<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _____________
Commission file number 1-11690
-----------------------------------
DEVELOPERS DIVERSIFIED REALTY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1723097
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
34555 Chagrin Boulevard Moreland Hills, Ohio 44022
- --------------------------------------------------------------------------------
(Address of principal executive offices - zip code)
(216) 247-4700
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since
last report)
APPLICABLE ONLY TO CORPORATE ISSUERS:
-------------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
25,056,880 shares outstanding as of May 12, 1997
---------- ------------
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of March 31, 1997 and December 31,
1996.
Condensed Consolidated Statements of Operations for the Three Month Periods
ended March 31, 1997 and 1996.
Condensed Consolidated Statements of Cash Flows for the Three Month Periods
ended March 31, 1997 and 1996.
Notes to Condensed Consolidated Financial Statements.
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1997 1996
- ------ --------- ------------
<S> <C> <C>
Real estate rental property:
Land $153,826,060 122,696,277
Land under development 21,193,075 27,304,847
Buildings 918,891,039 798,476,568
Fixtures and tenant improvements 16,039,700 14,805,101
Construction in progress 15,380,358 28,364,167
--------------- -------------
1,125,330,232 991,646,960
Less accumulated depreciation (147,498,338) (142,039,284)
--------------- -------------
Real estate, net 977,831,894 849,607,676
Cash and cash equivalents 2,682,400 12,600
Advances to and investments in joint ventures 112,002,221 106,795,688
Other assets 20,737,823 18,709,976
--------------- -------------
$1,113,254,338 $975,125,940
=============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Unsecured indebtedness:
Fixed rate senior notes $291,585,102 $215,492,754
Revolving credit facilities 19,000,000 95,500,000
Subordinated convertible debentures 60,000,000 60,000,000
--------------- -------------
370,585,102 370,992,754
Mortgage indebtedness:
Banks and other financial institutions 106,830,561 107,439,535
--------------- -------------
Total indebtedness 477,415,663 478,432,289
Accounts payable and accrued expenses 26,137,548 20,920,765
Other liabilities 9,396,531 6,436,667
--------------- -------------
512,949,742 505,789,721
--------------- -------------
Minority equity interest 16,293,180 -
Commitments and contingencies
Shareholders' equity:
Class A - 9.5% cumulative redeemable preferred shares, without par value,
$250 liquidation value; 1,500,000 shares authorized; 421,500 shares
issued and outstanding at March 31, 1997
and December 31, 1996 105,375,000 105,375,000
Class B - 9.44% cumulative redeemable preferred shares, without par value,
$250 liquidation value; 1,500,000 shares authorized; 177,500 shares
issued and outstanding at March 31, 1997
and December 31, 1996 44,375,000 44,375,000
Common shares, without par value, $.10 stated value; 50,000,000 shares
authorized; 25,055,498 and 21,682,917 shares issued and outstanding at
March 31, 1997 and December 31, 1996,
respectively 2,505,550 2,168,292
Paid-in-capital 485,525,515 369,417,186
Accumulated dividends in excess of net income (53,154,649) (51,384,259)
--------------- -------------
584,626,416 469,951,219
Less: Unearned compensation - restricted stock (615,000) (615,000)
--------------- -------------
584,011,416 469,336,219
--------------- -------------
$1,113,254,338 $975,125,940
=============== =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Revenues from operations:
Minimum rents $27,566,057 $22,682,584
Percentage and overage rents 1,057,039 754,208
Recoveries from tenants 7,225,868 5,743,626
Management fee income 723,260 508,809
Other 881,044 945,465
------------ -----------
37,453,268 30,634,692
------------ -----------
Rental operation expenses:
Operating and maintenance 3,566,877 3,037,213
Real estate taxes 4,391,049 3,413,341
General and administrative 2,465,727 1,732,948
Interest expense 8,047,202 7,343,006
Depreciation and amortization 7,406,457 5,904,605
------------ -----------
25,877,312 21,431,113
------------ -----------
Income before equity in net income
of joint ventures, minority equity interest and
gain on sales of real estate 11,575,956 9,203,579
Equity in net income of joint ventures 2,717,005 2,012,238
Minority equity interest (264,764) --
Gain on sales of real estate 3,525,785 --
------------ -----------
Net income $17,553,982 $11,215,817
=========== ===========
Net income applicable to common shareholders $14,004,076 $7,665,911
=========== ===========
Per share data:
Net income:
Primary $.57 $.39
==== ====
Fully diluted $.57 $.39
==== ====
Dividends declared $.63 $.60
==== ====
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------- ------------
<S> <C> <C>
Net cash flow provided by operating activities $ 21,107,035 $ 14,059,965
------------- ------------
Cash flow provided by (used for) investing activities:
Real estate developed or acquired (114,016,759) (23,353,342)
(Advances to) repayments from joint ventures, net (5,461,751) (1,147,884)
Proceeds from sales of real estate 5,452,034 --
------------- ------------
Net cash flow used for investing activities (114,026,476) (24,501,226)
------------- ------------
Cash flow provided by (used for) financing activities:
Repayment of revolving credit facilities, net (76,500,000) (87,500,000)
Proceeds from issuance of Medium Term Notes, net of
underwriting commissions and $106,000 of offering
expenses paid -- 52,604,000
Principal payments on rental property debt (608,974) (12,148,265)
Proceeds from issuance of Fixed Rate Senior Notes, net of
underwriting commissions and discounts and $500,000 of
offering expenses paid 75,577,000 --
Proceeds from issuance of common shares, net of
underwriting commissions and $425,000 and $300,000
of offering expenses paid in 1997 and 1996, respectively 115,831,877 75,389,307
Proceeds from issuance of Class B preferred shares, net of
underwriting commissions and $200,000 of offering
expenses paid -- 4,182,050
Proceeds from issuance of common shares in conjunction
with exercise of stock options, the Company's 401(k)
plan and dividend reinvestment plan 613,710 129,240
Dividends paid (19,324,372) (3,433,468)
------------- ------------
Net cash flow provided by financing activities 95,589,241 29,222,864
------------- ------------
Increase in cash and cash equivalents 2,669,800 18,781,603
Cash and cash equivalents, beginning of period 12,600 12,100
------------- ------------
Cash and cash equivalents, end of period $ 2,682,400 $ 18,793,703
============= ============
</TABLE>
Supplemental disclosure of non cash investing and financing activities:
In conjunction with the acquisitions of certain shopping centers, the Company
assumed other liabilities and minority equity interest aggregating approximately
$22.9 million for the three month period ended March 31, 1997. In addition,
included in accounts payable was approximately $0.3 million relating to
construction in progress which did not require the use of cash.
For the three month period ended March 31, 1996 included in accounts payable was
approximately $0.7 million relating to construction in progress and $13.0
million of dividends declared which did not require the use of cash.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
The Company is a self-administered and self-managed real estate
investment trust and is engaged in the business of acquiring, expanding, owning,
developing, managing and operating neighborhood and community shopping centers,
enclosed malls and business centers.
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. The
information furnished reflects all adjustments which are, in the opinion of
management, necessary to reflect a fair statement of the results for the interim
periods presented, and all such adjustments are of a normal recurring nature.
2. PUBLIC OFFERINGS
In January 1997, the Company sold 3,350,000 shares of common stock in
an underwritten offering at $36.625 per share. In March 1997, the Company issued
$75 million of 7.125% Pass-Through Asset Trust Securities which mature in March
2002. The aggregate net proceeds of approximately $191.4 million from the above
offerings were primarily used to retire variable rate indebtedness.
3. EQUITY INVESTMENTS IN JOINT VENTURES:
The Company's equity investments in joint ventures at March 31, 1997
were comprised of (i) a 50% joint venture interest in four Community Center
Joint Ventures, formed in November 1995 in conjunction with the acquisition of
the Homart Community Center Division of Sears, Roebuck and Co. ("Sears"), (ii) a
50% joint venture interest, formed in September 1996, with The Ohio State
Teachers Retirement Systems (OSTRS), (iii) a 50% joint venture interest, formed
in October 1996, in conjunction with the development of a 443,000 square foot
shopping center in Merriam, Kansas, (iv) a 35% joint venture interest in a
limited partnership, formed in January 1997, that owns a 286,388 square foot
shopping center located in San Antonio, Texas and (v) a 50% joint venture
interest in a limited partnership, formed in 1989, that owns a 411,977 square
foot shopping center located in Martinsville, Virginia.
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Summarized combined financial information of the Company's joint venture
investments is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
Combined Balance Sheets 1997 1996
------------ ------------
<S> <C> <C>
Real estate, net $600,747,298 $561,624,478
Other assets 21,434,797 16,012,336
------------ ------------
$622,182,095 $577,636,814
============ ============
Mortgage debt $390,789,931 $360,113,705
Amounts payable to DDRC 12,766,605 10,747,149
Other liabilities 9,052,887 7,782,117
------------ ------------
412,609,423 378,642,971
Accumulated equity 209,572,672 198,993,843
------------ ------------
$622,182,095 $577,636,814
============ ============
<CAPTION>
Three Month Period
Ended March 31,
Combined Statements of Operations 1997 1996
------------ ------------
Revenues from operations $19,304,067 $14,597,439
------------ ------------
Rental operation expenses 4,658,868 3,780,114
Depreciation and amortization
expenses 2,704,111 2,106,297
Interest expense 6,428,401 4,686,558
------------ ------------
13,791,380 10,572,969
------------ ------------
Net income $5,512,687 $4,024,470
============ ============
</TABLE>
The Company has guaranteed $25 million of joint venture indebtedness
and related interest associated with certain mortgage debt.
Advances to and investments in joint ventures include acquisition costs
related to the Community Center Joint Ventures and the Merriam joint venture of
approximately $2.6 million and $0.9 million respectively, and a deferred gain of
approximately $6.4 million related to the contribution of the real estate
property and mortgage debt to the OSTRS Joint Venture.
Included in management fee income for the three month period ended
March 31, 1997 and 1996 is approximately $0.6 million and $0.4 million,
respectively of fees earned from the Company's Joint Venture interests. Other
income for the three month period ended March 31, 1997 and 1996 includes $0.1
million and $0.3 million, respectively, of development fee income from the
Community Center Joint Ventures.
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<PAGE> 8
4. ACQUISITIONS AND PRO FORMA FINANCIAL INFORMATION
During the three month period ended March 31, 1997, the Company
completed the acquisition of or investment in four shopping centers with an
aggregate of approximately 1.4 million Company owned gross leasable square feet
(GLA) at an initial aggregate investment of approximately $116.5 million.
These properties are summarized as follows:
<TABLE>
<CAPTION>
Year Effective Date Company
Location Built of Acquisition GLA
----------------------------- ---- --------------- -----------
<S> <C> <C> <C>
Cleveland (North Olmsted), OH 1958 January 1, 1997 463,440
Cleveland (North Olmsted), OH 1987 January 1, 1997 142,947
San Antonio, TX (1) 1996 January 23, 1997 286,388
Phoenix, AZ 1996 February 21, & March 27, 1997 490,885
-----------
1,383,660
===========
<FN>
(1) Property acquired through a joint venture in which the Company owns a 35% interest.
</TABLE>
The operating results of the acquired shopping centers are included in
the results of operations of the Company from the effective date of acquisition.
The following unaudited supplemental pro forma operating data is
presented for the three months ended March 31, 1996 as if each of the following
transactions had occurred on January 1, 1996 (i) the acquisition by the Company
of all properties acquired by the Company in 1996 and 1997; (ii) the sale by the
Company of 175,000 depositary shares representing 9.44% Class B Cumulative
Redeemable Preferred Shares in January 1996, (iii) the completion of the sale by
the Company of $111.7 million of Medium Term Notes in 1996, (iv) the completion
of the sale by the Company of 2,611,500 Common Shares in March 1996, (v) the
completion of the sale by the Company of 3,350,000 common shares in January 1997
and (vi) the completion of the sale by the Company of the $75 million 7.125%
Pass through Asset Trust Securities in March 1997.
<TABLE>
<CAPTION>
Three Month Period Ended March 31,
----------------------------------
(in thousands, except per share)
1996
-------
<S> <C>
Pro forma revenues $32,367
=======
Pro forma net income applicable
to common shareholders $ 9,348
=======
Pro forma net income applicable
to common shareholders
per common share $ .43
=======
</TABLE>
Pro forma information for the three months ended March 31, 1997 is not
presented because two of the four acquired properties were either under
development or in the lease-up phase and, accordingly, the related operating
information for such centers either does not exist or would not be meaningful.
