PROSPECTUS SUPPLEMENT
(To Prospectus dated May 1, 2001)
[Kimco Realty Corporation LOGO]
$ 35,000,000
Kimco Realty Corporation
4.961% Senior Notes Due 2007
We are offering $35,000,000 of notes. The notes will bear interest at
4.961% per year and will mature on November 30, 2007. We will pay interest on
the notes on May 30 and November 30 of each year, beginning May 30, 2003. The
notes are not redeemable prior to maturity.
The notes will be unsecured and will rank equally with all of our other
unsecured senior indebtedness from time to time outstanding.
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Per Note Total
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Public Offering Price(1) ......................... 100.000% $35,000,000
Agents' Commission ............................... 0.300% $ 105,000
Proceeds, before expenses, to Kimco .............. 99.700% $34,895,000
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(1) Plus accrued interest, if any, from November 20, 2002, if settlement occurs
after that date.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
We are offering the notes ultimately to purchasers of pass-through
certificates of the Core Investment Grade Bond Trust I offered simultaneously
herewith through Core Bond Products LLC, as depositor of the trust, utilizing
the services of Banc of America Securities LLC, J.P. Morgan Securities Inc.,
Fleet Securities, Inc., HSBC Securities (USA) Inc. and Wachovia Securities, Inc.
as our placement agents. Each of Banc of America Securities LLC, J.P. Morgan
Securities Inc., Fleet Securities, Inc., HSBC Securities (USA) Inc. and Wachovia
Securities, Inc. is a statutory underwriter within the meaning of the Securities
Act of 1933, as amended.
The notes will be ready for delivery in book-entry form only through
The Depository Trust Company on or about November 20, 2002.
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Banc of America Securities LLC JPMorgan
Fleet Securities, Inc.
HSBC
Wachovia Securities
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The date of this prospectus supplement is November 15, 2002
TABLE OF CONTENTS
Prospectus Supplement
Page
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Forward-Looking Information ............................................... S-3
Use of Proceeds ........................................................... S-3
Ratio of Earnings To Fixed Charges ........................................ S-3
Description of Notes ...................................................... S-3
Certain U.S. Federal Income Tax Consequences to Non-United States Holders . S-6
Plan of Distribution ...................................................... S-7
Legal Matters ............................................................. S-8
Experts ................................................................... S-8
Prospectus
Where Can You Find More Information ..........................................1
Incorporation Of Certain Documents By Reference ..............................1
The Company ..................................................................2
Use Of Proceeds ..............................................................2
Description Of Debt Securities ...............................................2
Description Of Common Stock .................................................15
Description Of Common Stock Warrants ........................................17
Description Of Preferred Stock ..............................................18
Description Of Depositary Shares ............................................26
Ratios Of Earnings To Fixed Charges .........................................29
Material Federal Income Tax Considerations To Us Of Our REIT Election .......29
Plan Of Distribution ........................................................37
Experts .....................................................................38
Legal Matters ...............................................................38
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When used in this prospectus supplement and the accompanying
prospectus, the terms "we", "our", "us", the "Company" and "Kimco" refer to
Kimco Realty Corporation and its subsidiaries.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and the placement agents have not, authorized any other person to provide
you with different or additional information. If anyone provides you with
different or additional information, you should not rely on it. We are not, and
the placement agents are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement and the accompanying
prospectus is accurate as of their dates. Our business, financial condition,
results of operations and prospects may have changed since then.
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FORWARD-LOOKING INFORMATION
This prospectus supplement and the accompanying prospectus, as well as
the information incorporated by reference herein and therein, contain certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. We intend such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995 and are including this statement for
purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words "believe," "expect," "intend," "anticipate," "estimate," "project" or
similar expressions. Our ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. Factors which may cause
actual results to differ materially from current expectations include, but are
not limited to, changes in general economic conditions, local real estate
conditions, legislative/regulatory changes (including changes to laws governing
the taxation of REITs), availability of capital, interest rates and increases in
operating costs. Accordingly, there is no assurance that our expectations will
be realized. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the notes we are
offering by this prospectus supplement will be approximately $34.8 million after
deducting agents' commissions and estimated expenses. We will use the net
proceeds received from this offering for repayment of indebtedness under our
revolving credit facilities and for general corporate purposes. We currently
have two unsecured revolving credit facilities for general corporate purposes in
the aggregate amount of $400.0 million. The facilities bear interest at LIBOR
plus 65 basis points and are scheduled to mature in 2003.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for the nine-month period ended
September 30, 2002 was 3.1. Our ratio of earnings to combined fixed charges
and preferred stock dividend requirements for the nine-month period ended
September 30, 2002 was 2.6.
For purposes of computing these ratios, earnings have been calculated
by adding fixed charges (excluding capitalized interest) to pre-tax income from
continuing operations before adjustment for minority interests in consolidated
subsidiaries or income/loss from unconsolidated partnerships. Fixed charges
consist of interest costs, whether expensed or capitalized, the interest
component of rental expenses, and amortization of debt discounts and issue
costs, whether expensed or capitalized.
DESCRIPTION OF NOTES
General
The notes will be limited in aggregate principal amount to $35.0
million. The notes are to be issued under the indenture, which is more fully
described in the accompanying prospectus. The notes will be issued only in
registered form and in denominations of $1,000 and integral multiples of $1,000.
Certain terms used herein are defined in the accompanying prospectus.
The notes will bear interest at 4.961% per year and will mature on
November 30, 2007. We will pay interest on the notes in U.S. dollars
semi-annually in arrears on May 30 and November 30 of each year, commencing May
30, 2003, to the registered holders of the notes on the preceding May 15 or
November 15, respectively. Interest on the notes will be computed on the basis
of a 360-day year consisting of twelve 30-day months. We will pay the principal
of each note payable upon maturity in U.S. dollars against presentation and
surrender thereof at the corporate trust office of the Trustee, located
initially at One State Street, New York, New York 10004.
The notes will be unsecured and will rank equally with all of our other
unsecured senior indebtedness from time to time outstanding. The notes are not
subject to any redemption or sinking fund provisions and are not repayable at
the option of any holder prior to maturity.
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Reference is made to the section entitled "Certain Covenants" in the
accompanying prospectus for a description of the covenants applicable to the
notes. The indenture contains provisions for defeasance of the entire
indebtedness of Debt Securities and certain covenants contained therein, in each
case upon compliance with the conditions set forth therein, which provisions
apply to the notes.
Book-Entry System
The notes will be issued as global securities. The Depository Trust
Company, or DTC, will act as securities depositary for all of the notes. Any
cross-market transfers of notes will be effected in DTC on behalf of Euroclear
or Clearstream Luxembourg, as participants in DTC, in accordance with the rules
of DTC. However, such cross-market transfers will require delivery of
instructions to Euroclear or Clearstream Luxembourg, as the case may be, by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines. Euroclear or Clearstream Luxembourg, as the
case may be, will, if the transfer meets its settlement requirements, deliver
instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving the beneficial interests in
the applicable global certificate in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Participants of Euroclear or Clearstream Luxembourg may not deliver
instructions directly to the depositaries for Euroclear or Clearstream
Luxembourg, as the case may be.
Because of time zone differences, the securities account of a Euroclear
or Clearstream Luxembourg participant purchasing a beneficial interest in a
global certificate from a DTC participant will be credited during the securities
settlement processing day (which must be a business day for Euroclear or
Clearstream Luxembourg, as applicable) immediately following the DTC settlement
date. Credit of such transfer of a beneficial interest in a global security
settled during such processing day will be reported to the applicable Euroclear
or Clearstream Luxembourg participant on that day. Cash received in Euroclear or
Clearstream Luxembourg as a result of a transfer of a beneficial interest in a
global security by or through a Euroclear or Clearstream Luxembourg participant
to a DTC participant will be received with value on the DTC settlement date but
will be available in the applicable Euroclear or Clearstream Luxembourg cash
account only as of the business day following settlement in DTC.
DTC, Euroclear and Clearstream Luxembourg
The information set out below in connection with DTC, Euroclear and
Clearstream Luxembourg is subject to any change in or reinterpretation of the
rules, regulations and procedures of the clearing systems currently in effect.
The information about each of them set forth below has been obtained from
sources that the depositor believes to be reliable, but neither we nor any
placement agent takes any responsibility for the accuracy or completeness of the
information. Neither we nor any placement agent will have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, beneficial ownership interests in the notes held through the facilities of
any clearing system or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Although DTC, Euroclear and Clearstream Luxembourg have agreed to the
following procedures described in this section, in order to facilitate transfers
of interests in the notes among participants of DTC, Euroclear and Clearstream
Luxembourg, they are under no obligation to perform or to continue to perform
such procedures, and such procedures may be discontinued at any time. Neither we
nor any placement agent assumes any responsibility for the performance by DTC,
Euroclear or Clearstream Luxembourg or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
DTC, Euroclear and Clearstream Luxembourg have advised us as follows:
DTC. DTC is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC was created to hold securities for DTC
participants and to facilitate the clearance and settlement of transactions
between DTC participants through electronic book-entry changes in accounts of
DTC participants, thereby eliminating the need for physical movement of notes.
DTC participants include the placement agents and other securities brokers and
dealers, banks, trust companies, clearing corporations and may in the future
include certain other organizations ("DTC participants"). Indirect access to the
DTC system is also available to other such banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
participant, either directly or
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indirectly ("indirect DTC participants"). DTC is owned by a number of its
participants and by the New York Stock Exchange, the American Stock Exchange and
the National Association of Securities Dealers, and rules applicable to DTC and
its participants are on file with the Securities and Exchange Commission.
Transfers of ownership or other interests in the notes in DTC may be
made only through DTC participants. Indirect DTC participants are required to
effect transfers through a DTC participant. DTC has no knowledge of the actual
beneficial owners of the notes. DTC's records reflect only the identity of the
DTC participants to whose accounts the notes are credited, which may not be the
beneficial owners. DTC participants will remain responsible for keeping account
of their holdings on behalf of their customers and for forwarding all notices
concerning the notes to their customers.
So long as DTC, or its nominee, is the holder of a global security,
payments on a global security will be made in immediately available funds to
DTC. DTC's practice is to credit DTC participants' accounts on the applicable
payment date in accordance with their respective holdings shown on its records,
unless DTC has reason to believe that it will not receive payment on that date.
Payments by DTC participants to beneficial owners will be governed by standing
instructions and customary practices, as in the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of the DTC participants and not of DTC or any other
party, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment to DTC is the responsibility of the trustee.
Disbursement of payments to DTC participants will be DTC's responsibility and
disbursement of payments to the beneficial owners will be the responsibility of
DTC participants and indirect DTC participants.
Because DTC can only act on behalf of DTC participants, who in turn act
on behalf of indirect DTC participants, and because owners of beneficial
interests in the global notes will hold their interests through DTC participants
or indirect DTC participants, the ability of the owners of beneficial interests
in a global certificate to pledge their interests to persons or entities that do
not participate in DTC, or otherwise take actions with respect to their
interests, may be limited.
Ownership of interests in the global securities will be shown on, and
the transfer of those ownership interests will be effected only through, records
maintained by DTC, the DTC participants and the indirect DTC participants. The
laws of some jurisdictions require that certain persons take physical delivery
in certificated form of securities which they own. Consequently, the ability to
transfer beneficial interests in the global securities is limited to such
extent.
Delivery of notices and other communications by DTC to DTC
participants, by DTC participants to indirect DTC participants and by DTC
participants and indirect DTC participants to beneficial owners will be governed
by arrangements among them, subject to any statutory or regulatory requirements
that may be in effect from time to time.
According to DTC, the foregoing information with respect to DTC has
been provided to the industry for informational purposes only and is not
intended to serve as a representation, warranty or contract modification of any
kind.
Euroclear. Euroclear was created in 1968 to hold securities for
Euroclear participants (as defined below) and to clear and settle transactions
between Euroclear participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
notes and any risk from lack of simultaneous transfers of securities and cash.
Euroclear includes various other services, including securities lending and
borrowing and interfaces with domestic markets in several countries. Euroclear
is operated by the Euroclear Bank S.A./N.V. (the "Euroclear operator"), under
contract with Euroclear Clearance Systems S.C., a Belgium cooperative
corporation (the "cooperative"). All operations are conducted by the Euroclear
operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear operator, not the cooperative. The
cooperative establishes policy for Euroclear on behalf of Euroclear
participants. Euroclear participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include affiliates of the placement agents and their respective
affiliates ("Euroclear participants"). Indirect access to Euroclear is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear
operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System, and
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applicable Belgian law (collectively, the "Euroclear terms and conditions"). The
Euroclear terms and conditions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear and receipts of
payment with respect to securities in Euroclear. All securities in Euroclear are
held on a fungible basis without attribution of specific notes to specific
securities clearance accounts. The Euroclear operator acts under the Euroclear
terms and conditions only on behalf of Euroclear participants and has no record
of or relationship with persons holding through Euroclear participants.
Payments with respect to notes held beneficially through Euroclear will
be credited to the cash accounts of Euroclear participants in accordance with
the Euroclear terms and conditions, to the extent received by the Euroclear
operator and by Euroclear.
Clearstream Luxembourg. Clearstream Luxembourg is incorporated under
the laws of Luxembourg as a professional depositary. Clearstream Luxembourg
holds securities for Clearstream Luxembourg participants (as defined below) and
facilitates the clearance and settlement of securities transactions between
Clearstream Luxembourg participants through electronic book-entry changes in
accounts of Clearstream Luxembourg participants, thereby eliminating the need
for physical movement of notes. Clearstream Luxembourg provides to Clearstream
Luxembourg participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream Luxembourg interfaces with
domestic markets in several countries. As a professional depositary, Clearstream
Luxembourg is subject to regulation by the Luxembourg Monetary Institute.
Clearstream Luxembourg participants are recognized financial institutions around
the world, including affiliates of the placement agents and other securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Clearstream Luxembourg participants"). Indirect access to
Clearstream Luxembourg is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream Luxembourg participant either directly or
indirectly.
Payments with respect to notes held beneficially through Clearstream
Luxembourg will be credited to cash accounts of Clearstream Luxembourg
participants in accordance with its rules and procedures, to the extent received
by Clearstream Luxembourg.
Trading
Except for trades involving Euroclear and Clearstream Luxembourg
participants, beneficial interests in the notes will trade in DTC's Same-Day
Funds Settlement System, and secondary market trading activity in the notes will
therefore settle in immediately available funds, subject in all cases to the
rules and operating procedures of DTC. Transfers between participants in DTC
will be effected in the ordinary way in accordance with DTC's rules and
operating procedures and will be settled in immediately available funds, while
transfers between participants in Euroclear and Clearstream Luxembourg will be
effected in the ordinary way in accordance with their respective rules and
operating procedures.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
Tax Considerations To The Company
As discussed in the accompanying prospectus under the caption "Material
Federal Income Tax Considerations To Us Of Our REIT Election" if we acquire any
asset from a corporation which is or has been a C corporation in a transaction
in which the basis of the assets in our hands is determined by reference to the
basis of the assets in the hands of the C corporation, and we subsequently
recognize gain on the disposition of the asset during the 10-year period
beginning on the date we acquired the asset, then we will be required to pay tax
at the highest regular corporate tax rate on this gain to the extent of the
excess of (a) the fair market value of the asset over (b) our adjusted basis in
the asset, in each case determined as of the date on which we acquired the
asset. A C corporation is generally defined as a corporation required to pay
full-corporate level tax. In addition, if we recognize gain on the disposition
of any asset during the 10-year period beginning on the first day of the first
taxable year for which we qualified as a REIT and we held the asset on the first
day of this period, then we will be required to pay tax at the highest regular
corporate tax rate on this gain to the extent of the excess of (a) the fair
market value of the asset over (b) our adjusted basis in the asset, in each case
determined as of the first day of the first taxable year for which we qualified
as a REIT. Prior to January 2, 2002, in order to obtain the results described in
this paragraph with respect to the recognition of gain, we were required to make
an election under Treasury Regulation Section 1.337(d)-5T. However, for
transactions occurring on or after January 2, 2002, Treasury Regulation Section
S-6
1.337(d)-7T provides that, in order to obtain equivalent treatment, we must
refrain from making an election. We plan to make or refrain from making an
election under the applicable Treasury Regulations to obtain the results
described in this paragraph with respect to the recognition of gain.
PLAN OF DISTRIBUTION
Subject to the terms and conditions contained in a placement agency
agreement by and between us and Banc of America Securities LLC, J.P. Morgan
Securities Inc., Fleet Securities, Inc., HSBC Securities (USA) Inc. and Wachovia
Securities, Inc., as placement agents, we have agreed to sell the notes to, and
the placement agents have agreed to solicit offers to purchase the notes from,
Core Bond Products LLC, as depositor for Core Investment Grade Bond Trust I (the
"trust").
We are offering the notes ultimately to purchasers of pass-through
certificates of the trust offered simultaneously herewith through Core Bond
Products LLC, as depositor of the trust, utilizing the services of Banc of
America Securities LLC, J.P. Morgan Securities Inc., Fleet Securities, Inc.,
HSBC Securities (USA) Inc. and Wachovia Securities, Inc., as our placement
agents. Each of Banc of America Securities LLC, J.P. Morgan Securities Inc.,
Fleet Securities, Inc., HSBC Securities (USA) Inc. and Wachovia Securities, Inc.
is a statutory underwriter within the meaning of the Securities Act of 1933, as
amended.
