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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-23463
PHILIPS INTERNATIONAL REALTY CORP.
(Exact name of registrant as specified in its charter)
Maryland 13-3963667
(State or other jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
295 Madison Avenue, 2nd Floor
New York, New York 10017
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (212) 545-1100
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value None
- -------------------------------------------------------------------------------
(Title of Each Class) (Name of Each Exchange on Which
Registered)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. |X|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) Yes |_| No |X|
As of March 15, 2004, the aggregate market value of voting and non-voting common
equity held by non-affiliates of the registrant was approximately $2.8 million.
The aggregate market value was computed with reference to the average bid and
asked prices of the stock as quoted on the OTC Bulletin Board on such date. The
calculation does not reflect a determination that persons are non-affiliates for
any other purpose.
As of March 15, 2004, 7,340,474 shares of common stock, $.01 par value, of the
Company (the "Common Stock") were outstanding.
LOCATION OF EXHIBIT INDEX: The index of exhibits is contained on page number 34
herein.
DOCUMENTS INCORPORATED BY REFERENCE: None
PHILIPS INTERNATIONAL REALTY CORP.
TABLE OF CONTENTS
FORM 10-K
Page
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PART I
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities 7
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 10
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 11
Item 9A. Controls and Procedures 11
PART III
Item 10. Directors and Executive Officers of the Registrant 11
Item 11. Executive Compensation 13
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 16
Item 13. Certain Relationships and Related Transactions 17
Item 14. Principal Accountant Fees and Services 18
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 18
i
PART I
ITEM 1. BUSINESS
General
Philips International Realty Corp. (the "Company") is a real estate investment
trust ("REIT") originally formed to continue and expand the shopping center
business of certain affiliated companies owned or controlled by Philip Pilevsky
(the "Philips Group"). The Philips Group had been engaged for many years in the
ownership, development and acquisition for redevelopment of neighborhood and
community shopping centers predominantly concentrated in the greater New York
and Miami metropolitan areas.
On October 13, 1999, the Board of Directors of the Company announced that it had
retained a financial advisor to assist the Company in examining strategic
alternatives to maximize shareholder value. The Board believed that the
Company's then current stock price did not reflect the underlying value of its
assets. Given the changing dynamics of the REIT market place and consistent with
its commitment to realize shareholder value for all investors, the Board
believed that it was prudent to explore the strategic alternatives for the
Company.
At a Special Meeting of Stockholders held on October 10, 2000, approximately 80%
of the Company's 7,340,474 common shares outstanding were voted, with 99.7% of
these votes cast, in favor of a plan of liquidation.
The plan of liquidation approved by stockholders generally provided for (i) the
disposition of the Company's real estate properties for cash, the assumption of
indebtedness and/or the redemption of certain equity interests in the Company,
(ii) payment or provision for the Company's liabilities, (iii) distribution of
the net cash proceeds, then estimated at $18.25 per share of common stock, to
stockholders in two or more liquidating distributions, and (iv) the wind-up of
operations and dissolution of the Company.
The Company has recently completed the disposition of the last of its real
estate properties and has distributed to date $17.75 per share in cash to its
stockholders. This has been achieved through a series of ten property sales
and/or redemption transactions, and eight liquidating distributions as more
fully described below. See "Item 1. Business - Plan of Liquidation."
The Board of Directors of the Company is currently seeking (i) final resolution
of a certain class action filed against the Company and its directors in
connection with the plan of liquidation, and (ii) recovery of $2.1 million
expended by the Company in defense of this action pursuant to the terms of its
directors and officers' insurance policy. (See "Item 3 - Legal Proceedings").
Upon completion of such matters, the Board of Directors currently intends to
declare a ninth liquidating distribution and then may act to dissolve the
corporation, transferring the Company's then residual miscellaneous assets,
liabilities and contingent obligations, if any, into a liquidating trust. As any
such assets are realized, liabilities paid and contingencies resolved, future
liquidating distributions would be made from the trust at such times and in such
amounts as the trustee deems appropriate. Notwithstanding that (i) the weak
economic environment since adoption of the plan of liquidation in October 2000
has depressed retail rents and real property values, and (ii) the Company had to
contend with the Kmart Chapter 11 bankruptcy proceedings in seeking to divest
many of its shopping center properties in which this troubled retailer was the
anchor tenant, the Company currently expects total distributions to shareholders
will be within 1% of the originally projected total of $18.25 per share.
There can be no assurances, however, pending further research into the economic,
tax and governance issues associated with dissolution of the corporation and
creation of a liquidating trust, whether the wind-down of the Company's
operations will proceed as described above. The Company may not form such
liquidating trust and may simply continue in its current form until such time as
its liquidation is complete. Further, there can be no assurances, given the
significant legal and business matters yet to be resolved, whether the total
distributions to shareholders will be as currently projected.
Plan of Liquidation
The following is a chronology of the events which have transpired to date
pursuant to the plan of liquidation approved by stockholders on October 10,
2000.
In November 2000, the Company completed the distribution of its interest in four
shopping center properties in Hialeah, Florida and the sale of its interest in
one redevelopment site (1517-25 Third Avenue, New York City) for total
consideration of approximately $123 million to former unit holders in the
Operating Partnership, including Philip Pilevsky, the Company's Chairman and
Chief Executive Officer (collectively, the "Related Limited Partners") ("The
Hialeah Agreements"). The total consideration was comprised of $3.3 million in
cash, $85.3 million in mortgage debt assumption and $34.1 million in redemption
of the Related Limited Partners' entire equity interest in the Operating
Partnership (1,870,873 Units valued at $18.25 per Unit).
On December 4, 2000, certain affiliates of the Company disposed of interests in
eight properties aggregating approximately 1,178,000 square feet to Kimco Income
Operating Partnership, L.P. ("Kimco") for a total consideration of $137 million
pursuant to an Asset Contribution, Purchase and Sale Agreement dated as of April
28, 2000. The purchase price was comprised of approximately $71.1 million in
cash, $55.4 million in mortgage debt assumption and $10.5 million of equity
redemption (576,326 Operating Partnership Units valued at $18.25 per Unit). The
properties included four New York shopping centers (Forest Avenue Shoppers Town,
Meadowbrook Commons, Merrick Commons and Mill Basin Plaza), two Connecticut
shopping centers (Branhaven Plaza and Elm Plaza), one shopping center property
in New Jersey (Millside Plaza) and one shopping center property in Massachusetts
(Foxboro Plaza).
On June 14, 2001, the Company completed the sale of its redevelopment site
located in Lake Worth, Florida (the "Lake Worth Property") to the Related
Limited Partners, for approximately $7.6 million in cash, pursuant to an Amended
and Restated Purchase and Sale Agreement dated as of June 20, 2000 (the "Lake
Worth Agreement").
-1-
The purchase price paid by the Related Limited Partners under the Lake Worth
Agreement will be adjusted, up or down, so that the aggregate value per Unit
received by them in connection with the distribution to the Related Limited
Partners of the Company's four shopping center properties located in Hialeah,
Florida and the sale to the Related Limited Partners in December 2000 of the
Company's redevelopment property located on Third Avenue in New York, New York
($18.25 per share), and the total per share value received by the Company's
stockholders in the liquidation, will be the same.
On August 31, 2001, the Company completed the sale of its North Star Shopping
Center in Alexandria, Minnesota for approximately $4.5 million pursuant to the
Sale and Purchase Agreement dated July 16, 2001 by Philips Shopping Center Fund
L.P., a Delaware limited partnership, as Seller, and Repco LLP, as successor to
Kordel, Inc., a Minnesota corporation, as Buyer.
On October 31, 2001, the Company completed the sale of its Highway 101 Shopping
Center in Port Angeles, Washington for approximately $4.5 million in cash,
pursuant to the Sale and Purchase Agreement dated June 14, 2001 by Philips
Shopping Center Fund L.P., a Delaware limited partnership, as Seller, and BDG
LLC, as successor to 3 Puyallup Associates, LLC, a Washington limited liability
company, as Buyer.
On January 29, 2002, the Company announced that Kmart Corporation's ("Kmart")
Chapter 11 bankruptcy filing was likely to delay the sales of the Company's then
five remaining properties pursuant to the Company's plan of liquidation, and
might result in a reduction of the remaining projected liquidating distributions
of $3.00 per common share. Further, the Company reported that Kmart leased a
significant portion of the space in each of the Company's then five remaining
shopping center properties, of which four stores were currently operating and
one Kmart store in Reedley, California was closed. While operating in
bankruptcy, Kmart announced that it would seek immediate cancellation of leases
at closed locations. As a result of the uncertainty pertaining to the ultimate
status of the Kmart leases, the Company expected a delay in the completion of
its plan of liquidation. Also, the potential impact on the proceeds from sales
of the then remaining five properties could not then be evaluated.
On February 19, 2002, the Company announced that the New York Stock Exchange
(the "NYSE") had advised the Company that it may be subject to NYSE trading
suspension and delisting if the Company's average market capitalization fell
below $15 million ($2.05 per common share) over a 30-day trading period.
On March 13, 2002, the Company announced that its four properties with operating
Kmart stores (Sacramento, CA, Atwater, CA, McHenry, IL and Hopkinsville, KY)
were not affected by Kmart's recent announcement of store closings. Kmart had
been operating under the protection of Chapter 11 of the Bankruptcy Code, and
the Court approved the cancellation of the Kmart lease at the Company's then
fifth remaining property, located in Reedley, California, in January. Although
none of the Company's remaining Kmart stores were targeted for closure at such
time, there could be no assurance that Kmart would not seek to cancel additional
leases while it was in bankruptcy. Further, the Company objected to Kmart's
request for an extension of the 60-day period in which the debtor must assume or
reject the Company's leases under the Bankruptcy Code. Kmart was seeking an
extension on all remaining leases through July 2003, and the Courts generally
grant such significant extensions. As to the Company's Kmart leases, the Court
approved an agreement with Kmart whereby all leases which had not been assumed
or rejected on or before September 30, 2002 would be subject to certain
protections from October 1, 2002 through January 15, 2003 which, among other
things, precluded store closings during this period. In addition, the Court set
March 31, 2003 as the deadline for Kmart to assume or reject the Company's
leases without prejudice to Kmart's right to seek further extension.
On April 16, 2002, the Company completed the sale of its McHenry Commons
shopping center property in McHenry, Illinois for approximately $3.9 million in
cash, pursuant to a Sale and Purchase Agreement dated November 29, 2001 by and
between Philips Shopping Center Fund, L.P., a Delaware limited partnership, as
Seller, and GK Development, Inc., an Illinois corporation, and Star Realty
Investors, LLC, an Illinois limited liability company, jointly and severally as
Purchaser.
On October 3, 2002, the Company completed the sale of its Kmart Shopping Center
in Sacramento, California for approximately $5.9 million in cash, pursuant to a
Purchase and Sale Agreement dated September 24, 2002 by and between Philips
Shopping Center Fund L.P., a Delaware limited partnership, as Seller, and M&A
Gabaee L.P., a California limited partnership, Mirasa L.L.C., a California
limited liability company, and Corsair, L.L.C., a Nevada limited liability
company, jointly and severally as Buyer.
On October 8, 2002, the Company announced that it expected the New York Stock
Exchange would commence action to suspend trading and apply to delist the
Company's shares of common stock on the NYSE concurrent with payment of the
fifth liquidating distribution scheduled to be paid on October 22, 2002. If the
Company's shares ceased to be traded on the NYSE, the Company indicated it
believed that an alternative trading venue may be available; however, there
could be no assurance that such an alternative market would develop. If the
Company was delisted from the NYSE, the Company further noted that it had no
current intention to seek listing of its common shares on any other securities
exchange or on NASDAQ.
On October 28, 2002, the Company reported that the NYSE had delivered notice to
the Company and issued a press release to advise that it had determined the
common stock of the Company, trading symbol PHR, should be removed from the list
of companies traded on the NYSE. This decision was reached in view of the fact
that the Company had fallen below the NYSE's continued listing standards as its
average global market capitalization over a consecutive 30 day period was less
than $15,000,000. Furthermore, the NYSE noted that the Company has been
operating pursuant to a plan of liquidation approved by its shareholders on
October 10, 2000 and has made four liquidating distributions totaling $15.25 as
of such date, with a fifth liquidating distribution of $0.50 to be paid on
October 22, 2002. The NYSE indicated it intended to (and did, in fact) suspend
trading in the Company's common stock prior to the opening on October 23, 2002
in connection with this distribution. Action by the NYSE with the Securities and
Exchange Commission delisting the Company's shares followed the completion of
applicable procedures. The Company did not request a review of this NYSE
determination. Upon the completion of all prescribed delisting procedures, the
Company automatically became a Section 12(g) reporting company, pursuant to the
Securities and Exchange Act, and was no longer a Section 12(b) reporting
company.
-2-
The Company has no current intention to seek listing of its common shares on any
other securities exchange or on NASDAQ. However, unless and until the Board of
Directors acts to dissolve the corporation, the Company believes that
alternative trading venues, such as the "Pink Sheets" and the "OTC Bulletin
Board," will continue to be available to its shareholders. There can be no
assurance, however, that any such alternative markets will remain active. The
Company may also cease filing periodic reports under the Securities Exchange Act
of 1934, as amended (the "1934 Act") after the filing of this Annual Report on
Form 10-K in order to reduce expenses. Pertinent information will be
disseminated by press release and perhaps the filing of current reports on Form
8-K. If the Company ceases to file periodic reports, it will be out of
compliance with its obligations under the 1934 Act and Securities and Exchange
Commission ("SEC") Rule 144 will become unavailable for the resale of shares by
affiliates of the Company. Alternatively, if the Company continues to file
periodic reports and if it is still in existence at the time the Annual Report
on Form 10-K is required to be filed for the year ending December 31, 2004, the
Company may elect to include unaudited financial statements in such report to
reduce expenses, unless required to do otherwise.
On January 24, 2003, Kmart filed a plan of reorganization and related disclosure
statement with the bankruptcy court. Confirmation hearings were scheduled for
April 14 and 15, 2003. Assuming the court approved the disclosure statement and
the plan was confirmed, Kmart's filings indicated it would emerge from Chapter
11 on or about April 30, 2003. In connection therewith, Kmart filed a motion
dated February 5, 2003 with the court seeking to extend the deadline by which it
must assume or reject certain "go-forward" leases of real property from March
31, 2003 to the effective date of a plan reorganization, but no later than May
31, 2003. The Company did not object to this motion as it pertained to its
leases with Kmart at its Atwater, California and Hopkinsville, Kentucky shopping
centers.
On February 28, 2003, the Company completed the sale of its shopping center
property in Reedley, California for approximately $2.6 million in cash, pursuant
to a Purchase and Sale Agreement dated January 29, 2003 by and between Philips
Shopping Center Fund, L.P., a Delaware limited partnership, as Seller, and D&L
Lowe L.P., a California limited partnership, as Buyer.
On April 22, 2003, Kmart announced that the bankruptcy court had approved its
plan of reorganization. Kmart subsequently emerged from Chapter 11 on May 6,
2003. The Company's leases with Kmart at its Atwater, California and
Hopkinsville, Kentucky shopping centers were assumed in connection with this
restructuring.
On August 26, 2003, the Company completed the sale of its shopping center on
Bellevue Road in Atwater, California for the price of $6.0 million in cash,
pursuant to a Purchase and Sale Agreement dated June 23, 2003 by and between
Philips Shopping Center Fund, L.P., a Delaware limited partnership, as Seller,
and Nationwide Properties, LLC, a California limited liability company, as
Buyer.
