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Filed pursuant to Rule 424(b)(3)
Registration File No. 333-52667
KIMCO REALTY CORPORATION
AND
THE PRICE REIT, INC.
JOINT PROXY STATEMENT
KIMCO REALTY CORPORATION
PROSPECTUS
This Joint Proxy Statement and Prospectus (the 'Joint Proxy Statement/
Prospectus') is being furnished to the holders of shares of common stock, par
value $.01 per share (the 'Kimco Common Stock'), of Kimco Realty Corporation, a
Maryland corporation ('Kimco'), in connection with the solicitation of proxies
by the Board of Directors of Kimco for use at the 1998 Annual Meeting of
Stockholders of Kimco to be held at 410 Park Avenue, 4th Floor Boardroom, New
York, New York 10022, at 10:00 a.m., New York City time on June 19, 1998, and at
any adjournments or postponements thereof (the 'Kimco Annual Meeting'). This
Joint Proxy Statement/Prospectus also constitutes the Prospectus of Kimco with
respect to the issuance of shares of Kimco Common Stock and depositary shares
(the 'Kimco Class D Depositary Shares' and, together with the Kimco Common
Stock, the 'Merger Consideration'), each of which represents a one-tenth
fractional interest in a share of a new issue of 7.5% Class D Cumulative
Convertible Preferred Stock, liquidation preference $250.00 per share (the
'Kimco Class D Preferred Stock'), of Kimco, to be issued to holders of common
stock, par value $.01 per share (the 'Price REIT Common Stock'), of The Price
REIT, Inc., a Maryland corporation ('Price REIT'), in connection with the Merger
(as defined herein). Pursuant to the Merger, each share of Price REIT Common
Stock will be converted (on a tax-free basis) into the right to receive a
combination of Kimco Common Stock and Kimco Class D Depositary Shares intended
to provide the holders of Price REIT Common Stock with not less than $45.00 of
value, based on the Kimco Average Price (as defined herein) and the liquidation
preference of the Kimco Class D Depositary Shares, in exchange for each share of
Price REIT Common Stock converted in the Merger. No assurance, however, can be
given that the Merger Consideration will actually have such intended value. If
the actual price of the Kimco Common Stock on the closing date of the Merger is
less than the Kimco Average Price, then the Merger Consideration may have, on
such date, a value less than $45.00. See 'Description of Kimco Securities.'
Assuming the Kimco Average Price is $35.00, Price REIT stockholders will receive
(i) one share of Kimco Common Stock and (ii) 0.40 Kimco Class D Depositary
Shares. The Merger Consideration is subject to adjustment depending on the Kimco
Average Price. Examples of the Merger Consideration, assuming various Kimco
Average Prices, are set forth herein. See 'Summary--Conversion of Securities'
and 'The Merger Agreement--Pre-Closing Adjustments.' The dividend rate on the
Kimco Class D Depositary Shares will be the greater of (i) 7.5% per annum or
(ii) the dividend on the shares of Kimco Common Stock into which a Kimco Class D
Depositary Share is convertible plus $0.0275 quarterly.
The Kimco Class D Depositary Shares will be convertible into Kimco Common
Stock at a conversion price of $40.25 per share, subject to certain adjustments,
at any time by the holder and may be redeemed by Kimco at the conversion price
in shares of Kimco Common Stock at any time after the third anniversary of the
Merger if, for any 20 trading days during a rolling period of 30 consecutive
trading days, the Kimco Common Stock closing price exceeds $48.30, subject to
adjustment. Such adjustments are described in this Joint Proxy
Statement/Prospectus. See 'Description of Kimco Securities--Kimco Class D
Depositary Shares.'
Since the determination of the Merger Consideration will not occur until
after the date of this Joint Proxy Statement/Prospectus, holders of Price REIT
Common Stock will be able to obtain the exact Merger Consideration that they may
receive in exchange for their Price REIT Common Stock by calling (888) 212-7101
on or after June 11, 1998.
Kimco Common Stock is traded on the New York Stock Exchange, Inc. (the
'NYSE') under the symbol 'KIM.' On May 12, 1998, the closing price for Kimco
Common Stock as reported by the NYSE Composite Tape was $39.00 per share. At the
Kimco Annual Meeting, Kimco stockholders will be asked to (i) approve the
issuance of the Merger Consideration in connection with the Merger (the 'Kimco
Share Proposal'), (ii) elect six Directors to serve for a term of one year and
until their successors are duly elected and qualified, (iii) consider and vote
on a proposal to approve and adopt the 1998 Equity Participation Plan of Kimco
Realty Corporation (the 'Kimco 1998 Equity Participation Plan'), (iv) to
consider and vote upon the postponement or adjournment of the Kimco Annual
Meeting in order to solicit additional votes for the Kimco Share Proposal (the
'Kimco Adjournment Proposal') if the Chairman of the Kimco Annual Meeting
determines that there are not sufficient votes to approve the Kimco Share
Proposal and (v) consider and vote upon any other matters that may properly come
before the Kimco Annual Meeting or any adjournments or postponements thereof.
This Joint Proxy Statement/Prospectus is also being furnished to the holders
of Price REIT Common Stock in connection with the solicitation of proxies by the
Board of Directors of Price REIT for use at a Special Meeting of Stockholders of
Price REIT to be held at the Town and Country Resort Hotel, Regency Hall, 500
Hotel Circle North, San Diego, California on June 19, 1998, at 10:00 a.m.,
Pacific time, and at any adjournments or postponements thereof (the 'Price REIT
Special Meeting').
This Joint Proxy Statement/Prospectus relates to the proposed merger (the
'Merger') of Price REIT with and into REIT Sub, Inc., a Maryland corporation and
a wholly owned subsidiary of Kimco ('Merger Sub'), pursuant to the Agreement and
Plan of Merger, dated as of January 13, 1998, as amended as of March 5, 1998 and
May 14, 1998 (the 'Merger Agreement'), among Kimco, Merger Sub and Price REIT.
Upon completion of the Merger, the separate corporate existence of Price REIT
will cease and Merger Sub will be the surviving corporation in the Merger
(sometimes hereinafter referred to as the 'Surviving Corporation'). Consummation
of the Merger is subject to various conditions (which must be satisfied or
waived), including approval of the Merger by the holders of a majority of the
outstanding shares of Price REIT Common Stock at the Price REIT Special Meeting,
and approval of the Kimco Share Proposal by the holders of a majority of the
votes cast at the Kimco Annual Meeting; provided that the total vote cast at the
Kimco Annual Meeting represents over 50% in interest of all Kimco Common Stock
entitled to vote on the Kimco Share Proposal.
Holders of Price REIT Common Stock will also be asked to consider and vote
upon the postponement or adjournment of the Price REIT Special Meeting in order
to solicit additional votes for the Merger (the 'Price REIT Adjournment
Proposal') if the Chairman of the Price REIT Special Meeting determines that
there are not sufficient votes to approve the Merger. No other business may be
transacted at the Price REIT Special Meeting or at any adjournments or
postponements thereof.
SEE 'RISK FACTORS' BEGINNING ON PAGE 22 FOR A DISCUSSION OF THE MATERIAL
RISKS THAT SHOULD BE CONSIDERED IN EVALUATING THE MERGER DESCRIBED HEREIN AND
THE SECURITIES OFFERED HEREBY.
All information contained in this Joint Proxy Statement/Prospectus with
respect to Kimco and Merger Sub has been provided by Kimco. All information
contained in this Joint Proxy Statement/Prospectus with respect to Price REIT
has been provided by Price REIT.
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to stockholders of Kimco and Price REIT on or about May
18, 1998. A stockholder of Kimco or Price REIT who has given a proxy may revoke
it at any time prior to its exercise.
------------------------
THE SECURITIES ISSUABLE PURSUANT TO THIS JOINT PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/ PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is May 15, 1998.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY KIMCO,
MERGER SUB OR PRICE REIT. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY OF THE
SECURITIES OFFERED BY THIS JOINT PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION
OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS
NOR THE ISSUANCE OR SALE OF ANY SECURITIES HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH OR INCORPORATED HEREIN SINCE THE DATE HEREOF.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Summary and under the captions 'Risk Factors,'
'The Merger--Kimco's Reasons for the Merger; Positive and Negative Factors
Considered,' '--Recommendation of the Board of Directors of Kimco,' '--Opinion
of Kimco's Financial Advisor,' '--Price REIT's Reasons for the Merger; Positive
and Negative Factors Considered,' '--Recommendation of the Board of Directors of
Price REIT,' '--Opinion of Price REIT's Financial Advisor' and elsewhere in this
Joint Proxy Statement/Prospectus constitute 'forward-looking statements' within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
Kimco, Price REIT and the Surviving Corporation or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions, which
will, among other things, affect demand for rental space, availability and
creditworthiness of prospective tenants, rental rates and the availability of
financing; adverse changes in the real estate markets including, among other
things, competition with other companies; risks of real estate development and
acquisition; governmental actions and initiatives; environmental/safety
requirements; and other changes and factors referenced in this Joint Proxy
Statement/Prospectus. See 'Risk Factors.'
AVAILABLE INFORMATION
Kimco and Price REIT are each subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the 'Exchange
Act'), and in accordance therewith file reports, proxy statements and other
information with the Securities and Exchange Commission (the 'Commission'). Such
reports, proxy statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's Midwest Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and Northeast Regional Office, 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such materials can be
obtained at prescribed rates from the Public Reference Section of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition,
the Commission maintains a Website that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of such Website is http://www.sec.gov. Material
filed by Kimco and Price REIT can also be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005, on which the
Kimco Common Stock and Price REIT Common Stock are listed.
Kimco has filed with the Commission a Registration Statement on Form S-4
(the 'Registration Statement') (of which this Joint Proxy Statement/Prospectus
is a part) under the Securities Act of 1933, as amended (the 'Securities Act'),
with respect to the securities offered hereby. This Joint Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted
ii
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as permitted by the rules and regulations of the Commission. Statements
contained in this Joint Proxy Statement/Prospectus as to the contents of any
agreement or other document are not necessarily complete, and in each instance
reference is made to the copy of such agreement or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference and the exhibits and schedules thereto. For
further information regarding Kimco and the securities offered hereby, reference
is hereby made to the Registration Statement and such exhibits and schedules
which may be obtained from the Commission at its principal office in Washington,
D.C. upon payment of the fees prescribed by the Commission.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed by Kimco and Price REIT with the
Commission are hereby incorporated by reference into this Joint Proxy
Statement/Prospectus:
Kimco (Commission File No. 1-10899):
1. Annual Report on Form 10-K for the year ended December 31, 1997 filed
March 26, 1998, as amended on Form 10-K/A filed April 29, 1998; and
2. Current Reports on Form 8-K filed January 21, 1998, January 22, 1998,
January 30, 1998, March 12, 1998, April 15, 1998 and May 6, 1998 and the
amendment to the Current Report on Form 8-K/A filed April 21, 1998.
Price REIT (Commission File No. 1-13432):
1. Annual Report on Form 10-K for the year ended December 31, 1997 filed
March 27, 1998; and
2. Current Reports on Form 8-K filed January 21, 1998 and March 11, 1998,
the amendments to Current Reports on Form 8-K/A filed May 9, 1997, July
24, 1997, November 7, 1997 and December 29, 1997 and the amendment to
Current Report on Form 8-K/A filed May 5, 1998.
In addition, all reports and other documents filed by each of Kimco and
Price REIT pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date hereof and prior to the Kimco Annual Meeting and the
Price REIT Special Meeting shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such reports and
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/Prospectus to the extent that a
statement contained herein, or in any other subsequently filed document that
also is incorporated or deemed to be incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Joint Proxy Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE HEREIN) ARE AVAILABLE, WITHOUT CHARGE, UPON WRITTEN OR
ORAL REQUEST FROM ANY PERSON TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS
DELIVERED, INCLUDING ANY BENEFICIAL OWNER, TO, IN THE CASE OF DOCUMENTS RELATING
TO KIMCO, KIMCO REALTY CORPORATION, 3333 NEW HYDE PARK ROAD, NEW HYDE PARK, NEW
YORK, 11042-0020, ATTENTION BRUCE M. KAUDERER (TELEPHONE NO. (516) 869-9000),
OR, IN THE CASE OF DOCUMENTS RELATING TO PRICE REIT, THE PRICE REIT, INC., 7979
IVANHOE AVENUE, SUITE 524, LA JOLLA, CALIFORNIA 92037, ATTENTION GEORGE M. JEZEK
(TELEPHONE NO. (619) 551-2320). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JUNE 12, 1998. COPIES OF DOCUMENTS SO
REQUESTED WILL BE SENT BY FIRST CLASS MAIL, POSTAGE PAID, WITHIN ONE BUSINESS
DAY OF THE RECEIPT OF SUCH REQUEST.
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TABLE OF CONTENTS
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SUMMARY.................................................................................................. 1
The Companies.......................................................................................... 1
Risk Factors........................................................................................... 3
Interests of Certain Persons in the Merger; Possible Conflicts of Interest............................. 5
The Meetings........................................................................................... 6
The Kimco Annual Meeting............................................................................... 6
The Merger............................................................................................. 8
The Merger Consideration............................................................................... 14
Federal Income Tax Consequences........................................................................ 17
Comparative Rights of Stockholders..................................................................... 17
Material Contracts Between Price REIT and Kimco........................................................ 17
Summary Historical and Unaudited Pro Forma Combined Financial Data..................................... 18
RISK FACTORS............................................................................................. 22
Additional Leverage of Combined Entity................................................................. 22
Relationship of Kimco Common Stock to Outstanding Preferred Stock...................................... 22
Decrease in Distributions Per Share to Holders of Price REIT Common Stock.............................. 22
Possible Conflicts of Interest; Benefits to Certain Price REIT Directors and Officers.................. 22
Real Estate Investment Risks........................................................................... 22
Venture Stores, Inc.................................................................................... 23
Risks Relating To Realization Of Benefits.............................................................. 23
Dependence On Key Personnel............................................................................ 23
Possible Adverse Effects On Stock Price Arising From Shares Available For Future Sale.................. 23
Impact Of Interest Rates And Other Factors On Stock Price.............................................. 23
Potential Stock Price Fluctuations..................................................................... 23
No Appraisal Rights.................................................................................... 23
Adverse Consequences of Failure to Qualify as a REIT................................................... 24
Possible Environmental Liabilities..................................................................... 24
Ownership Limits....................................................................................... 24
Control and Influence by Significant Stockholder....................................................... 25
COMPARATIVE PER SHARE DATA............................................................................... 26
COMPARATIVE MARKET DATA.................................................................................. 27
KIMCO ANNUAL MEETING..................................................................................... 28
Purpose of the Kimco Annual Meeting.................................................................... 28
Record Date; Voting Rights; Proxies.................................................................... 28
Solicitation of Kimco Proxies.......................................................................... 29
Quorum................................................................................................. 29
Required Vote.......................................................................................... 29
PRICE REIT SPECIAL MEETING............................................................................... 30
Purpose of the Price REIT Special Meeting.............................................................. 30
Record Date; Voting Rights; Proxies.................................................................... 30
Solicitation of Price REIT Proxies..................................................................... 30
Quorum................................................................................................. 31
Required Vote.......................................................................................... 31
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TABLE OF CONTENTS--(CONTINUED)
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THE COMPANIES............................................................................................ 32
Kimco.................................................................................................. 32
Price REIT............................................................................................. 33
Merger Sub............................................................................................. 34
Combined Entity........................................................................................ 34
RECENT DEVELOPMENTS...................................................................................... 35
Kimco.................................................................................................. 35
Price REIT............................................................................................. 36
Impact of Year 2000.................................................................................... 37
THE MERGER............................................................................................... 38
General................................................................................................ 38
Background of the Merger............................................................................... 38
Kimco's Reasons for the Merger; Positive and Negative Factors Considered............................... 41
Recommendation of the Board of Directors of Kimco...................................................... 42
Opinion of Kimco's Financial Advisor................................................................... 43
Price REIT's Reasons for the Merger; Positive and Negative Factors Considered.......................... 48
Recommendation of the Board of Directors of Price REIT................................................. 49
Opinion of Price REIT's Financial Advisor.............................................................. 50
Interests of Certain Persons in the Merger; Possible Conflicts of Interest............................. 55
Accounting Treatment................................................................................... 56
Regulatory Approval.................................................................................... 56
Resale Restrictions.................................................................................... 57
No Appraisal Rights.................................................................................... 57
THE MERGER AGREEMENT..................................................................................... 57
Terms of the Merger.................................................................................... 57
Conversion of Price REIT Common Stock.................................................................. 58
Pre-Closing Adjustments................................................................................ 58
Conversion of Price REIT Preferred Stock............................................................... 59
Kimco Special Second Quarter Dividend.................................................................. 59
Price REIT Special Second Quarter Dividend............................................................. 60
Exchange of Price REIT Stock Certificates.............................................................. 60
Representations and Warranties......................................................................... 61
Certain Covenants...................................................................................... 61
No Solicitation of Transactions........................................................................ 63
Stock Exchange Listing................................................................................. 63
Indemnification........................................................................................ 64
Insurance.............................................................................................. 64
Governance............................................................................................. 64
Employees.............................................................................................. 64
Conditions to the Merger............................................................................... 64
Termination............................................................................................ 65
Break-Up Fees and Expenses............................................................................. 66
Amendment and Waiver................................................................................... 67
FEDERAL INCOME TAX CONSEQUENCES.......................................................................... 68
Federal Income Tax Consequences........................................................................ 68
Taxation of Kimco Stockholders......................................................................... 72
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET............................................................ 77
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TABLE OF CONTENTS--(CONTINUED)
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PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME...................................................... 80
MATERIAL CONTRACTS BETWEEN KIMCO AND PRICE REIT.......................................................... 83
COMPARISON OF STOCKHOLDER RIGHTS......................................................................... 83
Maryland Control Share Statute......................................................................... 83
Amendment of Charter................................................................................... 83
Notice of Adjournment.................................................................................. 83
Special Meetings....................................................................................... 84
Voting Rights.......................................................................................... 84
Directors.............................................................................................. 84
Dividends and Other Distributions...................................................................... 84
Transactions with Directors, Officers and Affiliates................................................... 85
Ownership Limits....................................................................................... 85
Investment Policy...................................................................................... 85
DESCRIPTION OF KIMCO SECURITIES.......................................................................... 86
General................................................................................................ 86
Kimco Common Stock..................................................................................... 86
Kimco Class D Depositary Shares........................................................................ 87
Kimco Class D Preferred Stock.......................................................................... 89
Kimco Class E Preferred Stock.......................................................................... 92
Kimco Outstanding Depositary Shares.................................................................... 93
Kimco Outstanding Preferred Stock...................................................................... 93
Ownership Limit; Restrictions on Transfer.............................................................. 95
Certain Provisions of the Kimco Charter and Kimco Bylaws and of Maryland Law........................... 98
Maryland Business Combination Law...................................................................... 98
Control Share Acquisitions............................................................................. 98
Kimco Dividend Reinvestment Plan....................................................................... 98
ELECTION OF KIMCO DIRECTORS.............................................................................. 99
Information Regarding Nominees......................................................................... 99
Committees of the Board of Directors................................................................... 100
Compensation of Directors.............................................................................. 100
Vote Required.......................................................................................... 101
Security Ownership of Certain Beneficial Owners and Management......................................... 101
Executive Compensation and Transactions with Management and Others..................................... 103
Kimco Option Grants in Last Fiscal Year................................................................ 104
Kimco Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values................ 104
Compensation Committee Interlocks and Insider Participation............................................ 105
Report of the Executive Compensation Committee of Kimco on Executive Compensation...................... 106
Performance Graph...................................................................................... 109
Stock Option Plan...................................................................................... 110
401(k) Plan............................................................................................ 110
Certain Relationships and Related Transactions......................................................... 110
Independent Public Accountants......................................................................... 111
Section 16(a) Beneficial Ownership Reporting Compliance................................................ 112
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PROPOSAL TO APPROVE KIMCO 1998 EQUITY PARTICIPATION PLAN................................................. 112
Kimco 1998 Equity Participation Plan................................................................... 112
Administration......................................................................................... 112
Eligibility............................................................................................ 113
Awards under the Kimco 1998 Equity Participation Plan.................................................. 113
Securities Laws and Federal Income Taxes............................................................... 113
Vote Required.......................................................................................... 114
ADJOURNMENT PROPOSALS.................................................................................... 114
Kimco Adjournment Proposal............................................................................. 114
Price REIT Adjournment Proposal........................................................................ 115
OTHER MATTERS............................................................................................ 115
LEGAL MATTERS............................................................................................ 115
EXPERTS.................................................................................................. 115
KIMCO STOCKHOLDER PROPOSALS.............................................................................. 115
LOCATION OF DEFINED TERMS................................................................................ 116
ANNEX A--MERGER AGREEMENT................................................................................ A-1
Original Agreement
First Amendment
Second Amendment
ANNEX B--OPINION OF JEFFERIES & COMPANY, INC............................................................. B-1
ANNEX C--OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED................................... C-1
ANNEX D--KIMCO 1998 EQUITY PARTICIPATION PLAN............................................................ D-1
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SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Joint Proxy Statement/Prospectus and the Annexes hereto. This summary
does not contain a complete statement of all material information relating to
the Agreement and Plan of Merger dated as of January 13, 1998, as amended as of
March 5, 1998 and May 14, 1998 (the 'Merger Agreement'), among Kimco Realty
Corporation ('Kimco'), REIT Sub, Inc., a wholly owned subsidiary of Kimco
('Merger Sub'), and The Price REIT, Inc. ('Price REIT'), and the proposed merger
of Price REIT with and into Merger Sub (the 'Merger'), and is subject to, and is
qualified in its entirety by, the more detailed information and financial
statements contained or incorporated by reference in this Joint Proxy
Statement/Prospectus. Stockholders of Kimco and Price REIT should read carefully
this Joint Proxy Statement/Prospectus in its entirety. See 'Location of Defined
Terms' beginning on page 116 for the location of the definitions of certain
terms used in this Joint Proxy Statement/Prospectus.
THE COMPANIES
Kimco
Kimco began operations through a predecessor in 1966, and today Kimco
believes, based upon its review of industry publications and other publicly
available sources, that it is one of the nation's largest publicly-traded owners
and operators of neighborhood and community shopping centers (measured by gross
leasable area ('GLA')). Kimco's neighborhood and community shopping center
properties are designed to attract local area customers and typically are
anchored by a supermarket, discount department store or drugstore tenant
offering day-to-day necessities rather than high-priced luxury items. As of
February 1, 1998, Kimco's portfolio was comprised of 339 property interests,
including 273 neighborhood and community shopping center properties, two
regional malls, 62 retail store leases, a leased parcel of undeveloped land and
a distribution center comprising, in total, approximately 41.7 million square
feet of GLA, located in 37 states.
As of February 1, 1998, Kimco's portfolio included approximately 35.8
million square feet of GLA in 273 neighborhood and community shopping center
properties and two regional malls, located in 30 states ('Total Shopping Center
GLA'). Neighborhood and community shopping centers comprise the primary focus of
Kimco's current portfolio, representing approximately 97% of Kimco's Total
Shopping Center GLA. As of February 1, 1998, approximately 90% of Kimco's
neighborhood and community shopping center space was leased, and the average
annualized base rent per leased square foot of the neighborhood and community
shopping center portfolio was $6.37.
In addition to its neighborhood and community shopping center portfolio, as
of February 1, 1998, Kimco had interests in retail store leases totaling
approximately 5.6 million square feet of anchor store premises in 62
neighborhood and community shopping centers located in 24 states. As of February
1, 1998, approximately 98% of these premises had been sublet to retailers that
lease the stores pursuant to net lease agreements providing for average
annualized base rental payments to Kimco of $3.73 per square foot. Kimco's
average annualized base rental obligation pursuant to its retail store leases
with the fee owners of such subleased premises is approximately $2.74 per square
foot. The average remaining primary term of Kimco's retail store leases (and
similarly the remaining primary terms of its sublease agreements with the
tenants currently leasing such space) is approximately 4.8 years, excluding
options to renew such leases for terms which generally range from 5-25 years.
Kimco's investment objective has been to increase cash flow, current income
and consequently the value of its existing portfolio of properties, and to seek
continued growth through (i) the strategic retenanting, renovation and expansion
of its existing centers, and (ii) the selective acquisition of established
income-producing real estate properties, and properties requiring significant
re-tenanting and redevelopment, primarily in neighborhood and community shopping
centers in geographic regions in which Kimco presently operates. Kimco intends
to consider investments in other real estate sectors and in geographic markets
where it does not presently operate should suitable opportunities arise.
In view of current market conditions, Kimco has deemed it advisable to
explore the creation of a new entity that would invest in real estate properties
with characteristics that, in its view, would be more appropriately financed
through greater leverage than Kimco traditionally uses. Such characteristics
would include, but not be limited to, high grade properties with strong, stable
cash flow from credit-worthy retailers. Assuming consummation of the Merger, Mr.
Joseph K. Kornwasser, the current President and Chief Executive Officer of Price
REIT, has entered into an employment agreement with Kimco that provides that he
will be the Chairman of
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the Spin-Off REIT (as defined herein). In order to establish the Spin-Off REIT,
it is contemplated that certain of the properties of the Combined Entity that
have such characteristics would be contributed to the new entity, and a majority
interest in such entity would be spun-off to stockholders of the Combined Entity
with Kimco retaining the balance of the ownership interest. However, no specific
properties have been identified as likely to be contributed to the Spin-Off
REIT. Assuming consummation of the Merger, Kimco anticipates that the Spin-Off
REIT will be created in 1998; however, no assurance regarding such timing can be
given. As exploration of the Spin-Off REIT is in the preliminary stages, no
determinations have yet been made by Kimco regarding the ultimate structure,
size or scope of the Spin-Off REIT, and no assurances can be given that such
transaction will occur.
Kimco is self-administered and self-managed through present management,
which has owned and managed neighborhood and community shopping centers for more
than 30 years. The executive officers are engaged in the day-to-day management
and operation of real estate exclusively with Kimco, with nearly all operating
functions, including leasing, legal, construction, data processing, maintenance,
finance and accounting administered by Kimco.
Kimco's executive offices are located at 3333 New Hyde Park Road, New Hyde
Park, New York 11042-0020 and its telephone number is (516) 869-9000. Unless the
context indicates otherwise, the term 'Kimco' as used herein is intended to
include subsidiaries of Kimco.
Price REIT
Price REIT is a self-administered and self-managed equity real estate
investment trust (a 'REIT') that is primarily focused on the acquisition,
development, management and redevelopment of destination retail shopping center
properties known as 'power centers.' As of December 31, 1997, Price REIT owned
or had interests in 37 properties, consisting of 33 power and community centers,
one stand-alone retail warehouse, one project under development and two
undeveloped land parcels, located in 15 states containing approximately 7.3
million square feet of GLA with approximately 540 tenants. The overall occupancy
rate of the power and community centers was approximately 98.4% with an average
base rent per leased square foot of $10.13 at December 31, 1997.
Price REIT's executive offices are located at 7979 Ivanhoe Avenue, Suite
524, La Jolla, California 92037 and its telephone number is (619) 551-2320.
Price REIT's administrative offices are located at 145 South Fairfax Avenue,
Fourth Floor, Los Angeles, California 90036 and its telephone number is (213)
937-8200. Unless the context indicates otherwise, the term 'Price REIT' as used
herein is intended to include subsidiaries of Price REIT.
Merger Sub
Merger Sub is a Maryland corporation, recently organized as a wholly owned
subsidiary of Kimco solely for the purpose of effecting the Merger. It has no
material assets and has not engaged in any activities except in connection with
the Merger.
Merger Sub's executive offices are located at 3333 New Hyde Park Road, New
Hyde Park, New York 11042-0020 and its telephone number is (516) 869-9000.
Combined Entity
The combined operations of Kimco and Price REIT (the 'Combined Entity') at
February 1, 1998, after giving effect to the Merger, would consist of
approximately 48.8 million square feet of GLA in 308 shopping center properties
(comprising neighborhood and community shopping centers and power centers), two
regional malls, 62 retail store leases, one stand-alone retail warehouse, one
distribution center, one project under development and three undeveloped land
parcels, located in 38 states. At February 1, 1998, after giving effect to the
Merger, it is expected that the Combined Entity would have an average annualized
base rent per leased square foot of $7.06 and an overall occupancy rate of the
neighborhood and community shopping centers, power centers and malls of
approximately 91.0%.
The broad geographic diversity of the portfolio of the Combined Entity
should reduce the potential adverse impact of fluctuations in local economies.
The integration of Price REIT's acquisition, development and management
capabilities with Kimco's construction management capabilities and related
in-house legal support system should result in the Combined Entity being a more
fully integrated real estate company than Kimco and Price REIT independently. As
a result, the management team of the Combined Entity is expected to be more
vertically integrated from a development and management perspective. The
Combined Entity may also benefit from economies of scale and operating
efficiencies resulting from the Merger, primarily in terms of the
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integration of back office facilities and regulatory compliance. In addition,
the Combined Entity is expected to have an increased market capitalization, a
stronger balance sheet, a larger portfolio and additional development
capabilities, which may provide greater liquidity, including expanded access to
the capital markets at a reduced cost, enabling it to improve its results of
operations and financial position.
RISK FACTORS
In considering whether to approve the Kimco Share Proposal or the Merger
Agreement, as the case may be, stockholders of Kimco and Price REIT should
consider, in addition to the other information in this Joint Proxy
Statement/Prospectus, the material risks discussed under 'Risk Factors.' Such
matters include:
o Additional Leverage of Combined Entity. Holders of Price REIT
Common Stock should consider that the pro forma combined outstanding
indebtedness of Kimco at December 31, 1997, giving effect to the
Merger, would be approximately $831 million, as compared to Price
REIT's indebtedness at December 31, 1997 of approximately $300
million.
o Relationship of Kimco Common Stock to Outstanding Preferred
Stock. Outstanding issues of Kimco Preference Shares (as defined
herein) will be senior to the Kimco Common Stock which will be
issued in connection with the Merger with respect to distribution
rights and liquidation preference.
o Decrease in Distributions Per Share to Holders of Price REIT Common
Stock. Assuming Kimco continues to make distributions at the same
rate as was declared for the quarter ended December 31, 1997, and
assuming the issuance of one share of Kimco Common Stock and 0.40
Kimco Class D Depositary Shares in the Merger, each holder of a
share of Price REIT Common Stock converted into Merger Consideration
in the Merger would be entitled to receive a quarterly distribution
of $0.48 for each share of Kimco Common Stock and $0.1875 for each
0.40 Kimco Class D Depositary Share (for an aggregate distribution
of $0.6675) as compared to the $0.725 per share that was declared on
each share of Price REIT Common Stock in the quarter ended December
31, 1997.
o Possible Conflicts of Interest; Benefits to Certain Price REIT
Directors and Officers. Certain officers and directors of Price
REIT have certain individual interests in the Merger that are in
addition to the interests of other holders of Price REIT Common
Stock. Those additional individual interests may result in conflicts
of interest with respect to their obligations to Price REIT in
connection with the Merger and with respect to their recommendation
to the holders of Price REIT Common Stock to vote FOR the Merger.
o Real Estate Investment Risks. Following the Merger, Kimco will
continue the businesses undertaken separately by Kimco and Price
REIT prior to the Merger of owning, operating, managing, acquiring
and developing neighborhood and community shopping centers and power
centers. The business risks to be faced by Kimco after the Merger
will be similar to those now faced separately by Kimco and Price
REIT.
o Venture Stores, Inc. Venture Stores, Inc. ('Venture'), a tenant
which provides approximately 11.2% of Kimco's annualized base rental
revenue as of February 1, 1998 (8.5% on a pro forma basis, giving
effect to the Merger), has recently filed for protection under
Chapter 11 of the United States Bankruptcy Code. Kimco has not
received notice that Venture will be delinquent in the payment of
any rents due. There can be, however, no assurance that Venture will
continue to pay rents as they become due or that the trustee in
bankruptcy will not reject the leases under which Venture is bound.
o Risks Relating to Realization of Benefits. There can be no
assurance that the anticipated benefits from the Merger will be
realized or that the integration of Kimco and Price REIT will be
successfully and timely implemented.
o Dependence on Key Personnel. Kimco, following the Merger, will
depend on the services of Messrs. Milton Cooper, Joseph K.
Kornwasser, Michael J. Flynn and Jerald Friedman. Kimco and Price
REIT believe that the loss of the services of any of these key
personnel could have an adverse effect on Kimco.
o Possible Adverse Effects on Stock Price Arising from Shares
Available for Future Sale. Substantially all of the shares of Kimco
Common Stock to be issued in the Merger to the holders of Price REIT
Common Stock and holders of options to purchase Price REIT Common
Stock (approximately 12,636,279 shares, subject to adjustment) and
those currently outstanding will be
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freely tradeable by the holders thereof upon consummation of the
Merger. Sales of a substantial number of shares of Kimco Common
Stock, or the perception that such sales could occur, could
adversely affect the prevailing market price of Kimco Common Stock
which could adversely impact Kimco's ability to raise additional
capital in the public equity market.
o Impact of Interest Rates and Other Factors on Stock Price. Any
significant increase in market interest rates from their current
levels could lead holders of Kimco Common Stock to seek higher
yields through other investments, which could adversely affect the
market price of the Kimco Common Stock.
o Potential Stock Price Fluctuations. The relative stock prices of
the Kimco Common Stock and the Price REIT Common Stock on the
Closing Date (as defined herein) may vary significantly from the
prices as of the date of execution of the Merger Agreement, the date
hereof or the date on which stockholders vote on the Merger or the
Kimco Share Proposal. In addition, there can be no assurance as to
the prices at which the Kimco Common Stock and Kimco Class D
Depositary Shares will trade after the Merger.
o No Appraisal Rights. Under the Maryland General Corporation Law
(the 'MGCL'), the holders of Price REIT Common Stock will not be
entitled to appraisal rights in connection with the Merger because
the Price REIT Common Stock is listed on the NYSE.
o Adverse Consequences of Failure to Qualify as a REIT. If Kimco
fails to qualify as a REIT, Kimco will be subject to Federal income
tax (including any applicable alternative minimum tax) on its
taxable income at corporate rates. If Price REIT failed to qualify
as a REIT prior to the consummation of the Merger, Price REIT may be
liable for Federal income taxes as a result of such failure and
Kimco and Merger Sub would succeed to this tax liability upon the
Merger.
o Possible Environmental Liabilities. Under various Federal, state
and local laws, ordinances and regulations, an owner of real estate
is liable for the costs of removal or remediation of certain
hazardous or toxic substances on or in such property. Such laws
often impose such liability without regard to whether the owner knew
of, or was responsible for, the presence of such hazardous or toxic
substances. The presence of such substances, or the failure to
properly remediate such substances, may adversely affect the owner's
ability to sell or rent such property or to borrow using such
property as collateral.
o Ownership Limits. As a REIT, not more than 50% in value of the
outstanding shares of Kimco may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Internal Revenue Code
of 1986, as amended (the 'Code')). In order to maintain its
qualification as a REIT, the Kimco Charter (as defined herein)
imposes certain limits on the ownership of Kimco capital stock, as
described below. These ownership limits, as well as the ability of
Kimco to issue other classes of common and preferred stock, may
delay, defer or prevent a change in control of Kimco and may also
(i) deter tender offers for the Kimco Common Stock, which offers may
be attractive to the stockholders, or (ii) limit the opportunity for
stockholders to receive a premium for their shares of Kimco Common
Stock that might otherwise exist if an investor were attempting to
assemble a block of shares in excess of the relevant ownership limit
or otherwise effect a change in control of Kimco. Subject to certain
exceptions specified in the Kimco Charter, no holder may own, or be
deemed to own by virtue of the constructive ownership provisions of
the Code, more than 2% (the 'Ownership Limit') in value of the
outstanding shares of Kimco Common Stock nor may any holder acquire
more than 9.8% in value or number of the outstanding shares of Kimco
Class D Preferred Stock. Moreover, because of its convertibility
into Kimco Common Stock, the ownership of Kimco Class D Preferred
Stock would be taken into account in determining compliance with the
Ownership Limit. Furthermore, as more fully set forth in the Kimco
Class D Preferred Stock Articles Supplementary (the 'Kimco Class D
Preferred Stock Articles Supplementary'), Kimco Class D Preferred
Stock is subject to an overall restriction under which no holder may
own, as a result of ownership of Kimco Class D Preferred Stock, in
the aggregate, in excess of 5.0% in value of all the outstanding
Kimco capital stock. The constructive ownership rules are complex
and may cause Kimco Common Stock owned actually or constructively by
a group of related individuals and/or entities to be deemed
constructively owned by one individual or entity. As a result, the
acquisition of less than 2% in value of Kimco Common Stock or less
than 9.8% of Kimco Class D Preferred Stock (or the acquisition of
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<PAGE>
an interest in an entity which owns Kimco Common Stock or Kimco
Class D Preferred 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 Kimco Common Stock or
9.8% of Kimco Class D Preferred Stock, and thus subject such Kimco
Common Stock or Kimco Class D Preferred Stock to the Ownership Limit
or the Preferred Stock Ownership Limit (as defined herein).
o Control and Influence by Significant Stockholder. As of May 8,
1998, Mr. Milton Cooper, Chairman and Chief Executive Officer of
Kimco, and a related private corporation in which Mr. Cooper owns a
controlling interest, beneficially owned in the aggregate
approximately 11.3% of the shares of Kimco Common Stock.
Accordingly, Mr. Cooper may continue to have substantial influence
over Kimco and on the outcome of any matters submitted to Kimco's
stockholders for approval.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; POSSIBLE CONFLICTS OF INTEREST
In considering the recommendation of the Board of Directors of Price REIT
with respect to the Merger Agreement and the transactions contemplated thereby,
stockholders should be aware that certain officers and directors of Price REIT
have individual interests in the Merger that are in addition to the interests of
other holders of Price REIT Common Stock. Those additional individual interests
may result in conflicts of interest with respect to their obligations in
connection with the Merger and with respect to their recommendation to the
holders of Price REIT Common Stock to vote FOR the Merger. Those interests
include the following: (i) certain employees and directors of Price REIT will
receive Kimco Common Stock and Kimco Class D Depositary Shares, in the same
proportion as such securities are issued as Merger Consideration to holders of
Price REIT Common Stock generally as consideration for the cancellation of their
options to purchase shares of Price REIT Common Stock; (ii) Joseph K.
Kornwasser, President and Chief Executive Officer and a Director of Price REIT,
will become a member of the Board of Directors of Kimco, Senior Executive Vice
President of Kimco and, in the event that Kimco proceeds with its contemplated
'leveraged REIT' affiliate (the 'Spin-Off REIT'), the occurrence of which is not
assured, Chairman of the Spin-Off REIT, pursuant to a three-year employment
agreement providing for an annual base salary of $425,000 per year and an annual
bonus equal to $225,000, and will be granted options to purchase 250,000 shares
of Kimco Common Stock at an exercise price based on the closing price of Kimco
Common Stock on the date of the closing of the Merger (the 'Closing Date') (and
options to acquire shares of common stock of the Spin-Off REIT, the exercise
price of which will equal the distribution value for tax purposes of the
underlying shares at the time of such distribution ('Spin-Off REIT Options'),
equal to 1.5% of the outstanding (not-fully diluted) common shares of the
Spin-Off REIT immediately following their contemplated distribution to Kimco
stockholders ('Spin-Off REIT Outstanding Stock')); (iii) Jerald Friedman, Senior
Executive Vice President and Chief Operating Officer of Price REIT, will become
Executive Vice President of Kimco pursuant to a three-year employment agreement
providing for an annual base salary of $300,000 per year and an annual bonus
equal to $150,000, and will be granted options to purchase 100,000 shares of
Kimco Common Stock at an exercise price based on the closing price of Kimco
Common Stock on the Closing Date (and Spin-Off REIT Options to acquire 0.40% of
the Spin-Off REIT Outstanding Stock); (iv) Lawrence M. Kronenberg, Executive
Vice President--Finance of Price REIT, will become a Vice President of Kimco and
Chief Financial Officer of the Spin-Off REIT, in the event of its occurrence,
pursuant to a three-year employment agreement providing for an annual base
salary of $190,000 per year and an annual bonus equal to $90,000, and will be
granted options to purchase 50,000 shares of Kimco Common Stock at an exercise
price based on the closing price of Kimco Common Stock on the Closing Date (and
Spin-Off REIT Options to acquire 0.25% of the Spin-Off REIT Outstanding Stock);
(v) George M. Jezek, Executive Vice President, Chief Financial Officer,
Treasurer and Secretary of Price REIT, will be entitled to receive a severance
payment in the amount of $199,452 under his employment agreement with Price
REIT; and (vi) directors and officers of Price REIT will be provided with
certain indemnification rights under the bylaws of the Surviving Corporation.
See 'The Merger--Interests of Certain Persons in the Merger; Possible Conflicts
of Interest' for additional information relating to such interests.
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THE MEETINGS
Time, Place and Date
The 1998 Kimco Annual Meeting will be held at 410 Park Avenue, 4th Floor
Boardroom, New York, New York 10022 on June 19, 1998 at 10:00 a.m., New York
City time.
The Price REIT Special Meeting will be held at the Town and Country Resort
Hotel, Regency Hall, 500 Hotel Circle North, San Diego, California on June 19,
1998 at 10:00 a.m., Pacific time.
Purpose of the Meetings
The Kimco Annual Meeting
At the Kimco Annual Meeting, holders of Kimco Common Stock will be asked
to:
1. Approve the Kimco Share Proposal pursuant to which Kimco will issue
Kimco Common Stock and Kimco Class D Depositary Shares, each of which
represents a one-tenth fractional interest in a share of Kimco Class D
Preferred Stock, in connection with the Merger, the terms and conditions of
which are set forth in the Merger Agreement. Pursuant to the Merger, each
share of Price REIT Common Stock will be converted (on a tax-free basis)
into the right to receive a combination of Kimco Common Stock and Kimco
Class D Depositary Shares intended to provide the holders of Price REIT
Common Stock with not less than $45.00 of value, based on the Kimco Average
Price (as defined herein) and the liquidation preference of the Kimco Class
D Depositary Shares, in exchange for each share of Price REIT Common Stock
converted in the Merger. No assurance, however, can be given that the
Merger Consideration will actually have such intended value. If the actual
price of the Kimco Common Stock on the closing date of the Merger is less
than the Kimco Average Price, then the Merger Consideration may have, on
such date, a value less than $45.00. Assuming the Kimco Average Price is
$35.00, holders of Price REIT Common Stock will receive (i) one share of
Kimco Common Stock and (ii) 0.40 Kimco Class D Depositary Shares. The
Merger Consideration is subject to adjustment depending on the Kimco
Average Price. Examples of the Merger Consideration, assuming various Kimco
Average Prices, are set forth herein. See 'Summary--Conversion of
Securities' and 'The Merger Agreement--Pre-Closing Adjustments.' The
dividend rate on the Kimco Class D Depositary Shares will be the greater of
(i) 7.5% per annum or (ii) the dividend on the shares of Kimco Common Stock
into which a Depositary Share is convertible plus $0.0275 quarterly. The
Kimco Class D Depositary Shares will be convertible into Kimco Common Stock
at a conversion price of $40.25 per share, subject to certain adjustments,
at any time by the holder and may be redeemed by Kimco at the conversion
price in shares of Kimco Common Stock at any time after the third
anniversary of the Merger if, for any 20 trading days during a rolling
period of 30 consecutive trading days, the Kimco Common Stock closing price
exceeds $48.30, subject to adjustment. Such adjustments are described in
this Joint Proxy Statement/Prospectus.
2. Elect six Directors to serve for a term of one year and until their
successors are duly elected and qualified.
3. Consider and vote on a proposal to approve and adopt the Kimco 1998
Equity Participation Plan.
4. Consider and vote upon the Kimco Adjournment Proposal if the
Chairman of the Kimco Annual Meeting determines that there are not
sufficient votes to approve the Kimco Share Proposal.
5. Consider and vote upon any other matters that may properly come
before the Kimco Annual Meeting.
THE BOARD OF DIRECTORS OF KIMCO HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE KIMCO SHARE PROPOSAL AND UNANIMOUSLY RECOMMENDS THAT KIMCO
STOCKHOLDERS VOTE FOR APPROVAL OF THE KIMCO SHARE PROPOSAL. SEE 'THE
MERGER--BACKGROUND OF THE MERGER', '--KIMCO'S REASONS FOR THE MERGER; POSITIVE
AND NEGATIVE FACTORS CONSIDERED' AND '--RECOMMENDATION OF THE BOARD OF DIRECTORS
OF KIMCO.' THE BOARD OF DIRECTORS OF KIMCO ALSO UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR ALL OF THE NOMINEES FOR THE BOARD OF DIRECTORS OF KIMCO SET FORTH IN
THIS JOINT PROXY STATEMENT/PROSPECTUS, FOR THE APPROVAL OF THE KIMCO 1998 EQUITY
PARTICIPATION PLAN AND FOR THE APPROVAL OF THE KIMCO ADJOURNMENT PROPOSAL.
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The Price REIT Special Meeting
At the Price REIT Special Meeting, holders of Price REIT Common Stock will
be asked (i) to consider and vote upon a proposal to approve the Merger, the
terms and conditions of which are set forth in the Merger Agreement, and the
consummation of the transactions contemplated thereby and (ii) to consider and
vote upon the Price REIT Adjournment Proposal if the Chairman of the Price REIT
Special Meeting determines that there are not sufficient votes to approve the
Merger.
No other business may be transacted at the Price REIT Special Meeting or at
any adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF PRICE REIT HAS UNANIMOUSLY DECLARED THE MERGER
ADVISABLE, HAS APPROVED AND ADOPTED THE MERGER AND THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF PRICE REIT COMMON STOCK VOTE TO APPROVE
THE MERGER AND VOTE TO APPROVE THE PRICE REIT ADJOURNMENT PROPOSAL. SEE 'THE
MERGER--BACKGROUND OF THE MERGER', '--PRICE REIT'S REASONS FOR THE MERGER;
POSITIVE AND NEGATIVE FACTORS CONSIDERED,' '--RECOMMENDATION OF THE BOARD OF
DIRECTORS OF PRICE REIT,' '--INTERESTS OF CERTAIN PERSONS IN THE MERGER;
POSSIBLE CONFLICTS OF INTEREST' AND 'ADJOURNMENT PROPOSALS--PRICE REIT
ADJOURNMENT PROPOSAL.'
Votes Required; Record Date
Kimco. Holders of Kimco Common Stock are entitled to one vote per share.
Each of the Kimco Share Proposal and the approval of the Kimco 1998 Equity
Participation Plan requires approval, in each case, by the affirmative vote of
the holders of a majority of the votes cast at the Kimco Annual Meeting;
provided that the total vote cast at the Kimco Annual Meeting, in each case,
represents over 50% in interest of all Kimco Common Stock entitled to vote on
such proposal. Directors are elected by vote of a plurality of the shares of
Kimco Common Stock present, in person or by proxy, and entitled to vote at the
Kimco Annual Meeting. The approval of the Kimco Adjournment Proposal requires
the affirmative vote of the holders of a majority of the shares of Kimco Common
Stock represented at the Kimco Annual Meeting, whether or not a quorum is
present. Only holders of Kimco Common Stock at the close of business on May 8,
1998 (the 'Kimco Record Date') will be entitled to notice of and to vote at the
Kimco Annual Meeting. As of the Kimco Record Date, directors and executive
officers of Kimco and their affiliates, all of whom have indicated that they
will vote for the Kimco Share Proposal, for each of the nominees for the Board
of Directors set forth in this Joint Proxy Statement/Prospectus, for the
approval of the Kimco 1998 Equity Participation Plan and for the Kimco
Adjournment Proposal, were beneficial owners of 8,109,835 shares of Kimco Common
Stock, representing approximately 19.0% of the outstanding Kimco Common Stock.
Accordingly, the affirmative votes by the holders of these shares may affect the
outcome of the vote on each of these matters. See 'The Kimco Annual Meeting.'
Price REIT. The Merger will require approval by the affirmative vote of
the holders of a majority of the outstanding shares of Price REIT Common Stock
entitled to vote thereon. The approval of the Price REIT Adjournment Proposal
requires the affirmative vote of the holders of a majority of the shares of
Price REIT Common Stock represented at the Price REIT Special Meeting, whether
or not a quorum is present. Holders of Price REIT Common Stock are entitled to
one vote per share. Only holders of Price REIT Common Stock at the close of
business on May 8, 1998 (the 'Price REIT Record Date') will be entitled to
notice of and to vote at the Price REIT Special Meeting. As of the Price REIT
Record Date, directors and executive officers of Price REIT and their
affiliates, all of whom have indicated that they will vote for approval of the
Merger, were beneficial owners of 878,395 shares of Price REIT Common Stock
(including 15,000 shares of Price REIT Common Stock with respect to which
beneficial ownership is disclaimed), representing approximately 7.1% of the
outstanding shares of Price REIT Common Stock. Accordingly, the affirmative
votes by the holders of these shares may affect the outcome of the vote. See
'Price REIT Special Meeting.'
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THE MERGER
The discussion in this Joint Proxy Statement/Prospectus of the Merger and
the description of the Merger's principal terms are subject to and qualified in
their entirety by reference to the Merger Agreement, a copy of which is attached
to this Joint Proxy Statement/Prospectus as Annex A and which is incorporated by
reference herein.
Kimco's Reasons for the Merger; Positive and Negative Factors Considered
The factors that the Kimco Board of Directors considered in reaching its
determination to approve the Merger Agreement and to recommend approval of the
Kimco Share Proposal to the Kimco stockholders are that: (i) the Merger provides
Kimco with the opportunity to expand significantly the size and geographic
diversity of its portfolio in a single transaction, which may reduce the
potential adverse impact on the overall portfolio of fluctuations in local
economies and will result in a combined company that will be national in scale;
(ii) the Merger will result in the addition to the Kimco portfolio of properties
viewed by the Kimco Board of Directors as being very well maintained, with
strong credit quality tenants that will provide additional diversity to the
Kimco tenant base; (iii) management's belief, based in part on its financial
advisor's analyses, that the Merger would be accretive, on a going-forward
basis, to Kimco's funds from operations per share; (iv) the integration of Price
REIT's acquisition, development and management capabilities will add
complementary expertise to Kimco's construction management capabilities and its
related in-house legal support system; (v) the Merger will add to senior
management's strength by adding complementary expertise that will facilitate
Kimco's expansion into real estate development activities and increased activity
in geographic areas in which Kimco does not currently have a presence; (vi)
management's belief that the increased market capitalization, stronger balance
sheet, the increase in the size of Kimco's portfolio and the addition of
development capabilities may provide Kimco with greater liquidity, including
expanded access to the capital markets at a reduced cost, enabling it to improve
its results of operations and financial position; (vii) the opinion of Kimco's
financial advisor that the proposed consideration to be paid by Kimco pursuant
to the Merger was fair to the public common stockholders of Kimco from a
financial point of view; (viii) the Merger is intended to qualify as a tax-free
reorganization for Federal income tax purposes; (ix) the ability to effectuate
the Merger through the issuance of equity securities; (x) the opportunities for
economies of scale and operating efficiencies that should result from the
Merger; and (xi) the belief of the Board of Directors of Kimco that the overall
terms of the Merger Agreement are fair to Kimco.
The Kimco Board of Directors also considered certain potentially negative
factors that could arise from the proposed Merger. The material potentially
negative factors considered were as follows: (i) the significant costs involved
in connection with consummating the Merger and the substantial management time
and effort required to effectuate the Merger and integrate the businesses of
Kimco and Price REIT; (ii) the possible adverse effects on the market for Kimco
Common Stock and upon Kimco's ability to raise capital in both the public and
private markets that might result if the Merger were not consummated; (iii)
that, if the Merger does not occur, under certain circumstances Kimco could have
to pay either $6.25 million or $12.5 million as liquidated damages to Price
REIT, plus, in certain instances, expenses; (iv) that, to the extent that the
Kimco Average Price is less than $33.75, the number of shares of Kimco Common
Stock to be issued will be increased to arrive at a Notional Value (as defined
herein) of $45.00, thereby reducing the calculation of Kimco's funds from
operations ('FFO') per share (a supplemental measure considered by most industry
analysts and equity REITs, including Kimco, to appropriately reflect the
performance of an equity REIT, calculated in accordance with the National
Association of Real Estate Investment Trusts ('NAREIT') FFO definition); and (v)
the risk that the anticipated benefits of the Merger might not be fully
realized. In the view of the Kimco Board of Directors, the negative factors were
not sufficient, either individually or collectively, to outweigh the advantages
of the Merger.
Recommendation of the Board of Directors of Kimco
At meetings held on January 13, 1998, March 5, 1998 and May 14, 1998 the
Board of Directors of Kimco unanimously approved the Original Merger Agreement
(as defined herein), the First Amendment (as defined herein) and the Second
Amendment (as defined herein), respectively, and unanimously recommends a vote
FOR approval of the Kimco Share Proposal by the stockholders of Kimco. The Board
of Directors of Kimco believes that the terms of the Merger are fair to and in
the best interests of Kimco and its stockholders. For a discussion of the
factors considered by the Board of Directors in reaching its decision, see 'The
Merger--Kimco's Reasons
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for the Merger; Positive and Negative Factors Considered' and '--Recommendation
of the Board of Directors of Kimco.'
Price REIT's Reasons for the Merger; Positive and Negative Factors Considered
The reasons that Price REIT's Board of Directors approved the Merger
Agreement and is recommending its approval are: (i) the Merger affords holders
of Price REIT Common Stock a significant participation in a substantially larger
and more diverse property portfolio which will also include neighborhood and
community centers as well as power centers; (ii) the Merger will result in
geographic diversification of the operations of Kimco and Price REIT such that
the combined company will be a truly national company; (iii) as a result of the
Merger, Kimco will have a more diverse tenant base, which will include major
retailers and discount stores; (iv) management's belief that the increased
market capitalization of Kimco following the Merger, its resulting stronger
balance sheet, the increase in the size of Kimco's portfolio and the addition of
development capabilities may provide Kimco following the Merger with greater
access to the capital markets and a lower cost of funds, thereby facilitating
further growth of what will be one of the largest non-mall retail REITs in the
United States; (v) Kimco's management, construction and in-house legal
capabilities will complement Price REIT's acquisition, development and
management capabilities; (vi) the Merger will combine the strong senior
management of Kimco and Price REIT at all levels, adding complementary expertise
to Kimco that will permit the expansion into multiple shopping center product
types, and will permit Kimco to focus on opportunities for existing property
development, redevelopment and expansion; (vii) the value of the Merger
Consideration represents a premium over the historic trading prices for Price
REIT Common Stock; (viii) the opinion of Price REIT's financial advisor that the
proposed consideration to be paid by Kimco pursuant to the Merger was fair to
the holders of Price REIT Common Stock from a financial point of view; (ix) the
Merger is intended to qualify as a tax-free reorganization for Federal income
tax purposes; (x) the belief of the Price REIT Board of Directors that the
overall terms of the Merger Agreement are fair to the holders of Price REIT
Common Stock; (xi) the issuance of equity securities of Kimco in the Merger,
including the Kimco Class D Depositary Shares, with what management believes are
attractive terms, will allow holders of Price REIT Common Stock to participate
in the future growth of Kimco and in the Spin-Off REIT, in the event of its
occurrence; (xii) that, if the Kimco Average Price exceeds $35.00, the Notional
Value (as defined herein) will exceed $45.00; and (xiii) the opportunities for
economies of scale and operating efficiencies that are expected to result from
the Merger.
The Price REIT Board of Directors also considered certain potentially
negative factors that could arise from the proposed Merger. The material
potentially negative factors considered were as follows: (i) the significant
costs involved in connection with consummating the Merger and the substantial
management time and effort required to effectuate the Merger and integrate the
businesses of Kimco and Price REIT; (ii) the possible adverse effects on the
market for Price REIT Common Stock and upon Price REIT's ability to raise
capital in both the public and private markets that might result if the Merger
were not consummated; (iii) that, if the Merger does not occur, under certain
circumstances Price REIT could have to pay a fee of $12.5 million to Kimco,
plus, in certain instances, expenses of up to $2 million; (iv) expectations that
the distributions payable with respect to the Merger Consideration will be less
than the distributions currently payable with respect to each share of Price
REIT Common Stock; and (v) the risk that the anticipated benefits of the Merger
might not be fully realized. In the view of the Price REIT Board of Directors,
the negative factors were not sufficient, either individually or collectively,
to outweigh the advantages of the Merger.
Recommendation of the Board of Directors of Price REIT
At a meeting held on January 13, 1998, the Board of Directors of Price REIT
declared the Merger to be advisable and, by unanimous vote of those Directors
present at the meeting, approved and adopted the Merger and the Original Merger
Agreement. At a meeting held on March 5, 1998, the Board of Directors of Price
REIT, by unanimous vote, approved and adopted the First Amendment. By unanimous
written consent, the Board of Directors of Price REIT, on May 13, 1998, approved
and adopted the Second Amendment. The Board of Directors of Price REIT believes
that the terms of the Merger are fair to and in the best interests of Price REIT
and its stockholders and unanimously recommends a vote FOR approval of the
Merger by the holders of Price REIT Common Stock. For a discussion of the
factors considered by the Board of Directors in reaching its decision, see 'The
Merger--Price REIT's Reasons for the Merger; Positive and Negative Factors
Considered' and '--Recommendation of the Board of Directors of Price REIT.'
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Conversion of Price REIT Common Stock
Upon completion of the Merger, each share of Price REIT Common Stock issued
and outstanding immediately prior to the Effective Time (as defined herein) will
be converted into the right to receive:
(A) in the event that the sum of (i) the Kimco Average Price (as
hereinafter defined) and (ii) $10.00 (the sum being referred to herein as
the 'Notional Value') is less than or equal to $45.00: one share of Kimco
Common Stock, plus a number of Kimco Class D Depositary Shares equal to a
fraction, the numerator of which is $45.00 less the Kimco Average Price and
the denominator of which is $25.00; provided, however, that if the Kimco
Average Price is less than $33.75, each share of Price REIT Common Stock
will be converted into the right to receive 0.45 Kimco Class D Depositary
Shares plus a number of shares of Kimco Common Stock equal to a fraction,
the numerator of which is $33.75 and the denominator of which is the Kimco
Average Price; and
(B) if the Notional Value is greater than $45.00: one share of Kimco
Common Stock plus a number of Kimco Class D Depositary Shares equal to 0.40
minus a fraction, the numerator of which is the Notional Value less $45.00
and the denominator of which is $50.00; provided, however, that in no event
shall the aggregate fractional number of Kimco Class D Depositary Shares
issued in respect of one share of Price REIT Common Stock be less than
0.36. However, holders of Price REIT Common Stock will never receive less
than $9.00 in liquidation preference of Kimco Class D Depositary Shares.
Thus, as a result of the Merger, holders of Price REIT Common Stock will
obtain the benefit of 50% of the increase in value of Kimco Common Stock as
reflected in the Kimco Average Price between $35.00 and $37.00 and 100% of
any increase above $37.00. As used herein, the 'Kimco Average Price' shall
be the average of the daily high and low sales prices of the Kimco Common
Stock on the NYSE as reported in The Wall Street Journal, or, if not
reported thereby, by another authoritative source, during the fifteen (15)
randomly selected trading days within the thirty (30) consecutive trading
days ending on and including the seventh trading day immediately preceding
the date of the Kimco Annual Meeting. The random selection of trading days
will be made under the joint supervision of the financial advisors retained
by Kimco and Price REIT in connection with the transactions contemplated by
the Merger Agreement.
Set out below, for illustrative purposes only, are seven examples of the
Merger Consideration to be received by the holders of Price REIT Common Stock
upon consummation of the Merger, depending on the Kimco Average Price:
1. If the Kimco Average Price is equal to $39.00
If the Kimco Average Price is equal to $39.00, holders of Price REIT
Common Stock will receive one share of Kimco Common Stock valued at the
Kimco Average Price of $39.00 and $9.00 in liquidation preference of Kimco
Class D Depositary Shares, or 0.36 Kimco Class D Depositary Shares, per
share of Price REIT Common Stock for a Notional Value of $48.00 (i.e.,
$39.00 +$9.00 = $48.00).
2. If the Kimco Average Price is equal to $37.00
If the Kimco Average Price is $37.00, holders of Price REIT Common
Stock will receive one share of Kimco Common Stock valued at the Kimco
Average Price of $37.00 and $9.00 in liquidation preference of Kimco Class
D Depositary Shares, or 0.36 Kimco Class D Depositary Shares, per share of
Price REIT Common Stock for a Notional Value of $46.00 (i.e., $37.00 +
$9.00 = $46.00).
3. If the Kimco Average Price is less than $37.00 but greater than
$35.00
If the Kimco Average Price is $35.50, holders of Price REIT Common
Stock will receive (i) one share of Kimco Common Stock valued at the Kimco
Average Price of $35.50 and (ii) $9.75 (i.e., $10.00--$0.25 = $9.75) in
liquidation preference of Kimco Class D Depositary Shares or 0.39 (i.e.,
$9.75/$25.00 = 0.39) Kimco Class D Depositary Shares. As a result, holders
of Price REIT Common Stock will receive a Notional Value of $45.25 (i.e.,
$35.50 + $9.75 = $45.25).
4. If the Kimco Average Price is equal to $35.00
If the Kimco Average Price is $35.00, holders of Price REIT Common
Stock will receive (i) one share of Kimco Common Stock valued at the Kimco
Average Price of $35.00 and (ii) $10.00 in liquidation preference of Kimco
Class D Depositary Shares or 0.40 (i.e., $10.00/$25.00 = 0.40) Kimco Class
D Depositary Shares. As a result, holders of Price REIT Common Stock will
receive a Notional Value of $45.00 (i.e., $35.00 + $10.00 = $45.00).
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5. If the Kimco Average Price is less than $35.00, but greater than or
equal to $33.75
If the Kimco Average Price is $33.75, holders of Price REIT Common
Stock will receive (i) one share of Kimco Common Stock valued at the Kimco
Average Price of $33.75 and (ii) $11.25 ($45.00 minimum value--$33.75 =
$11.25) in liquidation preference of Kimco Class D Depositary Shares or
0.45 (i.e., $11.25/$25.00 = 0.45) Kimco Class D Depositary Shares. As a
result, holders of Price REIT Common Stock will receive a Notional Value of
$45.00 (i.e., $33.75 + $11.25 = $45.00).
6. If the Kimco Average Price is less than $33.75, but greater than or
equal to $32.00
If the Kimco Average Price is $32.00, holders of Price REIT Common
Stock will receive (i) 1.05 ($33.75/$32.00) shares of Kimco Common Stock
valued at the Kimco Average Price of $32.00 to deliver $33.75 of Kimco
Common Stock value and (ii) $11.25 ($45.00 minimum value--$33.75 = $11.25)
in liquidation preference of Kimco Class D Depositary Shares or 0.45 (i.e.,
$11.25/$25.00 = 0.45) Kimco Class D Depositary Shares. As a result, holders
of Price REIT Common Stock will receive a Notional Value of $45.00 (i.e.,
$33.75 + $11.25 = $45.00).
7. If the Kimco Average Price is less than $32.00
If the Kimco Average Price is $31.00, holders of Price REIT Common
Stock will receive 1.09 ($33.75/$31.00) shares of Kimco Common Stock valued
at the Kimco Average Price of $31.00 to deliver $33.75 of Kimco Common
Stock Value and (iii) $11.25 ($45.00 minimum value--$33.75 = $11.25) in
liquidation preference of Kimco Class D Depositary Shares or 0.45 (i.e.,
$11.25/$25.00 = 0.45) Kimco Class D Depositary Shares. As a result, holders
of Price REIT Common Stock will receive a combined value of $45.00 (i.e.,
$33.75 + $11.25 = $45.00). Kimco, however, may elect to terminate the
Merger Agreement in the event the Kimco Average Price or the closing price
of Kimco Common Stock on the Closing Date or on either of the two
immediately preceding business days is less than $32.00. See
'--Termination.'
SINCE THE DETERMINATION OF THE MERGER CONSIDERATION WILL NOT OCCUR UNTIL
AFTER THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS, HOLDERS OF PRICE REIT
COMMON STOCK WILL BE ABLE TO OBTAIN THE EXACT MERGER CONSIDERATION THAT THEY MAY
RECEIVE IN EXCHANGE FOR THEIR PRICE REIT COMMON STOCK BY CALLING (888) 212-7101
ON OR AFTER JUNE 11, 1998.
As a result of the Merger, all shares of Price REIT Common Stock will cease
to be outstanding and will be cancelled and retired, and each holder of a
certificate representing any shares of Price REIT Common Stock (each a
'Certificate') will cease to have any rights with respect to such shares of
Price REIT Common Stock, except the right to receive, without interest, the
Merger Consideration and cash in lieu of fractional shares of Kimco Common Stock
and/or Kimco Class D Depositary Shares upon the surrender of such Certificate.
No fractional shares of Merger Consideration will be issued in connection
with the Merger. In lieu of the issuance of any fractional shares of Merger
Consideration, cash adjustments will be paid to the holders of Price REIT Common
Stock in respect of any fractional shares of Merger Consideration that would
otherwise be issuable.
Conversion of Price REIT Preferred Stock
If, prior to the merger, Price REIT has issued shares of Class A Floating
Rate Cumulative Preferred Stock, liquidation preference $1,000 per share ('Price
REIT Preferred Stock'), then upon completion of the Merger, each outstanding
share of Price REIT Preferred Stock will be converted into the right to receive
10 Class E Depositary Shares of Kimco (the 'Kimco Class E Depositary Shares'),
each of which will represent a one-tenth fractional interest in a share of a new
issue of Kimco Class E Floating Rate Cumulative Preferred Stock, liquidation
preference $1,000 per share ('Kimco Class E Preferred Stock'). For additional
information regarding the Price REIT Preferred Stock and the Kimco Class E
Preferred Stock, see 'Recent Developments--Price REIT' and 'Description of
Kimco Securities--Kimco Class E Preferred Stock.'
Opinion of Financial Advisor to Kimco
On January 13, 1998, Jefferies & Company, Inc. ('Jefferies') delivered its
oral opinion to Kimco's Board of Directors and confirmed such opinion in writing
as of the date of this Joint Proxy Statement/Prospectus, to the effect that, as
of such date, the proposed consideration to be paid by Kimco pursuant to the
Merger was fair to the public common stockholders of Kimco from a financial
point of view. A copy of the full text of the Jefferies
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Opinion (as defined herein), which sets forth the assumptions made, procedures
followed, matters considered and limits on the scope of Jefferies' review, is
attached as Annex B to this Joint Proxy Statement/Prospectus, and should be read
carefully in its entirety. See 'The Merger--Opinion of Kimco's Financial
Advisor.'
Opinion of Financial Advisor to Price REIT
On January 13, 1998, Merrill Lynch, Pierce, Fenner & Smith Incorporated
('Merrill Lynch') delivered its written opinion to Price REIT's Board of
Directors to the effect that, as of such date, and based upon the assumptions
made, matters considered and limits of review set forth in such opinion, the
Merger Consideration to be received by the holders of Price REIT Common Stock in
the Merger was fair to such stockholders from a financial point of view. A copy
of the Merrill Lynch Opinion (as defined herein), which sets forth the
assumptions made, procedures followed, matters considered and limitations on the
scope of Merrill Lynch's review, is attached as Annex C to this Joint Proxy
Statement/Prospectus, and should be read carefully in its entirety. See 'The
Merger--Opinion of Price REIT's Financial Advisor.'
Conditions to the Merger
The obligations of Kimco and Price REIT to consummate the Merger are
subject to the satisfaction or waiver of certain conditions, including, among
others, (i) the obtaining by Kimco and Price REIT of the required stockholder
approval, (ii) the absence of any material adverse change in the financial
condition, business or operations of the other party (other than any such change
that affects both parties in a substantially similar manner), (iii) the absence
of any injunction prohibiting consummation of the Merger, (iv) the receipt of
certain legal opinions with respect to the tax consequences of the Merger, (v)
the receipt of certain legal opinions with respect to the organization and
operation in conformity with the requirements for qualification as a REIT under
the Code of Kimco and Price REIT, respectively, (vi) obtaining all material
consents, authorizations, orders and approvals of governmental agencies and
third parties and (vii) the Registration Statement, of which this Joint Proxy
Statement/Prospectus is a part, having become effective. There is currently no
intention on the part of either Kimco or Price REIT to waive any of the
conditions to the Merger. If, however, either Kimco or Price REIT were to decide
to waive any of these conditions, such party would consider the necessity of
resoliciting its stockholders. See 'The Merger Agreement--Conditions to the
Merger.'
Effective Time of the Merger
The Merger will become effective upon the later of the acceptance for
record of the Articles of Merger by the State Department of Assessments and
Taxation of Maryland or at such later time, not to exceed 30 days after
acceptance of the Articles of Merger for record, which Kimco and Price REIT
shall have agreed upon and designated in such filings in accordance with
applicable law as the effective time of the Merger (the 'Effective Time').
Subject to the satisfaction (or waiver) of the other conditions to the
obligations of Kimco and Price REIT to consummate the Merger, it is currently
expected that the Merger will be consummated on June 19, 1998 or as soon
thereafter as such conditions are satisfied (or waived).
Kimco Special Second Quarter Dividend
In connection with the Merger, on May 14, 1998, the Kimco Board of
Directors declared a dividend (the 'Kimco Special Second Quarter Dividend') of
$0.42 per share of Kimco Common Stock for the period beginning on April 1, 1998
and ending on June 18, 1998, payable on July 2, 1998 to Kimco stockholders of
record on June 18, 1998, the last business day prior to the Kimco Annual
Meeting. The per share amount of the Kimco Special Second Quarter Dividend
represents the pro rata portion of Kimco's quarterly dividend for the second
quarter of 1998 ($0.48).
Price REIT Special Second Quarter Dividend
In connection with the Merger, on May 13, 1998, the Price REIT Board of
Directors declared a dividend (the 'Price REIT Special Second Quarter Dividend')
of $0.651 per share of Price REIT Common Stock for the period beginning on April
1, 1998 and ending on June 18, 1998, payable on June 29, 1998 to holders of
Price REIT Common Stock of record on June 18, 1998, the last business day prior
to the Price REIT Special Meeting. The per share amount of the Price REIT
Special Second Quarter Dividend represents the pro rata portion of Price REIT's
quarterly dividend for the second quarter of 1998 ($0.75).
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Exchange of Price REIT Stock Certificates
Upon completion of the Merger, each holder of a Certificate or Certificates
outstanding immediately prior to the Merger, upon the surrender thereof (duly
endorsed, if required) to BankBoston, N.A. ('BankBoston'), as exchange agent
(the 'Exchange Agent'), will be entitled to receive a certificate or
certificates representing the number of whole shares of Kimco Common Stock and a
receipt or receipts representing the number of whole Kimco Class D Depositary
Shares into which such shares of Price REIT Common Stock will have been
automatically converted as a result of the Merger. Upon the completion of the
Merger, the holder of a certificate or certificates representing Price REIT
Preferred Stock, upon surrender thereof (duly endorsed, if required) to the
Exchange Agent will be entitled to receive a receipt or receipts representing
Kimco Class E Depositary Shares representing the number of shares of Kimco Class
E Preferred Stock into which the Price REIT Preferred Stock will have been
automatically converted as a result of the Merger.
After the consummation of the Merger, Kimco will cause the Exchange Agent
to mail a letter of transmittal and instructions to all holders of record of
Price REIT Common Stock as of the Effective Time for use in surrendering their
Certificates in exchange for certificates representing the Merger Consideration.
Certificates should not be surrendered until the letter of transmittal and
instructions are received. See 'The Merger Agreement--Exchange of Certificates.'
No Appraisal Rights
Holders of Price REIT Common Stock are not entitled to any appraisal rights
in connection with the Merger because the Price REIT Common Stock is listed on
the NYSE. Under the MGCL, the holder of Price REIT Preferred Stock has appraisal
rights in connection with the Merger, however the sole holder of such stock has
agreed to waive such rights. See 'Recent Developments--Price REIT.'
Termination
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval of the Kimco
Share Proposal and the Merger by the stockholders of Kimco and Price REIT,
respectively, under the following circumstances, among others, (a) by the mutual
consent of Kimco and Price REIT; (b) by action of either the Board of Directors
of Kimco or Price REIT if (i) the Merger shall not have been consummated by June
30, 1998 (provided that the terminating party shall not have breached in any
material respect its obligations under the Merger Agreement in any manner that
shall have proximately contributed to the occurrence of such failure to
consummate the Merger) or (ii) a meeting of Kimco's stockholders or Price REIT's
stockholders shall have been duly convened and held and the approval by such
stockholders of the Kimco Share Proposal or the Merger and the transactions
contemplated thereby, respectively, shall not have been obtained at such meeting
or any adjournment thereof; (c) by action of the Board of Directors of Price
REIT, if (i) a majority of the Board of Directors of Price REIT determines in
good faith that such termination is required because a pending Acquisition
Proposal (as defined herein) has been made for Price REIT, (ii) Kimco or any of
its directors or officers participate in negotiations regarding an Acquisition
Proposal for Kimco in breach of the terms of the Merger Agreement, (iii) there
has been a breach by Kimco or Merger Sub of any representation or warranty
contained in the Merger Agreement that would have or would be reasonably likely
to have a material adverse effect on the business, assets, results of operations
or condition (financial or otherwise) of Kimco and its subsidiaries taken as a
whole, which is not curable by June 29, 1998, or (iv) there has been a material
breach by Kimco of any covenant or agreement set forth in the Merger Agreement
that is not curable or, if curable, is not cured within 30 days after written
notice of such breach; or (d) by action of the Board of Directors of Kimco if
(i) a majority of the Board of Directors of Kimco determines in good faith that
such termination is required because a pending Acquisition Proposal has been
made for Kimco, (ii) Price REIT or any of its directors or officers participate
in negotiations regarding an Acquisition Proposal for Price REIT in breach of
the terms of the Merger Agreement, (iii) there has been a breach by Price REIT
of any representation or warranty contained in the Merger Agreement that would
have or would be reasonably likely to have a material adverse effect on the
business, assets, results of operations or condition (financial or otherwise) of
Price REIT and its subsidiaries taken as a whole, that is not curable by June
29, 1998, (iv) there has been a material breach by Price REIT of any covenant or
agreement set forth in the Merger Agreement that is not curable or, if curable,
is not cured within 30 days after written notice of such breach, or (v) the
Kimco Average Price or the closing price
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of Kimco Common Stock on the Closing Date or on either of the two immediately
preceding business days is less than $32.00. See 'The Merger
Agreement--Termination.'
In the event the Merger is not consummated for any reason, Kimco will
continue to pursue its business objectives of increasing cash flow, current
income and consequently the value of its existing portfolio of properties, and
to seek continued growth through (i) the strategic re-tenanting, renovation and
expansion of its existing centers and (ii) the selective acquisition of
established income-producing real estate properties, and properties requiring
significant re-tenanting and redevelopment--all primarily neighborhood and
community shopping centers in geographic regions where Kimco presently operates.
Kimco intends to consider investments in other real estate sectors and in
geographic markets where it does not presently operate should suitable
opportunities arise.
In the event the Merger is not consummated for any reason, Price REIT will
continue to pursue its business objectives of (i) maximizing cash flow, income
and capital appreciation of its property portfolio through active property
management and the acquisition and development of additional properties,
contractual rent increases and percentage rent, reletting of existing space at
higher rents and expansion or remodeling of existing properties; (ii) holding
properties for long term investment; and (iii) maintaining Price REIT's existing
reputation as a high quality developer, owner and operator of power and
community centers.
If the Merger does not occur, under certain circumstances, Kimco will be
entitled to receive a fee of $12.5 million, plus, in certain instances,
expenses, from Price REIT and under other circumstances Price REIT will be
entitled to receive a fee of either $6.25 million or $12.5 million from Kimco,
plus, in certain instances, expenses.
Accounting Treatment
Kimco will account for the Merger in accordance with the purchase method of
accounting. See 'The Merger--Accounting Treatment.'
Resale Restrictions
The Kimco Common Stock and Kimco Class D Depositary Shares received by
holders of Price REIT Common Stock in the Merger will be freely transferable,
except that the Kimco Common Stock and Kimco Class D Depositary Shares received
by persons who are deemed to be 'affiliates' (as such term is defined under the
Securities Act) of Price REIT at the time of the Price REIT Special Meeting may
be resold by them only in certain permitted circumstances. See 'The
Merger--Resale Restrictions.'
New York Stock Exchange Listing
The Price REIT Common Stock is listed on the NYSE. It is a condition to
Price REIT's obligation to consummate the Merger that the Kimco Common Stock and
Kimco Class D Depositary Shares to be issued as Merger Consideration shall have
been approved for listing on the NYSE, subject only to official notice of
issuance.
THE MERGER CONSIDERATION
Kimco Common Stock
All shares of Kimco Common Stock, when issued in connection with the
Merger, will be duly authorized, fully paid and nonassessable. Holders of Kimco
Common Stock are entitled to receive dividends when, as and if declared by the
Board of Directors of Kimco, out of assets legally available therefor. Payment
and declaration of dividends on the Kimco Common Stock and purchases of shares
thereof by Kimco will be subject to certain restrictions if Kimco fails to pay
dividends on the Kimco Preference Shares. See 'Description of Kimco
Securities--Kimco Class D Preferred Stock' and '--Kimco Outstanding Preferred
Stock.' Upon any liquidation, dissolution or winding up of Kimco, holders of
Kimco 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
the debts and other liabilities of Kimco and the preferential amounts owing with
respect to any outstanding Kimco Preference Shares. The Kimco Common Stock
possesses 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.
See 'Description of Kimco Securities--Kimco Common Stock.'
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Kimco Class D Depositary Shares
The Kimco Class D Depositary Shares to be issued as part of the Merger
Consideration will each represent a one-tenth fractional interest in a share of
Kimco Class D Preferred Stock. Subject to the terms of the Deposit Agreement,
each owner of a Kimco Class D Depositary Share will be entitled, in proportion
to the one-tenth fractional interest of a share of Kimco Class D Preferred Stock
represented by the Class D Depositary Share, to all of the rights and
preferences of the Kimco Class D Preferred Stock. The Kimco Class D Depositary
Shares will be evidenced by receipts issued pursuant to the Deposit Agreement.
Dividends. Whenever the Depositary (as defined herein) receives any cash
dividend or other cash distribution on the deposited shares of Kimco Class D
Preferred Stock, the Depositary will distribute to Holders (as defined herein)
of record on the record date fixed by the Board of Directors of Kimco such
amounts of such sum as are, as nearly as practicable, in proportion to the
respective numbers of Kimco Class D Depositary Shares held by such Holders. The
dividend rate on the Kimco Class D Depositary Shares will be the greater of (i)
7.5% per annum or (ii) the dividend on the shares of Kimco Common Stock into
which a Kimco Class D Depositary Share is convertible plus $0.0275 quarterly.
Voting Rights. Upon the written request of a Holder on a record date for
any meeting at which the holders of deposited shares of Kimco Class D Preferred
Stock are entitled to vote, the Depositary will vote or cause to be voted the
amount of Kimco Class D Preferred Stock represented by the Kimco Class D
Depositary Shares evidenced by such receipt in accordance with the instructions
set forth in such request. Each share of Kimco Class D Preferred Stock is
entitled to 10 votes and, accordingly, each Kimco Class D Depositary Share is
entitled to one vote.
Redemption by Kimco. Subject to the terms of the Kimco Class D Preferred
Stock Articles Supplementary, in the event that notice of redemption has been
properly given and Kimco has irrevocably set aside Kimco Common Stock and cash
in lieu of fractional shares, in trust for the benefit of the Holders, with the
Depositary, the Depositary will redeem the number of Kimco Class D Depositary
Shares representing such Kimco Class D Preferred Stock so called for redemption.
Conversion. Subject to the terms of the Kimco Class D Preferred Stock
Articles Supplementary, Holders may direct the Depositary to convert all of the
outstanding deposited shares of Kimco Class D Preferred Stock represented by any
whole number of Kimco Class D Depositary Shares held by such Holder into Kimco
Common Stock.
Conversion of Kimco Class D Preferred Stock into Kimco Class D Excess
Preferred Stock. As provided in the Kimco Class D Preferred Stock Articles
Supplementary, upon the happening of certain events, shares of Kimco Class D
Preferred Stock will be automatically converted into Kimco Class D Excess
Preferred Stock (as defined herein).
Surrender of Receipts and Withdrawal of Deposited Kimco Class D Preferred
Stock. Any Holder may withdraw any or all of the deposited shares of Kimco
Class D Preferred Stock represented by Kimco Class D Depositary Shares and all
money and other property, if any, represented by such Kimco Class D Depositary
Shares by surrendering such Holder's receipt or receipts at the corporate office
of the Depositary, provided that such Kimco Class D Preferred Stock has not been
previously redeemed or called for redemption or has been converted into Kimco
Common Stock or Kimco Class D Excess Preferred Stock.
Subscription Rights, Preferences or Privileges. If Kimco, at any time
offers or causes to be offered to the persons in whose names deposited shares of
Kimco Class D Preferred Stock are registered on the books of Kimco any rights,
preferences or privileges to subscribe for or to purchase any securities or any
rights, preferences or privileges of any other nature, such rights, preferences
or privileges will in each such instance be made available by the Depositary to
the Holders in such manner as Kimco instructs (including by the issue to such
Holders of warrants representing such rights, preferences or privileges).
See 'Description of Kimco Securities--Kimco Class D Depositary Shares.'
Kimco Class D Preferred Stock
Upon consummation of the Merger, the issued and outstanding shares of Kimco
Class D Preferred Stock issued as part of the Merger Consideration will be duly
authorized, fully paid and nonassessable. The shares of Kimco Class D Preferred
Stock are evidenced by receipts evidencing Kimco Class D Depositary Shares.
Kimco
15
<PAGE>
Class D Preferred Stock is pari passu with the Kimco Class E Preferred Stock and
the Kimco Outstanding Preferred Stock (as defined herein) as to dividends and as
to the distribution of assets upon any liquidation, dissolution or winding up
the affairs of Kimco.
Dividends. Holders of Kimco Class D Preferred Stock will be entitled to
receive dividends, when and as declared by the Board of Directors of Kimco, out
of funds legally available therefor. Such dividends will be payable by Kimco in
cash at the rate per share equal to the greater of (i) $18.75 per annum or (ii)
the cash dividends on the shares of Kimco Common Stock, into which a share of
Kimco Class D Preferred Stock is convertible plus $0.0275 per quarter. Dividends
on the Kimco Class D Preferred Stock will be cumulative from the Effective Time
and will be payable quarterly in arrears on January 15, April 15, July 15 and
October 15 of each year or, if not a business day, the next succeeding business
day.
Voting Rights. Whenever dividends on Kimco Class D Preferred Stock are in
arrears for six or more quarterly periods, holders of such Kimco Class D
Preferred Stock will be entitled to vote separately as a class with the holders
of all Kimco Parity Stock for the election of two additional directors of Kimco.
Such election shall be held at a special meeting called by the holders of record
of at least 10% of the outstanding Kimco Class D Preferred Stock or the
outstanding Kimco Parity Stock or, if the request for a special meeting is
received by Kimco less than 90 days prior to the next annual or special meeting
of stockholders, at the next annual or such special meeting of stockholders and
at each subsequent annual meeting of stockholders until all arrearages and the
dividend for the then current dividend period shall have been fully paid or a
sum sufficient for the full payment thereof shall have been set aside. In
addition to the foregoing voting rights, for so long as any Kimco Class D
Preferred Stock is outstanding, any authorization of, increase in the authorized
amount of or number of issued, or reclassification of, Kimco Preferred Stock
ranking senior to the Kimco Class D Preferred Stock or any amendment of the
Kimco Charter, by merger, consolidation or otherwise, which materially and
adversely affects any right, preference, privilege or voting power of the Kimco
Class D Preferred Stock or the holders thereof must be approved by holders of at
least two-thirds of the Kimco Class D Preferred Stock outstanding at the time.
No Preemptive Rights. Holders of Kimco Class D Preferred Stock do not have
preemptive rights.
Redemption by Kimco. On or after the third anniversary of the initial
issue date of the Kimco Class D Preferred Stock, the shares of Kimco Class D
Preferred Stock may be redeemed, in whole or from time to time in part, at the
option of Kimco, if during any 20 trading days during a 30 consecutive trading
day period the closing price of the Kimco Common Stock is greater than 120% of
the Conversion Price (as defined herein). Upon redemption, holders of Kimco
Class D Preferred Stock will receive such number of shares of Common Stock into
which Kimco Class D Preferred Stock is convertible (at the Conversion Price) as
of the opening of business of the date set for redemption by the Board of
Directors of Kimco.
Conversion. Each holder of shares of Kimco Class D Preferred Stock will
have the right, at his or her option at any time, to convert all or a portion of
such shares (including fractions of such shares so long as such fractions are in
integral multiples of one-tenth of a share), unless previously redeemed, into
Kimco Common Stock at the conversion price of $40.25 per share, subject to
adjustment from time to time (the 'Conversion Price'). For purposes of such
conversion, each share of Kimco Class D Preferred Stock will be valued at
$250.00.
Liquidation. Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of Kimco, subject to the prior preferences and other
rights of any class or series of stock ranking senior to Kimco Class D Preferred
Stock as to the distribution of assets upon liquidation, dissolution or winding
up of the affairs of Kimco, but before any distribution or payment will be made
to the holders of any class or series of Kimco Junior Stock, the holders of
Kimco Class D Preferred Stock will be entitled to receive out of the assets of
Kimco available for distribution to stockholders remaining after payment or
provision for payment of all debts and other liabilities of Kimco other than
Kimco's obligations with respect to any outstanding Kimco Junior Stock, a
liquidation preference of $250.00 per share for the Kimco Class D Preferred
Stock, plus an amount equal to all accrued and unpaid dividends to the date of
payment.
See 'Description of Kimco Securities--Kimco Class D Preferred Stock.'
16
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
It is the opinion of Gibson, Dunn & Crutcher LLP, special counsel to Price
REIT in connection with the Merger, which opinion has been rendered to Price
REIT, that on the basis of the facts, representations and assumptions set forth
in such opinion, the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, that Price REIT
and Kimco will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, that no gain or loss will be recognized by Price
REIT as a result of the Merger and that no gain or loss will be recognized by a
holder of Price REIT Common Stock who receives Merger Consideration for Price
REIT Common Stock exchanged therefor (except with respect to any cash received
in lieu of a fractional interest in Merger Consideration).
Brown & Wood LLP, special counsel to Kimco in connection with the Merger,
is of the opinion that, on the basis of certain facts, representations and
assumptions set forth in an opinion letter rendered to Kimco, the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that Price REIT and Kimco will each be a
party to that reorganization within the meaning of Section 368(b) of the Code.
See 'Federal Income Tax Consequences--Federal Income Tax Consequences of the
Merger.'
COMPARATIVE RIGHTS OF STOCKHOLDERS
The rights of stockholders of Price REIT currently are governed by the
Price REIT Charter and Price REIT Bylaws (as defined herein) and applicable law.
Upon completion of the Merger, stockholders of Price REIT will become
stockholders of Kimco, and their rights as stockholders of Kimco will be
governed by the Kimco Charter and Kimco Bylaws (as defined herein) and
applicable law. Both Kimco and Price REIT are incorporated under and governed by
the laws of the State of Maryland.
Certain material differences between the rights of stockholders of Price
REIT and the rights of stockholders of Kimco are described under 'Comparison of
Stockholder Rights.'
MATERIAL CONTRACTS BETWEEN PRICE REIT AND KIMCO
On April 23, 1996, Kimco and Price REIT formed a partnership (the
'Partnership') to purchase Hayden Plaza North, a 191,000 square foot shopping
center in Phoenix, Arizona, at a cost of $3,490,000. The acquisition was
completed by the Partnership on May 3, 1996. Each of Kimco and Price REIT owns a
50% interest in the Partnership.
Price REIT, Kimco and Lehman Brothers Inc. ('Lehman Bros.') intend to enter
into a Purchase Agreement (the 'Purchase Agreement') pursuant to which Lehman
Bros. will agree to purchase up to $65.0 million of Price REIT Preferred Stock.
Price REIT currently expects to issue 65,000 shares of Price REIT Preferred
Stock (with an aggregate purchase price of $65.0 million) in May 1998. Pursuant
to the Second Amendment, the Price REIT Preferred Stock will be exchanged in the
Merger for Kimco Class E Depositary Shares. Because the transaction remains
subject to completion of definitive documentation, no assurance can be given
that the issuance of Price REIT Preferred Stock will occur within the
anticipated time frame or at all. For more information about this proposed
agreement, the Price REIT Preferred Stock and the Kimco Class E Depositary
Shares, see 'Recent Developments--Price REIT.'
17
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED
PRO FORMA COMBINED FINANCIAL DATA
KIMCO SUMMARY CONSOLIDATED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- --------- --------- ---------
(In thousands, except for number of shopping centers
and per share data)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues from rental property(1).............. $ 198,929 $ 168,144 $ 143,132 $ 125,272 $ 98,854
Income before extraordinary items............. $ 85,836(4) $ 73,827(4) $ 51,922 $ 41,071 $ 35,159(5)
Income before extraordinary items, per common
share
Basic....................................... $ 1.80(4) $ 1.61(4) $ 1.33 $ 1.17 $ 1.17(5)
Diluted..................................... $ 1.78(4) $ 1.59(4) $ 1.32 $ 1.16 $ 1.17(5)
Net income.................................... $ 85,836 $ 73,827 $ 51,922 $ 40,247 $ 34,573
Dividends paid on common shares(2)............ $ 64,123 $ 55,385 $ 47,140 $ 40,092 $ 35,282
Dividends per common share(2)................. $ 1.72 $ 1.56 $ 1.44 $ 1.33 $ 1.25
Weighted average number of shares of common
stock outstanding (Basic)................... 37,388 35,906 33,388 30,072 28,657
Shopping center gross leasable area (square
feet at end of period)...................... 34,581(6) 27,360(6) 23,465(6) 21,125 19,609
Shopping center properties (at end of
period)..................................... 264(6) 210(6) 174(6) 157 148
BALANCE SHEET DATA (at end of period):
Real estate, before accumulated
depreciation................................ $1,404,196(6) $1,072,056(6) $ 932,390(6) $ 796,611 $ 662,874
Total assets.................................. $1,343,890 $1,023,033 $ 884,242 $ 736,709 $ 652,823
Total debt.................................... $ 531,614 $ 364,655 $ 389,223 $ 372,999 $ 290,886
Stockholders' equity.......................... $ 743,319 $ 605,771 $ 447,150 $ 320,712 $ 336,212
OTHER DATA:
Funds from Operations(3):
Net Income.................................. $ 85,836 $ 73,827 $ 51,922 $ 40,247 $ 34,573
Depreciation and amortization............... 30,053 27,067 26,188 23,478 19,898
(Gain) loss on sales of properties and early
repayment of mortgage debt................ (244) (802) (370) 824 (2,895)
Preferred stock dividends................... (18,438) (16,134) (7,631) (5,812) (1,582)
Other....................................... 976 1,148 2,019 901 875
---------- ---------- --------- --------- ---------
Funds from Operations....................... $ 98,183 $ 85,106 $ 72,128 $ 59,638 $ 50,869
---------- ---------- --------- --------- ---------
---------- ---------- --------- --------- ---------
Cash flow provided by operations............ $ 125,108 $ 101,892 $ 74,233 $ 62,933 $ 54,886
Cash flow used for investing activities..... $ (280,823) $ (144,027) $(127,261) $(142,183) $(119,788)
Cash flow provided by financing
activities................................ $ 149,269 $ 63,395 $ 58,248 $ 37,047 $ 109,384
</TABLE>
- ------------------
(1) Does not include revenues from rental property relating to unconsolidated
joint ventures or revenues relating to the investment in retail store
leases.