The placement agents are acting on a reasonable efforts basis and will
receive a placement fee from us of 0.30% of the principal amount of each note
issued by us. The placement agents also are acting as underwriters for the
public offering of the trust's pass-through certificates. We have agreed to
indemnify the placement agents against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended, or to contribute to
payments the placement agents may be required to make because of any of those
liabilities.
We have authorized the placement agents to deliver a copy of this
prospectus supplement and accompanying prospectus relating to the notes offered
hereby to purchasers of the trust's pass-through certificates. The prospectus
supplement and the accompanying prospectus relate only to us and the notes and
do not relate to the trust or the pass-through certificates. You should rely
only on this prospectus supplement and the accompanying prospectus for a
description of our company and the notes.
We have not been involved in the creation of the trust or the
preparation of the registration statement and related prospectus relating to the
offering and sale of the trust's pass-through certificates. We are not partners,
joint venturers or in any similar arrangement with the trust or any of the other
issuers whose securities may be deposited in the trust nor do we own any
interest in the trust. Accordingly, we are not assuming any responsibility for
or any liability or obligations with respect to the trust or the registration
statements and prospectuses relating to the pass-through certificates or any
such securities. Our responsibilities, liabilities and obligations are limited
solely to the information contained in or specifically incorporated by reference
in this prospectus supplement and the accompanying prospectus and to our
obligations under the notes and the indenture.
We estimate that our share of the total expenses of this offering,
excluding the placement agents' commission, will be approximately $100,000.
Other Relationships
From time to time, the placement agents and certain of their affiliates
have engaged, and may in the future engage, in transactions with, and perform
investment banking and/or commercial banking services, for us and our affiliates
in the ordinary course of business. Affiliates of the placement agents are
lenders on our credit facilities. These affiliates will receive their
proportionate share of the amount of the credit facilities to be repaid with the
proceeds of this offering. Because more than ten percent of the net proceeds of
the offering may be paid to members or affiliates of members of the National
Association of Securities Dealers, Inc. participating in the offering, the
offering will be conducted in accordance with NASD Conduct Rule 2710(c)(8).
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LEGAL MATTERS
Latham & Watkins, New York, New York, will pass upon certain matters
relating to the offering for the Company. Sidley Austin Brown and Wood LLP, New
York, New York, will act as counsel to the placement agents. Ballard Spahr
Andrews & Ingersoll, LLP, Baltimore, Maryland, will pass upon certain matters of
Maryland law. Certain members of Latham & Watkins and their families own
beneficial interests in less than 1% of our common stock.
EXPERTS
The financial statements incorporated in this prospectus supplement and
the accompanying prospectus by reference to the Annual Report on Form 10-K for
the year ended December 31, 2001 have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
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PROSPECTUS
KIMCO REALTY CORPORATION
$750,000,000
Debt Securities, Preferred Stock,
Depositary Shares, Common Stock and Common Stock Warrants
We may from time to time offer an aggregate public offering price of up to
$750,000,000 of the following securities on terms to be determined at the time
of the offering:
1. our unsecured senior debt securities;
2. shares or fractional shares of our preferred stock, par value $1.00 per
share;
3. shares of our preferred stock represented by depositary shares;
4. shares of our common stock, par value $.01 per share; or
5. warrants to purchase our common stock.
Our debt securities, preferred stock, depositary shares, common stock and
common stock warrants may be offered separately, together or as units, in
separate classes or series, in amounts, at prices and on terms to be set forth
in a supplement to this prospectus.
The specific terms of the securities offered by this prospectus will be
set forth in each prospectus supplement and will include, where applicable:
o in the case of our debt securities, the specific title, aggregate
principal amount, currency of denomination and payment, form (which may
be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and
time of payment of interest, terms for redemption at our option or
repayment at the option of the holder of the debt securities, terms for
sinking fund payments, terms for conversion into preferred stock or
common stock, and any initial public offering price;
o in the case of our preferred stock, the specific title and stated
value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price;
o in the case of our depositary shares, the fractional share of our
preferred stock represented by each depositary share;
o in the case of our common stock, any initial public offering price; and
o in the case of our warrants to purchase our common stock, the duration,
offering price, exercise price and detachability.
In addition, the specific terms may include limitations on direct or
beneficial ownership and restrictions on transfer of the securities offered by
this prospectus, in each case as may be appropriate to preserve our status as a
real estate investment trust, or REIT, for federal income tax purposes.
Each prospectus supplement will also contain information, where
applicable, about United States federal income tax considerations, and any
exchange listing of, the securities covered by the prospectus supplement.
The securities offered by this prospectus may be offered directly, through
agents designated from time to time by us, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
securities offered by this prospectus, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them, will be
set forth, or will be calculable from the information set forth, in the
applicable prospectus supplement. None of the securities offered by this
prospectus may be sold without delivery of the applicable prospectus supplement
describing the method and terms of the offering of those securities.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE AND ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is May 1, 2001.
TABLE OF CONTENTS
Where can you find more information ....................................... 1
Incorporation of Certain Documents by Reference ........................... 1
The Company ............................................................... 2
Use of Proceeds ........................................................... 2
Description of Debt Securities ............................................ 2
Description of Common Stock ............................................... 15
Description of Common Stock Warrants ...................................... 17
Description of Preferred Stock ............................................ 18
Description of Depositary Shares .......................................... 26
Ratios of Earnings to Fixed Charges ....................................... 29
Material Federal Income Tax Considerations to us of our REIT Election ..... 29
Plan of Distribution ...................................................... 37
Experts ................................................................... 38
Legal Matters ............................................................. 38
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WHERE CAN YOU FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission, or the SEC. Our SEC
filings are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file with the SEC
at the SEC's following public reference facilities:
Public Reference Room Chicago Regional Office
450 Fifth Street, N.W. Citicorp Center
Room 1024 500 West Madison Street
Washington, D.C. 20549 Suite 1400
Chicago, Illinois 60661-2511
You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information on
the operations at the public reference facilities. Our SEC filings are also
available at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
This prospectus constitutes part of a registration statement on Form S-3
filed by us under the Securities Act. As allowed by SEC rules, this prospectus
does not contain all the information you can find in the registration statement
or the exhibits to the registration statement.
Statements contained in this prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance reference
is made to the copy of that contract or other document filed as an exhibit to
the registration statement, each such statement being qualified in all respects
by that reference and the exhibits and schedules thereto. For further
information about us and the securities offered by this prospectus, you should
refer to the registration statement and such exhibits and schedules which may be
obtained from the SEC at its principal office in Washington, D.C. upon payment
of the fees prescribed by the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by us under the Securities
Exchange Act of 1934, as amended, with the SEC and are incorporated by reference
in this prospectus:
o Annual Report on Form 10-K for the year ended December 31, 2000; and
o Definitive proxy statement filed on April 5, 2001.
We are also incorporating by reference into this prospectus all documents
that we have filed or will file with the SEC as prescribed by Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act since the date of this
prospectus and prior to the termination of the sale of the securities offered by
this prospectus.
This means that important information about us appears or will appear in
these documents and will be regarded as appearing in this prospectus. To the
extent that information appearing in a document filed later is inconsistent with
prior information, the later statement will control and the prior information,
except as modified or superseded, will no longer be a part of this prospectus.
Copies of all documents which are incorporated by reference in this
prospectus and the applicable prospectus supplement (not including the exhibits
to such information, unless such exhibits are specifically incorporated by
reference) will be provided without charge to each person, including any
beneficial owner of the securities offered by this prospectus, to whom this
prospectus or the applicable prospectus supplement is delivered, upon written or
oral request. Requests should be directed to our secretary, 3333 New Hyde Park
Road, New Hyde Park, New York 11042-0020 (telephone number: (516) 869-9000).
THE COMPANY
We began operations through a predecessor in 1966, and today are one of
the nation's largest publicly-traded owners and operators of neighborhood and
community shopping centers (measured by gross leasable area, which we refer to
as "GLA"). As of February 8, 2001, we owned interests in 496 properties,
including:
o 433 neighborhood and community shopping centers;
o two regional malls;
o 50 retail store leases;
o 10 ground up development projects; and
o one distribution center.
These properties have a total of approximately 66.0 million square feet of
GLA and are located in 41 states.
Fifty-three shopping center properties approximately comprising 9.2
million square feet are part of the Kimco Income REIT, a joint venture
arrangement with institutional investors geared towards investing in retail
properties financed primarily through non-recourse mortgages.
We believe that we have operated, and we intend to continue to operate, in
such a manner to qualify as a REIT under the Internal Revenue Code of 1986, as
amended (the "Code"). We are self-administered and self-managed through present
management, which has owned and managed neighborhood and community shopping
centers for more than 35 years. Our executive officers are engaged in the
day-to-day management and operation of our real estate exclusively, and we
administer nearly all operating functions for our properties, including leasing,
legal, construction, data processing, maintenance, finance and accounting. Our
executive offices are located at 3333 New Hyde Park Road, New Hyde Park, New
York 11042-0020 and our telephone number is (516) 869-9000.
In order to maintain our qualification as a REIT for federal income tax
purposes, we are required to distribute at least 90% of our net taxable income,
excluding capital gains, each year. Dividends on any preferred stock issued by
us are included as distributions for this purpose. Historically, our
distributions have exceeded, and we expect that our distributions will continue
to exceed, our net taxable income each year. A portion of such distributions may
constitute a return of capital. As a result of the foregoing, our consolidated
net worth may decline. We, however, do not believe that consolidated
stockholders' equity is a meaningful reflection of net real estate values.
USE OF PROCEEDS
Unless otherwise described in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of the securities offered by this
prospectus for general corporate purposes, which may include the acquisition of
neighborhood and community shopping centers as suitable opportunities arise, the
expansion and improvement of certain properties in our portfolio, and the
repayment of indebtedness outstanding at that time.
DESCRIPTION OF DEBT SECURITIES
Our unsecured senior debt securities are to be issued under an indenture,
dated as of September 1, 1993, as amended by the first supplemental indenture,
dated as of August 4, 1994, the second supplemental indenture, dated as of
April 7, 1995, and as further amended or supplemented from time to time, between
us and Bank of New York (successor by merger to IBJ Schroder Bank & Trust
Company), as trustee. The indenture has been filed as an exhibit to the
registration statement of which this prospectus is a part and is available for
inspection at the corporate trust office of the trustee at 101 Barclay Street,
21st Floor, New York, New York 10286 or as described above under "Where You Can
Find More Information." The indenture is subject to, and governed by, the Trust
indenture Act of 1939, as amended. The statements made hereunder relating to the
indenture and the debt securities to be issued thereunder are summaries of some
of
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the provisions thereof and do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all provisions of the
indenture and the debt securities. All section references appearing herein are
to sections of the indenture.
General
The debt securities will be our direct, unsecured obligations and will
rank equally with all of our other unsecured and unsubordinated indebtedness.
The indenture provides that the debt securities may be issued without limit as
to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of our board of directors or as established in one or more indentures
supplemental to the indenture. All debt securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the debt securities of such
series, for issuances of additional debt securities of that series (Section
301).
The indenture provides that there may be more than one trustee thereunder,
each with respect to one or more series of debt securities. Any trustee under
the indenture may resign or be removed with respect to one or more series of
debt securities, and a successor trustee may be appointed to act with respect to
that series (Section 608). In the event that two or more persons are acting as
trustee with respect to different series of debt securities, each trustee shall
be a trustee of a trust under the indenture separate and apart from the trust
administered by any other trustee (Section 609), and, except as otherwise
indicated herein, any action described herein to be taken by the trustee may be
taken by each trustee with respect to, and only with respect to, the one or more
series of debt securities for which it is trustee under the indenture.
For a detailed description of a specific series of debt securities, you
should consult the prospectus supplement for that series. The prospectus
supplement may contain any of the following information, where applicable:
(1) the title of those debt securities;
(2) the aggregate principal amount of those debt securities and any limit
on the aggregate principal amount;
(3) if other than the principal amount thereof, the portion of the
principal amount thereof payable upon declaration of acceleration of
the maturity thereof, or (if applicable) the portion of the principal
amount of those debt securities which is convertible into our common
stock or our preferred stock, or the method by which any portion shall
be determined;
(4) if convertible, any applicable limitations on the ownership or
transferability of our common stock or our preferred stock into which
those debt securities are convertible which exist to preserve our
status as a REIT;
(5) the date or dates, or the method for determining the date or dates, on
which the principal of those debt securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the method by
which the rate or rates shall be determined, at which those debt
securities will bear interest, if any;
(7) the date or dates, or the method for determining the date or dates,
from which any interest will accrue, the interest payment dates on
which that interest will be payable, the regular record dates for the
interest payment dates, or the method by which that date shall be
determined, the person to whom that interest shall be payable, and the
basis upon which interest shall be calculated if other than that of a
360-day year of twelve 30-day months;
(8) the place or places where (a) the principal of (and premium, if any)
and interest, if any, on those debt securities will be payable, (b)
those debt securities may be surrendered for conversion or
registration of transfer or exchange and (c) notices or demands to or
upon us in respect of those debt securities and the indenture may be
served;
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(9) the period or periods within which, the price or prices at which, and
the terms and conditions upon which those debt securities may be
redeemed, as a whole or in part, at our option, if we are to have that
option;
(10) our obligation, if any, to redeem, repay or purchase those debt
securities pursuant to any sinking fund or analogous provision or at
the option of a holder of those debt securities and the period or
periods within which, the price or prices at which and the terms and
conditions upon which those debt securities will be redeemed, repaid
or purchased, as a whole or in part, pursuant to that obligation;
(11) if other than U.S. Dollars, the currency or currencies in which
those debt securities are denominated and payable, which may be
units of two or more foreign currencies or a composite currency or
currencies, and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of (and premium, if any)
or interest, if any, on those debt securities may be determined with
reference to an index, formula or other method (which index, formula
or method may, but need not be, based on a currency, currencies,
currency unit or units or composite currency or currencies) and the
manner in which those amounts shall be determined;
(13) any additions to, modifications of or deletions from the terms of
those debt securities with respect to the events of default or
covenants set forth in the indenture;
(14) whether those debt securities will be issued in certificated or
book-entry form or both;
(15) whether those debt securities will be in registered or bearer form
and, if in registered form, their denominations if other than $1,000
and any integral multiple of $1,000 and, if in bearer form, their
denominations and the terms and conditions relating thereto;
(16) the applicability, if any, of the defeasance and covenant defeasance
provisions of article fourteen of the indenture;
(17) if those debt securities are to be issued upon the exercise of debt
warrants, the time, manner and place for those debt securities to be
authenticated and delivered;
(18) the terms, if any, upon which those debt securities may be
convertible into our common stock or our preferred stock and the
terms and conditions upon which that conversion will be effected,
including, without limitation, the initial conversion price or rate
and the conversion period;
(19) whether and under what circumstances we will pay additional amounts
as contemplated in the indenture on those debt securities in respect
of any tax, assessment or governmental charge and, if so, whether we
will have the option to redeem those debt securities in lieu of
making such payment; and
(20) any other terms of those debt securities not inconsistent with the
provisions of the indenture (Section 301).
The debt securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of their maturity. We
refer to this type of debt securities as original issue discount securities. Any
material or applicable, special U.S. federal income tax, accounting and other
considerations applicable to original issue discount securities will be
described in the applicable prospectus supplement.
Except as described under "Certain Covenants--Limitations on Incurrence of
Debt" and under "Merger, Consolidation or Sale," the indenture does not contain
any other provisions that would limit our ability to incur indebtedness or to
substantially reduce or eliminate our assets, which may have an adverse effect
on our ability to service our indebtedness (including the debt securities) or
that would afford holders of the debt securities protection in the event of:
(1) a highly leveraged or similar transaction involving us, our
management, or any affiliate of any of those parties,
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(2) a change of control, or
(3) a reorganization, restructuring, merger or similar transaction
involving us that may adversely affect the holders of our debt
securities.
Furthermore, subject to the limitations set forth under "Merger,
Consolidation or Sale," we may, in the future, enter into certain transactions,
such as the sale of all or substantially all of our assets or a merger or
consolidation involving us, that would increase the amount of our indebtedness
or substantially reduce or eliminate our assets, which may have an adverse
effect on our ability to service our indebtedness, including the debt
securities. In addition, restrictions on ownership and transfers of our common
stock and our preferred stock are designed to preserve our status as a REIT and,
therefore, may act to prevent or hinder a change of control. You should refer to
the applicable prospectus supplement for information with respect to any
deletions from, modifications of or additions to the events of default or our
covenants that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
A significant number of our properties are owned through our subsidiaries.
Therefore, our rights and those of our creditors, including holders of debt
securities, to participate in the assets of those subsidiaries upon the
liquidation or recapitalization of those subsidiaries or otherwise will be
subject to the prior claims of those subsidiaries' respective creditors (except
to the extent that our claims as a creditor may be recognized).
Denominations, Interest, Registration and Transfer
Unless otherwise described in the applicable prospectus supplement, the
debt securities of any series will be issuable in denominations of $1,000 and
integral multiples of $1,000 (Section 302).