On December 12, 2003, the Company completed the sale of its shopping center on
Fort Campbell Boulevard in Hopkinsville, Kentucky for the price of $2.875
million in cash, pursuant to a Purchase and Sale Agreement dated December 4,
2003 by and between Philips Shopping Center Fund, L.P., a Delaware limited
partnership, as Seller, and Kmart Express LLC, a Michigan limited liability
company, as Buyer. With the completion of such sale, the Company ceased all
active business operations and now exists solely to complete its liquidation.
The Board of Directors of the Company authorized liquidating distributions
generally following each of the foregoing asset dispositions as follows:
Per Share
Date Paid Amount
--------- ------
December 22, 2000 $13.00
July 9, 2001 1.00
September 24, 2001 0.75
November 19, 2001 0.50
October 22, 2002 0.50
March 18, 2003 0.50
September 16, 2003 1.00
January 6, 2004 0.50
------
$17.75
======
Other Dispositions of Real Estate Interests
On July 14, 2000, certain subsidiaries of the Company sold seven properties
aggregating approximately 620,000 square feet to Kimco Income Operating
Partnership, L.P., a Delaware limited partnership ("Kimco"), for a total
consideration of $67.3 million pursuant to a Purchase and Sale Agreement dated
as of April 28, 2000. The purchase price was comprised of approximately $51.0
million in cash and mortgage debt assumption of $16.3 million. The properties
included four New York shopping centers (Walgreens at Freeport, Munsey Park,
Yonkers and Glen Cove) and three in Florida (Key Largo, Orlando and Lake Mary).
Management and Capital Structure
Philip Pilevsky is the Chairman of the Board of Directors and Chief Executive
Officer, President, principal financial officer and Secretary of the Company.
Mr. Pilevsky receives no compensation for his services.
Louis Petra, former President and Director of the Company, resigned such offices
and terminated his at-will employment agreement with the Company effective
October 5, 2001. Mr. Petra currently acts as a consultant to the Company's Board
of Directors with regard to the completion of the plan of liquidation. Sheila
Levine, former Chief Operating Officer, Executive Vice President and Secretary,
resigned such offices and terminated her at-will agreement with the Company
effective November 12, 2002. Ms. Levine remains a member of the Board of
Directors of the Company. Carl Kraus, the Company's Chief Financial Officer,
resigned such office effective March 31, 2002.
-3-
The wind-down of the Company's operations is being strategically directed by its
Board of Directors, with the considered advice and counsel of the Company's
professional consultants.
The Company was incorporated in Maryland on July 16, 1997. Its executive offices
are located at 295 Madison Avenue, 2nd Floor, New York, New York 10017, and its
telephone number is (212) 545-1100.
As of December 31, 2000, the Company had utilized proceeds from property
dispositions in part to satisfy all outstanding mortgage indebtedness. While the
Company's organizational documents do not limit the amount of indebtedness that
the Company may incur, there was no secured debt outstanding at December 31,
2003 and the Company does not expect to incur any such debt in the future.
Employees
Philip Pilevsky was the sole employee of the Company as of December 31, 2003.
Mr. Pilevsky does not currently receive any remuneration for services rendered
in his capacities as described above. Mr. Pilevsky is, however, a shareholder of
the Company and receives liquidating distributions in respect of this equity
interest as may be declared from time to time by the Board generally with regard
to all shares of common stock then outstanding.
Industry Segments
The Company historically operated in a single industry segment -- real estate.
The Company did not have any foreign operations and its business was not
seasonal. See the financial statements attached hereto and incorporated by
reference herein for financial information relating to the Company's historic
real estate activities.
Risk Factors
The Company is actively seeking to realize its remaining assets, settle its
liabilities and resolve its contingent obligations. It is not presently
determinable whether, upon completion of the liquidation, the net assets
available for distribution to shareholders will differ materially from the
amount shown in the accompanying Consolidated Statement of Net Assets in
Liquidation.
The Company's ability to complete its plan of liquidation and achieve its
estimated total cash distributions to stockholders may be affected by the risk
factors set forth below. All investors should consider the following risk
factors before deciding to purchase securities of the Company. The Company
refers to itself as "we" or "our" in the following risk factors.
We are dependent upon our Board of Directors, Chief Executive Officer and
professional consultants whose continued service is not guaranteed.
We are dependent upon our Board of Directors, Chief Executive Officer and
professional consultants for strategic business direction in the wind-down of
the Company's operations, including the resolution of certain pending litigation
and the realization of the Company's residual assets. Loss of their services
could adversely affect us. We cannot assure you that our Board of Directors,
Chief Executive Officer and professional consultants will continue to provide
services to us.
Mr. Louis Petra resigned as our President and as a Director in October 2001. Mr.
Petra remains a consultant to us on a per diem basis. Sheila Levine, former
Chief Operating Officer, Executive Vice President and Secretary, resigned such
offices and terminated her at-will employment agreement with the Company
effective November 12, 2002. Ms Levine remains a member of our Board of
Directors. Mr. Carl Kraus resigned as our Chief Financial Officer effective
March 31, 2002. We no longer have the services of Mr. Kraus, and we only have
the services of Mr. Petra, as consultant, and Ms. Levine, as a Board member, on
a limited basis.
Inability to make required distributions to shareholders could affect our real
estate investment trust status.
For the Internal Revenue Service to treat us as a real estate investment trust
under the Internal Revenue Code of 1986, as amended (the "Code"), we must
distribute to our shareholders at least 90% of our real estate investment trust
taxable income each year. We cannot assure you that we will satisfy the annual
distribution requirement to qualify as a real estate investment trust.
Consequences of any failure to qualify as a real estate investment trust could
adversely affect our financial condition.
Our failure to qualify as a real estate investment trust for federal income tax
purposes could adversely affect our financial and other conditions.
Tax liabilities as a consequence of failure to qualify as a real estate
investment trust. We elected to be treated and have operated so as to qualify as
a real estate investment trust for federal income tax purposes since our taxable
year ended December 31, 1997. Although we believe we will continue to operate in
such manner, we cannot guarantee that we will do so. Qualification as a real
estate investment trust depends on our meeting various requirements (some on an
annual and quarterly basis) established under highly technical and complex tax
provisions of the Internal Revenue Code. Because few judicial or administrative
interpretations of such provisions exist and qualification determinations are
fact sensitive, we cannot assure you that we will qualify as a real estate
investment trust for any taxable year.
-4-
If we fail to qualify as a real estate investment trust in any taxable year, we
will be subject to the following:
o we will not be allowed a deduction for distributions to
shareholders;
o we will be subject to federal income tax at regular
corporate rates, including any alternative minimum tax, if
applicable; and
o unless we are entitled to relief under certain statutory
provisions, we will not be permitted to qualify as a real
estate investment trust for the four taxable years
following the year during which we were disqualified.
A loss of real estate investment trust status could have an adverse effect on
us. Failure to qualify as a real estate investment trust also would eliminate
any requirement that we make distributions to our shareholders.
Other tax liabilities. Even if we qualify as a real estate investment trust, we
are subject to certain federal, state and local taxes on our income and property
and, in some circumstances, certain other state and local taxes.
Risk of changes in the tax law applicable to real estate investment trusts.
Since the Internal Revenue Service, the United States Treasury Department and
Congress frequently review federal income tax legislation, we cannot predict
whether, when or to what extent new federal tax laws, regulations,
interpretations or rulings will be adopted. Any of such legislative action may
prospectively or retroactively modify our tax treatment and, therefore, may
adversely affect taxation of us or our shareholders.
Certain provisions of law may inhibit changes in control.
Certain provisions of the Maryland General Corporation Law, our articles of
incorporation, our by-laws, and our shareholder rights plan may (1) inhibit a
change in control of our Company, (2) inhibit the removal of existing management
or (3) prevent us from paying you a premium for your shares of our common stock
over the then-prevailing market prices.
Staggered board of directors. We divide our Board of Directors into three
classes serving staggered three-year terms. This may inhibit a change in control
of our Company.
New classes and series. Under our articles of incorporation, our Board of
Directors may create new classes and series of securities and establish
preferences and rights of such classes and series. Our issuance of additional
classes or series of our capital stock may inhibit a change of control of our
Company.
Ownership limit. Under our articles of incorporation and certain resolutions of
our Board of Directors, no one may acquire or own more than 8% of the
outstanding shares of our capital stock (except for Mr. Pilevsky who may own up
to 17.5% of such shares) and no one may own or acquire shares of any class of
our capital stock that would (1) cause five or fewer persons to own more than
50% in value of our shares of capital stock or (2) otherwise cause us to fail to
qualify as a real estate investment trust. Such ownership limit may:
o discourage a change of control of our Company;
o deter tender offers for our capital stock that you may
find attractive; or
o limit your opportunity to receive a premium for your
capital stock that might otherwise exist if an investor
attempted to assemble a block of capital stock in excess
of the ownership limit or to effect a change in control of
our Company.
Shareholder rights plan. Our Board of Directors adopted a Shareholder Rights
Plan effective as of March 31, 1999. The Rights Plan provides for a non-cash
distribution of rights to purchase a fraction of a share of a new series of
preferred stock, exercisable upon the occurrence of certain events. Generally,
upon the earlier to occur of (i) ten calendar days following the date of public
announcement that a person or group of affiliated or associated persons has
acquired, or obtained the right to acquire, beneficial ownership of fifteen
percent (15%) or more of our outstanding common stock or (ii) ten calendar days
following the commencement of, or public announcement of an intent to commence,
a tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of fifteen percent (15%) or more of
our outstanding common stock, you, as a holder of a right, will have the right
to receive, upon exercise, common stock having a market value equal to two times
the cost of such shares. Once any person or group becomes an acquiring person,
all rights that are or were beneficially owned by any such acquiring person will
be null and void.
The Rights Plan contains provisions to safeguard your interests in the event of
an unsolicited offer to acquire us. However, because our Board of Directors can
redeem the rights in certain circumstances, the Rights Plan will not prevent our
acquisition on terms that our Board of Directors considers favorable and fair to
you.
Our board of directors may change investment and financing policies without your
vote.
General. Our Board of Directors determines (1) our investment and financing
policies, (2) our operating strategy, and (3) our debt, capitalization,
distribution and operating policies. At any time and without your approval, the
Board of Directors may revise or amend these policies and strategies. Such
changes could adversely affect our financial condition or results of operations.
-5-
Issuance of additional securities. You do not have any preemptive right to
acquire any common stock or other equity or debt securities we may offer. Any
such issuance of securities could dilute your investment.
Disclosure regarding forward-looking statements.
The Company considers portions of this information to be forward-looking
statements within the meaning of Section 21E of the 1934 Act. The Company
intends such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in Section 21E of the
Exchange Act. Such forward-looking statements relate to, without limitation, the
Company's future economic performance, plans and objectives for future
operations and projections of revenue and other financial items. Forward-looking
statements can be identified by the use of words such as "may," "will,"
"should," "expect," "anticipate," "estimate," "continue" or comparable
terminology. Forward-looking statements are inherently subject to risks and
uncertainties, many of which the Company cannot predict with accuracy and some
of which the Company might not even anticipate. Although the Company believes
that the expectations reflected in such forward-looking statements are based
upon reasonable assumptions at the time made, it can give no assurance that its
expectations will be achieved. Future events and actual results, financial and
otherwise, may differ materially from the results discussed in the
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements. Among the factors about which the Company has
made assumptions are changes in the general economic climate; conditions,
including those affecting industries in which the Company's principal tenants
compete; any failure of the general economy to recover from the current economic
downturn; the extent of any tenant bankruptcies; the Company's ability to lease
or re-lease space at current or anticipated rents; changes in the supply of and
demand for shopping center properties; changes in interest rate levels; changes
in operating costs; the Company's ability to obtain adequate insurance,
including coverage for terrorist acts; the availability of financing; and other
risks associated with the development and acquisition of properties, including
risks that the development may not be completed on schedule, that the tenants
will not take occupancy or pay rent, or that development or operating costs may
be greater than anticipated. For further information on factors which could
impact the Company and the statements contained herein, see the "Risk Factors"
section. The Company assumes no obligation to update and supplement
forward-looking statements that become untrue because of subsequent events.
ITEM 2. PROPERTIES
As of December 31, 2003, the Company had divested all of its real estate
properties and was conducting no active business operations. See "Item 1 -
Business - Plan of Liquidation."
ITEM 3. LEGAL PROCEEDINGS
On October 2, 2000, a class action was filed in the United States District Court
for the Southern District of New York against the Company and its directors. The
complaint alleged a number of improprieties concerning the pending plan of
liquidation of the Company. The Company believes that the asserted claims are
without merit, and will defend against such claims vigorously. On November 9,
2000, the Court, ruling from the bench, denied the plaintiff's motion for a
preliminary injunction. This bench ruling was followed by a written order dated
November 30, 2000 wherein the Court concluded that the plaintiff had failed to
demonstrate either that it was likely to succeed on the merits of its case or
that there were sufficiently serious questions going to the merits of its case
to make it fair ground for litigation.
On February 5, 2002 the Court denied the plaintiff's motion for class action
certification. The plaintiff may elect to proceed with its claims on its own now
that class certification has been denied. The plaintiff also has asserted
derivative claims for alleged breaches of fiduciary duty by the directors of the
Company. The Company believes that such derivative claims are deficient for,
among other reasons, the grounds upon which class certification was denied. The
Company believes that all of the asserted claims are without merit, and will
defend against such claims vigorously.
On February 28, 2002, the Company announced that the plaintiff had sought
permission from the Court of Appeals for the Second Circuit to appeal the denial
of class certification discussed above. In order for plaintiff to have obtained
permission to appeal, it had to demonstrate that the denial of class
certification effectively terminated the litigation and that the District
Court's decision was an abuse of its discretion. The Company opposed plaintiff's
application. If the Court of Appeals granted plaintiff's request, plaintiff
would then have been able to appeal the District Court's denial of class
certification.
On May 28, 2002, the United States Court of Appeals for the Second Circuit
ordered that the plaintiff's petition to appeal the District Court's denial of
class certification also be denied.
The Board of Directors of the Company is currently seeking (i) final resolution
of this pending class action, and (ii) recovery of $2.1 million expended by the
Company in defense of this action pursuant of the terms of its directors' and
officers' insurance policy. While it is probable that such defense costs will
not be fully recovered since the carrier is now seeking to disqualify a
substantial portion of the costs incurred as non-covered expenses under the
policy, the Company considers the carrier's assertions to be without merit, in
contravention of the policy's specifications and will take such action as may be
necessary to protect the interests of its shareholders.
Except as noted above, the Company is not presently involved in any litigation
nor to its knowledge is any litigation threatened against the Company or its
subsidiaries that, in management's opinion, would result in any material adverse
effect on the Company, or which is not covered by the Company's liability
insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
-6-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
The Company's common stock was listed on the NYSE under the ticker symbol "PHR"
and began trading May 8, 1998.
On October 18, 2002, the NYSE delivered notice to the Company and issued a press
release to advise that it had determined the common stock of the Company should
be removed from the list of companies traded on the NYSE. This decision was
reached in view of the fact that the Company had fallen below the NYSE's
continued listing standards as its average global market capitalization over a
consecutive thirty day period was less than $15,000,000. Furthermore, the NYSE
noted that the Company has been operating pursuant to a plan of liquidation
approved by its shareholders on October 10, 2000 and has made four liquidating
distributions totaling $15.25 as of such date, with a fifth liquidating of $0.50
to be paid on October 22, 2002. The NYSE indicated it intended to (and did, in
fact) suspend trading in the Company's common stock prior to the opening on
October 23, 2002 in connection with this distribution. Action by the NYSE with
the Securities and Exchange Commission delisting the Company followed the
completion of applicable procedures. The Company did not request a review of
this NYSE determination.
