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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
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 1-12844
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JDN REALTY CORPORATION
----------------------
(Exact name of registrant as specified in its charter)
Maryland 58-1468053
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
359 East Paces Ferry Road, Suite 400, Atlanta, GA 30305
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(Address of principal executive offices) (Zip Code)
(404) 262-3252
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Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $.01 Par Value New York Stock Exchange
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Preferred Stock, $.01 Par Value New York Stock Exchange
------------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act:
None
----
(Title of Class)
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the shares of common stock of the Registrant
(based on the closing price of these shares on the New York Stock Exchange on
March 2, 1999) held by non-affiliates was approximately $675,913,794.
The number of shares outstanding of the Registrant's common stock, $0.01 par
value, was 33,231,247 on March 2, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Documents incorporated by reference and the part of Form 10-K into which the
document is incorporated:
Portions of the Registrant's definitive Proxy Statement relating to the
Annual Meeting of Shareholders to be held on May 19, 1999 are incorporated
into Part III of this Form 10-K.
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TABLE OF CONTENTS
Form 10-K
Item No. Report Page
- ------- -----------
PART I
1. Business.................................................. 1
2. Properties................................................ 8
3. Legal Proceedings......................................... 12
4. Submission of Matters to a Vote of Security Holders....... 12
PART II
5. Market for Registrant's Common Equity and
Related Shareholder Matters............................... 13
6. Selected Financial Data................................... 14
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 15
7A. Quantitative and Qualitative Disclosures About Market Risk 24
8. Financial Statements and Supplementary Data............... 24
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.................... 24
PART III
10. Directors and Executive Officers of the Registrant........ 25
11. Executive Compensation.................................... 25
12. Security Ownership of Certain Beneficial Owners and
Management................................................ 25
13. Certain Relationships and Related Transactions............ 25
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K...................................... 26
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PART I
Item 1. Business
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BACKGROUND
JDN Realty Corporation is a real estate company specializing in the
development and asset management of retail shopping centers anchored by value-
oriented retailers. When referred to herein, the term "Company" represents JDN
Realty Corporation and its wholly-owned subsidiaries. As of December 31, 1998,
the Company owned and operated, either directly or indirectly through affiliated
entities or joint ventures, 91 shopping center properties containing
approximately 12.1 million square feet of gross leasable area ("Company GLA")
located in 14 states, primarily in the southeastern United States, with the
highest concentrations in Georgia, North Carolina, and Tennessee. As of December
31, 1998, the Company, either directly or indirectly through affiliated entities
or joint ventures, had 36 projects under construction. The principal tenants of
the Company's properties include Wal-Mart, Lowe's, and Kroger. As of December
31, 1998, no single property accounted for 10% or more of the Company's total
assets or total revenues. The Company was incorporated under Maryland law in
1993 and has elected to be treated as a real estate investment trust ("REIT")
for federal income tax purposes.
The Company holds an interest in JDN Development Company, Inc.
("Development Company"), which is structured such that the Company owns 99% of
the economic interest while J. Donald Nichols, the Company's Chairman and Chief
Executive Officer, owns the remaining 1% and controls Development Company's
operations and activities through his voting common stock ownership. Current tax
law restricts the ability of REITs to engage in certain activities, such as the
sale of certain properties and third-party fee development. Because it is not a
REIT, Development Company may engage in real estate development activities such
as sales of all or portions of development projects. As of December 31, 1998,
the Company had invested $9.2 million in Development Company in the form of
equity capital, $113.7 million in the form of secured notes receivable and $28.1
million in the form of unsecured advances.
The Company's business objective is to increase funds from operations per
share and maximize shareholder value by:
. development of new shopping centers anchored by strong shopping center
retailers,
. redevelopment and expansion of its existing or newly acquired
properties,
. effective leasing and management of its properties and ground leasing
of adjacent outparcels and
. acquisition of existing shopping centers.
DESCRIPTION OF BUSINESS
Development
The Company's primary growth strategy is to develop, on assignment,
shopping centers anchored by value-oriented retailers. Through December 31,
1998, the Company and its founders had developed or jointly developed 151
shopping center projects, of which 99 have been built on assignment from
Wal-Mart. The Company's primary development relationships continue to be with
Wal-Mart and Lowe's with additional significant relationships with Kroger,
Target and Home Depot.
Management believes that the Company's relationships with these and other
value-oriented retailers provide the Company with a superior selection of
potential anchor tenants for its shopping centers. Management believes that the
selection of the initial tenants for a shopping center project is among the most
important factors in determining the initial success and long-term viability of
a project.
The Company's assignment-based development strategy is designed to reduce
the risks associated with development by ensuring that a significant shopping
center retailer is committed before the Company
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spends substantial time or money on a project. Typically, the Company has signed
leases or has commitments from shopping center retailers for 80% to 90% of the
planned shopping center square footage prior to the purchase of land and the
commencement of construction.
After obtaining an assignment from a significant retailer in a particular
market, the Company generally:
. Performs preliminary demographic, traffic and economic studies that
indicate particular locations, and estimates preliminary costs
associated with those potential sites;
. Contacts other major shopping center retailers that the Company
believes would be interested in the same market to seek a development
assignment;
. Obtains an option on the proposed site;
. Estimates costs by evaluating soil, water, sewer, environmental and
traffic factors, as well as any other costs associated with the
particular site;
. Develops a site plan, taking into account the physical constraints of
the property and the physical requirements of the shopping center
retailers, that can be translated into economic terms to set rental
rates for anchor tenants;
. Reviews the local rental market to determine demand for and pricing of
local tenant space;
. Contacts potential outparcel users for the site to determine demand
for and pricing of outparcels;
. Performs financial analyses to confirm that the development meets
internal return-on-cost criteria;
. After the Company obtains a signed lease or a commitment from a
significant shopping center retailer, the Company purchases the land
and oversees construction of the shopping center.
By adhering to a disciplined development philosophy that mitigates
development risks, the Company has generally been able to deliver projects on a
timely basis that meet budgeted returns.
The Company has historically concentrated its development activities in the
Southeast as a result of attractive shopping center development opportunities
with major anchor retailers in this region. The Company continues to actively
pursue development opportunities within the Southeast based on assignments from
major retailers. The Company is also pursuing development opportunities outside
the Southeast in areas such as the Midwest, Southwest and California as the
result of increased tenant interest and opportunities in these areas with local
developers in the form of strategic alliances. Strategic alliances have evolved
with local developers who have development opportunities in their local markets.
The Company typically owns these projects and compensates the strategic alliance
partners on a fee basis.
During 1998, the Company, either directly or indirectly through Development
Company and joint ventures, completed all or portions of 20 development
projects. These projects added approximately 1.8 million square feet of Company
GLA to the Company's operating portfolio of shopping center properties and cost
approximately $146.1 million. The annualized aggregate unleveraged return on
cost for these 20 projects was 11.3%. As of December 31, 1998, the Company,
either directly or indirectly through Development Company and joint ventures,
had begun construction of a total of 36 projects which when completed are
expected to add approximately 3.2 million square feet of Company GLA to the
Company's operating portfolio of shopping center properties.
Redevelopment and Expansion
The Company's objective of continued growth includes the selective
redevelopment, retenanting and expansion of existing or recently acquired
shopping centers to increase cash flows and property values. Management is
active in its tenants' expansion plans as changing demographics and increased
sales
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warrant expansion or relocation. Redevelopment projects have included adding
anchor tenants, changing the tenant mix and reconfiguring shopping centers. The
Company has worked closely with several anchor tenants to enlarge their stores
and enhance merchandising capabilities at existing and recently acquired
properties.
During 1998, the Company completed the redevelopment of four shopping
centers as follows:
. In its Topeka, Kansas shopping center, the Company relocated
Bauersfeld Grocery from a 42,000 square foot store to a 47,860 square
foot store. The Company is in the process of re-leasing the newly
vacated space.
. In its Canton, Georgia shopping center, the Company relocated Ingles
from a 27,200 square foot store to a 62,603 square foot store which
was previously a dark Wal-Mart store. The Company is in the process of
re-leasing the newly vacated space.
. In its Lexington, Virginia and South Boston, Virginia shopping
centers, Wal-Mart completed its expansion from discount stores with
approximately 65,000 square feet to Supercenters of approximately
175,000 square feet. In conjunction with these expansions, the Company
relocated an aggregate of 25,800 square feet of shop space and
expanded the shop space at these centers by an aggregate of 22,600
square feet.
At December 31, 1998, the Company and Development Company had three
redevelopment projects under way:
. In its Cartersville, Georgia shopping center, the Company is
relocating a 27,200 square foot Ingles into a 60,000 square foot
store. Ingles is relocating into space previously occupied by a dark
Wal-Mart.
. In its Chamblee, Georgia shopping center, the Company is in the
process of relocating and expanding a grocery store into vacated space
and upgrading the shopping center.
. In Milwaukee, Wisconsin, Development Company is relocating a 21,090
square foot Walgreens out of an existing predominately vacant mall and
replacing the mall with a 120,000 square foot Wal-Mart.
Asset Management
The Company's in-house leasing, property management and asset management
teams work together to attract and retain national, regional and local tenants
and to maintain productive relationships with these tenants. Further, the
Company's strong relationships with national and regional non-anchor tenants
have contributed to a majority of the non-anchor retail space of each
development project being leased prior to completion. The leasing staff seeks a
complementary mix of financially qualified tenants. The Company's leasing
professionals analyze the financial condition of each retail prospect, evaluate
the prospect's business plan and suitability as a tenant in a particular center
and recommend the prospect to management. This process increases long-term
occupancy and reduces tenant turnover. Successful initial leasing and tenant
retention enables the Company to reduce the cost of re-leasing and to maintain
occupancy levels.
During 1998, on a "same property" basis, the Company achieved the following
results:
. Net operating income increased 0.6% for the year ended December 31,
1998 as compared to the year ended December 31, 1997, primarily as a
result of leasing of vacant space, rental increases from existing
tenants and higher percentage rent payments.
. At December 31, 1998, the properties were 98.2% leased as compared to
98.1% at December 31, 1997.
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. Annualized base rent per leased square foot increased to $7.29 as of
December 31, 1998 from $7.22 as of December 31, 1997.
As of December 31, 1998, the Company's operating portfolio of 91
shopping center properties was 96.4% leased.
The Company also seeks to increase shareholder value from its
existing portfolio by reviewing properties for disposition. The Company's
disposition strategy focuses on selling assets that management believes (1) have
reached their maximum earnings potential, (2) have tenants with which the
Company has high concentrations and (3) are located in geographic areas with
which the Company has high concentrations. The Company also believes that the
disposition of assets represents an effective means for it to generate
additional capital. The Company intends to utilize different strategies for
dispositions, including tax minimizing like-kind exchanges. While the Company
has not sold significant assets over the past five years, the Company expects to
more aggressively access the disposition market in the future.
Acquisitions
The Company also seeks to increase its funds from operations per
share and shareholder value through selective acquisition activity. The Company
intends to continue to acquire, for long-term investment, high-quality, well-
located shopping centers with attractive initial yields and strong prospects for
future cash flow growth and capital appreciation. The Company's strategy focuses
on properties to which its development, leasing and property management teams
can add value through redevelopment or expansion, leasing of vacant space or
increasing rental rates over time. During 1998, the Company acquired the
following 11 shopping center properties:
Acquisition Company Purchase
Location Date GLA Price
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Milwaukee, WI 2/04/98 383,967 $ 13,262,000
Milwaukee, WI 2/04/98 190,142 10,706,000
Milwaukee, WI 2/04/98 143,454 11,937,000
Milwaukee, WI 2/04/98 217,093 16,527,000
Milwaukee, WI 2/04/98 160,533 6,081,000
Fayetteville, NC 2/23/98 204,291 12,870,000
Antioch, TN 3/31/98 51,533 3,538,000
Franklin, TN 3/31/98 54,411 4,412,000
Chamblee, GA 5/29/98 175,971 11,320,000
Lynchburg, VA 6/22/98 270,767 18,300,000
Denver, CO 10/7/98 244,640 38,148,000
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2,096,802 $147,101,000
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As of December 31, 1998, the Company was pursuing other acquisition
opportunities in the ordinary course of business, which are not subject to
definitive agreements. In an effort to close these and other acquisitions, the
Company may utilize various means which could include, for example, assumption
of indebtedness, purchase of mortgage loans or issuance of partnership units in
"Down REIT" structures.
Tenants
As of December 31, 1998, the Company and Development Company had the
following significant tenants:
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Percent of Percent of
Company Annualized
Tenant GLA Base Rent
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Wal-Mart 23.0% 16.6%
Lowe's 12.4% 13.1%
No other tenants account for more than 10% of Company GLA or annualized
base rent in 1998. The loss of any of these tenants or the inability of any of
them to pay rent could have an adverse effect on the Company's business.
The tenant base of the Company, Development Company and affiliated
entities had the following characteristics as of December 31, 1998:
Percent of Percent of
Company Annualized
Type of Tenant GLA Base Rent
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Anchor 76.2% 68.8%
Non-anchor 20.2% 31.2%
Unleased 3.6% 0.0%
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Total 100.00% 100.00%
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National 72.1% 69.0%
Regional 15.2% 16.8%
Local 9.1% 14.2%
Unleased 3.6% 0.0%
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Total 100.00% 100.00%
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Competition
The Company competes with commercial developers, real estate companies and
other real estate owners for development and acquisition opportunities in all of
its market areas. Certain of these competitors may have greater capital and
other resources than those of the Company. The operations of each shopping
center in the Company's portfolio are subject to competition from similar
shopping centers in their respective locations. Management believes that the
Company is well-positioned to compete effectively for development and
acquisition opportunities and is generally well-positioned to compete in markets
in which its shopping center properties are located.
Environmental Matters
The Company is subject to numerous federal, state and local environmental
regulations that apply to the development, ownership and operation of real
property. In developing shopping centers, the Company engages environmental
consultants to determine whether flood plains, wetlands or environmentally
sensitive areas are part of the property to be developed. If flood plains are
identified, any necessary governmental permits or consents are sought and, if
required, development and construction is planned so that flood plain areas are
preserved or alternative flood plain capacity is created in conformance with
federal and local flood plain management requirements.
Stormwater discharge from a construction facility is evaluated in
connection with the requirements for stormwater permits under the Clean Water
Act, which this is an evolving program in most states.
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Management anticipates that general stormwater permits will be applicable to the
Company's activities and individual permits will not be required for existing or
new developments.
Four shopping centers acquired in February 1998 contain friable asbestos
elbow fitting insulation on mechanical systems throughout the shopping centers
and may contain other asbestos containing materials. These materials will be
inspected for damage or disturbance periodically and adequate remediation will
be performed in the event of any repairs or renovations on the affected area.
Some of the buildings on the Company's properties were built when low
concentrations of non-friable asbestos were commonly used in building materials
such as roof flashings and vinyl floor tile and may contain non-friable asbestos
building materials. Management believes that buildings that contain limited
amounts of friable asbestos, which is subject to monitoring by the Company, and
materials that contain low concentrations of non-friable asbestos, when properly
managed and maintained generally do not impose any environmental hazard. The
Company's properties may also be affected by materials that contain
polychlorinated bipheynis ("PCBs"), such as electrical transformers, owned by
other parties located on the Company's properties. Management does not believe
that the presence of such materials will result in removal costs that would have
a material adverse effect on the Company's financial condition or results of
operations in the event of any future major repairs or renovation activities.
Any one or more of the Company's shopping centers can potentially be
negatively impacted, either through physical contamination or by virtue of an
adverse effect on property values by the release of hazardous or toxic
substances emanating from areas adjacent to or near the centers. Several of the
centers are adjacent to or near areas that either contain or have contained
above-ground or underground petroleum storage tanks that either have or may have
released petroleum products into the soil or groundwater. At least five of the
Company's shopping center properties at one time contained underground storage
tanks that were used to store petroleum products. Soil and groundwater
contamination has been the subject of remediation efforts and has been
documented at one of these sites.
The Company's general policy is to obtain a new or updated environmental
assessment each time it develops or acquires a property. The Company had Phase
I environmental assessments conducted on each property on which it began
construction during 1998. The Company had Phase I or Phase II environmental
assessments on all except one property it acquired during 1998.
The terms of all agreements for purchase and sale of properties the Company
has acquired or will acquire contain or are expected to contain representations
related to the sellers' knowledge of existing environmental conditions.
Generally, sellers do not assume responsibility for any liability relating to
existing adverse environmental conditions that are not known to the seller.
Moreover, because the terms of the Company's leases with its shopping center
tenants do not give the Company control over the day-to-day operational
activities of the tenants, no assurance can be given that any lessee of a
property owned or to be owned by the Company has not and will not create a
hazardous environmental condition.
The Company has not been notified by any governmental authority of any
material noncompliance, environmental claim or liability in connection with any
of its shopping centers. The Company has not been notified of any claim for
personal injury or property damage by a private party in connection with any of
its properties as a result of environmental conditions. The Company is not
aware of any other environmental condition or liability with respect to any of
its properties that management believes would have a material adverse effect on
the Company's financial position or results of operations.
Employees
As of March 1, 1999, the Company and Development Company employed 94 full-
time individuals and one part-time individual, including executive,
administrative and field personnel.
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Executive Officers
<TABLE>
<CAPTION>
Name Age Positions with the Company
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<S> <C> <C>
J. Donald Nichols 58 Chairman and Chief Executive Officer
Elizabeth L. Nichols 45 President and Director
William J. Kerley 43 Senior Vice President, Chief
Financial Officer, Secretary, Treasurer
Jeb L. Hughes 47 Senior Vice President, Development of JDN
Development Company, Inc.
Laurie A. Farris 36 Vice President and Director of Acquisitions
John D. Harris, Jr. 39 Vice President, Controller and Assistant Secretary
David L. Henzlik 36 Vice President, Leasing
Leilani L. Jones 37 Vice President and Director of Property Management and Assistant Secretary
C. Sheldon Whittelsey, IV 37 Vice President, Development
</TABLE>
The following is a biographical summary of the experience of the executive
officers of the Company:
J. Donald Nichols. Mr. Nichols has served as Chairman and Chief Executive
Officer of the Company since its formation in December 1993. In 1978, Mr.
Nichols formed JDN Enterprises, Inc., the Company's predecessor ("Enterprises"),
for the purpose of developing shopping centers anchored primarily by Wal-Mart.
He served as President of Enterprises from its inception until 1989, at which
time Mr. Nichols became Chairman. Mr. Nichols served as Chairman of Enterprises
until he assumed his current position with the Company.
Elizabeth L. Nichols. Ms. Nichols has served as President of the Company
since its formation in December 1993. Ms. Nichols joined Enterprises in 1980,
where she arranged permanent and construction financing, performed market due
diligence and site acquisition, and negotiated leases. Ms. Nichols organized
the formation of Enterprises' in-house property management and leasing
departments in 1984. Ms. Nichols was Vice President of Finance for Enterprises
from 1982 until 1989, when she became President. Ms. Nichols served as President
of Enterprises until she assumed her current position with the Company. Mr.
Nichols and Ms. Nichols are husband and wife.
William J. Kerley. Mr. Kerley has served as Senior Vice President and
Chief Financial Officer of the Company since May 1998. From the Company's
inception in December 1993 to May 1998, Mr. Kerley served as Chief Financial
Officer, Secretary and Treasurer of the Company. Mr. Kerley served as Chief
Financial Officer of Enterprises from August 1993 to December 1993. From 1989
to 1993, Mr. Kerley was a consultant to Enterprises and other real estate and
operating companies in the southeastern United States.
Jeb L. Hughes. Mr. Hughes has served as Senior Vice President, Development
of Development Company since May 1998. From May 1996 to May 1998, Mr. Hughes
served as Vice President, Development of Development Company. Mr. Hughes joined
Enterprises in 1989 and managed the development and construction of shopping
centers for Enterprises until it was merged into the Company in
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December 1993. Mr. Hughes was self-employed and acted as a consultant to
Development Company from January 1994 to May 1996.
Laurie A. Farris. Ms. Farris has served as Vice President and Director of
Acquisitions since joining the Company in June 1997. From August 1991 to June
1997, Ms. Farris served as Vice President, Senior Commercial Real Estate
Underwriter and Portfolio Manager of First Union National Bank in Nashville,
Tennessee. Ms. Farris is a Certified Commercial Investment Member ("CCIM").
John D. Harris, Jr. Mr. Harris has served as Vice President and Controller
of the Company since May 1998. From July 1994 to May 1998, Mr. Harris served as
Controller of the Company. From 1984 to July 1994, Mr. Harris was employed by
the Atlanta, Georgia, office of Ernst & Young, most recently holding the
position of Senior Manager, where he specialized in serving real estate and
entrepreneurial companies. Mr. Harris is a certified public accountant.
David L. Henzlik. Mr. Henzlik joined Enterprises in 1989 as a leasing
agent and has served as Vice President, Leasing of the Company since March 1995.
Leilani L. Jones. Ms. Jones has served as Vice President and Director of
Property Management of the Company since its formation in December 1993 and as
Assistant Secretary since May 1997. Ms. Jones joined Enterprises in 1985 and
served as Vice President and Director of Property Management from 1990 until
December 1993. Ms. Jones is a Certified Property Manager and a CCIM.
C. Sheldon Whittelsey, IV. Mr. Whittelsey has served as Vice President,
Development of the Company since its formation in December 1993. Mr. Whittelsey
joined Enterprises in 1986 where he was involved in site acquisition,
development and outparcel sales.
Financial Information About Industry Segments
The Company is in the business of development, redevelopment, asset
management and acquisition of shopping centers. The Company considers its
activities to consist of a single industry segment. See the Consolidated
Financial Statements and Notes thereto included in Item 8 of this Annual Report
on Form 10-K for certain information required in Item 1.
Item 2. Properties
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The Company's corporate headquarters are located in a building it owns at
359 East Paces Ferry Road, Suite 400, Atlanta, Georgia 30305. The Company
coordinates most of its corporate activities from its headquarters, although the
Company also maintains offices in Nashville, Tennessee; Charlotte, North
Carolina; Birmingham, Alabama; Los Angeles, California; and Bentonville,
Arkansas.
As of December 31, 1998, the Company owned and operated, either directly or
indirectly through affiliated entities or joint ventures, 91 shopping center
properties totaling approximately 12.1 million square feet of gross leasable
area. The following table sets forth information on these properties as of
December 31, 1998:
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<TABLE>
<CAPTION>
JDN REALTY CORPORATION
OPERATING PORTFOLIO
DECEMBER 31, 1998
Year Built/
Renovated Total Company Percent
Location or Expanded GLA (1) GLA Leased Anchor Stores
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<S> <C> <C> <C> <C> <C>
ALABAMA
Decatur 1965/1996 122,956 122,956 87.8% Food World
Gadsden 1979 131,044 85,341 93.9% rld(2), Public Wholesale, Food World(2), Eckerd
Opelika 1993/1995 306,225 306,225 100.0% 100.0% Wal-Mart, Lowe's, Winn-Dixie, Goody's, CVS
COLORADO
Denver 1997 244,640 244,640 98.6% King Soopers, Homeplace, OfficeMax, Just for feet
PetsMart
FLORIDA
Brandon 1997 243,204 115,949 97.9% Lowe's(2), Jumbo Sports
Fort Walton Beach 1986 21,900 21,900 65.8% Wal-Mart(2)
Gulf Breeze 1998 172,058 3,426 0.0% Wal-Mart(2)
Ocala 1984/1991 151,338 151,338 98.2% Wal-Mart, Winn Dixie
Tallahassee 1990/1994 265,304 109,055 98.9% Wal-Mart(2), Lowe's
GEORGIA
Alpharetta 1998 129,044 129,044 100.0% Lowe's
Buford 1998 353,251 353,251 98.9% Wal-Mart, Lowe's
Canton 1983 127,854 127,854 75.3% Ingles, CVS
Canton (5) 1996 238,026 238,026 100.0% Wal-Mart
Cartersville 1984 52,240 52,240 87.0% Ingles, Eckerd
Cartersville 1995 375,828 375,828 100.0% Wal-Mart, Lowe's
Chamblee 1976 175,971 175,971 87.0% Winn Dixie, CVS
Conyers (4) 1996 420,816 119,698 100.0% Wal-Mart(2), Home Depot(2),Rhodes
Cordele 1997 176,054 176,054 100.0% Wal-Mart
Cumming 1997 428,754 297,655 95.4% Wal-Mart(2),Home Depot(2), Goody's, Office Max
Eastman 1990 82,907 41,604 100.0% Wal-Mart(2), Food Lion
Fayetteville 1990 156,063 156,063 91.3% Cub Foods, Cinemark Movies, C
Fort Oglethorpe 1973/1992 176,903 176,903 97.6% Kmart, Albertson's, CVS
Griffin 1986 172,546 64,772 93.7% Wal-Mart(2), Winn-Dixie
LaFayette 1990 73,648 73,648 85.5% Food Lion, Goody's
LaGrange 1984 62,990 62,990 100.0% Wal-Mart
Lawrenceville 1998 10,126 10,126 100.0% CVS
Lawrenceville 1990 89,064 89,064 97.2% Winn-Dixie, Eckerd
Lawrenceville 1989/1995 277,078 277,078 98.5% Wal-Mart, Kroger, Regal Cinemas
Lilburn 1990 73,951 73,951 100.0% Kroger
Lilburn 1997 132,847 132,847 100.0% Lowe's
Loganville 1995 95,277 91,197 96.9% Kroger
Madison 1989 106,100 106,100 91.1% Wal-Mart, Ingles, Advance Auto
Marietta 1997 151,047 151,047 95.8% Lowe's
Newnan 1995 426,725 360,669 100.0% Wal-Mart, Lowe's, Uptons(2)
Peachtree City 1997 10,800 10,800 100.0% Pike Nurseries
Riverdale 1989 80,186 22,401 100.0% Kroger(2)
Rome 1980 38,506 38,506 100.0% Big Lots
Stockbridge 1988 162,779 162,779 97.7% Kmart, Ingles
Stockbridge 1997 10,800 10,800 100.0% Pike Nurseries
Suwanee 1997 43,393 43,393 53.8% Pike Nurseries
Tucker 1998 199,549 64,905 100.0% Wal-Mart(2)
Union City 1986 181,956 100,004 100.0% Wal-Mart(2), Ingles, Drug Emporium
Warner Robins (3) 1997 145,939 145,939 100.0% Lowe's
Woodstock 1995 170,942 170,942 100.0% Wal-Mart
Woodstock 1997 132,847 132,847 100.0% Lowe's
Woodstock 1997 11,020 11,020 100.0% Pike Nurseries
9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JDN REALTY CORPORATION
OPERATING PORTFOLIO
DECEMBER 31, 1998
Year Built/
Renovated Total Company Percent
Location or Expanded GLA (1) GLA Leased Anchor Stores
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KANSAS
Topeka 1976 125,657 125,657 57.1% Bauersfeld's Grocery
KENTUCKY
Lexington 1998 340,029 23,392 100.0% -
Richmond 1992 229,314 158,042 100.0% Kmart, Lowe's(2), Food Lion, Rite Aid
MISSISSIPPI
Jackson 1996 326,519 107,980 98.6% Target(2), Home Depot(2), Office Depot,
PetsMart, Fred's
Jackson 1997 159,684 51,301 71.9% Office Depot, Home Depot(2)
NORTH CAROLINA
Asheville 1996 186,970 186,970 100.0% Food Lion, Circuit City, Carmike Cinemas,
OfficeMax, Michael's
Fayetteville 1985 204,291 204,291 91.3% Circuit City,Staples, TJ Maxx, General Cinemas,
Discovery Zone
Greensboro 1997 464,756 342,215 99.6% Target(2), Kohl's, Kroger, Homeplace,
Babies 'R Us, PetsMart
Greenville 1996 329,818 232,818 100.0% Target(2), Kroger, TJ Maxx, Circuit City,
Barnes & Noble, Reading China
Hendersonville 1988/1995 133,052 133,052 99.1% Wal-Mart, Ingles
Rockingham 1988 168,776 168,776 100.0% Wal-Mart, Lowe's, Harris Teeter
Wallace 1989 118,991 118,991 95.5% Wal-Mart, Wilson's
Wilmington 1991 169,432 169,432 99.4% Wal-Mart, Winn-Dixie
Wilmington 1998 262,191 139,941 89.0% Target(2), Marshalls, PetsMart, OfficeMax
OHIO
Burlington 1991/1995 356,181 159,359 100.0% Lowe's, Sam's Club(2), Wal-Mart(2)
Gallipolis 1998 212,158 212,158 91.5% Wal-Mart
PENNSYLVANIA
Monaca 1997 150,010 150,010 94.9% Lowe's
SOUTH CAROLINA
Charleston 1991 196,049 196,049 99.5% Wal-Mart, Food Lion
Cheraw 1990 111,029 45,099 100.0% Wal-Mart(2), Food Lion
Lake City 1991 135,962 135,962 100.0% Wal-Mart, I.G.A.
Sumter 1987 158,293 19,143 100.0% Wal-Mart(2), Kroger(2)
TENNESSEE
Antioch 1990 51,533 51,533 94.0% Food Lion, Walgreen's
Chattanooga 1992 214,579 214,579 100.0% Kmart, Albertson's
Columbia 1993 68,948 68,948 100.0% Albertson's
Farragut 1991 71,311 71,311 94.7% BI-LO
Franklin 1983 186,000 18,000 100.0% Big Lots(2)
Franklin 1990 54,411 54,411 84.9% Food Lion, Eckerd
Goodlettsville 1987 84,945 84,945 100.0% Kroger
Memphis 1993 64,223 64,223 94.0% Kroger
Murfreesboro 1972/1993 117,750 117,750 100.0% Albertson's
Murfreesboro 1972/1994 71,028 71,028 100.0% Kroger
Murfreesboro 1998 202,291 79,291 100.0% Target(2),TJ Maxx, Books-a-Million, Party City
Nashville 1998 200,084 200,084 100.0% Wal-Mart
Tullahoma 1989 79,404 79,404 94.5% BI-LO
</TABLE>
10
<PAGE>
JDN REALTY CORPORATION
OPERATING PORTFOLIO
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Year Built/
Renovated Total Company Percent
Location or Expanded GLA (1) GLA Leased Anchor Stores
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VIRGINIA
Chester 1977/1978 116,311 116,311 100.0% Ukrop's, Rite-Aid
Lexington 1989/1997 94,370 94,370 95.8% Wal-Mart
Lynchburg 1990 315,767 270,767 84.4% Goody's, Cinemark Movies,
Staples, TJ Maxx, Circuit City
Midlothian 1985 79,408 79,408 92.7% Food Lion, CVS
South Boston 1989/1997 90,330 90,330 100.0% Wal-Mart
WISCONSIN
Brookfield 1967 190,142 190,142 98.7% Homegoods, Burlington Coat Factory, TJ Maxx,
OfficeMax
Brown Deer 1967 217,093 217,093 100.0% TJ Maxx, Kohl's, OfficeMax, Michael's
Brown Deer 1989 143,454 143,454 100.0% Pick 'N Save, Homegoods
Milwaukee 1962 160,533 160,533 100.0% Kohl's, Pick 'N Save
Milwaukee 1951 106,409 106,409 100.0% Movies 10, Dunham's, Walgreen's
West Allis (6) 1968 383,967 383,967 100.0% Kohl's, Pick 'N Save, Homegoods, Walgreen's
TOTAL 15,315,949 12,097,775 96.4%
====================================================================================================================================
</TABLE>
(1) Total GLA includes anchor stores that are not owned by the Company.
(2) Anchor store that is not owned by the Company.
(3) Lowe's store owned by Development Company. Remainder of center owned by the
Company.
(4) Property owned by a joint venture which is 72% owned by Development Company
and 28% owned by unaffiliated third parties.
(5) Wal-Mart store owned by Development Company. Remainder of center owned by
the Company.
(6) Property owned by a joint venture which is approximately 82.5% owned by the
Company and approximately 17.5% owned by unaffiliated third parties.
11
<PAGE>
Item 3. Legal Proceedings
- --------------------------
The Company is, from time to time, a party to legal proceedings which arise
in the ordinary course of its business. The Company is not currently involved
in any litigation nor, to management's knowledge, is any litigation threatened
against the Company, the outcome of which would, in management's judgement based
on information currently available, have a material adverse effect on the
financial position or results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matter was submitted to a vote of security holders during the fourth
quarter of 1998.
12
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
- ------------------------------------------------------------------------------
The Company's common shares are traded on the New York Stock Exchange
("NYSE") under the symbol "JDN." The following table sets forth the high and low
trading prices per common share and the distributions declared per common share
(each as adjusted for the Company's three-for-two stock split in June 1998) for
the periods indicated, as reported by the NYSE:
Distributions
Declared Per
High Low Share
---- ---- -------------
1997
First Quarter $ 19.4167 $ 16.8333 $ 0.3167
Second Quarter 20.9167 17.5000 0.3333
Third Quarter 22.7083 20.2500 0.3333
Fourth Quarter 23.3333 20.0000 0.3333
1998
First Quarter 23.0000 20.4167 0.3333
Second Quarter 23.0000 20.4167 0.3600
Third Quarter 23.1250 18.6250 0.3600
Fourth Quarter 22.7500 19.4375 0.3600
The Company intends to pay regular quarterly distributions to common
shareholders. Future distributions will be declared and paid at the discretion
of the Board of Directors and will depend upon cash generated by operating
activities, the Company's financial condition, capital requirements, annual
distribution requirements under the REIT provisions of the Internal Revenue Code
of 1986, as amended, distributions to the Company's preferred shareholders and
such other factors as the Board of Directors deems relevant.
The Company anticipates that for the foreseeable future cash available for
distribution will be greater than earnings and profits due to non-cash expenses,
primarily depreciation and amortization. Distributions by the Company to the
extent of its current and accumulated earnings and profits for federal income
tax purposes are taxable to shareholders as ordinary dividend income.
Distributions in excess of earnings and profits generally are treated as a non-
taxable return of capital. Such distributions have the effect of deferring
taxation until the sale of a shareholder's common stock. In order to maintain
its qualification as a REIT, the Company must make annual distributions to
shareholders of at least 95% of its taxable income. Under certain
circumstances, which management does not expect to occur, the Company could be
required to make distributions in excess of cash available for distributions in
order to meet such requirements.
The Company currently maintains the JDN Realty Corporation Dividend
Reinvestment and Stock Purchase Plan which enables its shareholders to
automatically reinvest distributions as well as make voluntary cash payments
towards the purchase of additional shares.
As of March 3, 1999, there were 503 holders of record of the Company's
common stock and approximately 18,900 beneficial holders.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------
Pro Forma
(dollars in thousands, except per share data) 1998 1997 1996 1995 1994 (1) 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Minimum and percentage rents $ 71,191 $ 43,346 $ 32,933 $ 27,466 $ 21,889 $ 19,013
Recoveries from tenants 10,003 4,512 3,475 3,245 2,806 2,500
Other revenue 117 147 215 651 515 512
--------------------------------------------------------------------------
Total revenues 81,311 48,005 36,623 31,362 25,210 22,025
Operating and maintenance expenses 6,439 3,201 2,586 2,231 1,878 1,618
Real estate taxes 5,316 2,540 1,817 1,970 1,504 1,321
General and administrative expenses 7,105 4,265 3,367 2,818 2,359 2,236
Depreciation and amortization 16,824 10,130 7,786 6,558 5,493 4,768
--------------------------------------------------------------------------
Total expenses 35,684 20,136 15,556 13,577 11,234 9,943
Income from operations 45,627 27,869 21,067 17,785 13,976 12,082
Interest expense, net 9,454 4,856 5,598 6,977 6,882 6,919
Income before extraordinary items 41,337 27,585 16,697 11,268 7,024 5,093
Net income 41,337 21,293 16,682 10,737 7,024 3,001
Net income attributable to common
shareholders 39,996 21,293 16,682 10,737 7,024 3,001
OTHER DATA
Funds from operations (2) $ 56,792 $ 37,701 $ 24,683 $ 17,234 $ 12,492 $ 9,836
Cash provided by (used in)
Operating activities 56,060 41,577 26,070 18,052 11,636 9,705
Investing activities (352,096) (204,578) (83,983) (61,118) 156,620 156,620
Financing activities 284,597 171,731 57,513 45,738 147,267 147,267
Ratio of earnings to fixed charges 2.41 2.62 2.29 1.90 1.94 1.64
PER SHARE DATA (3)
Net income per common share
Basic $ 1.30 $ 0.92 $ 1.00 $ 0.81 $ 0.62 $ - (4)
Diluted $ 1.28 $ 0.91 $ 1.00 $ 0.81 $ 0.62 $ - (4)
Dividends per common share $ 1.41 $ 1.32 $ 1.25 $ 1.20 $ - $ 0.89
<CAPTION>
December 31,
---------------------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Shopping center properties 91 68 48 42 38
Gross leasable area (square feet in thousands) 12,098 8,327 6,135 4,953 3,971
Percent of gross leasable area leased 96.4% 97.1% 98.2% 98.9% 97.9%
December 31,
---------------------------------------------------------------
(dollars in thousands) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Shopping center properties before accumulated depreciation $ 847,266 $ 535,303 $ 332,669 $ 276,818 $229,522
Shopping center properties, net 791,173 496,997 304,696 256,506 215,687
Total assets 968,922 599,753 371,986 295,868 237,008
Unsecured debt 383,092 203,011 - - -
Total debt 425,563 216,602 141,882 128,839 113,332
Total liabilities and minority interest 450,877 228,165 145,447 135,882 118,837
Shareholders' equity 518,045 371,588 226,539 159,986 118,171
</TABLE>
(1) Pro forma information represents the results of operations as if the
Company's initial public offering and related transactions had been completed on
January 1, 1994.
(2) Funds from operations ("FFO") is defined by the National Association of
Real Estate Investment Trusts, Inc. to mean net income, computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains or
losses from debt restructuring and sales of property, plus depreciation and
amortization of real estate assets, and after adjustments for unconsolidated
partnerships and joint ventures. The Company believes that FFO is helpful to
investors as a measure of the performance of an equity REIT because, along with
cash provided by operating activities, investing activities and financing
activities, it provides investors with an indication of the ability of the
Company to make capital expenditures and to fund other cash needs. The Company's
method of calculating FFO may be different from methods used by other REITs and,
accordingly, may not be comparable to such other REITs. FFO does not represent
cash provided by operating activities, as defined by GAAP, should not be
considered as an alternative to net income (determined in accordance with GAAP)
as an indication of operating performance and is not indicative of cash
available to fund all cash flow needs, including the Company's ability to make
cash distributions.
(3) Earnings per share amounts prior to 1998 have been restated to reflect a 3-
for-2 common stock split effected in the form of stock dividend in June of 1998.
(4) Earnings per share data for 1994 is not relevant because the results of
operations include the period prior to the Company's initial public offering,
which represents combined operations of partnerships and corporations. Net
income per share-basic and net income per share-diluted for the period
subsequent to the Company's initial public offering, March 29,1994 to December
31,1994 were each $.28.
________________________________________________________________________________
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
The following discussion should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report.
OVERVIEW
JDN Realty Corporation (the "Company") is a real estate development company
which specializes in the development and asset management of retail shopping
centers anchored by value-oriented retailers. As of December 31, 1998, the
Company owned and operated, either directly or through affiliated entities or
joint ventures, a total of 91 shopping center properties and had 36 retail
projects under construction. The Company has elected to be taxed as a real
estate investment trust ("REIT") for federal income tax purposes.
The Company holds an interest in JDN Development Company, Inc.
("Development Company") which is structured such that the Company owns 99% of
the economic interest while J. Donald Nichols, the Company's Chairman and Chief
Executive Officer, owns the remaining 1% and controls Development Company's
operations and activities through his voting common stock ownership. Current tax
law restricts the ability of REITs to engage in certain activities, such as the
sale of certain properties and third party fee development. Because it is not a
REIT, Development Company may engage in real estate development activities such
as sales of all or portions of development projects. As of December 31, 1998,
the Company had invested $9.2 million in Development Company in the form of
equity capital, $113.7 million in the form of secured notes receivable and $28.1
million in the form of unsecured advances.
RESULTS OF OPERATIONS
Comparison of the Year Ended December 31, 1998 to the Year Ended December 31,
1997.
Minimum and percentage rents increased $27.8 million or 64.2% to $71.2
million for the year ended December 31, 1998 from $43.3 million for the same
period in 1997. During 1998 and 1997, the Company began operations at 28
properties developed or redeveloped by the Company totaling 3.5 million square
feet (the "98/97 Development Properties"). Minimum and percentage rents
increased $13.5 million for the year ended December 31, 1998 over the same
period in 1997 due to the 98/97 Development Properties. During 1998 and 1997,
the Company acquired 21 shopping center properties from third parties totaling
3.1 million square feet of gross leasable area (the "98/97 Acquisition
Properties"). Minimum and percentage rents increased $13.9 million for the year
ended December 31, 1998 over the same period in 1997 as a result of the
operations of the 98/97 Acquisition Properties. The remaining increase relates
to higher minimum and percentage rents at existing properties.
Recoveries from tenants increased $5.5 million to $10.0 million for the
year ended December 31, 1998 from $4.5 million for the same period in 1997. Of
this increase, $897,000 relates to the 98/97 Development Properties and $4.2
million relates to the 98/97 Acquisition Properties. The remaining increase
relates to an increase in recoverable expenses at existing properties.
Other revenue decreased $30,000 or 20.4% to $117,000 for the year ended
December 31, 1998 from $147,000 for the same period in 1997. This decrease is
the result of a reduction in revenues associated with managing and leasing fewer
properties for third-party owners.
Operating and maintenance expenses increased $3.2 million to $6.4 million
for the year ended December 31, 1998 from $3.2 million for the same period in
1997. Of this increase, $408,000 relates to the 98/97 Development Properties
and $2.7 million relates to the 98/97 Acquisition Properties. The remaining
increase relates to increased expenses at existing properties.
Real estate taxes increased $2.8 million to $5.3 million for the year ended
December 31, 1998 from $2.5 million for the same period in 1997. Of this
increase, $613,000 relates to the 98/97
15
<PAGE>
Development Properties and $1.9 million relates to the 98/97 Acquisition
Properties. The remaining increase relates to increased real estate taxes at
existing properties.
General and administrative expenses increased $2.8 million or 66.6% to $7.1
million for the year ended December 31, 1998 from $4.3 million for the same
period in 1997. General and administrative expenses as a percentage of minimum
and percentage rents increased slightly to 10.0% for the year ended December 31,
1998 from 9.8% for the year ended December 31, 1997. The increase in absolute
dollars primarily reflects the cost of additional employees and other expenses
associated with the increased number of properties owned and operated by the
Company.
Depreciation and amortization expense increased $6.7 million or 66.1% to
$16.8 million for the year ended December 31, 1998 from $10.1 million for the
same period in 1997. Of this increase, $2.9 million relates to the 98/97
Development Properties and $3.8 million relates to the 98/97 Acquisition
Properties. Changes in depreciation and amortization expense at existing
properties were not material.
Interest expense, net of capitalized amounts, increased $4.6 million or
94.7% to $9.5 million for the year ended December 31, 1998 from $4.9 million for
the same period in 1997. This increase results primarily from an increase in
average debt balances between 1998 and 1997.
Other income, net decreased $260,000 or 21.6% to $945,000 for the year
ended December 31, 1998 from $1.2 million for the same period in 1997. The
decrease is primarily attributable to the decreased interest income associated
with the cancellation of a $10.5 million mortgage note receivable in February
1998, offset by an increase in interest income earned on an $8.0 million
mortgage note receivable issued in April 1998.
Equity in net income of unconsolidated entities increased $669,000 or 19.9%
to $4.0 million for the year ended December 31, 1998 from $3.4 million for the
same period in 1997. This increase results primarily from an increase in net
gains on land sales by Development Company.
Minority interest in net income of consolidated subsidiary for the year
ended December 31, 1998 of $196,000 represents a third-party investors' share of
the net income of a limited partnership that was formed in February 1998 to own
and operate a shopping center located in Milwaukee, Wisconsin. There was no
such minority interest in 1997.
Net gain on real estate sales for the year ended December 31, 1998 of
$379,000 represents a gain on the sale of two parcels of land, one located in
Hickory, North Carolina and the other in Lexington, Virginia. Net loss on real
estate sales for the year ended December 31, 1997 of $352,000 represents a loss
on the sale of two parcels of land in Wilmington, North Carolina.
Extraordinary items of $5.9 million for the year ended December 31, 1997
represent charges to earnings of unamortized deferred financing costs and
prepayment penalties associated with the termination of a secured line of credit
in May 1997 and the prepayment of a $75.0 million secured term loan in August
1997. There were no extraordinary items for the year ended December 31, 1998.
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
Minimum and percentage rents increased $10.4 million or 31.6% to $43.3
million for the year ended December 31, 1997 from $32.9 million for the same
period in 1996. During 1997 and 1996, the Company began operations at 15
properties developed by the Company totaling 1.9 million square feet (the "97/96
Development Properties"). Minimum and percentage rents increased $5.6 million
for the year ended December 31, 1997 over the same period in 1996 due to the
97/96 Development Properties. During 1997 and 1996, the Company acquired nine
shopping center properties from unrelated third parties totaling 916,000 square
feet of gross leasable area. In addition, during 1997, the Company acquired
unaffiliated joint venture partners' interests in the limited liability
companies which owned two properties located in Asheville, North Carolina and
Loganville, Georgia (the "Joint Ventures") and changed its accounting for these
two properties from the equity method to the consolidated method. Minimum and
percentage rents increased $4.5 million for the year ended December 31, 1997
over the same period in 1996 due to the operations of the 11 properties acquired
as noted above (collectively, the
16
<PAGE>
"97/96 Acquisition Properties"). The remaining increase relates to higher rental
revenues at the existing properties.
Recoveries from tenants increased $1.0 million or 29.8% to $4.5 million for
the year ended December 31, 1997 from $3.5 million for the same period in 1996.
Of this increase, $346,000 relates to the 97/96 Development Properties and
$716,000 relates to the 97/96 Acquisition Properties. The increases are offset
by a decrease in recoveries at the remaining properties
Other revenue decreased $68,000 or 31.6% to $147,000 for the year ended
December 31, 1997 from $215,000 for the same period in 1996. This decrease is
the result of a reduction in revenues associated with managing and leasing fewer
properties for third-party owners.
Operating and maintenance expenses increased $615,000 or 23.8% to $3.2
million for the year ended December 31, 1997 from $2.6 million for the same
period in 1996. Of this increase, $236,000 relates to the 97/96 Development
Properties and $387,000 relates to the 97/96 Acquisition Properties. The
increases are offset by a slight decrease in operating expenses at the existing
properties.
Real estate taxes increased $723,000 or 39.8% to $2.5 million for the year
ended December 31, 1997 from $1.8 million for the same period in 1996. Of this
increase, $171,000 relates to the 97/96 Development Properties and $454,000
relates to the 97/96 Acquisition Properties. The remaining increase relates to
increased taxes at the existing properties.
General and administrative expenses increased $898,000 or 26.7% to $4.3
million for the year ended December 31, 1997 from $3.4 million for the same
period in 1996. General and administrative expenses as a percentage of minimum
and percentage rents decreased to 9.8% for the year ended December 31, 1997 from
10.2% for the year ended December 31, 1996. The increase in absolute dollars
primarily reflects the cost of additional employees and other expenses
associated with an increase in the number of properties owned and operated by
the Company.
Depreciation and amortization expense increased $2.3 million or 30.1% to
$10.1 million for the year ended December 31, 1997 from $7.8 million for the
same period in 1996. Of this increase, $1.2 million relates to the 97/96
Development Properties and $1.0 million relates to the 97/96 Acquisition
Properties. The remaining increase relates primarily to amortization of tenant
improvements, tenant allowances and leasing commissions for new tenants at
existing properties.
Interest expense, net of capitalized amounts, decreased $1.0 million or
17.2% to $4.9 million for the year ended December 31, 1997 from $5.9 million for
the same period in 1996. This decrease is primarily attributable to the
repayment of debt with proceeds from equity offerings in 1997 and 1996.
Other income increased $1.1 million to $1.2 million for the year ended
December 31, 1997 from $83,000 for the same period in 1996. This increase is
due primarily to interest income earned on a $10.5 million mortgage note
receivable executed in December 1996.
Equity in net income of unconsolidated entities increased $2.0 million to
$3.4 million for the year ended December 31, 1997 from $1.4 million for the same
period in 1996. This increase is due to the operations of the Joint Ventures
and to the operations of the four properties operated by Development Company in
Canton, Georgia; Conyers, Georgia; Warner Robins, Georgia; and Steubenville,
Ohio. In addition, Development Company recognized gains due to its increased
land sales activity and the sale of shopping centers in Steubenville, Ohio and
Winston-Salem, North Carolina.