Unless otherwise specified in the applicable prospectus supplement, the
principal of (and premium, if any) and interest on any series of debt securities
will be payable at the corporate trust office of the trustee, initially located
at 101 Barclay Street, 21st Floor, New York, New York 10286, provided that, at
our option, payment of interest may be made by check mailed to the address of
the person entitled thereto as it appears in the security register or by wire
transfer of funds to that person at an account maintained within the United
States (Sections 301, 305, 306, 307 and 1002).
Any interest not punctually paid or duly provided for on any interest
payment date with respect to a debt security will forthwith cease to be payable
to the holder of that debt security on the applicable regular record date and
may either be paid to the person in whose name that debt security is registered
at the close of business on a special record date for the payment of the
interest not punctually paid or duly provided for to be fixed by the trustee,
notice whereof shall be given to the holder of that debt security not less than
10 days prior to the special record date, or may be paid at any time in any
other lawful manner, all as more completely described in the indenture.
Subject to certain limitations imposed upon debt securities issued in
book- entry form, the debt securities of any series will be exchangeable for
other debt securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of those
debt securities at the corporate trust office of the trustee. In addition,
subject to certain limitations imposed upon debt securities issued in book-entry
form, the debt securities of any series may be surrendered for conversion or
registration of transfer or exchange thereof at the corporate trust office of
the trustee. Every debt security surrendered for conversion, registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer. No service charge will be imposed for any registration
of transfer or exchange of any debt securities, but we may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection with the registration of transfer or exchange of debt securities
(Section 305). If the applicable prospectus supplement refers to any transfer
agent (in addition to the trustee) initially designated by us with respect to
any series of debt securities, we may at any time rescind the designation of
that transfer agent or approve a change in the location through which that
transfer agent acts, except that we will be required to maintain a transfer
agent in each place of payment for that series. We may at any time designate
additional transfer agents with respect to any series of debt securities
(Section 1002).
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Neither we nor any trustee shall be required to:
(1) issue, register the transfer of or exchange debt securities of any
series during a period beginning at the opening of business 15 days
before any selection of debt securities of that series to be
redeemed and ending at the close of business on the day of mailing
of the relevant notice of redemption;
(2) register the transfer of or exchange any debt security, or portion
thereof, called for redemption, except the unredeemed portion of any
debt security being redeemed in part; or
(3) issue, register the transfer of or exchange any debt security which
has been surrendered for repayment at the option of the holder of
that debt security, except the portion, if any, of that debt
security not to be so repaid (Section 305).
Merger, Consolidation or Sale
We may consolidate with, or sell, lease or convey all or substantially all
of our assets to, or merge with or into, any other corporation, provided that:
(1) either we shall be the continuing corporation, or the successor
corporation (if other than us) formed by or resulting from that
consolidation or merger or which shall have received the transfer of
our assets, shall expressly assume payment of the principal of (and
premium, if any) and interest on all of the debt securities and the
due and punctual performance and observance of all of the covenants
and conditions contained in the indenture;
(2) immediately after giving effect to that transaction and treating any
indebtedness which becomes an obligation of ours or of any of our
subsidiaries as a result thereof as having been incurred by us or
that subsidiary at the time of that transaction, no event of default
under the indenture, and no event which, after notice or the lapse
of time, or both, would become an event of default, shall have
occurred and be continuing; and
(3) an officer's certificate and legal opinion covering the above
conditions shall be delivered to the trustee (Sections 801 and 803).
Certain Covenants
Limitations on Incurrence of Debt. We will not, and will not permit any of
our subsidiaries to, incur any Debt (as defined below) if, immediately after
giving effect to the incurrence of that additional Debt, the aggregate principal
amount of all outstanding Debt of ours and of our subsidiaries on a consolidated
basis determined in accordance with generally accepted accounting principles is
greater than 65% of the sum of:
(1) our Undepreciated Real Estate Assets (as defined below) as of the
end of the calendar quarter covered in our annual report on Form 10-
K or quarterly report on Form 10-Q, as the case may be, most
recently filed with the SEC (or, if that filing is not permitted
under the Securities Exchange Act, with the trustee) prior to the
incurrence of that additional Debt; and
(2) the purchase price of any real estate assets acquired by us or any
of our subsidiaries since the end of that calendar quarter,
including those obtained in connection with the incurrence of that
additional Debt (Section 1004).
In addition to the foregoing limitation on the incurrence of Debt, we will
not, and will not permit any of our subsidiaries to, incur any Debt secured by
any mortgage, lien, charge, pledge, encumbrance or security interest of any kind
upon any of our property or the property of any of our subsidiaries if,
immediately after giving effect to the incurrence of that additional Debt, the
aggregate principal amount of all of our outstanding Debt and the outstanding
Debt of our subsidiaries on a consolidated basis which is secured by any
mortgage, lien, charge, pledge, encumbrance or security interest on our property
or the property of any of our subsidiaries is greater than 40% of the sum of:
(1) our Undepreciated Real Estate Assets as of the end of the calendar
quarter covered in our annual report on Form 10-K or quarterly
report on Form 10-Q, as the case may be, most recently filed with
6
the SEC (or, if such filing is not permitted under the Securities
Exchange Act, with the trustee) prior to the incurrence of that
additional Debt; and
(2) the purchase price of any real estate assets acquired by us or any
of our subsidiaries since the end of that calendar quarter,
including those obtained in connection with the incurrence of that
additional Debt (Section 1004).
In addition to the foregoing limitations on the incurrence of Debt, we
will not, and will not permit any of our subsidiaries to, incur any Debt if
Consolidated Income Available for Debt Service (as defined below) for any 12
consecutive calendar months within the 15 calendar months immediately preceding
the date on which that additional Debt is to be incurred shall have been less
than 1.5 times the Maximum Annual Service Charge (as defined below) on our Debt
and the Debt of all of our subsidiaries to be outstanding immediately after the
incurring of that additional Debt (Section 1004).
Restrictions on Dividends and Other Distributions. We will not, in respect
of any shares of any class of our stock:
(1) declare or pay any dividends (other than dividends payable in the
form of our stock) on our stock;
(2) apply any of our property or assets to the purchase, redemption or
other acquisition or retirement of our stock;
(3) set apart any sum for the purchase, redemption or other acquisition
or retirement of our stock; or
(4) make any other distribution, by reduction of capital or otherwise
if, immediately after that declaration or other action referred to
above, the aggregate of all those declarations and other actions
since the date on which the indenture was originally executed shall
exceed the sum of:
(a) Funds from Operations (as defined below) from June 30, 1993
until the end of the calendar quarter covered in our annual
report on Form 10-K or quarterly report on Form 10-Q, as the
case may be, most recently filed with the SEC (or, if that
filing is not permitted under the Securities Exchange Act, with
the trustee) prior to that declaration or other action; and
(b) $26,000,000; provided, however, that the foregoing limitation
shall not apply to any declaration or other action referred to
above which is necessary to maintain our status as a REIT under
the Code if the aggregate principal amount of all our
outstanding Debt and the outstanding Debt of our subsidiaries
at that time is less than 65% of our Undepreciated Real Estate
Assets as of the end of the calendar quarter covered in our
annual report on Form 10-K or quarterly report on Form 10-Q, as
the case may be, most recently filed with the SEC (or, if that
filing is not permitted under the Securities Exchange Act, with
the trustee) prior to that declaration or other action (Section
1005).
Notwithstanding the foregoing, we will not be prohibited from making the
payment of any dividend within 30 days of the declaration of that dividend if at
the date of declaration that payment would have complied with the provisions of
the immediately preceding paragraph (Section 1005).
Existence. Except as permitted under "Merger, Consolidation or Sale," we
will do or cause to be done all things necessary to preserve and keep in full
force and effect our corporate existence, rights (charter and statutory) and
franchises; provided, however, that we will not be required to preserve any
right or franchise if we determine that the preservation of that right or
franchise is no longer desirable in the conduct of our business and that the
loss of that right or franchise is not disadvantageous in any material respect
to the holders of the debt securities (Section 1006).
Maintenance of Properties. We will cause all of our properties used or
useful in the conduct of our business or the business of any of our subsidiaries
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements to those
properties, all as in our judgment may be necessary so that the business carried
on in connection with those properties may be properly and advantageously
conducted at all times; provided, however, that we and our subsidiaries will not
be prevented
7
from selling or otherwise disposing for value our respective properties in the
ordinary course of business (Section 1007).
Insurance. We will, and will cause each of our subsidiaries to, keep all
of our insurable properties insured against loss or damage at least in an amount
equal to their then full insurable value with insurers of recognized
responsibility and having a rating of at least A:VIII in Best's Key Rating Guide
(Section 1008).
Payment of Taxes and Other Claims. We will pay or discharge or cause to be
paid or discharged, before the same shall become delinquent,
(1) all taxes, assessments and governmental charges levied or imposed
upon us or any of our subsidiaries or upon our income, profits or
property or the income, profits or property of any of our
subsidiaries, and
(2) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a lien upon our property or the property
of any of our subsidiaries; provided, however, that we will not be
required to pay or discharge or cause to be paid or discharged any
tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings
(Section 1009).
Provision of Financial Information. Whether or not we are subject to
Section 13 or 15(d) of the Securities Exchange Act, we will, to the extent
permitted under the Securities Exchange Act, file with the SEC the annual
reports, quarterly reports and other documents which we would have been required
to file with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange
Act if we were so subject, those documents to be filed with the SEC on or prior
to the respective dates by which we would have been required so to file those
documents if we were so subject. We will also in any event:
(1) within 15 days of each date by which we would have been required to
file those documents with the SEC pursuant to Section 13 or 15(d) of
the Securities Exchange Act:
(a) transmit by mail to all holders of debt securities, as their
names and addresses appear in the security register, without
cost to the holders of debt securities, copies of the annual
reports and quarterly reports which we would have been required
to file with the SEC pursuant to Section 13 or 15(d) of the
Securities Exchange Act if we were subject to those Sections,
and
(b) file with the trustee copies of the annual reports, quarterly
reports and other documents which we would have been required
to file with the SEC pursuant to Section 13 or 15(d) of the
Securities Exchange Act if we were subject to those Sections,
and
(2) if filing those documents by us with the SEC is not permitted under
the Securities Exchange Act, promptly upon written request and
payment of the reasonable cost of duplication and delivery, supply
copies of those documents to any prospective holder of debt
securities (Section 1010).
Maintenance of Unencumbered Total Asset Value. We will at all times
maintain an Unencumbered Total Asset Value in an amount of not less than one
hundred percent (100%) of the aggregate principal amount of all our outstanding
Debt and the outstanding Debt of our subsidiaries that is unsecured (Section
1014).
Definitions Used for the Debt Securities
As used herein,
"Consolidated Income Available for Debt Service" for any period means our
Consolidated Net Income (as defined below) and the Consolidated Net Income of
our subsidiaries plus amounts which have been deducted for:
(1) interest on our Debt and interest on the Debt of our subsidiaries,
(2) provision for our taxes and the taxes of our subsidiaries based on
income,
(3) amortization of debt discount,
8
(4) property depreciation and amortization, and
(5) the effect of any noncash charge resulting from a change in
accounting principles in determining Consolidated Net Income for
that period.
"Consolidated Net Income" for any period means the amount of our
consolidated net income (or loss) and the consolidated net income (or loss) of
our subsidiaries for that period determined on a consolidated basis in
accordance with generally accepted accounting principles.
"Debt" of ours or any of our subsidiaries means any indebtedness of ours
or any of our subsidiaries, whether or not contingent, in respect of:
(1) borrowed money or evidenced by bonds, notes, debentures or similar
instruments,
(2) indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property owned by
us or any of our subsidiaries,
(3) letters of credit or amounts representing the balance deferred and
unpaid of the purchase price of any property except any balance that
constitutes an accrued expense or trade payable, or
(4) any lease of property by us or any of our subsidiaries as lessee
which is reflected on our consolidated balance sheet as a
capitalized lease in accordance with generally accepted accounting
principles,
in the case of items of indebtedness under (1) through (3) above to the extent
that those items (other than letters of credit) would appear as a liability on
our consolidated balance sheet in accordance with generally accepted
accounting principles, and also includes, to the extent not otherwise
included, any obligation by us or any of our subsidiaries to be liable for, or
to pay, as obligor, guarantor or otherwise (other than for purposes of
collection in the ordinary course of business), indebtedness of another person
(other than us or any of our subsidiaries) (it being understood that Debt
shall be deemed to be incurred by us or any of our subsidiaries whenever we or
that subsidiary shall create, assume, guarantee or otherwise become liable in
respect thereof).
"Funds from Operations" for any period means our Consolidated Net Income and
the Consolidated Net Income of our subsidiaries for that period without giving
effect to depreciation and amortization, gains or losses from extraordinary
items, gains or losses on sales of real estate, gains or losses on investments
in marketable securities and any provision/benefit for income taxes for that
period, plus funds from operations of unconsolidated joint ventures, all
determined on a consistent basis for that period.
"Maximum Annual Service Charge" as of any date means the maximum amount
which may become payable in any period of 12 consecutive calendar months from
that date for interest on, and required amortization of, Debt. The amount
payable for amortization shall include the amount of any sinking fund or other
analogous fund for the retirement of Debt and the amount payable on account of
principal on any Debt which matures serially other than at the final maturity
date of that Debt.
"Total Assets" as of any date means the sum of (1) our Undepreciated Real
Estate Assets and (2) all our other assets determined in accordance with
generally accepted accounting principles (but excluding goodwill and amortized
debt costs).
"Undepreciated Real Estate Assets" as of any date means the amount of our
real estate assets and the real estate assets of our subsidiaries on that date,
before depreciation and amortization determined on a consolidated basis in
accordance with generally accepted accounting principles.
"Unencumbered Total Asset Value" as of any date means the sum of our Total
Assets which are unencumbered by any mortgage, lien, charge, pledge or security
interest that secures the payment of any obligations under any Debt.
Events of Default, Notice and Waiver
The indenture provides that the following events are events of default
with respect to any series of debt securities issued thereunder:
9
(1) default for 30 days in the payment of any installment of interest on
any debt security of that series;
(2) default in the payment of the principal of (or premium, if any, on)
any debt security of that series at its maturity;
(3) default in making any sinking fund payment as required for any debt
security of that series;
(4) default in the performance of any of our other covenants contained
in the indenture (other than a covenant added to the indenture
solely for the benefit of a series of debt securities issued
thereunder other than that series), continued for 60 days after
written notice as provided in the indenture;
(5) default in the payment of an aggregate principal amount exceeding
$10,000,000 of any evidence of our indebtedness or any mortgage,
indenture or other instrument under which indebtedness is issued or
by which that indebtedness is secured, that default having occurred
after the expiration of any applicable grace period and having
resulted in the acceleration of the maturity of that indebtedness,
but only if that indebtedness is not discharged or that acceleration
is not rescinded or annulled;
(6) certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of ours or any of
our significant subsidiaries (as defined in Regulation S-X
promulgated under the Securities Act) or either of our properties;
and
(7) any other event of default provided with respect to a particular
series of debt securities (Section 501).
If an event of default under the indenture with respect to debt securities
of any series at the time outstanding occurs and is continuing, then in all of
those cases the trustee or the holders of not less than 25% in principal amount
of the outstanding debt securities of that series may declare the principal
amount (or, if the debt securities of that series are original issue discount
securities or indexed securities, that portion of the principal amount as may be
specified in the terms thereof) of all of the debt securities of that series to
be due and payable immediately by written notice thereof to us (and to the
trustee if given by the holders of debt securities). However, at any time after
a declaration of acceleration with respect to debt securities of that series (or
of all debt securities then outstanding under the indenture, as the case may be)
has been made, but before a judgment or decree for payment of the money due has
been obtained by the trustee, the holders of not less than a majority in
principal amount of outstanding debt securities of that series (or of all debt
securities then outstanding under the indenture, as the case may be) may rescind
and annul that declaration and its consequences if:
(1) we shall have deposited with the trustee all required payments of
the principal of (and premium, if any) and interest on the debt
securities of that series (or of all debt securities then
outstanding under the indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the trustee, and
(2) all events of default, other than the non-payment of accelerated
principal (or specified portion thereof), with respect to debt
securities of that series (or of all debt securities then
outstanding under the indenture, as the case may be) have been cured
or waived as provided in the indenture (Section 502). The indenture
also provides that the holders of not less than a majority in
principal amount of the outstanding debt securities of any series
(or of all debt securities then outstanding under the indenture, as
the case may be) may waive any past default with respect to that
series and its consequences, except a default:
(a) in the payment of the principal of (or premium, if any) or
interest on any debt security of that series, or
(b) in respect of a covenant or provision contained in the
indenture that cannot be modified or amended without the
consent of the holder of each outstanding debt security
affected thereby (Section 513).
The trustee is required to give notice to the holders of debt securities
within 90 days of a default under the indenture; provided, however, that the
trustee may withhold notice to the holders of any series of debt securities of
any default with respect to that series (except a default in the payment of the
principal of (or
10
premium, if any) or interest on any debt security of that series or in the
payment of any sinking fund installment in respect of any debt security of
that series) if the responsible officers of the trustee consider that
withholding to be in the interest of those holders of debt securities
(Section 601).
