-----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, Q3zCl5mIf6Or6zG6yEotQzBYv1mV0Oe8Um2DbN4ng9bIDTO5z4kQ3oh+aViJyezw 2NX1tA02cR3LxmYZp/IzJg== 0000931763-01-000737.txt : 20010409 0000931763-01-000737.hdr.sgml : 20010409 ACCESSION NUMBER: 0000931763-01-000737 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JDN REALTY CORP CENTRAL INDEX KEY: 0000916836 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 581468053 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-12844 FILM NUMBER: 1590560 BUSINESS ADDRESS: STREET 1: 359 EAST PACES FERRY ROAD STREET 2: STE 400 CITY: ATLANTA STATE: GA ZIP: 30305 BUSINESS PHONE: 4042623252 MAIL ADDRESS: STREET 1: 3359 EAST PACES FERRY RD STREET 2: STE 400 CITY: ATLANTA STATE: GA ZIP: 30305 10-K 1 0001.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 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 001-12844 JDN REALTY CORPORATION (Exact Name of Registrant as Specified in its Charter) Maryland 58-1468053 (State or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) 359 East Paces Ferry Road, Suite 400, Atlanta, GA 30305 (Address of Principal Executive Offices) (Zip Code) (404) 262-3252 Registrant's Telephone Number, Including Area Code Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, $.01 Par Value New York Stock Exchange Preferred Stock, $.01 Par Value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of the shares of common stock of the Registrant (based on the closing price of these shares on the New York Stock Exchange on March 16, 2001) held by non-affiliates was approximately $389,583,373. The number of shares outstanding of the Registrant's common stock, $0.01 par value, was 32,876,234 on March 16, 2001. Documents Incorporated By Reference ----------------------------------- Portions of the Registrant's definitive Proxy Statement relating to the 2001 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K. TABLE OF CONTENTS
Form 10-K Item No. Report Page - -------- ----------- Forward-Looking Statements in Form 10-K....................................... 1 PART I 1. Business...................................................................... 2 2. Properties.................................................................... 19 3. Legal Proceedings............................................................. 24 4. Submission of Matters to a Vote of Security Holders........................... 26 PART II 5. Market for Registrant's Common Equity and Related Shareholder Matters................................................. 27 6. Selected Financial Data....................................................... 28 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................... 30 7A. Quantitative and Qualitative Disclosures about Market Risk.................... 46 8. Financial Statements and Supplementary Data................................... 46 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................................... 46 PART III 10. Directors and Executive Officers of the Registrant............................ 47 11. Executive Compensation........................................................ 47 12. Security Ownership of Certain Beneficial Owners and Management.................................................................. 47 13. Certain Relationships and Related Transactions................................ 47 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......................................................... 48 FINANCIAL INFORMATION Financial Statements F-1 Financial Statement Schedules F-23
FORWARD-LOOKING STATEMENTS IN FORM 10-K Management has included herein certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used, statements which are not historical in nature, including the words "anticipate," "estimate," "should," "expect," "believe," "intend" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are, by their nature, subject to known and unknown risks and uncertainties. Forward- looking statements include statements regarding future shopping center property sales, future development activities with certain tenants, and projected capital requirements for, number of, and timing of shopping centers to be delivered from development pipeline. Among the factors that could cause actual results to differ materially from those anticipated are the following: changes in the composition of senior management and the Board of Directors; the ability to attract and retain key employees; business conditions and the general economy, especially as they affect interest rates and value-oriented retailers; the federal, state and local regulatory environment; the ability to refinance maturing debt obligations on acceptable terms; the availability of debt and equity capital with acceptable terms and conditions including, without limitation, the availability of bank credit to fund development activities; the ability to sell operating shopping center properties and parcels of land on schedule and upon economically favorable terms; the availability of partners for joint venture projects and the ability to negotiate favorable joint venture terms; the availability of new development opportunities; changes in the financial condition or corporate strategy of or business relations with primary retail tenants; the outcome and timing of any resolution and costs of pending litigation and investigations; the ability to fund, complete and lease existing development and redevelopment projects on schedule and within budget; the ability to maintain or obtain all necessary licenses, permits and approvals required to conduct its business; tax legislation affecting the development business of JDN Realty Corporation and JDN Development Company, Inc.; and the ability of JDN Realty Corporation to maintain its qualification as a REIT. Other risks, uncertainties and factors that could cause actual results to differ materially from those projected are detailed from time to time in press releases and reports filed by JDN Realty Corporation with the Securities and Exchange Commission, including Forms 8-K, 10-Q and 10-K. For examples, see "Risk Factors" under Part I, Item 1 of this report. 1 PART I Item 1. Business - ----------------- BACKGROUND JDN Realty Corporation is a real estate company specializing in the development and asset management of shopping centers. When referred to herein, the term "Company" represents JDN Realty Corporation and its wholly owned or majority-owned subsidiaries, other than JDN Development Company, Inc. ("JDN Development"). As of December 31, 2000, the Company and JDN Development owned and operated, either directly or indirectly through affiliated entities, 111 shopping center properties containing approximately 11.9 million square feet of gross leasable area ("Company GLA") located in 19 states, with the highest concentrations in Georgia, Tennessee and Florida. The principal tenants of the Company's and JDN Development's properties include Lowe's, Wal-Mart, and TJX Companies. As of December 31, 2000, the Company and JDN Development, either directly or indirectly through affiliated entities or joint ventures, had 25 projects under construction. JDN Realty Corporation was incorporated under Maryland law in 1993 and has elected to be treated as a real estate investment trust ("REIT") for federal income tax purposes. JDN Development was formed in December 1994 to engage primarily in the development of shopping center properties. In order to comply with federal income tax law requirements, JDN Development was initially structured such that the Company owned 99% of the economic interest while the remaining 1% economic interest was owned by a former executive officer of the Company. Recent legislation amending the tax laws applicable to REITs permitted a change in the ownership structure of JDN Development. Effective January 1, 2001, the Company effected this change by acquiring 100% of the ownership of JDN Development. As a result of this acquisition, effective January 1, 2001 the Company has changed its accounting for JDN Development from the equity method to the consolidated method. In addition, the Company and JDN Development elected taxable REIT subsidiary status for JDN Development. See "Federal Income Tax Legislative Developments" below. Because it is not a REIT, JDN Development may engage in certain activities in which the Company cannot, such as sales of all or portions of development projects and third-party fee development. While taxable REIT subsidiaries may engage in a variety of activities unrelated to real estate, the Company does not expect the activities of JDN Development to expand significantly beyond the development activities in which JDN Development has historically engaged. As of December 31, 2000, the Company had invested $4.0 million in JDN Development in the form of equity capital, $134.6 million in the form of secured notes receivable and $58.9 million in the form of unsecured advances. As of December 31, 2000, the Company guaranteed one loan of JDN Development in the amount of $3.3 million. This loan was secured by property owned by JDN Development and was paid in full in February 2001. UNDISCLOSED TRANSACTIONS, LEASE DISCREPANCIES AND MANAGEMENT CHANGES Undisclosed Compensation Arrangements, Related Party Transactions and Unauthorized Benefits In February 2000, the Company announced that it had discovered undisclosed compensation arrangements and related party transactions with two executive officers of the Company and JDN Development. The undisclosed compensation arrangements were in the form of payments by the Company or JDN Development for the purchase of land on behalf of an entity owned by these officers and in the form of payments of fees and commissions to this entity. The undisclosed related party transactions consisted of sales of land by JDN Development to entities in which these officers directly or 2 indirectly held interests. In addition, the Company discovered that these officers received unauthorized benefits from or through JDN Development, which included unauthorized receipt of commissions and fees related to real estate transactions consummated by JDN Development, unauthorized site improvements to land owned by these officers and the unauthorized conveyance of one parcel of land to these officers. Discrepancies in Leases with and Land Sales to Tenants In April 2000, the Company announced the discovery of discrepancies in cost and other information underlying certain leases and real estate sales agreements with the Company's two largest tenants, Lowe's and Wal-Mart (collectively, the "Major Anchor Tenants"). The Company determined that these discrepancies may have affected the negotiation of rental rates and purchase prices paid by the Major Anchor Tenants in transactions with the Company and JDN Development. After further investigation and discussions with the Major Anchor Tenants, the Company, JDN Development and the Major Anchor Tenants entered into an Estoppel and Release on May 23, 2000 which contained a financial settlement and reaffirmed the terms of all existing leases without modification, restatement or adjustment and reaffirmed all previously consummated real estate sales transactions without modification, restatement or adjustment. Management Changes In February 2000, J. Donald Nichols resigned as Chief Executive Officer of the Company and as President of JDN Development. Also in February 2000, Jeb L. Hughes, Senior Vice President of JDN Development, and C. Sheldon Whittelsey, IV, Vice President of the Company and JDN Development, resigned from all of their positions with the Company and JDN Development. In March 2000, W. Fred Williams was hired to serve as President and Director of JDN Development. In April 2000, William J. Kerley resigned from the position of Chief Financial Officer of the Company, and John D. Harris, Jr., the Company's Controller, was appointed Secretary, Treasurer, and Interim Chief Financial Officer. In April 2000, Mr. Nichols resigned from his remaining positions with the Company and JDN Development and Craig Macnab, a member of the Company's Board of Directors, was hired to serve as Chief Executive Officer of the Company. In August 2000, Mr. Harris was appointed Chief Financial Officer and Michael A. Quinlan, former Controller of JDN Development, was appointed Controller of the Company. Also in August 2000, Elizabeth L. Nichols resigned her position as Director of the Company and subsequently resigned from the position of President in September 2000. In October 2000, W. Fred Williams resigned his positions as President and Director of JDN Development. Lee S. Wielansky was hired to serve as President and Chief Executive Officer of JDN Development in November 2000. Bank Credit Agreements As a result of the undisclosed compensation and related party transactions, from April 14, 2000 to May 23, 2000, the Company was deemed to be in default under the credit agreements related to its primary line of credit and term loan. On May 23, 2000, the Company and the bank groups entered into amendments to its line of credit and term loan (the "Secured Credit Agreements"), which cured all existing defaults. Under the Secured Credit Agreements, loans outstanding were converted from unsecured to secured, the interest rates increased to LIBOR plus 2.50% (which was later reduced to LIBOR plus 2.25% after certain post-closing conditions were met), the maximum amount available under the line of credit decreased from $200 million to $175 million and the maturity dates changed to June 2001. On March 29, 2001, the Company closed a Third Amended and Restated Master Credit Agreement with Fleet National Bank as Agent (the "2001 Credit Agreement"), replacing the existing Secured Credit Agreements. The 2001 Credit Agreement provides for maximum borrowings of $300.0 million, comprised of a $150.0 million revolving credit facility and a $150.0 million term loan. Loans 3 made pursuant to the 2001 Credit Agreement will initially bear interest at LIBOR plus 2.00% and will range from LIBOR plus 1.75% to LIBOR plus 2.25% based on Company leverage and credit quality. The 2001 Credit Agreement matures December 31, 2002. DESCRIPTION OF BUSINESS Development The Company's primary business has historically been to develop shopping centers anchored by retailers such as, for example, the Major Anchor Tenants. Through December 31, 2000, the Company, its predecessors and JDN Development had developed or jointly developed 189 shopping center projects, of which 107 were built on assignment from Wal-Mart and 34 were built on assignment from Lowe's. The Company and JDN Development have also historically developed for other retailers such as Kohl's, Kroger and PetsMart. Currently, the Company and JDN Development are involved in development activities with 10 different secondary anchor tenants such as Best Buy and Bed, Bath and Beyond. The Company and JDN Development expect to continue to pursue development opportunities with retailers with which they have traditionally worked while broadening the tenant and product mix to include grocers and grocery anchored shopping centers. Management intends to become more selective in the development projects it approves with a focus on location in high barrier-to-entry markets with demographic attributes that allow for net operating income growth over time. Management believes that this focus on location combined with developing for retailers who are leaders in their local markets will enable the Company to achieve favorable rates of return on its investments in shopping center properties. After obtaining an assignment from a retailer in a particular market, JDN Development generally: . Obtains an option on the proposed site; . Develops a site plan, taking into account the physical constraints of the property and the physical requirements of shopping center retailers, that can be translated into economic terms to set rental rates for anchor tenants; . Performs preliminary demographic, traffic and economic studies on the proposed site; . Obtains preliminary approval from its Investment Committee; . Contacts other major shopping center retailers that management believes would be interested in the same market to determine their interest in leasing space at the proposed site; . Estimates costs by evaluating soil, water, sewer, environmental and traffic factors, as well as any other costs associated with the proposed site; . Reviews the local rental market to determine demand for and pricing of local tenant space; . Contacts potential outparcel users for the site to determine demand for and pricing of outparcels; . Performs financial analyses to confirm that the development meets internal return on investment criteria; and . After final approval from the Investment Committee and a commitment from a significant shopping center retailer, the Company and JDN Development form a partnership that purchases, either directly or indirectly through an affiliated entity, the site and oversee construction of the shopping center. The Company and JDN Development have historically concentrated their development activities in the Southeast as a result of attractive shopping center development opportunities with major anchor retailers. The Company and JDN Development expect to continue to pursue development opportunities within the Southeast based on assignments from major retailers. In addition, the Company intends to develop, acquire and own shopping centers in other locations with demonstrated growth potential or 4 population density with high barriers-to-entry for other shopping center developers. JDN Development has pursued development opportunities with its own development staff and with selected local developers in the Midwest, Southwest, Northeast and California as the result of increased tenant interest and opportunities in these markets. JDN Development's indirectly wholly owned subsidiary, Goldberg Property Associates, Inc. ("Goldberg"), a real estate development, brokerage and property management company in Denver, Colorado, provides JDN Development with additional development opportunities, regional knowledge of the intermountain states and opportunities to develop for additional regional retailers. Goldberg currently has begun construction on two projects, with additional projects in various stages of pre-development. During 2000, the Company and JDN Development completed projects which added approximately 957,000 square feet of Company GLA to the Company's operating portfolio of shopping centers and cost approximately $96.8 million. As of December 31, 2000, the Company, either directly or indirectly through JDN Development and joint ventures, had begun construction of a total of 25 projects which are expected to add approximately 2.1 million square feet of Company GLA to the Company's operating portfolio of shopping center properties. During 2000, the Company approved one shopping center project and to date, in 2001, has approved one additional project. Historically, the Company and JDN Development have approved multiple projects in any given year. Management anticipates, however, that a reduction in the number of approved projects, based on its more selective focus, may also reduce development activity and the number of completed projects delivered in future periods. This reduction could mean slower or flat growth in the operating portfolio as well as net operating income and funds from operations. Asset Management The Company's objective is to maximize long-term value of its portfolio of operating shopping centers. Management believes that this objective is best accomplished through aggressive leasing and property management efforts, through redevelopment and expansions of selected shopping centers, and through disposition of assets not meeting location, demographic and credit standards necessary for maximizing long-term value. The Company's asset management team seeks to attract quality retail and service tenants, maintain high occupancy rates, and establish a portfolio consisting of high quality assets located in fundamentally sound markets that have high barriers-to-entry. Leasing and Property Management The leasing staff seeks a complementary mix of financially qualified tenants. Prior to entering into leases, the Company's leasing professionals analyze the financial condition of each retail prospect, evaluate the prospect's business plan and suitability as a tenant in a particular center and make recommendations to management. In management's judgement, this process maximizes rental revenue and reduces the risk of tenant turnover. After leasing space, the Company's property management department seeks to maximize the portfolio returns by increasing revenues through renewals of existing tenant leases and reducing operating expenses. During 2000, on a "same property" basis, the Company experienced the following results: . Net operating income decreased 0.1% for the year ended December 31, 2000 as compared to the year ended December 31, 1999, primarily as a result of an increase in operating costs. . At December 31, 2000, the Company's properties were 95.8% leased as compared to 94.4% at December 31, 1999. This increase primarily relates to the releasing of a portion of a vacant anchor space at one of the Company's shopping center properties. . Annualized base rent per leased square foot increased 0.5% to $7.69 as of December 31, 2000 from $7.65 as of December 31, 1999 due to an increase in effective rent upon turnover or renewal of space. 5 As of December 31, 2000, the Company's and JDN Development's overall operating portfolio of 111 shopping center properties was 95.6% leased. Redevelopment and Expansion The Company's business strategy also includes the selective redevelopment, retenanting and expansion of shopping centers to increase cash flows and property values while simultaneously earning a risk adjusted return on incremental investment. The Company has historically been active in its tenant expansion plans as changing demographics and increased sales warrant expansion or relocation. Redevelopment projects have included the addition of anchor tenants, changes in the tenant mix and the reconfiguration of shopping centers. The Company and JDN Development have worked closely with several anchor tenants to enlarge their stores and enhance merchandising capabilities. During 2000, the Company and JDN Development completed the redevelopment of two shopping centers. In Milwaukee, Wisconsin, JDN Development relocated a 21,090 square foot Walgreen's out of an existing predominantly vacant mall to an outparcel and replaced the mall with a 205,757 square foot Wal-Mart. In Eastman, Georgia, the Company relocated a 3,600 square foot Movie Gallery into a 4,800 square foot freestanding store and expanded a Food Lion into a 35,560 square foot store. Also during 2000, the Company completed two expansions. In Warner Robins, Georgia the Company added a non-owned Wal-Mart, a TJ Maxx, 14,400 square feet of small tenant shops and an office supply retailer scheduled to open in 2001. In Greensboro, North Carolina, the Company added an Old Navy and Dick's Sporting Goods to an existing shopping center. Dispositions The disposition strategy of the Company is designed to generate capital to be used to fund profitable development activities and to dispose of shopping center properties the returns and growth potential of which fall below management's objective. The asset management and dispositions teams analyze properties for potential dispositions, focus on selling assets that do not fit the overall Company strategy and replace them with assets located in high barrier-to-entry, high growth markets with an emphasis on high rates of profitability. The Company has utilized different strategies for dispositions in the past, which have included selling all or portions of shopping centers for cash and through the use of tax-deferred exchanges ("1031 Exchanges") under Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code"). Management intends to continue to explore different disposition strategies as a means of executing the overall disposition strategy. During 2000, the Company and JDN Development sold the following shopping center properties: 6 Disposition Company Location Date GLA Proceeds - -------------------------------------------------------------------------------- Cordele, Georgia (1) 01/19/00 149,704 $ 9,653,075 Gallipolis, Ohio (1) 01/19/00 179,958 13,128,872 Wallace, North Carolina 02/10/00 118,993 4,230,000 Cheraw, South Carolina 02/10/00 45,100 2,520,000 Cordele, Georgia 05/22/00 26,350 2,100,000 Milwaukee, Wisconsin (3) 05/25/00 30,000 2,550,000 Canton, GA (1) (3) 06/05/00 199,026 13,739,296 Cumming, Georgia (1) 06/06/00 202,847 12,857,579 Buford, Georgia (1) 06/28/00 205,330 13,606,552 Newnan, Georgia (1) 07/11/00 204,170 13,743,777 Wilmington, North Carolina 08/23/00 169,437 8,900,000 Wilmington, North Carolina (2) 09/08/00 - 800,000 Rockingham, North Carolina 10/06/00 168,776 6,250,000 Lake City, South Carolina 10/06/00 135,963 5,380,000 Buford, Georgia 10/18/00 29,700 3,400,000 Murfreesboro, Tennessee 11/01/00 71,028 3,500,000 Greensboro, North Carolina (2) 11/17/00 - 1,775,831 Milwaukee, Wisconsin (3) 12/15/00 15,120 2,500,000 ----------- --------------- Totals 1,951,502 $120,634,982 =========== =============== - ------------------------------------------------------------ (1) Sale of only the Wal-Mart at this location. (2) Sale of vacant land only. (3) Owned by JDN Development As of December 31, 2000, the Company and JDN Development were negotiating the sale of 23 shopping center properties (the "Marketed Properties"), 11 of which were subject to definitive agreements at that date, for an estimated aggregate purchase price of approximately $134.3 million. The aggregate net book value of the Marketed Properties is approximately $114.2 million and represents approximately 16.1% of net operating income for the year ended December 31, 2000. The sale of the Marketed Properties is dependent upon, among other things, the negotiation of transactions with buyers, completion of due diligence and, in some cases, the ability of the purchasers to successfully obtain financing for these transactions. There can be no assurance that any of these properties will be sold when expected or at all. Failure to sell some or all of the Marketed Properties could adversely affect the Company's ability to fund its ongoing development activities. 7 TENANTS As of December 31, 2000, the Company and JDN Development had the following tenants representing more than 10% of Company GLA or annualized base rent. Percent of Percent of Company Annualized Base Tenant GLA Rent - -------------------------------------------------------------------------- Lowe's 16.6% 17.5% Wal-Mart 11.4% 5.6% No other tenant accounted for more than 10% of Company GLA or annualized base rent in 2000. The loss of either Major Anchor Tenant or the inability of either of them to pay rent would have a material adverse effect on the Company's financial condition and results of operations. See also "Risk Factors" below and "Recent Developments" above. The tenant base of the Company and JDN Development had the following characteristics as of December 31, 2000: Percent of Percent of Company Annualized Base Tenant GLA Rent - --------------------------------------------------------------------- Anchor 53.3% 41.6% Second Anchor 20.5% 23.5% In Line 17.4% 27.8% Outparcel 3.7% 6.7% Other 0.7% 0.4% Unleased 4.4% 0.0% ------------ ------------ Total 100.0% 100.0% ============ ============ National 74.0% 73.0% Regional 9.9% 11.6% Local 11.7% 15.4% Unleased 4.4% 0.0% ------------ ------------ Total 100.0% 100.0% ============ ============ COMPETITION The Company and JDN Development compete with commercial developers, real estate companies and other real estate owners for development opportunities in all of their market areas. Certain of these competitors may have greater amounts of available capital, better access to capital at lower costs, more management and development expertise, better relationships with their key tenant base and other resources than those of the Company or JDN Development. The operations of each shopping center in the Company's portfolio are subject to competition from similar shopping centers in their respective locations. Management believes that the Company and JDN Development are well positioned to compete effectively for development and acquisition opportunities and are generally well positioned to compete in markets in which their shopping center properties are located, although recent developments 8 described in this report could impact the competitive position of the Company and JDN Development in the future. ENVIRONMENTAL MATTERS The Company and JDN Development are subject to numerous federal, state and local environmental regulations that apply to the development, ownership and operation of real property. In developing shopping centers, the Company and JDN Development engage environmental consultants to determine whether flood plains, wetlands or environmentally sensitive areas are part of the property to be developed. If flood plains are identified, any necessary governmental permits or consents are sought and, if required, development and construction is planned so that flood plain areas are preserved or alternative flood plain capacity is created in conformance with federal and local flood plain management requirements. Stormwater discharge from a construction facility is evaluated in connection with the requirements for stormwater permits under the Clean Water Act, which is an evolving program in most states. Management anticipates that, in many cases, general stormwater permits will be applicable to the Company's activities and individual permits will not be required for existing or new developments. Some of the Company's shopping centers contain friable asbestos elbow fitting insulation on mechanical systems throughout the shopping centers and may contain other asbestos containing materials. These materials are inspected for damage or disturbance periodically and adequate remediation is performed in the event of any repairs or renovations on the affected area. Some of the buildings on the Company's properties were built when low concentrations of non-friable asbestos were commonly used in building materials such as roof flashings and vinyl floor tile and may contain non-friable asbestos building materials. Management believes that buildings that contain limited amounts of friable asbestos, which is subject to monitoring by the Company, and materials that contain low concentrations of non-friable asbestos, when properly managed and maintained, generally do not impose any environmental hazard. In 2000, the Company and JDN Development purchased certain land for its development projects, which contained structures with friable asbestos. The Company and JDN Development performed demolition and remediation according to government regulations prior to beginning construction. The Company's properties may also be affected by materials that contain polychlorinated biphenyls ("PCBs"), such as electrical transformers, owned by other parties located on the Company's properties. Management does not believe that the presence of such materials will result in removal costs that would have a material adverse effect on the Company's financial condition or results of operations in the event of any future major repairs or renovation activities. Any one or more of the Company's shopping centers can potentially be negatively impacted, either through physical contamination or by virtue of an adverse effect on property values by the release of hazardous or toxic substances emanating from areas adjacent to or near the centers. Several of the centers are adjacent to or near areas that either contain or have contained above-ground or underground petroleum storage tanks that either have or may have released petroleum products into the soil or groundwater. A number of the Company's shopping center properties at one time contained underground storage tanks that were used to store petroleum products. When necessary, soil and groundwater contaminations have been the subject of remediation efforts as required by law. The general policy of the Company and JDN Development is to obtain a new or updated environmental assessment each time it develops or acquires a property. The Company and JDN Development obtained Phase I environmental assessments of each property on which they began construction during 2000. Because the terms of all agreements for purchase and sale of properties the Company and JDN Development have acquired or will acquire contain or are expected to contain representations related to the sellers' knowledge of existing environmental conditions. Because the terms of the Company's leases with its shopping center tenants do not give the Company control over the day- 9 to-day operational activities of the tenants, no assurance can be given that any lessee of a property owned or to be owned by the Company has not or will not create a hazardous environmental condition. Except as noted below, the Company and JDN Development have not been notified by any governmental authority of any material noncompliance, environmental claim or liability in connection with any of its shopping centers. The Company and JDN Development have not been notified of any claim for personal injury or property damage by a private party in connection with any of its properties as a result of environmental conditions. The Company and JDN Development have entered into a Consent Agreement with the Environmental Protection Agency relating to an alleged violation of a wetlands permit at one of the Company's recently developed properties. Pursuant to the Consent Agreement, the Company and JDN Development have agreed to certain remedial measures none of which Management believes will have a material adverse effect on the Company's financial condition or results of operations. The Company and JDN Development are not aware of any other environmental condition or liability with respect to any of their properties that management believes would have a material adverse effect on the Company's financial condition or results of operations. EMPLOYEES As of March 16, 2001, the Company, JDN Development and their respective subsidiaries employed 122 full-time individuals and four part-time individuals, including executive, administrative and field personnel. Executive Officers of the Registrant are as follows:
Name Age Positions - ---- --- --------- Craig Macnab 45 Chief Executive Officer and Director Lee S. Wielansky 49 President and Chief Executive Officer, JDN Development Company, Inc. and Director John D. Harris, Jr. 41 Chief Financial Officer, Senior Vice President, Secretary and Treasurer Andrew E. Rothfeder 32 Senior Vice President and Director of Asset Management Laurie A. Farris 38 Vice President and Director of Acquisitions David L. Henzlik 39 Vice President and Director of Development Leasing, JDN Development Leilani L. Jones 39 Vice President and Director of Property Management and Assistant Secretary Michael A. Quinlan 41 Vice President, Controller and Assistant Secretary
The term of each executive officer runs until his or her successor is elected and qualified at the first meeting of the Board of Directors following the annual meeting or until his or her earlier resignation or removal. The following is a biographical summary of the experience of the executive officers of the Company: Craig Macnab. Mr. Macnab has served as the Company's Chief Executive Officer since April 2000, and as a director since December 1993. From June 1993 to December 1996, Mr. Macnab served as General Partner of MacNiel Advisors, and from January 1997 to March 1999, he served as President of Tandem Capital. Lee S. Wielansky. Mr. Wielansky joined JDN Development in November 2000 as President and Chief Executive Officer. Mr. Wielansky was elected to the Board of Directors of the Company in February 2001. Prior to joining JDN Development, from January 1995 until March 1998, Mr. Wielansky 10 was President and Chief Executive Officer of the Midland Development Group. From March 1998 until November 2000, he served as Managing Director of Regency Realty Corporation. Mr. Wielansky is a Director of Acadia Realty Trust and Director and Vice Chairman of Allegiant Bancorp, Inc. John D. Harris, Jr. Mr. Harris has served as Chief Financial Officer and Senior Vice President since August 2000 and as Secretary and Treasurer of the Company since March 2000. Mr. Harris served as Interim Chief Financial Officer from April 2000 to July 2000. Mr. Harris served as Vice President and Controller of the Company from May 1988 to April 2000. From July 1994 to May 1998, Mr. Harris served as Controller of the Company. Mr. Harris is a certified public accountant. Andrew E. Rothfeder. Mr. Rothfeder served as a leasing agent of the Company since its formation in December 1993 and has served as Vice President and Director of Asset Management of the Company since May 1999. Laurie A. Farris. Ms. Farris has served as Vice President and Director of Acquisitions since joining the Company in June 1997. From August 1991 to June 1997, Ms. Farris served as Vice President, Senior Commercial Real Estate Underwriter and Portfolio Manager of First Union National Bank in Nashville, Tennessee. Ms. Farris is a Certified Commercial Investment Member ("CCIM"). David L. Henzlik. Mr. Henzlik has served as Vice President and Director of Development Leasing, JDN Development since December 1999. From March 1995 to December 1999, Mr. Henzlik served as Vice President and Director of Leasing of the Company. Leilani L. Jones. Ms. Jones has served as Vice President and Director of Property Management of the Company since its formation in December 1993 and as Assistant Secretary of the Company since May 1977. Ms. Jones is a certified Property Manager and a CCIM. Michael A. Quinlan. Mr. Quinlan has served as Vice President, Controller and Assistant Secretary of the Company since July 2000. From October 1997 through June 2000, Mr. Quinlan served as Controller and Assistant Secretary of JDN Development. Prior to joining JDN Development, Mr. Quinlan was an employee of The Rouse Company serving as a Regional Financial Advisor from June 1996 through September 1997 and as a Senior Group Controller from January 1995 through May 1996. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The Company is in the business of development, redevelopment, management, and acquisition and disposition of shopping centers. The Company considers its activities to be conducted within a single industry segment. See the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report on Form 10-K for certain information required in Item 1. RISK FACTORS As a real estate company specializing in the development and acquisition of retail shopping centers, the Company is subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in certain forward-looking statements contained herein and elsewhere. In addition, because it operates as a REIT, the Company is also subject to certain tax related risks. Among the factors that could cause actual results to differ materially from those indicated and that could cause future results to differ materially from past results are the following: 11 The Company is Dependent on Major Anchor Tenants for Revenues; Major Anchor Tenant Relations Have Been and May be Further Affected by Recent Developments Major Anchor Tenants. As of December 31, 2000, Lowe's and Wal-Mart each leased more than 10% of the gross leaseable area that the Company owned directly, and Lowe's accounted for more than 10% of the Company's total annualized base rent. No other single tenant accounted for more than 10% of the Company's GLA or total annualized base rent in 2000. If the Company were unable to finance, complete and lease or sell development projects to either of the Company's two largest tenants or if the financial condition or corporate strategy of either of these tenants changes, or if the recent developments adversely affect the willingness or interest of the Major Anchor Tenants to do business with the Company, the Company could experience material adverse consequences, such as reduced net income, reduced funds from operations, reduced distributions and violation of covenants in one or more of its debt obligations. In addition, other tenants may not be attracted to the Company's properties without these tenants. The following is a list of examples of changes that could have a material adverse effect on the Company: . The Company could experience a loss of liquidity, either through further restrictions under its existing credit facility, its inability to attract joint venture partners, its inability to sell projects as expected, its inability to access alternative sources of capital, or otherwise, that could cause the Company to become unable to start or complete existing or new development projects; . Either Major Anchor Tenant could become unable to complete and lease existing development and redevelopment projects on schedule and within targeted projections; . Either Major Anchor Tenant could become unable to pay rent as it becomes due; . Either Major Anchor Tenant could fail to renew leases as they expire causing vacancy at certain shopping centers or causing the Company to re-lease the vacant space on less than favorable economic terms; . Either Major Anchor Tenant could discontinue providing or provide significantly fewer assignments of development projects to the Company or either Major Anchor Tenant could provide assignments that are not economically feasible for the Company to pursue, and the Company could be unable to replace the income from these assignments with economically advantageous assignments from other retail anchor tenants; . The Company could become unable to complete new and existing development projects for these tenants as a result of the inability or unwillingness of third-party vendors to provide services to the Company; and . The Company could become unable to obtain funds through joint venture relationships as a result of the inability or unwillingness of potential third-party joint venture partners to enter into joint venture relationships with the Company. Other Tenants. A change in the financial condition or business strategy of another major tenant or a number of smaller tenants may have an adverse impact on the properties affected and on the income that those properties produce. Other Tenant Relations may be Affected by Recent Developments. The Company depends, and will continue to depend upon, its relationships with current and future tenants. Management believes, based on the current level of activity, that it has the ability to maintain current and develop new relationships. However, inability of the Company to maintain current and to develop new tenant relationships, as a result of the events described in "Recent Developments" in Part I, Item 1 of this Report, could have a material adverse effect on the Company. 12 The Company is Dependent on Outside Financing to Support its Business Strategy The Company's strategy includes developing and redeveloping shopping center properties. Because the Company operates in a manner so as to preserve its qualification as a REIT, which requires, among other things, the distribution of at least 95% of its taxable income (or 90% of its taxable income after December 31, 2000) to shareholders each year, the Company is generally not able to fund its development activities with cash from operating activities. The Company must, therefore, rely in part on the availability of debt or equity capital to fund development and redevelopment activities. The Company's existing 2001 Credit Agreement consists of a $150.0 million revolving credit facility and a $150.0 million term loan, as more particularly described under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in Part II, Item 7 of this report. The 2001 Credit Agreement contains restrictions on the Company's ability to incur additional indebtedness, requires the Company to maintain certain specified financial ratios and obligates the Company to provide certain of its properties as security. The Company may be unable to refinance or repay this indebtedness in full when it matures in December 2002. There can be no assurance that the Company will have access to public or private debt or equity capital markets to fund future growth on acceptable terms. The Company is subject to a variety of risks associated with debt financing. Examples of these risks include the following: . The Company's cash provided by operating activities may be insufficient to meet required payments of principal and interest; . The Company may be unable to pay or refinance indebtedness on its properties; . If prevailing interest rates or other factors at the time of refinancing result in higher interest rates on refinancing, then the Company's interest costs would increase, which may adversely affect the Company's related returns on its development and redevelopment activities, cash provided by operating activities and the ability to make distributions or payments to holders of the Company's securities; . If the Company is unable to secure refinancing of indebtedness on acceptable terms, the Company may be forced to dispose of properties upon disadvantageous terms, which may result in losses to the Company and may adversely affect the Company's funds from operations; . If the Company is unable to obtain secured or unsecured financing on acceptable terms, the Company may not be able to fund its development pipeline, resulting in a loss of future income and asset value to the Company; . If a property or properties are mortgaged to secure payment of indebtedness and the Company is unable to meet mortgage payments, the mortgagee may foreclose upon the property or otherwise compel the Company to transfer the property to the mortgagee, resulting in a loss of income and asset value to the Company; and, . The Company is limited on the amount of total indebtedness it may incur and on the amount of secured indebtedness it may incur by its credit agreements and bond indentures which limits the funds available for the Company's development and redevelopment activities. As a result of its failure to timely file its Annual Report on Form 10-K for the year ended December 31, 1999, the Company's registration statement on Form S-3 as filed with the Securities and Exchange Commission ("SEC") is no longer effective. The inability of the Company to rely on its shelf registration statement may adversely affect the Company's ability to timely access the public debt and equity capital markets. 13 The Company is Dependent on Land Sales and Shopping Center Sales to Support its Growth In addition to outside financing, the Company is dependent upon selling land and shopping center properties to provide funds to invest in its development activities. The closing of real estate transactions requires considerable effort and is dependent upon multiple factors that are not necessarily within the Company's control. Among these factors are the ability of the purchaser to obtain financing, the resolution of issues arising out of due diligence, economic conditions which may make sales prices unattractive to the Company, economic conditions which make real estate unattractive to potential purchasers, and unforeseen delays in the process which cause delays in the closing. Failure to close land sales and shopping center property sales on schedule could adversely affect the Company's ability to continue to fund its development activities. The Company is Subject to Tax-Related Risks Tax Liabilities of Failure to Qualify as a REIT. The Company has elected to be taxed as a REIT for federal income tax purposes. No assurance can be provided, however, that the Company will continue to operate in a manner enabling it to remain so qualified. Qualification as a REIT involves the application of highly technical and complex Code provisions. Also, the determination of various factual matters and circumstances not entirely within the Company's control may impact its ability to qualify as a REIT. In addition, new legislation, regulations, administrative interpretations or court decisions may significantly change the tax laws with respect to the qualification as a REIT or the federal income tax consequences of such qualification. Among the requirements to qualify as a REIT, the Company must distribute at least 95% (or 90% after December 31, 2000) of its taxable income to its shareholders each year. Possible timing differences between the receipt of income, the payment of expenses and the inclusion and deduction of such amounts in determining taxable income could force the Company to reduce its dividends below the level necessary to maintain its qualification as a REIT, which would have material adverse tax consequences. In order to maintain qualification as a REIT, the Company must also satisfy annually two gross income requirements. In addition, at the close of each quarter of the Company's taxable year, the Company must satisfy certain tests under the Code relating to the nature of its assets. As part of these asset tests, except for investments in REITs, qualified REIT subsidiaries and taxable REIT subsidiaries, a REIT cannot own securities of any one issuer in an amount representing more than 10% of the outstanding voting securities of such issuer (or more than 10% of either the voting securities or of the total value of the securities of such issuer after December 31, 2000). The Internal Revenue Service ("IRS") has adopted the Securities and Exchange Commission's position that the term "voting security" should generally be interpreted to include not only the formal legal right to vote for the election of directors pursuant to the law of the state of incorporation but also the de facto power, based on all the surrounding facts and circumstances, to determine, or influence the determination of, the identity of a corporation's directors. As of December 31, 2000, the Company owned 1% of the voting securities and 100% of the non-voting securities of JDN Development. While no assurance can be given that the IRS would not successfully assert that the shares of non-voting securities of JDN Development previously held by the Company did not constitute "voting securities," management of the Company believes that, prior to January 1, 2001, the Company did not have the de facto power to determine, or unduly influence the determination of the identity of the directors of JDN Development. If in any taxable year the Company does not qualify as a REIT, it would be taxed as a "C" corporation and, in computing its taxable income, the Company would not be able to deduct distributions to the holders of the Company's capital stock. In addition, unless entitled to relief under certain statutory provisions, the Company could not elect REIT status for the four taxable years following the year during which qualification was lost. It is not possible to state whether in all circumstances the Company would be entitled to such statutory relief. Failure to qualify as a REIT for even one year could result in the Company incurring substantial indebtedness (to the extent borrowings are feasible) or liquidating 14 substantial investments in order to pay the resulting taxes. In addition, the Company would no longer be required by the Code to make any distributions to its stockholders. As a "C" corporation, future distributions by the Company to its stockholders would be made at the discretion of the Company's Board of Directors, and it is not anticipated that the Company would make any distributions to its stockholders in the foreseeable future. This likely would have a significant adverse affect on the value of the Company's securities. Other REIT Taxes. Although qualified for REIT taxation, certain transactions or other events could lead to the Company being taxed at rates ranging from 4% to 100% on certain income or gains. For example, the Company is subject to a 100% tax on the net income derived from "prohibited transactions." A prohibited transaction is the sale or other disposition of property held primarily for sale to customers in the ordinary course of a trade or business, with the exception of foreclosure property. Whether property is held primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all of the facts and circumstances with respect to the particular transaction. Certain safe harbor rules are provided pursuant to which certain sales will be deemed not to constitute prohibited transactions. Specific requirements must be satisfied in order to bring a sale within the safe harbor. See "Federal Income Tax Considerations" filed as an exhibit to this report. During 2000, the Company sold certain shopping center properties that fell outside the safe harbor rules, and in 2001, the Company intends to sell certain additional shopping center properties that also fall outside the safe harbor rules. The Company, however, believes that, based on all of the facts and circumstances, it will not have held such properties primarily for sale to customers in the ordinary course of a trade or business and, therefore, such property sales would not be considered prohibited transactions. There can be no assurance that the IRS will not disagree with such conclusion. The Outcome of Shareholder Litigation May Adversely Affect the Company's Business and Financial Results Claims have been brought by shareholders against the Company and certain of its directors and current and former executive officers alleging various violations of federal securities laws and state laws. An unfavorable disposition of these claims against the Company and the costs related thereto could have a material adverse effect on the Company's financial condition or cash flows and results of operations, as described in "Legal Proceedings" in Part I, Item 3 of this report. The Company incurred substantial defense costs during 2000, and it is likely that the Company will continue to incur substantial defense costs until the shareholder claims have been resolved. The Company May Become Subject to Regulatory Proceedings As a result of an investigation by a special committee of the Company's Board of Directors into undisclosed compensation arrangements, related party transactions and unauthorized benefits, the Company was unable to file its 1999 Annual Report on Form 10-K report by the required deadline. The SEC initiated a formal order of investigation as of August 2, 2000. Pursuant to this order, the Company has voluntarily provided certain documents and other information to the SEC regarding the compensation arrangements, unauthorized benefits and related party transactions discussed in Part I of this report. By letter dated March 5, 2001, the SEC staff advised the Company that it intended to recommend that the SEC institute a proceeding against the Company. The Company continues to cooperate fully with the SEC staff in order to resolve this matter as expeditiously as practicable. Management of the Company does not expect that the resolution of this matter will have a material adverse effect on the Company's business, financial condition or results of operation. However, the Company is unable to predict with certainty the timing or ultimate outcome of this matter. The Company cannot be certain that it will not be subject to regulatory proceedings initiated by other regulatory agencies, and may experience difficulties in maintaining or obtaining all necessary licenses, permits and approvals required to conduct it business as a result of such proceedings. Regulatory agencies and self-regulatory organizations, such as the New York Stock Exchange, the Internal Revenue Service or state tax authorities, may seek to impose fines, penalties or other remedies against the Company. The imposition of any such fines, penalties or other remedies could have a material adverse effect on the Company. Changes in Key Personnel May Adversely Affect the Company The Company depends on the efforts of its executive officers and other key personnel. The loss of key personnel in the future could have a significant adverse effect on the Company's operations. Similarly, the Company has recently hired new executives and promoted or reassigned other personnel. The inability of these employees to effectively assume their new responsibilities could have an adverse effect on the Company's operations. 15 The Company is Subject to Risks Inherent in Investment in Real Estate Properties General Risks. Real property investments are subject to varying degrees of risk. Among the factors that may affect real estate values and the income generated from real estate investments are the following: . changes in the general economic climate; . local conditions (such as an over supply of or a reduction in demand for shopping center space in an area); . the quality and philosophy of management; . competition from other available space; . the ability of the owner to provide adequate maintenance and insurance; . variable operating costs (including real estate taxes); . costs associated with federal, state and local government laws and regulations (including, for example, environmental, zoning and other land use laws and regulations); . changes in business conditions and the general economy as they affect interest rate levels; . the availability of financing; and . potential liability under and changes in environmental and other laws. Dependence on Rental Income from Real Property. Because rental income from real property represents substantially all of the Company's total revenues, the inability of a significant number of the Company's tenants to meet their obligations to the Company, or the inability of the Company to lease on economically favorable terms a significant amount of space in its properties could adversely affect the Company. In the event of default by a tenant, the Company may experience delays and incur substantial costs in enforcing its rights as landlord. In addition, although circumstances may cause a reduction in income from the investment, there is generally no reduction in certain significant expenditures associated with ownership of real estate (such as mortgage payments, real estate taxes and maintenance costs). Operating Risks. The Company's shopping center properties are subject to all operating risks common to shopping center developments and are particularly subject to the risks of changing economic conditions that affect value-oriented retailers and the retail industry as a whole. Such risks include the following: . competition from other shopping center developments and developers; . excessive building of comparable properties or increases in unemployment in the areas in which the Company's properties are located (either of which might adversely affect occupancy or rental rates); . increases in operating costs due to inflation and other factors (which increases may not necessarily be offset by increased rents); . inability or unwillingness of lessees to pay rent increases; . changes in general economic conditions or consumer preferences that affect the demand for value-oriented retailers or that result in the merger of closings or relocations by such retailers; . the availability of debt and equity capital with favorable terms and conditions; . future enactment of laws regulating public places (including present and possible future laws relating to access by disabled persons); and . limitation by local rental markets of the extent to which rents may be increased to meet increased expenses without decreasing occupancy rates. Any of the above may adversely affect the Company's ability to make distributions or payments to holders of its securities. 16 Illiquidity of Real Estate. Equity real estate investments are relatively difficult to convert to cash and therefore may tend to limit the ability of the Company to react promptly in response to changes in economic or other conditions. Further, restrictions applicable to REITs may affect the Company's ability to sell properties without adversely affecting returns to holders of the Company's securities. Inability to Rent Unleased Space. Many factors, including certain covenants found in some leases with existing tenants that restrict the use of other space at a property, may affect the ability of the Company to rent unleased space. There can be no assurance that any tenant whose lease expires in the future will renew such lease or that the Company will be able to re-lease space on economically advantageous terms. In addition, the Company may incur costs in making improvements or repairs to a property that are required by a new tenant. Effect of Uninsured Loss on Performance. The Company carries comprehensive liability, fire, flood, extended coverage and rental loss insurance with policy specifications and insured limits that are customary for similar properties. Certain types of losses (such as from wars or earthquakes), however, are either uninsurable or insurable only at costs which are not economically justifiable. If an uninsured loss occurs, although the Company would continue to be obligated to repay any recourse mortgage indebtedness on the property, the Company may lose both its invested capital in, and anticipated profits from, the property. Competition. Numerous commercial developers, real estate companies and other owners of real estate (particularly those that operate in the states in which the Company's properties are located) compete with the Company in seeking land for development and tenants for properties. Certain of these competitors may have greater access to capital and other resources than the Company. Potential Environmental Liability and Cost of Remediation. As an owner of real property, the Company may become liable for the costs of removal or remediation of certain hazardous or toxic substances at, under or disposed of in connection with such property. Also, the Company may become liable for certain other potential costs relating to hazardous or toxic substances (including government fines and injuries to persons and adjacent property). Various federal, state and local environmental laws may impose liability without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances and may impose liability on the owner in connection with the activities of an operator of the property. The costs of any required remediation, removal, fines or personal or property damages and the Company's liability for these costs could exceed the value of the property. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the Company's ability to sell or rent such property or to borrow using such property as collateral, which, in turn, would reduce the Company's revenues. Americans with Disabilities Act. The Company's properties and any additional developments or acquisitions must comply with Title III of the Americans with Disabilities Act ("ADA"). Compliance with the ADA's requirements may require removal of structural, architectural or communication barriers to handicapped access and utilization in certain public areas of the Company's properties. Noncompliance could result in injunctive relief, imposition of fines or an award of damages to private litigants. If the Company must make changes to bring any of its properties into compliance with the ADA, expenses associated with such changes could adversely affect the Company's ability to make expected distributions. The Company believes that its competitors face similar costs to comply with the requirements of the ADA. The Company is Subject to Risks Inherent in Development and Acquisition Activities Developing or expanding existing shopping centers is an integral part of the Company's strategy for maintaining and enhancing the value of its shopping center portfolio. While the Company's policies with respect to its activities are intended to limit some of the risks otherwise associated with those activities (including not commencing construction on a project prior to obtaining a commitment from an anchor tenant), the Company and JDN Development nevertheless will incur certain risks, including risks related to 17 delays in construction and lease-up, costs of materials, financing availability, volatility in interest rates, labor availability and the failure of properties to perform as expected. The Company and JDN Development could also become unable to complete development projects because of the inability or unwillingness of third-party vendors such as contractors to provide services to the Company or JDN Development or the inability of the Company or JDN Development to obtain financing on economically feasible terms. 18 Item 2. Properties The Company's corporate headquarters are located in a building it owns at 359 East Paces Ferry Road, Suite 400, Atlanta, Georgia 30305. JDN Development leases space from the Company at that location. The Company and JDN Development coordinate most of their corporate activities from their headquarters, although the Company and JDN Development also maintain offices in Nashville, Tennessee; Charlotte, North Carolina; Denver, Colorado; Birmingham, Alabama; Morlton, New Jersey; and St. Louis, Missouri. As of December 31, 2000, the Company and JDN Development owned and operated, either directly or indirectly through affiliated entities, 111 shopping center properties totaling approximately 11.9 million square feet of gross leasable area. The following tables set forth information on these properties as of December 31, 2000: 19