The Company has no current intention to seek listing of its common shares on any
other securities exchange or on NASDAQ. However, unless and until the Board of
Directors acts to dissolve the corporation, the Company believes that
alternative trading venues, such as the "Pink Sheets" and the "OTC Bulletin
Board," will continue to be available to its shareholders. There can be no
assurance, however, that any such alternative markets will remain active. The
Company may also cease filing periodic reports under the 1934 Act after the
filing of this Annual Report on Form 10-K in order to reduce expenses. Pertinent
information will be disseminated by press release and perhaps the filing of
current reports on Form 8-K. If the Company ceases to file periodic reports, it
will be out of compliance with its obligations under the 1934 Act and SEC Rule
144 will become unavailable for the resale of shares by affiliates of the
Company. Alternatively, if the Company continues to file periodic reports and if
it is still in existence at the time the Annual Report on Form 10-K is required
to be filed for the year ending December 31, 2004, the Company may elect to
include unaudited financial statements in such report to reduce expenses, unless
required to do otherwise.
Market Information
The following table sets forth the high and low bid prices for the Company's
common stock, as quoted on the OTC Bulletin Board, for the period October 23,
2002 through December 31, 2003. These high and low bid quotations were furnished
by a representative of the OTC Bulletin Board, represent prices between
broker-dealers (without regard to retail mark-ups and mark-downs or any
commissions to the broker-dealer), and may not reflect prices for the Company's
common stock in actual transactions.
2003: High Low
----- ---- ---
First Quarter $2.00 $1.40
Second Quarter $1.73 $1.46
Third Quarter $1.88 $0.86
Fourth Quarter $0.97 $0.90
2002:
October 23 - December 31 $1.65 $1.25
The following table sets forth the quarterly high, low and closing price per
share of common stock reported on the NYSE for the period January 1, 2002
through October 22, 2002:
2002: High Low Close
---- ---- --- -----
First Quarter $2.50 $1.77 $2.45
Second Quarter $2.50 $2.00 $2.07
Third Quarter $2.15 $1.77 $1.88
Fourth Quarter (to October 22) $2.00 $1.71 $1.95
On March 15, 2004, the average bid and asked prices of the Company's common
stock as quoted on the OTC Bulletin Board was $0.40 per share.
Holders
On March 15, 2004, the Company had approximately 1,150 common shareholders of
record.
Recent Sales of Unregistered Securities
The Company did not issue any unregistered securities in the years ended
December 31, 2003, 2002 or 2001.
-7-
Dividends and Distributions
The Company paid distributions on its common stock during calendar years 2003
and 2002 as follows:
Record Date of Amount
Date of Declaration Date Payment Per Share
---- ------- ---------
2003:
8/28/03................................ 9/9/03 9/16/03 $1.00*
3/3/03................................. 3/11/03 3/18/03 $0.50*
2002:
10/8/02................................ 10/15/02 10/22/02 $0.50*
* Constituted liquidating distributions under the Company's plan of liquidation.
Prior to any dissolution of the Company, at which point a designated trustee (if
a trust is established) would have discretion, future distributions will be
determined by the Board of Directors and will be dependent upon a number of
factors. In addition, in order to maintain its qualification as a REIT under the
Code, the Company is, in general, required to distribute currently 90% of its
taxable income. Upon the stockholders' approval of the plan of liquidation in
October 2000, the Company suspended the payment of regular quarterly dividends.
Pursuant to the plan of liquidation, a total of $17.75 has been distributed to
date.
Common Stock Buy-Back Program
In March 1999, the Board of Directors authorized a discretionary common stock
buy-back program pursuant to which the Company may repurchase up to $5 million
in value of its outstanding shares of common stock. Purchases may be made from
time to time in open market transactions at prevailing prices or through
privately negotiated transactions and are subject to compliance with applicable
securities and tax regulations. No shares have been repurchased to date under
this program; however, the Board may elect in its discretion to repurchase
shares in the future.
Securities Authorized for Issuance Under Equity Compensation Plans
The Company had maintained a stock option plan pursuant to which a maximum
852,550 shares of the Company's common stock could be issued for qualified and
non-qualified options. Options granted under the plan generally vested ratably
over a three-year term, expired ten years from the date of grant and were
exercisable at the market price on the date of grant, unless otherwise
determined by the Company's Board of Directors in its sole discretion.
In conjunction with the Company's adoption of the plan of liquidation and the
disposal of substantially all of its shopping center properties, all options
outstanding at December 31, 2000 (705,500 shares at a weighted average exercise
price of $17.43) became fully vested and were replaced one-for-one by a
contractual right (a "Contract Right") to receive a cash distribution on the
same basis and at the same time as liquidating distributions are made to
shareholders. The total amount to be paid on each Contract Right will equal the
total per share proceeds distributed to shareholders less the original stock
option exercise price. Contract Rights are retained after termination of
employment. No additional stock options or Contract Rights have been issued
since December 2000.
See "Item 11 - Executive Compensation" and "Item 12 - Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters."
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial and operating information for
the Company as of and for the years ended December 31, 2003, 2002, 2001, 2000
and 1999. This information should be read in conjunction with all of the
financial statements and the notes thereto appearing elsewhere in this Annual
Report on Form 10-K. See "Item 1 - Business-Plan of Liquidation."
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
(In thousands, except per share and property data)
Operating Data (discontinued operations):
Revenues from rental property $1,203 $2,791 $5,023 $43,134 $42,457
Income (Loss) from discontinued operations before
extraordinary items (115) 113 2,743 49,997 8,336
Income (Loss) from discontinued operations before
extraordinary items, per common share:
Basic (.02) .02 .37 6.81 1.14
Diluted (.02) .02 .37 6.81 1.14
Balance Sheet Data:
Rental properties, net, at cost -- 10,103 18,974 33,579 261,631
Investments in real estate joint ventures -- -- -- -- 25,134
Total assets 8,834 18,679 22,385 37,572 306,550
Mortgages and notes payable -- -- -- -- 181,955
Shareholders' equity -- 17,613 21,170 34,944 86,854
Net assets in liquidation 2,817 -- -- -- --
Other Data:
Net cash provided by (used in) operating (42) 427 (298) 10,038 15,784
activities
Net cash provided by (used in) investing 10,973 8,334 16,029 120,268 (51,760)
activities
Net cash provided by (used in) financing (11,049) (3,683) (16,573) (131,785) 30,044
activities
Cash dividends declared per share 2.00 .50 2.25 13.76 1.51
GLA (sq.ft.) (at end of period) -- 272,430 477,901 890,663 3,889,514
Occupancy of Properties owned (%) (at end of -- 84.2 90.7 83.1 90.5
Period)
-8-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the accompanying
Philips International Realty Corp. Consolidated Financial Statements and Notes
thereto.
When used in this Annual Report on Form 10-K, the words "may", "will", "expect",
"anticipate", "continue", "estimate", "project", "intend" and similar
expressions are intended to identify forward-looking statements regarding
events, conditions and financial trends that may affect the Company's future
plans of operations, business strategy, results of operations and financial
position. Such forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties. Actual results may
differ materially from those included within the forward-looking statements as a
result of various factors.
Results of Operations
During each of the three years in the period ended December 31, 2003, the
Company divested portions of its shopping center portfolio pursuant to a plan of
liquidation approved by shareholders on October 10, 2000. See Note 2 of the
accompanying Notes to Consolidated Financial Statements. The disposition of
these properties gives rise to significant changes when comparing the Company's
results of operations for the three years ended December 31, 2003, 2002 and
2001.
Comparison of Year Ended December 31, 2003 to December 31, 2002.
Revenues from rental property were $1,203,000 for the year ended December 31,
2003 compared to $2,791,000 for the year ended December 31, 2002. Expenses were
$1,555,000 during 2003 as compared to $1,729,000 during 2002. These changes
resulted primarily from the above-mentioned disposition of portions of the
Company's shopping center portfolio pursuant to the plan of liquidation during
the respective periods. See Note 2 of the accompanying Notes to Consolidated
Financial Statements.
Other income (expense), net for year ended December 31, 2003, includes $250,000
in estimated legal and other charges relating to the recovery of certain assets
of the Company. Other income (expense), net for year ended December 31, 2002,
includes $253,943 in interest charges relating to the settlement of real
property transfer tax obligations. See Note 7 of the accompanying Notes to
Consolidated Financial Statements.
Reference should be made to Note 2 of the accompanying Notes to Consolidated
Financial Statements for information relating to the gains (losses) on sales of
shopping center properties during these respective periods.
The Company adopted the liquidation basis of accounting as of December 31, 2003.
Reference should be made to Note 3 of the accompanying Notes to Consolidated
Financial Statements for information relating to the accrual of the estimated
costs of liquidation.
Comparison of Year Ended December 31, 2002 to December 31, 2001
Revenues from rental property were $2,791,000 for the year ended December 31,
2002 compared to $5,023,000 for the year ended December 31, 2001. Expenses were
$1,729,000 during 2002 as compared to $2,675,000 in 2001. These changes resulted
primarily from the above-mentioned disposition of portions of the Company's
shopping center portfolio pursuant to the plan of liquidation during these
respective periods. See Note 2 of the accompanying Notes to Consolidated
Financial Statements.
Other income (expense), net for year ended December 31, 2002, includes $253,943
in interest charges relating to the settlement of real property transfer tax
obligations. See Note 7 of the accompanying Notes to Consolidated Financial
Statements.
Reference should be made to Note 2 of the accompanying Notes to Consolidated
Financial Statements for information relating to the gains (losses) on sales of
shopping center properties during these respective periods.
Liquidity and Capital Resources
The Company expects to invest temporarily available cash in short-term,
investment-grade interest bearing securities, such as securities of the United
States government or its agencies, high-grade commercial paper and bank
deposits.
The Company believes that its net cash reserves will be sufficient to (i) make
distributions necessary to enable the Company to continue to qualify as a REIT,
and (ii) fund the wind-down of operations and dissolution of the Company. There
can be no assurances, however, whether the total distributions to stockholders
will differ materially from the amount shown in the accompanying Consolidated
Statement of Net Assets in Liquidation.
-9-
Cash Flows
Comparison of the Year Ended December 31, 2003 to December 31, 2002.
Net cash (used in) provided by operating activities was $(42,000) for the year
ended December 31, 2003, as compared to $427,000 for the year ended December 31,
2002. This change is primarily attributable to the above-mentioned disposition
of shopping center properties pursuant to the plan of liquidation during the
respective periods.
Net cash provided by investing activities was $10,973,000 during 2003, as
compared to $8,334,000 during 2002. See Note 2 of the accompanying Notes to
Consolidated Financial Statements for information pertaining to the sales of
shopping center properties during these respective periods.
Net cash used in financing activities was $11,049,000 during 2003 as compared to
$3,683,000 during 2002. See Note 10 of the accompanying Notes to Consolidated
Financial Statements for information relating to dividends paid during these
respective periods.
Comparison of the Year Ended December 31, 2002 to December 31, 2001
Net cash provided by (used in) operating activities was $427,000 for the year
ended December 31, 2002, as compared to $(298,000) for the year ended December
31, 2001. This change reflects the combined effects of (i)a reduction in
liquidation and litigation related costs incurred during 2002 as compared to
2001, (ii)the settlement of real property transfer tax obligations relating to
the Company's 1997 Formation Transactions and 1998 initial public stock offering
during 2002, and (iii)the above-mentioned disposition of shopping center
properties pursuant to the plan of liquidation during the respective periods.
Net cash provided by investing activities was $8,334,000 during 2002, as
compared to $16,029,000 during 2001. See Note 2 of the accompanying Notes to
Consolidated Financial Statements for information pertaining to the sales of
shopping center properties during these respective periods.
Net cash used in financing activities was $3,683,000 during 2002 as compared to
$16,573,000 during 2001. See Note 10 of the accompanying Notes to Consolidated
Financial Statements for information relating to dividends paid during these
respective periods.
Off Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Critical Accounting Policies
The Company believes that the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of consolidated
financial statements.
Basis of Presentation
The Company adopted the liquidation basis of accounting as of December 31, 2003.
The liquidation basis of accounting is appropriate when liquidation appears
imminent, a company can no longer be classified as a going concern, and the net
realizable values of a company's assets are reasonably determinable. Under this
method of accounting, assets and liabilities are stated at their estimated
realizable value (on an undiscounted basis) and estimated costs of liquidating
the Company are provided to the extent reasonably determinable.
In adopting the liquidation basis of accounting, the Company has accrued what it
believes are reasonable estimates of costs to liquidate its assets. The actual
costs to liquidate the Company may differ significantly depending on a number of
factors, including the length of time it takes to realize its remaining assets.
Estimated costs to liquidate the Company are reflected in the Consolidated
Statement of Net Assets in Liquidation as "Accrual for liquidation expenses."
It is not presently determinable whether, upon completion of the liquidation,
the net assets available for distribution to shareholders will differ materially
from the amount shown in the accompanying financial statement as "Net Assets in
Liquidation."
Use of Estimates
The preparation of financial statements in conformity with accounting principals
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Tabular Disclosure of Contractual Obligations
The Company is in liquidation and has no contractual obligations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
-10-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Regulation S-X are
included in this Annual Report on Form 10-K commencing on page 19.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures. The Company's management, with the
participation of the Company's chief executive officer and principal financial
officer, has evaluated the effectiveness of the Company's disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the 1934 Act) as of the end of the period covered by this report. Based on such
evaluation, the Company's chief executive officer and chief financial officer
have concluded that, as of the end of such period, the Company's disclosure
controls and procedures are effective in recording, processing, summarizing and
reporting, on a timely basis, information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act.
Internal Control Over Financial Reporting. There have not been any changes in
the Company's internal control over financial reporting (as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICER OF THE REGISTRANT
Set forth below is certain information as of March 15, 2004 for (i) the members
of the Board of Directors of the Company, (ii) the executive officer of the
Company and (iii) the directors and executive officer of the Company as a group:
Percentage
of Shares
Percentage Outstanding
Of Shares (on a fully-
First Term Number of Outstanding diluted
Name and Position Age Elected Expired (1) Shares (2)(3) (%) basis)%
- ----------------- --- ------- ----------- ------------- --- -------
Philip Pilevsky, Chairman of the Board of
Directors and Chief Executive Officer,
President and Secretary of the
Company........................................ 57 1997 2001 344,695(6) 4.7 4.7
Sheila Levine, Director(4)..................... 46 1997 2000 2,800(7) * *
Elise Jaffe, Director(5)....................... 48 1999 2002 1,000(8) * *
Robert S. Grimes, Director(4).................. 60 1997 2001 12,800(9) * *
Arnold S. Penner, Director(4)(5)............... 67 1997 2001 0(10) * *
A.F. Petrocelli, Director(5)................... 60 1997 2000 57,100(11) * *
-- ---- ---- ---------- -- --
All directors and executive officer as a
group (6 persons).............................. 418,395(12) 5.7 5.7
*Beneficial ownership of less than 1 percent is omitted.
(1) The Company's charter divides the Company's Board of Directors into three
classes, with the members of each such class serving staggered three-year
terms until their successors are duly elected and qualified. The Board of
Directors presently consists of six members as follows: Class I director,
Elise Jaffe, whose term expired in 2002; Class II directors, Sheila Levine
and A.F.Petrocelli, whose terms expired in 2000; and Class III directors,
Philip Pilevsky, Robert Grimes and Arnold S. Penner, whose terms expired in
2001. In light of the adoption of the Company's plan of liquidation on
October 10, 2000, the present directors are expected to remain in office
until the liquidation is completed.