The two Cleveland, Ohio properties are included in the Company's actual
operating results for the three months ended March 31, 1997.
The 1996 pro forma information above does not include revenues and
expenses for the five properties acquired by the Company in 1996 prior to their
respective acquisition dates because these shopping centers were either under
development or in the lease-up phase and, accordingly, the related operating
information for such centers either does not exist or would not be meaningful.
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<PAGE> 9
5. SHAREHOLDERS' EQUITY:
The following table summarizes the changes in shareholders' equity
since December 31, 1996:
<TABLE>
<CAPTION>
Class A 9.5% Class B 9.44%
Cumulative Cumulative
Redeemable Redeemable
Preferred Preferred Accumulated
Shares ($250 Shares ($250 Dividends in
Liquidation Liquidation Common Paid-in Excess of Restricted
Value) Value) Shares Capital Net Income Stock Total
------------ ----------- ---------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1996 $105,375,000 $44,375,000 $2,168,292 $369,417,186 $(51,384,259) $ (615,000) $469,336,219
Net income 17,553,982 17,553,982
Dividends declared -
Preferred Shares (3,549,906) (3,549,906)
Dividends declared -
Common Shares (15,774,466) (15,774,466)
Issuance of Common Shares 335,000 115,496,877 115,831,877
Stock options exercised 2,148 569,913 572,061
Shares issued through employee
401(k) plan 43 15,818 15,861
Shares issued through Dividend
Reinvestment Plan 67 25,721 25,788
------------ ----------- ---------- ------------ ------------ ---------- ------------
Balance March 31, 1997 $105,375,000 $44,375,000 $2,505,550 $485,525,515 $(53,154,649) $ (615,000) $584,011,416
============ =========== ========== ============ ============ ============= ============
</TABLE>
6. REVOLVING CREDIT FACILITIES:
In May 1995, the Company obtained a three year $150 million unsecured
revolving credit facility from a syndicate of financial institutions for which
the First National Bank of Chicago and the First National Bank of Boston serve
as agents (the "Unsecured Credit Facility"). In March 1997, the Company
renegotiated the terms of this facility to extend the agreement, to May 2000,
reduce the specified spread over LIBOR by 15 basis points and introduce a
competitive bid feature for up to $75 million of borrowings. Borrowings under
this facility bear interest at variable rates based on the prime rate or LIBOR
plus a specified spread, currently at 1.10%, depending on the Company's long
term senior unsecured debt rating from Standard and Poor's and Moody's Investors
Service. The Unsecured Credit Facility is used to finance the acquisition of
shopping centers, to provide working capital and for general corporate purposes.
At March 31, 1997, $15 million was outstanding under this facility.
In addition, the Company maintains a $10 million unsecured revolving
credit facility with National City Bank which matures in November 1999 and bears
interest at variable rates based on the prime rate or LIBOR plus a specified
spread, currently at 1.25%, depending on the Company's long term senior
unsecured debt rating from Standard and Poor's and Moody's Investors Service. At
March 31, 1997 there was $4 million outstanding under this facility.
7. EARNINGS PER SHARE
Primary earnings per share for net income applicable to common
shareholders was computed by dividing common share dividends paid or declared
for the period by the weighted average number of
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<PAGE> 10
common shares outstanding plus the undistributed net income (loss) applicable
to common shareholders, as appropriate, divided by the weighted average number
of common shares and common share equivalents outstanding. Common share
equivalents are excluded from the earnings per share calculation where they
would be antidilutive. The weighted average number of shares outstanding
utilized in the calculations is 24,520,075 and 19,704,565 for the three month
periods ended March 31, 1997 and 1996, respectively.
Fully diluted earnings per common share were calculated by dividing net
income (loss) applicable to common shareholders by the weighted average number
of common shares and common share equivalents during the period. Common share
equivalents included stock options outstanding and the assumed conversion of the
Debentures. For the three month period ended March 31, 1996, the assumed
conversion of the Debentures was antidilutive, and was therefore excluded from
the calculation. Common share equivalents for purposes of the fully diluted
earnings per share were 2,213,590 and 143,987 for the three month periods ended
March 31, 1997 and 1996, respectively.
As required by APB Opinion No. 15, supplementary pro forma income per
share data has been presented in Note 4.
8. SUBSEQUENT EVENTS
On May 12, 1997, the Company's shareholders approved an additional
500,000 common shares to be reserved for issuance under the Company's 1992
Employees' Share Option Plan.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
accompanying unaudited condensed consolidated financial statements and the notes
thereto.
RESULTS OF OPERATIONS
Revenues from Operations
Total revenues increased $6.8 million, or 22.3% to $37.4 million for
the three month period ended March 31, 1997 from $30.6 million for the same
period in 1996. Base and percentage rents for the three month period ended March
31, 1997 increased $5.2 million or 22.1% to $28.6 million as compared to $23.4
million for the same period in 1996. Approximately $0.8 million of the increase
in base and percentage rental income is the result of new leasing, re-tenanting
and expansion of the Core Portfolio Properties (shopping center properties owned
as of January 1, 1996), an increase of 3.9% over 1996 revenues from Core
Portfolio Properties. The eight shopping centers acquired by the Company in 1997
and 1996 contributed $4.7 million of additional revenue and the three new
shopping center developments contributed $0.7 million. The above increases were
offset by the transfer of two properties to a joint venture in September 1996
which reduced revenue by $1.0 million. At March 31, 1997, the occupancy rate of
the Company's portfolio, including properties owned through joint ventures, was
at 94.1% as compared to 94.2% at March 31, 1996. As of March 31, 1997, the
Company had also entered into leases with additional tenants aggregating
approximately 300,000 square feet of vacant space, approximately 1.4% of total
Company gross leasable area, which was not yet occupied at that date.
The average annualized base rent per leased square foot, including
those properties owned through joint ventures, was $8.16 at March 31, 1997 as
compared to $7.85 at December 31, 1996. Same store sales, for the current twelve
month period, increased 3.18% to $229 per square foot as compared to $222 per
square foot for the prior twelve month period.
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<PAGE> 11
The increase in recoveries from tenants of $1.5 million is directly
related to the increase in operating and maintenance expenses and real estate
taxes primarily associated with the 1997 and 1996 shopping center acquisitions
and developments. Recoveries were approximately 90.8% of operating expenses and
real estate taxes as compared to 89.0% for the same period in 1996. Management
fee income and other income increased by approximately $0.1 million which
generally relates to an increase in management fee income associated with the
formation of several joint ventures.
Expenses from Operations
Rental operating and maintenance expenses for the three month period
ended March 31, 1997 increased $0.5 million, or 17.4% to $3.5 million as
compared to $3.0 million for the same period in 1996. An increase of $0.4
million is attributable to the 11 shopping centers acquired and developed in
1996 and 1997 and $0.1 million in the Core Portfolio Properties.
Real estate taxes increased $1.0 million, or 28.6%, to $4.4 million for
the three month period ended March 31, 1997 as compared to $3.4 million for the
same period in 1996. This increase is related to the 11 shopping centers
acquired and developed in 1996 and 1997.
General and administrative expenses increased $0.7 million, or 42.3%,
to $2.5 million for the three month period ended March 31, 1997 as compared to
$1.7 million in 1996. The increase is attributable to the growth of the Company
primarily related to acquisitions, expansions and developments. The Company
continues to maintain a conservative policy with regard to the expensing of all
internal leasing salaries, legal salaries and related expenses associated with
the leasing and re-leasing of existing space. Total general and administrative
expenses were approximately 4.3% and 3.8% of total revenues, including revenues
of joint ventures, at March 31, 1997 and 1996, respectively.
Depreciation and amortization expense increased $1.5 million, or 25.4%,
to $7.4 million for the three month period ended March 31, 1997 as compared to
$5.9 million for the same period in 1996. The increase is primarily attributable
to the growth related to the 11 shopping centers acquired and developed in 1996
and 1997.
Interest expense increased $0.7 million, or 9.6%, to $8.0 million for
the three month period ended March 31, 1997, as compared to $7.3 million for the
same period in 1996. The overall increase in interest expense for the three
month period ended March 31, 1997 as compared to the same period in 1996 is
primarily related to the acquisition and development of shopping centers during
1997 and 1996. The weighted average debt outstanding during the three month
period ended March 31, 1997 and related weighted average interest rate was
$430.9 million and 7.8%, respectively, compared to $397.0 million and 8.1%,
respectively, for the same period in 1996. Interest costs capitalized, in
conjunction with development and expansion projects, were $0.8 million for the
three month period ended March 31, 1997, respectively, as compared to $0.7
million for the same period in 1996.
Equity in net income of joint ventures increased $0.7 million, or
35.0%, to $2.7 million for the three month period ended March 31, 1997 as
compared to $2.0 million for the same period in 1996. The increase is
attributable to the Community Center Joint Ventures, the formation of a joint
venture with Ohio State Teachers Retirement Systems ("OSTRS") and the formation
of a joint venture in San Antonio, Texas which contributed an additional $0.4
million, $0.2 million and $0.1 million, respectively, of equity in net income
of joint ventures for the three month period ended March 31, 1997.
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<PAGE> 12
The minority equity interest of $0.3 million for the three month period
ended March 31, 1997 relates to the Company's investment in two shopping center
properties in 1997. The amount represents the priority distribution associated
with the minority equity interest.
Gain on sales of real estate aggregated $3.5 million for the three
month period ended March 31, 1997. In March 1997, the Company sold two business
centers in Highland Heights, Ohio aggregating approximately 113,000 square feet
for approximately $5.7 million. The two business centers had been vacant for
approximately 18 months.
Net Income
Net income increased $6.3 million to $17.5 million for the three month
period ended March 31, 1997, as compared to net income of $11.2 million for the
same period in 1996. The increase in net income of $6.3 million is primarily
attributable to the increased net operating revenues (total revenues less
operating and maintenance, real estate taxes and general and administrative
expense) aggregating $4.6 million, resulting from new leasing, retenanting and
expansion of Core Portfolio Properties, and the 11 shopping centers acquired
and developed in 1996 and 1997. An increase of $0.7 million relates to
increased equity income from joint ventures and an increase of $3.5 million
relates to a gain on sale of real estate. The increase in net operating
revenues, equity income from joint ventures and gain on sale of real estate was
offset by increases in depreciation, interest expense and minority equity
interest of $1.5 million, $0.7 million and $0.3 million, respectively.
FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") provides an
additional indicator of the financial performance of a Real Estate Investment
Trust. FFO is defined generally as net income applicable to common shareholders
excluding gains (losses) on sale of property, non recurring charges and
extraordinary items, adjusting for certain non-cash items, principally real
property depreciation and equity income (loss) from its joint ventures and
adding the Company's proportionate share of FFO of its unconsolidated joint
ventures, determined on a consistent basis. The Company calculates FFO in
accordance with the foregoing definition, which is substantially the same as the
definition currently used by the National Association of Real Estate Investment
Trusts ("NAREIT"). Certain other real estate companies may calculate funds from
operations in a different manner. For the three month period ended March 31,
1997, FFO increased $4.6 million or 31.3% to $19.1 million as compared to $14.5
million for the same period in 1996. The increase is attributable to the
continuing increases in revenues from Core Portfolio Properties, acquisitions
and developments. The Company's calculation of FFO is as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
1997 1996
-------- --------
<S> <C> <C>
Net income applicable to
common shareholders (1) $14,004 $7,666
Depreciation of real property 7,322 5,854
Equity in net income of
joint ventures (2,717) (2,012)
Joint Ventures FFO (2) 4,051 3,065
Gain on sales of real estate (3,526) --
-------- --------
$19,134 $14,573
======== ========
</TABLE>
(1) Includes straight line rental revenues of approximately $0.3 million and
$0.1 million for the three month periods ended March 31, 1997 and 1996,
respectively, primarily related to recent acquisitions and new developments.