(2) Dividends paid during the period indicated.
(3) Most industry analysts and equity REITs, including Kimco, generally consider
FFO to be an appropriate supplemental measure of the performance of an
equity REIT. In March 1995, NAREIT modified the definition of FFO, among
other things, to eliminate adding back amortization of deferred financing
costs and depreciation of non-real estate items to net income when computing
FFO. Kimco adopted this new method as of January 1, 1996. FFO is defined as
net income applicable to common shares before depreciation and amortization,
extraordinary items, gains or losses on sales of real estate, plus FFO of
unconsolidated joint ventures determined on a consistent basis. FFO does not
represent cash generated from operating activities in accordance with
generally accepted accounting principles and therefore should not be
considered an alternative for net income as a measure of results of
operations, or for cash flows from operations calculated in accordance with
generally accepted accounting principles as a measure of liquidity. In
addition, the comparability of Kimco's FFO with the FFO reported by other
REITs may be affected by the differences that may exist regarding certain
accounting policies relating to expenditures for repairs and other recurring
items.
(4) Includes $0.2 million or $.01 per share in 1997 and $0.8 million or $.02 per
share in 1996, respectively, relating to non-recurring gains from the
disposition of a shopping center in each year.
(5) Income before extraordinary items and Income before extraordinary items, per
common share for the year ended December 31, 1993 include $3.4 million or
$0.12 per share, respectively, in non-recurring gains related to the
disposition of a shopping center and a casualty claim related to a joint
venture property.
(6) Shopping center gross leasable area, Shopping center properties and Real
estate, before accumulated depreciation do not include Kimco's investment in
retail store leases.
18
<PAGE>
PRICE REIT SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
--------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT FOR NUMBER OF SHOPPING CENTERS
AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues from rental property(1)........................... $ 69,335 $ 51,292 $ 40,152 $ 37,599 $ 27,332
Income before extraordinary items.......................... $ 26,254 $ 16,919 $ 16,386 $ 16,904 $ 9,128
Income per common share, before extraordinary items:
Basic.................................................... $ 2.39 $ 1.98 $ 1.98 $ 2.07 $ 1.84
Diluted.................................................. $ 2.36 $ 1.98 $ 1.98 $ 2.07 $ 1.84
Net income................................................. $ 26,254 $ 16,919 $ 16,386 $ 16,904 $ 9,128
Dividends paid on common shares(2)......................... $ 32,439 $ 24,336 $ 22,038 $ 20,859 $ 12,128
Dividends per common share(2).............................. $ 2.90 $ 2.80 $ 2.67 $ 2.56 $ 2.38
Weighted average number of shares of common stock
outstanding (Basic)...................................... 10,982 8,560 8,259 8,165 4,957
Shopping center gross leasable area (square feet at end of
period) ................................................. 7,335 5,188 4,628 3,662 3,317
Shopping center properties (at end of period) ............. 37 24 19 14 12
BALANCE SHEET DATA (AT END OF PERIOD):
Real estate, before accumulated depreciation............... $ 642,141 $422,093 $381,648 $307,939 $ 296,459
Total assets............................................... $ 637,503 $428,071 $382,478 $312,419 $ 292,195
Total debt................................................. $ 299,628 $184,908 $157,832 $ 86,750 $ 65,000
Stockholders' equity....................................... $ 326,246 $236,982 $221,238 $224,600 $ 226,261
OTHER DATA:
Funds from operations(3)...................................
Net income............................................... $ 26,254 $ 16,919 $ 16,386 $ 16,904 $ 9,128
Depreciation and amortization............................ 15,752 11,876 9,686 9,165 6,797
Gain on sale of property................................. (2,787) -- -- -- --
Other.................................................... 704 661 510 202 (396)
--------- -------- -------- -------- ---------
Funds from operations.................................... $ 39,923 $ 29,456 $ 26,582 $ 26,271 $ 15,529
--------- -------- -------- -------- ---------
--------- -------- -------- -------- ---------
Cash flow provided by operations......................... $ 35,662 $ 25,247 $ 24,220 $ 22,184 $ 14,164
Cash flow used for investing activities.................. $(195,179) $(30,084) $(74,436) $(26,266) $(146,851)
Cash flow provided by financing activities............... $ 151,622 $ 14,965 $ 49,364 $ 3,186 $ 134,003
</TABLE>
- ------------------
(1) Does not include revenues from rental property related to unconsolidated
joint ventures.
(2) Dividends paid during the period indicated.
(3) Most industry analysts and equity REITs, including Price REIT, consider FFO
an appropriate supplemental measure of operating performance of an equity
REIT. In general, FFO adjusts net income for non-cash charges such as
depreciation, certain amortization expenses and most non-recurring gains or
losses. However, FFO does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and
should not be considered an alternative to net income as an indication of
the results of Price REIT's performance or to cash flows as a measure of
liquidity. In May 1995, NAREIT modified the definition of FFO, among other
things, to eliminate amortization of deferred financing costs and
depreciation of non-real estate items added back to net income when
computing FFO. Price REIT implemented the new method of calculating FFO
under the NAREIT provisions on the NAREIT-suggested adoption date of January
1, 1996. Price REIT has recalculated and presented FFO for the periods in
the table above, including periods prior to 1996, under the new definition.
19
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
(000'S)
<S> <C>
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET DATA:
Assets:
Real estate, net of accumulated depreciation.............................................. $ 2,007,046
Investment in retail store leases......................................................... 15,938
Investments and advances to real estate joint ventures.................................... 30,669
Cash and cash equivalents................................................................. 23,452
Accounts and notes receivable............................................................. 17,504
Deferred charges and prepaid expenses..................................................... 31,558
Other assets.............................................................................. 64,729
-----------------
$ 2,190,896
-----------------
-----------------
Liabilities:
Notes payable............................................................................. $ 672,343
Mortgages payable......................................................................... 158,899
Accounts payable and accrued expenses..................................................... 66,046
Other liabilities......................................................................... 9,769
-----------------
907,057
-----------------
Minority interests in partnerships............................................................. 5,269
-----------------
Stockholders' Equity:
Preferred stock........................................................................... 1,376
Common stock.............................................................................. 523
Paid-in capital........................................................................... 1,392,314
Cumulative distributions in excess of net income.......................................... (115,643)
-----------------
1,278,570
-----------------
$ 2,190,896
-----------------
-----------------
</TABLE>
- ------------------
See Notes to Kimco Realty Corporation and Subsidiaries
Unaudited Pro Forma Combined Consolidated Financial Data.
20
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA (UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
(000'S, EXCEPT
PER
SHARE DATA)
<S> <C>
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT DATA:
Revenues from rental property........................................................ $ 297,615
-----------------
Rental property expenses-
Rent................................................................................. 4,909
Real estate taxes.................................................................... 37,250
Interest............................................................................. 58,075
Operating and maintenance............................................................ 31,655
Depreciation and amortization........................................................ 49,371
-----------------
181,260
-----------------
Income from rental property.......................................................... 116,355
Income from investment in retail store leases........................................ 3,572
-----------------
119,927
Management fee income................................................................ 3,575
General and administrative expenses.................................................. (14,642)
Equity in income (losses) of real estate joint ventures, net......................... 2,682
Minority interests in income of partnerships, net.................................... (296)
Other income (expenses), net......................................................... 7,295
-----------------
Income before gain on sale of shopping center properties........................... 118,541
Gain on sale of shopping center properties........................................... 2,787
-----------------
Net income.................................................................... $ 121,328
-----------------
-----------------
Net income applicable to common shares........................................ $ 93,972
-----------------
-----------------
Net income per common share
Basic...................................................................... $ 1.91
Diluted.................................................................... $ 1.89
Pro forma basic weighted average number of shares outstanding........................ 49,283
-----------------
Pro forma diluted weighted average number of shares outstanding...................... 49,745
-----------------
Pro forma dividends paid on common shares............................................ $ 84,581
-----------------
Pro forma cash dividends per common share............................................ $ 1.72
-----------------
</TABLE>
- ------------------
See Notes to Kimco Realty Corporation and Subsidiaries
Unaudited Pro Forma Combined Consolidated Financial Data.
21
<PAGE>
RISK FACTORS
Kimco stockholders and holders of Price REIT Common Stock should carefully
consider, among other things, the following risk factors before voting to
approve the Kimco Share Proposal or the Merger, as the case may be. Certain
statements set forth below may constitute 'forward-looking statements' within
the meaning of the Private Securities Litigation Reform Act of 1995. See
'Special Note Regarding Forward-Looking Statements' for additional factors
relating to such statements.
ADDITIONAL LEVERAGE OF COMBINED ENTITY
The pro forma combined outstanding indebtedness of Kimco at December 31,
1997, giving effect to the Merger, would be approximately $831 million, as
compared to Price REIT's indebtedness at December 31, 1997 of approximately $300
million.
RELATIONSHIP OF KIMCO COMMON STOCK TO OUTSTANDING PREFERRED STOCK
Outstanding issues of Kimco Class A Preferred Stock, Kimco Class B
Preferred Stock and Kimco Class C Preferred Stock (each as defined herein),
which are entitled to cumulative annual cash distributions ranging from $1.9375
to $2.125 per depositary share (such depositary shares representing a one-tenth
fractional interest in such shares of such classes of preferred stock) and a
liquidation preference of $25.00 per depositary share, as well as the Kimco
Class D Preferred Stock (represented by the Kimco Class D Depositary Shares)
included in the Merger Consideration and the Kimco Class E Preferred Stock
(represented by the Kimco Class E Depositary Shares) to be issued in connection
with the Merger to holders of Price REIT Preferred Stock, will be senior to the
Kimco Common Stock that will be issued in connection with the Merger with
respect to such distribution rights and liquidation preference.
DECREASE IN DISTRIBUTIONS PER SHARE TO HOLDERS OF PRICE REIT COMMON STOCK
Assuming Kimco continues to make distributions at the same rate as was
declared for the quarter ended December 31, 1997, and assuming the issuance of
one share of Kimco Common Stock and 0.40 Kimco Class D Depositary Shares in the
Merger, each holder of a share of Price REIT Common Stock converted into Merger
Consideration in the Merger would be entitled to receive a quarterly
distribution of $0.48 for each share of Kimco Common Stock and $0.1875 for each
0.40 Kimco Class D Depositary Share (for an aggregate distribution of $0.6675)
as compared to the $0.725 per share that was declared on each share of Price
REIT Common Stock for the quarter ended December 31, 1997. Stockholders of
Kimco, in considering whether to approve the Kimco Share Proposal, should
consider, in addition to the other information in this Joint Proxy
Statement/Prospectus, that, as a result of the Merger, Kimco will become
obligated to repay amounts outstanding under Price REIT's existing line of
credit which had outstanding borrowings of approximately $58 million at December
31, 1997.
POSSIBLE CONFLICTS OF INTEREST; BENEFITS TO CERTAIN PRICE REIT DIRECTORS AND
OFFICERS
In considering the recommendation of the Board of Directors of Price REIT
with respect to the Merger Agreement and the transactions contemplated thereby,
stockholders should be aware that certain officers and directors of Price REIT
have certain individual interests in the Merger that are in addition to the
interests of other holders of Price REIT Common Stock. Those additional
individual interests may result in conflicts of interest with respect to their
obligations to Price REIT in connection with the Merger and with respect to
their recommendation to the holders of Price REIT Common Stock to vote FOR the
Merger. See 'Summary--Interests of Certain Persons in the Merger; Possible
Conflicts of Interest' and 'The Merger--Interests of Certain Persons in the
Merger; Possible Conflicts of Interest' for additional information relating to
such interests.
REAL ESTATE INVESTMENT RISKS
Following the Merger, Kimco will continue the businesses undertaken
separately by Kimco and Price REIT prior to the Merger of owning, operating,
managing, acquiring and developing neighborhood and community shopping centers
and power centers. The business risks to be faced by Kimco after the Merger will
be similar to those now faced separately by Kimco and Price REIT.
22
<PAGE>
VENTURE STORES, INC.
Venture, a tenant which provides approximately 11.2% of Kimco's annualized
base rental revenue as of February 1, 1998 (8.5% on a pro forma basis, giving
effect to the Merger), has recently filed for protection under Chapter 11 of the
United States Bankruptcy Code. Kimco has not received notice that Venture will
be delinquent in the payment of any rents due. There can be, however, no
assurance that Venture will continue to pay rents as they become due or that the
trustee in bankruptcy will not reject the leases under which Venture is bound.
While Kimco believes, based upon current market conditions in the areas where
Venture is a tenant, that it could replace any defaulted or discharged leases
with leases that are on terms no less favorable than the leases currently in
place, no such assurance can be given. See 'The Companies--Recent Developments.'
RISKS RELATING TO REALIZATION OF BENEFITS
Kimco and Price REIT are large enterprises and considerable management time
and resources will be devoted to their integration. There can be no assurance,
however, that the anticipated benefits from the Merger will be realized or that
the integration will be successfully and timely implemented.
DEPENDENCE ON KEY PERSONNEL
Following the Merger, Kimco will depend on the services of Messrs. Milton
Cooper, Joseph K. Kornwasser, Michael J. Flynn and Jerald Friedman. Kimco and
Price REIT believe that the loss of the services of any of these key personnel
could have an adverse effect on Kimco.
POSSIBLE ADVERSE EFFECTS ON STOCK PRICE ARISING FROM SHARES AVAILABLE FOR FUTURE
SALE
Substantially all of the shares of Kimco Common Stock to be issued in the
Merger and those currently outstanding will be freely tradeable by the holders
thereof upon consummation of the Merger (approximately 12,636,279 shares,
subject to adjustment). Further, an additional 500,000 shares of Kimco Common
Stock (the 'Kimco Option Shares') will be issuable by Kimco upon exercise of
stock options expected to be outstanding upon consummation of the Merger
(including stock options to be issued to Messrs. Kornwasser, Friedman and
Kronenberg). It is expected that Kimco Option Shares will be included in an
effective registration statement of Kimco and the holders thereof will,
therefore, generally be able to resell such shares without resale restrictions
under the Securities Act. Sales of a substantial number of shares of Kimco
Common Stock, or the perception that such sales could occur, could adversely
affect the prevailing market price for the Kimco Common Stock. If such sales
reduce the market price of Kimco Common Stock, Kimco's ability to raise
additional capital in the public equity market could be adversely affected.
IMPACT OF INTEREST RATES AND OTHER FACTORS ON STOCK PRICE
Any significant increase in market interest rates from their current levels
could lead holders of Kimco Common Stock to seek higher yields through other
investments, which could adversely affect the market price of the shares of
Kimco Common Stock. One of the factors that may influence the price of Kimco
Common Stock in public markets will be the annual distribution rate on Kimco
Common Stock as compared with the yields on alternative investments. Moreover,
numerous other factors, such as governmental regulatory action and tax laws,
could have a significant impact on the future market price of Kimco Common
Stock.
POTENTIAL STOCK PRICE FLUCTUATIONS
The relative stock prices of the Kimco Common Stock and the Price REIT
Common Stock on the Closing Date may vary significantly from the prices as of
the date of execution of the Merger Agreement, the date hereof or the date on
which stockholders vote on the Merger or the Kimco Share Proposal, due to
changes in the business, operations and prospects of Kimco or Price REIT, market
assessments of the likelihood that the Merger will be consummated and the timing
thereof, general market and economic conditions, and other factors.
NO APPRAISAL RIGHTS
Under the MGCL, holders of Price REIT Common Stock will not be entitled to
appraisal rights in connection with the Merger because the Price REIT Common
Stock is listed on the NYSE. Under the MGCL, the holder of Price REIT Preferred
Stock has appraisal rights in connection with the Merger; however, the Purchase
Agreement is expected to provide that the sole holder of such stock will waive
such rights. See 'Recent Developments.'
23
<PAGE>
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
Kimco believes that it has operated so as to qualify as a REIT under the
Code since its formation in 1991. Although management of Kimco believes that
Kimco is organized and is operating in such a manner, no assurance can be given
that Kimco will be able to continue to operate in a manner so as to qualify or
remain so qualified. Qualification as a REIT involves the application of highly
technical and complex Code provisions for which there are only limited judicial
or administrative interpretations and the determination of various factual
matters and circumstances not entirely within Kimco's control. For example, in
order to qualify as a REIT, at least 95% of Kimco's gross income in any year
must be derived from qualifying sources and Kimco must make distributions to
stockholders aggregating annually at least 95% of its REIT taxable income
(excluding net capital gains). In addition, no assurance can be given that new
legislation, new regulations, administrative interpretations or court decisions
will not change the tax laws with respect to qualification as a REIT or the
Federal income tax consequences of such qualification. Kimco, however, is not
aware of any currently pending tax legislation that would adversely affect its
ability to continue to operate as a REIT.
If Kimco fails to qualify as a REIT, Kimco will be subject to Federal
income tax (including any applicable alternative minimum tax) on its taxable
income at corporate rates. In addition, unless entitled to relief under certain
statutory provisions, Kimco will also be disqualified from treatment as a REIT
for the four taxable years following the year during which qualification is
lost. This treatment would reduce the net earnings of Kimco available for
investment or distributions to stockholders because of the additional tax
liability to Kimco for the year or years involved. In addition, distributions
would no longer be required to be made. To the extent that distributions to
stockholders would have been made in anticipation of Kimco's qualifying as a
REIT, Kimco might be required to borrow funds or to liquidate certain of its
investments to pay the applicable tax. Failing to qualify as a REIT would also
constitute a default under certain debt obligations of Kimco.
Price REIT believes that, since its formation, it has operated so as to
qualify as a REIT under the Code. The failure of Price REIT to qualify as a REIT
prior to consummation of the Merger would have consequences generally similar to
the consequences of any failure by Kimco to qualify as a REIT, as described
above, and Kimco and Merger Sub would succeed to any such tax liability upon the
Merger.
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various Federal, state and local laws, ordinances and regulations, an
owner of real estate is liable for the costs of removal or remediation of
certain hazardous or toxic substances on or in such property. Such laws often
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances. The
presence of such substances, or the failure to properly remediate such
substances, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral. All of the real estate
properties owned or leased by Kimco or Price REIT (the 'Properties') have been
subjected to Phase I or similar environmental audits (which involve inspection
without soil sampling or ground water analysis) by independent environmental
consultants. These environmental audit reports have not revealed any significant
environmental liability, nor is Kimco or Price REIT aware of any environmental
liability with respect to the Properties that Kimco's or Price REIT's management
believes would have a material adverse effect on Kimco's business, assets or
results of operations. No assurance can be given that existing environmental
studies with respect to the Properties reveal all environmental liabilities or
that any prior owner of any such property did not create any material
environmental condition not known to Kimco or Price REIT.
OWNERSHIP LIMITS
As a REIT, not more than 50% in value of the outstanding shares of Kimco
may be owned, directly or indirectly, by five or fewer individuals (as defined
in the Code). In order to maintain its qualification as a REIT, the Kimco
Charter imposes certain limits on the ownership of Kimco stock, as described
below. To minimize the possibility that Kimco will fail to qualify as a REIT
under this test, the Kimco Charter authorizes the directors to take such action
as may be required to preserve its qualification as a REIT and limits the
ownership of Kimco's shares by any particular stockholder. These ownership
limits, as well as the ability of Kimco to issue other classes of common and
preferred stock, may delay, defer or prevent a change in control of Kimco and
may also (i) deter tender offers for the Kimco Common Stock, which offers may be
attractive to the stockholders, or (ii) limit the opportunity for stockholders
to receive a premium for their shares of Kimco Common Stock that might otherwise
exist if an investor were attempting to assemble a block of shares in excess of
the relevant
24
<PAGE>
ownership limit or otherwise effect a change in control of Kimco. Subject to
certain exceptions specified in the Kimco Charter, no holder may own, or be
deemed to own by virtue of the constructive ownership provisions of the Code,
more than the Ownership Limit of 2% in value of the outstanding shares of Kimco
Common Stock nor may any holder acquire more than 9.8% in value or number of the
outstanding shares of Kimco Class D Preferred Stock. Moreover, because of its
convertibility into Kimco Common Stock, the ownership of Kimco Class D Preferred
Stock would be taken into account in determining compliance with the Ownership
Limit. Furthermore, as more fully set forth in the Kimco Class D Preferred Stock
Articles Supplementary, Kimco Class D Preferred Stock is subject to an overall
restriction under which no holder may own, as a result of ownership of Kimco
Class D Preferred Stock, in the aggregate, in excess of 5.0% in value of all the
outstanding Kimco capital stock. The constructive ownership rules are complex
and may cause Kimco Common Stock owned actually or constructively by a group of
related individuals and/or entities to be deemed constructively owned by one
individual or entity. As a result, the acquisition of less than 2% in value of
Kimco Common Stock or less than 9.8% of Kimco Class D Preferred Stock (or the
acquisition of an interest in an entity which owns Kimco Common Stock or Kimco
Class D Preferred 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 Kimco Common Stock or 9.8% of Kimco Class D Preferred Stock,
and thus subject such Kimco Common Stock or Kimco Class D Preferred Stock to the
Ownership Limit or the Preferred Stock Ownership Limit. See 'Description of
Kimco Securities--Ownership Limit; Restrictions on Transfer.'
CONTROL AND INFLUENCE BY SIGNIFICANT STOCKHOLDER
As of May 8, 1998, Mr. Milton Cooper, Chairman and Chief Executive Officer
of Kimco, and a related private corporation in which Mr. Cooper owns a
controlling interest, beneficially owned in the aggregate approximately 11.3% of
the shares of Kimco Common Stock. Accordingly, Mr. Cooper may continue to have
substantial influence over Kimco and on the outcome of any matters submitted to
Kimco's stockholders for approval.
25
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth for Kimco and Price REIT certain historical
per common share data, unaudited pro forma per common share data, based upon the
historical financial results of Kimco and Price REIT, giving effect to the
Merger using the purchase method of accounting, and the equivalent pro forma
combined per common share amounts of Price REIT. The following pro forma data
should be read in conjunction with the historical financial statements of Kimco
and Price REIT incorporated by reference herein and pro forma combined financial
statements included herein. The unaudited pro forma combined financial data is
not necessarily indicative of the financial position or the results of
operations that may occur in the future or what the financial position or
results of operations would have been had the Merger been consummated for the
periods or as of the dates for which such information is presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
-------------------------------------------
PRICE REIT
HISTORICAL PRO FORMA(1) EQUIVALENT(2)
---------- ------------ -------------
<S> <C> <C> <C>
Book Value per common share
Kimco.................................................................. $12.83 $17.87
Price REIT............................................................. $27.88 $ 17.87
Cash Dividends per common share(3)
Kimco.................................................................. $ 1.72 $ 1.72
Price REIT............................................................. $ 2.90 $ 2.47
Net Income per common share (Basic)
Kimco.................................................................. $ 1.80 $ 1.91
Price REIT............................................................. $ 2.39 $ 1.91
Net Income per common share (Diluted)
Kimco.................................................................. $ 1.78 $ 1.89
Price REIT............................................................. $ 2.36 $ 1.89
</TABLE>
- ------------------
(1) The pro forma per common share data for Kimco has been calculated assuming
that in the Merger each share of Price REIT Common Stock is exchanged for
one share of Kimco Common Stock and 0.40 Kimco Class D Depositary Shares
(the 'Assumed Exchange Ratio').
(2) The equivalent pro forma per share amounts of Price REIT are calculated by
multiplying the pro forma book value per share of Kimco Common Stock and pro
forma net income per share of Kimco Common Stock by the Assumed Exchange
Ratio. The Price REIT equivalent pro forma cash dividends per share is
calculated by multiplying the pro forma cash dividends per share of Kimco
Common Stock by the Assumed Exchange Ratio, which includes dividends of
$0.1875 per quarter for each of the 0.40 shares of Kimco Class D Depositary
Shares.
(3) Kimco currently pays a quarterly dividend of $0.48 per common share. Kimco
intends to continue to pay such regular quarterly dividends. Future
distributions by Kimco will be at the discretion of the Board of Directors
of Kimco and will depend on the FFO of Kimco, its financial condition,
capital requirements, the annual distribution requirements under the REIT
provisions of the Code and such other factors as the Board of Directors of
Kimco deems relevant.
26
<PAGE>
COMPARATIVE MARKET DATA
The Kimco Common Stock and Price REIT Common Stock trade on the NYSE under
the symbols 'KIM' and 'RET,' respectively. The table below sets forth, for the
quarterly periods indicated, the high and low sales prices per share reported by
the NYSE Composite Tape and dividends declared per share for the Kimco Common
Stock and Price REIT Common Stock.
<TABLE>
<CAPTION>
KIMCO COMMON STOCK PRICE REIT COMMON STOCK
-------------------------- -----------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1996:
First Quarter............................................ $28 $25 1/4 $0.39 $31 1/2 $27 7/8 $ 0.70
Second Quarter........................................... $28 1/2 $25 5/8 $0.39 $32 3/8 $28 3/4 $ 0.70
Third Quarter............................................ $30 1/4 $26 1/2 $0.39 $32 5/8 $31 $ 0.70
Fourth Quarter........................................... $34 7/8 $28 3/8 $0.43 $38 3/4 $31 1/2 $ 0.70
1997:
First Quarter............................................ $34 5/8 $31 3/4 $0.43 $38 5/8 $35 3/4 $ 0.725
Second Quarter........................................... $33 3/8 $30 1/4 $0.43 $38 5/8 $35 7/8 $ 0.725
Third Quarter............................................ $36 3/16 $31 3/4 $0.43 $40 3/16 $36 1/2 $ 0.725
Fourth Quarter........................................... $35 1/2 $30 1/2 $0.48 $42 15/16 $38 11/16 $ 0.725
1998:
First Quarter............................................ $35 15/16 $33 7/16 $0.48 $45 5/8 $40 15/16 $ 0.75
Second Quarter (through May 12, 1998).................... $39 $34 7/8 (1) $47 1/2 $44 1/4 (2)
</TABLE>
- ------------------
(1) Dividends are normally declared at the end of the quarter. However, in
connection with the Merger, the Board of Directors of Kimco declared the
Kimco Special Second Quarter Dividend of $0.42 per share of Kimco Common
Stock. See 'The Merger Agreement--Kimco Special Second Quarter Dividend.'
(2) Dividends are normally declared at the end of the quarter. However, in
connection with the Merger, the Board of Directors of Price REIT declared
the Price REIT Special Second Quarter Dividend of $0.651 per share of Price
REIT Common Stock. See 'The Merger Agreement--Price REIT Special Second
Quarter Dividend.'
As of the Kimco Record Date, there were approximately 620 record holders of
Kimco Common Stock. Directors and executive officers of Kimco and their
affiliates, all of whom have indicated that they will vote for the Kimco Share
Proposal, for each of the nominees for the Board of Directors and for the Kimco
1998 Equity Participation Plan, were the owners of 8,109,835 shares of Kimco
Common Stock, representing approximately 19.0% of the outstanding Kimco Common
Stock. As of the Price REIT Record Date, there were approximately 1,117
recordholders of Price REIT Common Stock. Directors and executive officers of
Price REIT and their affiliates, all of whom have indicated that they will vote
for approval of the Merger, were beneficial owners of 878,395 shares of Price
REIT Common Stock (including 15,000 shares of Price REIT Common Stock with
respect to which beneficial ownership is disclaimed), representing approximately
7.1% of the outstanding Price REIT Common Stock.
The following table sets forth the last reported sales prices per share of
Kimco Common Stock and Price REIT Common Stock on January 12, 1998, the last
trading day preceding public announcement of the Merger, and on May 12, 1998,
the most recent date for which prices were available prior to printing this
Joint Proxy Statement/Prospectus. The table also indicates, as of each such
date, the market value on an equivalent per share basis of Price REIT Common
Stock.
<TABLE>
<CAPTION>
PRICE REIT
KIMCO PRICE REIT COMMON STOCK
COMMON STOCK COMMON STOCK EQUIVALENT(1)
------------ ------------ ------------
<S> <C> <C> <C>
January 12, 1998................................................. $ 34 7/8 $ 41 7/8 $45.00
May 12, 1998..................................................... $ 39 $ 47 3/8 $48.00
</TABLE>
- ------------------
(1) Assumes the Merger Consideration consists of one share of Kimco Common Stock
and Kimco Class D Depositary Shares having a liquidation preference of
$10.125 for each Kimco Class D Depositary Share on January 12, 1998 and
$9.00 on May 12, 1998, respectively. See 'The Merger Agreement--Pre-Closing
Adjustments.'
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR KIMCO COMMON
STOCK AND PRICE REIT COMMON STOCK. NO ASSURANCE CAN BE GIVEN AS TO THE PRICES AT
WHICH THE KIMCO COMMON STOCK AND KIMCO CLASS D DEPOSITARY SHARES WILL TRADE
AFTER THE MERGER.
SINCE THE DETERMINATION OF THE MERGER CONSIDERATION WILL OCCUR AFTER THE
DATE OF THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS, HOLDERS OF PRICE REIT
COMMON STOCK WILL BE ABLE TO OBTAIN THE EXACT MERGER CONSIDERATION BY CALLING
(888) 212-7101 ON OR AFTER JUNE 11, 1998.
27
<PAGE>
KIMCO ANNUAL MEETING
PURPOSE OF THE KIMCO ANNUAL MEETING
At the Kimco Annual Meeting, holders of Kimco Common Stock will be asked
to: (i) vote upon the Kimco Share Proposal, which provides for the issuance of
Kimco Common Stock and Kimco Class D Depositary Shares in the Merger, pursuant
to which Price REIT will be merged with and into Merger Sub, and each
outstanding share of Price REIT Common Stock will be converted into the right to
receive Kimco Common Stock and Kimco Class D Depositary Shares; (ii) elect six
Directors to serve for a term of one year and until their successors are duly
elected and qualified; (iii) consider and vote on a proposal to approve and
adopt the Kimco 1998 Equity Participation Plan; and (iv) consider and vote on
the Kimco Adjournment Proposal if the Chairman of the Kimco Annual Meeting
determines that there are not sufficient votes to approve the Kimco Share
Proposal.
Although neither Maryland law nor the Kimco Charter requires that Kimco
obtain stockholder approval of the Merger because Price REIT is merging with a
subsidiary of Kimco rather than Kimco itself, due to the number of shares of
Kimco Common Stock to be issued in the Merger, the rules of the NYSE require
Kimco to obtain stockholder approval of the issuance of such shares of Kimco
Common Stock.
Other Matters. Kimco stockholders will also consider and vote upon any
other matters that may properly come before the Kimco Annual Meeting.
THE BOARD OF DIRECTORS OF KIMCO HAS APPROVED THE MERGER AGREEMENT, THE
KIMCO SHARE PROPOSAL AND UNANIMOUSLY RECOMMENDS THAT KIMCO STOCKHOLDERS VOTE FOR
APPROVAL OF THE KIMCO SHARE PROPOSAL. SEE 'THE MERGER--BACKGROUND OF THE MERGER'
AND '--RECOMMENDATION OF THE BOARD OF DIRECTORS OF KIMCO.' THE BOARD OF
DIRECTORS OF KIMCO ALSO UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL OF THE
NOMINEES FOR THE BOARD OF DIRECTORS OF KIMCO SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, FOR APPROVAL OF THE KIMCO 1998 EQUITY PARTICIPATION PLAN
AND FOR APPROVAL OF THE KIMCO ADJOURNMENT PROPOSAL. SEE 'ELECTION OF KIMCO
DIRECTORS,' 'PROPOSAL TO APPROVE KIMCO 1998 EQUITY PARTICIPATION PLAN' AND
'ADJOURNMENT PROPOSALS--KIMCO ADJOURNMENT PROPOSAL.'
RECORD DATE; VOTING RIGHTS; PROXIES
The Kimco Board of Directors has fixed the close of business on May 8, 1998
as the Kimco Record Date for determining those holders entitled to notice of and
to vote at the Kimco Annual Meeting or any adjournments or postponements
thereof.
As of the Kimco Record Date, there were 42,712,839 shares of Kimco Common
Stock issued and outstanding, each of which entitles the holder thereof to one
vote. All shares of Kimco Common Stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted in accordance
with the instructions indicated in such proxies. IF NO INSTRUCTIONS ARE
INDICATED, SUCH SHARES OF KIMCO COMMON STOCK WILL BE VOTED FOR THE KIMCO SHARE
PROPOSAL, FOR THE ELECTION OF ALL NOMINEES FOR THE BOARD OF DIRECTORS OF KIMCO
SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS, FOR THE APPROVAL OF THE
KIMCO 1998 EQUITY PARTICIPATION PLAN AND FOR APPROVAL OF THE KIMCO ADJOURNMENT
PROPOSAL. Kimco does not know of any matters other than as described in the
accompanying Notice of Kimco Annual Meeting that are to come before the Kimco
Annual Meeting. If any other matter or matters are properly presented for action
at the Kimco Annual Meeting, the persons named in the enclosed form of proxy and
acting thereunder will have the discretion to vote on such matters in accordance
with their best judgment, unless such authorization is withheld. A Kimco
stockholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice thereof to the Secretary of Kimco, by signing
and returning a later dated proxy or by voting in person at the Kimco Annual
Meeting; however, mere attendance at the Kimco Annual Meeting will not in and of
itself have the effect of revoking the proxy.
28
<PAGE>
Under Maryland law and the Kimco Bylaws, shares represented by proxies that
reflect abstentions or 'broker non-votes' (i.e., shares held by a broker or
nominee which are represented at the Kimco Annual Meeting, but with respect to
which such broker or nominee is not empowered by the beneficial owner of the
stock to vote on a particular proposal) will be counted toward the presence of a
quorum. Under the rules of the NYSE, brokers do not have discretionary authority
to vote shares held by them on the Kimco Share Proposal or the Kimco 1998 Equity
Participation Plan. However, brokers do have discretionary authority to vote
shares held by them on the Kimco Adjournment Proposal. Thus, although present
for purposes of determining a quorum under Maryland law, such shares represented
by proxies reflecting abstentions or broker non-votes are not entitled to vote
on the Kimco Share Proposal and the Kimco 1998 Equity Participation Plan under
the rules of the NYSE.
SOLICITATION OF KIMCO PROXIES
Kimco will bear its own cost of solicitation of proxies. Brokerage firms,
fiduciaries, nominees and others will be reimbursed for their out-of-pocket
expenses in forwarding proxy materials to beneficial owners of Kimco Common
Stock held in their names. In addition to the use of the mails, proxies may be
solicited by directors, officers and regular employees of Kimco, who will not be
specifically compensated for such services, by means of personal calls upon, or
telephonic or telegraphic communications with, stockholders or their
representatives. In addition, Corporate Investor Communications, Inc. has been
engaged by Kimco to act as proxy solicitors and will receive a fee of $5,000
plus expenses.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of Kimco Common Stock entitled to
vote at the Kimco Annual Meeting is necessary to constitute a quorum at the
Kimco Annual Meeting.
REQUIRED VOTE
Each of the Kimco Share Proposal, the adoption of the Kimco 1998 Equity
Participation Plan and the Kimco Adjournment Proposal requires approval, in each
case, by the affirmative vote of the holders of a majority of the votes cast at
the Kimco Annual Meeting; provided that the total vote cast at the Kimco Annual
Meeting, in the case of the Kimco Share Proposal and the adoption of the Kimco
1998 Equity Participation Plan, represents over 50% in interest of all Kimco
Common Stock entitled to vote on such proposal. For purposes of the vote on the
Kimco Share Proposal and the adoption of the Kimco 1998 Equity Participation
Plan, abstentions will have the effect of a vote against such proposal, unless
holders of more than 50% in interest of all securities entitled to vote on such
proposal cast votes, in which event abstentions will have no effect on the
result of such vote. Abstentions will have the effect of a vote against the
Kimco Adjournment Proposal if submitted for a vote at the Kimco Annual Meeting.
A broker non-vote will have no effect on the result. Directors of Kimco are
elected by vote of a plurality of the shares of Kimco Common Stock present, in
person or by proxy, and entitled to vote at the Kimco Annual Meeting.
Accordingly, abstentions and broker non-votes as to the election of directors
will not be counted as votes cast and will have no effect on the result of the
vote. As of the Kimco Record Date, directors and executive officers of Kimco and
their affiliates, all of whom have indicated that they will vote for the Kimco
Share Proposal, for each of the nominees for the Board of Directors of Kimco set
forth in this Joint Proxy Statement/Prospectus, for the Kimco 1998 Equity
Participation Plan and for the Kimco Adjournment Proposal were beneficial owners
of 8,109,835 shares of Kimco Common Stock representing approximately 19.0% of
the outstanding Kimco Common Stock. Accordingly, the affirmative votes of the
holders of these shares may affect the outcome of the vote on each of these
matters.
THE MATTERS TO BE CONSIDERED AT THE KIMCO ANNUAL MEETING ARE OF GREAT
IMPORTANCE TO THE STOCKHOLDERS OF KIMCO. ACCORDINGLY, STOCKHOLDERS OF KIMCO ARE
URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT
PROXY STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
29
<PAGE>
PRICE REIT SPECIAL MEETING
PURPOSE OF THE PRICE REIT SPECIAL MEETING
At the Price REIT Special Meeting, holders of Price REIT Common Stock will
be asked to (i) consider and vote upon a proposal to approve the Merger, the
terms and conditions of which are described herein and set forth in the Merger
Agreement attached hereto as Annex A, and consummation of the transactions
contemplated thereby and (ii) consider and vote upon the Price REIT Adjournment
Proposal if the Chairman of the Price REIT Special Meeting determines that there
are not sufficient votes to approve the Merger.
THE BOARD OF DIRECTORS OF PRICE REIT HAS UNANIMOUSLY DECLARED THE MERGER
ADVISABLE, HAS APPROVED AND ADOPTED THE MERGER AND THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF PRICE REIT COMMON STOCK VOTE TO APPROVE
THE MERGER AND FOR THE PRICE REIT ADJOURNMENT PROPOSAL. SEE 'THE
MERGER--BACKGROUND OF THE MERGER,' '--RECOMMENDATION OF THE BOARD OF DIRECTORS
OF PRICE REIT,' '--INTERESTS OF CERTAIN PERSONS IN THE MERGER; POSSIBLE
CONFLICTS OF INTEREST' AND 'ADJOURNMENT PROPOSALS--PRICE REIT ADJOURNMENT
PROPOSAL.'
RECORD DATE; VOTING RIGHTS; PROXIES
The Price REIT Board of Directors has fixed the close of business on May 8,
1998 as the Price REIT Record Date for determining holders entitled to notice of
and to vote at the Price REIT Special Meeting or any adjournments or
postponements thereof.
As of the Price REIT Record Date, there were 11,731,479 shares of Price
REIT Common Stock issued and outstanding, each of which entitles the holder
thereof to one vote. All shares of Price REIT Common Stock represented by
properly executed proxies will, unless such proxies have been previously
revoked, be voted in accordance with the instructions indicated in such proxies.
IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES OF PRICE REIT COMMON STOCK WILL BE
VOTED TO APPROVE THE MERGER AND FOR THE PRICE REIT ADJOURNMENT PROPOSAL. A
holder of Price REIT Common Stock who has given a proxy may revoke it at any
time prior to its exercise by giving written notice thereof to the Secretary of
Price REIT, by signing and returning a later dated proxy, or by voting in person
at the Price REIT Special Meeting; however, mere attendance at the Price REIT
Special Meeting will not in and of itself have the effect of revoking the proxy.
Shares of Price REIT Common Stock represented by proxies that reflect
abstentions or 'broker non-votes' (i.e., shares held by a broker or nominee
which are represented at the Price REIT Special Meeting, but with respect to
which such broker or nominee is not empowered by the beneficial owner of the
stock to vote on a particular proposal) will be counted toward the presence of a
quorum and will have the same effect as votes cast against approval of the
Merger. However, brokers do have discretionary authority to vote shares held by
them with respect to the Price REIT Adjournment Proposal. See '--Required Vote.'
SOLICITATION OF PRICE REIT PROXIES
Price REIT will bear its own cost of solicitation of proxies. Brokerage
firms, fiduciaries, nominees and others will be reimbursed for their
out-of-pocket expenses in forwarding proxy materials to beneficial owners of
shares of Price REIT Common Stock held in their names. In addition to the use of
the mails, proxies may be solicited by directors, officers and regular employees
of Price REIT, who will not be specifically compensated for such services, by
means of personal calls upon, or telephonic or telegraphic communications with,
stockholders or their representatives. In addition, Corporate Investor
Communications, Inc. has been engaged by Price REIT to act as proxy solicitors
and will receive a fee of $4,500 plus expenses.
30
<PAGE>
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of Price REIT Common Stock is
necessary to constitute a quorum at the Price REIT Special Meeting.
REQUIRED VOTE
The approval of the Merger requires the affirmative vote of the holders of
a majority of the outstanding shares of Price REIT Common Stock. The approval of
the Price REIT Adjournment Proposal requires the affirmative vote of the holders
of a majority of the shares represented at the Price REIT Special Meeting,
whether or not a quorum is present. Abstentions and broker non-votes will have
the effect of votes against approval of the Merger and abstentions will have the
effect of votes against the Price REIT Adjournment Proposal if submitted for a
vote at the Price REIT Special Meeting. As of the Price REIT Record Date,
directors and executive officers of Price REIT and their affiliates, all of whom
have indicated that they will vote for approval of the Merger, were beneficial
owners of 878,395 shares of Price REIT Common Stock (including 15,000 shares of
Price REIT Common Stock with respect to which beneficial ownership is
disclaimed), representing approximately 7.1% of the outstanding shares of Price
REIT Common Stock. Accordingly, the affirmative votes by the holders of these
shares may affect the outcome of the vote.
THE MATTERS TO BE CONSIDERED AT THE PRICE REIT SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE HOLDERS OF PRICE REIT COMMON STOCK. ACCORDINGLY, HOLDERS OF
PRICE REIT COMMON STOCK ARE URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION
PRESENTED IN THIS JOINT PROXY STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
31
<PAGE>
THE COMPANIES
KIMCO
Kimco is one of the nation's largest owners and operators of neighborhood
and community shopping centers. As of February 1, 1998, Kimco's portfolio was
comprised of 339 property interests, including 273 neighborhood and community
shopping center properties, two regional malls, 62 retail store leases, one
leased parcel of undeveloped land and one distribution center comprising, in
total, approximately 41.7 million square feet of GLA, located in 37 states.
Kimco believes, based upon its review of industry publications and other
publicly available sources, that its portfolio of neighborhood and community
shopping center properties is one of the largest (measured by GLA) currently
held by any publicly-traded REIT. Kimco is a self-administered REIT and manages
its properties through present management which has owned and operated
neighborhood and community shopping centers for more than 30 years. Kimco has
not engaged, nor does it expect to retain, any REIT advisors in connection with
the operation of its properties.
Kimco began operations through its predecessor, The Kimco Corporation,
which was organized in 1966 upon the contribution of several shopping center
properties owned by its principal stockholders. In 1973, these principals formed
Kimco as a Delaware corporation, and in 1985, the operations of The Kimco
Corporation were merged into Kimco. Kimco completed its initial public stock
offering in November 1991, and reorganized as a Maryland corporation during
1994.
Kimco's growth through its first 15 years resulted primarily from the
ground-up development and construction of its shopping centers. By 1981, Kimco
had assembled a portfolio of 77 properties that provided an established source
of income and positioned Kimco for an expansion of its asset base. At that time,
Kimco revised its strategy to focus on the acquisition of existing shopping
centers because it generally believed that available financial returns did not
justify the risks of continued ground-up development of properties. Furthermore,
Kimco's management believed that existing properties with below market-rate
leases were available in the market at attractive prices. Kimco considers such
properties to offer greater leasing flexibility in the event space becomes
available or should there be an overcapacity of space in the local economy.
Kimco also believes that opportunities exist to create value through the
redevelopment and re-tenanting of existing shopping centers. As a result of this
change in strategy, Kimco has developed only two of the 262 property interests
added to its portfolio since 1981, as compared with 68 of the 77 properties
owned prior to that time.
Kimco has operated in a manner to qualify as a REIT under Sections 856
through 860 of the Code. Under those sections of the Code, Kimco must distribute
at least 95% of its taxable income and meet certain other asset and income
tests. As a result, pretax income of Kimco effectively flows through to its
stockholders who are taxed on the income on their individual income tax returns
eliminating the double taxation (at the corporate and stockholder levels) that
generally results from investment in a corporation.
Kimco's Policies with Respect to Certain Activities
Kimco has authority to issue shares of capital stock or other senior
securities in exchange for property and to repurchase or otherwise acquire its
Common Stock or other securities and may engage in such activities in the
future. Although it is not presently contemplated, Kimco may consider offering
purchase money financing in connection with the sale of properties where the
provision of such financing will increase the value received by Kimco for the
property sold. Kimco will not engage in trading, underwriting or the agency
distribution or sale of securities of other issuers. At all times, Kimco intends
to make investments in such a manner as to be consistent with the requirements
of the Code to qualify as a REIT unless, because of circumstances or changes in
the Code for the regulations promulgated thereunder, the Kimco Board determines
that it is no longer in the best interests of Kimco to qualify as a REIT.
Kimco's Investment Policy
Investments in Real Estate or Interests in Real Estate. Kimco's investment
objective has been to increase cash flow, current income and consequently the
value of its existing portfolio of properties, and to seek continued growth
through (i) the strategic re-tenanting, renovation and expansion of its existing
centers and (ii) the selective acquisition of established income-producing real
estate properties, and properties requiring significant re-tenanting and
redevelopment, primarily in neighborhood and community shopping centers in
geographic regions in which Kimco presently operates. Kimco intends to consider
investments in other real estate sectors and in geographic markets where it does
not presently operate should suitable opportunities arise. Future investments,
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however, including the activities described below, will not be limited to any
geographical area or a specified percentage of Kimco's assets.
Kimco's neighborhood and community shopping center properties are designed
to attract local area customers and typically are anchored by a supermarket,
discount department store or drugstore tenant offering day-to-day necessities
rather than high-priced luxury items. Kimco may either purchase or lease income-
producing properties in the future, and may also participate with other entities
in property ownership through partnerships, joint ventures or similar types of
co-ownership. Equity investments may be subject to existing mortgage financing
and other indebtedness or such financing or indebtedness may be incurred in
connection with acquiring investments. Any such financing or indebtedness will
have priority over Kimco's equity interest in such property. Kimco may make
loans to joint ventures in which it may or may not participate in the future.
While Kimco has historically held its properties for long-term investment,
and accordingly has placed strong emphasis on its ongoing program of regular
maintenance, periodic renovation and capital improvement, it is possible that
properties in the portfolio may be sold, in whole or in part, as circumstances
warrant, subject to REIT qualification rules.
Investments in Real Estate Mortgages. While Kimco's emphasis will be on
equity real estate investments, it may, in its discretion, invest in mortgages
and other interests related to neighborhood and community shopping centers. The
mortgages in which Kimco may invest may be either first mortgages or junior
mortgages and may or may not be insured by a governmental agency. In addition,
Kimco may invest in mortgage-related securities and/or may seek to issue
securities representing interests in such mortgage-related securities as a
method of raising additional funds.
Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities. Kimco may legally invest in the securities of other issuers, for
the purpose, among others, of exercising control over such entities, subject to
the gross income and asset tests necessary for REIT qualification. Kimco may
acquire all or substantially all of the securities or assets of other REITs or
similar entities where such investments would be consistent with Kimco's
investment policies. In any event, Kimco does not intend that its investments in
securities will require it to register as an 'investment company' under the
Investment Company Act of 1940.
Kimco emphasizes equity real estate investments but may, in its discretion,
invest in mortgages, other real estate interests and other investments.
Kimco's policies with respect to the aforementioned activities may be
reviewed and modified from time to time by the Kimco's Board of Directors
without notice to or the vote of the Kimco stockholders.
The Spin-Off REIT
In view of current market conditions, Kimco has deemed it advisable to
explore the creation of a new entity that would invest in real estate properties
with characteristics that, in its view, would be more appropriately financed
through greater leverage than Kimco traditionally uses. Such characteristics
would include, but not be limited to, high grade properties with strong, stable
cash flow from credit-worthy retailers. Assuming consummation of the Merger, Mr.
Joseph K. Kornwasser's employment agreement provides that he will be the
Chairman of the Spin-Off REIT. In order to establish the Spin-Off REIT, it is
contemplated that certain of the properties of the Combined Entity that have
such characteristics would be contributed to the new entity, and a majority
interest in such entity would be spun-off to stockholders of the Combined Entity
with Kimco retaining the balance of the ownership interest. However, no specific
properties have been identified as likely to be contributed to the Spin-Off
REIT. Assuming consummation of the Merger, Kimco anticipates that the Spin-Off
REIT will be created in 1998; however, no assurance regarding such timing can be
given. As exploration of the Spin-Off REIT is in the preliminary stages, no
determinations have yet been made by Kimco regarding the ultimate structure,
size or scope of the Spin-Off REIT, and no assurances can be given that such
transaction will occur.
PRICE REIT
Price REIT is a self-administered and self-managed equity REIT which is
primarily focused on the acquisition, development, management and redevelopment
of destination retail shopping center properties known as 'power centers.' As of
December 31, 1997, Price REIT owned or had interests in 37 properties,
consisting of 33 power and community centers, one stand-alone retail warehouse,
one project under development and two undeveloped land parcels, located in 15
states containing approximately 7.3 million square feet of GLA with
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approximately 540 tenants. The overall occupancy rate of the power and community
centers was approximately 98.4% with an average base rent per leased square foot
of $10.13 at December 31, 1997.
Power centers are typically open-air centers ranging in size from 200,000
to 700,000 square feet of GLA, and are usually comprised of one or more national
retail anchor tenants, often in a warehouse format. Anchor retail tenants
typically occupy between 60% and 90% of the total square footage in a power
center. The tenant mix in a power center is designed to draw consumers from up
to a 15-mile radius, creating a shopping 'destination.' The majority of Price
REIT's anchor tenants are retail warehouses, which are consumer-oriented
facilities with at least 25,000 to 100,000 square feet of gross leasable area
offering a variety of products for business use, personal use or resale. The
retail warehouse format of merchandise display, direct manufacturer purchasing,
low mark-ups and rapid inventory turnover is designed to provide substantial
consumer savings compared to other sources of similar merchandise.
Each of Price REIT's power centers is anchored by one or more national
retail tenants such as Home Depot, Costco, HomeBase and The Sports Authority.
Price REIT typically seeks to structure tenant leases as 'triple net' leases,
under the terms of which the tenant is responsible for its pro rata share of
costs and expenses associated with the ongoing operation of the property,
including but not limited to real property taxes and assessments, repairs and
maintenance, and insurance. The anchor tenants generally have primary lease
terms of five to ten years. Price REIT's leases generally provide for
contractual rent increases over the life of the lease based on a fixed amount or
consumer price indices, and, in certain cases, percentage rent, calculated as a
percentage of a tenant's gross sales above a predetermined threshold.
Price REIT's strategy is to continue to acquire, develop, own and manage
power centers anchored by national retail tenants who enter into long term
triple net leases. Price REIT's business objective is to increase its funds from
operations per share through the acquisition and development of additional
properties, contractual rent increases and percentage rent, reletting of
existing space at higher rents and expansion or remodeling of existing
properties.
Price REIT intends to pursue opportunities for acquisitions with expansion
potential and to develop additional power centers and community centers and
stand-alone retail warehouses. Price REIT conducts its development activities,
including site planning, construction management and leasing, primarily through
its in-house personnel.
Price REIT operates in a manner to qualify as a REIT under Sections 856
through 860 of the Code. Under those sections of the Code, Price REIT must
distribute at least 95% of its taxable income and meet certain other asset and
income tests. As a result, pretax income of Price REIT flows though to its
stockholders who are taxed on the income on their individual income tax returns
eliminating the double taxation (at the corporate and stockholder levels) that
generally results from investment in a corporation.
For a discussion of Price REIT's investment policies, see 'Comparison of
Stockholder Rights--Investment Policy.'
MERGER SUB
Merger Sub is a Maryland corporation, recently organized as a wholly owned
subsidiary of Kimco solely for the purpose of effecting the Merger. It has no
material assets and has not engaged in any activities except in connection with
the Merger.
COMBINED ENTITY
The Combined Entity, at February 1, 1998, after giving effect to the
Merger, would consist of approximately 48.8 million square feet of GLA in 308
shopping center properties (comprising neighborhood and community shopping
centers and power centers), two regional malls, 62 retail store leases, one
stand-alone retail warehouse, one distribution center, one project under
development and three undeveloped land parcels, located in 38 states. At
February 1, 1998, after giving effect to the Merger, it is expected that the
Combined Entity would have an average annualized base rent per leased square
foot of $7.06 and an overall occupancy rate of the neighborhood and community
shopping centers, power centers and malls of approximately 91.0%.
The broad geographic diversity of the portfolio of the Combined Entity
should reduce the potential adverse impact of fluctuations in local economies.
The integration of Price REIT's acquisition, development and management
capabilities with Kimco's construction management capabilities and related
in-house legal support
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system should result in the Combined Entity being a more fully integrated real
estate company than Kimco and Price REIT independently. As a result, the
management team of the Combined Entity is expected to be more vertically
integrated from a development and management perspective. The Combined Entity
may also benefit from economies of scale and operating efficiencies resulting
from the Merger, primarily in terms of the integration of back office facilities
and regulatory compliance. In addition, the Combined Entity is expected to have
an increased market capitalization, a stronger balance sheet, a larger portfolio
and additional development capabilities, which may provide greater liquidity,
including expanded access to the capital markets at a reduced cost, enabling it
to improve its results of operations and financial position.
RECENT DEVELOPMENTS
KIMCO
Shopping Center Acquisitions
During 1997, certain subsidiaries of Kimco acquired 14 neighborhood and
community shopping center properties comprising approximately 2.0 million square
feet of GLA in eight states. These shopping center properties were acquired in
separate transactions for an aggregate purchase price of approximately $141.7
million, including the assumption of approximately $14 million of mortgage debt.
For a further discussion regarding these shopping center acquisitions, see the
Current Report on Form 8-K of Kimco, filed January 22, 1998.
During January 1998, Kimco acquired seven neighborhood and community
shopping center properties comprising 0.6 million square feet of GLA in the
Denver, Colorado market for approximately $43.6 million, including the
assumption of $4.2 million of mortgage debt. In addition, an affiliate of Kimco
acquired three retail properties in the Chicago, Illinois market comprising 0.5
million square feet of GLA for an aggregate purchase price of $23.7 million.
Venture Stores, Inc. Portfolio Acquisition
In August 1997, Kimco acquired certain real estate assets from Venture for
the aggregate price of approximately $130 million, consisting of $70.5 million
in cash and the assumption of approximately $59.5 million of existing mortgage
debt on certain of these assets. This acquisition consisted of interests in 49
fee and leasehold properties totaling approximately 5.9 million square feet of
leasable area located in Illinois, Missouri, Texas, Oklahoma, Kansas, Indiana
and Iowa (collectively, the 'Venture Properties Acquisition'). The transaction
included approximately 573,000 square feet of non-Venture retail space. In
addition, Kimco was granted (i) an option to acquire two other properties for
$4.5 million, (ii) an option to acquire up to 11 additional properties should
certain conditions be satisfied and (iii) rights of first refusal, for a period
of five years, to acquire 31 additional properties containing 4.2 million square
feet of leasable area. Simultaneously with this transaction, Kimco entered into
a long-term unitary net lease with Venture covering all premises occupied by
Venture on these properties. As a result of this transaction, Venture was the
primary or sole tenant at 60 locations representing approximately 11.2% of the
annualized base rental revenues of Kimco as of February 1, 1998.
In January 1998, Venture filed for protection under Chapter 11 of the
United States Bankruptcy Code. Kimco has not received notice that Venture will
be delinquent in the payment of any rents due. There can be, however, no
assurance that Venture will continue to pay rents as they become due or that the
trustee in bankruptcy will not reject the leases under which Venture is bound.
Irrespective of Venture's current financial status, management believes
that the Venture Properties Acquisition represents a unique strategic
opportunity for Kimco, based on the significant intrinsic value in the
underlying real estate assets as a result of (i) attractive geographic
locations, (ii) current below market-rate leases and (iii) the opportunity to
lease-up the remaining 165,000 square feet of vacant non-Venture retail space.
In addition to its intrinsic real estate value, the Venture Properties
Acquisition also provides Kimco with (i) strong initial yields, (ii) increased
geographic diversification and (iii) options to acquire additional properties.
While Kimco believes, based upon current market conditions in the areas where
Venture is a tenant, that it could replace any defaulted or discharged leases
with leases that are on no less favorable terms than the leases currently in
place, no such assurance can be given.
On April 27, 1998, Kimco announced that it had reached an agreement to
purchase Venture's leasehold position at 89 locations, including 56 properties
pursuant to two unitary leases currently in place with Kimco, 30
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properties pursuant to a master lease with Metropolitan Life Insurance Co.
('Metropolitan Life') and three properties leased by Venture from others. The
purchase price for the leasehold positions will be $95.0 million, less certain
closing adjustments, but is subject to upward adjustment based on the success of
Kimco's attempts to re-tenant the properties over a two-year period. The
agreement is subject to the approval of the U.S. Bankruptcy Court, which is
expected to review the Kimco offer (which has the support of the official
committee representing Venture's creditors) and any competing bids for the lease
rights and rule on the proposed transaction at a hearing on June 1, 1998.
On May 1, 1998, Kimco entered into an agreement to lease 49 of these
locations to Kmart Corporation. Kimco is also negotiating with several other
major retailers to lease certain of the remaining Venture locations. No
assurances, however, can be given regarding the terms or timing of such other
transactions. Kimco also announced that it had reached an agreement with
Metropolitan Life to purchase the 30 fee and leasehold positions of the
properties currently leased by Metropolitan Life to Venture. Such transactions
are contingent upon the approval of the U.S. Bankruptcy Court of the purchase by
Kimco of Venture's leasehold positions in the 89 locations described above and,
accordingly, no assurances can be given that final agreements will be entered
into or, if entered into, whether the terms of such final agreements will
materially differ from the terms described above.
Revolving Credit Facility
In March 1998, Kimco obtained an additional $150 million interim unsecured
revolving credit facility from Chase Bank (as defined herein) and First Chicago
NBD Corporation to both finance the purchase of properties and meet any
short-term working capital requirements. This facility is scheduled to expire in
June 1998; however, it is Kimco's intention to extend the term of this facility
and establish it as a continuing part of Kimco's total unsecured revolving
credit availability.
During April 1998, Kimco completed the sale of an aggregate 2,259,020
shares of Kimco Common Stock in four separate transactions consisting of a
primary public stock offering of 460,000 shares of Kimco Common Stock at
$36.0625 per share and three private placements of 415,945 shares, 546,075
shares and 837,000 shares, respectively, of Kimco Common Stock priced at
$36.0625, $36.625 and $36.25 per share, respectively. The Kimco Common Stock
sold in these private placements will be deposited in separate unit investment
trusts. The net cash proceeds from these offerings, totaling approximately $77.6
million (after related transaction costs of approximately $4.4 million), will be
used for general corporate purposes, including the acquisition of interests in
neighborhood and community shopping centers as suitable opportunities arise and
the expansion and improvement of properties in Kimco's portfolio. Pending such
use, Kimco may (i) temporarily repay borrowings under Kimco's revolving credit
facilities or (ii) invest in short-term income providing investments such as
investments in commercial paper, government securities or money market funds
that invest in government securities.
Commitment to Issue Preferred Stock
Kimco intends to enter into the Purchase Agreement. See '--Price REIT'
below for additional information.
PRICE REIT
Issuance of Preferred Stock
Price REIT, Kimco and Lehman Bros. intend to enter into the Purchase
Agreement pursuant to which Lehman Bros. will agree to purchase an aggregate of
up to $65.0 million of Price REIT Preferred Stock. Price REIT currently expects
to issue 65,000 shares of Price REIT Preferred Stock (with an aggregate purchase
price of $65.0 million) in May 1998. Pursuant to the Second Amendment, the Price
REIT Preferred Stock will be exchanged in the Merger for Kimco Class E
Depositary Shares. Because the transaction remains subject to completion of
definitive documentation, no assurance can be given that the issuance of Price
REIT Preferred Stock will occur within the anticipated time frame or at all. In
general, following the Merger, Kimco will assume Price REIT's obligations under
the Purchase Agreement and, through the issuance of the Kimco Class E Depositary
Shares, will assume the obligations of the Price REIT Preferred Stock.
The material terms of or applicable to the Price REIT Preferred Stock are
expected to be as follows:
Liquidation Preference and Dividend Rate. The Price REIT Preferred Stock
has a liquidation preference of $1,000 per share and entitles the holder to
dividends at a floating rate. The dividend rate is equal to the three
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month LIBOR rate plus 2.0% and is payable quarterly on a cumulative basis. The
terms of the Price REIT Preferred Stock are expected to provide that the three
month LIBOR rate will be reset each quarter, two business days before the first
day of the relevant dividend period.
Optional Call. The Purchase Agreement is expected to provide that Price
REIT (or, following the Merger, Kimco) may exercise a contractual right to call
(the 'Price REIT Optional Call') any outstanding Price REIT Preferred Stock (or,
following the Merger, Kimco Class E Depositary Shares) at a price equal to the
liquidation preference plus accrued but unpaid dividends not later than the
earlier of: (i) 150 days after the Merger and (ii) the first anniversary of the
date of the Purchase Agreement (the 'Price REIT Optional Call Period').
Form of Offering. The Price REIT Preferred Stock will be issued to Lehman
Bros. in a private offering pursuant to Section 4(2) under the Securities Act.
Subsequent Secondary Offering. If the Price REIT Optional Call is not
exercised by Price REIT (or, after the Merger, by Kimco), then Price REIT (or
Kimco, as the case may be) will be required to register under the Securities Act
the resale of the Price REIT Preferred Stock (or depositary shares representing
Price REIT Preferred Stock). If the Merger does not occur and the Price REIT
Preferred Stock remains outstanding, then Price REIT will register for resale
depositary shares representing the Price REIT Preferred Stock. The depositary
shares will have identical terms, rights, preferences and privileges as the
Price REIT Preferred Stock, except that such depositary shares will be eligible
for redemption by the depositary beginning five years after the end of the Price
REIT Optional Call Period. If the Merger occurs, the Price REIT Preferred Stock
will be converted as a result of the Merger into the right to receive Kimco
Class E Depositary Shares. Kimco will then be obligated to register the resale
by Lehman Bros. of the Kimco Class E Depositary Shares.
Treatment of Price REIT Preferred Stock in the Merger. Upon completion of
the Merger, each outstanding share of Price REIT Preferred Stock will be
converted into the right to receive 10 Kimco Class E Depositary Shares, each of
which will represent a one-tenth fractional interest in a share of newly issued
Kimco Class E Preferred Stock.
Voting Rights. Holders of shares of Price REIT Preferred Stock will have no
voting rights, except that if distributions on such shares are in arrears for
more than six dividend periods, the number of directors on the Price REIT Board
of Directors will be increased by one and the holder(s) of the shares of Price
REIT Preferred Stock will have the right, voting as a separate class, to elect
one additional director. The number of additional directors that may be elected
under such circumstances may be increased to two if the Price REIT Charter is
amended to so allow.
Appraisal Rights. Under the MGCL, the holder of Price REIT Preferred Stock
has appraisal rights in connection with the Merger; however, the Purchase
Agreement is expected to provide that the sole holder of such stock will waive
such rights.
Terms of Kimco Class E Depositary Shares and Kimco Class E Preferred
Stock. The terms of each of the Kimco Class E Depositary Shares and the Kimco
Class E Preferred Stock represented thereby will entitle the holders thereof to
substantially the same rights as the holders of the Price REIT Preferred Stock
are entitled and, if applicable, the rights to which holders of the depositary
shares that Price REIT may be required to issue, as described under
'--Subsequent Secondary Offering,' are entitled. In addition, the Kimco Class E
Preferred Stock will be subject to an overall ownership limitation as more fully
described under 'Description of Kimco Securities--Kimco Class E Preferred
Stock.'
Increase in Line of Credit
On February 27, 1998, Price REIT increased the availability under its
unsecured line of credit from $75 million to $100 million. The terms of such
line of credit were not otherwise changed in any material respect.
IMPACT OF YEAR 2000
Like most corporations, Kimco and Price REIT are reliant upon technology to
run their respective businesses. Many computer systems process dates using two
digits to identify the year, and some systems are unable to properly process
dates beginning with the year 2000. Kimco and Price REIT are currently assessing
and addressing this 'Year 2000' issue and do not believe the costs connected
with this assessment will have a material adverse effect on either company's
results of operations.
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THE MERGER
GENERAL
The Merger Agreement provides for a business combination between Kimco and
Price REIT in which Price REIT would be merged with and into Merger Sub, a
wholly owned subsidiary of Kimco, and the holders of Price REIT Common Stock
would be issued Merger Consideration in a transaction which will be treated as a
purchase for accounting purposes and is intended to qualify as a tax-free
reorganization for Federal income tax purposes. The discussion in this Joint
Proxy Statement/Prospectus of the Merger and the description of the Merger's
principal terms are subject to and qualified in their entirety by reference to
the Merger Agreement, a copy of which is attached to this Joint Proxy
Statement/Prospectus as Annex A and which is incorporated herein by reference.
BACKGROUND OF THE MERGER
Milton Cooper, the Chairman and Chief Executive Officer of Kimco, and
Joseph K. Kornwasser, the President and Chief Executive Officer of Price REIT,
first met in May 1993. Thereafter, Messrs. Cooper and Kornwasser met on many
occasions and discussed their respective businesses. Prior to June 1996,
however, no meaningful discussions were held about a merger of Kimco and Price
REIT.
In May 1996, Kimco and Price REIT formed the Partnership to purchase the
Hayden Plaza North shopping center in Phoenix, Arizona. Price REIT owns a 50%
interest in the Partnership and a wholly owned subsidiary of Kimco owns the
remaining 50% interest. Price REIT and Kimco have been working together
successfully on the redevelopment and expansion of the Hayden Plaza North
shopping center since that time.
In June 1996, Messrs. Cooper and Kornwasser held very preliminary
discussions to determine if there was a mutual interest in pursuing discussions
with the intention of forming some type of strategic alliance between Kimco and
Price REIT. Following such discussions, which did not result in any substantive
agreement, Messrs. Cooper and Kornwasser sporadically had informal conversations
over the course of the ensuing year regarding the possibility of engaging in
some type of strategic alliance without arriving at a mutually acceptable
structure for such an alliance.
On November 4, 1997, Messrs. Cooper and Kornwasser met at Mr. Cooper's
request and discussed the possibility of exploring a potential business
combination between Kimco and Price REIT.
On November 13, 1997, Price REIT received an unsolicited proposal from
Price Enterprises, Inc. ('PEI') regarding a possible business combination
between Price REIT and PEI. Price REIT was formerly affiliated with a
predecessor of PEI. However, Price REIT has no current relationship with PEI. On
November 17, 1997, PEI announced its delivery of the proposal to Price REIT. On
November 18, 1997, Price REIT announced the receipt of PEI's proposal.
Pursuant to an engagement letter dated November 20, 1997, Price REIT
retained Merrill Lynch to act as financial advisor to Price REIT with respect to
any proposed business combinations between Price REIT and a third party.
On November 24, 1997, Price REIT advised PEI of and announced Price REIT's
rejection of PEI's proposal because such proposal was not deemed to be in the
best interests of Price REIT or its stockholders. The Price REIT Board of
Directors, in consultation with its legal and financial advisors, determined
that PEI's proposal was not in the best interests of Price REIT or its
stockholders because of the Board's belief that, among other things, the
proposed combined company's capital structure would be viewed unfavorably (as
compared to industry peers) and would have negatively impacted the proposed
combined company's credit rating and debt capacity. In addition, the Price REIT
Board of Directors concluded that the preferred stock offered by PEI would
likely be discounted significantly from its stated liquidation preference by the
public markets due to the illiquidity of the preferred stock which would
represent a significant portion of the combined company's equity market
capitalization.
On November 25, 1997, Mr. Cooper called Mr. Kornwasser to discuss further
the possibility of a proposed business combination between Kimco and Price REIT.
Messrs. Cooper and Kornwasser continued discussions by telephone on multiple
occasions over the ensuing days regarding the proposed business combination.
On December 1, 1997, Kimco delivered a letter (the 'December 1 Letter') to
Price REIT in which Kimco proposed a strategic combination of the two companies.
The December 1 Letter outlined, in general terms, the
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proposed combination of the two companies and stated Kimco's willingness to pay
a total of $45.00 per share to holders of Price REIT Common Stock payable in
Kimco securities (consisting of 80% Kimco Common Stock and 20% from a new class
of Kimco preferred stock). The December 1 Letter did not describe in detail the
terms of the proposed combination. It did, however, ask that Price REIT execute
an accompanying confidentiality agreement which would facilitate negotiations on
the proposed combination. The confidentiality agreement was signed by Price REIT
on December 1 and returned to Kimco.
In early December, Jefferies began to act as financial advisor to Kimco
(and was formally engaged by Kimco pursuant to a letter agreement dated December
16, 1997) with respect to any proposed business combinations between Kimco and a
third party. Mr. Richard G. Dooley, a director of Kimco, serves on the Board of
Directors of Jefferies.
On December 3, 1997, a special meeting of the Board of Directors of Price
REIT was held at which representatives from Merrill Lynch and Price REIT's legal
advisors were present. The Board of Price REIT discussed the proposal from Kimco
and authorized management to continue to explore the proposal.
From December 4, 1997 through January 12, 1998, the management of Kimco and
Price REIT and each company's respective financial and legal advisors had
numerous discussions regarding various business and legal issues.
On December 8, 1997, Mr. Cooper, Michael Flynn (Vice Chairman of Kimco) and
Michael Pappagallo (Vice President--Chief Financial Officer of Kimco) and Mr.
Kornwasser, along with representatives of their respective financial advisors,
met with the objective of discussing the specific terms and structure of a
potential merger between Kimco and Price REIT and to see if the parties could
reach a mutually acceptable resolution on unresolved issues.
Reciprocal due diligence commenced on December 9, 1997 and was completed by
January 13, 1998 to the satisfaction of both parties.
On December 15, 1997, a special meeting of the Board of Directors of Price
REIT was held at which management, along with representatives from Merrill Lynch
and outside legal counsel advised the Directors of Price REIT of the status of
negotiations with Kimco regarding the proposed business combination. After
discussion, the Price REIT Board of Directors authorized management to continue
discussions with Kimco regarding the proposed transaction. Also on December 15,
1997, a special meeting of the Board of Directors of Kimco was held at which
management, along with representatives from Jefferies and outside legal counsel,
advised the Board of Directors of Kimco of the status of negotiations with Price
REIT regarding the proposed business combination. After discussion, the Kimco
Board of Directors authorized management to continue discussions with Price REIT
regarding the proposed transaction. Management of Kimco and Price REIT and their
respective legal counsel began to negotiate the terms of a draft merger
agreement and subsequently engaged in numerous discussions regarding the
specific terms and conditions of such agreement.
On December 29, 1997, a series of conversations took place between Kimco,
Price REIT, their respective financial and legal advisors, regarding Price
REIT's requirement that the holders of Price REIT Common Stock be able to
participate through their receipt of the Merger Consideration in any increase in
value of the Kimco Common Stock above $35.00 per share during the calculation
period of the Kimco Average Price. While no agreement was reached on this issue,
it was agreed that the parties would continue negotiations in an effort to reach
a mutually beneficial arrangement.
On January 5, 1998, Kimco, Price REIT and their respective financial and
legal advisors met by telephone conference to discuss the details of the
proposed Merger. At such meeting, several outstanding issues were discussed,
with agreements being reached that the formula to determine the Merger
Consideration would provide that the holders of Price REIT Common Stock would
participate in any increase above $35.00 in the Kimco Common Stock during the
calculation period of the Kimco Average Price per share. During the next several
days, Messrs. Cooper and Kornwasser as well as respective legal counsel for
Kimco and Price REIT held several telephone discussions in which all outstanding
terms and conditions to the Original Merger Agreement (as defined herein) were
finalized for submission to the respective Boards of Directors of Kimco and
Price REIT for their consideration.
On January 13, 1998, a special meeting of the Board of Directors of Price
REIT was held at which management, representatives from Merrill Lynch and legal
counsel were present. At the meeting, the Price REIT
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Board of Directors was updated on the status of discussions with Kimco regarding
the potential merger transaction between Kimco and Price REIT. Mr. Kornwasser
reviewed with the Board of Directors (i) a summary of the terms of the proposed
merger, (ii) the status of Price REIT's financial and business plans with and
without the proposed merger, (iii) pertinent due diligence findings with respect
to Kimco and (iv) the potential benefits as well as the risks of the proposed
merger transaction as described below under '--Price REIT's Reasons for the
Merger; Positive and Negative Factors Considered.'
At that meeting, Price REIT's legal counsel made a presentation to the
Price REIT Board of Directors in which it explained the material terms of the
proposed merger, briefed the Board on certain legal issues raised by the
proposed merger transaction and advised the Board of Directors of its fiduciary
duties in connection with such transaction.
In addition, Merrill Lynch at that meeting presented its financial analysis
of the proposed merger transaction between Kimco and Price REIT. Merrill Lynch
concluded its presentation by delivering to the Price REIT Board of Directors
its written opinion to the effect that, as of that date, and based upon the
assumptions made, matters considered and limits of review set forth in such
opinion, the consideration to be received by the holders of Price REIT Common
Stock in the proposed merger was fair to such stockholders from a financial
point of view.
Following such presentations, and after extensive discussion of the
advantages and disadvantages of the proposed merger transaction, as described
under '--Price REIT's Reasons for the Merger; Positive and Negative Factors
Considered,' the Board of Directors of Price REIT concluded that the advantages
of the proposed merger outweighed the potential negative factors, and, by
unanimous vote of those Directors present at the meeting, approved the Merger, a
definitive merger agreement (the 'Original Merger Agreement') and all
transactions contemplated thereby.
On January 13, 1998, a special meeting of the Board of Directors of Kimco
was held at which management, representatives from Jefferies and legal counsel
were present. At the meeting, the Kimco Board of Directors was updated on the
status of discussions with Price REIT regarding the proposed merger transaction
between Price REIT and Kimco. Mr. Cooper and the representatives from Jefferies
reviewed with the Board of Directors (i) a summary of the terms of the proposed
merger, (ii) the status of Kimco's financial and business plans with and without
the proposed merger, (iii) pertinent due diligence findings with respect to
Price REIT and (iv) the potential benefits as well as the risks of the proposed
merger transaction as described below under '--Kimco's Reasons for the Merger;
Positive and Negative Factors Considered.'
At that meeting, Kimco's legal counsel made a presentation to the Kimco
Board of Directors in which it explained the material terms of the proposed
merger, briefed the Board on certain legal issues raised by the proposed merger
transaction and advised the Board of Directors of its fiduciary duties in
connection with such transaction.
In addition, Jefferies at that meeting presented its financial analysis of
the proposed merger transaction between Kimco and Price REIT. Jefferies
concluded its presentation by orally presenting to the Kimco Board of Directors
its opinion to the effect that, as of that date, the consideration to be paid by
Kimco in the proposed merger was fair to the public common stockholders of Kimco
from a financial point of view.
Following such presentations, and after extensive discussion of the
advantages and disadvantages of the proposed merger transaction, as described
under '--Kimco's Reasons for the Merger; Positive and Negative Factors
Considered,' the Board of Directors of Kimco concluded that the advantages of
the proposed merger outweighed the potential negative factors, and, by unanimous
vote of the Directors of Kimco approved the Merger, the Original Merger
Agreement and all transactions contemplated thereby, including the Kimco Share
Proposal.
The Original Merger Agreement was executed on January 13, 1998.
On February 20, 1998, Mr. Cooper contacted Mr. Kornwasser to express his
concern that the stock prices of the Kimco Common Stock and the Price REIT
Common Stock might be vulnerable to artificial movement prior to the Closing
Date. Mr. Kornwasser stated his belief that such movements of the stock prices
were not in the best interest of either party's stockholders. In an attempt to
address this situation, Messrs. Cooper and Kornwasser agreed to modify the
calculation of the Kimco Average Price so that the days to be used in such
calculation would be randomly selected.
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On March 5, 1998, the Board of Directors of Kimco and the Board of
Directors of Price REIT each held a meeting to approve and adopt, and each by
unanimous vote approved and adopted, the First Amendment to the Original Merger
Agreement (the 'First Amendment'). The First Amendment provides for the Kimco
Average Price to be calculated based on the average daily high and low prices of
the Kimco Common Stock on 15 randomly selected trading days within a rolling
period of 30 consecutive trading days ending on the seventh day prior to the
date of the Kimco Annual Meeting.
The First Amendment was executed on March 5, 1998.
On May 14, 1998, the Board of Directors of Kimco held a meeting to approve
and adopt, and by unanimous vote approved and adopted, the Second Amendment to
the Original Merger Agreement (the 'Second Amendment'). By unanimous written
consent, on May 13, 1998, the Board of Directors of Price REIT approved and
adopted the Second Amendment. The Second Amendment revised the Articles
Supplementary setting forth the terms of the Kimco Class D Preferred Stock,
included as Exhibit A to the Merger Agreement, to address certain voting and
ownership restriction issues that had been agreed upon by the parties and added
additional provisions required in order to provide for the conversion of the
Price REIT Preferred Stock into Kimco Class E Preferred Stock upon the
consummation of the Merger.
The Second Amendment was executed on May 14, 1998.
KIMCO'S REASONS FOR THE MERGER; POSITIVE AND NEGATIVE FACTORS CONSIDERED
The material positive factors that the Kimco Board of Directors considered
in reaching its determination to approve the Merger Agreement and to recommend
approval of the Kimco Share Proposal are set forth below:
(i) the Merger provides Kimco with the opportunity, in a single
transaction, to expand significantly the size and geographic diversity of
its portfolio by acquiring a portfolio of 37 properties, consisting of 33
major destination retail shopping power center properties, one retail
warehouse property, one property currently under development and two
additional properties held for development. These properties are located
primarily in the western United States, an area where Kimco has only a
limited presence, which may reduce the potential adverse impact on the
overall portfolio of fluctuations in local economies and will result in a
combined company that will be national in scale;
(ii) the properties that will be added to the Kimco portfolio as a
result of the Merger are viewed by the Kimco Board of Directors as being
very well maintained with strong credit quality tenants that will provide
additional diversity to the Kimco tenant base;
(iii) the belief of Kimco's management, based in part on Jefferies'
analyses, that the Merger would be accretive, on a going-forward basis, to
Kimco's FFO per share;
(iv) the integration of Price REIT's acquisition, development and
management capabilities will add complementary expertise to Kimco's
construction management capabilities and its related in-house legal support
system and will result in Kimco being a more fully integrated real estate
company with a management team that is more vertically integrated from a
development and management perspective;
(v) the Merger will add to senior management's strength by adding
complementary expertise that will facilitate Kimco's expansion into real
estate development activities and increased activity in geographic areas in
which Kimco does not currently have a presence. In connection therewith,
Messrs. Kornwasser, Friedman and Kronenberg have entered into employment
agreements with Kimco pursuant to which they will become, upon consummation
of the Merger, Senior Executive Vice President, Executive Vice President
and Vice President of Kimco, respectively. In addition, Mr. Kornwasser will
become a member of the Kimco Board of Directors. The Board of Directors of
Kimco viewed this as favorable because it believes that each of these
executives is a seasoned and skilled manager who will be able to make a
valuable contribution to Kimco;
(vi) management's belief that the increased market capitalization, a
stronger balance sheet, the increase in the size of Kimco's portfolio and
the addition of development capabilities may provide Kimco with greater
liquidity, including expanded access to the capital markets at a reduced
cost, enabling it to improve its results of operations and financial
position;
(vii) the opinion of Jefferies given on January 13, 1998 that, as of
such date, the proposed consideration to be paid by Kimco pursuant to the
Merger was fair to the public stockholders of Kimco from a financial
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point of view. While the Kimco Board of Directors did not explicitly adopt
Jefferies' opinion, it relied on such opinion and Jefferies' analyses in its
overall evaluation of the Merger and viewed Jefferies' opinion as favorable
because the independent conclusion reached by Jefferies was consistent with the
opinion of Kimco's management;
(viii) the Merger is intended to qualify as a tax-free reorganization
for Federal income tax purposes. The Board of Directors of Kimco viewed
this as favorable because no gain or loss will be recognized by Kimco as a
result of the Merger;
(ix) the ability to effectuate the Merger through the issuance of
equity rather than through the use of cash or a public offering of
securities, which the Kimco Board of Directors viewed as favorable in part
because it will result in Kimco having a stronger balance sheet;
(x) the opportunities for economies of scale and operating
efficiencies that should result from the Merger, primarily in terms of the
integration of back office facilities and regulatory compliance; and
(xi) the Kimco Board of Directors' view that the overall terms of the
Merger Agreement are fair to Kimco.
The Board of Directors of Kimco believes that these reasons are relevant to
and support its ultimate conclusion because they are consistent with Kimco's
previously stated mission of maximizing long-term profitability for its
stockholders. In addition, by acquiring these assets in a single transaction and
instituting certain operating efficiencies going forward, the Kimco Board of
Directors believes that Kimco will recognize certain cost savings by eliminating
the management time and effort required to acquire a substantial number of
properties on an individual basis and, to a lesser extent, management's estimate
of the annual general and administrative cost savings resulting from the Merger.
The Kimco Board of Directors also considered certain potentially negative
factors that could arise from the proposed Merger. The material potentially
negative factors considered were as follows:
(i) the significant costs involved in connection with consummating the
Merger and the substantial management time and effort required to
effectuate the Merger and integrate the businesses of Kimco and Price REIT;
(ii) the possible adverse effects upon the market for Kimco Common
Stock and upon Kimco's ability to raise capital and issue equity in both
the public and private markets that might result if the Merger were not
consummated;
(iii) that, if the Merger does not occur, under certain circumstances
Kimco could have to pay to Price REIT a fee of either $6.25 million or
$12.5 million plus, in certain instances, expenses;
(iv) that, if the Kimco Average Price is less than $33.75, the number
of shares of Kimco Common Stock to be issued will be increased to arrive at
a Notional Value of $45.00, thereby reducing the calculation of Kimco's FFO
per share (a supplemental measure considered by most industry analysts and
equity REITs, including Kimco, to appropriately reflect the performance of
an equity REIT, calculated in accordance with NAREIT's FFO definition); and
(v) the risk that the anticipated benefits of the Merger might not be
fully realized. In the view of the Kimco Board of Directors, the negative
factors were not sufficient, either individually or collectively, to
outweigh the advantages of the Merger.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF KIMCO
The Kimco Board of Directors believes that the terms of the Merger
Agreement and the transactions contemplated thereby are fair to and in the best
interests of Kimco and its stockholders. ACCORDINGLY, AT SPECIAL MEETINGS HELD
ON JANUARY 13, 1998, MARCH 5, 1998 AND MAY 14, 1998, THE KIMCO BOARD OF
DIRECTORS UNANIMOUSLY APPROVED THE ORIGINAL MERGER AGREEMENT, THE FIRST
AMENDMENT AND THE SECOND AMENDMENT, RESPECTIVELY, AND RECOMMENDS APPROVAL OF THE
KIMCO SHARE PROPOSAL BY THE STOCKHOLDERS OF KIMCO. In reaching its conclusion,
the Kimco Board of Directors consulted with Kimco's management, as well as its
financial advisors, legal counsel and accountants, and considered a number of
factors in separate
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conversations with Kimco's management and at meetings of the Board of Directors.
In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the Kimco Board of Directors did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination.
THE BOARD OF DIRECTORS OF KIMCO UNANIMOUSLY RECOMMENDS THAT KIMCO
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE KIMCO SHARE PROPOSAL.
OPINION OF KIMCO'S FINANCIAL ADVISOR
Kimco engaged Jefferies to opine on the fairness of the consideration to be
paid by Kimco pursuant to the Merger, from a financial point of view, to the
public common stockholders of Kimco. The Board of Directors of Kimco selected
Jefferies because, as part of its investment banking business, Jefferies is
regularly engaged in the evaluation of capital structures, the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements, financial restructuring and
other financial services. No limitations were imposed by the Kimco Board of
Directors on the scope of Jefferies' investigation or the procedures to be
followed in rendering the Jefferies Opinion. Mr. Richard G. Dooley, a director
of Kimco also serves on the Board of Directors of Jefferies.
Jefferies delivered its oral opinion to the Kimco Board of Directors on
January 13, 1998 and confirmed such opinion in writing as of the date of this
Joint Proxy Statement/Prospectus (the 'Jefferies Opinion'), to the effect that,
as of such date and based on the matters described therein, the consideration to
be paid by Kimco pursuant to the Merger is fair to the public common
stockholders of Kimco from a financial point of view. For purposes of the
Jefferies Opinion, the term 'consideration to be paid by Kimco pursuant to the
Merger' includes the exchange of each outstanding share of Price REIT Common
Stock into 1.00 share of Kimco Common Stock and 0.40 Kimco Class D Depositary
Shares, subject to the adjustments described in Section 4.1(b) of the Merger
Agreement. Jefferies did not recommend to the Kimco Board of Directors that any
specific consideration would constitute the appropriate consideration in the
Merger. Except as set forth below, no limitations were imposed by the Kimco
Board of Directors on the scope of Jefferies' investigations or procedures to be
followed in rendering the Jefferies Opinion. Jefferies was not requested to
opine as to, and the Jefferies Opinion did not address, the underlying business
decision of the Kimco Board of Directors to proceed with or to effect the
Merger.
THE FULL TEXT OF THE JEFFERIES OPINION IS ATTACHED AS ANNEX B TO THIS JOINT
PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. KIMCO
STOCKHOLDERS ARE URGED TO READ THE JEFFERIES OPINION CAREFULLY AND IN ITS
ENTIRETY FOR THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, THE MATTERS CONSIDERED
AND LIMITATIONS OF THE REVIEW BY JEFFERIES IN ARRIVING AT THE CONCLUSIONS
EXPRESSED THEREIN. THE MERGER CONSIDERATION WAS DETERMINED ON THE BASIS OF
NEGOTIATIONS BETWEEN KIMCO AND PRICE REIT AND WAS APPROVED BY THE KIMCO BOARD OF
DIRECTORS. THE SUMMARY OF THE JEFFERIES OPINION SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE JEFFERIES OPINION.
In rendering the Jefferies Opinion, Jefferies noted that the consummation
of the Merger is conditioned upon the approval by the Kimco stockholders of the
Kimco Share Proposal, and that Jefferies is not recommending that Kimco, the
Kimco Board of Directors, any of its stockholders, or any other person, should
take any specific action in connection with the Merger. The Jefferies Opinion
also does not constitute a recommendation of the Merger over any alternative
transactions which may be available to Kimco, and does not address Kimco's
underlying business decision to effect the Merger. In addition, the Jefferies
Opinion does not opine as to the market value or the prices at which any of the
securities of Kimco may trade at any time.
In connection with the preparation of the Jefferies Opinion, Jefferies,
among other things: (i) reviewed Merger Agreement (including any schedules and
exhibits thereto); (ii) reviewed certain financial and other information that
was publicly available; (iii) reviewed information furnished to Jefferies by
Kimco and Price REIT, including certain internal financial analyses, budgets,
reports and other information prepared by the respective managements of the
companies; (iv) held discussions with various members of senior management of
Kimco and Price REIT concerning each company's historical and current
operations, financial conditions and prospects, as well as the strategic and
operating benefits anticipated from the Merger; (v) reviewed the share price and
trading history of Kimco's and Price REIT's publicly traded securities from
January 2, 1996 to January 12,
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1998; (vi) reviewed the valuations of publicly traded companies which Jefferies
deemed comparable to Kimco and Price REIT; (vii) reviewed the acquisition
valuation multiples and stock purchase price premiums of publicly traded
companies which Jefferies deemed comparable to Kimco and Price REIT; (viii)
reviewed the net asset valuations of both Kimco and Price REIT and the net asset
valuations of publicly traded companies which Jefferies deemed comparable to
Kimco and Price REIT; (ix) analyzed the combined FFO and funds available for
distribution ('FAD') per share of the combined company on a pro forma basis (a
supplemental measure considered by most industry analysts and Jefferies to
appropriately reflect the performance of an equity REIT, calculated in
accordance with NAREIT's FFO definition); (x) prepared discounted cash flow
analyses of Kimco and Price REIT on a stand-alone basis; and (xi) prepared a
relative contribution analysis of revenue, net operating income, FFO and FAD
contributed by each of Kimco and Price REIT. In addition, Jefferies conducted
such other reviews, analyses and inquiries relating to Kimco and Price REIT as
it considered appropriate in rendering the Jefferies Opinion.
In Jefferies' review and analysis and in rendering the Jefferies Opinion,
Jefferies relied upon, but did not assume any responsibility to independently
investigate or verify, the accuracy, completeness and fair presentation of all
financial and other information that was provided to it by Kimco or Price REIT
or that was publicly available (including, without limitation, the information
described above and the financial projections and financial models prepared by
Kimco and Price REIT in the ordinary course of conducting their respective
business and not in contemplation of the Merger, regarding the estimated future
performance of the respective companies). The Jefferies Opinion was expressly
conditioned upon such information (whether written or oral) being complete,
accurate and fair in all respects.