The indenture provides that no holders of debt securities of any series
may institute any proceedings, judicial or otherwise, with respect to the
indenture or for any remedy thereunder, except in the case of failure of the
trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an event of default from the holders of not
less than 25% in principal amount of the outstanding debt securities of that
series, as well as an offer of indemnity reasonably satisfactory to it (Section
507). This provision will not prevent, however, any holder of debt securities
from instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on those debt securities at the respective due
dates thereof (Section 508).
Subject to provisions in the indenture relating to its duties in case of
default, the trustee is under no obligation to exercise any of its rights or
powers under the indenture at the request or direction of any holders of any
series of debt securities then outstanding under the indenture, unless those
holders shall have offered to the trustee reasonable security or indemnity
(Section 602). The holders of not less than a majority in principal amount of
the outstanding debt securities of any series (or of all debt securities then
outstanding under the indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee, or of exercising any trust or power conferred upon the
trustee. However, the trustee may refuse to follow any direction which is in
conflict with any law or the indenture, which may involve the trustee in
personal liability or which may be unduly prejudicial to the holders of debt
securities of those series not joining therein (Section 512).
Within 120 days after the close of each fiscal year, we must deliver to
the trustee a certificate, signed by one of several specified officers, stating
whether or not that officer has knowledge of any default under the indenture
and, if so, specifying each of those defaults and the nature and status thereof
(Section 1011).
Modification
Modifications and amendments of the indenture and debt securities may be
made only with the consent of the holders of not less than a majority in
principal amount of all outstanding debt securities which are affected by such
modification or amendment; provided, however, that no modification or amendment
may, without the consent of the holder of each of the debt securities affected
thereby,
(1) change the stated maturity of the principal of, or any installment
of interest (or premium, if any) on, any debt security;
(2) reduce the principal amount of, or the rate or amount of interest
on, or any premium payable on redemption of, any debt security, or
reduce the amount of principal of an original issue discount
security that would be due and payable upon declaration of
acceleration of the maturity thereof or would be provable in
bankruptcy, or adversely affect any right of repayment of the holder
of any debt security;
(3) change the place of payment, or the coin or currency, for payment of
principal of (or premium, if any) or interest on any debt security;
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to any debt security;
(5) reduce the above-stated percentage of outstanding debt securities of
any series necessary to modify or amend the indenture, to waive
compliance with certain provisions thereof or certain defaults and
consequences thereunder or to reduce the quorum or voting
requirements set forth in the indenture; or
(6) modify any of the foregoing provisions or any of the provisions
relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect that
action or to provide that certain other provisions may not be
modified or waived without the consent of the holder of that debt
security (Section 902).
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The holders of not less than a majority in principal amount of outstanding
debt securities have the right to waive compliance by us with some of the
covenants in the indenture (Section 1013).
Modifications and amendments of the indenture may be made by us and the
trustee without the consent of any holder of debt securities for any of the
following purposes:
(1) to evidence the succession of another person to us as obligor under
the indenture;
(2) to add to our covenants for the benefit of the holders of all or any
series of debt securities or to surrender any right or power
conferred upon us in the indenture;
(3) to add events of default for the benefit of the holders of all or
any series of debt securities;
(4) to add or change any provisions of the indenture to facilitate the
issuance of, or to liberalize some of the terms of, debt securities
in bearer form, or to permit or facilitate the issuance of debt
securities in uncertificated form, provided that such action shall
not adversely affect the interests of the holders of the debt
securities of any series in any material respect;
(5) to change or eliminate any provisions of the indenture, provided
that any of those changes or elimination shall become effective only
when there are no debt securities outstanding of any series created
prior thereto which are entitled to the benefit of that provision;
(6) to secure the debt securities;
(7) to establish the form or terms of debt securities of any series,
including the provisions and procedures, if applicable, for the
conversion of those debt securities into our common stock or our
preferred stock;
(8) to provide for the acceptance of appointment by a successor trustee
or facilitate the administration of the trusts under the indenture
by more than one trustee;
(9) to cure any ambiguity, defect or inconsistency in the indenture,
provided that such action shall not adversely affect the interests
of the holders of debt securities of any series in any material
respect; or
(10) to supplement any of the provisions of the indenture to the extent
necessary to permit or facilitate defeasance and discharge of any
series of those debt securities, provided that such action shall not
adversely affect the interests of the holders of the debt securities
of any series in any material respect (Section 901).
The indenture provides that in determining whether the holders of the
requisite principal amount of outstanding debt securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of debt
securities,
(1) the principal amount of an original issue discount security that
shall be deemed to be outstanding shall be the amount of the
principal thereof that would be due and payable as of the date of
that determination upon declaration of acceleration of the maturity
thereof,
(2) the principal amount of a debt security denominated in a foreign
currency that shall be deemed outstanding shall be the U.S. Dollar
equivalent, determined on the issue date for that debt security, of
the principal amount (or, in the case of an original issue discount
security, the U.S. Dollar equivalent on the issue date of that debt
security of the amount determined as provided in (1) above),
(3) the principal amount of an indexed security that shall be deemed
outstanding shall be the principal face amount of that indexed
security at original issuance, unless otherwise provided with
respect to that indexed security pursuant to Section 301 of the
indenture, and
(4) debt securities owned by us or any other obligor upon the debt
securities or any of our affiliates or of that other obligor shall
be disregarded (Section 101).
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The indenture contains provisions for convening meetings of the holders of
debt securities of a series (Section 1501). A meeting may be called at any time
by the trustee, and also, upon request, by us or the holders of at least 10% in
principal amount of the outstanding debt securities of that series, in any of
those cases upon notice given as provided in the indenture (Section 1502).
Except for any consent that must be given by the holder of each debt security
affected by certain modifications and amendments of the indenture, any
resolution presented at a meeting or adjourned meeting duly reconvened at which
a quorum is present may be adopted by the affirmative vote of the holders of a
majority in principal amount of the outstanding debt securities of that series;
provided, however, that, except as referred to above, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the holders of a
specified percentage, which is less than a majority, in principal amount of the
outstanding debt securities of a series may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the holders of that specified percentage in principal amount of the outstanding
debt securities of that series. Any resolution passed or decision taken at any
meeting of holders of debt securities of any series duly held in accordance with
the indenture will be binding on all holders of debt securities of that series.
The quorum at any meeting called to adopt a resolution, and at any reconvened
meeting, will be persons holding or representing a majority in principal amount
of the outstanding debt securities of a series; provided, however, that if any
action is to be taken at that meeting with respect to a consent or waiver which
may be given by the holders of not less than a specified percentage in principal
amount of the outstanding debt securities of a series, the persons holding or
representing that specified percentage in principal amount of the outstanding
debt securities of that series will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at
a meeting of holders of debt securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the indenture expressly provides may be made, given or taken by the
holders of a specified percentage in principal amount of all outstanding debt
securities affected thereby, or of the holders of that series and one or more
additional series:
(1) there shall be no minimum quorum requirement for that meeting, and
(2) the principal amount of the outstanding debt securities of that
series that vote in favor of that request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken
into account in determining whether that request, demand,
authorization, direction, notice, consent, waiver or other action
has been made, given or taken under the indenture (Section 1504).
Discharge, Defeasance and Covenant Defeasance
We may discharge certain obligations to holders of any series of debt
securities that have not already been delivered to the trustee for cancellation
and that either have become due and payable or will become due and payable
within one year (or scheduled for redemption within one year) by irrevocably
depositing with the trustee, in trust, funds in the currency or currencies,
currency unit or units or composite currency or currencies in which those debt
securities are payable in an amount sufficient to pay the entire indebtedness on
those debt securities in respect of principal (and premium, if any) and interest
to the date of that deposit (if those debt securities have become due and
payable) or to the stated maturity or redemption date, as the case may be
(Section 401).
The indenture provides that, if the provisions of article fourteen of the
indenture are made applicable to the debt securities of or within any series
pursuant to Section 301 of the indenture, we may elect either:
(1) to defease and be discharged from any and all obligations with
respect to those debt securities (except for the obligation to pay
additional amounts, if any, upon the occurrence of certain events of
tax, assessment or governmental charge with respect to payments on
those debt securities and the obligations to register the transfer
or exchange of those debt securities, to replace temporary or
mutilated, destroyed, lost or stolen debt securities, to maintain an
office or agency in respect of those debt securities and to hold
moneys for payment in trust) ("defeasance") (Section 1402); or
13
(2) to be released from its obligations with respect to those debt
securities under Sections 1004 to 1010, inclusive, and Section 1014
of the indenture (being the restrictions described under "Certain
Covenants") or, if provided pursuant to Section 301 of the
indenture, its obligations with respect to any other covenant, and
any omission to comply with those obligations shall not constitute a
default or an event of default with respect to those debt securities
("covenant defeasance") (Section 1403),
in either case upon the irrevocable deposit by us with the trustee, in trust,
of an amount, in the currency or currencies, currency unit or units or
composite currency or currencies in which those debt securities are payable at
stated maturity, or Government Obligations (as defined below), or both,
applicable to those debt securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest
on those debt securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
That type of trust may only be established if, among other things, we have
delivered to the trustee an opinion of counsel to the effect that the holders of
those debt securities will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of that defeasance or covenant defeasance and
will be subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if that defeasance or
covenant defeasance had not occurred, and that opinion of counsel, in the case
of defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable U.S. federal income tax law occurring after
the date of the indenture (Section 1404).
"Government Obligations" means securities which are:
(1) direct obligations of the United States of America or the government
which issued the foreign currency in which the debt securities of a
particular series are payable, for the payment of which its full
faith and credit is pledged; or
(2) obligations of a person controlled or supervised by and acting as an
agency or instrumentality of the United States of America or that
government which issued the foreign currency in which the debt
securities of that series are payable, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by
the United States of America or that other government,
which, in either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank
or trust company as custodian with respect to that Government Obligation or a
specific payment of interest on or principal of that Government Obligation
held by the custodian for the account of the holder of a depository receipt,
provided that (except as required by law) the custodian is not authorized to
make any deduction from the amount payable to the holder of the depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the
Government Obligation evidenced by the depository receipt (Section 101).
Unless otherwise provided in the applicable prospectus supplement, if after
we have deposited funds or Government Obligations or both to effect defeasance
or covenant defeasance with respect to debt securities of any series,
(1) the holder of a debt security of that series is entitled to, and
does, elect pursuant to Section 301 of the indenture or the terms of
that debt security to receive payment in a currency, currency unit
or composite currency other than that in which the deposit has been
made in respect of that debt security, or
(2) a Conversion Event (as defined below) occurs in respect of the
currency, currency unit or composite currency in which the deposit
has been made,
then, the indebtedness represented by that debt security shall be deemed to
have been, and will be, fully discharged and satisfied through the payment of
the principal of (and premium, if any) and interest on that debt security as
they become due out of the proceeds yielded by converting the amount so
deposited in respect of that debt security into the currency, currency unit or
composite currency in which that debt security
14
becomes payable as a result of that election or cessation of usage based on
the applicable market exchange rate (Section 1405). "Conversion Event" means
the cessation of use of:
(1) a currency, currency unit or composite currency both by the
government of the country which issued that currency and for the
settlement of transactions by a central bank or other public
institutions of or within the international banking community,
(2) the European Currency Unit, or ECU, both within the European
Monetary System and for the settlement of transactions by public
institutions of or within the European Communities, or
(3) any currency unit or composite currency other than the ECU for the
purposes for which it was established.
Unless otherwise provided in the applicable prospectus supplement, all
payments of principal of (and premium, if any) and interest on any debt security
that is payable in a foreign currency that ceases to be used by its government
of issuance shall be made in U.S. Dollars (Section 101).
In the event we effect covenant defeasance with respect to any debt
securities and those debt securities are declared due and payable because of the
occurrence of any event of default other than the event of default described in
clause (4) under "Events of Default, Notice and Waiver" with respect to Sections
1004 to 1010, inclusive, and Section 1014 of the indenture (which Sections would
no longer be applicable to those debt securities) or described in clause (7)
under "Events of Default, Notice and Waiver" with respect to any other covenant
as to which there has been covenant defeasance, the amount in such currency,
currency unit or composite currency in which those debt securities are payable,
and Government Obligations on deposit with the trustee, will be sufficient to
pay amounts due on those debt securities at the time of their stated maturity
but may not be sufficient to pay amounts due on those debt securities at the
time of the acceleration resulting from that event of default. However, we would
remain liable to make payment of those amounts due at the time of acceleration.
The applicable prospectus supplement may further describe the provisions,
if any, permitting that defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the debt
securities of or within a particular series.
Conversion Rights
The terms and conditions, if any, upon which the debt securities are
convertible into other debt securities, our common stock or our preferred stock
will be set forth in the applicable prospectus supplement relating thereto.
Those terms will include whether those debt securities are convertible into
other debt securities, our common stock or our preferred stock, the conversion
price (or manner of calculation thereof), the conversion period, provisions as
to whether conversion will be at our option or the option of the holders of debt
securities, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of those debt
securities.
Global Securities
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on behalf
of, a depositary identified in the applicable prospectus supplement relating to
that series. Global securities may be issued in either registered or bearer form
and in either temporary or permanent form. The specific terms of the depositary
arrangement with respect to a series of debt securities will be described in the
applicable prospectus supplement relating to that series.
DESCRIPTION OF COMMON STOCK
We have the authority to issue 200,000,000 shares of common stock, par
value $.01 per share, and 102,000,000 shares of excess stock, par value $.01 per
share. At December 31, 2000, we had outstanding 63,144,589 shares of common
stock and no shares of excess stock. Prior to August 4, 1994, we were
15
incorporated as a Delaware corporation. On August 4, 1994, we reincorporated
as a Maryland corporation pursuant to an Agreement and Plan of Merger approved
by our stockholders.
The following description of our common stock sets forth certain general
terms and provisions of the common stock to which any prospectus supplement may
relate, including a prospectus supplement providing that common stock will be
issuable upon conversion of our debt securities or our preferred stock or upon
the exercise of common stock warrants issued by us. The statements below
describing the common stock are in all respects subject to and qualified in
their entirety by reference to the applicable provisions of our charter and
bylaws.
Holders of our common stock will be entitled to receive dividends when, as
and if declared by our board of directors, out of assets legally available
therefor. Payment and declaration of dividends on the common stock and purchases
of shares thereof by us will be subject to certain restrictions if we fail to
pay dividends on our preferred stock. Upon our liquidation, dissolution or
winding up, holders of common stock will be entitled to share equally and
ratably in any assets available for distribution to them, after payment or
provision for payment of our debts and other liabilities and the preferential
amounts owing with respect to any of our outstanding preferred stock. The common
stock will possess ordinary voting rights for the election of directors and in
respect of other corporate matters, with each share entitling the holder thereof
to one vote. Holders of common stock will not have cumulative voting rights in
the election of directors, which means that holders of more than 50% of all of
the shares of our common stock voting for the election of directors will be able
to elect all of the directors if they choose to do so and, accordingly, the
holders of the remaining shares will be unable to elect any directors. Holders
of shares of common stock will not have preemptive rights, which means they have
no right to acquire any additional shares of common stock that may be issued by
us at a subsequent date. The common stock will, when issued, be fully paid and
nonassessable and will not be subject to preemptive or similar rights.
Under Maryland law and our charter, a distribution (whether by dividend,
redemption or other acquisition of shares) to holders of shares of common stock
may be made only if, after giving effect to the distribution, our total assets
are greater than our total liabilities plus the amount necessary to satisfy the
preferential rights upon dissolution of stockholders whose preferential rights
on dissolution are superior to the holders of common stock. We have complied
with this requirement in all of our prior distributions to holders of common
stock.
Restrictions on Ownership
For us to qualify as a REIT under the Code, not more than 50% in value of
our outstanding stock may be owned, actually or constructively, by five or fewer
individuals (as defined in the Code to include certain entities) during the last
half of a taxable year. Our stock also must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year. In addition, rent from related
party tenants (generally, a tenant of a REIT owned, actually or constructively,
10% or more by the REIT, or a 10% owner of the REIT) is not qualifying income
for purposes of the income tests under the Code.
Subject to the exceptions specified in our charter, no holder may own, or
be deemed to own by virtue of the constructive ownership provisions of the Code,
more than 2% in value of the outstanding shares of our common stock. The
constructive ownership rules are complex and may cause common stock owned
actually or constructively by a group of related individuals or entities or both
to be deemed constructively owned by one individual or entity. As a result, the
acquisition of less than 2% in value of the common stock (or the acquisition of
an interest in an entity which owns common stock) by an individual or entity
could cause that individual or entity (or another individual or entity) to own
constructively in excess of 2% in value of the common stock, and thus subject
such common stock to the ownership limit.