Net loss on real estate sales was $352,000 for the year ended December 31,
1997 compared to $15,000 for the year ended December 31, 1996. The 1997 loss
resulted from the sale of two parcels of land located in Wilmington, North
Carolina. The 1996 loss resulted from additional expenses associated with the
fourth quarter 1995 sale of a shopping center located in Hickory, North
Carolina.
Extraordinary items of $5.9 million for the year ended December 31, 1997
represent charges to earnings of unamortized deferred financing costs and
prepayment penalties associated with the termination of a secured line of credit
in May 1997 and the prepayment of a $75.0 million secured term loan in August
1997. There were no extraordinary items for the year ended December 31, 1996.
17
<PAGE>
FUNDS FROM OPERATIONS
Funds from operations ("FFO") is defined by the National Association of
Real Estate Investment Trusts, Inc. to mean net income, computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains or
losses from debt restructuring and sales of property, plus depreciation and
amortization of real estate assets, and after adjustments for unconsolidated
partnerships and joint ventures. The Company believes that FFO is helpful to
investors as a measure of the performance of an equity REIT because, along with
cash provided by operating activities, investing activities and financing
activities, it provides investors with an indication of the Company's ability to
make capital expenditures and to fund other cash needs. The Company's method of
calculating FFO may be different from methods used by other REITs and,
accordingly, may not be comparable to such other REITs. FFO does not represent
cash provided by operating activities as defined by GAAP, should not be
considered an alternative to net income (determined in accordance with GAAP) as
an indication of operating performance and is not indicative of cash available
to fund all cash flow needs, including the Company's ability to make cash
distributions. The Company has presented below the calculation of FFO for the
periods indicated:
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
-------------------------------------
(in thousands)
<S> <C> <C> <C>
Net income attributable to common shareholders $39,996 $21,293 $16,682
Depreciation of real estate assets 15,854 9,497 7,303
Amortization of tenant allowances and tenant improvements 178 144 104
Amortization of deferred leasing commissions 283 291 255
Net (gain) loss on real estate sales (379) 352 15
Extraordinary items - 5,940 -
Adjustments related to activities in unconsolidated entities 860 184 324
-------------------------------------
FFO $56,792 $37,701 $24,683
=====================================
</TABLE>
LEASING
The Company's properties were 96.4% leased as of December 31, 1998, 97.1%
leased as of December 31, 1997 and 98.2% leased as of December 31, 1996. The
decrease from 1997 to 1998 and from 1996 to 1997 is attributable to shop tenant
vacancy at newly developed shopping centers and shopping centers with unleased
space acquired by the Company as redevelopment opportunities. The 43 properties
that the Company owned and operated for all of 1997 and 1998, were 98.1%, 98.4%
and 98.4% leased as of December 31, 1998, 1997 and 1996, respectively.
FORWARD-LOOKING STATEMENTS
Management has included herein certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended. When used,
statements which are not historical in nature including the words "anticipate,"
"estimate," "should," "expect," "believe," "intend" and similar expressions are
intended to identify forward-looking statements. Such statements are, by their
nature, subject to certain risks and uncertainties. Among the factors that
could cause actual results to differ materially from those projected are the
following: business conditions and the general economy, especially as they
affect interest rates; business conditions as they affect value-oriented
retailers; the federal, state and local regulatory environment; availability of
debt and equity capital with favorable terms and conditions; availability of new
development and acquisition opportunities; changes in the financial condition or
corporate strategy of the Company's primary retail tenants and in particular
Wal-Mart and Lowe's; ability to complete and lease existing development and
redevelopment projects on schedule and within budget; and inability of
18
<PAGE>
the Company to maintain its qualification as a REIT. Other risks, uncertainties
and factors that could cause actual results to differ materially from those
projected are detailed from time to time in reports filed by the Company with
the Securities and Exchange Commission, including Forms 8-K, 10-Q and 10-K.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Funds
- -------------------------
Historically, the Company's primary sources of funds have been cash
generated from operating activities and proceeds from lines of credit, debt
offerings and equity offerings. The Company's primary uses of funds have been
development, redevelopment and acquisition of shopping center properties,
distributions to shareholders, scheduled debt amortization, and capital
improvements to existing shopping center properties. The Company generally has
used cash generated from operating activities to fund its distributions to
shareholders, scheduled debt amortization and capital improvements to existing
properties. The Company has used proceeds from lines of credit to finance its
development, redevelopment and acquisition activities. The Company has used
proceeds from debt and equity offerings to repay outstanding indebtedness and to
fund its ongoing development, redevelopment and acquisition activities.
During 1998 the Company funded $159.6 million in development and
redevelopment costs and advanced $75.4 million to Development Company to fund
its development activities. In addition, during 1998 the Company acquired 11
shopping centers from six third-party sellers for aggregate consideration of
$147.6 million. The Company funded these acquisitions with the following:
. Advances under its unsecured line of credit (the "Unsecured Line of
Credit") of $105.5 million;
. Assumption of indebtedness of $28.6 million;
. Issuance of limited partnership units valued at $3.0 million in a
limited partnership formed to own and operate a shopping center; and
. Cancellation of a $10.5 million mortgage loan receivable from the
seller of one of the shopping center properties.
As a result of this development, redevelopment and acquisition activity,
the Company completed seven public capital markets transactions in 1998. In
five of these transactions, the Company issued an aggregate of 3.8 million
shares of its common stock which netted proceeds of $101.0 million. The Company
also issued 2.0 million shares of its 9 3/8% Series A Cumulative Preferred Stock
which netted proceeds of $48.2 million. In addition, the Company issued $75.0
million of 6.918% MandatOry Par Put Remarketed Securities(sm) (the "MOPPRS").
In connection with the issuance of the MOPPRS, Merrill Lynch, Pierce, Fenner and
Smith Incorporated ("Merrill Lynch") purchased an option to remarket the MOPPRS
on March 31, 2003. The Company's effective borrowing rate on the MOPPRS is
6.58%.
During 1998, the Company entered into a Distribution Agreement with a group
of agents led by Merrill Lynch relating to the proposed issue and sale from time
to time of up to $505.5 million of the Company's Medium-Term Notes Due Nine
Months or More From the Date of Issue (the "Medium-Term Notes Program"). The
aggregate offering amount under the Medium-Term Notes Program is subject to
reduction as a result of the sale by the Company of other securities described
in its Prospectus dated October 30, 1997 and has been reduced by the seven
offerings described above. The Medium-Term Notes program provides an additional
facility for funding the Company's acquisition and development activities. As
of December 31, 1998, the Company had $276.9 million registered and available
for issue under the Medium-Term Notes program.
19
<PAGE>
Indebtedness
- ------------
As of December 31, 1998, the Company's indebtedness consisted of the
following:
<TABLE>
<CAPTION>
PERCENT
PRINCIPAL INTEREST MATURITY OF TOTAL MONTHS TO
BALANCE RATE DATE INDEBTEDNESS MATURITY
----------- -------- ---------- ------------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Fixed Rate
Seven Year Notes $ 74,802 7.10% (1) 1-Aug-04 17.6% 67
Ten Year Notes 84,771 7.23% (1) 1-Aug-07 20.0% 103
MandatOry Par Put Remarketed Securities (2) 75,000 6.58% (1) 31-Mar-03 (2) 17.6% 51
Mortgage note payable- Richmond, Kentucky 6,290 6.88% (3) 01-Dec-03 1.5% 59
Mortgage note payable- Jackson, Mississippi 7,021 9.25% 01-Mar-17 1.6% 218
Mortgage note payable- Milwaukee, Wisconsin 5,143 7.75% 01-Aug-09 1.2% 127
----------- -------- ------------- ----------
253,027 7.06% 59.5% 80
Floating Rate
Unsecured Line of Credit 133,500 6.88% (4) 22-May-01 31.4% 29
Revolving Line of Credit 15,019 8.50% (4) 01-Sep-99 3.5% 8
Mortgage note payable - Denver, Colorado 24,017 7.93% (5) 18-Jul-01 (5) 5.6% 31
----------- -------- ------------- ----------
172,536 7.17% 40.5% 27
----------- -------- ------------- ----------
$425,563 7.10% 100.0% 58
=========== ======== ============= ==========
</TABLE>
(1) Represents stated rate plus amortization of deferred loan costs.
(2) Represents notes payable with a stated rate of 6.918% and a stated
maturity date of March 31, 2013. These notes are subject to mandatory
tender on March 31, 2003.
(3) The interest rate on this note is adjusted on December 1 of each year.
(4) Stated rate of LIBOR plus 1.00% plus amortization of deferred loan costs.
(5) In December, 1998, the Company exercised its option to extend the maturity
of this mortgage note payable from January 1999 to July 2001. On January
17, 1999, this mortgage note converted from a floating rate of LIBOR plus
2.75% to a fixed rate of 6.812%.
During 1998, the Company amended the Unsecured Line of Credit as
follows:
. Increased maximum borrowings allowed from $150.0 million to
$174.8 million (expandable to $200.0 million);
. Extended the maturity date by one year from May 22, 2000 to May
22, 2001;
. Reduced the borrowing rate from LIBOR plus 1.25% to LIBOR plus
1.00%
In addition to amending the Unsecured Line of Credit, in 1998 the Company
entered into a $20.0 million Revolving Loan Credit Agreement (the "Revolving
Line of Credit") with Wachovia Bank, N.A. The Revolving Line of Credit is
unsecured, bears interest at LIBOR plus 1.00% and matures in September 1999.
The amended Unsecured Line of Credit and the Revolving Line of Credit provide
the Company with additional capacity to fund its development, redevelopment and
acquisition activities.
As of December 31, 1998, the Company had $41.3 million available under the
Unsecured Line of Credit and $5.0 million available under the Revolving Line of
Credit.
Derivatives and Market Risk
- ---------------------------
The Company is exposed to market risk from changes in interest rates on its
indebtedness, which could impact its financial condition and results of
operations. The Company manages its exposure to these market risks through its
regular operating and financing activities. The Company manages its ratio of
fixed to floating rate debt with the objective of achieving a mix that
management believes is appropriate. The Company has and may from time to time
in the future enter into interest rate swap agreements in which it agrees to
exchange various combinations of fixed and/or variable interest rates on agreed
upon notional amounts. Effective as of December 31, 1998, the Company had one
interest rate
20
<PAGE>
swap agreement as described below. Management does not foresee or expect any
significant changes in its exposure to interest rate fluctuations or in how such
exposure is managed in the near future. The Company intends to use derivative
financial instruments as risk management tools and not for speculative or
trading purposes. Under the terms of the Company's interest rate swap agreement,
the Company pays a fixed rate of 6.48% and receives a variable rate equal to the
rate for the one-month LIBOR rate based on the notional amount in the contract
of $50.0 million. The maturity date of the swap agreement is January 1, 2001.
The Company's future earnings, cash flows and fair values of financial
instruments are primarily dependent upon market rates of interest such as LIBOR.
Based upon consolidated indebtedness and interest rates at December 31, 1998, a
hypothetical immediate 1.0% increase in interest rates would decrease future
annual earnings by approximately $863,000, cash flows by approximately $1.1
million and fair value of debt by approximately $11.3 million.
Future Sources and Uses of Funds
- --------------------------------
As of December 31, 1998, the Company, Development Company and affiliated
entities had 36 projects under construction which, when completed, are expected
to add approximately 3.2 million square feet of gross leasable area which the
Company expects to own. Of these projects under construction, 11 are located in
Georgia, six are located in North Carolina, three are located in Florida, and
two are located in Tennessee. The Company has either signed leases by tenants
or commitments by retailers to occupy space in 72.0% of the total square feet of
these projects. The Company estimates that additional funding needed to
complete the construction of these projects is $138.2 million.
Management expects to fund the remaining costs of its development projects
and the costs of any future development projects or acquisitions with a
combination of one or more of the following:
. advances under the Unsecured Line of Credit;
. advances under the Revolving Line of Credit;
. issuances of securities under the Medium-Term Notes Program;
. issuances of common or preferred stock;
. issuances of debt securities;
. issuances of limited partnership units in DownREIT structures;
. advances under secured financings;
. advances under term loans with financial institutions;
. proceeds from the sales of assets;
. proceeds from the contribution of a pool of assets to a joint venture
in which the Company participates.
Subsequent to December 31, 1998, the Company entered into the following
transactions:
. On January 13, 1999, the Company issued 500,000 shares of its common
stock in a public offering which netted proceeds of approximately
$10.8 million. The Company used the net proceeds to repay amounts
outstanding under the Unsecured Line of Credit.
. On February 17, 1999, the Company closed a $100.0 million unsecured
term loan with Wachovia Bank, N.A., as agent. This term loan matures
in February 2002 and the interest rate is LIBOR plus 1.40%. The
Company used the net proceeds to repay amounts outstanding under the
Unsecured Line of Credit.
The Company is pursuing three loans with institutional investors secured by
Lowe's stores in Alpharetta, Georgia, Lilburn, Georgia and Woodstock, Georgia.
The Company expects these loans to close in March 1999 and to generate an
aggregate of $39.2 million in proceeds to the Company. The Company expects the
loan terms to provide for self-amortizing payments of principal and interest at
21
<PAGE>
fixed interest rates between 6.55% and 6.70% per annum for the remaining terms
of the respective Lowe's leases, which average between 18 and 19 years.
The Company is also pursuing a joint venture with an institutional investor
which could provide up to $200.0 million in capital to the Company. Under the
proposed terms, the Company would contribute a pool of existing shopping centers
and shopping centers under construction to the joint venture and retain an
ownership interest in the joint venture. The Company is in the preliminary
stages of pursuing a transaction or series of transactions of this nature and
there can be no assurance that any such transactions will be consummated.
In order for the Company to continue to qualify as a REIT, it must annually
distribute to shareholders at least 95% of its taxable income. Management
believes that the Company will meet this requirement in 1999 with cash generated
from operating activities. In addition, management believes that cash generated
from operating activities will be adequate to fund capital improvements to the
Company's existing shopping center properties and scheduled debt amortization in
1999.
In order to meet the Company's long term liquidity requirements, management
anticipates that the Company's cash generated from operating activities will
continue to increase as a result of new developments, redevelopments,
acquisitions and improved operations at existing centers. Management
anticipates that these activities will enable the Company to make distributions
to shareholders, maintain and improve its properties, make scheduled debt
payments, and obtain debt or equity financing for its development, redevelopment
and acquisition properties. With the exception of a $7.0 million amortizing
mortgage loan, all of the Company's debt requires balloon payments in the
future. The Revolving Line of Credit matures in 1999; the Unsecured Line of
Credit matures in 2001; a mortgage note payable of $24.0 million matures in
2001; the MOPPRS are subject to mandatory tender in 2003; a mortgage note
payable of $6.3 million matures in 2003; the Seven Year Notes mature in 2004;
the Ten Year Notes mature in 2007; and a mortgage note payable of $5.1 million
matures in 2009. Management intends to refinance or repay these maturing debt
instruments with proceeds from other sources of capital at or prior to their
respective maturities. Management will evaluate various alternatives and select
the best options based on market conditions at the time. Management expects to
seek additional equity financing when market conditions are favorable in order
to maintain its debt-to-total-market-capitalization ratio within limits
acceptable to management. There can be no assurance that debt or equity markets
will be favorable in the future and unfavorable markets could limit the
Company's ability to expand its business or repay or refinance maturing debt.
FEDERAL INCOME TAX PROPOSALS
On February 1, 1999, the Clinton Administration announced its proposals for
the fiscal year 2000 federal budget. These proposals contain certain provisions
that, if enacted, would significantly modify the REIT-related provisions of the
Internal Revenue Code of 1986, as amended (the "Code"). A summary of the
significant provisions is as follows:
Permit Taxable REIT Subsidiaries and Prohibit Preferred Stock Subsidiaries
- --------------------------------------------------------------------------
A REIT would be permitted to operate taxable subsidiaries through which the
REIT could conduct activities such as providing "noncustomary" and other
currently prohibited services with respect to REIT tenants and other customers.
Many REITs, including the Company, currently own interests in preferred stock or
non-voting common stock subsidiaries, which conduct such activities. This
proposal would prohibit such preferred stock or non-voting common stock
subsidiaries by limiting a REIT's ownership in these subsidiaries to 10% of
voting stock or 10% of the value of the subsidiaries. The value of all taxable
REIT subsidiaries would be limited to 15% of the value of the REIT's total
assets, and the value of all qualified independent contractor subsidiaries, a
type of taxable REIT subsidiary, would be limited to 5% of the value of the
REIT's total assets. This proposal would also prohibit deductibility of
22
<PAGE>
intercompany interest expense between a REIT and its taxable REIT subsidiaries
and impose a 100% tax on any non-arms length payments between a REIT and its
taxable subsidiaries.
Prohibit Closely Held REITs
- ---------------------------
REITs would be subject to an additional requirement for REIT qualification
which would prohibit certain closely held structures. No entity or person would
be permitted to own stock of a REIT possessing 50% or more of the total combined
voting power of all classes of voting stock or 50% or more of the total value of
all shares of all classes of stock. This requirement would not apply to
ownership by a REIT of 50% or more of the stock (vote or value) of another REIT.
Recognition of Built-in Gain Upon the Conversion of a C Corporation into a REIT
- -------------------------------------------------------------------------------
This proposal would require immediate recognition of built-in gain of any C
corporation with a value of more than $5 million which converts to REIT status.
Of these proposed changes, only the change related to taxable REIT
subsidiaries would directly affect the Company. If Congress enacts such a
provision, the ownership structure of Development Company would change as it
would be required to be restructured as a taxable REIT subsidiary. Management
believes that the activities conducted by Development Company should not change.
For financial reporting purposes, the Company would change its accounting for
Development Company from the equity method to the consolidated method.
Management does not believe, however, that these changes would modify the way
the Company conducts its business and would not have a material effect on the
results of operations or financial condition of the Company. These provisions
represent only the Clinton Administration's proposals; no action has been
initiated in Congress. At this time, it is uncertain whether Congress will
enact any or all of these provisions or additional provisions.
YEAR 2000 READINESS DISCLOSURE
Like most businesses, the Company is reliant upon technology to operate and
manage its business. Many computer systems process dates using two digits to
identify the year, and some systems are unable to properly process dates
beginning with the year 2000. As a result of this potential problem, the
Company began to assess its exposure to this issue several years ago. As a
result of its ongoing assessment, the Company believes that it has identified
all of its information technology ("IT") and non-IT systems with exposure to the
Year 2000 problem. The Company's critical IT systems include, but are not
limited to, accounting and reporting applications and all IT hardware, such as
desktop computers, laptop computers and data networking equipment. The
Company's critical non-IT systems include, but are not limited to, telephone
systems, fax machines, copy machines as well as HVAC systems at the Company's
properties. All of the Company's accounting and reporting software has been
purchased from third-party vendors. The Company has requested and received
certifications from its third-party vendors that all of its critical IT software
is Year 2000 compliant. The Company is currently in the process of determining
its exposure to any critical non-IT systems that are not Year 2000 compliant and
will develop a contingency plan if one becomes necessary.
The Company is undergoing an IT systems needs assessment which may result
in new accounting and reporting hardware and software being installed. The
Company will ensure that all newly installed hardware and software are Year 2000
compliant.
The Company cannot ensure that various third parties with which it deals
will be Year 2000 compliant. Failure of various third parties such as banks,
significant tenants and vendors to adequately address the Year 2000 problem
could have an adverse impact on the Company's business. This impact could
include the inability of the Company's banks to process receipt or disbursement
of checks for a period of time, the inability to receive payments from its
significant tenants for a period of time and the inability of its vendors to
provide services or materials to complete its development projects on time and
23
<PAGE>
within budget. The Company has reviewed publicly available information on the
Year 2000 readiness of its banks and significant tenants and, based solely on a
review of this information, has noted nothing indicating their failure to be
Year 2000 compliant in all material respects. The Company is not aware of any
other significant suppliers or vendors with a Year 2000 issue that would
materially impact the Company's results of operations, liquidity or capital
resources. There can be no assurances, however, that the systems of other
companies, on which the Company relies, will be timely converted and would not
have an adverse effect on the Company's systems. The Company will continue to
monitor the state of Year 2000 readiness of these and other significant third
parties, and will develop a contingency plan if one becomes necessary.
The Company believes it has an effective program in place that will resolve
the Year 2000 issues in a timely manner. Aside from catastrophic failure of
banks, utility companies or governmental agencies, the Company believes that it
could continue its normal business operations even if compliance by the Company
or its vendors, suppliers and customers is delayed. Aside from a catastrophic
failure that would affect most businesses, the Company does not believe that the
Year 2000 issue will materially impact its results of operations, liquidity or
capital resources.
Historic costs of addressing and solving the Company's Year 2000 problems
have not been, and estimated costs are not expected to be material.
INFLATION
The Company's leases generally contain provisions designed to mitigate the
adverse impact of inflation on net income. These provisions include clauses
enabling the Company to pass through to tenants certain operating costs,
including real estate taxes, common area maintenance, utilities and insurance,
thereby reducing the Company's exposure to increases in costs and operating
expenses resulting from inflation. Certain of the Company's leases contain
clauses enabling the Company to receive percentage rents based on tenants' store
sales, which generally increase as prices rise, and, in certain cases,
escalation clauses, which generally increase rental rates during the terms of
the leases. In addition, many of the Company's leases with non-anchor tenants
are for terms of less than ten years, which permits the Company to seek
increased rents as market conditions permit.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
Information on quantitative and qualitative disclosure about market risk
are included in Item 7 of this Form 10-K under the caption "Liquidity and
Capital Resources."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
The financial statements and supplementary data required under Regulation
S-X and listed in Item 14(a)(1) below are included in a separate section of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None.
24
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The information relating to Directors of the Company set forth in the
Company's Proxy Statement relating to the Annual Meeting of Shareholders to be
held on May 19, 1999 under the caption "Election of Directors" is incorporated
herein by reference.
The information relating to Executive Officers of the Company is included
in Item 1 of this annual report on Form 10-K under the caption "Executive
Officers."
The information relating to Section 16(a) beneficial ownership reporting
compliance set forth in the Company's Proxy Statement relating to the Annual
Meeting of Shareholders to be held on May 19, 1999 under the caption "Security
Ownership of Certain Beneficial Owners and Management" is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The information set forth in the Company's Proxy Statement relating to the
Annual Meeting of Shareholders to be held on May 19, 1999 under the caption
"Executive Compensation" is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The information set forth in the Company's Proxy Statement relating to the
Annual Meeting of Shareholders to be held on May 19, 1999 under the caption
"Security Ownership of Certain Beneficial Owners and Management" is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information set forth in the Company's Proxy Statement relating to the
Annual Meeting of Shareholders to be held on May 19, 1999 under the caption
"Certain Relationships and Related Transactions" is incorporated herein by
reference.
25
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
(A) (1) FINANCIAL STATEMENTS
The following financial statements are included in and filed pursuant to
Item 8 and are included herein on the pages indicated:
<TABLE>
<S> <C>
Consolidated balance sheets - December 31, 1998 and 1997............................. F-1
Consolidated statements of income - Years ended
December 31, 1998, 1997, and 1996.............................................. F-2
Consolidated statements of shareholders' equity - Years ended
December 31, 1998, 1997, and 1996.............................................. F-3
Consolidated statements of cash flows - December 31, 1998, 1997, and 1996............ F-4
Notes to consolidated financial statements........................................... F-5
Report of Ernst & Young LLP, Independent Auditors.................................... F-17
</TABLE>
(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules are included in and filed
pursuant to Item 14(d) and are included herein on the pages indicated:
<TABLE>
<S> <C>
Schedule II - Valuation and Qualifying Accounts...................................... F-18
Schedule III - Real Estate and Accumulated Depreciation.............................. F-19
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.
(3) EXHIBITS
Exhibit Number Description
-------------- -----------
3.1 Articles of Restatement of JDN Realty Corporation (1)
3.2 Articles of Merger of JDN Enterprises, Inc. with and into
the Company (2)
3.3 Amended and Restated Bylaws of the Company (10)
4 Specimen stock certificate (3)
10.1 JDN Realty Corporation 1993 Incentive Stock Plan, as
amended (10)
10.2 JDN Realty Corporation 1993 Non-Employee Director Stock
Option Plan (2)
10.3 Indemnification Agreement by and between J. Donald Nichols
and JDN Realty Corporation, dated February 23, 1994 (2)
10.4 Indemnification Agreement by and between Elizabeth L.
Nichols and JDN Realty Corporation, dated February 23, 1994
(2)
10.5 Indemnification Agreement by and between William J. Kerley
and JDN Realty Corporation, dated February 23, 1994 (2)
10.6 $200,000,000 Amended and Restated Credit Agreement dated as
of September 3, 1998, among JDN Realty Corporation and
Wachovia Bank, N.A., as Agent (5)
26
<PAGE>
10.7 $100,000,000 Term Loan Credit Agreement dated as of February 17,
1999 among JDN Realty Corporation, Wachovia Bank, N.A., as Agent
and PNC, National Association, as Documentation Agent
10.8 Indenture, dated as of July 15, 1997, by the Company to First
Union National Bank as Trustee (6)
10.9 First Supplemental Indenture, dated as of July 31, 1997, by the
Company to First Union National Bank, as Trustee (6)
10.10 Second Supplemental Indenture, dated as of February 5, 1998, by
the Company to First Union National Bank, as Trustee (7)
10.11 JDN Realty Corporation Dividend Reinvestment and Stock Purchase
Plan (8)
10.12 JDN Realty Corporation 1995 Employee Stock Purchase Plan (4)
10.13 Employment Agreement by and between J. Donald Nichols and the
Company, dated as of December 1, 1996 (9)
10.14 Employment Agreement by and between Elizabeth L. Nichols and the
Company, dated as of December 1, 1996 (9)
10.15 Employment Agreement by and between William J. Kerley and the
Company, dated as of December 1, 1996 (9)
10.16 Employment Agreement by and between David L. Henzlik and the
Company, dated as of December 1, 1996 (9)
10.17 Employment Agreement by and between John D. Harris, Jr. and the
Company dated as of May 1, 1997. (10)
10.18 Employment Agreement by and between Leilani L. Jones and the
Company, dated as of May 1, 1997. (10)
12 Ratio of Earnings to Fixed Charges
21 Subsidiaries of the Company
23 Consent of Independent Auditors
27 Financial Data Schedule
99.1 Risk Factors/Cautionary Statements for Purposes of the Private
Securities Litigation Reform Act of 1995
99.2 Federal Income Tax and ERISA Considerations
(1) Filed as an exhibit to the Company's filing on Form 8-K dated November
7, 1996, previously filed pursuant to the Securities Exchange Act of
1934, and hereby incorporated by reference.
(2) Filed as an exhibit to the Company's Registration Statement on Form
S-11 (No. 33-73710) previously filed pursuant to the Securities Act of
1933 and hereby incorporated by reference.
(3) Filed as an exhibit to the Company's Registration Statement on Form
S-3 (No. 333-22339) previously filed pursuant to the Securities Act of
1933 and hereby incorporated by reference.
(4) Filed as an exhibit to the Company's Registration Statement on Form
S-8 (No. 333-1848) previously filed pursuant to the Securities Act of
1933 and hereby incorporated by reference.
27
<PAGE>
(5) Filed as an exhibit to the Company's quarterly report on Form 10-Q for
the quarter ended September 30, 1998, previously filed pursuant to the
Securities Exchange Act of 1934 and hereby incorporated by reference.
(6) Filed as an exhibit to the Company's filing on Form 8-K dated August
1, 1997, previously filed pursuant to the Securities Exchange Act of
1934 and hereby incorporated by reference.
(7) Filed as an exhibit to the Company's filing on Form 8-K dated February
13, 1998, previously filed pursuant to the Securities Exchange Act of
1934 and hereby incorporated by reference.
(8) Filed as an exhibit to the Company's Registration Statement on Form S-
3 (No. 33-90868) previously filed pursuant to the Securities Act of
1933 and hereby incorporated by reference.
(9) Filed as an exhibit to the Company's annual report on Form 10-K for
the year ended December 31, 1996, previously filed pursuant to the
Securities Exchange Act of 1934 and hereby incorporated by reference.
(10) Filed as an exhibit to the Company's filing on Form 10-K for the
year ended December 31, 1997, previously filed pursuant to the
Securities Exchange Act of 1934 and hereby incorporated by reference.
28
<PAGE>
Executive Compensation Plans and Arrangements
The following is a list of all executive compensation plans and
arrangements filed as exhibits to this annual report on Form 10-K or
incorporated herein by reference:
1. JDN Realty Corporation 1993 Incentive Stock Plan, as amended (Exhibit
10.1)
2. JDN Realty Corporation Savings and Profit Sharing Plan (Exhibit 10.3)
3. Employment Agreement, dated as of December 1, 1996, by and between J.
Donald Nichols and the Company (Exhibit 10.12)
4. Employment Agreement, dated as of December 1, 1996, by and between
Elizabeth L. Nichols and the Company (Exhibit 10.13)
5. Employment Agreement, dated as of December 1, 1996, by and between
William J. Kerley and the Company (Exhibit 10.14)
6. Employment Agreement, dated as of December 1, 1996, by and between
David L. Henzlik and the Company (Exhibit 10.15)
7. Employment Agreement, dated as of May 1, 1997, by and between John D.
Harris, Jr. and the Company (Exhibit 10.16)
8. Employment Agreement, dated as of May 1, 1997, by and between Leilani
L. Jones and the Company (Exhibit 10.17)
9. Indemnification Agreement, dated as of February 23, 1994, by and
between J. Donald Nichols and the Company (Exhibit 10.3)
10. Indemnification Agreement, dated as of February 23, 1994, by and
between Elizabeth L. Nichols and the Company (Exhibit 10.4)
11. Indemnification Agreement, dated as of February 23, 1994, by and
between William J. Kerley and the Company (Exhibit 10.5)
12. JDN Realty Corporation 1995 Employee Stock Purchase Plan (Exhibit
10.10)
(B) REPORTS ON FORM 8-K
During the three months ended December 31, 1998, the Company filed the
following reports on Form 8-K:
(i) Form 8-K dated October 19, 1998 containing the following:
. A Terms Agreement with Merrill Lynch, Pierce, Fenner and Smith
Incorporated ("Merrill Lynch") relating to the sale by the
Company to Merrill Lynch of 977,500 shares of the Company's
common stock at a price of $20.6875 per share
. Risk Factors/Cautionary Statements for purposes of the Private
Securities Litigation Reform Act of 1995
(ii) Form 8-K dated October 30, 1998 containing the following:
. Risk Factors/Cautionary Statements for purposes of the Private
Securities Litigation Reform Act of 1995
. Federal Income Tax and ERISA considerations
(ii) Form 8-K dated November 10, 1998 containing a Terms Agreement with
SunTrust Equitable Securities Corporation ("SunTrust Equitable")
relating to the sale by the Company to SunTrust Equitable of 717,500
shares of the Company's common stock at a price of $21.25 per share
29
<PAGE>
(iii) Form 8-K/A dated December 23, 1998 containing the following:
. Audited statements of revenue and certain expenses of five
shopping centers pursuant to Rule 3-14 of Regulation S-X
. Pro forma consolidated balance sheet and income statements of the
Company pursuant to Article 11 of Regulation S-X
(iv) Form 8-K dated December 23, 1998 containing the following:
. Audited statements of revenue and certain expenses of eight
shopping centers pursuant to Rule 3-14 of Regulation S-X
. Pro forma consolidated balance sheet and income statements of the
Company pursuant to Article 11 of Regulation S-X
(C) EXHIBITS
The response to this portion of Item 14 is submitted as a separate section
of this report.
(D) FINANCIAL STATEMENT SCHEDULES
The response to this portion of Item 14 is submitted as a separate section
of this report.
30
<PAGE>
ITEM 8
------
FINANCIAL STATEMENTS AND SUPPLEMENT DATA
----------------------------------------
ITEM 14(D)
----------
FINANCIAL STATEMENT SCHEDULES
-----------------------------
<PAGE>
JDN REALTY CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------------
(dollars in thousands, except per share data) 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Shopping center properties, at cost:
Land $ 153,111 $ 85,837
Buildings and improvements 619,963 397,110
Property under development 74,192 52,356
------------------------------
847,266 535,303
Less: accumulated depreciation and amortization (56,093) (38,306)
------------------------------
Shopping center properties, net 791,173 496,997
Cash and cash equivalents - 11,439
Rents receivable, net of allowance for doubtful accounts of $667 and
$719 in 1998 and 1997, respectively 7,158 2,691
Investments in and advances to unconsolidated entity, JDN
Development Company, Inc. 151,040 71,221
Deferred costs, net of amortization 4,424 4,189
Other assets 15,127 13,216
------------------------------
$ 968,922 $ 599,753
==============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Unsecured notes payable $ 234,573 $ 159,511
Unsecured lines of credit 148,519 43,500
Mortgage notes payable 42,471 13,591
Accounts payable and accrued expenses 11,550 6,719
Other liabilities 10,764 4,844
------------------------------
Total liabilities 447,877 228,165
Third party investors' interest 3,000 -
Shareholders' Equity
Preferred stock, par value $.01 per share - authorized 20,000,000
shares: 9 3/8% Series A Cumulative Redeemable Preferred Stock,
liquidation preference $25 per share, issued and outstanding
2,000,000 and -0- shares in 1998 and 1997, respectively. 20 -
Common stock, par value $.01 per share - authorized 150,000,000
shares, issued and outstanding 32,704,408 and 27,745,798 shares
in 1998 and 1997, respectively 327 277
Paid-in capital 524,787 378,400
Accumulated deficit (7,089) (7,089)
------------------------------
518,045 371,588
------------------------------
$ 968,922 $ 599,753
==============================
</TABLE>
See accompanying notes.
F-1
<PAGE>
JDN REALTY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
(in thousands, except per share data) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Minimum and percentage rents $ 71,191 $ 43,346 $ 32,933
Recoveries from tenants 10,003 4,512 3,475
Other revenue 117 147 215
------------------------------------------
Total revenues 81,311 48,005 36,623
OPERATING EXPENSES:
Operating and maintenance 6,439 3,201 2,586
Real estate taxes 5,316 2,540 1,817
General and administrative 7,105 4,265 3,367
Depreciation and amortization 16,824 10,130 7,786
------------------------------------------
Total operating expenses 35,684 20,136 15,556
------------------------------------------
INCOME FROM OPERATIONS 45,627 27,869 21,067
Other income (expense):
Interest expense, net (9,454) (4,856) (5,868)
Other income, net 945 1,205 83
Equity in net income of unconsolidated entities 4,036 3,367 1,415
------------------------------------------
Income before minority interest in net income of consolidated subsidiary, net
gain (loss) on real estate sales
and extraordinary items 41,154 27,585 16,697
Minority interest in net income of consolidated subsidiary (196) - -
------------------------------------------
Income before net gain (loss) on real estate sales and
extraordinary items 40,958 27,585 16,697
Net gain (loss) on real estate sales 379 (352) (15)
------------------------------------------
Income before extraordinary items 41,337 27,233 16,682
Extraordinary items - (5,940) -
------------------------------------------
Net Income 41,337 21,293 16,682
Dividends to preferred shareholders (1,341) - -
------------------------------------------
Net income attributable to common shareholders $ 39,996 $ 21,293 $ 16,682
==========================================
Income per share--basic
Income before extraordinary items (net of preferred dividend) $ 1.30 $ 1.18 $ 1.00
Extraordinary items - (0.26) -
------------------------------------------
Net income attributable to common shareholders $ 1.30 $ 0.92 $ 1.00
==========================================
Income per share--diluted
Income before extraordinary items (net of preferred dividend) $ 1.28 $ 1.16 $ 1.00
Extraordinary items - (0.25) -
------------------------------------------
Net income attributable to common shareholders $ 1.28 $ 0.91 $ 1.00
==========================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
JDN REALTY CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Common Paid-in Accumulated
Stock Stock Capital Deficit Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 $ - $ 150 $ 166,925 $ (7,089) $ 159,986
Proceeds from offerings of common stock - 46 71,498 - 71,544
Distributions to common shareholders
($1.25 per share) - - (4,991) (16,682) (21,673)
Net income - - - 16,682 16,682
-----------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 - 196 233,432 (7,089) 226,539
Proceeds from offerings of common stock - 81 155,707 - 155,788
Distributions to common shareholders
($1.32 per share) - - (10,739) (21,293) (32,032)
Net income - - - 21,293 21,293
-----------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 - 277 378,400 (7,089) 371,588
Proceeds from offering of preferred stock 20 - 48,154 - 48,174
Proceeds from offerings of common stock - 50 102,425 - 102,475
Distributions to preferred shareholders
($0.67 per share) - - - (1,341) (1,341)
Distributions to common shareholders
($1.41 per share) - - (4,192) (39,996) (44,188)
Net income - - - 41,337 41,337
-----------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ 20 $ 327 $ 524,787 $ (7,089) $ 518,045
=======================================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
JDN REALTY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
(in thousands) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 41,337 $ 21,293 $ 16,682
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 15,676 9,641 7,516
Amortization 1,758 1,540 1,774
Equity in net income of unconsolidated entities (4,036) (3,367) (1,415)
Minority interest in net income of consolidated subsidiary 196 - -
Net (gain) loss on real estate sales (379) 352 15
Extraordinary items - 5,940 -
Changes in assets and liabilities:
Rents receivable (4,467) (537) 420
Other assets (130) (174) -
Accounts payable and accrued expenses 3,766 4,721 834
Other liabilities 2,339 2,168 244
--------------------------------------------
Net cash provided by operating activities 56,060 41,577 26,070
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of shopping center properties (105,453) (29,222) (6,815)
Improvements to shopping center properties (1,507) (1,714) (772)
Development of shopping center properties (159,590) (139,026) (48,264)
Investments in and advances to JDN Development Company, Inc. (75,361) (33,031) (16,495)
Other (10,185) (1,585) (11,637)
--------------------------------------------
Net cash used in investing activities (352,096) (204,578) (83,983)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgages and notes payable 1,060 48,508 82,251
Principal payments on mortgages and notes payable (532) (201,821) (69,208)
Proceeds from unsecured lines of credit 381,420 248,715 -
Principal payments on unsecured lines of credit (276,401) (205,215) -
Proceeds from issuance of unsecured notes payable 76,548 159,486 -
Net proceeds from issuance of common stock 101,011 155,788 71,544
Net proceeds from issuance of preferred stock 48,174 - -
Distributions to common shareholders (44,188) (32,032) (26,229)
Distributions to preferred shareholders (1,341) - -
Deferred financing costs - (4,564) (246)
Other (1,154) 2,866 (599)
--------------------------------------------
Net cash provided by financing activities 284,597 171,731 57,513
--------------------------------------------
Increase (decrease) in cash and cash equivalents (11,439) 8,730 (400)
Cash and cash equivalents at beginning of year 11,439 2,709 3,109
--------------------------------------------
Cash and cash equivalents at end of year $ - $ 11,439 $ 2,709
============================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
JDN Realty Corporation
Notes to Consolidated Financial Statements
December 31, 1998
(dollars in thousands, except per share data)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
JDN Realty Corporation (the "Company") is a real estate company
specializing in the development and asset management of retail shopping centers
anchored by value-oriented retailers. The Company's shopping centers are
located in 14 states, primarily in the Southeast. The Company has elected to be
taxed as a real estate investment trust ("REIT").
Basis of Presentation
The financial statements represent the consolidated financial statements of
the Company, its wholly-owned subsidiaries and its majority-owned subsidiaries.
All significant intercompany balances and transactions have been eliminated.
Investments in Unconsolidated Entities
The Company uses the equity method of accounting for investments in non-
majority owned entities including those where the Company's ownership is below
20% and where the Company has the ability to exercise significant influence over
operating and financial policies.
Real Estate Assets
Shopping center properties are stated at cost less accumulated
depreciation. The Company capitalizes costs of construction, property taxes,
interest and other miscellaneous costs incurred during the development period
until such time as projects become operational. Depreciation and amortization
are provided on a straight-line basis over the estimated useful lives of the
assets. Expenditures for maintenance and repairs are charged to operations as
incurred. Renovations which improve or extend the life of the related assets
are capitalized.
The Company records impairment losses on long-lived assets used in
operations when indicators of impairment are present and the estimated
undiscounted cash flows related to those assets are less than their carrying
amounts.
Deferred Costs
Costs and fees associated with the Company's debt obligations are included
in deferred costs in the accompanying consolidated balance sheets and are
amortized over the terms of the related debt agreements. Amortization of these
deferred financing costs is included in interest expense in the consolidated
statements of income. Accumulated amortization totaled approximately $1,224 and
$329 at December 31, 1998 and 1997, respectively.
Revenue Recognition
The Company leases space in its shopping centers to tenants and recognizes
minimum base rentals as revenue on a straight-line basis over the terms of the
operating leases. The tenants are required to pay additional rentals based on
common area maintenance expenses, and the Company recognizes such rentals as the
revenue is earned. In addition, certain tenants pay incremental rental amounts
based on store sales and these percentage rentals are recognized as earned.
The tenant base includes primarily national or regional retail chains and
local retailers, and consequently the Company's credit risk is concentrated in
the retail industry. Rents receivable in excess of security deposits are
unsecured and are subject to credit losses to this extent.
F-5
<PAGE>
Net Gain (Loss) on Real Estate Sales
Net gain (loss) on real estate sales relates to the sale of parcels of
land. The applicable gain or loss is recognized at closing, when the earnings
process is deemed to be complete, which generally coincides with the receipt of
cash.
Interest Costs
Interest costs incurred during the development period of projects are
capitalized and depreciated over the life of the building. Interest costs
capitalized were $6,401, $4,650, and $1,993 for the years ended December 31,
1998, 1997, and 1996, respectively. Interest payments totaled $21,766, $11,407
and $10,293 during the years ended December 31, 1998, 1997 and 1996,
respectively.
Interest Rate Swaps
The Company enters into interest rate swap agreements to hedge certain
elements of its exposure to increasing rates on its floating rate debt. These
agreements involve the exchange of amounts based on fixed interest rates for
amounts based on variable interest rates over the lives of the agreements
without an exchange of the notional amounts upon which the payments are based.
The differential to be paid or received as interest rates change is accrued and
recognized as an adjustment to interest incurred. The fair value of the
interest rate swap agreements and changes in the fair value as a result of
changes in market interest rates are not recognized in the financial statements.
Stock-Based Compensation
The Company uses the intrinsic value method for valuing its awards of stock
options and restricted stock and recording the related compensation expense, if
any. See Note 13 for pro forma disclosures using the fair value method as
described in Financial Accounting Standards Board ("FASB") Statement No. 123,
Accounting for Stock-Based Compensation ("Statement 123").
Income Taxes
The Company elected to be taxed as a REIT under the Internal Revenue Code
of 1986, as amended (the "Code") and began operating as such on March 27, 1994.
As a result, the Company is not subject to federal income taxes to the extent
that it distributes annually at least 95% of its taxable income to its
shareholders and satisfies certain other requirements defined in the Code.
Accordingly, no provision was made for federal income taxes in the accompanying
consolidated financial statements.
The Company declared distributions per share of $1.41, $1.32, and $1.25
during the years ended December 31, 1998, 1997, and 1996, respectively, and
these distributions are summarized as follows:
<TABLE>
<CAPTION>
Years ended December 31,
1998 1997 1996
------------------------------------
<S> <C> <C> <C>
Ordinary income $ 1.35 $ 0.97 $ 1.05
Return of capital 0.06 0.35 0.20
Long-term capital gains - - -
------------------------------------
$ 1.41 $ 1.32 $ 1.25
====================================
</TABLE>
F-6
<PAGE>
Per Share Data
Basic and diluted earnings per share are calculated in accordance with FASB
Statement No. 128, Earnings per Share ("Statement 128"). Earnings per share
amounts for all periods have been presented, and where appropriate, restated to
conform to the requirements of Statement 128.
In May 1998, the Company declared a 3-for-2 stock split, which was effected
in the form of a stock dividend, to shareholders of record on June 19, 1998.
All share and per share information have been restated to reflect the stock
split.
Statements of Cash Flows
The Company considers all highly liquid investments with original
maturities of three months or less when purchased to be cash equivalents.
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
New Accounting Standard
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities ("Statement 133"). The Company expects to
adopt Statement 133 effective January 1, 2000. Statement 133 will require the
Company to recognize all derivatives on the balance sheet at fair value. The
Company does not anticipate that the adoption of Statement 133 will have a
significant effect on its results of operations or financial position.
Reclassifications
Certain amounts as previously reported have been reclassified to conform to
the current year's presentation.
2. UNSECURED NOTES PAYABLE
Unsecured Notes Payable consisted of the following:
<TABLE>
<CAPTION>
December 31,
1998 1997
--------------------------------------
<S> <C> <C>
Seven Year Notes $ 74,802 $ 74,767
Ten Year Notes 84,771 84,744
MandatOry Par Put Remarketed Securities 75,000 -
--------------------------------------
$ 234,573 $ 159,511
======================================
</TABLE>
The Seven Year Notes represent unsecured notes payable issued in a public
offering with a face amount of $75,000, a stated interest rate of 6.80% and a
maturity date of August 1, 2004. The Ten Year Notes represent unsecured notes
payable issued in a public offering with a face amount of $85,000, a stated
interest rate of 6.95% and a maturity date of August 1, 2007. Interest on the
Seven Year Notes and Ten Year Notes is payable semi-annually in arrears on each
February 1 and August 1.
The MandatOry Par Put Remarketed Securities ("MOPPRS") represent unsecured
notes payable issued in a public offering in 1998 with a face amount of $75,000,
a stated interest rate of 6.918% and a maturity date of March 31, 2013.
Interest on the MOPPRS is payable semi-annually in arrears on each March 31 and
September 30. In connection with the issuance of the MOPPRS, the Company sold
an option to remarket the MOPPRS on March 31, 2003 to the agent. On March 31,
2003 the MOPPRS are subject to mandatory tender.
F-7
<PAGE>
The Seven Year Notes, the Ten Year Notes and the MOPPRS were issued under
Supplemental Indentures and an Indenture which contain covenants customary for
notes of these types, including limitations on total indebtedness of the
Company, limitations on secured debt, maintenance of minimum interest coverage
ratios and maintenance of minimum ratios of unencumbered assets to unsecured
debt.
3. UNSECURED LINES OF CREDIT
Unsecured Lines of Credit consisted of the following:
<TABLE>
<CAPTION>
December 31,
1998 1997
------------------------------------
<S> <C> <C>
Unsecured Line of Credit $ 133,500 $ 43,500
Revolving Line of Credit 15,019 -
------------------------------------
$ 148,519 $ 43,500
====================================
</TABLE>
The Unsecured Line of Credit represents a $174,750 (expandable to $200,000)
unsecured line of credit with a bank group which closed in May 1997 and was
amended in September 1998. The Company may borrow amounts under the Unsecured
Line of Credit up to an amount equal to 60% of the value of all Eligible
Unencumbered Stabilized Properties, as defined, plus 50% of the cost of all
Construction in Progress, as defined. The Unsecured Line of Credit contains
covenants customary for credit facilities with similar terms and maturities,
including limitations on secured debt, maintenance of minimum interest coverage
ratios and maintenance of minimum ratios of unencumbered assets to unsecured
debt. Interest on the Unsecured Line of Credit is LIBOR plus 1.00% and is
payable monthly. At December 31, 1998, the Company had the ability to draw an
additional $41,250 under the Unsecured Line of Credit, and the weighted average
interest rate on amounts outstanding under the Unsecured Line of Credit was
6.58%. The Unsecured Line of Credit matures in May 2001.
The Revolving Line of Credit represents a $20,000 unsecured line of credit
with a bank which closed in September 1998. The Company may borrow on a daily
basis amounts of up to $20,000 under the Revolving Line of Credit at an interest
rate of LIBOR plus 1.00%. At December 31, 1998, the Company had the ability to
draw an additional $4,981 under the Revolving Line of Credit, and the weighted
average interest rate on the amount outstanding was 8.31%. The Revolving Line
of Credit matures in September 1999.
4. MORTGAGE NOTES PAYABLE
The Company's Mortgage Notes Payable consisted of the following:
<TABLE>
<CAPTION>
December 31,
1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage note payable- Richmond, Kentucky $ 6,290 $ 6,429
Mortgage note payable- Jackson, Mississippi 7,021 7,162
Mortgage note payable- Milwaukee, Wisconsin 5,143 -
Construction note payable - Denver, Colorado 24,017 -
--------- ---------
$ 42,471 $ 13,591
========= ==========
</TABLE>
The mortgage notes payable for Richmond, Kentucky, Jackson, Mississippi and
Milwaukee, Wisconsin are amortizing notes payable secured by shopping centers
owned and operated at those respective locations with aggregate net book values
of $27,959 at December 31, 1998. At December 31, 1998, the weighted average
interest rate of these three notes was 8.02%, and aggregate monthly payments of
principal and interest on these three notes was $174. These notes mature in
2003, 2017 and
F-8
<PAGE>
2009, respectively. The Company assumed the Jackson, Mississippi note in
connection with an acquisition in 1997. The Company assumed the Milwaukee,
Wisconsin note in connection with an acquisition in 1998.
