-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ah9PxbTJp9OvLcEvdeQE5pWYeV6zoGTXtGB4thJQ77hL5vKqe48tkNe1JcjXeimV VGcIunC5QJrhJxuTXV7Igw== 0000950152-97-004008.txt : 19970520 0000950152-97-004008.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950152-97-004008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEVELOPERS DIVERSIFIED REALTY CORP CENTRAL INDEX KEY: 0000894315 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 341723097 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11690 FILM NUMBER: 97608599 BUSINESS ADDRESS: STREET 1: 34555 CHAGRIN BLVD CITY: MORELAND HILLS STATE: OH ZIP: 44022 BUSINESS PHONE: 2162474700 MAIL ADDRESS: STREET 1: 34555 CHAGRIN BLVD CITY: MORELAND HILLS STATE: OH ZIP: 44022 10-Q 1 DEVELOPERS DIVERSIFIED REALTY CORPORATION / 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to _____________ Commission file number 1-11690 ----------------------------------- DEVELOPERS DIVERSIFIED REALTY CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-1723097 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 34555 Chagrin Boulevard Moreland Hills, Ohio 44022 - -------------------------------------------------------------------------------- (Address of principal executive offices - zip code) (216) 247-4700 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) APPLICABLE ONLY TO CORPORATE ISSUERS: ------------------------------------- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. 25,056,880 shares outstanding as of May 12, 1997 ---------- ------------ -1- 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996. Condensed Consolidated Statements of Operations for the Three Month Periods ended March 31, 1997 and 1996. Condensed Consolidated Statements of Cash Flows for the Three Month Periods ended March 31, 1997 and 1996. Notes to Condensed Consolidated Financial Statements. -2- 3 DEVELOPERS DIVERSIFIED REALTY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, December 31, ASSETS 1997 1996 - ------ --------- ------------ Real estate rental property: Land $153,826,060 122,696,277 Land under development 21,193,075 27,304,847 Buildings 918,891,039 798,476,568 Fixtures and tenant improvements 16,039,700 14,805,101 Construction in progress 15,380,358 28,364,167 --------------- ------------- 1,125,330,232 991,646,960 Less accumulated depreciation (147,498,338) (142,039,284) --------------- ------------- Real estate, net 977,831,894 849,607,676 Cash and cash equivalents 2,682,400 12,600 Advances to and investments in joint ventures 112,002,221 106,795,688 Other assets 20,737,823 18,709,976 --------------- ------------- $1,113,254,338 $975,125,940 =============== ============= LIABILITIES AND SHAREHOLDERS' EQUITY Unsecured indebtedness: Fixed rate senior notes $291,585,102 $215,492,754 Revolving credit facilities 19,000,000 95,500,000 Subordinated convertible debentures 60,000,000 60,000,000 --------------- ------------- 370,585,102 370,992,754 Mortgage indebtedness: Banks and other financial institutions 106,830,561 107,439,535 --------------- ------------- Total indebtedness 477,415,663 478,432,289 Accounts payable and accrued expenses 26,137,548 20,920,765 Other liabilities 9,396,531 6,436,667 --------------- ------------- 512,949,742 505,789,721 --------------- ------------- Minority equity interest 16,293,180 - Commitments and contingencies Shareholders' equity: Class A - 9.5% cumulative redeemable preferred shares, without par value, $250 liquidation value; 1,500,000 shares authorized; 421,500 shares issued and outstanding at March 31, 1997 and December 31, 1996 105,375,000 105,375,000 Class B - 9.44% cumulative redeemable preferred shares, without par value, $250 liquidation value; 1,500,000 shares authorized; 177,500 shares issued and outstanding at March 31, 1997 and December 31, 1996 44,375,000 44,375,000 Common shares, without par value, $.10 stated value; 50,000,000 shares authorized; 25,055,498 and 21,682,917 shares issued and outstanding at March 31, 1997 and December 31, 1996, respectively 2,505,550 2,168,292 Paid-in-capital 485,525,515 369,417,186 Accumulated dividends in excess of net income (53,154,649) (51,384,259) --------------- ------------- 584,626,416 469,951,219 Less: Unearned compensation - restricted stock (615,000) (615,000) --------------- ------------- 584,011,416 469,336,219 --------------- ------------- $1,113,254,338 $975,125,940 =============== =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -3- 4 DEVELOPERS DIVERSIFIED REALTY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, (UNAUDITED)
1997 1996 ------------ ----------- Revenues from operations: Minimum rents $27,566,057 $22,682,584 Percentage and overage rents 1,057,039 754,208 Recoveries from tenants 7,225,868 5,743,626 Management fee income 723,260 508,809 Other 881,044 945,465 ------------ ----------- 37,453,268 30,634,692 ------------ ----------- Rental operation expenses: Operating and maintenance 3,566,877 3,037,213 Real estate taxes 4,391,049 3,413,341 General and administrative 2,465,727 1,732,948 Interest expense 8,047,202 7,343,006 Depreciation and amortization 7,406,457 5,904,605 ------------ ----------- 25,877,312 21,431,113 ------------ ----------- Income before equity in net income of joint ventures, minority equity interest and gain on sales of real estate 11,575,956 9,203,579 Equity in net income of joint ventures 2,717,005 2,012,238 Minority equity interest (264,764) -- Gain on sales of real estate 3,525,785 -- ------------ ----------- Net income $17,553,982 $11,215,817 =========== =========== Net income applicable to common shareholders $14,004,076 $7,665,911 =========== =========== Per share data: Net income: Primary $.57 $.39 ==== ==== Fully diluted $.57 $.39 ==== ==== Dividends declared $.63 $.60 ==== ====
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -4- 5 DEVELOPERS DIVERSIFIED REALTY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIOD ENDED MARCH 31, (UNAUDITED)
1997 1996 ------------- ------------ Net cash flow provided by operating activities $ 21,107,035 $ 14,059,965 ------------- ------------ Cash flow provided by (used for) investing activities: Real estate developed or acquired (114,016,759) (23,353,342) (Advances to) repayments from joint ventures, net (5,461,751) (1,147,884) Proceeds from sales of real estate 5,452,034 -- ------------- ------------ Net cash flow used for investing activities (114,026,476) (24,501,226) ------------- ------------ Cash flow provided by (used for) financing activities: Repayment of revolving credit facilities, net (76,500,000) (87,500,000) Proceeds from issuance of Medium Term Notes, net of underwriting commissions and $106,000 of offering expenses paid -- 52,604,000 Principal payments on rental property debt (608,974) (12,148,265) Proceeds from issuance of Fixed Rate Senior Notes, net of underwriting commissions and discounts and $500,000 of offering expenses paid 75,577,000 -- Proceeds from issuance of common shares, net of underwriting commissions and $425,000 and $300,000 of offering expenses paid in 1997 and 1996, respectively 115,831,877 75,389,307 Proceeds from issuance of Class B preferred shares, net of underwriting commissions and $200,000 of offering expenses paid -- 4,182,050 Proceeds from issuance of common shares in conjunction with exercise of stock options, the Company's 401(k) plan and dividend reinvestment plan 613,710 129,240 Dividends paid (19,324,372) (3,433,468) ------------- ------------ Net cash flow provided by financing activities 95,589,241 29,222,864 ------------- ------------ Increase in cash and cash equivalents 2,669,800 18,781,603 Cash and cash equivalents, beginning of period 12,600 12,100 ------------- ------------ Cash and cash equivalents, end of period $ 2,682,400 $ 18,793,703 ============= ============
Supplemental disclosure of non cash investing and financing activities: In conjunction with the acquisitions of certain shopping centers, the Company assumed other liabilities and minority equity interest aggregating approximately $22.9 million for the three month period ended March 31, 1997. In addition, included in accounts payable was approximately $0.3 million relating to construction in progress which did not require the use of cash. For the three month period ended March 31, 1996 included in accounts payable was approximately $0.7 million relating to construction in progress and $13.0 million of dividends declared which did not require the use of cash. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -5- 6 DEVELOPERS DIVERSIFIED REALTY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS The Company is a self-administered and self-managed real estate investment trust and is engaged in the business of acquiring, expanding, owning, developing, managing and operating neighborhood and community shopping centers, enclosed malls and business centers. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The information furnished reflects all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature. 2. PUBLIC OFFERINGS In January 1997, the Company sold 3,350,000 shares of common stock in an underwritten offering at $36.625 per share. In March 1997, the Company issued $75 million of 7.125% Pass-Through Asset Trust Securities which mature in March 2002. The aggregate net proceeds of approximately $191.4 million from the above offerings were primarily used to retire variable rate indebtedness. 3. EQUITY INVESTMENTS IN JOINT VENTURES: The Company's equity investments in joint ventures at March 31, 1997 were comprised of (i) a 50% joint venture interest in four Community Center Joint Ventures, formed in November 1995 in conjunction with the acquisition of the Homart Community Center Division of Sears, Roebuck and Co. ("Sears"), (ii) a 50% joint venture interest, formed in September 1996, with The Ohio State Teachers Retirement Systems (OSTRS), (iii) a 50% joint venture interest, formed in October 1996, in conjunction with the development of a 443,000 square foot shopping center in Merriam, Kansas, (iv) a 35% joint venture interest in a limited partnership, formed in January 1997, that owns a 286,388 square foot shopping center located in San Antonio, Texas and (v) a 50% joint venture interest in a limited partnership, formed in 1989, that owns a 411,977 square foot shopping center located in Martinsville, Virginia. -6- 7 Summarized combined financial information of the Company's joint venture investments is as follows:
March 31, December 31, Combined Balance Sheets 1997 1996 ------------ ------------ Real estate, net $600,747,298 $561,624,478 Other assets 21,434,797 16,012,336 ------------ ------------ $622,182,095 $577,636,814 ============ ============ Mortgage debt $390,789,931 $360,113,705 Amounts payable to DDRC 12,766,605 10,747,149 Other liabilities 9,052,887 7,782,117 ------------ ------------ 412,609,423 378,642,971 Accumulated equity 209,572,672 198,993,843 ------------ ------------ $622,182,095 $577,636,814 ============ ============ Three Month Period Ended March 31, Combined Statements of Operations 1997 1996 ------------ ------------ Revenues from operations $19,304,067 $14,597,439 ------------ ------------ Rental operation expenses 4,658,868 3,780,114 Depreciation and amortization expenses 2,704,111 2,106,297 Interest expense 6,428,401 4,686,558 ------------ ------------ 13,791,380 10,572,969 ------------ ------------ Net income $5,512,687 $4,024,470 ============ ============
The Company has guaranteed $25 million of joint venture indebtedness and related interest associated with certain mortgage debt. Advances to and investments in joint ventures include acquisition costs related to the Community Center Joint Ventures and the Merriam joint venture of approximately $2.6 million and $0.9 million respectively, and a deferred gain of approximately $6.4 million related to the contribution of the real estate property and mortgage debt to the OSTRS Joint Venture. Included in management fee income for the three month period ended March 31, 1997 and 1996 is approximately $0.6 million and $0.4 million, respectively of fees earned from the Company's Joint Venture interests. Other income for the three month period ended March 31, 1997 and 1996 includes $0.1 million and $0.3 million, respectively, of development fee income from the Community Center Joint Ventures. -7- 8 4. ACQUISITIONS AND PRO FORMA FINANCIAL INFORMATION During the three month period ended March 31, 1997, the Company completed the acquisition of or investment in four shopping centers with an aggregate of approximately 1.4 million Company owned gross leasable square feet (GLA) at an initial aggregate investment of approximately $116.5 million. These properties are summarized as follows:
Year Effective Date Company Location Built of Acquisition GLA ----------------------------- ---- --------------- ----------- Cleveland (North Olmsted), OH 1958 January 1, 1997 463,440 Cleveland (North Olmsted), OH 1987 January 1, 1997 142,947 San Antonio, TX (1) 1996 January 23, 1997 286,388 Phoenix, AZ 1996 February 21, & March 27, 1997 490,885 ----------- 1,383,660 =========== (1) Property acquired through a joint venture in which the Company owns a 35% interest.