Existing stockholders who exceeded the ownership limit immediately after
the completion of our initial public offering of our common stock in November
1991, may continue to do so and may acquire additional shares through the stock
option plan, or from other existing stockholders who exceed the ownership limit,
but may not acquire additional shares from such sources such that the five
largest beneficial owners of common stock could own, actually or constructively,
more than 49.6% of the outstanding common stock, and in any
16
event may not acquire additional shares from any other sources. In addition,
because rent from related party tenants is not qualifying rent for purposes of
the gross income tests under the Code, our charter provides that no individual
or entity may own, or be deemed to own by virtue of the attribution provisions
of the Code (which differ from the attribution provisions applied to the
ownership limit), in excess of 9.8% in value of our outstanding common stock. We
refer to this ownership limitation as the related party limit. Our board of
directors may waive the ownership limit and the related party limit with respect
to a particular stockholder (such related party limit has been waived with
respect to the existing stockholders who exceeded the related party limit
immediately after the initial public offering of our common stock) if evidence
satisfactory to our board of directors and our tax counsel is presented that
such ownership will not then or in the future jeopardize our status as a REIT.
As a condition of that waiver, our board of directors may require opinions of
counsel satisfactory to it or an undertaking or both from the applicant with
respect to preserving our REIT status. The foregoing restrictions on
transferability and ownership will not apply if our board of directors
determines that it is no longer in our best interests to attempt to qualify, or
to continue to qualify, as a REIT. If shares of common stock in excess of the
ownership limit or the related party limit, or shares which would otherwise
cause the REIT to be beneficially owned by less than 100 persons or which would
otherwise cause us to be "closely held" within the meaning of the Code or would
otherwise result in our failure to qualify as a REIT, are issued or transferred
to any person, that issuance or transfer shall be null and void to the intended
transferee, and the intended transferee would acquire no rights to the stock.
Shares transferred in excess of the ownership limit or the related party limit,
or shares which would otherwise cause us to be "closely held" within the meaning
of the Code or would otherwise result in our failure to qualify as a REIT, will
automatically be exchanged for shares of a separate class of stock, which we
refer to as excess stock, that will be transferred by operation of law to us as
trustee for the exclusive benefit of the person or persons to whom the shares
are ultimately transferred, until that time as the intended transferee
retransfers the shares. While these shares are held in trust, they will not be
entitled to vote or to share in any dividends or other distributions (except
upon liquidation). The shares may be retransferred by the intended transferee to
any person who may hold those shares at a price not to exceed either:
(1) the price paid by the intended transferee, or
(2) if the intended transferee did not give value for such shares, a
price per share equal to the market value of the shares on the date
of the purported transfer to the intended transferee,
at which point the shares will automatically be exchanged for ordinary common
stock. In addition, such shares of excess stock held in trust are purchasable
by us for a 90-day period at a price equal to the lesser of the price paid for
the stock by the intended transferee and the market price for the stock on the
date we determine to purchase the stock. This period commences on the date of
the violative transfer if the intended transferee gives us notice of the
transfer, or the date our board of directors determines that a violative
transfer has occurred if no notice is provided.
All certificates representing shares of common stock will bear a legend
referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions of
the Code, more than a specified percentage of the outstanding shares of common
stock must file an affidavit with us containing the information specified in our
charter within 30 days after January 1 of each year. In addition, each common
stockholder shall upon demand be required to disclose to us in writing such
information with respect to the actual and constructive ownership of shares as
our board of directors deems necessary to comply with the provisions of the Code
applicable to a REIT or to comply with the requirements of any taxing authority
or governmental agency.
The registrar and transfer agent for our common stock is The Bank of New
York.
DESCRIPTION OF COMMON STOCK WARRANTS
We may issue common stock warrants for the purchase of our common stock.
Common stock warrants may be issued independently or together with any of the
other securities offered by this prospectus that are
17
offered by any prospectus supplement and may be attached to or separate from
the securities offered by this prospectus. Each series of common stock
warrants will be issued under a separate warrant agreement to be entered into
between us and a warrant agent specified in the applicable prospectus
supplement. The warrant agent will act solely as our agent in connection with
the common stock warrants of such series and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners
of common stock warrants.
The applicable prospectus supplement will describe the terms of the common
stock warrants in respect of which this prospectus is being delivered,
including, where applicable, the following:
(1) the title of those common stock warrants;
(2) the aggregate number of those common stock warrants;
(3) the price or prices at which those common stock warrants will be
issued;
(4) the designation, number and terms of the shares of common stock
purchasable upon exercise of those common stock warrants;
(5) the designation and terms of the other securities offered by this
prospectus with which the common stock warrants are issued and the
number of those common stock warrants issued with each security
offered by this prospectus;
(6) the date, if any, on and after which those common stock warrants and
the related common stock will be separately transferable;
(7) the price at which each share of common stock purchasable upon
exercise of those common stock warrants may be purchased;
(8) the date on which the right to exercise those common stock warrants
shall commence and the date on which that right shall expire;
(9) the minimum or maximum amount of those common stock warrants which
may be exercised at any one time;
(10) information with respect to book-entry procedures, if any;
(11) a discussion of federal income tax considerations; and
(12) any other material terms of those common stock warrants, including
terms, procedures and limitations relating to the exchange and
exercise of those common stock warrants.
DESCRIPTION OF PREFERRED STOCK
We are authorized to issue 5,000,000 shares of preferred stock, par value
$1.00 per share, 345,000 shares of 7 3/4% Class A Cumulative Redeemable
Preferred Stock, $1.00 par value per share, 230,000 shares of 8 1/2% Class B
Cumulative Redeemable Preferred Stock, $1.00 par value per share, 460,000 shares
of 8 3/8% Class C Cumulative Redeemable Preferred Stock, $1.00 par value per
share, 700,000 shares of 7 1/2% Class D Cumulative Convertible Preferred Stock,
$1.00 par value per share, and 65,000 shares of Class E Floating Rate Cumulative
Redeemable Preferred Stock. We are also authorized to issue 345,000 shares of
Class A Excess Preferred Stock, $1.00 par value per share, 230,000 shares of
Class B Excess Preferred Stock, $1.00 par value per share, 460,000 shares of
Class C Excess Preferred Stock, $1.00 par value per share, 700,000 shares of
Class D Excess Preferred Stock, $1.00 par value per share and 65,000 shares of
Class E Excess Preferred Stock, par value $1.00 per share, which are reserved
for issuance upon conversion of certain outstanding Class A preferred stock,
Class B preferred stock, Class C preferred stock, Class D preferred stock or
Class E preferred stock, as the case may be, as necessary to preserve our status
as a REIT. At December 31, 2000, 300,000 shares of Class A preferred stock,
represented by 3,000,000 depositary shares, 200,000 shares of Class B preferred
stock, represented by 2,000,000 depositary shares, 400,000 shares of Class C
preferred stock, represented by 4,000,000 depositary shares, and 418,254.2
shares of Class D preferred stock, represented by 4,182,542 depositary shares,
were outstanding.
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Under our charter, our board of directors may from time to time establish
and issue one or more classes or series of preferred stock and fix the
designations, powers, preferences and rights of the shares of such classes or
series and the qualifications, limitations or restrictions thereon, including,
but not limited to, the fixing of the dividend rights, dividend rate or rates,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions) and the liquidation preferences.
The following description of our preferred stock sets forth certain general
terms and provisions of our preferred stock to which any prospectus supplement
may relate. The statements below describing the preferred stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of our charter (including the applicable articles
supplementary) and bylaws.
General
Subject to limitations prescribed by Maryland law and our charter, our
board of directors is authorized to fix the number of shares constituting each
class or series of preferred stock and the designations and powers, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including those provisions
as may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and those other subjects or
matters as may be fixed by resolution of our board of directors or duly
authorized committee thereof. The preferred stock will, when issued, be fully
paid and nonassessable and will not have, or be subject to, any preemptive or
similar rights.
You should refer to the prospectus supplement relating to the class or
series of preferred stock offered thereby for specific terms, including:
(1) The class or series, title and stated value of that preferred stock;
(2) The number of shares of that preferred stock offered, the
liquidation preference per share and the offering price of that
preferred stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to that preferred stock;
(4) Whether dividends on that preferred stock shall be cumulative or not
and, if cumulative, the date from which dividends on that preferred
stock shall accumulate;
(5) The procedures for any auction and remarketing, if any, for that
preferred stock;
(6) Provisions for a sinking fund, if any, for that preferred stock;
(7) Provisions for redemption, if applicable, of that preferred stock;
(8) Any listing of that preferred stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which that preferred
stock will be convertible into our common stock, including the
conversion price (or manner of calculation thereof);
(10) Whether interests in that preferred stock will be represented by our
depositary shares;
(11) A discussion of certain federal income tax considerations applicable
to that preferred stock;
(12) Any limitations on actual, beneficial or constructive ownership and
restrictions on transfer of that preferred stock and, if
convertible, the related common stock, in each case as may be
appropriate to preserve our status as a REIT; and
(13) Any other material terms, preferences, rights, limitations or
restrictions of that preferred stock.
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Rank
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will, with respect to rights to the payment of dividends and
distribution of our assets and rights upon our liquidation, dissolution or
winding up, rank:
(1) senior to all classes or series of our common stock and excess stock
and to all of our equity securities the terms of which provide that
those equity securities are subordinated to the preferred stock;
(2) on a parity with all of our equity securities other than those
referred to in clauses (1) and (3); and
(3) junior to all of our equity securities which the terms of that
preferred stock provide will rank senior to it.
For these purposes, the term "equity securities" does not include
convertible debt securities.
Dividends
Holders of shares of our preferred stock of each class or series shall be
entitled to receive, when, as and if declared by our board of directors, out of
our assets legally available for payment, cash dividends at rates and on dates
as will be set forth in the applicable prospectus supplement. Each dividend
shall be payable to holders of record as they appear on our stock transfer books
on the record dates as shall be fixed by our board of directors.
Dividends on any class or series of our preferred stock may be cumulative
or non-cumulative, as provided in the applicable prospectus supplement.
Dividends, if cumulative, will accumulate from and after the date set forth in
the applicable prospectus supplement. If our board of directors fails to
authorize a dividend payable on a dividend payment date on any class or series
of our preferred stock for which dividends are noncumulative, then the holders
of that class or series of our preferred stock will have no right to receive a
dividend in respect of the dividend period ending on that dividend payment date,
and we will have no obligation to pay the dividend accrued for that period,
whether or not dividends on that class or series are declared payable on any
future dividend payment date.
If any shares of our preferred stock of any class or series are
outstanding, no full dividends shall be authorized or paid or set apart for
payment on our preferred stock of any other class or series ranking, as to
dividends, on a parity with or junior to the preferred stock of that class or
series for any period unless:
(1) if that class or series of preferred stock has a cumulative
dividend, full cumulative dividends have been or contemporaneously
are authorized and paid or authorized and a sum sufficient for the
payment thereof set part for that payment on the preferred stock of
that class or series for all past dividend periods and the then
current dividend period, or
(2) if that class or series of preferred stock does not have a
cumulative dividend, full dividends for the then current dividend
period have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set apart
for that payment on the preferred stock of that class or series.
When dividends are not paid in full (or a sum sufficient for their full
payment is not so set apart) upon the shares of preferred stock of any class or
series and the shares of any other class or series of preferred stock ranking on
a parity as to dividends with the preferred stock of that class or series, all
dividends declared upon shares of preferred stock of that class or series and
any other class or series of preferred stock ranking on a parity as to dividends
with that preferred stock shall be authorized pro rata so that the amount of
dividends authorized per share on the preferred stock of that class or series
and that other class or series of preferred stock shall in all cases bear to
each other the same ratio that accrued and unpaid dividends per share on the
shares of preferred stock of that class or series (which shall not include any
accumulation in respect of unpaid dividends for prior dividend periods if that
preferred stock does not have a cumulative dividend) and that other class or
series of preferred stock bear to each other. No interest, or sum of money in
20
lieu of interest, shall be payable in respect of any dividend payment or
payments on preferred stock of that series that may be in arrears.
Except as provided in the immediately preceding paragraph, unless: (1) if
that class or series of preferred stock has a cumulative dividend, full
cumulative dividends on the preferred stock of that class or series have been or
contemporaneously are authorized and paid or authorized and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and the
then current dividend period; and (2) if that class or series of preferred stock
does not have a cumulative dividend, full dividends on the preferred stock of
that class or series have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set aside for payment
for the then current dividend period, then no dividends (other than in our
common stock or other stock ranking junior to the preferred stock of that class
or series as to dividends and upon our liquidation, dissolution or winding up)
shall be authorized or paid or set aside for payment or other distribution shall
be authorized or made upon our common stock, excess stock or any of our other
stock ranking junior to or on a parity with the preferred stock of that class or
series as to dividends or upon liquidation, nor shall any common stock, excess
stock or any of our other stock ranking junior to or on a parity with the
preferred stock of such class or series as to dividends or upon our liquidation,
dissolution or winding up be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of that stock) by us (except by conversion into or
exchange for other of our stock ranking junior to the preferred stock of that
class or series as to dividends and upon our liquidation, dissolution or winding
up).
Any dividend payment made on shares of a class or series of preferred stock
shall first be credited against the earliest accrued but unpaid dividend due
with respect to shares of that class or series which remains payable.
Redemption
If the applicable prospectus supplement so states, the shares of preferred
stock will be subject to mandatory redemption or redemption at our option, in
whole or in part, in each case on the terms, at the times and at the redemption
prices set forth in that prospectus supplement.
The prospectus supplement relating to a class or series of preferred stock
that is subject to mandatory redemption will specify the number of shares of
that preferred stock that shall be redeemed by us in each year commencing after
a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if that preferred stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable prospectus supplement. If the
redemption price for preferred stock of any series is payable only from the net
proceeds of the issuance of our stock, the terms of that preferred stock may
provide that, if no such stock shall have been issued or to the extent the net
proceeds from any issuance are insufficient to pay in full the aggregate
redemption price then due, that preferred stock shall automatically and
mandatorily be converted into shares of our applicable stock pursuant to
conversion provisions specified in the applicable prospectus supplement.
Notwithstanding the foregoing, unless:
(1) if that class or series of preferred stock has a cumulative
dividend, full cumulative dividends on all shares of any class or
series of preferred stock shall have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods
and the then current dividend period; and
(2) if that class or series of preferred stock does not have a
cumulative dividend, full dividends on the preferred stock of any
class or series have been or contemporaneously are authorized and
paid or authorized and a sum sufficient for the payment thereof set
apart for payment for the then current dividend period, no shares of
any class or series of preferred stock shall be redeemed unless all
outstanding shares of preferred stock of that class or series are
simultaneously redeemed; provided, however, that the foregoing shall
not prevent the purchase or acquisition of shares of preferred stock
of that class or series pursuant to a purchase or exchange offer
made on the same terms to holders of all outstanding shares of
preferred stock of that class or series; or
21
(3) if that class or series of preferred stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of any
class or series of preferred stock have been or contemporaneously
are authorized and paid or authorized and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods
and the then current dividend period; and
(4) if that class or series of preferred stock does not have a
cumulative dividend, full dividends on the preferred stock of any
class or series have been or contemporaneously are authorized and
paid or authorized and a sum sufficient for the payment thereof set
apart for payment for the then current dividend period, we shall not
purchase or otherwise acquire directly or indirectly any shares of
preferred stock of that class or series (except by conversion into
or exchange for our stock ranking junior to the preferred stock of
that class or series as to dividends and upon our liquidation,
dissolution or winding up).
If fewer than all of the outstanding shares of preferred stock of any class
or series are to be redeemed, the number of shares to be redeemed will be
determined by us and those shares may be redeemed pro rata from the holders of
record of those shares in proportion to the number of those shares held by those
holders (with adjustments to avoid redemption of fractional shares) or any other
equitable method determined by us that will not result in the issuance of any
excess preferred stock.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of a share of preferred
stock of any class or series to be redeemed at the address shown on our stock
transfer books. Each notice shall state:
(1) the redemption date;
(2) the number of shares and class or series of the preferred stock to
be redeemed;
(3) the redemption price;
(4) the place or places where certificates for that preferred stock are
to be surrendered for payment of the redemption price;
(5) that dividends on the shares to be redeemed will cease to accrue on
that redemption date; and
(6) the date upon which the holder's conversion rights, if any, as to
those shares shall terminate.
If fewer than all the shares of preferred stock of any class or series are
to be redeemed, the notice mailed to each holder thereof shall also specify the
number of shares of preferred stock to be redeemed from each holder. If notice
of redemption of any shares of preferred stock has been given and if the funds
necessary for that redemption have been set apart by us in trust for the benefit
of the holders of any shares of preferred stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on those
shares of preferred stock, those shares of preferred stock shall no longer be
deemed outstanding and all rights of the holders of those shares will terminate,
except the right to receive the redemption price.