The construction note payable represents a construction loan assumed in
connection with the acquisition of a shopping center in Denver, Colorado in 1998
which is secured by the shopping center with a net book value of $33,460 at
December 31, 1998. As of December 31, 1998, the construction loan carried an
interest rate of LIBOR plus 2.75%, or 7.93%. On January 17, 1999, this loan
converted to a fixed rate of 6.81% with monthly payments of principal and
interest of $169 payable through maturity in 2001.
5. DEBT MATURITIES
As of December 31, 1998, principal payments on the Company's Unsecured
Notes Payable, Unsecured Lines of Credit, and Mortgage Notes Payable are due as
follows:
<TABLE>
<S> <C>
1999 $ 15,651
2000 681
2001 158,254
2002 798
2003 81,278
Thereafter 168,901
----------
$ 425,563
==========
</TABLE>
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company maintains an interest rate swap agreement as a hedge against
increasing rates on its floating rate debt. Under the terms of the agreement,
the Company pays a fixed rate of 6.48% and receives a variable rate equal to the
rate for the one-month LIBOR rate based on the notional amount in the contract
of $50,000. This interest rate swap agreement matures on January 1, 2001.
Based upon amounts that the Company would have paid to terminate the swap
transaction on December 31, 1998, the fair value of the swap transaction was
estimated to be a liability of $1,468 at December 31, 1998.
Based upon borrowing rates management believes are available to the Company
for loans with similar terms and average maturities, the fair value of the
Company's Unsecured Notes Payable, Unsecured Lines of Credit and Mortgage Notes
Payable was estimated to be $419,117 at December 31, 1998.
7. PREFERRED STOCK
On September 17, 1998, the Company issued 2,000,000 shares of its 9 3/8%
Series A Cumulative Redeemable Preferred Stock (the "Series A Preferred Stock"),
par value $0.01 per share, with a liquidation preference of $25.00 per share.
The Series A Preferred Stock has no stated maturity but is redeemable at the
Company's option on or after September 15, 2003 for $25.00 per share plus
accumulated, accrued and unpaid dividends. Dividends on the Series A Preferred
Stock are cumulative from the date of original issue and are payable quarterly
on or about the last day of March, June, September and December of each year,
when and as declared. Holders of the Series A Preferred Stock have no voting
rights except with respect to certain extraordinary events affecting the rights
of the holders of the Series A Preferred Stock. The Series A Preferred Stock is
not convertible or exchangeable for any other securities or property of the
Company.
8. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED ENTITIES
The Company owns 1% of the outstanding voting common stock and 100% of the
outstanding non-voting common stock of JDN Development Company, Inc.
("Development Company"). J. Donald Nichols, the Company's Chairman and Chief
Executive Officer, owns the remaining 99% of the outstanding voting common stock
of Development Company. The Company accounts for its investment
F-9
<PAGE>
in Development Company on the equity method because management believes that it
is able to exercise significant influence over the operating and financial
policies of Development Company. In 1996 and for a portion of 1997, the Company
also owned 50% economic interests in two joint ventures formed for the purpose
of developing shopping centers in Loganville, Georgia, and Asheville, North
Carolina (the "Joint Ventures"). During 1997, the Company purchased all the
interests of its third party joint venture partners in the Joint Ventures.
Combined summarized financial information on Development Company and the
Joint Ventures is as follows:
<TABLE>
<CAPTION>
December 31,
1998 1997
-----------------------------
Assets
<S> <C> <C>
Operating properties $ 54,166 $ 47,740
Property under development 117,156 46,333
-----------------------------
Total real estate 171,322 94,073
Other assets 18,557 12,952
-----------------------------
$189,879 $107,025
=============================
Liabilities
Mortgage notes payable $ 26,058 $ 28,980
Notes and advances payable to JDN Realty Corporation 141,795 62,858
Other liabilities 10,379 6,644
-----------------------------
178,232 98,482
Equity 11,647 8,543
-----------------------------
$189,879 $107,025
=============================
</TABLE>
<TABLE>
Years Ended December 31,
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Rental revenues $ 4,297 $ 4,619 $ 2,969
Operating expenses (1,876) (1,689) (654)
--------------------------------------------
Income from operations 2,421 2,930 2,315
Interest expense (4,545) (3,791) (1,313)
Net gain on real estate sales 7,293 7,579 2,358
Other income (expense), net 64 (725) (795)
--------------------------------------------
Income before income tax expense 5,233 5,993 2,565
Income tax expense (2,129) (2,220) (549)
--------------------------------------------
Net income $ 3,104 $ 3,773 $ 2,016
============================================
</TABLE>
Income (losses) from sitework development contracts associated with sales
of land parcels are included in net gain on real estate sales. Changes in
estimates associated with these contracts increased net gain on real estate
sales in 1996 by approximately $1,153 and increased net income by approximately
$679. The Company's share of this increase was $672, which is included in
equity in net income of unconsolidated entities in the accompanying statements
of income for the year ended December 31, 1996.
9. OPERATING LEASES
Shopping center properties are leased to tenants under operating leases
with expiration dates extending to the year 2056. As of December 31, 1998,
approximate future minimum rentals due under noncancellable operating leases,
excluding tenant reimbursements of operating expenses and additional
F-10
<PAGE>
rentals based on tenants' sales volume, and were as follows:
- -------------------------------------------------------------------------------
1999 $ 80,909
2000 77,314
2001 71,614
2002 67,006
2003 62,591
Thereafter 591,555
----------
$ 950,989
==========
As of December 31, 1998, Wal-Mart Stores, Inc., a national retailer, was an
anchor in 33 of the Company's shopping centers. Wal-Mart was a tenant of the
Company in 22 of the shopping centers and an unrelated party owned Wal-Mart's
portion of the center in the remaining 11 shopping centers. Rentals from this
significant tenant were approximately 16%, 19%, and 22% of total minimum and
percentage rents for the years ended December 31, 1998, 1997, and 1996,
respectively. As of December 31, 1998, Lowe's Companies, Inc., a national
retailer, was an anchor in 15 of the Company's shopping centers. Lowe's was a
tenant of the Company in 12 of the shopping centers and an unrelated party owned
Lowe's portion of the center in the remaining three shopping centers. Rentals
from this significant tenant were 12%, 10%, and 11% of total minimum and
percentage rent for the years ended December 31, 1998, 1997, and 1996,
respectively. There were no other tenants which represented more than 10% of the
Company's total minimum and percentage rent in any year presented.
10. EXTRAORDINARY ITEMS
In 1997, the Company terminated and satisfied in full a $75,000 secured
term loan which was scheduled to mature in 2001. The Company charged
unamortized deferred financing costs and prepayment penalties related to this
loan of $5,539 to earnings as a component of extraordinary items. Also in 1997,
the Company terminated a $40,000 secured line of credit with a bank which was
scheduled to mature in June 1998. The Company charged unamortized deferred
financing costs of $401 related to this line of credit to earnings as a
component of extraordinary items.
11. INCENTIVE STOCK PLAN
The Company maintains the JDN Realty Corporation 1993 Incentive Stock Plan
(the "Incentive Stock Plan") which provides for the issuance of options to
purchase shares of the Company's common stock, restricted shares of common stock
and stock appreciation rights to individuals providing services to the Company,
its subsidiaries and affiliated entities at the discretion of the Compensation
Committee of the Board of Directors. Under the Incentive Stock Plan, the
exercise price of options granted will not be less than the fair market value of
the shares on the date of grant for incentive stock options and will not be less
than 50% of the fair market value of the shares on the date of grant for non-
qualified stock options. No options have been granted under the Incentive Stock
Plan with exercise prices below fair market value. The options generally expire
10 years from the date of grant. Generally all options, other than options
granted in 1995, vest one-third after six months and one-third after each of the
two successive twelve-month periods thereafter. Options granted in 1995 were
scheduled to vest nine years after the grant date; however, the vesting period
accelerated because certain performance measures were met.
F-11
<PAGE>
The following is a summary of option activity under the Incentive Stock
Plan:
<TABLE>
<CAPTION>
Weighted Average
Number of Shares Option Price Option Price
Underlying Options Per Share Per Share
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding, January 1, 1996 1,381,220 $13.50 to $15.50 $ 14.337
Granted - - -
Exercised - - -
Forfeited (12,000) $15.50 15.50
-----------------------------------------------------------------
Options outstanding, December 31, 1996 1,369,220 $13.50 to $15.50 $ 14.327
Granted 1,413,750 $19.25 to $20.75 20.746
Exercised (49,500) $14.667 to $15.50 14.742
Forfeited - - -
-----------------------------------------------------------------
Options outstanding, December 31, 1997 2,733,470 $13.50 to $20.75 $ 17.639
Granted 10,000 21.3125 21.3125
Exercised (23,500) 13.50 to 20.75 15.50
Forfeited (5,000) 21.75 21.75
-----------------------------------------------------------------
Options outstanding, December 31, 1998 2,714,970 $13.50 to $21.3125 $ 17.672
=================================================================
Options exercisable, December 31, 1998 1,766,970 $13.50 to $20.75 $ 16.021
=================================================================
</TABLE>
Effective February 27, 1998, the Company amended the Incentive Stock Plan
to, among other things, provide for issuances of restricted stock thereunder.
Concurrently, the Company adopted the JDN Realty Corporation Deferred Bonus Plan
pursuant to the Incentive Stock Plan (the "Deferred Bonus Plan") which
established a program to provide incentive compensation to certain key employees
in the form of a bonus that can be deferred at the election of the employee, the
value of which is tied to the equity value of the Company. An eligible employee
may elect to defer all or a specified (which must be at least 25%) portion of
the receipt of cash bonus payments awarded by the Company and to receive
restricted stock in lieu thereof under the Incentive Stock Plan.
On March 1, 1998, the Company issued 111,312 shares of restricted stock
under the Deferred Bonus Plan. The restricted stock issued in 1998 vests one-
fourth on March 1, 1999 and one-fourth on each successive March 1 thereafter.
As of December 31, 1998, 775,866 shares were available for the Company to award
in any combination of options, restricted stock or stock appreciation rights
under the Incentive Stock Plan.
12. DIRECTORS STOCK PLAN
The Company maintains the JDN Realty Corporation 1993 Non-Employee Director
Stock Option Plan (the "Directors Plan") which provides for the issuance of
options to purchase shares of the Company's common stock or the granting of
shares of common stock to members of the Company's board of directors who are
not employees of the Company. The Directors Plan initially provided that 4,500
options be granted automatically to each non-employee director serving the
Company on January 1 of each year. The exercise price of each option equaled
the fair market value of the shares on the date of grant. The options expire 10
years from the date of grant and vest in the following manner: (1) one-third two
years after the date of grant, (2) one-third three years after the date of
grant, and (3) one-third four years after the date of grant. In November 1998,
the Company amended the Directors Plan as follows with respect to future grants:
(1) increased the number of options granted automatically to 15,000 options to
each non-employee director serving the Company on January 1 of each year; (2)
changed the option vesting period to the following: (a) one-third six months
after the date of grant, (b) one-third 18 months after the date of grant, and
(c) one-third 30 months after the date of grant; and (3) provided for the
F-12
<PAGE>
awarding of $10 in value of common stock to each non-employee director on the
first day of each calendar quarter beginning January 1, 1999.
The following is a summary of option activity under the Directors Plan:
<TABLE>
<CAPTION>
Weighted Average
Number of Shares Option Price Option Price
Underlying Options Per Share Per Share
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding, January 1, 1996 27,000 $13.333 to $14.667 $ 14.00
Granted 13,500 14.917 14.917
Exercised - - -
Forfeited - - -
-----------------------------------------------------------------
Options outstanding, December 31, 1996 40,500 $13.333 to $14.917 $14.306
Granted 18,000 $18.417 18.417
Exercised - - -
Forfeited - - -
-----------------------------------------------------------------
Options outstanding, December 31, 1997 58,500 $13.333 to $18.417 $15.571
Granted 18,000 $21.584 21.584
Exercised (3,000) $13.333 13.333
Forfeited - - -
-----------------------------------------------------------------
Options outstanding, December 31, 1998 73,500 $13.333 to $21.584 $17.135
=================================================================
</TABLE>
As of December 31, 1998, 373,500 shares were available for award under the
Directors Plan in any combination of options or shares of common stock.
13. PRO FORMA DISCLOSURES ON STOCK BASED COMPENSATION
Pro forma information regarding net income and earnings per share is
required by Statement 123 using an acceptable fair value method for all stock
based compensation granted by the Company subsequent to December 31, 1994. The
Company estimated the fair value for this stock based compensation at the date
of grant using a Black-Scholes option pricing model with the following weighted-
average assumptions for 1998, 1997 and 1996: risk-free interest rate of 5.71%,
6.18%, and 6.39%, respectively; dividend yield of 7.24%, 6.43% and 6.80%,
respectively; volatility factor of the expected market price of the Company's
common stock of 0.16, 0.16, and 0.15, respectively, and a weighted-average
expected life of the options of 5, 5 and 9 years, respectively.
For purposes of pro forma disclosures, the estimated fair value of stock
based compensation is amortized to expense over the applicable vesting periods.
On a pro forma basis, assuming that the Company utilized the fair value method
of accounting for stock based compensation, net income and net income per share
information was as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
--------------------------------------
<S> <C> <C> <C>
Net income $40,057 $20,505 $16,623
Net income attributable to common shareholders 38,716 20,505 16,623
Net income attributable to common shareholders per share:
Basic 1.26 0.89 1.00
Diluted 1.24 0.87 0.99
</TABLE>
14. PROFIT SHARING PLAN
The Company offers to employees the JDN Realty Corporation Savings and
Profit Sharing Plan (the "Profit Sharing Plan"), a defined contribution plan,
which is intended to qualify under Section
F-13
<PAGE>
401(a) and 401(k) of the Code. Employees who have completed six months of
service with the Company may participate in the Profit Sharing Plan.
Participants may contribute up to 20% of their base salary to the Profit Sharing
Plan and any matching contribution by the Company is discretionary. During the
years ended December 31, 1998, 1997 and 1996, the Company contributed $48, $36
and $25, respectively, to the Profit Sharing Plan.
15. EMPLOYEE STOCK PURCHASE PLAN
The Company maintains the JDN Realty Corporation 1995 Employee Stock
Purchase Plan (the "ESPP") which is intended to qualify as an "Employee Stock
Purchase Plan" within the meaning of Section 423 of the Code. The ESPP
authorizes the sale of up to 150,000 shares of common stock to eligible
employees of the Company at a 15% discount from the market price. During 1998,
1997 and 1996, the Company issued 1,755, 1,248, and -0- shares, respectively,
under the ESPP.
16. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company maintains the JDN Realty Corporation Dividend Reinvestment and
Stock Purchase Plan (the "DRIP"). The DRIP allows shareholders to automatically
reinvest cash dividends in and make optional cash purchases of shares of the
Company's common stock. As of December 31, 1998, 24,112 shares had been issued
under the DRIP and 725,888 were reserved for issuance.
17. COMMITMENTS AND CONTINGENCIES
As of December 31, 1998, the Company guaranteed all or portions of three
loans of Development Company or its subsidiaries in the amount of $21,031. The
loans are secured by property owned by Development Company or its subsidiaries
and are due in 1999.
As of December 31, 1998, the Company had executed construction contracts on
19 of its development sites and had approximately $18,186 in costs remaining to
be incurred under these contracts.
The Company is, from time to time, a party to legal proceedings, which
arise in the ordinary course of its business. The Company is not currently
involved in any litigation, and, to management's knowledge, no litigation is
threatened against the Company, the outcome of which would, in management's
judgment based on information currently available, have a material adverse
effect on the results of operations or financial condition of the Company.
F-14
<PAGE>
18. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Numerator:
Income before extraordinary items $41,337 $27,233 $16,682
Extraordinary items - (5,940) -
-----------------------------------------
Net income 41,337 21,293 16,682
Dividends to preferred shareholders (1,341)
-----------------------------------------
Net income attributable to common shareholders $39,996 $21,293 $16,682
=========================================
Denominator (in thousands):
Weighted-average shares outstanding 30,788 23,066 16,629
Unvested restricted stock outstanding (87) - -
-----------------------------------------
Denominator for basic earnings per share 30,701 23,066 16,629
Dilutive effect of stock options and unvested
restricted stock 527 416 90
-----------------------------------------
Denominator for diluted earnings per share 31,228 23,482 16,719
=========================================
Income per share--basic:
Income before extraordinary items
(net of preferred dividends) $ 1.30 $ 1.18 $ 1.00
Extraordinary items - (0.26) -
-----------------------------------------
Net income attributable to common shareholders $ 1.30 $ 0.92 $ 1.00
=========================================
Income per share--diluted:
Income before extraordinary items
(net of preferred dividends) $ 1.28 $ 1.16 $ 1.00
Extraordinary items - (0.25) -
----------------------------------------
Net income attributable to common shareholders $ 1.28 $ 0.91 $ 1.00
========================================
</TABLE>
The Company is the general partner in a limited partnership that issued
limited partnership units valued at $3,000 in a limited partnership formed to
own and operate a shopping center in Milwaukee, Wisconsin. Subject to certain
conditions, the limited partnership units became exchangeable for cash or
139,535 shares of the Company's common stock beginning in February 1999. Using
the "if-converted" method, the effect of these units is antidilutive; therefore,
they have been excluded from the computation of earnings per share.
19. SUBSEQUENT EVENTS
During January 1999, the Company issued 500,000 shares of its common stock
in a public offering netting proceeds of $10,903 which were used to repay
outstanding indebtedness.
During February 1999, the Company closed a $100,000 unsecured term loan
(the "Term Loan") with a bank group. The Term Loan matures in February 2002, and
interest on the Term Loan is payable monthly at LIBOR plus 1.40%.
F-15
<PAGE>
20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information
for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Quarters
First Second Third Fourth
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998
Revenues $ 17,046 $ 19,209 $ 20,617 $ 24,439
Net income $ 9,112 $ 10,053 $ 10,555 $ 11,617
Net income attributable to common shareholders $ 9,112 $ 10,053 $ 10,386 $ 10,445
Income per common share:
Basic Basic $ 0.31 $ 0.33 $ 0.34 $ 0.32
DilutedDiluted $ 0.31 $ 0.32 $ 0.33 $ 0.32
1997
Revenues $ 10,279 $ 10,916 $ 12,338 $ 14,473
Income before extraordinary item $ 5,503 $ 6,726 $ 7,078 $ 7,926
Net income $ 5,503 $ 6,325 $ 1,539 $ 7,926
Income per common share--basic
Income before extraordinary item $ 0.27 $ 0.29 $ 0.31 $ 0.31
Net income $ 0.27 $ 0.27 $ 0.07 $ 0.31
Income per common share--diluted
Income before extraordinary item $ 0.27 $ 0.29 $ 0.30 $ 0.31
Net income $ 0.27 $ 0.27 $ 0.07 $ 0.31
</TABLE>
F-16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
JDN REALTY CORPORATION
We have audited the accompanying consolidated balance sheets of JDN Realty
Corporation as of December 31, 1998 and 1997 and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1998. Our audits also included the
financial statement schedules listed in the Index at Item 14(a). These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of JDN Realty
Corporation at December 31, 1998 and 1997 and the consolidated results of its
operations and cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
Also in our opinion, the related financial statement schedules, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
ERNST & YOUNG LLP
Atlanta, Georgia
February 26, 1999
F-17
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
JDN REALTY CORPORATION
(In thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
COL.A COL.B COL.C COL.D
- ---------------------------------------------------------------------------------------------------------------------------
Additions
---------------------------------------
Balance at Beginning Charged to Costs Charged to Other
Description of Period and Expenses Accounts - Describe Deductions - Describe
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Deduct from asset accounts:
Allowance for Doubtful Accounts $ 719 $ 386 $ 438(1)
============== ========== ===========
Year ended December 31, 1997:
Deduct from asset accounts:
Allowance for Doubtful Accounts $ 410 $ 619 $ 310(1)
============== ========== ===========
Year ended December 31, 1996:
Deduct from asset accounts:
Allowance for Doubtful Accounts $ 277 $ 350 $ 217(1)
============== ========== ===========
<CAPTION>
- -----------------------------------------------------
COL.A COL.E
- -----------------------------------------------------
Balance at End
Description of Period
- -----------------------------------------------------
<S> <C>
Year ended December 31, 1998:
Deduct from asset accounts:
Allowance for Doubtful Accounts $ 667
========
Year ended December 31, 1997:
Deduct from asset accounts:
Allowance for Doubtful Accounts $ 719
========
Year ended December 31, 1996:
Deduct from asset accounts:
Allowance for Doubtful Accounts $ 410
========
</TABLE>
(1) Write-off of uncollectible rents receivable.
F-18
<PAGE>
Schedule III - Real Estate and Accumulated Depreciation
JDN Realty Corporation
December 31, 1998
(In thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D
- ---------------------------------------------------------------------------------------------------------------
Cost Captilized
---------------
Subsequent to
-------------
Initial cost to Company Acquisition
----------------------- -----------
Buildings and
Description Encumbrances Land Improvements Improvements
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Property:
- ------------------
Southland Plaza (Decator, AL) $ - $ 1,013 $ 5,802 $ 208
East Side Plaza (Gadsden, AL) - 130.00 - 2,325.00
Pepperell Corners (Opelika, AL) - 2,062 11,676 117
Pepperell Corners Phase II (Opelika, AL) - 744 1,628 (33)
University Hills (Denver, CO) 24,017 15,272 17,017 3,314
Brandon Lake Village (Brandon, FL) - 3,627 7,110 -
White Sands (Fort Walton, FL) - 452 - 1,141
Gulf Breeze Marketplace (Gulf Breeze, FL) - 362 - 40
Ocala West Shopping Center (Ocala,FL) - 839 4,920 213
Capital West (Tallahassee, FL) - 2,040 - 4,862
Alpharetta Lowe's (Alpharetta, GA) - 5,859 6,800 -
Buford Lowe's (Buford, GA) - 3,620 19,555 -
Riverplace (Canton, GA) - 2,926 4,478 1,476
River Pointe (Canton, GA) - 570 2,301 212
Bartow Marketplace (Cartersville, GA) - 3,513 16,669 164
Felton's Crossing (Cartersville, GA) - 177 - 3,254
Chamblee Plaza (Chamblee, GA) - 1,698 9,913 (8)
Cordele Marketplace (Cordele, GA) - 603 8,164 314
Cumming Marketplace (Cumming, GA) - 4,154 15,250 1,286
Dodge County (Eastman, GA) - 172 - 2,317
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COL. E COL. F COL. G COL. H
- ------------------------------------------------------------------------------------------------------------------------------------
Gross Ammount at which Carried at close of Period
-------------------------------------------------
Buildings and Accumulated Date of Date
Description Land Improvements Total Depreciation Construction Acquired
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Property:
- ------------------
Southland Plaza (Decator, AL) $ 1,013 $ 6,010 $ 7,023 $ 378 1963 1996
East Side Plaza (Gadsden, AL) 130.00 2,325.00 2,455.00 1,109.00 1979 1980
Pepperell Corners (Opelika, AL) 2,062 11,793 13,855 1,774 1993 1994
Pepperell Corners Phase II (Opelika, AL) 744 1,595 2,339 190 1995 1995
University Hills (Denver, CO) 15,272 20,331 35,603 2,139 1997 1998
Brandon Lake Village (Brandon, FL) 3,627 7,110 10,737 58 1997 1998
White Sands (Fort Walton, FL) 452 1,141 1,593 348 1986 1985
Gulf Breeze Marketplace (Gulf Breeze, FL) 562 40 402 3 1998 1998
Ocala West Shopping Center (Ocala,FL) 839 5,133 5,972 196 1984 1997
Capital West (Tallahassee, FL) 2,040 4,862 6,902 1,311 1990 1989
Alpharetta Lowe's (Alpharetta, GA) 5,859 6,800 12,659 33 1998 1998
Buford Lowe's (Buford, GA) 3,620 19,555 23,175 97 1998 1998
Riverplace (Canton, GA) 2,926 5,954 8,880 1,167 1983 1983
River Pointe (Canton, GA) 370 2,513 2,883 170 1996 1996
Bartow Marketplace (Cartersville, GA) 3,513 16,833 20,346 1,466 1995 1995
Felton's Crossing (Cartersville, GA) 177 5,254 3,431 1,390 1984 1983
Chamblee Plaza (Chamblee, GA) 1,698 9,905 11,603 182 1976 1998
Cordele Marketplace (Cordele, GA) 603 8,478 9,081 186 1997 1997
Cumming Marketplace (Cumming, GA) 4,154 16,536 20,690 560 1997 1997
Dodge County (Eastman, GA) 172 2,317 2,489 621 1990 1986
</TABLE>
F-19
<PAGE>
Schedule III - Real Estate and Accumulated Depreciation
JDN Realty Corporation
December 31, 1998
(In thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D
- -----------------------------------------------------------------------------------------------------------------------------------
Cost Capitalized
----------------
Subsequent to
-------------
Initial Cost to Company Acquisition
----------------------- -----------
Buildings and
Description Encumbrances Land Improvements Improvements
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Property:
- -------------------
Banks Station (Fayetteville, GA) - 1,522 9,603 240
Bruno's Plaza (Ft. Oglethorpe, GA) - 1,092 6,193 109
Ellis Crossing (Griffin, GA) - 302 - 2,483
North Main Street (LaFayette, GA) - 123 - 3,156
LaGrange Wal-Mart (LaGrange, GA) - 183 - 1,420
CVS (Lawrenceville, GA) - 925 1,138 -
Five Folks Village (Lawrenceville, GA) - 1,245 7,065 109
Lawrenceville Town Center (Lawrenceville, GA) - 3,270 17,037 446
Five Folks Crossing (Lilburn, GA) - 930 5,287 39
Pleasant Hill Lowe's(Lilburn, GA) - 3,643 6,413 184
Midway Plaza (Loganville, GA) - 1,356 6,400 97
Beacon Heights (Madison, GA) - 549 - 4,284
Garrison Ridge Xing (Marietta, GA) - 3,587 8,440 (3)
Newman Crossing (Newman, Ga) - 3,750 17,745 323
Pike's Nursery (Peachtree City, GA) - 1,008 1,004 -
Merchant Square (Riverdale, GA) - 191 - 1,368
Freeway Junction (Stockbridge, GA) - 979 5,550 260
Pike Nurseries (Stockbridge, GA) - 963 1,039 44
Noble Farm Plaza (Suwanee, GA) - 1,536 3,389 33
Cofer Crossing (Tucker, GA) - 1,348 1,167 13
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COL. E COL. F COL. G COL. H
- ------------------------------------------------------------------------------------------------------------------------------------
Gross Amount at which Carried at close of Period
-------------------------------------------------
Buildings and Accumulated Date of Date
Description Land Improvements Total Depreciation Construction Acquired
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Property:
- -------------------
Banks Station (Fayetteville, GA) 1,522 9,843 11,365 1,514 1990 1994
Bruno's Plaza (Ft. Oglethorpe, GA) 1,092 6,302 7,394 862 1973 1994
Ellis Crossing (Griffin, GA) 302 2,483 2,785 989 1986 1985
North Main Street (LaFayette, GA) 123 3,156 3,279 862 1990 1988
LaGrange Wal-Mart (LaGrange, GA) 183 1,420 1,603 647 1984 1983
CVS (Lawrenceville, GA) 925 1,138 2,065 - 1998 1998
Five Folks Village (Lawrenceville, GA) 1,245 7,174 8,419 1,084 1990 1994
Lawrenceville Town Center (Lawrenceville,GA) 3,270 17,483 20,753 2,677 1989 1994
Five Folks Crossing (Lilbrun, GA) 930 5,326 6,256 802 1990 1994
Pleasant Hill Lowe's (Librun, GA) 3,643 6,597 10,240 246 1997 1997
Midway Plaza (Loganville, GA) 1,356 6,497 7,853 603 1995 1997
Beacon Heights (Madison, GA) 549 4,284 4,833 1,258 1989 1987
Garrison Ridge Xing (Marietta, GA) 3,587 8,437 12,024 268 1997 1997
Newman Crossing (Newman, GA) 3,750 18,068 21,818 1,514 1995 1995
Pike's Nursery (Peachtree City, GA) 1,008 1,004 2,012 48 1997 1997
Merchant Square (Riverdale, GA) 191 1,368 1,559 402 1989 1989
Freeway Junction (Stockbridge, GA) 979 5,810 6,789 729 1988 1994
Pike Nurseries (Stockbridge, GA) 963 1,083 2,046 51 1997 1997
Noble Farm Plaza (Suwanee, GA) 1,536 3,422 4,958 64 1997 1997
Cofer Crossing (Tucker, GA) 1,348 1,180 2,528 - 1998 1998
</TABLE>
F-20
<PAGE>
Schedule III - Real Estate and Accumalated Depreciation
JDN Realty Corporation
December 31, 1998
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COL.A COL.B COL.C COL.D
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Capitalized
----------------
Subsequent to
-------------
Initial Cost to Company Acquisition
----------------------- -----------
Buildings and
Description Encumbrances Land Improvements Improvements
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Property:
- ------------------
Shannon Square (Union City, GA) - 195 - 4,323
Warner Robins Place (Warner Robins, GA) - 203 907 26
Pike's Nursery (Woodstock, GA) - 1,323 1,102 -
Woodstock Place (Woodstock, GA) - 1,692 - 7,652
Woodstock Project (Woodstock, GA) - 4,047 7,210 -
Suttons North Plaza (Topeka, KS) - 270 1,660 1,440
South Farm Marketplace (Lexington, KY) - 1,002 298 -
Carriage Gate (Richmond, KY) 6,290 1,398 7,944 47
Junction S/C (Jackson, MS) 7,021 1,361 7,858 79
Metro Station (Jackson, MS) - 521 3,382 -
River Hills S/C (Asheville, NC) - 3,125 13,376 169
Cross Pointe Centre (Fayetteville, NC) - 1,931 10,840 483
Wendover Place S/C (Greensboro, NC) - 7,212 15,136 8,002
University Commons (Greenville, NC) - 3,557 17,529 234
East Ridge Crossing (Hendersonville, NC) - - - 4,314
Pineridge Crossing (Rockingham, NC) - 203 - 7,223
Island Creek Crossing (Wallace, NC) - 665 3,842 381
Myrtle Grove (Wilmington, NC) - 1,877 - 8,852
New Center (Wilmington, NC) - 2,649 10,479 383
Tri-State Plaza (Burlington, OH) - 1,563 6,210 210
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
COL.E COL.F COL.G COL.H
- -------------------------------------------------------------------------------------------------------------------------------
Gross Amount at which Carried
at close of Period
------------------------------------
Buildings and Accumulated Date of Date
Description Land Improvements Total Depreciation Construction Acquired
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Property:
- --------------------
Shannon Square (Union City, GA) 195 4,323 4,518 1,477 1986 1984
Warner Robins Place (Warner Robins, GA) 203 933 1,136 40 1997 1997
Pike's Nursery (Woodstock, GA) 1,323 1,102 2,425 58 1997 1997
Woodstock Place (Woodstock, GA) 1,692 7,652 9,344 1,099 1985 1982
Woodstock Project (Woodstock, GA) 4,047 7,210 11,257 239 1997 1997
Suttons North Plaza (Topeka, KS) 270 3,100 3,370 77 1976 1997
South Farm Marketplace (Lexington, KY) 1,002 298 1,300 - 1998 1998
Carriage Gate (Richmond, KY) 1,398 7,991 9,389 1,100 1992 1994
Junction S/C (Jackson, MS) 1,361 7,937 9,298 455 1996 1997
Metro Station (Jackson, MS) 521 3,382 3,903 64 1997 1998
River Hills S/C (Asheville, NC) 3,125 13,545 16,670 788 1996 1997
Cross Pointe Centre (Fayetteville, NC) 1,931 11,323 13,254 292 1985 1998
Wendover Place S/C (Greensboro, NC) 7,212 23,158 30,350 702 1997 1997
University Commons (Greenville, NC) 3,557 17,763 21,320 1,165 1996 1996
East Ridge Crossing (Hendersonville, NC) - 4,314 4,314 1,329 1988 1988
Pineridge Crossing (Rockingham, NC) 203 7,223 7,426 2,042 1988 1986
Island Creek Crossing (Wallace, NC) 665 4,223 4,888 591 1989 1994
Myrtle Grove (Wilmington, NC) 1,877 8,852 10,729 2,119 1991 1988
New Center (Wilmington, NC) 2,649 10,862 13,511 151 1998 1998
Tri-State Plaza (Burlington, OH) 1,563 6,420 7,983 772 1995 1995
</TABLE>
F-21
<PAGE>
Schedule III - Real Estate and Accumulated Depreciation
JDN Realty Corporation
December 31, 1998
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D
- -----------------------------------------------------------------------------------------------------------------------------------
Cost Capitalized
----------------
Subsequent to
-------------
Initial Cost to Company Acquisition
----------------------- -----------
Building and
Description Encumbrances Land Improvements Improvements
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Property:
- ---------------------
Walmart (Gallipolis, OH) - 1,307 10,587 18
Township Marketplace (Monaco, PA) - 1,635 10,105 1,811
Ashley Crossing (Charleston, SC) - 1,821 10,354 180
Chesterfield Commons (Cheraw, SC) - 127 - 2,166
Kelley Corners (Lake City, SC) - 415 5,310 121
Merchants Walk (Sumler, SC) - 130 - 799
Millcreek Commons (Antioch, TN) - 530 3,092 17
Overlook at Hamilton Place (Chattanooga, TN) - 1,595 12,725 209
Columbia Bruno's Village (Columbia, TN) - 673 3,859 17
Farragut Pointe (Farragut, TN) - 731 4,165 21
Alexander Plaxa (Franklin, TN) - 24 - 486
Battlewood Shopping Center (Franklin, TN) - 662 3,822 (3)
Northcreek Commons (Goodlettsville, TN) - 743 4,311 207
Country Bridge (Memphis, TN) - 750 4,29? 59
Memorial Village (Murfreesboro, TN) - 991 5,636 152
Plaza South S/C (Murfreesboro, TN) - 523 3,088 149
Towne Center (Murfreesboro, TN) - 2,594 6,822 -
The Marketplace (Nashville, TN) - 2,175 10,495 13
Cherokee Square (Tullahoma, TN) - 503 2,868 33
Bermuda Square S/C (Chester, VA) - 1,302 7,534 257
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
COL. A COL. E COL. F COL. G COL. H
- -----------------------------------------------------------------------------------------------------------------------------------
Gross Amount at which Carried at close of Period
------------------------------------------------
Buildings and Accumulated Date of Date
Description Land Improvements Total Depreciation Construction Acquired
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Property:
- ---------------------
Walmart (Gallipolis, OH) 1,307 10,605 11,912 168 1998 1998
Township Marketplace (Monaco, PA) 1,635 11,916 13,551 422 1997 1997
Ashley Crossing (Charleston, SC) 1,821 10,534 12,355 1,594 1991 1994
Chesterfield Commons (Cheraw, SC) 127 2,166 2,293 622 1990 1986
Kelley Corners (Lake City, SC) 415 5,431 5,846 836 1991 1994
Merchants Walk (Sumler, SC) 130 799 929 313 1987 1986
Millcreek Commons (Antioch, TN) 530 3,109 3,639 74 1990 1998
Overlook at Hamilton Place (Chattanooga, TN) 1,595 12,934 14,529 1,918 1992 1994
Columbia Bruno's Village (Columbia, TN) 673 3,876 4,549 532 1993 1994
Farragut Pointe (Farragut, TN) 731 4,186 4,917 636 1991 1994
Alexander Plaxa (Franklin, TN) 24 486 510 84 1983 1983
Battlewood Shopping Center (Franklin, TN) 662 3,819 4,481 90 1990 1998
Northcreek Commons (Goodlettsville, TN) 743 4,518 5,261 425 1987 1995
Country Bridge (Memphis, TN) 750 4,355 5,103 656 1993 1994
Memorial Village (Murfreesboro, TN) 991 5,788 6,779 793 1972 1994
Plaza South S/C (Murfreesboro, TN) 523 3,237 3,760 282 1990 1997
Towne Center (Murfreesboro, TN) 2,594 6,822 9,416 47 1998 1998
The Marketplace (Nashville, TN) 2,175 10,508 12,683 56 1998 1998
Cherokee Square (Tullahoma, TN) 503 2,901 3,404 444 1989 1994
Bermuda Square S/C (Chester, VA) 1,302 7,791 9,093 301 1977 1997
</TABLE>
F-22
<PAGE>
Schedule III- Real Estate and Accumulated Depreciation
JDN Realty Corporation
December 31, 1998
(In thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
COL.A COL. B COL. C COL.D
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Capitalized
------------
Subsequent to
---------------
Initial Cost to Company Acquisition
------------------------ ------------
Buildings and
Description Encumbrances Land Improvements Improvements
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Property
- ------------------
Candlers Station: (Lynchburg, VA) - 2,745 15,601 59
Genito Crossing (Midlothian, VA) - 823 4,812 11
Lexington Commons (Lexington, VA) - 882 4,548 885
Tri-Rivers S/C (South Boston,VA) - 502 4,414 183
Shoppers World (Brookfield, WI) - 1,989 12,025 3
Brown Deer Center (Brown Deer, WI) - 1,790 10,230 (4)
Market Place of Brown Deer (Brown Deer, WI) 5,143 1,641 9,497 -
Point Luomiz (Milwaukee, WI) - 912 5,331 3
West Allis Center (Milwaukee WI) - 2, 479 14,885 3
Atlanta Headquarters - 495 - 3,605
-----------------------------------------------------------------------------
Total Operating Property 42,475 146,418 526,876 93,087
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Land Under Ground Lease
Charleston, South Carolina - 362 - -
-----------------------------------------------------------------------------
Total Land Under Ground Lease - 362 - -
----------------------------------------------------------------------------
Undeveloped Land:
- ----------------
---------------------------------------------------------------------------
Garden, Alabama - 55 - -
Cumming, Georgia - 2,778 - -
Eastman, Georgia - 69 - -
Fayedleville, Georgia - 150 - -
LaFayette, Georgia - 84 - -
Lawrenceville, Georgia - 293 - -
Madison, Georgia - 22 - -
Warner Robins, Georgia - 235 - -
Golf Breeze, Florida - 1,393 - -
Rockingham, North Carolina - 300 - -
Wallace, North Carolina - 251 - -
Gallipolis, Ohio - 158 - -
Charleston, South Carolina - 179 - -
Lenington, Virginia - 164 - -
----------------------------------------------------------------------------
- 6,331 - -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Subtotal 42,478 153,131 526,876 93,087
----------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
COL.E COL.F
- -----------------------------------------------------------------------------------------------------------------------------------
Gross Amount at which Carried at close of Period
------------------------------------------------
Buildings and Accumulated
Description Land Improvement Total Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Property
- ------------------
Candlers Station: (Lynchburg, VA) 2,745 15,660 18,405 250
Genito Crossing (Midlothian, VA) 823 4,823 5,646 192
Lexington Commons (Lexington, VA) 882 5,433 6,315 1,060
Tri-Rivers S/C (South Boston, VA) 502 4,597 5,099 227
Shoppers World (Brookfield, WI) 1,989 12,030 14,019 314
Brown Deer Center (Brown Deer, WI) 1,790 10,226 12,016 270
Market Place of Brown Deer (Brown Deer, WI) 1,641 9,437 11,078 249
Point Luomiz (Milwaukee, WI) 912 5,334 6,246 141
West Allis Center (Milwaukee, WI) 2,479 14,886 17,367 389
Atlanta Headquarters 495 5,603 6,100 150
-----------------------------------------------------------------------------
Total Operating Property 146,418 619,963 766,381 56,093
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Land Under Ground Lease
Charleston, South Carolina 362 - 362 -
-----------------------------------------------------------------------------
Total Land Under Ground Lease 362 - 362 -
-----------------------------------------------------------------------------
Undeveloped Land:
- ----------------
-----------------------------------------------------------------------------
Garden, Alabama 55 - 55 -
Cumming, Georgia 2,778 - 2,778 -
Eastman, Georgia 69 - 69 -
Fayedleville, Georgia 150 - 150 -
LaFayette, Georgia 84 - 84 -
Lawrenceville, Georgia 293 - 293 -
Madison, Georgia 22 - 22 -
Warner Robins, Georgia 235 - 235 -
Golf Breeze, Florida 1,393 - 1,393 -
Rockingham, North Carolina 300 - 300 -
Wallace, North Carolina 251 - 251 -
Gallipolis, Ohio 158 - 158 -
Charleston, South Carolina 179 - 179 -
Lenington, Virginia 164 - 164 -
-----------------------------------------------------------------------------
6,331 - 6,331 -
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Subtotal 155,181 619,963 773,074 56,093
-----------------------------------------------------------------------------
<CAPTION>
COL.G COL.H
---------------------------------------------------------------------------------
Date of Date
Description Construction Acquired
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Property
- ------------------
Candlers Station: (Lynchburg, VA) 1990 1998
Genito Crossing (Midlothian, VA) 1985 1997
Lexington Commons (Lexington, VA) 1989 1988
Tri-Rivers S/C (South Boston, VA) 1989 1997
Shoppers World (Brookfield, WI) 1967 1998
Brown Deer Center (Brown Deer, WI) 1967 1998
Market Place of Brown Deer (Brown Deer, WI) 1989 1998
Point Luomiz (Milwaukee, WI) 1962 1998
West Allis Center (Milwaukee, WI) 1968 1998
Atlanta Headquarters 1955 1997
----------------------------------
Total Operating Property
</TABLE>
F-23
<PAGE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
JDN REALTY CORPORATION
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Capitalized
----------------
Subsequent to
-------------
Initial Cost to Company Acquisition
----------------------- -----------
Building and
Description Encumbrances Land Improvements Improvements
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property under Development
-------------------------------------------------------------------------------------------------------
Early Acquisition Cost - - - 162 -
Nacogdoches, TX - 753 935 -
Asheville/Pallosa, NC - - 809 -
Redevelop -- Topeka, KS - - 4 -
Urving, TX - - 25 -
Scottsboro, AL - 581 365 -
Manfreesboro, TN - 924 2,506 -
Greensboro North, NC - - 1,447 -
Buford, GA - 1,162 1,804 -
Macon, GA - 1,100 5,689 -
Brandon Publix, FL - 2,603 5,682 -
Nashville Charlotte, TN - 3,261 (87) -
Redev-Milwaukee, WI - - 5 -
Colombus, GA - 2,015 1,472 -
Beaver Valley II, PA - 2,678 4,997 -
Stone Mountain, GA - 5,951 4,383 -
Milwaukee S. Gate, WI - - 173 -
Goodletisville, TN - - - -
Hendersonville, TN - 3,355 4,651 -
Greensboro Ph II, NC - 1,302 342 -
Tucker, GA - 1,754 2,582 -
Lexington S. Farm, KY - - 887 -
Battlewood, SC - - 9 -
Opelika, AL - 2,600 74 -
University Hills, CO - - 2,083 -
Eastman, GA - - 1 -
Lafayette, GA - - 1 -
Tupelo, MS - - 28 -
Winston Salem, NC - 814 1,907 -
Redev-Ft Oglethorpe, GA - - 5 -
Redev-Chamblee, GA - - 113 -
Redev-Cartersville, GA - - 285 -
------------------------------------------------------------------------------------------------------
Total Property under
Development - 30,853 43,339 -
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Total $ 42,471 $ 183,964 $ 570,215 $ 93,087
------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COL. E COL. F
- ------------------------------------------------------------------------------------------------------------------------------------
Gross Amount at which Carried at close of Period
------------------------------------------------
Buildings and Accumulated
Description Land Improvements Total Depreciation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property under Development
-------------------------------------------------------------------------------------------------------
Early Acquisition Cost - - 162 162 -
Nacogdoches, TX 753 935 1,688 -
Asheville/Pallosa, NC - 809 809 -
Redevelop -- Topeka, KS - 4 4 -
Urving, TX - 25 25 -
Scottsboro, AL 581 365 946 -
Manfreesboro, TN 924 2,506 3,430 -
Greensboro North, NC - 1,447 1,447 -
Buford, GA 1,162 1,804 2,966 -
Macon, GA 1,100 5,689 6,789 -
Brandon Publix, FL 2,603 5,682 8,285 -
Nashville Charlotte, TN 3,261 (87) 3,174 -
Redev-Milwaukee, WI - 5 5 -
Colombus, GA 2,015 1,472 3,487 -
Beaver Valley II, PA 2,678 4,997 7,675 -
Stone Mountain, GA 5,951 4,383 10,334 -
Milwaukee S. Gate, WI - 173 173 -
Goodletisville, TN - - - -
Hendersonville, TN 3,355 4,651 8,006 -
Greensboro Ph II, NC 1,302 342 1,644 -
Tucker, GA 1,754 2,582 4,336 -
Lexington S. Farm, KY - 887 887 -
Battlewood, SC - 9 9 -
Opelika, AL 2,600 74 2,674 -
University Hills, CO - 2,083 2,083 -
Eastman, GA - 1 1 -
Lafayette, GA - 1 1 -
Tupelo, MS - 28 28 -
Winston Salem, NC 814 1,907 2,721 -
Redev-Ft. Oglethorpe, GA - 5 5 -
Redev-Chamblee, GA - 113 113 -
Redev-Cartersville, GA - 285 285 -
-------------------------------------------------------------------------------------------------------
Total Property under
Development 30,853 43,339 74,192 -
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Total $ 185,964 $ 663,302 $ 847,266 $ 56,093
---------------------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------
COL G COL H
------------------------------------
Date of Date
Description Construction Acquired
- --------------------------------------------------------------------------
<S> <C> <C>
Property under Development
Early Acquisition Cost -
Nacogdoches, TX
Asheville/Pallosa, NC
Redevelop -- Topeka, KS
Urving, TX
Scottsboro, AL
Manfreesboro, TN
Greensboro North, NC
Buford, GA
Macon, GA
Brandon Publix, FL
Nashville Charlotte, TN
Redev-Milwaukee, WI
Colombus, GA
Beaver Valley II, PA
Stone Mountain, GA
Milwaukee S. Gate, WI
Goodletisville, TN
Hendersonville, TN
Greensboro Ph II, NC
Tucker, GA
Lexington S. Farm, KY
Battlewood, SC
Opelika, AL
University Hills, CO
Eastman, GA
Lafayette, GA
Tupelo, MS
Winston Salem, NC
Redev-Ft. Oglethorpe, GA
Redev-Chamblee, GA
Redev-Cartersville, GA
</TABLE>
F-24
<PAGE>
Schedule III - Real Estate and Accumulated Depreciation
JDN Realty Corporation
December 31, 1998
(In thousands)
(1) Estimated useful life of building.
(2) Estimated useful life of sign.
(3) Aggregate cost for Federal Income tax purposes of $315,851.
(4) Reconciliation of "Real Estate and Accumulated Depreciation";
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
---------------------------------
<S> <C> <C> <C>
Investment in Real Estate
Balance at beginning of year $ 535,303 $ 332,669 $ 276,818
Additions/Improvements 308,437 203,086 56,538
Deductions (18,310) (452) (687)
------------------------------------
Balance at end of year $ 825,430 $ 535,303 $ 332,669
====================================
Accumulated Depreciation
Balance of beginning of year $ 38,306 $ 27,973 $ 20,312
Additions charged to costs and expenses 19,010 9,932 7,739
Other Additions - 401 -
Deductions (1,223) - (78)
------------------------------------
Balance at end of year $ 56,093 $ 38,306 $ 27,973
====================================
</TABLE>
F-25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
JDN REALTY CORPORATION
Dated: March 23, 1999 By: /s/ J. Donald Nichols
----------------------
J. Donald Nichols
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ J. Donald Nichols Chairman and Chief Executive Officer March 23, 1999
- -----------------------------
J. Donald Nichols
/s/ Elizabeth L. Nichols President and Director March 23, 1999
- -----------------------------
Elizabeth L. Nichols
/s/ William J. Kerley Senior Vice President and
- -----------------------------
William J. Kerley Chief Financial Officer March 23, 1999
/s/ John D. Harris, Jr. Vice President and Controller March 23, 1999
- -----------------------------
John D. Harris, Jr.
/s/ Haywood D. Cochrane, Jr. Director March 23, 1999
- -----------------------------
Haywood D. Cochrane, Jr.