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<PAGE> 13
(2) Joint Venture Funds From Operations are summarized as follows:
<TABLE>
<S> <C> <C>
Net income (a) $5,513 $4,024
Depreciation of real property 2,704 2,106
----- -----
$8,217 $6,130
====== ======
DDRC Ownership interests (b) $4,051 $3,065
====== ======
<FN>
(a) Includes straight line rental revenue of approximately $0.6 million for the
three month periods ended March 31, 1997 and 1996. The Company's
proportionate share of straight line rental revenues was $0.3 million for
the three month periods ended March 31, 1997 and 1996.
(b) At March 31, 1997 the Company owned a 50% joint venture interest relating to
13 shopping center properties and a 35% joint venture interest in one
shopping center property. At March 31, 1996 the Company owned a 50% joint
venture interest in eleven shopping center properties.
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates that cash flow from operating activities will continue
to provide adequate capital for all principal payments, recurring tenant
improvements, as well as dividend payments in accordance with REIT requirements
and that cash on hand, borrowings under its existing revolving credit
facilities, as well as other debt and equity alternatives will provide the
necessary capital to achieve continued growth. Cash flow from operating
activities for the three month period ended March 31, 1997 increased to $21.1
million as compared to $14.1 million for the same period in 1996. The increase
is attributable to the 11 acquisitions and developments completed in 1997 and
1996, new leasing, expansion and re-tenanting of the core portfolio properties
and the equity offerings completed in 1997 and 1996.
An increase in the 1997 quarterly dividend per common share to $.63 from $.60
was approved in December 1996 by the Company's Board of Directors. It is
anticipated that the new dividend level will result in a more conservative
payout ratio as compared to prior years. A lower payout ratio will enable the
Company to retain more capital which will be utilized toward attractive
investment opportunities in the development, acquisition and expansion of
portfolio properties. The Company's common share dividend payout ratio for the
first quarter of 1997 approximated 82.4% of the actual funds from operations.
During the three month period ended March 31, 1997, the Company and its joint
ventures invested $122.8 million, net, to acquire, develop, expand, improve and
re-tenant its properties as follows: (in millions):
Acquisitions
During the first quarter of 1997 the Company acquired two adjacent shopping
center properties in Ahwatukee, Arizona (a suburb of Phoenix), aggregating
490,885 square feet for an aggregate purchase price of approximately $65.3
million. The Company also acquired a majority ownership interest in two adjacent
shopping center properties aggregating 606,387 square feet in North Olmsted,
Ohio (a suburb of Cleveland) for an initial investment of approximately $38
million.
-13-
<PAGE> 14
The Company also acquired a 35% ownership interest in a 296,000 square foot
shopping center in San Antonio, Texas. This shopping center was acquired at a
cost of approximately $38.3 million of which the Company's proportionate share
aggregated approximately $13.4 million.
Developments
The Company has substantially completed the construction of an 84,000 square
foot community shopping center in Aurora, Ohio with a Heinen's Supermarket (not
owned by the Company) and Revco Drug Store as anchor tenants.
Development activity also continues to progress at the Company's shopping
centers in Atlanta, Georgia and Framingham, Massachusetts which were acquired in
connection with the Community Center Joint Ventures in November 1995. The
Atlanta and Framingham centers are scheduled to be substantially completed by
the third quarter of 1997. The majority of tenants have opened at each center.
Construction has also commenced on the development of four additional shopping
centers which include: (i) a 235,000 square foot Phase II development of the
Canton, Ohio center which will include Home Place, Service Merchandise, Petsmart
and JoAnn Fabrics ETC as anchor tenants; (ii) a 500,000 square foot shopping
center in Boardman, Ohio which includes Wal-Mart, Lowe's, Dick's Sporting Goods,
Giant Eagle Supermarket, Staples and Petsmart as anchor tenants. The Lowe's,
Wal-Mart and Dick's Sporting Goods stores opened during the first quarter of
1997; (iii) a 475,000 square foot shopping center in Stow, Ohio which will
include Target (not owned by the Company), Kohl's, Giant Eagle Supermarket
(opened fourth quarter 1996), Office Max (opened first quarter 1997) and Stein
Mart as anchor tenants and (iv) a 445,000 square foot shopping center in
Merriam, Kansas which is being developed through a joint venture formed in
October 1996, 50% of which is owned by the Company. This center will include
Home Depot, Cinemark, Hen House Supermarket, and Petsmart as anchor tenants.
Expansions
The Company is currently expanding seven of its shopping centers, including a
50,000 square foot expansion in Birmingham, Alabama; a 98,000 square foot
expansion in Spring Hill, Florida; a 30,000 square foot supermarket expansion in
Chillicothe, Ohio; a 44,000 square foot expansion in Marietta, Georgia; a 79,000
square foot expansion and redevelopment in Martinsville, Virginia; a 130,000
square foot redevelopment in Winchester, Virginia and an 18,000 square foot
retail expansion in East Norriton, Pennsylvania.
FINANCING ACTIVITIES
The acquisitions, developments and expansions were financed through cash
provided from operating activities revolving credit facilities, mortgages
assumed and debt and equity offerings. Total debt outstanding at March 31, 1997
was $477.4 million compared to 359.1 million at March 31, 1996.
In January 1997, the Company successfully completed a 3,350,000 common share
offering and received net proceeds of approximately $116 million which were
primarily used to retire variable rate debt. The common share offering
significantly strengthened the Company's balance sheet and positioned the
Company to continue to take advantage of attractive acquisition, development and
expansion opportunities discussed above.
-14-
<PAGE> 15
In March 1997, the Company issued $75 million of senior unsecured Putable Asset
Trust Securities (PATS). The PATS were issued at a discount of 99.53%, have a
coupon rate of 7.125% and mature on March 15, 2002. The effective yield to the
put date, after adjusting for the call premium and debt issue costs, is
approximately 6.9%.
In March 1997, the Company extended its $150 million unsecured revolving credit
facility, agented by the First National Bank of Chicago and the First National
Bank of Boston, for an additional year, through May 2000, and reduced the
interest rate 15 basis points and also introduced a competitive bid feature for
up to $75 million of borrowings.
In March 1997, the Company sold two business centers in Highland Heights, Ohio
aggregating approximately 113,000 square feet for approximately $5.7 million and
recognized a gain of approximately $3.5 million. The net proceeds of
approximately $5.4 million were used to repay revolving credit debt.
At March 31, 1997, the Company's capitalization consisted of $477.4 million of
debt (excluding the Company's proportionate share of joint venture mortgage
debt aggregating $191.4 million), $149.8 million of preferred stock and
$945.8 million of market equity (market equity is defined as common shares
outstanding multiplied by the closing price of the common shares on the New
York Stock Exchange at March 31, 1997 of $37.75) resulting in a debt total
market capitalization ratio of .30 to 1.0. At March 31, 1997, the Company's
total debt consisted of $455.4 million of fixed rate debt, and $22.0 million
of variable rate debt.
It is management's intention that the Company have access to the capital
resources necessary to expand and develop its business. Accordingly, the Company
may seek to obtain funds through additional equity offerings or debt financing
in a manner consistent with its intention to operate with a conservative debt
capitalization policy and maintain its investment grade ratings with Moody's
Investor Services and Standard and Poor's. In June 1996, the Company filed a
shelf registration statement with the Securities and Exchange Commission under
which $400 million of debt securities, preferred shares or common shares may be
issued. As of March 31, 1997, the Company had $218.6 million available under its
shelf registration statement. In addition, as of March 31, 1997 the Company had
$141 million available under its $160 million of unsecured revolving credit
facilities. On March 31, 1997, the Company also had 94 operating properties with
$29.6 million or 74.6% of the total revenue for the three month period ended
March 31, 1997 which were unencumbered thereby providing a potential collateral
base for future borrowings.
INFLATION
Substantially all of the Company's long-term leases contain provisions
designed to mitigate the adverse impact of inflation. Such provisions include
clauses enabling the Company to receive percentage rentals based on tenants'
gross sales, which generally increase as prices rise, and/or escalation clauses,
which generally increase rental rates during the terms of the leases. Such
escalation clauses are often related to increases in the consumer price index or
similar inflation indices. In addition, many of the Company's leases are for
terms of less than ten years, which permits the Company to seek increased rents
upon re-rental at market rates. Most of the Company's leases require the tenants
to pay their share of operating expenses, including common area maintenance,
real estate taxes, insurance and utilities, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
-15-
<PAGE> 16
At March 31, 1997, approximately 95.4% of the Company's debt (not
including joint venture debt) bore interest at fixed rates with a weighted
average maturity of approximately 4.6 years and a weighted average interest rate
of approximately 7.8%. The remainder of the Company's debt bears interest at
variable rates, with a weighted average maturity of approximately 3.3 years and
a weighted average interest rate of approximately 8.4%. As of March 31, 1997 the
Company's Community Center Joint Ventures had variable rate debt aggregating
approximately $326.0 million in the form of bridge loans which are scheduled to
be converted to long-term fixed rate debt through securitizations. The Company's
OSTRS Joint Venture has variable rate debt aggregating $24.3 million. The
Company's joint venture in San Antonio, Texas has variable rate debt aggregating
$26.7 million. The Company intends to utilize variable rate indebtedness
available under its revolving credit facilities to initially fund future
acquisitions of shopping centers. Thus, to the extent that the Company incurs
additional variable rate indebtedness, its exposure to increases in interest
rates in an inflationary period would increase. The Company believes, however,
that in no event would increases in interest expenses as a result of inflation
significantly impact the Company's distributable cash flow.
The Community Center Joint Ventures have entered into swap agreements
with major financial institutions as a hedge against increasing interest rates
associated with the joint ventures' proposed upcoming long term financing. The
Company intends to continuously monitor and actively manage interest costs on
its variable rate debt portfolio and may enter into swap positions based on
market fluctuations. In addition, the Company believes that it has the ability
to obtain funds through additional equity and/or debt offerings, including the
issuance of medium term notes. Accordingly, the cost of obtaining such
protection agreements in relation to the Company's access to capital markets
will continue to be evaluated.
ECONOMIC CONDITIONS
Many regions of the United States, including regions in which the
Company owns property, have experienced varying degrees of economic recession. A
continuation of the economic recession, or further adverse changes in general or
local economic conditions, could result in the inability of some existing
tenants of the Company to meet their lease obligations and could otherwise
adversely affect the Company's ability to attract or retain tenants. The
shopping centers are typically anchored by discount department stores (usually
Wal-Mart, Kmart or J.C. Penney), supermarkets, and drug stores which usually
offer day-to-day necessities, rather than high-priced luxury items. Since these
merchants typically perform better in an economic recession than those who
market high priced luxury items, the percentage rents received by the Company
have remained relatively stable. In addition, the Company seeks to reduce its
operating and leasing risks through ownership of a portfolio of properties with
a diverse geographic and tenant base.
During 1996 and 1997, certain national and regional retailers
experienced financial difficulties and several have filed for protection under
bankruptcy laws. Although the Company has experienced an increase in the number
of tenants filing for protection under bankruptcy laws, no significant
bankruptcies have occurred through May 12, 1997 with regard to the Company's
portfolio of tenants.
-16-
<PAGE> 17
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not presently involved in any material litigation nor,
to its knowledge, is any material litigation threatened against the Company or
its properties, other than routine litigation arising in the ordinary course of
business and which is expected to be covered by the Company's liability
insurance.
ITEM 2. MATERIAL MODIFICATIONS OF RIGHTS OF REGISTRANT'S SECURITIES
None
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER EVENTS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits -
4.1 Second amendment to credit agreement between the Company and
the First National Bank of Chicago and the First National Bank
of Boston
11.1 Earnings per Share
27 (a) Financial Data Schedule
b) Reports on Form 8-K
Date of Report Items Reported
-------------- --------------
January 13, 1997 Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits
-17-
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
May 15, 1997 /s/ Scott A. Wolstein
- ---------------------------- ---------------------------------------
(Date) Scott A. Wolstein, President and
Chief Executive Officer
May 15, 1997 /s/ William H. Schafer
- ---------------------------- ---------------------------------------
(Date) William H. Schafer, Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
-18-
<PAGE> 1
Exhibit 4.1
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
This SECOND AMENDMENT TO CREDIT AGREEMENT dated as of March 31, 1997 is
among Developers Diversified Realty Corporation, a corporation organized under
the laws of the State of Ohio (the "Borrower"), The First National Bank of
Chicago, a national banking association, and The First National Bank of Boston,
a national banking association (collectively, the "Arrangers"), the several
banks, financial institutions and other entities from time to time parties to
this Agreement (collectively, with the Arrangers, the "Lenders"), and The First
National Bank of Chicago, not individually, but as "Administrative Agent".