Liquidation Preference
Upon our voluntary or involuntary liquidation, dissolution or winding up,
then, before any distribution or payment shall be made to the holders of any
common stock, excess stock or any other class or series of our stock ranking
junior to that class or series of preferred stock in the distribution of assets
upon our liquidation, dissolution or winding up, the holders of each class or
series of preferred stock shall be entitled to receive out of our assets legally
available for distribution to stockholders liquidating distributions in the
amount of the liquidation preference per share (set forth in the applicable
prospectus supplement), plus an amount equal to all dividends accrued and unpaid
thereon (which shall not include any accumulation in respect of unpaid dividends
for prior dividend periods if that class or series of preferred stock does not
have a cumulative dividend). After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of that class or series of
preferred stock will have no right or claim to any of our remaining assets. If,
upon our voluntary or involuntary liquidation, dissolution or winding up, our
legally available assets are insufficient to pay the amount of the liquidating
distributions on all outstanding shares of that class or series
22
of preferred stock and the corresponding amounts payable on all shares of
other classes or series of our stock ranking on a parity with that class or
series of preferred stock in the distribution of assets upon our liquidation,
dissolution or winding up, then the holders of that class or series of
preferred stock and all other classes or series of stock shall share ratably
in that distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
shares of that class or series of preferred stock, our remaining assets shall be
distributed among the holders of any other classes or series of stock ranking
junior to that class or series of preferred stock upon our liquidation,
dissolution or winding up, according to their respective rights and preferences
and in each case according to their respective number of shares. For those
purposes, neither our consolidation or merger with or into any other corporation
nor the sale, lease, transfer or conveyance of all or substantially all of our
property or business shall be deemed to constitute our liquidation, dissolution
or winding up.
Voting Rights
Except as set forth below or as otherwise from time to time required by law
or as indicated in the applicable prospectus supplement, holders of preferred
stock will not have any voting rights.
Whenever dividends on any shares of that class or series of preferred stock
shall be in arrears for six or more quarterly periods, regardless of whether
those quarterly periods are consecutive, the holders of those shares of that
class or series of preferred stock (voting separately as a class with all other
classes or series of preferred stock upon which like voting rights have been
conferred and are exercisable) will be entitled to vote for the election of two
additional directors to our board of directors (and our entire board of
directors will be increased by two directors) at a special meeting called by one
of our officers at the request of a holder of that class or series of preferred
stock or, if that special meeting is not called by that officer within 30 days,
at a special meeting called by a holder of that class or series of preferred
stock designated by the holders of record of at least 10% of the shares of any
of those classes or series of preferred stock (unless that request is received
less than 90 days before the date fixed for the next annual or special meeting
of the stockholders), or at the next annual meeting of stockholders, and at each
subsequent annual meeting until:
(1) if that class or series of preferred stock has a cumulative
dividend, then all dividends accumulated on those shares of
preferred stock for the past dividend periods and the then current
dividend period shall have been fully paid or declared and a sum
sufficient for the payment thereof set apart for payment, or
(2) if that class or series of preferred stock does not have a
cumulative dividend, then four consecutive quarterly dividends shall
have been fully paid or declared and a sum sufficient for the
payment thereof set apart for payment.
Unless provided otherwise for any series of preferred stock, so long as any
shares of preferred stock remain outstanding, we shall not, without the
affirmative vote or consent of the holders of at least two-thirds of the shares
of each class or series of preferred stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (that class or series
voting separately as a class),
(1) authorize or create, or increase the authorized or issued amount of,
any class or series of stock ranking senior to that class or series
of preferred stock with respect to payment of dividends or the
distribution of assets upon our liquidation, dissolution or winding
up or reclassify any of our authorized stock into those shares, or
create, authorize or issue any obligation or security convertible
into or evidencing the right to purchase those shares; or
(2) amend, alter or repeal the provisions of the charter in respect of
that class or series of preferred stock, whether by merger,
consolidation or otherwise, so as to materially and adversely affect
any right, preference, privilege or voting power of that class or
series of preferred stock or the holders thereof; provided, however,
that any increase in the amount of the authorized preferred stock or
the creation or issuance of any other class or series of preferred
stock, or any increase in the amount of authorized shares of that
class or series, in each case ranking on a parity with or junior to
the preferred stock of that class or series with respect to payment
of dividends and the distribution of
23
assets upon liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect those rights, preferences,
privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which that vote would otherwise be required shall
be effected, all outstanding shares of that class or series of preferred stock
shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been irrevocably deposited in trust to effect that
redemption.
Conversion Rights
The terms and conditions, if any, upon which shares of any class or series
of preferred stock are convertible into common stock, debt securities or another
series of preferred stock will be set forth in the applicable prospectus
supplement relating thereto. Such terms will include the number of shares of
common stock or those other series of preferred stock or the principal amount of
debt securities into which the preferred stock is convertible, the conversion
price (or manner of calculation thereof), the conversion period, provisions as
to whether conversion will be at our option or at the option of the holders of
that class or series of preferred stock, the events requiring an adjustment of
the conversion price and provisions affecting conversion in the event of the
redemption of that class or series of preferred stock.
Restrictions on Ownership
As discussed above under "Description of Common Stock--Restrictions on
Ownership," for us to qualify as a REIT under the Code, not more than 50% in
value of our outstanding stock may be owned, actually or constructively, by five
or fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year. Our stock also must be beneficially owned by
100 or more persons during at least 335 days of a taxable year of 12 months (or
during a proportionate part of a shorter taxable year). In addition, rent from
related party tenants (generally, a tenant of a REIT owned, actually or
constructively 10% or more by the REIT, or a 10% owner of the REIT) is not
qualifying income for purposes of the gross income tests under the Code.
Therefore, the applicable articles supplementary for each class or series of
preferred stock will contain certain provisions restricting the ownership and
transfer of that class or series of preferred stock. Except as otherwise
described in the applicable prospectus supplement relating thereto, the
provisions of each applicable articles supplementary relating to the ownership
limit for any class or series of preferred stock will provide as follows:
Our preferred stock ownership limit provision will provide that, subject to
some exceptions, no holder of that class or series of preferred stock may own,
or be deemed to own by virtue of the constructive ownership provisions of the
Code, preferred stock in excess of the preferred stock ownership limit, which
will be equal to 9.8% of the outstanding preferred stock of any class or series.
The constructive ownership rules are complex and may cause preferred stock owned
actually or constructively by a group of related individuals and/ or entities to
be deemed to be constructively owned by one individual or entity. As a result,
the acquisition of less than 9.8% of any class or series of preferred stock (or
the acquisition of an interest in an entity which owns preferred stock) by an
individual or entity could cause that individual or entity (or another
individual or entity) to own constructively in excess of 9.8% of that class or
series of preferred stock, and thus subject that preferred stock to the
preferred stock ownership limit.
Our board of directors will be entitled to waive the preferred stock
ownership limit with respect to a particular stockholder if evidence
satisfactory to our board of directors, with advice of our tax counsel, is
presented that the ownership will not then or in the future jeopardize our
status as a REIT. As a condition of that waiver, our board of directors may
require opinions of counsel satisfactory to it or an undertaking or both from
the applicant with respect to preserving our REIT status.
Such articles supplementary will provide that a transfer of the class or
series of preferred stock that results in a person actually or constructively
owning shares of preferred stock in excess of the preferred stock ownership
limit, or which would cause us to be "closely held" within the meaning of the
Code or would otherwise result in our failure to qualify as a REIT, will be null
and void as to the intended transferee, and the intended transferee will acquire
no rights or economic interest in those shares. In addition, shares actually or
constructively owned by a person in excess of the preferred stock ownership
limit, or which would
24
otherwise cause us to be "closely held" within the meaning of the Code or
would otherwise result in our failure to qualify as a REIT, will be
automatically exchanged for excess preferred stock, a separate class of
preferred stock that will be transferred, by operation of law to us as trustee
of a trust for the exclusive benefit of the transferee or transferees to whom
the shares are ultimately transferred (without violating the preferred stock
ownership limit). While held in trust, a class of excess preferred stock will
not be entitled to vote, it will not be considered for purposes of any
stockholder vote or the determination of a quorum for that vote, and it will
not be entitled to participate in any distributions made by us (except upon
liquidation). The intended transferee or owner may, at any time a class of
excess preferred stock is held by us in trust, transfer the class of excess
preferred stock to any person whose ownership of that class or series of
excess preferred stock would be permitted under the preferred stock ownership
limit, at a price not to exceed either:
(1) the price paid by the intended transferee or owner in the purported
transfer which resulted in the issuance of that class of excess
preferred stock; or
(2) if the intended transferee did not give full value for that class of
excess preferred stock, a price equal to the market price on the
date of the purported transfer or the other event that resulted in
the issuance of that class of excess preferred stock, at which time
that class of excess preferred stock would automatically be
exchanged for the corresponding class or series of preferred stock.
In addition, we have the right, for a period of 90 days during the time a
class of excess preferred stock is held by us in trust, to purchase all or any
portion of that class of excess preferred stock from the intended transferee or
owner at a price equal to the lesser of:
(1) the price paid for the stock by the intended transferee or owner
(or, if the intended transferee did not give full value for that
class of excess preferred stock, a price equal to the market price
on the date of the purported transfer or other event that resulted
in the issuance of that class of excess preferred stock), and
(2) the closing market price for the corresponding class of preferred
stock on the date we exercise our option to purchase the stock.
This period commences on the date of the violative transfer of ownership if
the intended transferee or owner gives notice of the transfer to us, or the date
our board of directors determines that a violative transfer or ownership has
occurred if no notice is provided.
All certificates representing shares of a class or series of preferred
stock will bear a legend referring to the restrictions described above.
The preferred stock ownership limit provision is set as a percentage of the
number of outstanding shares of any class or series of preferred stock. As a
result, if the number of shares of any class or series of preferred stock is
reduced on a non-pro rata basis among all holders of that class or series,
excess preferred stock may be created as a result of that reduction. In the
event that our action causes that reduction of shares, we have agreed to
exercise our option to repurchase those shares of that class or series of excess
preferred stock if the intended owner notifies us that it is unable to sell its
rights to that class or series of excess preferred stock.
All persons who own a specified percentage (or more) of our outstanding
stock must file an affidavit with us containing information regarding their
ownership of stock as set forth in the Treasury Regulations. Under current
Treasury Regulations, the percentage is set between one-half of one percent and
five percent, depending on the number of record holders of our stock. In
addition, each stockholder shall upon demand be required to disclose to us in
writing that information with respect to the actual and constructive ownership
of shares of our stock as our board of directors deems necessary to comply with
the provisions of the Code applicable to a REIT or to comply with the
requirements of any taxing authority or governmental agency.
25
DESCRIPTION OF DEPOSITARY SHARES
General
We may issue depositary shares, each of which will represent a fractional
interest of a share of a particular class or series of our preferred stock, as
specified in the applicable prospectus supplement. Shares of a class or series
of preferred stock represented by depositary shares will be deposited under a
separate deposit agreement among us, the depositary named therein and the
holders from time to time of the depositary receipts issued by the preferred
stock depositary which will evidence the depositary shares. Subject to the terms
of the deposit agreement, each owner of a depositary receipt will be entitled,
in proportion to the fractional interest of a share of a particular class or
series of preferred stock represented by the depositary shares evidenced by that
depositary receipt, to all the rights and preferences of the class or series of
preferred stock represented by those depositary shares (including dividend,
voting, conversion, redemption and liquidation rights).
The depositary shares will be evidenced by depositary receipts issued
pursuant to the applicable deposit agreement. Immediately following the issuance
and delivery of a class or series of preferred stock by us to the preferred
stock depositary, we will cause the preferred stock depositary to issue, on our
behalf, the depositary receipts. Copies of the applicable form of deposit
agreement and depositary receipt may be obtained from us upon request, and the
statements made hereunder relating to the deposit agreement and the depositary
receipts to be issued thereunder are summaries of certain provisions thereof and
do not purport to be complete and are subject to, and qualified in their
entirety by reference to, all of the provisions of the applicable deposit
agreement and related depositary receipts.
Dividends and Other Distributions
The preferred stock depositary will distribute all cash dividends or other
cash distributions received in respect of a class or series of preferred stock
to the record holders of depositary receipts evidencing the related depositary
shares in proportion to the number of those depositary receipts owned by those
holders, subject to certain obligations of holders to file proofs, certificates
and other information and to pay certain charges and expenses to the preferred
stock depositary.
In the event of a distribution other than in cash, the preferred stock
depositary will distribute property received by it to the record holders of
depositary receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the preferred stock depositary, unless the preferred stock
depositary determines that it is not feasible to make that distribution, in
which case the preferred stock depositary may, with our approval, sell that
property and distribute the net proceeds from that sale to those holders.
No distribution will be made in respect of any depositary share to the
extent that it represents any class or series of preferred stock converted into
excess preferred stock or otherwise converted or exchanged.
Withdrawal of Preferred Stock
Upon surrender of the depositary receipts at the corporate trust office of
the preferred stock depositary (unless the related depositary shares have
previously been called for redemption or converted into excess preferred stock
or otherwise), the holders thereof will be entitled to delivery at that office,
to or upon that holder's order, of the number of whole or fractional shares of
the class or series of preferred stock and any money or other property
represented by the depositary shares evidenced by those depositary receipts.
Holders of depositary receipts will be entitled to receive whole or fractional
shares of the related class or series of preferred stock on the basis of the
proportion of preferred stock represented by each depositary share as specified
in the applicable prospectus supplement, but holders of those shares of
preferred stock will not thereafter be entitled to receive depositary shares
therefor. If the depositary receipts delivered by the holder evidence a number
of depositary shares in excess of the number of depositary shares representing
the number of shares of preferred stock to be withdrawn, the preferred stock
depositary will deliver to that holder at the same time a new depositary receipt
evidencing the excess number of depositary shares.
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Redemption
Whenever we redeem shares of a class or series of preferred stock held by
the preferred stock depositary, the preferred stock depositary will redeem as of
the same redemption date the number of depositary shares representing shares of
the class or series of preferred stock so redeemed, provided we shall have paid
in full to the preferred stock depositary the redemption price of the preferred
stock to be redeemed plus an amount equal to any accrued and unpaid dividends
thereon to the date fixed for redemption. The redemption price per depositary
share will be equal to the corresponding proportion of the redemption price and
any other amounts per share payable with respect to that class or series of
preferred stock. If fewer than all the depositary shares are to be redeemed, the
depositary shares to be redeemed will be selected pro rata (as nearly as may be
practicable without creating fractional depositary shares) or by any other
equitable method determined by us that will not result in the issuance of any
excess preferred stock.
From and after the date fixed for redemption, all dividends in respect of
the shares of a class or series of preferred stock so called for redemption will
cease to accrue, the depositary shares so called for redemption will no longer
be deemed to be outstanding and all rights of the holders of the depositary
receipts evidencing the depositary shares so called for redemption will cease,
except the right to receive any moneys payable upon their redemption and any
money or other property to which the holders of those depositary receipts were
entitled upon their redemption and surrender thereof to the preferred stock
depositary.
Voting
Upon receipt of notice of any meeting at which the holders of a class or
series of preferred stock deposited with the preferred stock depositary are
entitled to vote, the preferred stock depositary will mail the information
contained in that notice of meeting to the record holders of the depositary
receipts evidencing the depositary shares which represent that class or series
of preferred stock. Each record holder of depositary receipts evidencing
depositary shares on the record date (which will be the same date as the record
date for that class or series of preferred stock) will be entitled to instruct
the preferred stock depositary as to the exercise of the voting rights
pertaining to the amount of preferred stock represented by that holder's
depositary shares. The preferred stock depositary will vote the amount of that
class or series of preferred stock represented by those depositary shares in
accordance with those instructions, and we will agree to take all reasonable
action which may be deemed necessary by the preferred stock depositary in order
to enable the preferred stock depositary to do so. The preferred stock
depositary will abstain from voting the amount of that class or series of
preferred stock represented by those depositary shares to the extent it does not
receive specific instructions from the holders of depositary receipts evidencing
those depositary shares. The preferred stock depositary shall not be responsible
for any failure to carry out any instruction to vote, or for the manner or
effect of any vote made, as long as that action or non-action is in good faith
and does not result from negligence or willful misconduct of the preferred stock
depositary.
Liquidation Preference
In the event of our liquidation, dissolution or winding up, whether
voluntary or involuntary, the holders of each depositary receipt will be
entitled to the fraction of the liquidation preference accorded each share of
preferred stock represented by the depositary shares evidenced by that
depositary receipt, as set forth in the applicable prospectus supplement.
Conversion
The depositary shares, as such, are not convertible into our common stock
(except as set forth in the proviso below) or any of our other securities or
property, except in connection with certain conversions in connection with the
preservation of our status as a REIT; provided that the depositary shares
representing our Class D preferred stock are convertible into our common stock.
Nevertheless, if so specified in the applicable prospectus supplement relating
to an offering of depositary shares, the depositary receipts may be surrendered
by holders thereof to the preferred stock depositary with written instructions
to the preferred stock depositary to instruct us to cause conversion of a class
or series of preferred stock represented by the depositary shares evidenced by
those depositary receipts into whole shares of our common stock, other shares of
a class or
27
series of preferred stock (including excess preferred stock) or other shares
of stock, and we have agreed that upon receipt of those instructions and any
amounts payable in respect thereof, we will cause the conversion thereof
utilizing the same procedures as those provided for delivery of preferred
stock to effect that conversion. If the depositary shares evidenced by a
depositary receipt are to be converted in part only, a new depositary receipt
or receipts will be issued for any depositary shares not to be converted. No
fractional shares of common stock will be issued upon conversion, and if that
conversion would result in a fractional share being issued, an amount will be
paid in cash by us equal to the value of the fractional interest based upon
the closing price of the common stock on the last business day prior to the
conversion.
Amendment and Termination of the Deposit Agreement
The form of depositary receipt evidencing the depositary shares which
represent the preferred stock and any provision of the deposit agreement may at
any time be amended by agreement between us and the preferred stock depositary.