Year Built/ Renovated Total Company Percent Location or Expanded GLA (1) GLA Leased Anchor Stores - ---------------------------------------------------------------------------------------------------------------------------- ALABAMA Decatur 1965/1996 122,957 122,957 100.0% Food World, Handy TV & Appliance Gadsden 1979 131,046 85,343 97.0% Public Wholesale, Food World(2),Dollar General(Eckerd)(6) Opelika 1993/1995 306,229 306,229 100.0% Wal-Mart, Lowe's, Winn-Dixie, Goody's, CVS Opelika 1999 135,201 135,201 100.0% Lowe's Scottsboro 1999 223,758 40,568 100.0% Wal-Mart(2), Goody's COLORADO Denver 1997 244,644 244,644 100.0% King Soopers, Homeplace, OfficeMax, PetsMart Parker 2000 203,715 0 100.0% Wal-Mart(2) FLORIDA Bradenton 1999 9,611 9,611 100.0% - Brandon 1997 243,207 115,952 100.0% Lowe's(2), The Sports Authority, Linens 'N Things Brandon 1999 51,424 51,424 100.0% Publix Fort Walton Beach 1986 21,902 21,902 73.7% - Gulf Breeze 1998 198,462 29,832 100.0% Wal-Mart(2) Ocala 1984/1991 183,820 183,820 98.1% Wal-Mart, Winn-Dixie Pensacola 2000 55,795 55,795 100.0% Scotty's Tallahassee 1990/1994 265,304 109,055 95.2% Wal-Mart(2), Lowe's GEORGIA Alpharetta 1998 129,044 129,044 100.0% Lowe's Athens 2000 218,883 24,004 95.0% Wal-Mart(2) Buford 1998 362,136 156,806 100.0% Wal-Mart (2), Lowe's Canton 1983 127,800 127,800 92.1% Ingles, Staples Canton (4) 1996 238,032 39,006 92.8% Wal-Mart (2) Cartersville 1984 112,242 112,242 74.5% Ingles, Eckerd Chamblee 1976 175,972 175,972 93.6% Winn-Dixie, CVS Columbus 1999 242,661 119,661 100.0% Target(2), Goody's, Michael's, PetsMart Cumming 1997 631,167 297,220 97.2% Wal-Mart (2), Home Depot(2), Goody's, OfficeMax, Lowe's, PetsMart, Michael's Cumming 2000 8,002 8,002 100.0% - Cumming 1999 27,604 27,604 74.6% Pike Nurseries Douglasville 1999 250,054 117,207 91.6% Lowe's(2), Babies 'R Us, Best Buy Eastman 1990 94,669 53,365 100.0% Wal-Mart(2), Food Lion Fayetteville 1990 156,066 156,066 93.2% Cub Foods(Ingles)(6), Movies 10, CVS Fayetteville 2000 15,646 15,646 100.0% Eckerd Fayetteville 2000 133,662 5,001 100.0% Lowe's(2) Fort Oglethorpe 1973/1992 176,903 176,903 98.0% Kmart, Albertson's, CVS Griffin 1986 172,548 64,773 93.8% Wal-Mart(2), Winn-Dixie LaFayette 1990 78,426 78,426 67.9% Food Lion Lawrenceville 1998 10,128 10,128 100.0% CVS Lawrenceville 1990 89,066 89,066 97.4% Winn-Dixie, Eckerd Lawrenceville 1989/1995 322,262 322,262 96.5% Wal-Mart, Kroger, Georgia Theatre Lilburn 1990 73,953 73,953 100.0% Kroger Lilburn 1997 132,849 132,849 100.0% Lowe's Loganville 1995 91,199 91,199 100.0% Kroger Macon 1999 102,100 102,100 100.0% Kmart Madison 1989 106,102 106,102 93.4% Wal-Mart, Ingles, CVS, Wal-Mart Storage(4) Marietta 1997 151,049 151,049 100.0% Lowe's McDonough 1999 4,670 4,670 100.0% - Newnan 1995 426,732 156,506 100.0% Wal-Mart(2), Lowe's, Upton's(2) Peachtree City 1997 10,800 10,800 100.0% Pike Nurseries Peachtree City 1999 43,619 43,619 96.8% Staples Riverdale 1989 80,190 22,405 94.6% Kroger(2)
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Year Built/ Renovated Total Company Percent Location or Expanded GLA (1) GLA Leased Anchor Stores - ----------------------------------------------------------------------------------------------------------- GEORGIA Stockbridge 1988 162,783 162,783 99.1% Kmart, Cub Foods(Ingles)(6) Stockbridge 1997 10,800 10,800 100.0% Pike Nurseries Stone Mountain 1999 131,000 131,000 100.0% Lowe's Suwanee 1997 54,302 43,394 87.1% Pike Nurseries, Eckerd(2) Tucker 1998 265,025 130,382 98.6% Wal-Mart(2), Kroger, Goody's Union City 1986 181,959 100,007 97.1% Wal-Mart(2), Ingles, Drug Emporium Warner Robins (3) 1997 416,528 196,344 98.2% Lowe's, Wal-Mart(2), TJ Maxx Woodstock 1995 170,942 170,942 100.0% Wal-Mart Woodstock 1997 255,860 132,849 100.0% Lowe's, Kmart(2) Woodstock 1997 11,020 11,020 100.0% Pike Nurseries ILLINOIS Decatur 1999 194,782 22,782 64.4% Wal-Mart (2) INDIANA Lafayette 2000 243,853 35,103 25.9% Wal-Mart (2) IOWA Davenport 1999 161,285 136,390 91.4% Borders Books & Music (2), Bed Bath & Beyond, KANSAS Topeka 1976 126,869 126,869 59.9% Bauersfeld's Grocery KENTUCKY Lexington 1998 346,430 29,793 100.0% Lowe's(2), Wal-Mart(2) Lexington 1998 204,836 24,878 83.1% Wal-Mart(2) Richmond 1992 229,317 158,045 100.0% Kmart, Lowe's(2), Food Lion, Rite Aid MICHIGAN Lansing 2000 185,316 50,119 100.0% Gander Mountain, Lowe's(2), Tractor Supply Company MISSISSIPPI Jackson 1996 326,324 107,785 95.2% Target(2), Home Depot(2), Office Depot, PetsMart, Fred's Jackson 1997 182,311 52,628 72.6% Office Depot, Home Depot(2) Oxford 2000 58,666 58,666 100.0% Kroger Tupelo 1999 149,357 41,357 72.9% Home Depot(2), PetsMart NORTH CAROLINA Asheville 1996 190,970 190,970 100.0% Dick's Sporting Goods, Circuit City, Carmike Cinemas, OfficeMax, Michael's, Goody's Fayetteville 1985 204,298 204,298 88.4% Circuit City(Hechinger)(6), Staples(Hechinger)(6), TJ Maxx, General Cinemas Greensboro 1999 244,901 122,651 96.6% BI-LO, PetsMart, Target(2) Hendersonville 1988/1995 170,792 170,792 100.0% Wal-Mart, Ingles Lumberton 1999 148,784 19,784 100.0% Lowe's(2) Rocky Mount 1999 68,060 68,060 100.0% PetsMart, TJ Maxx Winston Salem 1999 261,293 24,567 64.9% Wal-Mart(2), Carmike Cinemas(2) OHIO Burlington 1991/1995 356,181 159,359 100.0% Lowe's, Sam's Club(2), Wal-Mart(2) Gallipolis 1998 205,909 25,951 74.6% Wal-Mart(2) PENNSYLVANIA Monaca 1997/1999 237,960 237,960 98.8% Lowe's, Shop 'N Save, PetsMart Erie 2000 130,851 5,451 100.0% Target(2) SOUTH CAROLINA Charleston 1991 196,053 196,053 100.0% Wal-Mart, Food Lion Sumter 1987 158,294 19,144 100.0% Wal-Mart(2), Kroger(2)
21
Year Built/ Renovated Total Company Percent Location or Expanded GLA (1) GLA Leased Anchor Stores - ----------------------------------------------------------------------------------------------------------------------------- TENNESSEE Antioch 1990 51,534 51,534 93.8% Food Lion, Walgreen's Arlington 1993 64,225 64,225 100.0% Kroger Chattanooga 1992 214,581 214,581 100.0% Kmart, Albertson's Columbia 1993 68,952 68,952 91.7% Albertson's Farragut 1991 71,315 71,315 93.3% BI-LO Franklin 1983 186,005 18,005 100.0% Big Lots(2) Franklin 2000 223,251 3,501 100.0% Wal-Mart(2) Franklin 1990 54,412 54,412 92.3% Food Lion, Eckerd Goodlettsville 1987 84,683 84,683 85.8% Kroger Hendersonville 1999 133,147 133,147 100.0% Lowe's Murfreesboro 1972/1993 117,750 117,750 95.0% Albertson's Murfreesboro 1998 390,810 108,188 95.0% Target(2),TJ Maxx, Books-a-Million, Toys 'R Us(2), Lowe's(2) Nashville 1998 367,882 367,882 98.5% Wal-Mart, Lowe's TEXAS Ft. Worth 2000 129,924 0 100.0% Home Depot (2) Irving 1999 423,698 203,822 100.0% Kohl's, United Artists, Wal-Mart(2) McKinney 2000 120,712 120,712 79.4% Kohl's Nacogdoches 1999 57,413 57,413 92.7% Goody's, Staples VIRGINIA Chester 1977/1978 116,311 116,311 100.0% Ukrop's, Rite-Aid Lexington 1989/1997 201,229 201,229 98.3% Wal-Mart Lynchburg 1990 320,769 275,769 90.2% Goody's, Movies 10, Staples, Rugged Wearhouse, TJ Maxx, Circuit City, Toys'R Us(2) Midlothian 1985 79,410 79,410 92.2% Food Lion, CVS South Boston 1989/1997 200,405 200,405 100.0% Wal-Mart WISCONSIN Brookfield 1967 190,142 190,142 100.0% Marshall's Mega Store, Burlington Coat Factory, TJ Maxx, OfficeMax Brown Deer 1967 218,016 218,016 96.8% TJ Maxx, Kohl's, OfficeMax, Michael's, Pick 'N Save Storage Brown Deer 1989 143,372 143,372 100.0% Pick 'N Save, Marshall's Mega Store Milwaukee 1962 160,533 160,533 100.0% Kohl's, Pick 'N Save Milwaukee 1951 100,036 54,916 100.0% Movies 10(2),Walgreen's(2), Wal-Mart Storage(4) West Allis (5) 1968 383,967 383,967 88.1% Kohl's, Kohl's Storage, Pick 'N Save Storage, Marshall's Mega Store, Walgreen's, Pick 'N Save TOTAL 18,911,706 11,856,957 95.6% ============================================================================================================================
(1) Total GLA includes anchor stores that are not owned. (2) Anchor store that is not owned. (3) Lowe's store owned by JDN Development. Remainder of center owned by JDN Realty Corporation. (4) Short term license agreement. (5) Property owned by a joint venture which is approximately 82.5% owned by JDN Realty Corporation and approximately 17.5% owned by unaffiliated third parties. (6) Sublease tenant. 22
Percent of Percent of Number of Company Company Annualized Annualized Percent Location Centers GLA GLA Base Rent Base Rent Leased - --------------------------------------------------------------------------------------------------- Alabama 5 690,298 5.8% 4,299,375 4.7% 99.6% Colorado 2 244,644 2.1% 3,692,874 4.0% 100.0% Florida 8 577,391 4.9% 4,384,377 4.8% 97.5% Georgia 43 4,290,977 36.2% 36,958,596 40.2% 96.3% Illinois 1 22,782 0.2% 185,851 0.2% 64.4% Indiana 1 35,103 0.3% 118,073 0.1% 25.9% Iowa 1 136,390 1.2% 1,198,435 1.3% 91.4% Kansas 1 126,869 1.1% 439,411 0.5% 59.9% Kentucky 3 212,716 1.8% 1,965,535 2.1% 98.0% Michigan 1 50,119 0.4% 428,526 0.5% 100.0% Mississippi 4 260,436 2.2% 1,764,409 1.9% 88.2% North Carolina 7 801,122 6.8% 6,280,751 6.8% 95.5% Ohio 2 185,310 1.6% 1,292,347 1.4% 96.4% Pennsylvania 2 243,411 2.1% 1,802,520 2.0% 98.8% South Carolina 2 215,197 1.8% 1,750,037 1.9% 100.0% Tennessee 13 1,358,175 11.5% 10,712,290 11.7% 96.6% Texas 4 381,947 3.2% 3,892,826 4.2% 92.4% Virginia 5 873,124 7.4% 4,898,416 5.3% 95.8% Wisconsin 6 1,150,946 9.7% 5,869,205 6.4% 95.4% ------------------------------------------------------------------------- TOTAL 111 11,856,957 100.0% 91,933,854 100.0% 95.6% ===================================================================================================
Company Leased Vacant Percent Summary GLA GLA (1) GLA Leased - ------------------------------------------------------------------------------------------- Same Property (2) 9,107,076 8,728,038 379,038 95.8% Completed Construction 1,209,289 1,175,467 33,822 97.2% Under Construction 1,253,909 1,157,737 96,172 92.3% Redevelopment 286,683 275,483 11,200 96.1% ------------------------------------------------------- TOTAL (as of December 31, 2000) 11,856,957 11,336,725 520,232 95.6% =========================================================================================== Same Property Basis - December 31, 9,101,588 8,595,798 505,790 94.4% ===========================================================================================
(1) Leased GLA includes space for which the Company has a signed lease and the tenant is either open and/or paying rent. (2) Represents shopping centers which were owned by the Company as of both December 31, 1999 and December 31, 2000, excluding shopping centers classified as "Redevelopment". (3) The difference between 1999 and 2000 Same Property Company GLA is due to the addition of one square foot owned and non-owned outparcels. Additionally, two outparcels were leased in 2000. 23 Item 3. Legal Proceedings - -------------------------- LITIGATION Since the Company's announcement of the undisclosed compensation arrangements and unauthorized transactions described in Part I, Item 1 of this report, a number of lawsuits have been filed against the Company. One or more of these suits also names as defendants JDN Development and certain current and former officers and directors of JDN Development and/or the Company. Certain class actions filed in federal court allege violations of the federal securities laws asserting that by failing to report the undisclosed compensation, unauthorized benefits and related party transactions to the public in the Company's financial statements, public filings, and otherwise, the defendants made or participated in making material misstatements or omissions which caused the plaintiffs to purchase the Company's common and preferred stock at artificially inflated prices. Included in the class actions is a lawsuit which names among the defendants certain underwriters involved in the preferred stock offering by the Company in 1998 (the "Preferred Stock Class Action"). The Preferred Stock Class Action raises allegations similar to those raised in the other class action cases, but it is based on purported misrepresentations or omissions in the Company's registration statement and prospectus in connection with the 1998 offering. The plaintiffs in these lawsuits seek compensatory damages of an indeterminate amount, interest, attorneys' fees, experts' fees and other costs and disbursements. On April 17, 2000, the federal court entered an order consolidating the various class actions in the United States District Court for the Northern District of Georgia ("Consolidated Class Actions"). On June 13, 2000, the federal court entered an order appointing Clarion-CRA Securities lead plaintiff and the law firm of Chitwood & Harley as lead plaintiff's counsel. On February 13, 2001, plaintiffs in the Preferred Stock Class Action purported to amend their complaint to add Waller, Lansden, Dortch & Davis, PLLC, the Company's securities counsel, as a defendant. The purported amendment was not filed by the lead plaintiff and the Company intends to file a motion to strike the purported amendment as improper. A class action lawsuit was also filed by the Company's shareholders against the Company, JDN Development, and four former officers and directors of these companies in the Superior Court of Fulton County, Georgia. The complaint contains substantially the same factual allegations asserted in the federal class actions, but purports to seek relief under state law for damages which these plaintiffs allege should have been paid to the class as dividends. The original complaint contained claims of common law fraud, conversion and purported violations of Georgia's Racketeer Influenced and Corrupt Organizations Act, but the fraud count has now been dropped by way of an amended complaint recently filed by the plaintiffs. The plaintiffs seek compensatory and punitive damages, attorneys' fees and expenses, interest and equitable relief. The case was removed to federal court, but has now been remanded back to Superior Court, where it is currently pending. Lawsuits have also been filed against the Company as a nominal defendant, as well as individual defendants J. Donald Nichols, Elizabeth L. Nichols, Craig Macnab, Philip G. Satre, William G. Byrnes, Haywood D. Cochrane, Jr., William B. Greene, Jeb L. Hughes, C. Sheldon Whittelsey, IV and William J. Kerley in the United States District Court for the Northern District of Georgia, Atlanta Division and in Fulton County Superior Court. Each of the named individuals is a current or former officer or director of the Company or JDN Development. A similar suit has now been filed in State Court of Fulton County naming Ernst & Young, LLP, the Company's auditors, in addition to the above-referenced defendants. The plaintiffs purport to bring these suits as derivative actions. The complaints allege that the individual defendants, from 1994 through 1999, violated certain duties in connection with the previously undisclosed compensation arrangements. The complaints also allege claims for breach of fiduciary duty, abuse of control, waste of corporate assets, unjust enrichment and gross mismanagement. The plaintiffs, on behalf of the Company, seek injunctive relief, compensatory and punitive damages and disgorgement of all profits and gains by the individual defendants. The Company believes that it has meritorious defenses to the claims brought in the lawsuits described above, but there can be no assurance that such defenses will be successful or that the lawsuits will 24 not have a material adverse effect on the Company's financial position, results of operations and cash flows. In addition, the timing of the final resolution of these proceedings is uncertain. The Company is also subject to a formal order of investigation initiated by the SEC as of August 2, 2000. Pursuant to this order, the Company has voluntarily provided certain documents and other information to the SEC regarding the compensation arrangements, unauthorized benefits and related party transactions discussed in Part I of this report. By letter dated March 5, 2001, the SEC staff advised the Company that it intended to recommend that the SEC institute a proceeding against the Company. The Company continues to cooperate fully with the SEC staff in order to resolve this matter as expeditiously as practicable. Management of the Company does not expect that the resolution of this matter will have a material adverse effect on the Company's business, financial condition or results of operation. However, the Company is unable to predict with certainty the timing or ultimate outcome of this matter. In an unrelated lawsuit, on February 2, 2000, Dogwood Drive L.L.C., ("Dogwood") filed suit against the Company and WHF, Inc. ("WHF"), a wholly-owned subsidiary of JDN Development, which, until April 1999, owned a 72% interest in Dogwood and served as the operating member of the entity. The suit was filed in the Superior Court of Gwinnett County, Georgia. The complaint asserts, among other things, breach of fiduciary duty against WHF and improper receipt of funds by the Company. The Company believes that it and WHF have meritorious defenses to the claims and intends to vigorously defend the suit. On April 28, 2000, Lake Lucerne Estates Civic Club, Inc., a nonprofit homeowners association located in Gwinnett County, Georgia, and a number of individual plaintiffs, filed suit against JDN Development, Lowe's Companies, Inc., and Haygood Contracting, Inc. The suit was filed in the Superior Court of Fulton County, Georgia. The complaint asserts trespass, nuisance and negligence against JDN Development in connection with the development of a shopping center anchored by Lowe's. JDN Development has filed defensive pleadings denying liability, and discovery is now being conducted by both sides. The Company is from time to time a party to other legal proceedings which arise in the ordinary course of its business. The Company is not currently involved in any litigation in addition to the lawsuits described above the outcome of which would, in management's judgement based on information currently available, have a material adverse effect on the results of operations or financial condition of the Company, nor is management aware of any such litigation threatened against the Company. INDEMNIFICATION AND ADVANCES The Company's Charter provides that the Company shall indemnify and advance expenses to its officers and directors to the fullest extent permitted by law for any liability arising from claims against them in their capacities as such unless (a) the indemnitee is adjudged to be liable to the Company in a proceeding by or in the right of the Company, (b) the indemnitee is charged with receipt of improper personal benefit, whether or not involving action in the indemnitee's official capacity, and the indemnitee is adjudged to be liable on the basis that personal benefit was improperly received, or (c) it is established that (i) the act or omission of the indemnitee was material to the matter giving rise to the proceeding and the act or omission was committed in bad faith or was the result of active and deliberate dishonesty, or (ii) the indemnitee actually received an improper personal benefit in money, property or services. In addition to the rights provided pursuant to state law and the Company's Charter, certain current and former officers and directors of the Company have contractual rights to indemnification and advancement of expenses which are identical to the rights provided by state law and the Company's Charter, pursuant to an indemnification agreement between each of these individuals and the Company. Each such indemnification agreement provides that the Company shall advance expenses to the indemnitee in advance of the final disposition of a lawsuit upon receipt of a written undertaking by or on behalf of the indemnitee to repay any such amount if it is ultimately determined that the indemnitee is not entitled to indemnification under the terms of the Agreement. 25 Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the quarter ended December 31, 2000. 26 PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters The Company's common shares are traded on the New York Stock Exchange ("NYSE") under the symbol "JDN." The following table sets forth the high and low trading prices per common share and the distributions declared per common share for the periods indicated, as reported by the NYSE: Distributions Declared Per High Low Share ---------------- ----------------- ------------------ 1999 First Quarter $ 23.1250 $ 19.3750 $ 0.3600 Second Quarter 23.3750 19.0000 0.3950 Third Quarter 22.1875 19.5000 0.3950 Fourth Quarter 20.3750 14.8750 0.3950 2000 First Quarter $ 18.0625 $ 8.0000 $ 0.3950 Second Quarter 13.0000 8.0000 0.3000 Third Quarter 12.0000 10.0000 0.3000 Fourth Quarter 11.6250 9.0000 0.3000 The Company intends to pay regular quarterly distributions to common shareholders. Future distributions will be declared and paid at the discretion of the Board of Directors and will depend upon cash generated by operating activities, the Company's financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Code, distributions to the Company's preferred shareholders, restrictions imposed by the Company's credit agreements and such other factors as the Board of Directors deems relevant. Distributions by the Company to the extent of its current and accumulated earnings and profits for federal income tax purposes are taxable to shareholders as ordinary dividend income. Distributions in excess of earnings and profits generally are treated as a non-taxable return of capital. Such distributions have the effect of deferring taxation until the sale of a shareholder's common stock. In order to maintain its qualification as a REIT, the Company must make annual distributions to shareholders of at least 95% (or 90% after December 31, 2000) of its taxable income (excluding any net capital gain). Under certain circumstances, which management does not expect to occur, the Company could be required to make distributions in excess of cash available for distributions in order to meet such requirements. The 2001 Credit Agreement restricts the amount of distributions to common and preferred shareholders to 95% of the Company's funds from Operations (as defined in the 2001 Credit Agreement). The Company's Dividend Reinvestment and Stock Purchase Plan has been suspended. As of March 16, 2001, there were approximately 441 holders of record of the Company's common stock and approximately 12,260 beneficial holders. 27 Item 6. Selected Financial Data The following table contains selected historical financial data for each of the years in the five year period ended December 31, 2000. You should read this table in conjunction with the consolidated financial statements and related notes included elsewhere in this report and "Management Discussion and Analysis of Financial Condition and Results of Operation". 28 Selected Financial Data
Years Ended December 31, ---------------------------------------------------------------------------- (dollars in thousands, except per share data) 2000 1999 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------------------- Operating Data Minimum and percentage rents $ 91,438 $ 92,964 $ 71,191 $ 43,346 $ 32,933 Recoveries from tenants 12,705 13,205 10,003 4,512 3,475 Other revenue 1,907 69 117 147 215 ---------------------------------------------------------------------------- Total revenues 106,050 106,238 81,311 48,005 36,623 Operating and maintenance expenses 8,736 8,338 6,439 3,201 2,586 Real estate taxes 6,730 6,979 5,316 2,540 1,817 General and administrative expenses 8,574 8,130 7,105 4,265 3,367 Corporate investigation and legal costs 3,159 - - - - Severence expense 3,711 - - - - Impairment losses 18,882 90 - - - Depreciation and amortization 20,735 22,047 16,824 10,130 7,786 Tenant settlement expense - 5,610 - - - ---------------------------------------------------------------------------- Total expenses 70,527 51,194 35,684 20,136 15,556 Income from operations 35,523 55,044 45,627 27,869 21,067 Interest expense, net (25,220) (18,423) (9,454) (4,856) (5,598) Income before extraordinary items 23,497 53,051 40,680 25,489 16,230 Net income 23,497 53,051 40,680 19,549 16,230 Net income attributable to common shareholders 18,809 48,363 39,339 19,549 16,230 Other Data Funds from operations (1) $ 37,745 $ 52,193 $ 56,135 $ 35,957 $ 24,231 Cash provided by (used in) Operating activities 52,656 58,796 56,060 41,577 26,070 Investing activities (33,698) (148,368) (352,096) (204,578) (83,983) Financing activities (11,757) 91,648 284,597 171,731 57,513 Ratio of earnings to fixed charges 0.99 1.73 2.39 2.49 2.25 Per Share Data (2) Net income per common share Basic $ 0.58 $ 1.46 $ 1.28 $ 0.85 $ 0.98 Diluted 0.58 1.44 1.26 0.83 0.97 Dividends per common share 1.30 1.55 1.41 1.32 1.25 December 31, ---------------------------------------------------------------------------- 2000 1999 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------------------- Supplemental Data Shopping center properties 111 109 91 68 48 Gross leasable area (square feet in thousands) 11,857 12,945 12,098 8,327 6,135 Percent of gross leasable area leased 95.6% 95.2% 96.4% 97.1% 98.2% December 31, ---------------------------------------------------------------------------- (dollars in thousands) 2000 1999 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------------------- Balance Sheet Data Shopping center properties before accumulated depreciation $ 879,715 $ 962,897 $ 844,041 $ 533,133 $ 331,927 Shopping center properties, net 799,602 891,346 787,948 494,827 303,954 Total assets 1,083,963 1,116,795 965,171 596,660 370,637 Unsecured debt 234,697 469,635 383,092 203,011 - Total debt 574,141 570,882 425,563 216,602 141,882 Total liabilities and minority interest 597,354 600,966 450,877 228,166 145,447 Shareholders' equity 486,609 515,829 514,294 368,494 225,190
(1) Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trusts, Inc. to mean net income, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses from debt restructuring and sales of property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. The Company believes that FFO is helpful to investors as a measure of the performance of an equity REIT because, along with cash provided by operating activities, investing activities and financing activities, it provides investors with an indication of the Company's ability to make capital expenditures and to fund other cash needs. The Company's method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash provided by operating activities, as defined by GAAP, should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of operating performance and is not indicative of cash available to fund all cash flow needs, including the Company's ability to make cash distributions. (2) Earnings per share amounts prior to 1998 have been restated to reflect a 3-for-2 common stock split effected in the form of a stock dividend in June 1998. 29 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the financial statements and notes thereto, the risk factors and the forward-looking statements discussion appearing elsewhere in this report. Overview JDN Realty Corporation is a real estate company specializing in the development and asset management of retail shopping centers. When referred to herein, the term "Company" represents JDN Realty Corporation and its wholly owned or majority-owned subsidiaries, other than JDN Development Company, Inc. ("JDN Development"). As of December 31, 2000, the Company and JDN Development owned and operated, either directly or indirectly through affiliated entities, 111 shopping center properties containing approximately 11.9 million square feet of gross leasable area ("Company GLA") located in 19 states, with the highest concentrations in Georgia, Tennessee, and Florida. The principal tenants of the Company's and JDN Development's properties include Lowe's, Wal-Mart and TJX companies. As of December 31, 2000, the Company and JDN Development, either directly or indirectly through affiliated entities or joint ventures, had 25 projects under construction. The Company was incorporated under Maryland law in 1993 and has elected to be treated as a real estate investment trust ("REIT") for federal income tax purposes. JDN Development was formed in December 1994 to engage primarily in the development of shopping center properties. In order to comply with federal income tax law requirements, JDN Development was initially structured such that the Company owned 99% of the economic interest while the remaining 1% economic interest was owned by a former executive officer of the Company. Recent legislation amending the tax laws applicable to REITs permitted a change in the ownership structure of JDN Development. Effective January 1, 2001, the Company effected this change by acquiring 100% of the ownership of JDN Development. As a result of this acquisition, effective January 1, 2001 the Company has changed its accounting for JDN Development from the equity method to the consolidated method. In addition, the Company and JDN Development elected taxable REIT subsidiary status for JDN Development. See "Federal Income Tax Legislative Developments" below. Because it is not a REIT, JDN Development may engage in certain activities in which the Company cannot, such as sales of all or portions of development projects and third-party fee development. While taxable REIT subsidiaries may engage in a variety of activities unrelated to real estate, the Company does not expect the activities of JDN Development to expand significantly beyond the development activities in which JDN Development has historically engaged. As of December 31, 2000, the Company had invested $4.0 million in JDN Development in the form of equity capital, $134.6 million in the form of secured notes receivable and $58.9 million in the form of unsecured advances. As of December 31, 2000, the Company guaranteed one loan of JDN Development in the amount of $3.3 million. The loan was secured by property owned by JDN Development and was paid in full in February 2001. Results of Operations Comparison of the Year Ended December 31, 2000 to the Year Ended December 31,1999. During 2000 and 1999, the Company began operations at 40 shopping center properties which it developed totaling 3.2 million square feet (the "00/99 Development Properties"). During 2000 and 1999, the Company sold 16 shopping center properties totaling 3.5 million square feet space (the "00/99 Disposition Properties"). As indicated below, the Company's results of operations were affected by the 00/99 Development Properties and the 00/99 Disposition Properties. Minimum and percentage rents decreased $1.5 million or 1.6% to $91.4 million for the year ended December 31, 2000 from $93.0 million for the same period in 1999. Minimum and percentage 30 rents increased by $12.4 million as a result of the 00/99 Development Properties. This increase is offset by a $13.5 million decrease related to the 00/99 Disposition Properties. Minimum and percentage rents also decreased as a result of a write-off of straight line rent for a theater tenant at one of the Company's shopping center properties in the amount of $325,000 and adjustments made to the allowance for doubtful accounts. Recoveries from tenants decreased $500,000 or 3.8% to $12.7 million for the year ended December 31, 2000 from $13.2 million for the same period in 1999. Recoveries from tenants increased by $743,000 as a result of the 00/99 Development Properties. This increase is offset by a $1.4 million decrease related to the 00/99 Disposition Properties. The remaining increase relates to net increases in recoveries from tenants at existing properties caused by net increases in recoverable expenses. Other revenue increased $1.8 million to $1.9 million for the year ended December 31, 2000 from $69,000 for the same period in 1999. This increase resulted primarily from lease termination fees at two of the Company's operating properties. Operating and maintenance expenses increased $398,000 or 4.8% to $8.7 million for the year ended December 31, 2000 from $8.3 million for the same period in 1999. Operating and maintenance expenses increased by $826,000 as a result of the 00/99 Development Properties. This increase is offset by a $738,000 decrease related to the 00/99 Disposition Properties. The remaining increases are a result of increased operating and maintenance expenses at existing properties. Real estate taxes decreased $249,000 or 3.6% to $6.7 million for the year ended December 31, 2000 from $7.0 million for the same period in 1999. Real estate taxes increased by $398,000 as a result of the 00/99 Development Properties. This increase is offset by a $749,000 decrease related to the 00/99 Disposition Properties. The remaining increase relates to reductions in real estate taxes at existing properties. General and administrative expenses increased $444,000 or 5.5% for the year ended December 31, 2000 over the same period in 1999. General and administrative expenses as a percent of minimum and percentage rents increased to 9.4% for the year ended December 31, 2000 from 8.7% for the year ended December 31, 1999. This increase is primarily a result of a reduction in capitalized compensation and other costs related to development projects of approximately $1.1 million offset by the forfeiture and reversal of previously expensed equity awards associated with the registration of two executive officers. Corporate investigation and legal costs incurred during the year ended December 31, 2000 of $3.2 million represent the professional fees incurred by the Company primarily as a result of an investigation into undisclosed transactions and lease discrepancies, the investigation by the SEC and the class action lawsuits. Severance expense incurred during the year ended December 31, 2000 of $3.7 million represents payments to certain former executive officers of the Company who resigned during the year ended December 31, 2000. Impairment losses on shopping centers held for sale for the year ended December 31, 2000 of $18.9 million represent charges to reduce the basis of shopping centers and land held for sale to their estimated fair value less costs to sell, and to reduce other assets to their net realizable value (see "Impairment Losses" below). Depreciation and amortization expense decreased $1.3 million or 6.0% to $20.7 million for the year ended December 31, 2000 from $22.0 million for the same period in 1999. Depreciation and amortization expense increased by $2.4 million as a result of the 00/99 Development Properties. This increase is offset by a $3.7 million decrease related to the 00/99 Disposition Properties. Interest expense, net of capitalized amounts, increased $6.8 million or 36.9% to $25.2 million for the year ended December 31, 2000 from $18.4 million for the same period in 1999. This increase results from an increase in average debt balances between 2000 and 1999, an increase in interest rates on the 31 Company's lines of credit and term loan and an increase in amortization of deferred loan costs related to fees and expenses associated with amending its credit facilities (see "Liquidity and Capital Resources" below). Other income, net decreased $138,000 or 7.6% to $1.7 million for the year ended December 31, 2000 from $1.8 million for the same period in 1999. This decrease results from the write-off of certain deferred costs related to the modification of the Company's Credit Agreements (see "Liquidity and Capital Resources" below) and a decrease in interest income recorded by the Company. Equity in net loss of unconsolidated entities decreased $825,000 or 21.7% to $3.0 million for the year ended December 31, 2000 from $3.8 million for the same period in 1999. The net loss results primarily from the following: (1) a decrease in rental revenues as a result of the sale of two operating assets; (2) impairment losses totaling $2.2 million recognized on land held for sale; (3) carrying costs associated with an increase in land held for sale or future development; and (4) the recording of a valuation allowance of $5.4 million on deferred tax assets at JDN Development. These decreases and charges were offset by operating increases in gains on land sales and reductions in expenses. Net gain on real estate sales for the year ended December 31, 2000 of $14.7 million represents a net gain on the sale of 11 shopping center properties and two vacant parcels of land. Net gain on real estate sales for the year ended December 31, 1999 of $18.6 million represents a net gain on the sales of five shopping center properties. Comparison of the Year Ended December 31, 1999 to the Year Ended December 31,1998. During 1999 and 1998, the Company began operations at 44 shopping center properties which it developed totaling 4.7 million square feet (the "99/98 Development Properties"). During 1998, the Company acquired 11 shopping center properties from third parties totaling 2.1 million square feet of gross leasable area (the "1998 Acquisition Properties"). During 1999, the Company sold five shopping center properties totaling 1.2 million square feet. Of the five shopping center properties sold in 1999, three were fully operational during all of 1999 and 1998 (the "1999 Disposition Properties") and two were under development and operational for only a portion of 1998, and are included in the 99/98 Development Properties. As indicated below, the Company's results of operations were affected by the 99/98 Development Properties, the 1998 Acquisition Properties and the 1999 Disposition Properties. Minimum and percentage rents increased $21.8 million or 30.7% to $93.0 million for the year ended December 31, 1999 from $71.2 million for the same period in 1998. Of this increase, $17.2 million relates to the 99/98 Development Properties and $4.9 million relates to the 1998 Acquisition Properties. These increases are offset by a $803,000 decrease related to the 1999 Disposition Properties. The remaining increase relates to an increase in minimum and percentage rents at existing properties. Recoveries from tenants increased $3.2 million or 32.0% to $13.2 million for the year ended December 31, 1999 from $10.0 million for the same period in 1998. Of this increase, $2.0 million relates to the 99/98 Development Properties and $1.6 million relates to the 1998 Acquisition Properties. These increases are offset by a $54,000 decrease related to the 1999 Disposition Properties and a decrease in recoveries from tenants caused by a net decrease in recoverable expenses at existing properties caused in part by the separate tax platting of two anchor tenant tracts in 1999 on which the Company paid the taxes in 1998 and billed back to the tenants. Other revenue decreased $48,000 or 41.0% to $69,000 for the year ended December 31, 1999 from $117,000 for the same period in 1998. This decrease is the result of a reduction in revenues associated with managing and leasing fewer properties for third-party owners. Operating and maintenance expenses increased $1.9 million or 29.5% to $8.3 million for the year ended December 31, 1999 from $6.4 million for the same period in 1998. Of this increase, $811,000 relates to the 99/98 Development Properties, $1.1 million relates to the 1998 Acquisition Properties and $9,000 relates to the 1999 Disposition Properties. Operating and maintenance expenses at existing properties remained relatively constant over the years ended December 31, 1999 and 1998. 32 Real estate taxes increased $1.7 million or 31.3% to $7.0 million for the year ended December 31, 1999 from $5.3 million for the same period in 1998. Of this increase, $1.3 million relates to the 99/98 Development Properties and $636,000 relates to the 1998 Acquisition Properties. These increases are offset by a $33,000 decrease related to the 1999 Disposition Properties and a decrease in real estate taxes at existing properties due to the separate tax platting of two anchor tenant tracts in 1999 on which the Company paid the taxes in 1998 and billed back to the tenants. General and administrative expenses increased $1.0 million or 14.4% to $8.1 million for the year ended December 31, 1999 from $7.1 million for the same period in 1998. General and administrative expenses as a percent of minimum and percentage rents decreased to 8.7% for the year ended December 31, 1999 from 10.0% for the same period in 1998. The decrease in general and administrative expenses as a percentage of minimum and percentage rents is a result of certain cost containing programs initiated at the Company. The increase in absolute dollars primarily reflects the cost of additional employees and other expenses associated with the increased number of properties owned and operated by the Company. Depreciation and amortization expense increased $5.2 million or 31.1% to $22.0 million for the year ended December 31, 1999 from $16.8 million for the same period in 1998. Of this increase, $3.7 million relates to the 99/98 Development Properties and $1.2 million relates to the 1998 Acquisition Properties. These increases are offset by a $1,000 decrease related to the 1999 Disposition Properties. The remaining increase primarily relates to furniture and fixtures purchased in connection with the Company's move to new corporate offices in 1998. Interest expense, net of capitalized amounts, increased $8.9 million or 94.9% to $18.4 million for the year ended December 31, 1999 from $9.5 million for the same period in 1998. This increase results primarily from an increase in average debt balances between 1999 and 1998 due primarily to a decrease in common and preferred stock equity offerings during the period. Other income, net increased $873,000 or 92.4% to $1.8 million for the year ended December 31, 1999 from $945,000 for the same period in 1998. This increase results primarily from certain non-recurring fees relating to structuring a real estate transaction, an increase in interest income received from third-party notes receivable and fewer abandoned acquisition opportunities leading to a decrease in related expenses. Equity in net income (loss) of unconsolidated entities decreased $7.2 million to ($3.8) million for the year ended December 31, 1999 from $3.4 million for the same period in 1998. This decrease is attributable to the pre-tax effects of (1) the tenant settlement of $7.5 million discussed below, (2) the write-off of $5.6 million in abandoned pre-development costs, (3) $3.0 million in impairment losses related to parcels of land held for sale offset by (a) increases in land sales and (b) brokerage commissions and third-party property management fees earned by a subsidiary of JDN Development acquired in 1999. Minority interest in net income of consolidated subsidiary increased $19,000 or 9.6% to $215,000 for the year ended December 31, 1999 from $196,000 for the same period in 1998. This increase primarily results from an increase in net income allocated to the third-party investors in consolidated limited partnerships. Net gain on real estate sales for the year ended December 31, 1999 of $18.6 million represents net gains on the sale of five shopping center properties during 1999. Net gain on real estate sales for the year ended December 31, 1998 of $379,000 represents a gain on the sale of two parcels of land in 1998. Tenant Settlement In April 2000, the Company announced the discovery of discrepancies in cost and other information underlying certain leases and real estate sales agreements with the Company's two largest tenants, Wal-Mart and Lowe's (collectively, the "Major Anchor Tenants"). The Company determined that these discrepancies may have affected the negotiation of rental rates and purchase prices paid by the Major Anchor Tenants on transactions with the Company and JDN Development. After further investigation and discussions with the Major Anchor Tenants, the Company, JDN Development and the 33 Major Anchor Tenants entered into an Estoppel and Release on May 23, 2000 (the "Settlement Agreement") which settled potential claims resulting from these discrepancies. Material terms of the Settlement Agreement included the following: . The Company, JDN Development and the Major Anchor Tenants reaffirmed the terms of all existing leases without modification, restatement or adjustment; . The Company, JDN Development and the Major Anchor Tenants reaffirmed all previously consummated real estate sales transactions without modification, restatement or adjustment; and . The Company and JDN Development agreed to pay the Major Anchor Tenants an aggregate of $10 million, $5 million to each of the Major Anchor Tenants. As an inducement to enter into the Settlement Agreement, JDN Development agreed to pay an additional $350,000 to Lowe's. As a further inducement to enter into the Settlement Agreement, the Company and JDN Development agreed to reduce the selling price by $2.75 million of three Supercenters which the Company and JDN Development intended to sell to Wal-Mart. These Supercenter sales closed in June 2000. The Company and JDN Development recorded all charges related to this matter in the fourth quarter of 1999. Impairment Losses During 2000, the Company recorded impairment losses of approximately $18.9 million and JDN Development recorded impairment losses of $5.2 million. Of the amount the Company recorded, approximately $9.8 million relates to operating shopping centers that are being actively marketed for sale or already sold, approximately $5.5 million relates to operating shopping centers currently in use, $2.1 million relates to non-operating real estate and $1.5 million relates to an impaired mortgage note receivable. All amounts recorded at JDN Development relate to non-operating real estate. Additional impairment losses may be recognized in the future as the Company looks to the disposition of operating shopping center properties and the sale of various parcels of land adjacent to its operating properties as a significant source of funding development activities. Funds From Operations Funds from operation ("FFO") is defined by the National Association of Real Estate Investment Trusts, Inc. to mean net income, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses from debt restructuring and sales of property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. The Company believes that FFO is helpful to investors as a measure of the performance of an equity REIT because, along with cash provided by operating activities, investing activities and financing activities, it provides investors with an indication of the Company's ability to make capital expenditures and to fund other cash needs. The Company's method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash provided by operating activities as defined by GAAP, should not be considered an alternative to net income (determined in accordance with GAAP) as an indication of operating performance and is not indicative of cash available to fund all cash flow needs, including the Company's ability to make cash distributions. The Company has presented below the calculation of FFO for the periods indicated: 34
Years Ended December 31, 2000 1999 1998 ------------------------------------------------ (in thousands) Net income attributable to common shareholders $ 18,809 $ 48,363 $ 39,339 Depreciation of real estate assets 19,181 20,739 15,854 Amortization of tenant allowances and tenant improvements 258 220 178 Amortization of deferred leasing commissions 564 531 283 Impairment losses on shopping centers held for sale 15,409 90 - Net gain on real estate sales (14,712) (18,627) (379) Adjustments related to activities in unconsolidated entities (1,764) 877 860 ------------------------------------------------ FFO $ 37,745 $ 52,193 $ 56,135 ================================================
Development The Company's primary business has historically been to develop shopping centers anchored by retailers such as, for example, Lowe's and Wal- Mart. The Company and JDN Development have also historically developed for other retailers such as Kohl's, Kroger and PetsMart. Further, the Company and JDN Development are involved in development activities with 10 different secondary anchor tenants such as Best Buy and Bed, Bath and Beyond. The Company and JDN Development expect to continue to pursue development opportunities with retailers with which they have traditionally worked while broadening the tenant and product mix to include grocers and grocery anchored shopping centers. Management intends to become more selective in the development projects it approves with a focus on location characteristics in high barrier-to-entry markets with demographic attributes that allow for net operating income growth over time. As a result of management adopting more selective criteria when considering new developments, along with other factors, such as cost of capital, management changes and changing relations with retail customers, the Company expects that the volume of new development projects will decrease over the next 12 to 18 months. This reduction in activity may cause the rate of historical growth in revenues to decrease and income from land sales and development fees at JDN Development to decrease. These decreases could affect the Company's ability to increase its dividend to shareholders from its current level. Leasing and Tenant Information The properties of the Company and JDN Development were 95.8% leased as of December 31, 2000, 95.2% leased as of December 31, 1999 and 96.4% leased as of December 31, 1998. The increase from 1999 to 2000 is primarily attributable to the leasing of a portion of a previously vacant anchor space at one of the Company's shopping center properties. The decrease from 1998 to 1999 is primarily attributable to the termination of an anchor tenant lease at one of the Company's shopping center properties, and to vacancies at newly developed shopping centers and shopping centers with unleased space acquired by the Company as redevelopment opportunities. The 61 properties that the Company and JDN Development owned and operated for all of 1999 and 2000 were 96.8%, 95.4% and 96.8% leased as of December 31, 2000, 1999 and 1998, respectively. The Company derives the majority of its rental income and development activities from the retail industry; and as such, is exposed to adverse trends or events affecting segments of the retail 35 industry. As of December 31, 2000, the Company and JDN Development were exposed to the following segments of the retail industry: Percentage of Type Annualized Base Rent - --------------------------------------------------------------------------- Home Improvement 17.9% Supermarket 13.8% Discount 9.0% Restaurant 8.1% Discount Department Stores 4.3% Apparel 3.9% Home Goods 3.6% Theatre 3.2% Office Supplies 2.9% Drug Store 2.3% The Theatre segment is currently experiencing the fallout of aggressive expansion of new, multi-screen facilities. Recently, several companies' operating theatres have filed for protection under Chapter 11 of the bankruptcy code. Of the Company's six leases with theatre companies, three are with companies who have filed for Chapter 11 protection representing 2.5% of Annualized Base Rent. As of March 16, 2001, two of these leases have been modified for rental rate reductions totaling approximately $1.1 million, one of which has been approved by the bankruptcy court. The third lease also has not been assumed, but currently has no provision for rental rate reduction. Rejection of one or more of these leases or modification resulting in rate reductions could have an adverse effect on the Company's results of operations in future periods. Liquidity and Capital Resources Sources and Uses of Funds - ------------------------- Historically, the Company's primary sources of funds have been cash provided by operating activities, proceeds from lines of credit, term debt, secured mortgage notes payable, debt and equity offerings, and shopping center sales. The Company's primary uses of funds have historically been development, redevelopment and acquisition of shopping center properties, distributions to shareholders, repayment of outstanding indebtedness, repurchase of common stock, scheduled debt amortization, leasing costs and capital improvements to its existing shopping center properties. The Company generally has used cash provided by operating activities to fund its distributions to shareholders, capital improvements to existing properties and scheduled debt amortization. The Company has used proceeds from its lines of credit, term debt, secured mortgage notes payable, debt and equity offerings and shopping center sales to repay outstanding indebtedness, to repurchase common stock and to fund its ongoing development, redevelopment and acquisition activities. During 2000, the Company incurred $33.6 million in development costs, invested $19.9 million in partnerships that were formed to develop shopping center properties and advanced $76.1 million to JDN Development to fund its development and redevelopment activities. To fund these development activities, the Company and JDN Development sold all or portions of 13 shopping centers and two vacant parcels of land for net proceeds of approximately $99.5 million and $18.8 million respectively. In addition, the Company utilized approximately $40.5 million of the proceeds held by a qualified intermediary in connection with a Section 1031 tax-free deferred exchange to fund its development activities. 36 During the first quarter of 2000, the Company repurchased a total of 423,500 shares of its common stock for approximately $6.8 million at an average price of approximately $16.13 per share under a share repurchase program that has since been discontinued. Indebtedness - ------------ As of December 31, 2000, the Company's indebtedness consisted of the following:
Percent Principal Interest Maturity of Total Months to Balance Rate Date Indebtedness Maturity -------------- ----------- ----------- ------------- ----------- (in thousands) Fixed Rate Mortgage note payable - Denver, Colorado $ 21,627 6.81% 17-Jul-01 3.7% 7 MandatOry Par Put Remarketed Securities (1) 75,000 6.67%(2) 31-Mar-03 13.1% 27 Mortgage note payable- Richmond, Kentucky 5,990 8.00%(3) 1-Dec-03 1.0% 35 Seven Year Notes 74,873 7.10%(2) 1-Aug-04 13.0% 43 Ten Year Notes 84,824 7.23%(2) 1-Aug-07 14.8% 79 Mortgage note payable- Milwaukee, Wisconsin 4,471 7.75% 1-Aug-09 0.8% 103 Mortgage note payable- Jackson, Mississippi 6,696 9.25%(4) 1-Mar-17 1.2% 194 Mortgage note payable- Marietta, Georgia 10,746 7.66%(2) 15-Nov-17 1.9% 203 Mortgage note payable- Lilburn, Georgia 12,420 6.70%(2) 10-Feb-18 2.2% 205 Mortgage note payable- Woodstock, Georgia 11,679 6.55%(2) 15-Apr-18 2.0% 208 Mortgage note payable- Hendersonville, Tennessee 10,550 7.66%(2) 15-Jan-19 1.8% 217 Mortgage note payable- Alpharetta, Georgia 13,265 6.62%(2) 15-Apr-19 2.3% 220 -------------- ----------- -------------- ----------- 332,141 7.09% 57.8% 80 Floating Rate (6) Secured Term Loan 100,000 10.67%(5) 14-Jun-01 17.4% 5 Secured Line of Credit 142,000 10.92%(5) 14-Jun-01 24.8% 5 -------------- ----------- -------------- ----------- 242,000 10.82% 42.2% 5 -------------- ----------- -------------- ----------- $ 574,141 8.66% 100.0% 48 ============== =========== ============== ===========
(1) Represents notes payable with a stated rate of 6.918% and a stated maturity date of March 31, 2013. These notes are subject to mandatory tender on March 31, 2003. (2) Represents stated rate plus amortization of deferred loan costs. (3) The interest rate is adjusted on December 1 of each year. (4) The note can be prepaid after March 1, 2002 with 90 days written notice to the Lender. The Company will not incur any prepayment penalties in association with the loan prepayment after this date. (5) Represents stated rate of LIBOR plus 2.25% plus amortization of deferred loan costs. (6) Floating rate debt exposure is limited through investment in financial derivatives. As of December 31, 2000, $150 million of the $232 million was hedged with a LIBOR cap of 7.25% on $100 million which was terminated by the Company upon closing of the 2001 Credit Agreement and a $50 million swap with a fixed rate of 6.485% which expired on January 1, 2001. As a result of the undisclosed compensation and related party transactions discussed elsewhere in this report, from April 14, to May 23, 2000 the Company was deemed to be in default under the credit agreements related to its then existing primary line of credit and term loan. On May 23, 2000, the Company entered into a Second Amended and Restated Credit Agreement (the "Secured Line of Credit") and an Amended and Restated Term Loan Agreement (the "Secured Term Loan"), each effective as of May 19, 2000 (the Secured Line of Credit and the Secured Term Loan collectively referred to herein as the "Secured Credit Agreements"). Significant changes in the Secured Line of Credit as compared to the revolving line of credit it replaced included the following: . Reduced maximum borrowings allowed from $200.0 million to $175.0 million; . Changed the maturity date from May 2002 to June 2001; . Changed the facility from unsecured to secured; . Increased the borrowing rate from LIBOR plus 1.15% to LIBOR plus 2.50%; . Increased the facility fee payable quarterly from .15% to .35% of the maximum loan amount; . Increased the limit on the ratio of Consolidated Liabilities to Gross Asset Value from 55% to 60%, and deleted the covenants limiting the ratios of Unencumbered Assets to Total 37 Unsecured Funded Debt and Unsecured NOI to Unsecured Interest Expense, all as defined; and . Further restricted the Company's ability to pay distributions to shareholders. The Secured Term Loan amended the then existing term loan to, among other things: . Increase the borrowing rate from LIBOR plus 1.40% to LIBOR plus 2.50%; . Change the maturity date from February 2002 to June 2001; and . Change the facility from unsecured to secured. In the fourth quarter of 2000, the Company executed a Consent and First Amendment to the Second Amended and Restated Credit Agreement for the Secured Line of Credit and a similar Amendment for the Secured Term Loan (the "Amendments"), each effective as of September 30, 2000. The Amendments modified the Secured Credit Agreements as follows: . Reduced the borrowing rate from LIBOR plus 2.50% to LIBOR plus 2.25%; . Modified the definition of Secured Debt to include all debt secured by real property; and . Modified the provisions for Replacement Properties (as defined in the Secured Credit Agreement). On March 29, 2001, the Company closed a Third Amended and Restated Master Credit Agreement with Fleet National Bank as Agent (the "2001 Credit Agreement"), replacing the existing Secured Credit Agreements. The 2001 Credit Agreement provides for maximum borrowings of $300.0 million, comprised of a $150.0 million revolving credit facility and a $150.0 million term loan. Loans made pursuant to the 2001 Credit Agreement will initially bear interest at LIBOR plus 2.00% and will range from LIBOR plus 1.75% to LIBOR plus 2.25% based on Company leverage and credit quality. The 2001 Credit Agreement matures December 31, 2002. The 2001 Credit Agreement provides that the loans thereunder will be initially secured by first priority security interests in 52 properties valued at approximately $512.3 million. The Company may, however, add, remove or substitute certain of its other properties as Borrowing Base Properties subject to the conditions set forth in the 2001 Credit Agreement. The 2001 Credit Agreement contains certain requirements for each property within the Borrowing Base Properties and certain value and occupancy requirements for the Borrowing Base Properties in the aggregate. The 2001 Credit Agreement contains financial covenants including, but not limited to, a liabilities-to-assets ratio, fixed charges coverage ratios and a net worth covenant. In addition, the 2001 Credit Agreement restricts, subject to certain exceptions, the amount of distributions to the Company's shareholders to 95% of the Company's Funds From Operations (as defined in the 2001 Credit Agreement). The Company incurred fees and expenses associated with the closing of the 2001 Credit Agreement of approximately $4.9 million. During 2000, the Company entered into a two-year forward interest rate cap on $100.0 million of its floating rate debt. The cap effectively limited the floating one-month LIBOR rate on its Secured Term Loan to 7.25% or less over a two-year period. Upon closing of the 2001 Credit Agreement, the Company entered into an interest rate swap agreement with a notional amount of $150.0 million that effectively fixes the underlying LIBOR rate at 4.62%. Future Sources and Uses of Funds - -------------------------------- The most significant expected use of capital for the Company is its development activities. As of December 31, 2000, the Company, JDN Development and affiliated entities had 25 projects under construction and intend to commence construction during 2001 on approximately five additional projects. 38 The Company expects that the capital required to fund the future costs of these 30 projects, net of estimated construction reimbursements and expected land sales to retailers who will build and own their space in these projects, is approximately $162.5 million. These future costs are expected to be incurred during the remainder of 2001 and 2002. This projected capital requirement includes a number of assumptions including commitments by secondary anchor tenants. If some or all of these tenants do not execute leases, management anticipates that the amount required to finance these projects will be less. Another potential use of capital is the satisfaction of any liabilities arising out of pending litigation and governmental proceedings. As noted in Note 19, the Company is a party to certain litigation and government regulatory proceedings and may become subject to additional litigation or proceedings in the future. These matters may result in liabilities, fines, penalties or other remedies that, if material, could adversely affect the Company's financial condition, future results of operations and liquidity. The Company believes that cash provided by operating activities will be sufficient to fund its required distributions to shareholders (95% of taxable income for the year ended December 31, 2000 and 90% of taxable income for each year thereafter), improvements to the Company's operating shopping centers, leasing costs and scheduled debt amortization. The Company has historically utilized the public debt and equity markets to fund its development activities. However, the Company believes that it will be unable to issue unsecured debt, common stock or preferred stock as a result of, among other things, unfavorable capital markets for the foreseeable future. Also, because of the delay in filing the Company's Annual Report on Form 10-K for the year ended December 31, 1999, and the delay in filing the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2000, the Company is not currently eligible to issue securities under its Form S-3 and will not be eligible to use Form S-3 until it has made timely filings of periodic reports with the SEC for at least twelve calendar months after August 2000. Therefore, even if capital markets were to become more favorable for the issuance of securities, public issuances of debt or equity securities before August 2001 would be costly and require significant time to consummate. Furthermore, the Company is limited on the amount of debt that may be outstanding at any given time. Under the applicable indentures for its MOPPRS, Seven Year Notes and Ten Year Notes, and the 2001 Credit Agreement, the Company is limited in the amount of secured debt it may have outstanding to 40% of its Consolidated Total Assets, as defined. As of December 31, 2000, the Company's ratio of Secured Debt to Consolidated Total Assets was 28%. Under the 2001 Credit Agreement, the Company is limited in the amount of total debt it may have outstanding to 60% of Total Consolidated Assets, as defined. As of December 31, 2000, the Company's ratio of total debt to Total Consolidated Assets, as defined, was 49.6%. The company is also restricted on additional indebtedness in its interest coverage and fixed charges coverage ratios in the 2001 Credit Agreements. Therefore, the Company has only a limited ability to fund its development projects with proceeds from additional indebtedness. The Company and JDN Development expect the sale of all or portions of operating shopping center properties in addition to the sale of various parcels of land adjacent to its operating properties to be the primary source of capital for the Company to fund its development needs and certain other uses of funds noted above. In addition, the Company expects funds from the sale of its properties in 2000 and 2001 to be used to satisfy potential liabilities arising out of pending litigation, governmental proceedings and settlement agreements with respect to certain undisclosed transactions. During 2000, the Company and JDN Development sold all or portions of 13 shopping center properties and two parcels of land for gross proceeds of approximately $118.3 million. As of December 31, 2000, the Company and JDN Development were negotiating the sale of all or portions of 23 shopping centers with an aggregate net book value of approximately $114.2 million for estimated aggregate proceeds of approximately $134.3 million, 11 of which were subject to definitive agreements at that date. The Company expects that most of these properties will be sold in 2001 and the first half of 2002. As of March 21, 2001, the Company had closed on the sale of three of these shopping center properties for net proceeds of approximately $22.1 million. The Company expects to begin marketing for sale additional shopping centers that are expected to close after the first half of 2001. The closing of the dispositions is dependent upon, among other things, completion of due diligence and the ability of some of the 39 purchasers to successfully obtain financing. Therefore, there can be no assurance that any of these transactions will close when expected or at all, and there can be no assurance that, if closed, the disposition transactions will produce sufficient liquidity to enable the Company to fund its planned development projects. The Company also expects to obtain construction loans on certain development projects to help fund its expected development expenditures. The ability to obtain construction loans will be dependent upon a number of factors, including achievement of adequate pre-leasing of the project and satisfaction of any environmental, title or other issues with respect to the underlying real estate. The Company has engaged a financial advisor in the implementation of the Company strategy and in particular, assistance with financing alternatives. These alternative means could include, for example, the formation of joint ventures with institutional investors or other partners with available capital at attractive rates. Management believes that proceeds from asset sales, construction loans and any additional capital identified by its financial advisor will provide the additional funding necessary to complete its current development pipeline. However, if the Company is unsuccessful in raising capital adequate to fund its development activities, it will be required to discontinue the funding of some or all of its projects and will be required to liquidate some or all of its projects on potentially unfavorable terms. These unfavorable terms could result in significant losses upon liquidation and would have an adverse impact on future rental income, FFO and the Company's ability to continue the level of its current distributions to holders of its common stock. In order for the Company to continue to qualify as a REIT, it must annually distribute to its shareholders at least 95% (or 90% after December 31, 2000) of its taxable income (excluding net capital gains). Management believes that the Company will be able to meet this requirement in 2001 with cash provided by operating activities. As of December 31, 2000, the Company's indebtedness requires the following payments in the future: Percent of Debt Year Total Expiring - ---------------------------------------------------------------------------- 2001 $ 266,048 46.3% 2002 2,604 0.5% 2003 83,286 14.5% 2004 77,689 13.5% 2005 3,271 0.6% 2006 3,259 0.6% 2007 88,294 15.4% 2008 3,770 0.7% 2009 3,543 0.6% 2010 3,622 0.6% Thereafter 38,755 6.7% -------------- -------------------- $ 574,141 100.0% ============== ==================== With the closing of the 2001 Credit Agreement, the Company has refinanced $242.0 million of the $266.0 million of its indebtedness maturing in 2001. The Company is negotiating to refinance a $21.6 million mortgage note payable secured by a shopping center in Denver, Colorado which matures July 17, 40 2001. The Company expects this refinancing to close on or before the maturity date of this indebtedness. With respect to its other maturing obligations, management will evaluate various alternatives and select the best available options based on market conditions at the time. There can be no assurance, however, that the debt or equity capital markets will be favorable or available in the future, and unfavorable or unavailable markets could limit the Company's ability to continue to operate its business as it has in the past, complete development projects or repay or refinance maturing debt. Derivatives and Market Risk - --------------------------- The Company is exposed to market risk from changes in interest rates on its indebtedness, which could impact its financial condition and results of operations. The Company manages its exposure to these market risks through its regular operating and financing activities. The Company manages its ratio of fixed to floating rate debt with the objective of achieving a mix that management believes is appropriate. The Company has and may from time to time in the future enter into interest rate swap agreements or interest rate cap agreements in an attempt to hedge its exposure to increasing interest rates. Management does not foresee or expect any significant changes in its exposure to interest rate fluctuations or in how such exposure is managed in the near future. The Company intends to use derivative financial instruments as risk management tools and not for speculative or trading purposes. As of December 31, 2000, the Company had one interest rate swap agreement and one interest rate cap agreement as described below:
Strike Effective Termination Value at Description of Agreement Notional Amount Price Date Date 12/31/00 (1) - ------------------------------ -------------------- ------------ ------------- ---------------- ----------------- LIBOR, 30-day "Rate Swap" $ 50,000,000 6.485% 2/11/97 1/1/01 $ 13,000 LIBOR, 30-day "Rate Cap" $ 100,000,000 7.250% 8/21/00 (2) 8/21/02 $ 26,000
(1) A positive value indicates the theoretical net proceeds to the Company if the indicated agreement is sold, while a negative value indicates the theoretical cost to terminate the transaction. (2) The Company paid a one-time $396,000 fee. In conjunction with the closing of the 2001 Credit Agreement, the Company terminated the interest rate cap agreement that was due to expire in August 2002 and entered into an interest rate swap agreement at a strike price of 4.62% on $150.0 million of the Company's floating rate debt. The swap will expire on December 31, 2002. The Company's future earnings, cash flows and fair values of financial instruments are primarily dependent upon market rates of interest such as LIBOR. Based upon consolidated indebtedness and interest rates at December 31, 2000 (see "Indebtedness" above), a hypothetical immediate 1.0% increase in interest rates would decrease future annual earnings by approximately $1.1 million, cash flows by approximately $1.4 million and fair value of debt by approximately $10.1 million. Based upon consolidated indebtedness and interest rates at December 31, 1999, a hypothetical immediate 1.0% increase in interest rates would decrease future annual earnings by approximately $961,000, cash flows by approximately $1.2 million and fair value of debt by approximately $14.1 million. 41 Contingencies In February 2000, the Company announced that it had discovered undisclosed compensation arrangements with two executive officers of JDN Development, additional unauthorized benefits to these same two executive officers, and undisclosed related party transactions involving these two officers and the former Chairman and Chief Executive Officer of the Company. As a result of this discovery, a special committee of the Board of Directors was formed to, among other things, conduct an inquiry into these matters. As a result of the above investigation, the two executive officers of JDN Development, the Chairman and Chief Executive Officer of the Company and the Company's Chief Financial Officer resigned in 2000. Since the Company's announcement of the undisclosed transactions mentioned above, a number of lawsuits have been filed against the Company. One or more of these suits also names as defendants JDN Development and certain current and former officers and directors of JDN Development and/or the Company. Certain class actions filed in federal court allege violations of the federal securities laws asserting that by failing to report the undisclosed compensation, unauthorized benefits and related party transactions to the public in the Company's financial statements, public filings, and otherwise, the defendants made or participated in making material misstatements or omissions which caused the plaintiffs to purchase the Company's common and preferred stock at artificially inflated prices. Included in the class actions is a lawsuit which names among the defendants certain underwriters involved in the preferred stock offering by the Company in 1998 (the "Preferred Stock Class Action"). The Preferred Stock Class Action raises allegations similar to those raised in the other class action cases, but it is based on purported misrepresentations or omissions in the Company's registration statement and prospectus in connection with the 1998 offering. The plaintiffs in these lawsuits seek compensatory damages of an indeterminate amount, interest, attorneys' fees, experts' fees and other costs and disbursements. On April 17, 2000, the federal court entered an order consolidating the various class actions in the United States District Court for the Northern District of Georgia ("Consolidated Class Actions"). On June 13, 2000, the federal court entered an order appointing Clarion-CRA Securities lead plaintiff and the law firm of Chitwood & Harley as lead plaintiff's counsel. On February 13, 2001, plaintiffs in the Preferred Stock Class Action purported to amend their complaint to add Waller, Lansden, Dortch & Davis, PLLC, the Company's securities counsel, as a defendant. The purported amendment was not filed by the lead plaintiff and the Company intends to file a motion to strike the purported amendment as improper. A class action lawsuit was also filed by the Company's shareholders against the Company, JDN Development, and four former officers and directors of these companies in the Superior Court of Fulton County, Georgia. The complaint contains substantially the same factual allegations asserted in the federal class actions, but purports to seek relief under state law for damages which these plaintiffs allege should have been paid to the class as dividends. The original complaint contained claims of common law fraud, conversion and purported violations of Georgia's Racketeer Influenced and Corrupt Organizations Act, but the fraud count has now been dropped by way of an amended complaint recently filed by the plaintiffs. The plaintiffs seek compensatory and punitive damages, attorneys' fees and expenses, interest and equitable relief. The case was removed to federal court, but has now been remanded back to Superior Court, where it is currently pending. Lawsuits have also been filed against the Company as a nominal defendant, as well as individual defendants J. Donald Nichols, Elizabeth L. Nichols, Craig Macnab, Philip G. Satre, William G. Byrnes, Haywood D. Cochrane, Jr., William B. Greene, Jeb L. Hughes, C. Sheldon Whittelsey, IV and William J. Kerley in the United States District Court for the Northern District of Georgia, Atlanta Division and in Fulton County Superior Court. Each of the named individuals is a current or former officer or director of the Company or JDN Development. A similar suit has now been filed in State Court of Fulton County naming Ernst & Young, LLP, the Company's auditors, in addition to the above-referenced defendants. The plaintiffs purport to bring these suits as derivative actions. The complaints allege that the individual defendants, from 1994 through 1999, violated certain duties in connection with the previously undisclosed compensation arrangements. The complaints also allege claims for breach of fiduciary duty, abuse of 42 control, waste of corporate assets, unjust enrichment and gross mismanagement. The plaintiffs, on behalf of the Company, seek injunctive relief, compensatory and punitive damages and disgorgement of all profits and gains by the individual defendants. The Company believes that it has meritorious defenses to the claims brought in the lawsuits described above, but there can be no assurance that such defenses will be successful or that the lawsuits will not have a material adverse effect on the Company's financial position, results of operations and cash flows. In addition, the timing of the final resolution of these proceedings is uncertain. The Company is also subject to a formal order of investigation initiated by the SEC as of August 2, 2000. Pursuant to this order, the Company has voluntarily provided certain documents and other information to the SEC regarding the compensation arrangements, unauthorized benefits and related party transactions mentioned above. By letter dated March 5, 2001, the SEC staff advised the Company that it intended to recommend that the SEC institute a proceeding against the Company. The Company continues to cooperate fully with the SEC staff in order to resolve this matter as expeditiously as practicable. Management of the Company does not expect that the resolution of this matter will have a material adverse effect on the Company's business, financial condition or results of operation. However, the Company is unable to predict with certainty the timing or ultimate outcome of this matter. In an unrelated lawsuit, on February 2, 2000, Dogwood Drive L.L.C., ("Dogwood") filed suit against the Company and WHF, Inc. ("WHF"), a wholly-owned subsidiary of JDN Development, which, until April 1999, owned a 72% interest in Dogwood and served as the operating member of the entity. The suit was filed in the Superior Court of Gwinnett County, Georgia. The complaint asserts, among other things, breach of fiduciary duty against WHF and improper receipt of funds by the Company. The Company believes that it and WHF have meritorious defenses to the claims and intends to vigorously defend the suit. On April 28, 2000, Lake Lucerne Estates Civic Club, Inc., a nonprofit homeowners association located in Gwinnett County, Georgia, and a number of individual plaintiffs, filed suit against JDN Development, Lowe's Companies, Inc., and Haygood Contracting, Inc. The suit was filed in the Superior Court of Fulton County, Georgia. The complaint asserts trespass, nuisance and negligence against JDN Development in connection with the development of a shopping center anchored by Lowe's. JDN Development has filed defensive pleadings denying liability, and discovery is now being conducted by both sides. The Company is from time to time a party to other legal proceedings which arise in the ordinary course of its business. The Company is not currently involved in any litigation in addition to the lawsuits described above the outcome of which would, in management's judgement based on information currently available, have a material adverse effect on the results of operations or financial condition of the Company, nor is management aware of any such litigation threatened against the Company. The Company incurred legal and professional fees during the year ended December 31, 2000 in amounts significantly in excess of those incurred in previous years as a result of the litigation noted above. During 2000, the Company expensed approximately $3.2 million in legal and professional fees related to the special investigation, class action lawsuit and SEC inquiry. The Company cannot reasonably predict, with any degree of certainty, the additional legal and professional fees which will be incurred related to the class action litigation, the special committee's investigation, or any other related investigation by the SEC, the NYSE, IRS or any other regulatory body. Federal Income Tax Legislative Developments In 1999, legislation was enacted which contained several provisions affecting REITs. The new provisions became effective January 1, 2001 and significantly modify the REIT-related provisions of the Code. In addition to the provisions that directly affect the Company (discussed below), the legislation 43 also contained provisions relating to the following: (i) special foreclosure rules for healthcare REITs; (ii) clarification of the definition of independent contractors; and (iii) modification of the earnings and profits rules. Investment Limitations - ---------------------- The REIT asset tests are modified by adding a requirement that except for (i) "Safe Harbor Debt" and (ii) the ownership of stock in "taxable REIT subsidiaries," a REIT cannot own more than 10 percent of the total value of the securities of any corporation. "Safe Harbor Debt" is non-contingent, non- convertible debt ("straight debt") which satisfies one of the following three requirements: (a) the straight debt is issued by an individual, (b) all of the securities of the issuer owned by the REIT is "straight debt" or (c) the issuer is a partnership in which the REIT owns at least 20% of the partnership's profits. Taxable REIT Subsidiaries - ------------------------- A REIT will be permitted to operate a "taxable REIT subsidiary" which can provide a limited amount of services to tenants and other customers of the REIT (even if such services were not considered customarily furnished in connection with the rental of real property) and can manage or operate properties, generally for third parties, without causing the rents received by the REIT from such parties not to be treated as rent from real properties. A taxable REIT subsidiary will be subject to regular federal income tax, and state and local income tax where applicable, as a regular "C" corporation. The value of the securities of all taxable REIT subsidiaries cannot exceed 20% of the total value of the REIT's assets. In addition, interest paid by a taxable REIT subsidiary to the related REIT is subject to the earnings stripping rules contained in Section 163(j) of the Code and, therefore, the taxable REIT subsidiary cannot deduct interest in any year that would exceed 50% of the subsidiary's adjusted gross income. If any amount of interest, rent, or other deductions of the taxable REIT subsidiary to be paid to the REIT is determined not to be at arm's length, an excise tax of 100% is imposed on the portion that is redetermined to be excessive. However, rent received by a REIT will not fail to qualify as rents from real property by reason of the fact that all or any portion of such rent is redetermined for purposes of the excise tax. After considering the new investment limitations and taxable REIT subsidiary provisions, the Company and JDN Development have jointly elected to treat JDN Development as a taxable REIT subsidiary effective January 1, 2001. In addition, effective January 1, 2001, the Company acquired the remaining voting stock in JDN Development and, therefore, owns 100% of the capital stock of JDN Development. The Company will consolidate JDN Development's operations in its financial statements effective with the first reporting period in 2001. Distribution Requirements - ------------------------- In order to continue to maintain its qualification as a REIT, a REIT is required to distribute annually 95% of its REIT taxable income (excluding net capital gain). This required distribution is reduced from 95% to 90% effective for taxable years beginning after December 31, 2000. The Secured Credit Agreements restrict the Company's ability to pay cash distributions. Rents from Personal Property - ---------------------------- A REIT may treat rent from personal property as rent from real property so long as the rent from personal property does not exceed 15% of the total rent from both real and personal property for the taxable year. This determination will now be made by comparing the fair market value of the personal property to the fair market value of the real and personal property. Inflation The Company's leases generally contain provisions designed to mitigate the adverse impact of inflation on net income. These provisions include clauses enabling the Company to pass through to 44 tenants certain operating costs, including real estate taxes, common area maintenance, utilities and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. Certain of the Company's leases contain clauses enabling the Company to receive percentage rents based on tenants' gross sales, which generally increase as prices rise, and, in certain cases, escalation clauses, which generally increase rental rates during the terms of the leases. In addition, many of the Company's non-anchor leases are for terms of less than ten years, which permits the Company to seek increased rents upon re-leasing at higher market rates. 45 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Information on quantitative and qualitative disclosure about market risk are included in Part II, Item 7 of this Annual Report on Form 10-K under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Derivatives and Market Risk." Item 8. Financial Statements and Supplementary Data The financial statements and supplementary data required under Regulation S-X and listed in Item 14(a)(1) below are included in a separate section of this report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 46 PART III Item 10. Directors and Executive Officers of the Registrant The information relating to Directors of the Company set forth in the Company's Proxy Statement relating to the 2001 Annual Meeting of Shareholders under the caption "Election of Directors" is incorporated herein by reference. The information relating to Executive Officers of the Company is included in Part I, Item 1 of this annual report on Form 10-K under the caption "Executive Officers of the Registrant." The information relating to Section 16(a) beneficial ownership reporting compliance set forth in the Company's Proxy Statement relating to the 2001 Annual Meeting of Shareholders under the caption "Security Ownership of Certain Beneficial Owners and Management" is incorporated herein by reference. Item 11. Executive Compensation The information set forth in the Company's Proxy Statement relating to the 2001 Annual Meeting of Shareholders under the caption "Executive Compensation" is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The information set forth in the Company's Proxy Statement relating to the 2001 Annual Meeting of Shareholders under the caption "Security Ownership of Certain Beneficial Owners and Management" is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The information set forth in the Company's Proxy Statement relating to the 2001 Annual Meeting of Shareholders under the caption "Certain Relationships and Related Transactions" is incorporated herein by reference. 47 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Index to Financial Statements, Financial Statement Schedules and Exhibits (1) Financial Statements The following financial statements are included in and filed pursuant to Part II, Item 8 and are included herein on the pages indicated: Consolidated balance sheets - December 31, 2000 and 1999.................................. F-1 Consolidated statements of income - Years ended December 31, 2000, 1999, and 1998............................................... F-2 Consolidated statements of shareholders' equity - Years ended December 31, 2000, 1999, and 1998............................................... F-3 Consolidated statements of cash flows - Years ended December 31, 2000, 1999, and 1998................................................ F-4 Notes to consolidated financial statements................................................ F-5 Report of Ernst & Young LLP, Independent Auditors......................................... F-22 (2) Financial Statement Schedules The following financial statement schedules are included in and filed pursuant to Item 14(d) and are included herein on the pages indicated: Schedule II - Valuation and Qualifying Accounts ...................................... F-23 Schedule III - Real Estate and Accumulated Depreciation................................... F-24
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. (3) Exhibits Exhibit Number Description -------------- ----------- 3.1 Articles of Restatement of JDN Realty Corporation (1) 3.2 Articles of Merger of JDN Enterprises, Inc. with and into the Company (2) 3.3 Amendment No. 1 to the Amended and Restated Bylaws of the Company 3.4 Form of Articles Supplementary of JDN Realty Corporation classifying the 9 3/8% Series A Cumulative Redeemable Preferred Stock (14) 4.1 Specimen Common Stock Certificate (3) 4.2 Form of the Company's 9 3/8 % Series A Cumulative Redeemable Preferred Stock Certificate (14) 4.3 Form of 6.918 % MandatOry Par Put Remarketed Securities (sm) ("MOPPRS (sm)") due March 31, 2013 (15) 4.4 Form of 6.80% Global Note due August 1, 2004 (8) 48 4.5 Form of 6.95% Global Note due August 1, 2007 (8) 4.6 Form of Articles Supplementary of JDN Realty Corporation classifying the 9 3/8% Series A cumulative Redeemable Preferred Stock (14) 10.1 JDN Realty Corporation 1993 Incentive Stock Plan, as amended (17) 10.2 JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan, as amended (17) 10.3 JDN Realty Corporation Long-Term Incentive Plan (17) 10.4 Indemnification Agreement by and between J. Donald Nichols and JDN Realty Corporation, dated February 23, 1994 (2) 10.5 Indemnification Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation, dated February 23, 1994 (2) 10.6 Indemnification Agreement by and between William J. Kerley and JDN Realty Corporation, dated February 23, 1994 (2) 10.7 $200,000,000 Amended and Restated Credit Agreement dated as of September 3, 1998, among JDN Realty Corporation and Wachovia Bank, N.A., as Agent (4) 10.8 First Amendment dated as of June 11, 1999 to the $200,000,000 Amended and Restated Credit Agreement dated as of September 2, 1998 among JDN Realty Corporation, the Banks listed therein and Wachovia Bank, N.A., as Agent (5) 10.9 Agreement for Continued Funding dated March 2, 2000, but effective as of February 14, 2000, by and among JDN Realty Corporation, JDN Development Company, Inc., the Banks parties thereto and Wachovia Bank, N.A., as Agent (13) 10.10 $175,000,000 Second Amended and Restated Credit Agreement dated as of May 19, 2000, among JDN Realty Corporation, the Banks listed therein and Wachovia Bank, N.A., as Agent (16) 10.11 $100,000,000 Term Loan Credit Agreement dated as of February 17, 1999 among JDN Realty Corporation, Wachovia Bank, N.A., as Agent and PNC, National Association, as Documentation Agent (6) 10.12 First Amendment dated as of June 11, 1999 to the $100,000,000 Term Loan Credit Agreement dated as of February 17, 1999 among JDN Realty Corporation, the Banks Listed Herein, Wachovia Bank, N.A., as Agent and PNC Bank, National Association as the Documentation Agent (7) 10.13 Interim Agreement dated as of March 2, 2000, but effective as of February 14, 2000, by and among JDN Realty Corporation, JDN Development Company, Inc. the Banks parties thereto and Wachovia Bank, N.A., as Agent (13) 10.14 $100,000,000 Amended and Restated Term Loan Credit Agreement dated as of May 19, 2000, among JDN Realty Corporation, the Banks listed therein, Wachovia Bank, N.A., as Agent and PNC Bank, National Association, as Documentation Agent (16) 10.15 Indenture, dated as of July 15, 1997, by JDN Realty Corporation to First Union National Bank as Trustee (8) 10.16 First Supplemental Indenture, dated as of July 31, 1997, by JDN Realty Corporation to First Union National Bank, as Trustee (8) 10.17 Second Supplemental Indenture, dated as of February 5, 1998, by JDN Realty Corporation to First Union National Bank, as Trustee (9) 10.18 First Amendment to Second Supplemental Indenture, dated as of March 31, 1998, by JDN Realty Corporation to First Union National Bank, as Trustee (15) 10.19 JDN Realty Corporation Dividend Reinvestment and Stock Purchase Plan (10) 49 10.20 JDN Realty Corporation 1995 Employee Stock Purchase Plan, as amended (17) 10.21 Employment Agreement by and between J. Donald Nichols and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.22 Agreement dated May 19, 2000 between JDN Realty Corporation, JDN Development Company, Inc. and J. Donald Nichols regarding termination of Employment Agreement by and between J. Donald Nichols and JDN Realty Corporation dated as of December 1, 1996 (17) 10.23 Employment Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.24 Employment Agreement by and between William J. Kerley and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.25 Agreement dated April 15, 2000 between JDN Realty Corporation, JDN Development Company, Inc. and William J. Kerley regarding termination of Employment Agreement by and between William J. Kerley and JDN Realty Corporation dated as of December 1, 1996 (17) 10.26 Employment Agreement by and between John D. Harris, Jr. and JDN Realty Corporation dated as of May 1, 1997 (12) 10.27 Employment Agreement by and between Leilani L. Jones and JDN Realty Corporation, dated as of May 1, 1997 (12) 10.28 Employment Agreement by and between David L. Henzlik and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.29 Employment Agreement by and between W. Fred Williams, Jr. and JDN Development Company, Inc. dated as of March 8, 2000 and related Performance Share Agreement dated as of March 7, 2000 (17) 10.30 Tenant Estoppel and Release dated as of May 23, 2000 by and between JDN Development Company, Inc. and JDN Realty Corporation and their Affiliates Wal-Mart Stores, Inc. and Wal-Mart Real Estate Business Trust and Lowe's Companies, Inc. and Lowe's Home Centers, Inc. (16) 10.31 Separation and Partial Settlement Agreement dated as of June 14, 2000 by and between JDN Realty Corporation and JDN Development Company, Inc. and their affiliates, and ALA Associates, Inc., Jeb L. Hughes and C. Sheldon Whittelsey, IV (17) 10.32 Third Amended and Restated Master Credit Agreement dated as of March 29, 2001 among JDN Realty Corporation and Fleet National Bank as Agent 10.33 Amendment No. 2 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan (19) 10.34 Agreement dated July 26, 2000 between JDN Realty Corporation and Elizabeth L. Nichols regarding termination of Employment Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation dated as of December 1, 1996 (18) 10.35 Employment Agreement by and between Craig Macnab and JDN Realty Corporation dated as of November 17, 2000 10.36 Employment Agreement by and between Lee S. Wielansky and JDN Development Company, Inc. dated as of November 27, 2000 10.37 Agreement dated September 5, 2000 and related Consulting Agreement dated October 2, 2000 between JDN Development Company, Inc. and W. Fred Williams regarding termination of Employment Agreement by and between W. Fred Williams and JDN Development Company, Inc. 50 10.38 Amendment No. 3 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan 10.39 Amendment No. 1 to JDN Realty Corporation 1993 Incentive Stock Plan. 12 Ratio of Earnings to Fixed Charges 21 Subsidiaries of the Registrant 99.1 Federal Income Tax Considerations (1) Filed as an exhibit to the Company's filing on Form 8-K dated November 7, 1996, previously filed pursuant to the Securities Exchange Act of 1934, and hereby incorporated by reference. (2) Filed as an exhibit to the Company's Registration Statement on Form S-11 (No. 33-73710) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. (3) Filed as an exhibit to the Company's Registration Statement on Form S-3 (No. 333-22339) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. (4) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (5) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1999, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (6) Filed as an exhibit to the Company's annual report on Form 10-K for the year ended December 31, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (7) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1999, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (8) Filed as an exhibit to the Company's filing on Form 8-K dated August 1, 1997, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (9) Filed as an exhibit to the Company's filing on Form 8-K dated February 13, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (10) Filed as an exhibit to the Company's Registration Statement on Form S-3 (No. 33-90868) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. (11) Filed as an exhibit to the Company's annual report on Form 10-K for the year ended December 31, 1996, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (12) Filed as an exhibit to the Company's filing on Form 10-K for the year ended December 31, 1997, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (13) Filed as an exhibit to the Company's filing on Form 8-K dated March 7, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. 51 (14) Filed as an exhibit to the Company's filing on Form 8-A dated September 17, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (15) Filed as an exhibit to the Company's filing on Form 8-K dated April 1, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (16) Filed as an exhibit to the Company's filing on Form 8-K dated May 23, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (17) Filed as an exhibit to the Company's filing on Form 10-K for the year ended December 31, 1999, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated herein by reference. (18) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated herein by reference. (19) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated herein by reference. 52 Executive Compensation Plans and Arrangements The following is a list of all executive compensation plans and arrangements filed as exhibits to this annual report on Form 10-K or incorporated herein by reference: 1. JDN Realty Corporation 1993 Incentive Stock Plan, as amended (Exhibit 10.1) 2. JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan, as amended (Exhibit 10.2) 3. JDN Realty Corporation Long-Term Incentive Plan (Exhibit 10.3) 4. Employment Agreement, dated as of December 1, 1996, by and between J. Donald Nichols and the Company (Exhibit 10.21) 5. Letter Agreement dated May 19, 2000 between the Company, JDN Development and J. Donald Nichols regarding termination of Employment Agreement by and between J. Donald Nichols and the Company dated as of December 1, 1996 (Exhibit 10.22) 6. Employment Agreement, dated as of December 1, 1996, by and between Elizabeth L. Nichols and the Company (Exhibit 10.23) 7. Employment Agreement, dated as of December 1, 1996, by and between William J. Kerley and the Company (Exhibit 10.24) 8. Letter Agreement dated April 15, 2000 between the Company, JDN Development and William J. Kerley regarding termination of Employment Agreement by and between William J. Kerley and the Company dated December 1, 1996 (Exhibit 10.25) 9. Employment Agreement, dated as of December 1, 1996, by and between David L. Henzlik and the Company (Exhibit 10.28) 10. Employment Agreement, dated as of May 1, 1997, by and between John D. Harris, Jr. and the Company (Exhibit 10.26) 11. Employment Agreement, dated as of May 1, 1997, by and between Leilani L. Jones and the Company (Exhibit 10.27) 12. Employment Agreement, dated as of March 8, 2000, by and between W. Fred Williams, Jr. and JDN Development Company, Inc. and related Performance Share Agreement, dated as of March 7, 2000 (Exhibit 10.29) 13. Indemnification Agreement, dated as of February 23, 1994, by and between J. Donald Nichols and the Company (Exhibit 10.4) 14. Indemnification Agreement, dated as of February 23, 1994, by and between Elizabeth L. Nichols and the Company (Exhibit 10.5) 15. Indemnification Agreement, dated as of February 23, 1994, by and between William J. Kerley and the Company (Exhibit 10.6) 16. Separation and Partial Settlement Agreement dated as of June 14, 2000 by and between JDN Realty Corporation and JDN Development Company, Inc. and their Affiliates, ALA Associates, Inc. and Jeb L. Hughes and C. Sheldon Whittelsey, IV (Exhibit 10.31) 17. JDN Realty Corporation 1995 Employee Stock Purchase Plan as amended (Exhibit 10.20) 18. JDN Realty Corporation Dividend Reinvestment and Stock Purchase Plan (Exhibit 10.19) 19. Amendment No. 2 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan (Exhibit 10.33) 20. Agreement dated July 26, 2000 between JDN Realty Corporation and Elizabeth L. Nichols regarding termination of Employment Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation dated as of December 1, 1996 (Exhibit 10.34) 21. Employment Agreement by and between Craig Macnab and JDN Realty Corporation dated as November 17, 2000 (Exhibit 10.35) 22. Employment Agreement by and between Lee S. Wielansky and JDN Development Company, Inc. dated as of November 27, 2000 (Exhibit 10.36) 53 23. Agreement dated September 5, 2000 and related Consulting Agreement dated October 2, 2000 between JDN Development Company, Inc. and W. Fred Williams regarding termination of Employment Agreement by and between W. Fred Williams and JDN Development Company, Inc. (Exhibit 10.37) 24. Amendment No. 3 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan (Exhibit 10.38) 25. Amendment No. 1 to JDN Realty Corporation 1993 Incentive Stock Plan (Exhibit 10.39) (b) Reports on Form 8-K During the three months ended December 31, 2000, the Company did not file any reports on Form 8-K. (c) Exhibits The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial Statement Schedules The response to this portion of Item 14 is submitted as a separate section of this report. 54 Item 8 ------ FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA ------------------------------------------ Item 14(d) ---------- FINANCIAL STATEMENT SCHEDULES ----------------------------- 55 JDN REALTY CORPORATION CONSOLIDATED BALANCE SHEETS
December 31, -------------------------------- (dollars in thousands, except per share data) 2000 1999 - ----------------------------------------------------------------------------------------------------------------------- ASSETS Shopping center properties, at cost: Land $ 208,653 $ 191,823 Buildings and improvements 626,042 666,465 Property under development 45,020 104,609 -------------------------------- 879,715 962,897 Less: accumulated depreciation and amortization (80,113) (71,551) -------------------------------- Shopping center properties, net 799,602 891,346 Cash and cash equivalents 9,277 2,076 Proceeds receivable from deferred exchange - 40,476 Rents receivable, net of allowance for doubtful accounts of $732 and $714 in 2000 and 1999, respectively 11,200 10,272 Investments in and advances to unconsolidated entities: JDN Development Company, Inc. 193,523 121,095 Other 53,276 33,343 Deferred costs, net of amortization 6,039 5,099 Other assets 11,046 13,088 -------------------------------- $ 1,083,963 $ 1,116,795 ================================ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Unsecured notes payable $ 234,697 $ 234,635 Lines of credit and term loan 242,000 235,000 Mortgage notes payable 97,444 101,247 Accounts payable and accrued expenses 14,558 16,328 Other liabilities 5,151 9,500 -------------------------------- Total liabilities 593,850 596,710 Third party investors' interest 3,504 4,256 Shareholders' Equity Preferred stock, par value $.01 per share - authorized 20,000,000 shares: 9 3/8% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25 per share, issued and outstanding 2,000,000 shares in 2000 and 1999, respectively 20 20 Common stock, par value $.01 per share - authorized 150,000,000 shares, issued and outstanding 32,867,354 and 33,401,468 shares in 2000 and 1999, respectively 329 334 Paid-in capital 489,289 518,504 Accumulated deficit (3,029) (3,029) -------------------------------- 486,609 515,829 -------------------------------- $ 1,083,963 $ 1,116,795 ================================
See accompanying notes. F-1 JDN REALTY CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, ----------------------------------------------- (in thousands, except per share data) 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------------- Revenues: Minimum and percentage rents $ 91,438 $ 92,964 $ 71,191 Recoveries from tenants 12,705 13,205 10,003 Other revenue 1,907 69 117 ----------------------------------------------- Total revenues 106,050 106,238 81,311 Operating expenses: Operating and maintenance 8,736 8,338 6,439 Real estate taxes 6,730 6,979 5,316 General and administrative 8,574 8,130 7,105 Corporate investigation and legal costs 3,159 - - Severance expense 3,711 - - Impairment losses 18,882 90 - Depreciation and amortization 20,735 22,047 16,824 Tenant settlement expense - 5,610 - ----------------------------------------------- Total operating expenses 70,527 51,194 35,684 ----------------------------------------------- Income from operations 35,523 55,044 45,627 Other income (expense): Interest expense, net (25,220) (18,423) (9,454) Other income, net 1,680 1,818 945 Equity in net income (loss) of unconsolidated entities (2,976) (3,800) 3,379 ----------------------------------------------- Income before minority interest in net income of consolidated subsidiaries and net gain on real estate sales 9,007 34,639 40,497 Minority interest in net income of consolidated subsidiaries (222) (215) (196) ----------------------------------------------- Income before net gain on real estate sales 8,785 34,424 40,301 Net gain on real estate sales 14,712 18,627 379 ----------------------------------------------- Net Income 23,497 53,051 40,680 Dividends to preferred shareholders (4,688) (4,688) (1,341) ----------------------------------------------- Net income attributable to common shareholders $ 18,809 $ 48,363 $ 39,339 =============================================== Net income per common share: Basic $ 0.58 $ 1.46 $ 1.28 =============================================== Diluted $ 0.58 $ 1.44 $ 1.26 =============================================== Dividends per common share $ 1.295 $ 1.545 $ 1.413 ===============================================
See accompanying notes. F-2 JDN REALTY CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Preferred Common Paid-in Accumulated (in thousands, except per share data) Stock Stock Capital Deficit Total - -------------------------------------------------------------------------------------------------------------------------------- Balance, January 1, 1998 $ - $ 277 $ 375,306 $ (7,089) $ 368,494 Issuance of preferred stock 20 - 48,154 - 48,174 Issuances of common stock - 50 102,425 - 102,475 Distributions to preferred shareholders ($0.67 per share) - - - (1,341) (1,341) Distributions to common shareholders ($1.41 per share) - - (4,849) (39,339) (44,188) Net income - - - 40,680 40,680 ------------------------------------------------------------------- Balance, December 31, 1998 20 327 521,036 (7,089) 514,294 Issuances of common stock - 11 11,990 - 12,001 Repurchases of common stock - (4) (6,990) - (6,994) Distributions to preferred shareholders ($2.34 per share) - - - (4,688) (4,688) Distributions to common shareholders ($1.55 per share) - - (7,532) (44,303) (51,835) Net income - - - 53,051 53,051 ------------------------------------------------------------------- Balance, December 31, 1999 $ 20 $ 334 $ 518,504 $ (3,029) $ 515,829 Issuances of common stock - 5 1,610 - 1,615 Retirement of restricted common stock - (6) (291) - (297) Repurchases of common stock - (4) (6,839) - (6,843) Distributions to preferred shareholders ($2.34 per share) - - - (4,688) (4,688) Distributions to common shareholders ($1.30 per share) - - (23,695) (18,809) (42,504) Net income - - - 23,497 23,497 ------------------------------------------------------------------- Balance, December 31, 2000 $ 20 $ 329 $ 489,289 $ (3,029) $ 486,609 ===================================================================
See accompanying notes. F-3 JDN REALTY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, ---------------------------------------- (in thousands) 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities Net income $ 23,497 $ 53,051 $ 40,680 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 19,543 21,002 15,676 Amortization 3,499 2,507 1,758 Equity in net income of unconsolidated entities 2,976 3,800 (3,379) Minority interest in net income of consolidated subsidiaries 222 215 196 Net gain on real estate sales (14,712) (18,627) (379) Impairment losses 18,882 90 - Tenant settlement expenses - 5,610 - Changes in assets and liabilities: Rents receivable (928) (3,164) (4,467) Other assets 310 (515) (130) Accounts payable and accrued expenses (1,235) (4,703) 3,766 Other liabilities 602 (470) 2,339 ---------------------------------------- Net cash provided by operating activities 52,656 58,796 56,060 Cash flows from investing activities Development of shopping center properties (33,639) (205,085) (159,590) Purchases of shopping center properties - - (105,453) Improvements to shopping center properties (2,134) (984) (1,507) Proceeds from real estate sales 99,459 61,972 747 Net repayment of advances (to) from JDN Development Company, Inc. (76,141) 26,875 (75,361) Investments in unconsolidated entities (19,948) (33,343) - Other (1,295) 2,197 (10,932) ---------------------------------------- Net cash used in investing activities (33,698) (148,368) (352,096) Cash flows from financing activities Proceeds from mortgages and notes payable - 61,254 1,060 Principal payments on mortgages and notes payable (2,744) (1,648) (532) Proceeds from lines of credit 204,596 529,040 381,420 Principal payments on lines of credit (197,596) (442,559) (276,401) Proceeds from issuance of unsecured notes payable - - 76,548 Proceeds from deferred exchange of properties 40,476 - - Net proceeds from issuance of common stock - 11,225 101,011 Net proceeds from issuance of preferred stock - - 48,174 Repurchases of common stock (6,843) (6,995) - Distributions to common shareholders (42,504) (51,835) (44,188) Distributions to preferred shareholders (4,688) (4,688) (1,341) Deferred financing costs (2,454) (2,072) (1,154) Other - (74) - ---------------------------------------- Net cash provided by financing activities (11,757) 91,648 284,597 ---------------------------------------- Increase (decrease) in cash and cash equivalents 7,201 2,076 (11,439) Cash and cash equivalents at beginning of year 2,076 - 11,439 ---------------------------------------- Cash and cash equivalents at end of year $ 9,277 $ 2,076 $ - ========================================
See accompanying notes. F-4 JDN Realty Corporation Notes to Consolidated Financial Statements December 31, 2000 (dollars in thousands, except per share data) 1. Description of Business and Summary of Significant Accounting Policies Description of Business JDN Realty Corporation (the "Company") is a real estate company specializing in the development and asset management of retail shopping centers. The Company's operating shopping centers and development projects are located in 19 states. The Company has elected to be taxed as a real estate investment trust ("REIT"). Basis of Presentation The financial statements represent the consolidated financial statements of the Company, its wholly-owned and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Segment Reporting The Company operates in one reportable segment, the development, ownership and operation of retail properties, as defined in Statement of Financial Accounting Standard ("SFAS") No. 131, Disclosures about the Segments of an Enterprise and Related Information. Substantially all of the Company's assets, revenues and income are derived from this segment. Investments in Unconsolidated Entities The Company uses the equity method of accounting for investments in non- majority owned entities, including those where the Company's voting control is below 20%, where the Company has the ability to exercise significant influence over operating and financial policies. Real Estate Assets Shopping center properties are stated at cost less accumulated depreciation. The Company capitalizes costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until such time as projects become operational. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets beginning when the phases become substantially complete. The estimated useful life for financial reporting purposes is 31.5 years. Expenditures for maintenance and repairs are charged to operations as incurred. Renovations which improve or extend the life of the related assets are capitalized. As of December 31, 2000, the Company was negotiating the sale of 21 shopping center properties, with an aggregate net book value of $104,172 and an aggregate Net Operating Income of $90,583. The Company expects that these shopping center properties will be sold in 2001 and the first half of 2002. The Company records impairment losses and reduces the carrying amount of long-lived assets used in operations to their fair value when indicators of impairment are present and the estimated undiscounted cash flows, calculated using assumptions indicative of market conditions at the time impairment is evident, related to those assets are less than their carrying amounts. The Company records impairment losses and reduces the carrying amount of assets held for sale when the carrying amounts exceed the estimated selling prices less costs to sell. During 2000, the Company recorded impairment losses of approximately $18,882, of which approximately $9,829 relates to operating shopping centers held for sale and $5,491 relates to operating shopping centers held for use. F-5 Deferred Costs Costs and fees associated with the Company's debt obligations are included in deferred costs in the accompanying consolidated balance sheets and are amortized over the terms of the related debt agreements. Amortization of these deferred financing costs is included in interest expense in the consolidated statements of income. Accumulated amortization related to deferred costs totaled approximately $4,484 and $2,402 at December 31, 2000 and 1999, respectively. The Company capitalizes certain internal and external costs incurred in the development of computer software for internal use in accordance with Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The Company capitalized software development costs of $1,398 in 1999. Other Assets Included in other assets are notes receivable of $6,579 and $9,079 as of December 31, 2000 and 1999 respectively. Revenue Recognition The Company leases space in its shopping centers to tenants and recognizes minimum base rentals as revenue on a straight-line basis over the terms of the operating leases. The tenants are required to pay additional rentals based on common area maintenance expenses, and the Company recognizes such rentals as the revenue is earned. Certain tenants pay incremental rental amounts based on store sales and these percentage rentals are recognized as sales contingencies are resolved. The tenant base includes primarily national or regional retail chains and local retailers, and consequently the Company's credit risk is concentrated in the retail industry. Rents receivable in excess of security deposits are unsecured and are subject to credit losses to this extent. Net Gain on Real Estate Sales Net gain on real estate sales relates to the sale of shopping center properties and undeveloped parcels of land. In accordance with SFAS No. 66, Accounting for Real Estate Sales, the applicable gain or loss is recognized when the earnings process is deemed to be complete, which generally coincides with the closing. The Company records depreciation on shopping center properties through the date of sale. Interest Costs Interest costs incurred during the development period of projects are capitalized and depreciated over the life of the building. Interest costs capitalized were $9,444, $7,565 and $6,401 for the years ended December 31, 2000, 1999 and 1998, respectively. Interest payments totaled $45,051, $35,750 and $21,766 during the years ended December 31, 2000, 1999, and 1998, respectively. Interest income totaled $14,209, $10,765 and $8,571 during the years ended December 31, 2000, 1999 and 1998 respectively. Interest Rate Protection Agreements The Company utilizes interest rate swap agreements or interest rate cap agreements in an attempt to hedge its exposure to increasing rates on its floating rate debt. The interest rate swap agreements involve the exchange of amounts based on fixed interest rates for amounts based on variable interest rates over the lives of the agreements without an exchange of the notional amounts upon which the payments are based. The differential to be paid or received as interest rates change is accrued and recognized as an adjustment to interest incurred. The interest rate cap agreements involve a similar exchange once interest rates rise above a specified threshold. Below that threshold, the Company neither pays nor receives amounts under the interest rate cap agreements. Prior to the adoption of SFAS No. F-6 133, the fair value of the interest rate protection agreements and changes in the fair value as a result of changes in market interest rates are not recognized in the financial statements. On January 1, 2001, the Company adopted SFAS No. 133, as amended by SFAS No. 137 and No. 138 Accounting for Derivative Instruments and Hedging Activities. This accounting standard requires companies to carry all derivative instruments, including certain embedded derivatives, on the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. The Company uses only qualifying hedges that are designated specifically to reduce exposure to interest rate risk. If in the future, the interest rate protection agreements were terminated, the fair value would be recognized as expense upon termination. In the event of early extinguishment of a designated debt obligation, the fair value would be recognized as expense concurrent with the extinguishment. The effect of adopting the SFAS No. 133 did not have a material effect on the Company's consolidated financial statements. Stock-Based Compensation The Company uses the intrinsic value method for valuing its awards of stock options and restricted stock and recording the related compensation expense, if any, in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. See Note 13 for pro forma disclosures using the fair value method as described in SFAS No. 123, Accounting for Stock-Based Compensation ("Statement 123"). Income Taxes The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code") and began operating as such on March 27, 1994. As a result, the Company is not subject to federal income taxes to the extent that it distributes annually at least 95% (or 90% after December 31, 2000) of its taxable income to its shareholders and satisfies certain other requirements defined in the Code. Accordingly, no provision was made for income taxes in the accompanying consolidated financial statements. The Company's distributions per common share are summarized as follows: Years ended December 31, 2000 1999 1998 ------------------------------ Ordinary income $ 0.64 $1.38 $1.35 Return of capital - - 0.06 Long-term capital gains 0.66 0.17 - ------------------------------ $ 1.30 $1.55 $1.41 ============================== Per Share Data In May 1998, the Company declared a 3-for-2 stock split, effected in the form of a stock dividend, to shareholders of record on June 19, 1998. All share and per share information has been restated to reflect the stock split. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Use of Estimates The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts F-7 reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications Certain amounts as previously reported have been reclassified to conform to the current year's presentation. 2. Unsecured Notes Payable Unsecured Notes Payable consisted of the following: December 31, 2000 1999 -------------------------------- Mandatory Par Put Remarketed Securities $ 75,000 $ 75,000 Seven Year Notes 74,873 74,838 Ten Year Notes 84,824 84,797 -------------------------------- $ 234,697 $ 234,635 ================================ The Mandatory Par Put Remarketed Securities ("MOPPRS") represent unsecured notes payable with a face amount of $75,000, a stated interest rate of 6.918% and a maturity date of March 31, 2013. Interest on the MOPPRS is payable semi- annually in arrears on each March 31 and September 30. In connection with the issuance of the MOPPRS, the Company sold an option to remarket the MOPPRS on March 31, 2003 to the agent. On March 31, 2003 the MOPPRS are subject to mandatory tender. The Seven-Year Notes represent unsecured notes with a face amount of $75,000, a stated interest rate of 6.80% and a maturity date of August 1, 2004. The Ten-Year Notes represent unsecured notes payable with a face amount of $85,000, a stated interest rate of 6.95% and a maturity date of August 1, 2007. Interest on the Seven Year Notes and Ten Year Notes is payable semi-annually in arrears on each February 1 and August 1. The Seven Year Notes, the Ten Year Notes and the MOPPRS were issued under Supplemental Indentures and an Indenture which contain covenants customary for notes of these types, including limitations on total indebtedness of the Company, limitations on secured debt, maintenance of minimum interest coverage ratios and maintenance of minimum ratios of unencumbered assets to unsecured debt. 3. Line of Credit and Term Loan Line of Credit and Term Loan consisted of the following: December 31, 2000 1999 --------------------------------------- Term Loan $ 100,000 $ 100,000 Line of Credit 142,000 135,000 --------------------------------------- $ 242,000 $ 235,000 ======================================= Through May 23, 2000, the Line of Credit represented a $200,000 unsecured line of credit with a bank group, which was scheduled to mature in May 2002. Through May 23, 2000, the Term Loan represented a $100,000 unsecured term loan with a bank group, which was scheduled to mature in February 2002. As a result of certain undisclosed transactions and lease discrepancies discovered by the Company, it was determined that the Company had breached certain non-financial and non-operating covenants contained in the credit agreements underlying the Line of Credit and the Term Loan (collectively the "Credit Agreements"). On March 2, 2000, the Company entered into a Continued F-8 Funding Agreement and an Interim Agreement with the bank groups which suspended the breach of these covenants and permitted the Company to access credit on an unsecured basis under the Line of Credit from February 14, 2000 until these agreements expired on April 14, 2000. The Company incurred $531 in fees related to the Continued Funding Agreement and the Interim Agreement. From April 15, 2000 to May 23, 2000, the Company was in default of the Credit Agreements and incurred interest at the default rate, which ranged from 11.0% to 11.5% during that period. On May 23, 2000, the Company closed a Second Amended and Restated Credit Agreement (the "Secured Line of Credit") and an Amended and Restated Term Loan Agreement (the "Secured Term Loan"), each effective as of May 19, 2000 (the Secured Line of Credit and the Secured Term Loan collectively referred to herein as the "Secured Credit Agreements"). Significant changes in the Secured Line of Credit as compared to the Line of Credit include the following: . Reduced maximum borrowings allowed from $200.0 million to $175.0 million; . Changed the maturity date from May 2002 to June 2001; . Changed the facility from unsecured to secured; . Increased the borrowing rate from LIBOR plus 1.15% to LIBOR plus 2.50% through September 30, 2000, and LIBOR plus 2.25% thereafter; . Increased the facility fee payable quarterly from .15% to .35% of the maximum loan amount; . Increased the limit on the ratio of Consolidated Liabilities to Gross Asset Value from 55% to 60%, and deleted the covenants limiting the ratios of Unencumbered Assets to Total Unsecured Funded Debt and Unsecured NOI to Unsecured Interest Expense, all as defined; and . Further restricted the Company's ability to pay distributions to shareholders. The Secured Term Loan amended the Term Loan to, among other things, increase the borrowing rate from LIBOR plus 1.40% to LIBOR plus 2.50% (adjusted to LIBOR plus 2.25% after September 30, 2000), to change the maturity date from February 2002 to June 2001 and to change the facility from unsecured to secured. The Secured Credit Agreements provide that the loans thereunder will be secured by first priority security interests in the Borrowing Base Properties, as defined in the Secured Credit Agreements. The Borrowing Base Properties consist of 52 properties with a net book value of approximately $440.3 million at December 31, 2000. Generally, each Borrowing Base Property must maintain occupancy and leasing percentages of 80% or higher and in the aggregate 60% of the value of the Borrowing Base Properties (based upon a 10% capitalization rate on annualized Net Operating Income, as defined) must be equal to or exceed the Commitments, as defined in the Secured Credit Agreements. The Company has agreed in the Secured Credit Agreements not to purchase or finance the purchase of its common or preferred equity securities (except, in the case of its common stock, as may be required to fund employee benefit plans in the ordinary course of business or to satisfy the requirements of stock option plans) or debt securities, or to make any voluntary prepayment of such debt securities other than with proceeds of the sale of shopping center properties not included in the Borrowing Base Properties. In addition, the Secured Credit Agreements restrict the amount of distributions to shareholders to 100% of REIT taxable income, as defined in the Code, for the year ended December 31, 2000 and to 95% of REIT taxable income for the year ended December 31, 2001. The Company paid the banks up-front fees of $1,800 in connection with the Secured Credit Agreements. These fees were recorded as deferred financing costs with the related amortization recorded as an adjustment to interest incurred over the life of the Secured Credit Facilities. At December 31, 2000, the Company had the ability to draw an additional $33,000 under the Secured Line of Credit. The weighted average interest rate on amounts outstanding under the Secured Line of Credit was 8.95%. At December 31, 2000, the weighted average interest rate on amounts outstanding under the Secured Term Loan was 8.89%. F-9 On March 29, 2001, the Company closed a Third Amended and Restated Master Credit Agreement with Fleet National Bank as Agent (the "2001 Credit Agreement"), amending and superseding its existing Secured Credit Agreements. The 2001 Credit Agreement provides for maximum borrowings of $300.0 million, comprised of a $150.0 million revolving credit facility and a $150.0 million term loan. Loans made pursuant to the 2001 Credit Agreement will initially bear interest at LIBOR plus 2.00% and will range from LIBOR plus 1.75% to LIBOR plus 2.25% based on Company leverage and credit quality. The 2001 Credit Agreement matures December 31, 2002 which may be extended until January 1, 2003 provided that the Company is in compliance with the terms of the agreement. The 2001 Credit Agreement provides that the loans thereunder will remain secured by first priority security interests, which were granted in connection with the amendments to the Secured Credit Agreement in 2000, in the Borrowing Base Properties (as defined in the 2001 Credit Agreement). At the closing of the 2001 Credit Agreement, the Borrowing Base Properties consisted of 52 properties valued at approximately $512.3 million. The Company may, however, add, remove or substitute certain of its other properties as Borrowing Base Properties subject to the conditions set forth in the 2001 Credit Agreement. The 2001 Credit Agreement contains certain requirements for each property within the Borrowing Base Properties and certain value and occupancy requirements for the Borrowing Base Properties in the aggregate. The 2001 Credit Agreement contains financial covenants including, but not limited to, a liabilities-to-assets ratio, fixed charges coverage ratios and a net worth covenant. In addition, the 2001 Credit Agreement restricts, subject to certain exceptions, the amount of distributions to the Company's shareholders to 95% of the Company's Funds From Operations (as defined in the 2001 Credit Agreement). 4. Mortgage Notes Payable At December 31, 2000, the Company's Mortgage Notes Payable consisted of nine amortizing notes payable secured by shopping center properties with an aggregate net book value of $97,444. At December 31, 2000, the Mortgage Notes Payable had a weighted average interest rate of 7.21%, aggregate monthly payments of principal and interest of $824 and maturities beginning in July 2001 and continuing through April 2019. 5. Debt Maturities As of December 31, 2000, principal payments on the Company's Unsecured Notes Payable, Secured Line of Credit, Secured Term Loan, and Mortgage Notes Payable were due as follows: Year ending December 31, - -------------------------------------------------------------------------------- 2001 $ 266,048 2002 2,604 2003 83,286 2004 77,689 2005 3,271 Thereafter 141,243 ------------- $ 574,141 ============= In March 2001, the Company refinanced $242.0 million of the $266.0 million maturing in 2001. F-10 6. Fair Value of Financial Instruments The Company maintains an interest rate swap agreement and an interest rate cap agreement to hedge against increasing rates on its floating rate debt. Under the terms of the interest rate swap agreement, the Company pays a fixed rate of 6.48% and receives a variable rate equal to the rate for the one-month LIBOR based on a notional amount of $50,000. The interest rate swap agreement terminates on January 1, 2001. Under the terms of the interest rate cap agreement, the Company will receive a monthly amount equal to the positive difference between the one-month LIBOR and 7.25% based on a notional amount of $100,000. This interest rate cap agreement terminates on August 21, 2002. Under the terms of the interest rate cap agreement, if the one-month LIBOR does not exceed 7.25% on the payment date each month, the Company receives no payment. The carrying amounts and fair values of the Company's financial instruments with differences are as follows:
December 31, 2000 December 31, 1999 -------------------------- -------------------------- Carrying Carrying Amount Fair Value Amount Fair Value -------------------------- -------------------------- Unsecured Notes Payable $ 234,697 $ 193,591 $ 234,635 $ 225,473 Mortgage Notes Payable 97,444 94,328 101,247 98,398 Interest Rate Swap and Cap 313 39 - (114)
The following methods and assumptions were used by the Company in estimating its fair value disclosures of financial instruments: . Cash and cash equivalents, accounts receivable and accounts payable: The carrying amounts reported in the balance sheet for cash and cash equivalents, accounts receivable and accounts payable approximates their fair value. . Unsecured notes payable: The fair values of the Company's unsecured notes payable are estimated based on dealer quotes at or near year- end. . Lines of credit and term loan: The carrying amounts of the Company's borrowings under its lines of credit and term loan approximate fair value based on the Company's current incremental borrowing rates for similar borrowing arrangements. . Mortgage notes payable: The fair values of the Company's mortgage notes payable are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. . Interest rate swap and cap: The fair values of the Company's interest rate swap and cap are based on dealer quotes that consider the estimated net proceeds if sold for positive valuations or the estimated cost to terminate for negative valuations. 7. Preferred Stock In September 1998, the Company issued 2,000,000 shares of its 9 3/8% Series A Cumulative Redeemable Preferred Stock (the "Series A Preferred Stock"), par value $0.01 per share, with a liquidation preference of $25.00 per share. The Series A Preferred Stock has no stated maturity but is redeemable at the Company's option on or after September 15, 2003 for $25.00 per share plus accumulated, accrued and unpaid dividends. Dividends on the Series A Preferred Stock are cumulative from the date of original issue and are payable quarterly on or about the last day of March, June, September and December of each year, when and as declared. Holders of the Series A Preferred Stock have no voting rights except with respect to certain extraordinary events affecting the rights of the holders of the Series A Preferred Stock. The Series A Preferred Stock is not convertible or exchangeable for any other securities or property of the Company. F-11 8. Investments in and Advances to Unconsolidated Entities As of December 31, 2000 the Company owned 1% of the outstanding voting common stock and 100% of the outstanding non-voting common stock of JDN Development Company, Inc. ("JDN Development"). As of December 31, 2000, W. Fred Williams, the former President of JDN Development, owned the remaining 99% of the outstanding voting common stock of JDN Development. The Company accounts for its investment in JDN Development using the equity method because management believes that it is able to exercise significant influence over the operating and financial policies of JDN Development. As of December 31, 2000 the Company also has an investment along with JDN Development in 21 partnerships formed for the purpose of acquiring, developing, selling or exchanging real estate assets. During the development stage of any project developed within one of these partnerships, the Company is the limited partner, and JDN Development is the general partner. Once the project has reached stabilization, the Company becomes the general partner, and JDN Development becomes the limited partner. The partnerships are consolidated in the general partner's financial statements. The Company accounts for its investment in JDN Development using the equity method because management believes that it is able to exercise significant influence over the operating and financial policies of JDN Development. See discussion related to ownership changes in JDN Development and the resulting accounting change in Note 21 below. F-12 The following summarizes the combined financial information of JDN Development and the partnerships:
December 31, 2000 1999 --------------------------- Assets Operating properties $ 34,961 $ 27,662 Property under development 128,378 113,869 Land held for sale 60,346 24,727 --------------------------- Total real estate 223,685 166,258 Other assets 36,517 32,818 --------------------------- $260,202 $199,076 =========================== Liabilities Mortgage notes payable $ 3,373 $ 16,335 Notes and advances payable to JDN Realty Corporation 198,026 122,120 Other liabilities 13,630 24,158 --------------------------- 215,029 162,613 Third party investors' interest 49,857 32,146 (Deficit) equity (4,684) 4,317 --------------------------- $260,202 $199,076 ===========================
Years Ended December 31, 2000 1999 1998 --------------------------------------------- Rental revenues $ 3,357 $ 4,368 $ 4,297 Operating expenses (5,372) (3,490) (1,796) Tenant settlement expense - (7,490) - Impairment losses (5,833) (2,988) - Provision for abandoned projects (3,819) (5,616) (840) --------------------------------------------- (Loss) income from operations (11,667) (15,216) 1,661 Interest expense (9,476) (5,121) (4,545) Net gain on real estate sales 11,828 10,594 7,957 Other income, net 3,311 931 817 --------------------------------------------- (Loss) income before income tax expense (6,004) (8,812) 5,890 Income tax benefit (expense) (2,999) 3,524 (2,392) --------------------------------------------- Net (loss) income $ (9,003) $ (5,288) $ 3,498 =============================================
F-13 9. Operating Leases Shopping center properties are leased to tenants under operating leases with expiration dates extending to the year 2059. As of December 31, 2000, approximate future minimum rentals due under noncancellable operating leases, excluding tenant reimbursements of operating expenses and additional rentals based on tenants' sales volume, were as follows: - -------------------------------------------------------------------------------- 2001 $ 84,908 2002 80,408 2003 74,596 2004 70,437 2005 64,210 Thereafter 595,020 ----------------- $ 969,579 ================= As of December 31, 2000, Lowe's Companies, Inc., a national retailer, was an anchor in 21 of the Company's shopping centers. Lowe's was a tenant of the Company in 15 of the shopping centers and an unrelated party owned Lowe's portion of the center in the remaining six shopping centers. Rentals from this significant tenant were 17%, 14%, and 12% of total minimum and percentage rent for the years ended December 31, 2000, 1999, and 1998, respectively. There were no other tenants which represented more than 10% of the Company's total minimum and percentage rent in any year presented. As of December 31, 2000, Wal-Mart Stores, Inc., a national retailer, was an anchor in 33 of the Company's shopping centers. Wal-Mart was a tenant of the Company in 11 of the shopping centers and an unrelated party owned Wal-Mart's portion of the center in the remaining 22 shopping centers. Rentals from this significant tenant were approximately 9%, 15%, and 16% of total minimum and percentage rents for the years ended December 31, 2000, 1999, and 1998, respectively. 10. Long-Term Incentive Plan In 1999, the Company adopted the JDN Realty Corporation Long-Term Incentive Plan (the "LTIP"). Under the LTIP the Board of Directors may award restricted stock of the Company and options to purchase shares of common stock of the Company. Any restricted stock or stock options awarded under the LTIP are to be issued under the Incentive Stock Plan (see Note 11 below) and would vest upon satisfaction of criteria established by the Board of Directors. During 1999, the Company granted 600,000 shares of restricted stock under the LTIP. This non-cash issuance of stock totaling $12,038 is excluded from the statement of cash flows in 1999. During 2000, a total of 468,285 shares of this restricted stock were forfeited and the remaining 131,715 shares vested as pursuant to separation agreements with two of the Company's former officers. The Company recorded $976 and $344 related to stock based compensation under the LTIP for the years ended December 31, 2000 and 1999, respectively. 11. Incentive Stock Plan The Company maintains the JDN Realty Corporation 1993 Incentive Stock Plan (the "Incentive Stock Plan") which provides for the issuance of options to purchase shares of the Company's common stock, restricted stock and stock appreciation rights to individuals providing services to the Company, its subsidiaries and affiliated entities at the discretion of the Compensation Committee of the Board of Directors. Under the Incentive Stock Plan, the exercise price of options granted will not be less than the F-14 fair market value of the shares on the date of grant for incentive stock options and will not be less than 50% of the fair market value of the shares on the date of grant for non-qualified stock options. No options have been granted under the Incentive Stock Plan with exercise prices below fair market value. The options generally expire 10 years from the date of grant and vest one-third after six months and one-third after each of the two successive twelve-month periods thereafter. The following is a summary of option activity under the Incentive Stock Plan:
Weighted Average Number of Shares Option Price Option Price Underlying Options Per Share Per Share - ------------------------------------------------------------------------------------------------------------------------------- Options outstanding, January 1, 1998 2,733,470 $13.50 to $20.75 $17.639 Granted 10,000 $21.3125 21.313 Exercised (23,500) $13.50 to $20.75 14.782 Forfeited (5,000) $20.75 20.750 -------------------------------------------------------------------------- Options outstanding, December 31, 1998 2,714,970 $13.50 to $21.3125 17.672 Granted - - - Exercised (35,500) $13.50 to $20.75 14.623 Forfeited (10,000) $21.3125 21.313 -------------------------------------------------------------------------- Options outstanding, December 31, 1999 2,669,470 $13.50 to $21.3125 17.699 Granted 386,000 $9.75 to $10.50 10.180 Forfeited (2,060,011) $10.19 to $20.75 17.812 -------------------------------------------------------------------------- Options outstanding, December 31, 2000 995,459 $9.75 to $20.75 $14.552 ========================================================================== Options exercisable, December 31, 2000 659,959 $9.75 to $20.75 $16.743 ==========================================================================
Effective February 27, 1998, the Company amended the Incentive Stock Plan to, among other things, provide for issuances of restricted stock. Concurrently, the Company adopted the JDN Realty Corporation Deferred Bonus Plan pursuant to the Incentive Stock Plan (the "Deferred Bonus Plan") which established a program to provide incentive compensation to certain key employees in the form of a bonus that could be deferred at the election of the employee, the value of which is tied to the equity value of the Company. An eligible employee could elect to defer all or a specified portion of the receipt of cash bonus payments awarded by the Company and could receive restricted stock in lieu thereof under the Incentive Stock Plan. On March 1, 1998, the Company issued 111,312 shares of restricted stock under the Deferred Bonus Plan. This restricted stock vested one-fourth on March 1, 1999 and one-fourth on each successive March 1 thereafter. As of December 31, 2000, 1,993,655 shares were available for the Company to award in any combination of options, restricted stock or stock appreciation rights under the Incentive Stock Plan. During 2000, a total of 41,700 shares of this restricted stock were forfeited. The weighted average remaining contractual life of options outstanding under the Incentive Stock Plan as of December 31, 2000 was 6.9 years. During 2000 the Company issued 393,800 shares of restricted stock under the 1993 Incentive Stock Plan at a weighted average grant-date fair value of $4,185. The restricted stock, governed by the 2000 Restricted Stock Agreement, was issued to key employees to provide incentives that reward long-term growth and profitability of the Company. Of the 393,800 shares of restricted stock issued in 2000, 278,800 vest on July 10, 2010, however, up to 20% of the restricted stock may vest each year based upon achieving certain performance criteria adopted by the Compensation Committee. The remaining 115,000 shares of restricted stock vest monthly over a two year period beginning in April 2000 and continuing through March 2002. As of December 31, 2000, 366,152 shares of restricted stock were outstanding. The Company recorded $417, $193 and $116 related to stock based compensation under the Incentive Stock Plan for the years ended December 31, 2000, 1999 and 1998, respectively. The weighted average fair value of options granted under the Incentive Stock Plan for the years ended December 31, 2000 and 1998 was $88 and $10, respectively. F-15 12. Directors Stock Plan The Company maintains the JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan (the "Directors Plan") which provides for the issuance of options to purchase shares of the Company's common stock or the granting of shares of common stock to members of the Company's Board of Directors who are not employees of the Company. The Directors Plan initially provided that 4,500 options be granted automatically to each non-employee director serving the Company on January 1 of each year. The exercise price of each option equaled the fair market value of the shares on the date of grant. The options expire 10 years from the date of grant and vest in the following manner: (1) one-third two years after the date of grant, (2) one-third three years after the date of grant, and (3) one-third four years after the date of grant. In November 1998, the Company amended the Directors Plan as follows with respect to future grants: (1) increased the number of options granted automatically, annually to 15,000 options to each non-employee director serving the Company on January 1 of each year; (2) changed the option vesting period to the following: (a) one-third six months after the date of grant, (b) one-third 18 months after the date of grant, and (c) one-third 30 months after the date of grant; and (3) provided for the awarding of $10 in value of common stock to each non-employee director on the first day of each calendar quarter beginning January 1, 1999. In August 2000, the Company amended the Directors Plan to reduce the amount of the quarterly stock award to $8.75. The following is a summary of option activity under the Directors Plan:
Weighted Average Number of Shares Option Price Option Price Underlying Options Per Share Per Share - ------------------------------------------------------------------------------------------------------------------------------- Options outstanding, January 1, 1998 58,500 $13.333 to $18.417 $15.571 Granted 18,000 $21.584 21.584 Exercised (3,000) $13.333 13.333 -------------------------------------------------------------------------- Options outstanding, December 31, 1998 73,500 $13.333 to $21.584 17.135 Granted 75,000 $21.563 21.563 Exercised (1,500) $18.417 18.417 Forfeited (22,500) $18.417 to $21.584 21.147 -------------------------------------------------------------------------- Options outstanding, December 31, 1999 124,500 $13.333 to $21.584 19.061 Granted 75,000 $16.130 16.130 -------------------------------------------------------------------------- Options outstanding, December 31, 2000 199,500 $13.333 to $21.584 $17.959 ========================================================================== Options exercisable, December 31, 2000 116,000 $13.333 to $21.584 $17.828 ==========================================================================
As of December 31, 2000, 239,433 shares were available for award under the Directors Plan in any combination of options or shares of common stock. The weighted average remaining contractual life of options outstanding under the Directors Plan as of December 31, 2000 was 7.4 years. The Company recorded $175 and $190 related to stock based compensation under the Directors Plan for the years ended December 31, 2000 and 1999, respectively. The weighted average fair value of options granted under the Directors Plan for the years ended December 31, 2000, 1999 and 1998 was $12, $97 and $19, respectively. In February 2001, the Company made a one-time grant of an additional 30,000 options under the Directors Plan to each of the four non-employee directors at an exercise price of $12.17 per share. 13. Pro Forma Disclosures on Stock Based Compensation Pro forma information regarding net income and earnings per share is required by SFAS No. 123 using an acceptable fair value method for all stock based compensation granted by the Company subsequent to December 31, 1994. The Company estimated the fair value for this stock based compensation at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for 2000, 1999 and 1998: risk-free interest rate of 5.74% 4.57%, and 5.71%, respectively; dividend yield of 12.71%, 7.33% and 7.24%, respectively; volatility factor of the expected market price of the Company's common stock of 0.27, 0.17, and 0.16, respectively; and a weighted-average expected life of the options of 4, 5 and 5 years, respectively. F-16 Option valuation models used under SFAS 123 were developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of stock based compensation is amortized to expense over the applicable vesting periods. On a pro forma basis, assuming that the Company utilized the fair value method of accounting for stock based compensation, net income and net income per share information was as follows:
Years Ended December 31, 2000 1999 1998 -------------------------------------------- Net income $ 25,067 $52,135 $39,400 Net income attributable to common shareholders 20,379 47,447 38,059 Net income attributable to common shareholders per share: Basic $ 0.63 $ 1.43 $ 1.24 Diluted 0.63 1.41 1.22
14. Employee Stock Purchase Plan The Company suspended the JDN Realty Corporation 1995 Employee Stock Purchase Plan (the "ESPP") in 2000 which was intended to qualify as an "Employee Stock Purchase Plan" within the meaning of Section 423 of the Code. The ESPP authorized the sale of up to 150,000 shares of common stock to eligible employees of the Company at a 15% discount from the market price. During 1999 and 1998, the Company issued 2,158, and 1,755 shares, respectively, under the ESPP. 15. Dividend Reinvestment and Stock Purchase Plan The Company previously established the JDN Realty Corporation Dividend Reinvestment and Stock Purchase Plan (the "DRIP"). The DRIP allowed shareholders to automatically reinvest cash dividends in and make optional cash purchases of shares of the Company's common stock. As of December 31, 1999, 31,786 shares had been issued under the DRIP and 718,214 were reserved for issuance. In 2000, the DRIP was suspended. 16. Common Stock Repurchase Program On November 9, 1999, the Company announced a program which provided for the repurchase of up to 3.0 million of its outstanding common shares. Through December 31, 2000, the Company had repurchased 872,200 shares at an average price of approximately $15.84 per share for a total of $13,812. As of December 31, 2000, the Company has discontinued this repurchase program. F-17 17. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share:
Years Ended December 31, 2000 1999 1998 -------------------------------------------- Numerator: Net Income $ 23,497 $ 53,051 $ 40,680 Dividends to preferred shareholders (4,688) (4,688) (1,341) -------------------------------------------- Net income attributable to common shareholders $ 18,809 $ 48,363 $ 39,339 ============================================ Denominator (in thousands): Weighted-average shares outstanding 32,829 33,426 30,788 Unvested restricted stock outstanding (456) (300) (87) -------------------------------------------- Denominator for basic earnings per share 32,373 33,126 30,701 Dilutive effect of stock options and unvested restricted stock 56 442 527 -------------------------------------------- Denominator for diluted earnings per share 32,429 33,568 31,228 ============================================ Net income per common share: Basic $ 0.58 $ 1.46 $ 1.28 ============================================ Diluted $ 0.58 $ 1.44 $ 1.26 ============================================
The Company is the general partner in a limited partnership that issued limited partnership units initially valued at $3,000 in a limited partnership formed to own and operate a shopping center in Milwaukee, Wisconsin. Subject to certain conditions, the limited partnership units are exchangeable for cash or 139,535 shares of the Company's common stock. As of December 31, 2000, none of the limited partnership units have been exchanged for shares. Using the "if-converted" method, the dilutive effect of these units is immaterial. 18. Commitments As of December 31, 2000, the Company guaranteed one loan of JDN Development in the amount of $3,348. The loan was secured by property owned by JDN Development and was satisfied in full in February, 2001. As of December 31, 2000, the Company had executed construction contracts on 16 of its development sites and had approximately $4,028 in costs remaining to be incurred under these contracts. 19. Contingencies In February 2000, the Company announced that it had discovered undisclosed compensation arrangements with two executive officers of JDN Development, additional unauthorized benefits to these same two executive officers, and undisclosed related party transactions involving these two officers and the former Chairman and Chief Executive Officer of the Company. As a result of this discovery, a special committee of the Board of Directors was formed to, among other things, conduct an inquiry into these matters. As a result of the above investigation, the two executive officers of JDN Development, the Chairman and Chief Executive Officer of the Company and the Company's Chief Financial Officer resigned in 2000. F-18 Since the Company's announcement of the undisclosed transactions mentioned above, a number of lawsuits have been filed against the Company. One or more of these suits also names as defendants JDN Development and certain current and former officers and directors of JDN Development and/or the Company. Certain class actions filed in federal court allege violations of the federal securities laws asserting that by failing to report the undisclosed compensation, unauthorized benefits and related party transactions to the public in the Company's financial statements, public filings, and otherwise, the defendants made or participated in making material misstatements or omissions which caused the plaintiffs to purchase the Company's stock at artificially inflated prices. Included in the class actions is a lawsuit which names among the defendants certain underwriters involved in the preferred stock offering by the Company in 1998 (the "Preferred Stock Class Action"). The Preferred Stock Class Action raises allegations similar to those raised in the other class action cases, but it is based on purported misrepresentations or omissions in the Company's registration statement and prospectus in connection with the 1998 offering. The plaintiffs in these lawsuits seek compensatory damages of an indeterminate amount, interest, attorneys' fees, experts' fees and other costs and disbursements. On April 17, 2000, the federal court entered an order consolidating the various class actions in the United States District Court for the Northern District of Georgia ("Consolidated Class Actions"). On June 13, 2000, the federal court entered an order appointing Clarion-CRA Securities lead plaintiff and the law firm of Chitwood & Harley as lead plaintiff's counsel. On February 13, 2001, plaintiffs in the Preferred Stock Class Action purported to amend their complaint to add Waller, Lansden, Dortch & Davis, PLLC, the Company's securities counsel, as a defendant. The purported amendment was not filed by the lead plaintiff and the Company intends to file a motion to strike the purported amendment as improper. A class action lawsuit was also filed by the Company's shareholders against the Company, JDN Development, and four former officers and directors of these companies in the Superior Court of Fulton County, Georgia. The complaint contains substantially the same factual allegations asserted in the federal class actions, but purports to seek relief under state law for damages which these plaintiffs allege should have been paid to the class as dividends. The original complaint contained claims of common law fraud, conversion and purported violations of Georgia's Racketeer Influenced and Corrupt Organizations Act, but the fraud count has now been dropped by way of an amended complaint recently filed by the plaintiffs. The plaintiffs seek compensatory and punitive damages, attorneys' fees and expenses, interest and equitable relief. The case was removed to federal court, but has now been remanded back to Superior Court, where it is currently pending. Lawsuits have also been filed against the Company as a nominal defendant, as well as individual defendants J. Donald Nichols, Elizabeth L. Nichols, Craig Macnab, Philip G. Satre, William G. Byrnes, Haywood D. Cochrane, Jr., William B. Greene, Jeb L. Hughes, C. Sheldon Whittelsey, IV and William J. Kerley in the United States District Court for the Northern District of Georgia, Atlanta Division and in Fulton County Superior Court. Each of the named individuals are current or former officers or directors of the Company or JDN Development. A similar suit has now been filed in State Court of Fulton County naming Ernst & Young, LLP, the Company's auditors, in addition to the above-referenced defendants. The plaintiffs purport to bring these suits as derivative actions. The complaints allege that the individual defendants, from 1994 through 1999, violated certain duties in connection with the previously undisclosed compensation arrangements. The complaints also allege claims for breach of fiduciary duty, abuse of control, waste of corporate assets, unjust enrichment and gross mismanagement. The plaintiffs, on behalf of the Company, seek injunctive relief, compensatory and punitive damages and disgorgement of all profits and gains by the individual defendants. The Company believes that it has meritorious defenses to the claims brought in the lawsuits described above, but there can be no assurance that such defenses will be successful or that the lawsuits will not have a material adverse effect on the Company's financial position, results of operations and cash flows. In addition, the timing of the final resolution of these proceedings is uncertain. The Company is also subject to a formal order of investigation initiated by the SEC as of August 2, 2000. Pursuant to this order, the Company has voluntarily provided certain documents and other information to the SEC regarding the compensation arrangements, unauthorized benefits and related party transactions mentioned above. By letter dated March 5, 2001, the SEC staff advised the Company that it intended to recommend that the SEC institute a proceeding against the Company. F-19 The Company continues to cooperate fully with the SEC staff in order to resolve this matter as expeditiously as practicable. Management of the Company does not expect that the resolution of this matter will have a material adverse effect on the Company's business, financial condition or results of operation. However, the Company is unable to predict with certainty the timing or ultimate outcome of this matter. In an unrelated lawsuit, on February 2, 2000, Dogwood Drive L.L.C., ("Dogwood") filed suit against the Company and WHF, Inc. ("WHF"), a wholly-owned subsidiary of JDN Development, which, until April 1999, owned a 72% interest in Dogwood and served as the operating member of the entity. The suit was filed in the Superior Court of Gwinnett County, Georgia. The complaint asserts, among other things, breach of fiduciary duty against WHF and improper receipt of funds by the Company. The Company believes that it and WHF have meritorious defenses to the claims and intends to vigorously defend the suit. On April 28, 2000, Lake Lucerne Estates Civic Club, Inc., a nonprofit homeowners association located in Gwinnett County, Georgia, and a number of individual plaintiffs, filed suit against JDN Development, Lowe's Companies, Inc., and Haygood Contracting, Inc. The suit was filed in the Superior Court of Fulton County, Georgia. The complaint asserts trespass, nuisance and negligence against JDN Development in connection with the development of a shopping center anchored by Lowe's. JDN Development has filed defensive pleadings denying liability, and discovery is now being conducted by both sides. The Company is from time to time a party to other legal proceedings which arise in the ordinary course of its business. The Company is not currently involved in any litigation in addition to the lawsuits described above the outcome of which would, in management's judgement based on information currently available, have a material adverse effect on the results of operations or financial condition of the Company, nor is management aware of any such litigation threatened against the Company. 20. Related Party Transactions GeoSurvey, Ltd. Co. ("GeoSurvey"), which was 50% owned by two former executive officers of JDN Development and 50% owned by an unrelated third party, performs survey work for the Company. During the years ended December 31, 2000, 1999 and 1998, the Company paid for services provided by GeoSurvey in the amounts of $17, $18, and $11, respectively. Comm-Aviation, LLC ("Comm-Aviation"), which was 99% owned by J. Donald Nichols, the Company's former Chief Executive Officer, provided charter flight service to the Company. During the years ended December 31, 2000, 1999 and 1998, the Company paid for services provided by Comm-Aviation in the amounts of $47, $126 and $208, respectively. Lightyear Holdings, Inc. (formerly Unidial Holdings, Inc.) ("Lightyear"), which was 31% owned by Mr. Nichols through June 2, 2000, provides telecommunication services to the Company. Craig Macnab, a member of the Company's Board of Directors and the Company's current Chief Executive Officer, was also a board member of Lightyear from August 1996 until April 2000. During the years ended December 31, 2000, 1999, and 1998, the Company paid for services provided by Lightyear in the amounts of $37, $49, and $41, respectively. JDN Development paid additional amounts to these same companies in these years. 21. Subsequent Events During 2001, the Company sold three of its shopping center properties containing 253,500 square feet to three third-party purchasers for approximately $22,093. Recent legislation amending the tax laws applicable to REITs permitted a change in the ownership structure of JDN Development. Effective January 1, 2001, the Company affected this change by acquiring 100% of the ownership of JDN Development. As a result of the stock acquisition, the Company has changed its accounting for JDN Development from the equity method to the consolidated F-20 method effective January 1, 2001. In addition, the Company and JDN Development elected taxable REIT subsidiary status for federal income tax purposes for JDN Development. In conjunction with the closing of the 2001 Credit Agreement, the Company entered into an interest rate swap agreement at a strike price of 4.62% on $150,000 of the Company's indebtedness. The swap will expire on December 31, 2002. 22. Quarterly Financial Information (Unaudited) The following is a summary of the unaudited quarterly financial information for the years ended December 31, 2000 and 1999:
Quarters First Second Third Fourth - -------------------------------------------------------------------------------------------------------------------- 2000: Revenues $ 26,156 $ 26,276 $ 27,795 $ 25,823 Net income (loss) 14,059 10,604 12,023 (13,188) Net income (loss) attributable to common shareholders 12,887 9,432 10,851 (14,360) Income (loss) per common share: Basic $ 0.40 $ 0.29 $ 0.34 $ (0.44) Diluted 0.40 0.29 0.34 (0.44) 1999: Revenues $ 25,690 $ 25,940 $ 26,656 $ 27,952 Net income 11,932 12,099 18,601 10,419 Net income attributable to common shareholders 10,760 10,927 17,429 9,247 Income per common share: Basic $ 0.33 $ 0.33 $ 0.53 $ 0.28 Diluted 0.32 0.32 0.52 0.28
Fourth Quarter net income was impacted by special charges, which include impairment charges related to both operating and non-operating real estate assets on the Company and JDN Development, and a charge to earnings to create a valuation allowance on deferred tax assets recorded at JDN Development. Impairment charges amounted to $19,794 or $0.61 per share. The valuation allowance on the deferred tax asset at JDN Development amounted to $5,346 or $0.16 per share. F-21 Report of Independent Auditors Shareholders and Board of Directors JDN Realty Corporation We have audited the accompanying consolidated balance sheets of JDN Realty Corporation as of December 31, 2000 and 1999 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of JDN Realty Corporation at December 31, 2000 and 1999 and the consolidated results of its operations and cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States. Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Atlanta, Georgia March 29, 2001 F-22 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS JDN REALTY CORPORATION (In thousands)
- --------------------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E - --------------------------------------------------------------------------------------------------------------------------------- Additions ----------------------------------------- Balance at Beginning Charges to Costs Charged to Other Deductions- Balance at End Description of Period and Expenses Accounts - Describe Describe of Period - --------------------------------------------------------------------------------------------------------------------------------- Year ended December 31, 2000: Deduct from asset accounts: Allowance for Doubtful Accounts $714 $496 $478 (1) $732 ============== =============== ============== =============== Year ended December 31, 1999: Deduct from asset accounts: Allowance for Doubtful Accounts $667 $646 $599 (1) $714 ============== =============== ============== =============== Year ended December 31, 1998: Deduct from asset accounts: Allowance for Doubtful Accounts $719 $386 $438 (1) $667 ============== =============== ============== ===============
(1) Write-off of uncollectible rents receivable. F-23 Schedule III - Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------ COL. A COL. B COL. C COL. D COL. E - ------------------------------------------------------------------------------------------------------------------------------------ Cost Capitalized Subsequent to Gross Amount at which Initial Cost to Company Acquisition Carried at close of Period -------------------------- ----------------- ----------------------------- Buildings and Buildings and Description Encumbrances Land Improvements Improvements Land Improvements Total - ------------------------------------------------------------------------------------------------------------------------------------ Operating Property - ------------------ Southland Plaza (Decatur, AL) $ 4,061 $ 1,013 $ 5,802 $ 250 $ 1,013 $ 6,052 $ 7,065 East Side Plaza (Gadsden, AL) - 130 - 2,361 130 2,361 2,491 Pepperell Corners (Opelika, AL) 9,063 2,062 11,676 149 2,062 11,825 13,887 Pepperell Corners, Phase II (Opelika, AL) 1,050 744 1,628 (33) 744 1,595 2,339 Lowe's (Opelika, AL) 5,364 2,600 7,027 218 2,600 7,245 9,845 Trotter's Ridge (Scottsboro, AL) 1,610 581 3,068 77 581 3,145 3,726 University Hills (Denver, CO) 21,627 15,272 17,017 6,082 15,272 23,099 38,371 Brandon Lake Village (Brandon, FL) - 3,627 7,110 1,414 3,627 8,524 12,151 Publix (Brandon, FL) 4,601 1,721 3,418 117 1,721 3,535 5,256 Golden Corral (Bradenton, FL) - 883 1,283 10 883 1,293 2,176 White Sands (Fort Walton, FL) - 452 - 1,162 452 1,162 1,614 Gulf Breeze Marketplace (Gulf Breeze, FL) - 830 - 2,953 830 2,953 3,783 Ocala West Shopping Center (Ocala, FL) - 839 4,920 229 839 5,149 5,988 Capital West (Tallahassee, FL) 3,602 2,040 - 4,877 2,040 4,877 6,917 Lowe's (Alpharetta, GA) 13,265 5,366 6,800 631 4,466 7,431 11,897 Athens East (Athens, GA) - 102 2,690 - 102 2,690 2,792 Lowe's (Buford, GA) - 5,369 19,555 (11,465) 1,971 8,090 10,061 Riverplace (Canton, GA) 4,221 2,857 4,478 1,887 2,857 6,365 9,222 River Pointe (Canton, GA) 1,288 370 2,301 219 361 2,520 2,881 Felton's Crossing (Cartersville, GA) - 177 - 7,001 177 7,001 7,178 - ------------------------------------------------------------------------------------------------------------------------------------ COL. F COL. G COL. H COL. I - ------------------------------------------------------------------------------------------------------------------------------------ Life on which depreciation in Accumulated Date of latest income statements is Description Depreciation Construction Date Acquired computed - ------------------------------------------------------------------------------------------------------------------------------------ Operating Property - ------------------ Southland Plaza (Decatur, AL) $ 763 1965 1996 Building 31.5 years (1) Sign 20 years (2) East Side Plaza (Gadsden, AL) 1,262 1979 1980 Building 31.5 years (1) Pepperell Corners (Opelika, AL) 2,540 1993 1994 Building 31.5 years (1) Pepperell Corners, Phase II (Opelika, AL) 294 1995 1995 Building 31.5 years (1) Lowe's (Opelika, AL) 322 1999 1999 Building 31.5 years (1) Trotter's Ridge (Scottsboro, AL) 125 1999 1999 Building 31.5 years (1) University Hills (Denver, CO) 3,897 1997 1998 Building 31.5 years (1) Sign 20 years (2) Brandon Lake Village (Brandon, FL) 599 1997 1998 Building 31.5 years (1) Publix (Brandon, FL) 210 1999 1999 Building 31.5 years (1) Golden Corral (Bradenton, FL) 44 1999 1999 Building 31.5 years (1) White Sands (Fort Walton, FL) 453 1986 1985 Building 31.5 years (1) Sign 20 years (2) Gulf Breeze Marketplace (Gulf Breeze, FL) 106 1998 1998 Building 31.5 years (1) Ocala West Shopping Center (Ocala, FL) 531 1984 1997 Building 31.5 years (1) Capital West (Tallahassee, FL) 1,625 1990 1989 Building 31.5 years (1) Sign 20 years (2) Lowe's (Alpharetta, GA) 547 1998 1998 Building 31.5 years (1) Athens East (Athens, GA) 63 2000 2000 Building 31.5 years (1) Lowe's (Buford, GA) 523 1998 1998 Building 31.5 years (1) Riverplace (Canton, GA) 1,611 1983 1983 Building 31.5 years (1) River Pointe (Canton, GA) 345 1996 1996 Building 31.5 years (1) Felton's Crossing (Cartersville, GA) 1,728 1984 1983 Building 31.5 years (1) Sign 20 years (2)
F-24 Schedule III - Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands)
- ----------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C - ----------------------------------------------------------------------------------------------------------------- Cost Capitalized Subsequent to Initial Cost to Company Acquisition ------------------------------------------- Buildings and Encumbrances Land Improvements - ----------------------------------------------------------------------------------------------------------------- Operating Property: - ------------------- Chamblee Plaza (Chamblee, GA) - 1,698 9,913 578 Bradley Park Crossing (Columbus, GA) 3,950 2,015 7,622 155 Cumming Marketplace (Cumming, GA) 9,538 6,963 15,250 4,403 Pinetree Village (Cumming, GA) - 648 1,707 1,608 Douglasville Marketplace (Douglasville, GA) - 2,511 - 5,768 Dodge County (Eastman, GA) 1,762 172 - 2,755 Banks Station (Fayetteville, GA) - 1,522 9,603 (1,196) Bruno's Plaza (Ft. Oglethorpe, GA) 5,842 1,092 6,193 172 Ellis Crossing (Griffin, GA) - 302 - 2,487 Fayetteville - Specialty Shops (Fayetteville, GA) - 1,231 2,122 - North Main Street (Lafayette, GA) 2,590 123 - 4,455 LaGrange Wal-Mart (LaGrange, GA) - 183 - 1,420 CVS (Lawrenceville, GA) 402 925 1,138 59 Five Forks Village (Lawrenceville, GA) 2,942 1,245 7,065 156 Lawrenceville Town Center (Lawrenceville, GA) 12,787 3,563 17,037 (2,792) Five Forks Crossing (Lilburn, GA) 2,442 930 5,287 42 Pleasant Hill Lowe's (Lilburn, GA) 12,420 3,643 6,413 281 Midway Plaza (Loganville, GA) 3,618 1,356 6,400 109 K-Mart (Macon, GA) - 998 5,515 - Beacon Heights (Madison, GA) - 549 - 3,552 ------------------------------------------------------------------ COL. E COL. F -------------------------------------------------- Gross Amount at which Carried at close of Period Buildings and Accumulated Land Improvements Total Depreciation ------------------------------------------------------------------ Operating Property: - ------------------- Chamblee Plaza (Chamblee, GA) 1,698 10,491 12,189 832 Bradley Park Crossing (Columbus, GA) 2,014 7,777 9,791 374 Cumming Marketplace (Cumming, GA) 5,010 19,653 24,663 722 Pinetree Village (Cumming, GA) 1,243 3,315 4,558 98 Douglasville Marketplace (Douglasville, GA) 6,339 5,768 12,107 15 Dodge County (Eastman, GA) 180 2,755 2,935 787 Banks Station (Fayetteville, GA) 1,253 8,407 9,660 2,168 Bruno's Plaza (Ft. Oglethorpe, GA) 1,092 6,365 7,457 1,272 Ellis Crossing (Griffin, GA) 302 2,487 2,789 1,150 Fayetteville - Specialty Shops (Fayetteville, GA) 1,231 2,122 3,353 63 North Main Street (Lafayette, GA) 123 4,455 4,578 1,149 LaGrange Wal-Mart (LaGrange, GA) 183 1,420 1,603 738 CVS (Lawrenceville, GA) 925 1,197 2,122 76 Five Forks Village (Lawrenceville, GA) 1,245 7,221 8,466 1,549 Lawrenceville Town Center (Lawrenceville, GA) 2,984 14,245 17,229 3,812 Five Forks Crossing (Lilburn, GA) 930 5,329 6,259 1,145 Pleasant Hill Lowe's (Lilburn, GA) 3,556 6,694 10,250 522 Midway Plaza (Loganville, GA) 1,356 6,509 7,865 1,030 K-Mart (Macon, GA) 869 5,515 6,384 336 Beacon Heights (Madison, GA) 417 3,552 3,969 1,540 ------------------------------------------------------------- COL. G COL. H COL. I ------------------------------------------------------------- Life on which depreciation in Date of latest income statements is Construction Date Acquired computed ------------------------------------------------------------- Operating Property: - ------------------- Chamblee Plaza (Chamblee, GA) 1976 1998 Building 31.5 years (1) Bradley Park Crossing (Columbus, GA) 1999 1999 Building 31.5 years (1) Cumming Marketplace (Cumming, GA) 1997 1997 Building 31.5 years (1) Sign 20 years (2) Pinetree Village (Cumming, GA) 1999 1999 Building 31.5 years (1) Douglasville Marketplace (Douglasville, GA) 1999 1999 Building 31.5 years (1) Dodge County (Eastman, GA) 1990 1986 Building 31.5 years (1) Sign 20 years (2) Banks Station (Fayetteville, GA) 1990 1994 Building 31.5 years (1) Bruno's Plaza (Ft. Oglethorpe, GA) 1973 1994 Building 31.5 years (1) Ellis Crossing (Griffin, GA) 1986 1985 Building 31.5 years (1) Sign 20 years (2) Fayetteville - Specialty Shops (Fayetteville, GA) 2000 2000 Building 31.5 years (1) North Main Street (Lafayette, GA) 1990 1988 Building 31.5 years (1) Sign 20 years (2) LaGrange Wal-Mart (LaGrange, GA) 1984 1983 Building 31.5 years (1) CVS (Lawrenceville, GA) 1998 1998 Building 31.5 years (1) Five Forks Village (Lawrenceville, GA) 1990 1994 Building 31.5 years (1) Lawrenceville Town Center (Lawrenceville, GA) 1989 1994 Building 31.5 years (1) Five Forks Crossing (Lilburn, GA) 1990 1994 Building 31.5 years (1) Pleasant Hill Lowe's (Lilburn, GA) 1997 1997 Building 31.5 years (1) Midway Plaza (Loganville, GA) 1995 1997 Building 31.5 years (1) K-Mart (Macon, GA) 1999 1999 Building 31.5 years (1) Beacon Heights (Madison, GA) 1989 1987 Building 31.5 years (1) Sign 20 years (2)
F-25 Schedule III - Real Estate and Accumulated Depreciation JDN Realty Corporation December 31,2000 (In thousands)
- ----------------------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E - ----------------------------------------------------------------------------------------------------------------------------------- Cost Capitalized Subsequent to Gross Amount at which Initial Cost to Company Acquisition Carried at close of Period ----------------------------------------------------------------------- Buildings and Buildings and Encumbrances Land Improvements Improvements Land Improvements Total - ----------------------------------------------------------------------------------------------------------------------------------- Operating Property: - ------------------- Garrison Ridge Xing (Marietta, GA) 10,746 3,587 8,440 10 3,412 8,450 11,862 Applebee's (McDonough, GA) - 341 674 7 341 681 1,022 Newnan Crossing (Newnan, GA) 5,169 3,750 17,745 (9,942) 2,180 7,803 9,983 Peachtree City Marketplace (Peachtree GA) 1,441 772 1,242 2,473 1,150 3,715 4,865 Pike's Nursery (Peachtree City, GA) - 1,008 1,004 (1) 1,008 1,003 2,011 Merchant Square (Riverdale, GA) - 191 - 1,372 191 1,372 1,563 Freeway Junction (Stockbridge, GA) 5,376 979 5,550 238 979 5,788 6,767 Pike's Nurseries (Stockbridge, GA) - 963 1,039 44 963 1,083 2,046 Lowe's (Stone Mountain, GA) 4,260 3,186 7,882 (25) 3,307 7,857 11,164 Noble Farm Plaza (Suwanee, GA) 1,722 1,540 3,389 784 1,540 4,173 5,713 Cofer Crossing (Tucker, GA) 5,037 5,046 1,167 4,252 5,421 5,419 10,840 Shannon Square (Union City, GA) 3,303 195 - 4,347 195 4,347 4,542 Warner Robins Place (Warner Robins, GA) - 203 907 3,505 541 4,412 4,953 Pike's Nursery (Woodstock, GA) - 1,323 1,102 - 1,323 1,102 2,425 Woodstock Place (Woodstock, GA) 5,646 1,692 - 7,778 1,292 7,778 9,070 Woodstock Project (Woodstock, GA) 11,679 3,738 7,210 (104) 3,843 7,106 10,949 North Ridge Shopping Center (Davenport, IA) - 741 2,324 8,868 2,159 11,192 13,351 Decatur Marketplace (Decatur, IL) - 289 2,609 211 289 2,820 3,109 Suttons North Plaza (Topeka, KS) - 270 1,660 1,728 270 3,388 3,658 North Park Marketplace (Lexington, KY) - 243 - 1,662 722 1,662 2,384 - ----------------------------------------------------------------------------------------------------------------------------------- COL. F COL. G COL. H COL. I - ----------------------------------------------------------------------------------------------------------------------------------- Life on which depreciation in Accumulated Date of latest income statements is Depreciation Construction Date Acquired computed - ----------------------------------------------------------------------------------------------------------------------------------- Operating Property: - ------------------- Garrison Ridge Xing (Marietta, GA) 801 1997 1997 Building 31.5 years (1) Sign 20 years (2) Applebee's (McDonough, GA) 30 1999 1999 Building 31.5 years (1) Newnan Crossing (Newnan, GA) 1,191 1995 1995 Building 31.5 years (1) Sign 20 years (2) Peachtree City Marketplace (Peachtree GA) 113 1999 1999 Building 31.5 years (1) Pike's Nursery (Peachtree City, GA) 112 1997 1997 Building 31.5 years (1) Merchant Square (Riverdale, GA) 489 1989 1989 Building 31.5 years (1) Freeway Junction (Stockbridge, GA) 1,104 1988 1994 Building 31.5 years (1) Pike's Nurseries (Stockbridge, GA) 119 1997 1997 Building 31.5 years (1) Lowe's (Stone Mountain, GA) 318 1999 1999 Building 31.5 years (1) Noble Farm Plaza (Suwanee, GA) 321 1997 1997 Building 31.5 years (1) Cofer Crossing (Tucker, GA) 292 1998 1998 Building 31.5 years (1) Shannon Square (Union City, GA) 1,757 1986 1984 Building 31.5 years (1) Sign 20 years (2) Warner Robins Place (Warner Robins, GA) 146 1997 1997 Building 31.5 years (1) Pike's Nursery (Woodstock, GA) 128 1997 1997 Building 31.5 years (1) Woodstock Place (Woodstock, GA) 1,591 1985 1982 Building 31.5 years (1) Sign 20 years (2) Woodstock Project (Woodstock, GA) 688 1997 1997 Building 31.5 years (1) North Ridge Shopping Center (Davenport, IA) 190 1999 1999 Building 31.5 years (1) Decatur Marketplace (Decatur, IL) 88 1999 1999 Building 31.5 years (1) Suttons North Plaza (Topeka, KS) 301 1976 1997 Building 31.5 years (1) North Park Marketplace (Lexington, KY) 29 1999 1999 Building 31.5 years (1)
F-26 Schedule III- Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------ COL.A COL. B COL. C COL. D COL. E - ------------------------------------------------------------------------------------------------------------------------------------ Cost Capitalized Subsequent to Gross Amount at Initial Cost to Company Acquisition which Carried at close of Period ---------------------------------------------------------------------------- Buildings and Buildings and Description Encumbrances Land Improvements Improvements Land Improvements Total - ------------------------------------------------------------------------------------------------------------------------------------ Operating Property: - ------------------ South Farm Marketplace (Lexington, KY) - 4,785 298 (97) 4,785 201 4,986 Carriage Gate (Richmond, KY) 5,990 1,398 7,994 19 1,398 8,013 9,411 Junction S/C (Jackson, MS) 6,696 1,361 7,858 91 1,361 7,949 9,310 Metro Station (Jackson, MS) - 521 3,382 (1,089) 296 2,293 2,589 Oxford (Oxford, MS) - 1,809 1 - 1,809 1 1,810 Crosscreek Shopping Center (Tupelo, MS) - 754 - 4,059 1,203 4,059 5,262 River Hills S/C (Asheville, NC) 6,175 3,125 13,376 529 3,125 13,905 17,030 Cross Pointe Centre (Fayetteville, NC) 8,106 1,931 10,840 537 1,931 11,377 13,308 Lawndale Crossing (Greensboro, NC) 2,930 3,483 - 6,228 5,418 6,228 11,646 East Ridge Crossing (Hendersonville, NC) 6,777 - - 4,372 - 4,372 4,372 Lumberton - Lowe's (Lumberton, NC) - 506 - - 506 - 506 Jeffries Crossing (Rocky Mount, NC) 2,700 334 3,400 1,623 466 5,023 5,489 Kester Mill Village (Winston-Salem, NC) - 814 2,122 (627) 685 1,495 2,180 Tri-State Plaza (Burlington, OH) 5,263 1,563 6,210 213 1,363 6,423 7,786 Gallipolis Marketplace (Gallipolis, OH) - 1,405 10,587 (8,831) 393 1,756 2,149 Township Marketplace (Monaca, PA) 9,164 5,177 10,105 4,735 5,566 14,840 20,406 Ashley Crossing (Charleston, SC) 7,779 1,459 10,354 205 1,459 10,559 12,018 Kelley Corners (Lake City, SC) - 415 5,310 (5,310) - - - Merchants Walk (Sumter, SC) - 130 - 799 130 799 929 Millcreek Commons (Antioch, TN) 2,045 531 3,092 42 531 3,134 3,665 - ------------------------------------------------------------------------------------------------------------------------------------ COL. F COL. G COL. H COL. I - ------------------------------------------------------------------------------------------------------------------------------------ Life on which depreciation in Accumulated Date of latest income statements is Description Depreciation Construction Date Acquired computed - ------------------------------------------------------------------------------------------------------------------------------------ Operating Property: - ------------------ South Farm Marketplace (Lexington, KY) 6 1998 1998 Building 31.5 years (1) Carriage Gate (Richmond, KY) 1,611 1992 1994 Building 31.5 years (1) Sign 20 years (2) Junction S/C (Jackson, MS) 964 1996 1997 Building 31.5 years (1) Metro Station (Jackson, MS) 274 1997 1998 Building 31.5 years (1) Oxford (Oxford, MS) - 2000 2000 Building 31.5 years (1) Crosscreek Shopping Center (Tupelo, MS) 20 1999 1999 Building 31.5 years (1) River Hills S/C (Asheville, NC) 1,651 1996 1997 Building 31.5 years (1) Sign 20 years (2) Cross Pointe Centre (Fayetteville, NC) 1,009 1985 1998 Building 31.5 years (1) Lawndale Crossing (Greensboro, NC) 119 1999 1999 Building 31.5 years (1) East Ridge Crossing (Hendersonville, NC) 1,610 1988 1988 Building 31.5 years (1) Sign 20 years (2) Lumberton - Lowe's (Lumberton, NC) - 2000 2000 Building 31.5 years (1) Jeffries Crossing (Rocky Mount, NC) 183 1999 1999 Building 31.5 years (1) Kester Mill Village (Winston-Salem, NC) 125 1999 1999 Building 31.5 years (1) Tri-State Plaza (Burlington, OH) 1,182 1995 1995 Building 31.5 years (1) Sign 20 years (2) Gallipolis Marketplace (Gallipolis, OH) 116 1998 1998 Building 31.5 years (1) Township Marketplace (Monaca, PA) 1,142 1997 1997 Building 31.5 years (1) Ashley Crossing (Charleston, SC) 2,275 1991 1994 Building 31.5 years (1) Sign 20 years (2) Kelley Corners (Lake City, SC) - 1991 1994 Building 31.5 years (1) Sign 20 years (2) Merchants Walk (Sumter, SC) 368 1987 1986 Building 31.5 years (1) Sign 20 years (2) Millcreek Commons (Antioch, TN) 272 1990 1998 Building 31.5 years (1)
F-27 Schedule III - Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------ COL. A COL. B COL. C COL. D COL. E - ------------------------------------------------------------------------------------------------------------------------------------ Cost Capitalized Gross Amount at Subsequent to which Carried at close Initial Cost to Company Acquisition of Period ----------------------- ------------------------------------------------- Buildings and Buildings and Description Encumbrances Land Improvements Improvements Land Improvements Total - ------------------------------------------------------------------------------------------------------------------------------------ Operating Property: - ------------------ Overlook at Hamilton Place (Chattanooga, TN) 7,087 1,595 12,725 211 1,595 12,936 14,531 Columbia Square (Columbia, TN) 2,277 673 3,859 30 673 3,889 4,562 Farragut Pointe (Farragut, TN) 2,830 731 4,165 30 731 4,195 4,926 Alexander Plaza (Franklin, TN) - 24 - 491 24 491 515 Battlewood Shopping Center (Franklin, TN) 2,159 662 3,822 169 662 3,991 4,653 Cool Springs (Franklin, TN) - 764 48 - 764 48 812 Northcreek Commons (Goodlettsville, TN) 2,805 743 4,311 243 743 4,554 5,297 Lowe's (Hendersonville, TN) 10,550 4,074 7,649 41 4,074 7,690 11,764 Country Bridge (Memphis, TN) 2,548 750 4,294 211 750 4,505 5,255 Memorial Village (Murfreesboro, TN) 3,889 991 5,636 385 991 6,021 7,012 Towne Center (Murfreesboro, TN) 3,573 3,016 6,822 3,667 3,016 10,489 13,505 The Marketplace (Nashville, TN) 6,658 4,710 10,495 12,278 5,158 22,773 27,931 MacArthur Marketplace (Irving, TX) 6,243 6,440 11,918 1,379 7,286 13,297 20,583 Nacogdoches Marketplace (Nacogdoches, TX) 1,619 613 3,521 178 646 3,699 4,345 Bermuda Square S/C (Chester, VA) 3,841 1,302 7,534 549 1,302 8,083 9,385 Candlers Station (Lynchburg, VA) 10,942 2,495 15,601 (2,408) 2,054 13,193 15,247 Genito Crossing (Midlothian, VA) 3,151 823 4,812 18 823 4,830 5,653 Lexington Commons (Lexington, VA) - 882 4,548 927 882 5,475 6,357 Tri-Rivers S/C (South Boston, VA) - 502 4,414 192 503 4,606 5,109 Shoppers World (Brookfield, WI) 6,280 1,989 12,025 53 1,989 12,078 14,067 - ------------------------------------------------------------------------------------------------------------------------ COL. A COL. F COL. G COL. H COL. I - ------------------------------------------------------------------------------------------------------------------------ Life on which depreciation in Accumulated Date of Date latest income statements Description Depreciation Construction Acquired is computed - ------------------------------------------------------------------------------------------------------------------------ Operating Property: - ------------------ Overlook at Hamilton Place (Chattanooga, TN) 2,757 1992 1994 Building 31.5 years (1) Columbia Square (Columbia, TN) 779 1993 1994 Building 31.5 years (1) Farragut Pointe (Farragut, TN) 904 1991 1994 Building 31.5 years (1) Alexander Plaza (Franklin, TN) 116 1983 1983 Building 31.5 years (1) Battlewood Shopping Center (Franklin, TN) 336 1990 1998 Building 31.5 years (1) Cool Springs (Franklin, TN) - 2000 2000 Building 31.5 years (1) Northcreek Commons (Goodlettsville, TN) 720 1987 1995 Building 31.5 years (1) Sign 20 years (2) Lowe's (Hendersonville, TN) 461 1999 1999 Building 31.5 years (1) Country Bridge (Memphis, TN) 942 1993 1994 Building 31.5 years (1) Memorial Village (Murfreesboro, TN) 1,169 1972 1994 Building 31.5 years (1) Towne Center (Murfreesboro, TN) 703 1998 1998 Building 31.5 years (1) The Marketplace (Nashville, TN) 1,081 1998 1998 Building 31.5 years (1) MacArthur Marketplace (Irving, TX) 509 1999 1999 Building 31.5 years (1) Nacogdoches Marketplace (Nacogdoches, TX) 183 1999 1999 Building 31.5 years (1) Bermuda Square S/C (Chester, VA) 820 1977 1997 Building 31.5 years (1) Candlers Station (Lynchburg, VA) 1,266 1990 1998 Building 31.5 years (1) Genito Crossing (Midlothian, VA) 502 1985 1997 Building 31.5 years (1) Lexington Commons (Lexington, VA) 1,416 1989 1988 Building 31.5 years (1) Sign 20 years (2) Tri-Rivers S/C (South Boston, VA) 528 1989 1997 Building 31.5 years (1) Sign 20 years (2) Shoppers World (Brookfield, WI) 1,080 1967 1998 Building 31.5 years (1)
F-28 Schedule III - Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands)
- --------------------------------------------------------------------------------------------------------------------------------- COL.A COL. B COL. C COL. D COL. E - ---------------------------------------------------------------------------------------------------------------------------------- Cost Capitalized Subsequent to Gross Amount at which Carried Initial Cost to Company Acquisition at close of Period --------------------------------------------------------------------------- Buildings and Buildings and Description Encumbrances Land Improvements Improvements Land Improvements Total - ----------------------------------------------------------------------------------------------------------------------------------- Operating Property: - ------------------ Brown Deer Center (Brown Deer, WI) 7,170 1,790 10,230 85 1,791 10,315 12,106 Market Place of Brown Deer (Brown Deer, WI) 4,471 1,641 9,437 8 1,642 9,445 11,087 Point Loomis (Milwaukee, WI) 5,302 912 5,331 88 912 5,419 6,331 West Allis Center (Milwaukee WI) - 2,479 14,885 178 2,479 15,063 17,542 Alabama Corporate - - - (533) (94) (533) (627) Atlanta Headquarters - 495 - 6,292 495 6,292 6,787 JDN Realty Corporation (Atlanta, GA) - 362 - (2,569) 250 (2,569) (2,319) - ----------------------------------------------------------------------------------------------------------------------------------- Total Operating Property 339,444 181,720 526,993 99,049 181,370 626,042 807,412 -------------------------------------------------------------------------------------- Land under Ground Lease -------------------------------------------------------------------------------------- Charleston, South Carolina - 362 - - 362 - 362 -------------------------------------------------------------------------------------- Total Land under Ground Lease - 362 - - 362 - 362 -------------------------------------------------------------------------------------- Underdeveloped Land: - ------------------- -------------------------------------------------------------------------------------- Gadsden, Alabama - 55 - - 55 - 55 Brandon, Florida - 6,125 - - 2,748 - 2,748 Buford, Georgia - 1,347 - - 1,286 - 1,286 Cartersville, Georgia - 86 - - 86 - 86 Eastman, Georgia - 60 - - 61 - 61 Fayetteville, Georgia - 150 - - 150 - 150 Fayetteville - Specialty Shop - 3,281 - - 3,281 - 3,281 Franklin - Cool Springs - 3,190 - - 3,190 - 3,190 Greensboro - Lawndale Crossing - 696 - - 696 - 696 JDN Realty Corp - - - - (376) - (376) Lafayette, Georgia - 84 - - 84 - 84 Macon, Georgia - 287 - - 287 - 287 Madison, Georgia - 22 - - 22 - 22 Monaca - 5,298 - - 5,298 - 5,298 Nashville - 1,560 - - 1,560 - 1,560 Oxford - 398 - - 398 - 398 Peachtree City - 543 - - 543 - 543 Stone Mountain - 5,828 - - 5,828 - 5,828 Tupelo - 368 - - 368 - 368 Warner Robins, Georgia - 235 - - 235 - 235 Rockingham, North Carolina - 300 - - 300 - 300 Charleston, South Carolina - 179 - - 179 - 179 Murfreesboro, Tennessee - 357 - - 367 - 367 Lexington, Virginia - 164 - - 75 - 75 Lynchburg, Virginia - 250 - - 200 - 200 ------------------------------------------------------------------------------------------------- - 30,863 - - 26,921 - 26,921 ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- Subtotal 339,444 212,945 526,993 99,049 208,653 626,042 834,695 ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------ COL. F COL. G COL. H COL. I - ------------------------------------------------------------------------------------------------------------------------------ Life on which depreciation in Accumulated Date of latest income statements is Description Depreciation Construction Date Acquired computed - ------------------------------------------------------------------------------------------------------------------------------ Operating Property - ------------------ Brown Deer Center (Brown Deer, WI) 924 1967 1998 Building 31.5 years (1) Market Place of Brown Deer (Brown Deer, WI) 849 1989 1998 Building 31.5 years (1) Point Loomis (Milwaukee, WI) 484 1962 1998 Building 31.5 years (1) West Allis Center (Milwaukee WI) 1,346 1968 1998 Building 31.5 years (1) Alabama Corporate - 2000 2000 Building 31.5 years (1) Atlanta Headquarters - 1955 1997 Building 31.5 years (1) Sign 20 years (2) JDN Realty Corporation (Atlanta, GA) 537 1999 1999 Building 31.5 years (1) - ------------------------------------------------------------------------------------------------------------------------------ Total Operating Property 80,113 ---------- ---------- Land under Ground Lease Charleston, South Carolina - ---------- Total Land under Ground Lease - ---------- Underdeveloped Land: - ------------------- Gadsden, Alabama - Brandon, Florida - Buford, Georgia - Cartersville, Georgia - Eastman, Georgia - Fayetteville, Georgia - Fayetteville - Specialty Shop - Franklin - Cool Springs - Greensboro - Lawndale Crossing - JDN Realty Corp - Lafayette, Georgia - Macon, Georgia - Madison, Georgia - Monaca - Nashville - Oxford - Peachtree City - Stone Mountain - Tupelo - Warner Robins, Georgia - Rockingham, North Carolina - Charleston, South Carolina - Murfreesboro, Tennessee - Lexington, Virginia - Lynchburg, Virginia - ---------- - ---------- ---------- Subtotal 80,113 ----------
F-29 Schedule III- Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------ COL. A COL. B COL. C COL. D COL. E COL. F - ------------------------------------------------------------------------------------------------------------------------------------ Cost Capitalize Gross Amount at which Subsequent to Carried at Initial Cost to Company Acquisition close of Period --------------------------------------------------------------------------------------- Buildings and Buildings Accumulated Description Encumbrance Land Improvements Improvements Land Improvements Total Depreciation - ------------------------------------------------------------------------------------------------------------------------------------ Property under Development - -------------------------- Early Acquisition Cost - - 67 - - 67 67 - Fayetteville, AR - 2,685 1,718 - 2,685 1,718 4,403 - Irving, TX - 2,548 2,070 - 2,548 2,070 4,618 - Greensboro North, NC - 174 775 - 174 775 949 - McDonough, GA - 1,253 301 - 1,253 301 1,554 - Turner Hill, GA - 3,619 660 - 3,619 660 4,279 - Brandon Publix, FL - 2,045 2,143 - 2,045 2,143 4,188 - Lexington S. Farm, KY - 573 793 - 573 793 1,366 - Lexington N Park, KY - 404 1,256 - 404 1,256 1,660 - Tupelo, MS - 263 2,560 - 263 2,560 2,823 - Chesterfield, MI - 3,475 755 - 3,475 755 4,230 - Grandville, MI - 5,375 2,604 - 5,375 2,604 7,979 - Warner Robbins, GA - - 1,936 - - 1,936 1,936 - Overland Park KS - 3,833 2,369 - 3,833 2,369 6,202 - Oxford, MS - 525 414 - 525 414 939 - Newnan, GA - - 437 - - 437 437 - Realty Prop. Dev. - - (2,610) - - (2,610) (2,610) - Total Property under ---------------------------------------------------------------------------------------------------- Development - 26,772 18,248 - 26,772 18,248 445,020 - ---------------------------------------------------------------------------------------------------- Total $ 339,444 $ 239,71 $ 545,241 $ 99,049 $235,425 $ 644,290 $879,715 $ 80,113 ----------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------- COL. G COL. H COL. I - ------------------------------------------------------------------------- life on which depreciation in Date of latest income statements is Construction Date Acquired computed - ------------------------------------------------------------------------- F-30 Schedule III - Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands) (1) Estimated useful life of building. (2) Estimated useful life of sign.