With respect to the financial projections and financial models provided to
and examined by Jefferies, Jefferies noted that projecting future results of any
company is inherently subject to vast uncertainty. Jefferies assumed that such
projections and models were reasonably prepared and reflect the best currently
available estimates and good faith judgments of the respective managements of
Kimco and Price REIT as to the future performance of each company. In addition,
Jefferies noted that although it has performed sensitivity analyses thereon, in
rendering the Jefferies Opinion, Jefferies has assumed that each company will
perform in accordance with such projections and models for all periods specified
therein. In addition, although such projections and models did not form the
principal basis for the Jefferies Opinion, but rather constituted one of many
items that Jefferies employed, changes to such projections and models could
affect the Jefferies Opinion. Jefferies also assumed that the Merger will
qualify as a tax-free reorganization for U.S. Federal income tax purposes and
will be treated, for accounting purposes, as a purchase. Jefferies also assumed
that the final form of the Original Merger Agreement will be substantially
similar to the last draft reviewed by it. As a matter of policy, neither Kimco
nor Price REIT publicly disclose internal management forecasts, projections or
estimates of the type furnished to Jefferies in connection with its analysis of
the Merger, and such forecasts, projections and estimates were not prepared with
a view towards public disclosure. These forecasts, projections and estimates
were based on numerous variables and assumptions which are inherently uncertain
and which may not be within the control of management of Kimco, including,
without limitation, general economic, regulatory and competitive conditions.
Accordingly, actual results could vary materially from those set forth in such
forecasts, projections and estimates.
The preparation of fairness opinions involves various determinations as to
the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such opinions are not readily susceptible to
summary description. Accordingly, Jefferies believes its analyses must be
considered as a whole, and that considering any portion of such analyses or any
portion of the factors considered, without considering all analyses and current
factors, could create a misleading or incomplete view of the process underlying
the Jefferies Opinion. In its analyses, Jefferies made numerous assumptions with
respect to industry performance, general business and other conditions, many of
which are beyond the control of Kimco and Price REIT. Any estimates contained in
these analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable than
as set forth therein. In addition, analyses relating to the value of businesses
do not purport to be appraisals or to reflect the prices at which businesses
actually may be sold.
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The following paragraphs summarize the significant financial and
comparative analyses performed by Jefferies in arriving at the conclusions
expressed in the Jefferies Opinion. The information presented below is based on
the estimated financial condition of Kimco and Price REIT as of December 31,
1997 and share price information of Kimco Common Stock and Price REIT Common
Stock through the close of the market on January 12, 1998. The following
paragraphs do not purport to be a complete description of the analyses performed
or the matters considered by Jefferies in rendering the Jefferies Opinion.
Jefferies reviewed the methodology and calculations of the proposed
conversion of all of the shares of Price REIT Common Stock into Kimco Common
Stock and Kimco Class D Depositary Shares pursuant to the Merger. Based on the
exchange ratio (as of January 13, 1998) of 1.00 shares of Kimco Common Stock and
0.40 Kimco Class D Depositary Shares for each share of Price REIT Common Stock
outstanding as of January 13, 1998, holders of Price REIT Common Stock would
receive securities equivalent to 14,849,585 fully-diluted shares of Kimco Common
Stock, or approximately 26.4% of the Kimco Common Stock outstanding as of the
Effective Time of the Merger. Jefferies noted that the implied equity purchase
price for Price REIT, based on a value of $45.00 per share of Price REIT Common
Stock, was approximately $535.2 million.
Valuation Analysis of Price REIT
Comparable Company Analysis. Jefferies compared certain financial data and
multiples of financial parameters accorded certain other publicly traded REITs
comparable to Kimco and Price REIT. Financial data generally compared included
total revenues, net operating income, FFO and FAD. Multiples compared included
equity capitalization to FFO and equity capitalization to FAD. Jefferies looked
at these parameters because of the equity market's reliance upon these measures
in analyzing REIT performance. Companies compared to Kimco and Price REIT
included Alexander Haagen Properties, Burnham Pacific Properties, JDN Realty
Investors, JP Realty, Inc., Weingarten Realty Investors, Vornado Realty Trust,
Developers Diversified Realty and Excel Realty Trust, each of which is a
self-managed and infinite-life REIT. Jefferies compared the market value of each
such company, as determined by the closing price recorded for each company's
common stock on January 12, 1998, with each company's historical and projected
FFO and FAD. Jefferies' calculations resulted in the following ranges of
multiples for these companies: a mean equity capitalization to historical 1996
FFO multiple of 13.5x; a mean equity capitalization to projected 1997 FFO
multiple of 13.1x; a mean equity capitalization to projected 1998 FFO multiple
of 11.2x; a mean equity capitalization to historical 1996 FAD multiple of 13.9x;
a mean equity capitalization to projected 1997 FAD multiple of 12.9x; and a mean
equity capitalization to projected 1998 FAD multiple of 11.7x. Similar
calculations resulted in the following ranges of multiples for Kimco and Price
REIT, respectively: a mean equity capitalization to historical 1996 FFO multiple
of 14.7x and 12.2x; a mean equity capitalization to projected 1997 FFO multiple
of 13.3x and 11.4x; a mean equity capitalization to projected 1998 FFO multiple
of 11.9x and 10.3x; a mean equity capitalization to historical 1996 FAD multiple
of 15.8x and 13.3x; a mean equity capitalization to projected 1997 FAD multiple
of 13.8x and 11.9x; and a mean equity capitalization to projected 1998 FAD
multiple of 12.4x and 10.7x.
Price REIT's implied equity value ranged from between approximately $562.8
million and $588.4 million based on price to projected 1998 FFO multiples of
11.0x to 11.5x. Price REIT's implied equity value ranged from between
approximately $567.2 million and $591.9 million based on price to projected 1998
FAD multiples of 11.5x to 12.0x. These ranges of equity values for Price REIT
were compared to the implied equity purchase price to be paid to Price REIT
pursuant to the Merger of approximately $535.2 million.
None of the companies utilized in the above analysis for comparative
purposes is identical to Kimco or Price REIT. Accordingly, a complete analysis
of the results of the foregoing calculations cannot be limited to a quantitative
review of such results and involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the value of the
comparable companies as well as that of Kimco and Price REIT. In addition, the
multiples to estimated and projected FFO and FAD are based on projections, in
the case of the comparable companies, published by research analysts unrelated
to Jefferies and, in the case of Kimco and Price REIT, provided by management.
Accordingly, such projections may or may not prove to be accurate.
Net Asset Valuation. Jefferies calculated the implied net asset value of
the real estate of certain other publicly traded REITs comparable to Kimco and
Price REIT. Companies compared to Kimco and Price REIT
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included Alexander Haagen Properties, Burnham Pacific Properties, JDN Realty
Investors, JP Realty, Inc., Weingarten Realty Investors, Vornado Realty Trust,
Developers Diversified Realty and Excel Realty Trust, each of which is a
self-managed and infinite-life REIT. Jefferies calculated the implied net asset
value of the real estate of each company, utilizing the closing price recorded
for each company's common stock on January 12, 1998 as well as certain other
financial information contained in each company's Quarterly Report of Form 10-Q
for the quarter ended September 30, 1997 as well as each company's Annual Report
on Form 10-K for the year ended December 31, 1996. After calculating the implied
net asset value of each company's real estate, Jefferies calculated implied
capitalization rates for each company by dividing the 1998 projected net
operating income adjusted for straight line rent for each company by the implied
net asset value of each company's real estate. Such analysis yielded a mean
implied capitalization rate of 8.9%, with a high implied capitalization rate of
14.9% and a low implied capitalization rate of 5.7%. These estimates of 1998
projected net operating income adjusted for straight line rent were published by
research analysts unrelated to Jefferies.
Jefferies also calculated the implied net asset value of the real estate of
Price REIT, utilizing the closing price of Price REIT Common Stock on January
12, 1998 as well as certain other financial information contained in Price
REIT's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 as
well as the Annual Report on Form 10-K for the year ended December 31, 1996.
After calculating the implied net asset value of Price REIT's real estate,
Jefferies calculated Price REIT's implied capitalization rate by dividing 1998
projected net operating income adjusted for straight line rent by the implied
net asset value of Price REIT's real estate. Such analysis yielded an implied
capitalization rate of 9.9%. Jefferies then repeated the same analysis,
utilizing a $45.00 price for Price REIT Common Stock. Such analysis yielded an
implied capitalization rate of 9.4%. Price REIT's estimate of 1998 projected net
operating income adjusted for straight line rent was provided by a research
analyst from Jefferies.
The implied capitalization rate of 9.4% calculated utilizing a $45.00 price
for Price REIT Common Stock is greater than the mean implied capitalization rate
of 8.9% calculated for the other publicly traded REITs comparable to Kimco and
to Price REIT. Jefferies considered this analysis relevant to the fairness to
Kimco's public common stockholders from a financial point of view of the
consideration to be paid by Kimco pursuant to the Merger because, to the extent
that the implied capitalization rate calculated by Jefferies utilizing a $45.00
price for Price REIT Common Stock is less than the mean implied capitalization
rate calculated for the other publicly traded REITs comparable to Kimco and to
Price REIT, the return to the Kimco stockholders would adversely affect the
fairness of the consideration to be paid. Conversely, to the extent that the
implied capitalization rate calculated by Jefferies utilizing a $45.00 price for
Price REIT Common Stock is greater than the mean implied capitalization rate
calculated for the other publicly traded REITs comparable to Kimco and to Price
REIT, the return to the Kimco stockholders would positively affect the fairness
of the consideration to be paid. This would generally support a conclusion that
the transaction is fair. As a result, Jefferies considered the net asset
valuation analysis to support the Jefferies Opinion.
None of the companies utilized in the above analysis for comparative
purposes is identical to Kimco or Price REIT. Accordingly, a complete analysis
of the results of the foregoing calculations cannot be limited to a quantitative
review of such results and involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the value of the
comparable companies as well as that of Kimco and Price REIT. In addition, the
estimates of 1998 projected net operating income adjusted for straight line rent
are based on projections, in the case of the comparable companies, published by
research analysts unrelated to Jefferies and, in the case of Price REIT,
provided by a research analyst from Jefferies. Accordingly, such projections may
or may not prove to be accurate.
Comparable Merger and Acquisition Transaction Analysis. Jefferies reviewed
the consideration paid in 13 recent acquisitions of publicly traded real estate
investment trusts: Columbus Realty Trust (target)/Post Properties, Inc.
(acquiror); Santa Anita Realty Enterprises/Meditrust SBI; Wellsford Residential
Properties/Equity Residential Properties Trust; Paragon Group, Inc./Camden
Property Trust; California Jockey Club/Patriot American Hospitality; South West
Property Trust, Inc./United Dominion Realty Trust; ROC Communities/Chateau
Properties; Regency Realty Corporation/Security Capital US Realty; Kahler Realty
Corp./Tiger Real Estate Fund LP; Crocker Realty Trust/Highwoods Properties,
Inc.; DeBartolo Realty Corp./Simon Property Group, Inc.; McArthur-Glen
Realty/Horizon Outlet Centers; and America First REIT,
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Inc./Mid-American Apartment Communities. Jefferies analyzed the consideration
paid in such transactions as a multiple of the target companies' FFO for the
latest twelve month ('LTM') period prior to the acquisition of the target. Such
analysis yielded a mean multiple of 10.6x LTM FFO. Jefferies compared this
multiple with the 12.1x multiple of consideration to be paid by Kimco pursuant
to the Merger to annualized estimated FFO of Price REIT for the three months
ended December 31, 1997 ('Run Rate'). Jefferies believes that Run Rate results
are more appropriate than LTM results when evaluating Price REIT's historical
acquisition multiple due to Price REIT's significant recent acquisition
activity.
Price REIT's implied equity value ranged from between approximately $464.5
million and $486.7 million based on price to historical acquisition multiples of
between 10.5x to 11.0x FFO. These ranges of equity values for Price REIT were
compared to the implied equity purchase price to be paid to Price REIT pursuant
to the Merger of approximately $535.2 million.
Because the reasons for and circumstances surrounding each of the
transactions analyzed were diverse and because of the inherent differences
between the operations of Price REIT and the companies engaged in the selected
transactions, Jefferies believes that a purely quantitative comparable
transaction analysis is not particularly meaningful. An appropriate use of a
comparable transaction analysis in this instance necessarily involves complex
considerations and qualitative judgments concerning, among other things,
differences between the characteristics of these transactions and the Merger
that could affect the public trading value of the companies to which Price REIT
is being compared.
Premiums Paid Analysis. Jefferies examined the premiums paid in 13
completed acquisitions of publicly traded REITs announced on or after February
27, 1995 as screened by Securities Data Company. The mean premiums paid in these
completed transactions based on the target's stock price one day, one week and
four weeks prior to the announcement were 16.5%, 18.7% and 19.4%, respectively.
In the proposed Merger, the assumed offer price of $45.000 per share of Price
REIT common stock represents, based on the closing bid prices of $41.875 per
share of Price REIT common stock on January 12, 1998, $40.875 per share on
December 30, 1997, and $39.625 per share on November 26, 1997, an approximate
premium of 7.5%, 10.1% and 13.6%, respectively.
Discounted Cash Flow Analysis. Jefferies also performed discounted cash
flow analyses for Price REIT based upon projections of Price REIT's cash flow
from operations using a range of discount rates and ranges of terminal
capitalization rates and terminal FFO multiples. Based on a five-year analysis,
using discount rates ranging from 8.75% to 9.25% and terminal capitalization
rates ranging from 9.25% to 9.75%, these calculations indicated an implied
enterprise value ranging from approximately $1,156.8 million to $1,230.1 million
for Price REIT. Based on a five-year analysis, using discount rates ranging from
8.75% to 9.25% and terminal FFO multiples ranging from 11.0x to 11.5x, these
calculations indicated an implied enterprise value ranging from approximately
$968.3 million to $1,020.7 million for Price REIT. Jefferies then determined the
implied equity value of Price REIT by subtracting the assumed long-term debt
balance of Price REIT at December 31, 1997 ($298.6 million) from the above
enterprise value computations. Based on a five-year analysis, using discount
rates ranging from 8.75% to 9.25% and terminal capitalization rates ranging from
9.25% to 9.75%, this calculation indicated an implied equity value ranging from
approximately $858.2 million to $931.5 million for Price REIT. Based on a
five-year analysis, using discount rates ranging from 8.75% to 9.25% and
terminal FFO multiples ranging from 11.0x to 11.5x, this calculation indicated
an implied equity value ranging from approximately $669.7 million to $722.1
million for Price REIT. These ranges of equity values for Price REIT were
compared to the implied equity purchase price to be paid to Price REIT pursuant
to the Merger of approximately $535.2 million.
Analysis of Kimco After Giving Effect to the Merger
Pro Forma Merger Analysis. Jefferies compared the anticipated FFO and FAD
per share of Kimco on a stand-alone basis to the FFO and FAD per share of Kimco
and Price REIT combined on a pro forma basis after giving effect to the Merger.
Each scenario was based on the financial models and projections provided by
Kimco and Price REIT and assumed that the Merger was consummated on January 1,
1998. Jefferies observed that the Merger could be expected to be accretive on an
FFO per share basis in each year of the projection period from 1998 through
2002. At the January 13, 1998 implied exchange ratio, FFO per share is accretive
in 1998, assuming the Merger was consummated on January 1, 1998 and in 1999. At
the January 13, 1998 implied
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exchange ratio, FAD per share is accretive in 1998, assuming that the Merger was
consummated on January 1, 1998, and accretive in 1999.
Relative Contribution Analysis. Jefferies compared the relative
contribution of Kimco and Price REIT to projected combined revenues, net
operating income, FFO and FAD of the combined companies for 1997 through 2002,
based on the financial models provided by the managements of the companies. FFO
and FAD of Kimco on a stand-alone basis were projected to increase from 1998
through 2002 at a compound annual growth rate of approximately 11.2% and 11.4%,
respectively. Jefferies noted that Kimco's contribution was approximately 72.7%
and 71.3% of combined revenues; approximately 71.0% and 69.6% of combined net
operating income; 70.1% and 68.8% of combined FFO; and approximately 70.0% and
68.7% of combined FAD in projected 1998 and 1999, respectively. Jefferies
compared these projected contribution percentages with the approximately 73.6%
fully-diluted ownership that current Kimco common stockholders would have in the
combined company. Jefferies considered this analysis relevant to the fairness to
Kimco's public common stockholders from a financial point of view of the
consideration to be paid by Kimco pursuant to the Merger because, to the extent
that the percentage ownership of the holders of Price REIT Common Stock in the
combined company exceeds the projected contribution by Price REIT to the
combined operating results, the proportionate return to the Kimco stockholders
would adversely affect the fairness of the consideration to be paid. Conversely,
to the extent that the proportionate ownership of the holders of Price REIT
Common Stock following the Merger is lower than the anticipated contribution of
Price REIT to the combined operating results, the Merger could be expected to
improve per share results of operations from the perspective of current Kimco
common stockholders. This would generally support a conclusion that the
transaction is fair. As a result, Jefferies considered the relative contribution
analysis to support the Jefferies Opinion.
Based on the analyses and factors summarized above, Jefferies rendered the
Jefferies Opinion; however, the summary set forth above does not purport to be a
complete description of the analysis performed and the factors considered by
Jefferies in rendering the Jefferies Opinion.
Pursuant to an engagement letter dated December 16, 1997 between Kimco and
Jefferies, as compensation for Jefferies' services in connection with its
delivery of a fairness opinion to Kimco with respect to the Merger, Kimco has
paid Jefferies fees as follows: (i) a fee of $100,000 paid in cash on December
16, 1997 and (ii) an additional fee of $500,000 (without regard to whether the
Jefferies Opinion ultimately would be favorable or unfavorable), paid in cash on
January 13, 1998 which such fees, as described in clauses (i) and (ii) will be
credited against the Jefferies Advisory Fee (as defined herein), if earned. In
addition, in connection with Jefferies' role as exclusive financial advisor to
Kimco, Kimco will pay to Jefferies an advisory fee of 0.45% of the transaction
value on the Closing Date, or approximately $3.8 million (the 'Jefferies
Advisory Fee'). Kimco has also agreed to indemnify Jefferies against certain
liabilities, including liabilities arising under the Federal securities laws,
and to reimburse Jefferies promptly for all out-of-pocket expenses (including
the reasonable fees and expenses of counsel). In the ordinary course of its
business, Jefferies may actively trade the securities of Kimco and Price REIT
for its own account and for the accounts of its customers and, accordingly, may
at any time hold a long or short position in those securities.
PRICE REIT'S REASONS FOR THE MERGER; POSITIVE AND NEGATIVE FACTORS CONSIDERED
The material positive factors considered by the Price REIT Board of
Directors in approving the Merger and recommending its approval are set forth
below:
(i) the Merger affords holders of Price REIT Common Stock a
significant participation in a substantially larger and more diverse
property portfolio which will also include neighborhood and community
centers as well as power centers;
(ii) the Merger will result in geographic diversification of the
operations of Kimco and Price REIT such that the combined company will be a
truly national company;
(iii) as a result of the Merger, Kimco will have a more diverse tenant
base, which will include major retailers and discount stores;
(iv) management's belief that the increased market capitalization of
Kimco following the Merger, its resulting strong balance sheet, the
increase in the size of Kimco's portfolio and the addition of development
capabilities may provide Kimco following the Merger with greater access to
the capital markets and a lower
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cost of funds, thereby facilitating further growth of what will be one of
the largest non-mall retail REITs in the United States;
(v) Kimco's management, construction and in-house legal capabilities
will synergistically complement Price REIT's acquisition, development and
management capabilities;
(vi) the Merger will combine the strong senior management of Kimco and
Price REIT at all levels, adding complementary expertise to Kimco that will
permit the expansion into multiple shopping center product types, and will
permit Kimco to focus on opportunities for existing property development,
redevelopment and expansion;
(vii) the value of the Merger Consideration represents a premium over
the historic trading prices for Price REIT Common Stock;
(viii) the opinion of Merrill Lynch, Price REIT's financial advisor,
to the effect that the proposed consideration to be received by the holders
of Price REIT Common Stock pursuant to the Merger was fair to the holders
of Price REIT Common Stock from a financial point of view;
(ix) the Merger is intended to qualify as a tax-free organization for
Federal income tax purposes;
(x) the belief of the Price REIT Board of Directors that the overall
terms of the Merger Agreement are fair to Price REIT and its stockholders;
(xi) the issuance of equity securities of Kimco in the Merger,
including the Kimco Class D Depositary Shares with what management believes
are attractive terms, will allow holders of Price REIT Common Stock to
participate in the future growth of Kimco and in the Spin-Off REIT, in the
event of its occurrence;
(xii) that, if the Kimco Average Price exceeds $35.00, the Notional
Value will exceed $45.00; and
(xiii) the opportunities for economies of scale and operating
efficiencies that are expected to result from the Merger.
The Board of Directors of Price REIT also considered certain potentially
negative factors in its deliberations concerning the Merger. The material
potentially negative factors considered were as follows:
(i) the significant costs involved in connection with consummating the
Merger and the substantial management time and effort required to
effectuate the Merger and integrate the businesses of Kimco and Price REIT;
(ii) the possible adverse effects on the market for Price REIT Common
Stock and upon Price REIT's ability to raise capital in both the public and
private markets that might result if the Merger were not consummated;
(iii) that, if the Merger does not occur, under certain circumstances
Price REIT could have to pay a fee of $12.5 million to Kimco, plus, in
certain instances, expenses of up to $2.0 million;
(iv) expectations that the distributions payable with respect to the
Merger Consideration will be less than the distributions currently payable
with respect to each share of Price REIT Common Stock; and
(v) the risk that the anticipated benefits of the Merger might not be
fully realized.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF PRICE REIT
The Price REIT Board of Directors believes that the terms of the Merger
Agreement and the transactions contemplated thereby are fair to and in the best
interests of Price REIT and its stockholders. ACCORDINGLY, AT A SPECIAL MEETING
HELD ON JANUARY 13, 1998, THE PRICE REIT BOARD OF DIRECTORS, BY UNANIMOUS VOTE
OF THOSE DIRECTORS PRESENT AT THE MEETING, APPROVED THE MERGER AND THE ORIGINAL
MERGER AGREEMENT, AT A MEETING HELD ON MARCH 5, 1998, THE PRICE REIT BOARD OF
DIRECTORS, BY UNANIMOUS VOTE, APPROVED AND ADOPTED THE FIRST AMENDMENT AND, BY
UNANIMOUS WRITTEN CONSENT, THE PRICE REIT BOARD OF DIRECTORS, ON MAY 13, 1998,
APPROVED AND ADOPTED THE SECOND AMENDMENT AND RECOMMENDS APPROVAL OF THE MERGER
BY THE HOLDERS OF PRICE REIT COMMON STOCK. In reaching its conclusion, the Price
REIT Board of Directors consulted with Price REIT's management and financial and
legal advisors, and considered a number of factors at meetings of the Board of
Directors. While the Price REIT Board of Directors did not explicitly adopt the
Merrill Lynch Opinion, it relied in part on such opinion and Merrill Lynch's
analysis in its overall evaluation of the Merger. In
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the view of the Price REIT Board of Directors, the negative factors were not
sufficient, either individually or collectively, to outweigh the advantages of
the Merger.
In view of the wide variety of factors considered by the Board of Directors
of Price REIT, the Board of Directors of Price REIT did not quantify or
otherwise attempt to assign relative weights to the specific factors considered
in making its determination.
THE BOARD OF DIRECTORS OF PRICE REIT UNANIMOUSLY RECOMMENDS THAT HOLDERS OF
PRICE REIT COMMON STOCK VOTE TO APPROVE THE MERGER.
OPINION OF PRICE REIT'S FINANCIAL ADVISOR
At the meeting of the Price REIT Board of Directors held on January 13,
1998, Merrill Lynch delivered a written opinion (the 'Merrill Lynch Opinion') to
the Price REIT Board of Directors to the effect that, as of such date, and based
upon the assumptions made, matters considered and limits of review set forth in
the Merrill Lynch Opinion, the consideration to be received by the holders of
Price REIT Common Stock in the Merger was fair to such stockholders from a
financial point of view. In the opinion of the Price REIT Board of Directors,
there have been no material events or developments since the date of the Merrill
Lynch Opinion which might affect Merrill Lynch's analysis of the fairness, from
a financial point of view, of the consideration to be received by the holders of
Price REIT Common Stock in the Merger. In the event that the Merger Agreement is
amended subsequent to the date of this Joint Proxy Statement/Prospectus, the
Price REIT Board of Directors will make a determination at the time of such
amendment as to whether to request a new opinion from Merrill Lynch.
THE FULL TEXT OF THE MERRILL LYNCH OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND CERTAIN LIMITATIONS ON THE SCOPE OF
REVIEW UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS ANNEX C TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. EACH HOLDER OF PRICE REIT COMMON STOCK IS URGED TO READ
SUCH OPINION IN ITS ENTIRETY. THE MERRILL LYNCH OPINION WAS INTENDED FOR THE USE
AND BENEFIT OF THE PRICE REIT BOARD OF DIRECTORS, WAS DIRECTED ONLY TO THE
FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE CONSIDERATION TO BE RECEIVED BY
THE HOLDERS OF PRICE REIT COMMON STOCK IN THE MERGER, AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH
RESPECT TO THE MERGER OR ANY TRANSACTION RELATED THERETO. THE MERGER
CONSIDERATION WAS DETERMINED ON THE BASIS OF NEGOTIATIONS BETWEEN PRICE REIT AND
KIMCO AND WAS APPROVED BY THE PRICE REIT BOARD OF DIRECTORS. THE SUMMARY OF THE
MERRILL LYNCH OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at the Merrill Lynch Opinion, Merrill Lynch, among other
things: (i) reviewed certain publicly available business and financial
information relating to Price REIT and Kimco that Merrill Lynch deemed to be
relevant; (ii) reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets, liabilities and prospects
of Price REIT and Kimco, as well as the amount and timing of the cost savings
and related expenses and synergies expected to result from the Merger (the
'Expected Synergies') furnished to Merrill Lynch by Price REIT and Kimco,
respectively; (iii) conducted discussions with members of senior management of
Price REIT and Kimco concerning the matters described in clauses (i) and (ii)
above, as well as their respective businesses and prospects before and after
giving effect to the Merger and the Expected Synergies; (iv) reviewed the market
prices and valuation multiples for the Price REIT Common Stock and the Kimco
Common Stock and compared them with those of certain publicly traded companies
that Merrill Lynch deemed to be relevant; (v) reviewed the results of operations
of Price REIT and Kimco and compared them with those of certain publicly traded
companies that Merrill Lynch deemed to be relevant; (vi) compared the proposed
financial terms of the Merger with the financial terms of certain other
transactions that Merrill Lynch deemed to be relevant; (vii) participated in
certain discussions and negotiations among representatives of Price REIT and
Kimco and their financial and legal advisors; (viii) reviewed the potential pro
forma impact of the Merger; (ix) reviewed a draft, dated January 12, 1998, of
the Original Merger Agreement, including the form of Articles Supplementary of
Kimco setting forth the preferences, rights and designations for the Kimco Class
D Preferred Stock included as an exhibit to the Original Merger Agreement; and
(x) reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary, including Merrill Lynch's
assessment of general economic, market and monetary conditions.
In preparing the Merrill Lynch Opinion, Merrill Lynch assumed and relied on
the accuracy and completeness of all information supplied or otherwise made
available to Merrill Lynch, discussed with or
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reviewed by or for Merrill Lynch, or publicly available. Merrill Lynch also did
not assume any responsibility for independently verifying such information or
for undertaking an independent evaluation or appraisal of any of the assets or
liabilities of Price REIT or Kimco, and Merrill Lynch has not been furnished
with any such evaluation or appraisal. In addition, Merrill Lynch did not assume
any obligation to conduct any physical inspection of the properties or
facilities of Price REIT or Kimco. With respect to the financial forecast
information and the Expected Synergies furnished to or discussed with Merrill
Lynch by Price REIT or Kimco, Merrill Lynch assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgment of Price REIT's or Kimco's management as to the expected future
financial performance of Price REIT or Kimco, as the case may be, and the
Expected Synergies. Merrill Lynch further assumed that the Merger will qualify
as a tax-free reorganization for U.S. Federal income tax purposes. Merrill Lynch
also assumed that the final form of the Original Merger Agreement would be
substantially similar to the last draft reviewed by it. As a matter of policy,
neither Kimco nor Price REIT publicly disclose internal management forecasts,
projections or estimates of the type furnished to Merrill Lynch in connection
with its analysis of the Merger, and such forecasts, projections and estimates
were not prepared with a view towards public disclosure. These forecasts,
projections and estimates were based on numerous variables and assumptions which
are inherently uncertain and which may not be within the control of management
of Price REIT, including, without limitation, general economic, regulatory and
competitive conditions. Accordingly, actual results could vary materially from
those set forth in such forecasts, projections and estimates.
The Merrill Lynch Opinion is necessarily based upon market, economic and
other conditions as they exist and can be evaluated on, and on the information
made available to Merrill Lynch as of the date of the Merrill Lynch Opinion.
Merrill Lynch assumed that in the course of obtaining the necessary regulatory
or other consents or approvals (contractual or otherwise) for the Merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger. Merrill Lynch also assumed that the
combined entity will continue to qualify after the Merger as a REIT for U.S.
Federal income tax purposes.
In connection with the preparation of the Merrill Lynch Opinion, Merrill
Lynch was not authorized by Price REIT or the Price REIT Board of Directors to
solicit, nor has Merrill Lynch solicited, third-party indications of interest
for the acquisition of all or any part of Price REIT. In addition, Merrill Lynch
expressed no opinion as to the prices at which the Price REIT Common Stock or
the Kimco Common Stock will trade following the announcement of the Merger or as
to the prices at which the Kimco Common Stock or the Kimco Class D Depositary
Shares will trade following the consummation of the Merger.
At the meeting of the Price REIT Board of Directors held on January 13,
1998, Merrill Lynch presented certain financial and comparative analyses in
connection with the delivery of the Merrill Lynch Opinion. The following is a
summary of the material financial and comparative analyses performed by Merrill
Lynch in arriving at the Merrill Lynch Opinion.
Valuation of Price REIT
Historical Trading Performance and Current Capitalization. Merrill Lynch
reviewed certain trading information for Price REIT and, on the basis thereof,
calculated its market value, market capitalization and trading multiples based
on its stock price, as of January 9, 1998, of $41.75. For this purpose, Merrill
Lynch defined 'total market capitalization' as the market value of Price REIT's
common equity plus total debt, less cash and short-term investments (debt and
cash balances were based on Price REIT year-end estimates). Merrill Lynch then
calculated the market value of Price REIT as a multiple of projected FFO (a
supplemental measure considered by most industry analysts and Merrill Lynch to
appropriately reflect the performance of an equity REIT, calculated in
accordance with NAREIT's FFO definition) (based on mean estimates of FFO
provided by First Call, an industry service provider of earnings estimates based
on an average of earnings estimates published by various investment banking
firms ('First Call')), and FFO less recurring capital expenditures ('AFFO').
Price REIT's FFO multiples for 1997, 1998 and 1999 were 11.5x, 10.8x and 10.1x,
respectively, and AFFO multiples for 1997, 1998 and 1999 were 11.8x, 11.0x and
10.3x, respectively.
Merrill Lynch also reviewed Kimco's offer for Price REIT and, on the basis
thereof, calculated an aggregate net offer value for the Price REIT Common Stock
(the 'Net Offer Value') of $537.4 million (including $10.9 million attributable
to the acquisition of employee options to acquire Price REIT Common Stock).
Using
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an estimate of Price REIT's debt balances as of December 31, 1997 provided by
Price REIT's management, Merrill Lynch also calculated an aggregate transaction
value (the 'Transaction Value') of $835.7 million which consisted of the Net
Offer Value, plus total debt of $298.6 million, less an estimate of Price REIT's
cash balance at December 31, 1997 of $0.3 million. With respect to the Net Offer
Value, Merrill Lynch calculated FFO multiples for 1997, 1998 and 1999 of 12.3x,
11.1x, and 10.1x, respectively, and AFFO multiples for 1997, 1998 and 1999 of
12.7x, 11.4x and 10.4x, respectively (in each case, based on FFO or AFFO
projections provided by Price REIT's management).
Analysis of Selected Comparable Publicly Traded Companies. Using publicly
available information and estimates of future financial results published by
First Call, and taken from Merrill Lynch Equity Research, Merrill Lynch compared
certain financial and operating information and ratios for Price REIT with the
corresponding financial and operating information for a group of publicly traded
companies engaged primarily in the ownership, management, operation and/or
acquisition of retail shopping centers. For the purposes of its analysis, the
following companies were used as comparable companies to Price REIT: JDN Realty
Corporation, Alexander Haagen Properties, Inc., Excel Realty Trust, Inc., IRT
Property Co., Burnham Pacific Properties, Inc., Western Investment Real Estate
Trust and Kranzco Realty Trust (collectively, the 'Price REIT Comparable
Companies').
Merrill Lynch's calculations resulted in the following relevant ranges for
the Price REIT Comparable Companies and for Price REIT as of January 9, 1998: a
range of debt to total market capitalization (defined as equity market
capitalization plus long-term debt outstanding less cash on hand) of 23.4% to
55.9%, with a mean of 35.6% (as compared to Price REIT at 38.0%); a range of
market value as a multiple of projected 1997 FFO of 10.3x to 13.1x, with a mean
of 11.7x (as compared to Price REIT at 11.5x); a range of market value as a
multiple of projected 1998 FFO of 9.8x to 11.8x, with a mean of 10.6x (as
compared to Price REIT at 10.8x); a range of market value as a multiple of
projected 1997 AFFO of 11.1x to 13.6x, with a mean of 12.4x (as compared with
Price REIT at 11.8x); and a range of market value as a multiple of projected
1998 AFFO of 10.5x to 12.3x, with a mean of 11.3x (as compared to Price REIT at
11.0x). Based upon projected 1998 FFO multiples, the implied per share valuation
of the Price REIT Common Stock was from $39.53 to $47.59.
None of the Price REIT Comparable Companies is, of course, identical to
Price REIT. Accordingly, a complete analysis of the results of the foregoing
calculations cannot be limited to a quantitative review of such results and
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the Price REIT Comparable Companies
and other factors that could affect the public trading value of the Price REIT
Comparable Companies, as well as that of Price REIT. In addition, the multiples
of market value to projected 1997 and 1998 FFO and AFFO for the Price REIT
Comparable Companies are based on projections prepared by research analysts
using only publicly available information. Accordingly, such estimates may or
may not prove to be accurate.
Comparable Transaction Analysis. Merrill Lynch also compared certain
financial ratios of the Merger with those of selected other mergers and
strategic transactions involving retail shopping center oriented REITs. These
transactions were Horizon Outlet Centers, Inc.'s acquisition of McArthur Glen
Realty Corporation, Bradley Real Estate, Inc.'s acquisition of Tucker Properties
Corporation, Simon Property Group L.P.'s acquisition of DeBartolo Realty
Corporation and Prime Retail, Inc.'s acquisition of Horizon Group, Inc.
(collectively, the 'Price REIT Comparables').
Using publicly available information, Merrill Lynch calculated the premium
of the implied offer prices (based on the acquiror's stock price) relative to
the acquired company's stock price on the day before the announcement of the
respective transaction and the implied offer value per share for the acquired
company (based on the acquiror's stock price), as of the day before the
announcement of the respective transaction, as a multiple of LTM FFO per share
for such company. This analysis yielded a range of premiums (or discounts) of
(0.82%) to 11.59% with a mean of 3.53% and a median of 1.67% and a range of
transaction offer values as a multiple of LTM FFO of 7.4x to 11.3x with a mean
of 9.1x and a median of 8.9x, resulting in an implied per share valuation from
$27.01 to $41.25 for the Price REIT Common Stock.
Discounted Cash Flow Analyses. Merrill Lynch performed discounted cash
flow analyses (i.e., an analysis of the present value of projected levered cash
flows using the discount rates indicated) for Price REIT based upon projections
provided by Price REIT's management for the years 1998 through 2002, inclusive,
using discount rates reflecting a cost of equity ranging from 15.5% to 17.5% and
terminal value multiples of calendar year 2002
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AFFO ranging from 11.5x to 12.5x. AFFO and dividends per share of Price REIT
Common Stock were projected by Price REIT's management to increase from 1997
through 2002 at compound annual growth rates of approximately 7.9% and 3.6%,
respectively. The projections prepared by management of Price REIT were
estimates only and are inherently subject to known and unknown risks,
uncertainties, and other factors, many of which are outside of Price REIT's and
Merrill Lynch's control, which may cause the actual results to differ
significantly from those set forth in the projections. The range of implied
present values per share of Price REIT Common Stock was $36.21 to $41.52 using a
discounted dividend method and $40.03 to $45.54 using a discounted AFFO method.
Net Asset Valuation Analysis. Merrill Lynch performed a net asset
valuation for Price REIT based upon an aggregate real estate valuation of Price
REIT's properties (including net operating income attributable to joint venture
interests but less capital expenditures), an estimation of the current value of
Price REIT's other assets and liabilities and an estimation of Price REIT's debt
balances as of December 31, 1997. For the operating portfolio of Price REIT, the
real estate valuation utilized projected property net operating income for 1998,
as prepared by Price REIT management, and a range of capitalization rates of
9.50% to 10.50%. These calculations indicated a per share net asset valuation
range for the Price REIT Common Stock of $32.64 to $39.07.
Valuation of Merger Consideration
Historical Trading Performance and Current Capitalization. Merrill Lynch
reviewed certain trading information for the Kimco Common Stock and, on the
basis thereof, calculated its market value, market capitalization and trading
multiples based on its per share price, as of January 9, 1998, of $35.25. For
this purpose, Merrill Lynch defined 'total market capitalization' as the market
value of Kimco's common equity, plus preferred stock at liquidation value, plus
total debt, less cash and short-term investments (debt and cash balances were
based on Kimco year-end estimates). Merrill Lynch then calculated the market
value of the Kimco Common Stock as a multiple of projected FFO (based on mean
estimates of FFO provided by First Call) and AFFO. The FFO multiples for 1997,
1998 and 1999 were 13.5x, 12.4x and 11.5x, respectively, and AFFO multiples for
1997, 1998 and 1999 were 14.8x, 13.6x and 12.6x, respectively.
Analysis of Selected Comparable Publicly Traded Companies. Using publicly
available information and estimates of future financial results published by
First Call, and taken from Merrill Lynch Equity Research, Merrill Lynch compared
certain financial and operating information and ratios for Kimco with the
corresponding financial and operating information for a group of publicly traded
companies engaged primarily in the ownership, management, operation and/or
acquisition of retail shopping centers. For the purpose of its analysis, the
following companies were used as comparable companies to Kimco: Vornado Realty
Trust, New Plan Realty Trust, Weingarten Realty Investors, Regency Realty
Corporation, Federal Realty Investment Trust and Developers Diversified Realty
Corporation (collectively, the 'Kimco Comparable Companies').
Merrill Lynch's calculations resulted in the following relevant ranges for
the Kimco Comparable Companies and for Kimco as of January 9, 1998: a range of
debt to total market capitalization of 16.8% to 38.4%, with a mean of 29.6% (as
compared to Kimco at 25.3%); a range of market value of the common equity as a
multiple of projected 1997 FFO of 11.0x to 13.9x, with a mean of 12.8x (as
compared to Kimco at 13.5x); a range of market value of the common equity as a
multiple of projected 1998 FFO of 10.1x to 12.8x, with a mean of 11.8x (as
compared to Kimco at 12.4x); a range of market value of the common equity as a
multiple of projected 1997 AFFO of 11.5x to 15.1x, with a mean of 13.8x (as
compared to Kimco at 14.8x); a range of market value of the common equity as a
multiple of projected 1998 AFFO of 10.5x to 13.8x, with a mean of 12.7x (as
compared to Kimco at 13.6x). Based upon projected 1998 FFO multiples, the
implied per share valuation of the Kimco Common Stock was from $30.29 to $38.47.
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None of the Kimco Comparable Companies is, of course, identical to Kimco.
Accordingly, a complete analysis of the results of the foregoing calculations
cannot be limited to a quantitative review of such results and involves complex
considerations and judgments concerning differences in financial operating
characteristics of the Kimco Comparable Companies and other factors that could
affect the public trading value of the Kimco Comparable Companies, as well as
that of Kimco. In addition, the multiples of market value to estimated 1997 and
projected 1998 FFO and AFFO for the Kimco Comparable Companies are based on
projections prepared by research analysts using only publicly available
information. Accordingly, such estimates may or may not prove to be accurate.
Discounted Cash Flow Analyses. Merrill Lynch performed discounted cash
flow analyses (i.e., an analysis of the present value of projected levered cash
flows using the discount rates indicated) for Kimco based upon projections
provided by Kimco's management for the years 1998 through 2002, inclusive, using
discount rates reflecting a cost of equity ranging from 14.5% to 16.5% and
terminal value multiples of calendar year 2002 AFFO ranging from 13.0x to 14.0x.
The range of implied present values per share of Kimco Common Stock was $33.66
to $38.56 using a discounted dividend method and $36.66 to $41.71 using a
discounted AFFO method.
Net Asset Valuation Analysis. Merrill Lynch performed a net asset
valuation for Kimco based upon an aggregate real estate valuation of Kimco's
properties (less capital expenditures), an estimation of the current value of
Kimco's other assets and liabilities and an estimation of Kimco's debt balances
as of December 31, 1997. For the operating portfolio of Kimco, the real estate
valuation utilized projected property net operating income for 1998, as prepared
by Kimco management, and capitalization rates ranging from 9.00% to 10.00%.
These calculations indicated a per share net asset valuation range for the Kimco
Common Stock of $22.42 to $26.66.
Analysis of Preferred Stock. In reviewing the terms of the Kimco Class D
Preferred Stock, Merrill Lynch considered the following factors: (i) the overall
bond market, economic and other conditions as of January 13, 1998; (ii) Kimco's
senior subordinated credit rating; (iii) the dividend yield on the Kimco Common
Stock; (iv) Kimco's public market float and equity market capitalization; (v)
the historical stock price volatility of the Kimco Common Stock; (vi) the
current trading levels of Kimco's outstanding perpetual preferred stock issues;
(vii) assumed trading levels of Kimco senior subordinated debt; and (viii) other
previously completed REIT convertible preferred offerings. Merrill Lynch then
selected other recent public offerings of convertible preferred stock by REITs
and compared the following characteristics of such offerings and/or the issuers
thereof to the Kimco Class D Preferred Stock and/or Kimco: (i) the issuance
amount; (ii) the offer price per share; (iii) the offer yield; (iv) the
conversion premium; (v) the call protection; (vi) the issuer's credit rating;
(vii) the issuer's public float and equity market capitalization; (viii) the
historical common stock price volatility; (ix) the common stock dividend yield;
(x) the spread between the offer yield and the common stock dividend yield; and
(xi) the treasury yield at the offer date.
Pro Forma Merger Consequences. Merrill Lynch analyzed the pro forma
effects resulting from the Merger, including the potential impact on the
projected stand-alone FFO per share of Kimco Common Stock and the anticipated
per share FFO accretion (i.e., the incremental increase) to such stock resulting
from the Merger. Merrill Lynch observed that, after giving effect to the
Expected Synergies, the Merger would be accretive to the projected FFO per share
of Kimco Common Stock in each of the years 1998 through 2002, inclusive.
The summary set forth above does not purport to be a complete description
of the analysis performed by Merrill Lynch in arriving at the Merrill Lynch
Opinion. The preparation of a fairness opinion is a complex process and not
necessarily susceptible to partial or summary description. Merrill Lynch
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by Merrill Lynch, without
considering all such factors and analyses, could create a misleading view of the
process underlying the Merrill Lynch Opinion. In its analyses, Merrill Lynch
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond Price
REIT's, Kimco's and Merrill Lynch's control. Any estimates contained in Merrill
Lynch's analyses are not necessarily indicative of actual values, which may be
significantly more or less favorable than as set forth therein. Estimated values
do not purport to be appraisals and do not necessarily reflect the prices at
which businesses or companies may be sold in the future, and such estimates are
inherently subject to uncertainty.
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Except as set forth herein, no limitations were imposed by the Price REIT
Board of Directors on the scope of Merrill Lynch's investigations or the
procedures to be followed in rendering the Merrill Lynch Opinion.
The Price REIT Board of Directors selected Merrill Lynch to render a
fairness opinion because Merrill Lynch is an internationally recognized
investment banking firm with substantial experience in transactions similar to
the Merger and because it is familiar with Price REIT and its business. Merrill
Lynch is continually engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, secondary distributions of listed and unlisted securities and
private placements.
Pursuant to a letter agreement dated November 20, 1997, Price REIT agreed
to pay Merrill Lynch fees as follows: (i) a fee of $100,000, payable in cash on
the date of the letter agreement; (ii) an additional fee of $500,000 payable in
cash on the date Merrill Lynch delivered the Merrill Lynch Opinion; and (iii) on
the date the Merger is consummated, a fee equal to approximately $4.6 million
against which the fees described in clauses (i) and (ii) will be credited. In
addition, Price REIT has agreed to reimburse Merrill Lynch for its reasonable
out-of-pocket expenses, subject to certain limitations, and to indemnify Merrill
Lynch and certain related persons against certain liabilities, including certain
liabilities under the federal securities laws, arising out of its engagement.
Merrill Lynch has, in the past, provided financial advisory services to
Price REIT and Kimco and may continue to do so and has received, and may
receive, fees for the rendering of such services. In the past two years, Merrill
Lynch has acted as investment banker in connection with, and has received
customary compensation for, (x) the offering by Price REIT of (i) $55 million in
principal amount of 7.50% Senior Notes due 2006, (ii) an aggregate of 2,290,000
shares of Price REIT Common Stock (issued on two separate occasions) and (iii)
$50 million in principal amount of 7.125% Senior Notes due 2004; and (y)(i) the
offering by Kimco of 4,000,000 depositary shares representing interests in the
Kimco Class C Preferred Stock, (ii) the establishment by Kimco of a $150 million
medium term note program and (iii) the offering by Kimco of 4,000,000 shares of
Kimco Common Stock. In addition, in the ordinary course of its business, Merrill
Lynch may actively trade in the securities of Price REIT or Kimco, for its own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; POSSIBLE CONFLICTS OF INTEREST
In considering the recommendation of the Board of Directors of Price REIT
with respect to the Merger Agreement and the transactions contemplated thereby,
stockholders should be aware that certain officers and directors of Price REIT
have certain interests in the Merger that are in addition to their interests as
holders of Price REIT Common Stock, which may result in conflicts of interest
with respect to their obligations to Price REIT in determining whether it should
consummate the Merger. Certain of these interests are set forth below.
Stock Options. At the Effective Time, each option (a 'Price REIT Stock
Option') to purchase shares of Price REIT Common Stock which is outstanding
immediately prior to the Effective Time, whether or not then exercisable or
vested, will be satisfied and cancelled and, in the case of each such satisfied
and cancelled Price REIT Stock Option, each holder thereof will receive from
Kimco as soon as practicable, but in no event later than five business days
following the Effective Time, a number of shares of the Kimco Common Stock and
Kimco Class D Depositary Shares, subject to certain withholding provisions, in
the same proportion as such stock is issued as Merger Consideration to holders
of Price REIT Common Stock generally (the 'Option Consideration') (and cash in
lieu of fractional shares of Option Consideration), having a value equal to (A)
the product of (i) the amount by which the value of the Merger Consideration
payable per share of Price REIT Common Stock pursuant to the Merger Agreement,
assuming such Price REIT Stock Option had been exercised immediately prior to
the Effective Time, exceeds the per share exercise price of such Price REIT
Stock Option and (ii) the number of shares subject to such Price REIT Stock
Option minus (B) applicable withholding taxes.
Employment Agreements. Joseph K. Kornwasser, President and Chief Executive
Officer and a Director of Price REIT, will become a member of the Board of
Directors of Kimco, Senior Executive Vice President of Kimco and Chairman of the
Spin-Off REIT, in the event of its occurrence, pursuant to a three-year
employment agreement providing for an annual base salary of $425,000 per year
and an annual bonus equal to $225,000, and will be granted options to purchase
250,000 shares of Kimco Common Stock at an exercise price based on the
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closing price of Kimco Common Stock on the Closing Date (and Spin-Off REIT
Options equal to 1.5% of the Spin-Off REIT Outstanding Stock). Jerald Friedman,
Senior Executive Vice President and Chief Operating Officer of Price REIT, will
become Executive Vice President of Kimco pursuant to a three-year employment
agreement providing for an annual base salary of $300,000 per year and an annual
bonus equal to $150,000, and will be granted options to purchase 100,000 shares
of Kimco Common Stock at an exercise price based on the closing price of Kimco
Common Stock on the Closing Date (and Spin-Off REIT Options to acquire 0.40% of
the Spin-Off REIT Outstanding Stock). Lawrence M. Kronenberg, Executive Vice
President-Finance of Price REIT, will become a Vice President of Kimco and Chief
Financial Officer of the Spin-Off REIT, in the event of its occurrence, pursuant
to a three-year employment agreement providing for an annual base salary of
$190,000 and an annual bonus equal to $90,000, and will be granted options to
purchase 50,000 shares of Kimco Common Stock at an exercise price based on the
closing price of Kimco Common Stock on the Closing Date (and Spin-Off REIT
Options to acquire 0.25% of the Spin-Off REIT Outstanding Stock).
Severance Payment. George M. Jezek, Executive Vice President, Chief
Financial Officer, Treasurer and Secretary of Price REIT, will be entitled to
receive a severance payment in the amount of $199,452 under his employment
agreement with Price REIT as a result of the Merger.
Indemnification. Kimco has agreed to cause the Surviving Corporation to
keep in effect provisions in its charter and bylaws providing for exculpation of
director liability and indemnification of directors, officers, employees and
agents at least to the extent that such persons are entitled thereto under the
Price REIT Charter and Price REIT Bylaws as of the date of the Merger Agreement,
subject to Maryland law. In addition, Kimco has agreed to cause the Surviving
Corporation not to amend, repeal or otherwise modify any of the foregoing
provisions of the Surviving Corporation's charter and bylaws for a period of six
years after the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at any time prior to the Effective Time
were directors, officers, employees or agents of Price REIT in respect of
actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by the Merger Agreement),
unless such modification is required by law. Kimco has also agreed from and
after the Effective Time, to guaranty the obligations of the Surviving
Corporation under the indemnification provisions of the Price REIT Charter and
Price REIT Bylaws existing on the date of the Merger Agreement to the directors,
officers, employees or agents of Price REIT who at any time prior to the
Effective Time were entitled to indemnification thereunder in respect of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by the Merger Agreement).
Insurance. Kimco has agreed that, for a period of two years after the
Effective Time, the Surviving Corporation will cause to be maintained in effect
the current policies of directors' and officers' liability insurance maintained
by Price REIT (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
facts or events which occurred before the Effective Time; provided, however,
that in no event shall the Surviving Corporation be required to expend more than
an amount equal to 200% of current annual premiums paid by Price REIT for such
insurance.
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase for accounting and financial
reporting purposes. Purchase accounting for a combination is similar to the
accounting treatment used in the acquisition of any asset group. The fair market
value of the consideration (cash, stock, debt securities, etc.) given by the
acquiring firm is used as the valuation basis of the combination. The assets and
liabilities of the acquired firm are revalued to their respective fair market
values at the combination date. The financial statements of the acquiring
company reflect the combined operations from the date of combination.
REGULATORY APPROVAL
Kimco and Price REIT believe that the Merger may be consummated without
notification being given or certain information being furnished to the Federal
Trade Commission (the 'FTC') or the Antitrust Division of the Department of
Justice (the 'Antitrust Division') pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the 'HSR Act') and that no waiting period requirements
under the HSR Act are applicable to the Merger. However, there can be no
assurance that the consummation of the Merger will not be delayed by reason
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of the HSR Act. At any time before or after consummation of the Merger, the
Antitrust Division or the FTC could take such action under the antitrust laws as
it deems necessary or desirable in the public interest, including seeking to
enjoin the consummation of the Merger or seeking divestiture of substantial
assets of Kimco or Price REIT. At any time before or after the Effective Time,
any state could take such action under its own antitrust laws as it deems
necessary or desirable. Such action could include seeking to enjoin the
consummation of the Merger or seeking divestiture of Price REIT or assets of
Kimco or Price REIT by Kimco. Private parties may also seek to take legal action
under antitrust laws under certain circumstances.
RESALE RESTRICTIONS
All Kimco Common Stock and Kimco Class D Depositary Shares received by
holders of Price REIT Common Stock in the Merger will be freely transferable,
except that Kimco Common Stock and Kimco Class D Depositary Shares received by
persons who are deemed to be 'affiliates' of Price REIT prior to the Merger may
be resold by them only in transactions permitted by the resale provisions of
Rule 145 promulgated under the Securities Act ('Rule 145') (or Rule 144
promulgated under the Securities Act in the case of such persons who become
affiliates of Kimco) or as otherwise permitted under the Securities Act. Persons
who may be deemed to be affiliates of Kimco or Price REIT generally include
individuals or entities that control, are controlled by, or are under common
control with, such party and may include certain officers and directors of such
party, as well as principal stockholders of such party. The Merger Agreement
requires Price REIT to exercise its reasonable efforts to cause each of its
affiliates to execute a written agreement to the effect that such person will
not offer to sell, transfer or otherwise dispose of any of the Kimco Common
Stock or Kimco Class D Depositary Shares issued to such person in or pursuant to
the Merger unless (a) such sale, transfer or other disposition has been
registered under the Securities Act, (b) such sale, transfer or other
disposition is made in conformity with Rule 145 or (c) in the opinion of
counsel, reasonably satisfactory to Kimco, or a 'no action' letter obtained by
such person from the staff of the Commission, such sale, transfer or other
disposition is exempt from registration under the Securities Act.
NO APPRAISAL RIGHTS
Holders of Price REIT Common Stock will not be entitled to appraisal rights
as a result of the Merger because the Price REIT Common Stock is listed on the
NYSE. Under the MGCL, the holder of Price REIT Preferred Stock has appraisal
rights in connection with the Merger, however the sole holder of such stock has
agreed to waive such rights. See 'Recent Developments--Price REIT.'
THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the Merger
Agreement, a copy of which is attached as Annex A to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the Merger Agreement.
TERMS OF THE MERGER
Pursuant to the Merger Agreement, upon the terms and subject to the
conditions thereof, at the Effective Time, Price REIT will be merged with and
into Merger Sub, the separate corporate existence of Price REIT will cease and
Merger Sub will continue as the Surviving Corporation.
Upon the satisfaction or waiver of all conditions to the Merger, and
provided that the Merger Agreement has not been terminated or abandoned, Kimco
and Price REIT will cause Articles of Merger, meeting the requirements of the
MGCL, to be properly executed, verified and delivered for filing. In accordance
with the MGCL, the Merger will become effective upon the later of the acceptance
for record of the Articles of Merger by the State Department of Assessments and
Taxation of Maryland or at such later time, not to exceed 30 days after
acceptance of the Articles of Merger for record, which the parties have agreed
upon and designated in the Articles of Merger as the effective time of the
Merger.
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CONVERSION OF PRICE REIT COMMON STOCK
As a result of the Merger and without any action on the part of the holders
thereof, each share of Price REIT Common Stock issued and outstanding
immediately prior to the Effective Time will be converted (on a tax-free basis)
into the right to receive a combination of Kimco Common Stock and Kimco Class D
Depositary Shares intended to provide holders of Price REIT Common Stock with
not less than $45.00, based on the Kimco Average Price and the liquidation
preference of the Kimco Class D Depositary Shares. No assurances, however, can
be given that the Merger Consideration will actually have such intended value.
If the actual price of the Kimco Common Stock on the closing date of the Merger
is less than the Kimco Average Price, then the Merger Consideration may have, on
such date, a value less than $45.00. The dividend rate on the Kimco Class D
Depositary Shares will be the greater of (i) 7.5% per annum or (ii) the dividend
on the shares of Kimco Common Stock into which a Kimco Class D Depositary Share
is convertible plus $0.0275 quarterly. The Kimco Class D Depositary Shares will
be convertible into Kimco Common Stock at a conversion price of $40.25, subject
to certain adjustments, per share, at any time by the holder and may be redeemed
by Kimco at the conversion price in shares of Kimco Common Stock at any time
after the third anniversary of the Merger if, for any 20 trading days during a
rolling 30 day consecutive trading day period, the Kimco Common Stock closing
price exceeds 120% of the Conversion Price.
PRE-CLOSING ADJUSTMENTS
The Merger Agreement provides for a pre-closing adjustment to the number of
shares of Kimco Common Stock and Kimco Class D Depositary Shares issuable per
share of Price REIT Common Stock (the 'Pre-Closing Adjustment'). Specifically,
in the event that the Notional Value is less than $45.00 the face amount of the
Kimco Class D Depositary Shares will be increased up to a maximum of $11.25
(based on a liquidation preference of $25.00 per Kimco Class D Depositary Share)
to arrive at a Notional Value of $45.00. To the extent that the issuance of
$11.25 of Kimco Class D Depositary Shares would still result in less than $45.00
of combined Notional Value, the number of shares of Kimco Common Stock issuable
per share of Price REIT Common Stock will be increased in order to arrive at a
total Notional Value of $45.00 delivered in Kimco securities. However, Kimco may
elect to terminate the Merger Agreement in the event the Kimco Average Price is
less than $32.00.
In the event the Kimco Average Price plus $10.00 is greater than $45.00,
each share of Price REIT Common Stock would continue to be converted into one
share of Kimco Common Stock, and the amount of Kimco Class D Depositary Shares
will be decreased by 50% of the amount by which the Kimco Average Price plus
$10.00 exceeds $45.00.
Set forth below, for illustrative purposes only, are seven examples of the
Pre-Closing Adjustments:
1. If the Kimco Average Price is equal to $39.00
If the Kimco Average Price is equal to $39.00, holders of Price REIT
Common Stock will receive one share of Kimco Common Stock valued at the
Kimco Average Price of $39.00 and $9.00 in liquidation preference of Kimco
Class D Depositary Shares, or 0.36 Kimco Class D Depositary Shares, per
share of Price REIT Common Stock for a Notional Value of $48.00 (i.e.,
$39.00 + $9.00 = $48.00).
2. If the Kimco Average Price is equal to $37.00
If the Kimco Average Price is $37.00, holders of Price REIT Common
Stock will receive one share of Kimco Common Stock valued at the Kimco
Average Price of $37.00 and $9.00 in liquidation preference of Kimco Class
D Depositary Shares, or 0.36 Kimco Class D Depositary Shares, per share of
Price REIT Common Stock for a Notional Value of $46.00 (i.e., $37.00 +
$9.00 = $46.00).
3. If the Kimco Average Price is less than $37.00 but greater than
$35.00
If the Kimco Average Price is $35.50, holders of Price REIT Common
Stock will receive (i) one share of Kimco Common Stock valued at the Kimco
Average Price of $35.50 and (ii) $9.75 (i.e., $10.00-$0.25 = $9.75) in
liquidation preference of Kimco Class D Depositary Shares or 0.39 (i.e.,
$9.75/$25.00 = 0.39) Kimco Class D Depositary Shares. As a result, Price
REIT stockholders will receive a Notional Value of $45.25 (i.e., $35.50 +
$9.75 = $45.25).
4. If the Kimco Average Price is equal to $35.00
If the Kimco Average Price is $35.00, holders of Price REIT Common
Stock will receive (i) one share of Kimco Common Stock valued at the Kimco
Average Price of $35.00 and (ii) $10.00 in liquidation preference of Kimco
Class D Depositary Shares or 0.40 (i.e., $10.00/$25.00 = 0.40) Kimco Class
D Depositary Shares. As a result, Price REIT stockholders will receive a
Notional Value of $45.00 (i.e., $35.00 + $10.00 = $45.00).
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5. If the Kimco Average Price is less than $35.00, but greater than
or equal to $33.75
If the Kimco Average Price is $33.75, holders of Price REIT Common
Stock will receive (i) one share of Kimco Common Stock valued at the Kimco
Average Price of $33.75 and (ii) $11.25 ($45.00 minimum value-$33.75 =
$11.25) in liquidation preference of Kimco Class D Depositary Shares or
0.45 (i.e., $11.25/$25.00 = 0.45) Kimco Class D Depositary Shares. As a
result, holders of Price REIT Common Stock will receive a Notional Value of
$45.00 (i.e., $33.75 + $11.25 = $45.00).
6. If the Kimco Average Price is less than $33.75, but greater than
or equal to $32.00
If the Kimco Average Price is $32.00, holders of Price REIT Common
Stock will receive (i) 1.05 (i.e., $33.75/$32.00) shares of Kimco Common
Stock valued at the Kimco Average Price of $32.00 to deliver $33.75 of
Kimco Common Stock value and (ii) $11.25 ($45.00 minimum value-$33.75 =
$11.25) in liquidation preference of Kimco Class D Depositary Shares or
0.45 (i.e., $11.25/$25.00 = 0.45) Kimco Class D Depositary Shares. As a
result, holders of Price REIT Common Stock will receive a Notional Value of
$45.00 (i.e., $33.75 + $11.25 = $45.00).
7. If the Kimco Average Price is less than $32.00
If the Kimco Average Price is $31.00, holders of Price REIT Common
Stock will receive 1.09 (i.e., $33.75/$31.00) shares of Kimco Common Stock
valued at the Kimco Average Price of $31.00 to deliver $33.75 of Kimco
Common Stock Value and (iii) $11.25 ($45.00 minimum value-$33.75 = $11.25)
in liquidation preference of Kimco Class D Depositary Shares or 0.45 (i.e.,
$11.25/$25.00 = 0.45) Kimco Class D Depositary Shares.
As a result, holders of Price REIT Common Stock will receive a combined
value of $45.00 (i.e., $33.75 + $11.25 = $45.00). Kimco, however, may elect to
terminate the Merger Agreement in the event the Kimco Average Price or the
closing price of Kimco Common Stock on the Closing Date or on either of the two
immediately preceding business days is less than $32.00. See'--Termination.'
SINCE THE DETERMINATION OF THE MERGER CONSIDERATION WILL NOT OCCUR UNTIL
AFTER THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS, HOLDERS OF PRICE REIT
COMMON STOCK WILL BE ABLE TO OBTAIN THE EXACT MERGER CONSIDERATION THAT THEY MAY
RECEIVE IN EXCHANGE FOR THEIR PRICE REIT COMMON STOCK BY CALLING (888) 212-7107
ON OR AFTER JUNE 11, 1998.
At the Effective Time, each Price REIT Stock Option which is outstanding
immediately prior to the Effective Time, whether or not then exercisable or
vested, will be satisfied and cancelled and, in the case of each such satisfied
and cancelled Price REIT Stock Option, each holder thereof will receive from
Kimco, as soon as practicable but in no event later than five business days
following the Effective Time, the Option Consideration (and cash in lieu of
fractional shares of Option Consideration) having a value equal to (A) the
product of (i) the amount by which the value of the Merger Consideration payable
per share of Price REIT Common Stock pursuant to the Merger Agreement, assuming
such Price REIT Stock Option had been exercised immediately prior to the
Effective Time, exceeds the per share exercise price of such Price REIT Stock
Option and (ii) the number of shares subject to such Price REIT Stock Option
minus (B) applicable withholding taxes. See 'The Merger--Interests of Certain
Persons in the Merger; Possible Conflicts of Interest.'
CONVERSION OF PRICE REIT PREFERRED STOCK
If, prior to the Merger, Price REIT has issued shares of Price REIT
Preferred Stock, then upon completion of the Merger, each outstanding share of
Price REIT Preferred Stock will be converted into the right to receive 10 Kimco
Class E Depositary Shares, each of which will represent a one-tenth fractional
interest in a share of Kimco Class E Preferred Stock. For additional information
regarding the Price REIT Preferred Stock and the Kimco Class E Preferred Stock,
see 'Recent Developments--Price REIT' and 'Description of Kimco Securities--
Kimco Class E Preferred Stock.'
KIMCO SPECIAL SECOND QUARTER DIVIDEND
In connection with the Merger, the Kimco Board of Directors declared the
Kimco Special Second Quarter Dividend of $0.42 per share of Kimco Common Stock
for the period beginning on April 1, 1998 and ending on June 18, 1998, payable
on July 2, 1998 to Kimco stockholders of record on June 18, 1998, the last
business day prior to the Kimco Annual Meeting. The per share amount of the
Kimco Special Second Quarter Dividend represents the pro rata portion of Kimco's
quarterly dividend for the second quarter of 1998 ($0.48).
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PRICE REIT SPECIAL SECOND QUARTER DIVIDEND
In connection with the Merger, the Price REIT Board of Directors declared
the Price REIT Special Second Quarter Dividend of $0.651 per share of Price REIT
Common Stock for the period beginning on April 1, 1998 and ending on June 18,
1998, payable on June 29, 1998 to holders of Price REIT Common Stock of record
on June 18, 1998, the last business day prior to the Price REIT Special Meeting.
The per share amount of the Price REIT Special Second Quarter Dividend
represents the pro rata portion of Price REIT's quarterly dividend for the
second quarter of 1998 ($0.75).
EXCHANGE OF PRICE REIT COMMON STOCK CERTIFICATES
Promptly after the Effective Time, Kimco will cause the Exchange Agent to
mail to each person who was, at the Effective Time, a holder of record of shares
of Price REIT Common Stock, a letter of transmittal to be used by such holders
in forwarding the Certificates and instructions for effecting the surrender of
the Certificates in exchange for certificates representing Merger Consideration
and cash in lieu of fractional shares of Merger Consideration. Upon surrender to
the Exchange Agent of a Certificate for cancellation, together with a duly
executed and completed letter of transmittal, the holder of such Certificate
will be entitled to receive certificates representing that number of whole
shares of Merger Consideration, cash in lieu of any fractional shares (as
described below) and unpaid dividends and distributions, if any, which such
holder has the right to receive in respect of the Certificate surrendered, after
giving effect to any required withholding tax, and the Certificate so
surrendered will be cancelled. HOLDERS OF PRICE REIT COMMON STOCK SHOULD NOT
SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL FROM THE
EXCHANGE AGENT.
No fractional shares of Merger Consideration will be issued and any holder
of shares of Price REIT Common Stock entitled under the Merger Agreement to
receive a fractional share will be entitled to receive only a cash payment in
lieu thereof, which payment will be in an amount equal to such fractional
proportion of the Kimco Average Price per share of Kimco Common Stock and of the
liquidation preference per Kimco Class D Depositary Share, as applicable.
No dividends or other distributions on the Merger Consideration will be
paid with respect to any shares of Price REIT Common Stock represented by a
Certificate until such Certificate is surrendered for exchange as provided in
the Merger Agreement. Subject to the effect of applicable laws, following
surrender of any such Certificate, there will be paid to the holder of
Certificates representing whole shares of Merger Consideration issued in
exchange therefor, without interest (i) at the time of such surrender, the
amount of any dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of Merger
Consideration and not paid, less the amount of any withholding taxes which may
be required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender thereof and a payment date subsequent to surrender thereof
payable with respect to such whole shares of Merger Consideration less the
amount of any withholding taxes, which may be required thereon.
At or after the Effective Time, there will be no transfers on the transfer
books of Price REIT of shares of Price REIT Common Stock which were outstanding
immediately prior to the Effective Time.
Any portion of the Merger Consideration held by the Exchange Agent
(together with cash in lieu of fractional shares of the Merger Consideration and
the proceeds of any investments thereof) that are unclaimed by the former
holders of Price REIT Common Stock one year after the Effective Time will be
delivered to the Surviving Corporation. Any former holders of Price REIT Common
Stock who have not theretofore complied with the exchange procedures in the
Merger Agreement may thereafter look only to the Surviving Corporation for
payment of their shares constituting the Merger Consideration, cash in lieu of
fractional shares of Merger Consideration and any unpaid dividends and
distributions on the Merger Consideration, deliverable in respect of each share
of Price REIT Common Stock such stockholder holds. Notwithstanding the
foregoing, none of Kimco, Price REIT, the Exchange Agent or any other person
will be liable to any former holder of shares of Price REIT Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
In the event that any Certificate has been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed and, if required by the Surviving
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Corporation, the posting by such person of a bond in such reasonable amount as
the Surviving Corporation may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration, cash in lieu of fractional shares and any unpaid dividends and
distributions on the Merger Consideration, as described above.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties
relating to, among other things: (a) the due incorporation, good standing,
authority and compliance with law of Kimco and Price REIT and similar corporate
matters; (b) the corporate power, authorization, execution, delivery and
enforceability of the Merger Agreement; (c) the capital structure of Kimco and
Price REIT; (d) subsidiaries of Kimco and Price REIT; (e) investment interests
of Kimco and Price REIT; (f) conflicts under charter or bylaws, breaches,
violations, defaults or conflicts of any instruments or law and required
consents or approvals; (g) certain documents filed by each of Kimco and Price
REIT with the Commission and the accuracy of information contained therein; (h)
litigation; (i) conduct of business in the ordinary course and the absence of
certain changes or material adverse effects; (j) taxes; (k) books and records;
(l) properties; (m) environmental matters; (n) employee benefit plans; (o) labor
matters; (p) brokers' and finders' fees with respect to the Merger; (q) receipt
of fairness opinions; (r) ownership of the capital stock of the other company;
(s) related party transactions; (t) contracts and commitments; (u) leases; (v)
non-applicability of the Investment Company Act of 1940 to Price REIT; (w)
certain development rights of Price REIT; (x) certain payments by Price REIT
resulting from the Merger; and (y) non-applicability of certain provisions of
the MGCL.
CERTAIN COVENANTS
Each of Kimco and Price REIT has agreed, among other things, prior to the
consummation of the Merger, unless the other party agrees in writing or as
otherwise required or permitted by the Merger Agreement, (i) to use its
reasonable efforts, and to cause its subsidiaries to use their reasonable
efforts, to preserve intact their business organization and goodwill and keep
available the services of their officers and employees, (ii) to confer on a
regular basis with one or more representatives of the other to report
operational matters of materiality and any proposals to engage in material
transactions, (iii) promptly to notify the other of any material emergency or
other material change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or normal course of their businesses
or in the operation of their properties, any material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the breach in any material respect of any representation or
warranty contained in the Merger Agreement, (iv) to set the record date for the
quarterly dividend payable with respect to the Kimco Common Stock and any
outstanding Kimco Preference Shares and Price REIT Common Stock, respectively,
for the first calendar quarter of 1998 to a date not later than April 1, and (v)
promptly to deliver to the other true and correct copies of any report,
statement or schedule filed with the Commission subsequent to the date of the
Merger Agreement.
Price REIT has agreed that, among other things, prior to the consummation
of the Merger, except as previously disclosed to Kimco, unless Kimco agrees in
writing, Price REIT (i) shall, and shall cause each of its subsidiaries to,
conduct its operations according to their usual, regular and ordinary course in
substantially the same manner as previously conducted, subject to clause (ii)
below; (ii) shall not, and shall cause its subsidiaries not to, acquire, enter
into an option to acquire or exercise an option or contract to acquire
additional real property, encumber assets or commence construction of, or enter
into any agreement or commitment to develop or construct retail shopping center
properties or other real estate projects, except in an amount not to exceed
$150,000,000 in the aggregate; (iii) shall not amend its charter or bylaws; (iv)
shall not, except pursuant to the exercise of options, warrants, conversion
rights and other contractual rights existing on the date of the Merger Agreement
and disclosed pursuant to the Merger Agreement, issue any shares of its capital
stock, effect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction other than a private placement or
a sale pursuant to Rule 415 promulgated under the Securities Act under an
effective Price REIT registration statement of capital stock of Price REIT for
an amount not to exceed $75,000,000; (v) shall not grant, confer or award any
option, warrant, conversion right or other right not existing on the date of the
Merger Agreement to acquire any shares of its capital stock; (vi) shall not
increase any compensation or enter into or amend any employment agreement with
any of its present or future officers or directors; (vii) shall not adopt any
new employee benefit plan (including any stock option, stock benefit or stock
purchase plan) or amend any existing employee benefit plan in any material
respect, except for changes which are required by applicable law
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or are less favorable to participants in such plans; (viii) shall not declare,
set aside or pay any dividend or make any other distribution or payment with
respect to any shares of its capital stock, except (a) a dividend per share of
Price REIT Preferred Stock not to exceed $20.00 per quarter pro-rated for the
period from the date of issuance of such share to and including the Closing
Date, (b) a dividend not to exceed $0.75 per share of Price REIT Common Stock
for the last quarter of the year ended December 31, 1997 and (c) a dividend per
share of Price REIT Common Stock in an amount equal to the greater of (I) $0.75
per quarter pro-rated for the period from January 1, 1998 up to and including
the Closing Date and (II) the sum of (A) Price REIT's estimated undistributed
real estate investment trust taxable income (calculated without regard to the
dividends paid deductions as defined in Section 561 of the Code and by excluding
net capital gain) within the meaning of Section 857(b)(2) of the Code for Price
REIT's 1998 taxable year ending on the Closing Date and (B) Price REIT's
estimated undistributed net capital gain within the meaning of Section 857(b)(3)
of the Code for Price REIT's 1998 taxable year ending on the Closing Date; (ix)
shall not, except in connection with the use of shares of capital stock to pay
the exercise price or tax withholding in connection with stock-based employee
benefit plans of Price REIT, directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or capital stock of any of its
subsidiaries, or make any commitment for any such action; (x) except in the
ordinary course of business consistent with past practice, shall not, and shall
not permit any of its subsidiaries to, sell, lease, mortgage or otherwise
encumber or otherwise dispose of any Price REIT properties or any of its capital
stock of or other interests in subsidiaries or any of its other assets which are
material, individually or in the aggregate; (xi) shall not, and shall not permit
any of its subsidiaries to, incur, assume or prepay any indebtedness for
borrowed money in an amount in excess of $100,000,000, or assume, guarantee,
endorse or otherwise become liable or responsible for the obligations of any
third party or make any loans, advances or capital contributions to, or
investments in any other person, other than loans, advances and capital
contributions to its subsidiaries; (xii) shall not, and shall not permit any of
its subsidiaries to, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) of Price
REIT included in Price REIT's filings with the Commission as of the date of the
Merger Agreement or incurred in the ordinary course of business consistent with
past practice since that time; (xiii) shall not, and shall not permit any of its
subsidiaries to, enter into any commitment which may result in total payments or
liability by or to it in excess of $200,000 except (A) tenant reimbursements and
leases entered into in the ordinary course consistent with past practice and (B)
certain capital expenditures previously disclosed to Kimco; (xiv) shall not, and
shall not permit any of its subsidiaries to, enter into any commitment with any
officer, director, consultant or affiliate of Price REIT or any of its
subsidiaries other than the payment to each of Messrs. Kornwasser, Friedman and
Kronenberg of an amount equal to their respective 1997 bonus awards paid to such
individuals by Price REIT pro-rated for the period from January 1, 1998 up to
and including the Effective Time; (xv) shall not and shall not permit any of its
subsidiaries to take any action that would cause the representations and
warranties as to conduct of business in the ordinary course, contained in the
Merger Agreement, to be no longer true and correct; and (xvi) shall not acquire,
or announce any proposed acquisition of, 50% or more of the voting securities,
or all or substantially all of the assets, of another entity which has net
assets in excess of $25,000,000.
Kimco has agreed that, among other things, prior to the consummation of the
Merger, unless Price REIT agrees in writing, Kimco (i) shall not declare, set
aside or pay any dividend or make any other distribution or payment with respect
to any shares of its capital stock (including any dividend distribution payable
in, or otherwise make a distribution of, shares of capital stock of any existing
or subsequently formed subsidiary of Kimco), except (1)(v) (subject to the
allowance for the quarterly dividend for the first calendar quarter of 1998) a
dividend in an amount not to exceed $0.48 per share of Kimco Common Stock for
the last calendar quarter of 1997, (w) a dividend in the amount of $0.484375 per
depositary share representing the Kimco Class A Preferred Stock, (x) a dividend
in the amount of $0.53125 per depositary share representing the Kimco Class B
Preferred Stock, (y) a dividend in the amount of $0.52345 per depositary share
representing the Kimco Class C Preferred Stock and (z) a dividend per share of
Kimco Common Stock in an amount equal to the greater of (I) $0.48 per quarter
pro-rated for the period from January 1, 1998 up to and including the Closing
Date and (II) the sum of (A) Kimco's estimated undistributed real estate
investment trust taxable income (calculated without regard to dividends paid
deductions as defined in Section 561 of the Code and by excluding net capital
gain) within the
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meaning of Section 857(b)(2) of the Code for Kimco's 1998 taxable year through
the Closing Date and (B) Kimco's estimated undistributed net capital gain within
the meaning of Section 857(b)(3) of the Code for Kimco's 1998 taxable year
through the Closing Date and except (2) in connection with the use of shares of
its capital stock to pay the exercise price or tax withholding in connection
with stock-based employee benefit plans of Kimco, directly or indirectly redeem,
purchase or otherwise acquire any shares of its capital stock or capital stock
of any of its subsidiaries, or make any commitment for any such action; and (ii)
shall not amend its charter or bylaws.
Price REIT has agreed to use all reasonable efforts to obtain and deliver
to Kimco prior to the Closing Date certain letters from 'affiliates' of Price
REIT as defined under Rule 145. Kimco has agreed to file reports required to be
filed by it under the Exchange Act and the rules and regulations adopted by the
Commission thereunder, and to take such further action as any affiliate of Price
REIT may reasonably request, all to the extent required from time to time to
enable such affiliate to sell the Merger Consideration received by such
affiliate in the Merger without registration under the Securities Act pursuant
to Rule 145(d)(1) or any successor rule or regulation adopted by the Commission.
Kimco and Price REIT have agreed that, during the period from the date of
the Merger Agreement until the Effective Time, neither Price REIT nor Kimco nor
any of their respective subsidiaries or other affiliates will knowingly take or
knowingly fail to take any action which would jeopardize the qualification of
the Merger as a 'reorganization' within the meaning of Section 368(a) of the
Code.
NO SOLICITATION OF TRANSACTIONS
Each of Kimco and Price REIT has agreed that it will not, nor will it
permit any of its subsidiaries to, nor authorize or permit any of its directors,
officers or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by it or any of its subsidiaries to,
directly or indirectly through another person, (A) solicit, initiate or
encourage (including by way of furnishing information), or take any other action
designed to facilitate, any inquiries or the making of any proposal made by a
third party to acquire, directly or indirectly, including pursuant to a tender
offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power or all or substantially all the assets of either Kimco or
Price REIT, as the case may be (each such proposal is referred to as an
'Acquisition Proposal'), or (B) participate in any discussions or negotiations
regarding any Acquisition Proposal; provided, however, that if the Board of
Directors of either Kimco or Price REIT determines in good faith, after
consultation with its respective outside counsel, that it is necessary to do so
in order to comply with its fiduciary duties to its respective stockholders
under applicable law, such Board of Directors may, in response to an Acquisition
Proposal, subject to providing prior written notice of its decision to take such
action to the other party, (x) furnish information with respect to itself and
its subsidiaries to any person making an Acquisition Proposal pursuant to a
customary confidentiality agreement (as determined by such party after
consultation with its outside counsel) and (y) participate in discussions or
negotiations regarding such Acquisition Proposal.
In addition, each of Kimco and Price REIT has agreed to immediately advise
the other party orally and in writing of any request for information or of any
Acquisition Proposal, the material terms and conditions of such request or
Acquisition Proposal and the identity of the person making such request or
Acquisition Proposal. Each of Kimco and Price REIT has agreed to keep the other
party reasonably informed of the status and details (including amendments or
proposed amendments) of any such request or Acquisition Proposal.
Neither Kimco nor Price REIT will be prohibited from taking and disclosing
to its stockholders a position contemplated by Rule 14d-9 and Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to its
stockholders if, in the good faith judgment of the Board of Directors of either
Kimco or Price REIT, as the case may be, after consultation with its respective
outside counsel, failure so to disclose would be inconsistent with its
obligations under applicable law.
STOCK EXCHANGE LISTING
Kimco has agreed to promptly prepare and submit to the NYSE a listing
application covering the Kimco Common Stock and Kimco Class D Depositary Shares
issuable in the Merger, and to use its reasonable efforts to obtain, prior to
the Effective Time, approval for the listing of such Kimco Common Stock and
Kimco Class D Depositary Shares, subject to official notice of issuance.
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INDEMNIFICATION
From and after the Effective Time, Kimco has agreed to cause the Surviving
Corporation to keep in effect provisions in its charter and bylaws providing for
exculpation of director liability and indemnification of directors, officers,
employees and agents at least to the extent that such persons are entitled
thereto under the charter and bylaws of Price REIT as of the date of the Merger
Agreement, subject to Maryland law. In addition, Kimco has agreed to cause the
Surviving Corporation not to amend, repeal or otherwise modify any of the
foregoing provisions of the Surviving Corporation's charter and bylaws for a
period of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at any time prior to the
Effective Time were directors, officers, employees or agents of Price REIT in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by the Merger
Agreement), unless such modification is required by law. Kimco has also agreed
from and after the Effective Time, to guaranty the obligations of the Surviving
Corporation under the indemnification provisions of the charter and bylaws of
Price REIT existing on the date of the Merger Agreement to the directors,
officers, employees or agents of Price REIT who at any time prior to the
Effective Time were entitled to indemnification thereunder in respect of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by the Merger Agreement).
INSURANCE
Kimco has agreed that, for a period of two years after the Effective Time,
the Surviving Corporation will cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by Price
REIT (provided that the Surviving Corporation may substitute therefor policies
of at least the same coverage and amounts containing terms and conditions which
are no less advantageous) with respect to claims arising from facts or events
which occurred before the Effective Time; provided, however, that in no event
shall the Surviving Corporation be required to expend more than an amount equal
to 200% of current annual premiums paid by Price REIT for such insurance.
GOVERNANCE
The Kimco Board of Directors is obligated to take all action necessary to
cause the directors comprising the full Board of Directors of Kimco at the
Effective Time to be increased by one Director and to take all such action
necessary to cause Joseph K. Kornwasser to be selected as a Director of Kimco
for a term expiring at the 1999 annual meeting of stockholders following the
Effective Time, in order to fill the vacancy resulting from such newly created
directorship.
EMPLOYEES
Subject to considerations relating to the particular geographic region in
which the employee is located, it is the intent of Kimco and Price REIT that the
employees of Price REIT employed by the Surviving Corporation after the
Effective Time shall in general receive compensation and benefits on the same
basis and subject to the same standards as the employees of Kimco.
CONDITIONS TO THE MERGER
The respective obligations of Kimco and Price REIT to consummate the Merger
are subject to the fulfillment at or prior to the Closing Date or waiver of the
following conditions, among others: (a) the Kimco Share Proposal, the Merger and
the Merger Agreement shall have been approved in the manner required by
applicable law or by applicable regulations of any stock exchange or other
regulatory body by the holders of the issued and outstanding shares of capital
stock of Kimco and Price REIT, respectively, entitled to vote thereon; (b) none
of the parties to the Merger Agreement shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the consummation
of the transactions contemplated by the Merger Agreement; (c) the Registration
Statement of which this Joint Proxy Statement/Prospectus is a part shall have
become effective under the Securities Act and all necessary state securities or
'blue sky' permits or approvals required to carry out the transactions
contemplated by the Merger Agreement shall have been obtained and no stop order
with respect to any of the foregoing shall be in effect; (d) Kimco shall have
obtained the approval for the listing of the Kimco Common Stock and Kimco Class
D Depositary Shares issuable in the Merger on the NYSE, subject to official
notice of issuance; and (e) all consents, authorizations, orders and approvals
of (or filings or registrations with) any governmental commission, board or
other regulatory body or third party
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required in connection with the execution, delivery and performance of the
Merger Agreement shall have been obtained or made (except for filings in
connection with the Merger and any other documents required to be filed after
the Effective Time and except where the failure to have obtained or made any
such consent, authorization, order, approval, filing or registration would not
have a material adverse effect on the business, results of operations or
financial condition of Kimco and Price REIT (and their respective subsidiaries),
taken as a whole, following the Effective Time).
The obligations of each of Kimco and Price REIT to effect the Merger are
also subject to the fulfillment at or prior to the Closing Date or waiver by the
other party prior to the Effective Time of the following conditions, among
others: (a) the other party shall have performed all its agreements contained in
the Merger Agreement and the representations and warranties of the other party
set forth in the Merger Agreement shall be true in all material respects as of
the Effective Time unless, except for certain specified representations, the
failure of any such representation or warranty to be so true and correct would
not have or would not be reasonably likely to have a material adverse effect on
the business of such party and its subsidiaries taken as a whole; (b) each party
shall have received the opinion of its tax counsel that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that Kimco and Price REIT will each be a
party to that reorganization within the meaning of Section 368(b) of the Code;
(c) each party shall have received an opinion of the other's counsel to the
effect that the other party was organized in conformity with the requirements
for qualification and taxation as a REIT under Section 856 of the Code, and it
operates in a manner consistent with maintaining such status; (d) Kimco and
Price REIT shall have each received a 'comfort' letter from the other party's
independent accountants covering matters customarily included in such comfort
letters relating to transactions similar to the Merger; (e) each party shall
have received the opinion of its counsel that the Merger may be effected under
Maryland law; and (f) from the date of the Merger Agreement through the
Effective Time, there shall not have occurred any change in the financial
condition, business, or operations of the other party that would have or would
be reasonably likely to have a material adverse effect on the other party and
its subsidiaries taken as a whole, other than any such change that affects both
Kimco and Price REIT in a substantially similar manner. There is currently no
intention on the part of either Kimco or Price REIT to waive any of the
conditions to the Merger. If, however, either Kimco or Price REIT were to decide
to waive any of these conditions, such party would consider the necessity of
resoliciting its stockholders.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval of the Kimco
Share Proposal and the Merger by the stockholders of Kimco and Price REIT,
respectively, under the following circumstances: (a) by the mutual written
consent of Kimco and Price REIT; (b) by action of the Board of Directors of
Kimco or the Board of Directors of Price REIT if (i) the Merger shall not have
been consummated by June 30, 1998 (provided that the terminating party shall not
have breached in any material respect its obligations under the Merger Agreement
in any manner that shall have proximately contributed to the occurrence of such
failure to consummate the Merger), (ii) a meeting of Price REIT's stockholders
shall have been duly convened and held and the approval of the Merger by holders
of Price REIT Common Stock shall not have been obtained at such meeting or at
any adjournment thereof, (iii) a meeting of Kimco's stockholders shall have been
duly convened and held and the approval of the Kimco Share Proposal by Kimco's
stockholders shall not have been obtained at such meeting or at any adjournment
thereof, or (iv) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable, provided, that the party seeking to terminate the Merger
Agreement pursuant to this clause (iv) shall have used all reasonable efforts to
remove such order, decree, ruling or injunction; (c) by action of the Board of
Directors of Price REIT if (i) in the exercise of its good faith judgment as to
its fiduciary duties to its stockholders imposed by law, the Board of Directors
of Price REIT determines that such termination is required because an
Acquisition Proposal, that is reasonably capable of being consummated, has been
made for Price REIT and there is a substantial probability that holders of Price
REIT Common Stock will not approve the Merger because of such Acquisition
Proposal, (ii) Kimco or any of its directors or officers participate in
negotiations regarding an Acquisition Proposal for Kimco in breach of the terms
of the Merger Agreement (see '--No Solicitation of Transactions'), (iii) there
has been a breach by Kimco of any representation or warranty contained in the
Merger
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Agreement that would have or would be reasonably likely to have a material
adverse effect on Kimco and its subsidiaries taken as a whole, which breach is
not curable by June 29, 1998, or (iv) there has been a material breach of any
covenant or agreement contained in the Merger Agreement on the part of Kimco
that is not curable or, if curable, is not cured within 30 days after written
notice of such breach is given by Price REIT to Kimco; or (d) by action of the
Board of Directors of Kimco if (i) in the exercise of its good faith judgment as
to its fiduciary duties to its stockholders imposed by law, the Board of
Directors of Kimco determines that such termination is required because an
Acquisition Proposal, that is reasonably capable of being consummated, has been
made for Kimco and there is a substantial probability that the Kimco
stockholders will not approve the Kimco Share Proposal because of such
Acquisition Proposal, (ii) Price REIT or any of its directors or officers
participate in negotiations regarding an Acquisition Proposal for Price REIT in
breach of the terms of the Merger Agreement (see '--No Solicitation of
Transactions'), (iii) there has been a breach by Price REIT of any
representation or warranty contained in the Merger Agreement that would have or
would be reasonably likely to have a material adverse effect on Price REIT and
its subsidiaries taken as a whole, which breach is not curable by June 29, 1998,
(iv) there has been a material breach of any covenant or agreement contained in
the Merger Agreement on the part of Price REIT that is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Kimco to Price REIT or (v) in the event the Kimco Average Price or the
closing price of Kimco Common Stock on the Closing Date or on either of the two
immediately preceding business days is less than $32.00.
BREAK-UP FEES AND EXPENSES
If the Merger Agreement is terminated (i) by Price REIT by action of its
Board of Directors because a majority thereof determines in good faith (A)
(based on the advice of a financial advisor of nationally recognized reputation)
that a pending Acquisition Proposal for Price REIT is more favorable to holders
of Price REIT Common Stock than the Merger, (B) that such Acquisition Proposal
is reasonably capable of being consummated and (C) that there is a substantial
probability that the adoption of the Merger by the holders of Price REIT Common
Stock will not be obtained because of the pending Acquisition Proposal for Price
REIT or (ii) by Kimco if (A) Price REIT or any of its directors or officers
participates in discussions or negotiations regarding an Acquisition Proposal
for Price REIT in breach of the terms of the Merger Agreement or (B) there has
been a material breach by Price REIT of certain of the covenants or agreements
set forth in the Merger Agreement, which breach is not cured within 30 days
after written notice of such breach by Kimco to Price REIT (provided, the Board
of Directors of Kimco makes a good faith determination that such breach
materially impairs either the ability to consummate the Merger on the terms
contemplated in the Merger Agreement or the economic benefit of the Merger to
Kimco), then Price REIT will pay to Kimco a fee (the 'Break-Up Fee') equal to
the lesser of (x) $12,500,000 plus Break-Up Expenses (as defined herein) (the
'Base Amount') and (y) the maximum amount that can be paid to Kimco without
causing it to fail to meet the requirements of Sections 856(c)(2) and (3) of the
Code determined as if the payment of such amount did not constitute income
described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code
('Qualifying Income'), as determined by independent accountants to the party
which becomes entitled to the Break-Up Fee. Notwithstanding the foregoing, in
the event the fee recipient receives a letter from outside counsel indicating
that the fee recipient has received a ruling from the IRS holding that the fee
recipient's receipt of the Base Amount would either constitute Qualifying Income
or would be excluded from gross income within the meaning of Sections 856(c)(2)
and (3) of the Code (the 'REIT Requirements'), the Break-Up Fee will be an
amount equal to the Base Amount. If the Merger Agreement is terminated by Kimco
because (A) there has been a breach by Price REIT of certain of the
representations or warranties contained in the Merger Agreement which would have
or would be reasonably likely to have a material adverse effect and which is not
curable by June 29, 1998, (B) there has been a material breach of certain other
covenants or agreements set forth in the Merger Agreement on the part of Price
REIT, which breach is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by Kimco to Price REIT, provided
the Board of Directors of Kimco makes a good faith determination that such
breach materially impairs either the ability to consummate the Merger on the
terms contemplated in the Merger Agreement or the economic benefit of the Merger
to Kimco or (C) because a meeting of Price REIT's stockholders was convened and
held and the holders of Price REIT Common Stock did not approve the Merger at
such meeting, then Price REIT will pay Kimco an amount (the 'Break-Up Expenses')
equal to the lesser of (i) $2,000,000, (ii) the out-of-pocket expenses incurred
in connection with the Merger Agreement and the transactions contemplated
thereby and (iii) the maximum amount that can be paid without causing the
recipient to
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fail to meet the requirements of Sections 856(c)(2) and (3) of the Code
determined as if the payment of such amount did not constitute Qualifying
Income, as determined by independent accountants to the recipient.