However, any amendment that materially and adversely alters the rights of the
holders of depositary receipts or that would be materially and adversely
inconsistent with the rights granted to the holders of the related class or
series of preferred stock will not be effective unless that amendment has been
approved by the existing holders of at least two thirds of the depositary shares
evidenced by the depositary receipts then outstanding. No amendment shall impair
the right, subject to certain exceptions in the deposit agreement, of any holder
of depositary receipts to surrender any depositary receipt with instructions to
deliver to the holder the related class or series of preferred stock and all
money and other property, if any, represented thereby, except in order to comply
with law. Every holder of an outstanding depositary receipt at the time any of
those types of amendments becomes effective shall be deemed, by continuing to
hold that depositary receipt, to consent and agree to that amendment and to be
bound by the deposit agreement as amended thereby.
We may terminate the deposit agreement upon not less than 30 days' prior
written notice to the preferred stock depositary if:
(1) such termination is necessary to preserve our status as a REIT, or
(2) a majority of each class or series of preferred stock subject to
that deposit agreement consents to that termination, whereupon the
preferred stock depositary shall deliver or make available to each
holder of depositary receipts, upon surrender of the depositary
receipts held by that holder, that number of whole or fractional
shares of each class or series of preferred stock as are represented
by the depositary shares evidenced by those depositary receipts
together with any other property held by the preferred stock
depositary with respect to those depositary receipts.
We have agreed that if the deposit agreement is terminated to preserve our
status as a REIT, then we will use our best efforts to list each class or series
of preferred stock issued upon surrender of the related depositary shares on a
national securities exchange. In addition, the deposit agreement will
automatically terminate if:
(1) all outstanding depositary shares issued thereunder shall have been
redeemed,
(2) there shall have been a final distribution in respect of each class
or series of preferred stock subject to that deposit agreement in
connection with our liquidation, dissolution or winding up and that
distribution shall have been distributed to the holders of
depositary receipts evidencing the depositary shares representing
that class or series of preferred stock, or
(3) each share of preferred stock subject to that deposit agreement
shall have been converted into our stock not so represented by
depositary shares.
Charges of Preferred Stock Depositary
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the deposit agreement. In addition, we will pay the
fees and expenses of the preferred stock depositary in connection with the
performance of its duties under the deposit agreement. However, holders of
depositary
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receipts will pay the fees and expenses of the preferred stock depositary for
any duties requested by those holders to be performed which are outside of
those expressly provided for in the deposit agreement.
Resignation and Removal of Preferred Stock Depositary
The preferred stock depositary may resign at any time by delivering notice
to us of its election to do so, and we may at any time remove the preferred
stock depositary, that resignation or removal to take effect upon the
appointment of a successor preferred stock depositary. A successor preferred
stock depositary must be appointed within 60 days after delivery of the notice
of resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000.
Miscellaneous
The preferred stock depositary will forward to holders of depositary
receipts any reports and communications from us which are received by it with
respect to the related preferred stock.
Neither we nor the preferred stock depositary will be liable if it is
prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under the deposit agreement. Our obligations and
those of the preferred stock depositary under the deposit agreement will be
limited to performing our respective duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of a class or
series of preferred stock represented by the depositary shares), gross
negligence or willful misconduct, and neither we nor the preferred stock
depositary will be obligated to prosecute or defend any legal proceeding in
respect of any depositary receipts, depositary shares or shares of a class or
series of preferred stock represented thereby unless satisfactory indemnity is
furnished. We and the preferred stock depositary may rely on written advice of
counsel or accountants, or information provided by persons presenting shares of
a class or series of preferred stock represented thereby for deposit, holders of
depositary receipts or other persons believed in good faith to be competent to
give that information, and on documents believed in good faith to be genuine and
signed by a proper party.
In the event the preferred stock depositary shall receive conflicting
claims, requests or instructions from any holders of depositary receipts, on the
one hand, and us, on the other hand, the preferred stock depositary shall be
entitled to act on those claims, requests or instructions received from us.
RATIOS OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for the years ended December 31,
2000, 1999, 1998, 1997 and 1996 was 2.8, 2.7, 2.7, 3.5 and 3.5, respectively.
Our ratio of earnings to combined fixed charges and preferred stock dividend
requirements for the years ended December 31, 2000, 1999, 1998, 1997 and 1996
was 2.3, 2.1, 2.0, 2.3 and 2.3, respectively.
For purposes of computing these ratios, earnings have been calculated by
adding fixed charges (excluding capitalized interest) to income before income
taxes and extraordinary items. Fixed charges consist of interest costs, whether
expensed or capitalized, the interest component of rental expense, and
amortization of debt discounts and issue costs, whether expensed or capitalized.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
TO US OF OUR REIT ELECTION
The following is a summary of the federal income tax considerations to us
which are anticipated to be material to purchasers of the securities offered by
this prospectus. This summary is based on current law, is for general
information only and is not tax advice. Your tax treatment will vary depending
upon the terms of the specific securities that you acquire, as well as your
particular situation. This discussion does not attempt to address any aspects of
federal income taxation relevant to your ownership of the securities offered by
this
29
prospectus. Instead, the material federal income tax considerations relevant
to your ownership of the securities offered by this prospectus may be provided
in the applicable prospectus supplement relating thereto.
The information in this section is based on:
o the Internal Revenue Code;
o current, temporary and proposed Treasury regulations promulgated under
the Internal Revenue Code;
o the legislative history of the Internal Revenue Code;
o current administrative interpretations and practices of the Internal
Revenue Service; and
o court decisions
in each case, as of the date of this prospectus. In addition, the
administrative interpretations and practices of the Internal Revenue Service
include its practices and policies as expressed in private letter rulings
which are not binding on the Internal Revenue Service, except with respect to
the particular taxpayers who requested and received these rulings. Future
legislation, Treasury regulations, administrative interpretations and
practices and/or court decisions may adversely affect the tax considerations
contained in this discussion. Any change could apply retroactively to
transactions preceding the date of the change. Except as described below, we
have not requested, and do not plan to request, any rulings from the Internal
Revenue Service concerning our tax treatment, and the statements in this
prospectus are not binding on the Internal Revenue Service or any court. Thus,
we can provide no assurance that the tax considerations contained in this
discussion will not be challenged by the Internal Revenue Service or if
challenged, will not be sustained by a court.
You are advised to consult the applicable prospectus supplement, as well as
your own tax advisor, regarding the tax consequences to you of the acquisition,
ownership and sale of the securities offered by this prospectus, including the
federal, state, local, foreign and other tax consequences; our election to be
taxed as a REIT for federal income purposes; and potential changes in the tax
laws.
Taxation of the Company as a REIT
General. We elected to be taxed as a REIT under Sections 856 through 860 of
the Code, commencing with our taxable year beginning January 1, 1992. We believe
we have been organized and have operated in a manner which allows us to qualify
for taxation as a REIT under the Internal Revenue Code commencing with our
taxable year beginning January 1, 1992. We intend to continue to operate in this
manner, but there is no assurance that we have operated or will continue to
operate in a manner so as to qualify or remain qualified as a REIT.
The sections of the Internal Revenue Code and the corresponding Treasury
regulations that relate to the qualification and operation of a REIT are highly
technical and complex. This summary is qualified in its entirety by the
applicable Internal Revenue Code provisions, rules and regulations promulgated
thereunder, and administrative and judicial interpretations thereof.
As a condition to the closing of each offering of the securities offered by
this prospectus, other than offerings of medium term notes and as otherwise
specified in the applicable prospectus supplement, our tax counsel will render
an opinion to the underwriters of that offering to the effect that, commencing
with our taxable year which began January 1, 1992, we have been organized in
conformity with the requirements for qualification as a REIT, and our proposed
method of operation will enable us to continue to meet the requirements for
qualification and taxation as a REIT under the Internal Revenue Code. It must be
emphasized that this opinion will be based on various assumptions and
representations to be made by us as to factual matters, including
representations to be made in a factual certificate to be provided by one of our
officers. Our tax counsel will have no obligation to update its opinion
subsequent to its date. In addition, this opinion will be based upon our factual
representations set forth in this prospectus and set forth in the applicable
prospectus supplement. Moreover, our qualification and taxation as a REIT
depends upon our ability to meet, through actual annual operating results, asset
diversification, distribution levels and diversity of stock ownership, the
various qualification tests imposed under the Internal Revenue Code discussed
below, the results of which have not been and will not be reviewed by our tax
counsel. Accordingly, no assurance
30
can be given that our actual results of operation of any particular taxable
year will satisfy those requirements. Further, the anticipated income tax
treatment described in this prospectus may be changed, perhaps retroactively,
by legislative, administrative or judicial action at any time.
If we qualify for taxation as a REIT, we generally will not be required to
pay federal corporate income taxes on our net income that is currently
distributed to stockholders. This treatment substantially eliminates the "double
taxation" that generally results from investment in a regular corporation.
Double taxation means taxation once at the corporate level when income is earned
and once again at the stockholder level when this income is distributed. We will
be required to pay federal income tax, however, as follows:
o We will be required to pay tax at regular corporate rates on any
undistributed real estate investment trust taxable income, including
undistributed net capital gains.
o We may be required to pay the "alternative minimum tax" on our items of
tax preference.
o If we have (1) net income from the sale or other disposition of
foreclosure property which is held primarily for sale to customers in the
ordinary course of business or (2) other non-qualifying income from
foreclosure property, we will be required to pay tax at the highest
corporate rates on this income. Foreclosure property is generally defined
as property acquired by foreclosure or after a default on a loan secured
by the property or a lease of the property.
o We will be required to pay a 100% tax on any net income from prohibited
transactions. Prohibited transactions are, in general, sales or other
dispositions of property, other than foreclosure property, held primarily
for sale to customers in the ordinary course of business.
o If we fail to satisfy the 75% gross income test or the 95% gross income
test, as described below, but have otherwise maintained our qualification
as a REIT, we will be required to pay a 100% tax on an amount equal to
(1) the gross income attributable to the greater of (a) the amount by
which 75% of our gross income exceeds the amount qualifying under the 75%
gross income test described below and (b) the amount by which 90% of our
gross income exceeds the amount qualifying under the 95% gross income
test described below, multiplied by (2) a fraction intended to reflect
our profitability.
o If we fail to distribute during each calendar year at least the sum of
(1) 85% of our real estate investment trust ordinary income for such
taxable year, (2) 95% of our real estate investment trust capital gain
net income for such year, and (3) any undistributed taxable income from
prior periods, we will be required to pay a 4% excise tax on the excess
of that required distribution over the amounts actually distributed.
o If we acquire any asset from a corporation which is or has been a C
corporation in a transaction in which the basis of the asset in our hands
is determined by reference to the basis of the asset in the hands of the
C corporation, and we subsequently recognize gain on the disposition of
the asset during the ten-year period beginning on the date we acquired
the asset, then we will be required to pay tax at the highest regular
corporate tax rate on this gain to the extent of the excess of (a) the
fair market value of the asset over (b) our adjusted basis in the asset,
in each case determined as of the date we acquired the asset. A C
corporation is generally defined as a corporation required to pay full
corporate-level tax. In addition, if we recognize gain on the disposition
of any asset during the 10-year period beginning on the first day of the
first taxable year for which we qualified as a REIT and we held the asset
on the first day of this period, then we will be required to pay tax at
the highest regular corporate tax rate on this gain to the extent of the
excess of (a) the fair market value of the asset over (b) our adjusted
basis in the asset, in each case determined as of the first day of the
first taxable year for which we qualified as a REIT. The rules described
in this paragraph with respect to the recognition of gain assume that we
have made and will make a timely election under the relevant Treasury
regulations with respect to assets acquired from a C corporation that
have a carryover basis and assets that we owned on the first day of the
first taxable year for which we qualified as a REIT. We have timely filed
the election provided by the relevant Treasury regulations and we intend
to timely file all other similar elections.
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Requirements for Qualification. The Internal Revenue Code defines a REIT as a
corporation, trust or association:
(1) that is managed by one or more trustees or directors,
(2) that issues transferable shares or transferable certificates to
evidence beneficial ownership,
(3) that would be taxable as a domestic corporation, but for Sections
856 through 860 of the Internal Revenue Code,
(4) that is not a financial institution or an insurance company within
the meaning of the Internal Revenue Code,
(5) that is beneficially owned by 100 or more persons,
(6) not more than 50% in value of the outstanding stock of which is
owned, directly or constructively, by five or fewer individuals,
including specified entities, during the last half of each taxable
year, and
(7) that meets other tests, described below, regarding the nature of its
income, assets and the amount of its distribution.
The Internal Revenue Code provides that conditions (1) to (4) must be met
during the entire taxable year and that condition (5) must be met during at
least 335 days of a taxable year of 12 months, or during a proportionate part of
a taxable year of less than 12 months. Conditions (5) and (6) do not apply until
after the first taxable year for which an election is made to be taxed as a real
estate investment trust. For purposes of condition (6), pension funds and other
specified tax-exempt entities are generally treated as individuals, except that
a "look-through" exception applies to pension funds.
We have satisfied condition (5) and believe that we have issued sufficient
shares to allow us to satisfy condition (6). In addition, our charter provides,
and the articles supplementary for any series of preferred stock will provide,
for restrictions regarding ownership and transfer of our stock, which
restrictions are intended to assist us in continuing to satisfy the share
ownership requirements described in (5) and (6) above. The ownership and
transfer restrictions pertaining generally to our common stock and preferred
stock are described in "Description of Common Stock--Restrictions on Ownership
and Transfer" and "Description of Preferred Stock--Restrictions on Ownership and
Transfer" or, to the extent those restrictions differ from those described in
this prospectus, those restrictions will be described in the applicable
prospectus supplement. There can be no assurance, however, that those transfer
restrictions will in all cases prevent a violation of the stock ownership
provisions described in (5) and (6) above. If we fail to satisfy these share
ownership requirements, except as provided in the next sentence, our status as a
REIT will terminate. If, however, we comply with the rules contained in the
applicable Treasury regulations requiring us to attempt to ascertain the actual
ownership of our shares, and we do not know, and would not have known through
the exercise of reasonable diligence, that we failed to meet the requirement set
forth in condition (6) above, we will be treated as having met this requirement.
In addition, a corporation may not elect to become a REIT unless its taxable
year is the calendar year. We have a calendar year.
Ownership of Qualified REIT Subsidiaries and Interests in Partnerships. We
own and operate a number of properties through subsidiaries. Internal Revenue
Code Section 856(i) provides that a corporation which is a "qualified REIT
subsidiary" shall not be treated as a separate corporation, and all assets,
liabilities, and items of income, deduction, and credit of a "qualified REIT
subsidiary" shall be treated as assets, liabilities and items of the REIT. Thus,
in applying the requirements described herein, our "qualified REIT subsidiaries"
will be ignored, and all assets, liabilities and items of income, deduction, and
credit of those subsidiaries will be treated as our assets, liabilities and
items. We have received a ruling from the IRS to the effect that all of the
subsidiaries that were held by us prior to January 1, 1992, the effective date
of our election to be taxed as a REIT, will be "qualified REIT subsidiaries"
upon the effective date of our REIT election. Moreover, with respect to each
subsidiary of ours formed subsequent to January 1, 1992 and prior to January 1,
1998, we have owned 100% of the stock of that subsidiary at all times during the
period that subsidiary has been in existence. For tax years beginning on or
after January 1, 1998, any corporation wholly owned by a REIT is permitted to be
treated as a "qualified REIT subsidiary" regardless of whether that
32
subsidiary has always been owned by the REIT. Therefore, all of our
subsidiaries are "qualified REIT subsidiaries" within the meaning of the
Internal Revenue Code.
Treasury Regulations provide that if we are a partner in a partnership, we
will be deemed to own our proportionate share of the assets of the partnership.
Also, we will be deemed to be entitled to the income of the partnership
attributable to our proportionate share of the income of the partnership. The
character of the assets and gross income of the partnership will retain the same
character in our hands for purposes of Section 856 of the Internal Revenue Code,
including satisfying the gross income tests and the asset tests described below.
The treatment described above also applies with respect to the ownership of
interests in limited liability companies that are treated as partnerships. Thus,
our proportionate share of the assets, liabilities and items of income of the
partnerships and limited liability companies that are treated as partnerships in
which we are a partner or a member, respectively, will be treated as our assets,
liabilities and items of income for purposes of applying the requirements
described in this prospectus.
Income Tests. We must satisfy two gross income requirements annually to
maintain our qualification as a REIT:
o First, each taxable year we must derive directly or indirectly at least
75% of our gross income, excluding gross income from prohibited
transactions, from (a) investments relating to real property or mortgages
on real property, including rents from real property and, in some
circumstances, interest or (b) some type of temporary investments.
o Second, each taxable year we must derive at least 95% of our gross
income, excluding gross income from prohibited transactions, from (a) the
real property investments described above, (b) dividends, interest and
gain from the sale or disposition of stock or securities or (c) from any
combination of the foregoing.
For these purposes, the term "interest" generally does not include any
amount received or accrued, directly or indirectly, if the determination of that
amount depends in whole or in part on the income or profits of any person.
However, an amount received or accrued generally will not be excluded from the
term "interest" solely by reason of being based on a fixed percentage or
percentages of receipts or sales.