Years Ended December 31, 2000 1999 1998 ----------------------------------------------- Investment in Real Estate Balance at beginning of year $ 962,897 $ 844,041 $ 533,133 Additions/Improvements 110,390 294,635 330,273 Deductions (193,572) (175,779) (19,365) ----------------------------------------------- Balance at end of year $ 879,715 $ 962,897 $ 844,041 =============================================== Accumulated Depreciation Balance of beginning of year $ 71,551 $ 56,093 $ 38,306 Additions charged to costs and expenses 21,612 21,932 19,010 Other Additions - - - Deductions (13,050) (6,474) (1,223) ----------------------------------------------- Balance at end of year $ 80,113 $ 71,551 $ 56,093 ===============================================
F-31 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JDN REALTY CORPORATION Dated: April 2, 2001 By: /s/ Craig Macnab ------------- ------------------------------------- Craig Macnab Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Craig Macnab Chief Executive Officer, April 2, 2001 - -------------------- ------------- Craig Macnab and Director /s/ John D. Harris, Jr. Chief Financial Officer, Senior April 2, 2001 - ------------------------------------ ------------- John D. Harris, Jr. Vice President, Secretary and Treasurer /s/ Michael A. Quinlan Vice President and Controller April 2, 2001 - ------------------------------------ ------------- Michael A. Quinlan /s/ Haywood D. Cochrane, Jr. Director April 2, 2001 - ------------------------------------ ------------- Haywood D. Cochrane, Jr. /s/ William B. Greene Director April 2, 2001 - ------------------------------------ ------------- William B. Greene /s/ William G. Byrnes Director April 2, 2001 - ------------------------------------ ------------- William G. Byrnes /s/ Philip G. Satre Director April 2, 2001 - ------------------------------------ ------------- Philip G. Satre /s/ Lee S. Wielansky Director April 2, 2001 - ------------------------------------ ------------- Lee S. Wielansky
Item 14(c) ---------- EXHIBIT INDEX (3) Exhibits Exhibit Number Description -------------- ----------- 3.1 Articles of Restatement of JDN Realty Corporation (1) 3.2 Articles of Merger of JDN Enterprises, Inc. with and into the Company (2) 3.3 Amendment No. 1 to the Amended and Restated Bylaws of the Company 3.4 Form of Articles Supplementary of JDN Realty Corporation classifying the 9 3/8% Series A Cumulative Redeemable Preferred Stock (14) 4.1 Specimen Common Stock Certificate (3) 4.2 Form of the Company's 9 3/8 % Series A Cumulative Redeemable Preferred Stock Certificate (14) 4.3 Form of 6.918 % MandatOry Par Put Remarketed Securities (sm) ("MOPPRS (sm)") due March 31, 2013 (15) 4.4 Form of 6.80% Global Note due August 1, 2004 (8) 4.5 Form of 6.95% Global Note due August 1, 2007 (8) 4.6 Form of Articles Supplementary of JDN Realty Corporation classifying the 9 3/8% Series A cumulative Redeemable Preferred Stock (14) 10.1 JDN Realty Corporation 1993 Incentive Stock Plan, as amended (17) 10.2 JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan, as amended (17) 10.3 JDN Realty Corporation Long-Term Incentive Plan (17) 10.4 Indemnification Agreement by and between J. Donald Nichols and JDN Realty Corporation, dated February 23, 1994 (2) 10.5 Indemnification Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation, dated February 23, 1994 (2) 10.6 Indemnification Agreement by and between William J. Kerley and JDN Realty Corporation, dated February 23, 1994 (2) 10.7 $200,000,000 Amended and Restated Credit Agreement dated as of September 3, 1998, among JDN Realty Corporation and Wachovia Bank, N.A., as Agent (4) 10.8 First Amendment dated as of June 11, 1999 to the $200,000,000 Amended and Restated Credit Agreement dated as of September 2, 1998 among JDN Realty Corporation, the Banks listed therein and Wachovia Bank, N.A., as Agent (5) 10.9 Agreement for Continued Funding dated March 2, 2000, but effective as of February 14, 2000, by and among JDN Realty Corporation, JDN Development Company, Inc., the Banks parties thereto and Wachovia Bank, N.A., as Agent (13) 10.10 $175,000,000 Second Amended and Restated Credit Agreement dated as of May 19, 2000, among JDN Realty Corporation, the Banks listed therein and Wachovia Bank, N.A., as Agent (16) 10.11 $100,000,000 Term Loan Credit Agreement dated as of February 17, 1999 among JDN Realty Corporation, Wachovia Bank, N.A., as Agent and PNC, National Association, as Documentation Agent (6) 10.12 First Amendment dated as of June 11, 1999 to the $100,000,000 Term Loan Credit Agreement dated as of February 17, 1999 among JDN Realty Corporation, the Banks Listed Herein, Wachovia Bank, N.A., as Agent and PNC Bank, National Association as the Documentation Agent (7) 10.13 Interim Agreement dated as of March 2, 2000, but effective as of February 14, 2000, by and among JDN Realty Corporation, JDN Development Company, Inc. the Banks parties thereto and Wachovia Bank, N.A., as Agent (13) 10.14 $100,000,000 Amended and Restated Term Loan Credit Agreement dated as of May 19, 2000, among JDN Realty Corporation, the Banks listed therein, Wachovia Bank, N.A., as Agent and PNC Bank, National Association, as Documentation Agent (16) 10.15 Indenture, dated as of July 15, 1997, by JDN Realty Corporation to First Union National Bank as Trustee (8) 10.16 First Supplemental Indenture, dated as of July 31, 1997, by JDN Realty Corporation to First Union National Bank, as Trustee (8) 10.17 Second Supplemental Indenture, dated as of February 5, 1998, by JDN Realty Corporation to First Union National Bank, as Trustee (9) 10.18 First Amendment to Second Supplemental Indenture, dated as of March 31, 1998, by JDN Realty Corporation to First Union National Bank, as Trustee (15) 10.19 JDN Realty Corporation Dividend Reinvestment and Stock Purchase Plan (10) 10.20 JDN Realty Corporation 1995 Employee Stock Purchase Plan, as amended (17) 10.21 Employment Agreement by and between J. Donald Nichols and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.22 Agreement dated May 19, 2000 between JDN Realty Corporation, JDN Development Company, Inc. and J. Donald Nichols regarding termination of Employment Agreement by and between J. Donald Nichols and JDN Realty Corporation dated as of December 1, 1996 (17) 10.23 Employment Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.24 Employment Agreement by and between William J. Kerley and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.25 Agreement dated April 15, 2000 between JDN Realty Corporation, JDN Development Company, Inc. and William J. Kerley regarding termination of Employment Agreement by and between William J. Kerley and JDN Realty Corporation dated as of December 1, 1996 (17) 10.26 Employment Agreement by and between John D. Harris, Jr. and JDN Realty Corporation dated as of May 1, 1997 (12) 10.27 Employment Agreement by and between Leilani L. Jones and JDN Realty Corporation, dated as of May 1, 1997 (12) 10.28 Employment Agreement by and between David L. Henzlik and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.29 Employment Agreement by and between W. Fred Williams, Jr. and JDN Development Company, Inc. dated as of March 8, 2000 and related Performance Share Agreement dated as of March 7, 2000 (17) 10.30 Tenant Estoppel and Release dated as of May 23, 2000 by and between JDN Development Company, Inc. and JDN Realty Corporation and their Affiliates Wal-Mart Stores, Inc. and Wal-Mart Real Estate Business Trust and Lowe's Companies, Inc. and Lowe's Home Centers, Inc. (16) 10.31 Separation and Partial Settlement Agreement dated as of June 14, 2000 by and between JDN Realty Corporation and JDN Development Company, Inc. and their affiliates, and ALA Associates, Inc., Jeb L. Hughes and C. Sheldon Whittelsey, IV (17) 10.32 Third Amended and Restated Master Credit Agreement dated as of March 29, 2001 among JDN Realty Corporation and Fleet National Bank as Agent 10.33 Amendment No. 2 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan (19) 10.34 Agreement dated July 26, 2000 between JDN Realty Corporation and Elizabeth L. Nichols regarding termination of Employment Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation dated as of December 1, 1996 (18) 10.35 Employment Agreement by and between Craig Macnab and JDN Realty Corporation dated as of November 17, 2000 10.36 Employment Agreement by and between Lee S. Wielansky and JDN Development Company, Inc. dated as of November 27, 2000 10.37 Agreement dated September 5, 2000 and related Consulting Agreement dated October 2, 2000 between JDN Development Company, Inc. and W. Fred Williams regarding termination of Employment Agreement by and between W. Fred Williams and JDN Development Company, Inc. 10.38 Amendment No. 3 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan 10.39 Amendment No. 1 to JDN Realty Corporation 1993 Incentive Stock Plan. 12 Ratio of Earnings to Fixed Charges 21 Subsidiaries of the Registrant 99.1 Federal Income Tax Considerations (1) Filed as an exhibit to the Company's filing on Form 8-K dated November 7, 1996, previously filed pursuant to the Securities Exchange Act of 1934, and hereby incorporated by reference. (2) Filed as an exhibit to the Company's Registration Statement on Form S- 11 (No. 33-73710) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. (3) Filed as an exhibit to the Company's Registration Statement on Form S- 3 (No. 333-22339) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. (4) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (5) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1999, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (6) Filed as an exhibit to the Company's annual report on Form 10-K for the year ended December 31, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (7) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1999, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (8) Filed as an exhibit to the Company's filing on Form 8-K dated August 1, 1997, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (9) Filed as an exhibit to the Company's filing on Form 8-K dated February 13, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (10) Filed as an exhibit to the Company's Registration Statement on Form S- 3 (No. 33-90868) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. (11) Filed as an exhibit to the Company's annual report on Form 10-K for the year ended December 31, 1996, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (12) Filed as an exhibit to the Company's filing on Form 10-K for the year ended December 31, 1997, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (13) Filed as an exhibit to the Company's filing on Form 8-K dated March 7, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (14) Filed as an exhibit to the Company's filing on Form 8-A dated September 17, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (15) Filed as an exhibit to the Company's filing on Form 8-K dated April 1, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (16) Filed as an exhibit to the Company's filing on Form 8-K dated May 23, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (17) Filed as an exhibit to the Company's filing on Form 10-K for the year ended December 31, 1999, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated herein by reference. (18) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated herein by reference. (19) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated herein by reference. EX-3.3 2 0002.txt AMENDED AND RESTATED BYLAWS OF THE COMPANY EXHIBIT 3.3 AMENDED AND RESTATED BYLAWS OF JDN REALTY CORPORATION ARTICLE I OFFICES Section 1.1. Principal Office. The principal office of JDN Realty ---------------- Corporation, a Maryland corporation (the "Corporation"), shall be located at such place in the State of Maryland as the Corporation's Board of Directors may from time to time designate or as the business of the Corporation may require. Section 1.2. Other Offices. The Corporation may also have offices at such ------------- other places within or outside the State of Maryland as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II MEETINGS OF THE STOCKHOLDERS Section 2.1. Place of Meetings. Meetings of the stockholders shall be ----------------- held at such place within or outside the State of Maryland as shall be specified in the notice of the meeting or in a waiver thereof. Section 2.2. Annual Meeting. An annual meeting of the stockholders shall -------------- be held during the month of May of each year on a date and time designated by the Board of Directors and as set forth in the notice of the meeting, for the purpose of electing directors (in accordance with Section 3.3) and transacting such other business as may properly be brought before the meeting. Failure to hold an annual meeting or to hold such meeting at the time prescribed herein will not invalidate the Corporation's existence or affect otherwise valid acts of the Corporation. Section 2.3. Special Meetings. Special meetings of the stockholders may ---------------- be called by the Chairman of the Board, the President, the Board of Directors, or by such person or persons as may be authorized by the Corporation's Charter or by these Bylaws. The Secretary of the Corporation shall call a special meeting of the stockholders on the written request of stockholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting. A request for a special meeting shall state the purpose of the meeting and the matters proposed to be acted on at such meeting. The Secretary shall: (a) inform the stockholders who make the request for a special meeting of the reasonably estimated cost of preparing and mailing a notice of and, if applicable, proxy materials in connection with that meeting; and (b) on payment of these costs to the Corporation, notify each stockholder entitled to notice of the meeting. Unless requested by stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting, a special meeting need not be called to consider any matter which is substantially the same as a matter voted on at any special meeting of the stockholders held during the preceding 12 months. Section 2.4. Notice. Not less than 10 nor more than 90 days before each ------ meeting of the stockholders, the Secretary of the Corporation shall give written notice of the meeting to: (a) each stockholder of record entitled to vote at the meeting; and (b) each other stockholder entitled by applicable law to notice of the meeting. The notice shall state the date, time and place of the meeting and the purpose of the meeting, if the meeting is a special meeting or notice of the purpose is required by the Maryland General Corporation Law. Notice is given to a stockholder when it is: (a) personally delivered to the stockholder; (b) left at the stockholder's residence or usual place of business; (c) mailed to the stockholder at the stockholder's address as it appears on the records of the Corporation; or (d) transmitted to the stockholder by electronic mail to any electronic mail address of the stockholder or by any other electronic means. If mailed, notice is deemed to be given when deposited in the United States mail, postage prepaid, and addressed to the stockholder at the stockholder's address as it appears on the records of the Corporation. Section 2.5. Organization. At every meeting of the stockholders, the ------------ Chairman of the Board, or in the case of a vacancy in the office or absence of the Chairman of the Board, one of the following persons present in the order stated: the President, a Vice President, a chairman designated by the Board of Directors, or a chairman chosen by the stockholders entitled to cast a majority of the votes that all stockholders present in person or by proxy are entitled to cast, shall act as chairman of the meeting, and the Secretary, or, in the Secretary's absence, an Assistant Secretary, if any, or any person appointed by the chairman of the meeting, shall act as secretary of the meeting. Section 2.6. Quorum. The presence in person or by proxy of stockholders ------ entitled to cast a majority of all the votes entitled to be cast on a matter by a voting group, shall constitute a quorum at meetings of stockholders except as otherwise provided by statute or by the Charter with respect to the adoption of any particular matter. Once a share is represented for any purpose at a meeting of the stockholders of the Corporation, the holder is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting, unless a new record date is or must be set for that adjourned meeting. 2 Section 2.7. Adjournment. If a quorum is not present or represented at ----------- any meeting of the stockholders or for any other reason in the sole discretion of the chairman of the meeting, the chairman of the meeting shall have the power to adjourn the meeting from time to time, without further notice other than announcement at the meeting, to a date not more than 120 days after the original record date. At such adjourned meeting at which a quorum is present or represented, any business may be transacted which might have been transacted at the original meeting. Section 2.8. Majority Rule. Except with respect to the election of ------------- directors as provided in Section 3.5, a majority of all the votes cast at a meeting of stockholders at which a quorum is present is sufficient to approve any matter which properly comes before a meeting of the stockholders, unless the vote of a greater number is required by the Maryland General Corporation Law, the Charter or these Bylaws. Section 2.9. Voting. Each outstanding share of stock, regardless of ------ class, is entitled to one vote on each matter submitted to a vote at a meeting of the stockholders, unless otherwise provided pursuant to the Charter or by the Maryland General Corporation Law. Voting on any question or in any election may be by voice vote unless the chairman of the meeting orders otherwise or any stockholder demands that voting be by ballot. Section 2.10. Proxies. Each stockholder entitled to vote at a meeting of ------- the stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy by signing a writing authorizing another person to act as proxy. Signing may be accomplished by the stockholder or the stockholder's authorized agent signing the writing or causing the stockholder's signature to be affixed to the writing by any reasonable means, including facsimile signature. A stockholder may authorize another person to act as proxy by transmitting, or authorizing the transmission of, a telegram, cablegram, datagram, electronic mail or any other electronic or telephonic means to the person authorized to act as proxy or to any other person authorized to receive the proxy authorization on behalf of the person authorized to act as the proxy, including a proxy solicitation firm or proxy support service organization. A copy, facsimile telecommunication or other reliable reproduction of the writing or transmission authorized hereunder may be substituted for the original writing or transmission for any purpose for which the original writing or transmission could be used. A proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. Unless the proxy provides for a longer period, it is not valid more than 11 months after its date. A duly executed proxy shall be irrevocable if it conspicuously states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be irrevocable regardless of whether the interest with which it is coupled is an interest in the stock to be 3 voted under the proxy or another general interest in the Corporation or its assets or liabilities. Section 2.11. Voting of Shares by Certain Holders. Shares of the ----------------------------------- Corporation registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, a general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such shares pursuant to a bylaw or a resolution of the governing board of such corporation or other entity or agreement of the partners of the partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such shares. Any trustee or other fiduciary may vote shares registered in his or her name as such fiduciary, either in person or by proxy. Shares of the Corporation directly or indirectly owned by it on the applicable record date shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time. Shares of the Corporation acquired by it after the applicable record date and before the time of the meeting may be voted at the meeting by the holders of record as of the record date and shall be counted in determining the total number of outstanding shares entitled to be voted at the meeting. Section 2.12. Stock Ledger; List of Stockholders. The original or a ---------------------------------- duplicate of the Corporation's stock ledger shall be kept at the principal office of the Corporation's transfer agent and registrar. The officer or agent who has charge of the stock ledger books of the Corporation shall prepare and make, at least 10 days before each meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. Such list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, to be included in the list required by this Section 2.12 or to vote in person or by proxy at any meeting of stockholders. Section 2.13. Inspectors. The Board of Directors may, in advance of any ---------- meeting of the stockholders, appoint one or more inspectors to act at such 4 meeting or any adjournment thereof. If the inspectors are not so appointed or if any of them fails to appear or act, the chairman of the meeting may, and on the request of any stockholder entitled to vote thereat, shall appoint inspectors. Each inspector, before discharging of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his or her ability. The inspectors shall determine the number of shares represented at the meeting based on their determination of the validity and effect of proxies, and the existence of a quorum, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine and report the results, and perform such other acts as are proper to conduct the election and voting with fairness to all stockholders. On request of the chairman of the meeting or any stockholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. If there is more than one inspector, the report or certificate of a majority of the inspectors shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. No director or candidate for the office of director shall act as inspector of an election of directors. Inspectors need not be stockholders. Section 2.14. Action Without Meeting. Any action required or permitted to ---------------------- be taken at a meeting of the stockholders may be taken without a meeting if the following are filed with the records of meetings of the stockholders: (a) a unanimous written consent which sets forth the action and is signed by each stockholder entitled to vote on the matter; and (b) a written waiver of any right to dissent signed by each stockholder entitled to notice of the meeting but not entitled to vote at such meeting. The affirmative vote of the number of shares which would be necessary to authorize or take action at a meeting of stockholders, pursuant to Section 2.8, is the act of the stockholders without a meeting. Action taken by written consent is effective when the last stockholder signs the consent, unless the consent specifies a different effective date. Section 2.15. Business to be Transacted at Annual Meetings. -------------------------------------------- (a) Director Nominations. The Board of Directors, or a nominating -------------------- committee appointed by the Board of Directors, shall nominate candidates for election to the Board of Directors to be elected at meetings of stockholders at which directors are to be elected. (b) Other Stockholder Proposals. --------------------------- (1) No business shall be transacted at any annual meeting of stockholders other than business that is: (i) specified in the Corporation's 5 notice of meeting (including stockholder proposals included in the Corporation's proxy materials under Rule 14a-8 of Regulation 14A or any successor rule ("Rule 14a-8") under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), (ii) otherwise brought before the meeting by or at the direction of the Board of Directors, or (iii) a proper subject for the meeting and which is timely submitted by a stockholder of the Corporation who was a stockholder of record both at the time of the stockholder's submission and at the time of the annual meeting who complies fully with the notice requirements set forth in this Section 2.15(b) in addition to any other applicable law, rule or regulation applicable to such meeting. (2) For business to be properly submitted by a stockholder before any annual meeting under Section 2.15(b)(1)(iii) above, a stockholder must give timely notice in writing of such business to the Secretary of the Corporation. To be considered timely, a stockholder's notice must be received by the Secretary at the principal office of the Corporation not earlier than the date which is 120 calendar days nor later than the date which is 90 calendar days before the first anniversary of the date on which the Corporation first mailed its proxy statement to stockholders in connection with the prior year's annual meeting of stockholders. (3) If the Corporation did not hold an annual meeting during the previous year, or if the date of the applicable year's annual meeting has been advanced by more than 30 calendar days or delayed by more than 60 calendar days from the first anniversary of the date of the previous year's meeting, then a stockholder's notice must be received by the Secretary not earlier than the date which is 120 calendar days before date on which the Corporation first mailed its proxy statement to stockholders in connection with the applicable year's annual meeting and not later than the date of the later to occur of (i) 90 calendar days before the date on which the Corporation first mailed its proxy statement to stockholders in connection with the applicable year's annual meeting of stockholders or (ii) ten calendar days after the Corporation's first public announcement of the date of the applicable year's annual meeting of stockholders. (4) Notwithstanding anything in Section 2.15(b)(2) to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 70 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 2.15(b) shall also be considered timely, but only with respect to nominees for any new positions created by such 6 increase, if it shall be delivered to the Secretary of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation. (5) A stockholder's notice to the Secretary to submit a nomination or other business to an annual meeting of stockholders shall set forth: (i) the name and address of the stockholder; (ii) the class and number of shares of stock of the Corporation held of record and beneficially owned by such stockholder; (iii) the name(s), including any beneficial owners, and address(es) of such stockholder(s) in which all such shares of stock are registered on the stock transfer books of the Corporation; (iv) a representation that the stockholder intends to appear at the meeting in person or by proxy to submit the business specified in such notice; (v) a brief description of the business desired to be submitted to the annual meeting of stockholders, the complete text of any resolutions intended to be presented at the annual meeting and the reasons for conducting such business at the annual meeting of stockholders; (vi) any personal or other material interest of the stockholder in the business to be submitted; (vii) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (viii) all other information relating to the proposed business which may be required to be disclosed under applicable law. In addition, a stockholder seeking to submit such business at an annual meeting of the stockholders shall promptly provide any other information reasonably requested by the Corporation. (c) General. ------- (1) Only those persons who are nominated in accordance with the procedures set forth in this Section 2.15 shall be eligible for election as directors at an annual meeting of stockholders. Only business brought before the meeting in accordance with the procedures set forth in this Section 2.15 shall be conducted at a meeting of stockholders. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 2.15 and, if the chairman of such meeting determines that any proposed nomination or business is not in compliance with this Section 2.15, to declare that such defective proposal shall be disregarded. (2) For purposes of this Section 2.15, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News 7 Service, Associated Press, Business Wire or comparable news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to the Exchange Act. (3) Notwithstanding the foregoing provisions of this Section 2.15, a stockholder shall also comply with all applicable requirements of state law, the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.15. (4) Notwithstanding the foregoing provisions of this Section 2.15, a stockholder who seeks to have any proposal included in the Corporation's proxy materials shall comply with the requirements of Rule 14a-8 under the Exchange Act, and nothing in this Section 2.15 shall be deemed to affect the rights of stockholders to request inclusion of proposals in, nor the right of the Corporation to exclude proposals from, the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. ARTICLE III DIRECTORS Section 3.1. General Powers; Directors Holding Over. The business and -------------------------------------- affairs of the Corporation shall be managed under the direction of its Board of Directors. In case of failure to elect directors at an annual meeting of the stockholders, the directors holding over shall continue to direct the management of the business and affairs of the Corporation until their successors are elected and qualify. Section 3.2. Number. Except as set forth below, the number of directors ------ of the Corporation shall be not less than three nor more than nine, as determined from time to time by the Board of Directors of the Corporation, who shall, subject to Section 3.3 below, be elected at the annual meeting of stockholders, except in the case of any initial directors named in the Charter and except as provided below. If at any time the Corporation has less than three stockholders, the number of directors of the Corporation may be less than three but not less than the number of stockholders. Any action by the Board of Directors or stockholders to reduce the number of directors shall not affect the tenure of office of any director. Section 3.3. Classes. The Board of Directors of the Corporation shall be ------- classified into three classes, equal or approximately equal in number. If the number of directors is not divisible evenly by three, the Board of Directors shall determine the number of directors to be in each class, with each class to be approximately equal in number. Each director in Class 1 shall serve for an initial term ending at the annual meeting of stockholders in 1995 and until his or her successor is elected and qualified; each director in Class 2 shall serve for 8 an initial term ending at the annual meeting of the stockholders in 1996 and until his or her successor is elected and qualified; and each director in Class 3 shall serve for an initial term ending at the annual meeting of stockholders in 1997 and until his or her successor is elected and qualified. After the respective initial terms of the classes indicated, each such class of directors shall be elected for successive terms ending at the annual meeting of stockholders the third year after election and until his or her successor is elected and qualified. Section 3.4. Independent Directors. At least a majority of the entire --------------------- Board of Directors shall be Independent Directors, as hereinafter defined. An Independent Director shall mean a director who is not (a) an officer or employee of the Corporation; (b) the beneficial owner of five percent or more of any class of equity securities of the Corporation, or of any entity that controls, is controlled by or is under common control with the Corporation; or (c) a person who has a member of his or her immediate family who has one of the foregoing relationships with the Corporation. Section 3.5. Election And Tenure. Each director shall be elected by a ------------------- plurality of all the votes cast at a meeting of stockholders at which a quorum is present, and each director elected shall hold office until the end of his or her term as provided herein, and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Each share of stock may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. Stockholders shall not have any cumulative voting rights. Section 3.6. Qualifications. Each director of the Corporation shall have -------------- the qualifications required by the Charter or these Bylaws. Directors need not be residents of the State of Maryland or stockholders of the Corporation. Section 3.7. Removal. Any director may be removed (a) by stockholders in ------- accordance with the requirements of the Charter; or (b) by the unanimous vote of all of the other members of the Board of Directors. Section 3.8. Vacancies. The stockholders may elect a successor to fill any --------- vacancy on the Board of Directors which results from the removal of a director. A director elected by the stockholders to fill a vacancy which results from the removal of a director serves for the balance of the term of the removed director and until such director's successor is elected and qualifies. A majority of the remaining directors, whether or not sufficient to constitute a quorum, may fill a vacancy on the Board of Directors that results from any cause except an increase in the authorized number of directors. A majority of the entire Board of Directors may fill a vacancy which results from an increase in the number of directors and, subject to Section 3.3, determine the class of such additional director or directors. A director elected by the Board of Directors to 9 fill a vacancy serves until the next annual meeting of the stockholders and until such director's successor is elected and qualifies. Section 3.9. Lack of Directors. If at any time, by reason of death or ----------------- resignation or other cause, the Corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder may call a special meeting of stockholders in accordance with the provisions of the Charter or these Bylaws, and an election of directors may be held in the manner provided by the Charter, these Bylaws or the Maryland General Corporation Law. Section 3.10. Resignation. A director may resign at any time by ----------- delivering written notice to the Corporation, the Board of Directors, the Chairman of the Board or the President. A resignation is effective when notice is delivered, unless the notice specifies a later effective date. Section 3.11. Quorum. A majority of the entire Board of Directors shall ------ constitute a quorum for the transaction of business. If a quorum shall not be present at any meeting of the Board of Directors, a majority of the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 3.12. Annual Meeting. The annual meeting of the Board of Directors -------------- for the purpose of electing officers and transacting such other business as may be brought before the meeting shall be held each year as soon as reasonably practicable following the annual meeting of stockholders. No notice of such meeting shall be necessary in order to legally constitute the meeting, provided a quorum is present. Annual meetings may be held at such places, within or outside the State of Maryland, as may from time to time be determined by the Board of Directors. Section 3.13. Regular Meetings. Regular meetings of the Board of ---------------- Directors may be held without notice at such places, within or outside the State of Maryland, on such dates and at such times as may from time to time be determined by the Board of Directors. Section 3.14. Special Meetings. Special meetings of the Board of ---------------- Directors may be called by the Chairman of the Board or the President and shall be called by the Secretary on the written request of two directors. Notice of special meetings of the Board of Directors shall be given to each director at least two days prior to the meeting. Notice need not be in writing. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Such meetings shall be held at such places, within or outside the State of Maryland, on such dates and at such times as may be stated in the notice. 10 Section 3.15. Action Without Meeting. Any action required or permitted to ---------------------- be taken at a meeting of the Board of Directors or of a committee of the Board of Directors may be taken without a meeting, if a unanimous written consent which sets forth the action is: (a) signed by each member of the Board of Directors or committee; and (b) filed with the minutes of proceedings of the Board of Directors or committee. The affirmative vote of the number of directors that would be necessary to authorize or take action at a meeting, pursuant to Section 3.18, is the act of the Board of Directors without a meeting. Action taken by written consent is effective when the last director signs the consent unless the consent specifies a different effective date. Section 3.16. Meetings by Telephone. Members of the Board of Directors or --------------------- any committee may participate in a meeting by means of a conference telephone or similar communications equipment, provided all persons participating in the meeting can hear each other at the same time. A director participating in such a meeting is deemed to be present in person at the meeting. Section 3.17. Majority Rule. The action of a majority of the directors ------------- present at a meeting at which a quorum is present is the action of the Board of Directors unless the Charter, these Bylaws or the Maryland General Corporation Law requires a greater proportion. Section 3.18. Interested Director Transactions. No contract or -------------------------------- transaction (including, without limitation, a property acquisition or disposition) between the Corporation and any of its directors, or between the Corporation and any other corporation, firm or entity in which any of its directors is a director, or has a material financial interest, shall be void or voidable solely for this reason, or solely because the director is present at the meeting of the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction, or solely because his or their votes are counted for such purpose, if the requirements of Section 2-419(b)(1) of the Maryland General Corporation Law are complied with or the contract or transaction is fair and reasonable to the Corporation. Common or interested directors or the stock owned by them or by an interested corporation, firm or other entity may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee or at a meeting of stockholders, as the case may be, at which the contract or transaction is authorized, approved or ratified. Section 3.19. Compensation. The Board of Directors shall have the ------------ authority to fix the compensation of directors. The Board of Directors may delegate this authority to its Compensation Committee as set forth in Section 4.5. Such compensation may include stock options, restricted stock or other securities awarded under a plan approved by the Board of Directors and the stockholders of the Corporation. Directors shall be entitled to reimbursement for any reasonable expenses incurred in attending meetings and otherwise carrying out their duties. 11 Section 3.20. Organization. At every meeting of the Board of Directors, ------------ the Chairman of the Board, or in the case of a vacancy in the office or absence of the Chairman of the Board, the President or, in the absence of the President, a chairman chosen by a majority of the directors present, shall act as chairman of the meeting, and the Secretary, or, in the absence of the Secretary, an Assistant Secretary, if any, or any other person appointed by the chairman of the meeting, shall act as secretary of the meeting. ARTICLE IV COMMITTEES Section 4.1. Appointments and Powers. The Corporation shall have an ----------------------- Executive Committee, Audit Committee and a Compensation Committee. Each of the Audit Committee and the Compensation Committee shall have as members no less than two Independent Directors. In addition, the Board of Directors may, by resolution or resolutions passed by a majority of the whole Board of Directors, designate one or more other committees composed of one or more directors. The Board of Directors may designate one or more directors as alternative members of a committee who may replace any absent or disqualified member at any meeting of the committee. Such alternate members shall not be counted for purposes of determining a quorum unless acting for an absent or disqualified member, in which case they shall be counted in the place of the absent or disqualified member. The committee, to the extent provided in said resolution or resolutions or in these Bylaws, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it, except that a committee may not: (i) authorize dividends on shares of the Corporation's common stock; (ii) amend these Bylaws; (iii) approve any merger or share exchange which does not require stockholder approval; or (iv) authorize or approve the issuance or sale or contract for sale of shares except that if the Board of Directors has given general authorization for the issuance of stock providing for or establishing a method or procedure for determining the maximum number of shares to be issued, such committee may authorize or fix the terms and conditions of stock subject to classification or reclassification and the terms on which any stock may be issued in accordance with that general authorization or any stock option or other plan or program adopted by the Board of Directors. Such committee or committees shall have such name or names as may be stated in these Bylaws or as may be determined from time to time by resolution adopted by the Board of Directors. Committees may set their own policies and procedures to the extent consistent with the Maryland General Corporation Law. Section 4.2. Minutes. Committees shall keep regular minutes of their ------- proceedings and report the same to the Board of Directors when required. 12 Section 4.3. Executive Committee. The Executive Committee shall act in ------------------- the absence of the Board of Directors and shall be delegated all of the powers of the Board of Directors except as limited by the Maryland General Corporation Law. Section 4.4. Audit Committee. The Audit Committee shall have the special --------------- duties described below: (a) The Audit Committee shall select and engage on behalf of the Corporation and fix the compensation of, a firm of independent certified public accountants whose duty it shall be to audit the books and accounts of the Corporation and its subsidiaries for the fiscal year in which they are appointed, and who shall report to such Audit Committee. (b) The Audit Committee shall confer with the independent certified public accountants and shall determine, and from time to time shall report to the Board of Directors upon, the plans and results of the auditing of the books and accounts of the Corporation. (c) The Audit Committee shall review the services provided by, the independence of, and the fees charged by the independent certified public accountant, and from time to time shall report upon the same to the Board of Directors. (d) The Audit Committee shall review the adequacy of the Corporation's internal accounting controls, and from time to time shall report upon the same to the Board of Directors. (e) The Audit Committee shall have such other powers as may be delegated by the Board of Directors from time to time. None of the members of the Audit Committee shall be officers or employees of the Corporation. Section 4.5. Compensation Committee. The Compensation Committee shall ---------------------- establish a general compensation policy for the Corporation, shall (subject to any delegated authority under Section 3.19) approve increases in directors' fees, and shall approve increases in salaries paid to officers and senior employees earning in excess of an annual base salary of one-hundred fifty thousand dollars ($150,000.00). The Compensation Committee shall have all the powers of administration under all of the Corporation's employee benefit plans, including any stock compensation plans, bonus plans, retirement plans, stock purchase plans and medical, dental and insurance plans. In connection therewith, the Compensation Committee shall determine, subject to the provision of the Corporation's plans, the directors, officers and employees of the Corporation eligible to participate in any of the plans, the extent of such 13 participation and terms and conditions under which benefits may be vested, received or exercised. ARTICLE V NOTICES Section 5.1. Notice. Except as is otherwise specifically provided herein, ------ notices to stockholders and directors, shall specify the date, time and place of the meeting. Notice is given to a stockholder as provided in Section 2.4. Notice is given to a director when it is: (a) personally delivered or communicated by telephone to the director; (b) left at the director's residence or usual place of business; (c) mailed to the director at the director's address as it appears on the records of the Corporation; or (d) transmitted to the director by electronic mail to any electronic mail address of the director or by any other electronic means. If mailed, notice is deemed to be given when deposited in the United States mail, postage prepaid, and addressed to the director at the director's address as it appears on the records of the Corporation. Section 5.2. Waiver of Notice. Whenever any notice of the time, place or ---------------- purpose of a meeting is required to be given to any stockholder or director under the Maryland General Corporation Law, the Charter or these Bylaws, a written waiver, signed by the person entitled to notice and delivered to the Corporation and filed with the Corporation's minutes or records, whether before or after the time stated therein, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, Board of Directors or members of a committee of the Board of Directors need be specified in any written waiver of notice unless required by the Charter, these Bylaws or the Maryland General Corporation Law. Section 5.3. Attendance Constitutes Waiver. Attendance of a person at a ----------------------------- regular or special meeting of the stockholders, the Board of Directors or any committee thereof in person or by proxy shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE VI OFFICERS Section 6.1. Officers. The officers of the Corporation shall consist of a -------- President, Secretary and Treasurer, and may include a Chairman of the Board, Vice Chairman of the Board, a Chief Executive Officer, one or more Vice Presidents (any one or more of which may be designated as a senior or executive vice president), a Chief Financial Officer and one or more assistant 14 vice presidents, assistant treasurers, assistant controllers and assistant secretaries, each of whom shall be elected by the Board of Directors. In addition, the Board of Directors may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable. Any number of offices may be held by the same person except the offices of President and Vice President shall not be held by the same person concurrently. Section 6.2. Election. At the first meeting of the Board of Directors -------- following the annual meeting of stockholders, or as soon thereafter as is conveniently possible, the Board of Directors shall elect a President, Secretary and a Treasurer and such other additional officers, assistant officers and agents as may be deemed necessary may be elected by the Board of Directors. The Board of Directors may elect officers at such additional times as it deems advisable. The election or appointment of an officer shall not by itself create contract rights. Section 6.3. Removal. If the Board of Directors in its judgment finds ------- that the best interests of the Corporation will be served, it may remove any officer or agent of the Corporation. The removal of an officer or agent does not prejudice any of his or her contract rights. Section 6.4. Term of Office; Resignation. An officer of the Corporation --------------------------- shall serve for the term provided within any applicable contract for employment or, absent such contract, shall serve until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. A resignation is effective when the notice is delivered, unless the notice specifies a later effective date. If a resignation is made effective at a later date and the Corporation accepts such later date, the Board of Directors may fill the pending vacancy before the effective date if it provides that the successor does not take office until the effective date. An officer's resignation does not affect the Corporation's contract rights, if any, with the officer. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors or by such officer or agent of the Corporation to whom the Board of Directors may expressly delegate such authority. Section 6.5. Chairman of the Board. The Chairman of the Board shall be --------------------- chosen from among the members of the Board of Directors, shall be the Chief Executive Officer of the Corporation, shall perform such duties as may be delegated by the Board of Directors and shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board shall have general powers and duties of supervision and management usually vested in the office of chairman of the board and chief executive officer of a corporation, including the authority to make contracts on behalf of Corporation in the ordinary course of the Corporation's business. The Chairman of the Board 15 shall have general supervision, direction and control of the business of the Corporation, and shall see that all orders and resolutions of the Board of Directors are carried into effect. The Chairman of the Board shall execute bonds, mortgages and other contracts of the Corporation, except where required or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. The Chairman of the Board shall have such powers and duties as usually pertain to such office, except as the same may be modified by the Board of Directors. Section 6.6. President. The President shall have general powers and --------- duties of supervision and management usually vested in the office of president of a corporation, including the authority to make contracts on behalf of the Corporation in the ordinary course of the Corporation's business. The President shall have general supervision, direction and control of the business of the Corporation, and shall see that all orders and resolutions of the Board of Directors are carried into effect. In the absence of the Chairman of the Board, the President shall preside at all meetings of the stockholders and the Board of Directors. The President shall execute bonds, mortgages and other contracts, except where required or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. The President shall have the power to appoint, remove and suspend subordinate officers, agents and factors upon such terms and conditions as he deems reasonable and appropriate. The President shall have such powers and duties as usually pertain to such office, except as the same may be modified by the Board of Directors. Section 6.7. Chief Financial Officer. The Board of Directors may ----------------------- designate a Chief Financial Officer from among the elected officers. Said officer will have the responsibilities and duties as set forth by the Board of Directors or the Chief Executive Officer. Section 6.8. Vice Presidents. The Vice Presidents shall, in the absence --------------- or disability of the President, perform the duties and exercise the powers of the President as determined by the Board of Directors. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe or as the Chief Executive Officer or President may from time to time delegate. Section 6.9. Secretary. The Secretary shall attend all meetings of the --------- Board of Directors and stockholders, and record all the proceedings of such meetings in a book to be kept for that purpose. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties and have such other powers as the Board of Directors may from time to time 16 prescribe or as the Chief Executive Officer or President may from time to time delegate. Section 6.10. Assistant Secretaries. The Assistant Secretaries shall, in --------------------- the absence or disability of the Secretary, perform the duties and exercise the power of the Secretary as determined by the Board of Directors. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe or as the Chief Executive Officer or President may from time to time delegate. Section 6.11. Treasurer. The Treasurer shall have custody of the --------- corporate funds and securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors at its regular meetings, or when the Board of Directors so requires, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation. The Treasurer shall perform such other duties and have such other authority and powers as the Board of Directors may from time to time prescribe or as the Chief Executive Officer or President may from time to time delegate. Section 6.12. Assistant Treasurers. The Assistant Treasurers shall, in -------------------- the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer as determined by the Board of Directors. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe or the Chief Executive Officer or President may from time to time delegate. ARTICLE VII SHARES Section 7.1. Certificates For Shares. The shares of the Corporation shall ----------------------- be represented by certificates which shall be in a form approved by the Board of Directors and contain such information as may be required by the Maryland General Corporation Law or any securities exchanges on which any shares of the Corporation may be listed. Section 7.2. Facsimile Signatures. Any or all the signatures on the -------------------- certificate may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the 17 Corporation with the same effect as if he or she were such officer at the date of issue. Section 7.3. Lost, Stolen or Destroyed Certificates. The Board of -------------------------------------- Directors may determine the conditions for issuing a new stock certificate in place of any certificate issued by the Corporation which is alleged to have been lost, stolen or destroyed. The Board of Directors may require the owner of the lost, stolen or destroyed certificate to give to the Corporation a bond with sufficient surety to indemnify the Corporation against any loss or claim arising as a result of the issuance of a new certificate. The issuance of a new certificate under this Section 7.3 does not constitute an over issue of the shares it represents. Section 7.4. Transfer Of Shares. Upon surrender to the Corporation or the ------------------ transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 7.5. Record Date For Notice and Voting. For the purpose of --------------------------------- determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may set a record date or direct that the stock transfer books be closed for a stated period for the purpose of making any proper determination with respect to stockholders. The record date shall be not more than 90 days nor less than 10 days before the date on which the action requiring the determination will be taken. The transfer books may not be closed for a period longer than 20 days. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the later of: (a) the close of business on the day on which notice of the meeting is mailed; or (b) the 30th day before the meeting. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting not more than 120 days after the original record date; provided, however, that the Board of Directors may fix a new record date of the adjourned meeting. Section 7.6. Record Date For Dividends. For the purpose of determining ------------------------- stockholders entitled to receive payment of any dividend or an allotment of any rights, the record date is such date as is determined by the Board of Directors in accordance with Section 2-511 of the Maryland General Corporation Law. Section 7.7. Stockholders Of Record. The Corporation shall be entitled to ---------------------- recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such 18 share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland. Section 7.8. Denial Of Preemptive Rights. No stockholder shall have any --------------------------- preemptive right to subscribe to an additional issue of stock or to any security convertible into such stock unless, and except to the extent that, such right is expressly granted pursuant to the Charter. ARTICLE VIII GENERAL PROVISIONS Section 8.1. Dividends and Distributions. Subject to the provisions of --------------------------- the Charter and the Maryland General Corporation Law, the Board of Directors of the Corporation may, at any regular or special meeting, authorize the payment of dividends and other distributions upon the capital stock of the Corporation, as and when the Board of Directors may deem expedient. Dividends and other distributions may be paid in cash, property or shares of the Corporation, subject to the provisions of Maryland General Corporation Law and the Charter. Section 8.2. Checks, Drafts, and Notes. All checks, drafts or other ------------------------- orders for the payment of money, notes or other evidences of indebtedness of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 8.3. Fiscal Year. The fiscal year of the Corporation shall be the ----------- calendar year, unless otherwise fixed by the Board of Directors. Section 8.4. Annual Statement Of Affairs. The President, or any other --------------------------- executive officer of the Corporation designated by the Board of Directors, shall prepare annually a full and correct statement of the affairs of the Corporation, to include a balance sheet and a financial statement of operations for the preceding fiscal year. The statement of affairs shall be submitted at the annual meeting of stockholders and, within 20 days after such meeting, placed on file at the principal office of the Corporation. Section 8.5. Statements From Stockholders. In order to maintain its ---------------------------- status as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the "Code"), the Corporation shall demand annual written statements from those stockholders of record disclosing the actual owners of the shares of the Corporation to the extent required by Treasury Regulation Section 1.857-8(d). Such written statements from stockholders of record shall be demanded by the Corporation within 30 days after the close of the Corporation's taxable year. A list of the persons failing or refusing to comply in whole or in part with the Corporation's demand for statements shall be 19 maintained as part of the Corporation's records. The Corporation shall also maintain, within the Internal Revenue District in which it is required to file its federal income tax return, permanent records showing the information it has received as to actual ownership of those shares and a list of those persons failing or refusing to comply with that demand. Stockholders of the Corporation shall comply with the Corporation's demand for statements pursuant to Section 857 of the Code. ARTICLE IX AMENDMENTS The Board of Directors may amend or repeal any provision of these Bylaws without the consent of the stockholders, unless (i) the Charter or the Maryland General Corporation Law reserves this power exclusively to the stockholders; or (ii) the stockholders, in amending or repealing a particular bylaw, provide expressly that the Board of Directors may not amend or repeal that particular bylaw. Notwithstanding any of the provisions of these Bylaws (and notwithstanding the fact that a lesser percentage may be specified by law, or these Bylaws) the affirmative vote of the holders of at least eighty percent (80%) of the common stock and, if any, preferred stock entitled to vote, voting together as a single class, shall be required in order for the stockholders to amend or repeal any provision of these Bylaws. ARTICLE X EMERGENCY BYLAW In the event that a quorum of directors cannot be readily assembled because of a catastrophic event, the Board of Directors may take action by the affirmative vote of a majority of those directors present at a meeting and may exercise any emergency power granted to a board of directors under the Maryland General Corporation Law not inconsistent with this bylaw. If less than three regularly elected directors are present, the director present having the greatest seniority as a director may appoint one or more persons (not to exceed the number most recently fixed by the Board pursuant to Section 3.2) from among the officers or other executive employees of the Corporation to serve as substitute directors. If no regularly elected director is present, the officer present having the greatest seniority as an officer shall serve as a substitute director, shall appoint up to four additional persons from among the officers or other executive employees of the Corporation to serve as substitute directors. Special meetings of the Board of Directors may be called in an emergency by the director or, if no director is present at the Corporation's principal offices, by the officer present having the greatest seniority as an officer. 20 AMENDMENT NO. 1 TO THE AMENDED AND RESTATED BYLAWS OF JDN REALTY CORPORATION This Amendment No. 1 to the Amended and Restated Bylaws of JDN Realty Corporation (the "Amendment") is adopted the 13th day of February, 2000, by the Board of Directors of JDN Realty Corporation (the "Company"). WHEREAS, the Board of Directors has determined that it is in the best interest of the Company to amend its Amended and Restated Bylaws (the "Bylaws") as set forth herein. NOW, THEREFORE, the Bylaws are amended as follows: 1. The first sentence of Article II, Section 2.3 of the Bylaws is hereby amended to read as follows: "Special meetings of the stockholders may be called by the Chief Executive Officer or the President, the Board of Directors, or by such person or persons as may be authorized by the Corporation's Charter or by these Bylaws." 2. Article II, Section 2.5 of the Bylaws is hereby amended to read in its entirety as follows: Section 2.5 Organization. At every meeting of the stockholders, the Chief ------------ Executive Officer or, in the case of a vacancy in the office or absence of the Chief Executive Officer, one of the following persons present in the order stated: the President; a chairman designated by the Board of Directors; or a chairman chosen by the stockholders entitled to cast a majority of the votes that all stockholders present in person or by proxy are entitled to cast, shall act as chairman of the meeting, and the Secretary, or, in the Secretary's absence, an Assistant Secretary, if any, or any person appointed by the chairman of the meeting, shall act as secretary of the meeting. 3. Article III, Section 3.10 of the Bylaws is hereby amended to read in its entirety as follows: Section 3.10 Resignation. A director may resign at any time by delivering ----------- written notice to the Corporation, the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President. A resignation is effective when notice is delivered, unless the notice specifies a later effective date. 4. The first sentence of Article III, Section 3.14 of the Bylaws is hereby amended to read as follows: "Special meetings of the Board of Directors may be called by the Chief Executive Officer or the President and shall be called by the Secretary on the written request of two directors." 5. Article VI, Section 6.1 is further amended to include the following paragraph immediately after the last sentence: If a director has not been designated as Chairman of the Board, or if the designated Chairman of the Board is not present, the Board of Directors shall elect a Chairman of the Board from among its members to serve as Chairman of the Board of Directors. The Chairman of the Board shall preside at all meetings of the Board of Directors, and shall have such other powers as the Board of Directors may determine. 6. Article VI, Section 6.5 of the Bylaws is hereby amended to read in its entirety as follows: Section 6.5 Chief Executive Officer. The Chief Executive Officer shall ----------------------- perform such duties as may be delegated by the Board of Directors. The Chief Executive Officer shall have general powers and duties of supervision and management usually vested in the office of chief executive officer of a corporation, including the authority to make contracts on behalf of the Corporation in the ordinary course of the Corporation's business. The Chief Executive Officer shall have general supervision, direction and control of the business of the Corporation, and shall see that all orders and resolutions of the Board of Directors are carried into effect. The Chief Executive Officer shall execute bonds, mortgages and other contracts of the Corporation, except where required or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. The Chief Executive Officer shall have such powers and duties as usually pertain to such office, except as the same may be modified by the Board of Directors. Except as amended hereby, the Bylaws shall remain unmodified and in full force and effect. This Amendment shall be effective on the date first above written. 2 EX-10.32 3 0003.txt THIRD AMENDED AND RESTATED MASTER CREDIT AGREEMENT EXHIBIT 10.32 THIRD AMENDED, RESTATED AND CONSOLIDATED MASTER CREDIT AGREEMENT DATED AS OF MARCH 29, 2001 among JDN REALTY CORPORATION and FLEET NATIONAL BANK, THE OTHER LENDERS WHICH ARE PARTIES TO THIS AGREEMENT and OTHER LENDERS THAT MAY BECOME PARTIES TO THIS AGREEMENT and FLEET NATIONAL BANK, AS AGENT and BANKERS TRUST COMPANY, AS SYNDICATION AGENT and COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, AS DOCUMENTATION AGENT and FLEET SECURITIES, INC., AS ARRANGER and DEUTSCHE BANC ALEX. BROWN INC., AS CO-LEAD ARRANGER AND JOINT BOOK RUNNING MANAGER Table of Contents Page ---- (S)1. DEFINITIONS AND RULES OF INTERPRETATION............................ 1 (S) 1.1 Definitions............................................... 2 (S) 1.2 Rules of Interpretation................................... 26 (S)2. THE TERM LOAN FACILITY AND THE REVOLVING CREDIT FACILITY........... 27 (S) 2.1 Term Loan................................................. 27 (S) 2.2 Revolving Credit Loans.................................... 27 (S) 2.3 Facility Unused Fee....................................... 29 (S) 2.4 Reduction and Termination of Revolving Credit Commitments....................................... 29 (S) 2.5 Swing Loan Commitment..................................... 29 (S) 2.6 Interest on Loans......................................... 32 (S) 2.7 Requests for Revolving Credit Loans....................... 33 (S) 2.8 Funds for Revolving Credit Loans.......................... 33 (S) 2.9 Use of Proceeds........................................... 34 (S) 2.10 Letters of Credit......................................... 35 (S) 2.11 Extension of Maturity Date................................ 38 (S)3. REPAYMENT OF THE LOANS............................................. 40 (S) 3.1 Stated Maturity........................................... 40 (S) 3.2 Mandatory Prepayments..................................... 40 (S) 3.3 Optional Prepayments...................................... 41 (S) 3.4 Partial Prepayments....................................... 41 (S) 3.5 Proceeds from Debt or Equity Offering..................... 41 (S) 3.6 Effect of Prepayments..................................... 41 (S)4. CERTAIN GENERAL PROVISIONS......................................... 41 (S) 4.1 Conversion Options........................................ 41 (S) 4.2 Closing Fee............................................... 42 (S) 4.3 Agent's Fee............................................... 42 (S) 4.4 Funds for Payments........................................ 43 (S) 4.5 Computations.............................................. 44 (S) 4.6 Inability to Determine LIBOR.............................. 45 i Table of Contents (continued) Page ---- (S) 4.7 Illegality................................................ 45 (S) 4.8 Additional Interest....................................... 46 (S) 4.9 Additional Costs, Etc..................................... 46 (S) 4.10 Capital Adequacy.......................................... 47 (S) 4.11 Indemnity of Borrower..................................... 47 (S) 4.12 Default Interest; Late Charge............................. 48 (S) 4.13 Certificate............................................... 48 (S) 4.14 Limitation on Interest.................................... 48 (S) 4.15 Certain Provisions Relating to Increased Costs............ 49 (S)5. COLLATERAL SECURITY................................................ 49 (S) 5.1 Collateral................................................ 49 (S) 5.2 Appraisals................................................ 49 (S) 5.3 Replacement or Addition of Mortgaged Properties........... 49 (S) 5.4 Release of Mortgaged Property............................. 51 (S) 5.5 Additional Guarantors..................................... 52 (S) 5.6 Release of Certain Subsidiary Guarantors.................. 53 (S) 5.7 Release of Collateral..................................... 53 (S)6. REPRESENTATIONS AND WARRANTIES..................................... 53 (S) 6.1 Corporate Authority, Etc.................................. 53 (S) 6.2 Governmental Approvals.................................... 54 (S) 6.3 Title to Properties....................................... 54 (S) 6.4 Financial Statements...................................... 55 (S) 6.5 No Material Changes....................................... 55 (S) 6.6 Franchises, Patents, Copyrights, Etc...................... 55 (S) 6.7 Litigation................................................ 55 (S) 6.8 No Materially Adverse Contracts, Etc...................... 55 (S) 6.9 Compliance with Other Instruments, Laws, Etc.............. 56 (S) 6.10 Tax Status................................................ 56 (S) 6.11 No Event of Default....................................... 56 (S) 6.12 Holding Company and Investment Company Acts............... 56 (S) 6.13 Absence of UCC Financing Statements, Etc.................. 56 ii Table of Contents (continued) Page ---- (S) 6.14 Setoff, Etc............................................... 56 (S) 6.15 Certain Transactions...................................... 57 (S) 6.16 Employee Benefit Plans.................................... 57 (S) 6.17 Disclosure................................................ 58 (S) 6.18 Trade Name; Place of Business............................. 58 (S) 6.19 Regulations T, U and X.................................... 58 (S) 6.20 Environmental Compliance.................................. 58 (S) 6.21 Subsidiaries.............................................. 60 (S) 6.22 Leases.................................................... 61 (S) 6.23 Property.................................................. 61 (S) 6.24 Brokers................................................... 61 (S) 6.25 Other Debt................................................ 62 (S) 6.26 Solvency.................................................. 62 (S) 6.27 No Bankruptcy Filing...................................... 62 (S) 6.28 No Fraudulent Intent...................................... 62 (S) 6.29 Transaction in Best Interests of Borrower; Consideration............................................ 62 (S) 6.30 Contribution Agreement.................................... 62 (S) 6.31 Reaffirmation of Representations.......................... 63 (S)7. AFFIRMATIVE COVENANTS.............................................. 63 (S) 7.1 Punctual Payment.......................................... 63 (S) 7.2 Maintenance of Office..................................... 63 (S) 7.3 Records and Accounts...................................... 63 (S) 7.4 Financial Statements, Certificates and Information........ 63 (S) 7.5 Notices................................................... 66 (S) 7.6 Existence; Maintenance of Properties; Rating Agency Surveillance............................... 67 (S) 7.7 Insurance................................................. 68 (S) 7.8 Taxes; Liens.............................................. 71 (S) 7.9 Inspection of Properties and Books........................ 71 (S) 7.10 Compliance with Laws, Contracts, Licenses, and Permits.............................................. 72 (S) 7.11 Further Assurances........................................ 72 (S) 7.12 Management................................................ 72 iii Table of Contents (continued) Page ---- (S) 7.13 Leases of the Property.................................... 73 (S) 7.14 Business Operations....................................... 73 (S) 7.15 Registered Servicemark.................................... 73 (S) 7.16 Ownership of Real Estate.................................. 73 (S) 7.17 Distributions of Income to the Borrower................... 73 (S) 7.18 Limiting Agreements....................................... 74 (S) 7.19 Interest Rate Contract.................................... 74 (S) 7.20 Plan Assets............................................... 74 (S)8. NEGATIVE COVENANTS................................................. 74 (S) 8.1 Restrictions on Indebtedness.............................. 74 (S) 8.2 Restrictions on Liens, Etc................................ 75 (S) 8.3 Restrictions on Investments............................... 76 (S) 8.4 Merger, Consolidation..................................... 78 (S) 8.5 Sale and Leaseback........................................ 78 (S) 8.6 Compliance with Environmental Laws........................ 78 (S) 8.7 Distributions............................................. 80 (S) 8.8 Asset Sales............................................... 80 (S) 8.9 Development Activity...................................... 81 (S) 8.10 Restriction on Prepayment of Indebtedness................. 81 (S) 8.11 Zoning and Contract Changes and Compliance................ 81 (S) 8.12 Derivative Obligations.................................... 81 (S) 8.13 Bankruptcy Remote Subsidiaries............................ 82 (S)9. FINANCIAL COVENANTS................................................ 82 (S) 9.1 Borrowing Base............................................ 82 (S) 9.2 Fixed Charge Coverage..................................... 82 (S) 9.3 Secured Debt Ratio........................................ 82 (S) 9.4 Maximum Land Assets....................................... 82 (S) 9.5 Net Worth................................................. 82 (S) 9.6 Liabilities to Assets Ratio............................... 82 (S) 9.7 EBITDA Coverage........................................... 82 (S) 9.8 Borrowing Base Assets..................................... 82 iv Table of Contents (continued) Page ---- (S)10. CLOSING CONDITIONS................................................. 83 (S)10.1 Loan Documents............................................ 83 (S)10.2 Certified Copies of Organizational Documents.............. 84 (S)10.3 Resolutions............................................... 84 (S)10.4 Incumbency Certificate; Authorized Signers................ 84 (S)10.5 Opinion of Counsel........................................ 84 (S)10.6 Payment of Fees........................................... 84 (S)10.7 Insurance................................................. 84 (S)10.8 Performance; No Default................................... 84 (S)10.9 Representations and Warranties............................ 84 (S)10.10 Proceedings and Documents................................. 85 (S)10.11 Eligible Real Estate Qualification Documents.............. 85 (S)10.12 Compliance Certificate.................................... 85 (S)10.13 Assignment of Original Revolving Credit Agreement and Original Term Loan Agreement......................... 85 (S)10.14 Endorsements to Title Policy.............................. 85 (S)10.15 Stockholder and Partner Consents.......................... 85 (S)10.16 Acquisition of Interest Rate Contract..................... 85 (S)10.17 Contribution Agreement.................................... 86 (S)10.18 Other..................................................... 86 (S)11. CONDITIONS TO ALL BORROWINGS....................................... 86 (S)11.1 Prior Conditions Satisfied................................ 86 (S)11.2 Representations True; No Default.......................... 86 (S)11.3 No Legal Impediment....................................... 86 (S)11.4 Governmental Regulation................................... 86 (S)11.5 Proceedings and Documents................................. 86 (S)11.6 Borrowing Documents....................................... 87 (S)11.7 Endorsement to Title Policy............................... 87 (S)11.8 Future Advances Tax Payment............................... 87 (S)12. EVENTS OF DEFAULT; ACCELERATION; ETC............................... 87 (S)12.1 Events of Default and Acceleration........................ 87 v Table of Contents (continued) Page ---- (S)12.2 Limitation of Cure Periods................................ 91 (S)12.3 Termination of Commitments................................ 93 (S)12.4 Remedies.................................................. 93 (S)12.5 Distribution of Collateral Proceeds....................... 93 (S)13. SETOFF............................................................. 94 (S)14. THE AGENT.......................................................... 95 (S)14.1 Authorization............................................. 95 (S)14.2 Employees and Agents...................................... 95 (S)14.3 No Liability.............................................. 95 (S)14.4 No Representations........................................ 96 (S)14.5 Payments.................................................. 96 (S)14.6 Holders of Notes.......................................... 97 (S)14.7 Indemnity................................................. 97 (S)14.8 Agent as Lender........................................... 97 (S)14.9 Resignation; Removal...................................... 98 (S)14.10 Duties in the Case of Enforcement......................... 98 (S)14.11 Request for Agent Action.................................. 99 (S)14.12 Reliance on Hedge Provider................................ 99 (S)15. EXPENSES........................................................... 99 (S)16. INDEMNIFICATION.................................................... 100 (S)17. SURVIVAL OF COVENANTS, ETC......................................... 101 (S)18. ASSIGNMENT AND PARTICIPATION....................................... 101 (S)18.1 Conditions to Assignment by Lenders....................... 102 (S)18.2 Register.................................................. 102 (S)18.3 New Notes................................................. 