R E C I T A L S
A. Borrower, the Lenders and the Administrative Agent have entered into
a Credit Agreement dated as of May 1, 1995, as amended by First Amendment to
Credit Agreement dated as of June 18, 1996 (the "Credit Agreement").
B. Borrower has requested that the Lenders agree to extend the term of
the Credit Agreement for one additional year, amend the interest rates
thereunder and make certain other modifications to the Credit Agreement and the
Lenders are willing to agree to such modifications on the terms and conditions
described herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the parties agree as follows:
1. Article I of the Credit Agreement entitled "Definitions" is hereby
amended by amending and restating the following definitions as follows:
"Consolidated Capitalization Value" means, as of any date, an amount
equal to the sum of (i) Consolidated Cash Flow for the most recent period of two
consecutive fiscal quarters for which the Borrower has reported results under
SECTION 6.1 (excluding any portion of Consolidated Cash Flow attributable to
Assets Under Development and Projects acquired by the Borrower or its
Subsidiaries during such period) MULTIPLIED BY 2, and DIVIDED BY 0.095 PLUS (ii)
with respect to each Project so acquired by the Borrower or its Subsidiaries
during such period, the Borrower's estimated annual Net Operating Income for
such Project based on leases in existence at the date of such acquisition
DIVIDED BY 0.095.
"Facility Termination Date" means April 30, 2000.
"Interest Period" means an Absolute Interest Period, a CD Interest
Period or a LIBOR Interest Period.
"LIBOR Advance" means an Advance that bears interest at the LIBOR Rate,
whether a ratable Advance based on the LIBOR Applicable Margin or a Competitive
Bid Loan based on a Competitive LIBOR Margin.
"LIBOR Rate" means, with respect to a LIBOR Advance for the relevant
LIBOR Interest Period, the sum of (i) the quotient of (a) the Base LIBOR Rate
applicable to such
<PAGE> 2
LIBOR Interest Period, divided by (b) one minus the Reserve Requirement
(expressed as a decimal) applicable to such LIBOR Interest Period, plus (ii) in
the case of ratable LIBOR Advances, the LIBOR Applicable Margin in effect from
time to time during such LIBOR Interest Period, or in the case of LIBOR Advances
made as Competitive Bid Loans, the Competitive LIBOR Margin established in the
Competitive Bid Quote applicable to such Competitive Bid Loan. The LIBOR Rate
shall be rounded to the next higher 1/100 of 1% if the rate is not a multiple of
1/16 of 1% or 1/100 of 1%.
2. Article I of the Credit agreement entitled "Definitions" is hereby
further amended by adding the following new definitions:
"Absolute Interest Period" means, with respect to a Competitive Bid
Loan made at an Absolute Rate, a period of up to 180 days as requested by
Borrower in a Competitive Bid Quote Request and confirmed by a Lender in a
Competitive Bid Quote but in no event extending beyond the Facility Termination
Date. If an Absolute Interest Period would end on a day which is not a Business
Day, such Absolute Interest Period shall end on the next succeeding Business
Day.
"Absolute Rate" means a fixed rate of interest (rounded to the nearest
1/100 of 1%) for an Absolute Interest Period with respect to a Competitive Bid
Loan offered by a Lender and accepted by the Borrower at such rate.
"Competitive Bid Borrowing Notice" is defined in SECTION 2.23(e).
"Competitive Bid Lender" means a Lender which has a Competitive Bid
Loan outstanding.
"Competitive Bid Loan" is a Loan made pursuant to SECTION 2.22 hereof.
"Competitive Bid Note" means the promissory note payable to the order
of each Lender in the form attached hereto as EXHIBIT H to be used to evidence
any Competitive Bid Loans which such Lender elects to make (collectively, the
"Competitive Bid Notes").
"Competitive Bid Quote" means a response submitted by a Lender to the
Administrative Agent or the Borrower, as the case may be with respect to an
Invitation for Competitive Bid Quotes in the form attached as EXHIBIT I-3 or
J-2.
"Competitive Bid Quote Request" means a written request from Borrower
to Administrative Agent in the form attached as EXHIBIT I-1.
"Competitive LIBOR Margin" means, with respect to any Competitive Bid
Loan for a LIBOR Interest Period, the percentage established in the applicable
Competitive Bid Quote which is to be used to determine the interest rate
applicable to such Competitive Bid Loan.
"Funded Percentage" means, with respect to any Lender at any time, a
percentage equal to a fraction the numerator of which is the amount actually
disbursed and outstanding to
-2-
<PAGE> 3
Borrower by such Lender at such time (including Swingline Loans and Bid Loans),
and the denominator of which is the total amount disbursed and outstanding to
Borrower by all of the Lenders at such time (including Swingline Loans and Bid
Loans).
"Invitation for Competitive Bid Quotes" means a written notice to the
Lenders from the Administrative Agent in the form attached as EXHIBIT I-2 for
Competitive Bid Loans made pursuant to SECTION 2.23, and a written notice to the
Lenders from the Borrower in the form of EXHIBIT J-1 for Competitive Bid Loans
made pursuant to SECTION 2.24.
"Maximum Legal Rate" means the maximum nonusurious interest rate, if
any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the indebtedness evidenced by the Note and as
provided for herein or in the Note or other Loan Documents, under the laws of
such state or states whose laws are held by any court of competent jurisdiction
to govern the interest rate provisions of the Loan.
"Percentage" means for each Lender the ratio that such Lender's
Commitment bears to the Aggregate Commitment, expressed as a percentage.
"Swingline Advances" means, as of any date, collectively, all Swingline
Loans then outstanding under this Facility.
"Swingline Lender" shall mean Administrative Agent, in its capacity as
a Lender.
"Swingline Loans" means loans of up to $10,000,000 made by the
Swingline Lender in accordance with SECTION 2.21 hereof.
3. Section 2.1 of the Credit Agreement is hereby amended by restating
the first grammatical paragraph as follows:
Subject to the terms and conditions of this
Agreement, Lenders severally agree to make Advances through
the Administrative Agent to Borrower from time to time prior
to the Facility Termination Date, PROVIDED THAT the making of
any such Advance will not cause the outstanding principal
balance of all Loans (including all Advances, Swingline Loans
and Competitive Bid Loans) to exceed the then-current
Aggregate Commitment. The Advances may be ratable Floating
Rate Advances, ratable Fixed Rate Advances, non-pro rata
Swingline Loans or non-pro rata Competitive Bid Loans. Except
for Swingline Loans and Competitive Bid Loans, each Lender
shall fund its Percentage of each such Advance and no Lender
will be required to fund any amounts which when aggregated
with such Lender's Percentage of (i) all other Advances (other
than Competitive Bid Loans) then outstanding and (ii) all
Swingline Advances would exceed such Lender's then-current
Commitment. This facility ("FACILITY") is a revolving credit
facility and, subject to the provisions of this Agreement,
Borrower may request
-3-
<PAGE> 4
Advances hereunder, repay such Advances and reborrow Advances
at any time prior to the Facility Termination Date.
4. Section 2.3 of the Credit Agreement is amended and restated as
follows:
Each Advance hereunder shall consist of Loans made
from the several Lenders ratably in proportion to their
respective Percentages, except for Swingline Loans which shall
be made by the Swingline Lender in accordance with SECTION
2.21 and Competitive Bid Loans which may be made on a non-pro
rata basis by one or more of the Lenders in accordance with
SECTIONS 2.23 and 2.24.
5. Section 2.4 of the Credit Agreement is hereby amended by deleting
the first sentence and the table contained therein and replacing it with the
following:
Each of the ABR Applicable Margin, the CD Applicable
Margin and the LIBOR Applicable Margin to be used in
calculating the interest rate applicable to different Types of
Advances shall vary from time to time in accordance with the
higher of Borrower's then applicable (x) Moody's debt rating
and (y) S&P's debt rating, as the case may be, and the
Applicable Margin shall be adjusted effective on the next
Business Day following any change in Borrower's Moody's debt
rating and/or S&P's debt rating, as the case may be. The
applicable debt ratings and the Applicable Margins are set
forth in the following table:
<TABLE>
<CAPTION>
LIBOR/CD ABR
APPLICABLE APPLICABLE
S&P RATING MOODY'S RATING MARGIN MARGIN
------------- -------------- ---------- ----------
<S> <C> <C> <C>
A- or higher A3 or higher 0.90% 0.00%
BBB+ Baa1 1.00% 0.00%
BBB Baa2 1.10% 0.00%
BBB- Baa3 1.25% 0.25%
Less than BBB- Less than Baa3 1.45% 0.45%
</TABLE>
6. Section 2.5 of the Credit Agreement is hereby amended by deleting
the first sentence thereof and replacing it with the following:
"The Borrower agrees to Pay to the Administrative
Agent for the account of each Lender a commitment fee (the
"COMMITMENT FEE") calculated at the rate of 0.20% per annum on
the daily unborrowed portion of such Lender's Commitment
(which is equal to the daily difference between such Lender's
then outstanding Commitment and the then outstanding Loans
owed to such Lender) from the effective date of
-4-
<PAGE> 5
the Second Amendment to this Agreement to and including the
Facility Termination Date, payable quarterly in arrears on the
last day of each calendar quarter hereafter beginning June 30,
1997 and on the Facility Termination Date. Amounts owed to a
Lender in connection with Competitive Bid Loans shall not
constitute outstanding Loans owed to such Lender for purposes
of calculating the Commitment Fee.
7. Section 2.6 of the Credit Agreement is hereby amended by adding the
following sentence:
The Borrower shall also pay the fee due to the
Administrative Agent in connection with certain Competitive
Bid Loans as provided in SECTION 2.23 hereof.
8. Section 2.8 of the Credit Agreement is hereby amended by adding the
following sentence:
Notwithstanding the foregoing, in no event shall Borrower have
the right to prepay a Competitive Bid Loan without the consent
of the applicable Competitive Bid Lender.
9. Section 2.9 of the Credit Agreement is hereby restated as follows:
"The Borrower shall select the Type of Advance and,
in the case of each Fixed Rate Advance, the Interest Period
applicable to each Advance from time to time. The Borrower
shall give the Administrative Agent irrevocable notice (a
"Borrowing Notice") (i) not later am 9:00 a.m. Chicago time on
the Borrowing Date of each Floating Rate Advance, (ii) not
later than 10:00 a.m. Chicago time, at least one (1) Business
Day before the Borrowing Date for each Fixed CD Rate Advance,
(iii) not later than 10:00 a.m. Chicago time, at least three
(3) Business Days before the Borrowing Date for each LIBOR
Advance, and (iv) not later than 2:00 p.m. Chicago time on the
Borrowing Date for each Swingline Loan, specifying:
(a) the Borrowing Date, which shall be a Business
Day, of such Advance,
(b) the aggregate amount of such Advance,
(c) the Type of Advance selected (which must be a
Floating Rate Advance in the case of the Swingline
Loans), and
(d) in the case of each Fixed Rate Advance, the
Interest Period applicable thereto.
-5-
<PAGE> 6
The Administrative Agent shall advise the Lenders of
the contents of any Borrowing Notice requesting a LIBOR
Advance at least two Business Days prior to the applicable
Borrowing Date and shall provide a copy of each Borrowing
Notice to the Lenders on or promptly after the Borrowing Date.
Each Lender shall make available its Loan or Loans, in funds
immediately available in Chicago to the Administrative Agent
at its address specified pursuant to ARTICLE XIII on each
Borrowing Date not later than (i) 10:00 a.m. (Chicago time),
in the case of Floating Rate Advances which have been
requested by a Borrowing Notice given to the Administrative
Agent not later than 3:00 p.m. (Chicago time) on the Business
Day immediately preceding such Borrowing Date, or (ii) noon
(Chicago time) in the case of all other Advances (other than
Swingline Loans), and 4:00 p.m. (Chicago time) for all
Swingline Loans. The Administrative Agent will make the funds
so received from the Lenders available to the Borrower at the
Administrative Agent's aforesaid address.
No Interest Period may end after the Facility
Termination Date and, unless the Lenders otherwise agree in
writing, in no event may there be more than five (5) different
Interest Periods for LIBOR Advances outstanding at any one
time.