The operating results of the acquired shopping centers are included in the results of operations of the Company from the effective date of acquisition. The following unaudited supplemental pro forma operating data is presented for the three months ended March 31, 1996 as if each of the following transactions had occurred on January 1, 1996 (i) the acquisition by the Company of all properties acquired by the Company in 1996 and 1997; (ii) the sale by the Company of 175,000 depositary shares representing 9.44% Class B Cumulative Redeemable Preferred Shares in January 1996, (iii) the completion of the sale by the Company of $111.7 million of Medium Term Notes in 1996, (iv) the completion of the sale by the Company of 2,611,500 Common Shares in March 1996, (v) the completion of the sale by the Company of 3,350,000 common shares in January 1997 and (vi) the completion of the sale by the Company of the $75 million 7.125% Pass through Asset Trust Securities in March 1997.
Three Month Period Ended March 31, ---------------------------------- (in thousands, except per share) 1996 ------- Pro forma revenues $32,367 ======= Pro forma net income applicable to common shareholders $ 9,348 ======= Pro forma net income applicable to common shareholders per common share $ .43 =======
Pro forma information for the three months ended March 31, 1997 is not presented because two of the four acquired properties were either under development or in the lease-up phase and, accordingly, the related operating information for such centers either does not exist or would not be meaningful. The two Cleveland, Ohio properties are included in the Company's actual operating results for the three months ended March 31, 1997. The 1996 pro forma information above does not include revenues and expenses for the five properties acquired by the Company in 1996 prior to their respective acquisition dates because these shopping centers were either under development or in the lease-up phase and, accordingly, the related operating information for such centers either does not exist or would not be meaningful. -8- 9 5. SHAREHOLDERS' EQUITY: The following table summarizes the changes in shareholders' equity since December 31, 1996:
Class A 9.5% Class B 9.44% Cumulative Cumulative Redeemable Redeemable Preferred Preferred Accumulated Shares ($250 Shares ($250 Dividends in Liquidation Liquidation Common Paid-in Excess of Restricted Value) Value) Shares Capital Net Income Stock Total ------------ ----------- ---------- ------------ ------------ ---------- ------------ Balance December 31, 1996 $105,375,000 $44,375,000 $2,168,292 $369,417,186 $(51,384,259) $ (615,000) $469,336,219 Net income 17,553,982 17,553,982 Dividends declared - Preferred Shares (3,549,906) (3,549,906) Dividends declared - Common Shares (15,774,466) (15,774,466) Issuance of Common Shares 335,000 115,496,877 115,831,877 Stock options exercised 2,148 569,913 572,061 Shares issued through employee 401(k) plan 43 15,818 15,861 Shares issued through Dividend Reinvestment Plan 67 25,721 25,788 ------------ ----------- ---------- ------------ ------------ ---------- ------------ Balance March 31, 1997 $105,375,000 $44,375,000 $2,505,550 $485,525,515 $(53,154,649) $ (615,000) $584,011,416 ============ =========== ========== ============ ============ ============= ============
6. REVOLVING CREDIT FACILITIES: In May 1995, the Company obtained a three year $150 million unsecured revolving credit facility from a syndicate of financial institutions for which the First National Bank of Chicago and the First National Bank of Boston serve as agents (the "Unsecured Credit Facility"). In March 1997, the Company renegotiated the terms of this facility to extend the agreement, to May 2000, reduce the specified spread over LIBOR by 15 basis points and introduce a competitive bid feature for up to $75 million of borrowings. Borrowings under this facility bear interest at variable rates based on the prime rate or LIBOR plus a specified spread, currently at 1.10%, depending on the Company's long term senior unsecured debt rating from Standard and Poor's and Moody's Investors Service. The Unsecured Credit Facility is used to finance the acquisition of shopping centers, to provide working capital and for general corporate purposes. At March 31, 1997, $15 million was outstanding under this facility. In addition, the Company maintains a $10 million unsecured revolving credit facility with National City Bank which matures in November 1999 and bears interest at variable rates based on the prime rate or LIBOR plus a specified spread, currently at 1.25%, depending on the Company's long term senior unsecured debt rating from Standard and Poor's and Moody's Investors Service. At March 31, 1997 there was $4 million outstanding under this facility. 7. EARNINGS PER SHARE Primary earnings per share for net income applicable to common shareholders was computed by dividing common share dividends paid or declared for the period by the weighted average number of -9- 10 common shares outstanding plus the undistributed net income (loss) applicable to common shareholders, as appropriate, divided by the weighted average number of common shares and common share equivalents outstanding. Common share equivalents are excluded from the earnings per share calculation where they would be antidilutive. The weighted average number of shares outstanding utilized in the calculations is 24,520,075 and 19,704,565 for the three month periods ended March 31, 1997 and 1996, respectively. Fully diluted earnings per common share were calculated by dividing net income (loss) applicable to common shareholders by the weighted average number of common shares and common share equivalents during the period. Common share equivalents included stock options outstanding and the assumed conversion of the Debentures. For the three month period ended March 31, 1996, the assumed conversion of the Debentures was antidilutive, and was therefore excluded from the calculation. Common share equivalents for purposes of the fully diluted earnings per share were 2,213,590 and 143,987 for the three month periods ended March 31, 1997 and 1996, respectively. As required by APB Opinion No. 15, supplementary pro forma income per share data has been presented in Note 4. 8. SUBSEQUENT EVENTS On May 12, 1997, the Company's shareholders approved an additional 500,000 common shares to be reserved for issuance under the Company's 1992 Employees' Share Option Plan. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto. RESULTS OF OPERATIONS Revenues from Operations Total revenues increased $6.8 million, or 22.3% to $37.4 million for the three month period ended March 31, 1997 from $30.6 million for the same period in 1996. Base and percentage rents for the three month period ended March 31, 1997 increased $5.2 million or 22.1% to $28.6 million as compared to $23.4 million for the same period in 1996. Approximately $0.8 million of the increase in base and percentage rental income is the result of new leasing, re-tenanting and expansion of the Core Portfolio Properties (shopping center properties owned as of January 1, 1996), an increase of 3.9% over 1996 revenues from Core Portfolio Properties. The eight shopping centers acquired by the Company in 1997 and 1996 contributed $4.7 million of additional revenue and the three new shopping center developments contributed $0.7 million. The above increases were offset by the transfer of two properties to a joint venture in September 1996 which reduced revenue by $1.0 million. At March 31, 1997, the occupancy rate of the Company's portfolio, including properties owned through joint ventures, was at 94.1% as compared to 94.2% at March 31, 1996. As of March 31, 1997, the Company had also entered into leases with additional tenants aggregating approximately 300,000 square feet of vacant space, approximately 1.4% of total Company gross leasable area, which was not yet occupied at that date. The average annualized base rent per leased square foot, including those properties owned through joint ventures, was $8.16 at March 31, 1997 as compared to $7.85 at December 31, 1996. Same store sales, for the current twelve month period, increased 3.18% to $229 per square foot as compared to $222 per square foot for the prior twelve month period. -10- 11 The increase in recoveries from tenants of $1.5 million is directly related to the increase in operating and maintenance expenses and real estate taxes primarily associated with the 1997 and 1996 shopping center acquisitions and developments. Recoveries were approximately 90.8% of operating expenses and real estate taxes as compared to 89.0% for the same period in 1996. Management fee income and other income increased by approximately $0.1 million which generally relates to an increase in management fee income associated with the formation of several joint ventures. Expenses from Operations Rental operating and maintenance expenses for the three month period ended March 31, 1997 increased $0.5 million, or 17.4% to $3.5 million as compared to $3.0 million for the same period in 1996. An increase of $0.4 million is attributable to the 11 shopping centers acquired and developed in 1996 and 1997 and $0.1 million in the Core Portfolio Properties. Real estate taxes increased $1.0 million, or 28.6%, to $4.4 million for the three month period ended March 31, 1997 as compared to $3.4 million for the same period in 1996. This increase is related to the 11 shopping centers acquired and developed in 1996 and 1997. General and administrative expenses increased $0.7 million, or 42.3%, to $2.5 million for the three month period ended March 31, 1997 as compared to $1.7 million in 1996. The increase is attributable to the growth of the Company primarily related to acquisitions, expansions and developments. The Company continues to maintain a conservative policy with regard to the expensing of all internal leasing salaries, legal salaries and related expenses associated with the leasing and re-leasing of existing space. Total general and administrative expenses were approximately 4.3% and 3.8% of total revenues, including revenues of joint ventures, at March 31, 1997 and 1996, respectively. Depreciation and amortization expense increased $1.5 million, or 25.4%, to $7.4 million for the three month period ended March 31, 1997 as compared to $5.9 million for the same period in 1996. The increase is primarily attributable to the growth related to the 11 shopping centers acquired and developed in 1996 and 1997. Interest expense increased $0.7 million, or 9.6%, to $8.0 million for the three month period ended March 31, 1997, as compared to $7.3 million for the same period in 1996. The overall increase in interest expense for the three month period ended March 31, 1997 as compared to the same period in 1996 is primarily related to the acquisition and development of shopping centers during 1997 and 1996. The weighted average debt outstanding during the three month period ended March 31, 1997 and related weighted average interest rate was $430.9 million and 7.8%, respectively, compared to $397.0 million and 8.1%, respectively, for the same period in 1996. Interest costs capitalized, in conjunction with development and expansion projects, were $0.8 million for the three month period ended March 31, 1997, respectively, as compared to $0.7 million for the same period in 1996. Equity in net income of joint ventures increased $0.7 million, or 35.0%, to $2.7 million for the three month period ended March 31, 1997 as compared to $2.0 million for the same period in 1996. The increase is attributable to the Community Center Joint Ventures, the formation of a joint venture with Ohio State Teachers Retirement Systems ("OSTRS") and the formation of a joint venture in San Antonio, Texas which contributed an additional $0.4 million, $0.2 million and $0.1 million, respectively, of equity in net income of joint ventures for the three month period ended March 31, 1997. -11- 12 The minority equity interest of $0.3 million for the three month period ended March 31, 1997 relates to the Company's investment in two shopping center properties in 1997. The amount represents the priority distribution associated with the minority equity interest. Gain on sales of real estate aggregated $3.5 million for the three month period ended March 31, 1997. In March 1997, the Company sold two business centers in Highland Heights, Ohio aggregating approximately 113,000 square feet for approximately $5.7 million. The two business centers had been vacant for approximately 18 months. Net Income Net income increased $6.3 million to $17.5 million for the three month period ended March 31, 1997, as compared to net income of $11.2 million for the same period in 1996. The increase in net income of $6.3 million is primarily attributable to the increased net operating revenues (total revenues less operating and maintenance, real estate taxes and general and administrative expense) aggregating $4.6 million, resulting from new leasing, retenanting and expansion of Core Portfolio Properties, and the 11 shopping centers acquired and developed in 1996 and 1997. An increase of $0.7 million relates to increased equity income from joint ventures and an increase of $3.5 million relates to a gain on sale of real estate. The increase in net operating revenues, equity income from joint ventures and gain on sale of real estate was offset by increases in depreciation, interest expense and minority equity interest of $1.5 million, $0.7 million and $0.3 million, respectively. FUNDS FROM OPERATIONS Management believes that funds from operations ("FFO") provides an additional indicator of the financial performance of a Real Estate Investment Trust. FFO is defined generally as net income applicable to common shareholders excluding gains (losses) on sale of property, non recurring charges and extraordinary items, adjusting for certain non-cash items, principally real property depreciation and equity income (loss) from its joint ventures and adding the Company's proportionate share of FFO of its unconsolidated joint ventures, determined on a consistent basis. The Company calculates FFO in accordance with the foregoing definition, which is substantially the same as the definition currently used by the National Association of Real Estate Investment Trusts ("NAREIT"). Certain other real estate companies may calculate funds from operations in a different manner. For the three month period ended March 31, 1997, FFO increased $4.6 million or 31.3% to $19.1 million as compared to $14.5 million for the same period in 1996. The increase is attributable to the continuing increases in revenues from Core Portfolio Properties, acquisitions and developments. The Company's calculation of FFO is as follows (in thousands):
March 31, 1997 1996 -------- -------- Net income applicable to common shareholders (1) $14,004 $7,666 Depreciation of real property 7,322 5,854 Equity in net income of joint ventures (2,717) (2,012) Joint Ventures FFO (2) 4,051 3,065 Gain on sales of real estate (3,526) -- -------- -------- $19,134 $14,573 ======== ========
(1) Includes straight line rental revenues of approximately $0.3 million and $0.1 million for the three month periods ended March 31, 1997 and 1996, respectively, primarily related to recent acquisitions and new developments. -12- 13 (2) Joint Venture Funds From Operations are summarized as follows: Net income (a) $5,513 $4,024 Depreciation of real property 2,704 2,106 ----- ----- $8,217 $6,130 ====== ====== DDRC Ownership interests (b) $4,051 $3,065 ====== ====== (a) Includes straight line rental revenue of approximately $0.6 million for the three month periods ended March 31, 1997 and 1996. The Company's proportionate share of straight line rental revenues was $0.3 million for the three month periods ended March 31, 1997 and 1996. (b) At March 31, 1997 the Company owned a 50% joint venture interest relating to 13 shopping center properties and a 35% joint venture interest in one shopping center property. At March 31, 1996 the Company owned a 50% joint venture interest in eleven shopping center properties.