(2) Except as otherwise noted below, all shares of common stock are owned
beneficially by the individual listed with sole voting and/or investment
power.
(3) In conjunction with the Company's adoption of the plan of liquidation and
the disposal of substantially all of its shopping center properties, all
options then outstanding to acquire shares of the Company's common stock
became fully vested and replaced one-for-one by a contractual right (a
"Contract Right") to receive a cash distribution on the same basis and at
the same time as liquidating distributions are made to shareholders. The
total amount to be paid on each Contract Right will equal the total per
share proceeds distributed to shareholders less the original stock option
exercise price. Contract Rights are retained after termination of
employment.
(4) Member of the Compensation Committee of the Board of Directors.
(5) Member of the Audit Committee of the Board of Directors.
(6) Represents 344,695 shares of common stock. Does not include 240,000
Contract Rights.
-11-
(7) Represents 2,800 shares of common stock. Does not include 100,000 Contract
Rights.
(8) Represents 1,000 shares of common stock. Does not include 10,000 Contract
Rights.
(9) Represents 12,800 shares of common stock (11,400 shares of common stock
were purchased by SEJ Properties, L.P. of which Mr. Grimes is the
President/Treasurer and a shareholder of the General Partner, SEJ
Properties, Inc.; 1,400 shares of common stock were purchased by Mr.
Grimes' spouse, Ellen Grimes). Does not include 10,000 Contract Rights.
(10) Does not include 10,000 Contract Rights.
(11) Represents 57,100 shares of common stock. Does not include 10,000 Contract
Rights.
(12) Represents 418,395 shares of common stock. Does not include 380,000
Contract Rights.
Biographical information concerning the directors and executive officer is set
forth below.
Philip Pilevsky is Chairman of the Board of Directors and Chief Executive
Officer, President, principal financial officer and Secretary of the Company,
and has served as Chief Executive Officer and President of Philips International
Holding Corp. since its formation in 1982. Mr. Pilevsky has been involved in the
real estate business for nearly 30 years, including the development, leasing,
management, operation, acquisition and disposition of commercial properties.
Together with Ms. Levine, he founded the entities that now comprise Philips
International Holding Corp. and its affiliates. Mr. Pilevsky is a nationally
recognized member of the real estate community, providing the Company with
strategic leadership and a broadly based network of relationships. Outside the
real estate industry he is renowned as an educator, author in the field of
international relations and frequent commentator for Fox 5 and CNBC. Mr.
Pilevsky received a Bachelor of Arts degree from C.W. Post College and a Masters
Degree of Arts and a Masters Degree of Education from Columbia University. Mr.
Pilevsky is the brother of Sheila Levine.
Sheila Levine is a Director of the Company. Ms. Levine resigned as Chief
Operating Officer, Executive Vice President and Secretary of the Company
effective November 12, 2002. She has served as Chief Operating Officer and
Executive Vice President of Philips International Holding Corp. and, together
with Mr. Pilevsky, founded the entities that now comprise Philips International
Holding Corp. and its affiliates. Ms. Levine, active in the real estate business
for more than 20 years, received a Bachelor of Science in Business
Administration from the Hofstra University School of Business. Ms. Levine is the
sister of Mr. Pilevsky.
Elise Jaffe is a Director of the Company. Ms. Jaffe has served since 1994 as
Senior Vice President of Real Estate for Dress Barn, Inc., a major women's
apparel retailer owning approximately 725 stores within the United States. She
has been with Dress Barn, Inc. for nearly 20 years and serves on its Executive
Committee. Ms. Jaffe is on the Advisory Board of the International Council of
Shopping Centers/Value Retail News and is Vice President and the Treasurer of
the Paul Taylor Dance Foundation. Ms. Jaffe graduated from Tufts University with
a Bachelor of Arts in English and Psychology.
Arnold S. Penner is a Director of the Company. For over 30 years Mr. Penner has
been active in the real estate business as a real estate broker and investor in
a diverse portfolio of properties, including office buildings, retail properties
and parking facilities. Mr. Penner is a Director of United Capital Corp.
("United Capital"), an American Stock Exchange-listed company specializing in
the investment and management of real estate assets and the manufacturing and
sale of antenna and transformer products to a global customer base. Mr. Penner
also is involved with several philanthropic organizations devoted to children's
education.
A.F. Petrocelli is a Director of the Company. He has served as Chairman of the
Board and Chief Executive Officer of United Capital since December 1987 and
President since 1991. Mr. Petrocelli currently owns over 65% of United Capital
and has been a Director of United Capital since 1981. Mr. Petrocelli also serves
on the Board of Directors of Prime Hospitality Corp., a New York Stock
Exchange-listed company, Nathan's Famous, Inc., Metex Corporation and Boyar
Value Fund, Inc.
Robert S. Grimes is a Director of the Company. He has served as President of RS
Grimes Co., Inc., an investment company, since September 1987. Mr. Grimes has
also been a Director and Executive Vice President of Autobytel.com Inc. since
July 1996. From April 1981 to March 1987, Mr. Grimes was a partner with the
investment firm of Cowen & Company. Mr. Grimes is also a Director of Integrated
Color Solutions, Inc., Spafinder Inc. and Mikronite Technologies Inc. Mr. Grimes
holds a Bachelor of Science from Wharton School of Commerce and Finance at the
University of Pennsylvania and an L.L.B. from the University of Pennsylvania Law
School.
Audit Committee Financial Expert.
No member of the Audit Committee qualifies as an Audit Committee Financial
Expert under applicable SEC rules. Given that the Company is in liquidation, has
divested all of its real estate properties and is no longer conducting active
business operations, it does not believe that it could attract an Audit
Committee Financial Expert or that it is necessary for the protection of its
shareholders to do so.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers, directors and
persons who beneficially own more than 10% of the Company's common stock to file
initial reports of ownership and reports of changes of ownership (Forms 3, 4 and
5) of the common stock with the SEC. Officers, directors and greater than 10%
holders are required by SEC regulations to furnish the Company with copies of
such forms that they file.
To the Company's knowledge, based solely on the Company's review of the copies
of such reports received by the Company, the Company believes that during fiscal
year 2003, its officers, directors and greater than 10% beneficial owners
complied with all applicable Section 16(a) filing requirements.
-12-
Code of Ethics
The Company has not adopted a code of ethics that applies to its principal
executive officer, principal accounting officer or controller, or persons
performing similar functions. Given that the Company is in liquidation, has
divested all of its real estate properties and is no longer conducting active
business operations, it does not believe that a code of ethics is necessary for
the protection of its shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the compensation
of the Chief Executive Officer and the three other executive officers of the
Company (collectively, the "Named Executive Officers") for each of the Company's
last three fiscal years:
SUMMARY COMPENSATION TABLE
Annual Compensation (1) Long-Term Compensation
----------------------- ----------------------
Awards Payouts
------ -------
Securities
Restricted Underlying LTIP
Name and Other Annual Stock Options/SARs Payouts All Other
Principal Position Year Salary($) Bonus($) Compensation($) Award(s)($) (#) ($) Compensation
- ------------------ ---- --------- -------- --------------- ----------- --- --- ------------
Philip Pilevsky............. 2003 0(2) 0 0 0 0 0 0
Chief Executive Officer 2002 0(2) 0 0 0 0 0 0
President, principal 2001 0(2) 0 0 0 0 0 0
financial officer
And Secretary
Louis J. Petra.(3).......... 2003 0 0 0 0 0 0 0
2002 0 0 0 0 0 0 0
2001 51,000 0 0 0 0 0 0
Sheila Levine(4)............ 2003 0 0 0 0 0 0
2002 0(4) 0 0 0 0 0 0
2001 0(4) 0 0 0 0 0 0
Carl E. Kraus(5)............ 2003 0 0 0 0 0 0 0
2002 74,400 0 0 0 0 0 0
2001 126,000 0 0 0 0 0 0
(1) The annual compensation portion of this table includes the dollar value of
regular annual payments of base salary, bonus and any other annual
compensation earned by each named executive officer during the year
indicated.
(2) Philip Pilevsky, Chairman of the Board of Directors and Chief Executive
Officer, President and Secretary of the Company, did not receive
compensation from the Company in consideration for services rendered in
such capacities, as applicable, during calendar years 2003, 2002, and 2001.
(3) Louis J. Petra terminated the Petra At-Will Arrangement (as defined under
"Employment Contracts; Termination of Employment" below) and resigned from
his positions as President and Director of the Company effective October 5,
2001. See Employment Contracts; Louis J. Petra Termination of Employment
Agreement. Mr. Petra currently provides consulting services to the Company
on a per diem basis.
(4) Sheila Levine terminated the Levine-At-Will Arrangement (as defined under
"Employment Contracts; Termination of Employment" below) and resigned from
her positions as Chief Operating Officer, Executive Vice President and
Secretary of the Company effective November 12, 2002. Ms. Levine did not
receive compensation for services rendered in such capacities during 2002
and 2001 pursuant to the Levine-At-Will Arrangement. See Employment
Contracts; Sheila Levine Termination of Employment Agreement. Ms. Levine
remains a member of the Board of Directors of the Company.
(5) Carl E. Kraus terminated the Kraus At-Will Arrangement (as defined under
"Employment Contracts; Termination of Employment" below) and resigned from
his position as Chief Financial Officer of the Company effective March 31,
2002. See Employment Contracts; Carl E. Kraus Termination of Employment
Agreement.
-13-
AGGREGATED OPTION/SAR EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities
Underlying Unexercised Value of Unexercised In-
Shares Options/SARs at Fiscal The-Money Options/SARs at
Acquired Value Year-End (#) Fiscal Year-End ($)
on Exercise Realized --------------------------------- -------------------------------
Name (#) ($) Exercisable(1) Unexercisable Exercisable Unexercisable
- ---- --- --- -------------- ------------- ----------- -------------
Philip Pilevsky........... 0 0 (1) 0 0 0
Louis J. Petra............ 0 0 (1) 0 0 0
Sheila Levine............. 0 0 (1) 0 0 0
Carl E. Kraus............. 0 0 (1) 0 0 0
(1) In conjunction with the Company's adoption of the plan of liquidation and
the disposal of substantially all of the Company's shopping center
properties, Philip Pilevsky received 240,000 Contract Rights, Louis J.
Petra received 100,000 Contract Rights, Sheila Levine received 100,000
Contract Rights and Carl E. Kraus received 50,000 Contract Rights, in
replacement of previously vested stock options granted in years prior to
2000. Such Contract Rights represent the right to receive the excess of the
total per share liquidating distributions to stockholders over the original
stock option exercise price ($17.50 per share as to Messrs. Pilevsky, Petra
and Ms. Levine; $16.75 per share as to Mr. Kraus). The value of such
Contract Rights is at present not calculable. Contract Rights are retained
after termination of employment.
Compensation of Directors
Directors' Fees. Each non-employee director of the Company is entitled to
receive an annual fee of $10,000, plus (a) $750 for attendance in person at each
meeting of the full Board of Directors, (b) $500 for attendance in person at
each meeting of a committee thereof, if such meeting is held on a day other than
the day of a full Board meeting, and (c) $250 for each telephonic meeting
participation. The Company does not pay director fees to Sheila Levine, or to
employee directors, who in fiscal 2003 consisted of Philip Pilevsky. Each
director also is entitled to reimbursement for expenses relating to attendance
at meetings of the Board of Directors or any committee thereof. During 2003,
Elise Jaffe, Robert S. Grimes, Arnold S. Penner, and A.F. Petrocelli received
directors' fees in the amounts of $10,750, $10,000, $10,750 and $10,750
respectively.
Stock Option Plan. Pursuant to the Company's 1997 Stock Option and Long-Term
Incentive Plan (the "Stock Option Plan"), in 1998 each non-employee director was
granted a non-qualified option to purchase 10,000 shares of common stock in
connection with the director's initial appointment to the Board of Directors,
which have now been converted into Contract Rights. These grants under the Stock
Option Plan were made at an exercise price equal to the "fair market value" (as
defined under the Stock Option Plan) at the time of the grant of the shares of
common stock subject to such option. No options or additional Contract Rights
were granted to directors or executive officers in 2003.
Employment Contracts; Termination of Employment
Louis J. Petra Termination of Employment Agreement. In connection with the
Company's plan of liquidation, on December 4, 2000, Mr. Petra's employment
agreement with the Company (the "Petra Employment Agreement") was terminated as
a result of the change in control arising out of the sale of substantially all
of the assets of the Company. In connection with such termination, pursuant to
the terms of the Petra Employment Agreement, Mr. Petra received the remainder of
his salary through December 31, 2000, forgiveness of the $1,000,000 non-recourse
stock acquisition loan (plus interest) made by the Company to Mr. Petra (the
"Petra Loan"), and tax gross-up payments relating to such forgiveness of the
interest on such loan. In addition, all unvested options granted to Mr. Petra
immediately vested. The Company subsequently entered into an at-will employment
arrangement with Mr. Petra (the "Petra At-Will Arrangement"), whereby Mr. Petra
served as President of the Company and received a salary of $1,200 for each day
worked, customary employee benefits and reimbursement for reasonable business
expenses. The Petra At-Will Arrangement was terminable by the Company or Mr.
Petra at any time and for any or no reason. Mr. Petra terminated the Petra
At-Will Arrangement effective October 5, 2001. Mr. Petra did not receive any
severance payments in connection with the termination of the Petra At-Will
Arrangement, and no non-competition provisions apply. Mr. Petra currently
provides consulting services to the Company on a per diem basis.
Sheila Levine Termination of Employment Agreement. In connection with the
Company's plan of liquidation, on December 4, 2000, Ms. Levine's employment
agreement with the Company (the "Levine Employment Agreement") was terminated as
a result of the change in control arising out of the sale of substantially all
of the assets of the Company. All unvested options granted to Ms. Levine
immediately vested (they would have vested on January 1, 2001). The Company
subsequently entered into an at-will employment arrangement with Ms. Levine (the
"Levine At-Will Arrangement"), whereby Ms. Levine served as Chief Operating
Officer, Executive Vice President and Secretary of the Company and received no
salary, but did receive reimbursement for reasonable business expenses. The
Levine At-Will Arrangement was terminable by the Company or Ms. Levine at any
time and for any or no reason. Ms. Levine terminated the Levine At-Will
Arrangement effective November 12, 2002. Ms. Levine did not receive any
severance payments in connection with the termination of the Levine At-Will
Arrangement, and non-competition provisions continue to apply. Ms. Levine
remains a member of the Board of Directors of the Company.
Carl E. Kraus Termination of Employment Agreement. In connection with the
Company's plan of liquidation, on December 4, 2000, Mr. Kraus' employment
agreement with the Company (the "Kraus Employment Agreement") was terminated as
a result of the change in control arising out of the sale of substantially all
of the assets of the Company. In connection with such termination, pursuant to
the terms of the Kraus Employment Agreement, Mr. Kraus received the remainder of
his salary through December 31, 2001 and forgiveness of the $200,000
non-recourse stock acquisition loan (plus interest) made by the Company to Mr.
Kraus (the "Kraus Loan"). In addition, all unvested options granted to Mr. Kraus
immediately vested. The Company subsequently entered into an at-will employment
arrangement with Mr. Kraus (the "Kraus At-Will Arrangement"), whereby Mr. Kraus
served as Chief Financial Officer of the Company and received a salary of $1,200
for each day worked, customary employee benefits and reimbursement for
reasonable business expenses. The Kraus At-Will Arrangement was terminable by
the Company or Mr. Kraus at any time and for any or no reason. Mr. Kraus
terminated the Kraus At-Will Arrangement effective March 31, 2002. Mr. Kraus did
not receive any severance payments in connection with the termination of the
Kraus At-Will Arrangement, and no non-competition provisions apply.
