBRA coverage, and life insurance to the executive and the executives eligible family members for a period of twenty-four months following such termination.
In addition, following a change in control or prior to a change in control as determined by the Board of Directors in its discretion, whether or not the executive is terminated without cause or for good reason, we are required to make gross-up payments of excise taxes to the executive with respect to certain severance payments made to our executive officers following a change in control such that after payment by the executive of all taxes, the executive retains an amount of the gross-up payment equal to the excise tax imposed upon the payments. In the event of a change in control, all options, restricted stock and other awards based upon our equity incentive award plans or agreements held by the executive shall immediately become fully vested, exercisable or payable, as the case may be.
In evaluating severance benefits in the event of a change in control, the Compensation Committee had Towers Watson prepare a tally sheet that valued each component of the severance benefits for each executive. We also reviewed data comparing similar change in control severance provisions of other companies in our peer group. Based on this review, we determined that the severance benefits outlined above are reasonable and enable us to attract and retain talented executives who would provide stable leadership for the company in the ordinary course of business and through a change in control event. We determined that the double trigger methodology for cash severance benefits in which an executive is only eligible to receive a cash severance payment if there is a change in control and he or she is terminated without cause or for good reason within two years of a change in control event is prudent versus a single trigger that requires a cash payment only upon a change in control whether or not the executive terminates employment for such reasons. In contrast, we determined that the single trigger methodology was prudent in accelerating unvested equity awards for our executives previously granted for past performance under our pay-for-performance compensation program in order to recognize such performance and value creation by our executives for the company and to mitigate the risk that a potential buyer of our company will treat our executives unfairly or deny compensation that would otherwise have been due if the change in control had not occurred. In particular, we were concerned about (i) transactions in which a potential buyer is unable or unwilling to assume our outstanding unvested equity awards and (ii) going-private transactions (which have occurred among our peer group in recent years) in which converted equity awards, if any, would not provide the liquidity to our executives that we intended while we remained publicly traded. In addition, we determined that payment of a 280G tax gross-up payment in either a single-trigger or double-trigger situation was prudent because a tax gross-up payment is not extra compensation, but simply provides that the executive will receive the intended value of a severance payment or accelerated equity award after the normal and standard taxes are withheld, and not be subject to a punitive tax arising from 280G limits.
In consideration for the rights to receive such severance payments, each executive officer is subject to confidentiality obligations during employment and after termination, non-competition obligations during the term of employment and non-solicitation obligations for two years after the date of termination.
Assuming a payment event occurred on December 31, 2010 with a closing sales price of our common stock equal to $31.71 per share, we estimate that the following payments and benefits would be paid to our Named Executive Officers:
ESTIMATED 2010 VALUE DUE TO DISABILITY, DEATH OR A CHANGE IN CONTROL
For purposes of the agreements, a change in control will be deemed to have occurred in the following events: (i) complete liquidation of AMB Property Corporation or an agreement for the sale or disposition by AMB Property Corporation of all or substantially all of our assets, or we dispose of more than 50% of our interest in AMB Property, L.P.; (ii) any person becomes the beneficial owner, directly or indirectly, of securities representing 50% or more of the combined voting power of our then outstanding securities; (iii) during any period of 12 consecutive months, individuals who at the beginning of such period constitute our Board of Directors, and any new director whose election by the Board or nomination for election by our stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board of Directors; or (iv) a merger or consolidation of AMB Property Corporation with any other corporation or other entity, other than (A) a merger or consolidation which would result in our voting securities outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of AMB Property Corporation or such surviving entity outstanding immediately after such merger or consolidation or (B) where more than 50% of the directors of AMB Property Corporation or the surviving entity after such merger or consolidation were directors of AMB Property Corporation immediately before such merger or consolidation.
Compensation of Directors
The following table details compensation earned or paid to and equity accrued toward vesting for our independent directors in the year ended December 31, 2010. Our employee director did not receive additional compensation for his service on the Board.
Director Compensation Table
Director Compensation Philosophy
The Boards overall compensation philosophy in connection with our non-employee directors is to provide a mix of cash and equity-based compensation, with the goal of paying more of such compensation in the form of equity and a smaller portion in cash. The total compensation level for our non-employee directors is targeted at the 50th percentile of general industry companies with market capitalization similar to AMBs, but within the constraints of the 90th percentile of our peer companies relative to directors at real estate investment trust, or REIT, peers based on an analysis performed by our compensation consultant, Towers Watson. Officers who may also serve as a member of our Board of Directors are not paid any directors fees nor granted equity as directors in addition to their regular employee compensation.