LIQUIDITY AND CAPITAL RESOURCES The Company anticipates that cash flow from operating activities will continue to provide adequate capital for all principal payments, recurring tenant improvements, as well as dividend payments in accordance with REIT requirements and that cash on hand, borrowings under its existing revolving credit facilities, as well as other debt and equity alternatives will provide the necessary capital to achieve continued growth. Cash flow from operating activities for the three month period ended March 31, 1997 increased to $21.1 million as compared to $14.1 million for the same period in 1996. The increase is attributable to the 11 acquisitions and developments completed in 1997 and 1996, new leasing, expansion and re-tenanting of the core portfolio properties and the equity offerings completed in 1997 and 1996. An increase in the 1997 quarterly dividend per common share to $.63 from $.60 was approved in December 1996 by the Company's Board of Directors. It is anticipated that the new dividend level will result in a more conservative payout ratio as compared to prior years. A lower payout ratio will enable the Company to retain more capital which will be utilized toward attractive investment opportunities in the development, acquisition and expansion of portfolio properties. The Company's common share dividend payout ratio for the first quarter of 1997 approximated 82.4% of the actual funds from operations. During the three month period ended March 31, 1997, the Company and its joint ventures invested $122.8 million, net, to acquire, develop, expand, improve and re-tenant its properties as follows: (in millions): Acquisitions During the first quarter of 1997 the Company acquired two adjacent shopping center properties in Ahwatukee, Arizona (a suburb of Phoenix), aggregating 490,885 square feet for an aggregate purchase price of approximately $65.3 million. The Company also acquired a majority ownership interest in two adjacent shopping center properties aggregating 606,387 square feet in North Olmsted, Ohio (a suburb of Cleveland) for an initial investment of approximately $38 million. -13- 14 The Company also acquired a 35% ownership interest in a 296,000 square foot shopping center in San Antonio, Texas. This shopping center was acquired at a cost of approximately $38.3 million of which the Company's proportionate share aggregated approximately $13.4 million. Developments The Company has substantially completed the construction of an 84,000 square foot community shopping center in Aurora, Ohio with a Heinen's Supermarket (not owned by the Company) and Revco Drug Store as anchor tenants. Development activity also continues to progress at the Company's shopping centers in Atlanta, Georgia and Framingham, Massachusetts which were acquired in connection with the Community Center Joint Ventures in November 1995. The Atlanta and Framingham centers are scheduled to be substantially completed by the third quarter of 1997. The majority of tenants have opened at each center. Construction has also commenced on the development of four additional shopping centers which include: (i) a 235,000 square foot Phase II development of the Canton, Ohio center which will include Home Place, Service Merchandise, Petsmart and JoAnn Fabrics ETC as anchor tenants; (ii) a 500,000 square foot shopping center in Boardman, Ohio which includes Wal-Mart, Lowe's, Dick's Sporting Goods, Giant Eagle Supermarket, Staples and Petsmart as anchor tenants. The Lowe's, Wal-Mart and Dick's Sporting Goods stores opened during the first quarter of 1997; (iii) a 475,000 square foot shopping center in Stow, Ohio which will include Target (not owned by the Company), Kohl's, Giant Eagle Supermarket (opened fourth quarter 1996), Office Max (opened first quarter 1997) and Stein Mart as anchor tenants and (iv) a 445,000 square foot shopping center in Merriam, Kansas which is being developed through a joint venture formed in October 1996, 50% of which is owned by the Company. This center will include Home Depot, Cinemark, Hen House Supermarket, and Petsmart as anchor tenants. Expansions The Company is currently expanding seven of its shopping centers, including a 50,000 square foot expansion in Birmingham, Alabama; a 98,000 square foot expansion in Spring Hill, Florida; a 30,000 square foot supermarket expansion in Chillicothe, Ohio; a 44,000 square foot expansion in Marietta, Georgia; a 79,000 square foot expansion and redevelopment in Martinsville, Virginia; a 130,000 square foot redevelopment in Winchester, Virginia and an 18,000 square foot retail expansion in East Norriton, Pennsylvania. FINANCING ACTIVITIES The acquisitions, developments and expansions were financed through cash provided from operating activities revolving credit facilities, mortgages assumed and debt and equity offerings. Total debt outstanding at March 31, 1997 was $477.4 million compared to 359.1 million at March 31, 1996. In January 1997, the Company successfully completed a 3,350,000 common share offering and received net proceeds of approximately $116 million which were primarily used to retire variable rate debt. The common share offering significantly strengthened the Company's balance sheet and positioned the Company to continue to take advantage of attractive acquisition, development and expansion opportunities discussed above. -14- 15 In March 1997, the Company issued $75 million of senior unsecured Putable Asset Trust Securities (PATS). The PATS were issued at a discount of 99.53%, have a coupon rate of 7.125% and mature on March 15, 2002. The effective yield to the put date, after adjusting for the call premium and debt issue costs, is approximately 6.9%. In March 1997, the Company extended its $150 million unsecured revolving credit facility, agented by the First National Bank of Chicago and the First National Bank of Boston, for an additional year, through May 2000, and reduced the interest rate 15 basis points and also introduced a competitive bid feature for up to $75 million of borrowings. In March 1997, the Company sold two business centers in Highland Heights, Ohio aggregating approximately 113,000 square feet for approximately $5.7 million and recognized a gain of approximately $3.5 million. The net proceeds of approximately $5.4 million were used to repay revolving credit debt. At March 31, 1997, the Company's capitalization consisted of $477.4 million of debt (excluding the Company's proportionate share of joint venture mortgage debt aggregating $191.4 million), $149.8 million of preferred stock and $945.8 million of market equity (market equity is defined as common shares outstanding multiplied by the closing price of the common shares on the New York Stock Exchange at March 31, 1997 of $37.75) resulting in a debt total market capitalization ratio of .30 to 1.0. At March 31, 1997, the Company's total debt consisted of $455.4 million of fixed rate debt, and $22.0 million of variable rate debt. It is management's intention that the Company have access to the capital resources necessary to expand and develop its business. Accordingly, the Company may seek to obtain funds through additional equity offerings or debt financing in a manner consistent with its intention to operate with a conservative debt capitalization policy and maintain its investment grade ratings with Moody's Investor Services and Standard and Poor's. In June 1996, the Company filed a shelf registration statement with the Securities and Exchange Commission under which $400 million of debt securities, preferred shares or common shares may be issued. As of March 31, 1997, the Company had $218.6 million available under its shelf registration statement. In addition, as of March 31, 1997 the Company had $141 million available under its $160 million of unsecured revolving credit facilities. On March 31, 1997, the Company also had 94 operating properties with $29.6 million or 74.6% of the total revenue for the three month period ended March 31, 1997 which were unencumbered thereby providing a potential collateral base for future borrowings. INFLATION Substantially all of the Company's long-term leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive percentage rentals based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses are often related to increases in the consumer price index or similar inflation indices. In addition, many of the Company's leases are for terms of less than ten years, which permits the Company to seek increased rents upon re-rental at market rates. Most of the Company's leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. -15- 16 At March 31, 1997, approximately 95.4% of the Company's debt (not including joint venture debt) bore interest at fixed rates with a weighted average maturity of approximately 4.6 years and a weighted average interest rate of approximately 7.8%. The remainder of the Company's debt bears interest at variable rates, with a weighted average maturity of approximately 3.3 years and a weighted average interest rate of approximately 8.4%. As of March 31, 1997 the Company's Community Center Joint Ventures had variable rate debt aggregating approximately $326.0 million in the form of bridge loans which are scheduled to be converted to long-term fixed rate debt through securitizations. The Company's OSTRS Joint Venture has variable rate debt aggregating $24.3 million. The Company's joint venture in San Antonio, Texas has variable rate debt aggregating $26.7 million. The Company intends to utilize variable rate indebtedness available under its revolving credit facilities to initially fund future acquisitions of shopping centers. Thus, to the extent that the Company incurs additional variable rate indebtedness, its exposure to increases in interest rates in an inflationary period would increase. The Company believes, however, that in no event would increases in interest expenses as a result of inflation significantly impact the Company's distributable cash flow. The Community Center Joint Ventures have entered into swap agreements with major financial institutions as a hedge against increasing interest rates associated with the joint ventures' proposed upcoming long term financing. The Company intends to continuously monitor and actively manage interest costs on its variable rate debt portfolio and may enter into swap positions based on market fluctuations. In addition, the Company believes that it has the ability to obtain funds through additional equity and/or debt offerings, including the issuance of medium term notes. Accordingly, the cost of obtaining such protection agreements in relation to the Company's access to capital markets will continue to be evaluated. ECONOMIC CONDITIONS Many regions of the United States, including regions in which the Company owns property, have experienced varying degrees of economic recession. A continuation of the economic recession, or further adverse changes in general or local economic conditions, could result in the inability of some existing tenants of the Company to meet their lease obligations and could otherwise adversely affect the Company's ability to attract or retain tenants. The shopping centers are typically anchored by discount department stores (usually Wal-Mart, Kmart or J.C. Penney), supermarkets, and drug stores which usually offer day-to-day necessities, rather than high-priced luxury items. Since these merchants typically perform better in an economic recession than those who market high priced luxury items, the percentage rents received by the Company have remained relatively stable. In addition, the Company seeks to reduce its operating and leasing risks through ownership of a portfolio of properties with a diverse geographic and tenant base. During 1996 and 1997, certain national and regional retailers experienced financial difficulties and several have filed for protection under bankruptcy laws. Although the Company has experienced an increase in the number of tenants filing for protection under bankruptcy laws, no significant bankruptcies have occurred through May 12, 1997 with regard to the Company's portfolio of tenants. -16- 17 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not presently involved in any material litigation nor, to its knowledge, is any material litigation threatened against the Company or its properties, other than routine litigation arising in the ordinary course of business and which is expected to be covered by the Company's liability insurance. ITEM 2. MATERIAL MODIFICATIONS OF RIGHTS OF REGISTRANT'S SECURITIES None ITEM 3. DEFAULTS ON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER EVENTS None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits - 4.1 Second amendment to credit agreement between the Company and the First National Bank of Chicago and the First National Bank of Boston 11.1 Earnings per Share 27 (a) Financial Data Schedule b) Reports on Form 8-K Date of Report Items Reported -------------- -------------- January 13, 1997 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits -17- 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DEVELOPERS