-14-
Compensation Committee Interlocks and Insider Participation
Sheila Levine, a member of the Compensation Committee of the Board of Directors
during 2002, also served as the Chief Operating Officer, Executive Vice
President and Secretary of the Company through November 12, 2002. Ms. Levine is
also a party to certain related transactions with the Company. See "Certain
Relationships and Related Transactions". The other two members of the
Compensation Committee of the Board of Directors (comprising a majority thereof)
are Robert S. Grimes and Arnold S. Penner. Messrs Grimes and Penner are
independent outside directors of the Company who are neither employed by, nor
have any other affiliation with, the Company.
Board Compensation Committee Report on Executive Compensation
The Company is operating under a plan of liquidation. Philip Pilevsky, the sole
executive officer of the Company, serves as Chief Executive Officer, President,
principal financial officer and Secretary, and does not receive compensation for
services rendered in such capacities or as Chairman of the Board of Directors of
the Company.
Base Salaries. Louis J. Petra, former President of the Company, and Carl E.
Kraus, former Chief Financial Officer of the Company, received base compensation
during 2002 and 2001 in accordance with their at-will employment arrangements.
Such compensation levels were set to provide remuneration for the services
performed and were considered reasonable in light of the circumstances.
Stock Option Plan. Awards granted under the Stock Option Plan were historically
based on a number of factors, including (i) the executive officer's or key
employee's position in the Company, (ii) his or her performance and
responsibilities, (iii) the extent to which he or she already held an equity
stake in the Company, (iv) equity participation levels of comparable executives
and key employees at other companies in the compensation peer group, and (v)
individual contribution to the success of the Company's financial performance.
However, the Stock Option Plan did not provide any formulated method for
weighing these factors, and a decision to grant an award was based primarily
upon the Compensation Committee's evaluation of the past as well as the future
anticipated performance and responsibilities of the individual in question. No
options or additional Contract Rights were granted in 2003. See "Item 12 -
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters" for a more detailed description of such Contract Rights.
401(k) Savings Plan. The Company has maintained a 401(k) Savings and Retirement
Plan (the "401(k) Plan") to cover eligible employees of the Company and any
designated affiliates. The 401(k) Plan permits eligible employees of the Company
(and any designated affiliate) to defer up to 15% of their annual compensation,
subject to certain limitations imposed by the Code. The employees' elective
deferrals are immediately fully vested and non-forfeitable upon contribution to
the 401(k) Plan. The Company did not make matching contributions or
discretionary profit sharing contributions to the 401(k) Plan during 2003 and
does not currently intend to do so in the future. The 401(k) Plan is designed to
qualify under Section 401 of the Internal Revenue Code of 1986, as amended, so
that contributions by employees or by the Company to the 401(k) Plan, and income
earned thereon, will not be taxable to employees until withdrawn from the 401(k)
Plan, and so that contributions by the Company, if any, will be deductible by
the Company when made.
Chief Executive Officer Compensation. Philip Pilevsky, Chairman of the Board of
Directors and Chief Executive Officer, President, principal financial officer
and Secretary of the Company, does not currently receive any remuneration for
services performed in such capacities. Mr. Pilevsky is, however, a shareholder
of the Company and receives liquidating distributions in respect of this equity
interest as may be declared from time to time by the Board generally with regard
to all shares of Common Stock then outstanding.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
SHEILA LEVINE
ARNOLD S. PENNER
ROBERT S. GRIMES
Performance Graph
Stockholders of the Company approved the adoption of a plan of liquidation on
October 10, 2000. Pursuant to such plan, the Company has proceeded to divest all
of its real estate assets and concurrently authorize liquidating distributions
to its stockholders. Such liquidating distributions, totaling $17.75 in cash per
share to date, have been paid as follows:
December 2000 $13.00
July 2001 1.00
September 2001 .75
November 2001 .50
October 2002 .50
March 2003 .50
September 2003 1.00
January 2004 .50
-----
$17.75
======
-15-
The market price of the Company's shares of common stock in trading on the New
York Stock Exchange through October 22, 2002 (the date of trading suspension)
fluctuated in correlation with payment of these liquidating distributions, as
well as with investors' perception as to the potential for future distributions.
Therefore, the Company does not believe presentation of a performance graph
comparing total stockholder returns to any broad market or REIT industry index
would be meaningful. See "Item 5 - Market For Registrant's Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information as of December 31, 2003 with respect
to each person who is known by the Company, in reliance on Schedules 13D and 13G
filed with the SEC, to own beneficially more than 5% of the Company's
outstanding shares of common stock. Except as otherwise noted below, all shares
of common stock are owned beneficially by the individual listed with sole voting
and/or investment power.
Amount and Percentage of
Nature Shares
Name of Of Beneficial Outstanding
Beneficial Owner Ownership (%) (1)
- ---------------- --------- -------
Double Play Partners Limited Partnership (2).............................. 1,080,200 14.72%
Deutsche Bank AG (3)...................................................... 799,850 10.90%
Hot Creek Investors, L.P. (4)............................................. 687,800 9.40%
Loeb Partners Corporation (5)............................................. 519,315 7.07%
Cohen & Steers Capital Management, Inc. (6)............................... 481,000 6.55%
Option Opportunities Co. (7).............................................. 434,300 5.92%
AEW Capital Management, L.P. (8).......................................... 430,650 5.87%
(1) The total number of shares outstanding used in calculating this percentage
does not include shares which had been reserved for issuance upon the
exercise of stock options granted, or reserved for possible grant, to
certain employees and directors of the Company because all shares which had
been reserved for issuance upon the exercise of stock options, have been
converted into Contract Rights. Such Contract Rights carry no voting or
dispositive rights. This information is as of December 31, 2003.
(2) Address: 1391 Main Street, Springfield, MA 01103. Share information
furnished in reliance on the Schedule 13 G/A dated February 12, 2004 of
Double Play Partners Limited Partnership ("Double Play") filed with the
SEC, which represents holdings as of December 31, 2003. This number
represents shares for which Double Play has sole dispositive and voting
power.
(3) Address: Taunusanlage 12, D-60325, Frankfurt am Main, Federal Republic of
Germany. Share information is furnished in reliance on the Schedule 13G/A
dated February 12, 2004 of Deutsche Bank AG ("Deutsche") filed with the
SEC, which represents holdings as of December 31, 2003. This number
represents shares for which Deutsche has sole voting and shared dispositive
power by virtue of its position as the parent of RREEF America, L.L.C. This
number reflects the securities beneficially owned by the Private Clients
and Asset Management business group of Deutsche and its subsidiaries and
affiliates ("DBAG"), but does not reflect securities, if any, beneficially
owned by any other business group of DBAG.
(4) Address: Post Office Box 3178, Gardnerville, Nevada 89410. Share
information furnished in reliance on the Schedule 13G dated January 2, 2004
of Hot Creek Investors, L.P. filed with SEC, which represents holdings as
of January 2, 2004. This number represents shares for which Hot Creek
Investors, L.P. has shared voting and dispositive power with Hot Creek
Capital , L.L.C. and David M. W. Harvey.
(5) Address: 61 Broadway, New York, NY 10006. Share information furnishes in
reliance on the Schedule 13D dated October 27, 2003 of Loeb Partners
Corporation, Loeb Arbitrage Fund and Loeb Offshore Fund, Ltd. (collectively
"Loeb") filed with the SEC, which represents holdings as of July 2, 2003.
This number includes 496,145 shares for which Loeb has sole voting and
dispositive power, and 21, 170 shares for which Loeb has shared voting and
dispositive power.
(6) Address: 757 Third Avenue, New York, NY 10017. Cohen & Steers Capital
Management, Inc. ("Cohen & Steers") takes the position that such shares are
held for investment advisory clients and that Cohen & Steers disclaims
beneficial ownership of these shares. Share information is furnished in
reliance on the Schedule 13G dated February 13, 2001 of Cohen & Steers
filed with the SEC, which represents holdings as of December 31, 2000. This
number includes 406,500 shares for which Cohen & Steers has sole voting
power and 481,000 shares for which they have sole dispositive power.
(7) Address: 225 W. Washington St., 3rd Floor, Chicago, IL 60606. Share
information is furnished in reliance on the Schedule 13G dated February 23,
2001 of Option Opportunities Co. filed with the SEC, which represents
holdings as of January 31, 2001. This number represents shares for which
Option Opportunities Co. has sole voting and dispositive power.
(8) Address: World Trade Center East, Two Seaport Lane, Boston, MA 02110-2021.
Share information is furnished in reliance on the Schedule 13G dated
November 13, 2000 of AEW Capital Management, L.P. filed with the SEC. This
number represents shares for which AEW Capital Management, L.P. has sole
voting and dispositive power.
-16-
Equity Compensation Plan Information
The following table summarizes information, as of December 31, 2003, relating to
equity compensation plans of the Company (including individual compensation
arrangements) pursuant to which equity securities of the Company are authorized
for issuance.
Number of Securities
Remaining Available for
Number of Securities to be Future Issuance Under Equity
Issued Upon Exercise of Weighted-Average Exercise Compensation Plans
Outstanding Options, Warrants Price of Outstanding Options, (excluding securities reflected
Plan Category and Rights Warrants and Rights in column (a))
- ------------- ---------- ------------------- --------------
(a) (b) (c)
Equity Compensation Plans
Approved by Stockholders........ 705,500(1) $17.43(1) N/A(1)
Equity Compensation Plans
Not Approved by
Stockholders.................... N/A N/A N/A
--- --- ---
Total 705,500 N/A N/A
======= === ===
(1) The Company had maintained a stock option plan pursuant to which a
maximum 852,550 shares of the Company's common stock could be issued for
qualified and non-qualified options. Options granted under the plan
generally vested ratably over a three-year term, expired ten years from
the date of grant and were exercisable at the market price on the date of
grant, unless otherwise determined by the Company's Board of Directors in
its sole discretion.
In conjunction with the Company's adoption of the plan of liquidation and
the disposal of substantially all of its shopping center properties, all
options outstanding at December 31, 2000 (705,500 shares at a weighted
average exercise price of $17.43) became fully vested and were replaced
one-for-one by a Contract Right to receive a cash distribution on the
same basis and at the same time as liquidating distributions are made to
shareholders. The total amount to be paid on each Contract Right will
equal the total per share proceeds distributed to shareholders less the
original stock option exercise price. Contract Rights are retained after
termination of employment.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain directors and executive officers of the Company (or members of their
immediate families or related trusts) and persons who hold more than 5% of the
outstanding shares of common stock had direct or indirect interests in certain
transactions of the Company during 2003 as follows:
Management Agreement. Pursuant to a Management Agreement, Philips
International Holding Corp. ("PIHC"), an entity affiliated with Mr.
Philip Pilevsky, the Company's Chief Executive Officer, President and
Secretary, has historically provided property management, legal and
leasing services for the Company's retail properties including, among
other things, (i) operating, leasing and maintaining the properties;
(ii) the collection of rents; and (iii) overseeing the construction of
improvements and additions to the properties. PIHC has received a
management fee from the Company equal to 3% of gross rental collections
received from the properties, fees for legal services and leasing
commissions (not to exceed local current market rates) and a
construction supervisory fee (up to 10% of the cost of a project) with
regard to tenant improvements and construction matters relating to the
properties. In addition, PIHC is reimbursed for out-of-pocket expenses.
Fees paid for such services totaled $154,000, $225,000 and $247,000 for
the years ended December 31, 2003, 2002 and 2001, respectively.
The Management Agreement expires on December 31, 2004, subject to
automatic one-year renewals. The Management Agreement may be terminated
by the Company, at any time, (i) in whole or in part, upon thirty days'
written notice, in the event that the Company elects to perform one or
more of such management functions on an 'in-house' basis (with a
commensurate reduction in fees), and (ii) in whole, immediately, upon
the occurrence of certain other events, including upon the gross
negligence or willful misconduct of PIHC. The Company has continued the
Management Agreement, notwithstanding all of its properties have been
sold, in order to have the benefit of the PIHC organizational
infrastructure.
PIHC is owned and controlled by Mr. Pilevsky and Ms. Levine. The
Company granted options under the Stock Option Plan to certain senior
employees of PIHC who were actively involved in the management of the
properties. Such options have been converted into Contract Rights.
Non-Competition Agreement. Mr. Pilevsky, Ms. Levine and PIHC have
agreed pursuant to the Non-Competition Agreement to conduct all their
retail shopping center activities through the Company, except for their
activities with respect to the Excluded Properties and retail
properties under 10,000 square feet. The Non-Competition Agreement is
in effect until such time as (i) neither Mr. Pilevsky nor Ms. Levine
owns beneficially more than 15% of the outstanding shares of common
stock (including interests redeemable therefore) and (ii) one year has
lapsed since the Management Agreement has been terminated and neither
Mr. Pilevsky nor Ms. Levine is a director or executive officer of the
Company. In addition, in the event that at any time after December 31,
2003, Ms. Levine is neither a director nor executive officer of the
Company for at least one year, nor owns beneficially more than five
percent of the outstanding shares of common stock (including interests
redeemable therefore), then the Non-Competition Agreement will
terminate as to Ms. Levine. The Non-Competition Agreement currently
remains in effect due to clause (ii) above.
Excluded Properties. Mr. Pilevsky and Ms. Levine have economic
interests in certain retail properties which were not transferred to
the Company in the formation transactions (the "Excluded Properties").
The Excluded Properties were not included in the Company's portfolio
either because of the inability to obtain necessary partnership and
lender consents or because the asset profile was inconsistent with the
Company's criteria. Mr. Pilevsky has also granted the Company a right
of first refusal on the sale or transfer by Mr. Pilevsky of his
partnership interest in any of the Excluded Properties, except for a
transfer of Mr. Pilevsky's interest to an existing partner of such
property or a family member, or a sale of the entire property, in which
case Mr. Pilevsky will use reasonable efforts to cause such property to
be offered to the Company.
-17-
Redemption Transaction. On June 14, 2001, in conjunction with its plan
of liquidation, the Company completed the sale of a redevelopment site
(Palm Springs Plaza in Lake Worth, Florida) to certain limited partners
in the Operating Partnership, including Mr. Pilevsky and Ms. Levine,
for approximately $7.6 million in cash. The purchase price paid by
these limited partners under the Lake Worth Agreement will be adjusted,
if necessary, so that the value per Unit received by them ($18.25 per
Unit) pursuant to the redemption transactions which occurred in 2000
(i.e., the November 2000 distribution of the Company's four shopping
center properties located in Hialeah, FL, and the December 2000 sale of
the Company's redevelopment property located on Third Avenue in New
York, NY) and the total per share value received by our stockholders in
the liquidation, will be the same.
Other Matters. Jeffrey Levine, the husband of Ms. Levine, is a partner
at the accounting firm of Margolin Winer & Evens, LLP (formerly Chassin
Levine Rosen & Company, LLP), which firm has provided tax, accounting
and consulting services to the Company. During the year ended December
31, 2003, the Company paid an aggregate of approximately $54,000 in
fees to Margolin Winer & Evens, LLP.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
1. Audit Fees.
The aggregate fees incurred by the Company for fiscal years ended December 31,
2003 and 2002 for professional services rendered by Ernst & Young LLP in
connection with (i) the audit of the Company's annual financial statements, (ii)
the review of the financial statements included in the Company's Quarterly
Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30
and (iii) services provided in connection with statutory and regulatory filings
or engagements were $112,000 and $109,500, respectively.
2. Audit-Related Fees.
The Company did not incur any fees for fiscal years ended December 31, 2003 and
2002 for assurance and related services by Ernst & Young LLP in connection with
the performance of the audit or review of the Company's financial statements,
including 401(k) plan audits.