Notwithstanding the foregoing, in the event the recipient receives a letter from
outside counsel indicating that the recipient has received a ruling from the IRS
holding that the recipient's receipt of the Break-Up Expenses would either
constitute Qualifying Income or would be excluded from gross income within the
meaning of the REIT Requirements, the Break-Up Expenses shall be determined
without regard to clause (iii) above.
If the Merger Agreement is terminated by Kimco because the Kimco Average
Price or the closing price of Kimco Common Stock on the Closing Date or on
either of the two immediately preceding business days is less than $32.00, then
Kimco will pay Price REIT $6,250,000. If the Merger Agreement is terminated (i)
by Kimco by action of its Board of Directors because a majority thereof
determines in good faith (A) (based on the advice of a financial advisor of
nationally recognized reputation) that a pending Acquisition Proposal for Kimco
is more favorable to Kimco's stockholders than the Merger, (B) that such
Acquisition Proposal is reasonably capable of being consummated and (C) that
there is a substantial probability that the approval of the Kimco Share Proposal
by the stockholders of Kimco will not be obtained because of the pending
Acquisition Proposal for Kimco or (ii) by Price REIT if Kimco or any of its
directors or officers participates in discussions or negotiations regarding an
Acquisition Proposal for Kimco in breach of the terms of the Merger Agreement,
then Kimco will pay to Price REIT the Break-Up Fee. If the Merger Agreement is
terminated by Price REIT because (x) there has been a material breach of the
representations or warranties contained in the Merger Agreement which would have
or would be reasonably likely to have a material adverse effect and which is not
curable by June 29, 1998, (y) there has been a material breach of certain of the
covenants or agreements set forth in the Merger Agreement, which breach is not
cured within 30 days after written notice of such breach by Price REIT to Kimco
(provided the Board of Directors of Kimco makes a good faith determination that
such breach materially impairs either the ability to consummate the Merger on
the terms contemplated in the Merger Agreement or the economic benefit of the
Merger to Price REIT) or (z) because a meeting of Kimco's stockholders was
convened and held and the Kimco stockholders did not approve the Kimco Share
Proposal at such meeting, then Kimco will pay Price REIT the Break-Up Expenses.
If the Merger is not consummated (other than due to the mutual consent of
Kimco and Price REIT or because a meeting of Kimco stockholders was convened and
held and the approval of the Kimco Share Proposal was not obtained at such
meeting or adjournment thereof or Kimco's failure to perform its obligations
under the Merger Agreement in such a manner so as to entitle Price REIT to
terminate the Merger Agreement, and at the time of such termination an
Acquisition Proposal for Price REIT has been received by Price REIT, and either
prior to the termination of the Merger Agreement or within twelve (12) months
thereafter Price REIT enters into any written acquisition agreement which is
subsequently consummated (whether or not such acquisition agreement is related
to the Acquisition Proposal that had been received at the time of the
termination of the Merger Agreement), then Price REIT shall pay the Break-Up Fee
to Kimco. If the Merger is not consummated (other than due to the termination of
the Merger Agreement due to mutual consent of Kimco and Price REIT, or because a
meeting of Price REIT's stockholders was convened and held and the approval by
the holders of Price REIT Common Stock of the Merger has not been obtained at
such meeting or adjournment thereof or Kimco's failure to perform its
obligations under the Merger Agreement in such a manner so as to entitle Kimco
to terminate the Merger Agreement) and at the time of the termination of the
Merger Agreement an Acquisition Proposal for Kimco has been received by Kimco,
and either prior to the termination of the Merger Agreement or within twelve
(12) months thereafter Kimco enters into any written acquisition agreement which
is subsequently consummated (whether or not such acquisition agreement is
related to the Acquisition Proposal for Kimco that had been received at the time
of the termination of the Merger Agreement), then Kimco shall pay the Break-Up
Fee to Price REIT.
AMENDMENT AND WAIVER
The parties may modify or amend the Merger Agreement by written agreement
at any time prior to the Effective Time, to the extent permitted by applicable
law. The conditions to each party's obligation to consummate the Merger may be
waived by the other party in whole or in part to the extent permitted by
applicable law.
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FEDERAL INCOME TAX CONSEQUENCES
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a general summary of the material United States Federal
income tax consequences of the Merger to Price REIT, Kimco and the holders of
Price REIT Common Stock. The following summary is based upon current provisions
of the Code, temporary and final regulations thereunder, and current
administrative rulings and court decisions, all of which are subject to change
(possibly on a retroactive basis). No attempt has been made to comment on all
United States Federal income tax consequences of the Merger that may be relevant
to particular holders of Kimco Common Stock or Price REIT Common Stock,
including holders that are subject to special tax rules such as dealers in
securities, mutual funds, insurance companies, tax exempt entities, holders who
do not hold their shares as capital assets and holders that, for United States
Federal income tax purposes, are non-resident alien individuals, foreign
corporations, foreign partnerships or foreign estates or trusts. Holders of
Kimco Common Stock and Price REIT Common Stock are urged to consult with their
own legal and tax advisers regarding the United States Federal income tax
consequences of the Merger and any other consequences of the Merger under state,
local and foreign tax laws.
It is the opinion of Gibson, Dunn & Crutcher LLP, special counsel to Price
REIT in connection with the Merger, which opinion has been rendered to Price
REIT, that on the basis of the facts, representations and assumptions set forth
in such opinion, the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, that Price REIT
and Kimco will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, that no gain or loss will be recognized by Price
REIT as a result of the Merger and that no gain or loss will be recognized by a
holder of Price REIT Common Stock who receives Merger Consideration in exchange
for Price REIT Common Stock (except with respect to any cash received in lieu of
a fractional interest in Merger Consideration).
Brown & Wood LLP, special counsel to Kimco in connection with the Merger,
is of the opinion that, on the basis of certain facts, representations and
assumptions set forth in an opinion letter rendered to Kimco, the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that Price REIT and Kimco will each be a
party to that reorganization within the meaning of Section 368(b) of the Code.
Holders of Price REIT Common Stock and Kimco should be aware that such
opinions of counsel are not binding on the Internal Revenue Service (the 'IRS'),
and no assurance can be given that the IRS will not adopt a contrary position or
that such position will not be sustained by a court.
Consequences to Holders of Price REIT Common Stock
The aggregate basis of the Kimco Common Stock and Kimco Class D Depositary
Shares to be received by the holders of Price REIT Common Stock in connection
with the Merger will be the same as the aggregate tax basis in the Price REIT
Common Stock surrendered in exchange therefor (reduced by any amount allocable
to a fractional share interest for which cash is received), which basis will be
allocated between the Kimco Common Stock and Kimco Class D Depositary Shares
based on the relative fair market values of the Kimco Common Stock and the Kimco
Class D Depositary Shares at the time of the Merger. The holding period of the
Kimco Common Stock and Kimco Class D Depositary Shares to be received by the
holders of Price REIT Common Stock in connection with the Merger will include
the holding period of the Price REIT Common Stock surrendered in exchange
therefor, provided that the Price REIT Common Stock is held as a capital asset
at the Effective Time.
Cash received in lieu of a fractional interest in Merger Consideration will
be treated as received in redemption for such fractional interest, resulting in
the recognition of gain or loss, measured by the difference between the amount
of cash received and the portion of the basis of the shares of Price REIT Common
Stock allocable to such interest. Such gain or loss will constitute capital gain
or loss from the sale of stock if the shares of Price REIT Common Stock have
been held by the stockholder as a capital asset. Net capital gain of non-
corporate stockholders will generally be taxed at a 28% rate or 20% rate if the
shares of Price REIT Common Stock were held by the stockholder for more than one
year or eighteen months, respectively, as of the Effective Time.
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REIT Qualification of Kimco and Price REIT
General. Kimco elected REIT status commencing with its taxable year
beginning January 1, 1992. In the opinion of Brown & Wood LLP, special counsel
to Kimco, Kimco was organized in conformity with the requirements for
qualification and taxation as a REIT under the Code, and its method of operation
has enabled it and will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code. Brown & Wood LLP has opined
that, subsequent to the Merger, Kimco's proposed method of operation described
in this Joint Proxy Statement/Prospectus and as represented by Kimco will enable
it to meet the requirements for qualification and taxation as a REIT.
Price REIT elected REIT status commencing with its taxable year ending
December 31, 1991. In the opinion of Gibson, Dunn & Crutcher LLP, which has
acted as special counsel to Price REIT, commencing with its taxable year ended
December 31, 1991, Price REIT was organized in conformity with the requirements
for qualification and taxation as a REIT under the Code, and its method of
operation has enabled it (and will enable it up to the Effective Time of the
Merger) to continue to meet the requirements for qualification and taxation as a
REIT under the Code.
It must be emphasized that these opinions are based on various assumptions
relating to the organization and operation of various entities. In general,
Brown & Wood's opinion is based on various assumptions relating to the
organization and operation of various entities, including Kimco and Merger Sub,
and is conditioned upon certain representations made by Kimco as to factual
matters relating to the organization, operation, income, assets, distributions,
stockholder recordkeeping requirements and share ownership of Kimco. Kimco's
qualification as a REIT depends on its having met and continuing to meet,
through actual operating results, distribution levels, stockholder recordkeeping
requirements and diversity of share ownership, the various qualification tests
imposed under the Code that are discussed below, the results of which have not
been and will not be reviewed by Brown & Wood LLP. Accordingly, no assurance can
be given that the actual results of Kimco's operations for any particular
taxable year have satisfied or will satisfy such requirements.
Gibson, Dunn & Crutcher's opinion is based on various assumptions relating
to the organization and operation of various entities, including Price REIT, and
is conditioned upon the accuracy of certain representations made by Price REIT
as to factual matters relating to the organization, operation, income, assets,
distributions, stockholder recordkeeping requirements and stock ownership of
Price REIT. Price REIT's qualification as a REIT depends on its having met and
continuing to meet, through actual operating results, distribution levels,
stockholder recordkeeping requirements and diversity of stock ownership, the
various qualification tests imposed under the Code that are discussed below, the
results of which have not been and will not be reviewed by Gibson, Dunn &
Crutcher LLP. Accordingly, no assurance can be given that the actual results of
Price REIT's operations for any particular taxable year have satisfied or will
satisfy such requirements.
An opinion of counsel is not binding on the IRS or the courts, and no
assurance can be given that the IRS will not challenge Kimco's or Price REIT's
eligibility for taxation as a REIT. Further, the federal income tax treatment
described herein may be changed, perhaps retroactively, by legislative,
administrative or judicial action at any time.
Taxation of Kimco as a REIT
If Kimco qualifies for taxation as a REIT, it generally will not be subject
to Federal corporate income taxes on its net income that is currently
distributed to stockholders. This treatment substantially eliminates the 'double
taxation' (at the corporate and stockholder levels) that generally results from
investment in a regular corporation. However, Kimco will be subject to Federal
income tax as follows: First, Kimco will be taxed at regular corporate rates on
any undistributed real estate investment trust taxable income (as defined in the
Code), including undistributed net capital gains. However, provided that Kimco
elects to retain and pay tax on its net capital gains, its stockholders will
receive a refund or credit, as the case may be, for their proportionate share of
such tax. Second, under certain circumstances, Kimco may be subject to the
'alternative minimum tax' on its items of tax preference. Third, if Kimco has
(i) 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 (ii) other non-qualifying income from foreclosure property, it will be
subject to tax at the highest corporate rate on such income. Fourth, if Kimco
has net income from prohibited transactions (which are, in general, certain
sales or other dispositions of property held
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primarily for sale to customers in the ordinary course of business other than
foreclosure property), such income will be subject to a 100% tax. Fifth, if
Kimco should fail to satisfy the 75% gross income test or the 95% gross income
test (as discussed below), but has nonetheless maintained its qualification as a
REIT because certain other requirements have been met, it will be subject to a
100% tax on an amount equal to (a) the gross income attributable to the greater
of the amount by which Kimco fails the 75% or 95% test, multiplied by (b) a
fraction intended to reflect Kimco's profitability. Sixth, if Kimco should fail
to distribute during each calendar year at least the sum of (i) 85% of its real
estate investment trust ordinary income (as defined in the Code) for such year,
(ii) 95% of its real estate investment trust capital gain net income (as defined
in the Code) for such year, and (iii) any undistributed taxable income from
prior periods, Kimco would be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Seventh, if during
the 10-year period beginning on the first day of the first taxable year for
which Kimco qualified as a REIT (the 'Recognition Period'), Kimco recognizes
gain on the disposition of any asset held by Kimco as of the beginning of such
Recognition Period, then, to the extent of the excess of (a) the fair market
value of such asset as of the beginning of such Recognition Period over (b)
Kimco's adjusted basis in such asset as of the beginning of such Recognition
Period (the 'Built-in Gain'), such gain will be subject to tax at the highest
regular corporate rate pursuant to IRS regulations that have not yet been
promulgated. Eighth, if Kimco acquires any asset from a corporation (i.e.,
generally a corporation subject to full corporate-level tax) in certain
transactions in which the basis of the asset in the hands of Kimco is determined
by reference to the basis of the asset (or any other property) in the hands of
the corporation, and Kimco recognizes gain on the disposition of such asset
during the Recognition Period beginning on the date on which such asset was
acquired by Kimco, then, to the extent of the Built-in Gain, such gain will be
subject to tax at the highest regular corporate rate pursuant to IRS regulations
that have not yet been promulgated. The results described above with respect to
the recognition of Built-in Gain assume that Kimco will make an election
pursuant to IRS Notice 88-19. Kimco intends to make a protective election under
Notice 88-19 with respect to the Merger.
Income Tests. In order to maintain qualification as a REIT, Kimco annually
must satisfy two gross income requirements. First, at least 75% of Kimco's gross
income (excluding gross income from prohibited transactions) for each taxable
year must be derived directly or indirectly from investments relating to real
property or mortgages on real property (including 'rents from real property')
and, in certain circumstances, interest, or income from certain types of
temporary investments. Second, at least 95% of Kimco's gross income (excluding
gross income from prohibited transactions) for each taxable year must be derived
from such real property investments, dividends, interest and gain from the sale
or disposition of stock or securities (or from any combination of the
foregoing).
1. The 75% Test. At least 75% of Kimco's gross income for each taxable
year must be 'qualifying income.' Qualifying income generally includes (i) rents
from real property (except as modified below); (ii) interest on obligations
secured by mortgages on, or interests in, real property; (iii) gains from the
sale or other disposition of interests in real property and real estate
mortgages, other than gain from property held primarily for sale to customers in
the ordinary course of Kimco's trade or business ('dealer property'); (iv)
distributions on shares in other REITs, as well as gain from the sale of such
shares; (v) abatements and refunds of real property taxes; (vi) income from the
operation, and gain from the sale, of property acquired at or in lieu of a
foreclosure of a mortgage secured by such property ('foreclosure property');
(vii) commitment fees received for agreeing to make loans secured by mortgages
on real property or to purchase or lease real property; and (viii) certain
qualified temporary investment income attributable to the investment of new
capital received by Kimco in exchange for its shares (including the Securities
offered hereby) during the one-year period following the receipt of such new
capital.
Rents received by Kimco will qualify as 'rents from real property' in
satisfying the gross income requirements described above only if several
conditions are met. Rents received from a tenant will not qualify as rents from
real property in satisfying the 75% test (or the 95% gross income test described
below) if Kimco, or an owner of 10% or more of Kimco, directly or constructively
owns 10% or more of such tenant. In addition, if rent attributable to personal
property leased in connection with a lease of real property is greater than 15%
of the total rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as rents from real
property. Moreover, an amount received or accrued will not qualify as rents from
real property (or as interest income) for purposes of the 75% and 95% gross
income tests if it is based in whole or in part on the
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income or profits of any person. Finally, for rents received to qualify as rents
from real property, Kimco generally must not operate or manage the property or
furnish or render services to tenants (other than those allowed under a de
minimis exception), other than through an 'independent contractor' from whom
Kimco derives no income. The 'independent contractor' requirement, however, does
not apply to the extent that the services provided by Kimco are 'usually or
customarily rendered' in connection with the rental of space for occupancy only,
and are not otherwise considered 'rendered to the occupant.'
2. The 95% Test. At least 95% of Kimco's gross income for the taxable year
must be derived from the above-described qualifying income, or from dividends,
interest or gains from the sale or disposition of stock or other securities that
are not dealer property. Dividends and interest on any obligations not secured
by an interest in real property and any payments made to or on behalf of Kimco
by a financial institution pursuant to certain rate protection agreements will
be included as qualifying income for purposes of the 95% gross income test, but
not for purposes of the 75% test. For purposes of determining whether Kimco
complies with the 75% and 95% income tests, qualifying income does not include
income from prohibited transactions. A 'prohibited transaction' is, in general,
a sale of dealer property, other than foreclosure property.
If Kimco fails to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, it may nevertheless qualify as a REIT for such year if it
is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if Kimco's failure to meet such test was
due to reasonable cause and not due to willful neglect, Kimco attaches a
schedule of the sources of its income to its federal income tax return, and 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 Kimco
would be entitled to the benefit of these relief provisions.
Asset Tests. Kimco, at the close of each quarter of its taxable year, must
also satisfy three tests relating to the nature of its assets. First, at least
75% of the value of Kimco's total assets must be represented by real estate
assets (including (i) assets held by Kimco's qualified REIT subsidiaries and
Kimco's allocable share of real estate assets held by partnerships in which
Kimco owns an interest and (ii) stock or debt instruments held for not more than
one year purchased with the proceeds of a stock offering or long-term (at least
five years) debt offering of Kimco), cash, cash items and government securities.
Second, not more than 25% of Kimco's total assets may be represented by
securities other than those in the 75% asset class. Third, of the investments
included in the 25% asset class, the value of any one issuer's securities owned
by Kimco may not exceed 5% of the value of Kimco's total assets and Kimco may
not own more than 10% of any one issuer's outstanding voting securities (other
than a qualified REIT subsidiary).
Kimco presently owns 100% of the non-voting stock of Kimco Realty Services,
Inc. ('KRS'), which interest entitles Kimco to 95% of all dividends and
liquidating distributions of KRS. KRS is not a 'qualified REIT subsidiary.' The
Clinton Administration's 1999 budget proposal announced on February 2, 1998,
includes a proposal to amend the REIT asset tests to prohibit a REIT from owning
more than 10% of the value of the outstanding stock of any corporation that is
not a qualified REIT subsidiary (a 'non-qualified REIT subsidiary'). Existing
non-qualified REIT subsidiaries would be exempt from this provision, and
therefore subject only to the 5% asset test and 10% voting securities test of
current law, except that such exemption would terminate if the subsidiary
engaged in a new trade or business or acquired substantial new assets after the
legislation becomes effective. If this proposal were enacted, Kimco's ability to
engage in certain activities through a non-qualified REIT subsidiary, such as
KRS, would be limited or prohibited. No prediction can be made as to whether the
above-mentioned provision will be enacted and if enacted, whether the final
legislation will be in a form substantially similar to that in the proposal.
Annual Distribution Requirements. In order to qualify as a REIT, Kimco, is
required to distribute dividends (other than capital gain dividends) to its
stockholders in an amount at least equal to (A) the sum of (i) 95% of Kimco's
'REIT taxable income' (computed without regard to the dividends paid deduction
and Kimco's net capital gain) and (ii) 95% of the net income (after tax), if
any, from foreclosure property, minus (B) the sum of certain items of non-cash
income. In addition, if Kimco disposes of any asset during its Recognition
Period, Kimco will be required, pursuant to IRS regulations which have not yet
been promulgated, to distribute at least 95% of the Built-in Gain (after tax),
if any, recognized on the disposition of such asset. Such distributions must be
paid in the taxable year to which they relate, or in the following taxable year
if declared before Kimco timely files its tax return for such year and if paid
on or before the first regular dividend payment
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after such declaration. To the extent that Kimco does not distribute all of its
net capital gain or distributes at least 95%, but less than 100%, of its real
estate investment trust taxable income, as adjusted, it will be subject to tax
thereon at regular ordinary and capital gain corporate tax rates. Furthermore,
if Kimco should fail to distribute during each calendar year at least the sum of
(i) 85% of its real estate investment trust ordinary income for such year, (ii)
95% of its real estate investment trust capital gain net income for such year,
and (iii) any undistributed taxable income from prior periods, Kimco would be
subject to a 4% excise tax on the excess of such required distribution over the
amounts actually distributed. Kimco intends to make timely distributions
sufficient to satisfy this annual distribution requirement.
It is possible that Kimco, from time to time, may not have sufficient cash
or other liquid assets to meet the 95% distribution requirement due to timing
differences between (i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of such income and deduction of such
expenses in arriving at taxable income of Kimco. In the event that such timing
differences occur, in order to meet the 95% distribution requirement, Kimco 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.
TAXATION OF KIMCO STOCKHOLDERS
As used herein, the term 'U.S. Stockholder' means a holder of Kimco Common
Stock or Kimco Preference Shares who is (for United States federal income tax
purposes) (i) a citizen or resident of the United States, (ii) a corporation,
partnership, or other entity created or organized in or under the laws of the
United States, any state thereof or the District of Columbia, (iii) an estate,
the income of which is subject to United States federal income taxation
regardless of its source or (iv) a trust, if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial
decisions of the trust. A holder that is not a U.S. Stockholder as defined above
will be considered a 'Non-U.S. Stockholder.'
General. As long as Kimco qualifies as a REIT, distributions made to
Kimco's stockholders with respect to their shares out of current or accumulated
earnings and profits (and not designated as capital gain dividends) will be
taken into account by them as ordinary income and will not be eligible for the
dividends received deduction for stockholders that are corporations. For
purposes of determining whether distributions on the stock is out of current or
accumulated earnings and profits, the earnings and profits of Kimco will be
allocated first to the holders of Kimco Preference Shares and second to the
holders of Kimco Common Stock. Dividends that are designated as capital gain
dividends will be taxed as capital gains without regard to the period for which
the stockholder has held its securities. However, corporate stockholders may be
required to treat up to 20% of certain capital gain dividends as ordinary
income. To the extent that Kimco makes distributions in excess of current and
accumulated earnings and profits, these distributions are treated first as a
tax-free return of capital to the stockholder, reducing the tax basis of a
stockholder's securities by the amount of such distribution (but not below
zero), with distributions in excess of the stockholder's tax basis taxable as
capital gains (if the stock is held as a capital asset). In addition, any
dividend declared by Kimco in October, November or December of any year and
payable to a stockholder of record on a specific date in any such month will be
treated as both paid by Kimco and received by the stockholder on December 31 of
such year, provided that the dividend is actually paid by Kimco during January
of the following calendar year. Stockholders may not include in their individual
income tax returns any net operating losses or capital losses of Kimco.
Pursuant to the Taxpayer Relief Act of 1997, for taxable years of Kimco
that begin on or after January 1, 1998, Kimco may elect to retain and pay income
tax on its net long-term capital gain attributable to such taxable year. If
Kimco makes this election, its stockholders will be required to include in their
income as long-term capital gain their proportionate share of such amount so
designated by Kimco. A stockholder will be treated as having paid his or her
share of the tax paid by Kimco in respect of such amount so designated by Kimco,
for which such stockholder will be entitled to a credit or refund. In addition,
each stockholder's adjusted basis in Kimco stock will be increased by the excess
of the amount so includible in income over the tax deemed paid on such amount.
Kimco must pay tax on its designated long-term capital gain within 30 days of
the close of any taxable year in which it designates long-term capital gain
pursuant to this rule, and it must mail a written notice of its designation to
its stockholders within 60 days of the close of the taxable year.
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<PAGE>
Distributions made by Kimco and gain arising from the sale or exchange by a
stockholder of Kimco stock will not be treated as passive activity income, and,
as a result, stockholders will not be able to apply any 'passive losses' against
such income or gain. Distributions made by Kimco (to the extent that they do not
constitute a return of capital) generally will be treated as investment income
for purposes of computing the investment income limitation. Gain arising from
the sale or other disposition of Kimco stock (and distributions treated as
such), however, will not be treated as investment income unless a stockholder so
elects, in which case such capital gains will be taxed at ordinary income rates.
Upon any sale or other disposition of Kimco stock (subject to the
discussion below concerning the possible application of Section 306 in the case
of Kimco Class D Depositary Shares), a stockholder will recognize gain or loss
for federal income tax purposes in an amount equal to the difference between (i)
the amount of cash and the fair market value of any property received on such
sale or other disposition and (ii) the holder's adjusted basis in such shares of
Kimco stock for tax purposes. Net capital gain of a non-corporate shareholder
will generally be taxed at a 28% rate or a 20% rate if such shares have been
held for more than one year or eighteen months, respectively. In general, any
loss recognized by a stockholder upon the sale or other disposition of shares of
Kimco stock that have been held for six months or less (after applying certain
holding period rules) will be treated as a long-term capital loss, to the extent
of capital gain dividends received by such stockholders from Kimco which were
required to be treated as long-term capital gains.
Section 306 Stock. Under Section 306 of the Code, preferred stock received
in a reorganization, such as the Merger, that meets certain requirements
('Section 306 Stock') may be subject to special tax treatment under the Code.
Specifically, and as described in more detail below, treatment of Kimco Class D
Depositary Shares as Section 306 Stock could affect whether any gain recognized
on the subsequent disposition of such shares would be taxable at capital gain or
income rates, but will not affect the tax treatment of the receipt of Kimco
Class D Depository Shares by holders of Price REIT Common Stock who receive such
shares in the Merger. Preferred stock received in a reorganization will be
treated as Section 306 Stock to the extent that, in addition to certain other
requirements being satisfied, the effect of the transaction is 'substantially
the same as the receipt of a stock dividend.' Whether or not the receipt of
preferred stock in a reorganization is substantially the same as the receipt of
a stock dividend will depend upon the specific circumstances of each holder of
Price REIT Common Stock receiving Kimco Class D Depositary Shares. Moreover,
there exists very little authority interpreting this standard in the context of
a reorganization similar to the Merger where preferred stock having terms
similar to the Kimco Class D Depositary Shares is received. Accordingly, it is
uncertain whether Kimco Class D Depositary Shares received in the Merger by any
particular holder of Price REIT Common Stock will be treated as Section 306
Stock, and such determination will depend upon the specific circumstances of
each holder of Price REIT Common Stock receiving Kimco Class D Depositary Shares
in the Merger. Although the matter is not free from doubt, based upon a
published ruling of the IRS, assuming that a particular holder of Price REIT
Common Stock's percentage of stock ownership in Kimco is minimal and the
stockholder exercises no control over the affairs of Kimco, the receipt of Kimco
Class D Depositary Shares by such stockholder should not be considered
substantially the same as the receipt of a stock dividend and, therefore, such
Kimco Class D Depositary Shares received by such a holder of Price REIT Common
Stock should not be considered Section 306 Stock. Although the matter is
uncertain, based upon the foregoing published ruling and the underlying purposes
of Section 306 of the Code, it is anticipated that in most cases Kimco Class D
Depositary Shares received by a holder of Price REIT Common Stock pursuant to
the Merger should not be treated as Section 306 Stock. Nevertheless, due to the
lack of authority addressing the matter and the factual nature of such a
determination, holders of Price REIT Common Stock receiving Kimco Class D
Depositary Shares pursuant to the Merger should consult their own tax advisors
as to whether or not the Kimco Class D Depositary Shares received by them will
be treated as Section 306 Stock.
If Kimco Class D Depositary Shares received by a particular holder of Price
REIT Common Stock are treated as Section 306 Stock, such holder of Price REIT
Common Stock will be subject to special tax treatment upon a sale of such Kimco
Class D Depositary Shares under Section 306 of the Code. In general, subject to
certain exceptions (as more fully described below), upon the sale of such Kimco
Class D Depositary Shares, the amount realized would be treated first as
ordinary income to the extent of the amount which would have been treated as a
dividend to the holder of Price REIT Common Stock at the time of the Merger if
the holder of Price REIT Common Stock had received money (in lieu of the Kimco
Class D Depositary Shares) in an amount equal
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<PAGE>
to the fair market value of such Kimco Class D Depositary Shares at the
Effective Time. Any amount realized in excess of the ordinary income amount
(described above) would be treated first as a tax-free return of the holders of
Price REIT Common Stock basis in the Kimco Class D Depositary Shares sold (to
the extent of such basis), and then as long-term, mid-term or short-term capital
gain. To the extent that the portion of the amount realized that is not treated
as ordinary income, if any, is less than the holder of Price REIT Common Stock's
basis in the Kimco Class D Depositary Shares sold (i.e., such that the holder of
Price REIT Common Stock does not fully recover such stockholder's basis in the
Kimco Class D Depositary Shares sold), any remaining basis in the Kimco Class D
Depositary Shares sold would be added to any shares of Kimco Common Stock owned
by such stockholder. No loss would be allowed upon such a sale of Kimco Class D
Depositary Shares.
The foregoing consequences of a sale of any Kimco Class D Depositary Shares
that are treated as Section 306 Stock will not apply (1) if the disposition
constitutes a complete termination of the stockholder's ownership interest in
Kimco (i.e., if the stockholder does not own any stock in Kimco after the
disposition) or (2) if both the acquisition and disposition of the Kimco Class D
Depositary Shares were not in pursuance of a plan having as one of its principal
purposes the avoidance of Federal income tax. Although there is little authority
addressing the issue and, therefore, the matter is uncertain, even if Kimco
Class D Depositary Shares received by a holder of Price REIT Common Stock
pursuant to the Merger were treated as Section 306 Stock, it is anticipated that
in many cases the facts and circumstances surrounding the acquisition and
subsequent sale of such Kimco Class D Depositary Shares by a holder of Price
REIT Common Stock would more likely than not support a conclusion that both the
acquisition and sale of the Kimco Class D Depositary Shares were not in
pursuance of a plan having as one of its principal purposes the avoidance of
Federal income tax. Assuming that the surrounding facts and circumstances
support such a conclusion with respect to any particular Price REIT stockholder,
the sale of Kimco Class D Depositary Shares by such stockholder would not be
subject to the adverse tax consequences described above. Accordingly, holders of
Price REIT Common Stock receiving Kimco Class D Depositary Shares pursuant to
the Merger should consult their own tax advisors in this regard. In addition to
the foregoing, Kimco Common Stock received by a stockholder upon conversion of
Kimco Class D Depositary Shares will not be treated as Section 306 Stock, even
if the Kimco Class D Depositary Shares so converted were treated as Section 306
Stock.
In applying the foregoing rules, certain constructive ownership rules will
apply. Under these rules, a stockholder will be deemed to own stock owned and,
in some cases, constructively owned by certain family members, certain estates
and trusts of which the stockholder is a beneficiary, and certain affiliated
entities, as well as stock that is subject to certain options which are actually
or constructively owned by the stockholder or such other persons.
Due to the complexity of the foregoing rules and the importance of each
stockholder's specific circumstances in applying such rules, holders of Price
REIT Common Stock are urged to consult their own tax advisors concerning the
application of Section 306 of the Code to them in light of their specific
circumstances.
Conversion of Kimco Class D Depositary Shares into Kimco Common Stock. As
a general rule, no gain or loss will be recognized by a stockholder upon the
conversion of the Kimco Class D Depositary Shares into shares of Kimco Common
Stock. Income will generally be recognized, however, to the extent Kimco Common
Stock is received in payment of dividends in arrears. In addition, gain or loss
may be recognized to the extent that a stockholder receives cash in lieu of
fractional shares of Kimco Common Stock. Such gain or loss will be capital gain
or loss if the stock was held as a capital asset, measured by the difference
between the cash received for the fractional share interest and the
stockholder's basis in the fractional share interest.
Generally, a stockholder's basis in the Kimco Common Stock received upon
conversion of the Kimco Class D Depositary Shares, other than shares of Kimco
Common Stock taxed as dividends upon receipt, will equal the adjusted tax basis
of the converted Kimco Class D Depositary Shares (exclusive of any basis
allocable to a fractional share interest) and the holding period of such Kimco
Common Stock will include the holding period of the converted Kimco Class D
Depositary Shares. As a general rule, a stockholder's basis in shares of Kimco
Common Stock taxed as dividends upon receipt will equal the fair market value
thereof and the holding period for such Kimco Common Stock will begin on the day
following the conversion.
Adjustment of Conversion Price. Section 305 of the Code treats certain
actual or constructive distributions of stock with respect to stock or
convertible securities, such as Kimco Class D Depositary Shares, as a
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<PAGE>
distribution taxable as a dividend to the extent of the issuing corporation's
current or accumulated earnings and profits (as determined for federal income
tax purposes). Treasury regulations treat holders of convertible preferred stock
as having received such a constructive distribution when the conversion price of
such preferred stock is adjusted to reflect certain taxable distributions with
respect to the stock into which such preferred stock is convertible. Thus, under
certain circumstances, an adjustment to the conversion price of the Kimco Class
D Depositary Shares may give rise to a deemed taxable stock dividend to the
stockholders thereof, whether or not such stockholders exercise their conversion
privilege. This may occur in the event that Kimco proceeds with its contemplated
Spin-Off REIT and the conversion price of the Kimco Class D Depositary Shares is
reduced in connection therewith. In addition, the failure to fully adjust the
conversion price of the Kimco Class D Depositary Shares to reflect distributions
of stock dividends with respect to Kimco Common Stock (or rights to acquire such
stock) may give rise to a deemed taxable stock dividend to the holders of the
Kimco Common Stock.
Taxation of Tax-Exempt Stockholders. Most tax-exempt employees' pension
trusts are not subject to Federal income tax except to the extent of their
receipt of 'unrelated business taxable income' as defined in Section 512(a) of
the Code ('UBTI'). Distributions by Kimco to a holder that is a tax-exempt
entity will not constitute UBTI, provided that the tax-exempt entity has not
financed the acquisition of its securities with 'acquisition indebtedness'
within the meaning of the Code and the securities are not otherwise used in an
unrelated trade or business of the tax-exempt entity. In addition, for taxable
years beginning on or after January 1, 1994, certain pension trusts that own
more than 10% of a 'pension-held REIT' may be required to report a portion of
the distribution that they receive from such a REIT as UBTI. Kimco has not been
and does not expect to be treated as a pension-held REIT for purposes of this
rule.
Taxation of Foreign Stockholders. The following is a discussion of certain
anticipated U.S. Federal income tax consequences of the ownership and
disposition of Kimco stock applicable to Non-U.S. Stockholders of such
securities.
1. Ordinary Dividends. The portion of dividends received by Non-U.S.
Stockholders payable out of Kimco's earnings and profits which are not
attributable to capital gains of Kimco and which are not effectively connected
with a U.S. trade or business of the Non-U.S. Stockholder will be subject to
U.S. withholding tax at the rate of 30% (unless reduced by an applicable
treaty). In general, Non-U.S. Stockholders will not be considered engaged in a
U.S. trade or business solely as a result of their ownership of Kimco stock. In
cases where the dividend income from a Non-U.S. Stockholder's investment in
securities is (or is treated as) effectively connected with the Non-U.S.
Stockholder's conduct of a U.S. trade or business, the Non-U.S. Stockholder
generally will be subject to U.S. tax at graduated rates, in the same manner as
U.S. Stockholders are taxed with respect to such dividends (and may also be
subject to the 30% branch profits tax in the case of a Non-U.S. Stockholder that
is a foreign corporation).
2. Non-Dividend Distributions. Distributions by Kimco which are not
dividends out of the earnings and profits of Kimco will not be subject to U.S.
income or withholding tax. If it cannot be determined at the time a distribution
is made whether or not such distribution will be in excess of Kimco's current
and accumulated earnings and profits, the entire distribution will be subject to
withholding at the rate applicable to dividends. However, the Non-U.S.
Stockholder may seek a refund of such amounts from the IRS if it is subsequently
determined that such distribution was, in fact, in excess of current and
accumulated earnings and profits of Kimco.
3. Capital Gain Dividends. Under the Foreign Investment in Real Property
Tax Act of 1980 ('FIRPTA'), a distribution made by Kimco to a Non-U.S.
Stockholder, to the extent attributable to gains from dispositions of United
States real property interests ('USRPIs'), such as the properties beneficially
owned by Kimco, will be considered effectively connected with a U.S. trade or
business of the Non-U.S. Stockholder and subject to U.S. income tax at the rate
applicable to U.S. individuals or corporations, without regard to whether such
distribution is designated as a capital gain dividend. In addition, Kimco will
be required to withhold tax equal to 35% of any distribution to a Non-U.S.
Stockholder that could be designated as capital gain dividends. Distributions
subject to FIRPTA may also be subject to a 30% branch profits tax in the hands
of a foreign corporate stockholder that is not entitled to treaty exemption.
4. Dispositions of Kimco Stock. Unless Kimco stock constitutes a USRPI, a
sale of such stock by a Non-U.S. Stockholder generally will not be subject to
U.S. taxation under FIRPTA. Kimco stock will not constitute a
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<PAGE>
USRPI if Kimco is a 'domestically controlled REIT.' A domestically controlled
REIT is a REIT in which, at all times during a specified testing period, less
than 50% in value of its stock is held directly or indirectly by Non-U.S.
Stockholders. Kimco believes that it has been and anticipates that it will
continue to be a domestically controlled REIT, and therefore that the sale of
Kimco stock will not be subject to taxation under FIRPTA. Because the Kimco
stock will be publicly traded, however, no assurance can be given Kimco will
continue to be a domestically controlled REIT. If Kimco were not to qualify as a
domestically controlled REIT, a Non-U.S. Stockholder's sale of Kimco stock
generally would still not be subject to tax under FIRPTA provided that the
selling Non-U.S. Stockholder held 5% or less of that class of Kimco's
outstanding stock at all times during a specified testing period. If gain on the
sale of stock were subject to taxation under FIRPTA, the Non-U.S. Stockholder
would be subject to the same treatment as a U.S. Stockholder with respect to
such gain (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals) and the
purchaser of stock could be required to withhold 10% of the purchase price and
remit such amount to the IRS. Capital gains not subject to FIRPTA will
nonetheless be taxable in the United States to a Non-U.S. Stockholder in two
cases: (i) if the Non-U.S. Stockholder's investment in stock is effectively
connected with a U.S. trade or business conducted by such Non-U.S. Stockholder,
the Non-U.S. Stockholder will be subject to the same treatment as a U.S.
Stockholder with respect to such gain, or (ii) if the Non-U.S. Stockholder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and has a 'tax home' in the United States, the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gain.
Backup Withholding. Kimco reports to its stockholders and the IRS the
amount of dividends paid during each calendar year, and the amount of tax
withheld, if any. Under the backup withholding rules, a stockholder may be
subject to backup withholding at the rate of 31% with respect to dividends paid
unless such stockholder (a) is a corporation or comes within one of the exempt
categories and, when required, demonstrates this fact, or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A stockholder that does not provide Kimco with its correct
taxpayer identification number may also be subject to penalties imposed by the
IRS. Backup withholding is not an additional tax. Any amount paid as backup
withholding will be creditable against the stockholder's income tax liability.
In addition, Kimco may be required to withhold a portion of capital gain
distributions to any stockholders who fail to certify their non-foreign status
to Kimco.
On October 6, 1997, the Treasury Department issued new regulations (the
'New Regulations') that make certain modifications to the backup withholding
rules described above. The New Regulations attempt to unify certification
requirements and modify reliance standards. The New Regulations will generally
be effective for payments made after December 31, 1999, subject to certain
transition rules. Prospective investors are urged to consult their own tax
advisors regarding the New Regulations.
Failure to Qualify
If Kimco fails to qualify for taxation as a REIT in any taxable year, and
the relief provisions do not apply, Kimco will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Such a failure to qualify for taxation as a REIT could have an adverse
effect on the market value and marketability of the Kimco stock. Distributions
to stockholders in any year in which Kimco fails to qualify will not be
deductible by Kimco nor will they be required to be made. In such event, to the
extent of current and accumulated earnings and profits, all distributions to
stockholders will be taxable as ordinary income and, subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, Kimco 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 Kimco would be entitled to such
statutory relief.
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<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
December 31, 1997
------------------
(Unaudited)
(000's)
The following unaudited Pro Forma Combined Consolidated Balance Sheet gives
effect to the proposed Merger as if the Merger had occurred on December 31,
1997, under the purchase method of accounting in accordance with Accounting
Principles Board Opinion No. 16.
The unaudited Pro Forma Combined Consolidated Balance Sheet is presented
for comparative purposes only and is not necessarily indicative of what the
actual combined financial position of Kimco and Price REIT would have been at
December 31, 1997, nor does it purport to represent the future combined
financial position of Kimco and Price REIT. This information should be read in
conjunction with the audited consolidated financial statements and other
financial information contained in Kimco's Annual Report on Form 10-K and Price
REIT's Annual Report on Form 10-K for the year ended December 31, 1997,
including the notes thereto, in each case incorporated by reference herein.
<TABLE>
<CAPTION>
COMBINED
KIMCO PRICE REIT PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS RESULTS
---------- ---------- ----------- ----------
(000'S)
<S> <C> <C> <C> <C>
Assets:
Real estate, net of accumulated depreciation............. $1,196,788 $588,075 $ 222,183 $2,007,046
Investment in retail store leases........................ 15,938 -- -- 15,938
Investments and advances to real estate joint ventures... 9,794 22,555 (1,680) 30,669
Cash and cash equivalents................................ 30,978 3,474 (11,000) 23,452
Accounts and notes receivable............................ 16,203 1,301 -- 17,504
Deferred charges and prepaid expenses.................... 21,260 10,298 -- 31,558
Other assets............................................. 52,929 11,800 -- 64,729
---------- ---------- ----------- ----------
$1,343,890 $637,503 $ 209,503 $2,190,896
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Liabilities:
Notes payable............................................ $ 410,250 $262,093 $ -- $ 672,343
Mortgages payable........................................ 121,364 37,535 -- 158,899
Accounts payable and accrued expenses.................... 56,834 9,212 -- 66,046
Other liabilities........................................ 7,590 -- 2,179 9,769
---------- ---------- ----------- ----------
596,038 308,840 2,179 907,057
---------- ---------- ----------- ----------
Minority interests in partnerships....................... 4,532 2,417 (1,680) 5,269
---------- ---------- ----------- ----------
Stockholders' Equity:
Preferred stock.......................................... 900 -- 476 1,376
Common stock............................................. 404 117 2 523
Paid-in capital.......................................... 857,659 354,941 179,714 1,392,314
Cumulative distributions in excess of net income......... (115,643) (28,812) 28,812 (115,643)
---------- ---------- ----------- ----------
743,320 326,246 209,004 1,278,570
---------- ---------- ----------- ----------
$1,343,890 $637,503 $ 209,503 $2,190,896
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these pro forma combined
consolidated financial statements.
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<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
1. Basis of Presentation
The accompanying historical Consolidated Balance Sheets of Kimco and Price
REIT include the accounts of each company, their subsidiaries, all of which
are wholly owned, and all majority-owned partnerships. All significant
intercompany balances have been eliminated in consolidation.
The unaudited Pro Forma Combined Consolidated Balance Sheet gives effect to
the proposed Merger as if the Merger had occurred on December 31, 1997,
under the purchase method of accounting in accordance with Accounting
Principles Board Opinion No. 16.
2. Reclassification
Certain amounts reflected in the historical financial statements of both
companies have been reclassified to conform to the Pro Forma Combined
Consolidated Balance Sheet presentation.
3. Pro Forma Adjustments
(i) Real estate net of accumulated depreciation -
Real estate assets are stated at cost, less accumulated depreciation
and amortization. If there is an event or a change in circumstances
that indicates that the basis of Kimco's property may not be
recoverable, Kimco will assess any impairment in value by making a
comparison of (i) the current and projected operating cash flows
(undiscounted and without interest charges) of the property over its
remaining useful life and (ii) the net carrying amount of the
property. If the current and projected operating cash flows
(undiscounted and without interest charges) are less than the
carrying value of the property, the carrying value would be written
down to an amount to reflect the fair value of the property.
The adjustment to Real estate, net of accumulated depreciation
reflects the increase in book value of Price REIT's real estate
assets based upon the Kimco purchase price (assuming Kimco Common
Stock is valued at $35 per share) and an exchange ratio of one share
of Price REIT Common Stock for one share of Kimco Common Stock and
0.40 'Kimco Class D Depositary Shares, each representing a one-tenth
fractional interest in a new issue of Kimco Class D Cumulative
Convertible Preferred Stock as follows:
<TABLE>
<CAPTION>
(000's)
---------
<S> <C>
Issuance of:
(1) 11,894,444 shares of Kimco Common Stock (assumed value of $35 per share) based
on an exchange ratio of one for one and....................................... $ 416,306
(2) Issuance of 475,778 shares of Kimco Class D Preferred Stock (represented by
4,757,780 Kimco Class D Depositary Shares) based on an exchange ratio of 0.04
shares of Kimco Class D Preferred Stock (represented by .40 Kimco Class D
Depositary Shares) for one share of Price REIT Common Stock in exchange for
11,894,444 shares of Price REIT Common Stock.................................. 118,944
Assumption of Price REIT liabilities.................................................... 2,179
Merger costs............................................................................ 11,000 see (ii)
---------
Purchase price.......................................................................... 548,429
Less: Historical book basis of Price REIT's net assets acquired......................... (326,246)
---------
Real estate, net of accumulated depreciation............................................
Pro Forma adjustment.................................................................... $ 222,183
---------
---------
</TABLE>
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<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET--(CONTINUED)
3. Pro Forma Adjustments--(Continued)
(ii) Cash and cash equivalents -
The adjustment to cash and cash equivalents reflects the estimated
fees and other expenses relating to the Merger, including, but not
limited to, investment banking fees, legal and accounting fees,
printing, filing and other related costs.
(iii) Investments and advances in real estate, joint ventures and
Minority interests in partnerships -
During April 1996 Kimco and Price REIT formed a partnership to
purchase a property in Phoenix, AZ. Kimco has consolidated this
partnership for accounting purposes and Price REIT has recorded their
interest using the equity method. The adjustments to Investments and
advances in real estate joint ventures and Minority interests in
partnerships reflect the elimination of partnership accounting for
this partnership as a result of the Merger.
(iv) Stockholders' equity -
The adjustments to stockholders' equity reflect the issuance of
11,894,444 shares of Kimco Common Stock, par value $.01 per share,
and 475,778 shares of Kimco Class D Preferred Stock (represented by
4,757,780 Kimco Class D Depositary Shares) based on the exchange
ratio of one share of Price REIT Common Stock for one share of Kimco
Common Stock and 0.04 shares of Kimco Class D Preferred Stock
(represented by 0.40 Kimco Class D Depositary Shares) as follows:
<TABLE>
<CAPTION>
CUMULATIVE
DISTRIBUTIONS
COMMON PREFERRED PAID-IN IN EXCESS OF
STOCK STOCK CAPITAL NET INCOME
(000'S) (000'S) (000'S) (000'S)
------ --------- --------- -------------
<S> <C> <C> <C> <C>
Issuance of Kimco Common Stock......................... $ 119 $ -- $ 416,187 $ --
Issuance of Kimco Class D Preferred Stock.............. -- 476 118,468 --
Price REIT's historical Stockholders' equity........... (117 ) -- (354,941) (28,812)
------ --------- --------- -------------
Stockholders' equity Pro Forma adjustments............. $ 2 $ 476 $ 179,714 $ 28,812
------ --------- --------- -------------
</TABLE>
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<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------
(UNAUDITED)
(000'S EXCEPT PER SHARE DATA)
The following unaudited Pro Forma Combined Consolidated Statement of Income
for the year ended December 31, 1997 gives effect to the proposed Merger as if
the Merger had occurred as of January 1, 1997 under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16. In
addition, the Kimco Pro Forma Statement of Income column for the year ended
December 31, 1997 assumes the completion, as of January 1, 1997, of the
acquisition of 14 shopping center properties as previously reported in the
Current Report on Form 8-K filed on January 22, 1998, incorporated by reference
herein. The Price REIT Pro Forma Statement of Income columns for the year ended
December 31, 1997 assumes the completion, as of January 1, 1997, of the
acquisition of 13 shopping center properties as previously reported in the
Current Report on Form 8-K/A dated November 13, 1997, incorporated by reference
herein. (See Note 1 to the unaudited Pro Forma Combined Consolidated Statement
of Income).
The unaudited Pro Forma Combined Consolidated Statement of Income is
presented for comparative purposes only and is not necessarily indicative of
what the actual combined operating results of Kimco and Price REIT would have
been for the year ended December 31, 1997, nor does it purport to represent the
future combined operating results of Kimco and Price REIT. This information
should be read in conjunction with the audited consolidated financial statements
and other financial information contained in Kimco's Annual Report on Form 10-K
and Price REIT's Annual Report on Form 10-K for the year ended December 31,
1997, respectively, including the notes thereto, in each case incorporated by
reference herein.
<TABLE>
<CAPTION>
KIMCO 1997 PRICE REIT
PROPERTY 1997 PROPERTY
ACQUISITION ACQUISITION
KIMCO PRO FORMA KIMCO PRICE REIT PRO FORMA PRICE REIT
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues from rental property........... $ 198,929 $ 13,559 $ 212,488 $ 69,335 $15,792 $ 85,127
---------- ----------- --------- ---------- ------------- ----------
Rental property expenses-Rent........... 4,873 36 4,909 -- -- --
Real estate taxes....................... 26,346 1,580 27,926 7,671 1,653 9,324
Interest................................ 31,745 2,311 34,056 15,667 8,352 24,019
Operating and maintenance............... 22,194 2,147 24,341 5,890 1,424 7,314
Depreciation and amortization........... 30,053 2,285 32,338 15,752 3,555 19,307
---------- ----------- --------- ---------- ------------- ----------
115,211 8,359 123,570 44,980 14,984 59,964
---------- ----------- --------- ---------- ------------- ----------
Income from rental property........... 83,718 5,200 88,918 24,355 808 25,163
Income from investment in retail store
leases................................ 3,572 3,572
---------- ----------- --------- ---------- ------------- ----------
87,290 5,200 92,490 24,355 808 25,163
Management fee income................... 3,276 -- 3,276 299 -- 299
General and administrative expenses..... (11,651) -- (11,651) (4,191) -- (4,191)
Equity in income (losses) of real estate
joint ventures, net................... 1,117 -- 1,117 1,733 -- 1,733
Minority interests in income of
partnerships, net..................... (464) -- (464) -- -- --
Other income (expenses), net............ 6,024 -- 6,024 1,271 -- 1,271
---------- ----------- --------- ---------- ------------- ----------
Income before gain on sale of shopping
center properties................... 85,592 5,200 90,792 23,467 808 24,275
Gain on sale of shopping center
properties............................ 244 244 2,787 2,787
---------- ----------- --------- ---------- ------------- ----------
Net income............................ $ 85,836 $ 5,200 $ 91,036 $ 26,254 $ 808 $ 27,062
---------- ----------- --------- ---------- ------------- ----------
---------- ----------- --------- ---------- ------------- ----------
Net income applicable to common
shares.............................. $ 67,398 $ 5,200 $ 72,598 $ 26,254 $ 808 $ 27,062
---------- ----------- --------- ---------- ------------- ----------
---------- ----------- --------- ---------- ------------- ----------
Net income per common share
Basic............................... $ 1.80 $ 1.94 $ 2.39 $ 2.46
---------- --------- ---------- ----------
Diluted............................. $ 1.78 $ 1.92 $ 2.36 $ 2.44
---------- --------- ---------- ----------
Historical basic weighted average number
of shares outstanding................. 37,388 37,388 10,982 10,982
---------- --------- ---------- ----------
Historical diluted weighted average
number of shares outstanding.......... 37,850 37,850 11,113 11,113
---------- --------- ---------- ----------
Pro Forma basic weighted number of
shares outstanding....................
Pro Forma diluted weighted number of
shares outstanding....................
<CAPTION>
MERGER COMBINED
PRO FORMA PRO FORMA
ADJUSTMENTS RESULTS
----------- ---------
<S> <C> <C>
Revenues from rental property........... $ -- $ 297,615
----------- ---------
Rental property expenses-Rent........... -- 4,909
Real estate taxes....................... -- 37,250
Interest................................ -- 58,075
Operating and maintenance............... -- 31,655
Depreciation and amortization........... (2,274) 49,371
----------- ---------
(2,274) 181,260
----------- ---------
Income from rental property........... 2,274 116,355
Income from investment in retail store
leases................................ 3,572
----------- ---------
2,274 119,927
Management fee income................... -- 3,575
General and administrative expenses..... 1,200 (14,642)
Equity in income (losses) of real estate
joint ventures, net................... (168) 2,682
Minority interests in income of
partnerships, net..................... 168 (296)
Other income (expenses), net............ -- 7,295
----------- ---------
Income before gain on sale of shopping
center properties................... 3,474 118,541
Gain on sale of shopping center
properties............................ -- 3,031
----------- ---------
Net income............................ $ 3,474 $ 121,572
----------- ---------
----------- ---------
Net income applicable to common
shares.............................. ($5,447) $ 94,213
----------- ---------
----------- ---------
Net income per common share
Basic............................... $ 1.91
---------
Diluted............................. $ 1.89
---------
Historical basic weighted average number
of shares outstanding.................
Historical diluted weighted average
number of shares outstanding..........
Pro Forma basic weighted number of
shares outstanding.................... 49,283
---------
Pro Forma diluted weighted number of
shares outstanding.................... 49,745
---------
</TABLE>
The accompanying notes are an integral part of these pro forma combined
consolidated financial statements.
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<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME
1. Basis of Presentation
The Kimco Pro Forma Statement of Income for the year ended December 31,
1997 reflects the historical results of Kimco adjusted to give effect, as of
January 1, 1997 to the purchase of 14 shopping center properties acquired by
Kimco throughout 1997 as previously reported in the Current Report on Form 8-K
filed on January 22, 1998 and incorporated by reference herein. The Price REIT
Pro Forma Statement of Income for the year ended December 31, 1997 reflects the
historical results of Price REIT adjusted to give effect, as of January 1, 1997
to the purchase of 13 shopping center properties acquired by Price REIT
throughout 1997 as previously reported in the Current Report on Form 8-K/A dated
November 13, 1997, and incorporated by reference herein.
2. Reclassification
Certain amounts reflected in the historical financial statements of both
companies have been reclassified to conform to the presentation of the unaudited
Pro Forma Combined Statement of Income.
3. Pro Forma Adjustments
(i) Depreciation and amortization--
The adjustment to depreciation and amortization results from the net
increase in real estate owned as a result of recording Price REIT's real estate
assets at fair value versus historical cost. Depreciation is computed on the
straight-line method based upon an estimated useful life of 39 years and an
allocation of the stepped-up basis to land and building of 20% and 80%,
respectively.
Calculation of depreciation of real estate owned for the year ended
December 31, 1997 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
(000'S)
-----------------
<S> <C>
Depreciation expense based upon an estimated useful life of 39
years.......................................................... $ 16,621
Less: Pro Forma Price REIT depreciation of real estate owned
based upon an estimated useful life of 15 to 25 years.......... (18,895)
-----------------
Depreciation and amortization Pro Forma adjustment............... $ (2,274)
-----------------
-----------------
</TABLE>
(ii) General and administrative--
The adjustment to general and administrative expenses reflects the net
estimated reduction of those costs which are anticipated to be eliminated or
reduced as a result of the Merger, as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
(000'S)
-----------------
<S> <C>
Net reduction in salary and benefit costs........................ $ 550
Net reduction in duplication of public company expenses.......... 500
Net reduction in directors and officers insurance and directors
fees........................................................... 150
-------
General and administrative Pro Forma adjustment.................. $ 1,200
-------
-------
</TABLE>
(iii) Equity in income of real estate joint ventures, net and Minority
interests in income of partnerships, net--
During April 1996, Kimco and Price REIT formed a partnership to purchase a
property in Phoenix, AZ. Kimco has consolidated this partnership for accounting
purposes and Price REIT has recorded their interest using the equity method. The
adjustments to Equity in income of real estate joint ventures, net and Minority
interests in
81
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME--(CONTINUED)
3. Pro Forma Adjustments--(Continued)
income of partnerships, net reflect the elimination of partnership accounting
for this partnership as a result of the Merger.
(iv) Weighted average number of common shares outstanding--
The pro forma weighted average number of common shares outstanding for the
year ended December 31, 1997 are computed as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Kimco's historical weighted average number of shares outstanding........... 37,388
Issuance of Kimco common stock at an exchange ratio of one for one for all
Price REIT common stock outstanding in connection with the Merger........ 11,701
Add: Conversion of Price REIT stock options to Kimco common stock in
connection with the Merger............................................... 194
Pro Forma weighted average number of Kimco common shares outstanding
(Basic).................................................................. 49,283
Effect of Dilutive Securities--Stock Options............................... 462
-------
Pro Forma weighted average number of Kimco common shares outstanding
(Diluted)................................................................ 49,745
-------
-------
</TABLE>
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<PAGE>
MATERIAL CONTRACTS BETWEEN KIMCO AND PRICE REIT
On April 23, 1996, Kimco and Price REIT formed the Partnership to purchase
Hayden Plaza North, a 191,000 square foot shopping center in Phoenix, Arizona,
at a cost of $3,490,000. The acquisition was completed by the Partnership on May
3, 1996. Each of Kimco and Price REIT owns a 50% interest in the Partnership.
Price REIT, Kimco and Lehman Bros. intend to enter into the Purchase
Agreement pursuant to which Lehman Bros. will agree to purchase up to $65.0
million of Price REIT Preferred Stock. Price REIT currently expects to issue
65,000 shares of Price REIT Preferred Stock (with an aggregate purchase price of
$65.0 million) in May 1998. Pursuant to the Second Amendment, the Price REIT
Preferred Stock will be exchanged in the Merger for Kimco Class E Depositary
Shares. Because the transaction remains subject to completion of definitive
documentation, no assurance can be given that the issuance of Price REIT
Preferred Stock will occur within the anticipated time frame or at all. For more
information about this proposed agreement, the Price REIT Preferred Stock and
the Kimco Class E Depositary Shares, see 'Recent Developments--Price REIT' and
'Description of Kimco Securities--Kimco Class E Preferred Stock.'
COMPARISON OF STOCKHOLDER RIGHTS
Price REIT and Kimco are incorporated under and are governed by the laws of
the State of Maryland in accordance with the MGCL. Upon consummation of the
Merger, stockholders of Price REIT will become stockholders of Kimco. Their
rights as stockholders will continue to be governed by the MGCL, but instead of
being subject to the terms of the charter of Price REIT, as amended and in
effect on the date hereof (the 'Price REIT Charter'), and the bylaws of Price
REIT, as amended and in effect on the date hereof (the 'Price REIT Bylaws'),
their rights as stockholders will be governed by the charter of Kimco, as
amended and in effect on the date hereof (the 'Kimco Charter'), and the bylaws
of Kimco, as amended and in effect on the date hereof (the 'Kimco Bylaws'). The
following sets forth a summary of the differences between the Price REIT and
Kimco organizational documents. The following summary is qualified in its
entirety by reference to the Kimco Charter and the Kimco Bylaws, each of which
is filed as an exhibit to the Registration Statement of which this Joint Proxy
Statement/Prospectus is a part, and applicable law.
MARYLAND CONTROL SHARE STATUTE
Acquisitions of Price REIT stock are currently subject to the control share
provisions of Section 3-701
et seq. of the MGCL (the 'Maryland Control Share Statute'). The Maryland Control
Share Statute is not currently applicable to acquisitions of Kimco Common Stock,
nor will it be applicable to acquisitions of Kimco Common Stock following the
consummation of the Merger.
AMENDMENT OF CHARTER
Except as set forth in the Articles Supplementary that set forth the rights
and preferences of the holders of Kimco Preference Shares, the Kimco Charter may
be amended only by the affirmative vote of the holders of not less than
two-thirds of shares of Kimco Common Stock then outstanding and entitled to vote
thereon. The Price REIT Charter specifies that a majority of all the votes
entitled to be cast by stockholders entitled to vote is necessary to amend the
Price REIT Charter. Accordingly, holders of Price REIT Common Stock, upon
conversion of their shares into Kimco Common Stock in connection with the
Merger, will have a more limited right to amend the Kimco Charter than they had
to amend the Price REIT Charter.
NOTICE OF ADJOURNMENT
The Kimco Bylaws provide that notice of an adjourned meeting of
stockholders shall be given to each stockholder of record entitled to vote at
such meeting if the adjournment is for more than 30 days or if after the
adjournment a new record date is fixed for the adjourned meeting.
The Price REIT Bylaws provide that, provided an alternate place and time is
announced at the meeting at which adjournment is taken, notice of an adjourned
meeting of stockholders shall be given to each stockholder of record entitled to
vote at such meeting if the adjournment is more than 45 days or if a new record
date for the adjourned meeting is fixed.
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<PAGE>
SPECIAL MEETINGS
The Kimco Bylaws provide that the president may, or the president or the
secretary at the written request of a majority of the board of directors, shall
call a special meeting of Kimco's stockholders. A special meeting shall be
called by the president or the secretary upon the written request of
stockholders entitled to cast not less than 25% of all the votes entitled to be
cast at such meeting.
The Price REIT Bylaws provide that a special meeting of the stockholders
may be called at any time by a majority of the board of directors or by a
majority of independent directors, or by the chairman or the president, or by
one or more stockholders holding shares in the aggregate entitled to cast not
less than 25% of the votes at that meeting.
VOTING RIGHTS
The Kimco Charter states that each outstanding share of Kimco Common Stock
entitles the holder thereof to one vote on all matters at all meetings of the
stockholders of Kimco. The Kimco Bylaws provide that, if a quorum is present,
any question brought before such meeting shall be decided by a majority of the
stockholders having voting power thereat, unless otherwise provided by the MGCL
or the Kimco Charter or the Kimco Bylaws. In certain circumstances, holders of
Kimco Preference Shares are entitled to certain voting rights (see 'Description
of Kimco Securities--Kimco Preferred Stock').
The Price REIT Charter states that each outstanding share of Price REIT
Common Stock entitles the holder thereof to one vote on all matters submitted to
a vote of the holders of Price REIT Common Stock. The Price REIT Bylaws provide
that, if a quorum is present, the affirmative vote of the majority of the shares
represented at a meeting of stockholders and entitled to vote on any matter
(other than the election of directors) shall be the act of the stockholders,
regardless of whether a greater of votes is required by the MGCL, unless
otherwise provided under Maryland law or in the Price REIT Charter.
DIRECTORS
The Kimco Bylaws provide that the number of directors constituting Kimco's
Board of Directors cannot be fewer than three nor more than fifteen. The Price
REIT Charter and Bylaws specify that the number of directors constituting Price
REIT's Board of Directors shall not be less than three nor more than eight.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Kimco Charter permits the directors to pay dividends or other
distributions to Kimco's stockholders in cash, property or securities of Kimco.
The directors shall endeavor to declare and pay such dividends and distributions
as shall be necessary for Kimco to qualify as a REIT under the Code. However,
stockholders shall have no right to any dividend or distribution unless and
until declared by the Board of Directors of Kimco.
The Kimco Preference Shares rank senior to the Kimco Common Stock with
respect to distribution rights and liquidation preference. See 'Description of
Securities--Kimco Preferred Stock.'
The Price REIT Charter permits the directors to pay dividends when
authorized and declared. The directors shall endeavor to declare and pay such
dividends and distributions as shall be necessary for Price REIT to qualify as a
REIT under the Code.
Pursuant to the Dividend Reinvestment and Share Purchase Plan (the 'Price
REIT Reinvestment and Purchase Plan'), Price REIT provides eligible stockholders
of Price REIT with a method of investing cash dividends and optional cash
payments in additional shares of Price REIT Common Stock without payment of
service fees, brokerage commissions or other charges. The Price REIT
Reinvestment and Purchase Plan includes certain dollar limitations on
participation and provides for eligible stockholders of Price REIT to elect
dividend reinvestment on only a part of the shares registered in the name of a
participant (while continuing to receive cash dividends on remaining shares).
The Price REIT Reinvestment and Purchase Plan will terminate on the Effective
Date. Following the Merger, former stockholders of Price REIT who become Kimco
stockholders will be eligible to participate in and will receive information
regarding the Kimco Dividend Reinvestment and Common Stock Purchase Plan (the
'Kimco Dividend Reinvestment Plan'). See 'Description of Kimco Securities--Kimco
Dividend Reinvestment Plan.'
84
<PAGE>
TRANSACTIONS WITH DIRECTORS, OFFICERS AND AFFILIATES
The Kimco Bylaws state that Kimco shall not, without the approval of a
majority of the disinterested directors, engage in any transactions with one or
more directors, or any other corporation, firm, association or other entity in
which one or more of its directors or officers of Kimco are financially
interested.
The Price REIT Charter provides that any of the officers and directors of
Price REIT and their affiliates may engage in acquiring, developing,
constructing, operating and managing real property, independently or with
others, and the officers and directors of Price REIT and their affiliates have
no obligation to make any such business opportunities available to Price REIT,
and Price REIT has no interest in any such business opportunities other than
business opportunities which the officers and directors of Price REIT and their
affiliates in their sole discretion, have made available to Price REIT and in
which Price REIT has invested.
The Price REIT Bylaws provide that Price REIT will not make loans to or
borrow from, or enter into any contract, joint venture or transaction with, any
director or officer of Price REIT, any advisor, a certain other entity or any
affiliate of any of the foregoing unless a majority of the directors, including
a majority of the independent directors, approve the transaction as fair and
reasonable to Price REIT. Any investment by Price REIT in any property or other
real estate interest pursuant to a transaction with any advisor, the directors,
a certain other entity or affiliates thereof must be based upon appraisals of
the underlying properties from independent qualified appraisers and will not be
made at a price greater than the fair market value of such properties as
determined by such appraisals. Independent appraisals are not required, however,
in connection with certain sale leaseback transactions with a certain other
entity. The Bylaws also provide that Price REIT will not sell any of its
properties to any director, any advisor, a certain other entity or affiliates of
the foregoing, except pursuant to the provisions of any lease with a certain
other entity, or through the sale of all or part of Price REIT's interest in a
venture to a party already possessing an interest in such venture.
OWNERSHIP LIMITS
The Kimco Charter and Kimco Bylaws provide for certain percentage limits on
ownership of shares of Kimco Common Stock and Kimco Preference Shares. See
'Description of Kimco Securities--Ownership Limit; Restrictions on Transfer.'
The Price REIT Charter provides that the direct or indirect ownership of
more than 9.8% in value of the outstanding Price REIT Common Stock and/or Price
REIT Preferred Stock triggers an event, as a result of which the shares of Price
REIT Common Stock exceeding the 9.8% limit (i) are deemed to be transferred to
and held in trust by Price REIT and (ii) shall cease to be entitled to
distributions, voting rights and other benefits. However, the Board of Directors
of Price REIT may waive the foregoing restrictions, and has done or will do so
prior to the ownership by Lehman Bros. of the Price REIT Preferred Stock
exceeding the 9.8% limit.
INVESTMENT POLICY
Neither the Kimco Charter nor the Kimco Bylaws set forth a specific
investment policy for Kimco.
The Price REIT Bylaws generally impose certain prohibitions and
restrictions on various investment practices and activities of Price REIT,
including prohibitions against: (i) investing more than 10% of the value of its
total assets in equity investments in, and mortgage loans secured by, unimproved
real property, unless the property was acquired for the purpose of producing
rental or other operating income or development or construction on such land is
in progress or is planned to commence within one year; (ii) investing in
commodities or commodity future contracts other than 'interest rate futures'
contracts intended only for hedging purposes; (iii) investing in mortgage loans
on any one property which in the aggregate with all other mortgage loans on the
property would exceed 85% of the appraised value of the property, unless
substantial justification exists because of the presence of other underwriting
criteria; (iv) investing in mortgage loans that are subordinate to any mortgage
or equity interest of any 'advisor' or any of the directors or any of their
affiliates, or investing in mortgage loans that are subordinate to any liens or
other indebtedness on a property if the effect of such loans would be to cause
the aggregate value of all such mortgage loans to exceed 25% of Price REIT's
assets; (v) investing in equity securities of nongovernmental issuers for a
period in excess of 18 months; (vi) engaging in trading of securities, as
distinguished from investment activities; (vii) issuing equity securities
redeemable at the option of holders thereof; (viii) engaging in underwriting or
the agency distribution of securities issued by others; (ix) issuing options or
warrants to purchase common stock at an exercise price less than the fair market
value of the common stock on the date of the issuance or issuing options or
warrants to purchase a number of shares of
85
<PAGE>
which, when added to the number of shares of common stock issuable pursuant to
other options and warrants outstanding, would exceed 10% of the number of shares
on the date of grant, provided, however, that issuing options or warrants
ratably to all holders of shares of common stock or of another class of
securities is not prohibited; (x) issuing debt securities unless the debt
service coverage for the most recently completed fiscal year, as adjusted for
known changes, is sufficient to properly service that higher level of debt; (xi)
investing in real estate contracts of sale unless such contracts are in
recordable form and are appropriately recorded in the chain of title; (xii)
issuing assessable common stock or common stock on a deferred basis; (xiii)
subject in certain circumstances to the discretion of the Board of Directors of
Price REIT, incurring indebtedness which, together with the amount of all then
outstanding indebtedness, would exceed at the time of the borrowing 300% of the
net assets of Price REIT; and (xiv) acquiring securities in any company holding
investments, or engaging in activities, in which Price REIT is prohibited to
invest or engage.
DESCRIPTION OF KIMCO SECURITIES
The following summary of the terms of the capital stock of Kimco and
certain provisions of the organizational documents of Kimco does not purport to
be complete and is subject to and qualified in its entirety by reference to the
Kimco Charter and Kimco Bylaws.
GENERAL
The Kimco Charter provides that Kimco may issue up to 158,070,000 shares of
capital stock, consisting of 100,000,000 shares of Kimco Common Stock,
51,000,000 shares of excess stock, par value $.01 per share ('Excess Stock'),
5,000,000 shares of Kimco Preferred Stock, par value $1.00 per share ('Kimco
Preferred Stock'), 345,000 shares of 7 3/4% Class A Cumulative Redeemable
Preferred Stock, par value $1.00 per share ('Kimco Class A Preferred Stock'),
345,000 shares of Class A Excess Preferred Stock, par value $1.00 per share,
230,000 shares of 8 1/2% Class B Cumulative Redeemable Preferred Stock, par
value $1.00 per share ('Kimco Class B Preferred Stock'), 230,000 shares of Class
B Excess Preferred Stock, par value $1.00 per share, 460,000 shares of 8 3/8%
Class C Cumulative Redeemable Preferred Stock, par value $1.00 per share ('Kimco
Class C Preferred Stock'), and 460,000 shares of Class C Excess Preferred Stock,
par value $1.00 per share. In connection with the Merger, the Board of Directors
of Kimco will reclassify 700,000 shares of Kimco Preferred Stock as Kimco Class
D Preferred Stock and 700,000 shares of Kimco Preferred Stock as Kimco Class D
Excess Preferred Stock, par value $1.00 per share ('Kimco Class D Excess
Preferred Stock'), and the Board of Directors of Kimco may reclassify 65,000
shares of Kimco Preferred Stock as Kimco Class E Preferred Stock and 65,000
shares of Kimco Preferred Stock as Kimco Class E Excess Preferred Stock, par
value $1.00 per share ('Kimco Class E Excess Preferred Stock'). Upon
consummation of the Merger, at the Assumed Exchange Ratio, 55,349,118 shares of
Kimco Common Stock will be outstanding and an additional 475,778 shares will be
subject to conversion or redemption of shares of Kimco Class D Preferred Stock.
Upon consummation of the Merger, 300,000 shares of Kimco Class A Preferred
Stock, 200,000 shares of Kimco Class B Preferred Stock, 400,000 shares of Kimco
Class C Preferred Stock, 475,458 shares of Kimco Class D Preferred Stock, at the
Assumed Exchange Ratio, and no shares of Kimco Preferred Stock will be issued
and outstanding.
The Board of Directors of Kimco is authorized (i) to classify and
reclassify any unissued shares of any series of Preferred Stock; (ii) to provide
for the issuance of shares in other classes or series, including preferred stock
in one or more series; (iii) to establish the number of shares in each class or
series; and (iv) to fix the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of such class or series.
KIMCO COMMON STOCK
All shares of Kimco Common Stock, when issued in connection with the
Merger, will be duly authorized, fully paid and nonassessable. Holders of Kimco
Common Stock are entitled to receive dividends when, as and if declared by the
Board of Directors of Kimco, out of assets legally available therefor. Payment
and declaration of dividends on the Kimco Common Stock and purchases of shares
thereof by Kimco will be subject to certain restrictions if Kimco fails to pay
dividends on the Kimco Class A Preferred Stock, Kimco Class B Preferred Stock,
Kimco Class C Preferred Stock, Kimco Class D Preferred Stock or Kimco Class E
Preferred Stock (collectively, the 'Kimco Preference Shares'). See '--Kimco
Preferred Stock.' Upon any liquidation, dissolution or winding up of Kimco,
holders of Kimco 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 the debts and
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<PAGE>
other liabilities of Kimco and the preferential amounts owing with respect to
any outstanding Kimco Preference Shares. The Kimco Common Stock possesses
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 Kimco Common Stock do not have cumulative voting rights in the
election of directors, which means that holders of a plurality of all of the
shares of Kimco 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 Kimco Common Stock do not have preemptive rights, which means they
have no right to acquire any additional shares of Kimco Common Stock that may be
issued by Kimco at a subsequent date.
Under the MGCL and the Kimco 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, the company's
total assets are greater than the company's 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. Kimco has complied with this requirement in all of its prior
distributions to holders of Kimco Common Stock.
The Registrar and Transfer Agent for Kimco Common Stock is BankBoston.
KIMCO CLASS D DEPOSITARY SHARES
The Kimco Class D Depositary Shares to be issued as part of the Merger
Consideration shall each represent a one-tenth fractional interest in a share of
Kimco Class D Preferred Stock. The shares of Kimco Class D Preferred Stock
evidenced by receipts evidencing the Kimco Class D Depositary Shares shall be
deposited with BankBoston (the 'Depositary') and BankBoston shall, pursuant to
the terms of the Deposit Agreement between Kimco and BankBoston dated as of May
14, 1998 (the 'Deposit Agreement'), act as depositary and transfer agent for
Kimco. Subject to the terms of the Deposit Agreement, each owner of a Kimco
Class D Depositary Share will be entitled, in proportion to the one-tenth
fractional interest of a share of Kimco Class D Preferred Stock represented by
the Kimco Class D Depositary Share, to all of the rights and preferences of the
Kimco Class D Preferred Stock. The Kimco Class D Depositary Shares will be
evidenced by receipts issued pursuant to the Deposit Agreement.
Dividends. Whenever the Depositary receives any cash dividend or other
cash distribution on the deposited shares of Kimco Class D Preferred Stock, the
Depositary will distribute to holders of receipts evidencing Kimco Class D
Depositary Shares ('Holders') of record on the record date fixed by the Board of
Directors of Kimco such amounts of such sum as are, as nearly as practicable, in
proportion to the respective numbers of Kimco Class D Depositary Shares held by
such Holders. Any amount made available for distribution or distributed in
respect of Kimco Class D Depositary Shares subject to withholding taxes shall be
reduced accordingly. No cash dividend or other distribution (other than
distributions upon liquidation, dissolution or winding up) will be made in
respect of any Kimco Class D Depositary Shares representing deposited shares of
Kimco Class D Preferred Stock that have been converted into Kimco Class D Excess
Preferred Stock. The dividend rate on the Kimco Class D Depositary Shares will
be the greater of (i) 7.5% per annum or (ii) the dividend on the shares of Kimco
Common Stock into which a Kimco Class D Depositary Share is convertible plus
$0.0275 quarterly.
Whenever the Depositary receives any distribution other than cash on the
deposited shares of Kimco Class D Preferred Stock, the Depositary will
distribute to Holders of record on the record date fixed by the Board of
Directors such amounts of the securities or property received by it as are, as
nearly as practicable, in proportion to the respective numbers of Kimco Class D
Depositary Shares evidenced by the receipts held by such Holders, in any manner
that the Depositary and Kimco may deem equitable and practicable for
accomplishing such distribution. However, no distribution (other than
distributions upon liquidation, dissolution or winding up) will be made in
respect of any Kimco Class D Depositary Shares representing shares of Kimco
Class D Preferred Stock converted into shares of Kimco Class D Excess Preferred
Stock. If, in the opinion of the Depositary after consultation with Kimco, such
distribution cannot be made proportionately among such Holders, or if for any
other reason (including any requirement that Kimco or the Depositary withhold an
amount on account of taxes) the Depositary deems, after consultation with Kimco,
such distribution not to be feasible, the Depositary may, with the approval of
Kimco, adopt such method as it deems equitable and practicable for the purpose
of effecting such distribution, including the sale (at public or private sale)
of the securities or property thus received, or any
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part thereof, at such place or places and upon such terms as it may deem proper.
The net proceeds of any such sale shall be distributed or made available for
distribution, as the case may be, by the Depositary to Holders in the case of a
distribution received in cash. Kimco will not make any distribution of such
securities or property to the Holders unless Kimco provides to the Depositary an
opinion of counsel stating that such securities or property have been registered
under the Securities Act or are not required to be registered.
Voting Rights. Upon receipt of notice of any meeting at which the Holders
of deposited shares of Kimco Class D Preferred Stock are entitled to vote, the
Depositary will, as soon as practicable thereafter, mail to the Holders a notice
that will contain (i) such information as is contained in such notice of
meeting, (ii) a statement that the Holders at the close of business on a
specified record date fixed by the Board of Directors will be entitled, subject
to any applicable provision of law, to instruct the Depositary as to the
exercise of the voting rights pertaining to the amount of Kimco Class D
Preferred Stock represented by their respective Kimco Class D Depositary Shares
and (iii) a brief statement as to the manner in which such instructions may be
given. Upon the written request of a Holder on such record date, the Depositary
will vote or cause to be voted the amount of Kimco Class D Preferred Stock
represented by the Kimco Class D Depositary Shares in accordance with the
instructions set forth in such request. Each share of Kimco Class D Preferred
Stock is entitled to 10 votes and, accordingly, each Kimco Class D Depositary
Share is entitled to one vote. Kimco will take all reasonable action that may be
deemed necessary by the Depositary in order to enable the Depositary to vote
such shares of Kimco Class D Preferred Stock or cause such shares of Kimco Class
D Preferred Stock to be voted. In the absence of specific instructions from the
Holder, the Depositary will abstain from voting to the extent of the shares of
Kimco Class D Preferred Stock represented by the Kimco Class D Depositary
Shares. The Depositary will not be required to exercise discretion in voting any
shares of Kimco Class D Preferred Stock. Holders will have no right to direct
the vote of the shares of Kimco Class D Preferred Stock represented by the Kimco
Class D Depositary Shares.
Redemption by Kimco. Subject to the terms of the Kimco Class D Preferred
Stock Articles Supplementary, in the event that notice of redemption has been
properly given and Kimco has irrevocably set aside Kimco Common Stock and cash
in lieu of fractional shares, in trust for the benefit of the Holders, with the
Depositary, the Depositary will redeem the number of Kimco Class D Depositary
Shares representing such Kimco Class D Preferred Stock so called for redemption.
From and after such redemption date, all dividends in respect of the deposited
Kimco Class D Preferred Stock called for redemption will cease to accrue, Kimco
Class D Depositary Shares called for redemption will be deemed no longer to be
outstanding and all rights of the Holders (except the right to receive the
shares of Kimco Common Stock and cash in lieu of fractional shares to which
Holders were entitled upon such redemption) will, to the extent of such Kimco
Class D Depositary Shares, cease and terminate.
Conversion. Subject to the terms of the Kimco Class D Preferred Stock
Articles Supplementary, Holders may direct the Depositary to convert all of the
outstanding deposited shares of Kimco Class D Preferred Stock represented by any
whole number of Kimco Class D Depositary Shares held by such Holder into Kimco
Common Stock. To effect such a conversion, Holders must surrender the applicable
receipt or receipts to the Depositary, together with a duly completed and
executed notice of conversion in the form included in the receipt. Kimco and the
Depositary will thereafter effect the cancellation of each receipt so
surrendered for conversion and of the related Kimco Class D Preferred Stock, and
Kimco will issue to the Holder effecting such conversion the number of shares of
Kimco Common Stock into which such related shares of Kimco Class D Preferred
Stock are convertible (at a conversion price of $402.50 per share of Kimco Class
D Preferred Stock, subject to adjustment). Cash will be paid by Kimco in lieu of
any fractional shares of Kimco Common Stock resulting from such conversion.
Notwithstanding the foregoing, the right to convert any deposited shares of
Kimco Class D Preferred Stock will terminate at the close of business on the
date, if any, fixed for redemption of such Kimco Class D Preferred Stock.
Conversion of Kimco Class D Preferred Stock into Kimco Class D Excess
Preferred Stock. As provided in the Kimco Class D Preferred Stock Articles
Supplementary, upon the happening of certain events, shares of Kimco Class D
Preferred Stock will be automatically converted into Kimco Class D Excess
Preferred Stock. In the event of such a conversion, receipts evidencing Kimco
Class D Depositary Shares representing the deposited shares of Class D Preferred
Stock so converted will no longer represent, to the extent of the shares so
converted, deposited shares of Kimco Class D Preferred Stock but will instead
represent Kimco Class D Excess Preferred Stock. Receipts evidencing Kimco Class
D Depositary Shares representing Kimco Class D Excess Preferred Stock will be
entitled to the proportional rights of such Kimco Class D Excess Preferred Stock
as set forth in the
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Kimco Class D Preferred Stock Articles Supplementary, and not of the
proportional rights of Kimco Class D Preferred Stock. To the extent any shares
of Kimco Class D Excess Preferred Stock are purchased by Kimco as provided by
the Kimco Class D Preferred Stock Articles Supplementary, the Holders will be
deemed to have offered to sell, and the Depositary will purchase, such Kimco
Class D Depositary Shares on proportionally the same terms as such shares of
Kimco Class D Excess Preferred Stock were purchased by Kimco. Upon the
occurrence of any event causing Kimco Class D Excess Preferred Stock to be
converted into Kimco Class D Preferred Stock, the receipts evidencing Kimco
Class D Depositary Shares representing such Kimco Class D Excess Preferred Stock
so converted will, to the extent of the shares so converted, no longer represent
Kimco Class D Excess Preferred Stock but will instead represent shares of Kimco
Class D Preferred Stock and Holders thereof will be entitled to all of the
rights (subject to all of the limitations) of Holders of receipts evidencing
Kimco Class D Depositary Shares representing shares of Kimco Class D Preferred
Stock.
Surrender of Receipts and Withdrawal of Deposited Kimco Class D Preferred
Stock. Any Holder may withdraw any or all of the deposited shares of Kimco
Class D Preferred Stock represented by Kimco Class D Depositary Shares and all
money and other property, if any, represented by such Kimco Class D Depositary
Shares by surrendering such Holder's receipt or receipts at the corporate office
of the Depositary, provided that such Kimco Class D Preferred Stock has not been
previously redeemed or called for redemption or converted into Kimco Common
Stock or Kimco Class D Excess Preferred Stock. After such surrender, without
unreasonable delay, the Depositary will deliver to such Holder the number of
such whole or fractional shares of Kimco Class D Preferred Stock and all such
money and other property, if any, represented by the Kimco Depositary Shares
evidenced by the receipt or receipts surrendered for withdrawal. Delivery of
Kimco Class D Preferred Stock and such money and other property being withdrawn
may be made by the delivery of such certificates, documents of title and other
instruments as the Depositary may deem appropriate, which, if required by the
Depositary, shall be properly endorsed or accompanied by proper instruments of
transfer.
Subscription Rights, Preferences or Privileges. If Kimco at any time
offers or causes to be offered to the persons in whose names deposited shares of
Kimco Class D Preferred Stock are registered on the books of Kimco any rights,
preferences or privileges to subscribe for or to purchase any securities or any
rights, preferences or privileges of any other nature, such rights, preferences
or privileges will in each such instance be made available by the Depositary to
the Holders in such manner as Kimco instructs (including by the issue to such
Holders of warrants representing such rights, preferences or privileges).
However, the Depositary will, if so instructed by Kimco, and if applicable laws
or the terms of such rights, preferences or privileges so permit, sell such
rights, preferences or privileges of such Holders at public or private sale, at
such place or places and upon such terms as it may deem proper (i) if at the
time of issue or offer of any such rights, preferences or privileges Kimco
determines upon advice of its legal counsel that it is not lawful or feasible to
make such rights, preferences or privileges available to the Holders (by the
issue of warrants or otherwise) or (ii) if and to the extent instructed by
Holders who do not desire to exercise such rights, preferences or privileges.
The net proceeds of any such sale will be distributed by the Depositary to the
Holders entitled thereto in the case of a distribution received in cash. Kimco
will not make any distribution of such rights, preferences or privileges, unless
Kimco shall have provided to the Depositary an opinion of counsel stating that
such rights, preferences or privileges have been registered under the Securities
Act or do not need to be registered.
KIMCO CLASS D PREFERRED STOCK
Upon consummation of the Merger, the issued and outstanding shares of Kimco
Class D Preferred Stock issued as part of the Merger Consideration will be duly
authorized, fully paid and nonassessable. The shares of Kimco Class D Preferred
Stock are evidenced by receipts evidencing Kimco Class D Depositary Shares, each
of which represents a one-tenth fractional interest in a share of Kimco Class D
Preferred Stock. Kimco Class D Preferred Stock is pari passu with the Kimco
Class E Preferred Stock and the Kimco Outstanding Preferred Stock as to
dividends and as to the distribution of assets upon any liquidation, dissolution
or winding up the affairs of Kimco.
Dividends. Holders of Kimco Class D Preferred Stock will be entitled to
receive dividends, when and as declared by the Board of Directors of Kimco, out
of funds legally available therefor. Such dividends will be payable by Kimco in
cash at the rate per share equal to the greater of (i) $18.75 per annum or (ii)
the dividends on the shares of Kimco Common Stock into which a share of the
Kimco Class D Preferred Stock is convertible, plus $0.0275 per quarter.
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Dividends on the Kimco Class D Preferred Stock will be cumulative from the
Effective Time and will be payable quarterly in arrears on January 15, April 15,
July 15 and October 15 of each year or, if not a business day, the next
succeeding business day. Dividends on the Kimco Class D Preferred Stock will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
Dividends will be payable to the holders of record of Kimco Class D Preferred
Stock as they appear in the stock transfer records of Kimco at the close of
business on the applicable record date, which will be the first day of the
calendar month in which the applicable dividend payment date falls on such other
record date designated by the Board of Directors of Kimco for the payment of
dividends that is not more than 30 days nor less than 10 days prior to such
dividend payment date.
No dividends on Kimco Class D Preferred Stock will be declared by the Board
of Directors of Kimco or paid or set apart for payment if such declaration,
payment or setting apart for payment would violate any agreement of Kimco or is
restricted or prohibited by law. Dividends on the Kimco Class D Preferred Stock,
if not paid on the applicable dividend payment date, will accrue whether or not
dividends are authorized or declared for such dividend payment date, whether or
not Kimco has earnings and whether or not there are funds legally available for
the payment of such dividends.
If any shares of Kimco Class D Preferred Stock are outstanding, no full
dividends will be declared or paid or set apart for payment on any other class
or series of Kimco preferred stock ranking in parity with the Kimco Class D
Preferred Stock as to dividends and as to the distribution of assets upon any
liquidation, dissolution or winding up of the affairs of Kimco ('Kimco Parity
Stock') or ranking junior to the Kimco Class D Preferred Stock as to dividends
and as to the distribution of assets upon any liquidation, dissolution or
winding up of the affairs of Kimco ('Kimco Junior Stock') for any period unless
full cumulative dividends have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for such
payment on the Kimco Class D Preferred Stock for all past dividend periods and
the then current dividend period.
Voting Rights. Holders of Kimco Class D Preferred Stock have no other
voting rights except as described below.
Whenever dividends on Kimco Class D Preferred Stock are in arrears for six
or more quarterly periods, holders of such Kimco Class D Preferred Stock will be
entitled to vote separately as a class with the holders of all Kimco Parity
Stock for the election of two additional directors of Kimco. Such election shall
be held at a special meeting called by the holders of record of at least 10% of
the outstanding Kimco Class D Preferred Stock or the outstanding Kimco Parity
Stock or, if the request for a special meeting is received by Kimco less than 90
days prior to the next annual or special meeting of stockholders, at the next
annual or such special meeting of stockholders and at each subsequent annual
meeting of stockholders until all arrearages and the dividend for the then
current dividend period shall have been fully paid or a sum sufficient for the
full payment thereof shall have been set aside. Vacancies for directors elected
by holders of Kimco Class D Preferred Stock and Kimco Parity Stock will be
filled by the remaining director so elected then in office, or there is no such
remaining director, by vote of holders of a majority of the outstanding Kimco
Class D Preferred Stock and the outstanding Kimco Parity Stock voting as a
single class.
In addition to the foregoing voting rights, for so long as any Kimco Class
D Preferred Stock is outstanding, any authorization of, increase in the
authorized amount of or number of issued, or reclassification of, Kimco
Preferred Stock ranking senior to the Kimco Class D Preferred Stock or any
amendment of the Kimco Charter, by merger, consolidation or otherwise, which
materially and adversely affects any right, preference, privilege or voting
power of the Kimco Class D Preferred Stock or the holders thereof must be
approved by holders of at least two-thirds of the Kimco Class D Preferred Stock
outstanding at the time. For purposes of the foregoing sentence, any amendment
of the Kimco Charter resulting in any Kimco Class D Preferred Stock remaining
outstanding with the terms thereof materially unchanged, any increase in the
authorized amount of Kimco Class D Preferred Stock or any creation or issuance
of any Kimco Parity Stock will not be deemed to materially and adversely affect
any right, preference, privilege or voting power of any Kimco Class D Preferred
Stock or the holders thereof.