DIVERSIFIED REALTY CORPORATION May 15, 1997 /s/ Scott A. Wolstein - ---------------------------- --------------------------------------- (Date) Scott A. Wolstein, President and Chief Executive Officer May 15, 1997 /s/ William H. Schafer - ---------------------------- --------------------------------------- (Date) William H. Schafer, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) -18- EX-4.1 2 EXHIBIT 4.1 1 Exhibit 4.1 SECOND AMENDMENT TO CREDIT AGREEMENT ------------------------------------ This SECOND AMENDMENT TO CREDIT AGREEMENT dated as of March 31, 1997 is among Developers Diversified Realty Corporation, a corporation organized under the laws of the State of Ohio (the "Borrower"), The First National Bank of Chicago, a national banking association, and The First National Bank of Boston, a national banking association (collectively, the "Arrangers"), the several banks, financial institutions and other entities from time to time parties to this Agreement (collectively, with the Arrangers, the "Lenders"), and The First National Bank of Chicago, not individually, but as "Administrative Agent". R E C I T A L S A. Borrower, the Lenders and the Administrative Agent have entered into a Credit Agreement dated as of May 1, 1995, as amended by First Amendment to Credit Agreement dated as of June 18, 1996 (the "Credit Agreement"). B. Borrower has requested that the Lenders agree to extend the term of the Credit Agreement for one additional year, amend the interest rates thereunder and make certain other modifications to the Credit Agreement and the Lenders are willing to agree to such modifications on the terms and conditions described herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the parties agree as follows: 1. Article I of the Credit Agreement entitled "Definitions" is hereby amended by amending and restating the following definitions as follows: "Consolidated Capitalization Value" means, as of any date, an amount equal to the sum of (i) Consolidated Cash Flow for the most recent period of two consecutive fiscal quarters for which the Borrower has reported results under SECTION 6.1 (excluding any portion of Consolidated Cash Flow attributable to Assets Under Development and Projects acquired by the Borrower or its Subsidiaries during such period) MULTIPLIED BY 2, and DIVIDED BY 0.095 PLUS (ii) with respect to each Project so acquired by the Borrower or its Subsidiaries during such period, the Borrower's estimated annual Net Operating Income for such Project based on leases in existence at the date of such acquisition DIVIDED BY 0.095. "Facility Termination Date" means April 30, 2000. "Interest Period" means an Absolute Interest Period, a CD Interest Period or a LIBOR Interest Period. "LIBOR Advance" means an Advance that bears interest at the LIBOR Rate, whether a ratable Advance based on the LIBOR Applicable Margin or a Competitive Bid Loan based on a Competitive LIBOR Margin. "LIBOR Rate" means, with respect to a LIBOR Advance for the relevant LIBOR Interest Period, the sum of (i) the quotient of (a) the Base LIBOR Rate applicable to such 2 LIBOR Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such LIBOR Interest Period, plus (ii) in the case of ratable LIBOR Advances, the LIBOR Applicable Margin in effect from time to time during such LIBOR Interest Period, or in the case of LIBOR Advances made as Competitive Bid Loans, the Competitive LIBOR Margin established in the Competitive Bid Quote applicable to such Competitive Bid Loan. The LIBOR Rate shall be rounded to the next higher 1/100 of 1% if the rate is not a multiple of 1/16 of 1% or 1/100 of 1%. 2. Article I of the Credit agreement entitled "Definitions" is hereby further amended by adding the following new definitions: "Absolute Interest Period" means, with respect to a Competitive Bid Loan made at an Absolute Rate, a period of up to 180 days as requested by Borrower in a Competitive Bid Quote Request and confirmed by a Lender in a Competitive Bid Quote but in no event extending beyond the Facility Termination Date. If an Absolute Interest Period would end on a day which is not a Business Day, such Absolute Interest Period shall end on the next succeeding Business Day. "Absolute Rate" means a fixed rate of interest (rounded to the nearest 1/100 of 1%) for an Absolute Interest Period with respect to a Competitive Bid Loan offered by a Lender and accepted by the Borrower at such rate. "Competitive Bid Borrowing Notice" is defined in SECTION 2.23(e). "Competitive Bid Lender" means a Lender which has a Competitive Bid Loan outstanding. "Competitive Bid Loan" is a Loan made pursuant to SECTION 2.22 hereof. "Competitive Bid Note" means the promissory note payable to the order of each Lender in the form attached hereto as EXHIBIT H to be used to evidence any Competitive Bid Loans which such Lender elects to make (collectively, the "Competitive Bid Notes"). "Competitive Bid Quote" means a response submitted by a Lender to the Administrative Agent or the Borrower, as the case may be with respect to an Invitation for Competitive Bid Quotes in the form attached as EXHIBIT I-3 or J-2. "Competitive Bid Quote Request" means a written request from Borrower to Administrative Agent in the form attached as EXHIBIT I-1. "Competitive LIBOR Margin" means, with respect to any Competitive Bid Loan for a LIBOR Interest Period, the percentage established in the applicable Competitive Bid Quote which is to be used to determine the interest rate applicable to such Competitive Bid Loan. "Funded Percentage" means, with respect to any Lender at any time, a percentage equal to a fraction the numerator of which is the amount actually disbursed and outstanding to -2- 3 Borrower by such Lender at such time (including Swingline Loans and Bid Loans), and the denominator of which is the total amount disbursed and outstanding to Borrower by all of the Lenders at such time (including Swingline Loans and Bid Loans). "Invitation for Competitive Bid Quotes" means a written notice to the Lenders from the Administrative Agent in the form attached as EXHIBIT I-2 for Competitive Bid Loans made pursuant to SECTION 2.23, and a written notice to the Lenders from the Borrower in the form of EXHIBIT J-1 for Competitive Bid Loans made pursuant to SECTION 2.24. "Maximum Legal Rate" means the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or in the Note or other Loan Documents, under the laws of such state or states whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan. "Percentage" means for each Lender the ratio that such Lender's Commitment bears to the Aggregate Commitment, expressed as a percentage. "Swingline Advances" means, as of any date, collectively, all Swingline Loans then outstanding under this Facility. "Swingline Lender" shall mean Administrative Agent, in its capacity as a Lender. "Swingline Loans" means loans of up to $10,000,000 made by the Swingline Lender in accordance with SECTION 2.21 hereof. 3. Section 2.1 of the Credit Agreement is hereby amended by restating the first grammatical paragraph as follows: Subject to the terms and conditions of this Agreement, Lenders severally agree to make Advances through the Administrative Agent to Borrower from time to time prior to the Facility Termination Date, PROVIDED THAT the making of any such Advance will not cause the outstanding principal balance of all Loans (including all Advances, Swingline Loans and Competitive Bid Loans) to exceed the then-current Aggregate Commitment. The Advances may be ratable Floating Rate Advances, ratable Fixed Rate Advances, non-pro rata Swingline Loans or non-pro rata Competitive Bid Loans. Except for Swingline Loans and Competitive Bid Loans, each Lender shall fund its Percentage of each such Advance and no Lender will be required to fund any amounts which when aggregated with such Lender's Percentage of (i) all other Advances (other than Competitive Bid Loans) then outstanding and (ii) all Swingline Advances would exceed such Lender's then-current Commitment. This facility ("FACILITY") is a revolving credit facility and, subject to the provisions of this Agreement, Borrower may request -3- 4 Advances hereunder, repay such Advances and reborrow Advances at any time prior to the Facility Termination Date. 4. Section 2.3 of the Credit Agreement is amended and restated as follows: Each Advance hereunder shall consist of Loans made from the several Lenders ratably in proportion to their respective Percentages, except for Swingline Loans which shall be made by the Swingline Lender in accordance with SECTION 2.21 and Competitive Bid Loans which may be made on a non-pro rata basis by one or more of the Lenders in accordance with SECTIONS 2.23 and 2.24. 5. Section 2.4 of the Credit Agreement is hereby amended by deleting the first sentence and the table contained therein and replacing it with the following: Each of the ABR Applicable Margin, the CD Applicable Margin and the LIBOR Applicable Margin to be used in calculating the interest rate applicable to different Types of Advances shall vary from time to time in accordance with the higher of Borrower's then applicable (x) Moody's debt rating and (y) S&P's debt rating, as the case may be, and the Applicable Margin shall be adjusted effective on the next Business Day following any change in Borrower's Moody's debt rating and/or S&P's debt rating, as the case may be. The applicable debt ratings and the Applicable Margins are set forth in the following table:
LIBOR/CD ABR APPLICABLE APPLICABLE S&P RATING MOODY'S RATING MARGIN MARGIN ------------- -------------- ---------- ---------- A- or higher A3 or higher 0.90% 0.00% BBB+ Baa1 1.00% 0.00% BBB Baa2 1.10% 0.00% BBB- Baa3 1.25% 0.25% Less than BBB- Less than Baa3 1.45% 0.45%
6. Section 2.5 of the Credit Agreement is hereby amended by deleting the first sentence thereof and replacing it with the following: "The Borrower agrees to Pay to the Administrative Agent for the account of each Lender a commitment fee (the "COMMITMENT FEE") calculated at the rate of 0.20% per annum on the daily unborrowed portion of such Lender's Commitment (which is equal to the daily difference between such Lender's then outstanding Commitment and the then outstanding Loans owed to such Lender) from the effective date of -4- 5 the Second Amendment to this Agreement to and including the Facility Termination Date, payable quarterly in arrears on the last day of each calendar quarter hereafter beginning June 30, 1997 and on the Facility Termination Date. Amounts owed to a Lender in connection with Competitive Bid Loans shall not constitute outstanding Loans owed to such Lender for purposes of calculating the Commitment Fee. 7. Section 2.6 of the Credit Agreement is hereby amended by adding the following sentence: The Borrower shall also pay the fee due to the Administrative Agent in connection with certain Competitive Bid Loans as provided in SECTION 2.23 hereof. 8. Section 2.8 of the Credit Agreement is hereby amended by adding the following sentence: Notwithstanding the foregoing, in no event shall Borrower have the right to prepay a Competitive Bid Loan without the consent of the applicable Competitive Bid Lender. 