/s/ William B. Greene Director March 23, 1999
- -----------------------------
William B. Greene
/s/ Craig Macnab Director March 23, 1999
- -----------------------------
Craig Macnab
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert P. Corker, Jr. Director March 23, 1999
- -----------------------------
Robert P. Corker, Jr.
/s/ William G. Byrnes Director March 23, 1999
- -----------------------------
William G. Byrnes
</TABLE>
<PAGE>
Item 14(c)
----------
EXHIBITS
--------
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
3.1 Articles of Restatement of JDN Realty Corporation (1)
3.2 Articles of Merger of JDN Enterprises, Inc. with and into
the Company (2)
3.3 Amended and Restated Bylaws of the Company (10)
4 Specimen stock certificate (3)
10.1 JDN Realty Corporation 1993 Incentive Stock Plan, as
amended (10)
10.2 JDN Realty Corporation 1993 Non-Employee Director Stock
Option Plan (2)
10.3 Indemnification Agreement by and between J. Donald Nichols
and JDN Realty Corporation, dated February 23, 1994 (2)
10.4 Indemnification Agreement by and between Elizabeth L.
Nichols and JDN Realty Corporation, dated February 23,1994
(2)
10.5 Indemnification Agreement by and between William J. Kerley
and JDN Realty Corporation, dated February 23, 1994 (2)
10.6 $200,000,000 Amended and Restated Credit Agreement dated as
of September 2, 1998 among JDN Realty Corporation and
Wachovia Bank N.A., as Agent (5)
10.7 $100,000,000 Term Loan Credit Agreement dated as of
February 17, 1999 among JDN Realty Corporation, Wachovia
Bank, N.A., as Agent and PNC, National Association, as
Documentation Agent
10.8 Indenture, dated as of July 15, 1997, by the Company to
First Union National Bank as Trustee (6)
10.9 First Supplemental Indenture, dated as of July 31, 1997, by
the Company to First Union National Bank, as Trustee (6)
10.10 Second Supplemental Indenture, dated as of February 5, 1998,
by the Company to First Union National Bank, as Trustee (7)
10.11 JDN Realty Corporation Dividend Reinvestment and Stock
Purchase Plan (8)
10.12 JDN Realty Corporation 1995 Employee Stock Purchase Plan (4)
10.13 Employment Agreement by and between J. Donald Nichols and
the Company, dated as of December 1, 1996 (9)
10.14 Employment Agreement by and between Elizabeth L. Nichols and
the Company, dated as of December 1, 1996 (9)
10.15 Employment Agreement by and between William J. Kerley and
the Company, dated as of December 1, 1996 (9)
10.16 Employment Agreement by and between David L. Henzlik and the
Company, dated as of December 1, 1996 (9)
10.17 Employment Agreement by and between John D. Harris, Jr. and
the Company dated as of May 1, 1997. (10)
10.18 Employment Agreement by and between Leilani L. Jones and the
Company, dated as of May 1, 1997. (10)
12 Ratio of Earnings to Fixed Charges
21 Subsidiaries of the Company
23 Consent of Independent Auditors
27 Financial Data Schedule
99.1 Risk Factors/Cautionary Statements for Purposes of the
Private Securities Litigation Reform Act of 1995
99.2 Federal Income Tax and ERISA considerations
(1) Filed as an exhibit to the Company's filing on Form 8-K dated November
7, 1996, previously filed pursuant to the Securities Exchange Act of
1934, and hereby incorporated by reference.
<PAGE>
(2) Filed as an exhibit to the Company's Registration Statement on Form S-
11 (No. 33-73710) previously filed pursuant to the Securities Act of
1933 and hereby incorporated by reference.
(3) Filed as an exhibit to the Company's Registration Statement on Form S-
3 (No. 333-22339) previously filed pursuant to the Securities Act of
1933 and hereby incorporated by reference.
(4) Filed as an exhibit to the Company's Registration Statement on Form S-
8 (No. 333-1848) previously filed pursuant to the Securities Act of
1933 and hereby incorporated by reference.
(5) Filed as an exhibit to the Company's quarterly report on Form 10-Q for
the quarter ended September 30, 1998, previously filed pursuant to the
Securities Exchange Act of 1934 and hereby incorporated by reference.
(6) Filed as an exhibit to the Company's filing on Form 8-K dated August
1, 1997, previously filed pursuant to the Securities Exchange Act of
1934 and hereby incorporated by reference.
(7) Filed as an exhibit to the Company's filing on Form 8-K dated February
13, 1998, previously filed pursuant to the Securities Exchange Act of
1934 and hereby incorporated by reference.
(8) Filed as an exhibit to the Company's Registration Statement on Form S-
3 (No. 33-90868) previously filed pursuant to the Securities Act of
1933 and hereby incorporated by reference.
(9) Filed as an exhibit to the Company's annual report on Form 10-K for
the year ended December 31, 1996, previously filed pursuant to the
Securities Exchange Act of 1934 and hereby incorporated by reference.
(10) Filed as an exhibit to the Company's filing on Form 10-K for the year
ended December 31, 1997, previously filed pursuant to the Securities
Exchange Act of 1934 and hereby incorporated by reference.
<PAGE>
EXHIBIT 10.7
$100,000,000
TERM LOAN CREDIT AGREEMENT
dated as of
February 17, 1999
among
JDN REALTY CORPORATION
The Banks Listed Herein,
WACHOVIA BANK, N.A.,
as Agent
and
PNC BANK, NATIONAL ASSOCIATION,
as Documentation Agent
<PAGE>
TABLE OF CONTENTS
CREDIT AGREEMENT
ARTICLE I DEFINITIONS.............................................. 1
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Accounting Terms and Determinations...................... 16
SECTION 1.03. References............................................... 16
SECTION 1.04. Use of Defined Terms..................................... 17
SECTION 1.05. Terminology.............................................. 17
ARTICLE II. CREDITS.................................................. 17
SECTION 2.01. Commitments to Lend Loans................................ 17
SECTION 2.02. Method of Borrowing Loans................................ 17
SECTION 2.03. Term Notes............................................... 19
SECTION 2.04. Maturity of Loans........................................ 20
SECTION 2.05. Interest Rates........................................... 20
SECTION 2.06. Optional Prepayments..................................... 22
SECTION 2.07 Mandatory Prepayments....................................
SECTION 2.08. General Provisions as to Payments........................ 23
SECTION 2.09. Computation of Interest and Fees......................... 24
ARTICLE III. CONDITIONS.TO BORROWINGS................................. 25
SECTION 3.01. Conditions to First Borrowing............................ 25
ARTICLE IV. REPRESENTATIONS AND WARRANTIES........................... 27
SECTION 4.01. Corporate Existence and Power............................ 27
SECTION 4.02. Corporate and Governmental Authorization; No............. 27
SECTION 4.03. Binding Effect........................................... 27
SECTION 4.04. Financial Information.................................... 27
SECTION 4.05. No Litigation............................................ 28
(i)
<PAGE>
SECTION 4.06. Compliance with ERISA.................................... 28
SECTION 4.07. Compliance with Laws; Payment of Taxes................... 28
SECTION 4.08. Guarantors and Subsidiaries.............................. 28
SECTION 4.09. Investment Company Act................................... 29
SECTION 4.10. Public Utility Holding Company Act....................... 29
SECTION 4.11. Ownership of Property.................................... 29
SECTION 4.12. No Default............................................... 29
SECTION 4.13. Full Disclosure.......................................... 29
SECTION 4.14. Environmental Matters.................................... 29
SECTION 4.15. Capital Stock............................................ 30
SECTION 4.16. Margin Stock............................................. 30
SECTION 4.17. Insolvency............................................... 30
SECTION 4.18. Insurance................................................ 31
SECTION 4.19. Real Estate Investment Trust............................. 31
SECTION 4.20. Y2K Plan................................................. 31
ARTICLE V. COVENANTS................................................ 32
SECTION 5.01. Information.............................................. 32
SECTION 5.02. Inspection of Property, Books and Records................ 34
SECTION 5.03. Maintenance of Existence................................. 34
SECTION 5.04. Dissolution.............................................. 34
SECTION 5.05. Consolidations, Mergers and Sales of Assets.............. 34
SECTION 5.06. Use of Proceeds.......................................... 35
SECTION 5.07. Compliance with Laws; Payment of Taxes................... 35
SECTION 5.08. Insurance................................................ 36
SECTION 5.09. Change in Fiscal Year.................................... 36
SECTION 5.10. Maintenance of Property.................................. 36
(ii)
<PAGE>
SECTION 5.11. Environmental Notices.................................... 36
SECTION 5.12. Environmental Matters.................................... 36
SECTION 5.13. Environmental Release.................................... 37
SECTION 5.14. Transactions with Affiliates............................. 37
SECTION 5.15. Restricted Payments...................................... 37
SECTION 5.16. Loans or Advances........................................ 37
SECTION 5.17. Investments.............................................. 38
SECTION 5.18. [Intentionally Deleted].................................. 38
SECTION 5.19. Restrictions on Ability of Guarantors to Pay
Dividends............................................... 38
SECTION 5.20. Ratio of Total Consolidated Liabilities to Gross
Asset Value............................................. 39
SECTION 5.21. Ratio of Total Secured Debt to Gross Asset Value......... 39
SECTION 5.22. Ratio of EBITDA to Consolidated Interest Expense......... 39
SECTION 5.23. Ratio of Unencumbered Assets to Unsecured Funded
Debt.................................................... 39
SECTION 5.24. Ratio of Unsecured Net Operating Income to
Unsecured Interest Expense.............................. 39
SECTION 5.25. Guarantees............................................... 39
SECTION 5.26. Additional Revolving Credit.............................. 39
SECTION 5.27. Ownership................................................ 39
SECTION 5.28. Status as a REIT......................................... 39
SECTION 5.29. Guaranty by the Initial Guarantor; New Subsidiaries
Become Guarantors....................................... 39
ARTICLE. VI DEFAULTS................................................. 40
SECTION 6.01. Events of Default........................................ 40
SECTION 6.02. Notice of Default........................................ 44
ARTICLE VII. AGENT.................................................... 44
(iii)
<PAGE>
SECTION 7.01. Appointment; Powers and Immunities....................... 44
SECTION 7.02. Reliance by Agent........................................ 45
SECTION 7.03. Defaults................................................. 45
SECTION 7.04. Rights of Agent and its Affiliates as a Bank............. 45
SECTION 7.05. Indemnification.......................................... 46
SECTION 7.06 Consequential Damages.................................... 46
SECTION 7.07. Payee of Term Note Treated as Owner...................... 46
SECTION 7.08. Nonreliance on Agent and Other Banks..................... 46
SECTION 7.09. Failure to Act........................................... 47
SECTION 7.10. Resignation or Removal of Agent.......................... 47
ARTICLE VIII. CHANGE IN CIRCUMSTANCES; COMPENSATION.................... 47
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair.................................................. 47
SECTION 8.02. Illegality............................................... 48
SECTION 8.03. Increased Cost and Reduced Return........................ 49
SECTION 8.04. Base Rate Loans Substituted for Euro-Dollar
Loans................................................... 50
SECTION 8.05. Compensation............................................. 50
ARTICLE IX. MISCELLANEOUS............................................ 51
SECTION 9.01. Notices.................................................. 51
SECTION 9.02. No Waivers............................................... 51
SECTION 9.03. Expenses; Documentary Taxes.............................. 51
SECTION 9.04. Indemnification.......................................... 52
SECTION 9.05. Setoff; Sharing of Setoffs............................... 52
SECTION 9.06. Amendments and Waivers................................... 53
SECTION 9.07. No Margin Stock Collateral............................... 54
SECTION 9.08. Successors and Assigns................................... 54
(iv)
<PAGE>
SECTION 9.09. Confidentiality.......................................... 57
SECTION 9.10. Representation by Banks.................................. 57
SECTION 9.11. Obligations Several...................................... 57
SECTION 9.12. Georgia Law.............................................. 58
SECTION 9.13. Severability............................................. 58
SECTION 9.14. Interest................................................. 58
SECTION 9.15. Interpretation........................................... 59
SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction............ 59
SECTION 9.17. Counterparts............................................. 59
SECTION 9.18. Source of Funds -- ERISA................................. 59
(v)
<PAGE>
EXHIBIT A Form of Term Note
EXHIBIT B Form of Opinion of Counsel for the Borrower and Initial
Guarantor
EXHIBIT C Form of Opinion of Special Counsel for the Agent
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Notice of Borrowing
EXHIBIT F Form of Compliance Certificate
EXHIBIT G Form of Closing Certificate
EXHIBIT H Form of Officer's Certificate for Borrower
EXHIBIT I Form of Guaranty
EXHIBIT J Form of Contribution Agreement
EXHIBIT K Form of Borrowing Base Certificate
EXHIBIT L List of Eligible Properties
Schedule 4.08 Subsidiaries
Schedule 4.14 Environmental Matters
Schedule 5.17 Existing Investments
Schedule 5.25 Existing Guarantees
(vi)
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TERM LOAN CREDIT AGREEMENT
TERM LOAN CREDIT AGREEMENT dated as of February 17, 1999 among JDN
Realty Corporation, the BANKS listed on the signature pages hereof, WACHOVIA
BANK, N.A., as Agent and PNC BANK, NATIONAL ASSOCIATION, as Documentation Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this Section 1.01
-----------
shall, for all purposes of this Agreement and any amendment hereto (except as
herein otherwise expressly provided or unless the context otherwise requires),
have the meanings set forth herein:
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.05(c).
"Affiliate" of any relevant Person means (i) any Person that directly,
or indirectly through one or more intermediaries, controls the relevant Person
(a "Controlling Person"), (ii) any Person (other than the relevant Person or a
Subsidiary of the relevant Person) which is controlled by or is under common
control with a Controlling Person, or (iii) any Person (other than a Subsidiary
of the relevant Person) of which the relevant Person owns, directly or
indirectly, 20% or more of the common stock or equivalent equity interests. As
used herein, the term "control" means possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" means Wachovia Bank, N.A., a national banking association
organized under the laws of the United States of America, in its capacity as
agent for the Banks hereunder, and its successors and permitted assigns in such
capacity.
"Agent's Letter Agreement" means that certain letter agreement, dated
as of December 18, 1998, between the Borrower and the Agent relating to the
structure of the Loans, and certain fees from time to time payable by the
Borrower to the Agent, together with all amendments and supplements thereto.
"Agreement" means this Term Loan Credit Agreement, together with all
amendments and supplements hereto.
<PAGE>
"Applicable Margin" has the meaning set forth in Section 2.05(a).
"Assignee" has the meaning set forth in Section 9.08(c).
"Assignment and Acceptance" means an Assignment and Acceptance
executed in accordance with Section 9.08(c) in the form attached hereto as
Exhibit D.
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"Authority" has the meaning set forth in Section 8.02.
"Bank" means each bank listed on the signature pages hereof as having
a Commitment, and its successors and assigns.
"Base Rate" means for any Base Rate Loan for any day, the rate per
annum equal to the higher as of such day of (i) the Prime Rate, or (ii) one-half
of one percent above the Federal Funds Rate. For purposes of determining the
Base Rate for any day, changes in the Prime Rate or the Federal Funds Rate shall
be effective on the date of each such change.
"Base Rate Borrowing" means a Borrowing consisting of Base Rate Loans.
"Base Rate Loan" means a Loan which bears or is to bear interest at a
rate based upon the Base Rate, and is to be made as a Base Rate Loan pursuant to
the applicable Notice of Borrowing, Section 2.02(f), or Article VIII, as
applicable.
"Base Rent" means, with respect to leases of the Properties, the
minimum annual contractual rent payable thereunder, excluding common area
maintenance and percentage rent.
"Borrower" means JDN Realty Corporation, a Maryland corporation, and
its successors and its permitted assigns.
"Borrowing" means a borrowing hereunder consisting of Loans made to
the Borrower.
"Borrowing Base" means the sum (without duplication with respect to
any Property) of each of the following, as determined by reference to the most
recent Borrowing Base Certificate furnished pursuant to Section 3.01(h) or
Section 5.01(i), as applicable:
(i) an amount equal to the product of (w) 10 (which is the
capitalization rate), times (x) 4 (which is the annualization factor),
times (y) 0.60 (which is the advance rate), times (z) the Net Operating
Income for the 3 month period ending on the last day of the Fiscal Quarter
just
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ended prior to the date of determination, from each Eligible Unencumbered
Stabilized Property owned by the Borrower or any Guarantor for at least one
Fiscal Quarter; plus
(ii) an amount equal to the product of (x) the book value of each
Eligible Unencumbered Stabilized Property owned by the Borrower or any
Guarantor for less than a Fiscal Quarter, times (y) 0.60 (which is the
advance rate); plus
(iii) an amount equal to the lesser of: (A) the product of (x) 0.50
(which is the advance rate), times (y) the book value of Construction in
Progress on all Eligible Properties not subject to a Mortgage and (B)
$20,000,000.
"Borrowing Base Certificate" means a certificate substantially in the
form of Exhibit K, duly executed by an authorized officer, setting forth in
---------
reasonable detail the calculations for each component of the Borrowing Base.
"Capital Stock" means any nonredeemable capital stock or other
ownership interest of the Borrower or any Consolidated Entity (to the extent
issued to a Person other than the Borrower), whether common or preferred, and
including any interest as a member in a limited liability company.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. (S) 9601 et. seq. and its implementing regulations
and amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Inventory System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section 8.02.
"Closing Certificate" has the meaning set forth in Section 3.01(e).
"Closing Date" means February 17, 1999.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.
"Commitment" means, with respect to each Bank the amount set forth
opposite the name of such Bank on the signature pages hereof.
"Compliance Certificate" has the meaning set forth in Section 5.01(c).
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<PAGE>
"Consolidated Entity" means at any date any Person the accounts of
which, in accordance with GAAP, are consolidated with those of the Borrower in
its consolidated financial statements as of such date.
"Consolidated Interest Expense" for any period means, interest
expensed in respect of Debt of the Borrower and its Consolidated Subsidiaries
and the Guarantors.
"Consolidated Liabilities" means the sum of (i) all liabilities that,
in accordance with GAAP, should be classified as liabilities on a consolidated
balance sheet of Borrower and its Consolidated Subsidiaries and the Guarantors,
and (ii) to the extent not included in clause (i) of this definition, all
Redeemable Preferred Stock.
"Consolidated Net Income" means, for any period, the Net Income of the
Borrower and its Consolidated Subsidiaries and the Guarantors determined on a
consolidated basis, but excluding (i) extraordinary items and (ii) any equity
interests of the Borrower or any Subsidiary in the unremitted earnings of any
Person that is not a Subsidiary.
"Consolidated Operating Profits" means, for any period, the Operating
Profits of the Borrower and its Consolidated Subsidiaries.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with GAAP, would be consolidated
with those of the Borrower in its consolidated financial statements as of such
date.
"Construction in Progress" means, for any retail Property, calculated
on a consolidated basis for the Borrower and the Guarantors, the sum of (x)
construction-in-progress as shown from time to time on the books and records of
the Borrower and the Guarantors, maintained in accordance with GAAP, plus (y)
the book value, calculated in accordance with GAAP, of any Property that (i)
previously constituted construction-in-progress and (ii) has not yet become a
Stabilized Property.
"Contribution Agreement" means the Contribution Agreement of even date
herewith in substantially the form of Exhibit J to be executed by the Borrower
---------
and by the Initial Guarantor on the Closing Date and by each of the Guarantors
pursuant to Section 5.29.
"Control" means, with respect to any Person, the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities or otherwise.
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"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee under capital leases,
(v) all obligations of such Person to reimburse any bank or other Person in
respect of amounts payable under a banker's acceptance, (vi) all Redeemable
Preferred Stock of such Person (in the event such Person is a corporation),
(vii) all obligations of such Person to reimburse any bank or other Person in
respect of amounts paid or to be paid or to be paid under a letter of credit or
similar instrument, (viii) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such Person, (ix) all
obligations of such Person with respect to interest rate protection agreements,
foreign currency exchange agreements or other hedging arrangements (valued as
the termination value thereof computed in accordance with a method approved by
the International Swap Dealers Association and agreed to by such Person in the
applicable hedging agreement, if any), and (x) all Debt of others Guaranteed by
such Person.
"Debt Rating" means at any time whichever is the lowest of the rating
of the Borrower's senior unsecured, unenhanced debt (or, if no such debt exists,
its issuer credit rating for debt of such type) by Moody's, S&P and Duff &
Phelps (provided, that (i) if any two of such ratings are the same, such ratings
--------
shall apply, and (ii) in the event of a double or greater split rating, the
rating immediately above the lowest rating shall apply), or if only one of them
rates the Borrower's senior unsecured, unenhanced debt, Level IV of the table
contained in Section 2.05(a) shall apply.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Rate" means, with respect to any Loan, on any day, the sum of
2% plus the highest interest rate (including the Applicable Margin) which may be
applicable to any Loans hereunder (irrespective of whether any such type of
Loans are actually outstanding hereunder).
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"Dollars" or "$" means dollars in lawful currency of the United States
of America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Georgia are authorized by law to close.
"EBITDA" means at any time the sum of the following, determined on a
consolidated basis for the Borrower and the Guarantors, at the end of each
Fiscal Quarter, for the applicable measuring period: (i) Consolidated Net
Income; plus (ii) Consolidated Interest Expense; plus (iii) taxes on income;
---- ----
plus (iv) depreciation; plus (v) amortization; plus (vi) other non-cash charges.
- ---- ---- ----
"Eligible Property" means any retail Property which is either: (i)
listed on Exhibit L; or (ii) which has been approved as an Eligible Property by
---------
the Required Banks, at the request of the Borrower, taking into account the
following information concerning the Property provided to the Agent and the
Banks by the Borrower:
(x) as to all proposed Eligible Property, a physical description,
applicable environmental reports, and information regarding its location,
(y) as to any proposed Eligible Property which is a Stablilized
Property, information regarding its age and occupancy, an operating
statement and rent roll for the most recent Fiscal Quarter, and an
operating budget for the current Fiscal Year and
(z) as to any proposed Eligible Property which consists of
Construction in Progress, information regarding its rental status, and a
pro forma operating statement and rent roll (as of the time it becomes a
Stabilized Property);
provided, however, that under no circumstances can any Eligible Property include
- -------- -------
at any time any Property which at such time is an "Eligible Property" under the
Revolving Credit Agreement.
"Eligible Unencumbered Stabilized Property" means any Eligible
Property which (i) is not subject to a Mortgage, and (ii) is a Stabilized
Property.
"Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal
6
<PAGE>
prerequisites for conducting the business of the Borrower or any Subsidiary
required by any Environmental Requirement.
"Environmental Judgments and Orders" means all judgments, decrees or
orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent, or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.
"Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"Environmental Notices" means notice from any Environmental Authority
or by any other person or entity, of possible or alleged noncompliance with or
liability under any Environmental Requirement, including without limitation any
complaints, citations, demands or requests from any Environmental Authority or
from any other person or entity for correction of any violation of any
Environmental Requirement or any investigations concerning any violation of any
Environmental Requirement.
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means releases as defined in CERCLA or under
any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any Subsidiary
or the Properties, including but not limited to any such requirement under
CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Euro-Dollar Borrowing" means a Borrowing consisting of Euro-Dollar
Loans.
"Euro-Dollar Business Day" means any Domestic Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.
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<PAGE>
"Euro-Dollar Loan" means a Loan which bears or is to bear interest at
a rate based upon the Euro-Dollar Rate, and to be made as a Euro-Dollar Loan
pursuant to the applicable Notice of Borrowing.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.05(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
--------
be determined is not a Domestic Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic Business Day, and
(ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to the Agent on such day on such
transactions, as determined by the Agent.
"Fiscal Month" means any fiscal month of the Borrower.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
"Fiscal Year" means any fiscal year of the Borrower and the
Guarantors.
"Funds From Operations" means net income or loss computed in
accordance with GAAP, excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation and amortization of real estate assets, and
after adjustments for unconsolidated partnerships and joint ventures.
"GAAP" means generally accepted accounting principles applied on a
basis consistent with those which, in accordance with Section 1.02, are to be
used in making the calculations for purposes of determining compliance with the
terms of this Agreement.
"Gross Asset Value" means, on a consolidated basis for the Borrower
and the Guarantors, the sum of (without duplication with respect to any
Property):
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(i) an amount equal to the product of (x) 10 (which is the
capitalization rate), times (y) 4 (which is the annualization factor),
times (z) the Net Operating Income for the 3 month period ending on the
last day of the month just ended prior to the date of determination, from
each Property owned by the Borrower or any Guarantor for at least one
Fiscal Quarter; plus
(ii) an amount equal to the book value as of the last day of the
month just ended prior to the date of determination of Property owned by
the Borrower or any Guarantor for less than a Fiscal Quarter; plus
(iii) the book value of Construction in Progress on the last day of
the Fiscal Quarter just ended.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to provide collateral security, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided that the term Guarantee shall
--------
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guarantors" means any one, or more or all, as the context shall
require, of the Initial Guarantor and any Significant Subsidiary which becomes a
Guarantor pursuant to Section 5.29(subject to the provisions of the last
sentence of Section 5.05).
"Guaranty" means the Guaranty Agreement in substantially the form of
Exhibit I to be executed by the Initial Guarantor on the Closing Date and by
- ---------
each of the other Guarantors as required by and pursuant to Section 5.29,
unconditionally and jointly and severally Guaranteeing payment of the Loans, the
Term Notes and all other obligations of the Borrower to the Agent and the Banks
hereunder, including without limitation all principal, interest, fees, costs,
and compensation and indemnification amounts.
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"Hazardous Materials" includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. (S) 6901 et seq. and its implementing regulations and
amendments, or in any applicable state or local law or regulation, (b)
"hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in
any applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including, crude oil or any fraction thereof,
(d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or
in any applicable state or local law or regulation and (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable state or local law or
regulation, as each such Act, statute or regulation may be amended from time to
time.
"Initial Guarantor" means JDN DCI.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the first, second, third or sixth month
thereafter, as the Borrower may elect in the applicable Notice of Borrowing;
provided that:
- --------
(a) any Interest Period (subject to paragraph (c) below) which would
otherwise end on a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day unless such Euro-
Dollar Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall,
subject to paragraph (c) below, end on the last Euro-Dollar Business Day of
the appropriate subsequent calendar month; and
(c) no Interest Period may be selected which begins before the
Maturity Date and would otherwise end after the Maturity Date; and
(2) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; provided that:
--------
(a) any Interest Period (subject to paragraph (b) below) which would
otherwise end on a day which is not a Domestic Business Day shall be
extended to the next succeeding Domestic Business Day; and
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<PAGE>
(b) no Interest Period which begins before the Maturity Date and would
otherwise end after the Maturity Date may be selected.
"Investment" means any investment in any Person, whether by means of
purchase or acquisition of obligations or securities of such Person, capital
contribution to such Person, loan or advance to such Person, making of a time
deposit with such Person, or assumption of any obligation of such Person or
otherwise.
"JDN DCI" means JDN Development Company, Inc., a Delaware corporation.
"JDN Venture" means any Person formed by the Borrower or any
Consolidated Entity: (i) which is not a Consolidated Entity and (ii) in which
the Borrower or such Consolidated Entity owns either (x) 50% or more of the
beneficial interests therein, but does not have Control thereof, or (y) 20% or
more of the beneficial interests therein, but does have Control thereof.
"Lending Office" means, as to each Bank, its office located at its
address set forth on the signature pages hereof (or identified on the signature
pages hereof as its Lending Office) or such other office as such Bank may
hereafter designate as its Lending Office by notice to the Borrower and the
Agent.
"Lien" means, with respect to any asset, any mortgage, deed to secure
debt, deed of trust, lien, pledge, charge, security interest, security title,
preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For
the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed
to own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Loans" means the loans made by the Banks to the Borrower pursuant to
the terms and conditions set forth in Section 2.01, consisting of initial Loans
made by the Banks on or about the Closing Date (upon satisfaction of the
conditions set forth in Section 3.01) and thereafter, consisting solely of
Refunding Loans, with each Loan being either a Base Rate Loan or a Euro-Dollar
Loan, and references to "Loans" include Base Rate Loans or Euro-Dollar Loans, or
both, as the context shall require.
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<PAGE>
"Loan Documents" means this Agreement, the Term Notes, the Guaranty,
the Contribution Agreement, any other document evidencing, relating to or
securing the Loans, and any other document or instrument delivered from time to
time in connection with this Agreement, the Term Notes or the Loans, as such
documents and instruments may be amended or supplemented from time to time.
"London Interbank Offered Rate" has the meaning set forth in Section
2.05(c).
"Margin Stock" means "margin stock" as defined in Regulations T, U or
X.
"Material Adverse Effect" means, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, any of (a) the
financial condition, operations, business, properties or prospects of the
Borrower and the Guarantors taken as a whole, (b) the rights and remedies of the
Agent or the Banks under the Loan Documents, or the ability of the Borrower or
the Guarantors to perform its obligations under the Loan Documents to which it
is a party, as applicable, or (c) the legality, validity or enforceability of
any Loan Document.
"Maturity Date" means whichever is applicable of (i) February 15,
2002, or (ii) the date the Agent declares the Term Notes to be immediately due
and payable in full during the existence of an Event of Default pursuant to
Section 6.01.
"Moody's" means Moody's Investor Service, Inc.
"Mortgage" means (i) with respect to any referenced Property, a
mortgage, deed to secure debt, deed of trust or similar instrument encumbering
such Property, and (ii) with respect to the owner of any referenced Property, a
pledge of any of its capital stock or partnership interests.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"Net Income" means, as applied to any Person for any period, the
aggregate amount of net income of such Person for such period, as determined in
accordance with GAAP.
"Net Operating Income" means, for any Property, calculated on a
consolidated basis for the Borrower and the Guarantors, the sum of the following
derived from such Property:
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(i) Property revenues, less (ii) Property expenses (excluding depreciation,
amortization and debt service), less (iii) a management fee equal to 3% of Base
Rent, and less (iv) a capital reserve equal to $0.15 for each leasable square
foot.
"Non-Recourse Mortgage Debt" means Debt secured by a Mortgage on
Property, which the Borrower has determined in good faith is by its terms non-
recourse, except for customary exclusions for environmental liability,
misapplication or fraudulent application of rent after default, insurance
proceeds and condemnation awards and other customary exclusions.
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Officer's Certificate" has the meaning set forth in Section 3.01(f).
"Operating Profits" means, as applied to any Person for any period,
the operating income of such Person for such period, as determined in accordance
with GAAP.
"Participant" has the meaning set forth in Section 9.08(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Performance Pricing Determination Date" has the meaning set forth in
Section 2.05(a).
"Person" means an individual, a corporation, a partnership, an
unincorporated association, a limited liability corporation, a limited liability
partnership, a trust or any other entity or organization, including, but not
limited to, a government or political subdivision or an agency or
instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding 5 plan years made contributions.
"Prime Rate" refers to that interest rate so denominated and set by
Wachovia from time to time as an interest
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rate basis for borrowings. The Prime Rate is but one of several interest rate
bases used by Wachovia. Wachovia lends at interest rates above and below the
Prime Rate.
"Properties" means all real property owned, leased or otherwise used
or occupied by the Borrower or any Guarantor, wherever located.
"Quarterly Period" means a 3 month period (or portion thereof) ending
on each March 31, June 30, September 30 and December 31 after the Closing Date
and prior to the Maturity Date.
"Redeemable Preferred Stock" of any Person means any preferred stock
issued by such Person which is at any time prior to the Maturity Date either (i)
mandatorily redeemable (by sinking fund or similar payments or otherwise) or
(ii) redeemable at the option of the holder thereof.
"Refunding Loan" means a new Loan made on the day on which an
outstanding Loan is maturing or a Base Rate Borrowing is being converted to a
Euro-Dollar Borrowing, to the extent that the proceeds thereof are used entirely
for the purpose of paying such maturing Loan or Loan being converted.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Required Banks" means at any time Banks holding at least 66 2/3% of
the aggregate outstanding principal amount of the Loans.
"Restricted Payment" means (i) any dividend or other distribution on
any shares of the Borrower's Capital Stock (except dividends payable solely in
shares of its Capital Stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Borrower's
Capital Stock (except shares acquired upon the conversion thereof into other
shares of its Capital Stock) or (b) any option,
14
<PAGE>
warrant or other right to acquire shares of the Borrower's Capital Stock.
"Revolving Credit Agreement" means the Amended and Restated Credit
Agreement dated as of September 2, 1998, among the Borrower, the banks listed on
the signature pages thereof and Wachovia Bank, N.A., as Agent, as it may be
amended or supplemented from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-
Hill, Inc.
"Significant Subsidiary" means any Subsidiary which either (x) has
assets which constitute more than 5% of Gross Asset Value at the end of the most
recent Fiscal Quarter, or (y) contributed more than 5% of Consolidated Operating
Profits during the most recent Fiscal Quarter and the 3 Fiscal Quarters
immediately preceding such Fiscal Quarter (or, with respect to any Subsidiary
which existed during the entire 4 Fiscal Quarter period but was acquired by the
Borrower during such period, which would have contributed more than 5% of Gross
Asset Value during such period had it been a Subsidiary for the entire period).
"Stabilized Property" means at any time retail Properties (i) which
are at least 90% leased (pursuant to written leases which have been signed by
both landlord and tenant and under which the payment of Base Rent has commenced)
or (ii) are at least 80% occupied by tenants which have accepted the premises
and signed (together with the landlord) a lease, and with respect to which the
date for the commencement of payment of Base Rent has been established.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower; provided, however, that
-------- -------
"Subsidiary" shall not include any JDN Venture.
"Taxes" has the meaning set forth in Section 2.08(c).
"Term Notes" means the promissory notes of the Borrower substantially
in the form of Exhibit A evidencing the obligation of the Borrower to repay the
---------
Loans, together with all amendments, consolidations, modifications, renewals and
supplements thereto.
"Third Parties" means all lessees, sublessees, licensees and other
users of the Properties, excluding those users of the Properties in the ordinary
course of the Borrower's business and on a temporary basis.
15
<PAGE>
"Transferee" has the meaning set forth in Section 9.08(d).
"Total Consolidated Liabilities" means at any time, for the Borrower
and the Guarantors, determined on a consolidated basis, the sum of (i)
Consolidated Liabilities, plus (ii) all Debt Guaranteed by the Borrower or any
Guarantor, plus (iii) the face amount of all letters of credit issued for the
account of the Borrower or any Guarantor.
"Total Secured Debt" means at any time, for the Borrower and the
Guarantors, determined on a consolidated basis, the sum of the following, but
only if any Property, or ownership interest of the owner thereof, is subject to
a Mortgage with respect thereto: (i) all indebtedness for borrowed money; (ii)
the deferred purchase price of Property; (iii) all capital leases in which the
Borrower is the tenant; (iv) all obligations to reimburse any bank or other
Person in respect of amounts paid or to be paid under a letter of credit or
similar instrument; and (v) all Guarantees of Debt of Persons other than the
Borrower and the Guarantors.
"Unencumbered Assets" means at any time, for the Borrower and the
Guarantors, determined on a consolidated basis, the sum (without duplication
with respect to any Property) of the following:
(i) an amount equal to the product of (x) 10 (which is the
capitalization rate), times (y) 4 (which is the annualization factor),
times (z) the Net Operating Income for the 3 month period ending on the
last day of the Fiscal Quarter just ended prior to the date of
determination, from each Property not subject to a Mortgage and owned by
the Borrower or any Guarantor for at least one Fiscal Quarter; plus
(ii) an amount equal to the book value of each Property not subject
to a Mortgage and owned by the Borrower or any Guarantor for less than a
Fiscal Quarter; plus
(iii) an amount equal to the book value of Construction in Progress
on all Properties not subject to a Mortgage.
"Unencumbered Stabilized Properties" means at any time, all Stabilized
Properties not subject to a Mortgage.
"Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that
16
<PAGE>
such excess represents a potential liability of a member of the Controlled Group
to the PBGC or the Plan under Title IV of ERISA.
"Unsecured Funded Debt" means at any time, for the Borrower and the
Guarantors, determined on a consolidated basis, the sum of the following, but
only if any Property, or ownership interest of the owner thereof, is not subject
to a Mortgage with respect thereto: (i) all indebtedness for borrowed money;
(ii) the deferred purchase price of Property; (iii) all capital leases in which
the Borrower is the tenant; (iv) all obligations to reimburse any bank or other
Person in respect of amounts paid or to be paid under a letter of credit or
similar instrument; and (v) all Guarantees of Debt of Persons other than the
Borrower and the Guarantors.
"Unsecured Interest Expense" means at any time that portion of
Consolidated Interest Expense attributable to Unsecured Funded Debt.
"Unsecured Net Operating Income" means at any time all Net Operating
Income attributable to Unencumbered Stabilized Properties.
"Wachovia" means Wachovia Bank, N.A., a national banking association,
and its successors.
"Wholly Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Borrower.
"Y2K Plan" has the meaning set forth in Section 4.20.
"Year 2000 Compliant and Ready" means that (a) the Borrower's and its
Subsidiaries hardware and software systems with respect to the operation of its
business and its general business plan will: (i) handle date information
involving any and all dates before, during and/or after January 1, 2000,
including accepting input, providing output and performing date calculations in
whole or in part; (ii) operate, accurately without interruption on and in
respect of any and all dates before, during and/or after January 1, 2000 and
without any change in performance; (iii) store and provide date input
information without creating any ambiguity as to the century and; (b) the
Borrower has developed alternative plans to ensure business continuity in the
event of the failure of any or all of items (i) through (iii) in clause (a)
above in this definition.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
-----------------------------------
specified herein, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial
17
<PAGE>
statements required to be delivered hereunder shall be prepared, in accordance
with GAAP, applied on a basis consistent (except for changes concurred in by the
Borrower's independent public accountants or otherwise required by a change in
GAAP) with the most recent audited consolidated financial statements of the
Borrower and its Consolidated Subsidiaries delivered to the Banks unless with
respect to any such change concurred in by the Borrower's independent public
accountants or required by GAAP, in determining compliance with any of the
provisions of this Agreement or any of the other Loan Documents: (i) the
Borrower shall have objected to determining such compliance on such basis at the
time of delivery of such financial statements, or (ii) the Required Banks shall
so object in writing within 30 days after the delivery of such financial
statements, in either of which events such calculations shall be made on a basis
consistent with those used in the preparation of the latest financial statements
as to which such objection shall not have been made (which, if objection is made
in respect of the first financial statements delivered under Section 5.01
hereof, shall mean the financial statements referred to in Section 4.04).
SECTION 1.03. References. Unless otherwise indicated, references in
----------
this Agreement to "Articles", "Exhibits", "Schedules", "Sections" and other
Subdivisions are references to articles, exhibits, schedules, sections and other
subdivisions hereof.
SECTION 1.04. Use of Defined Terms. All terms defined in this
--------------------
Agreement shall have the same defined meanings when used in any of the other
Loan Documents, unless otherwise defined therein or unless the context shall
require otherwise.
SECTION 1.05. Terminology. All personal pronouns used in this
-----------
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural, and the plural
shall include the singular. Titles of Articles and Sections in this Agreement
are for convenience only, and neither limit nor amplify the provisions of this
Agreement.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend Loans. Each Bank severally agrees,
-------------------------
on the terms and conditions set forth herein, to make Loans to the Borrower on
or about the Closing Date in the amount of its Commitment; provided that all
--------
advances of the Loans by the Banks shall be made in a single funding on or about
the Closing Date (when all conditions have been satisfied), in an aggregate
amount not to exceed the aggregate Commitments, and thereafter, all Loans shall
be made only as Refunding Loans.
18
<PAGE>
Each Borrowing under this Section shall be in an aggregate principal amount of
(x) for Base Rate Loans, $5,000,000 or any larger integral multiple of
$1,000,000, and (y) for Euro-Dollar Loans, $10,000,000 or any larger integral
multiple of $1,000,000 and shall be made from the several Banks ratably in
proportion to their respective Commitments. Once repaid, Borrowings may not be
reborrowed pursuant hereto except as Refunding Loans.
SECTION 2.02. Method of Borrowing Loans. For all Loans:
-------------------------
(a) The Borrower shall give the Agent notice (a "Notice of
Borrowing"), which shall be substantially in the form of Exhibit E, prior to
---------
11:00 A.M. (Atlanta, Georgia time) on the same Domestic Business Day as each
Base Rate Borrowing and at least 3 Euro-Dollar Business Days before each Euro-
Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be Base Rate
Loans or Euro-Dollar Loans, and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's ratable share of
such Borrowing and such Notice of Borrowing, once received by the Agent, shall
not thereafter be revocable by the Borrower.
(c) Not later than 11:00 A.M. (Atlanta, Georgia time), as to Euro-
Dollar Borrowings, and 2:00 P.M. (Atlanta, Georgia time), as to Base Rate
Borrowings, on the date of the initial advance of the Loans, each Bank shall
(except as provided in paragraph (d) of this Section) make available its ratable
share of such Borrowing, in Federal or other funds immediately available in
Atlanta, Georgia, to the Agent at its address determined pursuant to Section
9.01. Unless the Agent determines that any applicable condition specified in
Article III has not been satisfied, the Agent will make the funds so received
from the Banks available to the Borrower at the Agent's aforesaid address.
Unless the Agent receives notice from a Bank, at the Agent's address referred to
in or specified pursuant to Section 9.01, no later than 4:00 P.M. (local time at
such address) on the date prior to the initial advance of the Loans stating that
such Bank will not make a Loan in connection with such Borrowing, the Agent
shall be entitled to
19
<PAGE>
assume that such Bank will make a Loan in connection with such Borrowing and, in
reliance on such assumption, the Agent may (but shall not be obligated to) make
available such Bank's ratable share of such Borrowing to the Borrower for the
account of such Bank. If the Agent makes such Bank's ratable share available to
the Borrower and such Bank does not in fact make its ratable share of such
Borrowing available on such date, the Agent shall be entitled to recover such
Bank's ratable share from such Bank or the Borrower (and for such purpose shall
be entitled to charge such amount to any account of the Borrower maintained with
the Agent), together with interest thereon for each day during the period from
the date of such Borrowing until such sum shall be paid in full at a rate per
annum equal to the rate at which the Agent determines that it obtained (or could
have obtained) overnight Federal funds to cover such amount for each such day
during such period, provided that (i) any such payment by the Borrower of such
--------
Bank's ratable share and interest thereon shall be without prejudice to any
rights that the Borrower may have against such Bank and (ii) until such Bank has
paid its ratable share of such Borrowing, together with interest pursuant to the
foregoing, it will have no interest in or rights with respect to such Borrowing
for any purpose hereunder. If the Agent does not exercise its option to advance
funds for the account of such Bank, it shall forthwith notify the Borrower of
such decision.
(d) All Loans other than the initial advance of the Term Loans shall
be made as Refunding Loans.
(e) Notwithstanding anything to the contrary contained in this
Agreement, no Euro-Dollar Borrowing may be made if there shall have occurred a
Default or an Event of Default, which Default or Event of Default shall not have
been cured or waived, and all Refunding Loans shall be made as Base Rate Loans
(but shall bear interest at the Default Rate, if applicable).
(f) In the event that a Notice of Borrowing fails to specify whether
the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar
Loans, such Loans shall be made as Base Rate Loans. If the Borrower is
otherwise entitled under this Agreement to repay any Loans maturing at the end
of an Interest Period applicable thereto with the proceeds of a new Borrowing,
and the Borrower fails to repay such Loans using its own moneys and fails to
give a Notice of Borrowing in connection with such new Borrowing, a new
Borrowing shall be deemed to be made on the date such Loans mature in an amount
equal to the principal amount of the Loans so maturing, and the Loans comprising
such new Borrowing shall be Base Rate Loans.
(g) Notwithstanding anything to the contrary contained herein, there
shall not be more than 8 Euro-Dollar Borrowings outstanding at any given time.
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<PAGE>
SECTION 2.03. Term Notes. (a) The Loans of each Bank shall be
----------
evidenced by a single Term Note payable to the order of such Bank for the
account of its Lending Office in an amount equal to the original principal
amount of such Bank's Commitment.
(b) Upon receipt of each Bank's Term Note pursuant to Section 3.01,
the Agent shall deliver such Term Note to such Bank. Each Bank shall record,
and prior to any transfer of its Term Note shall endorse on the schedules
forming a part thereof appropriate notations to evidence, the date, amount and
maturity of, and effective interest rate for, each Loan made by it, the date and
amount of each payment of principal made by the Borrower with respect thereto,
and such schedules of each such Bank's Term Note shall constitute rebuttable
presumptive evidence of the respective principal amounts owing and unpaid on
such Bank's Term Note; provided that the failure of any Bank to make, or error
--------
in making, any such recordation or endorsement shall not affect the obligation
of the Borrower hereunder or under the Term Notes or the ability of any Bank to
assign its Term Note. Each Bank is hereby irrevocably authorized by the
Borrower so to endorse its Term Note and to attach to and make a part of any
Term Note a continuation of any such schedule as and when required.
SECTION 2.04. Maturity of Loans. (a) Each Loan included in any
-----------------
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
(b) Notwithstanding the foregoing, the outstanding principal amount of
the Loans, if any, together with all accrued but unpaid interest thereon, if
any, shall be due and payable on the Maturity Date.
SECTION 2.05. Interest Rates. (a) "Applicable Margin" means (x) for
--------------
any Base Rate Loan, 0.00% and (y) for each Euro-Dollar Loan, (1) until the first
Performance Pricing Determination Date after the Closing Date, the percentage
set forth in Level III of the table below, and (2) thereafter, the percentage
determined on each Performance Pricing Determination Date by reference to the
table set forth below as to such type of Loan and the Debt Rating for the
quarterly or annual period ending immediately prior to such Performance Pricing
Determination Date; provided, that if there is no Debt Rating from at least two
--------
of the rating agencies, the Applicable Margin for Euro-Dollar Loans shall be
based upon Level IV of the table below.
===============================================================
Level I Level II Level III Level IV
===============================================================
21
<PAGE>
===============================================================
Debt Rating *BBB+ BBB BBB- **BBB-
and/1/
and/1/ and/1/ and/1/ Baa/3/
Baa/1/ Baa/2/ Baa/3/
---------------------------------------------------------------
Applicable Margin 1.10% 1.25% 1.40% 1.85%
===============================================================
In determining the amounts to be paid by the Borrower pursuant to Sections
2.05(b) and 2.05(c), the Borrower and the Banks shall refer to the Borrower's
Debt Rating from time to time. For purposes hereof, "Performance Pricing
Determination Date" shall mean each date on which the Debt Rating changes. Each
change in interest and fees as a result of a change in Debt Rating shall be
effective only for Loans (including Refunding Loans) which are made on or after
the relevant Performance Pricing Determination Date. All determinations
hereunder shall be made by the Agent unless the Required Banks shall object to
any such determination. The Borrower shall promptly notify the Agent of any
change in the Debt Rating.
(b) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until it
becomes due, at a rate per annum equal to the Base Rate for such day plus the
Applicable Margin. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of and, to the extent permitted by
applicable law, overdue interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
Default Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the sum of the Applicable Margin plus the applicable Adjusted
London Interbank Offered Rate for such Interest Period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than 3 months, at intervals of 3 months after the first day
thereof. Any overdue principal of and, to the extent permitted by law, overdue
interest on any Euro-Dollar Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the Default Rate.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London
________________________
/1/ if applicable
* Greater than or Equal to
** Less Than
22
<PAGE>
Interbank Offered Rate for such Interest Period by (ii) 1.00 minus the Euro-
Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan
means for the Interest Period of such Euro-Dollar Loan, the rate per annum
determined on the basis of the offered rate for deposits in Dollars of amounts
equal or comparable to the principal amount of such Euro-Dollar Loan offered for
a term comparable to such Interest Period, which rates appear on the Telerate
Page 3750 effective as of 11:00 A.M., London time, 2 Euro-Dollar Business Days
prior to the first day of such Interest Period, provided that if no such offered
--------
rates appear on such page, the "London Interbank Offered Rate" for such Interest
Period will be the arithmetic average (rounded upward, if necessary, to the next
higher 1/100th of 1%) of rates quoted by not less than 2 major banks in New York
City, selected by the Agent, at approximately 10:00 A.M., New York City time, 2
Euro-Dollar Business Days prior to the first day of such Interest Period, for
deposits in Dollars offered by leading European banks for a period comparable to
such Interest Period in an amount comparable to the principal amount of such
Euro-Dollar Loan.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank Offered
Rate shall be adjusted automatically on and as of the effective date of any
change in the Euro-Dollar Reserve Percentage.
(d) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
Banks by telecopier of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(e) After the occurrence and during the continuance of an Event of
Default, the principal amount of the Loans (and, to the extent permitted by
applicable law, all accrued interest thereon) may, at the election of the
Required Banks, bear interest at the Default Rate.