Cash Retainers for Non-Employee Directors
We compensate our non-employee directors with quarterly retainers for serving on the board and on the Audit Committee, instead of per meeting fees for attending board and committee meetings. We believe that this compensation structure for our directors encourages and recognizes the activities of our non-employee directors outside the context of attending meetings, better aligns our directors in performing their oversight function with the interests of the stockholders and helps to foster a long-term focus of our directors on the company.
For 2010, each non-employee director received each of the applicable retainers set forth below for attending Board of Directors and committee meetings and/or serving on the Board, the Audit Committee, as a committee chair or the lead director:
Each non-employee director is also reimbursed for reasonable expenses incurred to attend Board and committee meetings and educational or property tour programs.
Director Equity Compensation
Upon initial election to the Board, each non-employee director automatically receives an initial stock option grant under our Amended and Restated 2002 Stock Option and Incentive Plan to purchase 20,000 shares of our common stock. This initial stock option grant fully vests on the date of the next annual meeting of stockholders and has a term of ten years within which it can be exercised.
In addition to the directors automatic initial stock option grants, we grant stock options and/or restricted common stock to our non-employee directors on a discretionary basis under our Amended and Restated 2002 Stock Option and Incentive Plan. Such stock option grants are granted at an exercise price equal to the fair market value of our common stock on the date of grant. The Board of Directors determines the amount of stock options and/or restricted stock to be granted to non-employee directors on an annual basis. In making this determination, the Board of Directors considers analyses of our compensation consultant, Towers Watson, to determine competitive director compensation practices of publicly traded real estate investment trusts and of publicly traded companies in general industry having total market capitalizations comparable to us. We expect that non-employee directors re-elected at each annual meeting of stockholders will be granted additional stock options and/or restricted stock by the Board of Directors.
During 2010, upon re-election, each non-employee director received a subsequent grant of restricted common stock, stock options or any combination of both, at their option, valued in the aggregate at approximately $130,000 (so long as the restricted stock portion equaled at least 60% of the value of their election).
Compensation Policies and Practices and Risk Management
Our Board of Directors has the primary responsibility for overseeing risk management of our company, and our management provides it with a regular report highlighting their assessments and recommendations. Our Audit Committee focuses on oversight of financial risks relating to the company. Our Compensation Committee focuses primarily on risks relating to remuneration of our officers and employees, while our Nominating & Governance Committee focuses on reputational and corporate governance risks relating to our company. In addition, the Audit Committee and Board regularly hold discussions with our vice president, risk management, and our executives and other officers regarding the risks that may affect our company. With respect to specific areas affecting our company such as executive compensation policies and practices or corporate governance, our board committees within those areas also consider the risks to the company and advise on or take actions accordingly to address significant risks.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Mr. Cole, the chair, Mr. Reid and Mr. Tusher. There are no Compensation Committee interlocks and none of our employees participate on the Compensation Committee.
Notwithstanding anything to the contrary set forth in any of AMB Property Corporations or AMB Property, L.P.s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate by reference any filings, including this report, in whole or in part, the following Compensation Committee Report and the Audit Committee Report shall not be deemed to be incorporated by reference into any such filings and shall not otherwise be deemed to be filed under such Acts.
COMPENSATION COMMITTEE REPORT
Review of Compensation Discussion and Analysis
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth in this report with management, and based on such review and discussions, the Compensation Committee recommended to the Board of Directors that such discussion and analysis be included in an Amendment to AMB Property Corporation and AMB Property, L.P.s Annual Report on Form 10-K for the year ended December 31, 2010 and our proxy statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Equity Compensation Plan Information
We have two equity compensation plans: (1) the Third Amended and Restated 1997 Stock Option and Incentive Plan, as amended, and (2) the Amended and Restated 2002 Stock Option and Incentive Plan. A total of 17,500,000 shares of common stock are authorized for issuance pursuant to the Amended and Restated 2002 Stock Option and Incentive Plan, and no new grants are being made from the Third Amended and Restated 1997 Stock Option and Incentive Plan, as amended. Currently, awards under the stock option and incentive plans consist of non-qualified stock options and restricted shares of common stock. Our stockholders have approved both stock option and incentive plans. As of December 31, 2010:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of December 31, 2010, regarding the beneficial ownership of common stock and limited partnership units for (i) each person known by us to be the beneficial owner of 5% or more, in the aggregate, of our outstanding common stock and AMB Property, L.P.s outstanding limited partnership units, (ii) each director and each Named Executive Officer and (iii) our directors and Named Executive Officers as a group. Except as indicated below, the indicated person has sole voting and investment power with respect to all of the shares of common stock and limited partnership units beneficially owned by such person.