As to any matter on which the Kimco Class D Preferred Stock may vote,
including any action by written consent, each share of Kimco Class D Preferred
Stock shall be entitled to 10 votes, each of which 10 votes may be directed
separately by the holder thereof. With respect to each share of Kimco Class D
Preferred Stock, the
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holder thereof may designate up to 10 proxies, with each such proxy having the
right to vote a whole number of votes (totaling 10 votes per share of Kimco
Class D Preferred Stock).
Restrictions on Transferability and Ownership. The restrictions on
transferability and ownership described in '--Ownership Limit; Restrictions on
Transfer' below apply to Kimco Class D Preferred Stock.
No Preemptive Rights. Holders of Kimco Class D Preferred Stock do not have
preemptive rights.
Redemption by Kimco. On or after the third anniversary of the initial
issue date of the Kimco Class D Preferred Stock, the shares of Kimco Class D
Preferred Stock may be redeemed, in whole or from time to time in part, at the
option of Kimco, if during any 20 trading days during a 30 consecutive trading
day period the closing price of the Kimco Common Stock is greater than 120% of
the Conversion Price. Upon redemption, holders of Kimco Class D Preferred Stock
will receive such number of shares of Common Stock into which Kimco Class D
Preferred Stock is convertible (at the Conversion Price) as of the opening of
business of the date set for redemption by the Board of Directors of Kimco,
subject to the following limitations and to compliance by Kimco with the
procedural requirements applicable to the redemption of Kimco Class D Preferred
Stock. First, unless full cumulative dividends on all shares of Kimco Class D
Preferred Stock have been or contemporaneously are authorized and paid and a sum
sufficient for the payment thereof set apart for all past dividend periods and
the then current dividend period, no shares of such class shall be redeemed, and
Kimco shall not purchase or otherwise acquire directly or indirectly any shares
of such class, except in order to ensure that Kimco remains qualified as a REIT
for federal income tax purposes or the purchase or acquisition of Kimco Class D
Preferred Stock, pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding shares of Kimco Class D Preferred Stock. Second,
if less than all of the outstanding shares of Kimco Class D Preferred Stock are
to be redeemed, such shares to be redeemed will be selected pro rata (as nearly
as may be practicable without creating fraction shares) or by any other
equitable method determined by Kimco.
In case of redemption of less than all shares of Kimco Class D Preferred
Stock at the time outstanding, the shares to be redeemed shall be selected by
Kimco pro rata from the holders of record of such shares in proportion to the
number of shares held by such holders (with adjustments to avoid redemption of
fractional shares) or by any other equitable method determined by Kimco that
will not result in the issuance of any Kimco Class D Excess Preferred Stock.
Any shares of Kimco Class D Preferred Stock that have been redeemed will,
after such redemption, have the status of authorized but unissued preferred
stock, without designation as to series until such shares are once more
designated as part of a particular series by the Board of Directors of Kimco.
Conversion. Each holder of shares of Kimco Class D Preferred Stock will
have the right, at his or her option at any time, to convert all or a portion of
such shares (including fractions of such shares so long as such fractions are in
integral multiples of one-tenth of a share), unless previously redeemed, into
Kimco Common Stock at the conversion price of $40.25 per share, subject to
adjustment from time to time. For purposes of such conversion, each share of
Kimco Class D Preferred Stock will be valued at $250.00.
Holders of shares of Kimco Class D Preferred Stock at the close of business
on a record date (as fixed by the Board of Directors of Kimco) shall be entitled
to receive the dividend payable on the shares of Kimco Class D Preferred Stock
on the corresponding dividend payment date notwithstanding the conversion
thereof following such record date and prior to such dividend payment date.
However, shares of Kimco Class D Preferred Stock surrendered for conversion
during the period between the close of business on any record date and the
opening of business on the corresponding dividend payment date (except shares of
Kimco Class D Preferred Stock converted after the issuance of a notice of
redemption with respect to a redemption date during such period or coinciding
with such dividend payment date, the Kimco Class D Preferred Stock being
entitled to such dividend on the dividend payment date) must be accompanied by
payment of an amount equal to the dividend payable on such Kimco Class D
Preferred Stock on such dividend payment date. A holder of shares of Kimco Class
D Preferred Stock on a record date who (or whose transferees) tenders any such
shares of Kimco Class D Preferred Stock for conversion into shares of Kimco
Common Stock on such dividend payment date will receive the dividend payable by
Kimco on such Kimco Class D Preferred Stock on such date, and the converting
holder need not include payment of the amount of such dividend upon surrender of
shares of Kimco Class D Preferred Stock for conversion.
Liquidation. Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of Kimco, subject to the prior preferences and other
rights of any class or series of stock ranking senior to Kimco
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Class D Preferred Stock as to the distribution of assets upon liquidation,
dissolution or winding up of the affairs of Kimco, but before any distribution
or payment will be made to the holders of any class or series of Kimco Junior
Stock, the holders of Kimco Class D Preferred Stock will be entitled to receive
out of the assets of Kimco available for distribution to stockholders remaining
after payment or provision for payment of all debts and other liabilities of
Kimco other than Kimco's obligations with respect to any outstanding Kimco
Junior Stock, a liquidation preference of $250.00 per share for the Kimco Class
D Preferred Stock, plus an amount equal to all accrued and unpaid dividends to
the date of payment. If upon any voluntary or involuntary liquidation,
dissolution or winding up of Kimco, the legally available assets of Kimco shall
be insufficient to make such full payments to holders of Kimco Class D Preferred
Stock, then the holders of Kimco Class D Preferred Stock and Kimco Parity Stock
will share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they otherwise would be respectively
entitled. After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of Kimco Class D Preferred Stock will not
be entitled to any further participation in any distribution of assets by Kimco.
Neither a consolidation or merger of Kimco with or into another corporation nor
a merger of substantially all of Kimco's property or business will be considered
a liquidation, dissolution or winding of Kimco.
KIMCO CLASS E PREFERRED STOCK
If, prior to the Merger, Price REIT issues Price REIT Preferred Stock, then
upon completion of the Merger, each outstanding share of Price REIT Preferred
Stock will be converted into the right to receive 10 Kimco Class E Depositary
Shares, each of which will represent a one-tenth fractional interest in a share
of Kimco Class E Preferred Stock. Upon consummation of the Merger, the issued
and outstanding shares of Kimco Class E Preferred Stock issued in exchange for
the Price REIT Preferred Stock will be duly authorized, fully paid and
nonassessable. Kimco Class E Preferred Stock will be pari passu with the Kimco
Class D Preferred Stock and the Kimco Outstanding Preferred Stock as to
dividends and as to the distribution of assets upon any liquidation, dissolution
or winding up of the affairs of Kimco.
The material terms of the Kimco Class E Preferred Stock are expected to be
as follows:
Kimco Class E Depositary Shares. The shares of Kimco Class E Preferred
Stock will be evidenced by receipts evidencing Kimco Class E Depositary Shares.
Each Kimco Class E Depositary Share shall be entitled to one vote on each matter
on which the Kimco Class E Preferred Stock may vote. In the event of any
liquidation, dissolution or winding up of the affairs of Kimco, the holders of
receipts evidencing Kimco Class E Depositary Shares shall be entitled to be paid
a liquidation preference of $100.00 per Kimco Class E Depositary Share.
Liquidation Preference and Dividend Rate. The Kimco Class E Preferred Stock
will have a liquidation preference of $1,000 per share and will entitle the
holder to dividends at a floating rate. The dividend rate will be equal to the
three month LIBOR rate plus 2.0% and is payable quarterly on a cumulative basis.
The terms of the Kimco Class E Preferred Stock will provide that the three month
LIBOR rate will be reset each quarter, two business days before the first day of
the relevant dividend period.
Optional Call. Kimco will be entitled to exercise a contractual right to
call (the 'Kimco Optional Call') any Kimco Class E Depositary Shares at a price
equal to the liquidation preference plus accrued but unpaid dividends not later
than the earlier of: (i) 150 days after the Merger and (ii) the first
anniversary of the date of the Purchase Agreement (the 'Kimco Optional Call
Period').
Subsequent Secondary Offering. If the Kimco Optional Call is not exercised
by Kimco, Kimco may be required to register the resale by Lehman Bros. of the
Kimco Class E Preferred Stock (or the Kimco Class E Depositary Shares).
Redemption. The Kimco Class E Preferred Stock will be redeemable, in whole
or in part, on or after the fifth anniversary of the Purchase Agreement at a
redemption price of $1,000 per share, plus all accrued and unpaid dividends,
upon written notice to the holders thereof.
Voting Rights. Holders of shares of Kimco Class E Preferred Stock will have
no voting rights, except that if distributions on such shares are in arrears for
more than six dividend periods, the number of directors on the Kimco Board of
Directors will be increased by one and the holder(s) of the shares of Kimco
Class E Preferred Stock will have the right, voting as a separate class with the
holders of all Kimco Parity Stock, to elect one additional director.
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Ownership Limitation. Subject to certain exceptions contained in the
Articles Supplementary expected to be filed with respect to the Kimco Class E
Preferred Stock, it is anticipated that no holder of Kimco Class E Preferred
Stock may own, or be deemed to own by virtue of the constructive ownership
provisions of the Code, as a result of ownership of Kimco Class E Preferred
Stock, in the aggregate, in excess of 9.8% in value of all the outstanding Kimco
capital stock.
KIMCO OUTSTANDING DEPOSITARY SHARES
The Kimco Class A Preferred Stock is represented by depositary shares, each
representing a one-tenth fractional interest in a share of Kimco Class A
Preferred Stock (the 'Kimco Class A Depositary Shares'). The Kimco Class B
Preferred Stock is represented by depositary shares, each representing a
one-tenth fractional interest in a share of the Kimco Class B Preferred Stock
(the 'Kimco Class B Depositary Shares'). The Kimco Class C Preferred Stock is
represented by depositary shares, each representing a one-tenth fractional
interest in a share of Kimco Class C Preferred Stock (the 'Kimco Class C
Depositary Shares' and, together with the Kimco Class A Depositary Shares and
the Kimco Class B Depositary Shares, the 'Kimco Outstanding Depositary Shares').
Each Kimco Outstanding Depositary Share is entitled to one vote on each matter
on which the Kimco Outstanding Preferred Stock may vote. In the event of any
liquidation, dissolution or winding up of the affairs of Kimco, the holders of
receipts evidencing Kimco Outstanding Depositary Shares are entitled to be paid
a liquidation preference of $25.00 per Kimco Outstanding Depositary Share.
KIMCO OUTSTANDING PREFERRED STOCK
The issued and outstanding Kimco Class A Preferred Stock, Kimco Class B
Preferred Stock and Kimco Class C Preferred Stock (the 'Kimco Outstanding
Preferred Stock') are all duly authorized, fully paid and nonassessable. The
Kimco Outstanding Preferred Stock are each evidenced by receipts evidencing
depositary shares, each of which represents a one-tenth fractional interest in a
share of such class of preferred stock.
Dividends. Holders of Kimco Class A Preferred Stock are entitled to
receive, when and as authorized by the Board of Directors of Kimco, out of funds
legally available for the payment of distributions, cumulative preferential cash
distributions at the rate of 7 3/4% of the $250.00 liquidation preference per
annum (equivalent to a fixed annual amount of $1.9375 per Kimco Class A
Depositary Share). Holders of Kimco Class B Preferred Stock are entitled to
receive, when and as authorized by the Board of Directors of Kimco, out of funds
legally available for the payment of distributions, cumulative preferential cash
distributions at the rate of 8 1/2% of the $250.00 liquidation preference per
annum (equivalent to a fixed annual amount of $2.125 per Kimco Class B
Depositary Share). Holders of Kimco Class C Preferred Stock are entitled to
receive, when and as authorized by the Board of Directors of Kimco, out of funds
legally available for the payment of distributions, cumulative preferential cash
distributions at the rate of 8 3/8% of the $250.00 liquidation preference per
annum (equivalent to a fixed annual amount of $2.09375 per Kimco Class C
Depositary Share).
Distributions on the Kimco Outstanding Preferred Stock are cumulative and
are payable quarterly in arrears. Distributions on all classes of Kimco
Outstanding Preferred Stock are or will be computed on the basis of a 360-day
year consisting of twelve 30-day months. Distributions are or will be payable to
the holders of record of Kimco Outstanding Preferred Stock as they appear in the
stock transfer records of Kimco at the close of business on the applicable
record date, which will be the first day of the calendar month in which the
applicable distribution payment date falls on such other record date designated
by the Board of Directors of Kimco for the payment of distributions that is not
more than 30 days nor less than 10 days prior to such distribution payment date.
No distributions on Kimco Outstanding Preferred Stock will be authorized by
the Board of Directors of Kimco or paid or set apart for payment if such
authorization, payment or setting apart for payment would violate any agreement
of Kimco or is restricted or prohibited by law. Distributions on Kimco
Outstanding Preferred Stock will, nonetheless, accrue whether or not any of the
foregoing restrictions exist, whether or not there are funds legally available
for the payment thereof and whether or not they are authorized, and accrued but
unpaid distributions will accumulate as of the distribution payment date on
which they first become payable.
Except for pro rata distributions with respect to Kimco Outstanding
Preferred Stock and any shares of Parity Stock, no distributions on any Kimco
Parity Stock or shares of Kimco Junior Stock will be authorized, paid or set
aside for payment (other than a distribution payable in Kimco Junior Stock) for
any period, no other distribution on any Kimco Parity Stock or Kimco Junior
Stock and no redemption, purchase or other acquisition for
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consideration of Kimco Parity Stock or Kimco Junior Stock will be made, in each
case unless full cumulative distributions on the Kimco Outstanding Preferred
Stock have been or contemporaneously are authorized and paid or authorized and a
sum sufficient for full payment thereof is set aside.
Voting Rights. Holders of Kimco Outstanding Preferred Stock have no other
voting rights except as described below.
Whenever distributions on Kimco Outstanding Preferred Stock are in arrears
for six or more quarterly periods, holders of such Kimco Outstanding Preferred
Stock will be entitled to vote separately as a class with the holders of all
Kimco Parity Stock for the election of two additional directors of Kimco. Such
election shall be held at a special meeting called by the holders of record of
at least 10% of such outstanding Kimco Outstanding Preferred Stock or the
outstanding Kimco Parity Stock or, if the request for a special meeting is
received by Kimco less than 90 days prior to the next annual or special meeting
of stockholders, at the next annual or such special meeting of stockholders and
at each subsequent annual meeting of stockholders until all arrearages and the
distribution for the then current distribution period shall have been fully paid
or a sum sufficient for the full payment thereof shall have been set aside.
Vacancies for directors elected by holders of Kimco Outstanding Preferred Stock
and Kimco Parity Stock will be filled by the remaining director so elected then
in office, or there is no such remaining director, by vote of holders of a
majority of the outstanding Kimco Outstanding Preferred Stock and the
outstanding Kimco Parity Stock voting as a single class.
In addition to the foregoing voting rights, for so long as any shares of
Kimco Outstanding Preferred Stock are outstanding, any authorization of,
increase in the authorized amount of or number of issued, or reclassification
of, Kimco Preferred Stock ranking senior to the Kimco Outstanding Preferred
Stock or any amendment of the Kimco Charter, by merger, consolidation or
otherwise, which materially and adversely affects any right, preference,
privilege or voting power of any Kimco Outstanding Preferred Stock or the
holders thereof must be approved by holders of at least two-thirds of such Kimco
Outstanding Preferred Stock outstanding at the time. For purposes of the
foregoing sentence, any amendment of the Kimco Charter resulting in any shares
of Kimco Outstanding Preferred Stock remaining outstanding with the terms
thereof materially unchanged, any increase in the authorized amount of Kimco
Outstanding Preferred Stock or any creation or issuance of any Kimco Parity
Stock will not be deemed to materially and adversely affect any right,
preference, privilege or voting power of any shares of Kimco Outstanding
Preferred Stock or the holders thereof.
As to any matter on which the Kimco Outstanding Preferred Stock may vote,
including any action by written consent, each share of such class of Kimco
Outstanding Preferred Stock shall be entitled to 10 votes, each of which 10
votes may be directed separately by the holder thereof. With respect to each
share of such class of Kimco Outstanding Preferred Stock, the holder thereof may
designate up to 10 proxies, with each such proxy having the right to vote a
whole number of votes (totaling 10 votes per share of such class of Kimco
Outstanding Preferred Stock).
Restrictions on Transferability and Ownership. The restrictions on
transferability and ownership described in '--Ownership Limit; Restrictions on
Transfer' below apply to all classes of Kimco Outstanding Preferred Stock.
No Preemptive Rights. Holders of shares of Kimco Outstanding Preferred
Stock do not have preemptive rights.
Redemption. The shares of Kimco Outstanding Preferred Stock are not
convertible, redeemable or entitled to the benefit of any sinking fund, except
that (i) such shares may be purchased by Kimco under certain provisions of the
Kimco Charter designed to enable Kimco to preserve its status as a REIT under
the Code (see 'Federal Income Tax Consequences--Federal Income Tax Consequences
of the Merger; Taxation of Kimco as a REIT') and (ii) such shares may be
redeemed by Kimco as described below.
On and after September 22, 1998, July 15, 2000, or April 15, 2001, Kimco,
at its option and upon not less than 30 nor more than 60 days' written notice,
may redeem the Kimco Class A Preferred Stock, the Kimco Class B Preferred Stock
or the Kimco Class C Preferred Stock, respectively, in whole or part, at any
time or from time to time, for cash at a redemption price of $250.00 per share,
plus all accrued and unpaid distributions thereon to the date fixed for
redemption, without interest, subject to the following limitations and to
compliance by Kimco with the procedural requirements applicable to the
redemption of Kimco Class A Preferred Stock, Kimco Class B Preferred Stock or
Kimco Class C Preferred Stock, as the case may be. First, if less than all of
the outstanding Kimco Class A Preferred Stock, Kimco Class B Preferred Stock or
Kimco Class C Preferred Stock
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are to be redeemed, such shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fraction shares) or by any other
equitable method determined by Kimco. Second, the redemption price of such
shares (other than the portion thereof consisting of accrued and unpaid
distributions) is payable solely out of the sale proceeds of other equity
securities of Kimco and any rights (other than debt securities convertible into
or exchangeable for such equity securities) or options to purchase any of the
forgoing. Third, unless full cumulative distributions on all shares of Kimco
Class A Preferred Stock, Kimco Class B Preferred Stock or Kimco Class C
Preferred Stock, as the case may be, have been or contemporaneously are
authorized and paid and a sum sufficient for the payment thereof set apart for
all past distribution periods and the then current distribution period, no
shares of such class shall be redeemed, and Kimco shall not purchase or
otherwise acquire directly or indirectly any shares of such class, except in
order to ensure that Kimco remains qualified as a REIT for federal income tax
purposes or the purchase or acquisition of Kimco Class A Preferred Stock, Kimco
Class B Preferred Stock or Kimco Class C Preferred Stock, as the case may be,
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding shares of such class.
Any shares of Kimco Outstanding Preferred Stock that have been redeemed
will, after such redemption, have the status of authorized but unissued
preferred stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors of
Kimco.
Liquidation. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of Kimco, the holders and any class of outstanding
Kimco Outstanding Preferred Stock will be entitled to receive out of the assets
of Kimco available for distribution to stockholders remaining after payment or
provision for payment of all debts and other liabilities of Kimco other than
Kimco's obligations with respect to any outstanding Kimco Junior Stock, a
liquidation preference of $250.00 per share for the Kimco Outstanding Preferred
Stock, plus an amount equal to any accrued and unpaid distributions to the date
of payment. If upon any voluntary or involuntary liquidation, dissolution or
winding up of Kimco, the assets of Kimco shall be insufficient to make such full
payments to holders of shares of Kimco Outstanding Preferred Stock, then such
assets will be distributed pro rata among holders of Kimco Outstanding Preferred
Stock. After payment of the full amount of the liquidating distribution to which
they are entitled, the holders of Kimco Outstanding Preferred Stock will not be
entitled to any further participation in any distribution of assets by Kimco.
Neither a consolidation or merger of Kimco with or into another corporation nor
a merger of substantially all of Kimco's property or business will be considered
a liquidation, dissolution or winding of Kimco.
OWNERSHIP LIMIT; RESTRICTIONS ON TRANSFER
For Kimco to qualify as a REIT under the Code, not more than 50% in value
of its 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, and its stock 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 (as defined herein) is not qualifying income for purposes
of the income tests under the Code.
Subject to certain exceptions specified in the Kimco 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 Kimco Common Stock.
The constructive ownership rules are complex and may cause Kimco Common Stock
owned actually or constructively by a group of related individuals and/or
entities to be deemed constructively owned by one individual or entity. As a
result, the acquisition of less than 2% in value, by virtue of its
convertibility into Kimco Common Stock (or the acquisition of an interest in an
entity which owns Kimco Common Stock or Kimco Class D Preferred 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
Kimco Common Stock, and thus subject such Kimco Common Stock to the Ownership
Limit.
Existing stockholders who exceeded the Ownership Limit immediately after
the completion of Kimco's initial public offering of its common stock (the
'IPO') 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
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tenants who are owned, actually or constructively, 10% or more by Kimco, or are
a 10% owner of Kimco ('Related Party Tenants'), is not qualifying rent for
purposes of the gross income tests under the Code, the Kimco 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 the outstanding
Kimco Common Stock (the 'Related Party Limit'). The Board of Directors of Kimco
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 IPO) if evidence satisfactory to the Board of Directors of Kimco and Kimco's
tax counsel is presented that such ownership will not then or in the future
jeopardize Kimco's status as a REIT. As a condition of such waiver, the Board of
Directors of Kimco may require opinions of counsel satisfactory to it and/or an
undertaking from the applicant with respect to preserving the REIT status of
Kimco. The foregoing restrictions on transferability and ownership will not
apply if the Board of Directors of Kimco determines that it is no longer in the
best interest of Kimco to attempt to qualify, or to continue to qualify, as a
REIT. If shares of Kimco Common Stock in excess of the Ownership Limit or the
Related Party Limit, or shares which would cause the REIT to be beneficially
owned by less than 100 persons or which would cause Kimco to be 'closely held'
within the meaning of the Code or would otherwise result in failure to qualify
as a REIT, are issued or transferred to any person, such 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 Kimco to be 'closely held' within the meaning of the Code or would
otherwise result in failure to qualify as a REIT, will automatically be
exchanged for shares of Excess Stock that will be transferred by operation of
law to Kimco as trustee for the exclusive benefit of the person or persons to
whom the shares are ultimately transferred, until such 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 such shares at a price not to exceed (i)
the price paid by the intended transferee, or (ii) 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
Kimco 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 Kimco determines to purchase the stock. This period commences on the date
of the violative transfer if the intended transferee gives notice to Kimco of
the transfer, or the date of the Board of Directors of Kimco determines that a
violative transfer has occurred if no notice is provided.
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 Kimco containing the information specified in
Kimco's Charter within 30 days after January 1 of each year. In addition, each
stockholder shall upon demand be required to disclose to Kimco in writing such
information with respect to the actual and constructive ownership of shares of
stock of Kimco as the 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.
All certificates representing shares of Kimco Common Stock will bear a
legend referring to the restrictions described above.
Subject to certain exceptions contained in the applicable Articles
Supplementary for Kimco Class A Preferred Stock, Kimco Class B Preferred Stock
and Kimco Class C Preferred Stock, no holder of such class of Kimco Preference
Shares may own, or be deemed to own by virtue of the constructive ownership
provisions of the Code, Kimco Preference Shares in excess of 9.8% of the
outstanding Kimco Preference Shares of any class (the 'Preferred Stock Ownership
Limit'). In addition, as more fully set forth in the Kimco Class D Preferred
Stock Articles Supplementary, Kimco Class D Preferred Stock may not be
transferred or acquired in violation of the Preferred Stock Ownership Limit.
Kimco Class D Preferred Stock is also subject to an overall restriction under
which no holder may own, as a result of ownership of Kimco Class D Preferred
Stock, in the aggregate, in excess of 5.0% in value of the outstanding Kimco
Preference Shares and Kimco Common Stock (the 'Class D Aggregate Limit'). The
constructive ownership rules are complex and may cause Kimco Preference Shares
owned actually or constructively by a group of related individuals and/or
entities to be deemed to be
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constructively owned by one individual or entity. As a result, the acquisition
of less than 9.8% of any class of Kimco Preference Shares (or the acquisition of
an interest in an entity which owns Kimco Preference Shares) 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 such class of Preference Shares, and
thus subject such shares to the Preferred Stock Ownership Limit.
The Board of Directors of Kimco is entitled to waive the Preferred Stock
Ownership Limit with respect to a particular stockholder if evidence
satisfactory to the Board of Directors, with advice of Kimco's tax counsel, is
presented that such ownership will not then or in the future jeopardize Kimco's
status as a REIT. As a condition of such waiver, the Board of Directors of Kimco
may require opinions of counsel satisfactory to it and/or an undertaking from
the applicant with respect to preserving the REIT status of Kimco.
The Articles Supplementary for each class of Kimco Preference Shares
provide that a transfer of the class of Kimco Preference Shares that results in
a person actually or constructively owning Kimco Preference Shares in excess of
the Preferred Stock Ownership Limit and, in the case of the Kimco Class D
Preferred Stock, in excess of the Class D Aggregate Limit, or which would cause
Kimco to be 'closely held' within the meaning of the Code or would otherwise
result in 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 and, in the case of
the Kimco Class D Preferred Stock, in excess of the Class D Aggregate Limit, or
which would otherwise cause Kimco to be 'closely held' within the meaning of the
Code or would otherwise result in failure to qualify as a REIT, will be
automatically exchanged for shares of a separate class of preferred stock that
will be transferred, by operation of law to Kimco 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)
(the 'Excess Preferred Stock'). 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 such vote, and it will
not be entitled to participate in any distributions made by Kimco (except upon
liquidation). The intended transferee or owner may, at any time a class of
Excess Preferred Stock is held by Kimco in trust, transfer the class of Excess
Preferred Stock to any person whose ownership of such class of Excess Preferred
Stock would be permitted under the Preferred Stock Ownership Limit, at a price
not to exceed either (i) the price paid by the intended transferee or owner in
the purported transfer which resulted in the issuance of such class of Excess
Preferred Stock or (ii) if the intended transferee did not give full value for
such 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 such class of Excess Preferred Stock, at which time such class of Excess
Preferred Stock would automatically be exchanged for the corresponding class of
Kimco Preference Shares. In addition, Kimco would have the right, for a period
of 90 days during the time a class of Excess Preferred Stock is held by Kimco in
trust, to purchase all or any portion of such class of Excess Preferred Stock
from the intended transferee or owner at a price equal to the lesser of the
price paid for the stock by the intended transferee or owner (or, if the
intended transferee did not give full value for such 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 such class of Excess Preferred
Stock) and the closing market price for the corresponding class of Kimco
Preference Shares on the date Kimco exercises its 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 Kimco, or the date
the Board of Directors determines that a violative transfer or ownership has
occurred if no notice is provided.
All certificates representing a class of Kimco Preference Shares will bear
a legend referring to the restrictions described above.
The Preferred Stock Ownership Limit is set as a percentage of the number of
outstanding shares of each class of Kimco Preference Shares. As a result, if the
number of any class of Kimco Preference Shares (other than the Kimco Class D
Preferred Stock) is reduced on a non-pro rata basis among all holders of such
class or series, Excess Preferred Stock may be created as a result of such
reduction. (This should not be the result, however, in the case of shares of
Kimco Class D Preferred Stock because such shares can become Excess Preferred
Stock only upon an acquisition, and not merely the ownership, of such shares in
excess of the Preferred Stock Ownership Limit.) In the event that Kimco's action
causes such reduction of shares, Kimco has agreed to
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exercise its option to repurchase such shares of such class of Excess Preferred
Stock if the intended owner notifies Kimco that it is unable to sell its rights
to such class of Excess Preferred Stock.
All persons who own a specified percentage (or more) of the outstanding
stock of Kimco must file an affidavit with Kimco 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
stock. In addition, each stockholder shall upon demand be required to disclose
to Kimco in writing such information with respect to the actual and constructive
ownership of shares of stock of Kimco as the 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.
CERTAIN PROVISIONS OF THE KIMCO CHARTER AND KIMCO BYLAWS AND OF MARYLAND LAW
The following summary of certain provisions of the MGCL and the Kimco
Charter and Kimco Bylaws does not purport to be complete, and is qualified by
reference to the MGCL and the Kimco Charter and Kimco Bylaws. See 'Comparison of
Stockholder Rights.' Certain provisions in the Kimco Charter and Kimco Bylaws
relating to the matters specified below could have the effect of discouraging a
takeover or other transaction which holders of some, or a majority, of the
shares of Kimco Common Stock might believe to be otherwise in their best
interests or in which such holders could receive a premium for their shares.
MARYLAND BUSINESS COMBINATION LAW
The MGCL prohibits certain 'business combinations' (including a merger,
consolidation, share exchange, or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and any person (i) who beneficially owns 10% or more of the voting
power of the corporation's shares or (ii) who is an affiliate or associate of
the corporation who, at any time within the two-year period prior to the date in
question, was an Interested Stockholder (as defined therein) or an affiliate or
an associate thereof. Such business combinations are prohibited for five years
after the most recent date on which the Interested Stockholder became an
Interested Stockholder. Thereafter, any such business combination must be
recommended by the Board of Directors of such corporation and approved by the
affirmative vote of at least (a) 80% of the votes entitled to be cast by all
holders of outstanding shares of voting stock of the corporation, and (b)
two-thirds of the votes entitled to be cast by holders of voting stock of the
corporation other than voting stock held by the Interested Stockholder who will
(or whose affiliate will) be a party to the business combination, or by an
affiliate or associate of the Interested Stockholder, unless, among other
things, the corporation's stockholders receive a minimum price (as defined in
the MGCL) for their shares and the consideration is received in cash or in the
same form as previously paid by the Interested Stockholder for its shares. These
provisions of Maryland law do not apply, however, to business combinations that
are approved or exempted by the Board of Directors of the corporation prior to
the time that the Interested Stockholder becomes an Interested Stockholder.
The Maryland Business Combination Law could have the effect of discouraging
offers to acquire Kimco and of increasing the difficulty of consummating any
such offer.
CONTROL SHARE ACQUISITIONS
The Maryland Control Share Statute provides that 'control shares' of a
Maryland corporation acquired in a 'control share acquisition' have no voting
rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by the
acquiror. However, the Kimco Bylaws contain provisions which exempt Kimco from
the Maryland Control Share Statute. No assurance can be given, however, that
such provisions may not be removed at any time by amendment of the Kimco Bylaws.
KIMCO DIVIDEND REINVESTMENT PLAN
The Kimco Dividend Reinvestment Plan provides Kimco stockholders an
opportunity to automatically reinvest their cash dividends in additional shares
of Kimco Common Stock and to make monthly or other voluntary cash investments of
not less than $100 and not more than $25,000 per quarter. The Kimco Dividend
Reinvestment Plan is administered by BankBoston.
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ELECTION OF KIMCO DIRECTORS
The Kimco Bylaws provide that directors will be elected at each Annual
Meeting of Stockholders. Pursuant to such Bylaws, the Directors have fixed the
number of directors to be elected at the Kimco Annual Meeting at six. The
persons named as proxies in the accompanying form of proxy intend to vote in
favor of the election of the six nominees for director designated below, all of
whom are presently directors of Kimco, to serve until the next Annual Meeting of
Stockholders and until their successors are elected and qualify. It is expected
that each of these nominees will be able to serve, but if any such nominee is
unable to serve for any reason, the proxies reserve discretion to vote or
refrain from voting for a substitute nominee or nominees. In addition, assuming
consummation of the Merger, Kimco's Board of Directors is obligated to take all
action necessary to cause the directors comprising the full Board of Directors
of Kimco at the Effective Time to be increased by one Director and will take all
such action necessary to cause Joseph K. Kornwasser to be selected as a Director
of Kimco for a term expiring at the 1999 Annual Meeting of Stockholders
following the Effective Time, in order to fill the vacancy resulting from such
newly created directorship.
INFORMATION REGARDING NOMINEES (AS OF MAY 8, 1998)
<TABLE>
<CAPTION>
Present Principal Occupation or
Name Age Employment and Five Year Employment History
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Martin S. Kimmel(2)(3)............................... 82 Chairman (Emeritus) of the Board of Directors of
Kimco since November 1991; Chairman of the Board of
Directors of Kimco for more than five years prior
to such date. Founding member of Kimco's
predecessor in 1966.
Milton Cooper(2)(3).................................. 69 Chairman of the Board of Directors of Kimco since
November 1991; Director and President of Kimco for
more than five years prior to such date. Founding
member of Kimco's predecessor in 1966.
Richard G. Dooley(1)(3).............................. 68 Director of Kimco since December 1991. Consultant to,
and from 1978 to 1993, Executive Vice President and
Chief Investment Officer of Massachusetts Mutual
Life Insurance Company. Director of Jefferies.
Michael J. Flynn(2).................................. 62 Vice Chairman of the Board of Directors of Kimco
since January 1996 and, since January 1997,
President and Chief Operating Officer; Director of
Kimco since December 1991. Chairman of the Board
and President of Slattery Associates, Inc. for more
than five years prior to joining Kimco in 1996.
Joe Grills(3)........................................ 63 Director of Kimco since January 1997. Chief
Investment Officer for the IBM Retirement Funds
from 1986 to 1993.
Frank Lourenso(1)(3)................................. 57 Director of Kimco since December 1991. Executive Vice
President of The Chase Manhattan Bank ('Chase Bank'
and successor by merger to Chemical Bank, N.A.)
since 1990. Senior Vice President of Chase Bank for
more than five years prior to that time.
</TABLE>
(Footnotes continued on next page)
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(Footnotes continued from previous page)
- ------------------
(1) Member of Audit Committee.
(2) Member of Executive Committee.
(3) Member of Executive Compensation Committee. Messrs. Dooley, Grills and
Lourenso were elected to the Executive Compensation Committee on October 21,
1997 and first participated at the February 26, 1998 meeting.
Mr. Cooper is also a director of Getty Realty Corp. and Blue Ridge Real
Estate/Big Boulder Corporation and a trustee of MassMutual Corporate Investors
and MassMutual Participation Investors. He is also a member and the past
Chairman of the Board of Governors of the National Association of Real Estate
Investment Trusts and is a former chairman of the Shopping Center Committee of
the Real Estate Board of New York, Inc.
Mr. Dooley is also a director of Advest Group, Inc., Hartford Steam Boiler
Inspection and Insurance Co. and Jefferies Group, Inc. and a trustee of
MassMutual Corporate Investors and MassMutual Participation Investors.
Mr. Flynn is also Chairman of the Board of Directors of Blue Ridge Real
Estate/Big Boulder Corporation and a director of Slattery Associates, Inc.
Mr. Grills is also a Director of certain Merrill Lynch and Hotchkis and
Wyley Mutual Funds, Duke Management Company and the LaSalle Street Fund. He also
serves as a member of the Investment Advisory Committees of the State of New
York Common Retirement Fund and the Howard Hughes Medical Institute. Mr. Grills
is a member of the Financial Executives Institute Committee on Investment of
Employee Benefit Assets, its executive committee and is a former chairman of
that committee.
All directors of Kimco serve terms of one year and until the election and
qualification of their respective successors. Each of the above Directors was in
attendance at each of the four regular meetings of the Board of Directors held
during 1997, which occurred on January 28, April 30, July 30 and October 21, and
at a special meeting held December 1, 1997, and each was in attendance at the
1997 Annual Meeting of Stockholders held on May 28, 1997.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. The Board of Directors has established an Audit Committee
consisting of two independent Directors to make recommendations concerning the
engagement of independent public accountants, review with the independent public
accountants the plans and results of the audit engagement, approve professional
services provided by the independent public accountants, review the independence
of the independent public accountants, consider the range of audit and non-audit
fees and review the adequacy of Kimco's internal accounting controls. One
meeting of the Audit Committee was held during 1997 on January 28; in addition,
the Audit Committee held a meeting on February 26, 1998.
Executive Committee. The Executive Committee has been granted the
authority to acquire and dispose of real property, to borrow money on behalf of
Kimco and to authorize, on behalf of the full Board of Directors, the execution
of certain contracts and agreements (except for contracts between Kimco and KC
Holdings, Inc. See 'Compensation Committee Interlocks and Insider
Participation'). The Executive Committee convened twice during 1997, on April 30
and October 21.
Executive Compensation Committee. The Board of Directors has established
an Executive Compensation Committee to determine compensation for Kimco's
executive officers, in addition to administering the Kimco Stock Option Plan (as
defined herein). One meeting of the Executive Compensation Committee was held
during 1997, on October 21; in addition, the Executive Compensation Committee
held a meeting on February 26, 1998.
Each of the Directors comprising these various Committees of the Board of
Directors was in attendance at all meetings of such Committees held on the dates
indicated above. The Board of Directors has not established a nominating
committee.
COMPENSATION OF DIRECTORS
Members of the Board of Directors and Committees thereof who are not also
employees of Kimco receive an annual fee of $12,000, plus fees of $1,000 for
attending each regular or special meeting of the full Board. Directors, other
than Mr. Kimmel, who are not also employees of Kimco, receive $500 for attending
Committee meetings. Pursuant to such arrangements, each of Messrs. Kimmel,
Dooley, Lourenso and Grills received
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directors' fees of $18,000, $18,500, $18,500 and $18,000 respectively, during
1997. Employees of Kimco who are also Directors are not paid any directors'
fees.
Effective January 1, 1998, the annual fees for the non-employee members of
the Board of Directors of Kimco was increased to $24,000 plus fees of $2,000 for
attending each regular or special meeting of the full Board of Directors of
Kimco. Fees for attending Committee meetings remain at $500.
During November 1995, 1996 and 1997, Kimco granted each then non-employee
Director (other than (a) Mr. Kimmel, and (b) Mr. Flynn with regard to 1995)
options to acquire 7,500 shares of Kimco Common Stock at $24.92, $28.375 and
$31.75 per share, respectively, the market prices on the dates of such option
grants. See 'Executive Compensation and Transactions with Management and
Others--Executive Compensation and Employment Contracts' for information
concerning stock options granted to Mr. Flynn during 1995, 1996 and 1997. Kimco
intends to grant non-employee Directors, other than Mr. Kimmel, options to
acquire an additional 7,500 shares during November 1998 at the then current
market price.
Mr. Kimmel receives $50,000 per annum as payment for consulting services
rendered to, and reimbursement of certain expenses incurred on behalf of, Kimco.
VOTE REQUIRED
Directors of Kimco will be elected by vote of a plurality of the shares of
Kimco Common Stock present, in person or by proxy, and entitled to vote at the
Kimco Annual Meeting. Accordingly, abstentions as to the election of directors
will not affect the election of the candidates receiving the plurality of the
votes.
THE BOARD OF DIRECTORS OF KIMCO RECOMMENDS THAT YOU VOTE FOR ALL OF THE
NOMINEES SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information available to Kimco as of
May 8, 1998, with respect to shares of Kimco Common Stock and depositary shares
representing Kimco Class A Preferred Stock, Kimco Class B Preferred Stock and
Kimco Class C Preferred Stock (i) held by those persons known to Kimco to be the
beneficial owners (as determined under the rules of the Commission) of more than
5% of such shares and (ii) held, individually and as a group, by the Directors
and executive officers of Kimco:
<TABLE>
<CAPTION>
SHARES OWNED PERCENT
BENEFICIALLY(#) OF CLASS(%)
------------------------------------ ---------------------------------
NAME & ADDRESS (WHERE REQUIRED) DEPOSITARY DEPOSITARY
OF BENEFICIAL OWNER COMMON STOCK SHARES COMMON STOCK SHARES
- ------------------------------------------ ---------------- ----------------- ------------ -----------------
<S> <C> <C> <C> <C>
Cohen & Steers Capital 4,531,000 -- 10.6 --
Mgmt. Inc.
757 Third Avenue
New York, New York 10017
Milton Cooper 4,436,550(1)(6) -- 10.4 --
c/o Kimco Realty Corporation
3333 New Hyde Park Rd.
New Hyde Park, New York 11042
Fleming Capital Mgmt. 3,054,746 -- 7.2 --
320 Park Avenue
New York, New York 10027
Martin S. Kimmel 2,691,958(2) --(3) 6.3 --(3)
c/o Kimco Realty Corporation
3333 New Hyde Park Rd.
New Hyde Park, New York 11042
Helen Kimmel 1,929,962(4) 157,000(4) 4.5 5.2(4)
445 Park Avenue
New York, New York 10022
</TABLE>
101
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED PERCENT
BENEFICIALLY(#) OF CLASS(%)
------------------------------------ ---------------------------------
NAME & ADDRESS (WHERE REQUIRED) DEPOSITARY DEPOSITARY
OF BENEFICIAL OWNER COMMON STOCK SHARES COMMON STOCK SHARES
- ------------------------------------------ ---------------- ----------------- ------------ -----------------
<S> <C> <C> <C> <C>
Alex Weiss 177,865(5) -- * --
Michael J. Flynn 149,590 -- * --
Joseph V. Denis 70,400 -- * --
Richard G. Dooley 66,746 -- * --
Frank Lourenso 53,678 -- * --
Bruce M. Kauderer 46,835 -- * --
Michael V. Pappagallo 16,667 -- * --
Joe Grills 16,000 -- * --
All Directors and executive officers 7,726,289(6) -- 18.1 --
as a group (10 persons)
</TABLE>
- ------------------
* Less than 1%
(1) Includes 1,070,889 shares held by Mr. Cooper as trustee for the benefit of
Mr. Kimmel's son. Does not include 255,212 shares held by adult members of
Mr. Cooper's family, as to all of which shares Mr. Cooper disclaims
beneficial ownership.
(2) Does not include 1,070,889 shares held in trust by Mr. Cooper for Mr.
Kimmel's son or 739,211 shares held by Helen Kimmel, his wife, as to all of
which shares Mr. Kimmel disclaims beneficial ownership. Also, does not
include 1,190,751 shares held by foundations and trusts for which Mrs.
Kimmel is a trustee, as to all of which shares Mr. Kimmel disclaims
beneficial ownership.
(3) Does not include 157,000 depositary shares representing ownership of Kimco
Class A Preferred Stock held by Helen Kimmel, his wife, and a foundation for
which Mrs. Kimmel is a trustee, as to all of which shares Mr. Kimmel
disclaims beneficial ownership.
(4) Does not include 2,691,958 shares held by Mr. Kimmel, her husband, or
1,070,889 shares held in trust by Mr. Cooper for Mr. Kimmel's son, as to all
of which shares Mrs. Kimmel disclaims beneficial ownership. All depositary
shares and Percent of Class represent ownership of Kimco Class A Preferred
Stock.
(5) Does not include 1,154 shares held by Mrs. Linda Weiss, wife of Mr. Alex
Weiss, an executive officer of Kimco, as to all of which shares Mr. Weiss
disclaims beneficial ownership.
(6) Does not include 383,546 shares held by KC Holdings, Inc., a related,
private corporation in which Mr. Cooper holds a controlling interest. See
'Compensation Committee Interlocks and Insider Participation--Transactions
with KC Holdings, Inc.'
102
<PAGE>
EXECUTIVE COMPENSATION AND TRANSACTIONS WITH MANAGEMENT AND OTHERS
Executive Compensation. The following table sets forth the summary
compensation of the Chairman of the Board of Directors (and Chief Executive
Officer) and the four other most highly paid executive officers of Kimco (the
'Named Executive Officers') for calendar years 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-------------------------
ANNUAL COMPENSATION
----------------------------------------- (f)
(a) (b) (e) RESTRICTED (h)
NAME AND PERIOD (c) (d) OTHER ANNUAL STOCK (g) ALL OTHER
PRINCIPAL POSITION ENDED SALARY($) BONUS($) COMPENSATION($)(1) AWARDS($) OPTIONS(#)(2) COMPENSATION($)(3)
- ------------------------------ ------ --------- -------- ------------------ ---------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Milton Cooper ................ 12/97 283,000 100,000 -- -- (4) 8,190
Chief Exec. Officer and 12/96 282,500 100,000 -- -- (4) 8,190
Chairman of the Board of 12/95 282,500 100,000 -- -- (4) 3,780
Directors
Michael J. Flynn(5) .......... 12/97 358,000 100,000 -- -- 73,000 4,563
Vice Chairman of the Board 12/96 350,000 100,000 -- 934,388(6) 73,000 4,563
of Directors and President & 12/95 -- -- -- -- 75,000 --
Chief Operating Officer
since January 1997
Joseph V. Denis .............. 12/97 157,500 112,500 -- -- 12,500 870
Vice President-Construction 12/96 157,500 75,000 -- -- 12,500 870
12/95 157,500 75,000 -- -- 18,750 510
Bruce M. Kauderer(5) ......... 12/97 208,000 20,000 -- -- 18,750 1,872
Vice President-Legal 12/96 179,543 45,000 -- -- 18,750 1,296
and, since December 15, 12/95 94,231 13,355 -- -- 41,250 392
1997, General Counsel and
Secretary
Michael V. Pappagallo(5) ..... 12/97 148,539 51,667 -- -- 100,000 429
Chief Financial Officer 12/96 -- -- -- -- -- --
since 12/95 -- -- -- -- -- --
May 1997
</TABLE>
- ------------------
(1) No named officer received perquisites or other personal benefits aggregating
the lesser of 10% of annual salary and bonus or $50,000.
(2) Options to acquire shares of Kimco Common Stock at exercise prices equal to
the fair market value on the dates of grant.
(3) The amounts shown represent the value of Kimco paid group term life
insurance premiums.
(4) Mr. Cooper is ineligible to participate in the Kimco Stock Option Plan for
so long as he serves as a member of the Executive Compensation Committee.
(5) See 'Executive Compensation and Transactions with Management and
Others--Employment Contracts.'
(6) Restricted stock award covering 37,500 shares of Kimco Common Stock valued
at $1,321,875 based upon the closing price on the NYSE on December 31, 1997.
Mr. Flynn is eligible to receive dividends on such restricted shares at such
times and in such amounts as may be declared by the Board of Directors with
respect to all shares of Kimco Common Stock then outstanding.
Note: Robert P. Schulman, formerly the Senior Vice President and Secretary of
Kimco through December 15, 1997, did not receive compensation in such
capacity. Mr. Schulman, principal in the Law Offices of Robert P.
Schulman, received $250,000 for legal services rendered to Kimco during
each of years 1997, 1996 and 1995. In addition, Mr. Schulman was granted
options to acquire 15,000 shares of Kimco Common Stock during 1995 at an
exercise price of $24.92, equal to the fair market value of such shares
on the date of grant. Kimco paid group term life insurance premiums
valued at $14,664, $8,190 and $8,190, on behalf of Mr. Schulman during
years 1997, 1996 and 1995, respectively.
103
<PAGE>
KIMCO OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on options to acquire shares of
Kimco Common Stock granted to the Named Executive Officers during 1997.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL RATES
----------------------------------------------- OF
(a) (b) (c) (d) (e) STOCK PRICE
% OF TOTAL APPRECIATION
OPTIONS FOR OPTION TERM(1)
GRANTED TO ----------------------
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION (f) (g)
NAME (#)(2) YEAR ($/SH) DATE 5% ($) 10% ($)
- ------------------------------------------ ------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Milton Cooper............................. (3) (3) (3) (3) (3) (3)
Michael J. Flynn.......................... 73,000 15.5 31.75 11/03/07 1,457,810 3,393,800
Michael V. Pappagallo..................... 50,000 10.6 31.125 05/01/07 978,500 2,480,000
50,000 10.6 31.75 11/03/07 998,500 2,530,000
Joseph V. Denis........................... 12,500 2.7 31.75 11/03/07 249,625 632,500
Bruce M. Kauderer......................... 18,750 4.0 31.75 11/03/07 374,438 948,750
</TABLE>
- ------------------
(1) Assumed annual rates of stock price appreciation, as determined by the
Commission, for illustrative purposes only. Actual stock prices will vary
from time to time based upon market factors and Kimco's financial
performance. No assurance can be given that such rates will be achieved.
(2) Options become exercisable one-third on each of the first three
anniversaries of the date of grant.
(3) Mr. Cooper is ineligible to participate in the Kimco Stock Option Plan for
so long as he serves as a member of the Executive Compensation Committee.
KIMCO AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table provides information on options to acquire shares of
Kimco Common Stock exercised in 1997 by the Named Executive Officers, and the
value of each such officer's unexercised options to acquire shares of Kimco
Common Stock outstanding at December 31, 1997.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
YEAR END (#) YEAR-END ($)(1)
SHARES ACQUIRED VALUE ------------------ --------------------
NAME ON EXERCISE (#) REALIZED ($) EXER. UNEXER. EXER. UNEXER.
- ----------------------------------------- --------------- ------------ ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Milton Cooper............................ (2) (2) (2) (2) (2) (2)
Michael J. Flynn......................... -- -- 101,333 146,667 1,009,318 848,092
Michael V. Pappagallo.................... -- -- (3) 100,000 (3) 381,000
Joseph V. Denis.......................... 6,500 72,000 70,417 27,083 908,002 165,561
Bruce M. Kauderer........................ -- -- (3) 78,750 (3) 582,488
</TABLE>
- ------------------
(1) Based upon the closing price of Kimco Common Stock on the NYSE on December
31, 1997 of $35.25 per share.
(2) Mr. Cooper is ineligible to participate in the Kimco Stock Option Plan for
so long as he serves as a member of the Executive Compensation Committee.
(3) See 'Executive Compensation and Transactions with Management and
Others--Employment Contracts.'
Note: Robert P. Schulman, formerly the Senior Vice President and Secretary of
Kimco through December 15, 1997, holds options to acquire 71,250 shares of
Kimco Common Stock as of December 31, 1997. Options to acquire a total
66,250 shares were exercisable as of such date. Mr. Schulman's 66,250
exercisable and 5,000 unexercisable options had values of $923,613 and
$51,650, respectively, based upon the closing price of Kimco Common Stock
on the NYSE on December 31, 1997 of $35.25 per share.
104
<PAGE>
Employment Contracts. In May 1995, Kimco entered into an employment
agreement with Mr. Bruce M. Kauderer, Vice President--Legal, which provided for
a minimum annual base salary and bonus of $175,000 and $25,000, respectively,
and the issuance of options to acquire 37,500 shares of Kimco's Common Stock at
an exercise price of $25.75 per share, the market price on June 19, 1995, the
commencement date of his employment. The standard provisions of the Kimco Stock
Option Plan provide that options granted vest one-third on each of the first
three anniversaries of the date of grant, however, options first become
exercisable only after the optionee has completed a three-year length of service
requirement. Notwithstanding these provisions, should Mr. Kauderer's employment
with Kimco terminate before such options become exercisable, he is nonetheless
entitled to receive a cash payment equal to the value of those options that
would have otherwise ratably vested at the time his employment terminates. The
agreement further provides that should Mr. Kauderer's employment be terminated
(other than of his own volition) prior to June 19, 2005, Kimco will pay, as an
agreed one-time severance payment, an amount equal to the excess of (a) Mr.
Kauderer's most recent annual salary plus bonus (but not less than $200,000),
over (b) the value (i) realized by Mr. Kauderer upon the exercise of any options
granted to acquire shares of Kimco's stock in excess of (ii) Mr. Kauderer's most
recent annual salary plus bonus (but not less than $200,000).
In November 1995, Kimco entered into a three-year employment agreement with
Mr. Michael J. Flynn pursuant to which Mr. Flynn began to serve as Vice Chairman
of the Board of Directors effective January 2, 1996. Mr. Flynn assumed the
additional responsibilities of President and Chief Operating Officer in January
1997. In accordance with this employment agreement, Mr. Flynn is to receive
$450,000 per annum ($350,000 base salary and $100,000 guaranteed bonus) as
compensation for his services. In addition, Mr. Flynn received a grant of 37,500
shares of restricted Kimco Common Stock which vest in three equal installments,
one-third on each of January 2, 1997, 1998 and 1999. In the event of, and
depending upon the reasons for, a termination of Mr. Flynn's employment with
Kimco prior to such dates, (i) any such nonvested shares would either vest or
Mr. Flynn would receive, generally in lieu of the value thereof, cash severance
payments, and (ii) Mr. Flynn would receive the greater of (a) the remaining
compensation due through the term of his employment agreement, or (b) $450,000.
The agreement further provides that Mr. Flynn be granted options to acquire
75,000 shares of Kimco Common Stock at an exercise price of $24.917 per share,
the market price on the date of grant. These stock options are to be considered
incentive stock options, as defined in and to the extent permitted under the
Kimco Stock Option Plan, and otherwise shall be non-qualified options. Options
with respect to 37,500 of these shares shall vest in three equal installments
upon each of the first three anniversaries of the date of grant. Options with
respect to the remaining 37,500 shares shall vest in three equal installments
upon the day prior to each of the first three anniversaries of the date of
grant, but only if the average of the closing prices of a share of the Kimco
Common Stock (on the principal exchange on which such stock is then traded)
during any twenty consecutive day trading period equals or exceeds $33.34.
In April 1997, Kimco entered into a two-year employment agreement with Mr.
Michael V. Pappagallo pursuant to which Mr. Pappagallo began to serve as Chief
Financial Officer effective May 27, 1997. In accordance with this employment
agreement, Mr. Pappagallo is to receive $400,000 per annum ($250,000 base salary
and $150,000 guaranteed bonus) as compensation for his services. The agreement
further provides that Mr. Pappagallo be granted options to acquire 50,000 shares
of Kimco Common Stock at an exercise price equal to the market price on the date
of grant. These stock options are to be considered incentive stock options, as
defined in and to the extent permitted under the Kimco Stock Option Plan, and
otherwise shall be non-qualified options. Options with respect to these shares
shall vest in three equal installments upon each of the first three
anniversaries of the date of grant. In the event of, and depending upon the
reasons for, a termination of Mr. Pappagallo's employment with Kimco prior to
such dates, (i) any such nonvested shares would become 100% vested as of the
termination date and (ii) Mr. Pappagallo would receive the remaining
compensation due through the term of his employment agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation Committee of the Board of Directors, comprised
of Messrs. Martin Kimmel and Milton Cooper, is charged with the responsibility
of determining compensation levels, including awards pursuant to the Kimco Stock
Option Plan, for the Named Executive Officers other than Mr. Cooper. Mr.
Cooper's compensation is subject to review and approval by the members of the
Board of Directors other
105
<PAGE>
than Mr. Cooper and, further, both Messrs. Kimmel and Cooper are ineligible to
participate in the Kimco Stock Option Plan for so long as they serve as members
of this Committee.
Mr. Milton Cooper is Chairman of the Board of Directors of Kimco and Mr.
Martin Kimmel is Chairman Emeritus of the Board. Messrs. Cooper and Kimmel were
founding members of Kimco's predecessor in 1966.
Transactions with KC Holdings, Inc. To facilitate the IPO, Kimco
transferred its interests in 46 shopping center properties to a newly-formed
corporation, KC Holdings, Inc. ('KC Holdings'), and subsidiaries of KC Holdings.
The stock of KC Holdings is owned by the stockholders of Kimco prior to the IPO.
All of the real estate interests owned by KC Holdings and its subsidiaries are
subject to purchase options held by Kimco.
As of May 8, 1998, KC Holdings' subsidiaries had conveyed 14 shopping
center properties back to Kimco and had disposed of 10 additional centers in
transactions with third parties. The members of Kimco's Board of Directors who
are not also stockholders of KC Holdings unanimously approved Kimco's
acquisition of all fourteen shopping center properties that have been conveyed
back to Kimco.
Kimco is party to a management agreement pursuant to which it manages 18 of
KC Holdings' 22 shopping center properties under terms which Kimco believes are
no less favorable than would be obtained in negotiations with an independent
third party. The remaining four shopping center properties are owned in two
separate joint ventures and are managed by unaffiliated joint venture partners.
The management agreement was approved by a majority of Kimco's Directors who are
not also stockholders of KC Holdings. Management fees paid by KC Holdings to
Kimco totaled approximately $.6 million during 1997.
Transactions with Ripco Real Estate Corporation. During 1997, Kimco paid a
total of approximately $8,750 in brokerage commissions to Ripco Real Estate
Corporation ('Ripco') for services rendered by Ripco as leasing agent in one
transaction. Mr. Todd Cooper, a son of Mr. Milton Cooper, Chief Executive
Officer and Chairman of the Board of Directors of Kimco, is an officer and an
approximate 37% stockholder of Ripco. Such commissions are customarily paid by
landlords in comparable commercial leasing transactions, and Kimco believes that
the commissions paid by it to Ripco were at or below the customary rates for the
leasing services rendered.
Joint Ventures. Members of Kimco's management have investments in certain
real estate joint ventures or limited partnerships which own and/or operate
seven of Kimco's 339 property interests. Such management investments predate
Kimco's IPO and, in each case, Kimco is a general partner of the joint venture
or partnership and controls or directs the management of the joint venture or
partnership. Any material future transactions involving these joint ventures or
partnerships, such as major renovations, disposal or sale, will be subject to
the approval of a majority of disinterested directors of Kimco.
Relationship with Chase Bank. Mr. Lourenso, an Executive Vice President of
Chase Bank, has been a Director of Kimco since December 1991. Kimco has
maintained its principal banking relationship with Chase Bank. Chase Bank,
together with a consortium of six additional banks, has provided Kimco with a
$100 million (the 'Facility'), unsecured revolving credit facility which is
scheduled to expire in June 2000. Additionally, Chase Bank and one other bank
have provided Kimco with an additional $150 million interim unsecured revolving
credit facility which will expire in June, 1998. No borrowings were outstanding
under the Facility at December 31, 1997.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE OF KIMCO ON EXECUTIVE
COMPENSATION
The Executive Compensation Committee of Kimco has provided the following
Report on Executive Compensation:
Compensation Strategy and Performance Criteria. The members of this
Committee believe Kimco's success is attributable in large part to the talent
and dedication of its associates and, in particular, to the management and
leadership efforts of its executive officers. Accordingly, Kimco, under the
guidance of the Executive Compensation Committee, is committed to develop and
maintain compensation policies, plans and programs which seek to enhance cash
flows, and consequently real property and stockholder values, by aligning the
financial interests of Kimco's senior management with those of its stockholders.
106
<PAGE>
In furtherance of these goals, Kimco relies, to a large degree, on annual
and longer term incentive compensation (that is, specifically cash bonuses and
stock option grants) to attract and retain corporate officers and other key
associates of outstanding ability, and to motivate such persons to perform to
their fullest potential. Both of these forms of incentive compensation are
variable and designed to effectuate a pay-for-performance philosophy which
considers management's ability to consistently improve Kimco's FFO (a widely
accepted measure of performance for real estate investment trusts) to be of
paramount importance. Other performance criteria which effect incentive awards
include the demonstrated ability to strengthen Kimco's capital structure, the
measure of improved total return to stockholders and individual
performance/contributions to corporate goals and objectives.
The Committee annually deliberates the appropriate combination of cash and
stock-based compensation, and weighs the competitiveness of Kimco's plans in
relation to compensation practices employed by a select group of successful real
estate investment trusts that are (i) included in the NAREIT equity index used
in the accompanying stock performance graph, and (ii) believed to be comparable
to Kimco based on market capitalization, portfolio size and distribution and
product type. In general, the Committee has set base compensation levels for
Kimco's executive officers at competitive levels relative to this peer group.
The number of stock options granted annually is an amount which the Committee,
after due consideration of corporate and individual performance, changes in job
function or title, competitive option grant levels and previously awarded
options, considers appropriate to fairly compensate and properly motivate its
officers.
From time to time the Committee may retain compensation and other
management consultants to assist with, among other things, structuring Kimco's
various compensation programs and determining appropriate levels of salary,
bonus and other awards payable to Kimco's officers and key personnel, as well as
to guide Kimco in the development of near term individual performance objectives
necessary to achieve long-term profitability. No compensation consultants were
retained during the years for which compensation information has been provided
in this Joint Proxy Statement/Prospectus.
1997 Performance. In evaluating 1997 performance, particularly noteworthy
was Kimco's ability, under senior management's direction, to increase FFO for
the year ended December 31, 1997 by 15.4% to $98.2 million, from $85.1 million
in the prior year. On a per share basis, FFO increased by 11%, to $2.63 per
share from $2.37 per share in the prior year. The growth in FFO and FFO per
share was achieved through both an aggressive acquisition program and
significant accomplishments in new leasing and strategic re-tenanting within the
portfolio which (i) added 14 neighborhood and community shopping center
properties, 49 retail property interests and one health care facility comprising
approximately 8.0 million square feet of GLA for an aggregate purchase price of
$276 million, (ii) increased occupancy levels from the prior year from 87% to
90%, and (iii) enabled Kimco to realize continued growth in its average
annualized base rent per square foot, capitalizing on its below market-rate
rents.
Further, consideration was given to management's ability to continue its
strengthening of Kimco's consolidated balance sheet through (i) completing
Kimco's sixth primary offering of its Common Stock which has added approximately
$134 million to stockholders' equity and provided capital for property
acquisitions and redevelopment projects underway in the portfolio, and, (ii)
effectively utilizing its $150 million medium-term notes (MTN) program to issue
$100 million in cost-effective unsecured debt financing while continuing, in
management's opinion, to improve pricing thresholds for the real estate
industry. As a consequence of these transactions, Kimco continues to maintain a
strong, prudent capital structure as evidenced by the percentage of its total
debt to total market capitalization of 24% at December 31, 1997.
The increases in FFO and FFO per share, strong cash flow performance, and
continued strengthening of Kimco's capital structure were significant factors in
positioning Kimco for further growth. As a result of its 1997 performance, the
Board of Directors of Kimco authorized an increase in dividends on Kimco Common
Stock by 11.6% to $1.92 per share of Kimco Common Stock for 1998.
1997 Incentive Compensation. In establishing 1997 incentive compensation
(that is, the cash bonuses and stock option grants as set forth in the
accompanying Summary Compensation and Option Grants in Last Fiscal Year tables)
for Kimco's Named Executive Officers, the Committee concluded that each such
officer had individually made a very substantial contribution toward achieving
the aforementioned performance levels. The Committee did not specifically relate
any measure of performance or any accomplishment to the incentives awarded, nor
did the Committee assign relative weight to any specific performance factor.
Rather, the Committee
107
<PAGE>
members made the subjective determination that the incentives awarded were
appropriate in view of previously awarded incentives and their qualitative
assessment that 1997 represented a year of significant achievement for Kimco
that was, in large part, attributable to the talents and efforts of its
executive officers.
The annual bonus awarded for 1997 to Mr. Cooper, Chairman of the Board of
Directors and Chief Executive Officer, as set forth in the accompanying Summary
Compensation Table, was determined by the members of the Board, other than Mr.
Cooper, after evaluating generally Kimco's achievements for the year and
specifically Mr. Cooper's contributions towards realizing such performance
levels. The Board concluded that Mr. Cooper's leadership, vision and decision
making contributed significantly to these accomplishments and warranted the
bonus awarded to Mr. Cooper.
Martin S. Kimmel
Milton Cooper
As to that portion of the report which pertains to Mr. Cooper's
compensation:
Martin S. Kimmel
Richard G. Dooley
Michael J. Flynn
Joe Grills
Frank Lourenso
108
<PAGE>
PERFORMANCE GRAPH
The following stock price performance graph compares Kimco's performance to
the S&P 500 and the index of equity REITs prepared by NAREIT. Equity REITs are
defined as those which derive more than 75% of their income from equity
investments in real estate assets. The NAREIT equity index includes all tax
qualified REITs listed on the NYSE, American Stock Exchange or the NASDAQ
National Market System. Stock price performance, presented quarterly for the
five years ended December 31, 1997, is not necessarily indicative of future
results. All stock price performance assures the reinvestment of dividends.
Dates Kimco NAREIT S&P 500
----- ----- ------ -------
1/1/93 100.00 100.00 100.00
3/3/93 111.65 121.64 104.28
6/30/93 113.62 118.50 104.82
9/30/93 124.32 129.19 107.50
12/31/93 120.10 119.65 109.99
3/31/94 123.88 123.73 105.79
6/30/94 125.58 126.01 106.23
9/30/94 128.59 123.43 111.46
12/30/94 136.22 123.45 111.43
3/31/95 140.09 123.28 122.28
6/30/95 132.84 130.49 133.88
9/29/95 149.74 136.63 144.52
12/29/95 155.60 142.30 153.13
3/29/96 156.43 145.53 161.35
6/28/96 166.09 152.00 168.60
9/30/96 177.45 161.95 173.81
12/31/96 210.76 192.48 188.29
3/31/97 198.91 193.82 193.34
6/30/97 197.01 203.46 227.10
9/30/97 218.89 227.50 244.11
12/31/97 224.39 231.47 251.13
109
<PAGE>
STOCK OPTION PLAN
Description of Plan. Kimco maintains its incentive and non-qualified Stock
Option Plan (the 'Kimco Stock Option Plan') to further the growth and financial
success of Kimco by attracting and retaining Kimco's directors, executive
officers and other key employees. The Kimco Stock Option Plan allows for the
grant of 'incentive' and 'non-qualified' options (within the meaning of the
Code) that vest over time and are exercisable at the 'fair market value' of the
Kimco Common Stock at the date of grant.
The Executive Compensation Committee has the authority under the Kimco
Stock Option Plan to determine the terms of options granted under the Kimco
Stock Option Plan, including, among other things, the individuals (who may be
employees or directors of Kimco or any of its subsidiaries) who shall receive
options, the times when they shall receive the options, whether an incentive
stock option and/or non-qualified option shall be granted, the number of shares
to be subject to each option and the date or dates each option shall become
exercisable. The Executive Compensation Committee also has the authority to
grant options upon the condition that the employee agrees to cancel all or a
part of a previously granted option and to amend or accelerate the vesting of
previously granted options. No member of the Executive Compensation Committee is
eligible to participate in the Kimco Stock Option Plan.
The exercise price and term of each option are fixed by the Executive
Compensation Committee, provided, however, that the exercise price must be at
least equal to the fair market value of the stock on the date of grant and the
term cannot exceed 10 years; and further provided that in the case of an
incentive stock option granted to an individual who owns (or is deemed to own)
at least 10% of the total combined voting power of all classes of stock of
Kimco, a subsidiary or a parent (within the meaning of Section 424 of the Code),
the exercise price must be at least 110% of the fair market value on the date of
grant and the term cannot exceed five years. Incentive stock options may be
granted only within 10 years from the date of adoption of the Kimco Stock Option
Plan. The aggregate fair market value (determined at the time the option is
granted) of shares with respect to which incentive stock options may be granted
under the Kimco Stock Option Plan, or any other plan of Kimco or any parent or
subsidiary, which stock options are exercisable for the first time during any
calendar year, may not exceed $100,000. There is no limit on the number of
non-qualified options that may be granted to any one individual provided that
the grant of the options may not cause Kimco to fail to qualify as a REIT for
Federal income tax purposes. An optionee may, with the consent of the Executive
Compensation Committee, elect to pay for the shares to be received upon exercise
of his options in cash, shares of Common Stock of Kimco or any combination
thereof.
Option Grants. A maximum of 3,000,000 shares of Kimco Common Stock have
been reserved for issuance under the Kimco Stock Option Plan. Options to acquire
470,700, 315,500 and 423,540 shares were granted during 1997, 1996 and 1995 at
weighted average exercise prices of $31.72, $28.32 and $24.96 per share,
respectively. A total of 1,895,096 options exercisable at a weighted average
exercise price of $25.37 per share were outstanding at December 31, 1997, and as
of such date 329,673 shares were available for future grant under the Stock
Option Plan.
401(K) PLAN
Kimco maintains a 401(k) retirement plan covering substantially all
officers and employees of Kimco. The 401(k) plan permits participants to defer
up to a maximum of 10% of their eligible compensation, which deferrals generally
are matched concurrently by Kimco up to a maximum of 5% of the employee's
eligible compensation. Participants in the 401(k) Plan are not subject to
Federal and state income tax on salary deferral contributions or Kimco
contributions or on the earnings thereon until such amounts are withdrawn from
the 401(k) Plan. Salary reduction contributions are treated as wages subject to
FICA tax. Withdrawals from the plan may only be made upon termination of
employment, or in connection with certain provisions of the 401(k) Plan that
permit hardship withdrawals.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Members of Kimco's management hold investments in certain real estate joint
ventures or limited partnerships to which Kimco is a party. Such investments
predate Kimco's IPO and, in each case, Kimco controls or directs the management
of the joint venture or limited partnership. Any material future transactions
involving
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these joint ventures or partnerships require the approval of a majority of
disinterested directors of Kimco. See '--Compensation Committee Interlocks and
Insider Participation.'
Messrs. Kimmel and Cooper, Directors of Kimco, are stockholders of KC
Holdings. See '--Compensation Committee Interlocks and Insider Participation.'
Mr. Frank Lourenso, a Director of Kimco, is also an Executive Vice
President of Chase Bank. Kimco maintains its principal banking relationship with
Chase Bank. See '--Compensation Committee Interlocks and Insider Participation.'
Mr. Paul Dooley, Manager of Real Estate Tax Administration and Insurance
for Kimco, is the son of Mr. Richard G. Dooley, a director of Kimco. Mr. Paul
Dooley was paid total cash compensation of $105,761 in salary in 1997 as an
employee of Kimco. In addition, he was granted 5,000 options in 1997 pursuant to
the Kimco Stock Option Plan.
Indebtedness of Management. The following table sets forth information
with respect to indebtedness of Directors and executive officers to Kimco during
1997:
<TABLE>
<CAPTION>
Largest
Aggregate Indebtedness
Outstanding Amount Interest
During 1997 Purpose of Outstanding Rate
Name and Principal Position ($) Indebtedness ($) (%)
- ------------------------------------------------- ---------------------- --------------- ----------- --------
<S> <C> <C> <C> <C>
Michael J. Flynn................................. 496,750(2) Stock purchase 496,750 6.0
Vice Chairman of the Board of Directors.
President and Chief Operating Officer
since January 1997
Alex Weiss....................................... 225,938(1) Stock purchase 219,280 6.0
Vice President - Management
Information Systems
</TABLE>
- ------------------
(1) Loan extended during 1992 to supplement available margin loans and partially
fund the purchase of 60,000 shares of the Kimco Common Stock by Mr. Weiss.
The stock purchase loan is collateralized by the shares of Kimco Common
Stock acquired and is scheduled to be repaid over a term of eight years.
(2) Loan extended to Mr. Flynn during 1996 to fund the purchase of 10,000
outstanding shares of Kimco Common Stock and in 1997 to fund amounts
associated with a previously granted restricted stock award. This stock
purchase loan is collateralized by the shares of Kimco Common Stock acquired
and is repayable, commencing in 1999, over an approximate term of eight
years.
Indebtedness for Affiliate. During 1997, Kimco loaned to its preferred
stock affiliate, KRS, an aggregate amount of $12,000,000 evidenced by a series
of notes due in the year 2000 at a rate of interest of 10% per annum. Kimco
believes that the terms of such loans are no less favorable than could have been
obtained in an arm's length transaction with an unrelated third party.
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P. was engaged to perform the annual audit of the
books of account of Kimco for the calendar year ended December 31, 1997. There
are no affiliations between Kimco and Coopers & Lybrand L.L.P., its partners,
associates or employees, other than as pertain to its engagement as independent
auditors for Kimco in previous years. Representatives of Coopers & Lybrand
L.L.P. are expected to be present at the Kimco Annual Meeting and will be given
the opportunity to make a statement if they so desire and to respond to
appropriate questions.
The Audit Committee of the Kimco Board of Directors annually subsets its
recommendation with respect to the engagement of independent public accountants
at the meeting of the full Kimco Board of Directors which takes place each year
during Kimco's third fiscal quarter. Coopers & Lybrand L.L.P. has been Kimco's
independent public accountants since 1986. The Audit Committee of the Board of
Directors will review the appointment of Coopers & Lybrand L.L.P. for 1998 later
this year.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Kimco's officers and directors,
and persons who own more than ten percent of a registered class of Kimco's
equity securities, to file reports (Forms 3, 4 and 5) of the ownership and
changes in the ownership of such equity securities with the Commission and the
New York Stock Exchange. Officers, directors and beneficial owners of more than
ten percent of Kimco's stock are required by Commission regulation to furnish
Kimco with copies of all such forms which they file.
Based solely on Kimco's review of the copies of Forms 3, 4 and 5 and
amendments thereto received by it for the year ended December 31, 1997, or
written representations from certain reporting persons that no such forms were
required to be filed by those persons, Kimco believes that during the year ended
December 31, 1997, all filing requirements were complied with by its officers,
directors, beneficial owners of more than ten percent of Kimco's stock and other
persons subject to Section 16 of the Exchange Act.
PROPOSAL TO APPROVE KIMCO 1998 EQUITY PARTICIPATION PLAN
KIMCO 1998 EQUITY PARTICIPATION PLAN
Prior to the Kimco Annual Meeting, the Kimco Board of Directors will adopt
and approve the Kimco 1998 Equity Participation Plan and reserve 3,000,000
shares of Kimco Common Stock for stock options ('Options') and deferred stock
('Deferred Stock') awards (collectively, 'Awards') to employees of Kimco and its
subsidiaries, employees of KRS and other eligible participants after the Merger.
At the Kimco Annual Meeting, stockholders, of Kimco will be asked to approve a
proposal adopting the Kimco 1998 Equity Participation Plan. The principal
purposes of the Kimco 1998 Equity Participation Plan will be: (i) to provide
additional incentives for directors, officers, employees and consultants of
Kimco and its subsidiaries to further the growth, development and financial
success of Kimco by personally benefitting through the ownership of Company
stock and/or rights which recognize such growth, development and financial
success and (ii) to enable Kimco to obtain and retain the services of directors,
employees and consultants considered essential to the long range success of the
Company. Under the terms of the Kimco 1998 Equity Participation Plan, Options
may be granted to key employees and consultants of Kimco and its subsidiaries.
In addition, the Kimco 1998 Equity Participation Plan provides for the automatic
grant of certain Options to each of Kimco's non-employee directors (the
'Independent Directors') and permits such Independent Directors to elect to
receive Deferred Stock awards in lieu of directors' fees.
Under the Kimco 1998 Equity Participation Plan, not more than 3,000,000
shares of Kimco Common Stock (or the equivalent in other equity securities) will
be authorized for issuance upon exercise of Options or upon the award of
Deferred Stock. Such Options will be in addition to outstanding options to
purchase Kimco Common Stock under the Kimco Stock Option Plan. Furthermore, the
maximum number of shares which may be subject to Awards granted under the Kimco
1998 Equity Participation Plan to any individual in any calendar year will not
exceed 500,000 shares.
The principal features of the Kimco 1998 Equity Participation Plan are
summarized below, but the summary is qualified in its entirety by reference to
the Kimco 1998 Equity Participation Plan which is attached as Annex D to this
Joint Proxy Statement/Prospectus.
ADMINISTRATION
The Executive Compensation Committee of the Kimco Board of Directors (the
'Committee') will administer the Kimco 1998 Equity Participation Plan with
respect to grants to officers, employees or consultants of Kimco and the full
Board will administer the Kimco 1998 Equity Participation Plan with respect to
grants to Independent Directors. The Committee will consist of at least two
members of the Board, each of whom is a 'non-employee director' for purposes of
Rule 16b-3 under the Exchange Act ('Rule 16b-3') and an 'outside director' for
the purposes of Section 162(m) of the Code ('Section 162(m)'). Subject to the
terms and conditions of the Kimco 1998 Equity Participation Plan, the Committee
has the authority to select the persons to whom Options are to be made, to
determine the number of shares to be subject thereto and the terms and
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conditions thereof, and to make all other determinations and to take all other
actions necessary or advisable for the administration of the Kimco 1998 Equity
Participation Plan. Similarly, the Kimco Board of Directors has discretion to
determine the terms and conditions of grants of Awards to Independent Directors
and to interpret and administer the Kimco 1998 Equity Participation Plan with
respect to such grants to Independent Directors.
ELIGIBILITY
Under the terms of the Kimco 1998 Equity Participation Plan, Options may be
granted to individuals who are then officers or other employees of Kimco or any
of its present or future subsidiaries or to employees of KRS. Such Options also
may be granted to consultants of Kimco selected by the Committee for
participation in the Kimco 1998 Equity Participation Plan. In addition, the
Kimco 1998 Equity Participation Plan provides that, subject to certain
conditions contained therein, Independent Directors of Kimco may be granted
certain NQSOs (as defined herein) and may be granted Deferred Stock in lieu of
directors' fees by the Kimco Board of Directors.
AWARDS UNDER THE KIMCO 1998 EQUITY PARTICIPATION PLAN
The Kimco 1998 Equity Participation Plan provides that the Committee or the
Board, as applicable, may grant or issue Options or Deferred Stock, or a
combination thereof. Such grants are discretionary and are not determinable in
advance. Each Award will be set forth in a separate agreement or certificate and
will indicate the type, terms and conditions of the Award.
Non-qualified Stock Options. Non-qualified Stock Options ('NQSOs') granted
to employees or consultants will provide for the right to purchase Kimco Common
Stock at a price specified by the Committee which may not be less than fair
market value on the date of grant and usually will become exercisable, in the
discretion of the Committee in one or more installments after the grant date,
subject to the participant's continued provision of services to Kimco and/or
subject to the satisfaction of individual or Kimco performance targets
established by the Committee. NQSOs may be granted for any term specified by the
Committee, not to exceed ten years and one day from the date of grant.
Incentive Stock Options. Incentive Stock Options ('ISOs') will be designed
to comply with the provisions of the Code and will be subject to certain
restrictions contained in the Code. Among such restrictions, ISOs must have an
exercise price not less than the fair market value of a share of Kimco Common
Stock on the date of grant, may only be granted to employees of Kimco or any
subsidiary of Kimco, must expire within a specified period of time following the
optionee's termination of employment, and must be exercised within the ten years
after the date of grant; but, subject to the consent of the optionee, may be
subsequently modified to disqualify them from treatment as ISOs. In the case of
an ISO granted to an individual who owns (or is deemed to own) at least 10% of
the total combined voting power of all classes of stock of Kimco, the Kimco 1998
Equity Participation Plan provides that the exercise price must be at least 110%
of the fair market value of a share of Kimco Common Stock on the date of grant
and the ISO must expire upon the fifth anniversary of the date of its grant.
Deferred Stock. The Kimco 1998 Equity Participation Plan will authorize
the Kimco Board of Directors to, and it is expected that the Kimco Board of
Directors will, adopt procedures pursuant to which Independent Directors may
elect to receive a portion of their directors' fees in the form of Deferred
Stock.
SECURITIES LAWS AND FEDERAL INCOME TAXES
Securities Laws. The Kimco 1998 Equity Participation Plan is intended to
conform to the extent necessary with all provisions of the Securities Act and
the Exchange Act and any and all regulations and rules promulgated by the
Commission thereunder, including without limitation Rule 16b-3. The Kimco 1998
Equity Participation Plan will be administered, and Awards will be granted and
may be exercised, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, the Kimco 1998 Equity
Participation Plan and Awards granted thereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.
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General Federal Tax Consequences. Under current federal laws, in general,
recipients of awards and grants of NQSOs and Deferred Stock, under the Kimco
1998 Equity Participation Plan are taxable under Section 61 or 83 of the Code
upon their receipt of Kimco Common Stock or cash with respect to such awards or
grants and, subject to Section 162(m), Kimco will be entitled to an income tax
deduction with respect to the amounts taxable to such recipients. Under Sections
421 and 422 of the Code, recipients of ISOs are generally not taxable on their
receipt of Kimco Common Stock upon their exercises of ISOs if the ISOs and
Options are held for certain minimum holding periods and, in such event, Kimco
is not entitled to income tax deductions with respect to such exercises.
Participants in the Kimco 1998 Equity Participation Plan will be provided with
detailed information regarding the tax consequences relating to the various
types of awards and grants under the plan.
Section 162(m) Limitation. In general, under Section 162(m), income tax
deductions of publicly-held corporations may be limited to the extent total
compensation (including base salary, annual bonus, stock option exercises,
transfers of property and benefits paid under non-qualified plans) for certain
executive officers exceeds one million dollars (less the amount of any 'excess
parachute payments' as defined in Section 280G of the Code) per officer in any
one year. However, under Section 162(m), the deduction limit does not apply to
certain 'performance-based compensation.'
Under Section 162(m), stock options will satisfy the 'performance-based
compensation' exception if the award of the options are made by a Board of
Directors committee consisting solely of two or more 'outside directors,' the
plan sets the maximum number of shares that can be granted to any person within
a specified period and the compensation is based solely on an increase in the
stock price after the grant date (i.e., the option exercise price is equal to or
greater than the fair market value of the stock subject to the award on the
grant date). The Kimco 1998 Equity Participation Plan provides that the
Committee may grant Options which will qualify as 'performance-based
compensation.'
VOTE REQUIRED
Adoption of the Kimco 1998 Equity Participation Plan requires approval by
the affirmative vote of the holders of a majority of the votes cast at the Kimco
Annual Meeting; provided that the total number of votes cast at the Kimco Annual
Meeting represents over 50% in interest of all Kimco Common Stock entitled to
vote on such proposal. Accordingly, abstentions and broker non-votes will have
the effect of a vote against such proposal unless holders of more than 50% in
interest of all securities entitled to vote on such proposal cast votes, in
which event abstentions will have no effect on the result of such vote.
THE BOARD OF DIRECTORS OF KIMCO RECOMMENDS THAT YOU VOTE FOR APPROVAL OF
THE KIMCO 1998 EQUITY PARTICIPATION PLAN.
ADJOURNMENT PROPOSALS
KIMCO ADJOURNMENT PROPOSAL
At the Kimco Annual Meeting, holders of Kimco Common Stock may be asked to
consider and vote upon the Kimco Adjournment Proposal. The Chairman of the Kimco
Annual Meeting may deem it advisable to adjourn or postpone the Kimco Annual
Meeting in order to allow additional time to solicit proxies and to maximize the
number of Kimco stockholders casting votes with respect to the Kimco Share
Proposal, in which case it is expected that the Kimco Adjournment Proposal will
be submitted to the Kimco stockholders at the Kimco Annual Meeting for approval.
The rules and regulations of the Commission require that, in order for the proxy
holders to exercise discretion as to the adjournment of the Kimco Annual
Meeting, the Board of Directors of Kimco solicit proxies entitling the proxy
holders to vote on the Kimco Adjournment Proposal.
The approval of the Kimco Adjournment Proposal requires the affirmative
vote of the holders of a majority of the votes cast at the Kimco Annual Meeting.
THE BOARD OF DIRECTORS OF KIMCO UNANIMOUSLY RECOMMENDS THAT KIMCO
STOCKHOLDERS VOTE FOR THE KIMCO ADJOURNMENT PROPOSAL.
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PRICE REIT ADJOURNMENT PROPOSAL
At the Price REIT Special Meeting, holders of Price REIT Common Stock may
be asked to consider and vote upon the Price REIT Adjournment Proposal. The
Chairman of the Price REIT Special Meeting may deem it advisable to adjourn or
postpone the Price REIT Special Meeting in order to allow additional time to
solicit proxies and to maximize the number of holders of Price REIT Common Stock
casting votes with respect to the Merger, in which case it is expected that the
Price REIT Adjournment Proposal will be submitted to the Price REIT common
stockholders at the Price REIT Special Meeting for approval. The rules and
regulations of the Commission require that, in order for the proxy holders to
exercise discretion as to the adjournment of the Price REIT Special Meeting, the
Board of Directors of Price REIT solicit proxies entitling the proxy holders to
vote on the Price REIT Adjournment Proposal.
The approval of the Price REIT Adjournment Proposal requires the
affirmative vote of the holders of a majority of the votes cast at the Price
REIT Special Meeting.
THE BOARD OF DIRECTORS OF THE PRICE REIT UNANIMOUSLY RECOMMENDS THAT
HOLDERS OF PRICE REIT COMMON STOCK VOTE FOR THE PRICE REIT ADJOURNMENT PROPOSAL.
OTHER MATTERS
It is not expected that any matters other than those described in this
Joint Proxy Statement/Prospectus will be brought before the Kimco Annual
Meeting. If any other matters are presented, however, it is the intention of the
persons named in the Kimco proxy to vote the proxy in accordance with their best
judgment.
LEGAL MATTERS
The validity of the issuance of the Kimco Common Stock and Kimco Class D
Depositary Shares being offered hereby will be passed upon for Kimco by Brown &
Wood LLP. The Federal income tax consequences in connection with the Merger will
be passed upon by Gibson, Dunn & Crutcher LLP.
EXPERTS
The consolidated balance sheets of Kimco as of December 31, 1997 and 1996
and the consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three year period ended December 31, 1997, and the
Combined Historical Summary of Revenue and Certain Operating Expenses of Certain
Acquired Properties for the year ended December 31, 1997, all incorporated by
reference in this Joint Proxy Statement/Prospectus, have been incorporated
herein in reliance on the reports of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The consolidated financial statements of Price REIT, incorporated by
reference in this Joint Proxy Statement/Prospectus for the year ended December
31, 1997, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
Representatives of Ernst & Young LLP will be present at the Price REIT
Special Meeting and shall have the opportunity to make a statement if they so
desire and respond to appropriate questions.
KIMCO STOCKHOLDER PROPOSALS
Proposals of Kimco stockholders intended to be presented at Kimco's Annual
Meeting of Stockholders to be held in 1999 must be received by Kimco no later
than January 15, 1999. Such proposals must comply with the requirements as to
form and substance established by the Commission for such proposals in order to
be included in the proxy statement.
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LOCATION OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ---------------------------------------------------------------------------------------------------- ----------
<S> <C>
Acquisition Proposal................................................................................ 63
affiliates.......................................................................................... 14
AFFO................................................................................................ 51
Antitrust Division.................................................................................. 56
Assumed Exchange Ratio.............................................................................. 26
Awards.............................................................................................. 112
BankBoston.......................................................................................... 13
Base Amount......................................................................................... 66
Break-Up Expenses................................................................................... 66
Break-Up Fee........................................................................................ 66
Built-in Gain....................................................................................... 70
business combinations............................................................................... 98
Certificate......................................................................................... 11
Chase Bank.......................................................................................... 99
Class D Aggregate Limit............................................................................. 96
closely held........................................................................................ 96
Closing Date........................................................................................ 5
Code................................................................................................ 4
Combined Entity..................................................................................... 2
Commission.......................................................................................... ii
Committee........................................................................................... 112
Conversion Price.................................................................................... 12
dealer property..................................................................................... 70
December 1 Letter................................................................................... 38
Deferred Stock...................................................................................... 112
Deposit Agreement................................................................................... 87
Depositary.......................................................................................... 87
Effective Time...................................................................................... 12
Excess Preferred Stock.............................................................................. 97
Excess Stock........................................................................................ 86
Exchange Act........................................................................................ ii
Exchange Agent...................................................................................... 13
Expected Synergies.................................................................................. 50
Facility............................................................................................ 106
FAD................................................................................................. 44
FFO................................................................................................. 8
FIRPTA.............................................................................................. 75
First Amendment..................................................................................... 41
First Call.......................................................................................... 51
foreclosure property................................................................................ 69
FTC................................................................................................. 56
GLA................................................................................................. 1
Holders............................................................................................. 87
HSR Act............................................................................................. 56
Independent Directors............................................................................... 112
IPO................................................................................................. 95
IRS................................................................................................. 68
ISOs................................................................................................ 113
Jefferies........................................................................................... 11
Jefferies Advisory Fee.............................................................................. 48
Jefferies Opinion................................................................................... 43
Joint Proxy Statement/Prospectus.................................................................... Cover Page
KC Holdings......................................................................................... 106
</TABLE>
116
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ---------------------------------------------------------------------------------------------------- ----------
<S> <C>
Kimco............................................................................................... Cover Page
Kimco 1998 Equity Participation Plan................................................................ Cover Page
Kimco Adjournment Proposal.......................................................................... Cover Page
Kimco Annual Meeting................................................................................ Cover Page
Kimco Average Price................................................................................. 10
Kimco Bylaws........................................................................................ 83
Kimco Charter....................................................................................... 83
Kimco Class A Depositary Shares..................................................................... 93
Kimco Class A Preferred Stock....................................................................... 86
Kimco Class B Depositary Shares..................................................................... 93
Kimco Class B Preferred Stock....................................................................... 86
Kimco Class C Depositary Shares..................................................................... 93
Kimco Class C Preferred Stock....................................................................... 86
Kimco Class D Depositary Shares..................................................................... Cover Page
Kimco Class D Excess Preferred Stock................................................................ 86
Kimco Class D Preferred Stock....................................................................... Cover Page
Kimco Class D Preferred Stock Articles Supplementary................................................ 4
Kimco Class E Depositary Shares..................................................................... 11
Kimco Class E Excess Preferred Stock................................................................ 86
Kimco Class E Preferred Stock....................................................................... 11
Kimco Common Stock.................................................................................. Cover Page
Kimco Comparable Companies.......................................................................... 53
Kimco Dividend Reinvestment Plan.................................................................... 84
Kimco Junior Stock.................................................................................. 90
Kimco Optional Call................................................................................. 92
Kimco Optional Call Period.......................................................................... 92
Kimco Option Shares................................................................................. 23
Kimco Outstanding Depositary Shares................................................................. 93
Kimco Outstanding Preferred Stock................................................................... 93
Kimco Parity Stock.................................................................................. 90
Kimco Preference Shares............................................................................. 86
Kimco Preferred Stock............................................................................... 86
Kimco Record Date................................................................................... 7
Kimco Share Proposal................................................................................ Cover Page
Kimco Special Second Quarter Dividend............................................................... 12
Kimco Stock Option Plan............................................................................. 110
KRS................................................................................................. 71
Lehman Bros......................................................................................... 17
LTM................................................................................................. 47
Maryland Control Share Statute...................................................................... 83
Merger.............................................................................................. Cover Page
Merger Agreement.................................................................................... Cover Page
Merger Consideration................................................................................ Cover Page
Merger Sub.......................................................................................... Cover Page
Merrill Lynch....................................................................................... 12
Merrill Lynch Opinion............................................................................... 50
Metropolitan Life................................................................................... 36
MGCL................................................................................................ 4
Named Executive Officers............................................................................ 103
NAREIT.............................................................................................. 8
Net Offer Value..................................................................................... 51
New Regulations..................................................................................... 76
non-qualified REIT subsidiary....................................................................... 71
Non-U.S. Stockholder................................................................................ 72
Notional Value...................................................................................... 10
</TABLE>
117
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ---------------------------------------------------------------------------------------------------- ----------
<S> <C>
NQSOs............................................................................................... 113
NYSE................................................................................................ Cover Page
Option Consideration................................................................................ 55
Options............................................................................................. 112
Original Merger Agreement........................................................................... 40
Ownership Limit..................................................................................... 4
Partnership......................................................................................... 17
PEI................................................................................................. 38
Pre-Closing Adjustment.............................................................................. 58
Preferred Stock Ownership Limit..................................................................... 96
Price REIT.......................................................................................... Cover Page
Price REIT Adjournment Proposal..................................................................... Cover Page
Price REIT Bylaws................................................................................... 83
Price REIT Charter.................................................................................. 83
Price REIT Common Stock............................................................................. Cover Page
Price REIT Comparable Companies..................................................................... 52
Price REIT Comparables.............................................................................. 52
Price REIT Optional Call............................................................................ 37
Price REIT Optional Call Period..................................................................... 37
Price REIT Preferred Stock.......................................................................... 11
Price REIT Record Date.............................................................................. 7
Price REIT Reinvestment and Purchase Plan........................................................... 84
Price REIT Special Meeting.......................................................................... Cover Page
Price REIT Special Second Quarter Dividend.......................................................... 12
Price REIT Stock Option............................................................................. 55
prohibited transaction.............................................................................. 71
Properties.......................................................................................... 24
Purchase Agreement.................................................................................. 17
Qualifying Income................................................................................... 66
Recognition Period.................................................................................. 70
Registration Statement.............................................................................. ii
REIT................................................................................................ 2
REIT Requirements................................................................................... 66
REIT taxable income................................................................................. 71
Related Party Limit................................................................................. 96
Related Party Tenants............................................................................... 96
reorganization...................................................................................... 63
Ripco............................................................................................... 106
Rule 145............................................................................................ 57
Rule 16b-3.......................................................................................... 112
Run Rate............................................................................................ 47
Second Amendment.................................................................................... 41
Section 162(m)...................................................................................... 112
Section 306 Stock................................................................................... 73
Securities Act...................................................................................... ii
Spin-Off REIT....................................................................................... 5
Spin-Off REIT Options............................................................................... 5
Spin-Off REIT Outstanding Stock..................................................................... 5
Surviving Corporation............................................................................... Cover Page
Total Shopping Center GLA........................................................................... 1
Transaction Value................................................................................... 52
</TABLE>
118
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ---------------------------------------------------------------------------------------------------- ----------
<S> <C>
U.S. Stockholder.................................................................................... 72
UBTI................................................................................................ 75
USRPIs.............................................................................................. 75
Venture............................................................................................. 3
Venture Properties Acquisition...................................................................... 35
</TABLE>
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ANNEX A
MERGER AGREEMENT, AS AMENDED
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AGREEMENT AND PLAN OF MERGER
AMONG
KIMCO REALTY CORPORATION,
REIT SUB, INC.