103 (S)18.4 Participations............................................ 103 (S)18.5 Pledge by Lender.......................................... 103 (S)18.6 No Assignment by Borrower................................. 103 (S)18.7 Disclosure................................................ 104 (S)18.8 Amendments to Mortgages................................... 104 (S)18.9 Co-Agents................................................. 104 vi Table of Contents (continued) Page ---- (S)19. NOTICES............................................................ 104 (S)20. RELATIONSHIP....................................................... 105 (S)21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE................. 105 (S)22. HEADINGS........................................................... 106 (S)23. COUNTERPARTS....................................................... 106 (S)24. ENTIRE AGREEMENT, ETC.............................................. 106 (S)25. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS..................... 106 (S)26. DEALINGS WITH THE BORROWER......................................... 107 (S)27. CONSENTS, AMENDMENTS, WAIVERS, ETC................................. 107 (S)28. SEVERABILITY....................................................... 108 (S)29. TIME OF THE ESSENCE................................................ 108 (S)30. NO UNWRITTEN AGREEMENTS............................................ 108 (S)31. REPLACEMENT NOTES.................................................. 108 (S)32. NO THIRD PARTIES BENEFITTED........................................ 108 vii EXHIBITS AND SCHEDULES ---------------------- Exhibit A FORM OF AMENDED AND RESTATED TERM LOAN NOTE Exhibit B FORM OF AMENDED AND RESTATED REVOLVING CREDIT NOTE Exhibit C FORM OF SWING NOTE Exhibit D FORM OF ASSIGNMENT OF LEASES AND RENTS Exhibit E FORM OF UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE Exhibit F FORM OF INDEMNITY AGREEMENT REGARDING HAZARDOUS MATERIALS Exhibit G FORM OF MORTGAGE Exhibit H FORM OF REQUEST FOR REVOLVING CREDIT LOAN Exhibit I FORM OF LETTER OF CREDIT REQUEST Exhibit J FORM OF BORROWING BASE CERTIFICATE Exhibit K FORM OF COMPLIANCE CERTIFICATE Exhibit L FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT THIRD AMENDED, RESTATED AND CONSOLIDATED MASTER CREDIT AGREEMENT THIS THIRD AMENDED, RESTATED AND CONSOLIDATED MASTER CREDIT AGREEMENT (this "Agreement") is made as of the 29th day of March, 2001, by and among JDN REALTY CORPORATION, a Maryland corporation ("Borrower"), having its principal place of business at 359 East Paces Ferry Road, Suite 400, Atlanta, Georgia 30305, FLEET NATIONAL BANK ("Fleet"), the other lending institutions which are parties to this Agreement as "Lenders", and the other lending institutions that may become parties hereto pursuant to ss.18 (together with Fleet, the "Lenders"), and FLEET NATIONAL BANK, as Agent for the Lenders (the "Agent"), BANKERS TRUST COMPANY, as Syndication Agent ("Syndication Agent"), and COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as Documentation Agent ("Documentation Agent"). R E C I T A L S WHEREAS, Borrower, Wachovia Bank, N.A. ("Wachovia"), individually and as agent, and the other lenders a party thereto entered into that certain Second Amended and Restated Credit Agreement, dated as of May 19, 2000 (as the same may have been amended, the "Original Revolving Credit Agreement"), pursuant to which the lenders a party thereto agreed to provide a revolving credit facility of up to $175,000,000.00 to Borrower upon the terms and conditions set forth therein; and WHEREAS, Borrower, Wachovia, individually and as agent, and the other lenders a party thereto entered into that certain Amended and Restated Term Loan Credit Agreement, dated as of May 19, 2000 (as the same may have been amended, the "Original Term Loan Agreement"), pursuant to which the lenders a party thereto agreed to provide to Borrower a term loan of $100,000,000.00 upon the terms and conditions set forth therein; and WHEREAS, Wachovia, individually and as agent, has assigned its rights and obligations under the Original Revolving Credit Agreement and the Original Term Loan Agreement to Fleet, individually and as Agent; and WHEREAS, Borrower, Agent, Fleet and the Lenders desire to consolidate the Original Revolving Credit Agreement, the Original Term Loan Agreement and the indebtedness described therein, and to amend and restate the Original Revolving Credit Agreement and the Original Term Loan Agreement, as so consolidated, in their entirety; and NOW, THEREFORE, in consideration of the recitals herein and mutual covenants and agreements contained herein, the parties hereto hereby consolidate, amend and restate the Original Revolving Credit Agreement and the Original Term Loan Agreement in their entirety and covenant and agree as follows: (S)1. DEFINITIONS AND RULES OF INTERPRETATION. (S)1.1 Definitions. The following terms shall have the meanings set forth in this (S)1 or elsewhere in the provisions of this Agreement referred to below: Additional Guarantor. Each additional Subsidiary of Borrower which becomes a Guarantor pursuant to (S)5.5. Adjusted Consolidated EBITDA. For any period, the sum of the Consolidated EBITDA for such period less the Capital Improvement Reserve. Affiliate. An Affiliate, as applied to any Person, shall mean any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means (a) the possession, directly or indirectly, of the power to vote ten percent (10%) or more of the stock, shares, voting trust certificates, beneficial interest, partnership interests, member interests or other interests having voting power for the election of directors of such Person or otherwise to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise, or (b) the ownership of (i) a general partnership interest, (ii) a managing member's interest in a limited liability company or (iii) a limited partnership interest or preferred stock (or other ownership interest) representing ten percent (10%) or more of the outstanding limited partnership interests, preferred stock or other ownership interests of such Person. Agent. Fleet National Bank, acting as administrative agent for the Lenders, and its successors and assigns. Agent's Head Office. The Agent's head office located at 100 Federal Street, Boston, Massachusetts 02110, or at such other location as the Agent may designate from time to time by notice to the Borrower and the Lenders. Agent's Special Counsel. Long Aldridge & Norman LLP or such other counsel as selected by Agent. Agreement. This Third Amended, Restated and Consolidated Master Credit Agreement, including the Schedules and Exhibits hereto. Applicable Margin. On any date that the lower of the Ratings issued from time to time by the Rating Agencies for the Borrower is a Qualifying Rating, the Applicable Margin shall be as set forth below: Pricing Level LIBOR Rate Loans Base Rate Loans Pricing Level 1 1.75% 0% In the event that any of the Rating Agencies issues a Rating for the Borrower that is a Qualifying Rating, or in the event of any change in a Rating of the Borrower by any of 2 the Rating Agencies, or if the Borrower's Rating, after having obtained a Qualifying Rating, shall cease at any time to be a Qualifying Rating by any of the Rating Agencies (but subject to the provisions within the definition of the term "Qualifying Rating"), such change shall effect a change in the Applicable Margin, as applicable, on the first (1st) day of the first (1st) month following the Rating Notice Date. On any date that the lower of the Ratings for the Borrower is not a Qualifying Rating, or the Borrower has not obtained a Qualifying Rating from either S&P or Moody's, the Applicable Margin shall be based upon the ratio of the Consolidated Total Liabilities of the Borrower to the Consolidated Total Assets of the Borrower as set forth below. It is the intention of the parties that if the Borrower shall only obtain a Qualifying Rating from one of S&P or Moody's without seeking a Qualifying Rating from the other of S&P or Moody's, the Borrower shall be entitled to the benefit of the Pricing Level 1 described above; provided that if the Borrower shall have obtained a Qualifying Rating from both of S&P and Moody's, the lower of the two ratings (or the loss of the Qualifying Rating from either or both of S&P or Moody's thereafter) shall control. The Borrower may obtain a Rating from Fitch in lieu of a Rating from S&P or Moody's, which Rating shall be considered for the purposes hereof, provided that in no event may a Rating from Fitch be the sole Rating for the purposes hereof. On any date on which the Applicable Margin is to be determined based upon the ratio of the Consolidated Total Liabilities of the Borrower to the Consolidated Total Assets of the Borrower, the applicable margin set forth below based on the ratio of the Consolidated Total Liabilities of Borrower to the Consolidated Total Assets of Borrower: - -------------------------------------------------------------------------------- Base Rate Pricing Level Ratio LIBOR Rate Loans Loans - -------------------------------------------------------------------------------- Pricing Level 2 Less than 45% 1.875% 0% - -------------------------------------------------------------------------------- Pricing Level 3 Greater than or equal to 45% but less than 50% 2.000% 0% - -------------------------------------------------------------------------------- Pricing Level 4 Greater than or equal to 50% but less than 55% 2.125% 0% - -------------------------------------------------------------------------------- Pricing Level 5 55% or greater 2.250% 0% - -------------------------------------------------------------------------------- The initial Applicable Margin shall be at Pricing Level 3. The Applicable Margin shall not be adjusted based upon such ratio, if at all, until the first (1st) day of the first (1st) month following the delivery by Borrower to the Agent of the Compliance Certificate at the end of a fiscal quarter. In the event that Borrower shall fail to deliver to the Agent a quarterly Compliance Certificate on or before the date required by (S)7.4(c), then without limiting any other rights of the Agent and the Lenders under this Agreement, the Applicable Margin shall be at Pricing Level 5 until such failure is cured within any applicable cure period. 3 Arranger. Fleet Securities, Inc. Assignment and Acceptance Agreement. See (S)18.1. Assignment of Hedge. The Assignment of Hedge Agreement by the Borrower to the Agent for the benefit of the Lenders pursuant to which the Interest Rate Contract described in (S)10.16 is pledged as security for the Obligations, and any financing statements that may be delivered in connection therewith. Assignment of Interests. The Assignment of Interests by Borrower to the Agent for the benefit of the Lenders relating to the partnership interests of Borrower in JDN Holdings and the stock of Borrower in JDN AL, JDN DCI and JDN LP, Inc., pursuant to which the Borrower's ownership interests in the Persons described therein are pledged to the Agent for the benefit of the Lenders, and each other Assignment of Interests which may hereafter be executed pursuant to (S)5.3, as the same may be modified or amended, and any further assignments, certificates, powers, consents, acknowledgments, estoppels or financing statements that may be delivered in connection therewith, and individually any one of them. Assignment of Leases and Rents. Each of the assignments of leases and rents from the Borrower or a Guarantor to the Agent, as it may be modified or amended, pursuant to which there shall be assigned to the Agent for the benefit of the Lenders a security interest in the interest of the Borrower or such Guarantor as lessor with respect to all Leases of all or any part of each Mortgaged Property, each such assignment to be substantially in the form of Exhibit D annexed hereto, with such changes thereto as Agent may require as a result of state law or practice. Balance Sheet Date. December 31, 2000. Bankruptcy Code. Title 11, U.S.C.A., as amended from time to time or any successor statute thereto. Base Rate. The greater of (a) the fluctuating annual rate of interest announced from time to time by the Agent at the Agent's Head Office as its "prime rate" or (b) one-half of one percent (0.5%) above the Federal Funds Effective Rate (rounded upwards, if necessary, to the next one-eighth of one percent). The Base Rate is a reference rate and does not necessarily represent the lowest or best rate being charged to any customer. Any change in the rate of interest payable hereunder resulting from a change in the Base Rate shall become effective as of the opening of business on the day on which such change in the Base Rate becomes effective, without notice or demand of any kind. Base Rate Loans. Collectively, the Revolving Credit Base Rate Loans, the Term Base Rate Loans and Swing Loans bearing interest by reference to the Base Rate. Base Rent. With respect to any Lease, the minimum periodic contractual rent payable thereunder, excluding reimbursement or recovery of common area maintenance or other property operating expenses and excluding percentage rent. 4 Borrower. As defined in the preamble hereto. Borrowing Base. At any time with respect to the Borrower, the Borrowing Base shall be the Borrowing Base for Eligible Real Estate included in the Mortgaged Property owned by the Borrower or any Guarantor. The Borrowing Base for Eligible Real Estate included in the Mortgaged Property shall be the amount which is the lesser of (a) sixty percent (60%) of the sum of the Mortgaged Property Asset Value of the Mortgaged Property, and (b) the sum of the Debt Service Coverage Amounts for each Mortgaged Property, and the amount which is the lesser of (a) and (b) shall be the Borrowing Base for Eligible Real Estate included in the Mortgaged Property. Notwithstanding the foregoing, the Borrowing Base attributable to a Mortgaged Property shall not exceed the amount to which recovery under the applicable Mortgage is limited. Building. With respect to each Mortgaged Property or parcel of Real Estate, all of the buildings, structures and improvements now or hereafter located thereon. Business Day. Any day on which banking institutions located in the same city and State as the Agent's Head Office are located are open for the transaction of banking business and, in the case of LIBOR Rate Loans, which also is a LIBOR Business Day. Capital Improvement Reserve. With respect to any Real Estate now or hereafter owned or leased by the Borrower, any Guarantor or any of their respective Subsidiaries, a reserve for capital improvements, leasing commissions and tenant improvements in an amount equal to ten cents ($.10) multiplied by the Net Rentable Area contained therein. For purposes of this calculation, Net Rentable Area shall exclude square footage contained in Borrower's Rent Roll for any tenant who leases Real Estate pursuant to a ground lease. Capitalized Lease. A lease under which the discounted future rental payment obligations of the lessee or the obligor are required to be capitalized on the balance sheet of such Person in accordance with GAAP. CERCLA. See (S)6.20. Change in Control. A Change in Control shall exist upon the occurrence of any of the following: (a) any two of the following Persons shall cease to hold the position set forth below: Craig Macnab -- Chief Executive Officer of Borrower; John D. Harris, Jr. -- Chief Financial Officer of Borrower; and Lee Wielansky -- President and Chief Executive Officer of JDN DCI; and a competent and experienced successor for such Persons shall not be approved by the Required Lenders within six (6) months of such event, such approval not to be unreasonably withheld; or (b) any Person (including a Person's Affiliates and associates) or group (as that term is understood under Section 13(d) of the Securities Exchange Act of 1934, 5 as amended (the "Exchange Act") and the rules and regulations thereunder) shall have acquired after the Closing Date beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of a percentage (based on voting power, in the event different classes of stock shall have different voting powers) of the voting stock of Borrower equal to at least twenty percent (20%); or (c) as of any date a majority of the Board of Directors of Borrower consists of individuals who were not either (i) directors of Borrower as of the corresponding date of the previous year (provided, however, that the initial Board of Directors for reference purposes of this clause (c)(i) shall be the Board of Directors as of the Closing Date), (ii) selected or nominated to become directors by the Board of Directors of Borrower of which a majority consisted of individuals described in clause (c)(i) above, or (iii) selected or nominated to become directors by the Board of Directors of Borrower of which a majority consisted of individuals described in clause (c)(i), above and individuals described in clause (c)(ii), above. Closing Date. The first date on which all of the conditions set forth in (S)10 and (S)11 have been satisfied. Co-Arranger. Deutsche Banc Alex. Brown Inc. Code. The Internal Revenue Code of 1986, as amended. Collateral. All of the property, rights and interests of the Borrower and each Guarantor which are or are intended to be subject to the security interests, security title, liens and mortgages created by the Security Documents, including, without limitation, the Mortgaged Properties, and the Guaranty. Commitment. With respect to each Lender, the aggregate of (a) the Revolving Credit Commitment and (b) the Term Loan Commitment of such Lender, as set forth on Schedule 1 hereto, as the same may be changed from time to time in accordance with the terms of this Agreement. Commitment Percentage. With respect to each Lender, the percentage set forth on Schedule 1 hereto as such Lender's percentage of the Total Commitment, as the same may be changed from time to time in accordance with the terms of this Agreement. Compliance Certificate. See (S)7.4(c). Condemnation Proceeds. All compensation, awards, damages, rights of action and proceeds awarded to the Borrower or a Guarantor by reason of any Taking, net of all reasonable amounts actually expended to collect the same. Consolidated. With reference to any term defined herein, that term as applied to the accounts of a Person and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. 6 Consolidated EBITDA. With respect to any period, an amount equal to the EBITDA of Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP. Consolidated Fixed Charges. For any period, determined on a consolidated basis in accordance with GAAP, the sum of (i) Consolidated Interest Incurred for the fiscal quarter just ended and the immediately preceding fiscal quarter, plus (ii) all dividends paid or declared but not yet paid by the Borrower on preferred stock during the fiscal quarter just ended and the immediately preceding fiscal quarter, plus (iii) the aggregate amount of scheduled principal amortization paid in the fiscal quarter just ended and the immediately preceding fiscal quarter as reflected on the Borrower's most recent quarterly consolidated financial statement submitted to the Agent and the Lenders, but excluding any principal payments under this Agreement and excluding any balloon payments on other Indebtedness, plus (iv) any amounts due and payable by the Borrower or any of its Subsidiaries under any ground leases to which any of them is a party for the fiscal quarter just ended and the immediately preceding fiscal quarter. Consolidated Interest Expense. For any period, interest expensed in respect of Indebtedness of Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. Consolidated Interest Incurred. For any period, interest incurred on all Indebtedness of Borrower and its Subsidiaries (regardless of whether such interest was expensed or capitalized in accordance with GAAP), determined on a consolidated basis in accordance with GAAP excluding amortization of deferred loan costs. Consolidated Liabilities. The sum of (i) all liabilities that, in accordance with GAAP, should be classified as liabilities on a consolidated balance sheet of Borrower and its Subsidiaries and the Guarantors, and (ii) to the extent not included in clause (i) of this definition, all Redeemable Preferred Stock. Consolidated Net Income. For any period, the Net Income of the Borrower and its Subsidiaries determined on a consolidated basis, but excluding (i) extraordinary items and (ii) any equity interests of the Borrower or any Subsidiary in the unremitted earnings of any Person that is not a Subsidiary. Consolidated Tangible Net Worth. The total consolidated shareholders' equity of Borrower and its Subsidiaries as determined in accordance with GAAP, and less the sum of: (a) the total book value of all assets of the Borrower and its Subsidiaries properly classified as intangible assets under generally accepted accounting principles, including such items as goodwill, the purchase price of acquired assets in excess of the fair market value thereof, trademarks, trade names, service marks, brand names, copyrights, patents and licenses, and rights with respect to the foregoing; plus 7 (b) all amounts representing any write-up in the book value of any assets of Borrower or its Subsidiaries resulting from a revaluation thereof subsequent to the Balance Sheet Date. Consolidated Total Assets. On a consolidated basis for the Borrower and its Subsidiaries, Consolidated Total Assets shall mean the sum of (without duplication with respect to any Real Estate): (i) an amount equal to the product of (x) the Net Operating Income for the two (2) fiscal quarters just ended prior to the date of determination, times (y) two (2) (which is the annualization factor), divided by (z) 0.10 (which is the capitalization rate), from each separate Real Estate owned by the Borrower or any Guarantor for at least two fiscal quarters; plus (ii) an amount equal to the book value as of the last day of the month just ended prior to the date of determination of Real Estate owned by the Borrower or any Guarantor for less than two fiscal quarters; plus (iii) the book value of Land Assets and Construction in Progress on the last day of the fiscal quarter just ended; plus (iv) the aggregate amount of all (x) unrestricted cash and accounts receivable which are not past due of the Borrower and the Guarantors and (y) restricted cash held by any person serving as a "qualified intermediary" for purposes of an exchange pursuant to Section 1031 of the Code on behalf of the Borrower or any Guarantor; plus (v) the aggregate principal amount outstanding of all Replacement Property Development Loans as to which the development of the relevant property is controlled by the Borrower, a Guarantor or an Affiliate thereof; plus (vi) the book value of Borrower's interests in its Subsidiaries that are not Guarantors; plus (vii) the book value of Borrower's Minority Interests in Persons other than its Subsidiaries. Consolidated Total Assets will be adjusted, as appropriate, for acquisitions, dispositions and other changes to the portfolio during a quarter. Properties acquired or assets under development completed during the quarter will be valued at cost for a maximum of ninety (90) days from acquisition or completion (and until the end of the following fiscal quarter); provided that thereafter such properties shall be valued as provided in clause (i) of this definition. All income, expense and value associated with Real Estate disposed of during any quarter will be eliminated from calculations. Consolidated Total Liabilities. At any time, for the Borrower and its Subsidiaries, determined on a consolidated basis without duplication, the sum of (i) Consolidated Liabilities, plus (ii) all Indebtedness of the Borrower or any Subsidiary, 8 plus (iii) the face amount of all letters of credit issued for the account of the Borrower or any Subsidiary. Construction in Progress. For any retail Real Estate (or related improvements), calculated on a consolidated basis for the Borrower, the Guarantors and their respective Subsidiaries and Affiliates, the sum of (x) construction-in-progress as shown from time to time on the books and records of the Borrower and the Guarantors, maintained in accordance with GAAP, plus (y) the book value, calculated in accordance with GAAP, of any Real Estate that (i) previously constituted construction-in-progress and (ii) has not yet become a Stabilized Property. Contribution Agreement. That certain Contribution Agreement dated of even date herewith among the Borrower, the Subsidiary Guarantors and each Additional Guarantor which may hereafter become a party thereto. Conversion/Continuation Request. A notice given by the Borrower to the Agent of its election to convert or continue a Loan in accordance with (S)4.1. Debt Offering. The issuance and sale by the Borrower or any Guarantor of any debt securities of the Borrower or such Guarantor; provided, however, in no event shall either of the following be considered a Debt Offering: (i) the issuance by the Borrower or any Guarantor of debt securities which are unsecured obligations of such Person the proceeds of which are used to repay or reduce the Borrower's indebtedness pursuant to any of the Unsecured Notes in accordance with the terms of this Agreement (but only to the extent such proceeds are so used), or (ii) the issuance by the Borrower or any Guarantor of any debt securities for consideration other than for cash or cash equivalents. Debt Service Coverage Amount. At any time determined by the Agent, an amount equal to the maximum principal amount of Loans that may be outstanding pursuant to the following formula: Adjusted NOI ------------ = P 1.5 x D Where P = maximum principal balance of Loans that may be outstanding D = the greater of (a) the greater of (i) the then-current annual yield on ten (10) year obligations issued by the United States Treasury most recently prior to the date of determination plus 2.0% payable on a 25-year mortgage style amortization schedule (expressed as a decimal), or (ii) .095, and (b) the actual blended rate of interest then payable with respect to the Loans (expressed as a decimal) NOI = the product of (a) Net Operating Income from the Mortgaged Properties for the preceding two (2) fiscal quarters most recently ended multiplied by (b) two (2) Adjusted NOI = the sum of (a) NOI less (b) the Capital Improvement Reserve 9 Attached hereto as Schedule 2 is an example of the calculation of Debt Service Coverage Amount (such example is meant only as an illustration based upon the assumptions set forth in such example, and shall not be interpreted so as to limit the Agent in its good faith determination of the Debt Service Coverage Amount hereunder as hereinafter provided). The determination of the Debt Service Coverage Amount and the components thereof by the Agent shall, so long as the same shall be determined in good faith, be conclusive and binding absent manifest error. Default. See (S)12.1. Default Rate. See (S)4.12. Derivative Obligations. All Interest Rate Contracts and all other obligations of any Person in respect of any interest rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, forward equity transaction, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, forward transaction, collar transaction, currency swap, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions. Development SPE. A special purpose entity approved by the Required Lenders (which approval shall not be unreasonably withheld or delayed) formed by an unrelated party for the purpose of owning and developing property which may be purchased by the Borrower, any Guarantor or an Affiliate thereof and borrowing money for such purpose, which entity shall be restricted pursuant to its articles of incorporation from engaging in any business other than owning and developing property, and activities incidental thereto, and from incurring any Indebtedness, other than Replacement Property Development Loans and other Indebtedness incidental thereto. Distribution. With respect to any Person, the declaration or payment of any cash, dividend or distribution on or in respect of any shares of any class of capital stock or other beneficial interest of such Person; the purchase, redemption, exchange or other retirement by such Person of any shares of any class of capital stock or other beneficial interest of such Person, directly or indirectly through a Subsidiary of such Person or otherwise; the return of capital by such Person to its shareholders, partners, members or other owners as such; or any other distribution on or in respect of any shares of any class of capital stock or other beneficial interest of such Person; provided, however, that the dividend or distribution of common stock of a Person shall not constitute a Distribution with respect to such Person. Documentation Agent. As defined in the preamble. Dollars or $. Dollars in lawful currency of the United States of America. Domestic Lending Office. Initially, the office of each Lender designated as such on Schedule 1 hereto; thereafter, such other office of such Lender, if any, located within the United States that will be making or maintaining Base Rate Loans. 10 Drawdown Date. The date on which any Loan is made or is to be made, and the date on which any Loan which is made prior to the Maturity Date is converted in accordance with (S)4.1. EBITDA. With respect to any Person (or any asset of any Person) for any period, an amount equal to the sum of (a) the Net Income of such Person (or attributable to such asset) for such period plus (b) depreciation, amortization, interest expensed, income taxes and any extraordinary or non-recurring losses deducted in calculating such Net Income minus (c) any extraordinary or non-recurring gains included in calculating such Net Income, all as determined in accordance with GAAP. The Net Income of a Person (or any asset of a Person) shall be adjusted to reflect such Person's (or asset's) allocable share for the relevant period or as of the date of determination, taking into account such Person's respective ownership interest in other Persons or such assets. Notwithstanding anything in this Agreement to the contrary, any loss associated with a charge attributable to the settlement of the litigation described as items 1, 5 and 6 in Schedule 6.7 hereto shall, to the extent the same has been deducted in calculating EBITDA, be added back to EBITDA for the purposes of the covenants set forth in (S)9.2 and (S)9.7. Except as set forth in the definition of Funds from Operations, no similar adjustments shall be made in determining compliance with any other covenants set forth in this Agreement. Eligible Real Estate. Real Estate: (a) which is owned in fee (or a ground lease acceptable to the Agent in its reasonable discretion) by the Borrower or a Guarantor; (b) which is located within the contiguous 48 States of the continental United States, excluding those States which prescribe a "single-action" or similar rule limiting the rights of creditors secured by real property, which exclusion shall apply, without limitation, to the States of California and Washington except to the extent such exclusion is waived in writing by the Required Lenders with respect to a specific parcel of Real Estate; (c) which is improved by an income-producing retail shopping center consistent with Borrower's business strategy on the date of this Agreement; (d) as to which all of the representations set forth in (S)6 of this Agreement concerning Mortgaged Property are true and correct; (e) as to which the Agent and the Required Lenders, as applicable, have received and approved all Eligible Real Estate Qualification Documents, or will receive and approve them prior to inclusion of such Real Estate as a Mortgaged Property; and (f) which does not cause the Borrower to be in violation of the covenants set forth in (S)9.8. 11 Eligible Real Estate Qualification Documents. See Schedule 3 attached hereto. Employee Benefit Plan. Any employee benefit plan within the meaning of (S)3(3) of ERISA maintained or contributed to by either of the Borrower or any ERISA Affiliate, other than a Multiemployer Plan. Environmental Engineer. National Assessment Corporation or another firm of independent professional engineers or other scientists generally recognized as expert in the detection, analysis and remediation of Hazardous Substances and related environmental matters and acceptable to the Agent in its reasonable discretion and, so long as no Default or Event of Default exists hereunder, reasonably acceptable to the Borrower. Environmental Laws. See (S)6.20(a). Equity Offering. The issuance and sale after the Closing Date by the Borrower or any Guarantor of any equity securities of such Person; provided, however, that the issuance by the Borrower or any Guarantor of any equity securities of such Person or any securities or instruments convertible, exchangeable or exercisable for equity securities of such Person to any of the following shall not be deemed an Equity Offering: (i) any Person for consideration other than for cash or cash equivalents; (ii) any Person not previously employed by the Borrower or any Guarantor as a material inducement to such Person's entering into an employment contract with the Borrower or a Guarantor; (iii) directors, officers and employees of the Borrower or any Guarantor pursuant to an incentive stock or stock option, employee stock purchase, long-term incentive or stock bonus plans, whether now in effect or adopted in the future; or (iv) any Person pursuant to a dividend reinvestment or stock purchase program sponsored by the Borrower or any Guarantor, whether now in effect or adopted in the future. ERISA. The Employee Retirement Income Security Act of 1974, as amended and in effect from time to time. ERISA Affiliate. Any Person which is treated as a single employer with the Borrower, the Guarantors or their respective Subsidiaries under (S)414 of the Code. ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension Plan within the meaning of (S)4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived. Event of Default. See (S)12.1. Federal Funds Effective Rate. For any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published the average of the 12 quotations for such day on such transactions received by the Agent from three (3) Federal funds brokers of recognized standing selected by the Agent. Fitch. Fitch IBCA. Fleet. As defined in the preamble. Funds from Operations. With respect to any Person for any fiscal period, an amount equal to the Net Income (or Loss) of such Person for such period, computed in accordance with GAAP, excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be recalculated to reflect funds from operations on the same basis. Notwithstanding anything in this Agreement to the contrary, non-cash impairment charges of $6,973,000.00 taken by Borrower during the year ended December 31, 2000, a non-cash charge of $5,400,000.00 taken by JDN DCI during the year ended December 31, 2000 related to the creation of a valuation allowance on deferred tax assets and any loss associated with a charge attributable to the settlement of the litigation described as items 1, 5 and 6 in Schedule 6.7 hereto shall, to the extent the same has been previously deducted in calculating Funds from Operations, be added back to Funds from Operations. GAAP. Principles that are (a) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time and (b) consistently applied with past financial statements of the Person adopting the same principles; provided that a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been properly applied. Guarantee. A Guarantee by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to provide collateral security, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of (S)3(2) of ERISA maintained or contributed to by the Borrower or any ERISA 13 Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. Guarantors. Collectively, the Subsidiary Guarantors and each Additional Guarantor, and individually any one of them. Guaranty. The Unconditional Guaranty of Payment and Performance dated of even date herewith made by the Subsidiary Guarantors and each Unconditional Guaranty of Payment and Performance which is hereafter executed by an Additional Guarantor, in favor of the Agent and the Lenders, as the same may be modified or amended, each such Guaranty to be substantially in the form of Exhibit E attached hereto. Hazardous Substances. See (S)6.20(b). Hedge Obligations. All obligations of Borrower to any Lender or an Affiliate of a Lender to make any termination payments under any agreement with respect to an interest rate swap, collar, cap or floor or a forward rate agreement or other agreement regarding the hedging of interest rate risk exposure executed in connection with the satisfaction of the condition set forth in (S)10.16, and any confirming letter executed pursuant to such hedging agreement, all as amended, restated or otherwise modified. Nothing herein shall require the Borrower to obtain any such agreement from any Lender or an Affiliate of a Lender. Indebtedness. Indebtedness of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under Capitalized Leases, (v) all obligations of such Person to reimburse any bank or other Person in respect of amounts payable under a banker's acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event such Person is a corporation), (vii) all obligations of such Person to reimburse any bank or other Person in respect of amounts paid or to be paid under a letter of credit or similar instrument, (viii) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person, (ix) all obligations of such Person with respect to interest rate protection agreements, foreign currency exchange agreements or other hedging arrangements (valued as the termination value thereof computed in accordance with a method approved by the International Swap Dealers Association and agreed to by such Person in the applicable hedging agreement, if any), and (x) all Indebtedness of others Guaranteed by such Person. Indemnity Agreements. Each of the Indemnity Agreements Regarding Hazardous Materials now or hereafter made by the Borrower and Guarantor in favor of the Agent and the Lenders, as the same may be modified or amended, pursuant to which the Borrower and each Guarantor agree to indemnify the Agent and the Lenders with respect to Hazardous Substances and Environmental Laws, each such agreement to be substantially in the form of Exhibit F annexed hereto. 14 Insurance Proceeds. All insurance proceeds, damages, claims and rights of action and the right thereto under any insurance policies relating to any portion of any Collateral, net of all reasonable amounts actually expended to collect the same. Interest Payment Date. As to each Loan, the first (1st) day of each calendar month during the term of such Loan. Interest Period. With respect to each LIBOR Rate Loan (a) initially, the period commencing on the Drawdown Date of such LIBOR Rate Loan and ending one, two, three or six months thereafter, and (b) thereafter, each period commencing on the day following the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Loan Request or Conversion/Continuation Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period with respect to a LIBOR Rate Loan would otherwise end on a day that is not a LIBOR Business Day, such Interest Period shall end on the next succeeding LIBOR Business Day, unless such next succeeding LIBOR Business Day occurs in the next calendar month, in which case such Interest Period shall end on the next preceding LIBOR Business Day, as determined conclusively by the Agent in accordance with the then current bank practice in London; (ii) if the Borrower shall fail to give notice as provided in (S)4.1, the Borrower shall be deemed to have requested a conversion of the affected LIBOR Rate Loan to a Base Rate Loan on the last day of the then current Interest Period with respect thereto; and (iii) no Interest Period relating to any LIBOR Rate Loan shall extend beyond the Maturity Date. Interest Rate Contracts. Interest rate swap, collar, cap or similar agreements providing interest rate protection. Investments. With respect to any Person, all shares of capital stock, evidences of Indebtedness and other securities issued by any other Person and owned by such Person, all loans, advances, or extensions of credit to, or contributions to the capital of, any other Person, all purchases of the securities or business or integral part of the business of any other Person and commitments and options to make such purchases, all interests in real property, and all other investments; provided, however, that the term "Investment" shall not include (i) equipment, inventory and other tangible personal property acquired in the ordinary course of business, or (ii) current trade and customer accounts receivable for services rendered in the ordinary course of business and payable in accordance with customary trade terms. In determining the aggregate amount of Investments outstanding at any particular time: (a) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (b) there shall be deducted in respect of each Investment any amount received as a return of capital; (c) there shall not be deducted in 15 respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (a) may be deducted when paid; and (d) there shall not be deducted in respect of any Investment any decrease in the value thereof. Issuing Lender. Fleet, in its capacity as the Lender issuing the Letters of Credit. JDN AL. JDN Realty AL, Inc., an Alabama corporation. JDN DCI. JDN Development Company, Inc., a Delaware corporation. JDN Holdings. JDN Realty Holdings, L.P., a Georgia limited partnership. JDN LP, Inc. JDN Realty LP, Inc., a Delaware corporation. JDN Venture. Any Person formed by the Borrower or any Subsidiary: (i) the accounts of which are not consolidated with Borrower in accordance with GAAP and (ii) in which the Borrower or such Subsidiary owns either (x) 50% or more of the beneficial interests therein, but does not have "control" thereof within the meaning set forth in the definition of Affiliate, or (y) 20% or more of the beneficial interests therein, but does have control thereof. Land Assets. Land with respect to which the commencement of grading, construction of improvements or infrastructure has not yet commenced, and all unimproved land according to GAAP. Land Assets shall not include "outparcels" held in the ordinary course of business for sale or lease. Lease Summaries. Summaries or abstracts of the material terms of the Leases. Such Lease Summaries shall be in form and substance reasonably satisfactory to the Agent. Leases. Leases, licenses and agreements, whether written or oral, relating to the use or occupation of space in any Building or of any Real Estate. Lenders. Fleet, the other lending institutions which are party hereto and any other Person which becomes an assignee of any rights of a Lender pursuant to (S)18 (but not including any participant as described in (S)18). Letter of Credit. Any standby letter of credit issued at the request of the Borrower and for the account of the Borrower in accordance with (S)2.10. Letter of Credit Request. See (S)2.10(a). LIBOR. As applicable to any Interest Period for any LIBOR Loan, the rate per annum (rounded upwards, if necessary, to the nearest 1/32nd of one percent) as determined on the basis of the offered rates for deposits in Dollars, for the period of time comparable to such Interest Period which appears on the Telerate page 3750 as of 11:00 16 a.m. London time on the day that is two (2) LIBOR Business Days preceding the first day of such Interest Period; provided, however, if the rate described above does not appear on the Telerate System on any applicable interest determination date, LIBOR shall be the rate (rounded upwards as described above, if necessary) for deposits in Dollars for a period substantially equal to the Interest Period on the Reuters Page "LIBO" (or such other page as may replace the LIBO Page on that service for the purpose of displaying such rates), as of 11:00 a.m. (London Time), on the day that is two (2) LIBOR Business Days prior to the beginning of such Interest Period. If both the Telerate and Reuters systems are unavailable, then the rate for that date will be determined on the basis of the offered rates for deposits in Dollars for a period of time comparable to such Interest Period which are offered by four major banks in the London interbank market at approximately 11:00 a.m. London time, on the day that is two (2) LIBOR Business Days preceding the first day of such Interest Period as selected by Agent. The principal London office of each of the four major London banks will be requested to provide a quotation of its U.S. dollar deposit offered rate. If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the quotations. If fewer than two quotations are provided, the rate for that date will be determined on the basis of the rates quoted for loans in Dollars to leading European banks for a period of time comparable to such Interest Period offered by major banks in New York City at approximately 11:00 a.m. (New York City time), on the day that is two (2) LIBOR Business Days preceding the first day of such Interest Period. In the event that Agent is unable to obtain any such quotation as provided above, it will be deemed that LIBOR pursuant to a LIBOR Rate Loan cannot be determined and the provisions of (S)4.6 shall apply. In the event that the Board of Governors of the Federal Reserve System shall impose a Reserve Percentage with respect to LIBOR deposits of Agent, then for any period during which such Reserve Percentage shall apply, LIBOR shall be equal to the amount determined above divided by an amount equal to 1 minus the Reserve Percentage. LIBOR Business Day. Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in London, England. LIBOR Lending Office. Initially, the office of each Lender designated as such on Schedule 1 hereto; thereafter, such other office of such Lender, if any, that shall be making or maintaining LIBOR Rate Loans. LIBOR Rate Loans. Collectively, the Revolving Credit LIBOR Rate Loans, Term LIBOR Rate Loans and Swing Loans bearing interest by reference to LIBOR. Lien. See (S)8.2. Loan Documents. This Agreement, the Notes, the Letter of Credit Request, the Security Documents and all other documents, instruments or agreements now or hereafter executed or delivered by or on behalf of the Borrower or any Guarantor in connection with the Loans. 17 Loan Request. See (S)2.7. Loans. Collectively, the Revolving Credit Loans, the Term Loans and the Swing Loans. Major Tenant. A tenant of the Borrower or any Guarantor which leases space in a Mortgaged Property pursuant to a Lease which entitles it to occupy 25,000 square feet or more. Majority Lenders. As of any date, the Lender or Lenders whose aggregate Commitment Percentage is greater than fifty percent (50%) of the Total Commitment. Management Agreements. Agreements, whether written or oral, providing for the management of the Mortgaged Properties or any of them. Material Adverse Effect. A material adverse effect on (a) the business, properties, assets, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries considered as a whole; (b) the ability of Borrower or any Guarantor owning a Mortgaged Property to perform any of its obligations under the Loan Documents; or (c) the validity or enforceability of any of the Loan Documents or the rights or remedies of Agent or the Lenders thereunder. Maturity Date. December 31, 2002 (as such date may be extended as provided in (S)2.11), or such earlier date on which the Loans shall become due and payable pursuant to the terms hereof. Minimum Consolidated Tangible Net Worth. At any time, the sum of (a) $450,000,000.00 plus (b) ninety percent (90%) of the aggregate net proceeds received by the Borrower or any Guarantor after the Closing Date in connection with any Equity Offering to any other Person. Minority Interest. As to any Person, an ownership or other equity investment in any other Person, which investment is not consolidated with the accounts of such Person in accordance with GAAP. Moody's. Moody's Investor Service, Inc. Mortgaged Property or Mortgaged Properties. The Eligible Real Estate owned by the Borrower or a Guarantor which is security for the Obligations pursuant to the Mortgages. Mortgaged Property Asset Value. With respect to any Eligible Real Estate included in the Mortgaged Property owned by the Borrower or a Guarantor, the amount equal to the product of (x) the Net Operating Income for the two (2) fiscal quarters just ended prior to the date of determination, times (y) two (2) (which is the annualization factor), divided by 0.10 (which is the capitalization rate). 18 Mortgages. The Mortgages, Deeds to Secure Debt and/or Deeds of Trust from the Borrower or a Guarantor to the Agent for the benefit of the Lenders (or to trustees named therein acting on behalf of the Agent for the benefit of the Lenders), as the same may be modified or amended, pursuant to which the Borrower or a Guarantor has conveyed or granted a mortgage lien upon or a conveyance in fee simple of a Mortgaged Property as security for the Obligations, each such mortgage to be substantially in the form of Exhibit G annexed hereto, with such changes thereto as Agent may require as a result of state law or practice. Multiemployer Plan. Any multiemployer plan within the meaning of (S)3(37) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate. Net Income (or Loss). With respect to any Person (or any asset of any Person) for any period, the net income (or loss) of such Person (or attributable to such asset), determined in accordance with GAAP. The net income (or loss) of a Person shall include, without duplication, the allocable share of the net income (or loss) of any other Person in which a Minority Interest is owned by such Person based on the ownership of such Person in such other Person. Net Operating Income. With respect to any Real Estate, for any period, "property revenues", consisting of minimum and percentage rents as determined in accordance with GAAP together with recoveries from tenants as determined in accordance with GAAP, all such amounts shall be attributable to such period and accrued according to GAAP, less (i) all "property expenses" consisting of expenses incurred or accrued by the Borrower, a Guarantor or their respective Subsidiaries that are directly related to the operation and ownership of such Real Estate, including real estate taxes, sales taxes, common area maintenance charges, accounting and administration, security, utilities, maintenance, janitorial, premiums for casualty and liability insurance, ground lease payments (excluding from the foregoing expenses for depreciation, amortization, interest and leasing commissions with respect to such Real Estate), and (ii) an allowance for property management expenses calculated at the greater of (A) three percent (3.0%) of Base Rent or (B) actual property management expenses. If such period is less than a year, expenses described in clause (i) above that are payable less frequently than monthly during the course of a year (e.g., real estate taxes and insurance premiums) shall be adjusted by "straight lining" the amounts so that such expenses are accrued on a monthly basis over the course of a year and fairly stated for each period. Net Rentable Area. With respect to any Real Estate, the floor area of any buildings, structures or improvements available for leasing to tenants determined in accordance with the Rent Roll for such Real Estate, the manner of such determination to be reasonably consistent for all Real Estate of the same type unless otherwise approved by the Agent. Notes. Collectively, the Revolving Credit Notes, the Term Loan Notes and the Swing Loan Note. Notice. See (S)19. 19 Obligations. All indebtedness, obligations and liabilities of the Borrower or any Guarantor to any of the Lenders or the Agent, individually or collectively, under this Agreement or any of the other Loan Documents or in respect of any of the Loans, the Notes or the Letters of Credit, or other instruments at any time evidencing any of the foregoing, whether existing on the date of this Agreement or arising or incurred hereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise. Outstanding. With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination. With respect to Letters of Credit, the aggregate undrawn face amount of issued Letters of Credit. PBGC. The Pension Benefit Guaranty Corporation created by (S)4002 of ERISA and any successor entity or entities having similar responsibilities. Permitted Liens. Liens, security interests and other encumbrances permitted by (S)8.2. Person. Any individual, corporation, limited liability company, partnership, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof. Plan Assets. Assets of any employee benefit plan subject to Part 4, Subtitle A, Title I of ERISA. Potential Collateral. Any property of the Borrower or a Guarantor which is not at the time included in the Collateral and which consists of (i) Eligible Real Estate, or (ii) Real Estate which is capable of becoming Eligible Real Estate through the approval of the Required Lenders and the completion and delivery of Eligible Real Estate Qualification Documents. Pricing Level. Such term shall have the meaning established within the definition of Applicable Margin. Qualifying Rating. With respect to Borrower, a Rating equal to or more favorable than BB with respect to a rating issued by S&P, a rating of Ba2 in the case of a Rating issued by Moody's, or BB in the case of a Rating by Fitch. If, at any time after Borrower obtains a Qualifying Rating, (a) the rating system of any of the Rating Agencies (as opposed to the rating of the Borrower) shall change, or (b) any of the Rating Agencies shall no longer perform the functions of a securities rating agency, then the Borrower and the Agent shall promptly negotiate in good faith to amend the reference to the specific ratings in this definition for the determination of the Qualifying Rating, and pending such amendment, the applicable rating in effect as of the date the event described in this paragraph occurred shall continue to apply. Rating. With respect to the Borrower, the most recent rating issued from time to time by a Rating Agency as is applicable to Borrower as an issuer with respect to 20 long-term debt (i.e., a corporate credit or issuer rating with respect to long-term debt), or if no such Rating is in effect, then the rating applicable to Borrower's senior unsecured debt. Rating Agencies. S&P, Moody's and Fitch. Rating Notice. See (S)7.4(j). Rating Notice Date. The earlier of (a) the date a Rating Notice is received by the Agent, or (b) the date the Agent, having received actual notice of a change by a Rating Agency of its Rating, sends notice to the Borrower of such change, provided that nothing contained herein shall imply any obligation of the Agent to monitor such rating changes. Real Estate. All real property at any time owned or leased (as lessee or sublessee) by the Borrower, any Guarantor or any of their respective Subsidiaries, including, without limitation, the Mortgaged Properties. Record. The grid attached to any Note, or the continuation of such grid, or any other similar record, including computer records, maintained by the Agent with respect to any Loan referred to in such Note. Redeemable Preferred Stock. Any preferred stock issued by a Person which is at any time prior to the Maturity Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof. Register. See (S)18.2. REIT Status. With respect to Borrower, its status as a real estate investment trust as defined in (S)856(a) of the Code. Release. See (S)6.20(c)(iii). Rent Roll. A report prepared by the Borrower showing for each Mortgaged Property owned or leased by Borrower or a Guarantor, its occupancy, lease expiration dates, lease rent and other information in substantially the form presented to the Lenders prior to the date hereof or in such other form as may have been approved by the Agent. Replacement Property Development Loan. A loan by the Borrower or any Guarantor to a Development SPE, provided that (i) the proceeds of such loan are used solely for the development of a retail shopping center that may be purchased by the Borrower, any Guarantor or any Affiliate thereof, or that may be transferred to the Borrower, any Guarantor or any Affiliate thereof, as part of a sale and exchange of Real Estate pursuant to Section 1031 of the Code, (ii) the principal amount of such loan outstanding at any time shall not exceed 100% of the aggregate costs actually incurred (including hard and soft costs) for development of such property, (iii) such loan accrues 21 interest at a rate which is not less than the interest rate in effect from time to time with respect to Loans under this Agreement, with such interest being capitalized during construction and then payable from available cash flow, (iv) such loan is secured by a first priority mortgage, deed to secure debt, deed of trust or similar instrument on such Real Estate in favor of the Borrower or such Guarantor, (v) such loan matures no later than thirty-five (35) months after the date such loan is made, (vi) 100% of the net proceeds of sale of portions of such property by the Development SPE shall be paid and applied as a prepayment on such loan, (vii) such loan is repayable in full at the earlier of maturity or sale or transfer of all of the remaining property by the Development SPE, and (viii) such loan remains a performing loan in all material respects. Required Lenders. As of any date, the Lender or Lenders whose aggregate Commitment Percentage is equal to or greater than sixty-six and 2/3 percent (66-2/3%)of the Total Commitment. Reserve Percentage. For any day with respect to a LIBOR Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject thereto would be required to maintain reserves (including, without limitation, all base, supplemental, marginal and other reserves) under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "Eurocurrency Liabilities" (as that term is used in Regulation D or any successor or similar regulation), if such liabilities were outstanding. The Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage. Revolving Credit Base Rate Loans. Revolving Credit Loans bearing interest calculated by reference to the Base Rate. Revolving Credit Commitment. With respect to each Revolving Credit Lender, the amount set forth on Schedule 1 hereto as the aggregate amount of such Revolving Credit Lender's Revolving Credit Commitment, as the same may be reduced from time to time in accordance with the terms of this Agreement. Revolving Credit Commitment Percentage. With respect to each Revolving Credit Lender, the percentage set forth on Schedule 1 hereto as such Revolving Credit Lender's percentage of the aggregate Revolving Credit Commitments of all of the Revolving Credit Lenders. Revolving Credit Lenders. Collectively, the Lenders which are the holders of the Revolving Credit Notes, such Revolving Credit Lenders being identified on Schedule 1 hereto. Revolving Credit LIBOR Rate Loans. Revolving Credit Loans bearing interest calculated by reference to LIBOR. Revolving Credit Loan or Loans. An individual Revolving Credit Loan or the aggregate Revolving Credit Loans, as the case may be, in the maximum principal amount of $150,000,000.00 to be made by the Revolving Credit Lenders hereunder as 22 more particularly described in (S)2. Amounts drawn under a Letter of Credit shall also be considered Revolving Credit Loans as provided in (S)2.10(f). Revolving Credit Notes. See (S)2.2(b). Security Documents. Collectively, the Guaranty, the Mortgages, the Assignments of Leases and Rents, the Indemnity Agreements, the Assignment of Interests, the Assignment of Hedge, UCC-1 financing statements and any further collateral assignments to the Agent for the benefit of the Lenders. S&P. Standard & Poor's Ratings Group. Short-term Investments. Investments described in subsections (a) through (g), inclusive, of (S)8.3. For all purposes of this Agreement and the other Loan Documents, the value of Short-term Investments at any time shall be the current market value thereof determined in a manner reasonably satisfactory to the Agent. Stabilized Property. At any time, Real Estate improved as retail shopping centers (i) which are at least ninety percent (90%) leased (pursuant to written Leases which have been signed by both landlord and tenant and under which the payment of Base Rent has commenced) or (ii) which are at least eighty percent (80%) occupied by tenants which have accepted the premises and signed (together with the landlord) a Lease, and with respect to which the date for the commencement of payment of Base Rent has been established. State. A state of the United States of America. Subordination, Attornment and Non-Disturbance Agreement. An agreement among the Agent, the Borrower or a Guarantor and a tenant under a Lease pursuant to which such tenant agrees to subordinate its rights under the Lease to the lien or security title of the applicable Mortgage and agrees to recognize the Agent or its successor in interest as landlord under the Lease in the event of a foreclosure under such Mortgage, and the Agent agrees to not disturb the possession of such tenant, such agreement to be in form and substance reasonably satisfactory to Agent. Subsidiary. Any corporation, association, partnership, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes or controlling interests) of the outstanding voting interests or other economic interest, or any other entity the accounts of which are consolidated with the parent. Subsidiary Guarantors. JDN AL, JDN DCI, JDN Holdings, JDN LP, Inc., and the other parties to the Guaranty as of the Closing Date. Survey. An instrument survey of each parcel of Mortgaged Property prepared by a registered land surveyor which shall show the location of all buildings, structures, easements and utility lines on such property, shall be sufficient to remove the standard survey exception from the Title Policy, shall show that all buildings and 23 structures are within the lot lines of the Mortgaged Property and shall not show any encroachments by others (or to the extent any encroachments are shown, such encroachments shall be acceptable to the Agent in its reasonable discretion), shall show rights of way, adjoining sites, establish building lines and street lines, the distance to and names of the nearest intersecting streets and such other details as the Agent may reasonably require; and shall show whether or not the Mortgaged Property is located in a flood hazard district as established by the Federal Emergency Management Agency or any successor agency or is located in any flood plain, flood hazard or wetland protection district established under federal, state or local law and shall otherwise be in form and substance reasonably satisfactory to the Agent. Surveyor Certification. With respect to each parcel of Mortgaged Property, a certificate executed by the surveyor who prepared the Survey with respect thereto, dated as of a recent date and containing such information relating to such parcel as the Agent or the Title Insurance Company may reasonably require, such certificate to be reasonably satisfactory to the Agent in form and substance. Swing Loan. See (S)2.5(a). Swing Loan Lender. Fleet, in its capacity as Swing Loan Lender. Swing Loan Commitment. The sum of $10,000,000.00, as the same may be changed from time to time in accordance with the terms of this Agreement. Swing Loan Note. See (S)2.5(b). Syndication Agent. As defined in the preamble. Taking. The taking or appropriation (including by deed in lieu of condemnation) of any Mortgaged Property, or any part thereof or interest therein, for public or quasi-public use under the power of eminent domain, by reason of any public improvement or condemnation proceeding, or in any other manner or any damage or injury or diminution in value through condemnation, inverse condemnation or other exercise of the power of eminent domain. Term Base Rate Loans. The Term Loans bearing interest by reference to the Base Rate. Term LIBOR Rate Loans. The Term Loans bearing interest by reference to LIBOR. Term Loan or Term Loans. An individual Term Loan or the aggregate Term Loans, as the case may be, in the maximum principal amount of $150,000,000.00 made by the Term Loan Lenders hereunder and evidenced by the Term Loan Notes. Term Loan Commitment. As to each Term Loan Lender, the amount equal to such Term Loan Lender's percentage set forth on Schedule 1 of the aggregate principal amount of the Term Loans from time to time outstanding. 24 Term Loan Commitment Percentage. With respect to each Term Loan Lender, the percentage set forth on Schedule 1 hereto as such Term Loan Lender's percentage of the aggregate Term Loans. Term Loan Lenders. Collectively, the Lenders which are the holders of the Term Loan Notes, such Term Loan Lenders being identified on Schedule 1 hereto. Term Loan Notes. See (S)2.1(b). Test Period. See (S)9.2. Title Insurance Company. Chicago Title Insurance Company and/or any other title insurance company or companies approved by the Agent and the Borrower. Title Policy. With respect to each parcel of Mortgaged Property, an ALTA standard form title insurance policy (or, if such form is not available, an equivalent, legally promulgated form of mortgagee title insurance policy reasonably acceptable to the Agent) issued by a Title Insurance Company (with such reinsurance as the Agent may reasonably require, any such reinsurance to be with direct access endorsements to the extent available under applicable law) in an amount as the Agent may reasonably require insuring the priority of the Mortgage thereon and that the Borrower or a Guarantor, as applicable, holds marketable fee simple title to or a valid and subsisting leasehold interest in such parcel, subject only to the encumbrances acceptable to Agent in its reasonable discretion and which shall not contain standard exceptions for mechanics liens, persons in occupancy (other than tenants as tenants only under Leases) or matters which would be shown by a survey, shall not insure over any matter except to the extent that any such affirmative insurance is acceptable to the Agent in its reasonable discretion, and shall contain (a) a revolving credit endorsement and (b) such other endorsements and affirmative insurance as the Agent may reasonably require and is available in the State in which the Real Estate is located, including but not limited to (i) a comprehensive endorsement, (ii) a variable rate of interest endorsement, (iii) a usury endorsement, (iv) a doing business endorsement, (v) an ALTA form 3.1 zoning endorsement (in States where same is available from the Title Insurance Company without an opinion of counsel concerning such matters and where other evidence of zoning compliance has not been delivered to the Agent in the Agent's good faith business judgment), (vi) a "tie-in" endorsement relating to all Title Policies issued by such Title Insurance Company in respect of other Mortgaged Property and (vii) a "first loss" endorsement. Total Commitment. The sum of the Commitments of the Lenders, as in effect from time to time. Total Secured Debt. At any time, for the Borrower and its Subsidiaries, determined on a consolidated basis, the sum of the following, but only if any Real Estate, or ownership interest of the owner thereof, is subject to a mortgage, deed of trust, deed to secure debt or similar instrument encumbering such Real Estate, or with respect to an owner of such Real Estate, a pledge of any equity interests in such Person with respect 25 thereto: (i) all indebtedness for borrowed money; (ii) the deferred purchase price of Real Estate; (iii) all Capitalized Leases in which the Borrower is the tenant; (iv) all obligations to reimburse any bank or other Person in respect of amounts paid or to be paid under a letter of credit or similar instrument; and (v) all Guarantees of Indebtedness of Persons other than the Borrower and its Subsidiaries. Type. As to any Revolving Credit Loan or Term Loan, its nature as a Base Rate Loan or a LIBOR Rate Loan. Unsecured Notes. Collectively, (i) the $75,000,000.00 aggregate principal amount of 6.80% Notes Due 2004, and the $85,000,000.00 aggregate principal amount of 6.95% Notes Due 2007, both issued on August 4, 1997, pursuant to that certain Indenture dated as of July 15, 1997, made by Borrower in favor of First Union National Bank, as Trustee (the "Trustee"), as supplemented by that certain First Supplemental Indenture dated as of July 31, 1997, between Borrower and the Trustee, (ii) such of the $505,500,000.00 aggregate principal amount of JDN Realty Corporation Medium-Term Notes as may be issued under the Indenture described above, as supplemented by the First Supplemental Indenture described above and that certain Second Supplemental Indenture dated as of February 5, 1998, and that certain First Amendment to Second Supplemental Indenture, dated as of March 31, 1998, between Borrower and the Trustee (as supplemented, the "Indenture"), and (iii) such other unsecured indebtedness as may be issued by Borrower pursuant to the Indenture. Wachovia. As defined in the recitals. (S)1.2 Rules of Interpretation. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement. (b) The singular includes the plural and the plural includes the singular. (c) A reference to any law includes any amendment or modification of such law. (d) A reference to any Person includes its permitted successors and permitted assigns. (e) Accounting terms not otherwise defined herein have the meanings assigned to them by GAAP applied on a consistent basis by the accounting entity to which they refer. (f) The words "include", "includes" and "including" are not limiting. (g) The words "approval" and "approved", as the context requires, means an approval in writing given to the party seeking approval after full and fair 26 disclosure to the party giving approval of all material facts necessary in order to determine whether approval should be granted. (h) All terms not specifically defined herein or by GAAP, which terms are defined in the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts, have the meanings assigned to them therein. (i) Reference to a particular "(S)", refers to that section of this Agreement unless otherwise indicated. (j) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement. (S)2. THE TERM LOAN FACILITY AND THE REVOLVING CREDIT FACILITY. (S)2.1 Term Loan. (a) Subject to the terms and conditions set forth in this Agreement, each of the Term Loan Lenders severally agrees to lend to the Borrower such Term Loan Lender's Term Loan Commitment Percentage of the Term Loan Commitment. (b) The Term Loans shall be evidenced by separate promissory notes of the Borrower in substantially the form of Exhibit A hereto (collectively, the "Term Loan Notes"), dated of even date with this Agreement (except as otherwise provided in (S)18.3) and completed with appropriate insertions. One Term Loan Note shall be payable to the order of each Term Loan Lender in the principal amount equal to such Term Loan Lender's Term Loan Commitment, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes Agent to make or cause to be made, at or about the time of receipt of any payment of principal thereof, an appropriate notation on Agent's Record reflecting the receipt of such payment. The outstanding amount of the Term Loans set forth on Agent's Record shall be prima facie evidence of the principal amount thereof owing and unpaid to each Term Loan Lender, but the failure to record, or any error in so recording, any such amount on Agent's Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Term Loan Note to make payments of principal of or interest on any Term Loan Note when due. By delivery of the Term Loan Notes, there shall not be deemed to have occurred, and there has not otherwise occurred, any payment, satisfaction or novation of the indebtedness evidenced by the "Notes" (as defined in the Original Term Loan Agreement), which indebtedness is instead allocated among the Term Loan Lenders as of the date hereof and evidenced by the Term Loan Notes in accordance with their respective Term Loan Commitment Percentages. (S)2.2 Revolving Credit Loans. (a) Subject to the terms and conditions set forth in this Agreement, each of the Revolving Credit Lenders severally agrees to lend to the Borrower, and the 27 Borrower may borrow (and repay and reborrow) from time to time between the Closing Date and the Maturity Date upon notice by the Borrower to the Agent given in accordance with (S)2.7, such sums as are requested by the Borrower for the purposes set forth in (S)2.9 up to a maximum aggregate principal amount outstanding (after giving effect to all amounts requested) at any one time equal to the lesser of (i) such Revolving Credit Lender's Revolving Credit Commitment and (ii) such Revolving Credit Lender's Revolving Credit Commitment Percentage of the sum of (A) the Borrowing Base minus (B) the sum of (1) the amount of all Outstanding Term Loans and (2) the aggregate Letters of Credit Outstanding; provided, that, in all events no Default or Event of Default shall have occurred and be continuing; and provided, further, that the outstanding principal amount of the Revolving Credit Loans (after giving effect to all amounts requested) and Letters of Credit Outstanding shall not at any time exceed the total Revolving Credit Commitment or cause a violation of the covenant set forth in (S)9.1. The Revolving Credit Loans shall be made pro rata in accordance with each Revolving Credit Lender's Revolving Credit Commitment Percentage. Each request for a Revolving Credit Loan hereunder shall constitute a representation and warranty by the Borrower that all of the conditions set forth in 10 and (S)11 have been satisfied on the date of such request. No Revolving Credit Lender shall have any obligation to make Revolving Credit Loans to Borrower in the maximum aggregate principal outstanding balance of more than the principal face amount of its Revolving Credit Note. (b) The Revolving Credit Loans shall be evidenced by separate promissory notes of the Borrower in substantially the form of Exhibit B hereto (collectively, the "Revolving Credit Notes"), dated of even date with this Agreement (except as otherwise provided in (S)18.3) and completed with appropriate insertions. One Revolving Credit Note shall be payable to the order of each Revolving Credit Lender in the principal amount equal to such Revolving Credit Lender's Revolving Credit Commitment or, if less, the outstanding amount of all Revolving Credit Loans made by such Revolving Credit Lender, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes Agent to make or cause to be made, at or about the time of the Drawdown Date of any Revolving Credit Loan or the time of receipt of any payment of principal thereof, an appropriate notation on Agent's Record reflecting the making of such Revolving Credit Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Revolving Credit Loans set forth on Agent's Record shall be prima facie evidence of the principal amount thereof owing and unpaid to each Revolving Credit Lender, but the failure to record, or any error in so recording, any such amount on Agent's Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Revolving Credit Note to make payments of principal of or interest on any Revolving Credit Note when due. By delivery of the Revolving Credit Notes, there shall not be deemed to have occurred, and there has not otherwise occurred, any payment, satisfaction or novation of the indebtedness evidenced by the "Notes" as defined in the Original Revolving Credit Agreement, which indebtedness (including any amount outstanding as a swing loan under the Original Revolving Credit Agreement) is instead allocated among the Revolving Credit Lenders as of the date hereof and evidenced by the Revolving Credit Notes in accordance with their respective Revolving Credit Commitment Percentages. 28 (S)2.3 Facility Unused Fee. The Borrower agrees to pay to the Agent for the account of the Revolving Credit Lenders in accordance with their respective Revolving Credit Commitment Percentages a facility unused fee calculated at the rate per annum as set forth below on the average daily amount by which the total Revolving Credit Commitment exceeds the outstanding principal amount of Revolving Credit Loans and the Letters of Credit Outstanding during each calendar quarter or portion thereof commencing on the date hereof and ending on the Maturity Date. The facility unused fee shall be calculated based on the Pricing Level of the Applicable Margin applicable to the Loans as follows: Pricing Level Rate ------------- ---- Pricing Level 1 0.15% Pricing Levels 2 through 5 0.25% The facility unused fee shall be payable quarterly in arrears on the first day of each calendar quarter for the immediately preceding calendar quarter or portion thereof, on any earlier date on which the applicable Revolving Credit Commitments shall be reduced and on the Maturity Date. (S)2.4 Reduction and Termination of Revolving Credit Commitments. The Borrower shall have the right at any time and from time to time upon five (5) Business Days' prior written notice to the Agent to reduce by $5,000,000 or an integral multiple of $1,000,000 in excess thereof (provided that in no event shall the total Revolving Credit Commitment be reduced in such manner to an amount less than $75,000,000.00) or to terminate entirely the unborrowed portion of the Revolving Credit Commitments (provided that in no event may the Revolving Credit Commitment be reduced or terminated unless the outstanding Term Loans are reduced to an equal amount or paid in full, as applicable), whereupon the Revolving Credit Commitments of the Revolving Credit Lenders shall be reduced pro rata in accordance with their respective Revolving Credit Commitment Percentages of the amount specified in such notice or, as the case may be, terminated, any such termination or reduction to be without penalty except as otherwise set forth in (S)4.8; provided, however, that no such termination or reduction shall be permitted if, after giving effect thereto, the sum of Outstanding Revolving Credit Loans, the Outstanding Swing Loans and the Letters of Credit Outstanding would exceed the Revolving Credit Commitments of the Revolving Credit Lenders as so terminated or reduced. Promptly after receiving any notice from the Borrower delivered pursuant to this (S)2.4, the Agent will notify the Revolving Credit Lenders of the substance thereof. Upon the effective date of any such reduction or termination, the Borrower shall pay to the Agent for the respective accounts of the Revolving Credit Lenders the full amount of any facility fee under (S)2.3 then accrued on the amount of the reduction. No reduction or termination of the Revolving Credit Commitment may be reinstated. (S)2.5 Swing Loan Commitment. 