10. Article II of the Credit Agreement is amended by adding the
following new Sections:
2.21 SWINGLINE LOANS. In addition to the other
options available to Borrower hereunder, up to $10,000,000 of
the Swingline Lender's Commitment, shall be available for
Swingline Loans subject to the following. terms and
conditions. Swingline Loans shall be made available for same
day borrowings provided that notice is given in accordance
with SECTION 2.9 hereof. All Swingline Loans shall bear
interest at the Floating Rate and shall be deemed to be
Floating Rate Advances. In no event shall the Swingline Lender
be required to fund a Swingline Loan if it would increase the
total aggregate outstanding Loans (including Swingline Loans
but not including Competitive Bid Loans) by Swingline Lender
hereunder to an amount in excess of its Commitment. Upon
request of the Swingline Lender made to all the Lenders, each
Lender irrevocably agrees to purchase its Percentage of any
Swingline Loan made by the Swingline Lender regardless of
whether the conditions for disbursement are satisfied at the
time of such purchase, including the existence of an Event of
Default hereunder provided no Lender shall be required to have
total outstanding Loans (other than Competitive Bid Loans) in
an amount greater than its Commitment. Such purchase shall
take place on the date of the request by Swingline Lender so
long as such request is made by noon (Chicago time), otherwise
on the Business Day following such request. All
-6-
<PAGE> 7
requests for purchase shall be in writing. From and after the
date it is so purchased, each such Swingline Loan shall, to
the extent purchased, (i) be treated as a Loan made by the
purchasing Lenders and not by the selling Lender for all
purposes under this Agreement and the payment of the purchase
price by a Lender shall be deemed to be the making of a Loan
by such Lender and shall constitute outstanding principal
under such Lender's Note, and (ii) shall no longer be
considered a Swingline Loan except that all interest accruing
on or attributable to such Swingline Loan for the period prior
to the date of such purchase shall be paid. when due by the
Borrower to the Administrative Agent for the benefit of the
Swingline Lender and all such amounts accruing on or
attributable to such Loans for the period from and after the
date of such purchase shall be paid when due by the Borrower
to the Administrative Agent for the benefit of the purchasing
Lenders. If prior to purchasing its Percentage of a Swingline
Loan one of the events described in SECTION 7.7 OR 7.8 shall
have occurred and such event prevents the consummation of the
purchase contemplated by preceding provisions, each Lender
will purchase an undivided participating interest in the
outstanding Swingline Loan in an amount equal to its
Percentage of such Swingline Loan. From and after the date of
each Lender's purchase of its participating interest in a
Swingline Loan, if the Swingline Lender receives any payment
on account thereof, the Swingline Lender will distribute to
such Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Lender's
participating interest was outstanding and funded); provided,
however, that in the event that such payment was received by
the Swingline Lender and is required to be returned to the
Borrower, each Lender will return to the Swingline Lender any
portion thereof previously distributed by the Swingline Lender
to it. If any Lender fails to so purchase its Percentage of
any Swingline Loan, such Lender shall be deemed to be a
Defaulting Lender hereunder. No Swingline Loan shall be
outstanding for more than five (5) days at a time and
Swingline Loans shall not be outstanding for more than a total
of ten (10) days during any month.
2.22 Competitive Bid Loans.
---------------------
(a) COMPETITIVE BID OPTION. In addition to ratable
Advances pursuant to SECTION 2.3, but subject to the terms and
conditions of this Agreement (including, without limitation
the limitation set forth in SECTION 2.1 as to the maximum
amount of all outstanding Advances, including Swingline Loans
and Competitive Bid Loans), the Borrower may, as set forth in
SECTIONS 2.23 or 2.24, request the Lenders, prior to the
Facility Termination Date, to make offers to make Competitive
Bid Loans to the Borrower. Each Lender may, but shall have no
obligation to, make such offers and the Borrower may, but
shall have no obligation
-7-
<PAGE> 8
to, accept any such offers in the manner set forth in SECTION
2.23 or SECTION 2.24, as the case may be. Competitive Bid
Loans shall be evidenced by the Competitive Bid Notes.
Borrower shall not have the right to request a Competitive Bid
Loan at any time that a Default exists. If Borrower elects to
have Administrative Agent administer the Competitive Bid Loan
process, the procedures set forth in SECTION 2.23 shall apply.
If Borrower elects to administer the Competitive Bid Loan
process itself, the procedures set forth in SECTION 2.24 shall
apply.
(b) GENERAL TERMS. Any Competitive Bid Loan shall not
reduce the Commitment of the Lender making such Competitive
Bid Loan, and each such Lender shall continue to be obligated
to fund its full Percentage of all pro rata Advances under the
Facility. In no event can the aggregate amount of all
Competitive Bid Loans at any time exceed fifty percent (50%)
of the then Aggregate Commitment. Notwithstanding anything to
the contrary in SECTION 2.10, Competitive Bid Loans may not be
continued or converted and, if not repaid at the end of the
Interest Period applicable thereto, shall (subject to the
conditions set forth in this Agreement) be replaced by new
Competitive Bid Loans made in accordance with SECTION 2.23 or
SECTION 2.24 or by ratable Advances in accordance with SECTION
2.9.
(c) FUNDING OF COMPETITIVE BID LOANS. Each Lender
that is to make a Competitive Bid Loan shall, before 2:00 p.m.
(Chicago time) on the date of such Competitive Bid Loan
specified in the notice received from the Borrower make
available the amount of such Competitive Bid Loan to the
Administrative Agent. Upon fulfillment of the applicable
conditions to disbursement and after receipt of such funds,
the Administrative Agent will make such funds available to the
Borrower at the Administrative Agent's aforesaid address.
2.23 Agent Administered Competitive Bid Loans.
----------------------------------------
(a) COMPETITIVE BID QUOTE REQUEST. When the Borrower
wishes to request offers to make Competitive Bid Loans under
this SECTION 2.23, it shall transmit to the Administrative
Agent by telecopy a Competitive Bid Quote Request
substantially in the form of EXHIBIT I-1 hereto so as to be
received no later than (i) 10:00 a.m. (Chicago time) at least
five Business Days prior to the Borrowing Date proposed
therein, in the case of a request for a Competitive LIBOR
Margin or (ii) 9:00 a.m. (Chicago time) at least one Business
Day prior to the Borrowing Date proposed therein, in the case
of a request for an Absolute Rate specifying:
(i) the proposed Borrowing Date for the
proposed Competitive Bid Loan,
-8-
<PAGE> 9
(ii) the requested aggregate principal
amount of such Competitive Bid Loan which shall be at
least $5,000,000 and in an integral multiple of
$1,000,000,
(iii) whether the Competitive Bid Quotes
requested are to set forth a Competitive LIBOR Margin
or an Absolute Rate, or both, and
(iv) the LIBOR Interest Period, if a
Competitive LIBOR Margin is requested, or the
Absolute Interest Period, if an Absolute Rate is
requested.
The Borrower may request offers to make Competitive Bid Loans
for more than one (but not more than five) Interest Periods in
a single Competitive Bid Quote Request. No Competitive Bid
Quote Request shall be given within five Business Days (or
such other number of days as the Borrower and the
Administrative Agent may agree) of any other Competitive Bid
Quote Request or Invitation for Competitive Bid Quotes. A
Competitive Bid Quote Request that does not conform
substantially to the form of EXHIBIT I-1 hereto shall be
rejected, and the Administrative Agent shall promptly notify
the Borrower of such rejection by telecopy.
(b) INVITATION FOR COMPETITIVE BID QUOTES. Promptly
and in any event before the close of business on the same
Business Day of receipt of a Competitive Bid Quote Request
that is not rejected pursuant to SECTION 2.23(a), the
Administrative Agent shall send to each of the Lenders by
telecopy an Invitation for Competitive Bid Quotes
substantially in the form of EXHIBIT I-2 hereto, which shall
constitute an invitation by the Borrower to each Lender to
submit Competitive Bid Quotes offering to make the Competitive
Bid Loans to which such Competitive Bid Quote Request relates
in accordance with this SECTION 2.23.
(c) Submission of Contents of Competitive Bid Quotes.
-------------------------------------------------
(i) Each Lender may, in its sole discretion,
submit a Competitive bid Quote containing an offer or
offers to make Competitive Bid Loans in response to
any Invitation for Competitive Bid Quotes. Each
Competitive Bid Quote must comply with the
requirements of this SECTION 2.23(c) and must be
submitted to the Administrative Agent by telex or
telecopy at its
-9-
<PAGE> 10
offices not later than (a) 2:00 p.m. (Chicago time)
at least four Business Days prior to the proposed
Borrowing Date, in the case of a request for a
Competitive LIBOR Margin or (b) 9:00 a.m. (Chicago
time) on the proposed Borrowing Date, in the case of
a request for an Absolute Rate (or, in either case
upon reasonable prior notice to the Lenders, such
other time and rate as the Borrower and the
Administrative Agent may agree); PROVIDED that
Competitive Bid Quotes submitted by First Chicago may
only be submitted if the Administrative Agent or
First Chicago notifies the Borrower of the terms of
the offer or offers contained therein no later than
30 minutes prior to the latest time at which the
relevant Competitive Bid Quotes must be submitted by
the other Lenders. Subject to the Borrower's
compliance with all other conditions to disbursement
herein, any Competitive Bid Quote so made shall be
irrevocable except with the written consent of the
Administrative Agent given on the instructions of the
Borrower.
(ii) Each Competitive Bid Quote shall be in
substantially the form of EXHIBIT I-3 hereto and
shall in any case specify:
(a) the proposed Borrowing Date,
which shall be the same as that set forth in
the applicable Invitation for Competitive
Bid Quotes,
(b) the principal amount of the
Competitive Bid Loan for which each such
offer is being made, which principal amount
(1) may be greater than, less than or equal
to the Commitment of the quoting Lender, (2)
must be at least $5,000,000 and an integral
multiple of $1,000,000, and (3) may not
exceed the principal amount of Competitive
Bid Loans for which offers are requested,
(c) as applicable, the Competitive
LIBOR Margin and Absolute
-10-
<PAGE> 11
Rate offered for each such Competitive Bid
Loan,
(d) the minimum amount, if any, of
the Competitive Bid Loan which may be
accepted by the Borrower, and
(e) the identity of the quoting
Lender.
(iii) The Administrative Agent shall reject
any competitive Bid Quote that:
(a) is not substantially in the form
of EXHIBIT I-3 hereto or does not specify
afl of the information required by SECTION
2.23(c)(ii),
(b) contains qualifying, conditional
or similar language, other than any such
language contained in EXHIBIT I-3 hereto,
(c) proposes terms other than or in
addition to those set forth in the
applicable Invitation for Competitive Bid
Quotes, or
(d) arrives after the time set forth
in SECTION 2.23(c)(i).
If any Competitive Bid Quote shall be rejected pursuant to
this SECTION 2.23(c)(iii), then the Administrative Agent shall
notify the relevant Lender of such rejection as soon as
practical.
(d) NOTICE TO BORROWER. The Administrative Agent
shall promptly notify the Borrower of the terms (i) of any
Competitive Bid Quote submitted by a Lender that is in
accordance with SECTION 2.23(c) and (ii) of any Competitive
Bid Quote that amends, modifies or is otherwise inconsistent
with a previous Competitive Bid Quote submitted by such Lender
with respect to the same Competitive Bid Quote Request. Any
such subsequent Competitive Bid Quote shall be disregarded by
the Administrative Agent unless such subsequent Competitive
Bid Quote specifically states that it is submitted solely to
correct a manifest error in such former Competitive Bid Quote.
The Administrative Agent's notice to the Borrower shall
specify the
-11-
<PAGE> 12
aggregate principal amount of Competitive Bid Loans for which
offers have been received for each Interest Period specified
in the related Competitive Bid Quote Request and the
respective principal amounts and Competitive LIBOR Margins or
Absolute Rate, as the case may be, so offered.
