SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED NOVEMBER 12, 2002
PROSPECTUS SUPPLEMENT
(to Prospectus, dated May 1, 2001)
Kimco Realty Corporation
Title of Securities: % Notes due
Rank: Senior
Coupon: % per year
Secured: None. The Notes are unsecured.
Interest Payment Dates: and , commencing
Principal Amount: U.S.$
Maturity Date:
Make Whole Redemption Option: No
Withholding Redemption Option: No
Form: Book-entry form only through the facilities of The Depository Trust
Company
Moody's Rating:
S&P Rating:
Placement Agents' Commission: % of principal amount
Neither the Securities and Exchange Commission nor any state securities
commission or other regulatory body 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 these 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 and J.P. Morgan Securities Inc.
as our placement agents. Each of Banc of America Securities LLC and J.P. Morgan
Securities Inc. is a statutory underwriter within the meaning of the Securities
Act of 1933.
We have authorized the placement agents to deliver a copy of this
prospectus supplement and the accompanying prospectus relating to the notes
offered hereby to purchasers of the trust's pass-through certificates. This
prospectus supplement and the accompanying prospectus relate only to us and the
notes and do not relate to the trust or the trust's pass-through certificates.
You should only rely on this prospectus supplement and the accompanying
prospectus for a description of us 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
or joint venturers or in any similar relationship 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, the pass-through
certificates, the securities of any other issuer that may be deposited into 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 or
specifically incorporated by reference in this prospectus supplement and the
accompanying prospectus and to our obligations under the notes and 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 information in this prospectus supplement is not complete and may be
changed. This prospectus supplement and the accompanying prospectus are not an
offer to sell these securities and are not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is prohibited.
Banc of America Securities LLC JPMorgan
The date of this prospectus supplement is .
RATIOS 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.
S-2
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 ...................................... 18
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 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.
2
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;
3
(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,
4
(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 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
6
(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 from selling or otherwise disposing for value our respective
properties in the ordinary course of business (Section 1007).
7
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 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).
10
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).
11
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 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:
14
(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
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.
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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.
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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
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.
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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 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
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.
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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
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(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 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.
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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 assets upon
liquidation, dissolution or winding up, shall not be deemed to
materially and adversely affect those rights, preferences,
privileges or voting powers.
23
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 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:
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(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.
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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.
26
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 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.
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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 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.
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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 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.
29
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 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.
30
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.
31
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 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.
32
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 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.
33
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.
34
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.
35
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 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.
36
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 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.
37
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.
38
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[LOGO]
Kimco
Realty
Corporation
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% Notes due
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Prospectus Supplement
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Banc of America Securities LLC
JPMorgan
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