3. Tax Fees.
The Company did not incur any fees for fiscal year ended December 31, 2003 for
professional services rendered for tax compliance, tax advice or tax planning.
The aggregate fees incurred by the Company for fiscal year ended December 31,
2002 for professional services rendered by Ernst & Young LLP for tax advice were
$25,000. These services related to the Company's plan of liquidation.
4. All Other Fees.
The Company did not incur any other fees for fiscal years ended December 31,
2003 and 2002 for services rendered by Ernst & Young LLP.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT AUDITORS
PHILIPS INTERNATIONAL REALTY CORP.
Report of Independent Auditors
Consolidated Statement of Net Assets in Liquidation as of December 31, 2003
Consolidated Balance Sheet as of December 31, 2002
Consolidated Statements of Operations for the Years Ended December 31, 2003,
2002 and 2001
Consolidated Statements of Shareholders' Equity and Net Assets in Liquidation
for the Years Ended December 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows for the Years Ended December 31, 2003,
2002 and 2001
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules
All schedules are omitted because they are not required or the required
information is shown in the financial statements or notes thereto.
(a) 3. Exhibits
The exhibits required by this Item are set forth on the Exhibit Index attached
hereto.
(b) Reports On Form 8-K
No Current Reports on Form 8-K were filed by the Company in the fourth quarter
of 2003.
-18-
REPORT OF INDEPENDENT AUDITORS
To The Board of Directors and Shareholders of Philips International Realty Corp.
We have audited the accompanying consolidated balance sheet of Philips
International Realty Corp. as of December 31, 2002, and the related consolidated
statements of operations, shareholders' equity and net assets in liquidation and
cash flows for each of the three years in the period ended December 31, 2003.
Our audits also included the accompanying consolidated statement of net assets
in liquidation as of December 31, 2003. These financial statements are the
responsibility of the management of Philips International Realty Corp. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 3, the Company changed its basis of accounting as of
December 31, 2003, from the going concern basis to the liquidation basis.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Philips
International Realty Corp. at December 31, 2002 and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 2003, and its consolidated net assets in liquidation as of
December 31, 2003, in conformity with accounting principles generally accepted
in the United States and applied on the basis of accounting described in Note 3.
ERNST & YOUNG LLP
New York, New York
March 15, 2004
-19-
PHILIPS INTERNATIONAL REALTY CORP.
(IN PROCESS OF LIQUIDATION)
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
December 31, 2003
ASSETS (LIQUIDATION BASIS)
Cash and cash equivalents $5,823,934
Accounts receivable, net of allowance of $50,000 92,174
Prepaid expenses 49,967
Other assets 2,867,943
----------
8,834,018
----------
LIABILITIES (LIQUIDATION BASIS)
Accounts payable and accrued expenses (1,440,521)
Distributions payable on common stock (3,670,237)
Accrual for liquidation expenses (885,000)
----------
(5,995,758)
----------
MINORITY INTERESTS (LIQUIDATION BASIS) (21,478)
----------
COMMITMENTS AND CONTINGENCIES
NET ASSETS IN LIQUIDATION $2,816,782
==========
See accompanying notes.
-20-
PHILIPS INTERNATIONAL REALTY CORP.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002
DISCONTINUED OPERATIONS
ASSETS
Rental properties - held for sale - at cost
Land and improvements $ 2,086,356
Buildings and improvements 8,344,196
-----------
10,430,552
Less: Accumulated depreciation 327,892
-----------
Rental properties, net 10,102,660
Cash and cash equivalents 5,941,024
Accounts receivable, net of allowance of $140,000 107,484
Deferred charges and prepaid expenses 320,827
Other assets 2,206,614
-----------
Total Assets $18,678,609
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 961,505
Other liabilities 44,899
-----------
Total Liabilities 1,006,404
-----------
Minority interests 59,664
-----------
Commitments and contingencies
Shareholders' Equity:
Preferred Stock, $.01 par value; 30,000,000 shares authorized; no shares issued and
outstanding --
Common Stock, $.01 par value; 150,000,000 shares authorized; 7,340,474 shares issued
and outstanding 73,405
Additional paid in capital 92,668,007
Cumulative distributions in excess of net income (75,128,871)
------------
Total Shareholders' Equity 17,612,541
----------
Total Liabilities and Shareholders' Equity $18,678,609
===========
See accompanying notes.
-21-
PHILIPS INTERNATIONAL REALTY CORP.
(IN PROCESS OF LIQUIDATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended
December 31,
2003 2002 2001
---- ---- ----
Discontinued Operations:
Revenues from rental property $1,203,463 $2,790,564 $5,022,511
---------- ---------- ----------
Expenses:
Operating expenses 163,813 425,298 888,856
Real estate taxes 88,242 245,686 560,996
Management fees to affiliates 36,838 84,171 154,207
General and administrative expenses 1,265,670 974,053 1,070,547
--------- ------- ---------
1,554,563 1,729,208 2,674,606
--------- --------- ---------
Operating income (loss) from discontinued operations (351,100) 1,061,356 2,347,905
Minority interests in (income) loss before gain (loss) on sale and
provision for liquidation expenses 1,903 (2,863) (8,044)
Other income (expense), net (208,669) (219,029) 18,128
--------- --------- ------
Income (Loss) from discontinued operations before gain (loss) on sale
and provision for liquidation expenses (557,866) 839,464 2,357,989
Gain (Loss) on sale (net of minority share of $4,520, $(2,479) and $1,312 1,325,046 (726,812) 384,516
Provision for liquidation expenses (net of minority share of $3,009 in 2003) (881,991) -- --
--------- -------- ---------
Net income (loss) from discontinued operations ($114,811) $112,652 $2,742,505
========= ======== ==========
Basic and diluted net income (loss) per common share ($0.02) $0.02 $0.37
====== ===== =====
See accompanying notes.
-22-
PHILIPS INTERNATIONAL REALTY CORP.
(IN PROCESS OF LIQUIDATION)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND NET ASSETS IN LIQUIDATION
For the Years Ended December 31, 2003, 2002 and 2001
Cumulative
Common Stock Distributions
------------ Additional in Excess Net Assets
Paid-In of Net in Total Equity/
Shares Amount Capital Income Liquidation Net Assets
------ ------ ------- ------ ----------- ----------
Balance, December 31, 2000 7,340,474 $73,405 $92,668,007 $(57,797,724) $ -- $ 34,943,688
Net income from discontinued operations 2,742,505 2,742,505
Distributions on common stock (16,516,067) (16,516,067)
--------- ------- ----------- ------------ ---------- ------------
Balance, December 31, 2001 7,340,474 73,405 92,668,007 (71,571,286) -- 21,170,126
Net income from discontinued operations 112,652 112,652
Distributions on common stock (3,670,237) (3,670,237)
--------- ------- ----------- ------------ ---------- ------------
Balance, December 31, 2002 7,340,474 73,405 92,668,007 (75,128,871) -- 17,612,541
Net loss from discontinued operations (114,811) (114,811)
Distributions on common stock (14,680,948) (14,680,948)
Adjustments related to liquidation (73,405) (92,668,007) 89,924,630 2,816,782 --
--------- ------- ----------- ------------ ---------- ------------
Balance, December 31, 2003 7,340,474 $ -- $ -- $ -- $2,816,782 $ 2,816,782
========= ======= =========== ============ ========== ============
See accompanying notes.
23
PHILIPS INTERNATIONAL REALTY CORP.
(IN PROCESS OF LIQUIDATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
------------
2003 2002 2001
---- ---- ----
Operating activities:
Net income (loss) from discontinued operations $(114,811) $112,652 $2,742,505
Adjustments to reconcile net income (loss) from discontinued operations to net
cash (used in) provided by operating activities:
Minority interests in income (loss) (392) 384 9,356
(Gain) loss on sales of real estate (1,329,566) 729,291 (385,828)
Changes in operating assets and liabilities:
Accounts receivable 15,310 196,059 677,649
Prepaid expenses 42,003 (426,691) (917,145)
Other assets 26,429 (48,525) (1,057,725)
Accounts payable and accrued expenses 479,016 (110,386) (1,330,704)
Accrual for liquidation expenses 885,000 -- --
Other liabilities (44,899) (25,772) (36,222)
----------- ---------- -----------
Net cash (used in) provided by operating activities (41,910) 427,012 (298,114)
----------- ---------- -----------
Investing activities:
Net proceeds from sales of shopping center properties 10,973,325 8,333,842 16,029,452
----------- ---------- -----------
Financing activities:
Distributions to minority interests (37,794) (12,598) (56,691)
Distributions paid on common stock (11,010,711) (3,670,237) (16,516,067)
----------- ---------- -----------
Net cash used in financing activities (11,048,505) (3,682,835) (16,572,758)
----------- ---------- -----------
Net increase (decrease) in cash and cash equivalents (117,090) 5,078,019 (841,420)
Cash and cash equivalents, beginning of year 5,941,024 863,005 1,704,425
----------- ---------- -----------
Cash and cash equivalents, end of the year $5,823,934 $5,941,024 $863,005
=========== ========== ===========
Non-cash investing and financing activities:
Distributions declared and paid in succeeding year $3,670,237 $-- $--
=========== ========== ===========
See accompanying notes.
24
PHILIPS INTERNATIONAL REALTY CORP.
(IN PROCESS OF LIQUIDATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003
1. Business
Philips International Realty Corp. (the "Company") is a real estate investment
trust ("REIT") originally formed to continue and expand the shopping center
business of certain affiliated companies owned or controlled by Philip Pilevsky
(the "Philips Group"). The Philips Group had been engaged for many years in the
ownership, development and acquisition for redevelopment of neighborhood and
community shopping centers predominantly concentrated in the greater New York
and Miami metropolitan areas.
On October 13, 1999, the Board of Directors of the Company announced that it had
retained a financial advisor to assist the Company in examining strategic
alternatives to maximize shareholder value. The Board believed that the
Company's then current stock price did not reflect the underlying value of its
assets. Given the changing dynamics of the REIT market place and consistent with
its commitment to realize shareholder value for all investors, the Board
believed that it was prudent to explore the strategic alternatives for the
Company.
At a Special Meeting of Stockholders held on October 10, 2000, approximately 80%
of the Company's 7,340,474 common shares outstanding were voted, with 99.7% of
these votes cast, in favor of a plan of liquidation.
The plan of liquidation approved by stockholders generally provided for (i) the
disposition of the Company's real estate properties for cash, the assumption of
indebtedness and/or the redemption of certain equity interests in the Company,
(ii) payment or provision for the Company's liabilities, (iii) distribution of
the net cash proceeds, then estimated at $18.25 per share of common stock, to
stockholders in two or more liquidating distributions, and (iv) the wind-up of
operations and dissolution of the Company.
The Company completed the disposition of the last of its real estate properties
on December 12, 2003, and has distributed to date $17.75 per share in cash to
its stockholders. This has been achieved through a series of ten property sales
and/or redemption transactions, and eight liquidating distributions as more
fully described in Note 2 below.
2. Plan of Liquidation
The following is a chronology of the events which have transpired to date
pursuant to the plan of liquidation approved by stockholders on October 10,
2000.
In November 2000, the Company completed the distribution of its interest in four
shopping center properties in Hialeah, Florida and the sale of its interest in
one redevelopment site (1517-25 Third Avenue, New York City) for total
consideration of approximately $123 million to former unit holders in the
Operating Partnership, including Philip Pilevsky, the Company's Chairman and
Chief Executive Officer, (collectively, the "Related Limited Partners") ("The
Hialeah Agreements"). The total consideration was comprised of $3.3 million in
cash, $85.3 million in mortgage debt assumption and $34.1 million in redemption
of the Related Limited Partners' entire equity interest in the Operating
Partnership (1,870,873 Units valued at $18.25 per Unit). These transactions
resulted in a gain of approximately $24.4 million, net of $9.3 million of
minority interest.
On December 4, 2000, certain affiliates of the Company disposed of interests in
eight properties aggregating approximately 1,178,000 square feet to Kimco Income
Operating Partnership, L.P. ("Kimco") for a total consideration of $137 million
pursuant to an Asset Contribution, Purchase and Sale Agreement dated as of April
28, 2000. The purchase price was comprised of approximately $71.1 million in
cash, $55.4 million in mortgage debt assumption and $10.5 million of equity
redemption (576,326 Operating Partnership Units valued at $18.25 per Unit). The
properties included four New York shopping centers (Forest Avenue Shoppers Town,
Meadowbrook Commons, Merrick Commons and Mill Basin Plaza), two Connecticut
shopping centers (Branhaven Plaza and Elm Plaza), one shopping center property
in New Jersey (Millside Plaza) and one shopping center property in Massachusetts
(Foxboro Plaza). The disposition of these properties resulted in a gain of
approximately $17.4 million net of $6.6 million in minority interest.
On June 14, 2001, the Company completed the sale of its redevelopment site
located in Lake Worth, Florida (the "Lake Worth Property") to the Related
Limited Partners, for approximately $7.6 million in cash, pursuant to an Amended
and Restated Purchase and Sale Agreement dated as of June 20, 2000 (the "Lake
Worth Agreement"). The sale of this property resulted in a gain of approximately
$.3 million.
The purchase price paid by the Related Limited Partners under the Lake Worth
Agreement will be adjusted, up or down, so that the aggregate value per Unit
received by them in connection with the distribution to the Related Limited
Partners of the Company's four shopping center properties located in Hialeah,
Florida and the sale to the Related Limited Partners in December 2000 of the
Company's redevelopment property located on Third Avenue in New York, New York
($18.25 per share), and the total per share value received by the Company's
stockholders in the liquidation, will be the same.
25
On August 31, 2001, the Company completed the sale of its North Star Shopping
Center in Alexandria, Minnesota for approximately $4.5 million pursuant to the
Sale and Purchase Agreement dated July 16, 2001 by Philips Shopping Center Fund
L.P., a Delaware limited partnership, as Seller, and Repco LLP, as successor to
Kordel, Inc., a Minnesota corporation, as Buyer. The sale resulted in a gain of
approximately $4,000.
On October 31, 2001, the Company completed the sale of its Highway 101 Shopping
Center in Port Angeles, Washington for approximately $4.5 million in cash,
pursuant to the Sale and Purchase Agreement dated June 14, 2001 by Philips
Shopping Center Fund L.P., a Delaware limited partnership, as Seller, and BDG
LLC, as successor to 3 Puyallup Associates, LLC, a Washington limited liability
company, as Buyer. This sale resulted in a gain of approximately $39,000.
On January 29, 2002, the Company announced that Kmart Corporation's ("Kmart")
Chapter 11 bankruptcy filing was likely to delay the sales of the Company's then
five remaining properties pursuant to the Company's plan of liquidation, and
might result in a reduction of the remaining projected liquidating distributions
of $3.00 per common share. Further, the Company reported that Kmart leased a
significant portion of the space in each of the Company's then five remaining
shopping center properties, of which four stores were currently operating and
one Kmart store in Reedley, California was closed. While operating in
bankruptcy, Kmart announced that it would seek immediate cancellation of leases
at closed locations. As a result of the uncertainty pertaining to the ultimate
status of the Kmart leases, the Company expected a delay in the completion of
its plan of liquidation. Also, the potential impact on the proceeds from sales
of the then remaining five properties could not then be evaluated.
On February 19, 2002, the Company announced that the New York Stock Exchange
(the "NYSE") had advised the Company that it may be subject to NYSE trading
suspension and delisting if the Company's average market capitalization fell
below $15 million ($2.05 per common share) over a 30-day trading period.