29 (a) Subject to the terms and conditions set forth in this Agreement, and if necessary to meet the Borrower's funding deadlines, Swing Loan Lender agrees to lend to the Borrower (the "Swing Loans"), and the Borrower may borrow (and repay and reborrow) from time to time between the Closing Date and the date which is five (5) Business Days prior to the Maturity Date upon notice by the Borrower to the Swing Loan Lender given in accordance with this (S)2.5, such sums as are requested by the Borrower for the purposes set forth in (S)2.9 in an aggregate principal amount at any one time outstanding not exceeding the Swing Loan Commitment; provided that at no time shall the aggregate principal balance of Swing Loans then outstanding, when added to the Swing Loan Lender's Revolving Credit Commitment Percentage of all other Outstanding Revolving Credit Loans (after giving effect to all amounts requested), exceed the lesser of (i) the Swing Loan Lender's Revolving Credit Commitment and (ii) the Swing Loan Lender's Revolving Credit Commitment Percentage of the Borrowing Base minus the sum of (A) the Outstanding Loans (other than Swing Loans) plus (B) the Letters of Credit Outstanding, provided, further, that in all events no Default or Event of Default shall have occurred and be continuing; and provided, further, that the outstanding principal amount of the Loans (after giving effect to all amounts requested) shall not at any time exceed the Total Commitment. Swing Loans shall constitute "Loans" for all purposes hereunder, but shall not be considered the utilization of a Revolving Credit Lender's Revolving Credit Commitment. The funding of a Swing Loan hereunder shall constitute a representation and warranty by the Borrower that all of the conditions set forth in (S)10 and (S)11 have been satisfied on the date of such funding. (b) The Swing Loans shall be evidenced by a separate promissory note of the Borrower in substantially the form of Exhibit C hereto (the "Swing Note"), dated the date of this Agreement and completed with appropriate insertions. The Swing Loan Note shall be payable to the order of the Swing Loan Lender in the principal face amount equal to the Swing Loan Commitment and shall be payable as set forth below. The Borrower irrevocably authorizes the Swing Loan Lender to make or cause to be made, at or about the time of the Drawdown Date of any Swing Loan or at the time of receipt of any payment of principal thereof, an appropriate notation on the Swing Loan Lender's Record reflecting the making of such Swing Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Swing Loans set forth on the Swing Loan Lender's Record shall be prima facie evidence of the principal amount thereof owing and unpaid to the Swing Loan Lender, but the failure to record, or any error in so recording, any such amount on the Swing Loan Lender's Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under the Swing Loan Note to make payments of principal of or interest on any Swing Loan Note when due. (c) Each borrowing of Swing Loan shall be subject to the limits for Revolving Credit Base Rate Loans and Revolving Credit LIBOR Rate Loans set forth in (S)2.7. Borrower shall request a Swing Loan by delivering to the Swing Loan Lender a Loan Request no later than 11:00 a.m. (Boston time) on the requested Drawdown Date specifying the amount of the requested Swing Loan. The Loan Request shall also contain the statements and certifications required by (S)2.7(i)-(iii). Each such Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept such Swing Loan on the Drawdown Date. Notwithstanding anything herein to the 30 contrary, a Swing Loan shall either be a Revolving Credit Base Rate Loan or a Revolving Credit LIBOR Rate Loan having an Interest Period of one month, and in the event that the Borrower fails to specify whether it has selected a Revolving Credit Base Rate Loan or a Revolving Credit LIBOR Rate Loan, the Borrower shall be deemed conclusively to have selected a Revolving Credit LIBOR Rate Loan with an Interest Period of one month. Notwithstanding the foregoing, upon the date that the Revolving Credit Lenders shall be required to fund the Revolving Credit Loans pursuant to (S)2.5(d) to refund such Swing Loan, the interest rate shall be reset to a Revolving Credit LIBOR Rate Loan with an Interest Period as specified in the Loan Request given by the Borrower to the Agent in connection with such Swing Loan, or if no Interest Period is specified, then as a Revolving Credit Base Rate Loan in each case without any breakage or similar cost to the Borrower under (S)4.8 or otherwise. The proceeds of the Swing Loan will be made available by the Swing Loan Lender to the Borrower at the Agent's Head Office by crediting the account of the Borrower at such office with such proceeds. (d) The Swing Loan Lender shall within three (3) Business Days after the Drawdown Date with respect to such Swing Loan, request each Revolving Credit Lender, including the Swing Loan Lender, to make a Revolving Credit Loan pursuant to (S)2.2 in an amount equal to such Revolving Credit Lender's Revolving Credit Commitment Percentage of the amount of the Swing Loan outstanding on the date such notice is given. Borrower hereby irrevocably authorizes and directs the Swing Loan Lender to so act on its behalf, and agrees that any amount advanced to the Agent for the benefit of the Swing Loan Lender pursuant to this (S)2.5(d) shall be considered a Revolving Credit Loan pursuant to (S)2.2. Unless any of the events described in paragraph (h), (i) or (j) of (S)12.1 shall have occurred (in which event the procedures of (S)2.5(e) shall apply), each Revolving Credit Lender shall make the proceeds of its Revolving Credit Loan available to the Swing Loan Lender for the account of the Swing Loan Lender at the Agent's Head Office prior to 12:00 noon (Boston time) in funds immediately available no later than the third (3rd) Business Day after the date such notice is given just as if the Revolving Credit Lenders were funding directly to the Borrower, so that thereafter such Obligations shall be evidenced by the Revolving Credit Notes. The proceeds of such Revolving Credit Loan shall be immediately applied to repay the Swing Loans. (e) If prior to the making of a Revolving Credit Loan pursuant to (S)2.5(d) by all of the Revolving Credit Lenders, one of the events described in (S)12.1(h), (i) or (j) shall have occurred, each Revolving Credit Lender will, on the date such Revolving Credit Loan pursuant to (S)2.5(d) was to have been made, purchase an undivided participation interest in the Swing Loan in an amount equal to its Revolving Credit Commitment Percentage of such Swing Loan. Each Revolving Credit Lender will immediately transfer to the Swing Loan Lender in immediately available funds the amount of its participation and upon receipt thereof the Swing Loan Lender will deliver to such Revolving Credit Lender a Swing Loan participation certificate dated the date of receipt of such funds and in such amount. (f) Whenever at any time after the Swing Loan Lender has received from any Revolving Credit Lender such Revolving Credit Lender's participation interest 31 in a Swing Loan, the Swing Loan Lender receives any payment on account thereof, the Swing Loan Lender will distribute to such Revolving Credit Lender its participation interest in such amount (appropriately adjusted in the case of interest payments to reflect the period of time during which such Revolving Credit Lender's participating interest was outstanding and funded); provided, however, that in the event that such payment received by the Swing Loan Lender is required to be returned, such Revolving Credit Lender will return to the Swing Loan Lender any portion thereof previously distributed by the Swing Loan Lender to it. (g) Each Revolving Credit Lender's obligation to fund a Revolving Credit Loan as provided in (S)2.5(d) or to purchase participation interests pursuant to (S)2.5(e) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which such Revolving Credit Lender or the Borrower or Guarantors may have against the Swing Loan Lender, the Borrower or Guarantors or anyone else for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default; (iii) any adverse change in the condition (financial or otherwise) of the Borrower or Guarantors or any of their respective Subsidiaries; (iv) any breach of this Agreement or any of the other Loan Documents by the Borrower or Guarantors or any Revolving Credit Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. Any portions of a Swing Loan not so purchased or converted may be treated by the Agent and Swing Loan Lender as a Revolving Credit Loan which was not funded by the non-purchasing Revolving Credit Lender as contemplated by (S)2.8 and (S)12.5. Each Swing Loan, once so sold or converted, shall cease to be a Swing Loan for the purposes of this Agreement, but shall be a Revolving Credit Loan made by each Revolving Credit Lender under its Revolving Credit Commitment. (S)2.6 Interest on Loans. (a) Each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the date on which such Base Rate Loan is repaid or converted to a LIBOR Rate Loan at the rate per annum equal to the sum of the Base Rate plus the Applicable Margin. (b) Each LIBOR Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of each Interest Period with respect thereto at the rate per annum equal to the sum of LIBOR determined for such Interest Period plus the Applicable Margin. (c) The Borrower promises to pay interest on each Loan in arrears on each Interest Payment Date with respect thereto. (d) Base Rate Loans and LIBOR Rate Loans may be converted to Loans of the other Type as provided in (S)4.1. 32 (S)2.7 Requests for Revolving Credit Loans. Except with respect to the initial Revolving Credit Loan on the Closing Date, the Borrower shall give to the Agent written notice in the form of Exhibit H hereto (or telephonic notice confirmed in writing in the form of Exhibit H hereto) of each Revolving Credit Loan requested hereunder (a "Loan Request") by 9:00 a.m. (Boston time) on the Business Day of the proposed Drawdown Date with respect to Revolving Credit Base Rate Loans and three (3) Business Days prior to the proposed Drawdown Date with respect to Revolving Credit LIBOR Rate Loans. Each such notice shall specify with respect to the requested Revolving Credit Loan the proposed principal amount of such Revolving Credit Loan, the Type of Revolving Credit Loan, the initial Interest Period (if applicable) for such Revolving Credit Loan and the Drawdown Date. Each such notice shall also contain (i) a general statement as to the purpose for which such advance shall be used (which purpose shall be in accordance with the terms of (S)2.9), (ii) a certification by the chief financial officer or chief accounting officer of the Borrower that the Borrower and the Guarantors are and will be in compliance with all covenants under the Loan Documents after giving effect to the making of such Loan, and (iii) a current calculation of the Borrowing Base with such supporting information as the Agent may require adjusted in the best good faith estimate of the Borrower to give effect to the proposed advance. Promptly upon receipt of any such notice, the Agent shall notify each of the Revolving Credit Lenders thereof. Except as provided in this (S)2.7, each such Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Revolving Credit Loan requested from the Revolving Credit Lenders on the proposed Drawdown Date; provided that, in addition to the Borrower's other remedies against any Revolving Credit Lender which fails to advance its proportionate share of a requested Revolving Credit Loan, such Loan Request may be revoked by the Borrower by notice received by the Agent no later than the Drawdown Date if any Revolving Credit Lender fails to advance its proportionate share of the requested Revolving Credit Loan in accordance with the terms of this Agreement; and provided further that the Borrower shall be liable in accordance with the terms of this Agreement to any Revolving Credit Lender which is prepared to advance its proportionate share of the requested Revolving Credit Loan for any costs, expenses or damages actually incurred by such Revolving Credit Lender as a result of the Borrower's election to revoke such Loan Request. Nothing herein shall prevent the Borrower from seeking recourse against any Revolving Credit Lender that fails to advance its proportionate share of a requested Revolving Credit Loan as required by this Agreement. Each Loan Request shall be (a) for a Revolving Credit Base Rate Loan in a minimum aggregate amount of $1,000,000 or an integral multiple of $100,000 in excess thereof; or (b) for a Revolving Credit LIBOR Rate Loan in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in excess thereof; provided, however, that there shall be no more than eight (8) LIBOR Rate Loans (including Revolving Credit LIBOR Rate Loans and Term LIBOR Rate Loans) outstanding at any one time. (S)2.8 Funds for Revolving Credit Loans. (a) Not later than 1:00 p.m. (Boston time) on the proposed Drawdown Date of any Revolving Credit Loans, each of the Revolving Credit Lenders will make available to the Agent, at the Agent's Head Office, in immediately available funds, the amount of such Revolving Credit Lender's Revolving Credit Commitment Percentage of 33 the amount of the requested Revolving Credit Loans which may be disbursed pursuant to (S)2.2. Upon receipt from each Revolving Credit Lender of such amount, and upon receipt of the documents required by (S)10 and (S)11 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Agent will make available to the Borrower the aggregate amount of such Revolving Credit Loans made available to the Agent by the Revolving Credit Lenders by crediting such amount to the account of the Borrower maintained at the Agent's Head Office. The failure or refusal of any Revolving Credit Lender to make available to the Agent at the aforesaid time and place on any Drawdown Date the amount of its Revolving Credit Commitment Percentage of the requested Revolving Credit Loans shall not relieve any other Revolving Credit Lender from its several obligation hereunder to make available to the Agent the amount of such other Revolving Credit Lender's Revolving Credit Commitment Percentage of any requested Revolving Credit Loans, including any additional Revolving Credit Loans that may be requested subject to the terms and conditions hereof to provide funds to replace those not advanced by the Revolving Credit Lender so failing or refusing. In the event of any such failure or refusal, the Revolving Credit Lenders not so failing or refusing shall be entitled to a priority secured position as against the Revolving Credit Lender or Revolving Credit Lenders so failing or refusing to make available to the Borrower the amount of its or their Revolving Credit Commitment Percentage for such Revolving Credit Loans as provided in (S)12.5. (b) Unless the Agent shall have been notified by any Revolving Credit Lender prior to the applicable Drawdown Date that such Revolving Credit Lender will not make available to Agent such Revolving Credit Lender's Revolving Credit Commitment Percentage of a proposed Revolving Credit Loan, Agent may in its discretion assume that such Revolving Credit Lender has made such Revolving Credit Loan available to Agent in accordance with the provisions of this Agreement and the Agent may, if it chooses, in reliance upon such assumption make such Revolving Credit Loan available to the Borrower, and such Revolving Credit Lender shall be liable to the Agent for the amount of such advance. If such Revolving Credit Lender does not pay such corresponding amount upon the Agent's demand therefor, the Agent will promptly notify the Borrower, and the Borrower shall promptly pay such corresponding amount to the Agent. The Agent shall also be entitled to recover from the Revolving Credit Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrower to the date such corresponding amount is recovered by the Agent at a per annum rate equal to (i) from the Borrower at the applicable rate for such Revolving Credit Loan or (ii) from a Revolving Credit Lender at the Federal Funds Effective Rate. (S)2.9 Use of Proceeds. The Borrower will use the proceeds of the Loans and the Letters of Credit solely to (a) refinance Indebtedness under the Original Revolving Credit Agreement and the Original Term Loan Agreement; (b) provide financing for the acquisition and development by the Borrower and its Subsidiaries of Real Estate utilized or to be utilized for retail shopping centers; (c) for capital improvement projects for Real Estate; (d) for working capital purposes or other lawful REIT purposes; and (e) for such other purposes as the Required Lenders in their sole discretion from time to time may agree in writing. 34 (S)2.10 Letters of Credit. (a) Subject to the terms and conditions set forth in this Agreement, at any time and from time to time from the Closing Date through the day that is thirty (30) days prior to the Maturity Date, the Issuing Lender shall issue such Letters of Credit as the Borrower may request upon the delivery of a written request in the form of Exhibit I hereto (a "Letter of Credit Request") to the Issuing Lender, provided that (i) no Default or Event of Default shall have occurred and be continuing, (ii) upon issuance of such Letter of Credit, the Outstanding Letters of Credit (including Letters of Credit accepted but unpaid) shall not exceed Fifteen Million Dollars ($15,000,000.00), (iii) in no event shall the sum of (A) the Revolving Credit Loans Outstanding, (B) the sum of Swing Loans Outstanding and (C) the amount of Letters of Credit Outstanding (after giving effect to all Letters of Credit requested and any Letters of Credit accepted but unpaid) exceed the total Revolving Credit Commitment, (iv) the conditions set forth in (S)(S)10 and 11 shall have been satisfied, and (v) in no event shall any amount drawn under a Letter of Credit be available for reinstatement or a subsequent drawing under such Letter of Credit. Each Letter of Credit Request shall be executed by an officer of Borrower. The Issuing Lender shall be entitled to conclusively rely on such Person's authority to request a Letter of Credit on behalf of Borrower. The Issuing Lender shall have no duty to verify the authenticity of any signature appearing on a Letter of Credit Request. The Borrower assumes all risks with respect to the use of the Letters of Credit. Unless the Issuing Lender and the Required Lenders otherwise consent, the term of any Letter of Credit shall not exceed a period of time commencing on the issuance of the Letter of Credit and ending on the date which is fifteen (15) days prior to the Maturity Date (but in any event the term shall not extend beyond the Maturity Date). The amount available to be drawn under any Letter of Credit shall reduce on a dollar-for-dollar basis the amount available to be drawn under the Revolving Credit Commitment as a Revolving Credit Loan. (b) Each Letter of Credit Request shall be submitted to the Issuing Lender at least ten (10) Business Days (or such shorter period as the Issuing Lender may approve) prior to the date upon which the requested Letter of Credit is to be issued. Each such Letter of Credit Request shall contain (i) a statement as to the purpose for which such Letter of Credit shall be used (which purpose shall be in accordance with the terms of this Agreement), and (ii) a certification by the chief financial or chief accounting officer of Borrower that the Borrower is and will be in compliance with all covenants under the Loan Documents after giving effect to the issuance of such Letter of Credit. The Borrower shall further deliver to the Issuing Lender such additional applications and documents as the Issuing Lender may require, in conformity with the then standard practices of its letter of credit department, in connection with the issuance of such Letter of Credit; provided that in the event of any conflict, the terms of this Agreement shall control. (c) The Issuing Lender shall, if it approves of the content of the Letter of Credit Request (which approval shall not be unreasonably withheld), and subject to the conditions set forth in this Agreement, issue the Letter of Credit on or before ten (10) Business Days following receipt of the documents last due pursuant to (S)2.10(b). Each Letter of Credit shall be in form and substance reasonably satisfactory to the Issuing Lender in its reasonable discretion. Upon issuance of a Letter of Credit, the Issuing 35 Lender shall provide notice of the issuance of such Letter of Credit to the Revolving Credit Lenders and shall provide a copy of such Letter of Credit to any Revolving Credit Lender that requests a copy. (d) Upon the issuance of a Letter of Credit, each Revolving Credit Lender shall be deemed to have purchased a participation therein from Issuing Lender in an amount equal to its respective Revolving Credit Commitment Percentage of the amount of such Letter of Credit. No Revolving Credit Lender's obligation to participate in a Letter of Credit shall be affected by any other Revolving Credit Lender's failure to perform as required herein with respect to such Letter of Credit or any other Letter of Credit. (e) Upon the issuance of each Letter of Credit, the Borrower shall pay to the Issuing Lender (i) for its own account, a Letter of Credit fee calculated at the rate of one-eighth of one percent (0.125%) per annum of the amount available to be drawn under such Letter of Credit (which fee shall not be less than $1,000.00 in any event), and (ii) for the accounts of the Revolving Credit Lenders in accordance with their respective percentage shares of participation in such Letter of Credit, a Letter of Credit fee calculated at the rate per annum equal to the Applicable Margin then applicable to Revolving Credit LIBOR Rate Loans on the amount available to be drawn under such Letter of Credit. Such fees shall be payable in quarterly installments in arrears with respect to each Letter of Credit on the first day of each calendar quarter following the date of issuance and continuing on each quarter or portion thereof thereafter, as applicable, or on any earlier date on which the Revolving Credit Commitments shall terminate and on the expiration or return of any Letter of Credit. In addition, the Borrower shall pay to Issuing Lender for its own account within five (5) days of demand of Issuing Lender the standard issuance, documentation and service charges for Letters of Credit issued from time to time by Issuing Lender. (f) In the event that any amount is drawn under a Letter of Credit by the beneficiary thereof, the Borrower shall reimburse the Issuing Lender by having such amount drawn treated as an outstanding Revolving Credit Base Rate Loan under this Agreement and the Agent shall promptly notify each Revolving Credit Lender by telex, telecopy, telegram, telephone (confirmed in writing) or other similar means of transmission, and each Revolving Credit Lender shall promptly and unconditionally pay to the Agent, for the Issuing Lender's own account, an amount equal to such Revolving Credit Lender's Revolving Credit Commitment Percentage of such Letter of Credit (to the extent of the amount drawn). If and to the extent any Revolving Credit Lender shall not make such amount available on the Business Day on which such draw is funded, such Revolving Credit Lender agrees to pay such amount to the Agent forthwith on demand, together with interest thereon, for each day from the date on which such draw was funded until the date on which such amount is paid to the Agent, at the Federal Funds Effective Rate until three (3) days after the date on which the Agent gives notice of such draw and at the Federal Funds Effective Rate plus 1% for each day thereafter. Further, such Revolving Credit Lender shall be deemed to have assigned any and all payments made of principal and interest on its Loans, amounts due with respect to its participations in 36 Letters of Credit and any other amounts due to it hereunder to the Agent to fund the amount of any drawn Letter of Credit which such Revolving Credit Lender was required to fund pursuant to this (S)2.10(f) until such amount has been funded (as a result of such assignment or otherwise). In the event of any such failure or refusal, the Revolving Credit Lenders not so failing or refusing shall be entitled to a priority secured position for such amounts as provided in (S)12.5. The failure of any Revolving Credit Lender to make funds available to the Agent in such amount shall not relieve any other Revolving Credit Lender of its obligation hereunder to make funds available to the Agent pursuant to this (S)2.10(f). (g) If after the issuance of a Letter of Credit pursuant to (S)2.10(c) by the Issuing Lender, but prior to the funding of any portion thereof by a Revolving Credit Lender, one of the events described in (S)12.1(h), (i) or (j) shall have occurred, each Revolving Credit Lender will, on the date such Revolving Credit Loan pursuant to (S)2.10(f) was to have been made, purchase an undivided participation interest in the Letter of Credit in an amount equal to its Revolving Credit Commitment Percentage of the amount of such Letter of Credit. Each Revolving Credit Lender will immediately transfer to the Issuing Lender in immediately available funds the amount of its participation and upon receipt thereof the Issuing Lender will deliver to such Revolving Credit Lender a Letter of Credit participation certificate dated the date of receipt of such funds and in such amount. (h) Whenever at any time after the Issuing Lender has received from any Revolving Credit Lender any such Revolving Credit Lender's payment of funds under a Letter of Credit and thereafter the Issuing Lender receives any payment on account thereof, then the Issuing Lender will distribute to such Revolving Credit Lender its participation interest in such amount (appropriately adjusted in the case of interest payments to reflect the period of time during which such Revolving Credit Lender's participation interest was outstanding and funded); provided, however, that in the event that such payment received by the Issuing Lender is required to be returned, such Revolving Credit Lender will return to the Issuing Lender any portion thereof previously distributed by the Issuing Lender to it. (i) The issuance of any supplement, modification, amendment, renewal or extension to or of any Letter of Credit shall be treated in all respects the same as the issuance of a new Letter of Credit. (j) Borrower assumes all risks of the acts, omissions, or misuse of any Letter of Credit by the beneficiary thereof. Neither Agent, Issuing Lender nor any Lender will be responsible for (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or any document submitted by any party in connection with the issuance of any Letter of Credit, even if such document should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of any beneficiary of any Letter of 37 Credit to comply fully with the conditions required in order to demand payment under a Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document or draft required by or from a beneficiary in order to make a disbursement under a Letter of Credit or the proceeds thereof; (vii) for the misapplication by the beneficiary of any Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of Agent or any Lender. None of the foregoing will affect, impair or prevent the vesting of any of the rights or powers granted to Agent, Issuing Lender or the Lenders hereunder. In furtherance and extension and not in limitation or derogation of any of the foregoing, any act taken or omitted to be taken by Agent, Issuing Lender or the other Lenders in good faith will be binding on Borrower and will not put Agent, Issuing Lender or the other Lenders under any resulting liability to Borrower. (S)2.11 Extension of Maturity Date. (a) The Borrower has requested the ability to extend the Maturity Date. The Borrower acknowledges and agrees that, except as set forth in (S)2.11(b) below, the Lenders have no agreement or obligation to extend the Maturity Date. Notwithstanding the foregoing, the Borrower and the Lenders have agreed upon the following procedure with respect to requests by the Borrower to extend the Maturity Date: (i) The Borrower may request that the Lenders extend the Maturity Date by one (1) year. If the Borrower desires to request that the Maturity Date be extended by one (1) year, the Borrower shall deliver written notice of such request to the Agent not later than the date which is six (6) months prior to the Maturity Date (an "Extension Request"). The Agent shall promptly provide a copy of such notice to each of the Lenders. The Lenders shall notify the Agent within thirty (30) days of receipt of such notice from the Agent of such Lender's approval or rejection of the Extension Request and whether such approval is conditioned upon a reduction in such Lender's Commitment. Except as provided in (S)2.11(a)(iv), no Extension Request shall be deemed approved unless approved by all of the Lenders without change in the Commitments of each of the Lenders, which approval may be granted or withheld in each Lender's sole and absolute discretion. In the event that a Lender shall fail to respond in writing to the Agent within such thirty (30) day period, such Lender shall be deemed to have rejected the Extension Request. The Agent shall promptly notify the Borrower of the responses received from the Lenders with respect to the Extension Request. (ii) If the total of the Commitments approved by the Lenders to be extended is not less than eighty percent (80%) of the Total Commitment (such amount as is not approved for extension is hereinafter referred to as the "Extension Shortfall"), the Agent shall upon the request of the Borrower contact additional financial institutions acceptable to the Agent and the Borrower in their reasonable discretion (the "Potential Lenders") to determine their interest in extending the Maturity Date and acquiring a portion of the Extension Shortfall, and contact the Lenders which have approved the Extension Request to determine their interest in extending the Maturity Date and increasing their respective Commitments to cover a portion of the Extension Shortfall. The Borrower acknowledges and agrees that the Agent does not and cannot assure the Borrower that the Potential Lenders which have approved the 38 Extension Request will acquire the Extension Shortfall, and neither the Agent nor any Lender shall have any liability to the Borrower in the event that the Potential Lenders do not agree to acquire the Extension Shortfall. The Agent shall upon request from Borrower notify the Borrower, the Lenders and any Potential Lenders of the amount of the total commitments obtained for the provision of Loans to the Borrower during the requested extension period, indicating the individual amount of commitments of the Agent, the Lenders and any Potential Lenders, and any fees, additional covenants or other requirements that are being required as a condition to such approval. The Agent shall reserve the right to allocate such Commitments between the Lenders and any Potential Lenders at its reasonable discretion (provided that no such allocation may increase a Lender's Commitment without such Lender's approval); it being acknowledged that the Agent shall not be required to approve an allocation of Commitments which results in a Lender having a greater Commitment than that of Agent. (iii) The Borrower shall have ten (10) days after receipt of such notification from the Agent of the response obtained from the Lenders and any Potential Lenders to accept or reject such proposal in writing. Upon acceptance by the Borrower of such proposal, the Borrower shall become obligated to pay any fees required by the Agent and the Lenders with respect to such extension. Any additional covenants or requirements required by the Agent or the Lenders in connection with such extension shall be incorporated by such amendments to the Loan Documents as the Agent may require as a condition to the effectiveness of any Extension Request. (iv) In the event that the total of the Commitments approved by the Lenders to be extended is not less than eighty percent (80%) of the Total Commitment and the Lenders or Potential Lenders shall not have acquired all of the Extension Shortfall, then the Maturity Date shall be extended upon the terms and conditions approved by those Lenders that have approved the extension provided that on the then existing Maturity Date each of the Lenders whose Commitment is included within the Extension Shortfall shall have received as a prepayment of its Loans, all principal, interest, fees and other amounts due and payable to such Lender under the Loan Documents. (v) Nothing herein shall be deemed to require a Lender that does not approve an Extension Request to assign its Commitment at any time prior to the Maturity Date. (b) Provided that no Default or Event of Default shall have occurred and be continuing and that the Maturity Date is not being extended as provided in (S)2.11(a), the Borrower shall have the option, to be exercised by giving written notice to the Agent at least thirty (30) days prior to the Maturity Date, subject to the terms and conditions set forth in this Agreement, to extend the Maturity Date by one (1) day to January 1, 2003. The request by the Borrower for extension of the Maturity Date 39 pursuant to (S)2.11(b) shall constitute a representation and warranty by the Borrower that all of the conditions set forth in this Section shall have been satisfied on the date of such request and shall be satisfied on the then existing Maturity Date. The obligations of the Agent and the Lenders to extend the Maturity Date as provided in this (S)2.11(b) shall be subject to the satisfaction of the following conditions precedent on the Maturity Date (without regard to such extension request): (i) No Default. On the date the extension request is given and on the Maturity Date (as determined without regard to such extension) there shall exist no Default or Event of Default. (ii) Representations and Warranties. The representations and warranties made by the Borrower or the Guarantors in the Loan Documents or otherwise made by or on behalf of the Borrower, the Guarantors or any of their respective Subsidiaries in connection therewith or after the date thereof shall have been true and correct in all material respects when made and shall also be true and correct in all material respects on the Maturity Date (as determined without regard to such extension), except to the extent of changes resulting from transactions permitted by the Loan Documents, it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date. (S)3. REPAYMENT OF THE LOANS. (S)3.1 Stated Maturity. The Borrower promises to pay on the Maturity Date and there shall become absolutely due and payable on the Maturity Date all of the Loans outstanding on such date, together with any and all accrued and unpaid interest thereon. (S)3.2 Mandatory Prepayments. If at any time the sum of the aggregate outstanding principal amount of the Revolving Credit Loans, the Swing Loans and the Letters of Credit Outstanding exceeds the aggregate Revolving Credit Commitments, or the aggregate outstanding principal balance of the Revolving Credit Loans, the Term Loans, the Swing Loans and the Letters of Credit Outstanding exceeds the Borrowing Base, then the Borrower shall immediately pay the amount of such excess to the Agent for the respective accounts of the Lenders, as applicable, for application to the Loans as provided in (S)3.4, together with any additional amounts payable pursuant to (S)4.8, except that the amount of any Swing Loans shall be paid solely to the Swing Loan Lender. In the event there shall have occurred a casualty with respect to any Mortgaged Property and the Borrower is required to repay the Loans pursuant to (S)7.7 or a Taking and the Borrower is required to repay the Loans pursuant to a Mortgage or (S)7.7, the Borrower shall prepay the Loans concurrently with the date of receipt by the Borrower or the Agent of any Insurance Proceeds or Condemnation Proceeds in respect of such casualty or Taking, as applicable, or as soon thereafter as is reasonably practicable, in the amount required pursuant to the relevant provisions of (S)7.7 or such Mortgage. (S)3.3 Optional Prepayments. The Borrower shall have the right, at its election, to prepay the outstanding amount of the Loans, as a whole or in part, at any time without 40 penalty or premium; provided, that if any prepayment of the outstanding amount of any LIBOR Rate Loans pursuant to this (S)3.3 is made on a date that is not the last day of the Interest Period relating thereto, such prepayment shall be accompanied by the payment of any amounts due pursuant to (S)4.8. The Borrower shall give the Agent, no later than 10:00 a.m., Boston time, at least three (3) days prior written notice of any prepayment pursuant to this (S)3.3, in each case specifying the proposed date of prepayment of the applicable Revolving Credit Loans or Term Loans and the principal amount to be prepaid. Notwithstanding the foregoing, no prior notice shall be required for the prepayment of any Swing Loan. (S)3.4 Partial Prepayments. Each partial prepayment of the Loans under (S)3.3 shall be in a minimum amount of $1,000,000.00 or an integral multiple of $100,000 in excess thereof, shall be accompanied by the payment of accrued interest on the principal prepaid to the date of payment. Each partial payment under (S)3.2, (S)3.3 and (S)3.5 shall be applied first to the principal of any Outstanding Swing Loans, then, in the absence of instruction by the Borrower, to the principal of Revolving Credit Loans, and then to the principal of the Term Loans, and within each category, first to the principal of Base Rate Loans within such category and then to the principal of LIBOR Rate Loans within such category. Notwithstanding anything herein to the contrary, any prepayment of the Term Loans shall be accompanied by an equal reduction in the Revolving Credit Commitments pursuant to (S)2.4 (and a corresponding prepayment of the Revolving Credit Loans, if necessary). (S)3.5 Proceeds from Debt or Equity Offering. The Borrower shall cause the gross proceeds of any Debt Offering or Equity Offering, less all reasonable costs, fees, expenses, underwriting commissions, fees and discounts incurred in connection therewith, to be paid by the Borrower or Guarantor, as applicable, to the Agent for the account of the Lenders as a prepayment of the Loans to the Borrower within ten (10) days after the receipt thereof (or if a payment within such period would require payment of amounts pursuant to (S)4.8, then such payment shall be made at the first expiration of an Interest Period thereafter) to be applied first to the then outstanding principal of the Loans in the same manner as partial prepayments pursuant to (S)3.4 and then to accrued and unpaid interest on the Loans. (S)3.6 Effect of Prepayments. Amounts of the Revolving Credit Loans prepaid under (S)3.2, (S)3.3 and (S)3.5 prior to the Maturity Date may be reborrowed as provided in (S)2. Any portion of the Term Loan that is prepaid may not be reborrowed. (S)4. CERTAIN GENERAL PROVISIONS. (S)4.1 Conversion Options. (a) The Borrower may elect from time to time to convert any of its outstanding Revolving Credit Loans or Term Loans to a Revolving Credit Loan or Term Loan, respectively, of another Type and such Revolving Credit Loans or Term Loan shall thereafter bear interest as a Base Rate Loan or a LIBOR Rate Loan, as applicable; provided that (i) with respect to any such conversion of a LIBOR Rate Loan to a Base 41 Rate Loan, the Borrower shall give the Agent at least one (1) Business Day's prior written notice of such election, and such conversion shall only be made on the last day of the Interest Period with respect to such LIBOR Rate Loan; (ii) with respect to any such conversion of a Base Rate Loan to a LIBOR Rate Loan, the Borrower shall give the Agent at least three (3) LIBOR Business Days' prior written notice of such election and the Interest Period requested for such Loan, the principal amount of the Loan so converted shall be in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in excess thereof and, after giving effect to the making of such Loan, there shall be no more than eight (8) LIBOR Rate Loans (including both Revolving Credit Loans and Term Loans) outstanding at any one time; and (iii) no Loan may be converted into a LIBOR Rate Loan when any Default or Event of Default has occurred and is continuing. All or any part of the outstanding Revolving Credit Loans or Term Loans of any Type may be converted as provided herein, provided that no partial conversion shall result in a Revolving Credit Base Rate Loan or a Term Base Rate Loan in a principal amount of less than $1,000,000 or a Revolving Credit LIBOR Rate Loan or Term LIBOR Rate Loan in a principal amount of less than $2,000,000 and that the principal amount of each Loan shall be in an integral multiple of $100,000. On the date on which such conversion is being made, each Lender shall take such action as is necessary to transfer its Commitment Percentage of such Loans to its Domestic Lending Office or its LIBOR Lending Office, as the case may be. Each Conversion/Continuation Request relating to the conversion of a Base Rate Loan to a LIBOR Rate Loan shall be irrevocable by the Borrower. (b) Any LIBOR Rate Loan may be continued as such Type upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the terms of (S)4.1; provided that no LIBOR Rate Loan may be continued as such when any Default or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the Interest Period relating thereto ending during the continuance of any Default or Event of Default. (c) In the event that the Borrower does not notify the Agent of its election hereunder with respect to any LIBOR Rate Loan, such Loan shall be automatically converted to a Base Rate Loan at the end of the applicable Interest Period. (S)4.2 Closing Fee. The Borrower agrees to pay to Fleet certain fees for services rendered or to be rendered in connection with the Loans as provided pursuant to an Agreement Regarding Fees dated as of even date herewith between the Borrower and Fleet. Fleet shall pay on the Closing Date to the other Lenders a closing fee in accordance with their separate agreement. (S)4.3 Agent's Fee. The Borrower shall pay to the Agent, for the Agent's own account, an annual Agent's fee as provided in the Agreement Regarding Fees dated of even date herewith between Borrower and Fleet. The Agent's fee shall be payable quarterly in arrears on the first day of each calendar quarter for the immediately preceding calendar quarter or portion thereof. The Agent's fee shall also be paid upon the Maturity Date or earlier termination of the Commitments. The Agent's fee for any partial quarter shall be prorated. 42 (S)4.4 Funds for Payments. (a) All payments of principal, interest, facility fees, Letter of Credit fees, closing fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Agent, for the respective accounts of the Lenders and the Agent, as the case may be, at the Agent's Head Office, not later than 1:00 p.m. (Boston time) on the day when due, in each case in lawful money of the United States in immediately available funds. The Agent is hereby authorized to charge the accounts of the Borrower with Fleet, on the dates when the amount thereof shall become due and payable, with the amounts of the principal of and interest on the Loans and all fees, charges, expenses and other amounts owing to the Agent and/or the Lenders (including the Swing Loan Lender) under the Loan Documents. (b) All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes (other than income or franchise taxes imposed on any Lender), levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Agent, for the account of the Lenders (including the Swing Loan Lender) or (as the case may be) the Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Lenders or the Agent to receive the same net amount which the Lenders or the Agent would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under any other Loan Document. (c) Each Lender organized under the laws of a jurisdiction outside the United States, if requested in writing by the Borrower (but only so long as such Lender remains lawfully able to do so), shall provide the Borrower with such duly executed form(s) or statement(s) which may, from time to time, be prescribed by law and, which, pursuant to applicable provisions of (i) an income tax treaty between the United States and the country of residence of such Lender, (ii) the Code, or (iii) any applicable rules or regulations in effect under (i) or (ii) above, indicates the withholding status of such Lender; provided that nothing herein (including without limitation the failure or inability to provide such form or statement) shall relieve the Borrower of its obligations under (S)4.4(b). In the event that the Borrower shall have delivered the certificates or vouchers described above for any payments made by the Borrower and such Lender receives a refund of any taxes paid by the Borrower pursuant to (S)4.4(b), such Lender will pay to the Borrower the amount of such refund promptly upon receipt thereof; provided that if at any time thereafter such Lender is required to return such refund, the Borrower shall promptly repay to such Lender the amount of such refund. 43 (d) The obligations of the Borrower to the Lenders under this Agreement (and of the Revolving Credit Lenders to make payments to the Issuing Lender with respect to Letters of Credit) shall be absolute, unconditional and irrevocable, and shall be paid and performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of this Agreement, any Letter of Credit or any of the other Loan Documents; (ii) any improper use which may be made of any Letter of Credit or any improper acts or omissions of any beneficiary or transferee of any Letter of Credit in connection therewith; (iii) the existence of any claim, set-off, defense or any right which the Borrower or any of its Subsidiaries or Affiliates may have at any time against any beneficiary or any transferee of any Letter of Credit (or persons or entities for whom any such beneficiary or any such transferee may be acting) or the Lenders (other than the defense of payment to the Lenders in accordance with the terms of this Agreement) or any other person, whether in connection with any Letter of Credit, this Agreement, any other Loan Document, or any unrelated transaction; (iv) any draft, demand, certificate, statement or any other documents presented under any Letter of Credit proving to be insufficient, forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (v) any breach of any agreement between Borrower or any of its Subsidiaries or Affiliates and any beneficiary or transferee of any Letter of Credit; (vi) any irregularity in the transaction with respect to which any Letter of Credit is issued, including any fraud by the beneficiary or any transferee of such Letter of Credit; (vii) payment by the Issuing Lender under any Letter of Credit against presentation of a sight draft, demand, certificate or other document which does not comply with the terms of such Letter of Credit, provided that such payment shall not have constituted gross negligence or willful misconduct on the part of the Issuing Lender; (viii) any non-application or misapplication by the beneficiary of a Letter of Credit of the proceeds of such Letter of Credit; (ix) the legality, validity, form, regularity or enforceability of the Letter of Credit; (x) the failure of any payment by Issuing Lender to conform to the terms of a Letter of Credit (if, in Issuing Lender's good faith judgment, such payment is determined to be appropriate); (xi) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; (xii) the occurrence of any Default or Event of Default; and (xiii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, provided that such other circumstances or happenings shall not have been the result of gross negligence or willful misconduct on the part of the Issuing Lender. (S)4.5 Computations. All computations of interest on the Loans and of other fees to the extent applicable shall be based on a 360-day year and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term "Interest Period" with respect to LIBOR Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The Outstanding Loans as reflected on the records of the Agent from time to time shall be considered prima facie evidence of such amount. 44 (S)4.6 Inability to Determine LIBOR. In the event that, prior to the commencement of any Interest Period relating to any LIBOR Rate Loan, the Agent shall determine that adequate and reasonable methods do not exist for ascertaining LIBOR for such Interest Period, the Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower and the Lenders absent manifest error) to the Borrower and the Lenders. In such event (a) any Loan Request with respect to a LIBOR Rate Loan shall be automatically withdrawn and shall be deemed a request for a Base Rate Loan and (b) each LIBOR Rate Loan will automatically, on the last day of the then current Interest Period applicable thereto, become a Base Rate Loan, and the obligations of the Lenders to make LIBOR Rate Loans shall be suspended until the Agent determines that the circumstances giving rise to such suspension no longer exist, whereupon the Agent shall so notify the Borrower and the Lenders. (S)4.7 Illegality. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or the interpretation or application thereof shall make it unlawful, or any central bank or other governmental authority having jurisdiction over a Lender or its LIBOR Lending Office shall assert that it is unlawful, for any Lender to make or maintain LIBOR Rate Loans, such Lender shall forthwith give notice of such circumstances to the Agent and the Borrower and thereupon (a) the commitment of the Lenders to make LIBOR Rate Loans shall forthwith be suspended and (b) the LIBOR Rate Loans then outstanding shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such LIBOR Rate Loans or within such earlier period as may be required by law. Notwithstanding the foregoing, before giving such notice, the applicable Lender shall designate a different lending office if such designation will void the need for giving such notice and will not, in the judgment of such Lender, be otherwise materially disadvantageous to such Lender. In the event that the applicable Lender shall be replaced pursuant to (S)4.15, then to the extent the terms of this (S)4.7 are not otherwise applicable, Borrower again shall be permitted to request LIBOR Rate Loans. (S)4.8 Additional Interest. If any LIBOR Rate Loan or any portion thereof is repaid or is converted to a Base Rate Loan for any reason on a date which is prior to the last day of the Interest Period applicable to such LIBOR Rate Loan, or if repayment of the Loans has been accelerated as provided in (S)12.1, the Borrower will pay to the Agent upon demand for the account of the applicable Lenders in accordance with their respective Commitment Percentages (or to the Swing Loan Lender with respect to a Swing Loan), in addition to any amounts of interest otherwise payable hereunder, any amounts required to compensate such Lenders for any losses, costs or expenses which may reasonably be incurred as a result of such payment or conversion, including, without limitation, an amount equal to daily interest for the unexpired portion of such Interest Period on the LIBOR Rate Loan or portion thereof so repaid or converted at a per annum rate equal to the excess, if any, of (a) the interest rate calculated on the basis of LIBOR applicable to such LIBOR Rate Loan (including any spread over LIBOR) minus (b) the yield obtainable by the Agent upon the purchase of debt securities customarily issued by the Treasury of the United States of America which have a maturity date most closely approximating the last day of such Interest Period (it being understood that the purchase of such securities shall not be required in order for such amounts to be payable) and that a 45 Lender shall not be obligated or required to have actually obtained funds at LIBOR or to have actually reinvested such amounts as described above. Such amount shall be reduced to present value by using the rate on the United States Treasury Securities described in the foregoing sentence and the number of days remaining in the unexpired portion of the Interest Period in question. (S)4.9 Additional Costs, Etc. Notwithstanding anything herein to the contrary, if any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Lender or the Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Lender or the Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Loan Documents, such Lender's Commitment, a Letter of Credit or the Loans (other than taxes based upon or measured by the gross receipts, income or profits of such Lender or the Agent or its franchise tax), or (b) materially change the basis of taxation (except for changes in taxes on gross receipts, income or profits or its franchise tax) of payments to any Lender of the principal of or the interest on any Loans or any other amounts payable to any Lender under this Agreement or the other Loan Documents, or (c) impose or increase or render applicable any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law and which are not already reflected in any amounts payable by Borrower hereunder) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of any Lender, or (d) impose on any Lender or the Agent any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans, such Lender's Commitment, a Letter of Credit or any class of loans or commitments of which any of the Loans or such Lender's Commitment forms a part; and the result of any of the foregoing is: (i) to increase the cost to any Lender of making, funding, issuing, renewing, extending or maintaining any of the Loans, the Letters of Credit or such Lender's Commitment, or (ii) to reduce the amount of principal, interest or other amount payable to any Lender or the Agent hereunder on account of such Lender's Commitment or any of the Loans or the Letters of Credit, or 46 (iii) to require any Lender or the Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender or the Agent from the Borrower hereunder, then, and in each such case, the Borrower will, within fifteen (15) days of demand made by such Lender or (as the case may be) the Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Lender or the Agent such additional amounts as such Lender or the Agent shall determine in good faith to be sufficient to compensate such Lender or the Agent for such additional cost, reduction, payment or foregone interest or other sum. Each Lender and the Agent in determining such amounts may use any reasonable averaging and attribution methods generally applied by such Lender or the Agent. (S)4.10 Capital Adequacy. If after the date hereof any Lender determines that (a) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by any governmental authority charged with the administration thereof, or (b) compliance by such Lender or its parent bank holding company with any guideline, request or directive of any such entity regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on such Lender's or such holding company' s capital as a consequence of such Lender's commitment to make Loans or participate in Letters of Credit hereunder to a level below that which such Lender or holding company could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such holding company' s then existing policies with respect to capital adequacy and assuming the full utilization of such entity' s capital) by any amount deemed by such Lender to be material, then such Lender may notify the Borrower thereof. The Borrower agrees to pay to such Lender the amount of such reduction in the return on capital as and when such reduction is determined, upon presentation by such Lender of a statement of the amount setting forth the Lender's calculation thereof. In determining such amount, such Lender may use any reasonable averaging and attribution methods generally applied by such Lender. (S)4.11 Indemnity of Borrower. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from and against any loss, cost or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in payment of the principal amount of or any interest on any LIBOR Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain its LIBOR Rate Loans, or (b) default by the Borrower in making a borrowing or a conversion after the Borrower has given (or is deemed to have given) a Loan Request or a Conversion/Continuation Request. (S)4.12 Default Interest; Late Charge. Following the occurrence and during the continuance of any Event of Default, and regardless of whether or not the Agent or the Lenders shall have accelerated the maturity of the Loans, all Loans shall bear interest 47 payable on demand at a rate per annum equal to four percent (4%) above the rate that would otherwise be applicable at such time (the "Default Rate"), until such amount shall be paid in full (after as well as before judgment). In addition, the Borrower shall pay a late charge equal to five percent (5.0%) of any amount of interest and/or principal payable on the Loans or any other amounts payable hereunder or under the Loan Documents, which is not paid by the Borrower within ten (10) days of the date when due. (S)4.13 Certificate. A certificate setting forth any amounts payable pursuant to (S)4.8, (S)4.9, (S)4.10, (S)4.11 or (S)4.12 and a reasonably detailed explanation of such amounts which are due, submitted by any Lender or the Agent to the Borrower, shall be conclusive in the absence of manifest error. (S)4.14 Limitation on Interest. Notwithstanding anything in this Agreement or the other Loan Documents to the contrary, all agreements between or among the Borrower, the Guarantors, the Lenders and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Lenders exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Lenders in excess of the maximum lawful amount, the interest payable to the Lenders shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Lenders shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Lenders shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This Section shall control all agreements between or among the Borrower, the Guarantors, the Lenders and the Agent. (S)4.15 Certain Provisions Relating to Increased Costs. If a Lender gives notice of the existence of the circumstances set forth in (S)4.7 or any Lender requests compensation for any losses or costs to be reimbursed pursuant to any one or more of the provisions of (S)4.9 or (S)4.10, then, upon request of Borrower, such Lender, as applicable, shall use reasonable efforts in a manner consistent with such institution's practice in connection with loans like the Loan of such Lender to eliminate, mitigate or reduce amounts that would otherwise be payable by Borrower under the foregoing provisions, provided that such action would not be otherwise prejudicial to such Lender, including, without limitation, by designating another of such Lender's offices, branches or affiliates; the Borrower agreeing to pay all reasonably incurred costs and expenses incurred by such Lender in connection with any such action. Notwithstanding anything to the contrary contained herein, if no Default or Event of Default shall have occurred and be continuing, and if any Lender has given notice of the existence of the circumstances set forth in (S)4.7 48 or has requested payment or compensation for any losses or costs to be reimbursed pursuant to any one or more of the provisions of (S)4.9 or (S)4.10 (each, an "Affected Lender"), then, within thirty (30) days after such notice or request for payment or compensation, Borrower shall have the one-time right as to such Affected Lender, to be exercised by delivery of written notice delivered to the Agent and the Affected Lender within thirty (30) days of receipt of such notice, to elect to cause the Affected Lender to transfer its Commitment. The Agent shall promptly notify the remaining Lenders that each of such Lenders shall have the right, but not the obligation, to acquire a portion of the Commitment, pro rata based upon their relevant Commitment Percentages, of the Affected Lender (or if any of such Lenders does not elect to purchase its pro rata share, then to such remaining Lenders in such proportion as approved by the Agent). In the event that the Lenders do not elect to acquire all of the Affected Lender's Commitment, then the Agent shall endeavor to obtain a new Lender to acquire such remaining Commitment. Upon any such purchase of the Commitment of the Affected Lender, the Affected Lender's interest in the Obligations and its rights hereunder and under the Loan Documents shall terminate at the date of purchase, and the Affected Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest. The purchase price for the Affected Lender's Commitment shall equal any and all amounts outstanding and owed by Borrower to the Affected Lender, including principal and all accrued and unpaid interest or fees. (S)5. COLLATERAL SECURITY. (S)5.1 Collateral. The Obligations shall be secured by (i) a perfected first priority lien to be held by the Agent for the benefit of the Lenders on the Mortgaged Properties, pursuant to the terms of the Mortgages, (ii) a perfected first priority security interest to be held by the Agent for the benefit of the Lenders in the Leases pursuant to the terms of the Assignments of Leases and Rents and (iii) the Indemnity Agreements and the other Security Documents. The Obligations shall be guaranteed pursuant to the Guaranty. (S)5.2 Appraisals. In connection with the initial syndication of the Loans, Agent shall obtain appraisals of each of the Mortgaged Properties, which shall be delivered within 120 days after the Closing Date. In addition, the Agent on behalf of the Lenders shall obtain an appraisal of the Mortgaged Property at any time that the regulatory requirements of a Lender generally applicable to real estate loans of the category made under this Agreement as reasonably interpreted by such Lender shall require an appraisal. Borrower shall pay the Agent on demand all reasonable out-of-pocket costs of no more than one (1) such appraisal per twelve (12) month period for any Mortgaged Property. Any such appraisal obtained pursuant to this (S)5.2 shall be ordered by the Agent. (S)5.3 Replacement or Addition of Mortgaged Properties. (a) After the Closing Date, the Borrower shall have the right, subject to the consent of the Required Lenders and the satisfaction by the Borrower of the conditions set forth in this (S)5.3, to add Potential Collateral to the Collateral or to replace any Mortgaged Property which is Collateral with Potential Collateral. Subject to (S)9.8(e), 49 the Borrower from time to time after the Closing Date may also request that certain Real Estate of one or more Guarantors (collectively, the "Guarantor Collateral") be included as a Mortgaged Property for the purpose of increasing the Borrowing Base or replacing existing Collateral. In the event the Borrower desires to replace Collateral or add additional Potential Collateral or Guarantor Collateral as aforesaid, the Borrower shall provide written notice to the Agent of such request (which the Agent shall promptly furnish to the Lenders), together with all documentation and other information required to permit the Agent to determine whether such Real Estate is Eligible Real Estate. Thereafter, the Agent shall have ten (10) Business Days from the date of the receipt of such documentation and other information to advise the Borrower whether the Required Lenders consent to the acceptance of such Guarantor Collateral or Potential Collateral. Notwithstanding the foregoing, no Guarantor Collateral or Potential Collateral shall be included as Collateral unless and until the following conditions precedent shall have been satisfied: (i) such Guarantor Collateral or Potential Collateral shall be Eligible Real Estate; (ii) the owner of any Guarantor Collateral shall have executed a Guaranty, or, in the Agent's reasonable discretion, shall have been added as an additional Borrower hereunder pursuant to an amendment to this Agreement in form and substance reasonably satisfactory to the Agent and Agent's counsel; (iii) the Borrower or the owner of the Guarantor Collateral or Potential Collateral, as applicable, shall have executed and delivered to the Agent all Eligible Real Estate Qualification Documents (which may include an Assignment of Interests with respect to any direct or indirect interests in the owner of such Guarantor Collateral), all of which instruments, documents or agreements shall be in form and substance reasonably satisfactory to the Agent in its reasonable discretion; and (iv) after giving effect to the inclusion of such Guarantor Collateral or Potential Collateral, each of the representations and warranties made by or on behalf of the Borrower or the Guarantors or any of their respective Subsidiaries contained in this Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true in all material respects both as of the date as of which it was made and shall also be true as of the time of the replacement or addition of Mortgaged Properties, with the same effect as if made at and as of that time (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date), and no Default or Event of Default shall have occurred and be continuing, and the Agent shall have received a certificate of the Borrower to such effect. The decision of the Required Lenders to grant or withhold their consent to the acceptance of Guarantor Collateral or Potential Collateral under this (S)5.3 shall be based on the factors set forth in this (S)5.3 and the other provisions of this Agreement relating to Eligible Real Estate and Mortgaged Properties. 50 In connection with each such addition or substitution, the Borrower, within fifteen (15) Business Days of the Borrower's request to add such assets to the Collateral, shall pay to the Agent for the account of the Lenders a review fee of $10,000.00 for each asset to be added or replaced, which review fee shall be split equally among the Lenders, without regard to their respective Commitment Percentages. (b) Borrower may, at its option, obtain preliminary approval of the Required Lenders of Guarantor Collateral or Potential Collateral by delivering to the Agent and each of the Lenders the following with respect to such Guarantor Collateral or Potential Collateral: (i) a physical description of the Real Estate; (ii) current rent rolls, operating statements and an operating and capital expenditure budget for such Real Estate reasonably satisfactory to the Required Lenders; (iii) to the extent then available in Borrower's files, a Survey, environmental report, copies of existing title insurance policies, engineering reports and similar information reasonably satisfactory to the Required Lenders; and (iv) a certification to the knowledge of Borrower that such Real Estate will satisfy (or is anticipated to satisfy upon the acceptance of such Real Estate as Collateral) each of the other conditions to the acceptance of Real Estate as Collateral. The Required Lenders shall have ten (10) Business Days following receipt of all of the foregoing items to grant or deny preliminary approval for such proposed Guarantor Collateral or Potential Collateral. Agent shall notify the Borrower if and when the Required Lenders have granted such preliminary approval. In the event that the Required Lenders grant such preliminary approval, the Borrower shall satisfy the remaining requirements to the acceptance of such Collateral as provided in (S)5.3(a). Such Real Estate shall not be included in the Borrowing Base until the requirements of (S)5.3(a) are satisfied. (S)5.4 Release of Mortgaged Property. Provided no Default or Event of Default shall have occurred hereunder and be continuing (or would exist immediately after giving effect to the transactions contemplated by this (S)5.4), the Agent shall release a Mortgaged Property from the lien or security title of the Security Documents encumbering the same upon the request of the Borrower subject to and upon the following terms and conditions: (a) the Borrower shall deliver to the Agent written notice of its desire to obtain such release no later than ten (10) days prior to the date on which such release is to be effected; (b) the Borrower shall submit to the Agent with such request a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Agent under (S)6.4 or (S)7.4 adjusted in the best good faith estimate of the Borrower to give effect to the proposed release and 51 demonstrating that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such release; (c) all release documents to be executed by the Agent shall be in form and substance reasonably satisfactory to the Agent; (d) the Borrower shall pay all reasonable costs and expenses of the Agent in connection with such release, including without limitation, reasonable attorney's fees; (e) the Borrower shall pay to the Agent for the account of the Lenders a release price, which payment shall be applied to reduce the outstanding principal balance of the Loans as provided in (S)3.4, in an amount equal to one hundred percent (100%) of the Borrowing Base value attributable to such Mortgaged Property; (f) subject to Borrower's right to prepay the entire outstanding amount of the Loans in whole, but not in part, at no time during the term of this Agreement shall there be less than twenty five (25) Mortgaged Properties securing the Obligations; and (g) any release of a Mortgaged Property will not cause the Borrower to be in violation of the covenants set forth in (S)9.8. (S)5.5 Additional Guarantors. In the event that Borrower shall, after the Closing Date, have an Investment in any Subsidiary in which Borrower directly or indirectly owns a one hundred percent (100%) interest (including, without limitation, any Subsidiaries owned by JDN Development Investment, L.P. and JDN Holdings), Borrower shall cause each such Subsidiary to execute and deliver to Agent a Guaranty, and such Subsidiary shall become a Guarantor hereunder; provided, however, to the extent Borrower has an Investment in any such Subsidiary which is established as a special purpose entity to own Real Estate or equity interests related thereto and any loan documents, if any, to which any new Subsidiary directly owning title to any Real Estate is a party prohibit such new Subsidiary from guarantying the Obligations, Borrower shall not be obligated to cause such new Subsidiary to become a Guarantor. Borrower further covenants and agrees that Borrower shall cause each Subsidiary of Borrower that becomes a Guarantor pursuant to this (S)5.5 to become a party to the Contribution Agreement. The organizational agreements of each such Subsidiary created after the Closing Date shall specifically authorize each such Subsidiary to guarantee the Obligations and to execute the Contribution Agreement. Borrower shall further cause all representations, covenants and agreements in the Loan Documents with respect to Guarantors to be true and correct with respect to each such Subsidiary. In connection with the delivery of such Guaranty, Borrower shall deliver to the Agent such organizational agreements, resolutions, consents, opinions and other documents and instruments as the Agent may reasonably require. (S)5.6 Release of Certain Subsidiary Guarantors. In the event that a Subsidiary Guarantor shall transfer all of its assets for fair value and for cash in the ordinary course of its business, then such Subsidiary Guarantor may be released by Agent from liability 52 under the Guaranty provided that the Borrower shall deliver to Agent evidence satisfactory to Agent that (a) the Borrower will be in compliance with all covenants of this Agreement after giving effect to such sale and release, (b) such Subsidiary Guarantor shall be legally dissolved after its release from the Guaranty, and (c) the net cash proceeds from such sale are being distributed to Borrower as part of such dissolution. The provisions of this (S)5.6 shall not apply to JDN AL, JDN DCI, JDN Holdings, JDN LP, Inc. or any Guarantor which may own a Mortgaged Property or any direct or indirect interest in a Mortgaged Property. (S)5.7 Release of Collateral. Upon the refinancing or repayment of the Obligations, then the Agent shall be entitled to release the Collateral from the lien and security interest of the Security Documents and to release the Guarantors, provided that Agent has not received a notice from the "Representative" (as defined in (S)14.12) or the holder of the Hedge Obligations that any Hedge Obligation is then due and payable to the holder thereof. (S)6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Agent and the Lenders as follows. (S)6.1 Corporate Authority, Etc. (a) Incorporation; Good Standing. The Borrower is a Maryland corporation duly organized pursuant to articles of incorporation filed with the Maryland Secretary of State, and is in good standing under the laws of Maryland. Borrower conducts its business in a manner which enables it to qualify as a real estate investment trust under, and to be entitled to the benefits of, (S)856 of the Code, and has elected to be treated as and is entitled to the benefits of a real estate investment trust thereunder. The Borrower (i) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated, and (ii) is in good standing and is duly authorized to do business in the jurisdictions where the Mortgaged Properties owned or leased by it are located and in each other jurisdiction where a failure to be so qualified in such other jurisdiction could have a materially adverse effect on the business, assets or financial condition of Borrower. (b) Subsidiaries. Each of the Guarantors and each of the Subsidiaries of the Borrower and each Guarantor (i) is a corporation, limited partnership, general partnership, limited liability company or trust duly organized under the laws of its State of organization and is validly existing and in good standing under the laws thereof, (ii) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated and (iii) is in good standing and is duly authorized to do business in each jurisdiction where a failure to be so qualified could have a materially adverse effect on the business, assets or financial condition of the Borrower, the Guarantors or such Subsidiary. (c) Authorization. The execution, delivery and performance of this Agreement and the other Loan Documents to which any of the Borrower or any 53 Guarantor is a party and the transactions contemplated hereby and thereby (i) are within the authority of such Person, (ii) have been duly authorized by all necessary proceedings on the part of such Person, (iii) do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which such Person is subject or any judgment, order, writ, injunction, license or permit applicable to such Person, (iv) do not and will not conflict with or constitute a default (whether with the passage of time or the giving of notice, or both) under any provision of the partnership agreement, articles of incorporation or other charter documents or bylaws of, or any agreement or other instrument binding upon, such Person or any of its properties, (v) do not and will not result in or require the imposition of any lien or other encumbrance on any of the properties, assets or rights of such Person, and (vi) do not require the approval or consent of any Person other than those already obtained and delivered to Agent. (d) Enforceability. The execution and delivery of this Agreement and the other Loan Documents to which any of the Borrower or any Guarantor is a party are valid and legally binding obligations of such Person enforceable in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and general principles of equity. (S)6.2 Governmental Approvals. The execution, delivery and performance of this Agreement and the other Loan Documents to which the Borrower or any Guarantor is a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained and the filing of the Security Documents in the appropriate records office with respect thereto. (S)6.3 Title to Properties. Except as indicated on Schedule 6.3 hereto, the Borrower, the Guarantors and their respective Subsidiaries own or lease all of the assets reflected in the consolidated balance sheet of Borrower as at the Balance Sheet Date or acquired or leased since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date) or other adjustments that are not material in amount, subject to no rights of others, including any mortgages, leases pursuant to which Borrower or any of such Subsidiaries is the lessee, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens. (S)6.4 Financial Statements. The Borrower has furnished to Agent: (a) the consolidated balance sheet of Borrower and its Subsidiaries as of the Balance Sheet Date and the related consolidated statement of income and cash flow for the fiscal year then ended, (b) an unaudited statement of Net Operating Income for each of the Mortgaged Properties as of the Closing Date for the fiscal quarter ended December 31, 2000 reasonably satisfactory in form to the Agent and certified by the chief financial or accounting officer of Borrower as fairly presenting the Net Operating Income for such parcels for such periods, and (c) certain other financial information relating to the Borrower, the Guarantors and the Real Estate. Such balance sheet and statements have been prepared in accordance with generally accepted accounting principles and fairly 54 present the consolidated financial condition of the Borrower and its Subsidiaries as of such dates and the consolidated results of the operations of the Borrower and its Subsidiaries for such periods. There are no liabilities, contingent or otherwise, of the Borrower or any of its Subsidiaries involving material amounts not disclosed in said financial statements and the related notes thereto. (S)6.5 No Material Changes. Since the Balance Sheet Date, there has occurred no materially adverse change in the financial condition or business of the Borrower, any Guarantor and their respective Subsidiaries taken as a whole as shown on or reflected in the consolidated balance sheet of the Borrower as of the Balance Sheet Date, or its consolidated statement of income or cash flows for the fiscal year then ended, other than changes in the ordinary course of business that could not reasonably be expected to have a Material Adverse Effect. As of the date hereof, except as set forth on Schedule 6.5 hereto, there has occurred no materially adverse change in the financial condition or business of any of the Mortgaged Properties from the condition shown on the statements of income delivered to the Agent pursuant to (S)6.4 other than changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business or financial condition of such Mortgaged Property. (S)6.6 Franchises, Patents, Copyrights, Etc. The Borrower, the Guarantors and their respective Subsidiaries possess all franchises, patents, copyrights, trademarks, trade names, service marks, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of their business substantially as now conducted without known conflict with any rights of others. None of the Mortgaged Properties is owned or operated under or by reference to any registered or protected trademark, trade name, service mark or logo. (S)6.7 Litigation. Except as stated on Schedule 6.7, there are no actions, suits, proceedings or investigations of any kind pending or to the knowledge of the Borrower threatened against the Borrower, any Guarantor or any of their respective Subsidiaries before any court, tribunal, arbitrator, mediator or administrative agency or board which question the validity of this Agreement or any of the other Loan Documents, any action taken or to be taken pursuant hereto or thereto or any lien, security title or security interest created or intended to be created pursuant hereto or thereto, or which if adversely determined could reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 6.7, there are no judgments, final orders or awards outstanding against or affecting the Borrower, any Guarantor, any of their respective Subsidiaries or any Mortgaged Property. (S)6.8 No Materially Adverse Contracts, Etc. None of the Borrower, any Guarantor or any of their respective Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a materially adverse effect on the business, assets or financial condition of such Person. None of the Borrower, any Guarantor or any of their respective Subsidiaries is a party to any contract or agreement that has or could reasonably be expected to have a Material Adverse Effect. 