AND
THE PRICE REIT, INC.
DATED AS OF JANUARY 13, 1998
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TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
<S> <C>
THE MERGER................................................................................................ A-1
1.1. The Merger....................................................................................... A-1
1.2. The Closing...................................................................................... A-1
1.3. Effective Time................................................................................... A-1
ARTICLE 2
CHARTER AND BYLAWS OF THE SURVIVING CORPORATION........................................................... A-2
2.1. Charter.......................................................................................... A-2
2.2. Bylaws........................................................................................... A-2
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION....................................................... A-2
3.1. Directors........................................................................................ A-2
3.2. Officers......................................................................................... A-2
ARTICLE 4
PRICE REIT STOCK.......................................................................................... A-2
4.1. Conversion of the Price REIT Stock............................................................... A-2
4.2. Exchange of Certificates Representing Price REIT Common Stock.................................... A-3
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PRICE REIT.............................................................. A-5
5.1. Existence; Good Standing; Authority; Compliance With Law......................................... A-5
5.2. Authorization, Validity and Effect of Agreements................................................. A-6
5.3. Capitalization................................................................................... A-6
5.4. Subsidiaries..................................................................................... A-6
5.5. Other Interests.................................................................................. A-6
5.6. No Violation..................................................................................... A-6
5.7. SEC Documents.................................................................................... A-7
5.8. Litigation....................................................................................... A-7
5.9. Absence of Certain Changes....................................................................... A-7
5.10. Taxes............................................................................................ A-8
5.11. Books and Records................................................................................ A-8
5.12. Properties....................................................................................... A-8
5.13. Environmental Matters............................................................................ A-9
5.14. Employee Benefit Plans........................................................................... A-10
5.15. Labor Matters.................................................................................... A-10
5.16. No Brokers....................................................................................... A-10
5.17. Opinion of Financial Advisor..................................................................... A-11
5.18. Kimco Stock Ownership............................................................................ A-11
5.19. Related Party Transactions....................................................................... A-11
5.20. Contracts and Commitments........................................................................ A-11
5.21. Leases........................................................................................... A-11
5.22. Investment Company Act of 1940................................................................... A-11
5.23. Development Rights............................................................................... A-11
5.24. Certain Payments Resulting From Transactions..................................................... A-12
5.25. State Takeover Statutes.......................................................................... A-12
</TABLE>
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF KIMCO AND MERGER SUB.................................................... A-12
6.1. Existence; Good Standing; Authority; Compliance With Law......................................... A-12
6.2. Authorization, Validity and Effect of Agreements................................................. A-13
6.3. Capitalization................................................................................... A-13
6.4. Subsidiaries..................................................................................... A-13
6.5. Other Interests.................................................................................. A-13
6.6. No Violation..................................................................................... A-13
6.7. SEC Documents.................................................................................... A-14
6.8. Litigation....................................................................................... A-14
6.9. Absence of Certain Changes....................................................................... A-14
6.10. Taxes............................................................................................ A-15
6.11. Books and Records................................................................................ A-15
6.12. Properties....................................................................................... A-15
6.13. Environmental Matters............................................................................ A-16
6.14. Employee Benefit Plans........................................................................... A-16
6.15. Labor Matters.................................................................................... A-17
6.16. No Brokers....................................................................................... A-17
6.17. Opinion of Financial Advisor..................................................................... A-17
6.18. Price REIT Stock Ownership....................................................................... A-17
6.19. Related Party Transactions....................................................................... A-17
6.20. Contracts and Commitments........................................................................ A-17
6.21. Leases........................................................................................... A-18
6.22. Investment Company Act of 1940................................................................... A-18
ARTICLE 7
COVENANTS................................................................................................. A-18
7.1. No Solicitation by Price REIT.................................................................... A-18
7.2. No Solicitation by Kimco......................................................................... A-19
7.3. Conduct of Businesses............................................................................ A-20
7.4. Meetings of Stockholders......................................................................... A-23
7.5. Filings; Other Action............................................................................ A-24
7.6. Inspection of Records............................................................................ A-24
7.7. Publicity........................................................................................ A-24
7.8. Registration Statement........................................................................... A-24
7.9. Listing Application.............................................................................. A-25
7.10. Assumption of Debt and Leases.................................................................... A-25
7.11. Affiliates of Price REIT......................................................................... A-25
7.12. Expenses......................................................................................... A-25
7.13. Indemnification.................................................................................. A-25
7.14. Employees........................................................................................ A-26
7.15. Reorganization................................................................................... A-27
7.16. Advice of Changes................................................................................ A-27
7.17. Disqualifying Event.............................................................................. A-27
7.18. Governance....................................................................................... A-27
ARTICLE 8
CONDITIONS................................................................................................ A-28
8.1. Conditions to Each Party's Obligation to Effect the Merger....................................... A-28
8.2. Conditions to Obligations of Price REIT to Effect the Merger..................................... A-28
8.3. Conditions to Obligation of Kimco and Merger Sub to Effect the Merger............................ A-29
</TABLE>
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<TABLE>
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ARTICLE 9
TERMINATION............................................................................................... A-30
9.1. Termination by Mutual Consent.................................................................... A-30
9.2. Termination by Either Kimco or Price REIT........................................................ A-30
9.3. Termination by Price REIT........................................................................ A-30
9.4. Termination by Kimco............................................................................. A-30
9.5. Certain Fees and Expenses Upon Effect of Termination and Abandonment............................. A-30
9.6. Extension; Waiver................................................................................ A-32
ARTICLE 10
GENERAL PROVISIONS........................................................................................ A-32
10.1. Nonsurvival of Representations, Warranties and Agreements........................................ A-32
10.2. Notices.......................................................................................... A-33
10.3. Assignment; Binding Effect; Benefit.............................................................. A-33
10.4. Entire Agreement................................................................................. A-33
10.5. Confidentiality.................................................................................. A-34
10.6. Amendment........................................................................................ A-34
10.7. Governing Law.................................................................................... A-34
10.8. Counterparts..................................................................................... A-35
10.9. Headings......................................................................................... A-35
10.10. Interpretation................................................................................... A-35
10.11. Extension; Waiver................................................................................ A-35
10.12. Incorporation.................................................................................... A-35
10.13. Severability..................................................................................... A-35
10.14. Enforcement of Agreement......................................................................... A-35
10.15. Definitions...................................................................................... A-35
SCHEDULE 6.2.............................................................................................. S-1
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this 'Agreement'), dated as of January 13,
1998, among Kimco Realty Corporation, a Maryland corporation ('Kimco'), REIT
Sub, Inc., a Maryland corporation and a wholly owned subsidiary of Kimco
('Merger Sub'), and The Price REIT, Inc., a Maryland corporation ('Price REIT').
RECITALS
A. The Board of Directors of Kimco and the Board of Directors of Price
REIT have both determined that a business combination between Kimco and Price
REIT is in the best interests of their respective companies and stockholders and
presents an opportunity for their respective companies to achieve long-term
strategic and financial benefits, and accordingly have agreed to effect the
merger provided for herein upon the terms and subject to the conditions set
forth herein.
B. For federal income tax purposes, it is intended that the merger provided
for herein shall qualify as a reorganization within the meaning of Section
368(a)(1) of the Internal Revenue Code of 1986, as amended (the 'Code'), and for
financial accounting purposes shall be accounted for as a 'purchase.'
C. Each of Kimco and Price REIT has received a fairness opinion relating
to the transactions contemplated hereby as more fully described herein.
D. Kimco, Merger Sub and Price REIT desire to make certain
representations, warranties and agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3), Price REIT shall be merged
with and into Merger Sub in accordance with this Agreement and the separate
corporate existence of Price REIT shall thereupon cease (the 'Merger'). Merger
Sub shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the 'Surviving Corporation'). The Merger shall have the effects
specified in Section 3-114 of the Maryland General Corporation Law (the 'MGCL').
1.2. The Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the 'Closing') shall take place (a) at the offices of
Brown & Wood LLP, One World Trade Center, New York, New York, at 9:00 a.m.,
local time, on the third business day immediately following the day on which the
last to be fulfilled or waived of the conditions set forth in Article 8 shall be
fulfilled or waived in accordance herewith or (b) at such other time, date or
place as Kimco and Price REIT may agree. The date on which the Closing occurs is
hereinafter referred to as the 'Closing Date.' As used herein, 'business day'
shall mean a day on which banks are not required or authorized to close in The
City of New York.
1.3. Effective Time. If all the conditions to the Merger set forth in
Article 8 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 9, the parties
hereto shall cause Articles of Merger meeting the requirements of the MGCL to be
properly executed, verified and delivered for filing in accordance with the MGCL
on the Closing Date. The Merger shall become effective upon the later of the
acceptance for record of the Articles of Merger by the State Department of
Assessments and Taxation of Maryland (the 'SDAT') in accordance with the MGCL or
at such later time which the parties hereto shall have agreed upon and
designated in the Articles of Merger in accordance with the MGCL as the
effective time of the Merger (the 'Effective Time').
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ARTICLE 2
CHARTER AND BYLAWS OF THE SURVIVING CORPORATION
2.1. Charter. The Charter of Merger Sub in effect immediately prior to
the Effective Time shall be the Charter of the Surviving Corporation, until duly
amended in accordance with applicable law; provided that, as of the Effective
Time, Article Second of such Charter shall be amended to read in its entirety as
follows: 'The name of the corporation (which is hereinafter called the
'Corporation') is: The Price REIT, Inc.'
2.2. Bylaws. The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1. Directors. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time.
3.2. Officers. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time.
ARTICLE 4
PRICE REIT STOCK
4.1. Conversion of the Price REIT Stock.
(a) At the Effective Time, each share of the Common Stock, par value $.01
per share, of Merger Sub outstanding immediately prior to the Effective Time
shall remain outstanding and shall represent one share of Common Stock, par
value $.01 per share, of the Surviving Corporation.
(b) At the Effective Time, each share of common stock, par value $.01 per
share, of Price REIT (the 'Price REIT Common Stock'), issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive, upon surrender of the certificate formerly representing such
share (a 'Certificate') in accordance with Section 4.2: (A) in the event that
the sum of (i) the Kimco Average Closing Price (as hereinafter defined) and (ii)
$10.00 (the sum being referred to herein as the 'Notional Value') is less than
or equal to $45.00: one share of Kimco Common Stock, par value $.01 per share
(the 'Kimco Common Stock'), plus a number of depositary shares (the 'Kimco
Depositary Shares'), each of which represents an interest in one-tenth of a
share of Kimco Class D Cumulative Convertible Preferred Stock, par value $1.00
per share, having the terms and conditions specified on Exhibit A hereto (the
'Kimco Class D Preferred Stock'), equal to a fraction, the numerator of which is
$45.00 less the Kimco Average Closing Price and the denominator of which is
$25.00; provided, however, that if the Kimco Average Closing Price is less than
$33.75, each share of Price REIT Common Stock shall be converted into the right
to receive 0.45 Kimco Depositary Shares plus a number of shares of Kimco Common
Stock equal to a fraction, the numerator of which is $33.75 and the denominator
of which is the Kimco Average Closing Price; and (B) if the Notional Value is
greater than $45.00: one share of Kimco Common Stock plus a number of Kimco
Depositary Shares equal to 0.4 minus a fraction, the numerator of which is the
Notional Value less $45.00 and the denominator of which is $50.00; provided,
however, that in no event shall the aggregate fractional number of Kimco
Depositary Shares issued in respect of one share of Price REIT Common Stock be
less than 0.36. As used herein, the 'Kimco Average Closing Price' shall be the
average of the closing sales prices of the Kimco Common Stock on the New York
Stock Exchange (the 'NYSE') as reported in The Wall Street Journal, or, if not
reported thereby, by another authoritative source, during the twenty (20)
consecutive trading days ending on and including the third trading day
immediately preceding the date of the special meeting of Kimco's stockholders
contemplated by Section 7.4 hereof. The Kimco Common Stock and the Kimco
Depositary Shares
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to be received as consideration pursuant to the Merger by each holder of Price
REIT Common Stock are referred to herein as the 'Merger Consideration.'
(c) As a result of the Merger and without any action on the part of the
holder thereof, all shares of Price REIT Common Stock shall cease to be
outstanding and shall be cancelled and retired and shall cease to exist, and
each holder of a certificate (a 'Certificate') representing any shares of Price
REIT Common Stock shall thereafter cease to have any rights with respect to such
shares of Price REIT Common Stock, except the right to receive, without
interest, the Merger Consideration and cash in lieu of fractional shares of
Kimco Common Stock and/or Kimco Depositary Shares in accordance with Sections
4.1(b) and 4.2(e) hereto upon the surrender of such Certificate.
(d) Each share of Price REIT Common Stock issued and held in Price REIT's
treasury at the Effective Time, if any, shall, by virtue of the Merger, cease to
be outstanding and shall be cancelled and retired and shall cease to exist
without payment of any consideration therefor.
(e) Each option (a 'Price REIT Stock Option') to purchase shares of Price
REIT Common Stock granted under the stock option agreements and under the Price
REIT 1993 Stock Option Plan or the Price REIT 1996 Directors' Stock Option Plan
(the 'Price REIT Stock Option Plans') as set forth on Schedule 4.1(e) of the
Price REIT Disclosure Letter (as hereinafter defined), which is outstanding
immediately prior to the Effective Time, whether or not then exercisable or
vested, shall be satisfied and cancelled, at the Effective Time, and, in the
case of each such satisfied and cancelled Price REIT Stock Option, each holder
thereof shall be entitled to receive from Kimco and Kimco shall deliver or shall
cause to be delivered to such holder, as soon as practicable but in no event
later than five business days following the Effective Time, a number of shares
of the Kimco Common Stock and Kimco Depositary Shares in the same proportion as
such stock is issued as Merger Consideration pursuant to Section 4.1(b) (the
'Option Consideration') (and cash in lieu of fractional shares of Option
Consideration) having a value equal to (A) the product of (i) the amount by
which the value of the Merger Consideration payable per share of Price REIT
Common Stock pursuant to Section 4.1(b), assuming such Price REIT Stock Option
had been exercised immediately prior to the Effective Time, exceeds the per
share exercise price of such Price REIT Stock Option and (ii) the number of
shares subject to such Price REIT Stock Option (the product of (i) and (ii)
being the 'Option Spread'), minus (B) the product of (i) the Option Spread and
(ii) the sum of the Federal Withholding Rate and the State Withholding Rate set
forth opposite the name of such holder on Schedule 4.1(e) of the Price REIT
Disclosure Letter (which sum will be provided to Kimco at least ten (10)
business days prior to the Closing Date). The parties understand, acknowledge
and agree that the reduction in the Option Consideration, described in Clause
(B) of the previous sentence, is in full satisfaction of all federal and state
employment and withholding tax requirements applicable to such holder, and that
there shall be no reduction of any other compensation payable to such holder as
a result of the cancellation of such Price REIT Stock Option. For each holder,
Kimco shall remit to the Internal Revenue Service, in the manner required by the
applicable withholding requirements, the product of (x) the Option Spread for
such holder and (y) the percentage set forth under 'Federal Withholding Rate'
opposite the name of such holder on Schedule 4.1(e) of the Price REIT Disclosure
Letter. For each holder, Kimco shall remit to the California Franchise Tax Board
(or such other appropriate state authority) in the manner required by the
applicable withholding requirements, the product of (x) the Option Spread for
such holder and (y) the percentage set forth under 'State Withholding Rate'
opposite the name of such holder on Schedule 4.1(e) of the Price REIT Disclosure
Letter.
(f) Prior to the Effective Time, Price REIT shall use its best efforts to
(i) obtain any requisite consents or releases from holders of Price REIT Stock
Options and (ii) make any amendments to the terms of the Price REIT Stock Option
Plans or any award granted thereunder that are necessary to give effect to the
transactions contemplated by Section 4.1(e). Notwithstanding any other provision
of Section 4.1(e), delivery of the Option Consideration may be withheld in
respect of any option or award contemplated by Section 4.1(e) until any
necessary consents are obtained.
4.2. Exchange of Certificates Representing Price REIT Common Stock.
(a) As of the Effective Time, Kimco shall deposit, or shall cause to be
deposited, with an exchange agent selected by Kimco, which shall be Kimco's
transfer agent or such other party reasonably satisfactory to Price REIT (the
'Exchange Agent'), for the benefit of the holders of shares of Price REIT Common
Stock, for exchange in accordance with this Article 4, certificates representing
the Merger Consideration and cash in lieu of
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fractional shares of the Merger Consideration to be issued pursuant to Section
4.1 and paid pursuant to this Section 4.2 in exchange for outstanding shares of
Price Common Stock.
(b) Promptly after the Effective Time, Kimco shall cause the Exchange
Agent to mail to each holder of record of a Certificate or Certificates (i) a
letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Kimco may reasonably specify and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing the Merger Consideration and cash in lieu of fractional shares of
the Merger Consideration. Upon surrender of a Certificate for cancellation to
the Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor (x) certificates
representing the number of whole shares of the Merger Consideration and (y) a
check representing the amount of cash in lieu of fractional shares of the Merger
Consideration, if any, and unpaid dividends and distributions, if any, which
such holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article 4, after giving effect to any
required withholding tax, and the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or accrued on the cash in lieu of fractional
shares of the Merger Consideration and unpaid dividends and distributions, if
any, payable to holders of Certificates. In the event of a transfer of ownership
of Price REIT Common Stock which is not registered in the transfer records of
Price REIT, certificates representing the proper number of shares of the Merger
Consideration, together with a check for the cash to be paid in lieu of
fractional shares of the Merger Consideration, may be issued to such a
transferee if the Certificate representing shares of such Price REIT Common
Stock is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no dividends
or other distributions on the Merger Consideration shall be paid with respect to
any shares of Price REIT Common Stock represented by a Certificate until such
Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid to the holder of the certificates representing whole shares of the
Merger Consideration issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole shares of the Merger Consideration and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of the Merger Consideration,
less the amount of any withholding taxes which may be required thereon.
(d) At and after the Effective Time, there shall be no transfers on the
stock transfer books of Price REIT of the shares of Price REIT Common Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for certificates for whole shares of the Merger
Consideration and cash in lieu of fractional shares of the Merger Consideration,
if any, and unpaid dividends and distributions deliverable in respect thereof
pursuant to this Agreement in accordance with the procedures set forth in this
Article 4. Certificates surrendered for exchange by any person constituting an
'affiliate' of Price REIT for purposes of Rule 145(c) under the Securities Act
of 1933, as amended (the 'Securities Act'), shall not be exchanged until Kimco
has received a written agreement from such person as provided in Section 7.11.
(e) No fractional shares of the Merger Consideration shall be issued
pursuant hereto. In lieu of the issuance of any fractional shares of the Merger
Consideration pursuant to Section 4.1(b) cash adjustments will be paid to
holders in respect of any fractional shares of the Merger Consideration that
would otherwise be issuable, and the amount of such cash adjustment shall be
equal to such fractional proportion of the Kimco Average Closing Price per share
of Kimco Common Stock and of the liquidation preference per depositary share of
Kimco Class D Preferred Stock, as applicable.
(f) Any portion of the Merger Consideration held by the Exchange Agent
(together with any cash in lieu of fractional shares of the Merger Consideration
and the proceeds of any investments thereof) that remains unclaimed by the
former stockholders of Price REIT one year after the Effective Time shall be
delivered to the
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<PAGE>
Surviving Corporation. Any former stockholders of Price REIT who have not
theretofore complied with this Article 4 shall thereafter look only to the
Surviving Corporation for payment of their shares constituting the Merger
Consideration, cash in lieu of fractional shares of the Merger Consideration and
unpaid dividends and distributions on the Merger Consideration deliverable in
respect of each share of Price REIT Common Stock such stockholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon.
(g) None of Kimco, Price REIT, the Exchange Agent or any other person
shall be liable to any former holder of shares of Price REIT Common Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
or the Surviving Corporation will issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration and cash in lieu of fractional
shares of Kimco Class D Preferred Stock, and unpaid dividends and distributions
on shares of the Merger Consideration as provided in Section 4.2(c), deliverable
in respect thereof pursuant to this Agreement.
(i) The holders of shares of Price REIT Common Stock shall not be entitled
to appraisal rights as a result of the Merger.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PRICE REIT
Except as set forth in the disclosure letter delivered at or prior to the
execution hereof to Kimco, which shall refer to the relevant Sections of this
Agreement (the 'Price REIT Disclosure Letter'), Price REIT represents and
warrants to Kimco as follows:
5.1. Existence; Good Standing; Authority; Compliance With Law. Price REIT
is a corporation duly incorporated, validly existing and in good standing under
the laws of Maryland. Price REIT is duly licensed or qualified to do business as
a foreign corporation and is in good standing under the laws of any other state
of the United States in which the character of the properties owned or leased by
it therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not have a material
adverse effect on the business, assets, results of operations or condition
(financial or otherwise) of Price REIT and its Subsidiaries taken as a whole (a
'Price REIT Material Adverse Effect'). Price REIT has all requisite corporate
power and authority to own, operate, lease and encumber its properties and carry
on its business as now conducted. Each of Price REIT's Subsidiaries is a
corporation, limited liability company or partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate, company or partnership power
and authority to own its properties and to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good standing in
each jurisdiction in which the ownership of its property or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not have a Price REIT
Material Adverse Effect. Neither Price REIT nor any of its Subsidiaries is in
violation of any order of any court, governmental authority or arbitration board
or tribunal, or any law, ordinance, governmental rule or regulation to which
Price REIT or any of its Subsidiaries or any of their respective properties or
assets is subject, where such violation would have a Price REIT Material Adverse
Effect. To the knowledge of the executive officers of Price REIT, Price REIT and
its Subsidiaries have obtained all licenses, permits and other authorizations
and have taken all actions required by applicable law or governmental
regulations in connection with their business as now conducted, where the
failure to obtain any such item or to take any such action would have a Price
REIT Material Adverse Effect. Copies of Price REIT's and its Subsidiaries'
charter, bylaws, organization documents and partnership and joint venture
agreements have been previously delivered or made available to Kimco and such
documents are listed in the Price REIT Disclosure
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Letter and are true and correct. For the purposes of the immediately preceding
sentence, the term 'Subsidiary' shall include the entities set forth on Schedule
5.5 of the Price REIT Disclosure Letter.
5.2. Authorization, Validity and Effect of Agreements. Price REIT has the
requisite corporate power and authority to enter into the transactions
contemplated hereby and to execute and deliver this Agreement. Subject only to
the approval of this Agreement and the transactions contemplated hereby by the
affirmative vote of holders of a majority of the outstanding shares of Price
REIT Common Stock, the consummation by Price REIT of this Agreement and the
transactions contemplated hereby has been duly authorized by all requisite
corporate action on the part of Price REIT. This Agreement constitutes the valid
and legally binding obligations of Price REIT, enforceable against Price REIT in
accordance with its respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
5.3. Capitalization. The authorized capital stock of Price REIT consists
of 25,000,000 shares of Price REIT Common Stock and 2,000,000 shares of
preferred stock, par value $.01 per share (the 'Price REIT Preferred Stock'). As
of January 12, 1998, there were 11,700,793 shares of Price REIT Common Stock
issued and outstanding and no shares of Price REIT Preferred Stock issued and
outstanding. Price REIT has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of Price REIT on any matter. All such issued and outstanding
shares of Price REIT Common Stock are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. Other than the Price REIT
Stock Options, there are not at the date of this Agreement any existing options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments which obligate Price REIT or any of its Subsidiaries
to issue, transfer or sell any shares of capital stock of Price REIT or any of
its Subsidiaries. After the Effective Time, the Surviving Corporation will have
no obligation to issue, transfer or sell any shares of capital stock or other
equity interest of Price REIT or the Surviving Corporation pursuant to any Price
REIT Benefit Plan (as defined in Section 5.14).
5.4. Subsidiaries. Price REIT owns directly or indirectly each of the
outstanding shares of capital stock or all of the partnership or other equity
interests of each of Price REIT's Subsidiaries. Each of the outstanding shares
of capital stock of or other equity interests in each of Price REIT's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and is owned, directly or indirectly, by Price REIT free and clear of all liens,
pledges, security interests, claims or other encumbrances other than liens
imposed by local law which are not material. The following information for each
Subsidiary of Price REIT is set forth on the Price REIT Disclosure Letter, if
applicable: (i) its name and jurisdiction of incorporation or organization; (ii)
its authorized capital stock or share capital; and (iii) the name of each
stockholder or owner of an equity interest and the number of issued and
outstanding shares of capital stock or share capital or percentage ownership for
non-corporate entities held by it.
5.5. Other Interests. Except for interests in the Price REIT
Subsidiaries, neither Price REIT nor any of its Subsidiaries owns directly or
indirectly any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or entity (other than
investments in short-term investment securities).
5.6. No Violation. Except as set forth on Schedule 5.6 of the Price REIT
Disclosure Letter, neither the execution and delivery by Price REIT of this
Agreement nor the consummation by Price REIT of the transactions contemplated
hereby in accordance with the terms hereof, will (i) conflict with or result in
a breach of any provisions of the charter or bylaws of Price REIT, (ii) result
in a breach or violation of, a default under, or the triggering of any payment
or other material obligations pursuant to, or, except as otherwise contemplated
by Section 4.1(e), accelerate vesting under, any of the Price REIT Stock Option
Plans, or any grant or award made under any of the foregoing, (iii) violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of Price REIT or its Subsidiaries under, or result in
being declared void, voidable or without further binding effect, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which Price REIT or any of its
Subsidiaries is a party, or by which Price REIT or any of its Subsidiaries or
any of their properties is bound or affected, except for any of the foregoing
matters which, individually or in the aggregate, would not have a Price
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REIT Material Adverse Effect, or (iv) require any consent, approval or
authorization of, or declaration, filing or registration with, any domestic
governmental or regulatory authority, other than the filings provided for in
Article 1, any filings required by the Securities Exchange Act of 1934, as
amended (the 'Exchange Act'), the Securities Act or applicable state securities
and 'Blue Sky' laws (collectively, the 'Regulatory Filings') and filings with
the NYSE, or such other filings which, if not obtained or made, would not
prevent or delay in any material respect the consummation of any of the
transactions contemplated by this Agreement or otherwise prevent Price REIT from
performing its obligations under this Agreement in any material respect.
5.7. SEC Documents. Price REIT has delivered or made available to Kimco
each registration statement, report, proxy statement or information statement
and all exhibits thereto prepared by it or relating to its properties (including
registration statements covering mortgage pass-through certificates) since
January 1, 1995, which are set forth on the Price REIT Disclosure Letter, each
in the form (including exhibits and any amendments thereto) filed with the
United States Securities and Exchange Commission (the 'SEC') (collectively, the
'Price REIT Reports'). The Price REIT Reports, which were filed with the SEC in
a timely manner, constitute all forms, reports and documents required to be
filed by Price REIT under the Securities Act, the Exchange Act and the rules and
regulations promulgated thereunder (the 'Securities Laws'). As of their
respective dates, the Price REIT Reports (i) complied as to form in all material
respects with the applicable requirements of the Securities Laws and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of Price REIT included in or
incorporated by reference into the Price REIT Reports (including the related
notes and schedules) fairly presents the consolidated financial position of
Price REIT and its Subsidiaries as of its date and each of the consolidated
statements of income, retained earnings and cash flows of Price REIT included in
or incorporated by reference into the Price REIT Reports (including any related
notes and schedules) fairly presents the results of operations, retained
earnings or cash flows, as the case may be, of Price REIT and its Subsidiaries
for the periods set forth therein (subject, in the case of unaudited statements,
to normal year-end audit adjustments which would not be material in amount or
effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein and except, in the case of the unaudited statements, as permitted
by Form 10-Q of the SEC. Except as and to the extent set forth on the
consolidated balance sheet of Price REIT and its Subsidiaries at September 30,
1997, including all notes thereto, or as set forth in the Price REIT Reports,
neither Price REIT nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on, or reserved against in, a balance
sheet of Price REIT or in the notes thereto, prepared in accordance with
generally accepted accounting principles consistently applied other than any
such liabilities or obligations that, individually or in the aggregate, would
not have a Price REIT Material Adverse Effect.
5.8. Litigation. There are (i) no continuing orders, injunctions or
decrees of any court, arbitrator or governmental authority to which Price REIT
or any of its Subsidiaries is a party or by which any of its properties or
assets are bound or, to the knowledge of Price REIT, to which any of its
directors, officers, employees or agents is a party or by which any of their
properties or assets are bound and (ii) no actions, suits or proceedings pending
against Price REIT or any of its Subsidiaries or, to the knowledge of Price
REIT, against any of its directors, officers, employees or agents or, to the
knowledge of Price REIT, threatened in writing against Price REIT or any of its
Subsidiaries or against any of its directors, officers, employees or agents, at
law or in equity, or before or by any federal or state commission, board,
bureau, agency or instrumentality, that in the case of clauses (i) or (ii) above
are reasonably likely, individually or in the aggregate, to have a Price REIT
Material Adverse Effect.
5.9. Absence of Certain Changes. Except as disclosed in the Price REIT
Reports filed with the SEC prior to the date hereof, since September 30, 1997,
Price REIT and its Subsidiaries have conducted their business only in the
ordinary course of such business and there has not been (i) any Price REIT
Material Adverse Effect, (ii) as of the date hereof, any declaration, setting
aside or payment of any dividend or other distribution with respect to the Price
REIT Common Stock, (iii) any commitment, contractual obligation, borrowing,
capital expenditure or transaction (each, a 'Commitment') entered into by Price
REIT or any of its Subsidiaries, other than Commitments made in the ordinary
course of business none of which exceed $250,000 individually or
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$1,000,000 in the aggregate, or (iv) any material change in Price REIT's
accounting principles, practices or methods.
5.10. Taxes. (a) Price REIT and each of its Subsidiaries (i) has timely
filed all federal, state, local and foreign tax returns required to be filed by
any of them for tax years ended prior to the date of this Agreement or requests
for extensions have been timely filed and any such request has been granted and
has not expired and all such returns are complete in all material respects, (ii)
has paid or accrued all taxes shown to be due and payable on such returns or
which have become due and payable pursuant to any assessment, deficiency notice,
30-day letter or other notice received by it and (iii) has properly accrued all
such taxes for such periods subsequent to the periods covered by such returns.
The federal, state or local income or franchise tax returns of Price REIT and
each of its Subsidiaries, have not been examined by the appropriate taxing
authority, except for such examinations that, individually or in the aggregate,
would not have a Price REIT Material Adverse Effect. Neither Price REIT nor any
of its Subsidiaries has executed or filed with the Internal Revenue Service (the
'IRS') or any other taxing authority any agreement now in effect extending the
period for assessment or collection of any income or other taxes. Neither Price
REIT nor any of its Subsidiaries is a party to any pending action or proceeding
by any governmental authority for assessment or collection of taxes, and no
claim for assessment or collection of taxes has been asserted against it. True,
correct and complete copies of all federal, state and local income or franchise
tax returns filed by Price REIT and each of its Subsidiaries and all
communications relating thereto have been delivered to Kimco or made available
to representatives of Kimco. The most recent audited financial statements
contained in the Price REIT Reports reflect an adequate reserve for all material
Taxes payable by Price REIT and the Price REIT Subsidiaries for all taxable
periods and portions thereof through the date of such financial statements.
Since the date of such financial statements, Price REIT has incurred no
liability for taxes under Sections 857(b), 860(c) or 4981 of the Code, including
without limitation, any tax arising from a prohibited transaction described in
Section 857(b)(6) of the Code, and neither Price REIT nor any Price REIT
Subsidiary has incurred any liability for Taxes other than in the ordinary
course of business. As used in this Agreement, 'Taxes' shall include all
federal, state, local and foreign income, property, sales, franchise,
employment, excise and other taxes, tariffs or governmental charges of any
nature whatsoever, together with penalties, interest or additions to Tax with
respect thereto.
(b) Price REIT (i) has elected to be taxed as a real estate investment
trust (a 'REIT') within the meaning of the Code commencing with its taxable year
ended December 31, 1991, (ii) has been subject to taxation as a REIT within the
meaning of Section 856 of the Code and has satisfied all requirements to qualify
as a REIT for all taxable years commencing with its taxable year ended December
31, 1991 through its taxable year ended December 31, 1997, (iii) has operated
since December 31, 1997 to the date of this representation, and intends to
continue to operate, in such a manner so as to qualify as a REIT for its taxable
year ending the Closing Date, and (iv) has not taken or omitted to take any
action which would reasonably be expected to result in a challenge to its status
as a REIT, and to the knowledge of the executive officers of Price REIT, no such
challenge is pending or threatened. Price REIT represents that each of its
corporate Subsidiaries is a Qualified REIT Subsidiary as defined in Section
856(i) of the Code (as in effect prior to the enactment of the Taxpayer Relief
Act of 1997), and that each partnership, limited liability company, joint
venture or other legal entity in which Price REIT (either directly or
indirectly) owns any of the capital stock or other equity interests thereof has
been treated since its formation and continues to be treated for federal income
tax purposes as a partnership and not as an association taxable as a
corporation.
5.11. Books and Records.
(a) The books of account and other financial records of Price REIT and its
Subsidiaries are in all material respects true, complete and correct, have been
maintained in accordance with good business practices, and are accurately
reflected in all material respects in the financial statements included in the
Price REIT Reports.
(b) The minute books and other records of Price REIT and its Subsidiaries,
have been made available to Kimco, contain in all material respects accurate
records of all meetings and accurately reflect in all material respects all
other corporate action of the stockholders, members and directors and any
committees of the Board of Directors of Price REIT and its Subsidiaries.
5.12. Properties. Price REIT and its Subsidiaries own fee simple title
to, or hold ground leases in, each of the real properties identified in the
Price REIT Disclosure Letter (the 'Price REIT Properties'), which are all
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of the real estate properties owned or leased by them. The Price REIT Properties
are not subject to any rights of way, written agreements (other than leases),
laws, ordinances and regulations affecting building use or occupancy, or
reservations of an interest in title (collectively, 'Property Restrictions'),
except for (i) liens, mortgages or deeds of trust, claims against title, charges
which are liens, security interests or other encumbrances on title
('Encumbrances') and Property Restrictions set forth in the Price REIT
Disclosure Letter, (ii) Property Restrictions imposed or promulgated by law or
any governmental body or authority with respect to real property, including
zoning regulations, provided such Property Restrictions do not adversely affect
in any material respect the current use of the applicable property, (iii)
Encumbrances and Property Restrictions disclosed on existing title reports or
current surveys (in either case copies of which title reports and surveys have
been delivered or made available to Kimco), and (iv) mechanics', carriers',
workmen's, repairmen's liens and other Encumbrances, Property Restrictions and
other limitations of any kind, if any, which, individually or in the aggregate,
do not materially detract from the value of or materially interfere with the
present use of any of the Price REIT Properties subject thereto or affected
thereby, and do not otherwise materially impair business operations conducted by
Price REIT and its Subsidiaries and which have arisen or been incurred only in
the ordinary course of business. Valid policies of title insurance have been
issued insuring Price REIT's or any of its Subsidiaries' fee simple title to the
Price REIT Properties in amounts at least equal to the purchase price thereof,
subject only to the matters set forth therein or disclosed above and on the
Price REIT Disclosure Letter, and such policies are, at the date hereof, in full
force and effect and there are no pending claims against any such policy. Any
material certificate, permit or license from any governmental authority having
jurisdiction over any of the Price REIT Properties and any agreement, easement
or other right which is necessary to permit the material lawful use and
operation of the buildings and improvements on any of the Price REIT Properties
or which is necessary to permit the lawful use and operation of all driveways,
roads and other means of egress and ingress, which Price REIT has rights to, to
and from any of the Price REIT Properties which are currently occupied has been
obtained and is in full force and effect, and, to the best knowledge of Price
REIT, there exists no pending threat of modification or cancellation of any of
same. Price REIT is not in receipt of any written notice of any violation of any
material federal, state or municipal law, ordinance, order, regulation or
requirement affecting any portion of any of the Price REIT Properties issued by
any governmental authority other than such violations which would not reasonably
be expected to have a Price REIT Material Adverse Effect. To the knowledge of
Price REIT, (A) there are no material structural defects relating to the Price
REIT Properties, (B) there are no Price REIT Properties whose building systems
are not in working order in any material respect (except for temporary and
routine maintenance and operating systems failures which in any event are the
subject of adequate pending repair procedures), (C) there is no physical damage
to any Price REIT Property in excess of $100,000 for which there is no insurance
in effect covering the cost of the restoration as of the date hereof, or (D) no
current renovation or restoration to any Price REIT Property is underway or is
being contemplated the cost of which exceeds $100,000, except as set forth in
Schedule 5.12 of the Price REIT Disclosure Letter. Neither Price REIT nor any of
its Subsidiaries have received any written notice to the effect that (x) any
condemnation or material rezoning proceedings are pending or threatened with
respect to any of the Price REIT Properties or (y) any zoning, building or
similar law, code, ordinance, order or regulation is or will be violated in any
material respect by the continued maintenance, operation or use of any buildings
or other improvements on any of the Price REIT Properties as currently
maintained, used or operated or by the continued maintenance, operation or use
of the parking areas as currently maintained, used or operated. All work to be
performed, payments to be made and actions to be taken by Price REIT or its
Subsidiaries prior to the date hereof pursuant to any agreement entered into
with a governmental body or authority in connection with a site approval, zoning
reclassification or other similar action relating to the Price REIT Properties
(e.g., Local Improvement District, Road Improvement District, Environmental
Mitigation) has been performed, paid or taken, as the case may be, and Price
REIT is not aware of any planned or proposed work, payments or actions that may
be required after the date hereof pursuant to such agreements.
5.13. Environmental Matters. To the actual knowledge of the executive
officers of Price REIT, none of Price REIT, any of its Subsidiaries or any other
person has caused or permitted (a) the unlawful presence of any Hazardous
Materials on any of the Price REIT Properties, or (b) any unlawful spills,
releases, discharges or disposal of Hazardous Materials to have occurred or be
presently occurring on or from the Price REIT Properties as a result of any
construction on or operation and use of such properties, which presence or
occurrence would, individually or in the aggregate, have a Price REIT Material
Adverse Effect; and in connection with the
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construction on or operation and use of the Price REIT Properties, Price REIT
and its Subsidiaries have not failed to comply with all applicable local, state
and federal environmental laws, regulations, ordinances and administrative and
judicial orders relating to the generation, recycling, reuse, sale, storage,
handling, transport and disposal of any Hazardous Materials, except where the
failure to so comply would not reasonably be expected to have a Price REIT
Material Adverse Effect.
5.14. Employee Benefit Plans. All employee benefits plans and other
benefit programs, policies and arrangements covering employees of Price REIT and
the Price REIT Subsidiaries (the 'Price REIT Benefit Plans') are listed in the
Price REIT Disclosure Letter. True and complete copies of the Price REIT Benefit
Plans have been made available to Kimco. To the extent applicable, the Price
REIT Benefit Plans comply, in all material respects, with the requirements of
the Employee Retirement Income Security Act of 1974, as amended ('ERISA'), and
the Code, and any Price REIT Benefit Plan intended to be qualified under Section
401(a) of the Code has been determined by the IRS to be so qualified. No Price
REIT Benefit Plan is or has been covered by Title IV of ERISA or Section 412 of
the Code. Neither any Price REIT Benefit Plan nor any fiduciary thereof nor
Price REIT has incurred any material liability or penalty under Section 4975 of
the Code or Section 502(i) of ERISA. Each Price REIT Benefit Plan has been
maintained and administered in all material respects in compliance with its
terms and with ERISA and the Code to the extent applicable thereto. To the
knowledge of the executive officers of Price REIT, there are no pending or
anticipated claims against or otherwise involving any of the Price REIT Benefit
Plans and no suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of Price REIT Benefit Plan activities) has been
brought against or with respect to any such Price REIT Benefit Plan, except for
any of the foregoing which would not have a Price REIT Material Adverse Effect.
All material contributions required to be made as of the date hereof to the
Price REIT Benefit Plans have been timely made or provided for. Neither Price
REIT nor any entity under 'common control' with Price REIT within the meaning of
ERISA Section 4001 has contributed to, or been required to contribute to, any
'multiemployer plan' (as defined in Sections 3(37) and 4001(a)(3) of ERISA).
Price REIT does not maintain or contribute to any plan, program, policy or
arrangement which provides or has any liability to provide life insurance,
medical or other employee welfare benefits or supplemental pension benefits to
any employee or former employee upon his retirement or termination of
employment, except as required under Section 4890B of the Code, and Price REIT
has never represented, promised or contracted (whether in oral or written form)
to any employee or former employee that such benefits would be provided. Except
as disclosed in the Price REIT Reports, the execution of, and performance of the
transactions contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional subsequent events) constitute an event under any
benefit plan, program, policy, arrangement or agreement or any trust or loan
that will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligations to fund benefits with respect to any employee, director
or consultant of Price REIT or any of its Subsidiaries.
5.15. Labor Matters. Neither Price REIT nor any of its Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization. There
is no unfair labor practice or labor arbitration proceeding pending or, to the
knowledge of Price REIT, threatened against Price REIT or any of its
Subsidiaries relating to their business, except for any such proceeding which
would not have a Price REIT Material Adverse Effect. To the knowledge of the
executive officers of Price REIT, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made or
threatened involving employees of Price REIT or any of its Subsidiaries.
5.16. No Brokers. Price REIT has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Price REIT or Kimco to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
except that Price REIT has retained Merrill Lynch, Pierce, Fenner & Smith
Incorporated ('Merrill Lynch') as its financial advisor, pursuant to an
engagement letter dated November 20, 1997, a true and correct copy of which has
been delivered to Kimco prior to the date hereof. Other than the foregoing
arrangements, Price REIT is not aware of any claim for payment of any finder's
fees, brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
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5.17. Opinion of Financial Advisor. Price REIT has received the opinion of
Merrill Lynch to the effect that, as of the date hereof, the Merger
Consideration to be received by the holders of Price REIT Common Stock pursuant
to the Merger is fair to such holders from a financial point of view.
5.18. Kimco Stock Ownership. Neither Price REIT nor any of its
Subsidiaries owns any shares of Kimco Common Stock or other securities
convertible into any shares of Kimco Common Stock.
5.19. Related Party Transactions. Set forth in the Price REIT Disclosure
Letter is a list of all arrangements, agreements and contracts entered into by
Price REIT or any of its Subsidiaries with any executive officer, director or
family members or affiliates of such persons required to be disclosed in the
Price REIT Reports (including reports and filings analogous to the Price REIT
Reports prior to January 1, 1995) pursuant to the rules and regulations of the
SEC. The copies of such documents, all of which have previously been delivered
or made available to Kimco, are listed on the Price REIT Disclosure Letter and
are true and correct.
5.20. Contracts and Commitments. The Price REIT Disclosure Letter or the
Price REIT Reports set forth (i) all notes, debentures, bonds and other evidence
of indebtedness which are secured or collateralized by mortgages, deeds of trust
or other security interests in the Price REIT Properties or personal property of
Price REIT and its Subsidiaries and (ii) each Commitment entered into by Price
REIT or any of its Subsidiaries which may result in total payments or liability
in excess of $500,000, excluding tenant reimbursements and leases entered into
in the ordinary course. Copies of the foregoing have been previously delivered
or made available to Kimco, are listed on the Price REIT Disclosure Letter or
included in the Price REIT Reports and are true and correct. Each of the
contracts and Commitments described in the preceding sentence is in full force
and effect; none of Price REIT or any of its Subsidiaries has received any
notice of a default that has not been cured under any of the contracts and
Commitments described in the preceding sentence or is in default respecting any
payment obligations thereunder beyond any applicable grace periods; and, to
Price REIT's knowledge, none of the other parties to such contracts and
Commitments are in default with respect to any obligations, which individually
or in the aggregate are material, thereunder. All joint venture agreements to
which Price REIT or any of its Subsidiaries is a party are set forth on the
Price REIT Disclosure Letter and Price REIT or its Subsidiaries are not in
default with respect to any obligations, which individually or in the aggregate
are material, thereunder.
5.21. Leases. (a) The Price REIT Disclosure Letter sets forth a list of
all Price REIT Properties that are subject to or encumbered by any
non-residential lease accounting for 1% or more of Price REIT's rental revenues
for the most recent period reflected in the financial statements included in the
Price REIT Reports (a 'Material Price REIT Lease') and, with respect to each
such Material Price REIT Lease, sets forth the following information:
(i) the name of the lessee;
(ii) the expiration date of the lease;
(iii) the amount (or method of determining the amount) of monthly
rentals due under the lease; and
(iv) with respect to any Material Price REIT Lease with a remaining
term of less than 24 months, whether the lessee has notified Price REIT in
writing of any intention not to renew, or seek to renew, the lease.
(b) Except as set forth in the Price REIT Disclosure Letter, (i) all rental
payments due under each Material Price REIT Lease have been paid during the
period January 1, 1997 through November 30, 1997, and (ii) to Price REIT's
knowledge, no lessee is in material default, and no condition or event exists
which with the giving of notice or the passage of time, or both, would
constitute a material default by any lessee, under any Material Price REIT
Lease.
5.22. Investment Company Act of 1940. Neither Price REIT nor any of its
Subsidiaries is, or at the Effective Time will be, required to be registered
under the Investment Company Act of 1940, as amended.
5.23. Development Rights. Set forth in the Price REIT Disclosure Letter is
a list of all agreements entered into by Price REIT or any of its Subsidiaries
relating to the development or construction of retail shopping center or other
real estate properties. The copies of such agreements, all of which have
previously been delivered or made available to Kimco, are listed on the Price
REIT Disclosure Letter and are true and correct.
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5.24. Certain Payments Resulting From Transactions. Except as set forth in
the Price REIT Disclosure Letter, the execution of, and performance of the
transactions contemplated by, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) (i) constitute an event under
any Price REIT Benefit Plan, policy, practice, agreement or other arrangement or
any trust or loan (the 'Employee Arrangements') that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee, director or consultant of Price REIT or
any of its Subsidiaries or (ii) result in the triggering or imposition of any
restrictions or limitations on the right of Price REIT, Merger Sub or Kimco to
amend or terminate any Employee Arrangement and receive the full amount of any
excess assets remaining or resulting from such amendment or termination, subject
to applicable taxes. Except as set forth in the Price REIT Disclosure Letter, no
payment or benefit which will be required to be made pursuant to the terms of
any agreement, commitment or Price REIT Benefit Plan, as a result of the
transactions contemplated by this Agreement, to any officer, director or
employee of Price REIT or any of its Subsidiaries, will be characterized as an
'excess parachute payment' within the meaning of Section 280G(b)(l) of the Code.
5.25. State Takeover Statutes. Assuming that presently or at any time
within two years prior to the date hereof (i) neither Kimco nor Merger Sub is or
has been an 'interested stockholder' of Price REIT, and (ii) neither Kimco nor
Merger Sub has been an 'affiliate of an interested stockholder' of Price REIT,
all within the meaning of Section 3-601 of the MGCL, Price REIT has taken all
action necessary to exempt the transactions contemplated by this Agreement from
the operation of any applicable 'fair price,' 'moratorium,' 'control share
acquisition' or any other applicable anti-takeover statute or similar statute
enacted under the state or federal laws of the United States or similar statute
or regulation.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF KIMCO AND MERGER SUB
Except as set forth in the disclosure letter delivered at or prior to the
execution hereof to Price REIT, which shall refer to the relevant Sections of
this Agreement (the 'Kimco Disclosure Letter'), Kimco and Merger Sub represent
and warrant to Price REIT as follows:
6.1. Existence; Good Standing; Authority; Compliance With Law. Kimco and
Merger Sub are corporations, and each is duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation. Kimco is
duly licensed or qualified to do business as a foreign corporation and is in
good standing under the laws of any other state of the United States in which
the character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
business, assets, results of operations or condition (financial or otherwise) of
Kimco and its Subsidiaries taken as a whole (a 'Kimco Material Adverse Effect').
Kimco has all requisite corporate power and authority to own, operate, lease and
encumber its properties and carry on its business as it is now being conducted.
Each of Kimco's Subsidiaries is a corporation, limited liability company or
partnership duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has the corporate, company
or partnership power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good standing
would not have a Kimco Material Adverse Effect. Neither Kimco nor any or its
Subsidiaries is in violation of any order of any court, governmental authority
or arbitration board or tribunal, or any law, ordinance, governmental rule or
regulation to which Kimco or any of its Subsidiaries or any of their respective
properties or assets is subject, where such violation would have a Kimco
Material Adverse Effect. To the knowledge of the executive officers of Kimco,
Kimco and its Subsidiaries have obtained all licenses, permits and other
authorizations and have taken all actions required by applicable law or
governmental regulations in connection with their business as now conducted,
where the failure to obtain any such item or to take any such action would have
a Kimco Material Adverse Effect. True and correct copies of Kimco's and its
Subsidiaries' charter, bylaws, organization documents, and partnership and joint
venture agreements have been previously delivered or made available to Price
REIT.
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6.2. Authorization, Validity and Effect of Agreements. Each of Kimco and
Merger Sub has the requisite corporate power and authority to enter into the
transactions contemplated hereby and to execute and deliver this Agreement and
the agreements listed on Schedule 6.2 attached hereto (the 'Ancillary
Agreements') to which it is a party. Subject only to the approval of the
issuance of the Merger Consideration pursuant to the Merger contemplated hereby
by the holders of a majority of the shares of Kimco Common Stock present and
voting thereon, the consummation by Kimco and Merger Sub of this Agreement, the
Ancillary Agreement to which they are parties and the transactions contemplated
hereby has been duly authorized by all requisite corporate action on the part of
Kimco and Merger Sub. This Agreement constitutes, and the Ancillary Agreements
to which they are parties (when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally binding obligations of Kimco
and Merger Sub, enforceable against Kimco and Merger Sub in accordance with
their respective terms, subject to applicable bankruptcy, insolvency, moratorium
or other similar laws relating to creditors' rights and general principles of
equity.
6.3. Capitalization. The authorized capital stock of Kimco consists of
100,000,000 shares of Kimco Common Stock and 5,000,000 shares of Preferred
Stock, 345,000 shares of Class A Cumulative Redeemable Preferred Stock (the
'Class A Preferred Stock'), 230,000 shares of Class B Cumulative Redeemable
Preferred Stock, (the 'Class B Preferred Stock') and 460,000 Class C Cumulative
Redeemable Preferred Stock (the 'Class C Preferred Stock'), each par value $1.00
per share (collectively, the 'Kimco Preferred Stock'). As of the date hereof,
there were 40,394,805 shares of Kimco Common Stock issued and outstanding and
300,000 shares of Class A Preferred Stock, 200,000 shares of Class B Preferred
Stock, 400,000 shares of Class C Preferred Stock and no shares of Preferred
Stock of Kimco issued and outstanding. Kimco has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of Kimco on any matter. All such issued and
outstanding shares of Kimco Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. There are not at the
date of this Agreement any existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate Kimco or any of its Subsidiaries to issue, transfer or sell any shares
of stock or other equity interest of Kimco or any of its Subsidiaries, other
than the issuance after the date hereof by Kimco of Kimco Common Stock,
consistent with prior practice, upon the exercise of stock options issued to
employees and directors. As of the date hereof, options to purchase an aggregate
number of 1,879,841 shares of Kimco Common Stock are outstanding, of which
options to purchase 1,069,485 are exercisable.
6.4. Subsidiaries. (a) Except as set forth on Schedule 6.4 of the Kimco
Disclosure Letter, as of the date hereof, Kimco owns directly or indirectly each
of the outstanding shares of capital stock or all of the partnership or other
equity interests of each of Kimco's Subsidiaries. Each of the outstanding shares
of capital stock of or other equity interests in each of Kimco's Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable, and is owned,
directly or indirectly, by Kimco free and clear of all liens, pledges, security
interests, claims or other encumbrances other than liens imposed by local law
which are not material. The following information for each Subsidiary of Kimco
is set forth on the Kimco Disclosure Letter, if applicable: (i) its name and
jurisdiction of incorporation or organization; (ii) its authorized capital stock
or share capital; and (iii) the percentage ownership in each Subsidiary.
(b) The authorized stock of Merger Sub consists of one hundred (100) shares
of Common Stock, par value $.01 per share, which shares are issued and
outstanding and owned by Kimco. Kimco has owned and, as of the Closing Date,
will own 100% of the stock of Merger Sub at all times since Merger Sub's
formation. Merger Sub has not engaged in any activities other than in connection
with the transactions contemplated by this Agreement.
6.5. Other Interests. Except for interests in the Kimco Subsidiaries and
as otherwise set forth in the Kimco Disclosure Letter, neither Kimco nor any of
its Subsidiaries owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, business, trust
or entity (other than investments in short-term investment securities).
6.6. No Violation. Except as set forth in Schedule 6.6 of the Kimco
Disclosure Letter, neither the execution and delivery by Kimco and Merger Sub of
this Agreement nor the consummation by Kimco and Merger Sub of the transactions
contemplated hereby in accordance with the terms hereof, will (i) conflict with
or result in a breach of any provisions of the charter of Kimco, the Articles of
Incorporation of Merger Sub or their
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respective bylaws, (ii) result in a breach or violation of, a default under, or
the triggering of any payment or other material obligations pursuant to, or
accelerate vesting under, any of Kimco's stock option plans, or any grant or
award under any of the foregoing, (iii) violate, or conflict with, or result in
a breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or in a right of termination or cancellation of, or accelerate
the performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties of Kimco or its
Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any license, franchise, permit,
lease, contract, agreement or other instrument, commitment or obligation to
which Kimco or any of its Subsidiaries is a party, or by which Kimco or any of
its Subsidiaries or any of their properties is bound or affected, except for any
of the foregoing matters which, individually or in the aggregate, would not have
a Kimco Material Adverse Effect or (iv) require any consent, approval or
authorization of, or declaration, filing or registration with, any domestic
governmental or regulatory authority, other than the Regulatory Filings and
filings with the NYSE, or such other filings which, if not obtained or made,
would not prevent or delay in any material respect the consummation of any of
the transactions contemplated by this Agreement or otherwise prevent Kimco from
performing its obligations under this Agreement in any material respect.
6.7. SEC Documents. Kimco has delivered or made available to Price REIT
each registration statement, report, proxy statement or information statement
and all exhibits thereto prepared by it or relating to its properties since
January 1, 1995, which are set forth on the Kimco Disclosure Letter, each in the
form (including exhibits and any amendments thereto) filed with the SEC
(collectively, the 'Kimco Reports'). The Kimco Reports, which were filed with
the SEC in a timely manner, constitute all forms, reports and documents required
to be filed by Kimco under the Securities Laws. As of their respective dates,
the Kimco Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of Kimco included in or incorporated by reference
into the Kimco Reports (including the related notes and schedules) fairly
presents the consolidated financial position of Kimco and its Subsidiaries as of
its date and each of the consolidated statements of income, retained earnings
and cash flows of Kimco included in or incorporated by reference into the Kimco
Reports (including any related notes and schedules) fairly presents the results
of operations, retained earnings or cash flows, as the case may be, of Kimco and
its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC. Except as and to the extent
set forth on the consolidated balance sheet of Kimco and its Subsidiaries at
September 30, 1997, including all notes thereto, or as set forth in the Kimco
Reports, neither Kimco nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on, or reserved against in, a balance
sheet of Kimco or in the notes thereto, prepared in accordance with generally
accepted accounting principles consistently applied, other than any such
liabilities or obligations that, individually or in the aggregate, would not
have a Kimco Material Adverse Effect.
6.8. Litigation. There are (i) no continuing orders, injunctions or
decrees of any court, arbitrator or governmental authority to which Kimco or any
of its Subsidiaries is a party or by which any of its properties or assets are
bound or, to the best knowledge of Kimco, to which any of its directors,
officers, employees or agents is a party or by which any of their properties or
assets are bound and (ii) no actions, suits or proceedings pending against Kimco
or any of its Subsidiaries or, to the knowledge of Kimco, against any of its
directors, officers, employees or agents or, to the knowledge of Kimco,
threatened in writing against Kimco or any of its Subsidiaries or against any of
its directors, officers, employees or agents, at law or in equity, or before or
by any federal or state commission, board, bureau, agency or instrumentality,
that in the case of clauses (i) or (ii) above are reasonably likely,
individually or in the aggregate, to have a Kimco Material Adverse Effect.
6.9. Absence of Certain Changes. Except as disclosed in the Kimco Reports
filed with the SEC prior to the date hereof or in Schedule 6.9 of the Kimco
Disclosure Letter, since September 30, 1997, Kimco and its Subsidiaries have
conducted their business only in the ordinary course of such business (which,
for purposes of
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this section only, shall include all acquisitions of real estate properties and
financing arrangements made in connection therewith) and there has not been (i)
any Kimco Material Adverse Effect, (ii) as of the date hereof, any declaration,
setting aside or payment of any dividend or other distribution with respect to
the Kimco Common Stock or (iii) any material change in Kimco's accounting
principles, practices or methods.
6.10. Taxes. (a) Kimco and each of its Subsidiaries (i) has timely filed
all federal, state, local and foreign tax returns required to be filed by any of
them for tax years ended prior to the date of this Agreement or requests for
extensions have been timely filed and any such request has been granted and has
not expired and all such returns are complete in all material respects, (ii) has
paid or accrued all taxes shown to be due and payable on such returns or which
have become due and payable pursuant to any assessment, deficiency notice,
30-day letter or other notice received by it and (iii) has properly accrued all
such taxes for such periods subsequent to the periods covered by such returns.
The federal, state or local income or franchise tax returns of Kimco and each of
its Subsidiaries have not been examined by the appropriate taxing authority,
except for such examinations that, individually or in the aggregate, would not
have a Kimco Material Adverse Effect. Neither Kimco nor any of its Subsidiaries
has executed or filed with the IRS or any other taxing authority any agreement
now in effect extending the period for assessment or collection of any income or
other taxes. Neither Kimco nor any of its Subsidiaries is a party to any pending
action or proceeding by any governmental authority for assessment or collection
of taxes, and no claim for assessment or collection of taxes has been asserted
against it. True, correct and complete copies of all federal, state and local
income or franchise tax returns filed by Kimco and each of its Subsidiaries and
all communications relating thereto have been delivered to Price REIT or made
available to representatives of Price REIT. The most recent audited financial
statements contained in the Kimco Reports reflect an adequate reserve for all
material Taxes payable by Kimco and the Kimco Subsidiaries for all taxable
periods and portions thereof through the date of such financial statements.
Since the date of such financial statements, Kimco has incurred no liability for
taxes under Sections 857(b), 860(c) or 4981 of the Code, including without
limitation, any tax arising from a prohibited transaction described in Section
857(b)(6) of the Code, and neither Kimco nor any Kimco Subsidiary has incurred
any liability for Taxes other than in the ordinary course of business.
(b) Kimco (i) has elected to be taxed as a real estate investment trust (a
'REIT') within the meaning of the Code commencing with its taxable year ended
December 31, 1992, (ii) has been subject to taxation as a REIT within the
meaning of Section 856 of the Code and has satisfied all requirements to qualify
as a REIT for all taxable years commencing with its taxable year ended December
31, 1992 through its taxable year ended December 31, 1997, (iii) has operated
since December 31, 1997 to the date of this representation, and intends to
continue to operate in such a manner so as to qualify as a REIT for its taxable
year ending December 31, 1998, and (iv) has not taken or omitted to take any
action which would reasonably be expected to result in a challenge to its status
as a REIT, and to the knowledge of the executive officers of Kimco, no such
challenge is pending or threatened. Kimco represents that each of its corporate
Subsidiaries is a Qualified REIT Subsidiary as defined in Section 856(i) of the
Code (as in effect prior to the enactment of the Taxpayer Relief Act of 1997),
and that each partnership, limited liability company, joint venture or other
legal entity in which Kimco (either directly or indirectly) owns any of the
capital stock or other equity interests thereof has been treated since its
formation and continues to be treated for federal income tax purposes as a
partnership and not as an association taxable as a corporation.
6.11. Books and Records. (a) The books of account and other financial
records of Kimco and its Subsidiaries are in all material respects true,
complete and correct, have been maintained in accordance with good business
practices, and are accurately reflected in all material respects in the
financial statements included in the Kimco Reports.
(b) The minute books and other records of Kimco and its Subsidiaries, have
been made available to Price REIT, contain in all material respects accurate
records of all meetings and accurately reflect in all material respects all
other trust and corporate action of the stockholders, members and directors and
any committees of the Board of Directors of Kimco and its Subsidiaries.
6.12. Properties. Kimco and its Subsidiaries own fee simple title to, or
hold ground leases in, each of the real properties identified in the Kimco
Disclosure Letter (the 'Kimco Properties'), which are all the real estate
properties owned or leased by them. The Kimco Properties are not subject to any
Property Restrictions, except
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for (i) Encumbrances and Property Restrictions set forth in the Kimco Disclosure
Letter, (ii) Property Restrictions imposed or promulgated by law or any
governmental body or authority with respect to real property, including zoning
regulations, provided such Property Restrictions do not adversely affect in any
material respect the current use of the applicable property, (iii) Encumbrances
and Property Restrictions disclosed on existing title reports or current surveys
(in either case copies of which title reports and surveys have been delivered or
made available to Price REIT) and (iv) mechanics', carriers', workmen's,
repairmen's liens and other Encumbrances, Property Restrictions and other
limitations of any kind, if any, which, individually or in the aggregate, do not
materially detract from the value of or materially interfere with the present
use of any of the Kimco Properties subject thereto or affected thereby, and do
not otherwise materially impair business operations conducted by Kimco and its
Subsidiaries and which have arisen or been incurred only in the ordinary course
of business. Valid policies of title insurance have been issued insuring Kimco's
or any of its Subsidiaries' fee simple title to the Kimco Properties in amounts
at least equal to the purchase price thereof, subject only to the matters set
forth therein or disclosed above and on the Kimco Disclosure Letter, and such
policies are, at the date hereof, in full force and effect and there are no
pending claims against such policy. Any material certificate, permit or license
from any governmental authority having jurisdiction over any of the Kimco
Properties and any agreement, easement or other right which is necessary to
permit the material lawful use and operation of the buildings and improvements
on any of the Kimco Properties or which is necessary to permit the lawful use
and operation of all driveways, roads and other means of egress and ingress,
which Kimco has rights to, to and from any of the Kimco Properties which are
currently occupied has not been obtained and is not in full force and effect,
and, to the best knowledge of Kimco, there exists no pending threat of
modification or cancellation of any of same. Kimco is not in receipt of any
written notice of any violation of any material federal, state or municipal law,
ordinance, order, regulation or requirement affecting any portion of any of the
Kimco Properties issued by any governmental authority, other than such
violations which would not reasonably be expected to have a Kimco Material
Adverse Effect. To the knowledge of Kimco (A) there are no material structural
defects relating to the Kimco Properties, (B) there are no Kimco Properties
whose building systems are not in working order in any material respect (except
for temporary and routine maintenance and operating systems failures which in
any event are the subject of adequate pending repair procedures), (C) there is
no physical damage to any Kimco Property in excess of $500,000 for which there
is no insurance in effect covering the cost of the restoration as of the date
hereof or (D) no current renovation or restoration to any Kimco Property is
under way or is being contemplated the cost of which exceeds $500,000, except as
set forth on Schedule 6.12 of the Kimco Disclosure Letter. Neither Kimco nor any
of its Subsidiaries have received any written notice to the effect that (x) any
condemnation or material rezoning proceedings are pending or threatened with
respect to any of the Kimco Properties or (y) any zoning, building or similar
law, code, ordinance, order or regulation is or will be violated in any material
respect by the continued maintenance, operation or use of any buildings or other
improvements on any of the Kimco Properties as currently maintained, used or
operated or by the continued maintenance, operation or use of the parking areas
as currently maintained, used or operated.
6.13. Environmental Matters. To the actual knowledge of the executive
officers of Kimco, none of Kimco, any of its Subsidiaries or any other person
has caused or permitted (a) the unlawful presence of any Hazardous Materials on
any of the Kimco Properties or (b) any unlawful spills, releases, discharges or
disposal of Hazardous Materials to have occurred or be presently occurring on or
from the Kimco Properties as a result of any construction on or operation and
use of such properties, which presence or occurrence would, individually or in
the aggregate, have a Kimco Material Adverse Effect; and in connection with the
construction on or operation and use of the Kimco Properties, Kimco and its
Subsidiaries have not failed to comply with all applicable local, state and
federal environmental laws, regulations, ordinances and administrative and
judicial orders relating to the generation, recycling, reuse, sale, storage,
handling, transport and disposal of any Hazardous Materials, except where the
failure to so comply would not reasonably be expected to have a Kimco Material
Adverse Effect.
6.14. Employee Benefit Plans. All employee benefits plans and other
benefit programs, policies and arrangements covering employees of Kimco and its
Subsidiaries (the 'Kimco Benefit Plans') are listed in the Kimco Disclosure
Letter. True and complete copies of the Kimco Benefit Plans have been made
available to Price REIT. To the extent applicable, the Kimco Benefit Plans
comply, in all material respects, with the requirements of ERISA and the Code,
and any Kimco Benefit Plan intended to be qualified under Section 401(a) of the
Code has been determined by the IRS to be so qualified. No Kimco Benefit Plan is
or has
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been covered by Title IV of ERISA or Section 412 of the Code. Neither any Kimco
Benefit Plan nor any fiduciary thereof nor Kimco has incurred any material
liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA.
Each Kimco Benefit Plan has been maintained and administered in all material
respects in compliance with its terms and with ERISA and the Code to the extent
applicable thereto. To the knowledge of the executive officers of Kimco, there
are no pending or anticipated claims against or otherwise involving any of the
Kimco Benefit Plans and no suit, action or other litigation (excluding claims
for benefits incurred in the ordinary course of Kimco Benefit Plan activities)
has been brought against or with respect to any such Kimco Benefit Plan, except
for any of the foregoing which would not have a Kimco Material Adverse Effect.
All material contributions required to be made as of the date hereof to the
Kimco Benefit Plans have been timely made or provided for. Neither Kimco nor any
entity under 'common control' with Kimco within the meaning of ERISA Section
4001 has contributed to, or been required to contribute to, any 'multiemployer
plan' (as defined in Sections 3(37) and 4001(a)(3) of ERISA). Kimco does not
maintain or contribute to any plan, program, policy or arrangement which
provides or has any liability to provide life insurance, medical or other
employee welfare benefits or supplemental pension benefits to any employee or
former employee upon his retirement or termination of employment, except as
required under Section 4890B of the Code, and Kimco has never represented,
promised or contracted (whether in oral or written form) to any employee or
former employee that such benefits would be provided. Except as disclosed in the
Kimco Reports, the execution of, and performance of the transactions
contemplated by, this Agreement will not (either alone or upon the occurrence of
any additional subsequent events) constitute an event under any benefit plan,
program, policy, arrangement or agreement or any trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligations to fund benefits with respect to any employee, director or
consultant of Kimco or any of its Subsidiaries.
6.15. Labor Matters. Neither Kimco nor any of its Subsidiaries is a party
to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization. There
is no unfair labor practice or labor arbitration proceeding pending or, to the
knowledge of Kimco, threatened against Kimco or any of its Subsidiaries relating
to their business, except for any such proceeding which would not have a Kimco
Material Adverse Effect. To the knowledge of the executive officers of Kimco,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of Kimco or any of its Subsidiaries.
6.16. No Brokers. Kimco has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
Price REIT or Kimco to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that Kimco has retained Jefferies & Company, Inc. ('Jefferies') as its financial
advisor, pursuant to an engagement letter dated December 16, 1997, a true and
correct copy of which has been delivered to Price REIT prior to the date hereof.
Other than the foregoing arrangements, Kimco is not aware of any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
6.17. Opinion of Financial Advisor. Kimco has received the opinion of
Jefferies to the effect that, as of the date hereof, the Merger Consideration to
be paid by Kimco pursuant to the Merger is fair to the holders of Kimco Common
Stock from a financial point of view.
6.18. Price REIT Stock Ownership. Neither Kimco nor any of its
Subsidiaries owns any shares of capital stock of Price REIT or other securities
convertible into capital stock of Price REIT.
6.19. Related Party Transactions. Set forth in the Kimco Disclosure Letter
is a list of all arrangements, agreements and contracts entered into by Kimco or
any of its Subsidiaries with any executive officer, director or family members
of affiliates of such persons required to be disclosed in the Kimco Reports
(including reports and filings analogous to the Kimco Reports prior to January
1, 1995) pursuant to the rules and regulations of the SEC. The copies of such
documents, all of which have been previously delivered or made available to
Price REIT, are listed on the Kimco Disclosure Letter and are true and correct.
6.20. Contracts and Commitments. The Kimco Disclosure Letter or the Kimco
Reports set forth, as of the date hereof, (i) all notes, debentures, bonds and
other evidence of indebtedness which are secured or
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collateralized by mortgages, deeds of trust or other security interests in the
Kimco Properties or personal property of Kimco and its Subsidiaries and (ii)
each Commitment entered into by Kimco or any of its Subsidiaries which may
result in total payments or liability in excess of $500,000, excluding tenant
reimbursements and leases entered into in the ordinary course. Copies of the
foregoing have been previously delivered or made available to Price REIT, are
listed on the Kimco Disclosure Letter or included in the Kimco Reports and are
true and correct. None of Kimco or any of its Subsidiaries has received any
notice of a default that has not been cured under any of the documents described
in clause (i) above or is in default respecting any payment obligations
thereunder beyond any applicable grace periods. All joint venture agreements to
which Kimco or any of its Subsidiaries is a party are set forth on the Kimco
Disclosure Letter and Kimco or its Subsidiaries are not in default with respect
to any obligations, which individually or in the aggregate are material,
thereunder.
6.21. Leases.
(a) The Kimco Disclosure Letter sets forth a list of all Kimco Properties
that are subject to or encumbered by any non-residential lease accounting for 1%
or more of Kimco's rental revenues for the most recent period reflected in the
financial statements included in the Kimco Reports (a 'Material Kimco Lease')
and, with respect to each such Material Kimco Lease, sets forth the following
information:
(i) the name of the lessee;
(ii) the expiration date of the lease;
(iii) the amount (or method of determining the amount) of monthly
rentals due under the lease; and
(iv) with respect to any Material Kimco Lease with a remaining term of
less than 24 months, whether the lessee has notified Kimco in writing of
any intention not to renew, or seek to renew, the lease.
(b) Except as set forth in the Kimco Disclosure Letter, (i) all rental
payments due under each Material Kimco Lease have been paid during the period
January 1, 1997 through November 30, 1997 and (ii) to Kimco's knowledge, no
lessee is in material default, and no condition or event exists which with the
giving of notice or the passage of time, or both, would constitute a material
default by any lessee, under any Material Kimco Lease.
6.22. Investment Company Act of 1940. Neither Kimco nor any of its
Subsidiaries is, or at the Effective Time will be, required to be registered
under the Investment Company Act of 1940, as amended.
ARTICLE 7
COVENANTS
7.1. No Solicitation by Price REIT. (a) Price REIT shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize or permit any of its
directors, officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
Subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any proposal
which constitutes any Price REIT Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding any Price REIT Takeover
Proposal; provided, however, that if the Board of Directors of Price REIT
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to Price REIT's
stockholders under applicable law, Price REIT may, in response to a Price REIT
Takeover Proposal which was not solicited by it or which did not otherwise
result from a breach of this Section 7.1(a), and subject to providing prior
written notice of its decision to take such action to Kimco and compliance with
Section 7.1(c), (x) furnish information with respect to Price REIT and its
Subsidiaries to any person making a Price REIT Takeover Proposal pursuant to a
customary confidentiality agreement (as determined by Price REIT after
consultation with its outside counsel) and (y) participate in discussions or
negotiations regarding such Price REIT Takeover Proposal. For purposes of this
Agreement, 'Price REIT Takeover Proposal' means any proposal made by a third
party to acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, for consideration consisting of
cash and/or securities, more than
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50% of the combined voting power of the shares of Price REIT Common Stock then
outstanding or all or substantially all the assets of Price REIT.
(b) Except as expressly permitted by this Section 7.1, neither the Board of
Directors of Price REIT nor any committee thereof shall (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to Kimco, the
approval or recommendation by such Board of Directors or such committee of the
Merger or this Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any Price REIT Takeover Proposal or (iii) cause Price REIT
to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a 'Price REIT Acquisition
Agreement') related to any Price REIT Takeover Proposal. Notwithstanding the
foregoing, in the event that a majority of the Board of Directors of Price REIT
determines in good faith (A) (based on the advice of a financial advisor of
nationally recognized reputation) that a pending Price REIT Takeover Proposal is
more favorable to Price REIT's stockholders than the Merger, (B) that such Price
REIT Takeover Proposal is reasonably capable of being consummated and (C) that
there is a substantial probability that the adoption of this Agreement by
holders of Price REIT Common Stock will not be obtained due to the pending Price
REIT Takeover Proposal, the Board of Directors of Price REIT may (subject to
this and the following sentences and in compliance with Section 9.3(a)) approve
and recommend such Price REIT Takeover Proposal and, in connection therewith,
withdraw or modify its approval or recommendation of this Agreement and the
Merger and terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause Price REIT to enter into any Price REIT
Acquisition Agreement with respect to such Price REIT Takeover Proposal), but
only at a time that is after the fifth business day following Kimco's receipt of
written notice advising Kimco that the Board of Directors of Price REIT is
prepared to accept a Price REIT Takeover Proposal, specifying the material terms
and conditions of such Price REIT Takeover Proposal and identifying the person
making such Price REIT Takeover Proposal.
(c) In addition to the obligations of Price REIT set forth in paragraphs
(a) and (b) of this Section 7.1, Price REIT shall immediately advise Kimco
orally and in writing of any request for information or of any Price REIT
Takeover Proposal, the material terms and conditions of such request or Price
REIT Takeover Proposal and the identity of the person making such request or
Price REIT Takeover Proposal. Price REIT will keep Kimco reasonably informed of
the status and details (including amendments or proposed amendments) of any such
request or Price REIT Takeover Proposal.
(d) Nothing contained in this Section 7.1 shall prohibit Price REIT from
taking and disclosing to its stockholders a position contemplated by Rule 14d-9
and Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to Price REIT's stockholders if, in the good faith judgment of the
Board of Directors of Price REIT, after consultation with outside counsel,
failure so to disclose would be inconsistent with its obligations under
applicable law; provided, however, that neither Price REIT nor its Board of
Directors nor any committee thereof shall withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to this Agreement or
the Merger or approve or recommend, or propose publicly to approve or recommend,
a Price REIT Takeover Proposal, except in accordance with this Section 7.1.
7.2. No Solicitation by Kimco. (a) Kimco shall not, nor shall it permit
any of its Subsidiaries to, nor shall it authorize or permit any of its
directors, officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
Subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any proposal
which constitutes any Kimco Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding any Kimco Takeover
Proposal; provided, however, that if the Board of Directors of Kimco determines
in good faith, after consultation with outside counsel, that it is necessary to
do so in order to comply with its fiduciary duties to Kimco's stockholders under
applicable law, Kimco may, in response to a Kimco Takeover Proposal which was
not solicited by it or which did not otherwise result from a breach of this
Section 7.2(a), and subject to providing prior written notice of its decision to
take such action to Price REIT and compliance with Section 7.2(c), (x) furnish
information with respect to Kimco and its Subsidiaries to any person making a
Kimco Takeover Proposal pursuant to a customary confidentiality agreement (as
determined by Kimco after consultation with its outside counsel) and (y)
participate in discussions or negotiations regarding such Kimco Takeover
Proposal. For purposes of this Agreement, 'Kimco Takeover Proposal' means any
proposal made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
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combination, recapitalization, liquidation, dissolution or similar transaction,
for consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Kimco Common Stock then outstanding or
all or substantially all the assets of Kimco.
(b) Except as expressly permitted by this Section 7.2, neither the Board of
Directors of Kimco nor any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to Price REIT, the
approval or recommendation by such Board of Directors or such committee of the
Merger, this Agreement or the issuance of Kimco Common Stock and Kimco Preferred
Stock in connection with the Merger, (ii) approve or recommend, or propose
publicly to approve or recommend, any Kimco Takeover Proposal or (iii) cause
Kimco to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a 'Kimco Acquisition Agreement')
related to any Kimco Takeover Proposal. Notwithstanding the foregoing, in the
event that a majority of the Board of Directors of Kimco determines in good
faith (A) (based on the advice of a financial advisor of nationally recognized
reputation) that a pending Kimco Takeover Proposal is more favorable to Kimco's
stockholders than the Merger, (B) that such Price REIT Takeover Proposal is
reasonably capable of being consummated and (C) that there is a substantial
probability that the adoption of this Agreement by holders of Kimco Common Stock
will not be obtained due to the existence of the pending Kimco Takeover
Proposal, the Board of Directors of Kimco may (subject to this and the following
sentences) approve and recommend such Kimco Takeover Proposal and, in connection
therewith, withdraw or modify its approval or recommendation of this Agreement
and the Merger and terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause Kimco to enter into any Kimco Acquisition
Agreement with respect to such Kimco Takeover Proposal), but only at a time that
is after the fifth business day following Price REIT's receipt of written notice
advising Price REIT that the Board of Directors of Kimco is prepared to accept a
Kimco Takeover Proposal, specifying the material terms and conditions of such
Kimco Takeover Proposal and identifying the person making such Kimco Takeover
Proposal.
(c) In addition to the obligations of Kimco set forth in paragraphs (a) and
(b) of this Section 7.2, Kimco shall immediately advise Price REIT orally and in
writing of any request for information or of any Kimco Takeover Proposal, the
material terms and conditions of such request or Kimco Takeover Proposal and the
identity of the person making such request or Kimco Takeover Proposal. Kimco
will keep Price REIT reasonably informed of the status and details (including
amendments or proposed amendments) of any such request or Kimco Takeover
Proposal.
(d) Nothing contained in this Section 7.2 shall prohibit Kimco from taking
and disclosing to its stockholders a position contemplated by Rule 14d-9 and
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to Kimco's stockholders if, in the good faith judgment of the Board of Directors
of Kimco, after consultation with outside counsel, failure so to disclose would
be inconsistent with its obligations under applicable law; provided, however,
that neither Kimco nor its Board of Directors nor any committee thereof shall
withdraw or modify, or propose publicly to withdraw or modify, its position with
respect to this Agreement, the Merger, the issuance of Kimco Common Stock and
Kimco Preferred Stock in connection with the Merger, or approve or recommend, or
propose publicly to approve or recommend, a Kimco Takeover Proposal, except in
accordance with this Section 7.2.
7.3. Conduct of Businesses.
(i) Prior to the Effective Time, except as set forth in the Price REIT
Disclosure Letter or the Kimco Disclosure Letter or as contemplated by this
Agreement, unless the other party has consented in writing thereto, Kimco and
Price REIT:
(a) shall use their reasonable efforts, and shall cause each of their
respective Subsidiaries to use their reasonable efforts, to preserve intact
their business organizations and goodwill and keep available the services
of their respective officers and employees;
(b) shall confer on a regular basis with one or more representatives
of the other to report material operational matters and, subject to
Sections 7.1 and 7.2, respectively, any proposals to engage in material
transactions;
(c) shall promptly notify the other of any material emergency or other
material change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or the normal course of their
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businesses or in the operation of their properties, any material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the breach in any
material respect of any representation or warranty contained herein;
(d) shall set the record date for the quarterly dividend payable with
respect to the Kimco Common Stock and Kimco Preferred Stock and Price REIT
Common Stock, respectively, for the first calendar quarter of 1998 to a
date no later than April 1; and
(e) shall promptly deliver to the other true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement.
(ii) Prior to the Effective Time, except (1) as disclosed in the Price REIT
Two-Year Projection and the Price REIT Development Pipeline, copies of which
have been previously provided to Kimco, (2) as set forth in the Price REIT
Disclosure Letter, unless Kimco has consented in writing thereto, Price REIT:
(a) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted, subject to clause
(b) below;
(b) shall not, and shall cause its Subsidiaries not to, acquire, enter
into an option to acquire or exercise an option or contract to acquire
additional real property, encumber assets or commence construction of, or
enter into any agreement or commitment to develop or construct, retail
shopping center properties or other real estate projects, except in the
case of any of the foregoing in an amount not to exceed $150,000,000 in the
aggregate;
(c) shall not amend its charter or bylaws;
(d) shall not (1) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing on the
date hereof and disclosed pursuant to this Agreement, issue any shares of
its capital stock, effect any stock split, reverse stock split, stock
dividend, recapitalization or other similar transaction other than a
private placement or a sale pursuant to Rule 415 of the Securities Act
under an effective Price REIT registration statement of capital stock of
Price REIT for an amount not to exceed $75,000,000, the proceeds of which
shall be applied to pay down outstanding borrowings under Price REIT's
existing credit facilities or to the matters specified in Section
7.3(ii)(b), in each case in a manner consistent with Price REIT's past
practice, (2) grant, confer or award any option, warrant, conversion right
or other right not existing on the date hereof to acquire any shares of its
capital stock, (3) increase any compensation or enter into or amend any
employment agreement with any of its present or future officers or
directors or (4) adopt any new employee benefit plan (including any stock
option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan in any material respect, except for changes which are
required by applicable law or are less favorable to participants in such
plans;
(e) shall not declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock,
except (1)(x) a dividend in an amount not to exceed $0.75 per share of
Price REIT Common Stock for the last quarter of the year ending December
31, 1997 and (y) a dividend in an amount equal to the greater of (I) $0.75
per quarter pro-rated for the period from January 1, 1998 up to and
including the Closing Date and (II) the sum of (A) Price REIT's estimated
undistributed real estate investment trust taxable income (calculated
without regard to the dividends paid deductions as defined in Section 561
of the Code and by excluding net capital gain) within the meaning of
Section 857(b)(2) of the Code for Price REIT's 1998 taxable year ending on
the Closing Date and (B) Price REIT's estimated undistributed net capital
gain within the meaning of Section 857(b)(3) of the Code for Price REIT's
1998 taxable year ending on the Closing Date, and except (2) in connection
with the use of shares of capital stock to pay the exercise price or tax
withholding in connection with stock-based employee benefit plans of Price
REIT, directly or indirectly redeem, purchase or otherwise acquire any
shares of its capital stock or capital stock of any of its Subsidiaries, or
make any commitment for any such action;
(f) except in the ordinary course of business consistent with past
practice, shall not, and shall not permit any of its Subsidiaries to, sell,
lease, mortgage or otherwise encumber or subject to any Encumbrances or
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otherwise dispose of (i) any Price REIT Properties or any of its capital
stock of or other interests in its Subsidiaries or (ii) any of its other
assets which are material, individually or in the aggregate;
(g) shall not, and shall not permit any of its Subsidiaries to, (i)
incur, assume or prepay any indebtedness for borrowed money in an amount in
excess of $100,000,000, which amounts shall be applied to pay down
outstanding borrowings under Price REIT's existing credit facilities or to
the matters specified in Section 7.3(ii)(b), in each case in a manner
consistent with Price REIT's past practice, (ii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any third party or (iii) make any
loans, advances or capital contributions to, or (except as permitted by
Section 7.3(ii)(l)) investments in, any other person, other than loans,
advances and capital contributions to Subsidiaries;
(h) shall not, and shall not permit any of its Subsidiaries to, pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto) of Price
REIT included in the Price REIT Reports or incurred in the ordinary course
of business consistent with past practice;
(i) shall not, and shall not permit any of its Subsidiaries to, enter
into any Commitment which may result in total payments or liability by or
to it in excess of $200,000, except (1) tenant reimbursements and leases
entered into in the ordinary course consistent with past practice and (2)
capital expenditures disclosed in the Price REIT Project Pipeline for 1998
and 1999, a copy of which has been previously provided to Kimco;
(j) shall not, and shall not permit any of its Subsidiaries to, enter
into any Commitment with any officer, director, consultant or affiliate of
Price REIT or any of its Subsidiaries, other than a payment to each of the
three individuals entering into the Ancillary Agreements, of an amount
equal to the respective 1997 bonus awards paid to such individuals by Price
REIT pro-rated for the period from January 1, 1998 up to and including the
Effective Time;
(k) shall not, and shall not permit any of its Subsidiaries to, take
any other action that would cause the representations and warranties set
forth in Section 5.9 (with each reference therein to 'ordinary course of
business' being deemed for purposes of this Section 7.3(ii)(k) to be
immediately followed by 'consistent with past practice') to no longer be
true and correct;
(l) shall not acquire, or announce any proposed acquisition of, 50% or
more of the Voting Securities, or all or substantially all of the assets,
of another entity which has net assets in excess of $25,000,000. As used in
this Section 7.3(ii)(l), 'Voting Securities' shall mean any capital stock
or partnership or membership interests having the right generally to vote
in the election of directors, in the case of a corporation, or to otherwise
generally select the governing body, in the case of any other entity; and
(m) shall not, and shall not permit any of its Subsidiaries to,
authorize, or commit or agree to take, any of the foregoing actions.
(iii) Prior to the Effective Time, unless Price REIT has consented in
writing thereto, Kimco:
(a) shall not declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock
(including any dividend distribution payable in, or otherwise make a
distribution of, shares of capital stock of any existing or subsequently
formed subsidiary of Kimco), except (1)(v) (subject to Section 7.3(i)(d)) a
dividend in an amount not to exceed $0.48 per share of Kimco Common Stock
for the last calendar quarter of 1997, (w) a dividend in the amount of
$0.484375 per depositary share representing the Class A Preferred Stock,
(x) a dividend in the amount of $0.53125 per depositary share representing
the Class B Preferred Stock, (y) a dividend in the amount of $0.52345 per
depositary share representing the Class C Preferred Stock and (z) a
dividend in an amount equal to the greater of (I) $0.48 per quarter
pro-rated for the period from January 1, 1998 up to and including the
Closing Date and (II) the sum of (A) Kimco's estimated undistributed real
estate investment trust taxable income (calculated without regard to
dividends paid deductions as defined in Section 561 of the Code and by
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excluding net capital gain) within the meaning of Section 857(b)(2) of the
Code for Kimco's 1998 taxable year ending on the Closing Date and (B)
Kimco's estimated undistributed net capital gain within the meaning of
Section 857(b)(3) of the Code for Kimco's 1998 taxable year ending on the
Closing Date and except (2) in connection with the use of shares of its
capital stock to pay the exercise price or tax withholding in connection
with stock-based employee benefit plans of Kimco, directly or indirectly
redeem, purchase or otherwise acquire any shares of its capital stock or
capital stock of any of its Subsidiaries, or make any commitment for any
such action; and
(b) shall not amend its charter or bylaws.
(iv) If Kimco enters into negotiations with another Person who has a class
of securities registered under the Exchange Act regarding the acquisition of
such Person (whether effected through a merger, consolidation, share exchange,
tender offer or other form), then at least three business days prior to
executing any definitive agreement with such Person, Kimco shall notify Price
REIT of such transaction and consult with Price REIT with respect thereto, it
being understood, however, that Price REIT shall have no approval rights with
respect thereto. As used in this Section 7.3(iv), 'Person' means an individual,
corporation, partnership, limited liability company, joint venture, association,
trust, unincorporated organization or other entity.
(v) Except as required by law, Kimco and Price REIT shall not, and shall
not permit any of their respective Subsidiaries to, voluntarily take any action
that would, or that could reasonably be expected to, result in (a) any of the
representations and warranties of such party set forth in this Agreement that
are qualified as to materiality becoming untrue at the Effective Time, (b) any
of such representations and warranties that are not qualified as to materiality
becoming untrue in any material respect at the Effective Time or (c) except as
contemplated by Sections 7.1 and 7.2, any of the conditions to the Merger set
forth in Article 8 not being satisfied.