On March 13, 2002, the Company announced that its four properties with operating
Kmart stores (Sacramento, CA, Atwater, CA, McHenry, IL and Hopkinsville, KY)
were not affected by Kmart's recent announcement of store closings. Kmart had
been operating under the protection of Chapter 11 of the Bankruptcy Code, and
the Court approved the cancellation of the Kmart lease at the Company's then
fifth remaining property, located in Reedley, California, in January. Although
none of the Company's remaining Kmart stores were targeted for closure at such
time, there could be no assurance that Kmart would not seek to cancel additional
leases while it was in bankruptcy. Further, the Company objected to Kmart's
request for an extension of the 60-day period in which the debtor must assume or
reject the Company's leases under the Bankruptcy Code. Kmart was seeking an
extension on all remaining leases through July 2003, and the Courts generally
grant such significant extensions. As to the Company's Kmart leases, the Court
approved an agreement with Kmart whereby all leases which had not been assumed
or rejected on or before September 30, 2002 would be subject to certain
protections from October 1, 2002 through January 15, 2003 which, among other
things, precluded store closings during this period. In addition, the Court set
March 31, 2003 as the deadline for Kmart to assume or reject the Company's
leases without prejudice to Kmart's right to seek further extension.
On April 16, 2002, the Company completed the sale of its McHenry Commons
shopping center property in McHenry, Illinois for approximately $3.9 million in
cash, pursuant to a Sale and Purchase Agreement dated November 29, 2001 by and
between Philips Shopping Center Fund, L.P., a Delaware limited partnership, as
Seller, and GK Development, Inc., an Illinois corporation, and Star Realty
Investors, LLC, an Illinois limited liability company, jointly and severally as
Purchaser. This sale resulted in a gain of approximately $102,000.
On October 3, 2002, the Company completed the sale of its Kmart Shopping Center
in Sacramento, California for approximately $5.9 million in cash, pursuant to a
Purchase and Sale Agreement dated September 24, 2002 by and between Philips
Shopping Center Fund, L.P., a Delaware limited partnership, as Seller, and M&A
Gabaee L.P., a California limited partnership, Mirasa L.L.C., a California
limited liability company, and Corsair L.L.C., a Nevada limited liability
company, jointly and severally as Buyer. This transaction resulted in a gain of
approximately $118,000.
On October 8, 2002, the Company announced that it expected the New York Stock
Exchange would commence action to suspend trading and apply to delist the
Company's shares of common stock on the NYSE concurrent with payment of the
fifth liquidating distribution scheduled to be paid on October 22, 2002. If the
Company's shares ceased to be traded on the NYSE, the Company indicated it
believed that an alternative trading venue may be available; however, there
could be no assurance that such an alternative market would develop. If the
Company was delisted from the NYSE, the Company further noted that it had no
current intention to seek listing of its common shares on any other securities
exchange or on NASDAQ.
On October 28, 2002, the Company reported that the NYSE had delivered notice to
the Company and issued a press release to advise that it had determined the
common stock of the Company, trading symbol PHR, should be removed from the list
of companies traded on the NYSE. This decision was reached in view of the fact
that the Company had fallen below the NYSE's continued listing standards as its
average global market capitalization over a consecutive 30 day period was less
than $15,000,000. Furthermore, the NYSE noted that the Company has been
operating pursuant to a plan of liquidation approved by its shareholders on
October 10, 2000 and has made four liquidating distributions totaling $15.25 as
of such date, with a fifth liquidating distribution of $0.50 to be paid on
October 22, 2002. The NYSE indicated it intended to (and did, in fact) suspend
trading in the Company's common stock prior to the opening on October 23, 2002
in connection with this distribution. Action by the NYSE with the Securities and
Exchange Commission delisting the Company's shares followed the completion of
applicable procedures. The Company did not request a review of this NYSE
determination. Upon completion of all prescribed delisting procedures, the
Company automatically became a Section 12(g) reporting company, pursuant to the
Securities and Exchange Act, and was no longer a Section 12(b) reporting
company.
26
On January 24, 2003, Kmart filed a plan of reorganization and related disclosure
statement with the bankruptcy court. Confirmation hearings were scheduled for
April 14 and 15, 2003. Assuming the court approved the disclosure statement and
the plan was confirmed, Kmart's filings indicated it would emerge from Chapter
11 on or about April 30, 2003. In connection therewith, Kmart filed a motion
dated February 5, 2003 with the court seeking to extend the deadline by which it
must assume or reject certain "go-forward" leases of real property from March
31, 2003 to the effective date of a plan reorganization, but no later than May
31, 2003. The Company did not object to this motion as it pertained to its
leases with Kmart at its Atwater, California and Hopkinsville, Kentucky shopping
centers.
On February 28, 2003, the Company completed the sale of its shopping center
property in Reedley, California for approximately $2.6 million in cash, pursuant
to a Purchase and Sale Agreement dated January 29, 2003 by and between Philips
Shopping Center Fund, L.P., a Delaware limited partnership, as Seller, and D&L
Lowe L.P., a California limited partnership, as Buyer. This transaction resulted
in a gain of approximately $133,000.
On April 22, 2003, Kmart announced that the bankruptcy court had approved its
plan of reorganization. Kmart subsequently emerged from Chapter 11 on May 6,
2003. The Company's leases with Kmart at its Atwater, California and
Hopkinsville, Kentucky shopping centers were assumed in connection with this
restructuring.
On August 26, 2003, the Company completed the sale of its shopping center on
Bellevue Road in Atwater, California for the price of $6.0 million in cash,
pursuant to a Purchase and Sale Agreement dated June 23, 2003 by and between
Philips Shopping Center Fund, L.P., a Delaware limited partnership, as Seller,
and Nationwide Properties, LLC, a California limited liability company, as
Buyer. This transaction resulted in a gain of approximately $549,000.
On December 12, 2003, the Company completed the sale of its shopping center on
Fort Campbell Boulevard in Hopkinsville, Kentucky for the price of $2.875
million in cash, pursuant to a Purchase and Sale Agreement dated December 4,
2003 by and between Philips Shopping Center Fund, L.P., a Delaware limited
partnership, as Seller, and Kmart Express LLC, a Michigan limited liability
company, as Buyer. This transaction resulted in a loss of approximately $44,000.
With the completion of such sale, the Company ceased all active business
operations and now exists solely to complete its liquidation.
The Board of Directors of the Company authorized liquidating distributions
generally following each of the foregoing asset dispositions as follows:
Per Share
Date Paid Amount
--------- ------
December 22, 2000 $13.00
July 9, 2001 1.00
September 24, 2001 0.75
November 19, 2001 0.50
October 22, 2002 0.50
March 18, 2003 0.50
September 16, 2003 1.00
January 6, 2004 0.50
------
$17.75
======
The Board of Directors of the Company is currently seeking (i) final resolution
of a certain class action filed against the Company and its directors in
connection with the plan of liquidation, and (ii) recovery of approximately $2.1
million expended by the Company in defense of this action pursuant to the terms
of its directors and officers' insurance policy. (See Note 7.). Upon completion
of such matters, the Board of Directors currently intends to declare a ninth
liquidating distribution and then may act to dissolve the corporation,
transferring the Company's then residual miscellaneous assets, liabilities and
contingent obligations, if any, into a liquidating trust. As any such assets are
realized, liabilities paid and contingencies resolved, future liquidating
distributions would be made from the trust at such times and in such amounts as
the trustee deems appropriate. There can be no assurances, however, pending
further research into the economic, tax and governance issues associated with
dissolution of the corporation and creation of a liquidating trust, whether the
wind-down of the Company's operations will proceed in this manner. The Company
may not form such liquidating trust and may simply continue in its current form
until such time as its liquidation is complete.
27
3. Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly-owned. All significant
inter-company accounts and balances have been eliminated in consolidation.
Basis of Presentation
The Company adopted the liquidation basis of accounting as of December 31, 2003.
The liquidation basis of accounting is appropriate when liquidation appears
imminent, a company can no longer be classified as a going concern, and the net
realizable values of a company's assets are reasonably determinable. Under this
method of accounting, assets and liabilities are stated at their estimated
realizable value (on an undiscounted basis) and estimated costs of liquidating
the Company are provided to the extent reasonably determinable.
In adopting the liquidation basis of accounting, the Company has accrued what it
believes are reasonable estimates of costs to liquidate its assets. The actual
costs to liquidate the Company may differ significantly depending on a number of
factors, including the length of time it takes to realize its remaining assets.
Estimated costs to liquidate the Company are reflected in the Consolidated
Statement of Net Assets in Liquidation as "Accrual for liquidation expenses."
It is not presently determinable whether, upon completion of the liquidation,
the net assets available for distribution to shareholders will differ materially
from the amount shown in the accompanying financial statement as "Net Assets in
Liquidation."
Segment Information
The Company's shopping center properties had historically been anchored by
discount stores, supermarkets, drugstores and other retailers offering day to
day shopping necessities. Management considered the operating, investing and
financing activities of its properties to comprise a single business segment and
evaluated real estate performance and allocated resources based upon net income.
The Company's results of operations were significantly dependant on the overall
health of the retail industry. The Company's tenant base was comprised almost
exclusively of merchants in the retail industry. The retail industry is subject
to external factors such as inflation, consumer confidence, unemployment rates
and consumer tastes and preferences. A decline in the retail industry could have
reduced merchant sales, which could have adversely affected the operating
results of the Company.
As the result of the plan of liquidation, the Company's shopping center
operations have been presented as discontinued operations.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Real Estate Properties
Depreciation and amortization charges were suspended upon adoption of the plan
of liquidation. Buildings and improvements were depreciated on the straight-line
method over the estimated useful lives of the assets which ranged from 15 to 39
years. Tenant improvements (included in Buildings and improvements in the
accompanying Consolidated Balance Sheet) were amortized over the lives of the
respective leases using the straight-line method.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with an original
maturity of three months or less from date of purchase.
Banking relationships are maintained with major financial institutions.
Revenue Recognition
28
Minimum revenues from rental property were historically recognized on a
straight-line basis over the terms of the respective tenant leases. Percentage
rents, representing the Company's participation in tenants' gross sales in
excess of predetermined thresholds, were recognized upon verification that such
rents were due for any given lease year and totaled $34,000, $53,000 and
$204,000 for the years ended December 31, 2003, 2002 and 2001, respectively.
Deferred Charges
Costs incurred to obtain tenant leases (historically included in Deferred
charges and prepaid expenses in the accompanying Consolidated Balance Sheet)
were amortized over the terms of the related leases.
Income Taxes
The Company elected to be treated and has operated so as to qualify as a REIT
under Sections 856 through 860 of the Code. As a REIT, the Company generally is
not subject to federal income tax to the extent it distributes its REIT taxable
income to its shareholders and meets certain other organizational and
operational requirements. If the Company fails to qualify as a REIT in any
taxable year, the Company would be subject to federal income tax on its taxable
income at regular corporate rates. As a REIT, the Company may be subject to
certain state and local taxes on its income and property, and federal income and
excise taxes on any undistributed taxable income.
Income (Loss) Per Share
Basic income (loss) per share ("EPS") excludes the dilutive effects of any
outstanding options and warrants. Diluted income (loss) per share includes the
dilutive (but not any anti-dilutive) effect of outstanding options and warrants
calculated under the treasury stock method.
Basic and diluted net income (loss) per share in the accompanying Consolidated
Statements of Operations is based upon 7,340,474 weighted average shares of
common stock outstanding for the years ended December 31, 2003, 2002 and 2001,
and is computed by dividing Net income (loss) from discontinued operations by
the weighted average number of shares outstanding for the period.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash investments. The Company places its cash
investments with high quality financial institutions.
Minority Interests
The Company historically conducted substantially all of its business and held
its real estate interests through Philips International Realty, L.P., a Delaware
limited partnership (the "Operating Partnership"). This Operating Partnership
was owned 74.8% by the Company, as General Partner, and 25.2% by Unit holders,
as limited partners. The minority interests of these limited partners were
substantially eliminated in conjunction with the disposition of properties
pursuant to the plan of liquidation. See Note 2.
4. Deferred Charges, Prepaid Expenses and Other Assets
Deferred charges and prepaid expenses included in the accompanying Consolidated
Balance Sheet as of December 31, 2002 was comprised primarily of certain
deferred costs related to the plan of liquidation and prepaid expenses.
Other assets in the accompanying Consolidated Statement of Net Assets in
Liquidation as of December 31, 2003, and the Consolidated Balance Sheet as of
December 31, 2002, were substantially comprised of legal costs (approximately
$2,100,000 and $2,000,000, respectively) incurred in connection with the defense
of a certain class action (see Note 7). While it is probable that such defense
costs will not be fully recovered since the carrier is now seeking to disqualify
a substantial portion of the costs incurred as non-covered expenses under the
policy, the Company considers the carrier's assertions to be without merit, in
contravention of the policy's specifications and will take such action as may be
necessary to protect the interests of its shareholders. Other assets at December
31, 2003 also include certain transfer and real estate tax refunds pending, and
amounts due in connection with certain property sales.
5. Fair Value of Financial Instruments
Estimated fair values for financial instruments were determined by management
using market information available as of December 31, 2003 and 2002 and
appropriate valuation methodologies. Considerable judgment is necessary to
interpret market data and develop estimated fair values. Accordingly, the
estimates are not necessarily indicative of the amounts that could be realized
on disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts. Although management is not aware of any factors
that would significantly affect its estimates of the fair value amounts, such
amounts have not been comprehensively revalued for purposes of these financial
statements since December 31, 2003.
29
Cash and cash equivalents, accounts receivable, accounts payable and accrued
expenses are reflected in the accompanying consolidated financial statements as
of December 31, 2003 and 2002 at amounts which reasonably approximate their fair
values due to the short maturities of these accounts.
6. Related Party Transactions
The Company is party to a management agreement with Philips International
Holding Corp. ("PIHC"), a related party, pursuant to which PIHC has historically
provided day-to-day property management, leasing, legal and construction
supervisory services. Fees payable for such services have included (i) a
management fee equal to 3% of gross rental collections, (ii) leasing commissions
and legal fees in amounts not to exceed local current market rates, and (iii)
construction supervisory fees up to 10% of the costs of a project. In addition,
PIHC is reimbursed for certain direct out-of-pocket expenses. Fees paid for such
services totaled $154,000, $225,000 and $247,000 for the years ended December
31, 2003, 2002 and 2001, respectively.
7. Commitments and Contingencies
Legal Proceedings
On October 2, 2000, a class action was filed in the United States District Court
for the Southern District of New York against the Company and its directors. The
complaint alleged a number of improprieties concerning the pending plan of
liquidation of the Company. The Company believes that the asserted claims are
without merit, and will defend against such claims vigorously. On November 9,
2000, the Court, ruling from the bench, denied the plaintiff's motion for a
preliminary injunction. This bench ruling was followed by a written order dated
November 30, 2000 wherein the Court concluded that the plaintiff had failed to
demonstrate either that it was likely to succeed on the merits of its case or
that there were sufficiently serious questions going to the merits of its case
to make it fair ground for litigation.
On February 5, 2002, the Court denied the plaintiff's motion for class action
certification. The plaintiff may elect to proceed with its claims on its own now
that class certification has been denied. The plaintiff also has asserted
derivative claims for alleged breaches of fiduciary duty by the directors of the
Company. The Company believes that such derivative claims are deficient for,
among other reasons, the grounds upon which class certification was denied. The
Company believes that all of the asserted claims are without merit, and will
defend against such claims vigorously.