9. Section 2.9 of the Credit Agreement is hereby restated as follows: "The Borrower shall select the Type of Advance and, in the case of each Fixed Rate Advance, the Interest Period applicable to each Advance from time to time. The Borrower shall give the Administrative Agent irrevocable notice (a "Borrowing Notice") (i) not later am 9:00 a.m. Chicago time on the Borrowing Date of each Floating Rate Advance, (ii) not later than 10:00 a.m. Chicago time, at least one (1) Business Day before the Borrowing Date for each Fixed CD Rate Advance, (iii) not later than 10:00 a.m. Chicago time, at least three (3) Business Days before the Borrowing Date for each LIBOR Advance, and (iv) not later than 2:00 p.m. Chicago time on the Borrowing Date for each Swingline Loan, specifying: (a) the Borrowing Date, which shall be a Business Day, of such Advance, (b) the aggregate amount of such Advance, (c) the Type of Advance selected (which must be a Floating Rate Advance in the case of the Swingline Loans), and (d) in the case of each Fixed Rate Advance, the Interest Period applicable thereto. -5- 6 The Administrative Agent shall advise the Lenders of the contents of any Borrowing Notice requesting a LIBOR Advance at least two Business Days prior to the applicable Borrowing Date and shall provide a copy of each Borrowing Notice to the Lenders on or promptly after the Borrowing Date. Each Lender shall make available its Loan or Loans, in funds immediately available in Chicago to the Administrative Agent at its address specified pursuant to ARTICLE XIII on each Borrowing Date not later than (i) 10:00 a.m. (Chicago time), in the case of Floating Rate Advances which have been requested by a Borrowing Notice given to the Administrative Agent not later than 3:00 p.m. (Chicago time) on the Business Day immediately preceding such Borrowing Date, or (ii) noon (Chicago time) in the case of all other Advances (other than Swingline Loans), and 4:00 p.m. (Chicago time) for all Swingline Loans. The Administrative Agent will make the funds so received from the Lenders available to the Borrower at the Administrative Agent's aforesaid address. No Interest Period may end after the Facility Termination Date and, unless the Lenders otherwise agree in writing, in no event may there be more than five (5) different Interest Periods for LIBOR Advances outstanding at any one time. 10. Article II of the Credit Agreement is amended by adding the following new Sections: 2.21 SWINGLINE LOANS. In addition to the other options available to Borrower hereunder, up to $10,000,000 of the Swingline Lender's Commitment, shall be available for Swingline Loans subject to the following. terms and conditions. Swingline Loans shall be made available for same day borrowings provided that notice is given in accordance with SECTION 2.9 hereof. All Swingline Loans shall bear interest at the Floating Rate and shall be deemed to be Floating Rate Advances. In no event shall the Swingline Lender be required to fund a Swingline Loan if it would increase the total aggregate outstanding Loans (including Swingline Loans but not including Competitive Bid Loans) by Swingline Lender hereunder to an amount in excess of its Commitment. Upon request of the Swingline Lender made to all the Lenders, each Lender irrevocably agrees to purchase its Percentage of any Swingline Loan made by the Swingline Lender regardless of whether the conditions for disbursement are satisfied at the time of such purchase, including the existence of an Event of Default hereunder provided no Lender shall be required to have total outstanding Loans (other than Competitive Bid Loans) in an amount greater than its Commitment. Such purchase shall take place on the date of the request by Swingline Lender so long as such request is made by noon (Chicago time), otherwise on the Business Day following such request. All -6- 7 requests for purchase shall be in writing. From and after the date it is so purchased, each such Swingline Loan shall, to the extent purchased, (i) be treated as a Loan made by the purchasing Lenders and not by the selling Lender for all purposes under this Agreement and the payment of the purchase price by a Lender shall be deemed to be the making of a Loan by such Lender and shall constitute outstanding principal under such Lender's Note, and (ii) shall no longer be considered a Swingline Loan except that all interest accruing on or attributable to such Swingline Loan for the period prior to the date of such purchase shall be paid. when due by the Borrower to the Administrative Agent for the benefit of the Swingline Lender and all such amounts accruing on or attributable to such Loans for the period from and after the date of such purchase shall be paid when due by the Borrower to the Administrative Agent for the benefit of the purchasing Lenders. If prior to purchasing its Percentage of a Swingline Loan one of the events described in SECTION 7.7 OR 7.8 shall have occurred and such event prevents the consummation of the purchase contemplated by preceding provisions, each Lender will purchase an undivided participating interest in the outstanding Swingline Loan in an amount equal to its Percentage of such Swingline Loan. From and after the date of each Lender's purchase of its participating interest in a Swingline Loan, if the Swingline Lender receives any payment on account thereof, the Swingline Lender will distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded); provided, however, that in the event that such payment was received by the Swingline Lender and is required to be returned to the Borrower, each Lender will return to the Swingline Lender any portion thereof previously distributed by the Swingline Lender to it. If any Lender fails to so purchase its Percentage of any Swingline Loan, such Lender shall be deemed to be a Defaulting Lender hereunder. No Swingline Loan shall be outstanding for more than five (5) days at a time and Swingline Loans shall not be outstanding for more than a total of ten (10) days during any month. 2.22 Competitive Bid Loans. --------------------- (a) COMPETITIVE BID OPTION. In addition to ratable Advances pursuant to SECTION 2.3, but subject to the terms and conditions of this Agreement (including, without limitation the limitation set forth in SECTION 2.1 as to the maximum amount of all outstanding Advances, including Swingline Loans and Competitive Bid Loans), the Borrower may, as set forth in SECTIONS 2.23 or 2.24, request the Lenders, prior to the Facility Termination Date, to make offers to make Competitive Bid Loans to the Borrower. Each Lender may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation -7- 8 to, accept any such offers in the manner set forth in SECTION 2.23 or SECTION 2.24, as the case may be. Competitive Bid Loans shall be evidenced by the Competitive Bid Notes. Borrower shall not have the right to request a Competitive Bid Loan at any time that a Default exists. If Borrower elects to have Administrative Agent administer the Competitive Bid Loan process, the procedures set forth in SECTION 2.23 shall apply. If Borrower elects to administer the Competitive Bid Loan process itself, the procedures set forth in SECTION 2.24 shall apply. (b) GENERAL TERMS. Any Competitive Bid Loan shall not reduce the Commitment of the Lender making such Competitive Bid Loan, and each such Lender shall continue to be obligated to fund its full Percentage of all pro rata Advances under the Facility. In no event can the aggregate amount of all Competitive Bid Loans at any time exceed fifty percent (50%) of the then Aggregate Commitment. Notwithstanding anything to the contrary in SECTION 2.10, Competitive Bid Loans may not be continued or converted and, if not repaid at the end of the Interest Period applicable thereto, shall (subject to the conditions set forth in this Agreement) be replaced by new Competitive Bid Loans made in accordance with SECTION 2.23 or SECTION 2.24 or by ratable Advances in accordance with SECTION 2.9. (c) FUNDING OF COMPETITIVE BID LOANS. Each Lender that is to make a Competitive Bid Loan shall, before 2:00 p.m. (Chicago time) on the date of such Competitive Bid Loan specified in the notice received from the Borrower make available the amount of such Competitive Bid Loan to the Administrative Agent. Upon fulfillment of the applicable conditions to disbursement and after receipt of such funds, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's aforesaid address. 2.23 Agent Administered Competitive Bid Loans. ---------------------------------------- (a) COMPETITIVE BID QUOTE REQUEST. When the Borrower wishes to request offers to make Competitive Bid Loans under this SECTION 2.23, it shall transmit to the Administrative Agent by telecopy a Competitive Bid Quote Request substantially in the form of EXHIBIT I-1 hereto so as to be received no later than (i) 10:00 a.m. (Chicago time) at least five Business Days prior to the Borrowing Date proposed therein, in the case of a request for a Competitive LIBOR Margin or (ii) 9:00 a.m. (Chicago time) at least one Business Day prior to the Borrowing Date proposed therein, in the case of a request for an Absolute Rate specifying: (i) the proposed Borrowing Date for the proposed Competitive Bid Loan, -8- 9 (ii) the requested aggregate principal amount of such Competitive Bid Loan which shall be at least $5,000,000 and in an integral multiple of $1,000,000, (iii) whether the Competitive Bid Quotes requested are to set forth a Competitive LIBOR Margin or an Absolute Rate, or both, and (iv) the LIBOR Interest Period, if a Competitive LIBOR Margin is requested, or the Absolute Interest Period, if an Absolute Rate is requested. The Borrower may request offers to make Competitive Bid Loans for more than one (but not more than five) Interest Periods in a single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be given within five Business Days (or such other number of days as the Borrower and the Administrative Agent may agree) of any other Competitive Bid Quote Request or Invitation for Competitive Bid Quotes. A Competitive Bid Quote Request that does not conform substantially to the form of EXHIBIT I-1 hereto shall be rejected, and the Administrative Agent shall promptly notify the Borrower of such rejection by telecopy. (b) INVITATION FOR COMPETITIVE BID QUOTES. Promptly and in any event before the close of business on the same Business Day of receipt of a Competitive Bid Quote Request that is not rejected pursuant to SECTION 2.23(a), the Administrative Agent shall send to each of the Lenders by telecopy an Invitation for Competitive Bid Quotes substantially in the form of EXHIBIT I-2 hereto, which shall constitute an invitation by the Borrower to each Lender to submit Competitive Bid Quotes offering to make the Competitive Bid Loans to which such Competitive Bid Quote Request relates in accordance with this SECTION 2.23. (c) Submission of Contents of Competitive Bid Quotes. ------------------------------------------------- (i) Each Lender may, in its sole discretion, submit a Competitive bid Quote containing an offer or offers to make Competitive Bid Loans in response to any Invitation for Competitive Bid Quotes. Each Competitive Bid Quote must comply with the requirements of this SECTION 2.23(c) and must be submitted to the Administrative Agent by telex or telecopy at its -9- 10 offices not later than (a) 2:00 p.m. (Chicago time) at least four Business Days prior to the proposed Borrowing Date, in the case of a request for a Competitive LIBOR Margin or (b) 9:00 a.m. (Chicago time) on the proposed Borrowing Date, in the case of a request for an Absolute Rate (or, in either case upon reasonable prior notice to the Lenders, such other time and rate as the Borrower and the Administrative Agent may agree); PROVIDED that Competitive Bid Quotes submitted by First Chicago may only be submitted if the Administrative Agent or First Chicago notifies the Borrower of the terms of the offer or offers contained therein no later than 30 minutes prior to the latest time at which the relevant Competitive Bid Quotes must be submitted by the other Lenders. Subject to the Borrower's compliance with all other conditions to disbursement herein, any Competitive Bid Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Competitive Bid Quote shall be in substantially the form of EXHIBIT I-3 hereto and shall in any case specify: (a) the proposed Borrowing Date, which shall be the same as that set forth in the applicable Invitation for Competitive Bid Quotes, (b) the principal amount of the Competitive Bid Loan for which each such offer is being made, which principal amount (1) may be greater than, less than or equal to the Commitment of the quoting Lender, (2) must be at least $5,000,000 and an integral multiple of $1,000,000, and (3) may not exceed the principal amount of Competitive Bid Loans for which offers are requested, (c) as applicable, the Competitive LIBOR Margin and Absolute -10- 11 Rate offered for each such Competitive Bid Loan, (d) the minimum amount, if any, of the Competitive Bid Loan which may be accepted by the Borrower, and (e) the identity of the quoting Lender. (iii) The Administrative Agent shall reject any competitive Bid Quote that: (a) is not substantially in the form of EXHIBIT I-3 hereto or does not specify afl of the information required by SECTION 2.23(c)(ii), (b) contains qualifying, conditional or similar language, other than any such language contained in EXHIBIT I-3 hereto, (c) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bid Quotes, or (d) arrives after the time set forth in SECTION 2.23(c)(i). If any Competitive Bid Quote shall be rejected pursuant to this SECTION 2.23(c)(iii), then the Administrative Agent shall notify the relevant Lender of such rejection as soon as practical. (d) NOTICE TO BORROWER. The Administrative Agent shall promptly notify the Borrower of the terms (i) of any Competitive Bid Quote submitted by a Lender that is in accordance with SECTION 2.23(c) and (ii) of any Competitive Bid Quote that amends, modifies or is otherwise inconsistent with a previous Competitive Bid Quote submitted by such Lender with respect to the same Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall be disregarded by the Administrative Agent unless such subsequent Competitive Bid Quote specifically states that it is submitted solely to correct a manifest error in such former Competitive Bid Quote. The Administrative Agent's notice to the Borrower shall specify the -11- 12 aggregate principal amount of Competitive Bid Loans for which offers have been received for each Interest Period specified in the related Competitive Bid Quote Request and the respective principal amounts and Competitive LIBOR Margins or Absolute Rate, as the case may be, so offered. (e) ACCEPTANCE AND NOTICE BY BORROWER. Not later than (i) 6:00 p.m. (Chicago time) at least four Business Days prior to the proposed Borrowing Date in the case of a request for a Competitive LIBOR Margin or (ii) 10:00 a.m. (Chicago time) on the proposed Borrowing Date, in the case of a request for