SECTION 2.06. Optional Prepayments. (a) The Borrower may, upon at
--------------------
least 1 Domestic Business Days' notice to the Agent, prepay any Base Rate
Borrowing in whole at any time, or from time to time in part in amounts
aggregating at least $25,000,000 or any
23
<PAGE>
larger integral multiple of $25,000,000 (or any lesser amount equal to the
outstanding balance of such Borrowing), by paying the principal amount to be
prepaid together with accrued interest thereon to the date of prepayment. Each
such optional prepayment shall be applied to prepay ratably the Base Rate Loans
of the several Banks included in such Base Rate Borrowing.
(b) Upon 3 Domestic Business Day's prior written notice, the Borrower
may prepay any Euro-Dollar Borrowing in whole at any time, or from time to time
in part in amounts aggregating at least $25,000,000 or any larger integral
multiple of $25,000,000 (or any lesser amount equal to the outstanding balance
of such Borrowing), by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment, plus the amount of
compensation determined to be due pursuant to Section 8.05, if such prepayment
is not made on the last of an Interest Period. Each such optional prepayment
shall be applied to prepay ratably the Euro-Dollar Loans of the several Banks
included in such Euro-Dollar Borrowing.
(c) Upon receipt of a notice of prepayment pursuant to this Section
2.06, the Agent shall promptly notify each Bank of the contents thereof and of
such Bank's ratable share of such prepayment and such notice, once received by
the Agent, shall not thereafter be revocable by the Borrower.
SECTION 2.07. Mandatory Prepayments. On each date on which the
---------------------
aggregate principal amount of the Loans outstanding exceeds the Borrowing Base
on such date (including, without limitation, because an Eligible Property
included in the most recent Borrowing Base Certificate has become subject to a
Mortgage), the Borrower shall so notify the Agent of the amount of such excess
and repay or prepay such principal amount of the outstanding Loans (together
with interest thereon and any amount due under Section 8.05(a)) as may be
necessary so that after such payment the aggregate unpaid principal amount of
the Loans does not exceed the Borrowing Base on such date; provided, however,
-------- -------
that upon the request of the Borrower, the Borrower shall have 30 days in which
to identify and obtain approval of the Required Banks, pursuant to the
provisions of the definition of "Eligible Property"), a substitute Eligible
Property, and upon any such approval, such Eligible Property shall be included
in the computation of the Borrowing Base, and no prepayment shall be required
except to the extent the Borrowing Base, as so computed, still exceeds the
aggregate principal amount of the Loans outstanding. Each such payment or
prepayment shall be applied ratably to the Loans of the Banks outstanding on the
date of payment or prepayment in the following order of priority: (i) first, to
Base Rate Loans, and (ii) secondly, to Euro-Dollar Loans.
SECTION 2.08. General Provisions as to Payments. (a) The Borrower
---------------------------------
shall make each payment of principal of, and interest
24
<PAGE>
on, the Loans and of fees hereunder, not later than 11:00 A.M. (Atlanta, Georgia
time) on the date when due, in Federal or other funds immediately available in
Atlanta, Georgia, to the Agent at its address referred to in Section 9.01. The
Agent will distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks, such payment to be
distributed by the Agent (x) by 2:00 P.M. on the date of receipt by the Agent,
provided that such payment was received by the Agent by 1:00 P.M. (Atlanta,
Georgia time), and (y) by 2:00 P.M. (Atlanta, Georgia time) on the date
following the date of receipt by the Agent, if such payment was received by the
Agent after 1:00 P.M. (Atlanta, Georgia time). If the Agent shall fail to make
such distribution within the time required by the immediately preceding
sentence, such distribution shall be made together with interest thereon, for
each day during the period from the date such distribution should have been so
made until the date such distribution actually is made, at a rate per annum
equal to the Federal Funds Rate.
(b) Whenever any payment of principal of, or interest on, the Base
Rate Loans or of fees hereunder shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of or
interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-
Dollar Business Day, the date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls
in another calendar month, in which case the date for payment thereof shall be
the next preceding Euro-Dollar Business Day.
(c) All payments of principal, interest and fees and all other amounts
to be made by the Borrower pursuant to this Agreement with respect to any Loan
or fee relating thereto shall be paid without deduction for, and free from, any
tax, imposts, levies, duties, deductions, or withholdings of any nature now or
at anytime hereafter imposed by any governmental authority or by any taxing
authority thereof or therein excluding in the case of each Bank, taxes imposed
on or measured by its net income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Bank is organized or any political
subdivision thereof and, in the case of each Bank, taxes imposed on its income,
and franchise taxes imposed on it, by the jurisdiction of such Bank's applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, imposts, levies, duties, deductions or withholdings of any nature being
"Taxes"). In the event that the Borrower is required by applicable law to make
any such withholding or deduction of Taxes with respect to any Loan or fee or
other amount, the Borrower shall pay such deduction or withholding to the
applicable taxing authority, shall promptly furnish to any Bank in respect of
which such deduction or withholding is made all receipts and other documents
evidencing such payment and shall pay to such Bank additional amounts as may be
necessary in order that the
25
<PAGE>
amount received by such Bank after the required withholding or other payment
shall equal the amount such Bank would have received had no such withholding or
other payment been made.
Each Bank which is not organized under the laws of the United States
or any state thereof agrees, as soon as practicable after receipt by it of a
request by the Borrower to do so, to file all appropriate forms and take other
appropriate action to obtain a certificate or other appropriate document from
the appropriate governmental authority in the jurisdiction imposing the relevant
Taxes, establishing that it is entitled to receive payments of principal and
interest under this Agreement and the Term Notes without deduction and free from
withholding of any Taxes imposed by such jurisdiction; provided that if it is
--------
unable, for any reason, to establish such exemption, or to file such forms and,
in any event, during such period of time as such request for exemption is
pending, the Borrower shall nonetheless remain obligated under the terms of the
immediately preceding paragraph.
In the event any Bank receives a refund of any Taxes paid by the
Borrower pursuant to this Section 2.08(c), it will pay to the Borrower the
amount of such refund promptly upon receipt thereof; provided that if at any
--------
time thereafter it is required to return such refund, the Borrower shall
promptly repay to it the amount of such refund.
Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower and the Banks
contained in this Section 2.08(c) shall be applicable with respect to any
Participant, Assignee or other Transferee, and any calculations required by such
provisions (i) shall be made based upon the circumstances of such Participant,
Assignee or other Transferee, and (ii) constitute a continuing agreement and
shall survive the termination of this Agreement and the payment in full or
cancellation of the Term Notes.
SECTION 2.09. Computation of Interest and Fees. Interest on Base Rate
--------------------------------
Loans shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day). Interest on Euro-Dollar Loans shall be computed on the basis of a year of
360 days and paid for the actual number of days elapsed, calculated as to each
Interest Period from and including the first day thereof to but excluding the
last day thereof. Commitment fees and any other fees payable hereunder shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
ARTICLE III
CONDITIONS TO BORROWINGS
26
<PAGE>
SECTION 3.01. Conditions to First Borrowing. The obligation of each
-----------------------------
Bank to make a Loan on the occasion of the first Borrowing is subject to the
satisfaction of the conditions set forth in this Section 3.01, including receipt
by the Agent of the following (as to the documents described in paragraphs (a),
(c), (d) and (e) below, in sufficient number of counterparts for delivery of a
counterpart to each Bank and retention of one counterpart by the Agent):
(a) from each of the parties hereto of either (i) a duly executed
counterpart of this Agreement signed by such party or (ii) a facsimile
transmission of such executed counterpart, with the original to be sent to
the Agent by overnight courier);
(b) a duly executed Term Note and a Guaranty duly executed by the
Initial Guarantor and a Contribution Agreement duly executed by the
Borrower and the Initial Guarantor;
(c) an opinion letter of McCullough Sherrill, LLP, counsel for the
Borrower and the Initial Guarantor, dated as of the Closing Date,
substantially in the form of Exhibit B and covering such additional matters
---------
relating to the transactions contemplated hereby as the Agent or any Bank
may reasonably request;
(d) an opinion of Jones, Day, Reavis & Pogue, special counsel for the
Agent, dated as of the Closing Date, substantially in the form of Exhibit C
---------
and covering such additional matters relating to the transactions
contemplated hereby as the Agent may reasonably request;
(e) a certificate (the "Closing Certificate") substantially in the
form of Exhibit G, dated as of the Closing Date, signed by a principal
---------
financial officer of the Borrower, to the effect that, to the best of his
or her knowledge, (i) no Default has occurred and is continuing on the date
of the first Borrowing and (ii) the representations and warranties of the
Borrower contained in Article IV are true on and as of the date of the
first Borrowing hereunder;
(f) all documents which the Agent or any Bank may reasonably request
relating to the existence of the Borrower and the Initial Guarantor, the
corporate authority for and the validity of this Agreement, the Term Notes,
the Guaranty and the Contribution Agreement, and any other matters relevant
hereto, all in form and substance satisfactory to the Agent, including,
without limitation, a certificate of each of the Borrower and the Initial
Guarantor substantially in the form of Exhibit H (the "Officer's
---------
Certificate"), signed by the Secretary or an Assistant Secretary of the
Borrower and the Initial Guarantor, respectively, and as to the names, true
27
<PAGE>
signatures and incumbency of the officer or officers of the Borrower or
Initial Guarantor authorized to execute and deliver the Loan Documents, and
certified copies of the following items for each of the Borrower and
Initial Guarantor (i) a certificate of the Secretary of State of the State
of its incorporation as to its good standing as a corporation incorporated
therein, and (ii) the action taken by its Board of Directors authorizing
the execution, delivery and performance of the Loan Documents to which it
is a party;
(g) a Notice of Borrowing;
(h) receipt of the initial Borrowing Base Certificate, showing the
Borrowing Base as of last day of the Fiscal Quarter ending prior to the
Closing Date;
(i) receipt by the Agent of all fees payable to the Agent on the
Closing Date (i) for the sole account of the Agent pursuant to the Agent's
Letter Agreement and (ii) for the ratable account of the Banks pursuant to
the Summary of Terms and Conditions attached to the Agent's Letter
Agreement (and the Offering Memorandum sent to the Banks);
(j) the fact that, immediately before and after such funding, no
Default shall have occurred and be continuing; and
(k) the fact that the representations and warranties of the Borrower
contained in Article IV of this Agreement shall be true on and as of the
date of such funding.
In addition, if the Borrower desires funding of a Euro-Dollar Loan on the
Closing Date, the Agent shall have received, the requisite number of days prior
to the Closing Date, a funding indemnification letter satisfactory to it,
pursuant to which (i) the Agent and the Borrower shall have agreed upon the
interest rate, amount of Borrowing and Interest Period for such Euro-Dollar
Borrowing, and (ii) the Borrower shall indemnify the Banks from any loss or
expense arising from the failure to close on the anticipated Closing Date
identified in such letter or the failure to borrow such Euro-Dollar Borrowing on
such date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each of the Borrower and (by incorporation by reference in the
Guaranty) the Guarantors, as expressly stated, represents and warrants that:
28
<PAGE>
SECTION 4.01. Corporate Existence and Power. Each of the Borrower and
-----------------------------
the Guarantors is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to transact business in every jurisdiction where, by the nature of its
business, such qualification is necessary, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
--------------------------------------------
Contravention. The execution, delivery and performance by the Borrower of this
- -------------
Agreement, the Term Notes and the other Loan Documents and by the Guarantors of
the Guaranty (i) are within the Borrower's or such Guarantor's corporate powers,
(ii) have been duly authorized by all necessary corporate action, (iii) require
no action by or in respect of or filing with, any governmental body, agency or
official, (iv) do not contravene, or constitute a default under, any provision
of applicable law or regulation or of the certificate of incorporation or by-
laws of the Borrower or any Guarantor or of any agreement, judgment, injunction,
order, decree or other instrument binding upon the Borrower or any Guarantor and
(v) do not result in the creation or imposition of any Lien on any asset of the
Borrower or any of Guarantor.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
--------------
binding agreement of the Borrower enforceable in accordance with its terms, and
the Term Notes, the Guaranty and the other Loan Documents, when executed and
delivered in accordance with this Agreement, will constitute valid and binding
obligations of the Borrower and the Guarantors party thereto, enforceable in
accordance with their respective terms, provided that the enforceability hereof
--------
and thereof is subject in each case to general principles of equity and to
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally.
SECTION 4.04. Financial Information. (a) The consolidated balance
---------------------
sheets of the Borrower and the consolidated financial position of JDN DCI as of
December 31, 1997 and the related consolidated statements of income,
shareholders' equity and cash flows for the Fiscal Year then ended, reported on
by Ernst & Young LLP, copies of which have been delivered to each of the Banks,
and the unaudited consolidated financial statements of the Borrower for the
interim period ended September 30, 1998, copies of which have been delivered to
each of the Banks, fairly present, in conformity with GAAP, the consolidated
financial position of the Borrower and its Consolidated Subsidiaries and JDN DCI
as of such date and their consolidated results of operations and cash flows for
such periods stated.
(b) Since December 31, 1997, there has been no event, act, condition
or occurrence having a Material Adverse Effect.
29
<PAGE>
SECTION 4.05. No Litigation. There is no action, suit or proceeding
-------------
pending, or to the knowledge of the Borrower threatened, against or affecting
the Borrower, any Guarantor or any Subsidiary before any court or arbitrator or
any governmental body, agency or official which could have a Material Adverse
Effect or which in any manner draws into question the validity of or could
impair the ability of the Borrower or any Guarantor to perform its obligations
under, this Agreement, the Term Notes, the Guaranty or any of the other Loan
Documents.
SECTION 4.06. Compliance with ERISA. (a) The Borrower and each member
---------------------
of the Controlled Group have fulfilled their obligations under the minimum
funding standards of ERISA and the Code with respect to each Plan and are in
compliance in all material respects with the presently applicable provisions of
ERISA and the Code, and have not incurred any liability to the PBGC or a Plan
under Title IV of ERISA.
(b) Neither the Borrower nor any member of the Controlled Group is or
ever has been obligated to contribute to any Multiemployer Plan.
SECTION 4.07. Compliance with Laws; Payment of Taxes. To the best of
--------------------------------------
the Borrower's knowledge, the Borrower and each Guarantor and each Subsidiary is
in compliance with all applicable laws, regulations and similar requirements of
governmental authorities, except where such compliance is being contested in
good faith through appropriate proceedings. There have been filed on behalf of
the Borrower and each Guarantor and each Subsidiary all material Federal, state
and local income, excise, property and other tax returns which are required to
be filed by them and all taxes due pursuant to such returns or pursuant to any
assessment received by or on behalf of the Borrower and each Guarantor and each
Subsidiary have been paid, except in all cases, for any such tax, assessment,
fine or penalty that is being contested in good faith through appropriate
proceedings.. The charges, accruals and reserves on the books of the Borrower
and each Guarantor and each Subsidiary in respect of taxes or other governmental
charges are, in the opinion of the Borrower, adequate.
SECTION 4.08. Guarantors and Subsidiaries. Each of the Guarantors and
---------------------------
the Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, is duly qualified
to transact business in every jurisdiction where, by the nature of its business,
such qualification is necessary, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, except where failure to so qualify or be in
good standing would not have or cause a Material Adverse Effect. The Borrower
has no Subsidiaries except for those Subsidiaries listed on Schedule 4.08,
30
<PAGE>
which accurately sets forth each such Subsidiary's complete name and
jurisdiction of organization.
SECTION 4.09. Investment Company Act. Neither the Borrower nor any
----------------------
Guarantor or Subsidiary is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 4.10. Public Utility Holding Company Act. Neither the
----------------------------------
Borrower nor any Guarantor or Subsidiary is a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.
SECTION 4.11. Ownership of Property. Each of the Borrower, the
---------------------
Guarantors and the Subsidiaries has title to its properties sufficient for the
conduct of its business.
SECTION 4.12. No Default. To the best of Borrower's knowledge,
----------
neither the Borrower nor any Guarantor or Subsidiary is in default under or with
respect to any agreement, instrument or undertaking to which it is a party or by
which it or any of its property is bound which could have or cause a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
SECTION 4.13. Full Disclosure. All information heretofore furnished
---------------
by the Guarantors or the Borrower to the Agent or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by the Guarantors or the Borrower to
the Agent or any Bank will be, true, accurate and complete in every material
respect or based on reasonable estimates on the date as of which such
information is stated or certified. The Borrower and the Guarantors have
disclosed to the Banks in writing any and all facts which could have or cause a
Material Adverse Effect.
SECTION 4.14. Environmental Matters. (a) Except as set forth in
---------------------
Schedule 4.14, to the best of the Borrower's knowledge, neither the Borrower nor
any Guarantor or Subsidiary is subject to any Environmental Liability which
could have or cause a Material Adverse Effect and none of the Guarantors, the
Borrower or any Subsidiary has been designated as a potentially responsible
party under CERCLA or under any state statute similar to CERCLA. None of the
Properties has been identified on any current or proposed (i) National
Priorities List under 40 C.F.R. (S) 300, (ii) CERCLIS list or (iii) any list
arising from a state statute similar to CERCLA.
(b) Except as set forth in Schedule 4.14, to the best of the
Borrower's knowledge, no Hazardous Materials have been or are being used,
produced, manufactured, processed, treated, recycled,
31
<PAGE>
generated, stored, disposed of, managed or otherwise handled at, or shipped or
transported to or from the Properties or are otherwise present at, on, in or
under the Properties, or, to the best of the knowledge of the Borrower, at or
from any adjacent site or facility, except for Hazardous Materials, such as
cleaning solvents, pesticides and other materials used, produced, manufactured,
processed, treated, recycled, generated, stored, disposed of, managed, or
otherwise handled in the ordinary course of business in material compliance with
all applicable Environmental Requirements.
(c) Except as set forth in Schedule 4.14, to the best of the
Borrower's knowledge, each of the Borrower and its Subsidiaries and Affiliates
has procured all Environmental Authorizations necessary for the conduct of its
business, and is in compliance with all Environmental Requirements in connection
with the operation of the Properties and the Borrower's, and each of its
Subsidiary's and Affiliate's, respective businesses.
SECTION 4.15. Capital Stock. All Capital Stock, debentures, bonds,
-------------
notes and all other securities of and interests in the Borrower and its
Subsidiaries presently issued and outstanding or effective are validly and
properly issued or effective in all material respects in accordance with all
applicable laws, including, but not limited to, the "Blue Sky" laws of all
applicable states and the federal securities laws. The issued shares of or
other interests constituting Capital Stock of the Borrower's Wholly Owned
Subsidiaries are owned by the Borrower free and clear of any Lien or adverse
claim. At least a majority of the issued shares of capital stock of or other
interests in each of the Borrower's other Subsidiaries (other than Wholly Owned
Subsidiaries) is owned by the Borrower, and all such shares or other interests
which are owned by the Borrower are owned by it free and clear of any Lien or
adverse claim.
SECTION 4.16. Margin Stock. Neither the Borrower nor any Guarantor or
------------
Subsidiary is engaged principally, or as a significant part of its business, in
the business of purchasing or carrying any Margin Stock, and no part of the
proceeds of any Loan will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any Margin
Stock (other than loans to employees for the purchase of Capital Stock pursuant
to options granted by the Borrower), or be used for any purpose which violates,
or which is inconsistent with, the provisions of Regulation T, U or X.
SECTION 4.17. Insolvency. After giving effect to the execution and
----------
delivery of the Loan Documents and the making of the Loans under this Agreement:
(i) the Borrower will not (x) be "insolvent," within the meaning of such term as
used in O.C.G.A. (S) 18-2-22 or as defined in (S) 101 of the "Bankruptcy Code",
or Section 2 of either the "UFTA" or the "UFCA", or as defined or used
32
<PAGE>
in any "Other Applicable Law" (as those terms are defined below), or (y) be
unable to pay its debts generally as such debts become due within the meaning of
Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 6 of the
UFCA, or (z) have an unreasonably small capital to engage in any business or
transaction, whether current or contemplated, within the meaning of Section 548
of the Bankruptcy Code, Section 4 of the UFTA or Section 5 of the UFCA; and (ii)
the obligations of the Borrower under the Loan Documents and with respect to the
Loans will not be rendered avoidable under any Other Applicable Law. For
purposes of this Section 4.17, "Bankruptcy Code" means Title 11 of the United
States Code, "UFTA" means the Uniform Fraudulent Transfer Act, "UFCA" means the
Uniform Fraudulent Conveyance Act, and "Other Applicable Law" means any other
applicable law pertaining to fraudulent transfers or acts voidable by creditors,
in each case as such law may be amended from time to time.
SECTION 4.18. Insurance. Each of the Borrower, the Guarantors and the
---------
Subsidiaries has (either in the name of the Borrower or in such Subsidiary's own
name), or has caused its tenants to obtain (or, for tenants approved by the
Agent, to provide self-insurance with respect thereto), with financially sound
and reputable insurance companies, all-risk insurance in at least such amounts
and against at least such risks (including on all its property, and public
liability and worker's compensation) as are usually insured against in the same
general area by companies of established repute engaged in the same or similar
business.
SECTION 4.19. Real Estate Investment Trust. The Borrower has
----------------------------
elected to be treated and is qualified under Sections 856 through 860,
inclusive, of the Code as a real estate investment trust.
SECTION 4.20. Y2K Plan. The Borrower has developed and has delivered
--------
to the Agent and the Banks a comprehensive plan (the "Y2K Plan") for insuring
that the Borrower's and its Subsidiaries' software and hardware systems which
impact or affect in any way the business operations of the Borrower and its
Subsidiaries' will be Year 2000 Compliant and Ready. The Borrower and its
Subsidiaries' have met the Y2K Plan milestones such that all hardware and
software systems will be Year 2000 Compliant and Ready in accordance with the
Y2K Plan.
33
<PAGE>
ARTICLE V
COVENANTS
The Borrower and (by incorporation by reference in the Guaranty) the
Guarantors agree that, so long as any Bank has any Commitment hereunder or any
amount payable hereunder or under any Term Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
-----------
Banks:
(a) as soon as available and in any event within 90 days after the end
of each Fiscal Year, either (i) an executed copy of the Annual Report on
Form 10K for such Fiscal Year, or (ii) a consolidated balance sheet of the
Borrower and the Guarantors as of the end of such Fiscal Year and the
related consolidated statements of income, shareholders' equity and cash
flows for such Fiscal Year, setting forth in each case in comparative form
the figures for the previous fiscal year, in either case audited by Ernst &
Young LLP or other independent public accountants of nationally recognized
standing, with such audit opinion to be free of exceptions and
qualifications not acceptable to the Required Banks;
(b) as soon as available and in any event within 45 days after the end
of each of the first 3 Fiscal Quarters of each Fiscal Year, either (i) an
executed copy of the Quarterly Report on Form 10Q for such Fiscal Quarter,
or (ii) a consolidated balance sheet of the Borrower and the Guarantors as
of the end of such Fiscal Quarter and the related statement of income and
statement of cash flows for such Fiscal Quarter and for the portion of the
Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each
case in comparative form the figures for the corresponding Fiscal Quarter
and the corresponding portion of the previous Fiscal Year, all certified
(subject to normal year-end adjustments) as to fairness of presentation,
GAAP and consistency by the chief financial officer or the chief accounting
officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, a certificate,
substantially in the form of Exhibit F (a "Compliance Certificate"), of the
---------
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections
5.05, 5.15, 5.16, 5.17, 5.20 through 5.25, inclusive, on the date of such
financial statements and (ii) stating whether any Default exists on the
date of such certificate and, if any Default then exists, setting forth the
34
<PAGE>
details thereof and the action which the Borrower is taking or proposes to
take with respect thereto;
(d) simultaneously with the delivery of each set of annual financial
statements referred to in paragraph (a) above, a statement of the firm of
independent public accountants which reported on such statements to the
effect that nothing has come to their attention to cause them to believe
that any Default existed under Sections 5.20 through 5.24, inclusive, or
Section 6.01(e) or (f) on the date of such financial statements;
(e) within 5 Domestic Business Days after the Borrower becomes aware
of the occurrence of any Default, a certificate of the chief financial
officer or the chief accounting officer of the Borrower setting forth the
details thereof and the action which the Borrower is taking or proposes to
take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and annual, quarterly or monthly reports
which the Borrower shall have filed with the Securities and Exchange
Commission;
(h) if and when any member of the Controlled Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA,
a copy of such notice; or (iii) receives notice from the PBGC under Title
IV of ERISA of an intent to terminate or appoint a trustee to administer
any Plan, a copy of such notice;
(i) within 45 days after the end of each Fiscal Quarter, a Borrowing
Base Certificate as of the last day of the Fiscal Quarter just ended, and,
prior to the date of any removal or addition of any Property from the
Borrowing Base, a Borrowing Base Certificate as of such date, giving effect
to such removal or addition;
(j) simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b)
35
<PAGE>
above, operating statements for each Eligible Property for the period
covered by such financial statements; and
(k) from time to time such additional information regarding the
financial position or business of the Borrower and the Guarantors as the
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Inspection of Property, Books and Records. The Borrower
-----------------------------------------
and the Guarantors will (i) keep proper books of record and account in which
full, true and correct entries in conformity with GAAP shall be made of all
dealings and transactions in relation to its business and activities; and (ii)
permit representatives of any Bank at such Bank's expense prior to the
occurrence of a Default and at the Borrower's expense after the occurrence of a
Default to visit and inspect any of their respective properties, to examine and
make abstracts from any of their respective books and records and to discuss
their respective affairs, finances and accounts with their respective officers,
employees and independent public accountants. The Borrower and the Guarantors
agree to cooperate and assist in such visits and inspections, in each case at
such reasonable times and as often as may reasonably be desired.
SECTION 5.03. Maintenance of Existence. The Borrower shall and the
------------------------
Guarantors will each maintain its corporate existence and carry on its business
in substantially the same manner and in substantially the same fields as such
business is now carried on and maintained.
SECTION 5.04. Dissolution. Neither the Borrower nor any of the
-----------
Guarantors shall suffer or permit dissolution or liquidation either in whole or
in part or redeem or retire any shares of its own stock or that of any
Guarantor, except an established stock repurchase program of which the Agent has
been notified or through corporate reorganization to the extent permitted by
Section 5.05.
SECTION 5.05. Consolidations, Mergers and Sales of Assets. Neither
-------------------------------------------
the Borrower nor any of the Guarantors will consolidate or merge with or into,
or acquire all or substantially all of the assets or stock of any other Person,
or sell, lease or otherwise transfer all or any substantial part of its assets
to, any other Person, provided that:
--------
(i) the Borrower may merge with another Person if (x) such Person was
organized under the laws of the United States of America or one of its
states, (y) the Borrower is the corporation surviving such merger and (z)
immediately after giving effect to such merger, no Default shall have
occurred and be continuing;
36
<PAGE>
(ii) Guarantors may merge with one another, and the Guarantors may
sell, lease or otherwise transfer assets to the Borrower;
(iii) the foregoing limitation on the acquisition of all or
substantially all the assets or stock of another Person shall not prohibit,
during any Fiscal Quarter, the acquisition of all or substantially all of
the assets or stock of another Person unless the aggregate assets or stock
acquired in a single acquisition or series of related acquisitions of all
or substantially all of the assets or stock of another Person by the
Borrower and the Guarantors during such Fiscal Quarter constituted more
than 20% of Gross Asset Value at the end of the most recent Fiscal Quarter
immediately preceding such Fiscal Quarter; and
(iv) the foregoing limitation on the sale, lease or other transfer of
assets shall not prohibit, during any Fiscal Quarter, a transfer of assets
(in a single transaction or in a series of related transactions) unless the
aggregate assets to be so transferred, when combined with all other assets
transferred, by the Borrower and the Guarantors during such Fiscal Quarter
and the immediately preceding 3 Fiscal Quarters, constituted more than 20%
of Gross Asset Value at the end of the most recent Fiscal Quarter
immediately preceding such Fiscal Quarter.
In the case of any Guarantor which transfers substantially all of its
assets pursuant to clause (iv) of the preceding sentence, and in the case of any
Guarantor the stock of which is being sold and with respect to which clause (iv)
would have been satisfied if the transaction had been a sale of assets of such
Guarantor, such Guarantor may dissolve and shall be entitled to obtain from the
Agent a written release from the Guaranty, provided that it can demonstrate to
--------
the reasonable satisfaction of the Agent that (A) it has repaid in full all Debt
owed to the Borrower or any other Guarantor and (B) such sale was for cash and
in the case of an asset transfer, the net cash proceeds received in connection
therewith are being distributed to the Borrower as part of such dissolution, and
upon obtaining such written release, it shall no longer be a Guarantor for any
purpose hereunder.
SECTION 5.06. Use of Proceeds. The proceeds of the Loans may be used
---------------
for general corporate purposes; provided, however, that no portion of the
-------- -------
proceeds of the Loans will be used by the Borrower or any Subsidiary (i) in
connection with, whether directly or indirectly, any tender offer for, or other
acquisition of, stock of any corporation with a view towards obtaining control
of such other corporation, unless such tender offer or other acquisition is to
be made on a negotiated basis with the approval of the Board of Directors of the
Person to be acquired, and the provisions of Section 5.17 would not be violated,
(ii) directly or
37
<PAGE>
indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any Margin Stock, or (iii) for any purpose in violation
of any applicable law or regulation.
SECTION 5.07. Compliance with Laws; Payment of Taxes. The Borrower
--------------------------------------
and the Guarantors will, and will cause each member of the Controlled Group to,
comply with applicable laws (including but not limited to ERISA), regulations
and similar requirements of governmental authorities (including but not limited
to PBGC), except where the necessity of such compliance is being contested in
good faith through appropriate proceedings diligently pursued, and except where
the failure to comply would not have or be reasonably expected to cause a
Material Adverse Effect. The Borrower and the Guarantors will pay promptly when
due all taxes, assessments, governmental charges, claims for labor, supplies,
rent and other obligations which, if unpaid, might become a lien against the
Property of the Borrower or any Guarantor, except liabilities being contested in
good faith and against which the Borrower is maintaining accruals and reserves
which the Borrower believes are reasonable in accordance with GAAP.
SECTION 5.08. Insurance. The Borrower and the Guarantors will
---------
maintain (either in the name of the Borrower or in such Guarantor's own name),
or will cause its tenants to obtain, with financially sound and reputable
insurance companies (or, for tenants which have been approved in writing by the
Agent self insurance), all-risk insurance on all its property in at least such
amounts and against at least such risks (including on all its property, and
public liability and worker's compensation) as are usually insured against in
the same general area by companies of established repute engaged in the same or
similar business.
SECTION 5.09. Change in Fiscal Year. The Borrower and each of the
---------------------
Guarantors agrees that it will not change its Fiscal Year without the consent of
the Required Banks.
SECTION 5.10. Maintenance of Property. The Borrower and each
-----------------------
Guarantor shall maintain all of its Properties and assets in good condition,
repair and working order, ordinary wear and tear excepted.
SECTION 5.11. Environmental Notices. The Borrower and each Guarantor
---------------------
shall furnish to the Banks and the Agent prompt written notice of all
Environmental Liabilities, pending, threatened or anticipated Environmental
Proceedings, Environmental Notices, Environmental Judgments and Orders, and
Environmental Releases at, on, in, under or in any way affecting the Properties
or any adjacent property, and all facts, events, or conditions that could lead
to any of the foregoing.
SECTION 5.12. Environmental Matters. The Borrower and the Guarantors
---------------------
will not, and will not permit any Third Party to,
38
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use, produce, manufacture, process, treat, recycle, generate, store, dispose of,
manage at, or otherwise handle, or ship or transport to or from the Properties
any Hazardous Materials except for Hazardous Materials such as cleaning
solvents, pesticides and other similar materials used, produced, manufactured,
processed, treated, recycled, generated, stored, disposed, managed, or otherwise
handled in minimal amounts in the ordinary course of business in compliance with
all applicable Environmental Requirements.
SECTION 5.13. Environmental Release. The Borrower and each Guarantor
---------------------
agrees that upon the occurrence of an Environmental Release at or on any of the
Properties it will act immediately to investigate the extent of, and to take
appropriate remedial action to eliminate, such Environmental Release, whether or
not ordered or otherwise directed to do so by any Environmental Authority.
SECTION 5.14. Transactions with Affiliates. Neither the Borrower nor
----------------------------
any of the Guarantors shall enter into, or be a party to, any transaction with
any Affiliate of the Borrower or such Guarantor (which Affiliate is not the
Borrower or a Guarantor), except as permitted by law and in the ordinary course
of business and pursuant to reasonable terms which are no less favorable to
Borrower or such Subsidiary than would be obtained in a comparable arm's length
transaction with a Person which is not an Affiliate.
SECTION 5.15. Restricted Payments. The Borrower's Restricted Payments
-------------------
in any calendar year shall not exceed 95% of Funds from Operations for such
period, unless the Borrower must pay out an amount in excess of 95% of Funds
from Operations to permit the Borrower to preserve its status as a real estate
investment trust under the applicable provision of the Code.
SECTION 5.16. Loans or Advances. Neither the Borrower nor any of the
-----------------
Guarantors shall make loans or advances to any Person except as permitted by
Section 5.17 and except:
(i) loans or advances to employees and directors not exceeding
$10,000,000 in the aggregate principal amount outstanding at any time;
(ii) deposits required by government agencies or public utilities;
(iii) loans or advances from the Borrower to a Guarantor or from a
Guarantor to the Borrower or another Guarantor; and/or
(iv) other loans and advances by the Borrower and the Guarantors to
any JDN Venture which (x) are evidenced by notes (and, if requested by the
Agent, acting at the direction of the Required Banks, with such notes,
together with any related
39
<PAGE>
mortgage, have been assigned to and pledged with the Agent, for the benefit
of itself and the Banks, as security for the payment of all obligations of
the Borrower to the Agent and the Banks hereunder) and (y) are in an amount
which, together with Investments permitted by clause (vi) of Section 5.17,
do not exceed 15% of Gross Asset Value as of the end of the most recent
Fiscal Quarter;
provided that after giving effect to the making of any loans, advances or
- --------
deposits permitted by this Section, and no Default shall be in existence or be
created thereby.
SECTION 5.17. Investments. Investments of the Borrower as of the
-----------
Closing Date (other than in Subsidiaries, which are set forth in Schedule 4.08),
are set forth on Schedule 5.17. Neither the Borrower nor any of the Guarantors
shall make Investments after the Closing Date in any Person except as permitted
by Section 5.16 and except Investments in:
(i) direct obligations of the United States Government maturing
within one year;
(ii) certificates of deposit issued by a commercial bank whose
credit is satisfactory to the Agent;
(iii) commercial paper rated A1 or the equivalent thereof by S&P or
P1 or the equivalent thereof by Moody's and in either case maturing within
6 months after the date of acquisition;
(iv) tender bonds the payment of the principal of and interest on
which is fully supported by a letter of credit issued by a United States
bank whose long-term certificates of deposit are rated at least AA or the
equivalent thereof by S&P and Aa or the equivalent thereof by Moody's,; and
(v) Investments consisting of the acquisition of all or
substantially all of the assets or stock of another Person permitted by
Section 5.05(iii); and/or
(vi) other Investments by the Borrower and the Guarantors in an
amount which, (x) together with loans and advances permitted by clause (iv)
of Section 5.16, do not exceed 15% of Gross Asset Value as of the end of
the most recent Fiscal Quarter, and (y) with respect to Investments in
Persons over which, after giving effect to such Investment, the Borrower or
the Guarantors do not have Control, do not exceed 5% of Gross Asset Value
as of the end of the most recent Fiscal Quarter;
provided, however, immediately after giving effect to the making of any
- -----------------
Investment, no Default shall have occurred and be continuing.
40
<PAGE>
SECTION 5.18. [Intentionally Deleted].
SECTION 5.19. Restrictions on Ability of Guarantors to Pay Dividends.
------------------------------------------------------
The Borrower shall not permit any Guarantor to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such Guarantor to (i) pay any dividends or
make any other distributions on its Capital Stock or any other interest or (ii)
make or repay any loans or advances to the Borrower or the parent of such
Guarantor.
SECTION 5.20. Ratio of Total Consolidated Liabilities to Gross Asset
------------------------------------------------------
Value. The ratio of Total Consolidated Liabilities to Gross Asset Value shall at
- -----
all times be equal to or less than 0.55 to 1.0.
SECTION 5.21. Ratio of Total Secured Debt to Gross Asset Value. The
------------------------------------------------
ratio of Total Secured Debt to Gross Asset Value shall at all times be equal to
or less than 0.40 to 1.0.
SECTION 5.22. Ratio of EBITDA to Consolidated Interest Expense. The
------------------------------------------------
ratio of EBITDA to Consolidated Interest Expense for the Fiscal Quarter just
ended and the 3 immediately preceding Fiscal Quarters will not be less than 2.0
to 1.00, calculated at the end of each Fiscal Quarter.
SECTION 5.23. Ratio of Unencumbered Assets to Unsecured Funded Debt.
-----------------------------------------------------
The ratio of Unencumbered Assets to Unsecured Funded Debt shall at all times be
equal to or greater than 1.75 to 1.00.
SECTION 5.24. Ratio of Unsecured Net Operating Income to Unsecured
----------------------------------------------------
Interest Expense. The ratio of Unsecured Net Operating Income to Unsecured
- ----------------
Interest Expense shall at all times be equal to or greater than 1.75 to 1.0.
SECTION 5.25. Guarantees. Neither the Borrower nor any Guarantor will
----------
create, assume or suffer to exist any Guarantees of Debt of other Persons,
except (i) Guarantees in existence on May 23, 1997 in the aggregate amount as of
February 17, 1999 of $__________ and set forth on Schedule 5.25, (ii) Guarantees
of Debt of the Borrower or other Guarantors and (iii) other Guarantees in an
aggregate amount not exceeding at any time 10% of Gross Asset Value as of the
last day of the Fiscal Quarter just ended.
SECTION 5.26. Additional Revolving Credit. Neither the Borrower nor
---------------------------
any Guarantor will create, assume or suffer to exist any Debt for money borrowed
pursuant to revolving credit arrangements, except (i) Debt under the Revolving
Credit Agreement and (ii) other Debt of such type not to exceed at any time a
maximum of $25,000,000 of principal and commitments.
41
<PAGE>
SECTION 5.27. Ownership. The Borrower shall at all times own 99% of
---------
the capital stock of JDN DCI.
SECTION 5.28. Status as a REIT. The Borrower shall at all times
----------------
maintain its status as a real estate investment trust under the Code.
SECTION 5.29. Guaranty by the Initial Guarantor; New Subsidiaries to
------------------------------------------------------
Become Guarantors. The Initial Guarantor shall become a Guarantor on the
- -----------------
Closing Date, as contemplated in Section 3.01. Any Subsidiary acquired or
created after the Closing Date, must become a Guarantor promptly upon becoming a
Significant Subsidiary, in each case by (x) executing and delivering to the
Agent a counterpart of the Guaranty and a counterpart of the Contribution
Agreement (which the Borrower agrees to execute when the Initial Guarantor
executes it), thereby becoming a party to each of them, (y) delivering to the
Agent an opinion of counsel to such Subsidiary, in substantially the form and
substance of Exhibit B, but limited to such Subsidiary and the Guaranty and
---------
Contribution Agreement, and excluding paragraph 2 thereof, and (z) delivering to
the Agent documents pertaining to the Subsidiary reasonably requested by the
Agent of the types described in paragraph (f) of Section 3.01, but relating to
the Guaranty and the Contribution Agreement.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
-----------------
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Loan
or shall fail to pay any interest on any Loan within 5 Domestic Business
Days after such interest shall become due, or shall fail to pay any fee or
other amount payable hereunder within 5 Domestic Business Days after such
fee or other amount becomes due; or
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.01(e), 5.01(i), 5.02(ii), 5.03 through 5.06,
inclusive, or Sections 5.17 through 5.29, inclusive; or
(c) the Borrower or any Guarantor shall fail to observe or perform
any covenant or agreement contained or incorporated by reference in this
Agreement (other than those covered by paragraph (a) or (b) above) or the
Guaranty and such failure shall not have been cured within 30 days after
the earlier to occur of (i) written notice thereof has been given to the
Borrower or such Guarantor by the Agent at the request of any
42
<PAGE>
Bank or (ii) the Borrower or such Guarantor otherwise becomes aware of any
such failure; or
(d) any representation, warranty, certification or statement made by
the Borrower or any Guarantor in Article IV of this Agreement or the
Guaranty or in any certificate, financial statement or other document
delivered pursuant to this Agreement or the Guaranty shall prove to have
been incorrect or misleading in any material respect when made (or deemed
made); or
(e) the Borrower or any Guarantor shall fail to make any payment in
respect of Debt in an aggregate principal amount outstanding in excess of
$5,000,000 (other than the Term Notes) when due or within any applicable
grace period; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of Debt in an aggregate principal amount
outstanding in excess of $5,000,000 of the Borrower or any Guarantor
(including, without limitation, any required mandatory prepayment or "put"
of such Debt to the Borrower or any Guarantor) or enables (or, with the
giving of notice or lapse of time or both, would enable) the holders of
such Debt or commitment or any Person acting on such holders' behalf to
accelerate the maturity thereof or terminate any such commitment
(including, without limitation, any required mandatory prepayment or "put"
of such Debt to the Borrower or any Guarantor); provided, however, that
-------- -------
there shall be excluded from the foregoing any Non-Recourse Mortgage Debt
which, on a cumulative basis since May 23, 1997, together with Non-Recourse
Mortgage Debt of JDN Ventures permitted by the proviso in paragraph (g)
below, does not exceed $20,000,000 in aggregate principal amount; or
(g) failure of any JDN Venture to make any payment when due,
including payment of principal or interest (whether by acceleration or
otherwise), on any obligation of such JDN Venture, the aggregate
outstanding principal amount of which (whether or not then due) exceeds
$5,000,000, or there shall occur any event or condition which results in
the acceleration of the maturity of such obligation (including, without
limitation, any required mandatory prepayment of "put" to such JDN Venture
or to the Borrower or any Guarantor) or the termination of any commitment
pertaining thereto; provided, however, that there shall be excluded from
-------- -------
the foregoing any Non-Recourse Mortgage Debt which, on a cumulative basis
since May 23, 1997, together with Non-Recourse Mortgage Debt of the
Borrower and the Guarantors permitted by the proviso in paragraph (f)
above, does not exceed $20,000,000 in aggregate principal amount; or
43
<PAGE>
(h) the Borrower or any Guarantor shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally,
or shall admit in writing its inability, to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;
or
(i) an involuntary case or other proceeding shall be commenced
against the Borrower or any Guarantor seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days; or an order for relief shall be entered against
the Borrower or any Guarantor under the federal bankruptcy laws as now or
hereafter in effect; or
(j) the Borrower or any member of the Controlled Group shall fail to
pay when due any material amount which it shall have become liable to pay
to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans shall be filed under Title IV of ERISA by the
Borrower, any member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c)(5) of
ERISA and such proceeding shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must
be terminated;
(k) one or more judgments or orders for the payment of money in an
aggregate amount in excess of $5,000,000 shall be rendered against the
Borrower or any Guarantor and such judgment or order shall continue
unsatisfied and unstayed for a period of 30 days; or
(l) a federal tax lien shall be filed against the Borrower or any
Guarantor under Section 6323 of the Code or a
44
<PAGE>
lien of the PBGC shall be filed against the Borrower or any Subsidiary
under Section 4068 of ERISA and in either case such lien shall remain
undischarged for a period of 25 days after the date of filing; or
(m) (i) any Person or two or more Persons acting in concert, other
than J. Donald Nichols, Elizabeth L. Nichols or their immediate family
members, or trusts or other entities established for the benefit of any of
them, shall have acquired beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 20% or more of the outstanding shares of the
voting stock of the Borrower; or (ii) as of any date a majority of the
Board of Directors of the Borrower consists of individuals who were not
either (A) directors of the Borrower as of the corresponding date of the
previous year, (B) selected or nominated to become directors by the Board
of Directors of the Borrower of which a majority consisted of individuals
described in clause (A), or (C) selected or nominated to become directors
by the Board of Directors of the Borrower of which a majority consisted of
individuals described in clause (A) and individuals described in clause
(B); or
(n) the occurrence of any event, act, occurrence, or condition which
the Required Banks determine has caused a Material Adverse Effect.
then, and in every such event, the Agent shall, if requested by the Required
Banks, by notice to the Borrower declare the Term Notes (together with accrued
interest thereon), and all other amounts payable hereunder and under the other
Loan Documents, to be, and the Term Notes (together with accrued interest
thereon), and all other amounts payable hereunder and under the other Loan
Documents shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower together with interest at the Default Rate
accruing on the principal amount thereof from and after the date of such Event
of Default; provided that if any Event of Default specified in paragraph (h) or
--------
(i) above occurs with respect to the Borrower, without any notice to the
Borrower or any other act by the Agent or the Banks, the Term Notes (together
with accrued interest thereon) and all other amounts payable hereunder and under
the other Loan Documents shall automatically and without notice become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower together with
interest thereon at the Default Rate accruing on the principal amount thereof
from and after the date of such Event of Default. Notwithstanding the
foregoing, the Agent shall have available to it all other remedies at law or
equity, and shall exercise any one or all of them at the request of the Required
Banks. Following acceleration of the Term
45
<PAGE>
Notes by the Agent, nothing contained in this Agreement shall limit the right of
a Bank from initiating or conducting any litigation or collection proceedings,
or from exercising any other rights or remedies, with respect to the Term Note
on which it is named as payee.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
-----------------
Borrower of any Default under Section 6.01(c) promptly upon being requested to
do so by any Bank and shall thereupon notify all the Banks thereof.
46
<PAGE>
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment; Powers and Immunities. Each Bank hereby
----------------------------------
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Loan Documents with such powers as are specifically delegated to
the Agent by the terms hereof and thereof, together with such other powers as
are reasonably incidental thereto. The Agent: (a) shall have no duties or
responsibilities except as expressly set forth in this Agreement and the other
Loan Documents, and shall not by reason of this Agreement or any other Loan
Document be a trustee for any Bank; (b) shall not be responsible to the Banks
for any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any Bank under, this Agreement or
any other Loan Document, or for the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
any other document referred to or provided for herein or therein or for any
failure by the Borrower to perform any of its obligations hereunder or
thereunder; (c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or under any other Loan Document except to the
extent requested by the Required Banks, and (d) shall not be responsible for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document or any other document or instrument referred to or provided for herein
or therein or in connection herewith or therewith, except for its own gross
negligence or wilful misconduct. The Agent may employ agents and attorneys-in-
fact and shall not be responsible for the negligence or misconduct of any such
agents or attorneys-in-fact selected by it with reasonable care. The
provisions of this Article VII are solely for the benefit of the Agent and the
Banks, and the Borrower shall not have any rights as a third party beneficiary
of any of the provisions hereof. In performing its functions and duties under
this Agreement and under the other Loan Documents, the Agent shall act solely as
agent of the Banks and does not assume and shall not be deemed to have assumed
any obligation towards or relationship of agency or trust with or for the
Borrower. The duties of the Agent shall be ministerial and administrative in
nature, and the Agent shall not have by reason of this Agreement or any other
Loan Document a fiduciary relationship in respect of any Bank.
SECTION 7.02. Reliance by Agent. The Agent shall be entitled to rely
-----------------
upon any certification, notice or other communication (including any thereof by
telephone, telecopier, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants or other experts selected by the Agent. As
47
<PAGE>
to any matters not expressly provided for by this Agreement or any other Loan
Document, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder and thereunder in accordance with instructions
signed by the Required Banks, and such instructions of the Required Banks in any
action taken or failure to act pursuant thereto shall be binding on all of the
Banks.
SECTION 7.03. Defaults. The Agent shall not be deemed to have
--------
knowledge of the occurrence of a Default or an Event of Default (other than the
nonpayment of principal of or interest on the Loans) unless the Agent has
received notice from a Bank or the Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event
that the Agent receives such a notice of the occurrence of a Default or an Event
of Default, the Agent shall give prompt notice thereof to the Banks. The Agent
shall give each Bank prompt notice of each nonpayment of principal of or
interest on the Loans whether or not it has received any notice of the
occurrence of such nonpayment. The Agent shall (subject to Section 9.06) take
such action hereunder with respect to such Default or Event of Default as shall
be directed by the Required Banks, provided that, unless and until the Agent
--------
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Banks.