On February 28, 2002, the Company announced that the plaintiff had sought
permission from the Court of Appeals for the Second Circuit to appeal the denial
of class certification discussed above. In order for plaintiff to have obtained
permission to appeal, it had to demonstrate that the denial of class
certification effectively terminated the litigation and that the District
Court's decision was an abuse of its discretion. The Company opposed plaintiff's
application. If the Court of Appeals granted plaintiff's request, plaintiff
would then have been able to appeal the District Court's denial of class
certification.
On May 28, 2002, the United States Court of Appeals for the Second Circuit
ordered that the plaintiff's petition to appeal the District Court's denial of
class certification also be denied.
The Company has incurred significant costs in connection with the defense of
this litigation, which are included in Other assets in the accompanying
consolidated financial statements. While it is probable that such defense costs
will not be fully recovered since the carrier is now seeking to disqualify a
substantial portion of the costs incurred as non-covered expenses under the
policy, the Company considers the carrier's assertions to be without merit, in
contravention of the policy's specifications and will take such action as may be
necessary to protect the interests of its shareholders. See Note 4.
The Company has historically also been subject to various legal proceedings and
claims that arose in the ordinary course of business. These matters are
generally covered by insurance. Management believes that the final outcome of
such matters will not have a material adverse effect on the financial position,
results of operations or liquidity of the Company.
Other Matters
On June 28, 2002, the Company entered into a settlement agreement with the New
York City Department of Finance ("NYCDOF") pursuant to which the Company paid
$903,943, including principal of $650,000 and interest of $253,943, in full
satisfaction of all real property transfer taxes, interest and penalties
assessed by the NYCDOF in May 2002 in connection with the Company's 1997
formation transactions and 1998 initial public stock offering. The shopping
center properties relating to the subject tax assessments have been previously
disposed in connection with the plan of liquidation. Accordingly, the principal
and interest components of the settlement payment were charged to gain (loss) on
sale of shopping center properties and Other income (expense), respectively, in
the accompanying Consolidated Statement of Operations for the year ended
December 31, 2002.
30
In March and August 2003, respectively, the NYCDOF and the New York State
Department of Taxation and Finance ("NYSDOF") issued preliminary Notices of Tax
Due with regard to the Company's December 2000 transfer of its New York shopping
center properties to Kimco. On March 5, 2004, the NYCDOF issued an Adjusted
Notice of Tax Due with regard to such transfer. The NYCDOF is seeking to impose
interest charges only relating to the late filing of the subject transfer tax
returns. The Company does not expect to incur any material liability in
connection with the NYCDOF notices. The NYSDOF notices have been resolved with
no cost to the Company.
On June 5, 2003, the Company entered into a settlement agreement with the NYSDOF
pursuant to which the Company paid $147,963.28, in full satisfaction of all real
property transfer taxes assessed by the NYSDOF in connection with the Company's
1997 Formation Transactions and 1998 initial public offering.
8. Contract Rights Agreements
The Company had maintained a stock option plan pursuant to which a maximum
852,550 shares of the Company's Common Stock could be issued for qualified and
non-qualified options. Options granted under the Plan generally vested ratably
over a three-year term, expired ten years from the date of grant and were
exercisable at the market price on the date of grant, unless otherwise
determined by the Board in its sole discretion.
In conjunction with the Company's adoption of the plan of liquidation and the
disposal of substantially all of its shopping center properties, all options
outstanding at December 31, 2000 (705,500 shares at a weighted average exercise
price per share of $17.43) became fully vested and replaced one-for-one by a
contractual right (a "Contract Right") to receive a cash distribution on the
same basis and at the same time as liquidating distributions are made to
shareholders. The total amount to be paid on each Contract Right will equal the
total per share proceeds distributed to shareholders less the original stock
option exercise price. Contract Rights are retained after termination of
employment. The Company believes it has adequately accrued ($500,000 at December
31, 2003) for amounts which may become due and payable pursuant to such Contract
Rights.
9. Quarterly Financial Information
The following summary represents the results of operations for each quarter
during the years ended December 31, 2003 and 2002.
2003 (Unaudited)
------------------------------------------------
Mar. 31 June 30 Sept.30 Dec. 31
------- ------- ------- -------
(in thousands, except per share data)
Revenues from rental property $413 $369 $311 $110
Income (loss) from discontinued operations before extraordinary items $246 $73 $124 $(558)
Income (loss) from discontinued operations before extraordinary
items, per common share
Basic $.03 $.01 $.02 $(.08)
Diluted $.03 $.01 $.02 $(.08)
2002 (Unaudited)
------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
------- ------- -------- -------
(in thousands, except per share data)
Revenues from rental property $888 $735 $674 $494
Income (loss) from discontinued operations before
extraordinary items $428 $(551) $211 $25
Income (loss) from discontinued operations before
extraordinary items, per common share
Basic $.06 $(.08) $.03 $.01
Diluted $.06 $(.08) $.03 $.01
31
10. Distributions on Common Stock
The Company declared and paid cash distributions on its common stock for 2003,
2002 and 2001 as follows:
Record Date of Amount
Date of Declaration Date Payment Per Share
- ------------------- ---- ------- ---------
2003 Year:
3/3/03 3/11/03 3/18/03 $.50
8/28/03 9/9/03 9/16/03 $1.00
12/12/03 12/29/03 1/6/04 $.50
2002 Year:
10/8/02 10/15/02 10/22/02 $.50
2001 Year:
6/21/01 7/2/01 7/9/01 $1.00
9/5/01 9/17/01 9/24/01 $.75
11/2/01 11/12/01 11/19/01 $.50
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Signature Title Date
--------- ----- ----
/s/ PHILIP PILEVSKY Chairman of the Board and Chief Executive Officer, March 30, 2004
- ------------------- President, principal financial officer and Secretary
Philip Pilevsky
/s/ SHEILA LEVINE Director March 30, 2004
- -----------------
Sheila Levine
/s/ ARNOLD S. PENNER Director March 30, 2004
- --------------------
Arnold S. Penner
/s/ A. F. PETROCELLI Director March 30, 2004
- --------------------
A. F. Petrocelli
/s/ ELISE JAFFE Director March 30, 2004
- ---------------
Elise Jaffe
/s/ ROBERT S. GRIMES Director March 30, 2004
- --------------------
Robert S. Grimes
33
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
2.1 Plan of Liquidation and Dissolution of the Company (filed as exhibit 2.1 to the
Company's Current Report on Form 8-K dated April 28, 2000, and incorporated herein by
reference).
3.1 Amended and Restated Articles of Incorporation of the Company (filed as Exhibit 3.1 to
the Company's Current Report on Form 8-K dated December 31,1997, and incorporated
herein by reference).
3.2 Articles Supplementary of Series A Preferred Stock (filed as
Exhibit 3.2 to the Company's Form 8-K dated December 31, 1997 and
incorporated herein by reference).
3.3 Articles Supplementary dated July 27, 1999, (filed as Exhibit 3.1
to the Company's Current Report on Form 8-K dated July 15, 1999,
and incorporated herein by reference).
3.4 Third Amended and Restated By-Laws of the Company dated July 27, 1999, (filed as
Exhibit 3.2 to the Company's Current Report on Form 8-K dated July 15, 1999, and
incorporated herein by reference).
3.5 Form of Certificate of Common Stock (filed as Exhibit 3.4 to the Company's Registration
Statement on Form S-11, Registration No. 333-47975, and incorporated herein by
reference).
4.1 Shareholder Rights Agreement, dated as of March 31, 1999, between the Company and
BankBoston, N.A. (filed as Exhibit 4.1 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998, and incorporated herein by reference).
4.2 Amendment No. 1, dated July 27, 1999, to Shareholder Rights
Agreement dated as of March 31, 1999, between the Company and
Bank Boston N.A., as Rights Agent (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K dated July 15, 1999, and
incorporated herein by reference).
4.3 Articles Supplementary for Series A Junior Participating Preferred Stock (filed as
Exhibit 4.2 to the Company's Annual Report on Form 10-K for the year ended December 31,
1998, and incorporated herein by reference).
10.1 Amended and Restated Agreement of Limited Partnership of the Operating Partnership
(filed as Exhibit 10.1 to the Company's Registration Statement on Form S-11,
Registration No. 333- 47975, and incorporated herein by reference).
10.2 First Amendment to the Amended and Restated Agreement of Limited
Partnership of the Operating Partnership (filed as Exhibit 10.2
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, and incorporated herein by reference).
10.3 Form of 1997 Stock Option and Long-Term Incentive Plan of the Company (filed as Exhibit
10.2 to the Company's Registration Statement on Form S-4, Registration No. 333-41431,
and incorporated herein by reference).
10.4 Contribution and Exchange Agreement, dated August 11, 1997, among
National Properties Investment Trust, the Board of Trustees, the
Company, the Operating Partnership and certain contributing
partnerships or limited liability companies associated with a
private real estate firm controlled by Philip Pilevsky and
certain partners and members thereof (filed as Exhibit 10.6 to
the Company's Registration Statement on Form S-4, Registration
No. 333-41431, and incorporated herein by reference).
10.5 Amended and Restated Management Agreement, dated as of March 30, 1998, among the
Company, the Operating Partnership and Philips International Management Corp.
(Filed as Exhibit 10-8 to the Company's Form 10-K for the year ended December 31, 1997,
and incorporated herein by reference).
10.6 Amended and Restated Non-Competition Agreement, dated as of March 30, 1998, among the
Company, the Operating Partnership, Philip Pilevsky and Sheila Levine (filed as Exhibit
10.9 to the Company's Form 10-K for the year ended December 31, 1997, and incorporated
herein by reference).
10.7 Amendment No. 1 to Contribution and Exchange Agreement, dated as of December 29, 1997
(filed as Exhibit 10.13 to the Company's Form 8-K dated December 31, 1997, and
incorporated herein by reference).
34
10.8 Employment Agreement between the Company and Louis J. Petra (filed as exhibit 10.1 to
the Company's Current Report on Form 8-K dated December 31, 1997 and incorporated
herein by reference).
10.9 Employment Agreement between the Company and Sheila Levine (filed as Exhibit 10.2 to
the Company's Current Report on Form 8-K dated December 31, 1997 and incorporated
herein by reference).
10.10 Employment Agreement between the Company and Carl Kraus (filed as Exhibit 10.1 to the
Company's Current Report on Form 8-K dated July 15, 1999 and Incorporated herein by
reference).
10.11 Credit Agreement among the Operating Partnership and Prudential
Securities Credit Corporation (filed as Exhibit 10.18 to the
Company's Report on Form 10-Q for the period ended March 31, 1998
and incorporated herein by reference).
10.12 Purchase and Sale Agreement dated as of April 28, 2000, by and
among Munsey Park Associates, LLC, a New York limited liability
company, North Shore Triangle, LLC, a New York limited liability
company, Philips Yonkers, LLC, a New York limited liability
company, Philips Henry, LLC, a New York limited liability
company, Philips Shopping Center Fund, L.P., a Delaware limited
partnership, and Philips Lake Mary Associates, L.P., a Delaware
limited partnership, and Kimco Income Operating Partnership,
L.P., a Delaware limited partnership (filed as exhibit 10.1 to
the Company's Current Report on Form 8-K dated April 28, 2000,
and incorporated herein by reference).
10.13 Redemption Agreement dated as of April 27, 2000, by and among the
Operating Partnership and Philip Pilevsky (filed as exhibit 10.2
to the Company's Current Report on Form 8-K dated April 28, 2000,
and incorporated herein by reference).
10.14 Asset Contribution, Purchase and Sale Agreement dated as of April
28, 2000, by and among the Company, the Operating Partnership,
Certain Affiliated Parties signatory thereto, KIR Acquisition,
LLC, a Delaware limited liability company and Kimco Income
Operating Partnership, L.P., a Delaware limited partnership
(filed as exhibit 10.3 to the Company's Current Report on Form
8-K dated April 28, 2000, and incorporated herein by reference).
10.15 Amended and Restated Redemption Agreement dated as of April 27,
2000, by and among Philips International Realty, L.P., a Delaware
limited partnership, and Philip Pilevsky (filed as exhibit 10.1
to the Company's Current Report on Form 8-K dated April 28, 2000,
and incorporated herein by reference).
10.16 Redemption Agreement dated as of April 28, 2000, by and among Philips International
Realty, L.P., a Delaware limited partnership, and Allen Pilevsky (filed as exhibit 10.2
to the Company's Current Report on Form 8-K dated April 28, 2000, and incorporated
herein by reference).
10.17 Redemption Agreement dated as of April 28, 2000, by and among
Philips International Realty, L.P., a Delaware limited
partnership, and Fred Pilevsky (filed as exhibit 10.3 to the
Company's Current Report on Form 8-K dated April 28, 2000, and
incorporated herein by reference).
10.18 Redemption Agreement dated as of April 28, 2000, by and among
Philips International Realty, L.P., a Delaware limited
partnership, and SL Florida LLC, a Delaware limited liability
company (filed as exhibit 10.4 to the Company's Current Report on
Form 8-K dated April 28, 2000, and incorporated herein by
reference).
10.19 First Amendment to Asset Contribution, Purchase and Sale
Agreement dated as of May 31, 2000, by and among Philips
International Realty, L.P., a Delaware limited partnership, the
Company, certain Affiliated Parties signatory thereto, KIR
Acquisition, LLC, a Delaware limited liability company, and Kimco
Income Operating Partnership, L.P., a Delaware limited
partnership (filed as exhibit 10.5 to the Company's Current
Report on Form 8-K dated April 28, 2000, and incorporated herein
by reference).
10.20 Second Amendment to Asset Contribution, Purchase and Sale
Agreement dated as of June 15, 2000, by and among Philips
International Realty, L.P., a Delaware limited partnership, the
Company, certain Affiliated Parties signatory thereto, KIR
Acquisition, LLC, a Delaware limited liability company, and Kimco
Income Operating Partnership, L.P., a Delaware limited
partnership (filed as exhibit 10.6 to the Company's Current
Report on Form 8-K dated April 28, 2000, and incorporated herein
by reference).
35
10.21 Third Amendment to Asset Contribution, Purchase and Sale
Agreement dated as of June 20, 2000, by and among Philips
International Realty, L.P., a Delaware limited partnership, the
Company, certain Affiliated Parties signatory thereto, KIR
Acquisition, LLC, a Delaware limited liability company, and Kimco
Income Operating Partnership, L.P., a Delaware limited
partnership (filed as exhibit 10.7 to the Company's Current
Report on Form 8-K dated April 28, 2000, and incorporated herein
by reference).
10.22 Amended and Restated Purchase and Sale Agreement dated as of June
20, 2000, by 1517-25 Third, L.P., a New York limited partnership,
Philip Pilevsky, SL Florida LLC, a Delaware limited liability
company, Allen Pilevsky and Fred Pilevsky (filed as exhibit 10.8
to the Company's Current Report on Form 8-K dated April 28, 2000,
and incorporated herein by reference).
10.23 Amended and Restated Purchase and Sale Agreement dated as of June
20, 2000, by Philips International Realty, L.P., a Delaware
limited partnership, Philips Lake Worth Corp., a New York
corporation, and Philip Pilevsky (filed as exhibit 10.9 to the
Company's Current Report on Form 8-K dated April 28, 2000, and
incorporated herein by reference).
10.24 Amendment to Amended and Restated Purchase and Sale Agreement dated as of April 4,
2001, by and between the Company, Philips Lake Worth Corp., a New York corporation, and
Philip Pilevsky (filed as exhibit 10.24 to the Company's Annual Report on Form 10-K
dated April 17, 2001, and incorporated herein by reference).
31.1* Certification of the Company's Chief Executive Officer and
principal financial officer, Philip Pilevsky, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1* Certification of the Company's Chief Executive Officer and
principal financial officer, Philip Pilevsky, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
- -------------------
* filed herewith
36