an Absolute Rate (or, in either case upon reasonable prior notice to the Lenders, such other time and date as the Borrower and the Administrative Agent may agree), the Borrower shall notify the Administrative Agent of its acceptance or rejection of the offers so notified to it pursuant to SECTION 2.23(d), PROVIDED, HOWEVER, that the failure by the Borrower to give such notice to the Administrative Agent shall be deemed to be a rejection of all such offers. In the case of acceptance, such notice (a "COMPETITIVE BID BORROWING NOTICE") shall specify the aggregate principal amount of offers for each Interest Period that are accepted and the applicable interest rate. The Borrower may accept any Competitive Bid Quote in whole or in part (subject to the terms of SECTION 2.23(c)(iii)); PROVIDED that: (i) the aggregate principal amount of all Competitive Bid Loans to be disbursed on a given Borrowing Date may not exceed the applicable amount set forth in the related Competitive Bid Quote Request, (ii) acceptance of offers may only be made on the basis of ascending Competitive LIBOR Margins or Absolute Rates, as the case may be, and (iii) the Borrower may not accept any offer that is described in SECTION 2.23(c)(iii) or that otherwise fails to comply with the requirements of this Agreement. (f) ALLOCATION BY ADMINISTRATIVE AGENT. If offers are made by two or more Lenders with the same Competitive LIBOR Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which offers are accepted for the related Interest Period, the principal amount of Competitive Bid Loans in respect of which such offers are accepted shall be allocated by the -12- 13 Administrative Agent among such Lenders as nearly as possible (in such multiples, not greater than $1,000,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amount of such offers PROVIDED, however, that no Lender shall be allocated any Competitive Bid Loan which is less than the minimum amount which such Lender has indicated that it is willing to accept. Allocations by the Administrative Agent of the amounts of Competitive Bid Loans shall be conclusive in the absence of manifest error. The Administrative Agent shall promptly, but in any event on the same Business Day, notify each Lender of its receipt of a Competitive Bid Borrowing Notice and the principal amounts of the Competitive Bid Loans allocated to each participating Lender. (g) ADMINISTRATION FEE. The Borrower hereby agrees to pay to the Administrative Agent an administration fee of $2,500 per each Competitive Bid Quote Request transmitted by the Borrower to the Administrative Agent pursuant to SECTION 2.23(a). Such administration fees, if not paid at the time of the applicable Competitive Bid Quote Request shall be payable monthly in arrears on the first Business Day of each month and on the Facility Termination Date (or such earlier date on which the Aggregate Commitment shall terminate or be cancelled). 2.24 Competitive Bid Loans Administered By Borrower. ---------------------------------------------- (a) COMPETITIVE BID QUOTE REQUEST. When the Borrower wishes to request offers to make Competitive Bid Loans under this SECTION 2.24, it shall transmit to the Lenders and Administrative Agent by telecopy an Invitation for Competitive Bid Quote substantially in the form of EXHIBIT J-1 hereto so as to be received no later than (i) 10:00 a.m. (Chicago time) at least five Business Days prior to the Borrowing Date proposed therein, in the case of a request for a Competitive LIBOR Margin or (ii) 9:00 a.m. (Chicago time) at least one Business Day prior to the Borrowing Date proposed therein, in the case of a request for an Absolute Rate specifying: (i) the proposed, Borrowing Date for the proposed Competitive Bid Loan, (ii) the requested aggregate principal amount of such Competitive Bid Loan which shall be at least $5,000,000 and in an integral multiple of $1,000,000, (iii) whether the Competitive Bid Quotes requested are to set forth a Competitive LIBOR Margin or an Absolute Rate, or both, and -13- 14 (iv) the LIBOR Interest Period, if a Competitive LIBOR Margin is requested, or the Absolute Interest Period, if an Absolute Rate is requested. The Borrower may request offers to make Competitive Bid Loans for more than one (but not more than five) Interest Periods in a single Competitive Bid Quote. No Invitation for Competitive Bid Quote shall be given within five Business Days (or such other number of days as the Borrower and the Administrative Agent may agree) of any other Invitation for Competitive Bid Quote. (b) Submission and Contents of Competitive Bid ------------------------------------------ Quotes. ------- (i) Each Lender may, in its sole discretion, submit a Competitive Bid Quote containing an offer or offers to make Competitive Bid Loans in response to any Invitation for Competitive Bid Quotes. Each Competitive Bid Quote must comply with the requirements of this SECTION 2.24(b) and must be submitted to the Borrower by telex or telecopy at its offices not later than (a) 2:00 p.m. (Chicago time) at least four Business Days prior to the proposed Borrowing Date, in the case of a request for a Competitive LIBOR Margin or (b) 9:00 a.m. (Chicago time) on the proposed Borrowing Date, in the case of a request for an Absolute Rate (or, in either case upon reasonable prior notice to the Lenders, such other time and rate as the Borrower and the Administrative Agent may agree). Subject to the Borrower's compliance with all other conditions to disbursement herein, any Competitive Bid Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Competitive Bid Quote shall be in substantially the form of EXHIBIT J-2 hereto and shall in any case specify: (a) the proposed Borrowing Date, which shall be the same as that set forth in the applicable Invitation for Competitive Bid Quotes, -14- 15 (b) the principal amount of the Competitive Bid Loan for which each such offer is being made, which principal amount (1) may be greater than, less than or equal to the Commitment of the quoting Lender, (2) must be at least $5,000,000 and an integral multiple of $1,000,000, and (3) may not exceed the principal amount of Competitive Bid Loans for which offers are requested, (c) as applicable, the Competitive LIBOR Margin and Absolute Rate offered for each such Competitive Bid Loan, (d) the minimum amount, if any, of the Competitive Bid Loan which may be accepted by the Borrower, and (e) the identity of the quoting Lender. (iii) The Borrower shall reject any Competitive Bid Quote that: (a) is not substantially in the form of EXHIBIT J-2 hereto or does not specify all of the information required by SECTION 2.24(b)(ii), (b) contains qualifying, conditional or similar language, other than any such language contained in EXHIBIT J-2 hereto, (c) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bid Quotes, or (d) arrives after the time set forth in SECTION 2.24(b)(i). -15- 16 If any Competitive Bid Quote shall be rejected pursuant to this SECTION 2.24(b)(iii), then the Borrower shall notify the relevant Lender of such rejection as soon as practical. (c) ACCEPTANCE AND NOTICE BY BORROWER. Not later than (i) 6:00 p.m. (Chicago time) at least four Business Days prior to the proposed Borrowing Date in the case of a request for a Competitive LIBOR Margin or (ii) 10:00 a.m. (Chicago time) on the proposed Borrowing Date, in the case of a request for an Absolute Rate (or, in either case upon reasonable prior notice to the Lenders, such other time and date as the Borrower and the Administrative Agent may agree), the Borrower shall notify the Lenders and Administrative Agent of its acceptance or rejection of the offers submitted to it pursuant to SECTION 2.24(b); PROVIDED, HOWEVER, that the failure by the Borrower to give such notice to the Lenders and Administrative Agent shall be deemed to be a rejection of all such offers. In the case of acceptance, such notice to each Lender and the Administrative Agent shall specify the aggregate principal amount of offers for each Interest Period that are accepted and the applicable interest rate. The Borrower may accept any Competitive Bid Quote in whole or in part (subject to the terms of SECTION 2.24(b)(iii)); PROVIDED that: (i) the aggregate principal amount of all Competitive Bid Loans to be disbursed on a given Borrowing Date may not exceed the applicable amount set forth in the related Invitation for Competitive Bid Quote, (ii) acceptance of offers may only be made on the basis of ascending Competitive LIBOR Margins or Absolute Rates, as the case may be, and (iii) the Borrower may not accept any offer that is described in SECTION 2.24(b)(iii) or that otherwise fails to comply with the requirements of this Agreement. (d) ALLOCATION BY BORROWER. If offers are made by two or more Lenders with the same Competitive LIBOR Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which offers are accepted for the related Interest Period, the principal amount of Competitive Bid Loans in respect of which such offers are accepted shall be allocated by the Borrower among such Lenders as nearly as possible (in such multiples, not greater than $1,000,000, as the Administrative Agent may deem -16- 17 appropriate) in proportion to the aggregate principal amount of such offers PROVIDED, however, that no Lender shall be allocated any Competitive Bid Loan which is less than the minimum amount which such Lender has indicated that it is willing to accept. Allocations by the Borrower of the amounts of Competitive Bid Loans shall be conclusive in the absence of manifest error. 2.25 APPLICATION OF MONEYS RECEIVED. All moneys collected or received by the Administrative Agent on account of the Facility directly or indirectly, shall be applied in the following order of priority: (i) to the payment of all reasonable costs incurred in the collection of such moneys of which the Administrative Agent shall have given notice to the Borrower; (ii) to the reimbursement of any yield protection due to any of the Lenders in accordance with SECTION 3.1; (iii) to the payment of the Commitment Fee to the Lenders, if then due, and to the payment of all fees to the Administrative Agent; (iv) to payment of the full amount of interest and principal on the Swingline Loans; (v) first to interest until paid in full and then to principal for all Lenders (other than Defaulting Lenders) (i) as allocated by the Borrower (unless an Event of Default exists) between Competitive Bid Loans and ratable Advances (the amount allocated to ratable Advances to be distributed in accordance with the Percentages of the Lenders) or (ii) if an Event of Default exists, in accordance with the respective Funded Percentages of the Lenders; (vi) any other sums due to the Administrative Agent or any Lender under any of the Loan Documents; and (vii) to the payment of any sums due to each Defaulting Lender as their respective Percentages appear (provided that Administrative Agent shall have the right to set-off against such -17- 18 sums any amounts due from such Defaulting Lender). 2.26. USURY. This Agreement and each Note and Competitive Bid Note are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance of the Loan at a rate which could subject any Lender (including the Swingline Lender) to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate. If by the terms of this Agreement or the Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the interest rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding. 11. Section 3.4 of the Credit Agreement is hereby restated as follows: If any payment of a ratable Fixed Rate Advance or a Competitive Bid Loan occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a ratable Fixed Rate Advance or a Competitive Bid Loan is not made on the date specified by Borrower for any reason other than default by one or more of the Lenders, Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including without limitation any loss or cost in liquidating or employing deposits acquired to fund or maintain the ratable Fixed Rate Advance or Competitive Bid Loan, as the case may be. Without limitation of any losses arising from changes in the Fixed Rate adverse to the Lenders, in no event will the administrative cost payable by the Borrower as a result of such early payment or failure to make an advance exceed $250 per occurrence per Lender. Nothing in this Section 3.4 shall authorize the prepayment of a Competitive Bid Loan prior to the end of the applicable Interest Period. 12. Section 4.2 of the Credit Agreement is amended by adding the phrase "(including Swingline Loans and Competitive Bid Loans)" after the word "Advance." -18- 19 13. Section 6.19 of the Credit Agreement is amended by deleting the references therein to $175,000,000 and inserting in lieu thereof $225,000,000. 14. Section 6.21 (iii) of the Credit Agreement is modified to delete the reference to "2.0" and insert in lieu thereof "1.75." 15. The Exhibits attached hereto as Exhibit H, Exhibit I-1, I-2, I-3, and Exhibit J-1 and J-2 are hereby incorporated into the Credit Agreement as such Exhibits. 