(e) ACCEPTANCE AND NOTICE BY BORROWER. Not later than
(i) 6:00 p.m. (Chicago time) at least four Business Days prior
to the proposed Borrowing Date in the case of a request for a
Competitive LIBOR Margin or (ii) 10:00 a.m. (Chicago time) on
the proposed Borrowing Date, in the case of a request for an
Absolute Rate (or, in either case upon reasonable prior notice
to the Lenders, such other time and date as the Borrower and
the Administrative Agent may agree), the Borrower shall notify
the Administrative Agent of its acceptance or rejection of the
offers so notified to it pursuant to SECTION 2.23(d),
PROVIDED, HOWEVER, that the failure by the Borrower to give
such notice to the Administrative Agent shall be deemed to be
a rejection of all such offers. In the case of acceptance,
such notice (a "COMPETITIVE BID BORROWING NOTICE") shall
specify the aggregate principal amount of offers for each
Interest Period that are accepted and the applicable interest
rate. The Borrower may accept any Competitive Bid Quote in
whole or in part (subject to the terms of SECTION
2.23(c)(iii)); PROVIDED that:
(i) the aggregate principal amount of all
Competitive Bid Loans to be disbursed on a given
Borrowing Date may not exceed the applicable amount
set forth in the related Competitive Bid Quote
Request,
(ii) acceptance of offers may only be made
on the basis of ascending Competitive LIBOR Margins
or Absolute Rates, as the case may be, and
(iii) the Borrower may not accept any offer
that is described in SECTION 2.23(c)(iii) or that
otherwise fails to comply with the requirements of
this Agreement.
(f) ALLOCATION BY ADMINISTRATIVE AGENT. If offers are
made by two or more Lenders with the same Competitive LIBOR
Margins or Absolute Rates, as the case may be, for a greater
aggregate principal amount than the amount in respect of which
offers are accepted for the related Interest Period, the
principal amount of Competitive Bid Loans in respect of which
such offers are accepted shall be allocated by the
-12-
<PAGE> 13
Administrative Agent among such Lenders as nearly as possible
(in such multiples, not greater than $1,000,000, as the
Administrative Agent may deem appropriate) in proportion to
the aggregate principal amount of such offers PROVIDED,
however, that no Lender shall be allocated any Competitive Bid
Loan which is less than the minimum amount which such Lender
has indicated that it is willing to accept. Allocations by the
Administrative Agent of the amounts of Competitive Bid Loans
shall be conclusive in the absence of manifest error. The
Administrative Agent shall promptly, but in any event on the
same Business Day, notify each Lender of its receipt of a
Competitive Bid Borrowing Notice and the principal amounts of
the Competitive Bid Loans allocated to each participating
Lender.
(g) ADMINISTRATION FEE. The Borrower hereby agrees to
pay to the Administrative Agent an administration fee of
$2,500 per each Competitive Bid Quote Request transmitted by
the Borrower to the Administrative Agent pursuant to SECTION
2.23(a). Such administration fees, if not paid at the time of
the applicable Competitive Bid Quote Request shall be payable
monthly in arrears on the first Business Day of each month and
on the Facility Termination Date (or such earlier date on
which the Aggregate Commitment shall terminate or be
cancelled).
2.24 Competitive Bid Loans Administered By Borrower.
----------------------------------------------
(a) COMPETITIVE BID QUOTE REQUEST. When the Borrower
wishes to request offers to make Competitive Bid Loans under
this SECTION 2.24, it shall transmit to the Lenders and
Administrative Agent by telecopy an Invitation for Competitive
Bid Quote substantially in the form of EXHIBIT J-1 hereto so
as to be received no later than (i) 10:00 a.m. (Chicago time)
at least five Business Days prior to the Borrowing Date
proposed therein, in the case of a request for a Competitive
LIBOR Margin or (ii) 9:00 a.m. (Chicago time) at least one
Business Day prior to the Borrowing Date proposed therein, in
the case of a request for an Absolute Rate specifying:
(i) the proposed, Borrowing Date for the
proposed Competitive Bid Loan,
(ii) the requested aggregate principal
amount of such Competitive Bid Loan which shall be at
least $5,000,000 and in an integral multiple of
$1,000,000,
(iii) whether the Competitive Bid Quotes
requested are to set forth a Competitive LIBOR Margin
or an Absolute Rate, or both, and
-13-
<PAGE> 14
(iv) the LIBOR Interest Period, if a
Competitive LIBOR Margin is requested, or the
Absolute Interest Period, if an Absolute Rate is
requested.
The Borrower may request offers to make Competitive Bid Loans
for more than one (but not more than five) Interest Periods in
a single Competitive Bid Quote. No Invitation for Competitive
Bid Quote shall be given within five Business Days (or such
other number of days as the Borrower and the Administrative
Agent may agree) of any other Invitation for Competitive Bid
Quote.
(b) Submission and Contents of Competitive Bid
------------------------------------------
Quotes.
-------
(i) Each Lender may, in its sole discretion,
submit a Competitive Bid Quote containing an offer or
offers to make Competitive Bid Loans in response to
any Invitation for Competitive Bid Quotes. Each
Competitive Bid Quote must comply with the
requirements of this SECTION 2.24(b) and must be
submitted to the Borrower by telex or telecopy at its
offices not later than (a) 2:00 p.m. (Chicago time)
at least four Business Days prior to the proposed
Borrowing Date, in the case of a request for a
Competitive LIBOR Margin or (b) 9:00 a.m. (Chicago
time) on the proposed Borrowing Date, in the case of
a request for an Absolute Rate (or, in either case
upon reasonable prior notice to the Lenders, such
other time and rate as the Borrower and the
Administrative Agent may agree). Subject to the
Borrower's compliance with all other conditions to
disbursement herein, any Competitive Bid Quote so
made shall be irrevocable except with the written
consent of the Administrative Agent given on the
instructions of the Borrower.
(ii) Each Competitive Bid Quote shall be in
substantially the form of EXHIBIT J-2 hereto and
shall in any case specify:
(a) the proposed Borrowing Date,
which shall be the same as that set forth in
the applicable Invitation for Competitive
Bid Quotes,
-14-
<PAGE> 15
(b) the principal amount of the
Competitive Bid Loan for which each such
offer is being made, which principal amount
(1) may be greater than, less than or equal
to the Commitment of the quoting Lender, (2)
must be at least $5,000,000 and an integral
multiple of $1,000,000, and (3) may not
exceed the principal amount of Competitive
Bid Loans for which offers are requested,
(c) as applicable, the Competitive
LIBOR Margin and Absolute Rate offered for
each such Competitive Bid Loan,
(d) the minimum amount, if any, of
the Competitive Bid Loan which may be
accepted by the Borrower, and
(e) the identity of the quoting
Lender.
(iii) The Borrower shall reject any
Competitive Bid Quote that:
(a) is not substantially in the form
of EXHIBIT J-2 hereto or does not specify
all of the information required by SECTION
2.24(b)(ii),
(b) contains qualifying, conditional
or similar language, other than any such
language contained in EXHIBIT J-2 hereto,
(c) proposes terms other than or in
addition to those set forth in the
applicable Invitation for Competitive Bid
Quotes, or
(d) arrives after the time set forth
in SECTION 2.24(b)(i).
-15-
<PAGE> 16
If any Competitive Bid Quote shall be rejected pursuant to this SECTION
2.24(b)(iii), then the Borrower shall notify the relevant Lender of
such rejection as soon as practical.
(c) ACCEPTANCE AND NOTICE BY BORROWER. Not later than
(i) 6:00 p.m. (Chicago time) at least four Business Days prior
to the proposed Borrowing Date in the case of a request for a
Competitive LIBOR Margin or (ii) 10:00 a.m. (Chicago time) on
the proposed Borrowing Date, in the case of a request for an
Absolute Rate (or, in either case upon reasonable prior notice
to the Lenders, such other time and date as the Borrower and
the Administrative Agent may agree), the Borrower shall notify
the Lenders and Administrative Agent of its acceptance or
rejection of the offers submitted to it pursuant to SECTION
2.24(b); PROVIDED, HOWEVER, that the failure by the Borrower
to give such notice to the Lenders and Administrative Agent
shall be deemed to be a rejection of all such offers. In the
case of acceptance, such notice to each Lender and the
Administrative Agent shall specify the aggregate principal
amount of offers for each Interest Period that are accepted
and the applicable interest rate. The Borrower may accept any
Competitive Bid Quote in whole or in part (subject to the
terms of SECTION 2.24(b)(iii)); PROVIDED that:
(i) the aggregate principal amount of all
Competitive Bid Loans to be disbursed on a given
Borrowing Date may not exceed the applicable amount
set forth in the related Invitation for Competitive
Bid Quote,
(ii) acceptance of offers may only be made
on the basis of ascending Competitive LIBOR Margins
or Absolute Rates, as the case may be, and
(iii) the Borrower may not accept any offer
that is described in SECTION 2.24(b)(iii) or that
otherwise fails to comply with the requirements of
this Agreement.
(d) ALLOCATION BY BORROWER. If offers are made by two
or more Lenders with the same Competitive LIBOR Margins or
Absolute Rates, as the case may be, for a greater aggregate
principal amount than the amount in respect of which offers
are accepted for the related Interest Period, the principal
amount of Competitive Bid Loans in respect of which such
offers are accepted shall be allocated by the Borrower among
such Lenders as nearly as possible (in such multiples, not
greater than $1,000,000, as the Administrative Agent may deem
-16-
<PAGE> 17
appropriate) in proportion to the aggregate principal amount
of such offers PROVIDED, however, that no Lender shall be
allocated any Competitive Bid Loan which is less than the
minimum amount which such Lender has indicated that it is
willing to accept. Allocations by the Borrower of the amounts
of Competitive Bid Loans shall be conclusive in the absence of
manifest error.
2.25 APPLICATION OF MONEYS RECEIVED. All moneys
collected or received by the Administrative Agent on account
of the Facility directly or indirectly, shall be applied in
the following order of priority:
(i) to the payment of all reasonable costs
incurred in the collection of such moneys of which
the Administrative Agent shall have given notice to
the Borrower;
(ii) to the reimbursement of any yield
protection due to any of the Lenders in accordance
with SECTION 3.1;
(iii) to the payment of the Commitment Fee
to the Lenders, if then due, and to the payment of
all fees to the Administrative Agent;
(iv) to payment of the full amount of
interest and principal on the Swingline Loans;
(v) first to interest until paid in full and
then to principal for all Lenders (other than
Defaulting Lenders) (i) as allocated by the Borrower
(unless an Event of Default exists) between
Competitive Bid Loans and ratable Advances (the
amount allocated to ratable Advances to be
distributed in accordance with the Percentages of the
Lenders) or (ii) if an Event of Default exists, in
accordance with the respective Funded Percentages of
the Lenders;
(vi) any other sums due to the
Administrative Agent or any Lender under any of the
Loan Documents; and
(vii) to the payment of any sums due to each
Defaulting Lender as their respective Percentages
appear (provided that Administrative Agent shall have
the right to set-off against such
-17-
<PAGE> 18
sums any amounts due from such Defaulting Lender).
2.26. USURY. This Agreement and each Note and
Competitive Bid Note are subject to the express condition that
at no time shall Borrower be obligated or required to pay
interest on the principal balance of the Loan at a rate which
could subject any Lender (including the Swingline Lender) to
either civil or criminal liability as a result of being in
excess of the Maximum Legal Rate. If by the terms of this
Agreement or the Loan Documents, Borrower is at any time
required or obligated to pay interest on the principal balance
due hereunder at a rate in excess of the Maximum Legal Rate,
the interest rate or the Default Rate, as the case may be,
shall be deemed to be immediately reduced to the Maximum Legal
Rate and all previous payments in excess of the Maximum Legal
Rate shall be deemed to have been payments in reduction of
principal and not on account of the interest due hereunder.
All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the sums due under the Loan,
shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full
stated term of the Loan until payment in full so that the rate
or amount of interest on account of the Loan does not exceed
the Maximum Legal Rate of interest from time to time in effect
and applicable to the Loan for so long as the Loan is
outstanding.
11. Section 3.4 of the Credit Agreement is hereby restated as follows:
If any payment of a ratable Fixed Rate Advance or a
Competitive Bid Loan occurs on a date which is not the last
day of the applicable Interest Period, whether because of
acceleration, prepayment or otherwise, or a ratable Fixed Rate
Advance or a Competitive Bid Loan is not made on the date
specified by Borrower for any reason other than default by one
or more of the Lenders, Borrower will indemnify each Lender
for any loss or cost incurred by it resulting therefrom,
including without limitation any loss or cost in liquidating
or employing deposits acquired to fund or maintain the ratable
Fixed Rate Advance or Competitive Bid Loan, as the case may
be. Without limitation of any losses arising from changes in
the Fixed Rate adverse to the Lenders, in no event will the
administrative cost payable by the Borrower as a result of
such early payment or failure to make an advance exceed $250
per occurrence per Lender. Nothing in this Section 3.4 shall
authorize the prepayment of a Competitive Bid Loan prior to
the end of the applicable Interest Period.