Rents we receive will qualify as "rents from real property" in satisfying
the gross income requirements for a REIT described above only if the following
conditions are met:
o First, the amount of rent must not be based in whole or in part on the
income or profits of any person. However, an amount received or accrued
generally will not be excluded from the term "rents from real property"
solely by reason of being based on a fixed percentage or percentages of
receipts or sales.
o Second, we, or an actual or constructive owner of 10% or more of our
stock, do not actually or constructively own 10% or more of the interests
in the tenant.
o Third, rent attributable to personal property, leased in connection with
a lease of real property, is not greater than 15% of the total rent
received under the lease. If this condition is not met, then the portion
of the rent attributable to personal property will not qualify as "rents
from real property."
o Finally, we generally must not operate or manage our property or furnish
or render services to our tenants, subject to a 1% de minimis exception,
other than through an independent contractor from whom the real estate
investment trust derives no revenue. We may, however, directly perform
services that are "usually or customarily rendered" in connection with
the rental of space for occupancy only and are not otherwise considered
"rendered to the occupant" of the property. In addition, we may employ a
taxable REIT subsidiary which may be wholly or partially owned by us to
provide both customary and noncustomary services to our tenants without
causing the rent we receive from those tenants to fail to qualify as
"rents from real property."
We have received a ruling from the Internal Revenue Service providing that
the performance of the types of services provided by us will not cause the rents
received with respect to those leases to fail to qualify as "rents from real
property." In addition, we generally do not intend to receive rent which fails
to
33
satisfy any of the above conditions. Notwithstanding the foregoing, we may
have taken and may continue to take some of the actions set forth above to the
extent those actions will not, based on the advice of our tax counsel,
jeopardize our status as a REIT.
If we fail to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, we may nevertheless qualify as a REIT if we are entitled to
relief under the Internal Revenue Code. Generally, we may avail ourselves of the
relief provisions if:
o our failure to meet these tests was due to reasonable cause and not due
to willful neglect,
o we attach a schedule of the sources of our income to our Federal income
tax return, and
o any incorrect information on the schedule was not due to fraud with
intent to evade tax.
It is not possible, however, to state whether in all circumstances we would be
entitled to the benefit of these relief provisions. As discussed above under
"-General," even if these relief provisions apply, a tax would be imposed with
respect to our non-qualifying income.
Prohibited Transaction Income. Any gain that we realize on the sale of any
property held as inventory or other property held primarily for sale to
customers in the ordinary course of business will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. That prohibited
transaction income may also have an adverse effect upon our ability to satisfy
the income tests for qualification as a REIT. Under existing law, whether
property is held as inventory or primarily for sale to customers in the ordinary
course of business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. We hold our properties
for investment with a view to long-term appreciation, we are engaged in the
business of acquiring, developing, owning and operating our properties and we
make such occasional sales of the properties as are consistent with our
investment objectives. There can be no assurance, however, that the Internal
Revenue Service might not contend that one or more of those sales is subject to
the 100% penalty tax.
Asset Tests. At the close of each quarter of our taxable year, we also must
satisfy the following tests relating to the nature and diversification of our
assets.
o First, at least 75% of the value of our total assets must be represented
by real estate assets, cash, cash items and government securities. For
purposes of this test, real estate assets include stock or debt
instruments that are purchased with the proceeds of a stock offering or a
long-term public debt offering with a term of at least five year, but
only for the one-year period beginning on the date we receive these
proceeds.
o Second, not more than 25% of our total assets may be represented by
securities other than those includible in the 75% asset test.
o Third, for taxable years ending on or prior to December 31, 2000, of the
investments included in the 25% asset class, the value of any one
issuer's securities owned by us may not exceed 5% of the value of our
total assets and we may not own more than 10% of any one issuer's
outstanding voting securities.
o Finally, for taxable years beginning after December 31, 2000, (a) not
more than 20% of the value of our total assets may be represented by
securities of one or more taxable REIT subsidiaries and (b) except for
the securities of a taxable REIT subsidiary and securities included in
the 75% asset test, (i) not more than 5% of the value of our assets may
be represented by securities of any one issuer, (ii) we may not own more
than 10% of any one issuer's outstanding voting securities and (iii) we
may not own more than 10% of the value of any one issuer's securities.
For purposes of the 10% value test, securities do not include straight
debt that we own if (a) the issuer is an individual, (b) neither we nor
any of our taxable REIT subsidiaries owns any security of the issuer
other than straight debt or (iii) the issuer is a partnership, and we own
at least 20% of a profits interest in the partnership. Straight debt is
any written unconditional promise to pay on demand or on a specified date
a fixed amount of money if the interest rate and interest payment dates
are not contingent on profits, the borrower's discretion or similar
factors and the debt is not convertible, directly or indirectly, into
stock.
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We currently have numerous direct and indirect wholly-owned subsidiaries.
As set forth above, the ownership of more than 10% of the voting securities of
any one issuer by a REIT is prohibited unless such subsidiary is a taxable REIT
subsidiary. However, if our subsidiaries are "qualified REIT subsidiaries" as
defined in the Internal Revenue Code, those subsidiaries will not be treated as
separate corporations for federal income tax purposes. Thus, our ownership of
stock of a "qualified REIT subsidiary" will not cause us to fail the asset
tests.
Prior to January 1, 2001, we owned 100% of the nonvoting preferred stock of
Kimco Realty Services, Inc. and did not own any of the voting securities of
Kimco Realty Services, Inc. We refer to Kimco Realty Services, Inc. as the
Service Company. Effective January 1, 2001, we made a joint election with the
Service Company to treat the Service Company as a taxable REIT subsidiary. In
addition, effective January 1, 2001, we acquired 100% of the voting stock of the
Service Company and currently own 100% of the stock of the Service Company. We
believe, and will represent to our counsel for purposes of its opinion, that (i)
the value of the securities of the Service Company held by us did not exceed at
the close of any quarter during a taxable year that ended on or prior to
December 31, 2000 5% of the total value of our assets and (ii) the value of the
securities of all our taxable REIT subsidiaries does not and will not exceed
more than 20% of the value of our total assets at the close of each quarter
during a taxable year that begins after December 31, 2000. Our tax counsel, in
rendering its opinion as to our qualification as a REIT, will be relying on our
representations to that effect with respect to the value of those securities and
assets. No independent appraisals will be obtained to support this conclusion.
There can be no assurance that the Internal Revenue Service will not contend
that the value of the securities of the Service Company held by us exceeds the
applicable value limitation.
After initially meeting the asset tests at the close of any quarter, we
will not lose our status as a REIT for failure to satisfy the asset tests at the
end of a later quarter solely by reason of changes in asset values. If the
failure to satisfy the asset tests results from an acquisition of securities or
other property during a quarter, the failure can be cured by the disposition of
sufficient nonqualifying assets within 30 days after the close of the quarter.
We intend to maintain adequate records of the value of our assets to ensure
compliance with the asset tests and to take such other actions within 30 days
after the close of any quarter as may be required to cure any noncompliance. If
we fail to cure noncompliance with the asset tests within that time period, we
would cease to qualify as a REIT.
Taxable REIT Subsidiary. As discussed above, for taxable years beginning
after December 31, 2000, a REIT may own more than 10% of the voting securities
of an issuer or 10% or more of the value of the securities of an issuer if the
issuer is a taxable REIT subsidiary of the REIT. A corporation qualifies as a
taxable REIT subsidiary of a REIT if the corporation jointly elects with the
REIT to be treated as a taxable REIT subsidiary of the REIT. Dividends from a
taxable REIT subsidiary will be nonqualifying income for purposes of the 75%,
but not the 95% gross income test. Other than certain activities relating to
lodging and health care facilities, a taxable REIT subsidiary may generally
engage in any business, including, the provision of customary or noncustomary
services to tenants of its parent REIT.
Sections of the Internal Revenue Code which apply to tax years beginning
after December 31, 2000 generally intended to insure that transactions between a
REIT and its taxable REIT subsidiary occur at arm's length and on commercially
reasonable terms, include a provision that prevents a taxable REIT subsidiary
from deducting interest on direct or indirect indebtedness to its parent REIT
if, under specified series of tests, the taxable REIT subsidiary is considered
to have an excessive interest expense level and debt to equity ratio. In some
case, these sections of the Internal Revenue Code impose a 100% tax on a REIT if
its rental, service and/or other agreements with its taxable REIT subsidiaries
are not on arm's length terms.
As a result of the modifications to the sections of the Internal Revenue
Code which are described above and which are effective for taxable years
beginning after December 31, 2000, we modified our ownership of the Service
Company. As described above, effective January 1, 2001, we made a joint election
with the Service Company to treat the Service Company as a taxable REIT
subsidiary. In addition, effective January 1, 2001, we contributed the note that
was issued to us from the Service Company to the capital of the Service Company
and acquired 100% of the voting stock of the Service Company. Thus, we currently
own 100% of the stock of the Service Company and there is no debt outstanding
between the Service Company and us.
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Annual Distribution Requirements. To maintain our qualification as a REIT,
we are required to distribute dividends, other than capital gain dividends, to
our stockholders in an amount at least equal to the sum of:
o 90% of our REIT taxable income, and
o 90% of the our after tax net income, if any, from foreclosure property;
minus
o the excess of the sum of specified items of non-cash income items over 5%
of our REIT taxable income.
Our REIT taxable income is computed without regard to the dividends paid
deduction and our net capital gain. In addition, for purposes of this test,
non-cash income items includes income attributable to leveled stepped rents,
original issue discount or purchase money discount debt, or a like-kind
exchange that is later determined to be taxable.
We must pay these distributions in the taxable year to which they relate,
or in the following taxable year if declared before we timely file our tax
return for that year and if paid on or before the first regular dividend payment
after that declaration. The amount distributed must not be preferential-i.e.,
each holder of shares of common stock and each holder of shares of each class of
preferred stock must receive the same distribution per share. To the extent that
we do not distribute all of our net capital gain or distribute at least 90%, but
less than 100%, of our REIT taxable income, as adjusted, we will be subject to
tax thereon at regular ordinary and capital gain corporate tax rates. We believe
we have made, and intend to continue to make, timely distributions sufficient to
satisfy these annual distribution requirements.
We expect that our REIT taxable income will be less than our cash flow
because of depreciation and other non-cash charges included in computing our
REIT taxable income. Accordingly, we anticipate that we will generally have
sufficient cash or liquid assets to enable us to satisfy our distribution
requirement. However, it is possible that, from time to time, we may not have
sufficient cash or other liquid assets to meet the distribution requirement due
to timing differences between the actual receipt of income and actual payment of
deductible expenses and the inclusion of that income and deduction of those
expenses in arriving at our taxable income. In the event that those timing
differences occur, in order to meet the distribution requirement, we may find it
necessary to arrange for short-term, or possibly long-term, borrowings or to pay
dividends in the form of taxable stock dividends.
We may be able to rectify a failure to meet the distribution requirement
for a year by paying "deficiency dividends" to stockholders in a later year,
which may be included in our deduction for dividends paid for the earlier year.
Thus, we may be able to avoid being taxed on amounts distributed as deficiency
dividends. We will be required, however, to pay interest based upon the amount
of any deduction claimed for deficiency dividends and would be subject to any
applicable penalty provisions.
In addition, we will be required to pay a 4% excise tax on the excess of
the required distribution over the amounts actually distributed if we fail to
distribute during each calendar year, or in the case of distributions with
declaration and record dates falling the last three months of the calendar year,
by the end of January immediately following that year, at least the sum of 85%
of our ordinary income for that year, 95% of our capital gain net income for the
year, plus, in each case, any undistributed ordinary income or capital gain net
income, as the case may be, from prior periods. Any ordinary income or capital
gain net income on which this excise tax is imposed for any year is treated as
an amount distributed that year for purposes of calculating the tax.
Failure to Qualify
If we fail to qualify for taxation as a REIT in any taxable year, and the
relief provisions do not apply, we will be subject to tax, including any
applicable alternative minimum tax, on our taxable income at regular corporate
rates. That failure to qualify for taxation as a REIT could have an adverse
effect on the market value and marketability of the securities offered by this
prospectus. Distributions to stockholders in any year in which we fail to
qualify will not be deductible by us nor will they be required to be made. As a
result, our failure to qualify as a REIT would substantially reduce the cash
available for distribution by us to our
36
stockholders. In that event, to the extent of current and accumulated earnings
and profits, all distributions to stockholders will be taxable as ordinary
income and, subject to specified limitations in the Internal Revenue Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, we will also be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether
in all circumstances we would be entitled to that statutory relief.
Other Tax Matters
Some of our investments are through partnerships which may involve special
tax risks. These risks include possible challenge by the IRS of (a) allocations
of income and expense items, which could affect the computation of our income
and (b) the status of the partnerships as partnerships, as opposed to
associations taxable as corporations, for income tax purposes. Treasury
Regulations that are effective as of January 1, 1997 provide that a domestic
partnership is generally taxed as a partnership unless it elects to be taxed as
an association taxable as a corporation. None of the partnerships in which we
are a partner has made or intends to make that election. These Treasury
Regulations provide that a partnership's claimed classification will be
respected for periods prior January 1, 1997 date if the entity had a reasonable
basis for its claimed classification, and that partnership had not been notified
in writing on or before May 8, 1996 that the classification of that entity was
under examination. If any of the partnerships were treated as an association for
a prior period, and (i) if our ownership in any of those partnerships exceeded
10% of the partnership's voting interest or (ii) the value of that interest
exceeded 5% of the value of our assets, we would cease to qualify as a REIT for
that period and possibly future periods. Moreover, the deemed change in
classification of that partnership from an association to a partnership
effective as of January 1, 1997 would be a taxable event. We believe that each
of the partnerships has been properly treated for tax purposes as a partnership,
and not as an association taxable as a corporation. However, no assurance can be
given that the Internal Revenue Service may not successfully challenge the
status of any of the partnerships.
We may be subject to state or local taxation in various state or local
jurisdictions, including those in which we transact business. Our state or local
tax treatment may not conform to the federal income tax consequences described
above. Consequently, prospective investors should consult their own tax advisors
regarding the effect of state and local tax laws on an investment in us.
PLAN OF DISTRIBUTION
We may sell the securities offered by this prospectus to one or more
underwriters for public offering and sale by them or may sell the securities
offered by this prospectus to investors directly or through agents. Any
underwriter or agent involved in the offer and sale of the securities offered by
this prospectus will be named in the applicable prospectus supplement.
Underwriters may offer and sell the securities offered by this prospectus
at a fixed price or prices, which may be changed, at prices related to the
prevailing market prices at the time of sale or at negotiated prices. We also
may, from time to time, authorize underwriters acting as our agents to offer and
sell the securities offered by this prospectus upon the terms and conditions as
are set forth in the applicable prospectus supplement. In connection with the
sale of securities offered by this prospectus, underwriters may be deemed to
have received compensation from us in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of securities
offered by this prospectus for whom they may act as agent. Underwriters may sell
the securities offered by this prospectus to or through dealers, and those
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by us to underwriters or agents in
connection with the offering of the securities offered by this prospectus, and
any discounts, concessions or commissions allowed by underwriters to
participating dealers, will be set forth in the applicable prospectus
supplement. Underwriters, dealers and agents participating in the distribution
of the securities offered by this prospectus may be deemed to be underwriters,
and any discounts and commissions received by them and any profit realized by
them on
37
resale of the securities offered by this prospectus may be deemed to be
underwriting discounts and commissions, under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered
into with us, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
If so indicated in the applicable prospectus supplement, we will authorize
dealers acting as our agents to solicit offers by certain institutions to
purchase the securities offered by this prospectus from us at the public
offering price set forth in that prospectus supplement pursuant to delayed
delivery contracts providing for payment and delivery on the date or dates
stated in that prospectus supplement.
Each delayed delivery contract will be for an amount not less than, and the
aggregate principal amount of the securities offered by this prospectus sold
pursuant to delayed delivery contracts shall be not less nor more than, the
respective amounts stated in the applicable prospectus supplement. Institutions
with whom delayed delivery contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions but
will in all cases be subject to our approval. Delayed delivery contracts will
not be subject to any conditions except:
(1) the purchase by an institution of the securities offered by this
prospectus covered by its delayed delivery contracts shall not at
the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which that institution is
subject, and
(2) if the securities offered by this prospectus are being sold to
underwriters, we shall have sold to those underwriters the total
principal amount of the securities offered by this prospectus less
the principal amount thereof covered by delayed delivery contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with, and perform services for us and our subsidiaries in
the ordinary course of business.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the Kimco Realty Corporation and Subsidiaries' Annual Report on Form 10-K for
the year ended December 31, 2000, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be passed
upon for us by Latham & Watkins, New York, New York. Latham & Watkins and any
counsel for any underwriters, dealers or agents will rely on Ballard Spahr
Andrews & Ingersoll, Baltimore, Maryland, as to certain matters of Maryland law.
Certain members of Latham & Watkins and their families own beneficial interests
in less than 1% of our common stock.
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$35,000,000
[Kimco Realty Corporation LOGO]
4.961% Senior Notes due 2007
---------------------
Prospectus Supplement
---------------------
Banc of America Securities LLC
JPMorgan
Fleet Securities, Inc.
HSBC
Wachovia Securities
November 15, 2002
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