16. Borrower hereby represents and warrants to the Lenders that: (a) The Borrower has the corporate power and authority and legal right to execute and deliver this Amendment and each of the Notes to be executed and delivered pursuant hereto and to perform its obligations thereunder. The execution and delivery by the Borrower of this Amendment and the other documents executed pursuant to this Amendment and the other documents executed pursuant hereto in the performance of its obligations hereunder have been duly authorized by proper corporate proceedings, and such documents constitute the legal valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, in solvency or similar law effecting the enforcement of creditors rights generally; -19- 20 (b) each of the representations and warranties set forth in Article V of the Credit Agreement is true and correct in all material respects. 17. As of the effective date of this Amendment, BHF-Bank Aktiengesesellschaft, New York Branch ("BHF") shall cease to be a Lender under the Credit Agreement and BHF's Commitment of $16,000,000 shall be allocated $9,000,000 to First Chicago, $4,000,000 to Fleet National Bank ("Fleet") and $3,000,000 to Comerica Bank ("Comerica"), resulting in the Commitments of the Lenders being as shown on the signature pages hereto as of the effective date of this Amendment. The Notes held by First Chicago, and Fleet and Comerica shall be amended and restated as of the effective date of this Amendment to reflect such increases, in the form as shown on Exhibit A-1 attached hereto. All accrued interest and fees due to BHF under the Credit Agreement for the period prior to the effective date hereof shall be paid to BHF by the Borrower when due. 18. In consideration for their agreement to this Amendment, the Borrower shall pay on the date hereof to each of the Lenders an upfront fee equal to one-tenth of one percent (0.10%) of their respective Commitments on the effective date hereof. 19. This Amendment may be executed in counterparts and shall be effective when each of the parties hereto have executed and delivered to the Administrative Agent or its counsel one of such counterparts. 20. Except as expressly modified by this Amendment, the Credit Agreement shall continue in full force and effect. IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative Agent have executed this Amendment as of the date first above written. DEVELOPERS DIVERSIFIED REALTY CORPORATION By: --------------------------------- Its: -------------------------------- COMMITMENT: THE FIRST NATIONAL BANK OF CHICAGO, individually and as Administrative Agent $35,000,000 By: --------------------------------- Its: -------------------------------- -20- 21 COMMITMENT: THE FIRST NATIONAL BANK OF BOSTON $23,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: BANK OF AMERICA ILLINOIS $20,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: BHF-BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH Zero By: --------------------------------- Its: -------------------------------- COMMITMENT: DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH $16,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: FLEET NATIONAL BANK $20,000,000 By: --------------------------------- Its: -------------------------------- -21- 22 COMMITMENT: THE FIRST NATIONAL BANK OF BOSTON $23,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: BANK OF AMERICA ILLINOIS $20,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: BHF-BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH Zero By: --------------------------------- Its: -------------------------------- COMMITMENT: DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH $16,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: FLEET NATIONAL BANK $20,000,000 By: --------------------------------- Its: -------------------------------- -22- 23 COMMITMENT: THE FIRST NATIONAL BANK OF BOSTON $23,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: BANK OF AMERICA ILLINOIS $20,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: BHF-BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH Zero By: --------------------------------- Its: -------------------------------- COMMITMENT: DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH $16,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: FLEET NATIONAL BANK $20,000,000 By: --------------------------------- Its: -------------------------------- -23- 24 COMMITMENT: THE FIRST NATIONAL BANK OF BOSTON $23,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: BANK OF AMERICA ILLINOIS $20,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: BHF-BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH Zero By: --------------------------------- Its: -------------------------------- COMMITMENT: DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH $16,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: FLEET NATIONAL BANK $20,000,000 By: --------------------------------- Its: -------------------------------- -24- 25 COMMITMENT: THE FIRST NATIONAL BANK OF BOSTON $23,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: BANK OF AMERICA ILLINOIS $20,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: BHF-BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH Zero By: --------------------------------- Its: -------------------------------- COMMITMENT: DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH $16,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: FLEET NATIONAL BANK $20,000,000 By: --------------------------------- Its: -------------------------------- -25- 26 COMMITMENT: NIPPON CREDIT BANK, LTD. $13,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: COMERICA BANK, a Michigan banking corporation $13,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: SIGNET BANK $10,000,000 By: --------------------------------- Its: -------------------------------- -26- 27 COMMITMENT: NIPPON CREDIT BANK, LTD. $13,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: COMERICA BANK, a Michigan banking corporation $13,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: SIGNET BANK $10,000,000 By: --------------------------------- Its: -------------------------------- -27- 28 COMMITMENT: NIPPON CREDIT BANK, LTD. $13,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: COMERICA BANK, a Michigan banking corporation $13,000,000 By: --------------------------------- Its: -------------------------------- COMMITMENT: SIGNET BANK $10,000,000 By: --------------------------------- Its: -------------------------------- -28- 29 CONSENT AND AMENDMENT TO GUARANTIES The undersigned, Developers Diversified Finance Corporation and Developers Diversified of Alabama, Inc., hereby consent to the foregoing amendment and agree that their respective Guaranties dated as of May 1, 1995 shall continue in full force and effect, and that such Guaranties shall be amended so that all references therein to the Notes shall include the Competitive Bid Notes as defined in the foregoing Amendment. DEVELOPERS DIVERSIFIED FINANCE CORPORATION By: --------------------------------- Its: -------------------------------- DEVELOPERS DIVERSIFIED OF ALABAMA, INC. By: --------------------------------- Its: -------------------------------- -29- 30 EXHIBIT A-1 ----------- FORM OF AMENDED AND RESTATED NOTE ------------------------- AMENDED AND RESTATED NOTE $ March 31, 1997 ------------ Developers Diversified Realty Corporation, a corporation organized under the laws of the State of Ohio (the "Borrower"), promises to pay to the order of ____________________________ (the "Lender") the lesser of the principal sum of ______________ Million Dollars or the aggregate unpaid principal amount of all Loans made by the Lender to the Borrower pursuant to Article II of the Credit Agreement (as the same may be amended or modified, the "Agreement") hereinafter referred to, in immediately available funds at the main office of The First National Bank of Chicago in Chicago, Illinois, as Agent, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay remaining unpaid principal of and accrued and unpaid interest on the Loans in full on the Facility Termination Date. The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Loan and the date and amount of each principal payment hereunder. This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Credit Agreement, dated as of May 1, 1995, as amended by a First Amendment to Credit Agreement dated as of June 18, 1996, and Second Amendment to Credit Agreement dated as of March 31, 1997, among the Borrower, The First National Bank of Chicago, individually and as an Arranger and the Agent, The First National Bank of Boston, individually and as an Arranger, and the other lenders named therein, to which Agreement, as it may be amended from time to time, reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement. This Note amends and restates in its entirety the Note dated June 18, 1996 in the maximum principal sum of $ ____________ executed by the Borrower in favor of the Lender. If there is a Default under the Agreement or any other Loan Document and Agent exercises the remedies provided under the Agreement and/or any of the Loan Documents for the Lenders, then in addition to all amounts recoverable by the Agent and the Lenders under such documents, Agent and the Lenders shall be entitled to receive reasonable attorneys fees and expenses incurred by Agent and the Lenders in connection with the exercise of such remedies. -30- 31 Borrower and all endorsers severally waive presentment, protest and demand, notice of protest, demand and of dishonor and nonpayment of this Note, and any and all lack of diligence or delays in collection or enforcement of this Note, and expressly agree that this Note, or any payment hereunder, may be extended from time to time, and expressly consent to the release of any party liable for the obligation secured by this Note, the release of any of the security for this Note, the acceptance of any other security therefor, or any other indulgence or forbearance whatsoever, all without notice to any party and without affecting the liability of the Borrower and any endorsers hereof. This Note shall be governed and construed under the internal laws of the State of Illinois. BORROWER AND LENDER, BY ITS ACCEPTANCE HEREOF, EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS NOTE AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY. DEVELOPERS DIVERSIFIED REALTY CORPORATION, an Ohio corporation By: ------------------------------------ Print Name: ---------------------------- Its: ------------------------------------ -31- 32 SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL TO NOTE OF DEVELOPERS DIVERSIFIED REALTY CORPORATION, DATED MARCH 31, 1997 Maturity Principal Maturity Principal Amount of of Interest Amount Unpaid Date Loan Period Paid Balance - ---- ---- ------ ---- ------- -32- 33 EXHIBIT H --------- FORM OF COMPETITIVE BID NOTE ---------------------------- March 31, 1997 On or before the last day of each "Interest Period" applicable to a "Competitive Bid Loan", as defined in that certain Credit Agreement dated as of May 1, 1995, as amended (the "AGREEMENT") between DEVELOPERS DIVERSIFIED REALTY CORPORATION, a Ohio corporation ("BORROWER"), The First National Bank of Chicago, a national bank organized under the laws of the United States of America, individually and as Administrative Agent for the Lenders (as such terms are defined in the Agreement), Borrower promises to pay to the order of ____________ (the "Lender"), or its successors and assigns, the unpaid principal amount of such Competitive Bid Loan made by the Lender to the Borrower pursuant to SECTION 2.22 of the Agreement, in immediately available funds at the office of the Administrative Agent in Chicago, Illinois, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement. The Borrower shall pay any remaining unpaid principal amount of such Competitive Bid Loans under this Competitive Bid Note ("NOTE") in full on or before the Facility Termination in accordance with the terms of the Agreement. The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date, amount and due date of each Competitive Bid Loan and the date and amount of each principal payment hereunder. This Note is issued pursuant to, and is entitled to the security under and benefits of, the Agreement and the other Loan Documents, to which Agreement and Loan Documents, as they may be amended from time to time, reference is hereby made for, INTER ALIA, a statement of the terms and conditions under which this Note may be prepaid or its maturity date accelerated. Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement. If there is an Event of Default or Default under the Agreement or any other Loan Document and Lender exercises its remedies provided under the Agreement and/or any of the Loan Documents, then in addition to all amounts recoverable by the Lender under such documents, Lender shall be entitled to receive reasonable attorneys fees and expenses incurred by Lender in exercising such remedies. Borrower and all endorsers severally waive presentment, protest and demand, notice of protest, demand and of dishonor and nonpayment of this Note (except as otherwise expressly provided for in the Agreement), and any and all lack of diligence or delays in collection or enforcement of this Note, and expressly agree that this Note, or any payment hereunder, may be extended from time to time, and expressly consent to the release of any party liable for the obligation secured by this Note, the release of any of the security of this Note, the acceptance -33- 34 of any other security therefor, or any other indulgence or forbearance whatsoever, all without notice to any party and without affecting the liability of the Borrower and any endorsers hereof. This Note shall be governed and construed under the internal laws of the State of Illinois. BORROWER AND LENDER, BY ITS ACCEPTANCE HEREOF, EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS PROMISSORY NOTE OR ANY OTHER LOAN DOCUMENT OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS NOTE AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. DEVELOPERS DIVERSIFIED REALTY CORPORATION, an Ohio corporation By: -------------------------------- Print Name: ------------------------ Its: ------------------------------- -34- 35 PAYMENTS OF PRINCIPAL --------------------- Unpaid Principal Notation Date Balance Made by - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -35- 36 EXHIBIT I-1 ----------- FORM OF COMPETITIVE BID QUOTE REQUEST ------------------------------------- (Section 2.23(a)) To: The First National Bank of Chicago, as administrative agent (the "Agent") From: Developers Diversified Realty Corporation (the "Borrower") Re: Credit Agreement dated as of May 1, 1995, as amended among the Borrower, the lenders from time to time party thereto, The First National Bank of Chicago and The First National Bank of Boston, as Arrangers, and The First National Bank of Chicago, as Administrative Agent for the lenders (as amended, supplemented or otherwise modified from time to time through the date hereof, the "Agreement") 1. Capitalized terms used herein have the meanings assigned to them in the Agreement. 2. We hereby give notice pursuant to SECTION 2.23(a) of the Agreement that we request Competitive Bid Quotes for the following proposed Competitive Bid Loan(s): Borrowing Date:_______________, 19__ Principal Amount(1) Interest Period(2) 3. Such Competitive Bid Quotes should offer [a Competitive LIBOR Margin] [an Absolute Rate]. - -------- 1 Amount must be at least $5,000,000 and an integral multiple of $1,000,000. 2 One, two, three or six months (Competitive LIBOR Margin) or up to 180 days (Absolute Rate), subject to the provisions of the definitions of LIBOR Interest Period and Absolute Interest Period. -36- 37 4. Upon acceptance by the undersigned of any or all of the Competitive Bid Loans offered by Lenders in response to this request, the undersigned shall be deemed to affirm as of the Borrowing Date thereof the representations and warranties made in ARTICLE V of the Agreement. DEVELOPERS DIVERSIFIED REALTY CORPORATION, an Ohio corporation By: -------------------------------- Print Name: ------------------------ Its: ------------------------------- -37- 38 EXHIBIT I-2 ----------- INVITATION FOR COMPETITIVE BID QUOTES ------------------------------------- (Section 2.23(b)) To: Each of the Lenders party to the Agreement referred to below From: Invitation for Competitive Bid Quotes to Developers Diversified Realty Corporation (the "Borrower") Pursuant to SECTION 2.23(b) of the Credit Agreement dated as of May 1, 1995 as amended from time to time, among the Borrower, the lenders from time to time party thereto, The First National Bank of Chicago and The First National Bank of Boston, as Arrangers, and The First National Bank of Chicago, as Administrative Agent for the lenders (as amended, supplemented or otherwise modified from time to time through the date hereof, the "Agreement"), we are pleased on behalf of the Borrower to invite you to submit Competitive Bid Quotes to the Borrower for the following proposed Competitive Bid Loan(s): Borrowing Date: _____________, 19__ Principal Amount Interest Period Such Competitive Bid Quotes should offer [a Competitive LIBOR Margin] [an Absolute Rate]. Your Competitive Bid Quote must comply with SECTION 2.23(c) of the Agreement and the foregoing. Capitalized terms used herein have the meanings assigned to them in the Agreement. Please respond to this invitation by no later than 9:00 a.m. (Chicago time) on _________________, 19___. THE FIRST NATIONAL BANK OF CHICAGO, as Administrative Agent By: ------------------------------ Title: --------------------------- -38- 39 EXHIBIT 1-3 ----------- COMPETITIVE BID QUOTE --------------------- (Section 2.23(c)) ___________, 19__ To: The First National Bank of Chicago, as Administrative Agent Re: Competitive Bid Quote to Developers Diversified Realty Corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated _____________, 19____, we hereby make the following Competitive Bid Quote pursuant to SECTION 2.23(c) of the Agreement hereinafter referred to and on the following terms: 1. Quoting Lender:______________________________________________________ 2. Person to contact at Quoting Lender:_________________________________ 3. Borrowing Date: ____________________________________________________(1) 4. We hereby offer to make Competitive Bid Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: - -------- 1 As specified in the related Invitation For Competitive Bid Quotes. -39- 40 ================================================================================ [Competitive Principal Interest LIBOR [Absolute Minimum Amount(2) Period(3) Margin(4)] Rate(5)] Amount(6) ================================================================================ We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Credit Agreement dated as of May 1, 1995, among the Borrower, the lenders from time to time party thereto, The First National Bank of Chicago and The First National Bank of Boston as Arrangers, and The First National Bank of Chicago, as Administrative Agent for the lenders (as amended, supplemented or otherwise modified from time to time through the date hereof, the "Agreement"), irrevocably obligates us to make the Competitive Bid Loan(s) for which any offer(s) are accepted, in whole or in part. Capitalized terms used herein and not otherwise defined herein shall have their meanings as defined in the Agreement. Very truly yours, [NAME OF LENDER] By: ------------------------------ Title: --------------------------- - -------- 2 Principal amount bid for each Interest Period may not exceed the principal amount requested. Bids must be made for at least $5,000,000 and integral multiples of $1,000,000. 3 One, two, three or six months or up to 180 days, as specified in the related Invitation For Competitive Bid Quotes. 4 Competitive LIBOR Margin for the applicable LIBOR Interest Period. Specify percentage (rounded to the nearest 1/100 of 1%) and specify whether "PLUS" or "MINUS". 5 Specify rate of interest per annum (rounded to the nearest 1/100 of 1%). 6 Specify minimum amount, if any, which the Borrower may accept (see SECTION 2.23(c)(ii)(d)). -40- 41 EXHIBIT J-1 ----------- INVITATION FOR COMPETITIVE BID QUOTES ------------------------------------- (Section 2.24(a)) To: Each of the Lenders party to the Agreement referred to below From: Invitation for Competitive Bid Quotes to Developers Diversified Realty Corporation (the "Borrower") Pursuant to SECTION 2.24(a) of the Credit Agreement dated as of May 1, 1995 as amended from time to time, among the Borrower, the lenders from time to time party thereto, The First National Bank of Chicago and The First National Bank of Boston, as Arrangers, and The First National Bank of Chicago, as Administrative Agent for the lenders (as amended, supplemented or otherwise modified from time to time through the date hereof, the "Agreement"), we are pleased to invite you to submit Competitive Bid Quotes to the Borrower for the following proposed Competitive Bid Loan(s): Borrowing Date: ________________, 19__ Principal Amount(7) Interest Period(8) Such Competitive Bid Quotes should offer [a Competitive LIBOR Margin] [an Absolute Rate]. Your Competitive Bid Quote must comply with SECTION 2.24(a) of the Agreement and the foregoing. Capitalized terms used herein have the meanings assigned to them in the Agreement. Please respond to this invitation by no later than 9:00 a.m. (Chicago time) on __________________, 19___. Upon acceptance by the undersigned of any or all of the Competitive Bid Loans offered by Lenders in response to this request, the undersigned shall be deemed to affirm as - -------- 7 Amount must be at least $5,000,000 and an integral multiple of $1,000,000. 8 One, two, three or six months (Competitive LIBOR Margin) or up to 180 days (Absolute Rate), subject to the provisions of the definitions of LIBOR Interest Period and Absolute Interest Period. -41- 42 of the Borrowing Date thereof the representations and warranties made in ARTICLE V of the Agreement. DEVELOPERS DIVERSIFIED REALTY CORPORATION, an Ohio corporation By: ------------------------------ Print Name: ---------------------- Its: ----------------------------- -42- 43 EXHIBIT J-2 ----------- COMPETITIVE BID QUOTE --------------------- (Section 2.24(b)) ____________, 19__ To: Developers Diversified Realty Corporation Re: Competitive Bid Quote In response to your invitation dated , 19 , we hereby make the following Competitive Bid Quote pursuant to SECTION 2.24(b) of the Agreement hereinafter referred to and on the following terms: 1. Quoting Lender: ______________________________________________________ 2. Person to contact at Quoting Lender: _________________________________ 3. Borrowing Date: ____________________________________________________(1) 4. We hereby offer to make Competitive Bid Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: - -------- 1 As specified in the related Invitation For Competitive Bid Quotes. -43- 44 ================================================================================ [Competitive Principal Interest LIBOR [Absolute Minimum Amount(2) Period(3) Margin(4)] Rate(5)] Amount(6) ================================================================================ We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Credit Agreement dated as of May 1, 1995, among the Borrower, the lenders from time to time party thereto, The First National Bank of Chicago and The First National Bank of Boston as Arrangers, and The First National Bank of Chicago, as Administrative Agent for the lenders (as amended, supplemented or otherwise modified from time to time through the date hereof, the "Agreement"), irrevocably obligates us to make the Competitive Bid Loan(s) for which any offer(s) are accepted, in whole or in part. Capitalized terms used herein and not otherwise defined herein shall have their meanings as defined in the Agreement. Very truly yours, [NAME OF LENDER] By: -------------------------- Title: ----------------------- - -------- 2 Principal amount bid for each Interest Period may not exceed the principal amount requested. Bids must be made for at least $5,000,000 and integral multiples of $1,000,000. 3 One, two, three or six months or up to 180 days, as specified in the related Invitation For Competitive Bid Quotes. 4 Competitive LIBOR Margin for the applicable LIBOR Interest Period. Specify percentage (rounded to the nearest 1/100 of 1%) and specify whether "PLUS" or "MINUS". 5 Specify rate of interest per annum (rounded to the nearest 1/100 of 1%). 6 Specify minimum amount, if any, which the Borrower may accept (see SECTION 2.24(b)(ii)(d)). -44- EX-11.1 3 EXHIBIT 11.1 1 EXHIBIT 11.1 DEVELOPERS DIVERSIFIED REALTY CORPORATION Earning per share For the Three Month Periods Ended March 31,
1997 1996 ---- ---- Primary - per APB -15, Interpretation 102 Dividends declared per weighted average share outstanding (24,520,075 shares) $0.64 Dividends declared per weighted average share outstanding (19,704,565 shares) $0.66 Undistributed loss per share: ($1,770,390) divided by (24,520,075) (0.07) ------------ ($5,285,783) divided by 19,704,565 shares (0.27) ------------ Income per share $0.57 $0.39 ============ ============ Undistributed loss: Income available to common shareholders per statement of operations $14,004,076 $7,665,911 Dividends declared (15,774,466) (12,951,694) ------------ ------------ ($1,770,390) ($5,285,783) ============ ============ Fully diluted: Net Income available to common shareholders' $14,004,076 $7,665,911 Plus interest expense of convertible debentures 1,165,000 - ------------ ------------- Net income as adjusted assuming conversion of convertible debentures $15,169,076=$.57 $7,665,911=$0.39 ------------ ------------ Weighted Average Number of Shares and equivalents 26,733,665 19,848,552
EX-27 4 EXHIBIT 27
5 1 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1996 2,682,400 0 0 0 0 0 1,125,330,232 147,498,338 1,113,254,338 0 477,415,663 2,505,550 0 149,750,000 431,755,866 1,113,254,338 0 37,453,268 0 0 17,830,110 0 8,047,202 17,553,982 0 17,553,982 0 0 0 17,553,982 .57 .57
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