SECTION 7.04. Rights of Agent and its Affiliates as a Bank. With
--------------------------------------------
respect to the Loans made by the Agent and any Affiliate of the Agent, Wachovia
in its capacity as a Bank hereunder and any Affiliate of the Agent or such
Affiliate in its capacity as a Bank hereunder shall have the same rights and
powers hereunder as any other Bank and may exercise the same as though Wachovia
were not acting as the Agent, and the term "Bank" or "Banks" shall, unless the
context otherwise indicates, include Wachovia in its individual capacity and any
Affiliate of the Agent in its individual capacity. The Agent and any Affiliate
of the Agent may (without having to account therefor to any Bank) accept
deposits from, lend money to and generally engage in any kind of banking, trust
or other business with the Borrower (and any of the Borrower's Affiliates) as if
Wachovia were not acting as the Agent, and the Agent and any Affiliate of the
Agent may accept fees and other consideration from the Borrower (in addition to
any agency fees and arrangement fees heretofore agreed to between the Borrower
and the Agent) for services in connection with this Agreement or any other Loan
Document or otherwise without having to account for the same to the Banks.
SECTION 7.05. Indemnification. Each Bank severally agrees to
---------------
indemnify the Agent, to the extent the Agent shall not have been reimbursed by
the Borrower, ratably in accordance with its Commitment, for any and all
liabilities, obligations, losses,
48
<PAGE>
damages, penalties, actions, judgments, suits, costs, expenses (including,
without limitation, counsel fees and disbursements) or disbursements of any kind
and nature whatsoever which may be imposed on, incurred by or asserted against
the Agent in any way relating to or arising out of this Agreement or any other
Loan Document or any other documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby (excluding, unless an
Event of Default has occurred and is continuing, the normal administrative out
of pocket costs and expenses incident to the performance of its agency duties
hereunder) or the enforcement of any of the terms hereof or thereof or any such
other documents; provided that no Bank shall be liable for any of the foregoing
--------
to the extent they arise from the negligence or wilful misconduct of the Agent.
SECTION 7.06 Consequential Damages. THE AGENT SHALL NOT BE
---------------------
RESPONSIBLE OR LIABLE TO ANY BANK, THE BORROWER OR ANY OTHER PERSON OR ENTITY
FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
SECTION 7.07. Payee of Term Note Treated as Owner. The Agent may deem
-----------------------------------
and treat the payee of any Term Note as the owner thereof for all purposes
hereof unless and until a written notice of the assignment or transfer thereof
shall have been filed with the Agent and the provisions of Section 9.08(c) have
been satisfied. Any requests, authority or consent of any Person who at the
time of making such request or giving such authority or consent is the holder of
any Term Note shall be conclusive and binding on any subsequent holder,
transferee or assignee of that Term Note or of any Term Note or Term Notes
issued in exchange therefor or replacement thereof.
SECTION 7.08. Nonreliance on Agent and Other Banks. Each Bank agrees
------------------------------------
that it has, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Borrower and decision to enter into this
Agreement and that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. The Agent shall not be required to keep itself (or any Bank)
informed as to the performance or observance by the Borrower of this Agreement
or any of the other Loan Documents or any other document referred to or provided
for herein or therein or to inspect the properties or books of the Borrower or
any other Person. Except for notices, reports and other documents and
information expressly required to be furnished to the Banks by the Agent
hereunder or under the other Loan Documents, the Agent shall not have any duty
or responsibility
49
<PAGE>
to provide any Bank with any credit or other information concerning the affairs,
financial condition or business of the Borrower or any other Person (or any of
their Affiliates) which may come into the possession of the Agent.
SECTION 7.09. Failure to Act. Except for action expressly required of
--------------
the Agent hereunder or under the other Loan Documents, the Agent shall in all
cases be fully justified in failing or refusing to act hereunder and thereunder
unless it shall receive further assurances to its satisfaction by the Banks of
their indemnification obligations under Section 7.05 against any and all
liability and expense which may be incurred by the Agent by reason of taking,
continuing to take, or failing to take any such action.
SECTION 7.10. Resignation or Removal of Agent. Subject to the
-------------------------------
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving notice thereof to the Banks and the Borrower and
the Agent may be removed at any time with or without cause by the Required
Banks. Upon any such resignation or removal, the Required Banks shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Required Banks and shall have accepted such appointment within
30 days after the retiring Agent's notice of resignation or the Required Banks'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent. Any successor Agent shall be a bank which
has a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article VII shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent
hereunder.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
-------------------------------------------------
Unfair. If on or prior to the first day of any Interest Period:
- ------
(a) the Agent determines that deposits in Dollars (in the applicable
amounts) are not being offered in the relevant market for such Interest
Period, or
50
<PAGE>
(b) the Required Banks advise the Agent that the London Interbank
Offered Rate as determined by the Agent will not adequately and fairly
reflect the cost to such Banks of funding the Euro-Dollar Loans for such
Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
Euro-Dollar Loans specified in such notice shall be suspended. Unless the
Borrower notifies the Agent at least 2 Domestic Business Days before the date of
any Borrowing of such Euro-Dollar Loans for which a Notice of Borrowing has
previously been given that it elects not to borrow on such date, such Borrowing
shall instead be made as a Base Rate Borrowing.
SECTION 8.02. Illegality. If, after the date hereof, the adoption of
----------
any applicable law, rule or regulation, or any change therein or any existing or
future law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof (any such
agency being referred to as an "Authority" and any such event being referred to
as a "Change of Law"), or compliance by any Bank (or its Lending Office) with
any request or directive (whether or not having the force of law) of any
Authority shall make it unlawful or impossible for any Bank (or its Lending
Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so
notify the Agent, the Agent shall forthwith give notice thereof to the other
Banks and the Borrower, whereupon until such Bank notifies the Borrower and the
Agent that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before
giving any notice to the Agent pursuant to this Section, such Bank shall
designate a different Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine that it may not
lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans
to maturity and shall so specify in such notice, the Borrower shall immediately
prepay in full the then outstanding principal amount of each Euro-Dollar Loan of
such Bank, together with accrued interest thereon and any amount due such Bank
pursuant to Section 8.05(a). Concurrently with prepaying each such Euro-Dollar
Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount
from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks), and
such Bank shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If after the
---------------------------------
date hereof, a Change of Law or compliance by any Bank
51
<PAGE>
(or its Lending Office) with any request or directive (whether or not having the
force of law) of any Authority:
(i) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding with respect to any Euro-Dollar Loan any such
requirement included in an applicable Euro-Dollar Reserve Percentage)
against assets of, deposits with or for the account of, or credit extended
by, any Bank (or its Lending Office); or
(ii) shall impose on any Bank (or its Lending Office) or on the United
States market for certificates of deposit or the London interbank market
any other condition affecting its Euro-Dollar Borrowings, its Term Notes or
its obligation to make Euro-Dollar Borrowings;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Loan, or to reduce the amount
of any sum received or receivable by such Bank (or its Lending Office) under
this Agreement or under its Term Notes with respect thereto, by an amount deemed
by such Bank to be material, then, within 15 days after demand by such Bank
(with a copy to the Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such increased cost or
reduction.
(b) If any Bank shall have determined that after the date hereof the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof, or compliance by any Bank (or its Lending Office) with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any Authority, has or would have the effect of reducing the rate of return on
such Bank's capital as a consequence of its obligations hereunder to a level
below that which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within 15 days after demand by such Bank, the Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank for
such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the
52
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additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
(d) The provisions of this Section 8.03 shall be applicable with
respect to any Participant, Assignee or other Transferee, and any calculations
required by such provisions shall be made based upon the circumstances of such
Participant, Assignee or other Transferee.
SECTION 8.04. Base Rate Loans Substituted for Euro-Dollar Loans. If
-------------------------------------------------
(i) the obligation of any Bank to make or maintain any Euro-Dollar Loans has
been suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03, and the Borrower shall, by at least 5 Euro-
Dollar Business Days' prior notice to such Bank through the Agent, have elected
that the provisions of this Section shall apply to such Bank, then, unless and
until such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank as Euro-
Dollar Loans shall be made instead as Base Rate Loans (in all cases
interest and principal on such Loans shall be payable contemporaneously
with the related Euro-Dollar Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all payments
of principal which would otherwise be applied to repay such Euro-Dollar
Loans shall be applied to repay its Base Rate Loans instead.
SECTION 8.05. Compensation. Upon the request of any Bank, delivered
------------
to the Borrower and the Agent, the Borrower shall pay to such Bank such amount
or amounts as shall compensate such Bank for any loss, cost or expense incurred
by such Bank as a result of:
(a) any payment or prepayment (pursuant to Section 2.06, 6.01, 8.02
or otherwise) of a Euro-Dollar Borrowing on a date other than the last day of an
Interest Period for such Loan; or
(b) any failure by the Borrower to prepay a Euro-Dollar Borrowing on
the date for such prepayment specified in the relevant notice of prepayment
hereunder; or
(c) any failure by the Borrower to borrow a Euro-Dollar Borrowing on
the date for the Euro-Dollar Borrowing of which such Euro-Dollar Borrowing is a
part specified in the applicable Notice of Borrowing delivered pursuant to
Section 2.02;
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such compensation to include, without limitation, if such Euro-Dollar Borrowing
is a Euro-Dollar Loan, an amount equal to the excess, if any, of (x) the amount
of interest which would have accrued on the amount so paid or prepaid or not
prepaid or borrowed for the period from the date of such payment, prepayment or
failure to prepay or borrow to the last day of the then current Interest Period
for such Euro-Dollar Borrowing (or, in the case of a failure to prepay or
borrow, the Interest Period for such Euro-Dollar Borrowing which would have
commenced on the date of such failure to prepay or borrow) at the applicable
rate of interest for such Euro-Dollar Borrowing provided for herein over (y) the
amount of interest (as reasonably determined by such Bank) such Bank would have
paid on deposits in Dollars of comparable amounts having terms comparable to
such period placed with it by leading banks in the London interbank market.
ARTICLE IX
MISCELLANEOUS
-------------
SECTION 9.01. Notices. All notices, requests and other communications
-------
to any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address or telecopier number
set forth on the signature pages hereof or such other address or telecopier
number as such party may hereafter specify for the purpose by notice to each
other party. Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in this Section and the confirmation is received,
(ii) if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (iii) if given
by any other means, when delivered at the address specified in this Section;
provided that notices to the Agent under Article II or Article VIII shall not be
- --------
effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any
----------
Bank in exercising any right, power or privilege hereunder or under any Term
Note or other Loan Document shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes. The Borrower shall pay (i)
---------------------------
all out-of-pocket expenses of the Agent, including fees and disbursements of
special counsel for the Agent, in connection with the preparation of this
Agreement and the other Loan Documents, any waiver or consent hereunder or
thereunder or any amendment hereof or thereof or any Default or alleged Default
hereunder or thereunder and (ii) if a Default occurs, all
54
<PAGE>
out-of-pocket expenses incurred by the Agent and the Banks, including fees and
disbursements of counsel, in connection with such Default and collection and
other enforcement proceedings resulting therefrom, including out-of-pocket
expenses incurred in enforcing this Agreement and the other Loan Documents. The
Borrower shall indemnify the Agent and each Bank against any transfer taxes,
documentary taxes, assessments or charges made by any Authority by reason of the
execution and delivery of this Agreement or the other Loan Documents.
SECTION 9.04. Indemnification. The Borrower shall indemnify the
---------------
Agent, the Banks and each Affiliate thereof and their respective directors,
officers, employees and agents from, and hold each of them harmless against, any
and all losses, liabilities, claims or damages to which any of them may become
subject, insofar as such losses, liabilities, claims or damages arise out of or
result from any actual or proposed use by the Borrower of the proceeds of any
extension of credit by any Bank hereunder or breach by the Borrower of this
Agreement or any other Loan Document or from any investigation, litigation
(including, without limitation, any actions taken by the Agent or any of the
Banks to enforce this Agreement or any of the other Loan Documents) or other
proceeding (including, without limitation, any threatened investigation or
proceeding) relating to the foregoing, and the Borrower shall reimburse the
Agent and each Bank, and each Affiliate thereof and their respective directors,
officers, employees and agents, upon demand for any expenses (including, without
limitation, legal fees) incurred in connection with any such investigation or
proceeding; but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or wilful misconduct of the
Person to be indemnified.
SECTION 9.05. Setoff; Sharing of Setoffs. (a) The Borrower hereby
--------------------------
grants to the Agent and each Bank a lien for all indebtedness and obligations
owing to them from the Borrower upon all deposits or deposit accounts, of any
kind, or any interest in any deposits or deposit accounts thereof, now or
hereafter pledged, mortgaged, transferred or assigned to the Agent or any such
Bank or otherwise in the possession or control of the Agent or any such Bank for
any purpose for the account or benefit of the Borrower and including any balance
of any deposit account or of any credit of the Borrower with the Agent or any
such Bank, whether now existing or hereafter established hereby authorizing the
Agent and each Bank at any time or times with or without prior notice to apply
such balances or any part thereof to such of the indebtedness and obligations
owing by the Borrower to the Banks and/or the Agent then past due and in such
amounts as they may elect, and whether or not the collateral, if any, or the
responsibility of other Persons primarily, secondarily or otherwise liable may
be deemed adequate. For the purposes of this paragraph, all remittances and
property shall be deemed to be in the possession of the Agent or any such
55
<PAGE>
Bank as soon as the same may be put in transit to it by mail or carrier or by
other bailee.
(b) Each Bank agrees that if it shall, by exercising any right of
setoff or counterclaim or resort to collateral security or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest owing
with respect to the Term Note held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of all principal
and interest owing with respect to the Term Note held by such other Bank, the
Bank receiving such proportionately greater payment shall purchase such
participations in the Term Notes held by the other Banks owing to such other
Banks, and such other adjustments shall be made, as may be required so that all
such payments of principal and interest with respect to the Term Notes held by
the Banks owing to such other Banks shall be shared by the Banks pro rata;
provided that (i) nothing in this Section shall impair the right of any Bank to
- --------
exercise any right of setoff or counterclaim it may have and to apply the amount
subject to such exercise to the payment of indebtedness of the Borrower other
than its indebtedness under the Term Notes, and (ii) if all or any portion of
such payment received by the purchasing Bank is thereafter recovered from such
purchasing Bank, such purchase from each other Bank shall be rescinded and such
other Bank shall repay to the purchasing Bank the purchase price of such
participation to the extent of such recovery together with an amount equal to
such other Bank's ratable share (according to the proportion of (x) the amount
of such other Bank's required repayment to (y) the total amount so recovered
from the purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Term Note, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights of setoff or
counterclaim and other rights with respect to such participation as fully as if
such holder of a participation were a direct creditor of the Borrower in the
amount of such participation.
SECTION 9.06. Amendments and Waivers. (a) Any provision of this
----------------------
Agreement, the Term Notes or any other Loan Documents may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Borrower and the Required Banks (and, if the rights or duties of the Agent are
affected thereby, by the Agent); provided that, unless signed by all Banks, no
--------
such amendment or waiver shall, unless signed by all Banks, (i) change the
Commitment of any Bank or subject any Bank to any additional obligation, (ii)
change the principal of or rate of interest on any Loan or any fees (other than
fees payable to the Agent) hereunder, (iii) change the date fixed for any
payment of principal of or interest on any Loan or any fees hereunder, (iv)
change the amount of principal, interest or fees due on any date fixed for the
payment thereof, (v) change the percentage of the Commitments or of
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<PAGE>
the aggregate unpaid principal amount of the Term Notes, or the percentage of
Banks, which shall be required for the Banks or any of them to take any action
under this Section or any other provision of this Agreement, (vi) change the
manner of application of any payments made under this Agreement or the Term
Notes, (vii) release or substitute all or any substantial part of the collateral
(if any) held as security for the Loans, or (viii) release any Guarantee given
to support payment of the Loans, or (ix) change the definition of "Borrowing
Base".
(b) The Borrower will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement except through the Agent, unless each Bank shall be informed thereof
by the Borrower and shall be afforded an opportunity of considering the same and
shall be supplied by the Borrower with sufficient information to enable it to
make an informed decision with respect thereto. Executed or true and correct
copies of any waiver or consent effected pursuant to the provisions of this
Agreement shall be delivered by the Borrower to each Bank forthwith following
the date on which the same shall have been executed and delivered by the
requisite percentage of Banks. The Borrower will not, directly or indirectly,
pay or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, to any Bank (in its capacity as such) as
consideration for or as an inducement to the entering into by such Bank of any
waiver or amendment of any of the terms and provisions of this Agreement unless
such remuneration is concurrently paid, on the same terms, ratably to all such
Banks.
SECTION 9.07. No Margin Stock Collateral. Each of the Banks
--------------------------
represents to the Agent and each of the other Banks that it in good faith is
not, directly or indirectly (by negative pledge or otherwise), relying upon any
Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 9.08. Successors and Assigns. (a) The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that the Borrower may not
--------
assign or otherwise transfer any of its rights under this Agreement.
(b) Any Bank may at any time sell to one or more Persons (each a
"Participant") participating interests in any Loan owing to such Bank, any Term
Note held by such Bank, any Commitment hereunder or any other interest of such
Bank hereunder. In the event of any such sale by a Bank of a participating
interest to a Participant, such Bank's obligations under this Agreement shall
remain unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such Term Note for all
purposes under this Agreement, and the Borrower
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<PAGE>
and the Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement. In no
event shall a Bank that sells a participation be obligated to the Participant to
take or refrain from taking any action hereunder except that such Bank may agree
that it will not (except as provided below), without the consent of the
Participant, agree to (i) the change of any date fixed for the payment of
principal of or interest on the related loan or loans, (ii) the change of the
amount of any principal, interest or fees due on any date fixed for the payment
thereof with respect to the related loan or loans, (iii) the change of the
principal of the related loan or loans, (iv) any change in the rate at which
either interest is payable thereon or (if the Participant is entitled to any
part thereof) fee is payable hereunder from the rate at which the Participant is
entitled to receive interest or fee (as the case may be) in respect of such
participation, (v) the release or substitution of all or any substantial part of
the collateral (if any) held as security for the Loans, or (vi) the release of
any Guarantee given to support payment of the Loans. Each Bank selling a
participating interest in any Loan, Term Note, Commitment or other interest
under this Agreement shall, within 10 Domestic Business Days of such sale,
provide the Borrower and the Agent with written notification stating that such
sale has occurred and identifying the Participant and the interest purchased by
such Participant. The Borrower agrees that each Participant shall be entitled to
the benefits of Article VIII with respect to its participation in Loans
outstanding from time to time.
(c) Any Bank may at any time assign to one or more banks or financial
institutions (each an "Assignee") all or a proportionate part of its rights and
obligations under this Agreement, the Term Notes and the other Loan Documents,
and such Assignee shall assume all such rights and obligations, pursuant to an
Assignment and Acceptance, executed by such Assignee, such transferor Bank and
the Agent (and, in the case of an Assignee that is not then a Bank, subject to
clause (iii) below, by the Borrower); provided that (i) no interest may be sold
--------
by a Bank pursuant to this paragraph (c) unless the Assignee shall agree to
assume ratably equivalent portions of the transferor Bank's Commitment, (ii) if
a Bank is assigning only a portion of its Commitment, then, the amount of the
Commitment being assigned (determined as of the effective date of the
assignment) shall be in an amount not less than $5,000,000, (iii) except during
the continuance of a Default, no interest may be sold by a Bank pursuant to this
paragraph (c) to any Assignee that is not then a Bank (or an Affiliate of a
Bank) without the consent of the Borrower and the Agent, which consent shall not
be unreasonably withheld, and (iv) a Bank may not have more than 3 Assignees
that are not then Banks at any one time. Upon (A) execution of the Assignment
and Acceptance by such transferor Bank, such Assignee, the Agent and (if
applicable) the Borrower, (B) delivery of an executed copy of the Assignment and
Acceptance to the Borrower and
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the Agent, (C) payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such transferor Bank and such
Assignee, and (D) payment to the Agent of a processing and recordation fee in
the amount of (x) $1,500, in the case of an assignment to Bank or an Affiliate
thereof, and (y) $3,500, in the case of any other assignment, such Assignee
shall for all purposes be a Bank party to this Agreement and shall have all the
rights and obligations of a Bank under this Agreement to the same extent as if
it were an original party hereto with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by the Borrower, the Banks or the Agent shall be required. Upon the
consummation of any transfer to an Assignee pursuant to this paragraph (c), the
transferor Bank, the Agent and the Borrower shall make appropriate arrangements
so that, if required, a new Term Note is issued to each of such Assignee and
such transferor Bank.
(d) Subject to the provisions of Section 9.09, the Borrower
authorizes each Bank to disclose to any Participant, Assignee or other
transferee (each a "Transferee") and any prospective Transferee any and all
financial information in such Bank's possession concerning the Borrower which
has been delivered to such Bank by the Borrower pursuant to this Agreement or
which has been delivered to such Bank by the Borrower in connection with such
Bank's credit evaluation prior to entering into this Agreement.
(e) No Transferee shall be entitled to receive any greater payment
under Section 8.03 than the transferor Bank would have been entitled to receive
with respect to the rights transferred, unless such transfer is made with the
Borrower's prior written consent or by reason of the provisions of Section 8.02
or 8.03 requiring such Bank to designate a different Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
(f) Anything in this Section 9.08 to the contrary notwithstanding,
any Bank may assign and pledge all or any portion of the Loans and/or
obligations owing to it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such assigned
--------
Loans and/or obligations made by the Borrower to the assigning and/or pledging
Bank in accordance with the terms of this Agreement shall satisfy the Borrower's
obligations hereunder in respect of such assigned Loans and/or obligations to
the extent of such payment. No such assignment shall release the assigning
and/or pledging Bank from its obligations hereunder.
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<PAGE>
SECTION 9.09. Confidentiality. Each Bank agrees to exercise
---------------
commercially reasonable efforts to keep any information delivered or made
available by the Borrower to it which is clearly indicated to be confidential
information, confidential from anyone other than persons employed or retained by
such Bank who are or are expected to become engaged in evaluating, approving,
structuring or administering the Loans; provided that nothing herein shall
--------
prevent any Bank from disclosing such information (i) to any other Bank, (ii)
upon the order of any court or administrative agency, (iii) upon the request or
demand of any regulatory agency or authority having jurisdiction over such Bank,
(iv) which has been publicly disclosed, (v) to the extent reasonably required in
connection with any litigation to which the Agent, any Bank or their respective
Affiliates may be a party, (vi) to the extent reasonably required in connection
with the exercise of any remedy hereunder, (vii) to such Bank's legal counsel
and independent auditors, and (viii) to any actual or proposed Participant,
Assignee or other Transferee of all or part of its rights hereunder which has
agreed in writing to be bound by the provisions of this Section 9.09; provided
--------
that should disclosure of any such confidential information be required by
virtue of clause (ii) of the immediately preceding sentence, to the extent
permitted by law, any relevant Bank shall promptly notify the Borrower of same
so as to allow the Borrower to seek a protective order or to take any other
appropriate action; provided, further, that, no Bank shall be required to delay
-------- ------- ----
compliance with any directive to disclose any such information so as to allow
the Borrower to effect any such action.
SECTION 9.10. Representation by Banks. Each Bank hereby represents
-----------------------
that it is a commercial lender or financial institution which makes loans in the
ordinary course of its business and that it will make its Loans hereunder for
its own account in the ordinary course of such business; provided that, subject
--------
to Section 9.08, the disposition of the Term Note or Term Notes held by that
Bank shall at all times be within its exclusive control.
SECTION 9.11. Obligations Several. The obligations of each Bank
-------------------
hereunder are several, and no Bank shall be responsible for the obligations or
commitment of any other Bank hereunder. Nothing contained in this Agreement and
no action taken by the Banks pursuant hereto shall be deemed to constitute the
Banks to be a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Bank shall be a
separate and independent debt, and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement or any other Loan Document and
it shall not be necessary for any other Bank to be joined as an additional party
in any proceeding for such purpose.
SECTION 9.12. Georgia Law. This Agreement and each Term Note shall be
-----------
construed in accordance with and governed by the law of the State of Georgia.
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SECTION 9.13. Severability. In case any one or more of the provisions
------------
contained in this Agreement, the Term Notes or any of the other Loan Documents
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby and shall be
enforced to the greatest extent permitted by law.
SECTION 9.14. Interest. In no event shall the amount of interest, and
--------
all charges, amounts or fees contracted for, charged or collected pursuant to
this Agreement, the Term Notes or the other Loan Documents and deemed to be
interest under applicable law (collectively, "Interest") exceed the highest rate
of interest allowed by applicable law (the "Maximum Rate"), and in the event any
such payment is inadvertently received by any Bank, then the excess sum (the
"Excess") shall be credited as a payment of principal, unless the Borrower shall
notify such Bank in writing that it elects to have the Excess returned
forthwith. It is the express intent hereof that the Borrower not pay and the
Banks not receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may legally be paid by the Borrower under applicable law.
The right to accelerate maturity of any of the Loans does not include the right
to accelerate any interest that has not otherwise accrued on the date of such
acceleration, and the Agent and the Banks do not intend to collect any unearned
interest in the event of any such acceleration. All monies paid to the Agent or
the Banks hereunder or under any of the Term Notes or the other Loan Documents,
whether at maturity or by prepayment, shall be subject to rebate of unearned
interest as and to the extent required by applicable law. By the execution of
this Agreement, the Borrower covenants, to the fullest extent permitted by law,
that (i) the credit or return of any Excess shall constitute the acceptance by
the Borrower of such Excess, and (ii) the Borrower shall not seek or pursue any
other remedy, legal or equitable , against the Agent or any Bank, based in whole
or in part upon contracting for charging or receiving any Interest in excess of
the Maximum Rate. For the purpose of determining whether or not any Excess has
been contracted for, charged or received by the Agent or any Bank, all interest
at any time contracted for, charged or received from the Borrower in connection
with this Agreement, the Term Notes or any of the other Loan Documents shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread in equal parts throughout the full term of the Commitments. The
Borrower, the Agent and each Bank shall, to the maximum extent permitted under
applicable law, (i) characterize any non-principal payment as an expense, fee or
premium rather than as Interest and (ii) exclude voluntary prepayments and the
effects thereof. The provisions of this Section shall be deemed to be
incorporated into each Term Note and each of the other Loan Documents (whether
or not any provision of this Section is referred to therein). All such Loan
Documents and communications relating to any Interest owed by the Borrower and
all figures set forth therein shall, for the sole
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purpose of computing the extent of obligations hereunder and under the Term
Notes and the other Loan Documents be automatically recomputed by the Borrower,
and by any court considering the same, to give effect to the adjustments or
credits required by this Section.
SECTION 9.15. Interpretation. No provision of this Agreement or any
--------------
of the other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction. The
---------------------------------------------
Borrower (a) and each of the Banks and the Agent irrevocably waives, to the
fullest extent permitted by law, any and all right to trial by jury in any legal
proceeding arising out of this Agreement, any of the other Loan Documents, or
any of the transactions contemplated hereby or thereby, (b) submits to the
nonexclusive personal jurisdiction in the State of Georgia, the courts thereof
and the United States District Courts sitting therein, for the enforcement of
this Agreement, the Term Notes and the other Loan Documents, (c) waives any and
all personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
within the State of Georgia for the purpose of litigation to enforce this
Agreement, the Term Notes or the other Loan Documents, and (d) agrees that
service of process may be made upon it in the manner prescribed in Section 9.01
for the giving of notice to the Borrower. Nothing herein contained, however,
shall prevent the Agent from bringing any action or exercising any rights
against any security and against the Borrower personally, and against any assets
of the Borrower, within any other state or jurisdiction.
SECTION 9.17. Counterparts. This Agreement may be signed in any
------------
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
SECTION 9.18. Source of Funds -- ERISA. Each of the Banks hereby
------------------------
severally (and not jointly) represents to the Borrower that no part of the funds
to be used by such Bank to fund the Loans hereunder from time to time
constitutes (i) assets allocated to any separate account maintained by such Bank
in which any employee benefit plan (or its related trust) has any interest nor
(ii) any other assets of any employee benefit plan. As used in this Section,
the terms "employee benefit plan" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, under seal, by their respective authorized officers as of the
day and year first above written.
JDN REALTY CORPORATION (SEAL)
By:________________________________________
Title:
JDN Realty Corporation
359 East Paces Ferry Road
Suite 400
Atlanta, Georgia 30305
Attention: William J. Kerley
Chief Financial Officer
Telecopier number: 404-364-6444
Confirmation number: 404-262-3252
63
<PAGE>
COMMITMENTS WACHOVIA BANK, N.A., as Agent and
- -----------
as a Bank (SEAL)
$25,000,000 By:__________________________________________
Title:
Lending Office
--------------
Wachovia Bank, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Syndications Group
Telecopier number: 404-332-4005
Confirmation number: 404-332-6971
64
<PAGE>
COMMERZBANK, A.G., ATLANTA AGENCY
(SEAL)
$20,000,000 By:______________________________________
Title:
By:______________________________________
Title:
Lending Office
--------------
Commerzbank, A.G., New York Branch
2 World Financial Center
New York, New York 10281
Attention: Mr. Douglas P. Traynor
Telecopier number: 212-266-7565
Confirmation number: 212-266-7569
65
<PAGE>
BANKERS TRUST COMPANY (SEAL)
$15,000,000 By:______________________________________
Title:
Lending Office
--------------
Bankers Trust Company
130 Liberty Street, 25th Floor
New York, New York 10017
Attention: Mr. Jeffrey Baevsky
Telecopier number: 212-669-0764
Confirmation number: 212-250-4466
66
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
(SEAL)
$15,000,000 By:______________________________________
Title:
Lending Office
--------------
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Mail Stop P1-POPP-19-2
Pittsburgh, Pennsylvania 15222
Attention: Wayne Robertson
Real Estate Banking
Telecopier number: 412-762-6500
Confirmation number: 412-762-8452
67
<PAGE>
THE BANK OF NOVA SCOTIA (SEAL)
$15,000,000 By:______________________________________
Title:
Lending Office
--------------
Bank of Nova Scotia
The Bank of Nova Scotia
One Liberty Plaza
New York, New York 10006
Attention: Mr. Nick Voulgaris
Telecopier number: 212-225-5166
Confirmation number: 212-225-5157
68
<PAGE>
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
$10,000,000 By:______________________________________
Title:
Lending Office
--------------
701 Market Street
Chattanooga, TN 37402
Attention: Mr. Timothy L. Collins
Telecopier number: 423-757-4040
Confirmation number: 423-757-4205
TOTAL COMMITMENTS:
$100,000,000
69
<PAGE>
EXHIBIT A
---------
Term Note
Atlanta, Georgia
February 17, 1999
For value received, JDN REALTY CORPORATION, a Maryland corporation
(the "Borrower"), promises to pay to the order of
__________________________________________________, a ____________________ (the
"Bank"), for the account of its Lending Office, the principal sum of
___________________________________ AND NO/100 DOLLARS ($____________), or such
lesser amount as shall equal the unpaid principal amount of each Loan made by
the Bank to the Borrower pursuant to the Credit Agreement referred to below, on
the dates and in the amounts provided in the Credit Agreement. The Borrower
promises to pay interest on the unpaid principal amount of this Term Note on the
dates and at the rate or rates provided for in the Credit Agreement. Interest
on any overdue principal of and, to the extent permitted by law, overdue
interest on the principal amount hereof shall bear interest at the Default Rate,
as provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Wachovia Bank, N.A., 191 Peachtree
Street, N.E., Atlanta, Georgia 30303-1757, or such other address as may be
specified from time to time pursuant to the Credit Agreement.
All Loans made by the Bank, the respective maturities thereof, the
interest rates from time to time applicable thereto, and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
--------
the failure of the Bank to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Credit Agreement.
This Term Note is one of the Term Notes referred to in the Term Loan
Credit Agreement dated as of February 17, 1999 among the Borrower, the Banks
listed on the signature pages thereof, Wachovia Bank, N.A., as Agent and PNC
Bank, National Association, as Documentation Agent (as the same may be amended
and modified from time to time, the "Credit Agreement"). Reference is made to
the Credit Agreement for provisions for the optional and mandatory prepayment
and the repayment hereof and the acceleration of the maturity hereof, as well as
the obligation of the Borrower to pay all costs of collection, including
reasonable attorneys fees, in
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<PAGE>
the event this Term Note is collected by law or through an attorney at law.
The Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Term Note to be duly
executed, under seal, by its duly authorized officer as of the day and year
first above written.
JDN REALTY CORPORATION (SEAL)
By:______________________________________
Title:
71
<PAGE>
Term Note (cont'd)
Loans AND PAYMENTS OF PRINCIPAL
- ----------------------------------------------------------------
Base Rate Amount Amount of
or Euro- of Principal Maturity Notation
Date Dollar Loan Loan Repaid Date Made By
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
72
<PAGE>
EXHIBIT B
---------
OPINION OF
COUNSEL FOR THE BORROWER AND THE INITIAL GUARANTOR
--------------------------------------------------
[Dated as provided in
Section 3.01 of the
Credit Agreement]
To the Banks and the Agent
Referred to Below
c/o Wachovia Bank, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attn: Syndications Group
Dear Sirs:
We have acted as counsel for JDN Realty Corporation, a Maryland
corporation (the "Borrower"), and JDN Development Company, Inc., a Delaware
corporation (the "Initial Guarantor"), in connection with the Term Loan Credit
Agreement (the "Credit Agreement") dated as of February 17, 1999, among the
Borrower, the banks listed on the signature pages thereof, Wachovia Bank, N.A.,
as Agent and PNC Bank, National Association, as Documentation Agent. Terms
defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion. We have assumed for purposes of our opinions set
forth below that the execution and delivery of the Credit Agreement by each Bank
and by the Agent have been duly authorized by each Bank and by the Agent.
Upon the basis of the foregoing, we are of the opinion that:
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<PAGE>
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of Maryland and has all corporate powers
required to carry on its business as now conducted. The Initial Guarantor is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has all corporate powers required to carry on its business
as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Term Notes, and of the Guaranty by the Initial
Guarantor, respectively (i) are within its corporate powers, (ii) have been duly
authorized by all necessary corporate action, (iii) require no action by or in
respect of, or filing with, any governmental body, agency or official, (iv) do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or the Initial Guarantor or of any agreement, judgment, injunction, order,
decree or other instrument which to our knowledge is binding upon the Borrower
or the Initial Guarantor and (v) to our knowledge, except as provided in the
Credit Agreement, do not result in the creation or imposition of any Lien on any
asset of the Borrower or the Initial Guarantor or any of the Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of
the Borrower, and the Guaranty constitutes a valid and binding agreement of the
Initial Guarantor, in each case enforceable against it in accordance with its
terms, and the Term Notes constitute valid and binding obligations of the
Borrower, enforceable in accordance with its terms, except as such
enforceability may be limited by: (i) bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity.
4. To our knowledge, there is no action, suit or proceeding pending,
or threatened, against or affecting the Borrower before any court or arbitrator
or any governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could materially adversely affect the
business, consolidated financial position or consolidated results of operations
of the Borrower or the Initial Guarantor or which in any manner questions the
validity or enforceability of the Credit Agreement, any Term Note or the
Guaranty.
5. The Borrower is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
6. The Borrower is not a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding
74
<PAGE>
company", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended.
We are qualified to practice in the State of Georgia and do not purport to
be experts on any laws other than the laws of the United States and the State of
Georgia and this opinion is rendered only with respect to such laws, and, as
expressly provided and subject to the limitations contained in the last sentence
of this paragraph, the corporate law of the States of Maryland and Delaware. We
have made no independent investigation of the laws of any other jurisdiction.
As to (x) the opinions expressed in paragraph 1 with respect to due
incorporation, valid existence and good standing in Maryland of the Borrower,
our opinion is based solely on our review of the good standing certificate
issued by the Secretary of State of Maryland previously delivered to you, and
(y) the opinions expressed in paragraph 1 and clause (ii) of paragraph 2 with
respect to the Borrower's corporate powers under Maryland law, we have relied
solely on our review of Sections 2-101 through 2-104, inclusive, of the Maryland
General Corporation Law, and our review of the Borrower's Articles of
Incorporation and Bylaws and relevant resolutions of its Board of Directors. As
to (x) the opinions expressed in paragraph 1 with respect to as to due
incorporation, valid existence and good standing in Delaware of the Initial
Guarantor, our opinion is based solely on our review of the good standing
certificate issued by the Secretary of State of Delaware previously delivered to
you, and (y) the opinions expressed in paragraph 1 and clause (ii) of paragraph
2 with respect to the Initial Guarantor's corporate powers under Delaware law,
we have relied on our general understanding of the State of Delaware General
Corporation Law, and our review of the Initial Guarantor's Articles of
Incorporation and Bylaws and relevant resolutions of its Board of Directors.
This opinion is delivered to you in connection with the transaction
referenced above and may only be relied upon by you, any Assignee, Participant
or other Transferee under the Credit Agreement, and Jones, Day, Reavis & Pogue
without our prior written consent.
Very truly yours,
75
<PAGE>
EXHIBIT C
---------
OPINION OF
JONES, DAY, REAVIS & POGUE,
SPECIAL COUNSEL FOR THE AGENT
-----------------------------
[Dated as provided in
Section 3.01 of the
Credit Agreement]
To the Banks and the Agent
Referred to Below
c/o Wachovia Bank, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-175
Attention: Syndications Group
Dear Sirs:
We have participated in the preparation of the Term Loan Credit
Agreement (the "Credit Agreement") dated as of February 17, 1999, among JDN
Realty Corporation, a Maryland corporation (the "Borrower"), the banks listed on
the signature pages thereof (the "Banks"), Wachovia Bank, N.A., as Agent (the
"Agent") and PNC Bank, National Association, as Documentation Agent, and have
acted as special counsel for the Agent for the purpose of rendering this opinion
pursuant to Section 3.01(d) of the Credit Agreement. Terms defined in the
Credit Agreement are used herein as therein defined.
This opinion letter is limited by, and is in accordance with, the
January 1, 1992 edition of the Interpretive Standards applicable to Legal
Opinions to Third Parties in Corporate Transactions adopted by the Legal Opinion
Committee of the Corporate and Banking Law Section of the State Bar of Georgia
which Interpretive Standards are incorporated herein by this reference.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, and assuming the due authorization,
execution and delivery of the Credit Agreement and each of the Term Notes by or
on behalf of the Borrower, and of the Guaranty by the Initial Guarantor, we are
of the opinion that the
76
<PAGE>
Credit Agreement constitutes a valid and binding agreement of the Borrower, each
Term Note constitutes valid and binding obligations of the Borrower, and the
Guaranty constitutes a valid and binding agreement of the Initial Guarantor,
enforceable in accordance with its terms except as: (i) the enforceability
thereof may be affected by bankruptcy, insolvency, reorganization, fraudulent
conveyance, voidable preference, moratorium or similar laws applicable to
creditors' rights or the collection of debtors' obligations generally; (ii)
rights of acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability; and (iii) the enforceability
of certain of the remedial, waiver and other provisions of the Credit Agreement,
the Term Notes and the Guaranty may be further limited by the laws of the State
of Georgia; provided that such additional laws do not, in our opinion,
--------
substantially interfere with the practical realization of the benefits expressed
in the Credit Agreement, the Term Notes and the Guaranty, except for the
economic consequences of any procedural delay which may result from such laws.
In giving the foregoing opinion, we express no opinion as to the effect (if
any) of any law of any jurisdiction except the State of Georgia. We express no
opinion as to the effect of the compliance or noncompliance of the Agent or any
of the Banks with any state or federal laws or regulations applicable to the
Agent or any of the Banks by reason of the legal or regulatory status or the
nature of the business of the Agent or any of the Banks.
This opinion is delivered to you in connection with the transaction
referenced above and may only be relied upon by you and any Assignee,
Participant or other Transferee under the Credit Agreement without our prior
written consent.
Very truly yours,
77
<PAGE>
EXHIBIT D
---------
ASSIGNMENT AND ACCEPTANCE
-------------------------
Dated ____________, ____
Reference is made to the Term Loan Credit Agreement dated as of
February 17, 1999 (together with all amendments and modifications thereto, the
"Credit Agreement") among JDN Realty Corporation, a Maryland corporation (the
"Borrower"), the Banks (as defined in the Credit Agreement), Wachovia Bank,
N.A., as Agent (the "Agent") and PNC Bank, National Association, as
Documentation Agent. Terms defined in the Credit Agreement are used herein with
the same meaning.
_________________________________________ (the "Assignor") and
________________________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse to the Assignor, and the Assignee hereby purchases and assumes from the
Assignor, a ______% interest in and to all of the Assignor's rights and
obligations under the Credit Agreement as of the Effective Date (as defined
below) (including, without limitation, in the Loans owing to the Assignor and
the Term Note held by the Assignor.
2. The Assignor (i) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto, other
than that it is the legal and beneficial owner of the interest being assigned by
it hereunder, that such interest is free and clear of any adverse claim and that
as of the date hereof the aggregate outstanding principal amount of Loans owing
to it (without giving effect to assignments thereof which have not yet become
effective) is $_________________; (ii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under the Credit Agreement or any other instrument or document
furnished pursuant thereto; and (iii) attaches the Term Note referred to in
paragraph 1 above and requests that the Agent exchange such Term Note for [a new
Term Note dated _____________,____ in the principal amount of $__________
payable to the order of the Assignee] [new Term Notes as follows: a (i) Term
Note dated _____
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<PAGE>
___________, ____ in the principal amount of $_____________ payable to the order
of the Assignor and (ii) Term Note dated _____________, ____ in the principal
amount of $______________ payable to the order of the Assignee].
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 4.04(a) thereof (or any more recent financial statements of the
Borrower delivered pursuant to Section 5.01(a) or (b) thereof) and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (ii) agrees
that it will, independently and without reliance upon the Agent, the Assignor or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) confirms that it is a bank
or financial institution; (iv) appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (v) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank; (vi) specifies as
its Lending Office (and address for notices) the office set forth beneath its
name on the signature pages hereof, (vii) represents and warrants that the
execution, delivery and performance of this Assignment and Acceptance are within
its corporate powers and have been duly authorized by all necessary corporate
action, (viii) makes the representation and warranty contained in Section 9.18
of the Credit Agreement[, and (ix) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying as to the Assignee's status for
purposes of determining exemption from United States withholding taxes with
respect to all payments to be made to the Assignee under the Credit Agreement
and the Term Notes or such other documents as are necessary to indicate that all
such payments are subject to such taxes at a rate reduced by an applicable tax
treaty].
4. The Effective Date for this Assignment and Acceptance shall be
__________, ____ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for execution and
acceptance by the Agent and to the Borrower for execution by the Borrower.
5. Upon such execution and acceptance by the Agent [and execution by
the Borrower] [IF REQUIRED BY THE CREDIT AGREEMENT], from and after the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent rights and obligations have been transferred to it by this
Assignment and Acceptance, have the rights and obligations of a Bank thereunder
and (ii) the Assignor shall, to the extent its rights and obligations have been
transferred to the Assignee by this
79
<PAGE>
Assignment and Acceptance, relinquish its rights (other than under Sections
8.03, 9.03 and 9.04 of the Credit Agreement) and be released from its
obligations under the Credit Agreement.
6. Upon such execution and acceptance by the Agent [and execution by
the Borrower] [IF REQUIRED BY THE CREDIT AGREEMENT], from and after the
Effective Date, the Agent shall make all payments in respect of the interest
assigned hereby to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments for periods prior to such acceptance by the
Agent directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Georgia.
[NAME OF ASSIGNOR]
By:___________________________
Title:
[NAME OF ASSIGNEE]
By:___________________________
Title:
Lending Office:
[Address]
WACHOVIA BANK, N.A.,
As Agent
By:__________________________
Title:
JDN REALTY CORPORATION
IF REQUIRED BY THE CREDIT AGREEMENT
By:__________________________
Title:
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EXHIBIT E
---------
NOTICE OF BORROWING
-------------------
_____________________, ____
Wachovia Bank, N.A., as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Syndications Group
Re: Term Loan Credit Agreement (as amended and modified from time to time,
the "Credit Agreement") dated as of February 17, 1999 by and among JDN
Realty Corporation, the Banks from time to time parties thereto,
Wachovia Bank, N.A., as Agent and PNC Bank, National Association, as
Documentation Agent.
Gentlemen:
Unless otherwise defined herein, capitalized terms used herein shall have
the meanings attributable thereto in the Credit Agreement.
This Notice of Borrowing is delivered to you pursuant to Section 2.02 of
the Credit Agreement.
The Borrower hereby requests a [Euro-Dollar Borrowing] [Base Rate
Borrowing] in the aggregate principal amount of $___________ to be made on
______________, ____, and for interest to accrue thereon at the rate established
by the Credit Agreement for [Euro-Dollar Loans] [Base Rate Loans]. The duration
of the Interest Period with respect thereto shall be [1 month] [2 months] [3
months] [6 months] [30 days].
The calculation of the amounts described in Section 2.07 of the Credit
Agreement is as follows/2/:
(a) Borrowing Base per most recent
Borrowing Base Certificate $______________
(b) Principal amount outstanding under
____________________
/2/ Limitation: If (b) exceeds (a), the excess must be prepaid, subject to the
Borrower's right to identify and seek approval of a substitute Eligible
Property within 30 days.
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<PAGE>
Loans $______________
The Borrower hereby certifies that, as of the date hereof, none of the
Eligible Properties included in the most recent Borrowing Base Certificate is
subject to a Mortgage.
The Borrower has caused this Notice of Borrowing to be executed and
delivered by its duly authorized officer this _____ day of ___________, ___.
JDN REALTY CORPORATION
By:_______________________________
Title:
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EXHIBIT F
---------
COMPLIANCE CERTIFICATE
----------------------
Reference is made to the Term Loan Credit Agreement dated as of
February 17, 1999 (as modified and supplemented and in effect from time to time,
the "Credit Agreement") by and among JDN Realty Corporation, the Banks from time
to time parties thereto, Wachovia Bank, N.A., as Agent and PNC Bank, National
Association, as Documentation Agent. Capitalized terms used herein shall have
the meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 5.01(c) of the Credit Agreement, _______________,
the duly authorized ______________________ of the Borrower, hereby (i) certifies
to the Agent and the Banks that the information contained in the Compliance
Check List attached hereto is true, accurate and complete as of __________,
____, and that no Default is in existence on and as of the date hereof and (ii)
restates and reaffirms that the representations and warranties contained in
Article IV of the Credit Agreement are true on and as of the date hereof as
though restated on and as of this date.
JDN REALTY CORPORATION
By:____________________________
Its:
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<PAGE>
COMPLIANCE CHECK LIST
JDN REALTY CORPORATION
--------------------------
_____________, ____
1. Ratio of Consolidated Total Liabilities to Gross Asset Value (Section
5.20)
The ratio of Total Consolidated Liabilities to Gross Asset Value shall at
all times be equal to or less than 0.55 to 1.0.
(a) Total Consolidated Liabilities
Schedule 1 $_________
(b) Gross Asset Value Schedule 2 $_________
(c) Actual ratio of (a) to (b) ____ to 1.0
Maximum ratio 0.55 to 1.0
2. Ratio of Total Secured Debt to Gross Asset Value (Section 5.21)
The ratio of Total Secured Debt to Gross Asset Value shall at all times be
equal to or less than 0.40 to 1.0.
(a) Total Secured Debt Schedule 3 $__________
(b) Gross Asset Value Schedule 2 $__________
(c) Actual ratio of (a) to (b) ____ to 1.0
Maximum ratio 0.40 to 1.0
3. Ratio of EBITDA to Consolidated Interest Expense (Section 5.22)
The ratio of EBITDA to Consolidated Interest Expense for the Fiscal Quarter
just ended and the 3 immediately preceding Fiscal Quarters will not be less
than 2.0 to 1.00, calculated at the end of each Fiscal Quarter.
(a) EBITDA Schedule 4 $__________
(b) Consolidated Interest Expense $__________
(c) actual ratio of (a) to (b) ____ to 1.0
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Minimum ratio 2.0 to 1.0
4. Ratio of Unencumbered Assets to Unsecured Funded Debt (Section 5.23)
The ratio of Unencumbered Assets to Unsecured Funded Debt shall at all times
be equal to or greater than 1.75 to 1.00.
(a) Net Operating Income from each
and owned for at least one Fiscal
Quarter Schedule 5 $_________
(b) 10 times (a) $_________
(c) 4 times (b) $_________
(d) book value of each Property not subject
to a Mortgage and owned for less than
one Fiscal Quarter $_________
(e) book value of all Construction in Progress $_________
(f) sum of (c),(d) and (f) $_________
(g) Unsecured Funded Debt Schedule 6 $_________
(h) Actual ratio of (f) to (g) ____ to 1.0
Minimum ratio 1.75 to 1.0
5. Ratio of Unsecured Net Operating Income to Unsecured Interest Expense
(Section 5.24)
The ratio of Unsecured Net Operating Income to Unsecured Interest Expense
shall at all times be equal to or greater than 1.75 to 1.0.
