NOTE 9. LONG-TERM COMPENSATION

Prologis Outperformance Plan (“POP” formerly “OPP”)

Generally, under the POP, in the event that our annualized total stockholder return (“TSR”) during the performance period exceeds the annualized total shareholder return of the Morgan Stanley Capital Index US REIT Index (“RMS”) by more than 100 basis points during the performance period, then a performance pool will be formed under the POP equal to 3% of our excess return to stockholders. The performance pool shall not exceed an amount equal to the greater of (i) $75,000,000 or (ii) 0.5% of our common equity market capitalization as calculated under the POP (the “Capitalization Cap”).

Starting with the 2016 – 2018 performance period, if the relevant performance thresholds are met, participants can earn POP awards for their share of an aggregate performance pool up to $75,000,000. If earned, these POP awards will be paid after the end of the initial three-year performance period. If our levels of outperformance warrant an aggregate performance pool greater than $75,000,000, then participants can earn their share of the additional award amount in excess of $75,000,000 up to the Capitalization Cap (the “Excess Award Amount”) during the course of a three-year period after the end of the initial performance period. One-third of this Excess Award Amount can be earned at the end of each of the three years after the initial performance period, if our performance meets or exceeds the RMS in each of such three years.

POP also has certain positive TSR requirements, which must be met before participants can be paid awards under POP. In addition, participants will not be able to sell or transfer any equity they receive as initial or excess POP awards until three years after the end of the initial performance period. If the performance criteria are not met, the POP participation points and the POP LTIP Units will be forfeited.

Allocations of POP participation points for the 2016 – 2018 performance period were approved on June 3, 2016 and will be subject to certain modifications to the POP, as discussed above. We anticipate that the POP LTIP Units will be granted in the fourth quarter of 2016. The fair value of the award was $26.6 million at June 3, 2016, using a Monte Carlo valuation model that assumed a risk free interest rate of 0.99% and an expected volatility of 20.5%. Such points relate to a three-year performance period that began on January 1, 2016, and will end on December 31, 2018. At September 30, 2016, we also have POP points outstanding for the 2014 – 2016 and 2015 – 2017 performance periods under the POP that were not impacted by the modification.

Prologis Promote Plan (“PPP”)

A compensation pool was funded in 2015 associated with promotes earned from two of our co-investment ventures in the fourth quarter of 2015, at which time we accrued $4.7 million for the cash awards. In 2016, we granted 53,000 RSUs with a grant date fair value of $2.3 million and 114,000 LTIP Units with a grant date fair value of $4.9 million related to these promotes.

A compensation pool was funded associated with promotes earned from two of our co-investment ventures in the third quarter of 2016, at which time we accrued $15.2 million in cash awards.

Restricted Stock Units (“RSUs”)

The following table summarizes the activity for RSUs for the nine months ended September 30, 2016 (units in thousands):

	Number of			Weighted Average		Number of
	RSUs			Grant-Date Fair Value		RSUs Vested
Balance at January 1, 2016		1,626		$	42.21		109
Granted		806
Vested and distributed		(804	)
Forfeited		(36	)
Balance at September 30, 2016		1,592		$	40.37		125

Operating Partnership Long-Term Incentive Plan Units (“LTIP Units”)

The following table summarizes the activity for LTIP Units for the nine months ended September 30, 2016 (units in thousands):

	Number of		Weighted Average		Number of
	LTIP Units		Grant-Date Fair Value		LTIP Units Vested
Balance at January 1, 2016		1,244	$	42.21		303
Granted		893
Balance at September 30, 2016		2,137	$	40.45		743

Prologis Outperformance Plan Operating Partnership Long-Term Incentive Plan Units (“POP LTIP Units” formerly “OPP LTIP Units”)

At September 30, 2016, 2.5 million POP LTIP Units were outstanding with respect to the 2014 – 2016 and 2015 – 2017 performance periods. The following table summarizes the activity for the POP LTIP Units for the nine months ended September 30, 2016 (units in thousands):

	Number of POP
	LTIP Units
Balance at January 1, 2016		3,464
Forfeited		(927	)
Balance at September 30, 2016		2,537

Stock Options

We have 2.2 million stock options outstanding and exercisable at September 30, 2016, with a weighted average exercise price of $38.54. The aggregate intrinsic value of exercised options was $43.9 million and $6.0 million for the nine months ended September 30, 2016 and 2015, respectively. No stock options were granted in 2016 or 2015.