Item 13. Certain Relationships and Related Transactions, and Director Independence
There are no related party transactions that are reportable.
Our articles of incorporation contain procedures for authorizing related party transactions. Our Board of Directors may authorize any agreement or other transaction with any party even though one or more of our directors or officers may be a party to such an agreement or is an officer, director, stockholder, member or partner of the other party if (i) the existence of the relationship is disclosed or known to the Board of Directors, and the contract or transaction is authorized, approved or ratified by the affirmative vote of not less than a majority of the disinterested directors, even if they constitute less than a quorum of the Board; (ii) the existence is disclosed to the stockholders entitled to vote, and the contract or transaction is authorized, approved or ratified by a majority of the votes cast by the stockholders entitled to vote (excluding shares owned by any interested director or officer or the organization in which such person is a director or has a material financial interest); or (iii) the contract or transaction is fair and reasonable to the company.
Our Board of Directors currently consists of nine directors. A majority of the Board must be independent directors as defined by the New York Stock Exchange listing standards. Our Board has adopted the New York Stock Exchange listing standards of director independence. In general, an independent director is a director who the Board affirmatively determines has no material relationship with us. Under the New York Stock Exchanges rules, the following relationships are considered material and will cause a director to be deemed not independent:
(i) a director who is, or within the past three years has been, our employee, or who has an immediate family member who is, or within the past three years has been, one of our executive officers;
(ii) a director who has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from us, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);
(iii) a director who is a current partner or employee (or has an immediate family member who is a current partner) of our internal or external auditor;
(iv) a director who has an immediate family member who is a current employee of our internal or external auditor and who personally worked on our audit;
(v) a director who was (or has an immediate family member who was) within the last three years a partner or employee of our internal or external auditor and personally worked on our audit within that time;
(vi) a director who is or has been (or has an immediate family member who is or has been) within the last three years, employed as an executive officer of another company where any of our present executive officers simultaneously serve or served on that companys compensation committee; and
(vii) a director who is a current employee (or has an immediate family member who is a current executive officer) of a company that has made payments to, or received payments from, us for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other companys consolidated gross revenues.
Our Board of Directors has affirmatively determined that eight out of nine presently elected directors (specifically, T. Robert Burke, David A. Cole, Lydia H. Kennard, J. Michael Losh, Frederick W. Reid, Jeffrey L. Skelton, Thomas W. Tusher and Carl B. Webb) are independent directors in accordance with the New York Stock Exchange listing standards, our corporate governance principles and our Bylaws. In determining the independence of the members of the Board of Directors, the Board considered Mr. Burkes prior relationship with AMB as a co-founder and as an employee until 2000, and determined that this relationship did not affect the independence determination with respect to Mr. Burke.
Item 14. Principal Accountant Fees and Services
Fees Paid to Our Independent Registered Public Accounting Firm
During 2009 and 2010, we retained PricewaterhouseCoopers LLP as our independent registered public accounting firm to provide services in the following categories and amounts:
The Audit Committees policy is to pre-approve all audit and non-audit services provided by our independent registered public accounting firm. Pre-approval is generally provided for up to one year and is detailed as to the particular services or category of services. The Audit Committee has pre-approved thresholds for smaller projects to be performed by our independent registered public accounting firm and has delegated pre-approval authority to its chair for instances when approval outside of the scope of services previously approved is necessary prior to an Audit Committee meeting. Our independent registered public accounting firm and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with the pre-approval authority, and the fees for the services performed to such date. In the years ended December 31, 2010 and 2009, the Audit Committee or its chair approved all of the services provided by and the fees paid to the independent registered public accounting firm under the categories Audit, Audit-Related, Tax and All Other Fees described above prior to the rendering of such services.
The Audit Committee has considered whether the provision of non-audit services by PricewaterhouseCoopers LLP is compatible with maintaining their independence, and determined it was so.
Unless otherwise indicated below, the Commission file number to the exhibit is No. 001-13545.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, AMB Property Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 10, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934, this Amendment No. 1 to the report has been signed below by the following persons on behalf of AMB Property Corporation and in the capacities and on the dates indicated.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, AMB Property, L.P. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 10, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934, this Amendment No. 1 to the report has been signed below by the following persons on behalf of AMB Property Corporation and in the capacities and on the dates indicated.