12. Section 4.2 of the Credit Agreement is amended by adding the phrase
"(including Swingline Loans and Competitive Bid Loans)" after the word
"Advance."
-18-
<PAGE> 19
13. Section 6.19 of the Credit Agreement is amended by deleting the
references therein to $175,000,000 and inserting in lieu thereof $225,000,000.
14. Section 6.21 (iii) of the Credit Agreement is modified to delete
the reference to "2.0" and insert in lieu thereof "1.75."
15. The Exhibits attached hereto as Exhibit H, Exhibit I-1, I-2, I-3,
and Exhibit J-1 and J-2 are hereby incorporated into the Credit Agreement as
such Exhibits.
16. Borrower hereby represents and warrants to the Lenders that:
(a) The Borrower has the corporate power and
authority and legal right to execute and deliver this
Amendment and each of the Notes to be executed and delivered
pursuant hereto and to perform its obligations thereunder. The
execution and delivery by the Borrower of this Amendment and
the other documents executed pursuant to this Amendment and
the other documents executed pursuant hereto in the
performance of its obligations hereunder have been duly
authorized by proper corporate proceedings, and such documents
constitute the legal valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with
their terms, except as enforceability may be limited by
bankruptcy, in solvency or similar law effecting the
enforcement of creditors rights generally;
-19-
<PAGE> 20
(b) each of the representations and warranties set
forth in Article V of the Credit Agreement is true and correct
in all material respects.
17. As of the effective date of this Amendment, BHF-Bank
Aktiengesesellschaft, New York Branch ("BHF") shall cease to be a Lender under
the Credit Agreement and BHF's Commitment of $16,000,000 shall be allocated
$9,000,000 to First Chicago, $4,000,000 to Fleet National Bank ("Fleet") and
$3,000,000 to Comerica Bank ("Comerica"), resulting in the Commitments of the
Lenders being as shown on the signature pages hereto as of the effective date of
this Amendment. The Notes held by First Chicago, and Fleet and Comerica shall be
amended and restated as of the effective date of this Amendment to reflect such
increases, in the form as shown on Exhibit A-1 attached hereto. All accrued
interest and fees due to BHF under the Credit Agreement for the period prior to
the effective date hereof shall be paid to BHF by the Borrower when due.
18. In consideration for their agreement to this Amendment, the
Borrower shall pay on the date hereof to each of the Lenders an upfront fee
equal to one-tenth of one percent (0.10%) of their respective Commitments on the
effective date hereof.
19. This Amendment may be executed in counterparts and shall be
effective when each of the parties hereto have executed and delivered to the
Administrative Agent or its counsel one of such counterparts.
20. Except as expressly modified by this Amendment, the Credit
Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative
Agent have executed this Amendment as of the date first above written.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Administrative Agent
$35,000,000
By:
---------------------------------
Its:
--------------------------------
-20-
<PAGE> 21
COMMITMENT: THE FIRST NATIONAL BANK OF BOSTON
$23,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: BANK OF AMERICA ILLINOIS
$20,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: BHF-BANK AKTIENGESELLSCHAFT, NEW YORK
BRANCH
Zero
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH
$16,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: FLEET NATIONAL BANK
$20,000,000
By:
---------------------------------
Its:
--------------------------------
-21-
<PAGE> 22
COMMITMENT: THE FIRST NATIONAL BANK OF BOSTON
$23,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: BANK OF AMERICA ILLINOIS
$20,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: BHF-BANK AKTIENGESELLSCHAFT, NEW YORK
BRANCH
Zero
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH
$16,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: FLEET NATIONAL BANK
$20,000,000
By:
---------------------------------
Its:
--------------------------------
-22-
<PAGE> 23
COMMITMENT: THE FIRST NATIONAL BANK OF BOSTON
$23,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: BANK OF AMERICA ILLINOIS
$20,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: BHF-BANK AKTIENGESELLSCHAFT, NEW YORK
BRANCH
Zero
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH
$16,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: FLEET NATIONAL BANK
$20,000,000
By:
---------------------------------
Its:
--------------------------------
-23-
<PAGE> 24
COMMITMENT: THE FIRST NATIONAL BANK OF BOSTON
$23,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: BANK OF AMERICA ILLINOIS
$20,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: BHF-BANK AKTIENGESELLSCHAFT, NEW YORK
BRANCH
Zero
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH
$16,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: FLEET NATIONAL BANK
$20,000,000
By:
---------------------------------
Its:
--------------------------------
-24-
<PAGE> 25
COMMITMENT: THE FIRST NATIONAL BANK OF BOSTON
$23,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: BANK OF AMERICA ILLINOIS
$20,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: BHF-BANK AKTIENGESELLSCHAFT, NEW YORK
BRANCH
Zero
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH
$16,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: FLEET NATIONAL BANK
$20,000,000
By:
---------------------------------
Its:
--------------------------------
-25-
<PAGE> 26
COMMITMENT: NIPPON CREDIT BANK, LTD.
$13,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: COMERICA BANK, a Michigan banking
corporation
$13,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: SIGNET BANK
$10,000,000
By:
---------------------------------
Its:
--------------------------------
-26-
<PAGE> 27
COMMITMENT: NIPPON CREDIT BANK, LTD.
$13,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: COMERICA BANK, a Michigan banking
corporation
$13,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: SIGNET BANK
$10,000,000
By:
---------------------------------
Its:
--------------------------------
-27-
<PAGE> 28
COMMITMENT: NIPPON CREDIT BANK, LTD.
$13,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: COMERICA BANK, a Michigan banking
corporation
$13,000,000
By:
---------------------------------
Its:
--------------------------------
COMMITMENT: SIGNET BANK
$10,000,000
By:
---------------------------------
Its:
--------------------------------
-28-
<PAGE> 29
CONSENT AND AMENDMENT TO GUARANTIES
The undersigned, Developers Diversified Finance Corporation and
Developers Diversified of Alabama, Inc., hereby consent to the foregoing
amendment and agree that their respective Guaranties dated as of May 1, 1995
shall continue in full force and effect, and that such Guaranties shall be
amended so that all references therein to the Notes shall include the
Competitive Bid Notes as defined in the foregoing Amendment.
DEVELOPERS DIVERSIFIED FINANCE
CORPORATION
By:
---------------------------------
Its:
--------------------------------
DEVELOPERS DIVERSIFIED OF ALABAMA, INC.
By:
---------------------------------
Its:
--------------------------------
-29-
<PAGE> 30
EXHIBIT A-1
-----------
FORM OF
AMENDED AND RESTATED NOTE
-------------------------
AMENDED AND RESTATED NOTE
$ March 31, 1997
------------
Developers Diversified Realty Corporation, a corporation organized
under the laws of the State of Ohio (the "Borrower"), promises to pay to the
order of ____________________________ (the "Lender") the lesser of the principal
sum of ______________ Million Dollars or the aggregate unpaid principal amount
of all Loans made by the Lender to the Borrower pursuant to Article II of the
Credit Agreement (as the same may be amended or modified, the "Agreement")
hereinafter referred to, in immediately available funds at the main office of
The First National Bank of Chicago in Chicago, Illinois, as Agent, together with
interest on the unpaid principal amount hereof at the rates and on the dates set
forth in the Agreement. The Borrower shall pay remaining unpaid principal of and
accrued and unpaid interest on the Loans in full on the Facility Termination
Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Credit Agreement, dated as of May 1, 1995, as amended by a
First Amendment to Credit Agreement dated as of June 18, 1996, and Second
Amendment to Credit Agreement dated as of March 31, 1997, among the Borrower,
The First National Bank of Chicago, individually and as an Arranger and the
Agent, The First National Bank of Boston, individually and as an Arranger, and
the other lenders named therein, to which Agreement, as it may be amended from
time to time, reference is hereby made for a statement of the terms and
conditions governing this Note, including the terms and conditions under which
this Note may be prepaid or its maturity date accelerated. Capitalized terms
used herein and not otherwise defined herein are used with the meanings
attributed to them in the Agreement.
This Note amends and restates in its entirety the Note dated June 18,
1996 in the maximum principal sum of $ ____________ executed by the Borrower in
favor of the Lender.
If there is a Default under the Agreement or any other Loan Document
and Agent exercises the remedies provided under the Agreement and/or any of the
Loan Documents for the Lenders, then in addition to all amounts recoverable by
the Agent and the Lenders under such documents, Agent and the Lenders shall be
entitled to receive reasonable attorneys fees and expenses incurred by Agent and
the Lenders in connection with the exercise of such remedies.
-30-
<PAGE> 31
Borrower and all endorsers severally waive presentment, protest and
demand, notice of protest, demand and of dishonor and nonpayment of this Note,
and any and all lack of diligence or delays in collection or enforcement of this
Note, and expressly agree that this Note, or any payment hereunder, may be
extended from time to time, and expressly consent to the release of any party
liable for the obligation secured by this Note, the release of any of the
security for this Note, the acceptance of any other security therefor, or any
other indulgence or forbearance whatsoever, all without notice to any party and
without affecting the liability of the Borrower and any endorsers hereof.
This Note shall be governed and construed under the internal laws of
the State of Illinois.
BORROWER AND LENDER, BY ITS ACCEPTANCE HEREOF, EACH HEREBY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHT UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR RELATING THERETO OR ARISING
FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS NOTE AND AGREE THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A
JURY.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION, an Ohio corporation
By:
------------------------------------
Print Name:
----------------------------
Its:
------------------------------------
-31-
<PAGE> 32
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF DEVELOPERS DIVERSIFIED REALTY CORPORATION,
DATED MARCH 31, 1997
Maturity
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- ---- ---- ------ ---- -------
-32-
<PAGE> 33
EXHIBIT H
---------
FORM OF COMPETITIVE BID NOTE
----------------------------
March 31, 1997
On or before the last day of each "Interest Period" applicable to a
"Competitive Bid Loan", as defined in that certain Credit Agreement dated as of
May 1, 1995, as amended (the "AGREEMENT") between DEVELOPERS DIVERSIFIED REALTY
CORPORATION, a Ohio corporation ("BORROWER"), The First National Bank of
Chicago, a national bank organized under the laws of the United States of
America, individually and as Administrative Agent for the Lenders (as such terms
are defined in the Agreement), Borrower promises to pay to the order of
____________ (the "Lender"), or its successors and assigns, the unpaid principal
amount of such Competitive Bid Loan made by the Lender to the Borrower pursuant
to SECTION 2.22 of the Agreement, in immediately available funds at the office
of the Administrative Agent in Chicago, Illinois, together with interest on the
unpaid principal amount hereof at the rates and on the dates set forth in the
Agreement. The Borrower shall pay any remaining unpaid principal amount of such
Competitive Bid Loans under this Competitive Bid Note ("NOTE") in full on or
before the Facility Termination in accordance with the terms of the Agreement.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date, amount and due date of each Competitive Bid Loan and the date and
amount of each principal payment hereunder.
This Note is issued pursuant to, and is entitled to the security under
and benefits of, the Agreement and the other Loan Documents, to which Agreement
and Loan Documents, as they may be amended from time to time, reference is
hereby made for, INTER ALIA, a statement of the terms and conditions under which
this Note may be prepaid or its maturity date accelerated. Capitalized terms
used herein and not otherwise defined herein are used with the meanings
attributed to them in the Agreement.
If there is an Event of Default or Default under the Agreement or any
other Loan Document and Lender exercises its remedies provided under the
Agreement and/or any of the Loan Documents, then in addition to all amounts
recoverable by the Lender under such documents, Lender shall be entitled to
receive reasonable attorneys fees and expenses incurred by Lender in exercising
such remedies.
Borrower and all endorsers severally waive presentment, protest and
demand, notice of protest, demand and of dishonor and nonpayment of this Note
(except as otherwise expressly provided for in the Agreement), and any and all
lack of diligence or delays in collection or enforcement of this Note, and
expressly agree that this Note, or any payment hereunder, may be extended from
time to time, and expressly consent to the release of any party liable for the
obligation secured by this Note, the release of any of the security of this
Note, the acceptance
-33-
<PAGE> 34
of any other security therefor, or any other indulgence or forbearance
whatsoever, all without notice to any party and without affecting the liability
of the Borrower and any endorsers hereof.