(a) Unsecured Net Operating Income Schedule 5 $_________
(b) Unsecured Interest Expense/2/ $_________
(c) Actual ratio of (a) to (b) ____ to 1.0
Minimum ratio 1.75 to 1.0
_____________________
/2/ Include only Consolidated Interest Expense for Fiscal Quarter attributable
to Unsecured Funded Debt.
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6 Restricted Payments (Section 5.15)/3/
The Borrower's Restricted Payments in any calendar year shall not exceed 95%
of Funds from Operations for such period, unless (i) the Borrower must pay
out an amount in excess of 95% of Funds from Operations to permit the
Borrower to preserve its status as a real estate investment trust under the
applicable provision of the Code.
(a) Restricted Payments for current
calendar year $__________
(b) Funds from Operations for current
calendar year Schedule 7 $__________
(c) 95% of (b) $__________
Limitation: (a) may not exceed (c)
7. Guarantees (Section 5.25)
Neither the Borrower nor any Guarantor will create, assume or suffer to
exist any Guarantees of Debt of other Persons, except (i) Guarantees in
existence on May 23, 1997 in the aggregate as of August 31, 1998 of
21,770,661, (ii) Guarantees of Debt of the Borrower or other Guarantors and
(iii) other Guarantees in an aggregate amount not exceeding at any time 10%
of Gross Asset Value as of the last day of the Fiscal Quarter just ended.
(a) Amount Guaranteed by other Guarantees
not permitted by clauses (i) and (ii) $_________
(b) Gross Asset Value Schedule 2 $_________
(c) 10% of (b) $_________
Limitation: (a) may not exceed (c)
8. Consolidations, Mergers and Sales of Assets (Section 5.05)
_________________
/3/ Include this paragraph 6 and Schedule 7 only with the first Compliance
Certificate furnished after the end of each Fiscal Year. Amounts included
herein are for the year ended December 31, ____
86
<PAGE>
Neither the Borrower nor any of the Guarantors will consolidate or merge
with or into, or acquire all or substantially all of the assets or stock of
any other Person, or sell, lease or otherwise transfer all or any
substantial part of its assets to, any other Person, provided that:
--------
[(i) . . . (ii)]
(iii) the foregoing limitation on the acquisition of all or
substantially all the assets or stock of another Person shall not
prohibit, during any Fiscal Quarter, the acquisition of all or
substantially all of the assets or stock of another Person unless the
aggregate assets or stock acquired in a single acquisition or series of
related acquisitions of all or substantially all of the assets or stock
of another Person by the Borrower and the Guarantors during such Fiscal
Quarter constituted more than 20% of Gross Asset Value at the end of
the most recent Fiscal Quarter immediately preceding such Fiscal
Quarter; and
(iv) the foregoing limitation on the sale, lease or other
transfer of assets shall not prohibit, during any Fiscal Quarter, a
transfer of assets (in a single transaction or in a series of related
transactions) unless the aggregate assets to be so transferred, when
combined with all other assets transferred by the Borrower and the
Guarantors during such Fiscal Quarter and the immediately preceding 3
Fiscal Quarters, constituted more than 20% of Gross Asset Value at the
end of the most recent Fiscal Quarter immediately preceding such Fiscal
Quarter.
(a) Aggregate amount of assets or stock
acquired in a single acquisition or
series of related acquisitions
during Fiscal Quarter just ended $_________
(b) Gross Asset Value Schedule 2 $__________
(c) 20% of (b) $__________
Limitation: (a) may not exceed (c)
(d) Aggregate amount of assets sold
during Fiscal Quarter just
ended $_________
(e) Aggregate amount of assets sold
during 3 prior Fiscal Quarters $_________
87
<PAGE>
(f) Sum of (d) and (e) $_________
Limitation: (f) may not exceed (c)
9. Loans or Advances (Section 5.16)
Neither the Borrower nor any of the Guarantors shall make loans or advances
to any Person except as permitted by Section 5.17 and except:
(i) loans or advances to employees and directors not exceeding
$10,000,000 in the aggregate principal amount outstanding at any time;
[(ii) . . . (iii)]
(iv) other loans and advances by the Borrower and the
Guarantors to any JDN Venture which (x) are evidenced by notes (and, if
requested by the Agent, acting at the direction of the Required Banks,
with such notes, together with any related mortgage, have been assigned
to and pledged with the Agent, for the benefit of itself and the Banks,
as security for the payment of all obligations of the Borrower to the
Agent and the Banks hereunder) and (y) are in an amount which, together
with Investments permitted by clause (vi) of Section 5.17, do not
exceed 15% of Gross Asset Value as of the end of the most recent Fiscal
Quarter;
(a) Loans and advances to officers
and directors $________
Limitation $10,000,000
(b) Other loans and advances evidenced by
notes (and, if required, pledged with
Agent) and not
permitted by clauses (i) through (iii) $________
(c) See line (e) and "Limitation" of paragraph 10 below
10. Investments (Section 5.17)
Investments of the Borrower as of the Closing Date (other than in
Subsidiaries, which are set forth in Schedule 4.08), are set forth on
Schedule 5.17. Neither the Borrower nor any of the Guarantors shall make
Investments after the Closing Date in any Person except as permitted by
Section 5.16 and except Investments in:
88
<PAGE>
[(i) . . . (v)]
(vi) other Investments by the Borrower and the Guarantors in an amount
which, (x) together with loans and advances permitted by clause (iv) of
Section 5.16, do not exceed 15% of Gross Asset Value as of the end of the
most recent Fiscal Year, and (y) with respect to Investments in Persons over
which, after giving effect to such Investment, the Borrower or the
Guarantors do not have Control, do not exceed 5% of Gross Asset Value as of
the end of the most recent Fiscal Year;
(a) Line (b) of paragraph 9 above $_________
(b) Other Investments not permitted by
clauses (i) through (v) $_________
(c) Sum of (a) and (b) $_________
(d) Gross Asset Value Schedule 2 $_________
(e) 15% of (d) $_________
Limitation: (c) may not exceed (e)
(f) Investments included in line (b) in
Persons over which the Borrower or the
Guarantors do not have control $_________
(g) 5% of (d) $_________
Limitation: (f) may not exceed (g)
89
<PAGE>
Schedule 1
----------
Total Consolidated Liabilities
------------------------------
(a) Consolidated Liabilities $__________
(b) Debt Guaranteed by Borrower or any
Guarantor $__________
(c) face amount of all letters of credit
issued for the account of the Borrower
or any Guarantor $__________
TOTAL CONSOLIDATED LIABILITIES (sum of (a)
through (c) $__________
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<PAGE>
Schedule 2
----------
Gross Asset Value
-----------------
(a) Net Operating Income for the 3 month
period ending on the last day of the
month just ended prior to the date of
determination, from each Property owned
by the Borrower or any Guarantor for
at least one Fiscal Quarter $__________
(b) 40 times (a) $__________
(c) book value of each Property owned by
the Borrower or any Guarantor
for less than one Fiscal Quarter $__________
(d) book value of Construction in
Progress of each Property owned
by the Borrower or any Guarantor $__________
GROSS ASSET VALUE (sum of (b) through (d)) $__________
91
<PAGE>
Schedule 3
----------
Total Secured Debt/4/
------------------- -
INTEREST FINAL
RATE/5/ MATURITY TOTAL
---- - -------- -----
Money Borrowed
- --------------
________________________ __________ ________ $____
__
________________________ __________ ________ $____
__
________________________ __________ ________ $____
__
________________________ __________ ________ $____
__
________________________ __________ ________ $____
__
Total Money Borrowed $____
Deferred Purchase Price/6/
- ----------------------- -
________________________ __________ ________ $____
__
________________________ __________ ________ $____
__
________________________ __________ ________ $____
__
________________________ __________ ________ $____
__
Total Deffered Purchase Price $____
__
___________________
/4/ Include only the Debt secured by a Mortgage
/5/ If rate is fixed, insert contract rate. If rate is floating, state that.
/6/ Exclude trade accounts payable in the ordinary course of business.
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<PAGE>
Capital Leases in which Borrower is the Tenant
- ----------------------------------------------
________________________________________________________________ $_____
__
________________________________________________________________ $_____
__
Total Capital Leases $_____
__
Letter of Credit Reimbursement
Obligations
- -----------
________________________________________________________________ $_____
__
________________________________________________________________ $_____
__
Total Letter of Credit
Reimbursement Obligations $_____
__
Guarantees of Debt of Persons other than Borrower and Guarantors
- ----------------------------------------------------------------
________________________ __________ ________ $_____
__
________________________ __________ ________ $_____
__
________________________ __________ ________ $_____
__
________________________ __________ ________ $_____
__
________________________ __________ ________ $_____
__
TOTAL SECURED DEBT $=====
93
<PAGE>
Schedule 4
----------
EBITDA
------
____ quarter ___
consolidated net income $________
less extraordinary gains ($________)
plus extraordinary losses $________
plus Consolidated Interest Expense $________
plus taxes on income $________
plus depreciation and amortization $________
plus other non-cash charges $________
Total $________
____ quarter ___
consolidated net income $________
less extraordinary gains ($________)
plus extraordinary losses $________
plus Consolidated Interest Expense $________
plus taxes on income $________
plus depreciation and amortization $________
plus other non-cash charges $________
Total $________
____ quarter ___
consolidated net income $________
less extraordinary gains ($________)
plus extraordinary losses $________
plus Consolidated Interest Expense $________
plus taxes on income $________
plus depreciation and amortization $________
plus other non-cash charges $________
Total $________
____ quarter ___
consolidated net income $________
less extraordinary gains ($________)
plus extraordinary losses $________
plus Consolidated Interest Expense $________
plus taxes on income $________
plus depreciation and amortization $________
plus other non-cash charges $________
Total $________
EBITDA $________
94
<PAGE>
Schedule 5
----------
Net Operating Income/7/
-------------------- -
(for Fiscal Quarter just ended)
____ quarter ___
Property revenues $________
less Property expenses
(excluding depreciation, amortization
and debt service) ($________)
less management fee (3% of gross
rental income, excluding
percentage rents) ($________)
less capital reserve ($0.15 per leasable
square foot) ($________)
NET OPERATING INCOME $________
_________________________
/7/ Include only Properties not subject to a mortgage and owned for at least
one Fiscal Quarter
95
<PAGE>
Schedule 6
----------
Unsecured Funded Debt/8/
---------------------- -
INTEREST FINAL
RATE/9/ MATURITY TOTAL
---- - -------- -----
Money Borrowed
- --------------
_____________________________________ ___________ ________ $______
_____________________________________ ___________ ________ $______
_____________________________________ ___________ ________ $______
_____________________________________ ___________ ________ $______
_____________________________________ ___________ ________ $______
Total Money Borrowed $______
Deferred Purchase Price/10/
- ----------------------- --
_____________________________________ ___________ ________ $______
_____________________________________ ___________ ________ $______
_____________________________________ ___________ ________ $______
_____________________________________ ___________ ________ $______
Total Deferred Purchase Price $______
Capital Leases in which the Borrower is the tenant
- --------------------------------------------------
__________________________________________________________ ________ $______
__________________________________________________________ ________ $______
Total Capital Leases $______
____________________
/8/ Include only the Debt not secured by a Mortgage
/9/ If rate is fixed, insert contract rate. If rate is floating. state that.
/10/ Exclude trade accounts payable in the ordinary course of businss.
96
<PAGE>
Letter of Credit Reimbursement
Obligations
- -----------
_____________________________________ ___________ ________ $______
_____________________________________ ___________ ________ $______
Total Letter of Credit
Reimbursement Obligations $_____
Guarantees of Debt of Persons other than Borrower and Guarantors
- ----------------------------------------------------------------
_____________________________________ ___________ ________ $______
_____________________________________ ___________ ________ $______
_____________________________________ ___________ ________ $______
_____________________________________ ___________ ________ $______
_____________________________________ ___________ ________ $______
TOTAL UNSECURED FUNDED DEBT $======
97
<PAGE>
Schedule 7/11/
--------------
Funds from Operations/1/
-----------------------
(for Fiscal Year just ended)
Net income $___________
plus depreciation and amortization
of real estate assets $___________
plus net loss/(gain) on real estate
sales $___________
plus loss/(gains) on extraordinary
items $___________
plus depreciation of real estate
assets held in unconsolidated
entities $___________
FUNDS FROM OPERATIONS $___________
___________________
/11/ Include only with the first Compliance Certificate furnished after the
end of each Fiscal year.
98
<PAGE>
EXHIBIT G
---------
JDN REALTY CORPORATION
CLOSING CERTIFICATE
-------------------
Reference is made to the Term Loan Credit Agreement (the "Credit
Agreement") dated as of February 17, 1999, among JDN Realty Corporation, the
Banks listed therein, Wachovia Bank, N.A., as Agent and PNC Bank, National
Association, as Documentation Agent. Capitalized terms used herein have the
meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 3.01(e) of the Credit Agreement, ____________________,
the duly authorized _____________________ of JDN Realty Corporation, hereby
certifies to the Agent and the Banks that, to the best of my knowledge, (i) no
Default has occurred and is continuing as of the date hereof, and (ii) the
representations and warranties contained in Article IV of the Credit Agreement
are true on and as of the date hereof.
Certified as February 17, 1999.
By:____________________________
Printed Name:_______________
Title:______________________
99
<PAGE>
EXHIBIT H
---------
JDN REALTY CORPORATION
SECRETARY'S CERTIFICATE
The undersigned, __________________________________________, ________________,
Secretary of JDN Realty Corporation, a Maryland corporation (the "Borrower"),
hereby certifies that [s]he has been duly elected, qualified and is acting in
such capacity and that, as such, [s]he is familiar with the facts herein
certified and is duly authorized to certify the same, and hereby further
certifies, in connection with the Term Loan Credit Agreement dated as of
February 17, 1999 among the Borrower, Wachovia Bank, N.A. as Agent and as a
Bank, and certain other Banks listed on the signature pages thereof, that:
1. Attached hereto as Exhibit A is a complete and correct copy of the
Certificate of Incorporation of the Borrower as in full force and effect on the
date hereof as certified by the Secretary of State of the State of Maryland, the
Borrower's state of incorporation.
2. Attached hereto as Exhibit B is a complete and correct copy of the
Bylaws of the Borrower as in full force and effect on the date hereof.
3. Attached hereto as Exhibit C is a complete and correct copy of the
resolutions duly adopted by the Board of Directors of the Borrower on , 1998
approving, and authorizing the execution and delivery of, the Credit Agreement,
the Term Notes and the other Loan Documents (as such terms are defined in the
Credit Agreement) to which the Borrower is a party. Such resolutions have not
been repealed or amended and are in full force and effect, and no other
resolutions or consents have been adopted by the Board of Directors of the
Borrower in connection therewith.
4. ________________________________ , who is _______________________ of
the Borrower signed the Credit Agreement, the Term Notes and the other Loan
Documents to which the Borrower is a party, was duly elected, qualified and
acting as such at the time [s]he signed the Credit Agreement, the Term Notes and
other Loan Documents to which the Borrower is a party, and [his/her] signature
appearing on the Credit Agreement, the Term Notes and the other Loan Documents
to which the Borrower is a party is [his/her] genuine signature.
IN WITNESS WHEREOF, the undersigned has hereunto set [his/her] hand as of
February 17, 1999.
___________________________________________
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<PAGE>
EXHIBIT I
---------
GUARANTY
--------
THIS GUARANTY (this "Guaranty") is made as of February 17, 1999 by JDN
DEVELOPMENT COMPANY, INC., a Delaware corporation (the "Initial Guarantor" and a
"Guarantor"; the terms "Guarantor" and "Guarantors" shall include any Subsidiary
of JDN Realty Corporation which becomes a Guarantor pursuant to Section 15
hereof and Section 5.29 of the Credit Agreement referred to below) in favor of
the Agent, for the ratable benefit of the Banks, under the Credit Agreement
referred to below;
W I T N E S S E T H
WHEREAS, JDN REALTY CORPORATION, a Maryland corporation (the
"Borrower"), WACHOVIA BANK, N.A., as Agent (the "Agent") and PNC Bank, National
Association, as Documentation Agent and certain other Banks from time to time
party thereto have entered into a certain Term Loan Credit Agreement dated as of
February 17, 1999 (as amended as of the date hereof and as it may be amended or
modified further from time to time, the "Credit Agreement"), providing, subject
to the terms and conditions thereof, for term loans to be made by the Banks to
the Borrower which will the benefit the Guarantors;
WHEREAS, it is required by Section 5.29 of the Credit Agreement, that
the Initial Guarantor execute and deliver this Guaranty whereby it and, together
with other Guarantors which become such as contemplated in Section 15 hereof,
shall guarantee the payment when due of all principal, interest and other
amounts that shall be at any time payable by the Borrower under the Credit
Agreement, the Term Notes and the other Loan Documents; and
WHEREAS, in consideration of the financial and other support that the
Borrower has provided, and such financial and other support as the Borrower may
in the future provide, to the Guarantors, whether directly or indirectly, and in
order to induce the Banks and the Agent to enter into the Credit Agreement, the
Guarantors are willing to guarantee the obligations of the Borrower under the
Credit Agreement, the Term Notes, and the other Loan Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
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<PAGE>
SECTION 1. Definitions. Terms defined in the Credit Agreement and
-----------
not otherwise defined herein have, as used herein, the respective meanings
provided for therein.
SECTION 2. Representations and Warranties. The Guarantors
------------------------------
incorporate herein by reference as fully as if set forth herein all of the
representations and warranties pertaining to the Guarantors contained in Article
IV of the Credit Agreement (which representations and warranties shall be deemed
to have been renewed by the Guarantors upon each Borrowing under the Credit
Agreement).
SECTION 3. Covenants. The Guarantors covenant that, so long as any
---------
Bank has any Commitment outstanding under the Credit Agreement or any amount
payable under the Credit Agreement or any Term Note shall remain unpaid, the
Guarantors will fully comply with those covenants set forth in Article V of the
Credit Agreement pertaining to the Guarantors, and the Guarantors incorporate
herein by reference as fully as if set forth herein all of such covenants.
SECTION 4. The Guaranty. The Guarantors hereby irrevocably,
------------
unconditionally and jointly and severally guarantee (i) the full and punctual
payment (whether at stated maturity, upon acceleration or otherwise) of the
principal of and interest on each Term Note issued by the Borrower pursuant to
the Credit Agreement, and the full and punctual payment of all other amounts
payable by the Borrower under the Credit Agreement, including, without
limitation, all Loans and interest thereon, all compensation and indemnification
amounts and fees payable pursuant to the Credit Agreement and the Agent's Letter
Agreement, and (ii) the timely performance of all other obligations of the
Borrower under the Credit Agreement and the other Loan Documents (all of the
foregoing obligations being referred to collectively as the "Guaranteed
Obligations"). Upon failure by the Borrower to pay punctually any such amount or
perform such obligations, each of the Guarantors agrees that it shall forthwith
on demand pay the amount not so paid at the place and in the manner specified in
the Credit Agreement, the relevant Term Note or the relevant Loan Document, as
the case may be, or perform such obligation in accordance with the terms and
conditions therefor specified in the Credit Agreement or the other Loan
Documents, and pay all costs of collection, including reasonable attorneys fees;
provided that, notwithstanding the provisions of O.C.G.A. ss. 13-1-11(a)(2) to
the contrary, the Guarantor shall not be obligated to pay more than the
attorneys fees actually incurred in connection with such collection.
SECTION 5. Guaranty Unconditional. The obligations of the Guarantor
----------------------
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
102
<PAGE>
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Borrower under the Credit
Agreement, any Term Note, or any other Loan Document, by operation of law
or otherwise or any obligation of any other guarantor of any of the
Guaranteed Obligations;
(ii) any modification or amendment of or supplement to the
Credit Agreement, any Term Note, or any other Loan Document;
(iii) any release, nonperfection or invalidity of any direct or
indirect security, if any, for any obligation of the Borrower under the
Credit Agreement, any Term Note, any Loan Document, or any obligations of
any other guarantor of any of the Guaranteed Obligations;
(iv) any change in the corporate structure or ownership of the
Borrower or any Guarantor or any other guarantor of any of the Guaranteed
Obligations, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Borrower, or any other Guarantor or any other
guarantor of the Guaranteed Obligations, or its assets or any resulting
release or discharge of any obligation of the Borrower, or any other
Guarantor or any other guarantor of any of the Guaranteed Obligations;
(v) the existence of any claim, setoff or other rights which
the Guarantors may have at any time against the Borrower, any other
Guarantor or any other guarantor of any of the Guaranteed Obligations, the
Agent, any Bank or any other Person, whether in connection herewith or any
unrelated transactions, provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against
the Borrower, or any other Guarantor or any other guarantor of any of the
Guaranteed Obligations, for any reason related to the Credit Agreement, any
other Loan Document, or any other Guaranty, or any provision of applicable
law or regulation purporting to prohibit the payment by the Borrower, or
any other Guarantor or any other guarantor of the Guaranteed Obligations,
of the principal of or interest on any Term Note or any other amount
payable by the Borrower under the Credit Agreement, the Term Notes, or any
other Loan Document; or
(vii) any other act or omission to act or delay of any kind by
the Borrower, any other Guarantor or
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<PAGE>
any other guarantor of the Guaranteed Obligations, the Agent, any Bank or
any other Person or any other circumstance whatsoever which might, but for
the provisions of this paragraph, constitute a legal or equitable discharge
of the Guarantor's obligations hereunder.
SECTION 6. Discharge Only Upon Payment In Full; Reinstatement In
-----------------------------------------------------
Certain Circumstances. The Guarantors' obligations hereunder shall remain in
- ---------------------
full force and effect until all Guaranteed Obligations shall have been paid in
full and the Commitments under the Credit Agreement shall have terminated or
expired. If at any time any payment of the principal of or interest on any Term
Note or any other amount payable by the Borrower under the Credit Agreement or
any other Loan Document is rescinded or must be otherwise restored or returned
upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise,
the Guarantors' obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.
SECTION 7. Waiver of Notice by the Guarantors. The Guarantors
----------------------------------
irrevocably waive acceptance hereof, presentment, demand, protest and, to the
fullest extent permitted by law, any notice not provided for herein, as well as
any requirement that at any time any action be taken by any Person against the
Borrower, any other Guarantor or any other guarantor of the Guaranteed
Obligations, or any other Person.
SECTION 8. Stay of Acceleration. If acceleration of the time for
--------------------
payment of any amount payable by the Borrower under the Credit Agreement, any
Term Note or any other Loan Document is stayed upon the insolvency, bankruptcy
or reorganization of the Borrower, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, any Term Note or any other
Loan Document shall nonetheless be payable by the Guarantors hereunder forthwith
on demand by the Agent made at the request of the Required Banks.
SECTION 9. Notices. All notices, requests and other communications to
-------
any party hereunder shall be given or made by telecopier or other writing and
telecopied or mailed or delivered to the intended recipient at its address or
telecopier number set forth on the signature pages hereof or such other address
or telecopy number as such party may hereafter specify for such purpose by
notice to the Agent in accordance with the provisions of Section 9.01 of the
Credit Agreement. Except as otherwise provided in this Guaranty, all such
communications shall be deemed to have been duly given when transmitted by
telecopier, or personally delivered or, in the case of a mailed notice, 3
Domestic Business Days after such communication is deposited in the mails with
first
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<PAGE>
class postage prepaid, in each case given or addressed as aforesaid.
SECTION 10. No Waivers. No failure or delay by the Agent or any Banks
----------
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies provided in this Guaranty, the Credit Agreement, the
Term Notes, and the other Loan Documents shall be cumulative and not exclusive
of any rights or remedies provided by law.
SECTION 11. Successors and Assigns. This Guaranty is for the benefit
----------------------
of the Agent and the Banks and their respective successors and assigns and in
the event of an assignment of any amounts payable under the Credit Agreement,
the Term Notes, or the other Loan Documents, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty may not be assigned by the Guarantors without the
prior written consent of the Agent and the Required Banks, and shall be binding
upon the Guarantors and their respective successors and permitted assigns.
SECTION 12. Changes in Writing. Neither this Guaranty nor any
------------------
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Guarantors and the Agent, with the consent of the
Required Banks.
SECTION 13. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
---------------------------------------------------------
TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
- -----
THE LAW OF THE STATE OF GEORGIA. EACH OF THE GUARANTOR AND THE AGENT HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF GEORGIA AND OF ANY GEORGIA STATE COURT SITTING IN
ATLANTA, GEORGIA AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE
GUARANTORS IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE GUARANTORS AND THE AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 14. Taxes, etc. All payments required to be made by the
----------
Guarantor hereunder shall be made without setoff or counterclaim and free and
clear of and without deduction or withholding for or on account of, any present
or future taxes,
105
<PAGE>
levies, imposts, duties or other charges of whatsoever nature imposed by any
government or any political or taxing authority pursuant and subject to the
provisions of Section 2.08(c) of the Credit Agreement, the terms of which are
incorporated herein by reference as to the Guarantors as fully as if set forth
herein, and for such purposes, the rights and obligations of the Borrower under
such Section shall devolve to the Guarantors as to payments required to be made
by the Guarantors hereunder.
SECTION 15. Additional Guarantors; Release of Guarantors. Section 5.29
--------------------------------------------
of the Credit Agreement provides that all new Significant Subsidiaries must
become Guarantors, by, among other things, executing and delivering to the Agent
a counterpart of this Guaranty. Any Subsidiary which executes and delivers to
the Agent a counterpart of this Guaranty shall be a Guarantor for all purposes
hereunder. Under certain circumstances described in the last sentence of Section
5.05 of the Credit Agreement, Guarantors may obtain from the Agent a written
release from this Guaranty pursuant to the provisions of such sentence, and upon
obtaining such written release, any such Subsidiary shall no longer be a
Guarantor hereunder. Each other Guarantor consents and agrees to any such
release and agrees that no such release shall affect its obligations hereunder.
SECTION 16. Other Waivers by the Guarantors. The Guarantors hereby
-------------------------------
expressly waive, renounce, and agree not to assert, any right, claim or cause of
action, including, without limitation, a claim for reimbursement, subrogation,
indemnification or otherwise, against the Borrower arising out of or by reason
of this Guaranty or the obligations of the Guarantors hereunder, including,
without limitation, the payment or securing or purchasing of any of the
Guaranteed Obligations by the Guarantors, until payment in full of the
Guaranteed Obligations. The waiver, renunciation and agreement contained in the
immediately preceding sentence is for the benefit of the Agent and the Banks and
also for the benefit of the Borrower who may assert the benefits thereof as a
third-party beneficiary, and the Guarantors may be released from such waiver,
renunciation and agreement only by the execution and delivery, by the Agent, the
Required Banks and the Borrower, of an instrument expressly releasing the
Guarantors therefrom.
IN WITNESS WHEREOF, the Initial Guarantor has caused this
106
<PAGE>
Guaranty to be duly executed, under seal, by its authorized officer as of the
date first above written.
JDN DEVELOPMENT COMPANY, INC.
By:___________________________________
Title:
107
<PAGE>
EXHIBIT J
---------
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is entered into as of
February 17, 1999, by and between JDN REALTY CORPORATION, a Maryland corporation
(the "Principal") and JDN DEVELOPMENT COMPANY, INC. a Delaware corporation (the
"Initial Guarantor" and a "Guarantor"; the terms "Guarantor" and "Guarantors"
shall include any Subsidiary of JDN Realty Corporation which becomes a Guarantor
pursuant to the last paragraph hereof and Section 5.29 of the Credit Agreement
referred to below). The Principal and each of the Guarantors are sometimes
hereinafter referred to individually as a "Contributing Party" and collectively
as the "Contributing Parties").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Term Loan Credit Agreement, dated as
of February 17, 1999 among the Principal, the Banks party thereto, Wachovia
Bank, N.A., as Agent and PNC Bank, National Association, as Documentation Agent
(such agreement, as amended as of the date hereof and as the same may from time
to time be amended, modified, restated or extended, being hereinafter referred
to as the "Credit Agreement"; capitalized terms used herein shall have the
meanings ascribed thereto in the Credit Agreement), the Banks have agreed to
extend term loans to the Principal;
WHEREAS, it is required by Section 5.29 of the Credit Agreement that
the Initial Guarantor and each Significant Subsidiary execute and deliver that
certain Guaranty, dated as of even date herewith (such agreement, as the same
may from time to time be amended, modified, restated or extended, being
hereinafter referred to as the "Guaranty"), pursuant to which, among other
things, the Initial Guarantor and, together with Significant Subsidiaries which
become Guarantors as contemplated in the last paragraph hereof, have jointly and
severally agreed to guarantee the "Guaranteed Obligations" (as defined in the
Guaranty); and
WHEREAS, the Principal owns most of the beneficial interests in the
Initial Guarantor, and each Guarantor other than the Initial Guarantor is a
direct or indirect subsidiary of the Principal and is engaged in businesses
related to those of the Principal and each other Guarantor, and each of the
Guarantors will derive direct or indirect economic benefit from the
effectiveness and existence of the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce each Guarantor to enter into the Guaranty,
it is agreed as follows:
108
<PAGE>
To the extent that any Guarantor shall, under the Guaranty, make a
payment (a "Guarantor Payment") of a portion of the Guaranteed Obligations,
then, without limiting its rights of subrogation against the principal, such
Guarantor shall be entitled to contribution and indemnification from, and be
reimbursed by, each of the other Contributing Parties in an amount, for each
such Contributing Party, equal to a fraction of such Guarantor Payment, the
numerator of which fraction is such Contributing Party's Allocable Amount and
the denominator of which is the sum of the Allocable Amounts of all of the
Contributing Parties.
As of any date of determination, the "Allocable Amount" of each
Contributing Party shall be equal to the maximum amount of liability which could
be asserted against such Contributing Party hereunder with respect to the
applicable Guarantor Payment without (i) rendering such Contributing Party
"insolvent" within the meaning of Section 101(31) of the Federal Bankruptcy Code
(the "Bankruptcy Code") or Section 2 of either the Uniform Fraudulent Transfer
Act (the "UFTA") or the Uniform Fraudulent Conveyance Act (the "UFCA"), (ii)
leaving such Contributing Party with unreasonably small capital, within the
meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA or
Section 5 of the UFCA, or (iii) leaving such Contributing Party unable to pay
its debts as they become due within the meaning of Section 548 of the Bankruptcy
Code or Section 4 of the UFTA or Section 6 of the UFCA.
This Agreement is intended only to define the relative rights of the
Contributing Parties, and nothing set forth in this Agreement is intended to or
shall impair the obligations of the Guarantors, jointly and severally, to pay
any amounts, as and when the same shall become due and payable in accordance
with the terms of the Guaranty.
The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets in favor of each Guarantor to
which such contribution and indemnification is owing.
This Agreement shall become effective upon its execution by each of
the Contributing Parties and shall continue in full force and effect and may not
be terminated or otherwise revoked by any Contributing Party until all of the
Guaranteed Obligations shall have been indefeasibly paid in full (in lawful
money of the United States of America) and discharged and the Credit Agreement
and financing arrangements evidenced and governed by the Credit Agreement shall
have been terminated. Each Contributing Party agrees that if, notwithstanding
the foregoing, such Contributing Party shall have any right under applicable law
to terminate or revoke this Agreement, and such Contributing Party shall attempt
to exercise such right, then such termination or revocation shall not be
effective until a written notice of such revocation or
109
<PAGE>
termination, specifically referring hereto and signed by such Contributing
Party, is actually received by each of the other Contributing Parties and by the
Agent at its notice address set forth in the Credit Agreement. Such notice shall
not affect the right or power of any Contributing Party to enforce rights
arising prior to receipt of such written notice by each of the other
Contributing Parties and the Agent. If any Bank grants additional loans to the
Principal or takes other action giving rise to additional Guaranteed Obligations
after any Contributing Party has exercised any right to terminate or revoke this
Agreement but before the Agent receives such written notice, the rights of each
other Contributing Party to contribution and indemnification hereunder in
connection with any Guarantor Payments made with respect to such loans or
Guaranteed Obligations shall be the same as if such termination or revocation
had not occurred.
Section 5.29 of the Credit Agreement provides that new Significant
Subsidiaries must become Guarantors by, among other things, executing and
delivering to the Agent a counterpart of the Guaranty and of this Contribution
Agreement. Any Subsidiary which executes and delivers to the Agent a counterpart
of the Guaranty and of this Contribution Agreement shall be a Guarantor for all
purposes hereunder. Under certain circumstances described in the last sentence
of Section 5.05 of the Credit Agreement, Guarantors may obtain from the Agent a
written release from the Guaranty pursuant to the provisions of such sentence,
and upon obtaining such written release, any such Subsidiary shall no longer be
a Guarantor or Contributing Party hereunder, and such release shall
automatically and without further action constitute a release by each other
Contributing Party of all obligations of such Subsidiary hereunder. Each other
Guarantor consents and agrees to any such release and agrees that no such
release shall affect its obligations hereunder, except as to the Subsidiary so
released.
110
<PAGE>
IN WITNESS WHEREOF, each Contributing Party has executed and delivered
this Agreement, under seal, as of the date first above written.
JDN REALTY CORPORATION (SEAL)
By:_________________________________
Title:
JDN DEVELOPMENT COMPANY, INC. (SEAL)
By:_________________________________
Title:
111
<PAGE>
EXHIBIT K
---------
BORROWING BASE CERTIFICATE
Reference is made to the Term Loan Credit Agreement dated as of
February 17, 1999 (as modified and supplemented and in effect from time to time,
the "Credit Agreement") among JDN Realty Corporation, the Banks from time to
time parties thereto, Wachovia Bank, N.A., as Agent and PNC Bank, National
Association, as Documentation Agent. Capitalized terms used herein shall have
the meanings ascribed thereto in the Credit Agreement.
Pursuant to Section [3.01(h)][5.01(i)] of the Credit Agreement,
_______________, the duly authorized _______________ of the Borrower, hereby (i)
certifies to the Agent and the Banks that the calculation of the Borrowing Base
contained in this Borrowing Base Certificate is true, accurate and complete in
all material respects as of _______________, ______.
The calculation of the Borrowing Base is as follows:
(a) Net Operating Income for the 3 month period ending
on the last day of the Fiscal Quarter just ended
prior to the date of determination, from each
Eligible Unencumbered Stabilized Property $______________
(b) 10 times (a) $______________
(c) 4 times (b) $______________
(d) 0.60 times (c) $______________
(e) book value of Construction in Progress
on all Eligible Properties $______________
(f) 0.50 times (e) $______________
(g) lesser of (f) and $20,000,000 $______________
BORROWING BASE: sum of (d), plus (g) $______________
----
JDN REALTY CORPORATION
By:______________________________
Its:
112
<PAGE>
EXHIBIT L
---------
LIST OF ELIGIBLE PROPERTIES
---------------------------
JDN REALTY CORPORATION
<TABLE>
<CAPTION>
Total GLA in Year Built New to
Property GLA Borrowing Renovated or Borrowing
Number Shopping Center Name Location (Sq.Ft.) Base Expanded Base?
------ -------------------- -------- -------- ---- -------- -----
<S> <C> <C> <C> <C> <C> <C>
210 Brandon Lakes Village Brandon, FL 243,204 243,204 1997 Yes
220 White Sands Fort Walton, FL 21,900 21,900 1986 Yes
320 Ellis Crossing Griffin, GA 172,546 64,772 1986 Yes
344 Towne Center Lawrenceville, GA 277,078 277,078 1995 Yes
343 CVS Lawrenceville, GA 10,125 10,125 1998 Yes
347 Midway Shopping Loganville, GA 95,277 91,197 1995 Yes
Center
370 Merchant's Square Riverdale, GA 80,186 22,401 1989 Yes
376 Pike Nursersies Stockbridge, GA 10,800 10,800 1997 Yes
379 Village at Noble Farms Suwanee, GA 43,393 43,393 1997 Yes
387 Lowe's Warner Robins, GA 145,939 14,364 1997 Yes
880 Sutton's North Plaza Topeka, KS 125,657 125,657 1998 Yes
420 East Ridge Crossing Hendersonville, NC 133,052 133,052 1995 Yes
849 South Farm Lexington, KY 340,029 23,392 1998 Yes
140 Metro Station Jackson, MS 159,684 51,301 1997 Yes
410 Cross Pointe Fayetteville, NC 204,291 204,291 1985 Yes
505 Ashley Crossing Charleston, SC 196,049 196,409 1991 Yes
610 Farragut Pointe Farragut, TN 71,311 71,311 1991 Yes
622 Battlewood S/C Franklin, TN 54,411 54,411 1990 Yes
640 Country Bridge S/C Memphis, TN 64,223 64,223 1993 Yes
651 Plaza South S/C Murfreesboro, TN 71,028 71,028 1994 Yes
750 Lexington Crossing Lexington, VA 201,220 201,220 1997 Yes
755 Candlers Station Lynchburg, VA 315,767 270,767 1990 Yes
761 Genito Crossing Midlothian, VA 79,408 79,408 1985 Yes
2784 West Allis Center West Allis, WI 383,967 383,967 1968 Yes
____ Township Makeplace Monaca, PA 150,010 150,010 1997 Yes
------- -------
Total 3,650,555 2,879,681
</TABLE>
113
<PAGE>
Schedule 4.08
-------------
Subsidiaries
- ------------
Name Jurisdiction of Incorporation
- ---- -----------------------------
JDN Realty AL, Inc. Alabama
JDN Realty Corporation GP, Inc. Delaware
JDN of Pennsylvania Realty Corporation Delaware
JDN Realty LP, Inc. Delaware
JDN West Allis Associates, Limited Partnership Georgia
JDN Realty Investment, L.P. Georgia
Black Cherry Limited Liability Company Colorado
114
<PAGE>
Schedule 4.14
-------------
Environmental Matters
---------------------
The Borrower discloses the existence of the following: (i) a remediation
agreement (relating to a leaking, underground storage tank) entered into between
the State of Georgia and the owner of the Stop 'n' Go site adjacent to the
QuikTrip parcel located at the Borrower's Lawrenceville Property; (ii) a
remediation agreement (relating to soil and groundwater contamination) entered
into between the State of North Carolina and the owner of a tract adjoining the
Borrower's Greenville, North Carolina Property; and (iii) a limited Phase II
environmental assessment recommendation that impacted soils be remediated at the
Greensboro, North Carolina Property (but the Borrower has no knowledge that any
soil or water on or adjacent to any Property is contaminated by any Hazardous
Material.
115
<PAGE>
Schedule 5.17
-------------
Existing Investments/12/
------------------------
As of February 17, 1999
Investment Amount
---------- ------
1% of Voting Common Stock of JDN Development
Company, Inc. $ 100
100% of Non-Voting Common Stock of JDN
Development Company, Inc. $ 4,043,822
Mortgage Loans to JDN Development Company, Inc. $113,701,000
Advances to JDN Development Company, Inc. $ 28,094,173
Duck Creek, L.L.C $ 8,000,000
Denver Urban Renewal Authority Bonds $ 1,730,204
Cumming Sewer Authority Bonds $ 1,342,673
__________________
/12/Exclude Subsidiaries, which are set forth on Schedule 4.08.
116
<PAGE>
Schedule 5.25
-------------
Existing Guarantees
-------------------
In Effect on February 17, 1999
Entity/Instrument Amount
----------------- ------
JDN Development Company, Inc.
Construction loan - Canton, GA $ 9,449,908
Construction loan - Warner Robins, GA $ 7,207,118
------------
Sub-Total $ 16,657,026
Dogwood Drive, LLC
50% of Construction loan $ 4,340,674
------------
Total: $ 20,997,700
============
__________________
117
<PAGE>
EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996 1995 1994
---------- ---------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest Expense (including
amortization of deferred debt cost) $18,026 $ 9,525 $ 9,414 $ 8,747 $ 7,276
Interest Capitalized 6,401 4,650 1,993 1,538 343
--------- -------- ------- -------- -------
Total Fixed Charges $24,427 $14,175 $11,407 $10,285 $ 7,619
========= ======== ======= ======== =======
EARNINGS:
Net income before net gain (loss) on real
estate sales and extraorinary items $40,958 $27,585 $16,682 $10,782 $ 5,227
Fixed Charges 24,427 14,175 11,407 10,285 7,619
Capitalized Interest (6,401) (4,650) (1,993) (1,538) (343)
--------- -------- ------- -------- -------
Total Earnings $58,984 $37,110 $26,096 $19,529 $12,503
========= ======== ======= ======== =======
Ratio of Earnings to Fixed Charges 2.41 2.62 2.29 1.90 1.64
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Name State of Incorporation
---- ----------------------
JDN Development Company, Inc. Delaware
JDN of Pennsylvania Realty
Corporation Delaware
JDN Realty Corporation GP, Inc. Delaware
JDN Realty LP, Inc. Delaware
JDN of Alabama Realty Corporation Alabama
JDN Development LP, Inc. Delaware
WHF, Inc. Georgia
Dogwood Drive, L.L.C. Georgia
JDN West Allis Associates Limited Partnership Georgia
JDN Realty Investment, L.P. Georgia
JDN Development Investment, L.P. Georgia
JDN Real Estate Development, L.P. Georgia
JDN Realty AL, Inc. Alabama
Black Cherry Limited Liability Company Colorado
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 333-38611) of JDN Realty Corporation and the related Prospectus,
the Registration Statement (Form S-3 No. 33-90868) pertaining to the JDN Realty
Corporation Dividend Reinvestment and Stock Purchase Plan and in the related
Prospectus, the Registration Statement (Form S-8 No. 333-1848) pertaining to the
JDN Realty Corporation 1993 Incentive Stock Plan, the JDN Realty Corporation
1993 Non-Employee Director Stock Option Plan, and the JDN Realty Corporation
1995 Employee Stock Purchase Plan and in the related Prospectus of our report
dated February 27, 1999, with respect to the consolidated financial statements
and schedules of JDN Realty Corporation included in the Annual Report (Form 10-
K) for the year ended December 31, 1998.
ERNST & YOUNG LLP
Atlanta, Georgia
March 23, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 0 11,439
<SECURITIES> 0 0
<RECEIVABLES> 7,158 2,691
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 847,266 535,303
<DEPRECIATION> 56,093 38,306
<TOTAL-ASSETS> 968,922 599,753
<CURRENT-LIABILITIES> 0 0
<BONDS> 234,573 159,511
0 0
20 0
<COMMON> 327 277
<OTHER-SE> 517,698 371,311
<TOTAL-LIABILITY-AND-EQUITY> 968,922 599,753
<SALES> 0 0
<TOTAL-REVENUES> 81,311 48,005
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 35,684 20,136
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,454 4,856
<INCOME-PRETAX> 40,958 27,585
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 40,958 27,585
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 5,940
<CHANGES> 0 0
<NET-INCOME> 39,996 21,293
<EPS-PRIMARY> 1.30 0.92
<EPS-DILUTED> 1.28 0.91
</TABLE>
<PAGE>
EXHIBIT 99.1
RISK FACTORS/CAUTIONARY STATEMENTS
FOR PURPOSES OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Management of JDN Realty Corporation may from time to time make certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of
1934, as amended. When making statements which are not historical in nature,
including the words "anticipate," "estimate," "should," "expect," "believe,"
"intend" and similar expressions, we intend to identify forward-looking
statements. Such statements are, by their nature, subject to certain risks and
uncertainties.
Among the factors that could cause actual consolidated results from
operations to differ materially from those that the Company projects in forward-
looking statements are the following:
SIGNIFICANT RELIANCE ON MAJOR TENANTS; RISK OF TENANT BANKRUPTCY
Major Tenants. As of December 31, 1998, each of Wal-Mart and Lowe's leased more
than 10% of the gross leaseable area that the Company owned directly. Wal-Mart
and Lowe's also each accounted for more than 10% of the Company's total minimum
rent. No other single tenant accounts for more than 10% of the Company's gross
leaseable area or more than 10% total minimum rent in 1998.
If the financial condition or corporate strategy of any of the Company's major
tenants changes, these changes could have an adverse impact on the Company, such
as reducing distributions. The following is a list of examples of changes that
could have a material adverse effect on income and funds from operations and,
consequently, could reduce distributions:
- Wal-Mart or Lowe's could become unable to complete and lease existing
development and redevelopment projects on schedule and within budget;
- Wal-Mart or Lowe's could become unable to pay rent as it becomes due;
- Wal-Mart or Lowe's could fail to renew leases as they expire; and
- Wal-Mart or Lowe's could discontinue providing or provide significantly
fewer assignments of development projects to the Company, and the
Company could be unable to replace the income from these assignments
with economically advantageous assignments from other value-oriented
retail anchor tenants.
<PAGE>
Other Tenants. The bankruptcy or insolvency of a major tenant or a number
of smaller tenants may have an adverse impact on the properties affected and on
the income that those properties produce.
DEPENDENCE ON AND INFLUENCE OF EXECUTIVE OFFICERS AND DIRECTORS
The Company depends on the efforts of its executive officers, and
particularly J. Donald Nichols and Elizabeth L. Nichols. The loss of their
services could have an adverse effect on the operations of the Company.
J. Donald Nichols, Elizabeth L. Nichols and the other directors and
executive officers of the Company have substantial influence on the affairs of
the Company. For example, the directors may amend the investment and financing
policies of the Company without a vote of the holders of the Common Stock. Any
such amendments could result in decisions that are detrimental to the value of
the Company.
RISK OF DEBT FINANCING
The Company is subject to a variety of risks associated with debt
financing. Examples of these risks include the following:
- the Company's cash provided by operating activities may be
insufficient to meet required payments of principal and interest;
- the Company may be unable to pay or refinance indebtedness on its
properties;
- if prevailing interest rates or other factors at the time of
refinancing result in higher interest rates on refinancing, then the
Company's interest costs would increase, which may adversely affect
the Company's costs and related returns on its development and
redevelopment activities, cash provided by operating activities and
the ability to make distributions or payments to holders of the
Company's securities;
- if the Company is unable to secure refinancing of indebtedness on
acceptable terms, the Company may be forced to dispose of properties
upon disadvantageous terms, which may result in losses to the Company
and may adversely affect the Company's funds from operations; and
- if a property or properties are mortgaged to secure payment of
indebtedness and the Company is unable to meet mortgage payments, the
mortgagee may foreclose upon the property or otherwise compel the
Company to transfer the property to the mortgagee, resulting in a loss
of income and asset value to the Company.
In addition, in June 1998 the Division of Banking Supervision and
Regulation of the Board of Governors of the Federal Reserve System issued a
supervisory letter which addressed the subject of lending standards for business
loans. The supervisory letter noted, among other things, a significant increase
in bank lending to REITs and concluded that bank examiners should increase their
understanding of REITs and related lending and credit risks associated with
2
<PAGE>
lending to REITs. Management is uncertain of the future effects of the
supervisory letter on the Company. Any changes in bank lending practices as a
result of the supervisory letter may affect the Company's ability to
successfully negotiate new credit facilities.
Company policy currently prohibits the Company from incurring debt (secured
or unsecured) in excess of 60% of total market capitalization. The Board of
Directors can change this limitation without approval of the holders of the
Company's common stock. The Charter and Bylaws of the Company do not limit the
amount of borrowings the Company can incur.
REAL ESTATE INVESTMENT RISKS
General Risks. Real property investments are subject to varying degrees of
risk. Among the factors that may affect real estate values and the income
generated from real estate investments are the following:
- changes in the general economic climate;
- local conditions (such as an oversupply of or a reduction in demand for
shopping center space in an area);
- the quality and philosophy of management;
- competition from other available space;
- the ability of the owner to provide adequate maintenance and insurance;
- variable operating costs (including real estate taxes);
- costs associated with federal, state and local government laws and
regulations (including, for example, environmental, zoning and other
land use laws and regulations);
- changes in business conditions and the general economy as they affect
interest rate levels;
- the availability of financing; and
- potential liability under and changes in environmental and other laws.
Dependence on rental income from real property. Because rental income from
real property represents substantially all of the Company's total revenues, the
inability of a significant number of the Company's tenants to meet their
obligations to the Company, or the inability of the Company to lease on
economically favorable terms a significant amount of space in its properties
could adversely affect the Company.
In the event of default by a tenant, the Company may experience delays in
enforcing, and incur substantial costs to enforce its rights as landlord. In
addition, although circumstances may cause a reduction in income from the
investment, there is generally no reduction in certain significant expenditures
associated with ownership of real estate (such as mortgage payments, real estate
taxes and maintenance costs).
3
<PAGE>
Operating Risks. The Company's shopping center properties are subject to
all operating risks common to shopping center developments and are particularly
subject to the risks of changing economic conditions that affect value-oriented
retailers and the retail industry as a whole. Such risks include the following:
- competition from other shopping center developments and developers;
- excessive building of comparable properties or increases in unemployment
in the areas in which the Company's properties are located (either of
which might adversely affect occupancy or rental rates);
- increases in operating costs due to inflation and other factors (which
increases may not necessarily be offset by increased rents);
- inability or unwillingness of lessees to pay rent increases;
- changes in general economic conditions or consumer preferences that
affect the demand for value-oriented retailers or that result in the
merger of or closings by such retailers;
- the availability of debt and equity capital with favorable terms and
conditions;
- future enactment of laws regulating public places (including present and
possible future laws relating to access by disabled persons); and
- limitation by local rental markets of the extent to which rents may be
increased to meet increased expenses without decreasing occupancy
rates.