7.4. Meetings of Stockholders. Each of Kimco and Price REIT will take all
action necessary in accordance with applicable law and its charter and bylaws to
convene a meeting of its stockholders as promptly as practicable to consider and
vote upon (a) in the case of Kimco, the approval of the issuance of the Kimco
Common Stock constituting a part of the Merger Consideration pursuant to the
Merger contemplated hereby and (b) in the case of Price REIT, the approval of
this Agreement and the transactions contemplated hereby. The Board of Directors
of Kimco and the Board of Directors of Price REIT shall each recommend such
approval and Kimco and Price REIT shall each take all lawful action to solicit
such approval, including, without limitation, timely mailing the Proxy
Statement/Prospectus (as defined in Section 7.8); provided, however, that such
recommendation or solicitation is subject to any action taken by, or upon
authority of, the Board of Directors of Kimco or the Board of Directors of Price
REIT, as the case may be, in the exercise of its good faith judgment as to its
fiduciary duties to its stockholders imposed by law. Kimco and Price REIT shall
coordinate and cooperate with respect to the timing of such meetings and shall
use their best efforts to hold such meetings on the same day. If on the date of
the stockholder meetings of Kimco and Price REIT established pursuant to this
paragraph, either Kimco or Price REIT has respectively received less than a
majority of the shares of the Kimco Common Stock present and voting at the
meeting of the holders of Kimco Common Stock in favor of the issuance of the
Kimco Common Stock constituting part of the Merger Consideration or a majority
of the outstanding shares of Price REIT Common Stock at the meeting of the
holders of Price REIT Common Stock in favor of the Merger and neither a Price
REIT Takeover Proposal nor a Kimco Takeover Proposal has been publicly disclosed
and not withdrawn prior to the date of such meeting, then both parties shall
recommend the adjournment of their respective stockholder meetings until the
first to occur of (i) the date (10) days after the originally scheduled date of
the stockholder meetings or (ii) the date on which duly executed proxies for the
requisite number of votes approving the Merger or the issuance of the Kimco
Common Stock constituting a part of the Merger Consideration, as applicable,
shall have been obtained. It shall be a condition to the mailing of the Proxy
Statement/Prospectus that (i) Kimco shall have received a 'comfort' letter from
Ernst & Young LLP, independent public accountants for Price REIT, dated as of a
date within two business days before the date on which the Form S-4 (as defined
in Section 7.8) shall become effective, with respect to the financial statements
of Price REIT included in the Proxy Statement/Prospectus, in form and substance
reasonably satisfactory to Kimco, and customary in scope and substance for
'comfort' letters delivered by independent public accountants in connection with
registration statements and proxy statements similar to the Form S-4 and the
Proxy Statement/Prospectus, and (ii) Price REIT shall have received a 'comfort'
letter from Coopers & Lybrand, L.L.P., independent public accountants for Kimco,
dated as of a date within two business days before the date on
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which the Form S-4 shall become effective, with respect to the financial
statements of Kimco included in the Proxy Statement/Prospectus, in form and
substance reasonably satisfactory to Price REIT, and customary in scope and
substance for 'comfort' letters delivered by independent public accountants in
connection with registration statements and proxy statements similar to the Form
S-4 and the Proxy Statement/ Prospectus.
7.5. Filings; Other Action. Subject to the terms and conditions herein
provided, Price REIT and Kimco shall: (a) to the extent required, promptly make
their respective filings with respect to the Merger; (b) use all reasonable
efforts to cooperate with one another in (i) determining which filings are
required to be made prior to the Effective Time with, and which consents,
approvals, permits or authorizations are required to be obtained prior to the
Effective Time from, governmental or regulatory authorities of the United
States, the several states and foreign jurisdictions in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (ii) timely making all such filings and
timely seeking all such consents, approvals, permits or authorizations; (c) use
all reasonable efforts to obtain in writing any consents required from third
parties in form reasonably satisfactory to Price REIT and Kimco necessary to
effectuate the Merger; and (d) use all reasonable efforts to take, or cause to
be taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after the Effective
Time, any further action is necessary or desirable to carry out the purpose of
this Agreement, the proper officers and directors of Kimco and Price REIT shall
take all such necessary action.
7.6. Inspection of Records. From the date hereof to the Effective Time,
each of Price REIT and Kimco shall allow all designated officers, attorneys,
accountants and other representatives of the other access at all reasonable
times to the records and files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs, of Price REIT and
Kimco and their respective Subsidiaries.
7.7. Publicity. The initial press release relating to this Agreement shall
be a joint press release and thereafter Price REIT and Kimco shall, subject to
their respective legal obligations (including requirements of stock exchanges
and other similar regulatory bodies), consult with each other, and use
reasonable efforts to agree upon the text of any press release, before issuing
any such press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any federal or
state governmental or regulatory agency or with any national securities exchange
with respect thereto.
7.8. Registration Statement. Kimco and Price REIT shall cooperate and
promptly prepare and Kimco shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the 'Form S-4') under the Securities Act,
with respect to the Merger Consideration issuable in the Merger and the Option
Consideration deliverable pursuant to Section 4.1(e), a portion of which
Registration Statement shall also serve as the joint proxy statement with
respect to the meetings of the stockholders of Price REIT and of Kimco in
connection with the Merger (the 'Proxy Statement/Prospectus'). The respective
parties will cause the Proxy Statement/Prospectus and the Form S-4 to comply as
to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder. Kimco
shall use all reasonable efforts, and Price REIT will cooperate with Kimco, to
have the Form S-4 declared effective by the SEC as promptly as practicable.
Kimco shall use its reasonable efforts to obtain, prior to the effective date of
the Form S-4, all necessary state securities law or 'Blue Sky' permits or
approvals required to carry out the transactions contemplated by this Agreement
and will pay all expenses incident thereto. Kimco agrees that the Proxy
Statement/Prospectus and each amendment or supplement thereto at the time of
mailing thereof and at the time of the respective meetings of stockholders of
Kimco and Price REIT, or, in the case of the Form S-4 and each amendment or
supplement thereto, at the time it is filed or becomes effective, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that the foregoing shall not apply to the extent that any such untrue
statement of a material fact or omission to state a material fact was made by
Kimco in reliance upon and in conformity with information concerning Price REIT
furnished to Kimco by Price REIT specifically for use in the Proxy
Statement/Prospectus. Price REIT agrees that the information provided by it for
inclusion in the Proxy Statement/Prospectus and each amendment or supplement
thereto, at the time of mailing thereof and at the time of the respective
meetings of stockholders of Kimco and Price REIT, or, in the case of information
provided by Price REIT for inclusion in the Form S-4 or
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any amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Kimco will advise Price REIT, promptly after it receives notice
thereof, of the time when the Form S-4 has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of the Kimco Class D Preferred Stock issuable in connection with
the Merger for offering or sale in any jurisdiction, or any request by the SEC
for amendment of the Proxy Statement/Prospectus or the Form S-4 or comments
thereon and responses thereto or requests by the SEC for additional information.
7.9. Listing Application. Kimco shall promptly prepare and submit to the
NYSE a listing application covering the Kimco Common Stock and the Kimco
Depositary Shares issuable in the Merger, and shall use its reasonable efforts
to obtain, prior to the Effective Time, approval for the listing of such Kimco
Common Stock and the Kimco Depositary Shares, subject to official notice of
issuance.
7.10. Assumption of Debt and Leases. Without limiting the generality of
Section 7.5, with respect to debt issued by Price REIT under that certain
Indenture by and between Price REIT and First Trust of California, National
Association (the 'Trustee'), dated as of October 27, 1995 (the 'Indenture'), to
the extent the provisions of the Indenture so require, Kimco shall execute and
deliver to the Trustee (a) a Supplemental Indenture, in form and substance as
required by the Indenture (the 'Supplemental Indenture'), expressly assuming the
obligations of Price REIT with respect to the due and punctual payment of the
principal of (and premium, if any) and interest, if any, on all debt securities
issued by Price REIT under the Indenture and the due and punctual performance of
all the terms, covenants and conditions of the Indenture to be kept or performed
by Price REIT and (b) such other customary documents as the Trustee may request
in accordance with the Indenture with respect to the Supplemental Indenture.
7.11. Affiliates of Price REIT.
(a) At least 30 days prior to the Closing Date, Price REIT shall deliver to
Kimco a list of names and addresses of those persons who were, in Price REIT's
reasonable judgment, at the record date for its stockholders' meeting to approve
the Merger, 'affiliates' (each such person, an 'Affiliate') of Price REIT within
the meaning of Rule 145 of the rules and regulations promulgated under the
Securities Act ('Rule 145'). Price REIT shall provide Kimco such information and
documents as Kimco shall reasonably request for purposes of reviewing such list.
Price REIT shall use all reasonable efforts to deliver or cause to be delivered
to Kimco, prior to the Closing Date, from each of the Affiliates of Price REIT
identified in the foregoing list, an Affiliate Letter in the form attached
hereto as Exhibit B. Kimco shall be entitled to place legends as specified in
such Affiliate Letters on the certificates evidencing any shares of the Merger
Consideration to be received by such Affiliates pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the Merger Consideration, consistent with the terms of such Affiliate
Letters.
(b) Kimco shall file the reports required to be filed by it under the
Exchange Act and the rules and regulations adopted by the SEC thereunder, and it
will take such further action as any Affiliate of Price REIT may reasonably
request, all to the extent required from time to time to enable such Affiliate
to sell the Merger Consideration received by such Affiliate in the Merger
without registration under the Securities Act pursuant to (i) Rule 145(d)(1)
under the Securities Act, as such Rule may be amended from time to time, or (ii)
any successor rule or regulation hereafter adopted by the SEC.
7.12. Expenses. Subject to Section 9.5, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, except that (a) the filing fee in
connection with the filing of the Form S-4 or Proxy Statement/Prospectus with
the SEC and (b) the expenses incurred in connection with printing and mailing
the Form S-4 and the Proxy Statement/Prospectus, shall be shared equally by
Price REIT and Kimco.
7.13. Indemnification. (a) From and after the Effective Time, Kimco shall
cause the Surviving Corporation to keep in effect provisions in its Articles of
Incorporation and Bylaws providing for exculpation of director liability and
indemnification of directors, officers, employees and agents at least to the
extent that such persons are entitled thereto under the charter and bylaws of
Price REIT on the date hereof, subject to Maryland law, which provisions shall
not be amended, repealed or otherwise modified for a period of six years after
the
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Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at any time prior to the Effective Time were directors,
officers, employees or agents of Price REIT (the 'Indemnified Parties') in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), unless such modification is required by law; provided, that in the
event any claim or claims are asserted or made within such six year period, all
rights to indemnification in respect of any such claim or claims shall continue
until disposition of any and all such claims; provided, further, that from and
after the Effective Time, Kimco shall guaranty the obligations of the Surviving
Corporation under the indemnification provisions of the charter and bylaws of
Price REIT existing on the date hereof to the directors, officers, employees or
agents of Price REIT who at any time prior to the Effective Time were entitled
to indemnification thereunder in respect of actions or omissions occurring at or
prior to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement).
(b) For a period of two years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by Price REIT (provided
that the Surviving Corporation may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which occurred
before the Effective Time; provided, however, that in no event shall the
Surviving Corporation be required to expend pursuant to this Section 7.13(b)
more than an amount equal to 200% of current annual premiums paid by Price REIT
for such insurance (which annual premiums Price REIT represents and warrants to
be $130,000 in the aggregate).
(c) In the event that the Surviving Corporation or any of its respective
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case the successors
and assigns of such entity shall assume the obligations set forth in this
Section 7.13, which obligations are expressly intended to be for the irrevocable
benefit or, and shall be enforceable by, each Indemnified Party.
(d) This Section 7.13 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on the Surviving Corporation and its
representatives, successors and assigns.
7.14. Employees.
(a) Subject to considerations relating to the particular geographic region
in which the employee is located, it is the intent of the parties hereto that
the employees of Price REIT employed by the Surviving Corporation after the
Effective Time (the 'Former Price REIT Employees') shall in general receive
compensation and benefits on the same basis and subject to the same standards as
the employees of Kimco; provided, that, for a period of one year after the
Closing Date the standards of compensation and benefits received by such
employees shall be substantially similar to, but not less than, those received
from Price REIT immediately prior to the Closing Date. In addition, all Former
Price REIT Employees shall, at the option of the Surviving Corporation, either
(i) continue to be eligible to participate in any 'employee benefit plan,' as
defined in Section 3(3) of ERISA, and any other benefit programs, policies and
arrangements of Price REIT which are, at the option of the Surviving
Corporation, continued by the Surviving Corporation, or alternatively shall be
eligible to participate in the same manner as other similarly situated employees
of the Surviving Corporation who were formerly employees of Kimco in any
'employee benefit plan,' as defined in Section 3(3) of ERISA, and any other
benefit programs, policies and arrangements sponsored or maintained by the
Surviving Corporation after the Effective Time. With respect to each such
employee benefit plan, program, policy or arrangement, service with Price REIT
or any of its Subsidiaries (as applicable) shall be included for purposes of
determining eligibility to participate, vesting (if applicable) and entitlement
to benefits. The medical plan or plans maintained by the Surviving Corporation
after the Effective Time shall waive all limitations as to pre-existing
conditions, exclusions and waiting periods with respect to participation and
coverage requirements applicable to Former Price REIT Employees. With respect to
vacation benefits provided by the Surviving Corporation, the vacation benefit of
each Former Price REIT Employee shall include all hours of accrued but unused
vacation hours with Price REIT or its affiliates. Nothing in this Section 7.14
shall require Kimco to continue the employment of any particular Price REIT
employee from and after the Closing Date.
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(b) For purposes of this Section 7.14, the term 'employees' shall mean all
current employees of Price REIT and its Subsidiaries (including those on
disability or approved leave of absence, paid or unpaid).
(c) As of the Effective Time, the Surviving Corporation shall adopt a
retention and severance program (the 'Retention and Severance Program'). With
respect to the Covered Employees (as defined below), the Surviving Corporation
shall issue to such Covered Employees a letter substantially in the form
previously agreed upon by the parties. The Surviving Corporation shall maintain
the Retention and Severance Program in accordance with the terms thereof. Both
(i) the employees of Price REIT and its Subsidiaries who will participate in the
Retention and Severance Program (the 'Covered Employees') and (ii) the aggregate
obligation of the Surviving Corporation under the Retention and Severance
Program shall be determined in the discretion of Joseph K. Kornwasser, subject
to the approval of Kimco, which approval shall not be unreasonably withheld.
(d) Concurrently with the execution and delivery of this Agreement, Kimco
will enter into an employment agreement in the forms attached hereto with each
of Joseph K. Kornwasser, Jerald Friedman and Lawrence M. Kronenberg, each of
which shall become effective at, and only upon the occurrence of, the Effective
Time.
(e) Kimco agrees that options to purchase an aggregate of 60,000 shares of
Kimco Common Stock shall be available for grant on the Closing Date, pursuant to
Kimco's Amended and Restated Stock Option Plan, to be allocated to individuals
in the discretion of Joseph K. Kornwasser, subject to the approval of Kimco,
which approval shall not be unreasonably withheld. The exercise price of each
such option shall be the closing price of a share of Kimco Common Stock on the
Closing Date, as reported by the NYSE.
7.15. Reorganization. From and after the date hereof and until the
Effective Time, neither Kimco nor Price REIT nor any of their respective
Subsidiaries or other affiliates shall (i) knowingly take any action, or
knowingly fail to take any action that would jeopardize qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code; or
(ii) enter into any contract, agreement, commitment or arrangement with respect
to the foregoing.
7.16. Advice of Changes. Kimco and Price REIT shall each promptly advise
the other party orally and in writing to the extent it has knowledge of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement, and
(iii) any change or event having, or which, insofar as can reasonably be
foreseen, could reasonably be expected to have a material adverse effect on such
party or on the truth of their respective representations and warranties or the
ability of the conditions set forth in Article 8 to be satisfied; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement.
7.17. Disqualifying Event. In connection with the transactions
contemplated by the Merger, the Board of Directors of Price REIT shall not
exercise any power, and shall waive any right at any time, to take any action to
declare a Disqualifying Event (as such term is defined in Price REIT's charter)
under Article IX of Price REIT's charter or to redeem or to refuse to transfer
shares of Price REIT Common Stock pursuant thereto.
7.18. Governance. Kimco's Board of Directors shall take all action
necessary to cause the directors comprising the full Board of Directors of Kimco
at the Effective Time to be increased by one Director and shall take all such
action necessary to cause Joseph K. Kornwasser to be selected as a Director of
Kimco for a term expiring at the 1999 annual meeting of shareholders following
the Effective Time, in order to fill the vacancy resulting from such newly
created directorship; provided that, notwithstanding the foregoing, in the event
the 1998 annual meeting of Kimco is held after the Effective Time, Joseph K.
Kornwasser shall be among the nominees submitted to the stockholders of Kimco at
the 1998 annual meeting of shareholders to vote on the election of directors for
the term set forth above in accordance with Maryland law.
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ARTICLE 8
CONDITIONS
8.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have been
approved in the manner required by applicable law or by applicable regulations
of any stock exchange or other regulatory body by the holders of the issued and
outstanding shares of capital stock of Price REIT and Kimco entitled to vote
thereon.
(b) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the consummation
of the transactions contemplated by this Agreement. In the event any such order
or injunction shall have been issued, each party agrees to use its reasonable
efforts to have any such injunction lifted.
(c) The Form S-4 shall have become effective and all necessary state
securities law or 'Blue Sky' permits or approvals required to carry out the
transactions contemplated by this Agreement shall have been obtained and no stop
order with respect to any of the foregoing shall be in effect.
(d) Kimco shall have obtained the approval for the listing of the Kimco
Common Stock and Kimco Depositary Shares issuable in the Merger on the NYSE,
subject to official notice of issuance.
(e) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board, other regulatory body or
third parties required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to be
filed after the Effective Time and except where the failure to have obtained or
made any such consent, authorization, order, approval, filing or registration
would not have a material adverse effect on the business, results of operations
or financial condition of Kimco and Price REIT (and their respective
Subsidiaries), taken as a whole, following the Effective Time.
8.2. Conditions to Obligations of Price REIT to Effect the Merger. The
obligation of Price REIT to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions, unless
waived by Price REIT:
(a) Kimco shall have performed its agreements contained in this Agreement
required to be performed on or prior to the Closing Date and the representations
and warranties of Kimco and Merger Sub contained in this Agreement that are
qualified as to materiality or as to a Kimco Material Adverse Effect shall be
true and correct and any of such representations and warranties that are not so
qualified shall be true and correct in all material respects, in each case, as
of the Closing Date as if made on the Closing Date (except to the extent that
the representation or warranty is expressly limited by its terms to another
date), and Price REIT shall have received a certificate of the President or a
Vice President of Kimco, dated the Closing Date, certifying to such effect.
(b) Price REIT shall have received the opinion dated the Closing Date of
Gibson, Dunn & Crutcher LLP or another nationally recognized law firm selected
by Price REIT, based upon certificates and letters, which certificates and
letters are in the form agreed upon by the parties and are dated the Closing
Date, to the effect that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
and that Price REIT and Kimco will each be a party to that reorganization within
the meaning of Section 368(b) of the Code.
(c) Price REIT shall have received the opinion of Brown & Wood LLP in the
form attached as Exhibit C hereto (based upon customary representations in the
form attached thereto), dated the Closing Date, to the effect that, commencing
with its taxable year ended December 31, 1992, Kimco was organized in conformity
with the requirements for qualification and taxation as a REIT under Section 856
of the Code, and its method of operation has enabled it and will enable it to
continue to meet the requirements for qualification and taxation as a REIT under
the Code.
(d) Price REIT shall have received the opinion of Ballard Spahr Andrews &
Ingersoll, which is acting as Maryland counsel to Price REIT, to the effect that
all requisite approvals of the Merger by the stockholders of
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Price REIT have been obtained, that assuming due authorization and approval of
the Merger and the Articles of Merger by Kimco and its stockholders, upon filing
of the Articles of Merger with the SDAT, the Merger will be effective, and as to
such other matters of Maryland law as are customary in a transaction such as the
Merger.
(e) Price REIT shall have received a 'comfort' letter from Coopers &
Lybrand, L.L.P., dated the Closing Date, with respect to the financial
statements of Kimco included in the Proxy Statement/Prospectus, substantially in
the form described in Section 7.4.
(f) From the date of this Agreement through the Effective Time, there shall
not have occurred any change in the financial condition, business or operations
of Kimco and its Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have a Kimco Material Adverse Effect other than any such
change that results from a decline or deterioration in general economic
conditions or in conditions in the real estate markets in which either Price
REIT or Kimco operate and that affects both Price REIT and Kimco in a
substantially similar manner.
8.3. Conditions to Obligation of Kimco and Merger Sub to Effect the
Merger. The obligations of Kimco and Merger Sub to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions, unless waived by Kimco:
(a) Price REIT shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of Price REIT contained in this Agreement that
are qualified as to materiality or as to a Price REIT Material Adverse Effect
shall be true and correct and any such representations and warranties that are
not so qualified shall be true and correct in all material respects, in each
case, as of the Closing Date as if made on the Closing Date (except to the
extent that the representation or warranty is expressly limited by its terms to
another date), and Kimco shall have received a certificate of the President or a
Vice President of Price REIT, dated the Closing Date, certifying to such effect.
(b) Kimco shall have received the opinion dated the Closing Date of Brown &
Wood LLP or another nationally recognized law firm selected by Kimco, based upon
certificates and letters, which certificates and letters are in the form agreed
to by the parties and are dated the Closing Date, to the effect that the Merger
will be treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that Kimco and Price REIT will each
be a party to that reorganization within the meaning of Section 368(b) of the
Code.
(c) Kimco shall have received the opinion of Gibson, Dunn & Crutcher LLP in
the form attached as Exhibit D hereto (based upon customary representations in
the form attached thereto), dated the Closing Date, to the effect that,
commencing with its taxable year ended December 31, 1991, Price REIT was
organized in conformity with the requirements for qualification and taxation as
a REIT under Section 856 of the Code, and its method of operation has enabled it
and will enable it to continue to meet the requirements for qualification and
taxation as a REIT under the Code.
(d) Kimco shall have received the opinion of Brown & Wood LLP, which is
acting as Maryland counsel to Kimco, to the effect that this Agreement is
enforceable under New York law, that all requisite approvals of the Merger by
the stockholders of Kimco have been obtained, that assuming due authorization
and approval of the Merger and the Articles of Merger by Price REIT and its
stockholders, upon filing of the Articles of Merger with the SDAT, the Merger
will be effective, and as to such other matters as are customary in a
transaction such as the Merger.
(e) Kimco shall have received a 'comfort' letter from Ernst & Young LLP,
dated the Closing Date, with respect to the financial statements of Price REIT
included in the Proxy Statement/Prospectus, substantially in the form described
in Section 7.4.
(e) From the date of this Agreement through the Effective Time, there shall
not have occurred any change in the financial condition, business or operations
of Price REIT and its Subsidiaries, taken as a whole, that would have or would
be reasonably likely to have a Price REIT Material Adverse Effect other than any
such change that results from a decline or deterioration in general economic
conditions or in conditions in the real estate markets in which either Price
REIT or Kimco operate and that affects both Price REIT and Kimco in a
substantially similar manner.
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ARTICLE 9
TERMINATION
9.1. Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of Price REIT or Kimco,
by the mutual written consent of Kimco and Price REIT.
9.2. Termination by Either Kimco or Price REIT. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of Price REIT or the Board of Directors of Kimco if (a) the Merger shall not
have been consummated by June 30, 1998 or (b) a meeting of Price REIT's
stockholders shall have been duly convened and held and the approval of Price
REIT's stockholders required by Section 8.1(a) shall not have been obtained at
such meeting or at any adjournment thereof, or (c) a meeting of Kimco's
stockholders shall have been duly convened and held and the approval of Kimco's
stockholders required by Section 8.1(a) shall not have been obtained at such
meeting or at any adjournment thereof, or (d) a United States federal or state
court of competent jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable, provided, that the party seeking to terminate this Agreement
pursuant to this clause (d) shall have used all reasonable efforts to remove
such order, decree, ruling or injunction; and provided, in the case of a
termination pursuant to clause (a) above, that the terminating party shall not
have breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the occurrence of the
failure referred to in said clause.
9.3. Termination by Price REIT. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the adoption and approval by the stockholders of Price REIT referred to in
Section 8.1(a), by action of the Board of Directors of Price REIT, (a) in
accordance with Section 7.1(b); provided, however, that in order for the
termination of this Agreement pursuant to this Section 9.3(a) to be deemed
effective, Price REIT shall have complied with all provisions contained in
Section 7.1, including the notice provisions therein, and with applicable
requirements, including the payment of all amounts due under Section 9.5 or (b)
if Kimco or any of its directors or officers shall participate in discussions or
negotiations in breach of Section 7.2, or (c) if there has been a breach by
Kimco or Merger Sub of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to have a Kimco
Material Adverse Effect, which breach is not curable by June 29, 1998, or (d) if
there has been a material breach of any of the covenants or agreements set forth
in this Agreement on the part of Kimco, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Price REIT to Kimco. Notwithstanding the foregoing, any termination
pursuant to Section 9.3(a) shall only be effective if, simultaneously with such
termination, all sums that Price REIT is required to pay to Kimco or deposit
with the escrow agent pursuant to Section 9.5 have been paid or deposited in
immediately available funds.
9.4. Termination by Kimco. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
approval by the stockholders of Kimco referred to in Section 8.1(a), by action
of the Board of Directors of Kimco, (a) in accordance with Section 7.2(b);
provided, however, that in order for the termination of this Agreement pursuant
to this Section 9.4(a) to be deemed effective, Kimco shall have complied with
all provisions contained in Section 7.2, including the notice provisions
therein, or (b) if Price REIT or any of its directors or officers shall
participate in discussions or negotiations in breach of Section 7.1, or (c) if
there has been a breach by Price REIT of any representation or warranty
contained in this Agreement which would have or would be reasonably likely to
have a Price REIT Material Adverse Effect, which breach is not curable by June
29, 1998, (d) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of Price REIT, which breach
is not curable or, if curable, is not cured within 30 days after written notice
of such breach is given by Kimco to Price REIT or (e) in the event the Kimco
Average Closing Price or the closing price of Kimco Common Stock on the date
scheduled for the Closing or on either of the two immediately preceding business
days is less than $32.00.
9.5. Certain Fees and Expenses Upon Effect of Termination and
Abandonment. (a) If this Agreement shall be terminated (i) pursuant to Section
9.3(a), 9.4(b) or 9.4(d) (to the extent such termination pursuant to Section
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9.4(d) results from a material breach by Price REIT of the covenants set forth
in Sections 7.3(i)(a), 7.3(i)(c), 7.3(ii) (other than 7.3(ii)(c), 7.3(ii)(j) and
7.3(ii)(m) as it applies to Sections 7.3(ii)(c) and 7.3(ii)(j)), 7.5, 7.8 or
7.17; provided, that, the Board of Directors of Kimco makes a good faith
determination that such breach materially impairs either the ability to
consummate the Merger on the terms contemplated herein as of the date hereof or
the economic benefit of the Merger to Kimco anticipated at the date hereof),
then Price REIT will pay Kimco (provided Price REIT was not entitled to
terminate this Agreement pursuant to Section 9.3(c) or 9.3(d) at the time of
such termination) a fee equal to the Break-Up Fee (as defined below) or (ii)
pursuant to Section 9.4(c), 9.4(d) (to the extent such termination pursuant to
Section 9.4(d) results from a material breach by Price REIT of any of its
covenants in this Agreement other than those enumerated in clause (i) of this
Section 9.5(a) to the extent that the Board of Directors of Kimco has made the
determination set forth in the first proviso of said clause (i)) or 9.2(b), then
Price REIT will pay Kimco (provided Price REIT was not entitled to terminate
this Agreement pursuant to Section 9.3(c) or 9.3(d) at the time of such
termination) an amount equal to the Break-Up Expenses (as defined below).
(b) If this Agreement shall be terminated (i) pursuant to Section 9.4(e),
then Kimco will pay Price REIT (provided Kimco was not entitled to terminate
this Agreement pursuant to Section 9.4(b) or 9.4(c) at the time of such
termination) an amount equal to $6,250,000, (ii) pursuant to Section 9.4(a) or
9.3(b), then Kimco will pay to Price REIT (provided Kimco was not entitled to
terminate this Agreement pursuant to Section 9.4(c) or 9.4(d) at the time of
such termination) a fee equal to the Break-Up Fee or (iii) pursuant to Section
9.3(c), 9.3(d) or 9.2(c), then Kimco will pay Price REIT (provided Kimco was not
entitled to terminate this Agreement pursuant to Section 9.4(c) or 9.4(d) at the
time of such termination) an amount equal to the Break-Up Expenses.
(c) If the Merger is not consummated (other than due to the termination of
this Agreement pursuant to Section 9.1 or 9.2(c) or Kimco's failure to perform
its obligations under this Agreement in such a manner so as to entitle Price
REIT to terminate this Agreement pursuant to Section 9.3(c) or 9.3(d)) and at
the time of the termination of this Agreement a Price REIT Takeover Proposal has
been received by Price REIT, and either prior to the termination of this
Agreement or within twelve (12) months thereafter Price REIT enters into any
written Price REIT Acquisition Agreement which is subsequently consummated
(whether or not such Price REIT Acquisition Agreement is related to the Price
REIT Takeover Proposal which had been received at the time of the termination of
this Agreement), then Price REIT shall pay the Break-Up Fee to Kimco. If the
Merger is not consummated (other than due to the termination of this Agreement
pursuant to Section 9.1 or 9.2(b) or Price REITs's failure to perform its
obligations under this Agreement in such a manner so as to entitle Kimco to
terminate this Agreement pursuant to Section 9.4(c) or 9.4(d)) and at the time
of the termination of this Agreement a Kimco Takeover Proposal has been received
by Kimco, and either prior to the termination of this Agreement or within twelve
(12) months thereafter Kimco enters into any written Kimco Acquisition Agreement
which is subsequently consummated (whether or not such Kimco Acquisition
Agreement is related to the Kimco Takeover Proposal which had been received at
the time of the termination of this Agreement), then Kimco shall pay the
Break-Up Fee to Price REIT. Any and all amounts to be paid pursuant to this
Section 9.5, shall be paid, by Price REIT to Kimco or Kimco to Price REIT (as
applicable), in immediately available funds within three days of termination
(except as otherwise provided in Section 9.3).
(d) As used in this Agreement, 'Break-Up Fee' shall be an amount equal to
the lesser of (i) $12,500,000 plus Break-Up Expenses (the 'Base Amount') and
(ii) the maximum amount that can be paid to Kimco without causing it to fail to
meet the requirements of Sections 856(c)(2) and (3) of the Code determined as if
the payment of such amount did not constitute income described in Sections
856(c)(2)(A)- (H) and 856(c)(3)(A)-(I) of the Code ('Qualifying Income'), as
determined by independent accountants to the party hereto which becomes entitled
to the Break-Up Fee (the 'Fee Recipient'). Notwithstanding the foregoing, in the
event the Fee Recipient receives a letter from outside counsel (the 'Break-Up
Fee Tax Opinion') indicating that the Fee Recipient has received a ruling from
the IRS holding that the Fee Recipient's receipt of the Base Amount would either
constitute Qualifying Income or would be excluded from gross income within the
meaning of Sections 856(c)(2) and (3) of the Code (the 'REIT Requirements'), the
Break-Up Fee shall be an amount equal to the Base Amount. The obligation of the
party required to pay the Break-Up Fee to pay any unpaid portion of the Break-Up
Fee shall terminate five years from the date of this Agreement. In the event
that the Fee Recipient is not able to receive the full Base Amount, the other
party shall place the unpaid amount in escrow by wire transfer within three days
of termination (except as otherwise provided in Section 9.3) and shall not
release any
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portion thereof to the Fee Recipient unless and until the other party receives
either one or a combination of the following: (i) a letter from the Fee
Recipient's independent accountants indicating the maximum amount that can be
paid at that time to the Fee Recipient without causing the Fee Recipient to fail
to meet the REIT Requirements or (ii) a Break-Up Fee Tax Opinion, in either of
which events the other party shall pay to the Fee Recipient the lesser of the
unpaid Base Amount or the maximum amount stated in the letter referred to in (i)
above. Each of Price REIT and Kimco agrees to amend this Section 9.5 at the
request of the Fee Recipient in order to (x) maximize the portion of the
Break-Up Fee that may be distributed to the Fee Recipient hereunder without
causing the Fee Recipient to fail to meet the requirements of Sections 856
(c)(2) and (3) of the Code or (y) improve the Fee Recipient's chances of
securing a favorable ruling described in this Section 9.5(b), provided that no
such amendment may result in any additional cost or expense to the other party.
Amounts remaining in escrow after the obligation of a party to pay the Break-Up
Fee terminates shall be released to the party making such escrow deposit.
(e) The 'Break-Up Expenses' payable to Kimco or Price REIT, as the case may
be (the 'Expenses Recipient'), shall be an amount equal to the lesser of (i)
$2,000,000, (ii) the Expenses Recipient's out-of-pocket expenses incurred in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, all attorneys', accountants and investment
bankers' fees and expenses) and (iii) the maximum amount that can be paid to the
Expenses Recipient without causing it to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as if the payment of such
amount did not constitute Qualifying Income, as determined by independent
accountants to the Expenses Recipient. Notwithstanding the foregoing, in the
event the Expenses Recipient receives a letter from outside counsel (the
'Break-Up Fee Tax Opinion') indicating that the Expenses Recipient has received
a ruling from the IRS holding that the Expenses Recipient's receipt of the
Break-Up Expenses would either constitute Qualifying Income or would be excluded
from gross income within the meaning of the REIT Requirements, the Break-Up
Expenses shall be determined without regard to clause (iii) above. The
obligation of Kimco or Price REIT, as applicable ('Payor'), to pay any unpaid
portion of the Break-Up Expenses shall terminate five years from the date of
this Agreement. In the event that the Expenses Recipient is not able to receive
the full Break-Up Expenses, the Payor shall place the unpaid amount in escrow
and shall not release any portion thereof to the Expenses Recipient unless and
until the Payor receives any one or combination of the following: (i) a letter
from the Expenses Recipient's independent accountants indicating the maximum
amount that can be paid at the time to the Expenses Recipient without causing
the Expenses Recipient to fail to meet the REIT Requirements or (ii) a Break-Up
Expense Tax Opinion, in either of such events the Payor shall pay to the
Expenses Recipient the lesser of the unpaid Break-Up Expenses or the maximum
amount stated in the letter referred to in (i) above. Amounts remaining in
escrow after the obligation of a party to pay the Break-Up Expenses terminates
shall be released to the party making such escrow deposit.
(f) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article 9, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
9.5 and Section 7.12 and except for the provisions of Section 10.3, 10.4, 10.5,
10.6, 10.7, 10.9, 10.10, 10.13, 10.14 and 10.15. In the event either party is
required to file suit to seek all or a portion of Break-up Fee and/or Break-up
Expenses, and it ultimately succeeds, it shall be entitled to all expenses,
including attorneys' fees and expenses, which it has incurred in enforcing its
rights hereunder.
9.6. Extension; Waiver. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE 10
GENERAL PROVISIONS
10.1. Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the
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<PAGE>
Merger, provided, however, that the agreements contained in Article 4, the last
sentence of Section 7.5 and Sections 7.11, 7.13 and 7.14, and this Article 10
shall survive the Merger.
10.2. Notices. Any notice required to be given hereunder shall be in
writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid) and addressed as follows:
If to Kimco or Merger Sub:
Milton Cooper
Kimco Realty Corporation
3333 New Hyde Park Road
New Hyde Park, NY 11042-0020
Facsimile: (516) 869-7117
With a copy to:
Joseph W. Armbrust, Esq.
Brown & Wood LLP
One World Trade Center
New York, NY 10048
Facsimile: (212) 839-5599
If to Price REIT:
Joseph K. Kornwasser
The Price REIT, Inc.
145 South Fairfax Avenue
Fourth Floor
Los Angeles, CA 90036
Facsimile: (213) 937-8175
With a copy to:
Kenneth M. Doran, Esq.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Facsimile: (213) 229-7520
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.
10.3. Assignment; Binding Effect; Benefit. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Sections 7.13 and 7.14(e) (collectively, the 'Third Party Provisions'), nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement. The Third Party Provisions may be enforced
by the beneficiaries thereof.
10.4. Entire Agreement. This Agreement, the Exhibits, the Price REIT
Disclosure Letter and the Kimco Disclosure Letter and any documents delivered by
the parties in connection herewith constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
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<PAGE>
10.5. Confidentiality. (a) Except to the extent that any of the provisions
of that certain confidentiality agreement dated December 9, 1997 between Kimco
and Price REIT (the 'Confidentiality Agreement') are inconsistent with this
Agreement, in which case the terms of this Agreement shall govern and supersede
such provisions, the parties hereto acknowledge and agree that the
Confidentiality Agreement remains in full force and effect and shall survive any
termination of this Agreement.
(b) Each party hereto further agrees that if this Agreement is terminated
in accordance with its terms, until June 30, 1998, (1) it will not offer to hire
or hire any person currently or formerly employed by the other party with whom
such party has had contact prior hereto other than persons whose employment
shall have been terminated by such other party prior to the date of such offer
to hire or hiring and (2) neither it nor its Affiliates shall, directly or
indirectly, (A) (w) solicit, seek or offer to effect or effect, (x) negotiate
with or provide any information to the Board of Directors of the other party,
any director or officer of the other party or any stockholder of the other party
with respect to, (y) make any statement or proposal, whether written or oral,
either alone or in concert with others, to the Board of Directors of the other
party, any director or officer of the other party or any stockholder of the
other party or any other person with respect to, or (z) make any public
announcement (except as required by law in respect of actions permitted hereby)
or proposal or offer whatsoever (including, but not limited to, any
'solicitation' of 'proxies' as such terms are defined or used in Regulation 14A
of the Exchange Act) with respect to, (i) any form of business combination or
similar or other extraordinary transaction involving the other party or any
Affiliate thereof, including, without limitation, a merger, tender or exchange
offer or liquidation of the other party's assets, (ii) any form of
restructuring, recapitalization or similar transaction with respect to the other
party or any Affiliate thereof, (iii) any purchase of any securities or assets,
or rights or options to acquire any securities or assets (through purchase,
exchange, conversion or otherwise), of the other party or any Affiliate thereof,
(iv) any proposal to seek representation on the Board of Directors of the other
party or otherwise to seek to control or influence the management, Board of
Directors or policies of the other party or any Affiliate thereof, (v) any
request or proposal to waive, terminate or amend the provisions of this Section
10.5, or (vi) any proposal or other statement inconsistent with the terms of
this Section 10.5 or (B) instigate, encourage, join, act in concert with or
assist (including, but not limited to, providing or assisting in any way in the
obtaining of financing for, or acting as a joint or co-bidder for the other
party with) any third party to do any of the foregoing, unless and until such
party has received the prior written invitation or approval of a majority of the
Board of Directors of the other party to do any of the foregoing; provided that
without such invitation or approval, either party may at any time, on a
confidential, non-public basis, submit to the Chief Executive Officer or, if
none, the President of the other party a proposal to (I) amend any of the
provisions of this Section 10.5(e) or (II) effect a business combination or
other extraordinary transaction with the other party providing for the
acquisition of all or substantially all of the assets or the securities of the
other party, including, without limitation, a merger, tender offer or exchange
offer. Each party hereto agrees that it will not agree with any third party not
to waive its rights under this Section 10.5.
10.6. Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of Price REIT and Kimco and prior to the filing of the Articles of
Merger with the State Department of Assessments and Taxation of Maryland;
provided, however, that after any such stockholder approval is obtained, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. The parties agree to amend
this Agreement in the manner provided in the immediately preceding sentence to
the extent required to (a) continue the status of the parties as REITs or (b)
preserve the Merger as a tax-free reorganization under Section 368 of the Code.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
10.7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its rules of
conflict of laws, except that the validity of the Merger shall be governed by
the MGCL. Each of Price REIT and Kimco hereby irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts of the State of
New York and of the United States of America located in the State of New York
(the 'New York Courts') for any litigation arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to commence
any litigation relating thereto except in such courts), waives any objection to
the laying of venue of any such litigation in the New York Courts
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<PAGE>
and agrees not to plead or claim in any New York Court that such litigation
brought therein has been brought in an inconvenient forum.
10.8. Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
10.9. Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
10.10. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.11. Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
or warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
10.6, waive compliance with any of the agreements or conditions of the other
party contained in this Agreement. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
10.12. Incorporation. The Price REIT Disclosure Letter, the
Confidentiality Agreement and the Kimco Disclosure Letter and all Exhibits
attached hereto and thereto and referred to herein and therein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
10.13. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
10.14. Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any New York Court, this being in addition to
any other remedy to which they are entitled at law or in equity.
10.15. Definitions. As used in this Agreement: (a) 'Subsidiary' when used
with respect to any party means any corporation, partnership, limited liability
company, joint venture, business trust or other entity, of which such party
directly or indirectly owns or controls at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions with respect to
such corporation or other organization; and (b) 'knowledge' or 'best knowledge'
of any person means the actual knowledge of such person or of such person's
directors and executive officers after reasonable inquiry.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
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<PAGE>
KIMCO REALTY CORPORATION
<TABLE>
<S> <C>
ATTEST:
By: /s/ PETER T. SIMOR BY: /S/ MILTON COOPER
- ------------------------------------------------------ ------------------------------------------------------
ATTEST: REIT SUB, INC.
By: /s/ PETER T. SIMOR BY: /S/ MILTON COOPER
- ------------------------------------------------------ ------------------------------------------------------
ATTEST: THE PRICE REIT, INC.
By: /s/ LAWRENCE M. KRONENBERG BY: /S/ JOSEPH K. KORNWASSER
- ------------------------------------------------------ ------------------------------------------------------
</TABLE>
A-36
<PAGE>
SCHEDULE 6.2
1. Executive Employment Agreement dated January 13, 1998 between Kimco and
Joseph K. Kornwasser.
2. Executive Employment Agreement dated January 13, 1998 between Kimco and
Jerald Friedman.
3. Executive Employment Agreement dated January 13, 1998 between Kimco and
Lawrence M. Kronenberg.
S-1
<PAGE>
[This page intentionally left blank]
<PAGE>
EXHIBIT A
[REPLACED BY EXHIBIT A TO
THE SECOND AMENDMENT]
<PAGE>
EXHIBIT B
FORM OF AFFILIATE LETTER
Kimco Realty Corporation
3333 New Hyde Park Road
New Hyde Park, NY 11042-0020
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an 'affiliate' of The Price REIT, Inc., a Maryland corporation ('Price
REIT'), as the term 'affiliate' is (i) defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the 'Rules and Regulations')
of the Securities and Exchange Commission (the 'Commission') under the
Securities Act of 1933, as amended (the 'Act'), or (ii) used in and for the
purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger dated as
of January 13, 1998 (the 'Agreement'), among Kimco Realty Corporation, a
Maryland corporation ('Kimco'), REIT Sub, Inc., a Maryland corporation and a
wholly owned subsidiary of Kimco ('Merger Sub'), and Price REIT, Price REIT will
be merged with and into Merger Sub (the 'Merger').
As a result of the Merger, I may receive Common Stock, par value $.01 per
share, and depositary shares each of which represents an interest in one-tenth
of a share of Class D Cumulative Convertible Preferred Stock, par value $1.00
per share, of Kimco (the 'Merger Consideration') in exchange for shares owned by
me of Common Stock, par value $.01 per share, of Price REIT ('Price REIT Common
Stock').
I represent, warrant and covenant to Kimco that in the event I receive any
Merger Consideration as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Merger Consideration in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Merger Consideration
to the extent I felt necessary, with my counsel or counsel of Price REIT.
C. I have been advised that the issuance of Merger Consideration to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger was submitted for a vote of the
stockholders of Price REIT, I may be deemed to have been an affiliate of
Price REIT and any subsequent distribution by me of the Merger
Consideration has not been registered under the Act, I may not sell,
transfer or otherwise dispose of the Merger Consideration issued to me in
the Merger unless (i) such sale, transfer or other disposition has been
registered under the Act, (ii) such sale, transfer or other disposition is
made in conformity with Rule 145 promulgated by the Commission under the
Act or (iii) in the opinion of counsel reasonably acceptable to Kimco or a
'no action' letter obtained by the undersigned from the staff of the
Commission, such sale, transfer or other disposition is otherwise exempt
from registration under the Act.
D. I understand that Kimco is under no obligation to register the
sale, transfer or other disposition of the Merger Consideration by me or on
my behalf under the Act, or except as expressly set forth in the Agreement,
to take any other action necessary in order to make compliance with an
exemption from such registration available.
E. I do not own in excess of 1% of the outstanding Price REIT Common
Stock and, upon consummation of the Merger, will not own in excess of 1% of
the outstanding Kimco Common Stock.
<PAGE>
Execution of this letter should not be considered an admission on my part
that I am an 'affiliate' of Price REIT as described in the first paragraph of
this letter or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Very truly yours,
------------------------------------
Name:
Accepted this ____ day of
___________, 1998 by
KIMCO REALTY CORPORATION
By:
-----------------
Name:
---------------
Title:
--------------
<PAGE>
EXHIBIT C
[FORM OF OPINION]
, 1998
The Price REIT, Inc.
145 South Fairfax Avenue
Fourth Floor
Los Angeles, CA 90036
Ladies and Gentlemen:
We have acted as counsel for Kimco Realty Corporation, a Maryland
corporation ('Kimco'), in connection with the proposed merger (the 'Merger') of
The Price REIT, Inc., a Maryland corporation ('Price REIT'), with and into REIT
Sub, Inc., a Maryland corporation ('Merger Sub'), pursuant to an Agreement and
Plan of Merger dated as of January 13, 1998 (the 'Merger Agreement'), among
Kimco, Price REIT and Merger Sub, under which each issued and outstanding share
of Price REIT common stock will be converted into Kimco common stock and
depositary shares representing preferred stock.
In that connection, you have requested our opinion regarding certain
Federal income tax matters as further set forth below. In providing our opinion,
we have examined the Merger Agreement, the joint proxy statement/prospectus of
Kimco and Price REIT to be dated as of , 1998 (the 'Proxy
Statement/Prospectus'), and such other documents and corporate records as we
have deemed necessary or appropriate for purposes of our opinion. In addition,
we have assumed that (i) the Merger will be consummated in the manner
contemplated by the Proxy Statement/Prospectus and in accordance with the
provisions of the Merger Agreement and (ii) the representations made to us by
Kimco and Price REIT in a letter, dated , 1998, and delivered
to us for purposes of this opinion (the 'Kimco Representation Letter') are
accurate and complete.
Based on the foregoing information and representations, in our opinion,
commencing with its taxable year ending December 31, 1992, Kimco was organized
in conformity with the requirements for qualification and taxation as a REIT
under Section 856 of the Internal Revenue Code of 1986, as amended (the 'Code'),
and its method of operation has enabled it and will enable it to meet the
requirements for qualification and taxation as a REIT under the Code.
The opinions expressed herein are based upon existing statutory, regulatory
and judicial authority, any of which may be changed at any time with retroactive
effect. In addition, our opinions are based solely on the documents that we have
examined, the additional information that we have obtained, and the statements
contained in the Kimco Representation Letter, which we have assumed will be true
as of the effective time of the Merger. Our opinions cannot be relied upon if
any of the facts pertinent to the Federal income tax treatment of the Merger
stated in such documents or in such additional information is, or later becomes,
inaccurate, or if any of the statements contained in the Kimco Representation
Letter are, or later become, inaccurate. Finally, our opinions are limited to
the tax matters specifically covered hereby, and we have not been asked to
address, nor have we addressed, any other tax consequences in this opinion.
Furthermore, our opinion as to the status of Kimco as a REIT under the Code
is based upon the accuracy of the representations made by Kimco as to factual
matters relating to the organization, operation, income, assets, distributions
and stock ownership of Kimco. Kimco's qualification as a REIT depends upon its
having met and continuing to meet, through source of income, nature of assets
held, distribution levels and diversity of stock ownership, the various
qualifications tests imposed under the Code and described in the Proxy
Statement/Prospectus and the Kimco Representation Letter, the results of which
have not been and will not be reviewed by Brown & Wood LLP. Accordingly, we give
no assurance that the actual results of Kimco's operations for any taxable year
have satisfied or will satisfy such requirements.
This opinion is being provided solely for the benefit of Price REIT. No
other person or party shall be entitled to rely on this opinion.
Very truly yours,
<PAGE>
[This page intentionally left blank]
<PAGE>
EXHIBIT D
[FORM OF OPINION]
__________, 1998
(213) 229-7000
Kimco Realty Corporation
3333 New Hyde Park Road
New Hyde Park, NY 10142-0020
Re: Opinion Pursuant to Section 8.3(c) of Agreement and Plan of Merger
Gentlemen:
We are acting as special counsel to The Price REIT, Inc., a Maryland
corporation ('Price REIT'), in connection with (i) the Proxy
Statement/Prospectus, including the Registration Statement on Form S-4 (File No.
____________) (the 'Merger Registration Statement'), relating to the proposed
merger (the 'Merger') of Price REIT with and into REIT Sub, Inc. ('Merger Sub'),
a Maryland corporation, and a wholly-owned subsidiary of Kimco Realty
Corporation ('Kimco'). You have requested our opinion as to certain federal
income tax matters described below.
The Merger will be effected pursuant to the terms and conditions of the
Agreement and Plan of Merger (the 'Merger Agreement') dated of January 13, 1998,
among Kimco, Price REIT and Merger Sub. This opinion is being rendered pursuant
to Section 8.3(c) of the Merger Agreement.
In rendering our opinion, we have with your permission, relied upon and
assumed as correct now and as of the effective time of the Merger, (i) the
factual information contained in the Merger Registration Statement, (ii) certain
factual representations made by Price REIT, which are attached as Exhibits
hereto and made a part hereof, and (iii) such other materials as we have deemed
necessary or appropriate as a basis for our opinion.
On the basis of the information and representations contained in the
foregoing materials, we are of the opinion that:
Commencing with its taxable year ending December 31, 1991, Price REIT
was organized in conformity with the requirements for qualification as a
real estate investment trust, and its method of operation has enabled it to
meet the requirements for qualification and taxation as a real estate
investment trust under the Internal Revenue Code of 1986, as amended (the
'Code').
This opinion expresses our views as to federal income tax laws in effect as
of the date hereof, including the Code, applicable Treasury Regulations,
published rulings and administrative practices of the Internal Revenue Service
(the 'Service') and court decisions. This opinion represents our best legal
judgment as to the matters addressed herein, but is not binding on the Service
or the courts. Furthermore, the legal authorities upon which we rely are subject
to change either prospectively or retroactively. Any change in such authorities
or any change in the facts or representations, or any past or future actions by
Price REIT or Kimco contrary to such representations might adversely affect the
conclusions stated herein.
Furthermore, our opinion as to the status of Price REIT as a REIT under the
Code is based upon the accuracy of the representations made by Price REIT as to
factual matters relating to the organization, operation, income, assets,
distributions and stock ownership of Price REIT. Price REIT's qualification as a
REIT depends on its having met and continuing to meet, through actual operating
results, distribution levels and diversity of stock ownership, the various
qualifications tests imposed under the Code and described in the Merger
Registration Statement and the Exhibits attached thereto, the results of which
have not been and will not be
<PAGE>
reviewed by Gibson, Dunn & Crutcher LLP. Accordingly, we give no assurance that
the actual results of Price REIT's operations for any taxable year have
satisfied or will satisfy such requirements.
This opinion is being delivered to you solely for your use pursuant to
Section 8.3(c) of the Merger Agreement.
Very truly yours,
GIBSON, DUNN & CRUTCHER LLP
<PAGE>
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
FIRST AMENDMENT (the 'First Amendment') to Agreement and Plan of Merger
(the 'Original Agreement'), dated as of January 13, 1998, among Kimco Realty
Corporation, a Maryland corporation ('Kimco'), REIT Sub, Inc., a Maryland
corporation and a wholly owned subsidiary of Kimco ('Merger Sub'), and The Price
REIT, Inc., a Maryland corporation ('Price REIT').
WHEREAS, each of Kimco, Merger Sub and Price REIT has entered into the
Original Agreement and now desires to make certain changes to the Original
Agreement;
WHEREAS, the Boards of Directors of Kimco, Merger Sub and Price REIT have
approved the changes to the Original Agreement set forth in this First
Amendment.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and conditions herein, the parties hereby agree as
follows:
1. Section 4.1(b) is hereby deleted in its entirety and replaced by the
following:
(b) At the Effective Time, each share of common stock, par value $.01
per share, of Price REIT (the 'Price REIT Common Stock') issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into the right to receive, upon surrender of the certificate
formerly representing such share (a 'Certificate') in accordance with
Section 4.2: (A) in the event that the sum of (i) the Kimco Average Price
(as hereinafter defined) and (ii) $10.00 (the sum being referred to herein
as the 'Notional Value') is less than or equal to $45.00: one share of
Kimco Common Stock, par value $.01 per share (the 'Kimco Common Stock'),
plus a number of depositary shares (the 'Kimco Depositary Shares'), each of
which represents an interest in one-tenth of a share of Kimco Class D
Cumulative Convertible Preferred Stock, par value $1.00 per share, having
the terms and conditions specified on Exhibit A hereto (the 'Kimco Class D
Preferred Stock'), equal to a fraction, the numerator of which is $45.00
less the Kimco Average Price and the denominator of which is $25.00;
provided, however, that if the Kimco Average Price is less than $33.75,
each share of Price REIT Common Stock shall be converted into the right to
receive 0.45 Kimco Depositary Shares plus a number of shares of Kimco
Common Stock equal to a fraction, the numerator of which is $33.75 and the
denominator of which is the Kimco Average Price; and (B) if the Notional
Value is greater than $45.00: one share of Kimco Common Stock plus a number
of Kimco Depositary Shares equal to 0.4 minus a fraction, the numerator of
which is the Notional Value less $45.00 and the denominator of which is
$50.00; provided, however, that in no event shall the aggregate fractional
number of Kimco Depositary Shares issued in respect of one share of Price
REIT Common Stock be less than 0.36. As used herein, the 'Kimco Average
Price' shall be the average of the Average Prices (as defined herein) of
the Kimco Common Stock for fifteen (15) randomly selected trading days
within the thirty (30) consecutive trading days ending on and including the
seventh trading day immediately preceding the date of the special meeting
of Kimco's stockholders contemplated by Section 7.4 hereof. The 'Average
Price' for any day means the average of the daily high and low prices of
Kimco Common Stock on the New York Stock Exchange (the 'NYSE') as reported
in The Wall Street Journal or, if not reported thereby, by another
authoritative source. The random selection of trading days shall be made
under the joint supervision of the financial advisors retained by the
parties in connection with the transactions contemplated hereby. The Kimco
Common Stock and the Kimco Depositary Shares to be received as
consideration pursuant to the Merger by each holder of Price REIT Common
Stock are referred to herein as the 'Merger Consideration.'
2. All references in the Original Agreement to the 'Kimco Average Closing
Price' shall be amended to refer to the 'Kimco Average Price.'
3. Except as expressly amended by this First Amendment, the Original
Agreement and all of its terms, covenants, conditions and provisions are hereby
ratified and confirmed in all respects and shall continue in full force and
effect.
A-1-1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
and caused it to be delivered on their behalf as of the 5th day of March, 1998.
<TABLE>
<S> <C>
ATTEST: KIMCO REALTY CORPORATION
By: /s/ Michael V. Pappagallo By: /s/ Milton Cooper
ATTEST: REIT SUB, INC.
By: /s/ Michael V. Pappagallo By: /s/ Milton Cooper
ATTEST: THE PRICE REIT, INC.
By: /s/ Lawrence M. Kronenberg By: /s/ Jerald Friedman
</TABLE>
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<PAGE>
SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER
SECOND AMENDMENT (the 'Second Amendment') to Agreement and Plan of Merger
(the 'Original Agreement'), dated as of January 13, 1998, among Kimco Realty
Corporation, a Maryland corporation ('Kimco'), REIT Sub, Inc., a Maryland
corporation and a wholly owned subsidiary of Kimco ('Merger Sub'), and The Price
REIT, Inc., a Maryland corporation ('Price REIT'), as amended by the First
Amendment to the Original Agreement, dated March 5, 1998 (the 'First
Amendment'). Capitalized terms used herein without definition shall have the
meanings as set forth in the Original Agreement.
WHEREAS, each of Kimco, Merger Sub and Price REIT has entered into the
Original Agreement, to which is attached as Exhibit A thereto the Articles
Supplementary setting forth the terms and conditions of the Kimco Class D
Preferred Stock (the 'Kimco Class D Articles Supplementary');
WHEREAS, certain changes were made to the Original Agreement by way of the
First Amendment;
WHEREAS, the parties hereto desire to make certain revisions to the Kimco
Class D Articles Supplementary in order to address certain voting and ownership
restrictions that had been agreed upon by the parties hereto;
WHEREAS, Kimco and Price REIT intend to enter into a Purchase Agreement
(the 'Purchase Agreement') with Lehman Brothers Inc. ('Lehman Bros.') pursuant
to which Lehman Bros. will agree to purchase up to $65.0 million of a new series
of preferred stock of Price REIT (the 'Price REIT Preferred Stock');
WHEREAS, it is the intention of the parties hereto that, in the event that
(i) such Purchase Agreement is entered into on the terms and conditions that are
acceptable to Kimco, and (ii) Price REIT issues and Lehman Bros. purchases such
Price REIT Preferred Stock, each share of Price REIT Preferred Stock outstanding
at the Effective Time will be converted into the right to receive 10 Kimco Class
E Depositary Shares (as defined herein); and
WHEREAS, the Board of Directors of each of Kimco, Merger Sub and Price REIT
has approved the further changes to the Original Agreement set forth in this
Second Amendment.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and conditions herein, the parties hereby agree as
follows:
1. Exhibit A to the Original Agreement is hereby deleted and replaced in
its entirety by Exhibit A to this Second Amendment.
2. Article 4 of the Original Agreement is hereby amended by the addition of
Sections 4.3 and 4.4 set forth below, each of which will become effective only
in the event that (i) the Purchase Agreement is entered into upon terms and
conditions that are acceptable to Kimco and (ii) Price REIT issues and Lehman
Bros. purchases the Price REIT Preferred Stock:
'4.3 Conversion of the Price REIT Preferred Stock.
(a) At the Effective Time, each share of preferred stock, liquidation
preference $1,000 per share, of Price REIT (the 'Price REIT Preferred
Stock'), issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive 10 depositary shares
(the 'Kimco Class E Depositary Shares'), each of which will represent an
interest in one-tenth of a share in a new issue of Kimco Class E Floating
Rate Cumulative Preferred Stock, liquidation preference $1,000 per share,
having the terms and conditions substantially similar to those of the Price
REIT Preferred Stock (except that while the Kimco Class E Preferred Stock
will be redeemable by Kimco, the Price REIT Preferred Stock will be subject
to a contractual call right by Price REIT) ('Kimco Class E Preferred
Stock') upon surrender of the certificate formerly representing such share
(a 'Price REIT Preferred Stock Certificate') in accordance with Section
4.4.
(b) As a result of the Merger and without any action on the part of
the holder thereof, all shares of Price REIT Preferred Stock shall cease to
be outstanding and shall be cancelled and retired and shall cease to exist,
and each holder of a Price REIT Preferred Stock Certificate shall
thereafter cease to have any rights
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<PAGE>
with respect to such shares of Price REIT Preferred Stock, except the right
to receive, without interest, the Kimco Class E Depositary Shares in
accordance with Sections 4.3(a) and 4.4(b) hereto upon the surrender of
such Price REIT Preferred Stock Certificate.
(c) Each share of Price REIT Preferred Stock issued and held in Price
REIT's treasury at the Effective Time, if any, shall, by virtue of the
Merger, cease to be outstanding and shall be cancelled and retired and
shall cease to exist without payment of any consideration therefor.
4.4 Exchange of Price REIT Preferred Stock Certificates.
(a) As of the Effective Time, Kimco shall deposit, or shall cause to
be deposited, with the Exchange Agent, for the benefit of the holders of
shares of Price REIT Preferred Stock, for exchange in accordance with this
Article 4, certificates representing Kimco Class E Preferred Stock to be
issued pursuant to Section 4.3 in exchange for outstanding shares of Price
REIT Preferred Stock.
(b) Promptly after the Effective Time, Kimco shall cause the Exchange
Agent to mail to each holder of record of the Price REIT Preferred Stock
Certificate or Price REIT Preferred Stock Certificates (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk
of loss and title to the Price REIT Preferred Stock Certificates shall
pass, only upon delivery of the Price REIT Preferred Stock Certificates to
the Exchange Agent and shall be in such form and have such other provisions
as Kimco may reasonably specify and (ii) instructions for use in effecting
the surrender of the Price REIT Preferred Stock Certificates in exchange
for receipts representing Kimco Class E Depositary Shares. Upon surrender
of Price REIT Preferred Stock Certificates for cancellation to the Exchange
Agent together with such letter of transmittal, duly executed and completed
in accordance with the instructions thereto, the holder of such Price REIT
Preferred Stock Certificate shall be entitled to receive in exchange
therefor (x) receipts evidencing the number of whole Kimco Class E
Depositary Shares and (y) a check representing the amount of any declared
but unpaid dividends and distributions, if any, which such holder has the
right to receive in respect of the Price REIT Preferred Stock Certificate
surrendered pursuant to the provisions of this Article 4, after giving
effect to any required withholding tax, and the Price REIT Preferred Stock
Certificate so surrendered shall forthwith be cancelled. No interest will
be paid or accrued on unpaid dividends and distributions, if any, payable
to the holder of Price REIT Preferred Stock Certificates.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions on Kimco Class E Depositary Shares shall
be paid with respect to any shares of Price REIT Preferred Stock
represented by a Price REIT Preferred Stock Certificate until such Price
REIT Preferred Stock Certificate is surrendered for exchange as provided
herein. Subject to the effect of applicable laws, following surrender of
any such Price REIT Preferred Stock Certificate, there shall be paid to the
holder of the receipts evidencing whole Kimco Class E Depositary Shares
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore payable with respect to such
whole Kimco Class E Depositary Shares and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the
appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole
Kimco Class E Depositary Shares, less the amount of any withholding taxes
which may be required thereon.
(d) If, after the Effective Time, Price REIT Preferred Stock
Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for receipts for whole Kimco Class E Depositary
Shares but any declared and unpaid dividends and distributions deliverable
in respect thereof pursuant to this Agreement in accordance with the
procedures set forth in this Article 4.
(e) None of Kimco, Price REIT, the Exchange Agent or any other person
shall be liable to any former holder of shares of Price REIT Preferred
Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(f) In the event any Price REIT Preferred Stock Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Price REIT Preferred Stock Certificate to
be lost, stolen or destroyed and, if required by the Surviving Corporation,
the posting by such person of a bond in such reasonable amount as the
Surviving Corporation may direct as indemnity against
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<PAGE>
any claim that may be made against it with respect to such Price REIT
Preferred Stock Certificate, the Exchange Agent or the Surviving
Corporation will issue in exchange for such lost, stolen or destroyed Price
REIT Preferred Stock Certificate Kimco Class E Depositary Shares.
3. Section 7.3(ii)(e) is hereby deleted in its entirety and replaced with
the following:
'(e) shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock, except (1)(x) a dividend per share of Price REIT Preferred Stock not
to exceed $20.00 per quarter pro-rated for the period from the date of
issuance of such share to and including the Closing Date, (y) a dividend in
an amount not to exceed $0.75 per share of Price REIT Common Stock for the
last quarter of the year ending December 31, 1997 and (z) a dividend per
share of Price REIT Common Stock in an amount equal to the greater of (I)
$0.75 per quarter pro-rated for the period from January 1, 1998 up to and
including the Closing Date and (II) the sum of (A) Price REIT's estimated
undistributed real estate investment trust taxable income (calculated
without regard to the dividends paid deductions as defined in Section 561
of the Code and by excluding net capital gain) within the meaning of
Section 857(b)(2) of the Code for Price REIT's 1998 taxable year ending on
the Closing Date and (B) Price REIT's estimated undistributed net capital
gain within the meaning of Section 857(b)(3) of the Code for Price REIT's
1998 taxable year ending on the Closing Date, and except (2) in connection
with the use of shares of capital stock to pay the exercise price or tax
withholding in connection with stock-based employee benefit plans of Price
REIT, directly or indirectly redeem, purchase or otherwise acquire any
shares of its capital stock or capital stock of any of its Subsidiaries, or
make any commitment for any such action;'
4. Section 7.3 (iii)(a) is hereby deleted in its entirety and replaced with
the following:
'(a) shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock (including any dividend distribution payable in, or otherwise make a
distribution of, shares of capital stock of any existing or subsequently
formed subsidiary of Kimco), except (1)(v) (subject to Section 7.3(i)(d)) a
dividend in an amount not to exceed $0.48 per share of Kimco Common Stock
for the last calendar quarter of 1997, (w) a dividend in the amount of
$0.484375 per depositary share representing the Class A Preferred Stock,
(x) a dividend in the amount of $0.53125 per depositary share representing
the Class B Preferred Stock, (y) a dividend in the amount of $0.52345 per
depositary share representing the Class C Preferred Stock and (z) a
dividend per share of Kimco Common Stock in an amount equal to the greater
of (I) $0.48 per quarter pro-rated for the period from January 1, 1998 up
to and including the Closing Date and (II) the sum of (A) Kimco's estimated
undistributed real estate investment trust taxable income (calculated
without regard to dividends paid deductions as defined in Section 561 of
the Code and by excluding net capital gain) within the meaning of Section
857(b)(2) of the Code for Kimco's 1998 taxable year ending on the Closing
Date and (B) Kimco's estimated undistributed net capital gain within the
meaning of Section 857(b)(3) of the Code for Kimco's 1998 taxable year
ending on the Closing Date and except (2) in connection with the use of
shares of its capital stock to pay the exercise price or tax withholding in
connection with stock-based employee benefit plans of Kimco, directly or
indirectly redeem, purchase or otherwise acquire any shares of its capital
stock or capital stock of any of its Subsidiaries, or make any commitment
for any such action; and'
5. Except as expressly amended by this Second Amendment, the Original
Agreement (as amended by the First Amendment) and all of its terms, covenants,
conditions and provisions are hereby ratified and confirmed in all respects and
shall continue in full force and effect.
6. This Agreement may be executed in any number of counterparts, and by
each of the parties hereto on separate counterparts, each of which counterparts,
when so executed and delivered, shall be deemed an original, but all such
counterparts taken together shall constitute one and the same instrument.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
A-2-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
and caused it to be delivered on their behalf as of the 14th day of May, 1998.
<TABLE>
<S> <C>
ATTEST: KIMCO REALTY CORPORATION
By: /s/ Michael V. Pappagallo By: /s/ Milton Cooper
ATTEST: REIT SUB, INC.
By: /s/ Michael V. Pappagallo By: /s/ Milton Cooper
ATTEST: THE PRICE REIT, INC.
By: /s/ Lawrence M. Kronenberg By: /s/ Joseph K. Kornwasser
</TABLE>
A-2-4
<PAGE>
EXHIBIT A
ARTICLES SUPPLEMENTARY
OF
KIMCO REALTY CORPORATION
Kimco Realty Corporation, a corporation organized and existing under the laws of
the State of Maryland (the 'Corporation'), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority granted to and vested in the Board of
Directors of the Corporation (the 'Board of Directors') in accordance with
Article IV.D. of the charter of the Corporation, including these Articles
Supplementary (the 'Charter'), the Board of Directors, at a meeting held on
January 13, 1998, adopted resolutions reclassifying 700,000 shares (the
'Shares') of Preferred Stock (as defined in the Charter) as a separate
class of stock, 7.5% Class D Cumulative Convertible Preferred Stock, par
value $1.00 per share ('Class D Preferred Stock'), and reclassifying
700,000 shares (the 'Class D Excess Shares') of Preferred Stock (as defined
in the Charter) as a separate class of stock, Class D Excess Preferred
Stock, par value $1.00 per share ('Class D Excess Preferred Stock'), each
with the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends or other distributions,
qualifications, and terms and conditions of redemption set forth below:
7.5% Class D Cumulative Convertible Preferred Stock
A. Certain Definitions.
Unless the context otherwise requires, the terms defined in this paragraph
(A) shall have, for all purposes of the provisions of the Charter in respect of
the Class D Preferred Stock, the meanings herein specified (with terms defined
in the singular having comparable meanings when used in the plural).
Acquire. The term 'Acquire' shall mean the acquisition of Beneficial
Ownership or Constructive Ownership of shares of Preferred Equity Stock by any
means including, without limitation, a Transfer, the exercise of or right to
exercise any rights under any option, warrant, convertible security, pledge or
other security interest or similar right to acquire shares, but shall not
include the acquisition of any such rights unless, as a result, the acquiror
would be considered a Beneficial Owner or Constructive Owner, as defined below.
The term 'Acquisition' shall have the correlative meaning.
Aggregate Stock Ownership Limit. The term 'Aggregate Stock Ownership
Limit' shall mean not more than 5.0% in value of the aggregate of the
outstanding shares of Capital Stock. The number and value of shares of the
outstanding shares of Capital Stock shall be determined by the Board of
Directors of the Corporation in good faith, which determination shall be
conclusive for all purposes thereof.
Beneficial Ownership. The term 'Beneficial Ownership' shall mean ownership
of any shares of Capital Stock by a Person who is or would be treated as an
owner of such shares of Capital Stock either directly or constructively through
the application of Section 544 of the Code, as modified by Section 856(h)(1)(B)
of the Code. The terms 'Beneficial Owner,' 'Beneficially Owns' and 'Beneficially
Owned' shall have the correlative meanings.
Beneficiary. The term 'Beneficiary' shall mean the beneficiary of the
Trust as determined pursuant to subparagraph (11)(e)(1) of paragraph (G) below.
Business Day. The term 'Business Day' shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which banking
institutions in The City of New York are authorized or required by law,
regulation or executive order to close.
Capital Stock. The term 'Capital Stock' shall mean all classes of series
of stock of the Corporation, including, without limitation, Common Equity, Class
A Preferred Stock, Class B Preferred, Class C Preferred Stock and Preferred
Equity Stock.
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<PAGE>
Class A Preferred Stock. The term 'Class A Preferred Stock' shall mean the
7 3/4% Class A Cumulative Redeemable Preferred Stock, $1.00 par value per share,
of the Corporation.
Class B Preferred Stock. The term 'Class B Preferred Stock' shall mean the
8 1/2% Class B Cumulative Redeemable Preferred Stock, $1.00 par value per share,
of the Corporation.
Class C Preferred Stock. The term 'Class C Preferred Stock' shall mean the
8 3/8% Class C Cumulative Redeemable Preferred Stock, $1.00 par value per share,
of the Corporation.
Code. The term 'Code' shall mean the Internal Revenue Code of 1986, as
amended from time to time.
Common Equity. The term 'Common Equity' shall mean all shares now or
hereafter authorized of any class of common stock of the Corporation, including
the Common Stock, and any other stock of the Corporation, howsoever designated,
authorized after the Initial Issue Date, which has the right (subject always to
prior rights of any class or series of preferred stock) to participate in the
distribution of the assets and earnings of the Corporation without limit as to
per share amount.
Common Stock. The term 'Common Stock' shall mean the common stock, par
value $.01 per share, of the Corporation.
Constructive Ownership. The term 'Constructive Ownership' shall mean
ownership of any shares of Capital Stock by a Person who is or would be treated
as an owner of such shares of Capital Stock either directly or constructively
through the application of Section 318 of the Code, as modified by Section
856(d)(5) of the Code. The terms 'Constructive Owner,' 'Constructively Owns' and
'Constructively Owned' shall have the correlative meanings.
Conversion Price. The term 'Conversion Price' shall mean a conversion
price of $40.25 per share of Common Stock, subject to adjustment as set forth in
paragraph (E).
Depositary Shares. The term 'Depositary Shares' shall mean the Depositary
Shares each representing 1/10 of a share of Class D Preferred Stock.
Dividend Payment Date. The term 'Dividend Payment Date' shall have the
meaning set forth in subparagraph (2) of paragraph (B) below.
Dividend Period. The term 'Dividend Period' shall mean the period from,
and including, the Initial Issue Date to, but not including, the first Dividend
Payment Date, and thereafter each quarterly period from, and including, the
Dividend Payment Date to, but not including, the next Dividend Payment Date.
Initial Issue Date. The term 'Initial Issue Date' shall mean the date that
shares of Class D Preferred Stock are first issued by the Corporation.
Junior Stock. The term 'Junior Stock' shall mean, as the case may be, (i)
the Common Equity and any other class or series of stock of the Corporation
which is not entitled to receive any dividends in any Dividend Period unless all
dividends required to have been paid or declared and set apart for payment on
the Class D Preferred Stock shall have been so paid or declared and set apart
for payment or (ii) the Common Equity and any other class or series of stock of
the Corporation which is not entitled to receive any assets upon liquidation,
dissolution or winding up of the affairs of the Corporation until the Class D
Preferred Stock shall have received the entire amount to which such Class D
Preferred Stock is entitled upon such liquidation, dissolution or winding up.
IRS. The term 'IRS' shall mean the United States Internal Revenue Service.
Liquidation Preference. The term 'Liquidation Preference' shall mean
$250.00 per share of Class D Preferred Stock, plus any accumulated, accrued and
unpaid dividends.
Market Price. The term 'Market Price' shall mean the price of the Class D
Preferred Stock (i) as determined by multiplying by ten the last reported sales
price of the Depositary Shares reported on the New York Stock Exchange ('NYSE')
on the trading day immediately preceding the relevant date or, (ii) if the
Depositary Shares are not then traded on the NYSE, as determined by the last
reported sales price of the Depositary Shares on the trading day immediately
preceding the relevant date as reported on any exchange or quotation system over
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<PAGE>
which the Depositary Shares may be traded, or (iii) if the Depositary Shares are
not then traded over any exchange or quotation system, as determined in good
faith by the Board of Directors of the Corporation.
Ownership Limit. The term 'Ownership Limit' shall mean not more than 9.8%
(in value or in number of shares, whichever is more restrictive) of the
aggregate of the outstanding shares of Preferred Equity Stock. The number and
value of outstanding shares of Class D Preferred Stock of the Corporation shall
be determined by the Board of Directors of the Corporation in good faith, which
determination shall be conclusive for all purposes hereof.
Parity Stock. The term 'Parity Stock' shall mean, as the case may be, (i)
any class or series of stock of the Corporation which is entitled to receive
payment of dividends on a parity with the Class D Preferred Stock or (ii) any
class or series of stock of the Corporation which is entitled to receive assets
upon liquidation, dissolution or winding up of the affairs of the Corporation on
a parity with the Class D Preferred Stock. The term 'Parity Stock' shall include
the Class A Preferred Stock, the Class B Preferred Stock and the Class C
Preferred Stock.
Person. The term 'Person' shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified under Section 401(a) or
501(c)(17) of the Code), a portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity, and also includes a group as that
term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended; but does not include an underwriter which participates in a
public offering of the Class D Preferred Stock or any interest therein, provided
that such ownership by such underwriter would not result in the Corporation
being 'closely held' within the meaning of Section 856(h) of the Code, or
otherwise result in the Corporation failing to qualify as a REIT.
Preferred Equity Stock. The term 'Preferred Equity Stock' shall mean
shares of stock that are either Class D Preferred Stock or Class D Excess
Preferred Stock.
Press Release. The term 'Press Release' shall mean the press release
issued pursuant to subparagraph (1) of paragraph (D).
Purported Beneficial Transferee. The term 'Purported Beneficial
Transferee' shall mean, with respect to any purported Transfer which results in
Class D Excess Preferred Stock, the purported beneficial transferee or owner for
whom the Purported Record Transferee would have acquired or owned shares of
Class D Preferred Stock if such Transfer had been valid under subparagraph (1)
of paragraph (G) below.
Purported Record Transferee. The term 'Purported Record Transferee' shall
mean, with respect to any purported Transfer which results in Class D Excess
Preferred Stock, the record holder of the Preferred Equity Stock if such
Transfer had been valid under subparagraph (1) of paragraph (G) below.
REIT. The term 'REIT' shall mean a real estate investment trust within the
meaning of Section 856 of the Code.
Record Date. The term 'Record Date' shall mean the date designated by the
Board of Directors of the Corporation at the time a dividend is declared;
provided, however, that such Record Date shall be the first day of the calendar
month in which the applicable Dividend Payment Date falls or such other date
designated by the Board of Directors for the payment of dividends that is not
more than thirty (30) days nor less than ten (10) days prior to such Dividend
Payment Date.
Redemption Date. The term 'Redemption Date' shall have the meaning set
forth in subparagraph (1) of paragraph (D) below.
Redemption Shares. The term 'Redemption Shares' shall mean such number of
shares of Common Stock into which Class D Preferred Stock is convertible at the
Conversion Price as of the opening of business on the Redemption Date.
Senior Stock. The term 'Senior Stock' shall mean, as the case may be, (i)
any class or series of stock of the Corporation created after the Initial Issue
Date in accordance with subparagraph (1) of paragraph (F) ranking senior to the
Class D Preferred Stock in respect of the right to receive dividends or (ii) any
class or series of stock of the Corporation created after the Initial Issue Date
in accordance with subparagraph (1) of paragraph
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<PAGE>
(F) ranking senior to the Class D Preferred Stock in respect of the right to
participate in any distribution upon liquidation, dissolution or winding up of
the affairs of the Corporation.
Trading Day. The term 'Trading Day' shall mean any day on which the
securities in question are traded on the NYSE.
Transfer. The term 'Transfer' shall mean any sale, transfer, gift,
assignment, devise or other disposition of Preferred Equity Stock, including (i)
the granting of any option or entering into any agreement for the sale, transfer
or other disposition of Preferred Equity Stock or (ii) the sale, transfer,
assignment or other disposition of any securities (or rights convertible into or
exchangeable for Preferred Equity Stock), whether voluntary or involuntary,
whether of record or beneficially or Beneficially or Constructively Owned
(including but not limited to Transfers of interests in other entities which
result in changes in Beneficial or Constructive Ownership of Preferred Equity
Stock), and whether by operation of law or otherwise. The term 'Transferring'
and 'Transferred' shall have the correlative meanings.
Trust. The term 'Trust' shall mean the trust created pursuant to
subparagraph (11)(a) of paragraph (G).
Trustee. The term 'Trustee' shall mean the Corporation as trustee for the
Trust, and any successor trustee appointed by the Corporation.
B. Dividends.
1. The record holders of Class D Preferred Stock shall be entitled to
receive dividends, when and as declared by the Board of Directors of the
Corporation, out of funds legally available for payment of dividends. Such
dividends shall be payable by the Corporation in cash at the rate per share
equal to the greater of (i) $18.75 per annum or (ii) the cash dividends
(determined on each Dividend Payment Date referred to in subsection (2) of this
paragraph (B)) on the shares of Common Stock (or portion thereof) into which a
share of the Class D Preferred Stock is convertible, plus $0.275 per quarter.
2. Dividends on shares of Class D Preferred Stock shall accrue and be
cumulative from the Initial Issue Date. Dividends shall be payable quarterly in
arrears when and as declared by the Board of Directors of the Corporation on
January 15, April 15, July 15 and October 15 of each year (each, a 'Dividend
Payment Date'), commencing, with respect to the period commencing on the Initial
Issue Date and ending on June 30, 1998, on July 15, 1998. If any Dividend
Payment Date occurs on a day that is not a Business Day, any accrued dividends
otherwise payable on such Dividend Payment Date shall be paid on the next
succeeding Business Day. The amount of dividends payable on Class D Preferred
Stock for each full Dividend Period shall be computed by dividing by four (4)
the annual dividend rate set forth in subparagraph (1) of this paragraph (B)
above. Dividends payable in respect of the first Dividend Period and any
subsequent Dividend Period which is less than a full Dividend Period in length
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends shall be paid to the holders of record of the Class D
Preferred Stock as their names shall appear on the stock transfer records of the
Corporation at the close of business on the Record Date for such dividend.
Dividends in respect of any past Dividend Periods that are in arrears may be
declared and paid at any time to holders of record on the Record Date therefor.
Any dividend payment made on shares of Class D Preferred Stock shall be first
credited against the earliest accrued but unpaid dividend due which remains
payable. Upon issuance, the Class D Preferred Stock will rank on parity as to
dividends with the Class A Preferred Stock, the Class B Preferred Stock and the
Class C Preferred Stock.
3. If any shares of Class D Preferred Stock are outstanding, no full
dividends shall be declared or paid or set apart for payment on any other class
or series of Preferred Stock ranking junior to or on a parity with the Class D
Preferred Stock as to dividends for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Class D
Preferred Stock for all past Dividend Periods and the then current Dividend
Period. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the shares of the Class D Preferred Stock and
any other class or series of Preferred Stock ranking on a parity as to dividends
with the Class D Preferred Stock, all dividends declared upon the shares of the
Class D Preferred Stock and any other such class or series of Preferred Stock
shall be declared pro rata so that the amount of dividends declared per share on
the Class D Preferred Stock and such 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 the Class D Preferred Stock and
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such 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 the Class D Preferred Stock which may be in arrears.
4. Except as provided in subparagraph (3) of this paragraph (B), unless
full cumulative dividends on the Class D Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past Dividend Periods and the then
current Dividend Period, no dividends (other than in common stock or other stock
ranking junior to the Class D Preferred Stock as to dividends and upon
liquidation, dissolution and winding up of the affairs of the Corporation) shall
be declared or paid or set apart for payment or other distribution shall be
declared or made upon any Junior Stock or Parity Stock, nor shall any Junior
Stock or Parity Stock 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 any such stock) by the Corporation (except by
conversion into or exchange for other stock of the Corporation ranking junior to
the Class D Preferred Stock as to dividends and upon liquidation, dissolution or
winding up).
5. Notwithstanding anything contained herein to the contrary, no dividends
on shares of Class D Preferred Stock shall be authorized or declared by the
Board of Directors of the Corporation or paid or set apart for payment by the
Corporation at such time as the terms and provisions of any agreement of the
Corporation, including any agreement relating to its indebtedness, prohibits
such authorization, declaration, payment or setting apart for payment or
provides that such authorization, declaration, payment or setting apart for
payment would constitute a breach thereof or a default thereunder, or to the
extent such declaration or payment shall be restricted or prohibited by law.
6. Notwithstanding anything contained herein to the contrary, dividends on
the Class D Preferred Stock, if not paid on the applicable Dividend Payment
Date, will accrue whether or not dividends are authorized or declared for such
Dividend Payment Date, whether or not the Corporation has earnings and whether
or not there are funds legally available for the payment of such dividends.
7. If, for any taxable year, the Corporation elects to designate as
'capital gain dividends' (as defined in Section 857 of the Code) any portion
(the 'Capital Gains Amount') of the dividends (as determined for federal income
tax purposes) paid or made available for the year to holders of all classes of
stock (the 'Total Dividends'), then the portion of the Capital Gains Amount that
shall be allocable to holders of the Class D Preferred Stock shall be the amount
that the total dividends paid or made available to the holders of the Class D
Preferred Stock for the year bears to the Total Dividends.
C. Distributions Upon Liquidation, Dissolution or Winding Up.
1. Upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Corporation, subject to the prior preferences and other
rights of any class or series of stock ranking senior to the Class D Preferred
Stock as to the distribution of assets upon liquidation, dissolution or winding
up of the affairs of the Corporation, but before any distribution or payment
shall be made to the holders of any class or series of stock ranking junior to
the Class D Preferred Stock as to the distribution of assets upon any
liquidation, dissolution or winding up of the affairs of the Corporation, the
holders of Class D Preferred Stock shall be entitled to receive out of the
assets of the Corporation legally available for distribution to its stockholders
liquidating distributions in cash or property at its fair market value as
determined by the Board of Directors of the Corporation in the amount of the
Liquidation Preference per share plus an amount equal to all dividends accrued
and unpaid thereon to the date of such liquidation, dissolution or winding up.
After payment of the full amount of the liquidating distributions to which they
are entitled, the holders of Class D Preferred Stock will have no right or claim
to any of the remaining assets of the Corporation and shall not be entitled to
any other distribution in the event of liquidation, dissolution or winding up of
the affairs of the Corporation.
2. In the event that, upon any such voluntary or involuntary liquidation,
dissolution or winding up, the legally available assets of the Corporation are
insufficient to pay the amount of the Liquidation Preference per share plus an
amount equal to all dividends accrued and unpaid on the Class D Preferred Stock
and the corresponding amounts payable on each class or series of stock ranking
on a parity with the Class D Preferred Stock as to the distribution of assets
upon liquidation, dissolution or winding up of the affairs of the Corporation,
then the holders of the Class D Preferred Stock and all such stock shall share
ratably in any such distribution of assets in proportion to the full liquidating
distributions to which they otherwise would be respectively entitled.
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Upon issuance, the Class D Preferred Stock will rank on parity with the Class A
Preferred Stock, the Class B Preferred Stock and the Class C Preferred Stock as
to the distribution of assets upon any liquidation, dissolution or winding up of
the affairs of the Corporation. Neither the consolidation or merger of the
Corporation into or with another corporation or corporations nor the sale,
lease, transfer or conveyance of all or substantially all of the assets of the
Corporation to another corporation or any other entity shall be deemed a
liquidation, dissolution or winding up of the affairs of the Corporation within
the meaning of this paragraph (C).
D. Redemption by the Corporation.
1. The Class D Preferred Stock may be redeemed for Redemption Shares, in
whole or from time to time in part, on any date on or after the third
anniversary of the Initial Issue Date (or, if such date is not a Business Day,
on the first Business Day after such date) at the option of the Corporation if
for any 20 Trading Days within any period of 30 consecutive Trading Days,
including the last Trading Day of such period, the average closing price per
share of the Common Stock exceeds 120% of the Conversion Price. In order to
exercise its redemption option, the Corporation shall issue a press release
announcing the redemption (the 'Press Release') prior to the opening of business
on the fifth Trading Day after the condition in the preceding sentence has, from
time to time, been met. The Press Release shall announce the redemption and set
forth the number of shares of Class D Preferred Stock that the Corporation
intends to redeem. The redemption date shall be selected by the Corporation,
shall be specified in the notice of the redemption and shall not be less than 30
days nor more than 60 days after the date on which the Corporation issues the
Press Release (the 'Redemption Date').
2. Upon any redemption of the Class D Preferred Stock, the Corporation
shall pay in cash any accrued and unpaid dividends in arrears for any Dividend
Period ending on or prior to the Redemption Date. If the Redemption Date falls
after a Record Date and prior to the corresponding Dividend Payment Date, then
each holder of Class D Preferred Stock at the close of business on such Record
Date shall be entitled to the dividend payable on such shares of Class D
Preferred Stock on the corresponding dividend payment date notwithstanding the
redemption of such shares of Class D Preferred Stock before such Dividend
Payment Date. Except as provided above, the Corporation shall make no payment or
allowance for unpaid dividends, whether or not in arrears, on such shares of
Class D Preferred Stock to be redeemed or on the shares of Common Stock issued
upon such redemption.
3. If the Corporation shall redeem shares of Class D Preferred Stock
pursuant to subparagraph (1) of this paragraph (D), notice of such redemption
shall be given not more than five (5) Business Days after the date on which the
Corporation issues the Press Release to each holder of record of the shares of
Class D Preferred Stock to be redeemed. Notice shall be by publication in a
newspaper of general circulation in The City of New York, such publication to be
made once a week for two successive weeks commencing not less than 30 nor more
than 60 days prior to the Redemption Date. A similar notice will be mailed by
the Corporation, postage prepaid, not less than 30 nor more than 60 days prior
to the Redemption Date, addressed to the respective holders of record of the
Class D Preferred Stock to be redeemed at their respective addressees as they
appear on the stock transfer records of the Corporation. No failure to give such
notice or any defect therein or in the mailing thereof shall affect the validity
of the proceedings for the redemption of any shares of Class D Preferred Stock
except as to any holder to whom the Corporation has failed to give notice or
except as to any holder to whom notice was defective or not given. In addition
to any information required by law or by the applicable rules of any exchange
upon which Class D Preferred Stock may be listed or admitted to trading, such
notice shall state: (i) the Redemption Date; (ii) the Conversion Price; (iii)
the number of shares of Class D Preferred Stock to be redeemed and, if less than
all shares held by the particular holder are to be redeemed, the number of such
shares to be redeemed; (iv) the place or places where certificates for such
shares are to be surrendered in exchange for certificates evidencing the
Redemption Shares; and (v) that dividends on the shares to be redeemed will
cease to accrue on the Redemption Date.
4. Notice having been published or mailed in accordance with subparagraph
(3) of this paragraph (D), from and after the Redemption Date (unless the
Corporation shall fail to make available a number of shares of Common Stock or
amount of cash necessary to effect such redemption), (i) except as otherwise
provided herein, dividends on the shares of Class D Preferred Stock so called
for redemption shall cease to accrue, (ii) said shares shall no longer be deemed
to be outstanding and (iii) all rights of the holders thereof as holders of
Class D Preferred Stock of the Corporation shall cease (except the rights to
receive the shares of Common Stock and cash
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<PAGE>
payable upon such redemption, without interest thereon, upon surrender and
endorsement of their certificates if so required and to receive any dividends
payable thereon). The Corporation's obligation to provide Common Stock and cash
in accordance with the preceding sentence shall be deemed fulfilled if, on or
before the Redemption Date, the Corporation shall deposit with a bank or trust
company (which may be an affiliate of the Corporation) that has an office in the
Borough of Manhattan, City of New York, or in Baltimore, Maryland and that has,
or is an affiliate of a bank or trust company that has, a capital and surplus of
a least $50,000,000, Common Stock and any cash necessary for such redemption, in
trust, with irrevocable instructions that such Common Stock and cash be applied
to the redemption of the shares of Class D Preferred Stock so called for
redemption. At the close of business on the Redemption Date, each holder of
shares of Class D Preferred Stock to be redeemed (unless the Corporation
defaults in the delivery of the Common Stock or cash payable on such Redemption
Date) shall be deemed to be the record holder of the number of shares of Common
Stock into which such shares of Class D Preferred Stock is to be redeemed,
regardless of whether such holder has surrendered the certificates representing
the shares of Class D Preferred Stock. No interest shall accrue for the benefit
of the holder of shares of Class D Preferred Stock to be redeemed on any cash so
set aside by the Corporation. Subject to applicable escheat laws, any such cash
unclaimed at the end of two years from the Redemption Date shall revert to the
general funds of the Corporation, after which reversion the holders of such
shares so called for redemption shall look only to the general funds of the
Corporation for the payment of such cash.
5. As promptly as practicable after the surrender in accordance with said
notice of the certificates for any such shares of Class D Preferred Stock so
redeemed (properly endorsed or assigned for transfer, if the Corporation shall
so require and if the notice shall so state), such shares of Class D Preferred
Stock shall be exchanged for certificates representing shares of Common Stock
and any cash (without interest thereon) for which such shares of Class D
Preferred Stock have been redeemed. In case of redemption of less than all
shares of Class D Preferred Stock at the time outstanding, the shares to be
redeemed shall be selected by the Corporation pro rata from the holders of
record of such shares in proportion to the number of shares held by such holders
(with adjustments to avoid redemption of fractional shares) or by any other
equitable method determined by the Corporation that will not result in the
issuance of any Class D Excess Preferred Stock. If fewer than all the shares of
Class D Preferred Stock represented by any certificate are redeemed, than new
certificates representing the unredeemed shares of Class D Preferred Stock shall
be issued without cost to the holder thereof.