This Note shall be governed and construed under the internal laws of
the State of Illinois.
BORROWER AND LENDER, BY ITS ACCEPTANCE HEREOF, EACH HEREBY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHT UNDER THIS PROMISSORY NOTE OR ANY OTHER LOAN DOCUMENT OR RELATING THERETO
OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS NOTE AND
AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION, an Ohio corporation
By:
--------------------------------
Print Name:
------------------------
Its:
-------------------------------
-34-
<PAGE> 35
PAYMENTS OF PRINCIPAL
---------------------
Unpaid
Principal Notation
Date Balance Made by
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-35-
<PAGE> 36
EXHIBIT I-1
-----------
FORM OF COMPETITIVE BID QUOTE REQUEST
-------------------------------------
(Section 2.23(a))
To: The First National Bank of Chicago,
as administrative agent (the "Agent")
From: Developers Diversified Realty Corporation (the "Borrower")
Re: Credit Agreement dated as of May 1, 1995, as amended among the
Borrower, the lenders from time to time party thereto, The First
National Bank of Chicago and The First National Bank of Boston, as
Arrangers, and The First National Bank of Chicago, as Administrative
Agent for the lenders (as amended, supplemented or otherwise modified
from time to time through the date hereof, the "Agreement")
1. Capitalized terms used herein have the meanings assigned to them in
the Agreement.
2. We hereby give notice pursuant to SECTION 2.23(a) of the Agreement
that we request Competitive Bid Quotes for the following proposed Competitive
Bid Loan(s):
Borrowing Date:_______________, 19__
Principal Amount(1) Interest Period(2)
3. Such Competitive Bid Quotes should offer [a Competitive LIBOR
Margin] [an Absolute Rate].
- --------
1 Amount must be at least $5,000,000 and an integral multiple of
$1,000,000.
2 One, two, three or six months (Competitive LIBOR Margin) or up to 180
days (Absolute Rate), subject to the provisions of the definitions of
LIBOR Interest Period and Absolute Interest Period.
-36-
<PAGE> 37
4. Upon acceptance by the undersigned of any or all of the Competitive
Bid Loans offered by Lenders in response to this request, the undersigned shall
be deemed to affirm as of the Borrowing Date thereof the representations and
warranties made in ARTICLE V of the Agreement.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION, an Ohio corporation
By:
--------------------------------
Print Name:
------------------------
Its:
-------------------------------
-37-
<PAGE> 38
EXHIBIT I-2
-----------
INVITATION FOR COMPETITIVE BID QUOTES
-------------------------------------
(Section 2.23(b))
To: Each of the Lenders party to
the Agreement referred to below
From: Invitation for Competitive Bid Quotes to
Developers Diversified Realty Corporation (the "Borrower")
Pursuant to SECTION 2.23(b) of the Credit Agreement dated as of May 1,
1995 as amended from time to time, among the Borrower, the lenders from time to
time party thereto, The First National Bank of Chicago and The First National
Bank of Boston, as Arrangers, and The First National Bank of Chicago, as
Administrative Agent for the lenders (as amended, supplemented or otherwise
modified from time to time through the date hereof, the "Agreement"), we are
pleased on behalf of the Borrower to invite you to submit Competitive Bid Quotes
to the Borrower for the following proposed Competitive Bid Loan(s):
Borrowing Date: _____________, 19__
Principal Amount Interest Period
Such Competitive Bid Quotes should offer [a Competitive LIBOR Margin]
[an Absolute Rate]. Your Competitive Bid Quote must comply with SECTION 2.23(c)
of the Agreement and the foregoing. Capitalized terms used herein have the
meanings assigned to them in the Agreement.
Please respond to this invitation by no later than 9:00 a.m. (Chicago
time) on _________________, 19___.
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
By:
------------------------------
Title:
---------------------------
-38-
<PAGE> 39
EXHIBIT 1-3
-----------
COMPETITIVE BID QUOTE
---------------------
(Section 2.23(c))
___________, 19__
To: The First National Bank of Chicago,
as Administrative Agent
Re: Competitive Bid Quote to Developers Diversified Realty Corporation (the
"Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19____, we hereby make the following Competitive Bid Quote
pursuant to SECTION 2.23(c) of the Agreement hereinafter referred to and on the
following terms:
1. Quoting Lender:______________________________________________________
2. Person to contact at Quoting Lender:_________________________________
3. Borrowing Date: ____________________________________________________(1)
4. We hereby offer to make Competitive Bid Loan(s) in the following
principal amounts, for the following Interest Periods and at the
following rates:
- --------
1 As specified in the related Invitation For Competitive Bid Quotes.
-39-
<PAGE> 40
================================================================================
[Competitive
Principal Interest LIBOR [Absolute Minimum
Amount(2) Period(3) Margin(4)] Rate(5)] Amount(6)
================================================================================
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of May 1, 1995, among the Borrower, the lenders from time to time party
thereto, The First National Bank of Chicago and The First National Bank of
Boston as Arrangers, and The First National Bank of Chicago, as Administrative
Agent for the lenders (as amended, supplemented or otherwise modified from time
to time through the date hereof, the "Agreement"), irrevocably obligates us to
make the Competitive Bid Loan(s) for which any offer(s) are accepted, in whole
or in part. Capitalized terms used herein and not otherwise defined herein shall
have their meanings as defined in the Agreement.
Very truly yours,
[NAME OF LENDER]
By:
------------------------------
Title:
---------------------------
- --------
2 Principal amount bid for each Interest Period may not exceed the
principal amount requested. Bids must be made for at least $5,000,000
and integral multiples of $1,000,000.
3 One, two, three or six months or up to 180 days, as specified in the
related Invitation For Competitive Bid Quotes.
4 Competitive LIBOR Margin for the applicable LIBOR Interest Period.
Specify percentage (rounded to the nearest 1/100 of 1%) and specify
whether "PLUS" or "MINUS".
5 Specify rate of interest per annum (rounded to the nearest 1/100 of
1%).
6 Specify minimum amount, if any, which the Borrower may accept (see
SECTION 2.23(c)(ii)(d)).
-40-
<PAGE> 41
EXHIBIT J-1
-----------
INVITATION FOR COMPETITIVE BID QUOTES
-------------------------------------
(Section 2.24(a))
To: Each of the Lenders party to
the Agreement referred to below
From: Invitation for Competitive Bid Quotes to
Developers Diversified Realty Corporation (the "Borrower")
Pursuant to SECTION 2.24(a) of the Credit Agreement dated as of May 1,
1995 as amended from time to time, among the Borrower, the lenders from time to
time party thereto, The First National Bank of Chicago and The First National
Bank of Boston, as Arrangers, and The First National Bank of Chicago, as
Administrative Agent for the lenders (as amended, supplemented or otherwise
modified from time to time through the date hereof, the "Agreement"), we are
pleased to invite you to submit Competitive Bid Quotes to the Borrower for the
following proposed Competitive Bid Loan(s):
Borrowing Date: ________________, 19__
Principal Amount(7) Interest Period(8)
Such Competitive Bid Quotes should offer [a Competitive LIBOR Margin]
[an Absolute Rate]. Your Competitive Bid Quote must comply with SECTION 2.24(a)
of the Agreement and the foregoing. Capitalized terms used herein have the
meanings assigned to them in the Agreement.
Please respond to this invitation by no later than 9:00 a.m. (Chicago
time) on __________________, 19___.
Upon acceptance by the undersigned of any or all of the Competitive Bid
Loans offered by Lenders in response to this request, the undersigned shall be
deemed to affirm as
- --------
7 Amount must be at least $5,000,000 and an integral multiple of
$1,000,000.
8 One, two, three or six months (Competitive LIBOR Margin) or up to 180
days (Absolute Rate), subject to the provisions of the definitions of
LIBOR Interest Period and Absolute Interest Period.
-41-
<PAGE> 42
of the Borrowing Date thereof the representations and warranties made in ARTICLE
V of the Agreement.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION, an Ohio corporation
By:
------------------------------
Print Name:
----------------------
Its:
-----------------------------
-42-
<PAGE> 43
EXHIBIT J-2
-----------
COMPETITIVE BID QUOTE
---------------------
(Section 2.24(b))
____________, 19__
To: Developers Diversified Realty Corporation
Re: Competitive Bid Quote
In response to your invitation dated , 19 , we hereby make the
following Competitive Bid Quote pursuant to SECTION 2.24(b) of the Agreement
hereinafter referred to and on the following terms:
1. Quoting Lender: ______________________________________________________
2. Person to contact at Quoting Lender: _________________________________
3. Borrowing Date: ____________________________________________________(1)
4. We hereby offer to make Competitive Bid Loan(s) in the following
principal amounts, for the following Interest Periods and at the
following rates:
- --------
1 As specified in the related Invitation For Competitive Bid Quotes.
-43-
<PAGE> 44
================================================================================
[Competitive
Principal Interest LIBOR [Absolute Minimum
Amount(2) Period(3) Margin(4)] Rate(5)] Amount(6)
================================================================================
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of May 1, 1995, among the Borrower, the lenders from time to time party
thereto, The First National Bank of Chicago and The First National Bank of
Boston as Arrangers, and The First National Bank of Chicago, as Administrative
Agent for the lenders (as amended, supplemented or otherwise modified from time
to time through the date hereof, the "Agreement"), irrevocably obligates us to
make the Competitive Bid Loan(s) for which any offer(s) are accepted, in whole
or in part. Capitalized terms used herein and not otherwise defined herein shall
have their meanings as defined in the Agreement.
Very truly yours,
[NAME OF LENDER]
By:
--------------------------
Title:
-----------------------
- --------
2 Principal amount bid for each Interest Period may not exceed the
principal amount requested. Bids must be made for at least $5,000,000
and integral multiples of $1,000,000.
3 One, two, three or six months or up to 180 days, as specified in the
related Invitation For Competitive Bid Quotes.
4 Competitive LIBOR Margin for the applicable LIBOR Interest Period.
Specify percentage (rounded to the nearest 1/100 of 1%) and specify
whether "PLUS" or "MINUS".
5 Specify rate of interest per annum (rounded to the nearest 1/100 of
1%).
6 Specify minimum amount, if any, which the Borrower may accept (see
SECTION 2.24(b)(ii)(d)).
-44-
<PAGE> 1
EXHIBIT 11.1
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Earning per share
For the Three Month Periods Ended March 31,
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C> <C> <C>
Primary - per APB -15,
Interpretation 102
Dividends declared per weighted
average share outstanding
(24,520,075 shares) $0.64
Dividends declared per weighted
average share outstanding
(19,704,565 shares) $0.66
Undistributed loss per share:
($1,770,390) divided by
(24,520,075) (0.07)
------------
($5,285,783) divided by
19,704,565 shares (0.27)
------------
Income per share $0.57 $0.39
============ ============
Undistributed loss:
Income available to common shareholders per
statement of operations $14,004,076 $7,665,911
Dividends declared (15,774,466) (12,951,694)
------------ ------------
($1,770,390) ($5,285,783)
============ ============
Fully diluted:
Net Income available to common shareholders' $14,004,076 $7,665,911
Plus interest expense of convertible debentures 1,165,000 -
------------ -------------
Net income as adjusted assuming conversion of
convertible debentures $15,169,076=$.57 $7,665,911=$0.39
------------ ------------
Weighted Average Number of Shares and equivalents 26,733,665 19,848,552
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1996
<CASH> 2,682,400
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,125,330,232
<DEPRECIATION> 147,498,338
<TOTAL-ASSETS> 1,113,254,338
<CURRENT-LIABILITIES> 0
<BONDS> 477,415,663
<COMMON> 2,505,550
0
149,750,000
<OTHER-SE> 431,755,866
<TOTAL-LIABILITY-AND-EQUITY> 1,113,254,338
<SALES> 0
<TOTAL-REVENUES> 37,453,268
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,830,110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,047,202
<INCOME-PRETAX> 17,553,982
<INCOME-TAX> 0
<INCOME-CONTINUING> 17,553,982
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,553,982
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
</TABLE>