Any of the above may adversely affect the Company's ability to make
distributions or payments to holders of its securities.
Illiquidity of Real Estate. Equity real estate investments are relatively
difficult to convert to cash and therefore may tend to limit the ability of the
Company to react promptly in response to changes in economic or other
conditions. Further, restrictions applicable to REITS may affect the Company's
ability to sell properties without adversely affecting returns to holders of the
Company's securities.
Inability to Rent Unleased Space. Many factors, including certain covenants
found in some leases with existing tenants that restrict the use of other space
at a property, may affect the ability of the Company to rent unleased space.
There can be no assurance that any tenant whose lease expires in the future will
renew such lease or that the Company will be able to re-lease space on
economically advantageous terms. In addition, the Company may incur costs in
making improvements or repairs to a property that are required by a new tenant.
Effect of Uninsured Loss on Performance. The Company carries comprehensive
liability, fire, flood, extended coverage and rental loss insurance with policy
specifications and insured limits that are customary for similar properties.
Certain types of losses (such as from wars or earthquakes), however, are either
uninsurable or insurable only at costs which are not economically justifiable.
If an uninsured loss occurs, although the Company would continue to
4
<PAGE>
be obligated to repay any recourse mortgage indebtedness on the property, the
Company may lose both its invested capital in, and anticipated profits from, the
property.
Competition. Numerous commercial developers, real estate companies and
other owners of real estate (including those that operate in the region in which
the Company's properties are located) compete with the Company in seeking land
for development, properties for acquisition and tenants for properties. Certain
of these competitors may have greater capital and other resources than the
Company.
Potential Environmental Liability and Cost of Remediation. As an owner of
real property, the Company may become liable for the costs of removal or
remediation of certain hazardous or toxic substances at, under or disposed of in
connection with such property. Also, the Company may become liable for certain
other potential costs relating to hazardous or toxic substances (including
government fines and injuries to persons and adjacent property). Various
federal, state and local environmental laws may impose liability without regard
to whether the owner knew of, or was responsible for, the presence or disposal
of such substances and may impose liability on the owner in connection with the
activities of an operator of the property.
The cost of any required remediation, removal, fines or personal or
property damages and the owner's liability therefor could exceed the value of
the property. In addition, the presence of such substances, or the failure to
properly dispose of or remediate such substances, may adversely affect the
owner's ability to sell or rent such property or to borrow using such property
as collateral which, in turn, would reduce the owner's revenues.
Americans with Disabilities Act. The Company's properties and any
additional developments or acquisitions must comply with Title III of the
Americans with Disabilities Act. Compliance with the ADA's requirements may
require removal of structural, architectural or communication barriers to
handicapped access and utilization in certain public areas of the Company's
properties. Noncompliance could result in injunctive relief, imposition of fines
or an award of damages to private litigants. If the Company must make changes to
bring any of the properties into compliance with the ADA, expenses associated
with such changes could adversely affect the Company's ability to make expected
distributions. The Company believes that its competitors face similar costs to
comply with the requirements of the ADA.
RISKS INHERENT IN DEVELOPMENT AND ACQUISITION ACTIVITIES
Developing or expanding existing shopping centers is an integral part of
the Company's strategy for maintaining and enhancing the value of its shopping
center portfolio. While the Company's policies with respect to its activities
are intended to limit some of the risks otherwise associated with those
activities (including not commencing construction on a project prior to
obtaining a commitment from an anchor tenant), the Company nevertheless will
incur certain risks, including risks related to delays in construction and
lease-up, costs of materials, financing availability, volatility in interest
rates, labor availability and the failure of properties to perform as expected.
5
<PAGE>
LIMITATIONS ON POTENTIAL CHANGES IN CONTROL
Certain provisions of the Company's Charter and Bylaws and Maryland law may
make a change in the control of the Company more difficult, even if a change of
control were in the shareholders' interest. These provisions include the
following:
- the limitation on ownership of the Company's capital stock by any single
holder (other than the Nichols, their immediate family and certain
affiliates) to (a) 8% of either the number or the value of the
outstanding shares of common stock and (b) 8% of either the number or
the value of the outstanding shares of preferred stock;
- the staggered terms of the Company's Board of Directors;
- super-majority voting in certain situations;
- business combination provisions under Maryland law; and
- the ability of the Company's Board of Directors to issue stock without
shareholder approval.
ADVERSE TAX CONSEQUENCES
Tax Liabilities of Failure to Qualify as a REIT. The Company has elected to
be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the
"Code") for federal income tax purposes. We can provide no assurance, however,
that the Company will continue to operate in a manner enabling it to remain so
qualified. Qualification as a REIT involves the application of highly technical
and complex Code provisions which have only a limited number of judicial or
administrative interpretations. Also, the determination of various factual
matters and circumstances not entirely within the Company's control may impact
its ability to qualify as a REIT. In addition, new legislation, regulations,
administrative interpretations or court decisions may significantly change the
tax laws with respect to the qualification as a REIT or the federal income tax
consequences of such qualification.
If in any taxable year the Company does not qualify as a REIT, it would be
taxed as a corporation and, in computing its taxable income, the Company would
not be able to deduct distributions to the holders of the Company's capital
stock. In addition, unless entitled to relief under certain statutory
provisions, the Company could not elect REIT status for the four taxable years
following the year during which qualification was lost. This treatment would
reduce the net earnings of the Company available for investment or distribution
or payment to holders of its securities because of the additional tax liability
to the Company for the year or years involved. In addition, the Company would no
longer be required by the Code to make any distributions.
Among the requirements to qualify as a REIT, the Company must distribute at
least 95% of its taxable income to its shareholders each year. Possible timing
differences between receipt of income and payment of expenses and the inclusion
and deduction of such amounts in determining taxable income, could require the
Company to reduce its dividends below the level necessary to maintain its
qualification as a REIT, which would have material adverse tax consequences.
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Other REIT Taxes. Although qualified for REIT taxation, certain
transactions or other events could lead to the Company being taxed at rates
ranging from 4% to 100% on certain income or gains.
We may amend or supplement from time to time in other filings with the
Securities and Exchange Commission these risks, uncertainties and factors that
could cause actual consolidated results from operations to differ materially
from projections in forward-looking statements made by or on behalf of the
Company.
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EXHIBIT 99.2
FEDERAL INCOME TAX AND ERISA CONSIDERATIONS
The following discussion addresses the material federal tax considerations
relevant to the taxation of the Company and summarizes the material federal
income tax consequences relevant to certain shareholders. This discussion is for
general information only, is not exhaustive of all possible tax considerations
and is not intended as and should not be construed as tax advise. The actual tax
consequences of holding particular securities being issued by the Company may
vary in light of a prospective holder's particular facts and circumstances.
Certain holders, such as tax-exempt entities, insurance companies and financial
institutions, are generally subject to special rules which are not addressed
fully herein. In addition, the following discussion does not discuss issues
under any foreign, state or local tax laws except as expressly stated. The tax
treatment of a holder of any of the securities offered by the Company will vary
depending upon the terms of the particular securities acquired by such holder,
as well as his particular situation, and this discussion does not attempt to
address aspects of federal income taxation relating to holders of particular
securities. Any additional federal income tax considerations relevant to holders
of particular securities will be provided in the applicable Prospectus and/or
Prospectus Supplement relating thereto.
The following general summary of the federal income tax rules governing a
REIT and its shareholders is based on the Code, Treasury Regulations, generally
available judicial decisions, rulings and other administrative interpretations,
all of which are subject to change, and possibly retroactively. Because many
provisions of the Code have been revised substantially by recent legislation,
including the Taxpayer Relief Act of 1997 (the "1997 Act") and the Internal
Revenue Service Restructuring and Reform Act of 1998 (the "1998 Act"), very
few Treasury Regulations, judicial decisions, rulings or other administrative
pronouncements have been issued interpreting many of the revisions to the Code.
Waller Lansden Dortch & Davis, A Professional Limited Liability Company
("WLDD"), has acted as tax counsel to the Company and has reviewed this summary
and has rendered an opinion that the description of the law and the legal
conclusions contained herein are correct in all material respects, and that the
discussion hereunder fairly summarizes the federal income tax considerations
that are likely to be material to the Company and a holder of securities of the
Company. However, investors should be aware that Congress continues to consider
new tax bills. Accordingly, no assurance can be given that future legislation,
administrative regulations, rulings, or interpretations or court decisions will
not alter significantly the tax consequences described below or that such
changes or decisions will not be retroactive. The Company has not requested, nor
does it presently intend to request, a ruling from the Internal Revenue Service
(the "IRS") with respect to any of the matters discussed below. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the Company's eligibility for taxation as a REIT. Because the
provisions governing REITs are highly technical and complex, no attempt is made
in the following discussion to discuss in detail all of the possible tax
consequences applicable to the Company or its shareholders.
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It is also important to note that the application of federal income tax
laws and applicable regulations may be subject to varying interpretations and
could result in a charge to the Company at a later date upon final determination
by taxing authorities.
ACCORDINGLY, THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL
TAX PLANNING AND EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT THE APPLICABLE
PROSPECTUS AND/OR PROSPECTUS SUPPLEMENT, AS WELL AS WITH HIS OWN TAX ADVISOR,
REGARDING THE TAX CONSEQUENCES TO HIM OF THE ACQUISITION, OWNERSHIP AND SALE OF
THE COMPANY'S SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER
TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
It is the opinion of WLDD that the Company is organized and is operating in
conformity with the requirements for qualification and taxation as a REIT
commencing with the Company's taxable year ending December 31, 1994, and its
method of operation will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code. It must be emphasized that
this opinion is based on various assumptions and is conditioned upon certain
representations made by the Company as to factual matters including, but not
limited to, those set forth below in this discussion and those concerning its
business and properties as set forth in any applicable Prospectus and/or
Prospectus Supplement. Moreover, such qualification and taxation as a REIT
depends upon the Company's ability to meet, through actual annual operating
results, the various income, asset, distribution, stock ownership and other
tests discussed below, the results of which will not be reviewed by WLDD.
Accordingly, no assurance can be given that the actual results of the Company's
operations for any one taxable year will satisfy such requirements.
If the Company ceases to qualify as a REIT, and the relief provisions do
not apply, the Company's income that is distributed to shareholders would be
subject to the "double taxation" on earnings (once at the corporate level and
again at the shareholder level) that generally results from investment in a
corporation. Failure to maintain qualification as a REIT would force the Company
to reduce significantly its distributions and possibly incur substantial
indebtedness or liquidate substantial investments in order to pay the resulting
corporate taxes. In addition, the Company, once having obtained REIT status and
having lost such status, would not be eligible to elect REIT status for the four
subsequent taxable years, unless its failure to maintain its qualification was
due to reasonable cause and not willful neglect, and certain other requirements
were satisfied. In order to elect to again be taxed as a REIT, just as with the
original election, the Company would be required to distribute all of its
earnings and profits accumulated in any non-REIT taxable year.
The Company intends to conduct its affairs so that the assets of the
Company will not be deemed to be "plan assets" of any individual retirement
account, employee benefit plan subject
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to Title I of ERISA, or other qualified retirement plan subject to Section 4975
of the Code which acquires its shares.
TAXATION OF THE COMPANY
The Company elected to be taxed as a REIT for federal income tax purposes
commencing with the taxable year ending December 31, 1994. The Company has
continued its REIT election since that time and intends to continue such
election. The Company believes that it is organized and has operated in a manner
so as to qualify for taxation as a REIT, and the Company intends to continue to
operate in such a manner. However, no assurance can be given that the Company
has operated in a manner so as to qualify for taxation as a REIT or that it will
continue to operate in such a manner.
Generally, if the Company continues to qualify for taxation as a REIT, it
will not be subject to federal income tax on income or capital gains that it
distributes in a timely manner to shareholders. However, notwithstanding the
Company's qualification as a REIT, the Company will be subject to federal income
tax as follows: First, the Company will be taxed at regular corporate rates on
any undistributed "real estate investment trust taxable income," including
undistributed net capital gains. Second, under certain circumstances, the
Company may be subject to the "alternative minimum tax" on its items of tax
preference, if any. Third, if the Company has (i) net income from the sale or
other disposition of "foreclosure property" that is held primarily for sale to
customers in the ordinary course of business, or (ii) other nonqualifying income
from foreclosure property, it will be subject to tax on such income at the
highest corporate rate. Fourth, any net income that the Company has from
prohibited transactions (which are, in general, certain sales or other
dispositions of property other than foreclosure property held primarily for sale
to customers in the ordinary course of business) will be subject to a 100% tax.
Fifth, if the Company should fail to satisfy either the 75% or 95% gross income
tests (as discussed below), and has nonetheless maintained its qualification as
a REIT because certain other requirements have been met, it will be subject to a
100% tax on the net income attributable to the greater of the amount by which
the Company fails the 75% or 95% gross income tests. Sixth, if the Company fails
to distribute during each year at least the sum of (i) 85% of its REIT ordinary
income for such year, (ii) (subject to the Section 857(b) election) 95% of its
REIT capital gain net income for such year, and (iii) any undistributed taxable
income from preceding periods, then the Company will be subject to a 4% federal
excise tax on the excess of such required distribution over the amounts actually
distributed. Seventh, to the extent that the Company recognizes gain from the
disposition of an asset with respect to which there existed "built-in gain" as
of January 1, 1994 and such disposition occurs within a 10-year recognition
period beginning January 1, 1994, the Company will be subject to federal income
tax at the highest regular corporate rate on the amount of its "net recognized
built-in gain." The Company estimates that on January 1, 1994, the aggregate
"built-in gain" was approximately $12.1 million. The Company may offset any net
recognized built-in gain by available net operating loss carryforwards. On
January 1, 1994, the Company had approximately $2.7 million in net operating
loss carryforwards which expire at various dates through 2007. Management of the
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Company will consider this tax effect when determining whether it is in the best
interest of the Company to sell a specific piece of real property. Eighth, the
Company could be subject to tax in certain situations and on certain
transactions not presently contemplated.
REQUIREMENTS FOR QUALIFICATION AS A REIT
To qualify as a REIT for a taxable year under the Code, the Company must
have no earnings and profits accumulated in any non-REIT year. The Company also
must have in effect an election to be taxed as a REIT and must meet other
requirements, some of which are summarized below, including percentage tests
relating to the sources of its gross income, the nature of the Company's assets
and the distribution of its income to shareholders. Such election, if properly
made and assuming continuing compliance with the qualification tests described
herein, will continue in effect for subsequent years.
ORGANIZATIONAL REQUIREMENTS AND SHARE OWNERSHIP TESTS
Section 856(a) of the Code defines a REIT as a corporation, trust or
association (1) which is managed by one or more trustees or directors; (2) the
beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest; (3) which would be taxable,
but for Sections 856 through 859 of the Code, as a domestic corporation; (4)
which is neither a financial institution nor an insurance company, subject to
certain provisions of the Code; (5) the beneficial ownership of which is held by
100 or more persons, determined without reference to any rules of attribution
(the "share ownership test"); (6) that during the last half of each taxable year
not more than 50% in value of the outstanding stock of which is owned, directly
or indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) (the "five or fewer test"); and (7) which meets certain other
tests, described below, regarding the nature of its income and assets. Section
856(b) of the Code provides that conditions (1) through (4), inclusive, must be
met during the entire taxable year, and that condition (5) must be met during at
least 335 days of a taxable year of 12 months, or during a proportionate part of
a taxable year of fewer than 12 months. The five or fewer test and the share
ownership test do not apply to the first taxable year for which an election is
made to be treated as a REIT.
The Company has issued sufficient shares to a sufficient number of people
pursuant to its initial public offering to allow it to satisfy the share
ownership test and the five or fewer test. In addition, to assist in complying
with the five or fewer test on an ongoing basis, the Company's Charter contains
certain provisions restricting share transfers where the transferee (other than
the Nichols, members of their families and certain affiliates, and certain
exceptions specified in the Charter) would, after such transfer, own (a) more
than 8% either in number or value of the outstanding Common Stock of the Company
or (b) more than 8% either in number or value of the outstanding Preferred Stock
of the Company. Pension plans and certain other tax exempt entities will have
different restrictions on ownership. If, despite this prohibition, stock is
acquired increasing a transferee's ownership to over 8% in value of either the
outstanding Common Stock of the Company or Preferred Stock of the Company, the
stock in excess of the 8% is deemed to be held in trust for transfer at a price
which does not exceed what the purported transferee paid for the stock and,
while held in trust, the stock is not entitled to receive dividends or to
vote. In
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addition, under these circumstances, the Company also has the right to redeem
such stock. For purposes of determining whether the five or fewer test (but not
the share ownership test) is met, any stock held by a qualified trust (generally
pension plans, profit-sharing plans and other employee retirement trusts)
generally is treated as held directly by the trust's beneficiaries in proportion
to their actuarial interests in the trust, and not held by the trust.
The Company is required to maintain records of the actual and constructive
beneficial ownership of its shares. The 1997 Act added certain provisions to the
Code that provide that if the Company timely mails demand letters to certain
shareholders requesting stock ownership information be provided to the Company
or the IRS, unless the Company does not know, or exercising reasonable due
diligence would not have known, that the five or fewer test has in fact not been
satisfied, the Company shall be deemed to have satisfied the five or fewer test.
Pursuant to the 1997 Act, if the Company fails to comply with the Treasury
Regulations to ascertain its ownership it will be subject to a penalty for
failing to do so and will void the possible application of the deemed
satisfaction of the five or fewer test of ownership. The penalty is $25,000
($50,000 for intentional violations) for any year in which the Company does not
comply with the ownership Treasury Regulations. The Company will also be
required, when requested by the IRS, to send curative demand letters. In
accordance with the Treasury Regulations, the Company must and will demand from
certain shareholders written statements concerning the actual and constructive
beneficial ownership of shares. The Company's Bylaws require such record holders
to respond to such requests for information. Any shareholder who does not
provide the Company with requested information concerning share ownership will
be required to include certain information relating thereto with his income tax
return. A list of shareholders failing to fully comply with the demand for the
written statements shall be maintained as part of the Company's records required
under the Code.
INCOME TESTS
In order to maintain qualification as a REIT, two gross income requirements
must be satisfied annually by the Company. First, at least 75% of the Company's
gross income (other than from certain "prohibited transactions") in each taxable
year must consist of certain types of income identified in the Code, including
qualifying "rents from real property"; qualifying interest on obligations
secured by mortgages on real property or interests in real property; gain from
the sale or other disposition of real property (including interests in real
property and mortgages on real property) held for investment and not primarily
for sale to customers in the ordinary course of business; income and gain from
certain properties acquired by the Company through foreclosure; and income
earned from certain types of qualifying temporary investments. When the Company
receives new capital in exchange for its shares (other than dividend
reinvestment amounts) or in a public offering of debt instruments with
maturities of five years or longer, income attributable to the temporary
investment of such new capital, if received or accrued within one year of the
Company's receipt of the new capital, is qualified temporary investment income
under the 75% gross income test.
Second, at least 95% of the Company's gross income (other than from certain
"prohibited transactions") in each taxable year must consist of income which
qualifies under the 75% gross
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income test as well as dividends and interest from any other source, gain from
the sale or other disposition of shares and other securities which are not
dealer property, any payment to the Company under an interest rate swap or cap
agreement entered into as a hedge against variable rate indebtedness incurred to
acquire or carry real estate assets, and any gain from the disposition of such
an agreement.
In order to qualify as "rents from real property" in satisfying the gross
income requirements for a REIT described above, several conditions must be met
related to the identity of the tenant, the computation of the rent payable, and
the nature of the property leased. The Company does not anticipate receiving
rents that fail to meet these conditions. In addition, the Company must not
manage its properties or furnish or render services to the tenants of its
properties, except through an independent contractor from whom the Company
derives no income. There is an exception to this rule permitting a REIT to
perform directly certain "usually or customarily rendered" tenant services of
the sort which a tax-exempt organization could perform without being considered
in receipt of "unrelated business taxable income." The Company self-manages the
properties, but does not provide services to tenants which it believes are
outside the exception. The 1997 Act added certain provisions to the Code that
permit the Company to render a de minimis amount (1% of rents) of nonqualifying
services to tenants, or in connection with the management of the property, and
still treat other amounts received as "rents from real property." For these
purposes, the value of nonqualifying services shall not be less than 150% of the
Company's direct cost of providing the services.
If rent attributable to personal property leased in connection with a lease
of real property is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not qualify
as rents from real property. Generally, this 15% test is applied separately to
each lease. The portion of rental income treated as attributable to personal
property is determined according to the ratio of the tax basis of the personal
property to the total tax basis of the property which is rented. The
determination of what fixtures and other property constitute personal property
for federal tax purposes is difficult and imprecise. Based upon allocations of
value as found in the purchase agreements and/or upon review by employees of the
Company, the Company believes that it currently does not have and does not
believe that is likely in the future to have 15% in value of any significant
portion of its real properties classified as personalty. WLDD, in rendering its
opinion as to the qualification of the Company as a REIT, is relying on the
conclusions of the Company and its senior management as to the proportionate
value of the personalty. If, however, rent payments do not qualify, for reasons
discussed above, as rents from real property for purposes of Section 856 of the
Code, it will be more difficult for the Company to meet the 95% or 75% gross
income tests and continue to qualify as a REIT.
In order to qualify as "interest on obligations secured by mortgages on
real property," the amount of interest received generally must not be based on
the income or profits of any person, but may be based on a fixed percentage or
percentages of receipts or sales.
The Company may temporarily invest its working capital in short-term
investments, including shares in other REITs or interests in REMICs. Although
the Company will use its best efforts to ensure that its income generated by
these investments will be of a type which satisfies
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the 75% and 95% gross income tests, there can be no assurance in this regard.
The Company has analyzed its gross income through December 31, 1998 and has
determined that it has met and expects in the future to meet the 75% and 95%
gross income tests, and for 1998 and prior years has met the 30% gross income
test, which has been repealed for 1998 and subsequent years.
The Company is and expects to continue performing third-party management
services. Such income does not qualify for the 95% or 75% gross income test and
the Company will continue to monitor the volume of such income to avoid
violating the 95% and 75% gross income tests. The Company may, if necessary,
provide such services through a non-controlled affiliated entity to avoid
failing to satisfy either the 95% or 75% gross income test. The Company
presently has a non-controlled affiliated entity which is engaged in development
activities.
If the Company fails to meet the requirements of either or both the 75% or
95% gross income tests for any taxable year, it may nevertheless qualify as a
REIT for such year if it is entitled to relief under certain provisions of the
Code. These relief provisions will be generally available if the Company's
failure to meet such tests was due to reasonable cause and not to willful
neglect, the Company attaches a schedule of the sources of its income to its
return, and any incorrect information on the schedule was not due to fraud with
intent to evade tax. It is not possible, however, to know whether the Company
would be entitled to the benefit of these relief provisions as the application
of the relief provisions is dependent on future facts and circumstances. If
these relief provisions apply, a special tax generally equal to 100% is imposed
upon the net income attributable to the greater of the amount by which the
Company failed the 75% or 95% gross income tests.
ASSET TESTS
At the close of each quarter of the Company's taxable year, it must also
satisfy three tests relating to the nature of its assets. First, at least 75% of
the value of the Company's total assets must consist of "real estate assets"
(including interests in real property, interests in mortgages on real property,
shares in other qualified REITs, and certain temporary investments), cash, cash
items and government securities. Second, not more than 25% of the Company's
total assets may be represented, in whole or in part, by securities other than
those includable in the 75% asset class. Finally, of the investments included in
the 25% asset class, the value of any one issuer's securities owned by the
Company may not exceed 5% of the value of the Company's total assets, and the
Company may not own more than 10% of any one issuer's outstanding voting
securities.
If the Company meets the above requirements at the close of any quarter, it
will not lose its status as a REIT because of the change in value of its assets
during a subsequent quarter unless the discrepancy exists immediately after the
acquisition of any security or other property which is wholly or partly the
result of such acquisition. Where a failure to satisfy the above requirements
results from an acquisition of securities or other property during a quarter,
the failure can be cured by disposition of sufficient nonqualifying assets
within 30 days after the close of such quarter. While the Company intends to
meet the requirements of the asset tests described above, no assurance can be
given that the Company will be able to do so.
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The Company may own 100% of the stock of a corporation if such corporation
is a "qualified REIT subsidiary." For federal tax purposes, a qualified REIT
subsidiary is ignored and the assets, liabilities, income, deductions and other
attributes are treated as being owned or generated directly by the Company. The
Company currently has four qualified REIT subsidiaries. If the Company acquires
100% of an existing corporation, the acquired corporation will be deemed to
liquidate and all of its built-in gain will be taxable. In addition, the Company
would have to make distributions sufficient to eliminate any "C" corporation
earnings and profits as well as sufficient distributions to meet the
distribution requirements described below.
DISTRIBUTION REQUIREMENTS
In order to qualify as a REIT, the Company is required to distribute
dividends (other than capital gain dividends) to its shareholders in an amount
equal to or greater than the excess of (A) the sum of (i) 95% of the Company's
"real estate investment trust taxable income," computed without regard to the
dividends paid deduction and the Company's net capital gain ("net investment
income") and (ii) 95% of the net income, if any, (after tax) from foreclosure
property, over (B) the sum of certain non-cash income (from certain imputed
rental income and income from transactions inadvertently failing to qualify as
like-kind exchanges). These requirements may be waived by the IRS if the REIT
establishes that it failed to meet them by reason of distributions previously
made to meet the requirements of the 4% federal excise tax described below.
Unlike net investment income, the Company's net capital gain need not be
distributed in order for the Company to maintain its status under the Code as a
REIT; however, the Company will be taxed on any net capital gain which it fails
to distribute in a timely manner. A REIT may elect to retain and pay income tax
on net long-term capital gains that it receives during a taxable year. If the
Company makes this election, shareholders are required to include in their
income as long-term capital gain their proportionate share of the undistributed
long-term capital gains so designated by the Company. A shareholder will be
treated as having paid his or her share of the tax paid by the Company in
respect of long-term capital gains so designated by the Company, for which the
shareholder will be entitled to a credit or refund. In addition, the
shareholder's basis in his or her Company shares will be increased by the amount
of the Company's designated undistributed long-term capital gains that are
included in the shareholder's long-term capital gains, reduced by the
shareholder's proportionate share of tax paid by the Company on those gains that
the shareholder is treated as having paid. The earnings and profits of the
Company will be reduced, and the earnings and profits of any corporate
shareholder of the Company will be increased, to take into account amounts
designated by the Company pursuant to this rule. The Company must pay its tax on
its designated long-term capital gains within 30 days of the close of any
taxable year in which it designates long-term capital gains pursuant to this
rule, and it must mail a written notice of its designation to its shareholders
within 60 days of the close of the taxable year.
Should the Company distribute a capital gain dividend while Preferred
Shares are outstanding, it will be required to designate a portion of dividends
entitled to be received by holders of the Preferred Shares as capital gain
dividends, thereby reducing the portion of total
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distributions paid to holders of the Company's Common Shares which would
otherwise be characterized as capital gains dividends.
The Company will be subject to a nondeductible 4% federal excise tax to the
extent it fails within a calendar year to make "required distributions" to its
shareholders of 85% of its ordinary income and, unless the 1997 Act election is
made, 95% of its capital gain net income plus the excess, if any, of the
"grossed up required distribution" for the preceding calendar year over the
amount treated as distributed for such preceding calendar year. For this
purpose, the term "grossed up required distribution" for any calendar year is
the sum of the taxable income of the Company for the taxable year (without
regard to the deduction for dividends paid) and all amounts from earlier years
that are not treated as having been distributed under the provision. Dividends
declared in the last quarter of the year and paid during the following January
will be treated as having been paid and received on December 31. The Company
intends to make distributions to shareholders so that it will not incur this tax
but, as noted below, various situations could make it impractical to meet the
prescribed distribution schedule.
It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirements due to
timing differences between actual receipt of income and actual payment of
deductible expenses or dividends on the one hand and the inclusion of such
income and deduction of such expenses or dividends in arriving at "real estate
investment trust taxable income" of the Company on the other hand. The 1997 Act
eliminated certain items of phantom income from the 95% distribution
requirement. The problem of inadequate cash to make required distributions could
also occur as a result of the repayment in cash of principal amounts due on the
Company's outstanding debt, particularly in the case of "balloon" repayments or
as a result of capital losses on short-term investments of working capital.
Therefore, the Company might find it necessary to arrange for short-term, or
possibly long-term borrowing, or new equity financing. If the Company were
unable to arrange such borrowing or financing as might be necessary to provide
funds for required distributions, its REIT status could be jeopardized.
Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a year by paying "deficiency dividends"
to shareholders in a later year, which may be included in the Company's
deduction for dividends paid for the earlier year. The Company may be able to
avoid being taxed on amounts distributed as deficiency dividends; however, the
Company may in certain circumstances remain liable for the 4% federal excise tax
described above.
COMPANY'S OWNERSHIP OF PARTNERSHIP INTERESTS
In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT is deemed to own its proportionate share of
the partnership's assets and to earn its proportionate share of the
partnership's income. In addition, the assets and gross income of the
partnership retain the same character in the hands of the REIT for purposes of
the gross income and asset tests applicable to REITs as described above. Thus,
the Company's proportionate share of the assets, liabilities and items of income
of the partnerships and limited liability companies in
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which it has ownership interests will be treated as assets, liabilities and
items of income of the Company for purposes of applying the REIT requirements
described herein.
FEDERAL INCOME TAX TREATMENT OF LEASES
The availability to the Company of, among other things, depreciation
deductions with respect to the facilities owned and leased by the Company
depends upon the treatment of the Company as the owner of the facilities and the
classification of the leases of the facilities as true leases, rather than as
sales or financing arrangements, for federal income tax purposes. The Company
has not requested nor received an opinion that it will be treated as the owner
of the portion of the facilities constituting real property and the leases will
be treated as true leases of such real property for federal income tax purposes.
Based on the conclusions of the Company and its senior management as to the
values of personalty, the Company has met and plans to meet in the future its
compliance with the 95% distribution requirement (and the required distribution
requirement) by making distributions on the assumption that it is not entitled
to depreciation deductions for that portion of the leased facilities which it
believes constitutes personal property, but to report the amount of income
taxable to its shareholders by taking into account such depreciation. The value
of real and personal property and whether certain fixtures are real or personal
property are factual evaluations that cannot be determined with absolute
certainty under current IRS regulations and therefore are somewhat uncertain.
INCOME FROM PROHIBITED TRANSACTIONS
A REIT is subject to a 100% tax on the net income derived from "prohibited
transactions." A prohibited transaction is the sale or other disposition of
property "held primarily for sale to customers in the ordinary course of
business" which is not foreclosure property. The Company intends to hold its
properties for investment with a view to long-term appreciation, to engage in
the business of acquiring, developing, owning and operating its properties and
to make occasional sales of its properties as are consistent with the Company's
investment objectives. Whether property is held primarily for sale to customers
in the ordinary course of business is a question of fact that depends on all the
facts and circumstances with respect to the particular transaction.
A safe harbor exception is provided for which certain sales of "real estate
assets" will be deemed not to constitute a prohibited transaction. Generally,
the following requirements must be met for the sale to fall within this safe
harbor:
- the REIT must have held the property for at least four years;
- the total expenditures made by the REIT during the four-year period
preceding the date of sale which are includable in the basis of the
property must not exceed 30% of the net selling price of the property;
- during the taxable year, (i) the REIT does not make more than seven
sales of property (other than sales of foreclosure property or
property that was involuntarily converted), or (ii) the total adjusted
bases of property (other than sales of foreclosure property or
property that was involuntarily converted) sold
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must not exceed 10% of the total bases of all of the assets of the REIT
as of the beginning of the taxable year;
- if the REIT makes more than seven sales of property (other than sales of
foreclosure property or property that was involuntarily converted)
during the taxable year, substantially all of the marketing and
development expenditures with respect to the property must be made
through an "independent contractor" from whom the REIT itself does not
derive or receive any income; and
- if the property consists of land or improvements, not acquired through
foreclosure (or deed in lieu of foreclosure), or lease termination, the
REIT will not be considered to have held the property for at least four
years for production of rental income.
The Company may from time to time sell or exchange some of its properties
for various reasons. If the above safe harbor is not met, the Company will
consider all of the facts and circumstances of the particular transaction and
the possible applicability of the 100% tax. The simultaneous exercise of options
to acquire leased property that may be granted to certain lessees or other
events could result in sales of properties by the Company that exceed the safe
harbor. However, the Company believes that in such event, based on all of the
facts and circumstances, it will not have held such properties primarily for
sale to customers in the ordinary course of business.
OTHER ISSUES
With respect to property acquired from and leased back to the same or an
affiliated party, the IRS could assert that the Company realized prepaid rental
income in the year of purchase to the extent that the value of the leased
property exceeds the purchase price paid by the Company for that property. In
litigated cases involving sale-leasebacks which have considered this issue,
courts have concluded that buyers have realized prepaid rent where both parties
acknowledged that the purported purchase price for the property was
substantially less than fair market value and the purported rents were
substantially less than the fair market rentals. Because of the lack of clear
precedent and the inherently factual nature of the inquiry, complete assurance
cannot be given that the IRS could not successfully assert the existence of
prepaid rental income in such circumstances. The value of property and the fair
market rent for properties involved in sale-leasebacks are inherently factual
matters and always subject to challenge.
Additionally, it should be noted that Section 467 of the Code (concerning
leases with increasing rents) may apply to those leases of the Company which
provide for rents that increase from one period to the next. Section 467
provides that in the case of a so-called "disqualified leaseback agreement,"
rental income must be accrued at a constant rate. If such constant rent accrual
is required, the Company would recognize rental income in excess of cash rents
and as a result, may fail to meet the 95% dividend distribution requirement.
"Disqualified leaseback agreements" include leaseback transactions where a
principal purpose of providing increasing rent under the agreement is the
avoidance of federal income tax. The IRS has issued proposed regulations under
Section 467 relating to the treatment of rent and interest provided for in
certain
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leases. The proposed regulations apply to rental agreements that provide
for increasing or decreasing rent. A rental agreement has increasing or
decreasing rent if it requires the payment of contingent rent, other than rent
that is contingent due to (1) a provision computing rent based on a percentage
of the lessee's gross or net receipts; (2) adjustments based on a reasonable
price index; or (3) a provision requiring the lessee to pay third-party costs.
Therefore, additional rent provisions of leases containing such clauses should
not be "disqualified leaseback agreements." The proposed regulations also
provide that if the rent allocated to each calendar year does not vary from the
average rent allocated to all calendar years by more than 10%, the lease will be
deemed not motivated by tax avoidance and thus should not be a "disqualified
leaseback agreement." It should be noted, however, that leases involved in sale-
leaseback transactions are subject to special scrutiny under this Section. The
Company, based on its evaluation of the value of the property and the terms of
the leases, does not believe it has or will have in the future rent subject to
the provisions of Section 467.
DEPRECIATION OF PROPERTIES
For tax purposes, the Company's real property acquired subsequent to its
initial public offering is being depreciated over 39 years utilizing the
straight-line method of depreciation and personal property is being depreciated
over 5 to 15 years in accordance with applicable laws and regulations relating
to different classifications of personal property.
FAILURE TO QUALIFY AS A REIT
If the Company fails to qualify for federal income tax purposes as a REIT
in any taxable year, and the relief provisions do not apply, the Company will be
subject to tax on its taxable income at regular corporate rates (plus any
applicable alternative minimum tax). Distributions to shareholders in any year
in which the Company fails to qualify will not be deductible by the Company nor
will they be required to be made. In such event, to the extent of current or
accumulated earnings and profits, all distributions to shareholders will be
taxable as ordinary income and, subject to certain limitations in the Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, the Company will
also be disqualified from taxation as a REIT for the following four taxable
years. It is not possible to state whether in all circumstances the Company
would be entitled to statutory relief from such disqualification. Failure to
qualify for even one year could result in the Company's incurring substantial
indebtedness (to the extent borrowings are feasible) or liquidating substantial
investments in order to pay the resulting taxes.
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
As long as the Company qualifies as a REIT, distributions made to the
Company's taxable domestic shareholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by them as ordinary income and will not be eligible for the dividends
received deduction for corporations. Distributions that are designated as
capital gain dividends will be taxed as long-term capital gains (to the extent
that they do not exceed the Company's actual net capital gain for the taxable
year) without regard to
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the period for which the shareholder has held his or her stock. However,
corporate stockholders may be required to treat up to 20% of certain capital
gain dividends as ordinary income.
Distributions in excess of current and accumulated earnings and profits
will not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's shares in respect of which the distributions
were made, but rather will reduce the adjusted basis of such shares. To the
extent that such distributions exceed the adjusted basis of a shareholder's
shares in respect of which the distributions were made, they will be included in
income as capital gain provided that the shares are a capital asset in the hands
of the shareholder.
As a result of the 1997 Act and that 1998 Act, the maximum rate of tax on
net capital gains recognized by individuals and other non-corporate shareholders
upon the sale or disposition of shares of the Company held for more than 12
months has been reduced to 20%, and such maximum rate is further reduced to 18%
for shares sold after December 31, 2000, and held for more than five years. For
15% bracket taxpayers, the maximum rate on net capital gains is reduced to 10%,
and such maximum rate is further reduced to 8% for shares sold after December
31, 2000, and held for more than five years. The maximum rate for net capital
gains attributable to the sale of depreciable real property held for more than
12 months is 25% to the extent of the deductions for depreciation with respect
to such property. Long-term capital gain that the Company allocates to domestic
shareholders will be subject to the 25% rate to the extent that the gain does
not exceed depreciation on real property that the Company sold.
Capital losses recognized by a shareholder upon the disposition of shares
of the Company held for more than one year at the time of disposition will be a
long-term capital loss. In addition, any loss upon a sale or exchange of shares
of the Company by a shareholder who has held such shares for six months or less
(after applying certain holding period rules) will be treated as a long-term
capital loss to the extent of distributions from the Company required to be
treated by such shareholder as long-term capital gain.
All or a portion of any loss realized upon a taxable disposition of shares
of the Company may be disallowed if other shares of the Company are purchased
(under a dividend reinvestment plan or otherwise) within 30 days before or after
the disposition.
A redemption of Preferred Shares of the Company will be treated under
Section 302 of the Code as a dividend subject to tax at ordinary income tax
rates (to the extent of the Company's current or accumulated earnings and
profits), unless the redemption satisfies certain tests set forth in Section
302(b) of the Code enabling the redemption to be treated as a sale or exchange
of the Preferred Shares. The redemption will satisfy such test if it (i) is
"substantially disproportionate" with respect to the holder, (ii) results in a
"complete termination" of the holder's stock interest in the Company, or (iii)
is "not essentially equivalent to a dividend" with respect to the holder, all
within the meaning of Section 302(b) of the Code. In determining whether any of
these tests have been met, shares considered to be owned by the holder by reason
of certain constructive ownership rules set forth in the Code, as well as shares
actually owned, must generally be taken into account. Because the determination
as to whether any of the alternative tests of Section 302(b) of the Code is
satisfied with respect to any particular holder of the Preferred Shares will
depend upon the facts and circumstances as of the time the determination is
made, prospective investors are advised to consult their own tax advisors to
determine such tax treatment. If a redemption of the Preferred Shares is treated
as a distribution that is taxable as a dividend, the amount of the distribution
would be measured by the amount of cash and the fair market value of any
property received by the stockholders. The stockholder's adjusted tax basis in
such redeemed Preferred Shares would be transferred to the holder's remaining
stockholdings in the Company. If, however, the stockholder has no remaining
stockholdings in the Company, such basis may, under certain circumstances, be
transferred to a related person or it may be lost entirely.
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The Company may be required to withhold and remit to the IRS 31% of the
dividends paid to any shareholder who (a) fails to furnish the Company with a
properly certified taxpayer identification number, (b) has under reported
dividend or interest income to the IRS or (c) fails to certify to the Company
that he or she is not subject to backup withholding. Any amount paid as backup
withholding will be creditable against the shareholder's income tax liability.
The Company will report to its shareholders and the IRS the amount of dividends
paid during each calendar year and the amount of any tax withheld.
TAXATION OF TAX-EXEMPT SHAREHOLDERS
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the IRS has ruled that dividend
distributions from a REIT to an exempt employee pension trust do not constitute
UBTI, provided that the shares of the REIT are not otherwise used in an
unrelated trade or business of the exempt employee pension trust. Based on that
ruling, amounts distributed by the Company to Exempt Organizations should
generally not constitute UBTI. However, if an Exempt Organization finances its
acquisition of its shares with debt, a portion of its income from the Company
will constitute UBTI pursuant to the "debt-financed property" rules. In
addition, in certain circumstances, a pension trust that owns more than 10% of
the Company's stock is required to treat a percentage of the dividends from the
Company as UBTI (the "UBTI Percentage"). The UBTI Percentage is the gross income
derived by the Company from an unrelated trade or business (determined as if the
Company were a pension trust) divided by the gross income of the Company for the
year in which the dividends are paid. The UBTI rule applies to a pension trust
holding more than 10% of the Company's stock only if (1) the UBTI Percentage is
at least 5%, (2) the Company qualifies as a REIT only because the pension trust
is not treated as a single issuer for purposes of the five or fewer rule, and
(3) either (A) one pension trust owns more than 25% of the value of the
Company's stock or (B) a group of pension trusts each individually holding more
than 10% of the value of the Company's stock collectively owns more that 50% of
the value of the Company's stock. The Company currently does not expect that
this rule will apply.
TAXATION OF FOREIGN SHAREHOLDERS
The rules governing United States federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other foreign
shareholders (collectively, "non-U.S. shareholders") are complex and no attempt
will be made herein to provide more than a summary of such rules. Non-U.S.
shareholders should consult with their own tax advisers to determine the impact
of federal, state and local income tax laws with regard to an investment in
shares of the Company, including any reporting requirements.
Distributions that are not attributable to gain from sales or exchanges by
the Company of "United States Real Property Interests" and not designated by the
Company as capital gain dividends will be treated as dividends of ordinary
income to the extent that they are made out of
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current or accumulated earnings and profits of the Company. Generally, such
distributions will be subject to a U.S. withholding tax equal to 30% of the
gross amount of the distribution unless an applicable tax treaty reduces or
eliminates that tax. However, if income from the investment in the shares of the
Company is treated as effectively connected with the non-U.S. shareholder's
conduct of a United States trade or business, the non-U.S. shareholder generally
will be subject to a tax at graduated rates, in the same manner as U.S.
shareholders are taxed with respect to such dividends (and may also be subject
to the 30% branch profits tax in the case of a shareholder that is a foreign
corporation). Any distributions in excess of current and accumulated earnings
and profits of the Company will not be taxable to a non-U.S. shareholder to the
extent that they do not exceed the adjusted basis of the shareholder's shares,
but rather will reduce the adjusted basis of such shares. To the extent that
such distributions exceed the adjusted basis of a non-U.S. shareholder's shares
in the Company, they will give rise to tax liability if the non-U.S. shareholder
would otherwise be subject to tax on any gain from the sale or disposition of
his or her shares, as described below. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the distributions will be subject
to withholding at the same rate as dividends. However, amounts thus withheld are
refundable if it subsequently is determined that such distribution was, in fact,
in excess of current and accumulated earnings and profits of the Company.
Under currently applicable Treasury Regulations, withholding agents are
required to determine the applicable withholding rate pursuant to the
appropriate tax treaty, and withhold the appropriate amount. New Treasury
Regulations, however, have been adopted that revise in certain respects the
rules applicable to non-U.S. shareholders (the "New Treasury Regulations"). The
IRS has recently announced that the New Treasury Regulations are effective
generally for payments made after December 31, 1999, subject to certain
transition rules.
Currently, dividends paid to an address in a foreign country are presumed
to be paid to a resident of that country (unless the payor has knowledge to the
contrary) for purposes of the 30% U.S. withholding tax applicable to certain
non-U.S. shareholders and for purposes of determining the applicability of a tax
treaty rate. Under the New Treasury Regulations, however, a non-U.S. shareholder
who wishes to claim the benefit of an applicable treaty rate will be required to
provide Form W-8 which satisfies applicable certification and other
requirements, including a representation as to the holder's foreign status, the
holder's name and permanent residence address, and the relevant tax treaty. Such
information is subject to being reported to the IRS. A permanent residence
address for this purpose generally is the address in the country where the
person claims to be a resident for purposes of the country's income tax. If the
beneficial holder is a corporation, then the address is where the corporation
maintains its principal office in its country of incorporation. The New Treasury
Regulations also provide special rules to determine whether, for purposes of
determining the applicability of a tax treaty and for purposes of the 30%
withholding tax described above, dividends paid to a non-U.S. shareholder that
is an entity should be treated as paid to the entity or those holding an
interest in that entity. In particular, in the case of a foreign partnership,
the certification requirement will generally be applied to the partners of the
partnership. In addition, the New Treasury Regulations will also require the
partnership to provide certain information, including a United States taxpayer
identification number, and will provide look-through rules for tiered
partnerships. A non-U.S. shareholder that
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is eligible for a reduced rate of U.S. withholding tax pursuant to an income tax
treaty may obtain a refund of any excess amount withheld by filing an
appropriate claim for refund with the IRS. The New Treasury Regulations contain
detailed rules governing tax certifications during the transition period prior
to and immediately following the effectiveness of the New Treasury Regulations.
For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of "United
States Real Property Interests" will be taxed to a non-U.S. shareholder under
the provisions of the Foreign Investment in Real Property Tax Act of 1980, as
amended ("FIRPTA"). Under FIRPTA, these distributions are taxed to a non-U.S.
shareholder as if such gain were effectively connected with a United States
trade or business. Non-U.S. shareholders would be subject to U.S. income tax at
the rates applicable to U.S. individuals or corporations, without regard to
whether such distribution is designated as a capital gain dividend. Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a foreign corporate shareholder not entitled to treaty exemption.
The Company is required to withhold 35% of any distribution that could be
designated by the Company as a capital gain dividend to the extent that such
capital gain dividends are attributable to the sale or exchange by the Company
of "United States Real Property Interests." This amount is creditable against
the non-U.S. shareholder's federal tax liability.
Although the law is not entirely clear on the matter, it appears that
amounts designated by the Company pursuant to the 1997 Act as undistributed
capital gains would be treated with respect to non-U.S. shareholders in the
manner outlined in the preceding paragraph for actual distributions by the
Company of capital gain dividends. Under that approach, the non-U.S.
shareholders would be able to offset as a credit against their U.S. federal
income tax liability resulting therefrom their proportionate share of the tax
paid by the Company on such undistributed capital gains (and to receive from the
IRS a refund to the extent their proportionate share of such tax paid by the
Company were to exceed their actual U.S. federal income tax liability).
Gain recognized by a non-U.S. shareholder upon a sale of Company shares
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which, at all times during a
specified testing period, less than 50% in value of the shares were held
directly or indirectly by non-U.S. persons. The Company believes that it is, and
it expects to continue to be a domestically controlled REIT and, therefore, the
sale of Company shares should not be subject to taxation under FIRPTA. Because
the Company's stock is publicly traded, however, no assurance can be given that
the Company will continue to be a domestically controlled REIT.
If the Company does not constitute a domestically controlled REIT, a non-
U.S. shareholder's sale of Company shares generally will still not be subject to
tax under FIRPTA as a sale of U.S. Real Property Interests provided that (i) the
stock is "regularly traded" (as defined by applicable Treasury Regulations) on
an established securities market and (ii) the selling non-
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U.S. shareholder held 5% or less of the Company's outstanding stock at all times
during a specified testing period.
If gain on the sale of shares of the Company were subject to taxation under
FIRPTA, the non-U.S. shareholder would be subject to the same treatment as a
U.S. shareholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals) and the purchaser of the stock could be required to withhold
10% of the purchase price and remit such amount to the IRS.
Gain from the sale of Company shares that would not otherwise be subject to
FIRPTA will nonetheless be taxable in the United States to a non-U.S.
shareholder in two cases: (i) if the non-U.S. shareholder's investment in the
Company's stock is effectively connected with a U.S. trade or business conducted
by such non-U.S. shareholder, the non-U.S. shareholder will be subject to the
same treatment as a U.S. stockholder with respect to such gain, or (ii) if the
non-U.S. shareholder is a nonresident alien individual who was present in the
United States for 183 days or more during the taxable year and has a "tax home"
in the United States, the nonresident alien individual will be subject to a 30%
tax on the individual's capital gain.
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