6. No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon the redemption of Class D Preferred Stock. Instead
of any fractional shares of Common Stock which would otherwise be issuable upon
redemption of Class D Preferred Stock, the Corporation shall pay to the holder
of the shares of Class D Preferred Stock which were mandatorily converted a cash
adjustment in respect of such fractional shares in an amount equal to the same
fraction of the market price per share of the Common Stock (as determined in a
reasonable manner prescribed by the Board of Directors at the close of business
on the Redemption Date).
7. Unless full cumulative dividends on all shares of Class D Preferred
Stock shall have been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for payment for all past
Dividend Periods and the then current Dividend Period, no shares of any Class D
Preferred Stock shall be redeemed unless all outstanding shares of Class D
Preferred Stock are simultaneously redeemed; provided, however, that the
foregoing shall not prevent the purchase or acquisition of shares of Class D
Preferred Stock pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding shares of Class D Preferred Stock, and, unless
full cumulative dividends on all outstanding shares of Class D Preferred Stock
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past Dividend
Periods and the then current Dividend Period, the Corporation shall not purchase
or otherwise acquire directly or indirectly any shares of Class D Preferred
Stock (except by conversion into or exchange for stock of the Corporation
ranking junior to the Class D Preferred Stock as to dividends and upon
liquidation, dissolution or winding up).
8. All shares of Class D Preferred Stock redeemed pursuant to this
paragraph (D) shall be retired and shall be reclassified as authorized and
unissued shares of Preferred Stock, without designation as to class or series
and may thereafter be reissued as shares of any class or series of Preferred
Stock.
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E. Conversion.
1. Subject to paragraph (D), each holder of shares of Class D Preferred
Stock shall have the right, at his or her option at any time, to convert all or
a portion of such shares (including fractions of such shares so long as such
fractions are in integral multiples of 1/10 of a share), unless previously
redeemed, into Common Stock at the Conversion Price. The Conversion Price shall
be subject to adjustment from time to time as hereinafter provided. For purposes
of such conversion, each share of Class D Preferred Stock shall be valued at
$250.00. However, the right to convert shares of Class D Preferred Stock called
for redemption pursuant to paragraph (D) hereof shall terminate at the close of
business on the Redemption Date fixed for such redemption, unless the
Corporation shall default in the making of payment of the Common Stock and any
cash payable upon redemption under paragraph (D) hereof.
2. The Conversion Price shall be adjusted from time to time as follows:
a. If the Corporation shall pay or make a dividend or other
distribution on Common Stock in shares of Common Stock, the Conversion
Price in effect at the opening of business on the date following the date
fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the date
fixed for such determination and the denominator shall be the sum of such
number of shares and the total number of shares constituting such dividend
or other distribution, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For purposes of this subparagraph (2)(a), the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Corporation but shall include shares issuable
in respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Corporation will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
corporation.
b. If the Corporation shall issue additional rights or warrants to all
holders of its shares of Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the then
current market price per share (determined as provided in subparagraph
(2)(g) of this paragraph (E)) of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such rights or warrants
(other than pursuant to a dividend reinvestment plan), the Conversion Price
in effect at the opening of business on the day following the date fixed
for such determination shall be reduced by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common
Stock so offered for subscription or purchase would purchase at such
current market price (determined as provided in subparagraph (2)(g) of this
paragraph (E)) and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately
after the opening of business on the day following the date fixed for such
determination. For the purposes of this subparagraph (2)(b), the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Corporation but shall include shares issuable
in respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Corporation will not issue any rights or warrants in
respect of shares of Common Stock held in the treasury of the Corporation
during the period so held.
c. If outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the date following the day upon which such
subdivision becomes effective shall be proportionately reduced, and,
conversely, if outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
d. If the Corporation shall, by dividend or otherwise, distribute to
all holders of its shares of Common Stock evidences of its indebtedness,
assets or securities of the Corporation or other Persons (but excluding
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(i) any rights or warrants referred to in subparagraph (2)(b) of this
paragraph (E), (ii) any dividend or distribution referred to in
subparagraph (2)(e) of this paragraph (E), (iii) any cash dividend or cash
distribution out of current or accumulated funds from operations (as
determined by the Board of Directors) and (iv) any dividend or distribution
referred to in subparagraph (2)(a) of this paragraph (E)), the Conversion
Price shall be adjusted so that the same shall equal the price determined
by multiplying the Conversion Price in effect immediately prior to the
close of business on the date fixed for the determination of stockholders
entitled to receive such distribution by a fraction of which the numerator
shall be the current market price per share (determined as provided in
subparagraph (2)(g) of this paragraph (E)) of a share of Common Stock on
the date fixed for such determination less the then fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and shall be described in a statement filed with the transfer
agent for the Class D Preferred Stock) of the portion of the evidences of
the indebtedness, assets or securities so distributed applicable to a share
of Common Stock and the denominator shall be such current market price of a
share of Common Stock, such adjustment to become effective immediately
prior to the opening of business on the day following the date fixed for
the determination of stockholders entitled to receive such distribution.
Notwithstanding the foregoing, in the event of a distribution to all
holders of shares of Common Stock of rights to subscribe for additional
shares of the Corporation's capital stock (other than rights described in
subparagraph (2)(b) of this paragraph (E)), the Corporation may, instead of
making the adjustment in the Conversion Price set forth in this
subparagraph (2)(d), provide that each holder of shares of Class D
Preferred Stock who converts such shares shall be entitled to receive upon
such conversion, in addition to the applicable number of shares of Common
Stock, the number of such rights such holder would have been entitled to
receive had such holder converted such shares immediately prior to the
record date applicable to such distribution of rights.
e. If the Corporation shall, by dividend or otherwise, distribute to
all holders of its shares of Common Stock securities of one of its
subsidiaries that is (i) organized to qualify as a real estate investment
trust under applicable federal tax laws and regulations and (ii) identified
in any informational materials distributed to stockholders as being
intended to operate on a leveraged basis, then the Conversion Price shall
be adjusted so that the same shall equal the price determined by
subtracting from the Conversion Price in effect immediately prior to the
close of business on the date fixed for the determination of stockholders
entitled to receive such distribution (the 'Determination Date') the per
share amount of the distribution for tax purposes, as determined by the
Board of Directors. The Corporation will publish notice of such
distribution to holders of Class D Preferred Stock in a newspaper of
general circulation at least ten (10) business days prior to the
Determination Date.
f. For the purposes of this subparagraph (2), the reclassification of
shares of Common Stock into securities including securities other than
shares of Common Stock (other than any reclassification upon a
consolidation or merger to which subparagraph (6) of this paragraph (E)
applies) shall be deemed to involve (i) a distribution of such securities
other than shares of Common Stock to all holders of shares of Common Stock
(and the effective date of such reclassification shall be deemed to be 'the
date fixed for the determination of stockholders entitled to receive such
distribution' and the 'date fixed for such determination' within the
meaning of subparagraph (2)(d) of this paragraph (E)), and (ii) a
subdivision or combination, as the case may be, of the number of shares of
Common Stock outstanding immediately prior to such reclassification into
the number of shares of Common Stock outstanding immediately thereafter
(and the effective date of such reclassification shall be deemed to be 'the
day upon which such subdivision became effective' and 'the day upon which
such subdivision or combination becomes effective,' as the case may be,
within the meaning of subparagraph (2)(c) of this paragraph (E)).
g. For the purpose of any computation under subparagraphs (2)(b) and
2(d) of this paragraph (E), the current market price of a share of Common
Stock on any day shall be deemed to be the average of the daily closing
prices for the 30 consecutive trading days commencing 45 trading days
before the day in question. The closing price for each day shall be the
reported last sale price or, in case no such reported sale takes place on
such day, the average of the reported closing bid and asking prices, in
either case on the NYSE, or, if the shares of Common Stock are no longer
quoted on such exchange, on the principal national securities exchange on
which the shares of Common Stock are then listed or admitted to trading or,
if the shares of Common Stock are not quoted on any national securities
exchange, the closing sale price of the shares of
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Common Stock or, in case no reported sale takes place, average of the
shares of Common Stock or, in case no reported sale takes place, average of
the closing bid and asked prices on the Nasdaq National Market or any
comparable system, or if the shares of Common Stock are not quoted on the
Nasdaq National Market or any comparable system, the closing sale price,
or, in case no reported sale takes place, the average of the closing bid
and asked prices, as furnished by any NYSE member firm selected from time
to time by the Board of Directors for that purpose.
h. Notwithstanding the foregoing, no adjustment in the Conversion
Price for the Class D Preferred Stock shall be required unless such
adjustment would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this
subparagraph (h) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this subparagraph (2)(h) shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.
i. In the event that, as a result of an adjustment made pursuant to
paragraph (E), the holder of any shares of Class D Preferred Stock
thereafter surrendered for conversion shall become entitled to receive any
capital stock other than shares of Common Stock, thereafter the number of
shares of such capital stock so received shall be subject to adjustment
from time to time in a manner and on terms equivalent as nearly as
practicable to the provisions relating to the Class D Preferred Stock
contained in subparagraph (2) of this paragraph (E).
3. Upon the occurrence of a conversion as specified in this paragraph (E),
the holders of Class D Preferred Stock shall, upon notice from the Corporation,
surrender the certificates representing shares of Class D Preferred Stock at the
office of the Corporation or of its transfer agent for the Common Stock.
Thereupon, there shall be issued and delivered to such holder a certificate or
certificates for the number of shares of Common Stock into which the shares of
Class D Preferred Stock surrendered were convertible on the date on which such
conversion occurred. The Corporation shall not be obligated to issue such
certificates unless certificates evidencing such shares of Class D Preferred
Stock being converted are either delivered to the Corporation or any such
transfer agent, or the holder notifies the Corporation or any such transfer
agent that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection therewith.
4. Holders of shares of Class D Preferred Stock at the close of business on
a Record Date shall be entitled to receive the dividend payable on the shares of
Class D Preferred Stock on the corresponding Dividend Payment Date
notwithstanding the conversion thereof following such Record Date and prior to
such Dividend Payment Date. However, shares of Class D Preferred Stock
surrendered for conversion during the period between the close of business on
any Record Date and the opening of business on the corresponding Dividend
Payment Date (except shares of Class D Preferred Stock converted after the
issuance of a notice of redemption with respect to a Redemption Date during such
period or coinciding with such Dividend Payment Date, the Class D Preferred
Stock being entitled to such dividend on the Dividend Payment Date) must be
accompanied by payment of an amount equal to the dividend payable on such Class
D Preferred Stock on such Dividend Payment Date. A holder of shares of Class D
Preferred Stock on a Record Date who (or whose transferees) tenders any such
shares of Class D Preferred Stock for conversion into shares of Common Stock on
such Dividend Payment Date will receive the dividend payable by the Corporation
on such Class D Preferred Stock on such date, and the converting holder need not
include payment of the amount of such dividend upon surrender of shares of Class
D Preferred Stock for conversion. Except as provided above, the Corporation
shall make no payment or allowance for unpaid dividends, whether or not in
arrears, on converted shares of Class D Preferred Stock or for dividends on the
shares of Common Stock issued upon such conversion.
5. If the Common Stock issuable upon the conversion of the Class D
Preferred Stock shall be changed into the same or different number of shares of
any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for elsewhere in this paragraph (E), or the sale of all or
substantially all of the Corporation's properties and assets to any other
person), then and in each such event the holder of each share of Class D
Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification or other change by holders of the
number of shares of Common Stock into
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which such shares of Class D Preferred Stock might have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
6. If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this paragraph
(E)) or a merger or consolidation of the Corporation with or into another
corporation (other than a merger or consolidation with or transfer of assets to
the Corporation by any subsidiary), or the sale of all or substantially all of
the Corporation's properties and assets to any other person, then, as a part of
such reorganization, merger, consolidation or sale, provision shall be made so
that the holders of Class D Preferred Stock shall thereafter be entitled to
receive upon conversion of the Class D Preferred Stock, the number of shares of
stock or other securities or property of the Corporation, or of the successor
corporation resulting from such merger, consolidation or sale, to which such
holder would have been entitled if such holder had converted its shares of Class
D Preferred Stock immediately prior to such capital reorganization, merger,
consolidation or sale.
7. In each case of an adjustment or readjustment of the Conversion Price
for the Class D Preferred Stock, the Corporation at its expense will furnish
each holder of Class D Preferred Stock with a certificate, prepared by
independent public accountants of recognized standing certified by the chief
financial officer of the Corporation, showing such adjustment or readjustment,
and stating in detail the facts upon which such adjustment or readjustment is
based.
8. To exercise its conversion privilege, a holder of shares of Class D
Preferred Stock shall surrender the certificate or certificates representing the
shares being converted to the Corporation at its principal office in accordance
with subparagraph (3) of this paragraph (E), and shall give written notice to
the Corporation at that office that such holder elects to convert such shares.
Such notice shall also state the name or names (with address or addresses) in
which the certificate or certificates for shares of Common Stock issuable upon
such conversion shall be issued. The certificate or certificates for shares of
Class D Preferred Stock surrendered for conversion shall be accompanied by
proper assignment thereof to the Corporation or in blank. The date when such
written notice is received by the Corporation, together with the certificated or
certificates representing the shares of Preferred Stock being converted, shall
be the 'Conversion Date.' As promptly as practicable after the Conversion Date,
the Corporation shall issue and shall deliver to the holder of the shares of
Class D Preferred Stock being converted, or on its written order, such
certificate or certificates as it may request for the number of whole shares of
Common Stock issuable upon the conversion of such shares of Class D Preferred
Stock as the case may be, in accordance with the provisions of this subparagraph
(8), cash in the amount of all accrued and unpaid dividends on such shares of
Class D Preferred Stock, up to and including the Conversion Date, and cash, as
provided in subparagraph (9) of this paragraph (E), in respect of any fraction
of a share of Common Stock issuable upon such conversion. Such conversion shall
be deemed to have been effected immediately prior to the close of business on
the Conversion Date, and at such time the rights of the holder as holder of the
converted shares of Class D Preferred Stock shall cease and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Common Stock represented
thereby.
9. No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon the conversion of Class D Preferred Stock. Instead
of any fractional shares of Common Stock which would otherwise be issuable upon
conversion of shares of Class D Preferred Stock, the Corporation shall pay to
the holder of the shares of Class D Preferred Stock which were converted a cash
adjustment in respect of such fractional shares in an amount equal to the same
fraction of the market price per share of the Common Stock (as determined in a
reasonable manner prescribed by the Board of Directors at the close of business
on the Conversion Date).
10. The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the Class D Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Class D Preferred Stock, and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Class D
Preferred Stock, the Corporation shall take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
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F. Voting Rights.
1. The holders of record of shares of Class D Preferred Stock shall not be
entitled to any voting rights except as hereinafter provided in this paragraph
(F). The Corporation shall not, without either (a) the affirmative vote of the
holders of at least two-thirds of the shares of the Class D Preferred Stock
outstanding at the time, given in person or by proxy, at a meeting (such Class D
Preferred Stock voting separately as a class) or (b) the unanimous written
consent of all of the holders of shares of Class D Preferred Stock, (i)
authorize or create, or increase the authorized or issued amount of, any class
or series of Senior Stock, or reclassify any authorized stock into Senior Stock,
or create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such Senior Stock; or (ii) amend or repeal
the provisions of the Charter in respect of the Class D Preferred Stock so as to
materially and adversely affect any right, preference, privilege or voting power
of the Class D 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 the Class D Preferred Stock, in each case ranking
on a parity with or junior to the Class D Preferred Stock 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 such rights, preferences, privileges or voting powers.
2. If and whenever dividends payable on Class D Preferred Stock shall be in
arrears for six (6) or more quarterly periods, regardless of whether such
quarterly periods are consecutive, then the holders of Class D Preferred Stock
(voting separately as a class with such other class or series as provided in
subparagraph (6) of this paragraph (F)) shall be entitled at the next annual
meeting of the stockholders or at any special meeting to elect two (2)
additional directors. Upon election, such directors shall become directors of
the Corporation and the authorized number of directors of the Corporation shall
thereupon be automatically increased by such number of directors.
3. Whenever such voting right shall have vested, such right may be
exercised initially either at a special meeting of the holders of Class D
Preferred Stock, called as hereinafter provided, or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at such
annual meetings or by the written consent of the holders of Class D Preferred
Stock. Such right of the holders of Class D Preferred Stock to elect directors
may be exercised until all dividends to which the holders of Class D Preferred
Stock shall have been entitled for (i) all previous Dividend Periods and (ii)
the current Dividend Period shall have been paid in full or declared and a sum
of money sufficient for the payment thereof set aside for payment, at which time
the right of the holders of Class D Preferred Stock to elect such number of
directors shall cease, the term of such directors previously elected shall, upon
the resignation thereof, thereupon terminate, and the authorized number of
directors of the Corporation shall thereupon return to the number of authorized
directors otherwise in effect, but subject always to the same provisions for the
renewal and divestment of such special voting rights in the case of any such
future dividend default or defaults.
4. At any time when such voting right shall have vested in the holders of
Class D Preferred Stock and if such right shall not already have been initially
exercised, a proper officer of the Corporation shall, upon the written request
of any holder of record of Class D Preferred Stock then outstanding, addressed
to the Secretary of the Corporation, call a special meeting of holders of Class
D Preferred Stock. Such meeting shall be held on the earliest practicable date
upon the notice required for annual meetings of stockholders at the place for
holding annual meetings of stockholders of the Corporation or, if none, at a
place designated by the Secretary of the Corporation. If such meeting shall not
be called by the proper officers of the Corporation within thirty (30) days
after the personal service of such written request upon the Secretary of the
Corporation, or within thirty (30) days after mailing the same within the United
States, by registered mail, addressed to the Secretary of the Corporation at its
principal office (such mailing to be evidenced by the registry receipt issued by
the postal authorities), then the holders of record of ten percent (10%) of the
shares of Class D Preferred Stock then outstanding may designate in writing a
holder of Class D Preferred Stock to call such meeting at the expense of the
Corporation, and such meeting may be called by such person so designated upon
the notice required for annual meetings of stockholders and shall be held at the
place for holding annual meetings of the Corporation or, if none, at a place
designated by such holder. Any holder of Class D Preferred Stock that would be
entitled to vote at such meeting shall have access to the stock transfer records
of the Corporation for the purpose of causing a meeting of stockholders to be
called pursuant to the provisions of this paragraph (F). Notwithstanding the
provisions of this
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paragraph (F), however, no such special meeting shall be called if any such
request is received less than ninety (90) days before the date fixed for the
next ensuing annual or special meeting of stockholders.
5. If a director so elected by the holders of Class D Preferred Stock shall
cease to serve as a director before his/her term shall expire, the holders of
Class D Preferred Stock then outstanding may, at a special meeting of the
holders called as provided above, elect a successor to hold office for the
unexpired term of the director whose place shall be vacant.
6. If, at any time when the holders of Class D Preferred Stock are entitled
to elect directors pursuant to the foregoing provisions of this paragraph (F),
the holders of any one or more classes or series of Preferred Stock are entitled
to elect directors by reason of any default or event specified in the Charter,
as in effect at the time, and if the terms for such classes or series of
Preferred Stock so provide, then the voting rights of the Class D Preferred
Stock and the one or more classes or series of Preferred Stock then entitled to
vote shall be combined (with each having a number of votes proportional to the
aggregate liquidation preference of its outstanding shares). In such case, the
holders of Class D Preferred Stock and of all such classes or series of
Preferred Stock then entitled so to vote, voting together as a class, shall
elect such directors. If the holders of any such classes or series of Preferred
Stock have elected such directors prior to the happening of the default or event
providing for the election of directors by the holders of Class D Preferred
Stock, or prior to a written request for the holding of a special meeting being
received by the Secretary of the Corporation as elsewhere required in
subparagraph (4) of paragraph (F) above, then a new election shall be held with
all such classes or series of Preferred Stock and the Class D Preferred Stock
voting together as a single class for such directors, resulting in the
termination of the term of such previously elected directors upon the election
of such new directors. If the holders of any such classes or series of Preferred
Stock are entitled to elect in excess of two directors, the Class D Preferred
Stock shall not participate in the election of more than two such directors, and
those directors whose terms first expire shall be deemed to be the directors
elected by the holders of Class D Preferred Stock; provided that if at the
expiration of such terms the holders of Class D Preferred Stock are entitled to
vote in the election of directors pursuant to the provisions of this paragraph
(F), then the Secretary of the Corporation shall call a meeting (which meeting
may be the annual meeting or special meeting of stockholders referred to in
subparagraph (3) of this paragraph (F)) of holders of Class D Preferred Stock
for the purpose of electing replacement directors (in accordance with the
provisions of this paragraph (F)) to be held at or prior to the time of
expiration of the expiring terms referred to above.
7. In any matter in which the Class D Preferred Stock is entitled to vote
(as expressly provided herein), including any action by written consent, each
share of Class D Preferred Stock shall subject to subparagraph (6) of this
paragraph (F) be entitled to ten (10) votes, each of which ten (10) votes may be
directed separately by the holder thereof (or by any proxy or proxies of such
holder). With respect to each share of Class D Preferred Stock, the holder
thereof may designate up to ten (10) proxies, with each such proxy having the
right to vote a whole number of votes (totalling ten (10) votes per share of
Class D Preferred Stock).
G. Restrictions on Ownership and Transfer to Preserve Tax Benefit; Conversion
and Exchange for Class D Excess Preferred Stock; and Terms of Class D Excess
Preferred Stock.
1. Restriction on Ownership and Transfer.
a. Except as provided in subparagraph (8) of this paragraph (G), no
Person shall Acquire any shares of Class D Preferred Stock if, as the
result of such Acquisition, such Person shall Beneficially or
Constructively Own shares of Class D Preferred Stock in excess of the
Ownership Limit;
b. Except as provided in subparagraph (8) of this paragraph (G), no
Person shall Beneficially Own or Constructively Own any shares of Class D
Preferred Stock such that such Person would Beneficially Own or
Constructively Own Capital Stock in excess of the Aggregate Stock Ownership
Limit;
c. Except as provided in subparagraph (8) of this paragraph (G), any
Acquisition (whether or not such Acquisition is the result of a transaction
entered into through the facilities of the NYSE) that, if effective, would
result in any Person Beneficially Owning Class D Preferred Stock in excess
of the Ownership Limit shall be void ab initio as to the Acquisition of
such Class D Preferred Stock which would be otherwise Beneficially Owned by
such Person in excess of the Ownership Limit; and the intended transferee
shall acquire no rights in such Class D Preferred Stock;
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<PAGE>
d. Except as provided in subparagraph (8) of this paragraph (G), any
Acquisition (whether or not such Acquisition is the result of a transaction
entered into through the facilities of the NYSE) that, if effective, would
result in any Person Constructively Owning Class D Preferred Stock in
excess of the Ownership Limit shall be void ab initio as to the Acquisition
of such Class D Preferred Stock which would be otherwise Constructively
Owned by such Person in excess of the Ownership Limit; and the intended
transferee shall acquire no rights in such Class D Preferred Stock; and
e. Notwithstanding any other provisions contained in this paragraph
(G), any Transfer (whether or not such Transfer is the result of a
transaction entered into through the facilities of the NYSE) or other event
that, if effective, would result in the Corporation being 'closely held'
within the meaning of Section 856(h) of the Code, or would otherwise result
in the Corporation failing to qualify as a REIT (including, but not limited
to, a Transfer other event that would result in the Corporation owning
(directly or Constructively) an interest in a tenant that is described in
Section 856(d)(2)(B) of the Code if the income derived by the Corporation
from such tenant would cause the Corporation to fail to satisfy any of the
gross income requirements of Section 856(c) of the Code) shall be void ab
initio as to the Transfer of the Class D Preferred Stock or other event
which would cause the Corporation to be 'closely held' within the meaning
of Section 856(h) of the Code or would otherwise result in the Corporation
failing to qualify as a REIT; and the intended transferee or owner or
Constructive or Beneficial Owner shall acquire or retain no rights in such
Class D Preferred Stock.
2. Conversion Into and Exchange For Class D Excess Preferred Stock. If,
notwithstanding the other provisions contained in this paragraph (G), at any
time after the date of the Initial Issue Date, there is a purported Transfer or
Acquisition (whether or not such Transfer or Acquisition is the result of a
transaction entered into through the facilities of the NYSE), change in the
capital structure of the Corporation or other event such that one or more of the
restrictions on ownership and transfers described in subparagraph (1) of this
paragraph (G), above, has been violated, then the Class D Preferred Stock being
Transferred or Acquired (or in the case of an event other than a Transfer or
Acquisition, the Class D Preferred Stock owned or Constructively Owned or
Beneficially Owned or, if the next sentence applies, the Class D Preferred Stock
identified in the next sentence) which would cause one or more of the
restrictions on ownership or transfer to be violated (rounded up to the nearest
whole share) shall be automatically converted into an equal number of shares of
Class D Excess Preferred Stock. If at any time of such purported Transfer or
Acquisition any of the shares of the Class D Preferred Stock are then owned by a
depositary to permit the trading of beneficial interests in fractional shares of
Class D Preferred Stock, then shares of Class D Preferred Stock that shall be
converted to Class D Excess Preferred Stock shall be first taken from any Class
D Preferred Stock that is not in such depositary that is Beneficially Owned or
Constructively Owned by the Person whose Beneficial Ownership or Constructive
Ownership would otherwise violate the restrictions of subparagraph (1) of this
paragraph (G) prior to converting any shares in such depositary. Any conversion
pursuant to this subparagraph shall be effective as of the close of business on
the Business Day prior to the date of such Transfer or other event.
3. Remedies For Breach. If the Board of Directors or its designees shall
at any time determine in good faith that a Transfer or other event has taken
place in violation of subparagraph (1) of this paragraph (G) or that a Person
intends to Transfer or Acquire, has attempted to Transfer or Acquire or may
Transfer or Acquire direct ownership, beneficial ownership (determined without
reference to any rules of attribution), Beneficial Ownership or Constructive
Ownership of any shares of the Corporation in violation of subparagraph (1) of
this paragraph (G), the Board of Directors or its designees shall take such
action as it deems advisable to refuse to give effect to or to prevent such
Transfer, Acquisition or other event, including, but not limited to, causing the
Corporation to purchase such shares upon the terms and conditions specified by
the Board of Directors in its sole discretion, refusing to give effect to such
Transfer, Acquisition or other event on the books of the Corporation or
instituting proceedings to enjoin such Transfer, Acquisition or other event;
provided, however, that any Transfer or Acquisition (or, in the case of events
other than a Transfer or Acquisition, ownership or Constructive Ownership or
Beneficial Ownership) in violation of subparagraph (1) of this paragraph (G)
shall automatically result in the conversion described in subparagraph (ii),
irrespective of any action (or non-action) by the Board of Directors.
4. Notice of Restricted Transfer. Any Person who acquires or attempts to
acquire Class D Preferred Stock or other securities in violation of subparagraph
(1) of this paragraph (G), or any Person who owns or will own Class D Excess
Preferred Stock as a result of an event under subparagraph (2) of this paragraph
(G), shall
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immediately give written notice to the Corporation of such event and shall
provide to the Corporation such other information as the Corporation may request
in order to determine the effect, if any, of such Transfer or attempted Transfer
or other event on the Corporation's status as a REIT.
5. Owners Required To Provide Information. From and after the Initial
Issue Date, each Person who is a beneficial owner or Beneficial Owner or
Constructive Owner of Class D Preferred Stock and each Person (including the
stockholder of record) who is holding Class D Preferred Stock for a Beneficial
Owner or Constructive Owner shall provide to the Corporation such information
that the Corporation may request, in good faith, in order to determine the
Corporation's status as a REIT.
6. Remedies Not Limited. Nothing contained in this paragraph (G) (but
subject to subparagraph (12) of this paragraph (G)) shall limit the authority of
the Board of Directors to take such other action as it deems necessary or
advisable to protect the Corporation and the interests of its stockholders by
preservation of the Corporation's status as a REIT.
7. Ambiguity. In the case of an ambiguity in the application of any of the
provisions of this paragraph (G), including any definition contained in
paragraph (A), the Board of Directors shall have the power to determine the
application of the provisions of this paragraph (G) with respect to any
situation based on the facts known to it (subject, however, to the provisions of
paragraph (12) of this paragraph (G)).
8. Exceptions.
a. Subject to subparagraph (1)(d) of this paragraph (G), the Board of
Directors, in its sole and absolute discretion, with the advice of the
Corporation's tax counsel, may exempt a Person from the limitation on a Person
Acquiring Class D Preferred Stock in excess of the Ownership Limit or
Beneficially Owning Class D Preferred Stock in excess of the Aggregate Stock
Ownership Limit if such Person is not an individual for purposes of Section
542(a)(2) of the Code and the Board of Directors obtains such representations
and undertakings from such Person as are reasonably necessary to ascertain that
no individual's Acquisition or Beneficial Ownership of such Class D Preferred
Stock will violate the Ownership Limit or Beneficially Owning Class D Preferred
Stock in excess of the Aggregate Stock Ownership Limit, as the case may be, and
such Person agrees that any violation of such representations or undertaking (or
other action which is contrary to the restrictions contained in this paragraph
(G)) or attempted violation will result in such Class D Preferred Stock being
exchanged for Class D Excess Preferred Stock in accordance with subparagraph (2)
of this paragraph (G).
b. Subject to subparagraph (1)(d) of this paragraph (G), the Board of
Directors, in its sole and absolute discretion, with advice of the Corporation's
tax counsel, may exempt a Person from the limitation on a Person Constructively
Owning or Acquiring Class D Preferred Stock in excess of the Ownership Limit or
Beneficially Owning or Acquiring Class D Preferred Stock in excess of the
Aggregate Stock Ownership Limit if such Person does not and represents that it
will not own, directly or constructively (by virtue of the application of
Section 318 of the Code, as modified by Section 856(d)(5) of the Code), more
than a 9.8% interest (as set forth in Section 856(d)(2)(B) of the Code) in a
tenant of the Corporation and the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary to
ascertain this fact and such Person agrees that any violation or attempted
violation will result in such Class D Preferred Stock in excess of the Ownership
Limit or Beneficially Owning Class D Preferred Stock in excess of the Aggregate
Stock Ownership Limit being exchanged for Class D Excess Preferred Stock in
accordance with subparagraph (2) of this paragraph (G).
c. Prior to granting any exception pursuant to subparagraph (8)(a) or
(8)(b) of this paragraph (G), the Board of Directors may require a ruling from
the IRS, or an opinion of counsel, in either case in form and substance
satisfactory to the Board of Directors, in its sole discretion as it may deem
necessary or advisable in order to determine or ensure the Corporation's status
as a REIT; provided, however, that obtaining a favorable ruling or opinion shall
not be required for the Board of Directors to grant an exception hereunder.
9. Legend. Each certificate for Class D Preferred Stock shall bear
substantially the following legend:
'The Corporation will furnish to any stockholder, on request and
without charge, a full statement of the information required by Section
2-211(b) of the Corporations and Associations Article of the Annotated Code
of Maryland with respect to the designations and any preferences,
conversion and other rights, voting
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<PAGE>
powers, restrictions, limitations as to dividends and other distributions,
qualifications, and terms and conditions of redemptions of the stock of
each class which the Corporation has authority to issue and, if the
Corporation is authorized to issue any preferred or special class in
series, (i) the differences in the relative rights and preferences between
the shares of each series to the extent set, and (ii) the authority of the
Board of Directors to set such rights and preferences of subsequent series.
The foregoing summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the charter of the Corporation
(the 'Charter'), a copy of which will be sent without charge to each
stockholder who so requests. Such request must be made to the Secretary of
the Corporation at its principal office.
'The securities represented by this certificate are subject to
restrictions on ownership and transfer for the purpose of the Corporation's
maintenance of its status as a real estate investment trust under the
Internal Revenue Code of 1986, as amended. Except as otherwise provided
pursuant to the Charter of the Corporation, no Person may (i) Acquire any
shares of Class D Preferred Stock if, as a result of such Acquisition, such
Person shall Beneficially Own or Constructively Own shares of Class D
Preferred Stock in excess of 9.8% of the outstanding Class D Preferred
Stock and any Class D Excess Preferred Stock of the Corporation or (ii)
Beneficially Own or Constructively Own any shares of Class D Preferred
Stock such that such Person would Beneficially Own or Constructively Own in
excess of 5.0% in value of the aggregate of the outstanding shares of
Capital Stock. Any Person who attempts to Acquire or Beneficially Own or
Constructively Own shares of Class D Preferred Stock in excess of the above
limitations must immediately notify the Corporation. All capitalized terms
in this legend have the meanings defined in the Charter of the Corporation,
a copy of which, including the restrictions on transfer, will be sent to
any stockholder on request and without charge. Transfers in violation of
the restrictions described above shall be void ab initio. If the
restrictions on ownership and transfer are violated, the securities
represented hereby will be designated and treated as shares of Class D
Excess Preferred Stock which will be held in trust by the Corporation. The
foregoing summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the Charter, a copy of which,
including the restrictions on transfer, will be sent without charge to each
stockholder who so requests. Such request must be made to the Secretary of
the Corporation at its principal office.'
10. Severability. If any provision of this paragraph (G) or any
application of any such provision is determined to be invalid by any federal or
state court having jurisdiction, the validity of the remaining provisions shall
not be affected and other applications of such provision shall be affected only
to the extent necessary to comply with the determination of such court.
11. Class D Excess Preferred Stock.
a. Ownership In Trust. Upon any purported Transfer (whether or not such
Transfer is the result of a transaction entered into through the facilities of
the NYSE) or other event that results in the issuance of Class D Excess
Preferred Stock pursuant to subparagraph (2) of this paragraph (G), such Class D
Excess Preferred Stock shall be deemed to have been transferred to the
Corporation, as Trustee of a Trust for the exclusive benefit of such Beneficiary
or Beneficiaries to whom an interest in such Class D Excess Preferred Stock may
later be transferred pursuant to subparagraph (11)(e) of this paragraph (G).
Class D Excess Preferred Stock so held in trust shall be issued and outstanding
shares of stock of the Corporation. The Purported Record Transferee shall have
no rights in such Class D Excess Preferred Stock except the right to designate a
transferee of such Class D Excess Preferred Stock upon the terms specified in
subparagraph (11)(e) of this paragraph (G). The Purported Beneficial Transferee
shall have no rights in such Class D Excess Preferred Stock except as provided
in subparagraph (11)(e) of this paragraph (G).
b. Dividend Rights. Class D Excess Preferred Stock shall not be entitled
to any dividends or other distribution (except as provided in subparagraph
(11)(d) of this paragraph (G)). Any dividend or distribution paid prior to the
discovery by the Corporation that shares of Class D Preferred Stock have been
converted into Class D Excess Preferred Stock shall be repaid to the Corporation
upon demand.
c. Conversion Rights. Holders of shares of Class D Excess Preferred Stock
shall not be entitled to convert any shares of Class D Excess Preferred Stock
into shares of Common Stock. Any conversion made prior to the discovery by the
Corporation that shares of Class D Preferred Stock have been converted into
Class D Excess
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Preferred Stock shall be void ab initio and the Purported Record Transferee
shall return the shares of Class D Preferred Stock so converted to the
Corporation upon demand.
d. Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the assets of,
the Corporation, each holder of shares of Class D Excess Preferred Stock shall
be entitled to receive, ratably with each other holder of shares of Preferred
Equity Stock, that portion of the assets of the Corporation available for
distribution to the holders of shares of Preferred Equity Stock as the number
shares of Class D Excess Preferred Stock held by such holder bears to the total
number of shares of Preferred Equity Stock then outstanding. The Corporation, as
holder of the Class D Excess Preferred Stock in trust, or if the Corporation
shall have been dissolved, any trustee appointed by the Corporation prior to its
dissolution, shall distribute ratably to the Beneficiaries of the Trust, when
and if determined in accordance with subparagraph (11)(e) of this paragraph (G),
any such assets received in respect of the Class D Excess Preferred Stock in any
liquidation, dissolution or winding up of, or any distribution of the assets of
the Corporation.
e. Restrictions On Transfer; Designation of Beneficiary.
(1) Shares of Class D Excess Preferred Stock shall not be transferable.
Subject to the last sentence of this clause (1), the Purported Record Transferee
may freely designate a Beneficiary of an interest in the Trust (representing the
number of shares of Class D Excess Preferred Stock held by the Trust
attributable to a purported Transfer that resulted in the issuance of Class D
Excess Preferred Stock), if (i) the Class D Excess Preferred stock held in the
Trust would not be Class D Excess Preferred Stock in the hands of such
Beneficiary and (ii) the Purported Beneficial Transferee does not receive a
price from such Beneficiary that reflects a price per share for such Class D
Excess Preferred Stock that exceeds (x) the price per share such Purported
Beneficial Transferee paid for the Class D Preferred Stock in the purported
Transfer that resulted in the issuance of Class D Excess Preferred Stock, or (y)
if the Transfer or other event that resulted in the issuance of Class D Excess
Preferred Stock was not a transaction in which the Purported Beneficial
Transferee gave full value for such Class D Excess Preferred Stock, a price per
share equal to the Market Price on the date of the purported Transfer or other
event that resulted in the issuance of Class D Excess Preferred Stock. Upon such
transfer of an interest in the Trust, the corresponding shares of Class D Excess
Preferred Stock in the Trust shall be automatically exchanged for an equal
number of shares of Class D Preferred Stock and such Class D Preferred Stock
shall be transferred of record to the transferee of the interest in the Trust if
such Class D Preferred Stock would not be Class D Excess Preferred Stock in the
hands of such transferee. Prior to any transfer of any interest in the Trust,
the Purported Record Transferee must give advance notice to the Corporation of
the intended transfer and the Corporation must have waived in writing its
purchase rights under subparagraph (11)(g) of this paragraph (G).
(2) Notwithstanding the foregoing, if a Purported Beneficial Transferee
receives a price for designating a Beneficiary of an interest in the Trust that
exceeds the amounts allowable under subparagraph (11)(e)(1) of this paragraph
(G), such Purported Beneficial Transferee shall pay, or cause such Beneficiary
to pay, such excess to the Corporation.
f. Voting and Notice Rights. The holders of shares of Class D Excess
Preferred Stock shall have no voting rights and shall have no rights to receive
notice of any meetings.
g. Purchase Rights in Class D Excess Preferred Stock. Notwithstanding the
provisions of subparagraph (11)(e) of this paragraph (G), shares of Class D
Excess Preferred Stock shall be deemed to have been offered for sale to the
Corporation, or its designee, at a price per share equal to the lesser of (i)
the price per share in the transaction that required the issuance of such Class
D Excess Preferred Stock (or, if the Transfer or other event that resulted in
the issuance of Class D Excess Preferred Stock was not a transaction in which
the Purported Beneficial Transferee gave full value for such Class D Excess
Preferred Stock, a price per share equal to the Market Price on the date of the
purported Transfer or other event that resulted in the issuance of Class D
Excess Preferred Stock) and (ii) the Market Price on the date the Corporation,
or its designee, accepts such offer. The Corporation shall have the right to
accept such offer for a period of ninety (90) days after the later of (i) the
date of the Transfer or other event which resulted in the issuance of such
shares of Class D Excess Preferred Stock and (ii) the date the Board of
Directors determines in good faith that a Transfer or other event resulting in
the issuance of shares of Class D Excess Preferred Stock has occurred, if the
Corporation does not receive a notice of such Transfer or other event pursuant
to subparagraph (4) of this paragraph (G). The Corporation may appoint a
A-2-A-17
<PAGE>
special trustee of the Trust for the purpose of consummating the purchase of
Class D Excess Preferred Stock by the Corporation. In the event that the
Corporation's actions cause a reduction in the number of shares of Class D
Preferred Stock outstanding and such reduction results in the issuance of Class
D Excess Preferred Stock, the Corporation is required to exercise its option to
repurchase such shares of Class D Excess Preferred Stock if the Beneficial Owner
notifies the Corporation that it is unable to sell its rights to such Class D
Excess Preferred Stock.
12. Settlement. Nothing in this paragraph (G) shall preclude the
settlement of any transaction entered into through facilities of the NYSE.
H. Exclusion of Other Rights.
Except as may otherwise be required by law, the shares of Class D Preferred
Stock shall not have any preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions, qualifications
or terms or conditions of conversion or redemption other than those specifically
set forth in the Charter. The shares of Class D Preferred Stock and Class D
Excess Preferred Stock shall have no preemptive or subscription rights.
I. Headings of Subdivisions.
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
J. Severability of Provisions.
If any preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions, qualifications
or terms or conditions of conversion or redemption of the Class D Preferred
Stock set forth in the Charter is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications or terms or conditions of
conversion or redemption of Class D Preferred Stock set forth in the Charter
which can be given effect without the invalid, unlawful or unenforceable
provision thereof shall, nevertheless, remain in full force and effect, and no
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications or terms or
conditions of conversion or redemption of Class D Preferred Stock herein set
forth shall be deemed dependent upon any other provision thereof unless so
expressed therein.
K. Registration as Depositary Shares.
Shares of Class D Preferred Stock shall be registered in the form of
Depositary Shares representing a one-tenth fractional interest in a share of
Class D Preferred Stock on such terms and conditions as may be provided for in
any agreement binding upon the Corporation (whether directly or through merger
with any other corporation).
SECOND: The Shares and the Class D Excess Shares have been
reclassified by the Board of Directors under a power contained in the
Charter.
THIRD: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
FOURTH: The undersigned President of the Corporation acknowledges
these Articles Supplementary to be the corporate act of the Corporation
and, as to all matters or facts required to be verified under oath, the
undersigned President acknowledges that to the best of his knowledge,
information and belief, these matters and facts are true in all material
respects and that this statement is made under the penalties for perjury.
A-2-A-18
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary
to be signed in its name and on its behalf by its President and attested to by
its Secretary on this 14th day of May, 1998.
<TABLE>
<S> <C>
ATTEST: KIMCO REALTY CORPORATION
/s/ Bruce Kauderer /s/ Michael J. Flynn
Bruce Kauderer Michael J. Flynn
Secretary President
</TABLE>
A-2-A-19
<PAGE>
ANNEX B
FAIRNESS OPINION OF JEFFERIES & COMPANY, INC.
B-1
<PAGE>
January 14, 1998
The Board of Directors
KIMCO REALTY CORPORATION
3333 New Hyde Park Road
New Hyde Park, NY 11042-0020
To the Members of the Board of Directors:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the holders (the 'Kimco Shareholders') of the
outstanding common shares, par value $.01 per share (the 'Kimco Common Shares'),
of Kimco Realty Corporation, a Maryland corporation ('Kimco' or the 'Company'),
of the Consideration (as defined below) to be paid by Kimco pursuant to the
Proposed Transaction (as defined below). Under the terms of the Agreement (as
defined below), (i) The Price REIT, Inc., a Maryland corporation ('Price'), will
merge with and into REIT Sub, Inc., a wholly owned subsidiary of Kimco, (ii)
each outstanding common share of Price, par value $.01 per share (the 'Price
Common Shares'), will be converted into the right to receive (A) 1.00 Kimco
Common Share and (B) and 0.40 depositary shares of Kimco (the 'Kimco Preferred
Shares'), each representing a one-tenth of a share of Kimco Class D Cumulative
Convertible Preferred Stock, par value $1.00 per share, subject to adjustment as
set forth in the paragraph immediately below (the 'Consideration') and (iii)
Price will cease to exist as a corporation (collectively, the 'Proposed
Transaction'), all upon the terms and conditions presently set forth in the
Agreement and Plan of Merger, dated January 13, 1998 and as amended (the
'Agreement'), by and among Kimco and Price. The Proposed Transaction is subject
to the approval of the shareholders of both Kimco and Price. The terms and
conditions of the Proposed Transaction are more fully set forth in the
Agreement.
In the event that the sum of (i) the Kimco Average Price (as hereinafter
defined) and (ii) $10.00 (the sum of (i) and (ii) being referred to herein as
the 'Notional Value') is less than or equal to $45.00, each Price Common Share
will be converted in the Merger into the right to receive (1) one Kimco Common
Share, plus (2) a number of Kimco Preferred Shares equal to a fraction, the
numerator of which is $45.00 less the Kimco Average Price and the denominator of
which is $25.00; provided, however, that if the Kimco Average Price is less than
$33.75, each Price Common Share will be converted in the Merger into the right
to receive (1) a number of Kimco Common Shares equal to a fraction, the
numerator of which is $33.75 and the denominator of which is the Kimco Average
Price, and (2) 0.45 Kimco Preferred Shares. In the event that the Notional Value
is greater than $45.00, each Price Common Share will be converted in the Merger
into the right to receive (1) one Kimco Common Share, plus (2) a number of Kimco
Preferred Shares equal to 0.4 minus a fraction, the numerator of which is the
Notional Value less $45.00 and the denominator of which is $50.00; provided,
however, that in no event shall the aggregate fractional number of Kimco
Preferred Shares issued in respect of one Price Common Share be less than 0.36.
The 'Kimco Average Price' means the average of the daily high and low sales
prices of the Kimco Common Shares on the New York Stock Exchange for fifteen
randomly selected trading days within the thirty consecutive trading days ending
on and including the seventh trading day preceding the date of the meeting of
the holders of the Kimco Common Shares to be held in connection with the Merger.
The terms and conditions of the Merger are more fully set forth in the
Agreement.
Jefferies & Company, Inc. ('Jefferies'), as part of its investment banking
business, is regularly engaged in the evaluation of capital structures, the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements, financial
restructurings and other financial services. We are currently acting as
financial advisor to the Company in connection with the Proposed Transaction and
received a fee for delivering this opinion. Kimco has agreed to indemnify
Jefferies against certain liabilities arising out of or in connection with the
services rendered by Jefferies under such engagement. In the ordinary course of
our business, we may trade the securities of Kimco for our own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in those securities. We call your attention to the fact that Richard G.
Dooley, an outside director of our parent, Jefferies Group, Inc., is also an
outside director of Kimco. Mr. Dooley did not participate in any way in the
preparation and rendering of this opinion.
In conducting our analysis and arriving at the opinion expressed herein, we
have, among other things, (i) reviewed the Agreement (including any schedules
and exhibits thereto); (ii) reviewed certain financial and
B-2
<PAGE>
other information that was publicly available; (iii) reviewed information
furnished to us by Kimco and Price, including certain internal financial
analyses, budgets, reports and other information prepared by the respective
managements of the companies; (iv) held discussions with various members of
senior management of the Company and Price concerning each company's historical
and current operations, financial conditions and prospects, as well as the
strategic and operating benefits anticipated by each company from the Proposed
Transaction; (v) reviewed the share price and trading history of Kimco's and
Price's publicly traded securities from January 2, 1996 to January 9, 1998; (vi)
reviewed the valuations of publicly traded companies which we deemed comparable
to Kimco and Price; (vii) reviewed the acquisition valuation multiples and stock
purchase price premiums of publicly traded companies which we deemed comparable
to Kimco and Price; (viii) reviewed the net asset valuations of both Kimco and
Price with the net asset valuations of publicly traded companies which we deemed
comparable to Kimco and Price; (ix) analyzed the combined funds from operations
and funds available for distribution per share of the combined company on a pro
forma basis; (x) prepared discounted cash flow analyses of Kimco and Price on
both stand-alone and combined bases; and (xi) prepared a relative contribution
analysis of revenue, net operating income, funds from operations and funds
available for distribution contributed by each company compared with their pro
forma common stock ownership position in the combined company. In addition, we
have conducted such other reviews, analyses and inquiries relating to Kimco and
Price as we considered appropriate in rendering this opinion.
In our review and analysis and in rendering this opinion, we have relied
upon, but have not assumed any responsibility to independently investigate or
verify, the accuracy, completeness and fair presentation of all financial and
other information that was provided to us by Kimco or Price or that was publicly
available to us (including, without limitation, the information described above
and the financial projections and financial models prepared by Kimco and Price
regarding the estimated future performance of the respective companies before
and after giving effect to the Proposed Transaction). This opinion is expressly
conditioned upon such information (whether written or oral) being complete,
accurate and fair in all respects.
With respect to the financial projections and financial models provided to
and examined by us, we note that projecting future results of any company is
inherently subject to uncertainty. You have informed us, however, and we have
assumed, that such projections and models were reasonably prepared on bases
reflecting the best currently available estimates and good faith judgments of
the respective managements of the companies as to the future performance of each
company. In addition, although we have performed sensitivity analyses thereon,
in rendering this opinion we have assumed that each company will perform in
accordance with such projections and models for all periods specified therein.
Although such projections and models did not form the principal basis for our
opinion, but rather constituted one of many items that we employed, changes to
such projections and models could affect the opinion rendered herein. We have
assumed that the Proposed Transaction will be reported as a tax-free
reorganization and will be treated as a 'purchase' for accounting purposes.
In our review, we did not obtain any independent evaluation or appraisal of
the assets or liabilities of, nor conducted a comprehensive physical inspection
of any of the assets of, Price, nor have we been furnished with any such
evaluations or appraisals for Price or reports of such physical inspections for
Price, nor have we assumed any responsibility to obtain any such evaluations,
appraisals or inspections for Price. In addition, we did not obtain any
independent evaluation or appraisal of the assets or liabilities of, nor
conducted a comprehensive physical inspection of any of the assets of, Kimco,
nor have we been furnished with any such evaluations or appraisals for Kimco or
reports of such physical inspections for Kimco, nor have we assumed any
responsibility to obtain any such evaluations, appraisals or inspections for
Kimco. Our opinion is based on economic, monetary, political, regulatory, market
and other conditions existing and which can be evaluated as of the date hereof
(including, without limitation, current market prices of the Kimco or Price
Common Shares); however, such conditions are subject to rapid and unpredictable
change and such changes could affect the conclusions expressed herein. We have
made no independent investigation of any legal or accounting matters affecting
Kimco or Price, and we have assumed the correctness of all legal and accounting
advice given to such parties and their respective boards of directors,
including, without limitation, advice as to the accounting and tax consequences
(including the effect of the Proposed Transaction on Kimco's continuing status
as a 'real estate investment trust' under the Internal Revenue Code of 1986, as
amended) of the Proposed Transaction to Kimco, Price and their respective
shareholders.
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<PAGE>
In rendering this opinion we have also assumed that: (i) the Proposed
Transaction will be consummated on the terms described in the Agreement without
any waiver of any material terms or conditions and that the conditions to the
consummation of the Proposed Transaction set forth in the Agreement will be
satisfied without material expense; (ii) there is not now, and there will not as
a result of the consummation of the transactions contemplated by the Agreement
be, any default, or event of default, under any indenture, credit agreement or
other material agreement or instrument to which Kimco, Price or any of their
respective subsidiaries or affiliates is a party; and (iii) all material assets
and liabilities (contingent or otherwise, known or unknown) of Kimco and Price
are as set forth in their respective consolidated financial statements.
Moreover, in rendering the opinion set forth below we note that the
consummation of the Proposed Transaction is conditioned upon the approval of the
shareholders of Kimco, and we are not recommending that Kimco, its Board of
Directors, any of its security holders or any other person should take any
specific action in connection with the Proposed Transaction. Our opinion does
not constitute a recommendation of the Proposed Transaction over any alternative
transactions which may be available to Kimco, and does not address Kimco's
underlying business decision to effect the Proposed Transaction. Finally, we are
not opining as to the market value or the prices at which any of the securities
of Kimco may trade at any time.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the Consideration to be paid by Kimco
pursuant to the Proposed Transaction, taken as a whole, is fair to the Kimco
Shareholders from a financial point of view.
This opinion does not constitute a recommendation to any shareholder of
Kimco (or any other person) as to how such person should vote with respect to
the Proposed Transaction or any other matter. We expressly disclaim any
undertaking or obligation to advise any person of any change in any fact or
matter affecting our opinion of which we become aware after the date hereof.
This opinion may be reproduced in full in any proxy statement or prospectus
mailed to shareholders of Kimco in connection with the Proposed Transaction but
may not otherwise be disclosed publicly in any manner without our prior written
approval. In furnishing this opinion, we do not admit that we are experts within
the meaning of the term 'experts' as used in the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder.
Sincerely,
/s/ JEFFERIES & COMPANY, INC.
B-4
<PAGE>
ANNEX C
OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
C-1
<PAGE>
January 13, 1998
Board of Directors
The Price REIT, Inc.
7979 Ivanhoe Avenue
La Jolla, California 92037
Members of the Board of Directors:
The Price REIT, Inc. (the 'Company'), Kimco Realty Corporation (the
'Acquiror') and REIT Sub, Inc., a newly formed, wholly owned subsidiary of the
Acquiror (the 'Acquisition Sub'), propose to enter into an Agreement and Plan of
Merger, dated as of January 13, 1998 (the 'Agreement'), pursuant to which the
Company will be merged with and into the Acquisition Sub in a transaction (the
'Merger') in which each outstanding share of the Company's common stock, par
value $.01 per share (a 'Company Share'), will be converted into the right to
receive (1) shares of common stock, par value $.01 per share, of the Acquiror
(the 'Acquiror Common Shares') and (2) Depositary Shares of the Acquiror (the
'Acquiror Preferred Shares'), each representing one-tenth of one share of the
Acquiror's Class D Cumulative Convertible Preferred Stock, par value $1.00 per
share, all as set forth in the next paragraph. The Acquiror Common Shares and
Acquiror Preferred Shares to be issued to the Company's shareholders in the
Merger, as set forth in the next paragraph, shall be referred to herein as the
'Consideration'.
In the event that the sum of (i) the Acquiror Average Closing Price (as
hereinafter defined) and (ii) $10.00 (the sum of (i) and (ii) being referred to
herein as the 'Notional Value') is less than or equal to $45.00, each Company
Share will be converted in the Merger into the right to receive (1) one Acquiror
Common Share, plus (2) a number of Acquiror Preferred Shares equal to a
fraction, the numerator of which is $45.00 less the Acquiror Average Closing
Price and the denominator of which is $25.00; provided, however, that if the
Acquiror Average Closing Price is less than $33.75, each Company Share will be
converted in the Merger into the right to receive (1) a number of Acquiror
Common Shares equal to a fraction, the numerator of which is $33.75 and the
denominator of which is the Acquiror Average Closing Price, and (2) 0.45
Acquiror Preferred Shares. In the event that the Notional Value is greater than
$45.00, each Company Share will be converted in the Merger into the right to
receive (1) one Acquiror Common Share, plus (2) a number of Acquiror Preferred
Shares equal to 0.4 minus a fraction, the numerator of which is the Notional
Value less $45.00 and the denominator of which is $50.00; provided, however,
that in no event shall the aggregate fractional number of Acquiror Preferred
Shares issued in respect of one Company Share be less than 0.36. The 'Acquiror
Average Closing Price' means the average of the closing sales prices of the
Acquiror Common Shares on the New York Stock Exchange during the twenty
consecutive trading days ending on and including the third trading day preceding
the date of the meeting of the holders of the Company Shares to be held in
connection with the Merger. The terms and conditions of the Merger are more
fully set forth in the Agreement.
You have asked us whether, in our opinion, the proposed Consideration to be
received by the holders of the Company Shares pursuant to the Merger is fair
from a financial point of view to such holders.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company and the Acquiror that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and prospects
of the Company and the Acquiror, as well as the amount and timing of
the cost savings and related expenses and synergies expected to result
from the Merger (the 'Expected Synergies') furnished to us by the
Company and the Acquiror, respectively;
(3) Conducted discussions with members of senior management of the Company
and the Acquiror concerning the matters described in clauses 1 and 2
above, as well as their respective businesses and prospects before and
after giving effect to the Merger and the Expected Synergies;
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<PAGE>
(4) Reviewed the market prices and valuation multiples for the Company
Shares and the Acquiror Common Shares and compared them with those of
certain publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and the Acquiror and
compared them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and
legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed a draft, dated January 12, 1998, of the Agreement, including
the form of Articles Supplementary of the Acquiror (the 'Articles
Supplementary') setting forth the preferences, rights and designations
for the Acquiror Preferred Shares, included as an exhibit to the
Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or the Acquiror or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or the Acquiror. With respect to the financial forecast information and the
Expected Synergies furnished to or discussed with us by the Company or the
Acquiror, we have assumed that they have been reasonably prepared and reflect
the best currently available estimates and judgment of the Company's or the
Acquiror's management as to the expected future financial performance of the
Company or the Acquiror, as the case may be, and the Expected Synergies. We have
further assumed that the Merger will qualify as a tax-free reorganization for
U.S. federal income tax purposes. We have also assumed that the final form of
the Agreement (including the Articles Supplementary) will be substantially
similar to the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger. We have also assumed that the
Acquiror will continue to qualify after the Merger as a Real Estate Investment
Trust for U.S. federal income tax purposes. In connection with the preparation
of this opinion, we have not been authorized by the Company or the Board of
Directors to solicit, nor have we solicited, third-party indications of interest
for the acquisition of all or any part of the Company.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the delivery of this opinion and the
consummation of the Merger. In addition, the Company has agreed to indemnify us
for certain liabilities arising out of our engagement. We have in the past
provided financial advisory and financing services to the Company and the
Acquiror and may continue to do so and have received, and may receive, fees for
the rendering of such services. In addition, in the ordinary course of our
business, we may actively trade the Company Shares, as well as the Acquiror
Common Shares and other securities of the Acquiror, for our own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
C-3
<PAGE>
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation to
any shareholder as to how such shareholder should vote on the proposed Merger or
any matter related thereto.
We are not expressing any opinion herein as to the prices at which the
Company Shares or the Acquiror Common Shares will trade following the
announcement or consummation of the Merger or as to the price at which the
Acquiror Preferred Shares will trade following the consummation of the Merger.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Consideration to be received by the holders of the
Company Shares pursuant to the Merger is fair from a financial point of view to
the holders of such shares.
Very truly yours,
/s/ MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
C-4
<PAGE>
ANNEX D
THE 1998 EQUITY PARTICIPATION PLAN
D-1
<PAGE>
THE 1998 EQUITY PARTICIPATION PLAN
OF
KIMCO REALTY CORPORATION
Kimco Realty Corporation, a Maryland corporation, has adopted The 1998
Equity Participation Plan of Kimco Realty Corporation (the 'Plan'), effective
_____________, 1998, for the benefit of its eligible employees, consultants and
directors. The Plan consists of two plans, one for the benefit of key Employees
(as such term is defined below) and consultants and one for the benefit of
Independent Directors (as such term is defined below).
The purposes of this Plan are as follows:
To provide an additional incentive for directors, key Employees and
consultants to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company stock and/or
rights which recognize such growth, development and financial success.
To enable the Company to obtain and retain the services of directors, key
Employees and consultants considered essential to the long range success of the
Company by offering them an opportunity to own stock in the Company and/or
rights which will reflect the growth, development and financial success of the
Company.
ARTICLE I.
DEFINITIONS
Section 1.1. General.
Wherever the following terms are used in this Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise.
Section 1.2. Award Limit.
'Award Limit' shall mean 500,000 shares of Common Stock.
Section 1.3. Board.
'Board' shall mean the Board of Directors of the Company.
Section 1.4. Code.
'Code' shall mean the Internal Revenue Code of 1986, as amended.
Section 1.5. Committee.
'Committee' shall mean the Executive Compensation Committee of the Board,
or another committee of the Board, appointed as provided in Section 7.1.
Section 1.6. Common Stock.
'Common Stock' shall mean the common stock of the Company, par value $.01
per share, and any equity security of the Company issued or authorized to be
issued in the future, but excluding any preferred stock and any warrants,
options or other rights to purchase Common Stock. Debt securities of the Company
convertible into Common Stock shall be deemed equity securities of the Company.
D-2
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Section 1.7. Company.
'Company' shall mean Kimco Realty Corporation, a Maryland corporation.
Section 1.8. Corporate Transaction.
'Corporate Transaction' shall mean any of the following
stockholder-approved transactions to which the Company is a party:
(a) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change the
State in which the Company is incorporated, form a holding company or effect a
similar reorganization as to form whereupon this Plan and all Options are
assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause (a), above; or
(c) any reverse merger in which the Company is the surviving entity but in
which securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities are transferred or issued
to a person or persons different from those who held such securities immediately
prior to such merger.
Section 1.9. Deferred Stock.
'Deferred Stock' shall mean Common Stock awarded under Article VI of this
Plan.
Section 1.10. Director.
'Director' shall mean a member of the Board.
Section 1.11. Employee.
'Employee' shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company, of Kimco Realty
Services, Inc., or of any corporation which is a Subsidiary.
Section 1.12. Exchange Act.
'Exchange Act' shall mean the Securities Exchange Act of 1934, as amended.
Section 1.13. Fair Market Value.
'Fair Market Value' of a share of Common Stock as of a given date shall be
(i) the closing price of a share of Common Stock on the principal exchange on
which shares of Common Stock are then trading, if any (or as reported on any
composite index which includes such principal exchange), on the trading day
previous to such date, or if shares were not traded on the trading day previous
to such date, then on the next preceding date on which a trade occurred, or (ii)
if Common Stock is not traded on an exchange but is quoted on NASDAQ or a NYSE
successor quotation system, the mean between the closing representative bid and
asked prices for the Common Stock on the trading day previous to such date as
reported by NASDAQ or such successor quotation system; or (iii) if Common Stock
is not publicly traded on an exchange and not quoted on NASDAQ or a successor
quotation system, the Fair Market Value of a share of Common Stock as
established by the Committee (or the Board, in the case of Options granted to
Independent Directors) acting in good faith.
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Section 1.14. Grantee.
'Grantee' shall mean an Independent Director granted an award of Deferred
Stock under this Plan.
Section 1.15. Incentive Stock Option.
'Incentive Stock Option' shall mean an option which conforms to the
applicable provisions of Section 422 of the Code and which is designated as an
Incentive Stock Option by the Committee.
Section 1.16. Independent Director.
'Independent Director' shall mean a member of the Board who is not an
Employee of the Company.
Section 1.17. Non-Qualified Stock Option.
'Non-Qualified Stock Option' shall mean an Option which is not designated
as an Incentive Stock Option by the Committee.
Section 1.18. Option.
'Option' shall mean a stock option granted under Article III of this Plan.
An Option granted under this Plan shall, as determined by the Committee, be
either a Non-Qualified Stock Option or an Incentive Stock Option; provided,
however, that Options granted to Independent Directors and consultants shall be
Non-Qualified Stock Options.
Section 1.19. Optionee.
'Optionee' shall mean an Employee, consultant or Independent Director
granted an Option under this Plan.
Section 1.20. Plan.
'Plan' shall mean The 1998 Equity Participation Plan of Kimco Realty
Corporation.
Section 1.21. QDRO.
'QDRO' shall mean a qualified domestic relations order as defined by the
Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
Section 1.22. Rule 16b-3.
'Rule 16b-3' shall mean that certain Rule 16b-3 under the Exchange Act, as
such Rule may be amended from time to time.
Section 1.23. Subsidiary.
'Subsidiary' shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
Section 1.24. Termination of Consultancy.
'Termination of Consultancy' shall mean the time when the engagement of an
Optionee or Grantee as a consultant to the Company or a Subsidiary is terminated
for any reason, with or without cause, including, but not by way of limitation,
by resignation, discharge, death or retirement; but excluding terminations where
there is a simultaneous commencement of employment with the Company or any
Subsidiary. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Consultancy,
including, but not by way of limitation, the question of whether a Termination
of Consultancy resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Consultancy.
Notwithstanding any other provision of this Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate a consultant's service at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
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Section 1.25. Termination of Directorship.
'Termination of Directorship' shall mean the time when an Optionee or
Grantee who is an Independent Director ceases to be a Director for any reason,
including, but not by way of limitation, a termination by resignation, failure
to be elected, death or retirement. The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Directorship with respect to Independent Directors.
Section 1.26. Termination of Employment.
'Termination of Employment' shall mean the time when the employee-employer
relationship between an Optionee or Grantee and the Company or any Subsidiary is
terminated for any reason, with or without cause, including, but not by way of
limitation, a termination by resignation, discharge, death, disability or
retirement; but excluding (i) terminations where there is a simultaneous
reemployment or continuing employment of an Optionee or Grantee by the Company
or any Subsidiary, (ii) at the discretion of the Committee, terminations which
result in a temporary severance of the employee-employer relationship, and (iii)
at the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Committee, in its absolute discretion,
shall determine the effect of all matters and questions relating to Termination
of Employment, including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Employment; provided, however, that, unless otherwise determined by the
Committee in its discretion, a leave of absence, change in status from an
employee to an independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section. Notwithstanding
any other provision of this Plan, the Company or any Subsidiary has an absolute
and unrestricted right to terminate an Employee's employment at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
ARTICLE II.
SHARES SUBJECT TO PLAN
Section 2.1. Shares Subject to Plan.
(a) The shares of stock subject to Options and awards of Deferred Stock
shall be Common Stock, initially shares of the Company's Common Stock, par value
$.01 per share. The aggregate number of such shares which may be issued upon
exercise of such Options or upon any such awards of Deferred Stock under the
Plan shall not exceed three million (3,000,000). The shares of Common Stock
issuable upon exercise of such options or Deferred Stock may be either
previously authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Options and awards
of Deferred Stock granted under the Plan to any individual in any calendar year
shall not exceed the Award Limit. To the extent required by Section 162(m) of
the Code, shares subject to Options which are canceled continue to be counted
against the Award Limit and if, after grant of an Option, the price of shares
subject to such Option is reduced, the transaction is treated as a cancellation
of the Option and a grant of a new Option and both the Option deemed to be
canceled and the Option deemed to be granted are counted against the Award
Limit.
Section 2.2. Add-back of Options and Other Rights.
If any Option, or other right to acquire shares of Common Stock under any
other award under this Plan, expires or is canceled without having been fully
exercised, or is exercised in whole or in part for cash as permitted by this
Plan, the number of shares subject to such Option or other right but as to which
such Option or other right was not exercised prior to its expiration,
cancellation or exercise may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1. Furthermore, any shares subject to
Options or other awards which are adjusted pursuant to Section 8.3 and become
exercisable with respect to shares of stock of another corporation shall be
considered cancelled and may again be optioned, granted or awarded hereunder,
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subject to the limitations of Section 2.1. Shares of Common Stock which are
delivered by the Optionee or Grantee or withheld by the Company upon the
exercise of any Option, in payment of the exercise price thereof, may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Notwithstanding the provisions of this Section 2.2, no shares of Common
Stock may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.
ARTICLE III.
GRANTING OF OPTIONS
Section 3.1. Eligibility.
Any Employee or consultant selected by the Committee pursuant to Section
3.4(a)(i) shall be eligible to be granted an Option. Each Independent Director
of the Company shall be eligible to be granted Options at the times and in the
manner set forth in Section 3.4(d).
Section 3.2. Disqualification for Stock Ownership.
No person may be granted an Incentive Stock Option under this Plan if such
person, at the time the Incentive Stock Option is granted, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any then existing Subsidiary or parent corporation
(within the meaning of Section 422 of the Code) unless such Incentive Stock
Option conforms to the applicable provisions of Section 422 of the Code.
Section 3.3. Qualification of Incentive Stock Options.
No Incentive Stock Option shall be granted to any person who is not an
Employee.
Section 3.4. Granting of Options
(a) The Committee shall from time to time, in its absolute discretion, and
subject to applicable limitations of this Plan:
(i) Determine which Employees are key Employees and select from among
the key Employees or consultants (including Employees or consultants who
have previously received Options or other awards under this Plan) such of
them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of shares to be
subject to such Options granted to the selected key Employees or
consultants;
(iii) Subject to Section 3.3, determine whether such Options are to be
Incentive Stock Options or Non-Qualified Stock Options and whether such
Options are to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options, consistent
with this Plan; provided, however, that the terms and conditions of Options
intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not be limited to, such
terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m) of the Code.
(b) Upon the selection of a key Employee or consultant to be granted an
Option, the Committee shall instruct the Secretary of the Company to issue the
Option and may impose such conditions on the grant of the Option as it deems
appropriate. Without limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee or consultant
that the Employee or consultant surrender for cancellation some or all of the
unexercised Options or other rights which have been previously granted to him
under this Plan or otherwise. An Option, the grant of which is conditioned upon
such surrender, may have an option price lower (or higher) than the exercise
price of such surrendered Option or other award, may cover the same (or a lesser
or greater) number of shares as such surrendered Option or other award, may
contain such other terms as the Committee deems appropriate, and
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shall be exercisable in accordance with its terms, without regard to the number
of shares, price, exercise period or any other term or condition of such
surrendered Option or other award.
(c) Any Incentive Stock Option granted under this Plan may be modified by
the Committee to disqualify such option from treatment as an 'incentive stock
option' under Section 422 of the Code.
(d) Any person who, in his capacity as an Independent Director, was
scheduled to receive a grant of Options under Section 3.4 of the Amended and
Restated Stock Option Plan For Key Employees and Outside Directors of Kimco
Realty Corporation (the '1995 Plan') will receive such grants under this Plan.
Any person who, upon adoption of this Plan, is not an Independent Director of
the Company, but who later becomes an Independent Director shall be granted at
the time of his appointment as an Independent Director, a Non-Qualified Option
to purchase 3,000 shares of Common Stock. Each Independent Director who has
received a grant pursuant to this Section 3.4(d) or Section 3.4 of the 1995 Plan
shall be granted on the first and second anniversary of the date of his grant
under this Section 3.4.(d) or Section 3.4 of the 1995 Plan (so long as he is an
Independent Director on such date) a Non-Qualified Option to purchase 3,000
shares of Common Stock. All the foregoing Option grants authorized by this
Section 3.4(d) are subject to stockholder approval of the Plan.
ARTICLE IV.
TERMS OF OPTIONS
Section 4.1. Option Agreement.
Each Option shall be evidenced by a written Stock Option Agreement, which
shall be executed by the Optionee and an authorized officer of the Company and
which shall contain such terms and conditions as the Committee (or the Board, in
the case of Options granted to Independent Directors) shall determine,
consistent with this Plan. Stock Option Agreements evidencing Options intended
to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code. Stock
Option Agreements evidencing Incentive Stock Options shall contain such terms
and conditions as may be necessary to meet the applicable provisions of Section
422 of the Code.
Section 4.2. Option Price.
The price per share of the shares subject to each Option shall be set by
the Committee; provided, however, that such price shall be no less than the par
value of a share of Common Stock, unless otherwise permitted by applicable state
law, and (i) in the case of Incentive Stock Options and Options intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code, such price shall not be less than 100% of the Fair Market Value of
a share of Common Stock on the date the Option is granted; (ii) in the case of
Incentive Stock Options granted to an individual then owning (within the meaning
of Section 424(d) of the Code) more than 10% of the total combined voting power
of all classes of stock of the Company or any Subsidiary or parent corporation
thereof (within the meaning of Section 422 of the Code) such price shall not be
less than 110% of the Fair Market Value of a share of Common Stock on the date
the Option is granted; and (iii) in the case of Options granted to Independent
Directors, such price shall equal 100% of the Fair Market Value of a share of
Common Stock on the date the Option is granted.
Section 4.3. Expiration of Options.
(a) The term of an Option shall be set by the Committee in its discretion;
provided, however, that, no Option may be exercised to any extent by anyone
after the first to occur of the following events:
(i) In the case of an Incentive Stock Option, (A) the expiration of
ten years from the date the Option was granted, or (B) in the case of an
Optionee owning (within the meaning of Section 424(d) of the Code), at the
time the Option was granted, more than 10% of the total combined voting
power of all classes of stock of the Company, any Subsidiary or any parent
corporation (within the meaning of Section 422 of the Code), the expiration
of five years from the date the Option was granted; or
(ii) In the case of a Non-Qualified Option, the expiration of ten
years and one day from the date the Option was granted; or
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(iii) Except in the case of any Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of three months
from the date of the Optionee's Termination of Employment, Termination of
Consultancy or Termination of Directorship, as the case may be, for any
reason other than such Optionee's death unless the Optionee dies within
said three-month period; or
(iv) In the case of any Optionee who is disabled (within the meaning
of Section 22(e)(3) of the Code), the expiration of one year from the date
of the Optionee's Termination of Employment, Termination of Consultancy or
Termination of Directorship, as the case may be, for any reason other than
such Optionee's death unless the Optionee dies within said one-year period;
or
(v) The expiration of one year from the date of the Optionee's death.
(b) Subject to the provisions of Section 4.3(a), the Committee shall
provide, in the terms of each individual Option, when such Option expires and
becomes unexercisable; and (without limiting the generality of the foregoing)
the Committee may provide in the terms of individual Stock Option Agreements
that said Options expire immediately upon a Termination of Employment,
Termination of Consultancy or Termination of Directorship, as the case may be;
provided, however, that provision may be made that such Option shall become
exercisable in the event of a Termination of Employment because of the
Optionee's retirement, death, disability or as may otherwise be determined by
the Committee.
Section 4.4. Consideration.
In consideration of the granting of an Option, the Optionee shall agree, in
the written Stock Option Agreement, to remain in the employ of (or to consult
for or to serve as an Independent Director of, as applicable) the Company or any
Subsidiary for a period of at least one year (or such shorter period as may be
fixed in the Stock Option Agreement or by action of the Committee following
grant of the Option) after the Option is granted (or, in the case of an
Independent Director, until the next annual meeting of stockholders of the
Company). Nothing in this Plan or in any Stock Option Agreement hereunder shall
confer upon any Optionee any right to continue in the employ of, or as a
consultant for, the Company or any Subsidiary, or as a director of the Company,
or shall interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Optionee at
any time for any reason whatsoever, with or without good cause.
ARTICLE V.
EXERCISE OF OPTIONS
Section 5.1. Partial Exercise.
An exercisable Option may be exercised in whole or in part. However, an
Option shall not be exercisable with respect to fractional shares and the
Committee (or the Board, in the case of Options granted to Independent
Directors) may require that, by the terms of the Option, a partial exercise be
with respect to a minimum number of shares.
Section 5.2. Manner of Exercise.
All or a portion of an exercisable Option shall be deemed exercised upon
delivery of all of the following to the Secretary of the Company or his office:
(a) A written notice complying with the applicable rules established by the
Committee (or the Board, in the case of Options granted to Independent
Directors) stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to exercise
the Option or such portion;
(b) Such representations and documents as the Committee (or the Board, in
the case of Options granted to Independent Directors), in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee or Board may, in
its absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer notices to agents and
registrars;
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(c) In the event that the Option shall be exercised pursuant to Section 8.1
by any person or persons other than the Optionee, appropriate proof of the right
of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares with
respect to which the Option, or portion thereof, is exercised. However, the
Committee (or the Board, in the case of Options granted to Independent
Directors), may in its discretion (i) allow a delay in payment up to thirty (30)
days from the date the Option, or portion thereof, is exercised; (ii) allow
payment, in whole or in part, through the delivery of shares of Common Stock
owned by the Optionee, duly endorsed for transfer to the Company with a Fair
Market Value on the date of delivery equal to the aggregate exercise price of
the Option or exercised portion thereof; (iii) allow payment, in whole or in
part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee or the Board; (vi) allow payment, in whole
or in part, through the delivery of a notice that the Optionee has placed a
market sell order with a broker with respect to shares of Common Stock then
issuable upon exercise of the Option, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the Committee (or
the Board, in the case of Options granted to Independent Directors) may also
prescribe the form of such note and the security to be given for such note. The
Option may not be exercised, however, by delivery of a promissory note or by a
loan from the Company when or where such loan or other extension of credit is
prohibited by law.
Section 5.3. Conditions to Issuance of Stock Certificates.
The Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which
such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory body
which the Committee or Board shall, in its absolute discretion, deem necessary
or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee (or Board, in the case of
Options granted to Independent Directors) shall, in its absolute discretion,
determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise of
the Option as the Committee (or Board, in the case of Options granted to
Independent Directors) may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares, including
payment of any applicable withholding tax.
Section 5.4. Rights as Stockholders.
The holders of Options shall not be, nor have any of the rights or
privileges of, stockholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
Section 5.5. Ownership and Transfer Restrictions.
The Committee (or Board, in the case of Options granted to Independent
Directors), in its absolute discretion, may impose such restrictions on the
ownership and transferability of the shares purchasable upon the exercise of an
Option as it deems appropriate. Any such restriction shall be set forth in the
respective Stock Option Agreement and may be referred to on the certificates
evidencing such shares. The Committee may require
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the Employee to give the Company prompt notice of any disposition of shares of
Common Stock acquired by exercise of an Incentive Stock Option within (i) two
years from the date of granting such Option to such Employee or (ii) one year
after the transfer of such shares to such Employee. The Committee may direct
that the certificates evidencing shares acquired by exercise of an Option refer
to such requirement to give prompt notice of disposition.
Section 5.6. Exercise by Employees of Kimco Realty Services, Inc.
Notwithstanding anything to the contrary contained in this Plan, an
Optionee who is an employee of Kimco Realty Services, Inc. shall exercise his
Option in accordance with the following procedures:
(a)(i) Such Employee shall pay the exercise price to the Secretary of Kimco
Realty Services, Inc. in cash; (ii) Kimco Realty Services, Inc. shall then
purchase for cash from Kimco the number of shares underlying the exercised
Options for the Fair Market Value of such shares; and (iii) Kimco Realty
Services, Inc. shall then deliver such shares to the Employee.
(b) In the case of exercise of Options pursuant to Section 5.2(d)(iii),
only the provisions of paragraphs (a)(ii) and (a)(iii) above shall apply, and
then only with respect to the net number of shares issuable.
ARTICLE VI.
DEFERRED STOCK
Section 6.1. Eligibility.
Subject to the Award Limit, Independent Directors may be granted awards of
Deferred Stock in lieu of directors' fees, as provided in Section 6.2.
Section 6.2. Deferred Stock.
Deferred Stock may be granted to Independent Directors in lieu of
directors' fees which would otherwise be payable to such Independent Directors,
pursuant to such policies as may be adopted by the Board from time to time.
Unless otherwise provided by the Board, a Grantee of Deferred Stock shall have
no rights as a Company stockholder with respect to such Deferred Stock until
such time as the Common Stock underlying the award has been issued.
Section 6.3. Deferred Stock Agreement.
Each award of Deferred Stock shall be evidenced by a written agreement,
which shall be executed by the Grantee and an authorized Officer of the Company
and which shall contain such terms and conditions as the Board shall determine,
consistent with this Plan.
Section 6.4. Term.
The term of an award of Deferred Stock shall be set by the Board in its
discretion.
ARTICLE VII.
ADMINISTRATION
Section 7.1. Committee.
The Committee (or another committee or a subcommittee of the Board assuming
the functions of the Committee under this Plan) shall consist solely of two or
more Independent Directors appointed by and holding office at the pleasure of
the Board, each of whom is both a 'non-employee director' as defined by Rule
16b-3 and an 'outside director' for purposes of Section 162(m) of the Code.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.
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Section 7.2. Duties and Powers of Committee.
It shall be the duty of the Committee to conduct the general administration
of this Plan in accordance with its provisions. The Committee shall have the
power to interpret this Plan and the agreements pursuant to which Options are
granted or awarded, and to adopt such rules for the administration,
interpretation, and application of this Plan as are consistent therewith and to
interpret, amend or revoke any such rules. Notwithstanding the foregoing, the
full Board, acting by a majority of its members in office, shall conduct the
general administration of the Plan with respect to Options and awards of
Deferred Stock granted to Independent Directors. Any such grant or award under
this Plan need not be the same with respect to each Optionee or Grantee. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee.
Section 7.3. Majority Rule; Unanimous Written Consent.
The Committee shall act by a majority of its members in attendance at a
meeting at which a quorum is present or by a memorandum or other written
instrument signed by all members of the Committee.
Section 7.4. Compensation; Professional Assistance; Good Faith Actions.
Members of the Committee shall receive such compensation for their services
as members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of this
Plan shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding upon all
Optionees or Grantees, the Company and all other interested persons. No members
of the Committee or Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to this Plan,
Options and awards of Deferred Stock and all members of the Committee and the
Board shall be fully protected by the Company in respect of any such action,
determination or interpretation.
ARTICLE VIII.
MISCELLANEOUS PROVISIONS
Section 8.1. Not Transferable.
Options and Deferred Stock awards under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution or pursuant to a QDRO, unless and until such rights or awards
have been exercised, or the shares underlying such rights or awards have been
issued, and all restrictions applicable to such shares have lapsed. No Option or
Deferred Stock award or interest or right therein shall be liable for the debts,
contracts or engagements of the Optionee or Grantee or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect, except to the extent that such disposition is permitted
by the preceding sentence.
During the lifetime of the Optionee or Grantee, only he may exercise an
Option (or any portion thereof) granted to him under the Plan, unless it has
been disposed of pursuant to a QDRO. After the death of the Optionee or Grantee,
any exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock Option Agreement or
other agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Optionee's or Grantee's will or under the
then applicable laws of descent and distribution.
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Section 8.2. Amendment, Suspension or Termination of this Plan.
Except as otherwise provided in this Section 8.2, this Plan may be wholly
or partially amended or otherwise modified, suspended or terminated at any time
or from time to time by the Board or the Committee. However, without approval of
the Company's stockholders given within twelve months before or after the action
by the Board or the Committee, no action of the Board or the Committee may,
except as provided in Section 8.3, increase the limits imposed in Section 2.1 on
the maximum number of shares which may be issued under this Plan or modify the
Award Limit, and no action of the Board or the Committee may be taken that would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. No amendment, suspension or termination of this Plan shall, without the
consent of the holder of Options or Deferred Stock awards, alter or impair any
rights or obligations under any Options or Deferred Stock awards theretofore
granted or awarded, unless the award itself otherwise expressly so provides. No
Options or Deferred Stock may be granted or awarded during any period of
suspension or after termination of this Plan, and in no event may any Incentive
Stock Option be granted under this Plan after the first to occur of the
following events:
(a) The expiration of ten years from the date the Plan is adopted by the
Board; or
(b) The expiration of ten years from the date the Plan is approved by the
Company's stockholders under Section 10.4.
Section 8.3. Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 8.3(d), in the event that the Committee (or the
Board, in the case of Options granted to Independent Directors) determines that
any dividend or other distribution (whether in the form of cash, Common Stock,
other securities, or other property), recapitalization, reclassification, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer,
exchange or other disposition of all or substantially all of the assets of the
Company (including, but not limited to, a Corporate Transaction), or exchange of
Common Stock or other securities of the Company, issuance of warrants or other
rights to purchase Common Stock or other securities of the Company, or other
similar Corporate Transaction or event, in the Committee's sole discretion (or
in the case of Options granted to Independent Directors, the Board's sole
discretion), affects the Common Stock such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan
or with respect to an Option or Deferred Stock award, then the Committee shall,
in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock (or other securities
or property) with respect to which Options may be granted under the Plan,
or which may be granted as Deferred Stock (including, but not limited to,
adjustments of the limitations in Section 2.1 on the maximum number and
kind of shares which may be issued and adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options and in the number
and kind of shares of outstanding Deferred Stock, and
(iii) the grant or exercise price with respect to any Option.
(b) Subject to Sections 8.3(b)(vii) and 8.3(d), in the event of any
Corporate Transaction or other transaction or event described in Section 8.3(a)
or any unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee (or the Board, in the case of Options granted to
Independent Directors) in its discretion is hereby authorized to take any one or
more of the following actions whenever the Committee (or the Board, in the case
of Options granted to Independent Directors) determines that such action is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to any option, right or other award under this Plan, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or
principles:
(i) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of the agreement or by action taken prior to the occurrence of
such transaction or event and either
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automatically or upon the optionee's request, for either the purchase of
any such Option or Deferred Stock for an amount of cash equal to the amount
that could have been attained upon the exercise of such option, right or
award or realization of the optionee's rights had such option, right or
award been currently exercisable or payable or fully vested or the
replacement of such option, right or award with other rights or property
selected by the Committee (or the Board, in the case of Options granted to
Independent Directors) in its sole discretion;
(ii) In its sole and absolute discretion, the Committee (or the Board,
in the case of Options granted to Independent Directors) may provide,
either by the terms of such Option or Deferred Stock or by action taken
prior to the occurrence of such transaction or event that it cannot be
exercised after such event;
(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of such Option or Deferred Stock or by action taken prior to the
occurrence of such transaction or event, that for a specified period of
time prior to such transaction or event, such option or award shall be
exercisable as to all shares covered thereby, notwithstanding anything to
the contrary in the provisions of such Option;
(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of such Option or Deferred Stock or by action taken prior to the
occurrence of such transaction or event, that upon such event, such option,
Deferred Stock or award be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be substituted for
by similar options, rights or awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices; and
(v) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may make adjustments in
the number and type of shares of Common Stock (or other securities or
property) subject to outstanding Options, and in the number and kind of
outstanding Deferred Stock and/or in the terms and conditions of (including
the grant or exercise price), and the criteria included in, outstanding
options and Deferred Stock awards and options and Deferred Stock awards
which may be granted in the future.
(vi) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Board may provide either by the
terms of a Deferred Stock award or by action taken prior to the occurrence
of such event that, for a specified period of time prior to such event, the
restrictions imposed under a Deferred Stock Agreement upon some or all
shares of Deferred Stock may be terminated.
(vii) In the event of any Corporate Transaction, each outstanding
Option shall, immediately prior to the effective date of the Corporate
Transaction, automatically become fully exercisable for all of the shares
of Common Stock at the time subject to such rights or fully vested, as
applicable, and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding right shall
not so accelerate if and to the extent: (i) such right is, in connection
with the Corporate Transaction, either to be assumed by the successor or
survivor corporation (or parent thereof) or to be replaced with a
comparable right with respect to shares of the capital stock of the
successor or survivor corporation (or parent thereof) or (ii) the
acceleration of exercisability of such right is subject to other
limitations imposed by the Plan Administrator at the time of grant. The
determination of comparability of rights under clause (i) above shall be
made by the Plan Administrator, and its determination shall be final,
binding and conclusive.
(c) Subject to Section 8.3(d) and 8.8, the Committee may, in its
discretion, include such further provisions and limitations in any Option or
Deferred Stock agreement or certificate, as it may deem equitable and in the
best interests of the Company.
(d) With respect to Options and awards of Deferred Stock described in
Article VI which are granted to Section 162(m) participants and are intended to
qualify as performance-based compensation under Section 162(m)(4)(C), no
adjustment or action described in this Section 8.3 or in any other provision of
the Plan shall be authorized to the extent that such adjustment or action would
cause the Plan to violate Section 422(b)(1) of the Code or would cause such
option or stock appreciation right to fail to so qualify under Section
162(m)(4)(C), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be
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authorized to the extent such adjustment or action would result in short-swing
profits liability under Section 16 or violate the exemptive conditions of Rule
16b-3 unless the Committee determines that the option or other award is not to
comply with such exemptive conditions. The number of shares of Common Stock
subject to any option, right or award shall always be rounded to the next whole
number.
Section 8.4. Approval of Plan by Stockholders.
This Plan will be submitted for the approval of the Company's stockholders
within twelve months after the date of the Board's initial adoption of this
Plan. Options or Deferred Stock may be awarded prior to such stockholder
approval, provided that such Options not be exercisable prior to the time when
this Plan is approved by the stockholders, and provided further that if such
approval has not been obtained at the end of said twelve-month period, all
Options and Deferred Stock previously awarded under this Plan shall thereupon be
canceled and become null and void.
Section 8.5. Tax Withholding.
The Company shall be entitled to require payment in cash or deduction from
other compensation payable to each Optionee or Grantee of any sums required by
federal, state or local tax law to be withheld with respect to the issuance,
vesting or exercise of any Option or Deferred Stock. The Committee may in its
discretion and in satisfaction of the foregoing requirement allow such Optionee
or Grantee to elect to have the Company withhold shares of Common Stock
otherwise issuable under such Option or other award (or allow the return of
shares of Common Stock) having a Fair Market Value equal to the sums required to
be withheld.
Section 8.6. Loans.
The Committee may, in its discretion, extend one or more loans to key
Employees in connection with the exercise or receipt of an Option granted under
this Plan. The terms and conditions of any such loan shall be set by the
Committee.
Section 8.7. Forfeiture Provisions.
Pursuant to its general authority to determine the terms and conditions
applicable to awards under the Plan, the Committee (or the Board, in the case of
Options granted to Independent Directors) shall have the right (to the extent
consistent with the applicable exemptive conditions of Rule 16b-3) to provide,
in the terms of Options or other awards made under the Plan, or to require the
recipient to agree by separate written instrument, that (i) any proceeds, gains
or other economic benefit actually or constructively received by the recipient
upon any receipt or exercise of the award, or upon the receipt or resale of any
Common Stock underlying such award, must be paid to the Company, and (ii) the
award shall terminate and any unexercised portion of such award (whether or not
vested) shall be forfeited, if (a) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs prior to a specified date, or
within a specified time period following receipt or exercise of the award, or
(b) the recipient at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Committee (or
the Board, as applicable).
Section 8.8. Limitations Applicable to Section 16 Persons and
Performance-Based Compensation.
Notwithstanding any other provision of this Plan, this Plan and any Option
or Deferred Stock awarded to any individual who is then subject to Section 16 of
the Exchange Act shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan, Options and Deferred Stock granted or awarded hereunder shall be
deemed amended to the extent necessary to conform to such applicable exemptive
rule. Furthermore, notwithstanding any other provision of this Plan, any Option
or award of Deferred Stock described in Article VI which is granted to a Section
162(m) Participant and is intended to qualify as performance-based compensation
as described in Section 162(m)(4)(C) of the Code shall be subject to any
additional limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings issued
thereunder that are requirements for qualification as performance-based
compensation as described in
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Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the
extent necessary to conform to such requirements.
Section 8.9. Effect of Plan Upon Options and Compensation Plans.
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary. Nothing in this
Plan shall be construed to limit the right of the Company (i) to establish any
other forms of incentives or compensation for Employees, Directors or
Consultants of the Company or any Subsidiary or (ii) to grant or assume options
or other rights otherwise than under this Plan in connection with any proper
corporate purpose including but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, limited liability company, firm or association.
Section 8.10. Compliance with Laws.
This Plan, the granting and vesting of Options, Deferred Stock awards and
the issuance and delivery of shares of Common Stock and the payment of money
under this Plan or under Options or Deferred Stock awarded hereunder are subject
to compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan, Options and Deferred Stock awards granted
or awarded hereunder shall be deemed amended to the extent necessary to conform
to such laws, rules and regulations.
Section 8.11. Titles.
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Plan.
Section 8.12. Governing Law.
This Plan and any agreements hereunder shall be administered, interpreted
and enforced under the internal laws of the State of New York without regard to
conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of __________________ on ____________, 1998.
Executed on this ____ day of _______________, 1998.
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Secretary
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