55 (S)6.9 Compliance with Other Instruments, Laws, Etc. None of the Borrower, the Guarantors or any of their respective Subsidiaries is in violation of any provision of its charter or other organizational documents, bylaws, or any agreement or instrument to which it is subject or by which it or any of its properties is bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could reasonably be expected to materially and adversely affect the financial condition, properties or business of such Person. (S)6.10 Tax Status. Each of the Borrower, the Guarantors and their respective Subsidiaries (a) has made or filed all federal and state income and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject or has obtained an extension for filing, (b) has paid prior to delinquency all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers or partners of such Person know of no basis for any such claim. (S)6.11 No Event of Default. No Default or Event of Default has occurred and is continuing. (S)6.12 Holding Company and Investment Company Acts. None of the Borrower, the Guarantors or any of their respective Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935; nor is any of them an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. (S)6.13 Absence of UCC Financing Statements, Etc. Except with respect to Permitted Liens or as disclosed on the lien search reports delivered to and approved by the Agent, there is no financing statement (but excluding any financing statements that may be filed against Borrower, any Guarantor or their respective Subsidiaries without the consent or agreement of such Persons), security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any applicable filing records, registry, or other public office, that purports to cover, affect or give notice of any present or possible future lien on, or security interest or security title in, any property of the Borrower, any Guarantor or their respective Subsidiaries or rights thereunder. (S)6.14 Setoff, Etc. The Collateral and the rights of the Agent and the Lenders with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses (provided that the foregoing representation shall not be deemed a representation as to any potential claims of tenants under Leases, which are covered by (S)6.22). 56 (S)6.15 Certain Transactions. Except as disclosed on Schedule 6.15 hereto, none of the partners, officers, trustees, managers, members, directors, or employees of the Borrower, any Guarantor or any of their respective Subsidiaries is a party to any material agreement with the Borrower, any Guarantor or any of their respective Subsidiaries (other than for services as partners, managers, members, employees, officers and directors), including any such agreement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any partner, officer, trustee, director or such employee or, to the knowledge of the Borrower, any corporation, partnership, trust or other entity in which any partner, officer, trustee, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, which are on terms less favorable to the Borrower, a Guarantor or any of their respective Subsidiaries than those that would be obtained in a comparable arms-length transaction. (S)6.16 Employee Benefit Plans. The Borrower, each Guarantor and each ERISA Affiliate has fulfilled its obligation, if any, under the minimum funding standards of ERISA and the Code with respect to each Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan. Neither the Borrower, any Guarantor nor any ERISA Affiliate has (a) sought a waiver of the minimum funding standard under (S)412 of the Code in respect of any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, (b) failed to make any contribution or payment to any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, or made any amendment to any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Code, or (c) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under (S)4007 of ERISA. None of the Mortgaged Properties constitutes a "plan asset" of any Employee Plan, Multiemployer Plan or Guaranteed Pension Plan. (S)6.17 Disclosure. All of the representations and warranties made by or on behalf of the Borrower, the Guarantors and their respective Subsidiaries in this Agreement and the other Loan Documents or any document or instrument delivered to the Agent or the Lenders pursuant to or in connection with any of such Loan Documents are true and correct in all material respects, and neither the Borrower nor any Guarantor has failed to disclose such information as is necessary to make such representations and warranties not misleading. There is no material fact or circumstance that has not been disclosed to the Agent and the Lenders, and the written information, reports and other papers and data with respect to the Borrower, any Subsidiary, any Guarantor or the Mortgaged Properties (other than projections and estimates) furnished to the Agent or the Lenders in connection with this Agreement or the obtaining of the Commitments of the Lenders hereunder was, at the time so furnished, complete and correct in all material respects, or has been subsequently supplemented by other written information, reports or other papers or data, to the extent necessary to give in all material respects a true and accurate knowledge of the subject matter in all material respects; provided that such representation shall not apply to (a) the accuracy of any engineering and environmental 57 reports prepared by third parties or legal conclusions or analysis provided by the Borrower's and/or Guarantors' counsel (although the Borrower and the Guarantors have no reason to believe that the Agent and the Lenders may not rely on the accuracy thereof) or (b) budgets, projections and other forward-looking speculative information prepared in good faith by the Borrower (except to the extent the related assumptions were when made manifestly unreasonable). (S)6.18 Trade Name; Place of Business. Neither the Borrower nor any Guarantor uses any trade name and conducts business under any name other than its actual name set forth in the Loan Documents. The principal place of business of each of the Borrower and each Guarantor is 359 E. Paces Ferry Road, N.E., Suite 400, Atlanta, Georgia 30305. (S)6.19 Regulations T, U and X. No portion of any Loan is to be used for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 220, 221 and 224. Neither the Borrower nor any Guarantor is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 220, 221 and 224. (S)6.20 Environmental Compliance. The Borrower has taken all commercially reasonable steps to investigate the past and present conditions and usage of the Real Estate and the operations conducted thereon and, except as specifically set forth in the written environmental site assessment reports of the Environmental Engineer provided to the Agent on or before the date hereof, or in the case of Real Estate acquired after the date hereof, the environmental site assessment reports with respect thereto provided to the Agent, makes the following representations and warranties: (a) Neither the Borrower, any Guarantor, their respective Subsidiaries nor to the best knowledge and belief of Borrower any operator of the Real Estate, nor any operations thereon, is in violation, or alleged violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state or local statute, regulation, ordinance, order or decree relating to the environment (hereinafter "Environmental Laws"), which violation (i) involves Real Estate (other than the Mortgaged Properties) and would have a Material Adverse Effect or (ii) involves Mortgaged Property. (b) Neither the Borrower, any Guarantor nor any of their respective Subsidiaries has received notice from any third party including, without limitation, any federal, state or local governmental authority, (i) that it has been identified by the United States Environmental Protection Agency ("EPA") as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 58 Appendix B (1986); (ii) that any hazardous waste, as defined by 42 U.S.C. (S)9601(5), any hazardous substances as defined by 42 U.S.C. (S)9601(14), any pollutant or contaminant as defined by 42 U.S.C. (S)9601(33) or any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws ("Hazardous Substances") which it has generated, transported or disposed of have been found at any site at which a federal, state or local agency or other third party has conducted or has ordered that the Borrower, any Guarantor or any of their respective Subsidiaries conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party's incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances. (c) (i) No portion of the Real Estate has been used for the handling, processing, storage or disposal of Hazardous Substances except in accordance with applicable Environmental Laws, and no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Real Estate except those which are being operated and maintained in compliance with Environmental Laws; (ii) in the course of any activities conducted by the Borrower, any Guarantor, their respective Subsidiaries or, to the best knowledge and belief of the Borrower, the operators of their properties, no Hazardous Substances have been generated or are being used on the Real Estate except in the ordinary course of business and in accordance with applicable Environmental Laws; (iii) there has been no past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping (other than the storing of materials in reasonable quantities to the extent necessary for the operation of an office building or retail establishment in the ordinary course of business, and in any event in compliance with all Environmental Laws) (a "Release") or threatened Release of Hazardous Substances on, upon, into or from the Mortgaged Properties, which Release would have a material adverse effect on the value of such Mortgaged Properties or adjacent properties, or from any other Real Estate, which Release could have a Material Adverse Effect; (iv) except as set forth on Schedule 6.20 hereto, there have been no Releases on, upon, from or into any real property in the vicinity of any of the Real Estate which, through soil or groundwater contamination, may have come to be located on, and which would have a material adverse effect on the value of, the Real Estate; and (v) any Hazardous Substances that have been generated on any of the Real Estate have been transported off-site in accordance with all applicable Environmental Laws. The representation set forth in this (S)6.20(c) with respect to activities of lessees and other third parties unrelated to Borrower or any Guarantor shall be limited to the best knowledge and belief of the Borrower. (d) None of the Borrower, any Guarantor, their respective Subsidiaries nor the Real Estate is subject to any applicable Environmental Law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any governmental agency or the recording or delivery to other Persons of an environmental disclosure document or statement in each case by virtue of the transactions set forth herein and contemplated hereby, or as a condition to the recording of the Mortgages or to the effectiveness of any 59 other transactions contemplated hereby except for such matters that shall be complied with as of the Closing Date. (e) There are no existing or closed sanitary landfills, solid waste disposal sites, or hazardous waste treatment, storage or disposal facilities on or affecting the Real Estate. (f) There has been no claim by any party that any use, operation, or condition of the Real Estate has caused any nuisance or any other liability or adverse condition on any other property which could reasonably be expected to have a Material Adverse Effect, nor is there any knowledge of any basis for such a claim. (g) In the event that any event or circumstance described in (S)6.20 shall occur with respect to any Real Estate of Borrower, Guarantor or their respective Subsidiaries after the date hereof that Borrower is permitted to address pursuant to (S)8.6, such event or circumstance shall not constitute a misrepresentation of Borrower at any time the representations and warranties under this (S)6.20 are repeated or deemed repeated; provided further that the foregoing shall not limit the requirement that such representations with respect to Mortgaged Properties be correct when such properties are accepted as Collateral. (S)6.21 Subsidiaries. Schedule 6.21(a) sets forth, as of the date hereof, all of the Subsidiaries of the Borrower and the Guarantors, the form and jurisdiction of organization of each of the Subsidiaries, and the owners of the direct and indirect ownership interests therein. Schedule 6.21(b) sets forth, as of the date hereof, all of the Affiliates of the Borrower and its Subsidiaries that are not also Subsidiaries, the form and jurisdiction of organization of each of the Affiliates, the Borrower's or its Subsidiary's ownership interest therein and the other owners of the applicable Affiliates. No Person owns any legal, equitable or beneficial interest in any of the Persons set forth on Schedules 6.21(a) and 6.21(b) except as set forth on such Schedules. (S)6.22 Leases. The Borrower has delivered to the Agent true copies of the Leases relating to each Mortgaged Property required to be delivered as a part of the Eligible Real Estate Qualification Documents as of the date hereof. An accurate and complete Rent Roll and Lease Summary as of the date of inclusion of each Mortgaged Property in the Collateral with respect to all Leases of any portion of the Mortgaged Property has been provided to the Agent. The Leases reflected on such Rent Roll constitute as of the date thereof the sole agreements relating to leasing or licensing of space at such Mortgaged Property and in the Building relating thereto. No Major Tenant is entitled to any free rent, partial rent, rebate of rent payments, credit, offset or deduction in rent, including, without limitation, lease support payments or lease buy-outs, except as reflected in such Rent Roll. Except as set forth in Schedule 6.22, the Leases reflected therein are, as of the date of inclusion of the applicable Mortgaged Property in the Collateral, in full force and effect in accordance with their respective terms, without any payment default or any other material default thereunder, nor are there any defenses, counterclaims, offsets, concessions or rebates available to any tenant thereunder, and neither the Borrower nor any Guarantor has given or made, any notice of any payment or other material default, or 60 any claim, which remains uncured or unsatisfied, with respect to any of the Leases, and to the best of the knowledge and belief of the Borrower, there is no basis for any such claim or notice of default by any tenant. No property other than the Mortgaged Property which is the subject of the applicable Lease is necessary to comply with the requirements (including, without limitation, parking requirements) contained in such Lease. (S)6.23 Property. All of the Mortgaged Properties are in good condition and working order subject to ordinary wear and tear and casualty and condemnation permitted in the Loan Documents. All of the other Real Estate of the Borrower, Guarantors and their respective Subsidiaries is in good condition and working order subject to ordinary wear and tear and casualty and condemnation permitted in the Loan Documents, except for such portion of such Real Estate which is not occupied by any tenant and where such failure would not have a Material Adverse Effect. Such Real Estate, and the use and operation thereof, is in material compliance with all applicable zoning, building codes and other applicable governmental regulations. There are no unpaid or outstanding real estate or other taxes or assessments on or against any of the Mortgaged Properties which are payable by the Borrower or any Guarantor (except only real estate or other taxes or assessments, that are not yet delinquent or are being protested as permitted by this Agreement). There are no unpaid or outstanding real estate or other taxes or assessments on or against any other property of the Borrower, the Guarantors or any of their respective Subsidiaries which are payable by any of such Persons in any material amount (except only real estate or other taxes or assessments, that are not yet delinquent or are being protested as permitted by this Agreement). There are no pending eminent domain proceedings against any property of the Borrower, the Guarantors or their respective Subsidiaries or any part thereof, and, to the knowledge of the Borrower, no such proceedings are presently threatened or contemplated by any taking authority which may individually or in the aggregate have any Material Adverse Effect. None of the property of the Borrower, the Guarantors or their respective Subsidiaries is now damaged as a result of any fire, explosion, accident, flood or other casualty in any manner which individually or in the aggregate would have any Material Adverse Effect. (S)6.24 Brokers. Neither the Borrower, any Guarantor nor any of their respective Subsidiaries has engaged or otherwise dealt with any broker, finder or similar entity in connection with this Agreement or the Loans contemplated hereunder. (S)6.25 Other Debt. Neither the Borrower, any Guarantor nor any of their respective Subsidiaries is in default of the payment of any Indebtedness in an amount equal to or greater than $1,000,000.00 or the performance of any related agreement, mortgage, deed of trust, security agreement, financing agreement, indenture or lease to which any of them is a party. Neither the Borrower nor any Guarantor is a party to or bound by any agreement, instrument or indenture that may require the subordination in right or time or payment of any of the Obligations to any other indebtedness or obligation of the Borrower or any Guarantor. Schedule 6.25 hereto sets forth all agreements, mortgages, deeds of trust, financing agreements or other material agreements binding upon the Borrower and each Guarantor or their respective properties and entered into by the Borrower and/or such Guarantor as of the date of this Agreement with respect to any Indebtedness of the Borrower or any Guarantor in an amount equal to or greater than 61 $1,000,000.00, and the Borrower has provided the Agent with true, correct and complete copies thereof. (S)6.26 Solvency. As of the Closing Date and after giving effect to the transactions contemplated by this Agreement and the other Loan Documents, including all Loans made or to be made hereunder, neither the Borrower nor any Guarantor is insolvent on a balance sheet basis such that the sum of such Person's assets exceeds the sum of such Person's liabilities, the Borrower and each Guarantor is able to pay its debts as they become due, and the Borrower and each Guarantor has sufficient capital to carry on its business. (S)6.27 No Bankruptcy Filing. None of the Borrower or any Guarantor is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of its assets or property, and the Borrower has no knowledge of any Person contemplating the filing of any such petition against it or any Guarantor. (S)6.28 No Fraudulent Intent. Neither the execution and delivery of this Agreement or any of the other Loan Documents nor the performance of any actions required hereunder or thereunder is being undertaken by the Borrower or any Guarantor or any of their respective Subsidiaries with or as a result of any actual intent by any of such Persons to hinder, delay or defraud any entity to which any of such Persons is now or will hereafter become indebted. (S)6.29 Transaction in Best Interests of Borrower; Consideration. The transaction evidenced by this Agreement and the other Loan Documents is in the best interests of the Borrower, each Guarantor, their respective Subsidiaries and the creditors of such Persons. The direct and indirect benefits to inure to the Borrower, their respective Subsidiaries, the Guarantors and their respective Subsidiaries pursuant to this Agreement and the other Loan Documents constitute substantially more than "reasonably equivalent value" (as such term is used in (S)548 of the Bankruptcy Code) and "valuable consideration," "fair value," and "fair consideration," (as such terms are used in any applicable state fraudulent conveyance law), in exchange for the benefits to be provided by the Borrower, the Guarantors and their respective Subsidiaries pursuant to this Agreement and the other Loan Documents, and but for the willingness of each Guarantor to guaranty the Loan, the Borrower would be unable to obtain the financing contemplated hereunder which financing will enable the Borrower, each Guarantor and their respective Subsidiaries to have available financing to conduct and expand their business. (S)6.30 Contribution Agreement. The Borrower and the Guarantors have executed and delivered the Contribution Agreement, and the Contribution Agreement constitutes the valid and legally binding obligations of such parties enforceable against them in accordance with the terms and provisions thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. 62 (S)6.31 Reaffirmation of Representations. Borrower hereby restates and reaffirms each of the representations and warranties made by Borrower or any Guarantor set forth in the Mortgage and the Assignment of Leases and Rents as if the same were fully set forth herein. (S)7. AFFIRMATIVE COVENANTS. The Borrower covenants and agrees that, so long as any Loan, Note or Letter of Credit is outstanding or any Lender has any obligation to make any Loans or issue Letters of Credit: (S)7.1 Punctual Payment. The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans and all interest and fees provided for in this Agreement, all in accordance with the terms of this Agreement and the Notes, as well as all other sums owing pursuant to the Loan Documents. (S)7.2 Maintenance of Office. The Borrower and each Guarantor will maintain its respective chief executive office at 359 E. Paces Ferry Road, N.E., Suite 400, Atlanta, Georgia 30305, or at such other place in the United States of America as the Borrower or any Guarantor shall designate upon thirty (30) days prior written notice to the Agent and the Lenders, where notices, presentations and demands to or upon the Borrower or such Guarantor in respect of the Loan Documents may be given or made. (S)7.3 Records and Accounts. The Borrower and each Guarantor will (a) keep, and cause each of their respective Subsidiaries to keep, proper records and books of account in which true and correct entries will be made in accordance with GAAP and (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation and amortization of its properties and the properties of their respective Subsidiaries, contingencies and other reserves. Neither the Borrower, any Guarantor nor any of their respective Subsidiaries shall, without the prior written consent of the Required Lenders, (x) make any material change to the accounting procedures used by such Person in preparing the financial statements and other information described in (S)6.4 or (S)7.4, or (y) change its fiscal year. (S)7.4 Financial Statements, Certificates and Information. Borrower will deliver or cause to be delivered to the Agent with sufficient copies for each of the Lenders: (a) as soon as practicable, but in any event not later than ninety (90) days after the end of each fiscal year of Borrower, the audited consolidated balance sheet of Borrower and its Subsidiaries at the end of such year, and the related audited consolidated statements of income, changes in capital and cash flows for such year, each setting forth in comparative form the figures for the previous fiscal year and all such statements to be in reasonable detail, prepared in accordance with GAAP, and accompanied by an auditor's report prepared without qualification as to the scope of the audit by a "Big Five" accounting firm (the foregoing may be satisfied by delivery of the Form 10-K of the Borrower filed with the SEC), and any other information the Lenders may reasonably request to complete a financial analysis of the Borrower and its 63 Subsidiaries, together with a written statement from such accountants to the effect that they have read this Agreement, and that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any Default or Event of Default they shall disclose in such statement any such Default or Event of Default (provided that with respect to the audited financial statement due on or before March 31, 2001, such written statement from the Borrower's accountants shall be delivered on or before the date that is two (2) weeks following the date such financial statement is required to be delivered to Agent hereunder); (b) as soon as practicable, but in any event not later than forty-five (45) days after the end of each of the first three fiscal quarters of Borrower, copies of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarter, and the related unaudited consolidated statements of income and cash flows for the portion of Borrower's fiscal year then elapsed, all in reasonable detail and prepared in accordance with GAAP (the foregoing may be satisfied by delivery of the Form 10-Q of the Borrower filed with the SEC), together with a certification by the chief financial officer or accounting officer of Borrower that the information contained in such financial statements fairly presents the financial position of the Borrower and its Subsidiaries on the date thereof (subject to year-end adjustments); (c) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement (a "Compliance Certificate") certified by the chief financial officer or chief accounting officer of Borrower in the form of Exhibit K hereto (or in such other form as the Agent may approve from time to time) setting forth in reasonable detail computations evidencing compliance or non-compliance (as the case may be) with the covenants contained in (S)9 and the other covenants described in such certificate and (if applicable) setting forth reconciliations to reflect changes in GAAP since the Balance Sheet Date. Borrower shall submit with the Compliance Certificate a Borrowing Base Certificate in the form of Exhibit J attached hereto pursuant to which the Borrower shall calculate the amount of the Borrowing Base as of the end of the immediately preceding fiscal quarter of the Borrower. All income, expense and value associated with Real Estate or other Investments disposed of during any quarter will be eliminated from calculations, where applicable. The Compliance Certificate shall be accompanied by copies of the statements of Net Operating Income for such fiscal quarter for each of the Mortgaged Properties, prepared on a basis consistent with the statements furnished to the Lenders prior to the date hereof and otherwise in form and substance reasonably satisfactory to the Agent, together with a certification by the chief financial officer or chief accounting officer of Borrower that the information contained in such statement fairly presents the Net Operating Income of the Mortgaged Properties for such periods; (d) contemporaneously with the delivery of the financial statements referred to in clause (a) above, the statement of all contingent liabilities involving amounts of $1,000,000.00 or more of the Borrower and its Subsidiaries which are not reflected in such financial statements or referred to in the notes thereto (including, without limitation, all guaranties, endorsements and other contingent obligations in 64 respect of the indebtedness of others, and obligations to reimburse the issuer in respect of any letters of credit); (e) as soon as practicable but in any event not later than forty-five (45) days after the end of each fiscal quarter of Borrower (including the fourth fiscal quarter in each year), a Rent Roll for each of the Mortgaged Properties and a consolidated operating statement for the Mortgaged Properties, and a copy of each Lease or amendment entered into with respect to a Mortgaged Property during such quarter; (f) simultaneously with the delivery of the financial statement referred to in subsections (a) and (b) above, a supplemental investor package containing financial and statistical information related to the applicable quarter in the form delivered to the Agent prior to the Closing Date, together with a statement of sources and uses of funds with respect to properties under development; (g) contemporaneously with the filing or mailing thereof, copies of all material of a financial nature, reports or proxy statements sent to the shareholders of the Borrower; (h) promptly after they are filed with the Internal Revenue Service, copies of all annual federal income tax returns and amendments thereto of the Borrower and each Guarantor; (i) promptly upon the filing hereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports which the Borrower shall file with the SEC; (j) not later than five (5) Business Days after the Borrower receives notice of the same from any of the Rating Agencies or otherwise learns of the same, notice of the issuance of any change in the Rating by any of the Rating Agencies in respect of the Borrower or any debt of the Borrower (including any change in the Rating), together with the details thereof, and of any announcement by any of the Rating Agencies that any such Rating is "under review" or that any such Rating has been placed on a watch list or that any similar action has been taken by any of the Rating Agencies (collectively, a "Rating Notice"); (k) evidence reasonably satisfactory to Agent of the timely payment of all real estate taxes for the Mortgaged Properties; (l) not later than November 15 of each year, the cash flow projections for the Borrower and its Subsidiaries for the next three (3) years; and (m) from time to time such other financial data and information in the possession of the Borrower, each Guarantor or their respective Subsidiaries (including without limitation auditors' management letters, status of litigation or investigations against the Borrower and any settlement discussions relating thereto, property inspection and environmental reports and information as to zoning and other legal and regulatory 65 changes affecting the Borrower or any Guarantor) as the Agent may reasonably request. Information concerning such litigation or settlement discussions shall not include attorney-client privileged communications, but shall otherwise include information which may be confidential or subject to a work-product privilege so that the Agent and the Lenders receive the same level of disclosure from the Borrower with respect to such matters as has been made prior to the Closing Date. (S)7.5 Notices. (a) Defaults. The Borrower will immediately upon becoming aware of same notify the Agent in writing of the occurrence of any Default or Event of Default, which notice shall describe such occurrence with reasonable specificity and shall state that such notice is a "notice of default". If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Agreement or under any note, evidence of indebtedness, indenture or other obligation to which or with respect to which the Borrower, any Guarantor or any of their respective Subsidiaries is a party or obligor, whether as principal or surety, and such default would permit the holder of such note or obligation or other evidence of indebtedness to accelerate the maturity thereof, which acceleration would either cause a Default or have a Material Adverse Effect, the Borrower shall forthwith give written notice thereof to the Agent and each of the Lenders, describing the notice or action and the nature of the claimed default. (b) Environmental Events. The Borrower will give notice to the Agent within five (5) Business Days of becoming aware of (i) any potential or known Release, or threat of Release, of any Hazardous Substances in an amount that may be required to be contained, removed or otherwise remediated at or from any Real Estate; (ii) any violation of any Environmental Law that the Borrower, any Guarantor or any of their respective Subsidiaries reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency or (iii) any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, of any federal, state or local environmental agency or board, that in either case involves (A) any Mortgaged Property, (B) any other Real Estate and could reasonably be expected to have a Material Adverse Effect, or (C) or the Agent's liens or security title on the Collateral pursuant to the Security Documents. (c) Notification of Claims Against Collateral. The Borrower will give notice to the Agent in writing within five (5) Business Days of becoming aware of any material setoff, claims (including, with respect to the Mortgaged Property, environmental claims), withholdings or other defenses to which any of the Collateral, or the rights of the Agent or the Lenders with respect to the Collateral, are subject. (d) Notice of Litigation and Judgments. The Borrower will give notice to the Agent in writing within five (5) Business Days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting the Borrower, any Guarantor or any of their respective Subsidiaries or to which 66 the Borrower, any Guarantor or any of their respective Subsidiaries is or is to become a party involving an uninsured claim against any of the Borrower, any Guarantor or any of their respective Subsidiaries that could reasonably be expected to have a Material Adverse Effect and stating the nature and status of such litigation or proceedings. The Borrower and each Guarantor will give notice to the Agent, in writing, in form and detail reasonably satisfactory to the Agent and each of the Lenders, within ten days of any judgment not covered by insurance, whether final or otherwise, against any of the Borrower, any Guarantor or any of their respective Subsidiaries in an amount in excess of $1,000,000. (e) Notice of Proposed Sales, Encumbrances, Refinance or Transfer of Non-Mortgaged Property. The Borrower will give notice to the Agent of any completed sale, encumbrance, refinance or transfer of any Real Estate (other than the Mortgaged Properties) or other Investments of the type described in (S)8.3(i) of the Borrower, any Guarantor or their respective Subsidiaries within any fiscal quarter of Borrower, such notice to be submitted together with the Compliance Certificate provided or required to be provided to the Agent and the Lenders under (S)7.4 with respect to such fiscal quarter. The Compliance Certificate shall with respect to any completed sale, encumbrance, refinance or transfer be adjusted in the best good faith estimate of Borrower to give effect to such sale, encumbrance, refinance or transfer and demonstrate that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such sale, encumbrance, refinance or transfer. Notwithstanding the foregoing, in the event of any sale, encumbrance, refinance or transfer of any Real Estate or other Investment of the type described in (S)8.3(i) involving Real Estate or such other Investment in an amount in excess of $50,000,000.00, the Borrower shall promptly give notice to the Agent of such transaction, which notice shall be accompanied by a Compliance Certificate prepared using the financial statements of Borrower most recently provided or required to be provided to the Agent and the Lenders under (S)6.4 or (S)7.4, adjusted as provided in this paragraph. (f) ERISA. The Borrower will give notice to the Agent within five (5) Business Days after the Borrower or any ERISA Affiliate (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in (S)4043 of ERISA) with respect to any Guaranteed Pension Plan, Multiemployer Plan or Employee Benefit Plan, or knows that the plan administrator of any such plan has given or is required to give notice of any such reportable event; (ii) gives a copy of any notice of complete or partial withdrawal liability under Title IV of ERISA; or (iii) receives any notice from the PBGC under Title IV or ERISA of an intent to terminate or appoint a trustee to administer any such plan. (g) Notification of Lenders. Within five (5) Business Days after receiving any notice under this (S)7.5, the Agent will forward a copy thereof to each of the Lenders, together with copies of any certificates or other written information that accompanied such notice. (S)7.6 Existence; Maintenance of Properties; Rating Agency Surveillance. 67 (a) The Borrower will preserve and keep in full force and effect its existence as a Maryland corporation. Each Guarantor will preserve and keep in full force and effect its legal existence in the jurisdiction of its incorporation or formation. The Borrower and each Guarantor will cause each of their respective Subsidiaries to preserve and keep in full force and effect their legal existence in the jurisdiction of its incorporation or formation. The Borrower will preserve and keep in full force all of its rights and franchises and those of its Subsidiaries, the preservation of which is necessary to the conduct of their business. Borrower shall at all times comply with all requirements and applicable laws and regulations necessary to maintain REIT status. The common stock of Borrower shall at all times be listed for trading and be traded on the New York Stock Exchange (NYSE), unless otherwise consented to by the Required Lenders. The Borrower shall continue to own directly or indirectly one hundred percent (100%) of the Guarantors. (b) The Borrower (i) will cause all of its properties and those of its Subsidiaries used or useful in the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order (ordinary wear and tear excepted) and supplied with all necessary equipment, and (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof in all cases in which the failure so to do would have a material adverse effect on the condition of any Mortgaged Property or would cause a Material Adverse Effect. Without limitation of the obligations of the Borrower under this Agreement with respect to the maintenance of the Mortgaged Properties, the Borrower shall promptly and diligently comply with the recommendations of the Environmental Engineer concerning the maintenance, operation or upkeep of the Mortgaged Properties contained in the building inspection and environmental reports delivered to the Agent or otherwise obtained by Borrower or any Guarantor. (c) In the event that Borrower obtains a Qualifying Rating for the purposes of determining the Applicable Margin, Borrower shall at all times thereafter pay such monitoring, surveillance or similar fees as may be required by the applicable Rating Agency to continue to monitor the Borrower, and the Borrower shall upon the request of Agent provide evidence to Agent of the payment thereof. (S)7.7 Insurance. (a) The Borrower will procure and maintain or cause to be procured and maintained (i) insurance covering the Borrower and the Guarantors and their respective Subsidiaries, the Mortgaged Properties and their respective properties (the cost of such insurance to be borne by the insured thereunder) with financially sound and reputable insurers (or self-insurance provided by creditworthy tenants) in such amounts and against such risks and casualties as are customary for properties of similar character and location, due regard being given to the type of improvements thereon, their construction, location, use and occupancy, and (ii) such insurance as is required by the Security Documents. 68 (b) The Borrower or the applicable Guarantor shall pay all premiums on insurance policies. The liability insurance policies with respect to all Mortgaged Properties shall name the Agent and each Lender as an additional insured. (c) In the event of any loss or damage to the Mortgaged Property, the Borrower or the applicable Guarantor shall give prompt written notice to the insurance carrier and the Agent. Each of the Borrower and the Guarantors hereby irrevocably authorizes and empowers the Agent, at the Agent's option and in the Agent's sole discretion or at the request of the Required Lenders in their sole discretion, as its attorney in fact, to make proof of such loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive Insurance Proceeds, and to deduct therefrom the Agent's expenses incurred in the collection of such Insurance Proceeds; provided, however, that so long as no Default or Event of Default has occurred and is continuing and so long as the Borrower or any Guarantor shall in good faith diligently pursue such claim, the Borrower or such Guarantor may make proof of loss and appear in any proceedings or negotiations with respect to the adjustment of such claim, except that the Borrower or such Guarantor may not settle, adjust or compromise any such claim without the prior written consent of the Agent, which consent shall not be unreasonably withheld or delayed; provided, further, that the Borrower or such Guarantor may make proof of loss and adjust and compromise any claim under casualty insurance policies which is in an amount less than $500,000 so long as no Default or Event of Default has occurred and is continuing and so long as the Borrower or such Guarantor shall in good faith diligently pursue such claim. The Borrower and each Guarantor further authorize the Agent, at the Agent's option, to (i) apply the balance of such Insurance Proceeds to the payment of the Obligations whether or not then due, or (ii) if the Agent shall require the reconstruction or repair of the Mortgaged Property, to hold the balance of such proceeds as trustee to be used to pay taxes, charges, sewer use fees, water rates and assessments which may be imposed on the Mortgaged Property and the Obligations as they become due during the course of reconstruction or repair of the Mortgaged Property and to reimburse the Borrower or such Guarantor, in accordance with such terms and conditions as the Agent may prescribe, for the costs of reconstruction or repair of the Mortgaged Property, and upon completion of such reconstruction or repair to apply any excess to the payment of the Obligations. (d) Notwithstanding the foregoing or anything in the Mortgages, the Agent shall make net Insurance Proceeds and Condemnation Proceeds available to the Borrower or such Guarantor to reconstruct and repair the Mortgaged Property, in accordance with such terms and conditions as the Agent may prescribe in the Agent's discretion for the disbursement of the proceeds, provided that (i) the cost of such reconstruction or repair is not estimated by the Agent to exceed fifty percent (50%) of the replacement cost of the damaged Building (as reasonably estimated by the Agent), (ii) no Event of Default shall have occurred and be continuing, (iii) the Borrower or such Guarantor shall have provided to the Agent additional cash security in an amount equal to the amount reasonably estimated by the Agent to be the amount in excess of such proceeds which will be required to complete such repair or restoration, (iv) the Agent shall have approved the plans and specifications, construction budget, construction contracts, and construction schedule for such repair or restoration and reasonably 69 determined that the repaired or restored Mortgaged Property will provide the Agent with adequate security for the Obligations (provided that the Agent shall not disapprove such plans and specifications if the Building is to be restored to its condition immediately prior to such damage), (v) the Borrower or such Guarantor shall have delivered to the Agent written agreements binding upon the Major Tenants and not less than seventy-five percent (75%) of the remaining tenants or other parties having present or future rights to possession of any portion of the affected Mortgaged Property or having any right to require repair, restoration or completion of the Mortgaged Property or any portion thereof (determined by reference to those tenants in the aggregate occupying or having rights to occupy not less than seventy-five percent (75%) of the Net Rentable Area of the Building so damaged, excluding the portion leased by the Major Tenants), agreeing upon a date for delivery of possession of the Mortgaged Property or their respective portions thereof, to permit time which is sufficient in the judgment of the Agent for such repair or restoration and approving the plans and specifications for such repair or restoration, or other evidence satisfactory to the Agent that none of such tenants or other parties may terminate their Leases as a result of such casualty or as a result of having a right to approve the plans and specifications for such repair or restoration, (vi) the Agent shall reasonably determine that such repair or reconstruction can be completed prior to the Maturity Date, (vii) the Agent shall receive evidence reasonably satisfactory to it that any such restoration, repair or rebuilding complies in all respects with any and all applicable state, federal and local laws, ordinances and regulations, including without limitation, zoning laws, ordinances and regulations, and that all required permits, licenses and approvals relative thereto have been or will be issued in a manner so as not to materially impede the progress of restoration, (viii) the Agent shall receive evidence reasonably satisfactory to it that the insurer under such policies of fire or other casualty insurance does not assert any defense to payment under such policies against the Borrower, any Guarantor or the Agent, and (ix) with respect to any taking or condemnation, Agent shall determine that following such repair or restoration there shall be no more than the lesser of (i) a fifty percent (50%) reduction in occupancy or rental income from the Mortgaged Property so affected by such specific condemnation or taking (excluding any proceeds from rental loss insurance or proceeds from such award allocable to rent) or (ii) a fifteen percent (15%) reduction in occupancy or in rental income from all of the Mortgaged Properties (excluding any proceeds from rental loss insurance or proceeds of such award allocable to rent), after giving effect to the current condemnation or taking and any previous condemnations or takings which may have occurred. Any excess Insurance Proceeds shall be paid to the Borrower, or if an Event of Default has occurred and is continuing, such proceeds shall be applied to the payment of the Obligations, unless in either case by the terms of the applicable insurance policy the excess proceeds are required to be returned to such insurer. Any excess Condemnation Proceeds shall be applied to the payment of the Obligations. In no event shall the provisions of this section be construed to extend the Maturity Date or to limit in any way any right or remedy of the Agent upon the occurrence of an Event of Default hereunder. If the Mortgaged Property is sold or the Mortgaged Property is acquired by the Agent, all right, title and interest of the Borrower and any Guarantor in and to any insurance policies and unearned premiums thereon and in and to the proceeds thereof resulting from loss or damage to the 70 Mortgaged Property prior to the sale or acquisition shall pass to the Agent or any other successor in interest to the Borrower or purchaser of the Mortgaged Property. (e) The Borrower and the Guarantors will provide to the Agent for the benefit of the Lenders Title Policies for all of the Mortgaged Properties of such Person. Each Title Policy shall also contain, to the extent available, a tie-in endorsement aggregating the insurance coverage provided under all of the policies issued by the same title insurance company relating to the Borrower and each Guarantor. (S)7.8 Taxes; Liens. The Borrower and the Guarantors will, and will cause their respective Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become delinquent, all taxes, assessments and other governmental charges imposed upon them or upon the Mortgaged Properties or the other Real Estate, sales and activities, or any part thereof, or upon the income or profits therefrom as well as all claims for labor, materials or supplies that if unpaid might by law become a lien or charge upon any of its property or other Liens affecting any of the Collateral or other property of Borrower, the Guarantors or their respective Subsidiaries, provided that any such tax, assessment, charge or levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings which shall suspend the collection thereof with respect to such property, neither such property nor any portion thereof or interest therein would be in any danger of sale, forfeiture or loss by reason of such proceeding and the Borrower, any such Guarantor or any such Subsidiary shall have set aside on its books adequate reserves in accordance with GAAP; and provided, further, that forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor, the Borrower, any such Guarantor or any such Subsidiary either (i) will provide a bond issued by a surety reasonably acceptable to the Agent and sufficient to stay all such proceedings or (ii) if no such bond is provided, will pay each such tax, assessment, charge or levy. (S)7.9 Inspection of Properties and Books. The Borrower and the Guarantors will, and will cause their respective Subsidiaries to, permit the Lenders, through the Agent or any representative designated by the Agent, at the Borrower's expense and upon reasonable prior notice, to visit and inspect any of the properties of the Borrower, each Guarantor or any of their respective Subsidiaries, to examine the books of account of the Borrower, each Guarantor and their respective Subsidiaries (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Borrower, any Guarantor and their respective Subsidiaries with, and to be advised as to the same by, their respective officers, all at such reasonable times and intervals as the Agent or any Lender may reasonably request, provided that so long as no Default or Event of Default shall have occurred and be continuing, the Borrower shall not be required to pay for such visits and inspections more often than once in any twelve (12) month period. The Lenders shall use good faith efforts to coordinate such visits and inspections so as to minimize the interference with and disruption to the normal business operations of the Borrower, the Guarantors and their respective Subsidiaries. (S)7.10 Compliance with Laws, Contracts, Licenses, and Permits. The Borrower and the Guarantors will, and will cause each of their respective Subsidiaries to, comply in 71 all respects with (i) all applicable laws and regulations now or hereafter in effect wherever its business is conducted, including all Environmental Laws, (ii) the provisions of its corporate charter, partnership agreement, limited liability company agreement or declaration of trust, as the case may be, and other charter documents and bylaws, (iii) all agreements and instruments to which it is a party or by which it or any of its properties may be bound, (iv) all applicable decrees, orders, and judgments, and (v) all licenses and permits required by applicable laws and regulations for the conduct of its business or the ownership, use or operation of its properties, except where a failure to so comply with any of clauses (i) through (v) would not have a Material Adverse Effect. If any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Borrower, any Guarantor or their respective Subsidiaries may fulfill any of its obligations hereunder, the Borrower, such Guarantor or such Subsidiary will immediately take or cause to be taken all steps necessary to obtain such authorization, consent, approval, permit or license and furnish the Agent and the Lenders with evidence thereof. (S)7.11 Further Assurances. The Borrower and each Guarantor will and will cause each of their respective Subsidiaries to, cooperate with the Agent and the Lenders and execute such further instruments and documents as the Lenders or the Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Agreement and the other Loan Documents. (S)7.12 Management. The Borrower shall not and shall not permit any Guarantor to enter into any management agreement with a third party manager after the date hereof for any Mortgaged Property without the prior written consent of the Agent (which shall not be unreasonably withheld). Agent may condition any approval of a new manager upon the execution and delivery to Agent of collateral assignment of such management agreement to Agent and a subordination of the manager's rights thereunder to the rights of the Agent and the Lenders under the Loan Documents. (S)7.13 Leases of the Property. Neither the Borrower nor any Guarantor will lease all or any portion of a Mortgaged Property or amend, supplement or otherwise modify, terminate or cancel, or accept the surrender of, or consent to the assignment or subletting of, or grant any concessions to or waive the performance of any obligations of any tenant, lessee or licensee under, any now existing or future Lease without the prior written consent of the Agent; provided, however, with respect to (a) any Lease which covers less than 25,000 square feet of a Mortgaged Property, the Borrower or any Guarantor may enter into leases, amend, supplement or otherwise modify, terminate or cancel, or accept the surrender of, or consent to the assignment or subletting of, or granting concessions to or waive the performance of any obligations of any tenant, lessee or licensee under any such Lease in the ordinary course of business consistent with sound leasing and management practices for similar properties, or (b) any lease which covers 25,000 square feet or more of a Mortgaged Property, the Borrower or any Guarantor may enter into an amendment or modification of a Lease in the ordinary course of business consistent with sound leasing and management practices provided that such amendment or modification does not decrease any minimum rent, percentage rent or other financial obligation of the 72 tenant thereunder, release any tenant or guarantor, shorten the term thereof, increase landlord obligations, or otherwise materially modify such lease. (S)7.14 Business Operations. The Borrower, the Guarantors and their respective Subsidiaries shall operate their respective businesses in substantially the same manner and in substantially the same fields and lines of business as such business is now conducted and in compliance with the terms and conditions of this Agreement and the Loan Documents. (S)7.15 Registered Servicemark. Without the prior written consent of the Agent, none of the Mortgaged Properties shall be owned or operated by the Borrower or any Guarantor under any registered or protected trademark, tradename, servicemark or logo. Without limiting the foregoing, the Agent may condition its consent to the use of any of the foregoing upon the granting to the Agent for the benefit of the Lenders of a perfected first priority security interest therein. (S)7.16 Ownership of Real Estate. Without the prior written consent of Agent, all Real Estate and all interests (whether direct or indirect) of the Borrower, the Guarantors and any of their respective Subsidiaries in income-producing real estate assets now owned or leased or acquired or leased after the Closing Date shall be owned or leased directly by the Borrower; provided, however that (i) subject to the restrictions contained in (S)8.3, the Borrower shall be permitted to own or lease interests in Real Estate together with other third party joint venture partners; (ii) any Subsidiary may acquire Real Estate in a like-kind exchange of Real Estate of such Person; (iii) Real Estate may be owned by Subsidiaries of the Borrower as permitted in (S)8.13 or with respect to development permitted pursuant to (S)8.9; and (iv) a Subsidiary of the Borrower which has developed income-producing real estate may continue to own such property provided that the owner thereof is a Guarantor. (S)7.17 Distributions of Income to the Borrower. The Borrower shall cause all of its Subsidiaries to promptly distribute to the Borrower (but not less frequently than once each fiscal quarter of the Borrower, unless otherwise approved by the Agent), whether in the form of dividends, distributions or otherwise, all profits, proceeds or other income relating to or arising from its Subsidiaries' use, operation, financing, refinancing, sale or other disposition of their respective assets and properties after (a) the payment by each Subsidiary of its debt service and operating expenses for such quarter and (b) the establishment of reasonable reserves for the payment of operating expenses not paid on at least a quarterly basis and capital improvements to be made to such Subsidiary's assets and properties approved by such Subsidiary in the ordinary course of business consistent with its past practices. (S)7.18 Limiting Agreements. Should the Borrower, the Guarantors or any of their respective Subsidiaries enter into or modify any agreements or documents pertaining to any existing or future Indebtedness or Debt Offering providing for Indebtedness in excess of $500,000.00 or any Equity Offering, which agreements or documents include covenants, whether affirmative or negative, or any other provision which may have the same practical effect as any of the foregoing, which are individually 73 or in the aggregate more restrictive against the Borrower, the Guarantors or their respective Subsidiaries than those set forth in Articles 8 or 9 of this Agreement, the Borrower shall promptly notify the Agent and, if requested by the Agent or the Required Lenders, the Borrower, the Agent, and the Lenders shall promptly amend this Agreement and the other Loan Documents to include some or all of such more restrictive provisions as determined by the Agent or the Required Lenders in their sole discretion, and the Borrower shall cause the Guarantors to consent to such amendment. The Borrower agrees to deliver to the Agent copies of any agreements or documents (or modifications thereof) pertaining to existing or future Indebtedness, Debt Offering or Equity offering of the Borrower, the Guarantors or any of their respective Subsidiaries as the Agent form time to time may request. Notwithstanding the foregoing, this (S)7.18 shall not apply to covenants (whether affirmative or negative), warranties, defaults or events of default (or any other provision which may have the same practical effect as any of the foregoing) contained in any agreements or documents evidencing or securing Indebtedness that relate only to specific Real Estate that is collateral for such Indebtedness. (S)7.19 Interest Rate Contract. From and after the date of this Agreement, the Borrower shall at all times maintain in full force and effect the Interest Rate Contract described in (S)10.16. The Borrower shall upon the request of the Agent provide to the Agent evidence that such Interest Rate Contract is in effect. (S)7.20 Plan Assets. The Borrower will do, or cause to be done, all things necessary to ensure that none of the Mortgaged Properties will be deemed to be Plan Assets at any time. (S)8. NEGATIVE COVENANTS. The Borrower covenants and agrees that, so long as any Loan, Note or Letter of Credit is outstanding or any of the Lenders has any obligation to make any Loans or issue any Letter of Credit: (S)8.1 Restrictions on Indebtedness. The Borrower will not, and will not permit its respective Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than: (a) Indebtedness to the Lenders arising under any of the Loan Documents; (b) current liabilities of the Borrower, the Guarantors or their respective Subsidiaries incurred in the ordinary course of business but not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; (c) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of (S)7.8; 74 (d) Indebtedness in respect of judgments only to the extent, for the period and for an amount not resulting in a Default; (e) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; (f) Indebtedness in respect of reverse repurchase agreements having a term of not more than 180 days with respect to Investments described in (S)8.3(d) or (e); (g) subject to the provisions of (S)9, Indebtedness of the Borrower and its Subsidiaries; provided that, unless otherwise approved by Agent, no Indebtedness incurred after the Closing Date that is recourse to Borrower shall bear a maturity date that is sooner than 180 days after the Maturity Date; provided further that without the consent of Agent Indebtedness of Borrower entered into in the ordinary course of business that is secured by Real Estate and is recourse to Borrower in an aggregate amount not greater than $30,000,000.00 may mature on a date that is not sooner than 90 days after the Maturity Date; (h) Indebtedness arising under the Interest Rate Contract entered into pursuant to (S)10.16; and (i) unsecured Indebtedness of Subsidiaries of the Borrower to Borrower provided that repayment of such Indebtedness shall be subordinate at all times to the repayment of the Obligations pursuant to a subordination agreement reasonably satisfactory to Agent. (S)8.2 Restrictions on Liens, Etc. The Borrower will not, and will not permit its Subsidiaries to (a) create or incur or suffer to be created or incurred or to exist any lien, security title, encumbrance, mortgage, pledge, negative pledge, charge, restriction or other security interest of any kind upon any of their respective property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (b) transfer any of their property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (c) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (d) suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Indebtedness or claim or demand against any of them that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over any of their general creditors; (e) sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse(provided that this clause (e) shall not prohibit a true sale of a land option or development agreement); or (f) incur or maintain any obligation to any holder of Indebtedness of any of such Persons which prohibits the creation or maintenance of any lien securing the Obligations (collectively, "Liens"); provided that the Borrower and any such Subsidiary may create or incur or suffer to be created or incurred or to exist: 75 (i) Liens on properties to secure taxes, assessments and other governmental charges or claims for labor, material or supplies in respect of obligations not then delinquent; (ii) deposits or pledges made in connection with, or to secure payment of, workers' compensation, unemployment insurance, old age pensions or other social security obligations; (iii) Liens on assets other than the Collateral, the Mortgaged Property or any interest therein (including the rents, issues and profits therefrom) in respect of judgments, awards or Indebtedness which is permitted by (S)8.1(d) or (S)8.1(g); (iv) encumbrances on properties other than the Mortgaged Property consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's liens under leases to which the Borrower, the Guarantors or any such Subsidiary is a party, purchase money security interests and other liens or encumbrances, which do not individually or in the aggregate have a materially adverse effect on the business of the Borrower on a consolidated basis; (v) liens in favor of the Agent and the Lenders under the Loan Documents to secure the Obligations and the Hedge Obligations; and (vi) liens and encumbrances on a Mortgaged Property expressly permitted under the terms of the Mortgage relating thereto. (S)8.3 Restrictions on Investments. The Borrower will not, and will not permit any of its Subsidiaries to, make or permit to exist or to remain outstanding any Investment except Investments in: (a) marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Borrower or any such Subsidiary; (b) marketable direct obligations of any of the following: Federal Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal Home Loan Banks, Federal National Mortgage Association, Government National Mortgage Association, Bank for Cooperatives, Federal Intermediate Credit Banks, Federal Financing Banks, Export-Import Bank of the United States, Federal Land Banks, or any other agency or bank of the United States of America; (c) demand deposits, certificates of deposit, bankers acceptances and time deposits of any of the Lenders or any United States banks having total assets in excess of $100,000,000; provided, however, that the aggregate amount at any time so invested with any single bank having total assets of less than $1,000,000,000 will not exceed $1,000,000; 76 (d) securities commonly known as "commercial paper" issued by any Lender, or by a corporation organized and existing under the laws of the United States of America or any State which at the time of purchase are rated by Moody's Investors Service, Inc. or by Standard & Poor's Corporation at not less than "P 1" if then rated by Moody's Investors Service, Inc., and not less than "A 1", if then rated by Standard & Poor's Corporation; (e) mortgage-backed securities guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and other mortgage-backed bonds which at the time of purchase are rated by Moody's Investors Service, Inc. or by Standard & Poor's Corporation at not less than "AA" if then rated by Moody's Investors Service, Inc. and not less than "AA" if then rated by Standard & Poor's Corporation; (f) repurchase agreements having a term not greater than 180 days and fully secured by securities described in the foregoing subsections (a), (b) or (e) with the Lenders, banks described in the foregoing subsection (c) or financial institutions or other corporations having total assets in excess of $500,000,000; (g) shares of so-called "money market funds" registered with the Securities and Exchange Commission under the Investment Company Act of 1940 which maintain a level per-share value, invest principally in investments described in the foregoing subsections (a) through (f) and have total assets in excess of $50,000,000; (h) subject to (S)7.16 and (S)9, options, easements, licenses, fee interests and leasehold interests and similar interests in Real Estate utilized or to be utilized principally for retail shopping center purposes or a related purpose, including earnest money deposits relating thereto and transaction costs; (i) subject to the terms of this Agreement, Investments in Subsidiaries of Borrower existing as of the date hereof, and Investments in new wholly-owned Subsidiaries of Borrower created after the date of this Agreement; (j) loans or advances to employees and directors not exceeding $1,000,000.00 in the aggregate principal amount outstanding at any time; (k) deposits required by government agencies or public utilities; (l) (i) Replacement Property Development Loans, and (ii) other loans and advances by the Borrower and the Guarantors to any JDN Venture which are evidenced by notes (and, if requested by the Agent, acting at the direction of the Required Lenders, with such notes, together with any related mortgage, having been assigned to and pledged to the Agent, for the benefit of itself and the Lenders, as security for the payment of the Obligations and the Hedge Obligations) in an aggregate amount which, together with Investments permitted by (S)8.3(m), do not exceed ten percent (10%) of Borrower's Consolidated Total Assets as of the end of the most recent fiscal quarter of Borrower; 77 (m) other Investments by the Borrower and the Guarantors (including Investments in Persons over which, after giving effect to such Investment, the Borrower or the Guarantors do not have control) which do not exceed five percent (5%) of Borrower's Consolidated Total Assets as of the end of the most recent fiscal quarter of Borrower; and (n) Investments in any common stock issued by the Borrower which has been repurchased by the Borrower or any of its Subsidiaries, provided that in no event shall such Investments exceed in the aggregate $25,000,000.00 (based upon the cost to acquire such stock). (S)8.4 Merger, Consolidation. The Borrower will not, and will not permit its Subsidiaries to, become a party to any dissolution, liquidation, disposition of all or substantially all of its assets or business, merger, reorganization, consolidation or other business combination or agree to effect any asset acquisition, stock acquisition or other acquisition individually or in a series of transactions involving amounts in excess of $50,000,000.00 which may have a similar effect as any of the foregoing, in each case without the prior written consent of the Required Lenders, except for (i) the merger or consolidation of two or more Subsidiaries of the Borrower or any Guarantor, and (ii) the merger or consolidation of one or more of the Subsidiaries of the Borrower with and into the Borrower where the Borrower is the sole surviving entity. (S)8.5 Sale and Leaseback. The Borrower will not, and will not permit its Subsidiaries, to enter into any arrangement, directly or indirectly, whereby the Borrower or any such Subsidiary shall sell or transfer any Real Estate owned by it in order that then or thereafter the Borrower or any such Subsidiary shall lease back such Real Estate. (S)8.6 Compliance with Environmental Laws. The Borrower will not, and will not permit its Subsidiaries or any other Person to, do any of the following: (a) use any of the Real Estate or any portion thereof as a facility for the handling, processing, storage or disposal of Hazardous Substances, except for small quantities of Hazardous Substances used in the ordinary course of business and in material compliance with all applicable Environmental Laws, (b) cause or permit to be located on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Substances except in full compliance with Environmental Laws, (c) generate any Hazardous Substances on any of the Real Estate except in full compliance with Environmental Laws, (d) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause a Release of Hazardous Substances on, upon or into the Real Estate or any surrounding properties or any threatened Release of Hazardous Substances which might give rise to liability under CERCLA or any other Environmental Law, or (e) directly or indirectly transport or arrange for the transport of any Hazardous Substances (except in compliance with all Environmental Laws). The Borrower shall, and shall cause its Subsidiaries to: (i) in the event of any change in Environmental Laws governing the assessment, release or removal of Hazardous Substances, take all 78 reasonable action (including, without limitation, the conducting of engineering tests at the sole expense of the Borrower) to confirm that no Hazardous Substances are or ever were Released or disposed of on the Mortgaged Properties in violation of applicable Environmental Laws; and (ii) if any Release or disposal of Hazardous Substances which any Person may be legally obligated to contain, correct or otherwise remediate or which may otherwise expose it to liability shall occur or shall have occurred on the Real Estate (including without limitation any such Release or disposal occurring prior to the acquisition or leasing of such Real Estate by the Borrower or any such Subsidiary), the Borrower shall, after obtaining knowledge thereof, cause the prompt containment and removal of such Hazardous Substances and remediation of the Real Estate in full compliance with all applicable laws and regulations and to the reasonable satisfaction of the Agent; provided, that each of the Borrower and its Subsidiaries shall be deemed to be in compliance with Environmental Laws for the purpose of this clause (ii) so long as it or a responsible third party with sufficient financial resources is taking reasonable action to remediate or manage any event of noncompliance to the satisfaction of the Agent and no action shall have been commenced by any enforcement agency. The Agent may engage its own Environmental Engineer to review the environmental assessments and the compliance with the covenants contained herein. Notwithstanding the foregoing, if any Release or disposal of Hazardous Substances shall occur or shall have occurred on the Real Estate (except any such Release or disposal occurring prior to the acquisition or leasing of such Real Estate by the Borrower or any Guarantor and disclosed in an environmental assessment delivered to the Agent and the Lenders prior to the inclusion of such Real Estate in the Collateral) and such Real Estate is a Mortgaged Property, the Agent shall have the right to require that the Borrower provide to the Agent a substitute Mortgaged Property which is Eligible Real Estate within ninety (90) days of demand by the Agent in accordance with (S)5.3 or obtain the release of such Mortgaged Property pursuant to (S)5.4. At any time after an Event of Default shall have occurred hereunder, or, whether or not an Event of Default shall have occurred, at any time that the Agent or the Required Lenders shall have reasonable grounds to believe that a Release or threatened Release of Hazardous Substances which any Person may be legally obligated to contain, correct or otherwise remediate or which otherwise may expose such Person to liability may have occurred, relating to any Mortgaged Property, or that any of the Mortgaged Property is not in compliance with Environmental Laws to the extent required by the Loan Documents, the Agent may at its election (and will at the request of the Required Lenders) obtain such environmental assessments of such Mortgaged Property prepared by an Environmental Engineer as may be necessary or advisable for the purpose of evaluating or confirming (i) whether any Hazardous Substances are present in the soil or water at or adjacent to such Mortgaged Property and (ii) whether the use and operation of such Mortgaged Property comply with all Environmental Laws to the extent required by the Loan Documents. Environmental assessments may include detailed visual inspections of such Mortgaged Property including, without limitation, any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, as well as such other investigations or analyses as are reasonably necessary or appropriate 79 for a complete determination of the compliance of such Mortgaged Property and the use and operation thereof with all applicable Environmental Laws. All such environmental assessments shall be at the sole cost and expense of the Borrower, and shall be conducted to the extent reasonably practicable to minimize disruption to the conduct of business at such Mortgaged Property. (S)8.7 Distributions. The Borrower will not make any Distributions which would violate any of the following covenants: (a) The Borrower will not pay any Distribution to its shareholders the amount of which, when added to the amount of all other Distributions paid by it in the same fiscal quarter and the three immediately preceding fiscal quarters, would exceed ninety-five percent (95%) of its Funds from Operations for such period; provided that the Borrower shall be permitted to pay an amount in excess of such limit if necessary to permit the Borrower to maintain its REIT Status, as evidenced by a certification of the chief financial officer of the Borrower containing calculations in reasonable detail reasonably satisfactory in form and substance to the Agent. Notwithstanding the foregoing, Borrower may, subject to the limitations set forth in this Agreement (including specifically, but without limitation, those contained in (S)8.3(n) and (S)8.7(b)) make Distributions (which shall not be included in the ninety-five percent (95%) Funds from Operations test set forth in the preceding sentence) in order to enable Borrower to repurchase common stock of Borrower so long as (i) any such repurchase is made in Borrower's prudent business judgment, (ii) no Default or Event of Default shall have occurred and be continuing on the date of any such repurchase and (iii) no Default or Event of Default shall occur as a result of any such repurchase; (b) In the event that an Event of Default shall have occurred and be continuing, the Borrower shall not make any Distributions other than the minimum Distributions required under the Code to maintain the REIT Status of Borrower, as evidenced by a certification of the chief financial officer of the Borrower containing calculations in reasonable detail reasonably satisfactory in form and substance to the Agent; provided, however, that Borrower shall not be entitled to make any Distribution in connection with the repurchase of common stock of Borrower at any time an Event of Default shall have occurred and be continuing; and (c) In the event that an Event of Default shall have occurred and be continuing and the maturity of the Obligations has been accelerated, the Borrower shall not make any Distributions whatsoever, either directly or indirectly. (S)8.8 Asset Sales. The Borrower will not, and will not permit its Subsidiaries to, sell, transfer or otherwise dispose of any asset other than for fair market value. In the event that such disposition is of Real Estate or equity interests having a value greater than $50,000,000.00, a Compliance Certificate demonstrating compliance with the covenants referred to therein after giving effect to such sale, transfer or other disposition. (S)8.9 Development Activity. The Borrower will not, and will not permit its Subsidiaries or Affiliates to, engage, directly or indirectly (including through any 80 Affiliate in which the Borrower or its Subsidiaries owns a Minority Interest or through other Investments), in the development of properties without the prior written consent of the Required Lenders in their sole discretion; provided that without the consent of the Required Lenders the Borrower or any of its Subsidiaries or Affiliates may engage in the development of any number of properties to be used principally for or relating to retail shopping centers provided that the aggregate amount of Construction in Progress and Replacement Property Development Loans without duplication at any time shall not exceed thirty percent (30%) of the Consolidated Total Assets of Borrower. For purposes of this (S)8.9, the term "development" shall include the new construction of a shopping center or a substantial renovation or expansion of improvements to Real Estate which materially change the character or size thereof. The Borrower will, and will cause each of its Subsidiaries to, at all times that it is engaging in any development as provided herein, maintain available sources of capital acceptable to the Agent in its reasonable discretion equal to the total cost to acquire and complete such developments and to purchase such properties except where such a failure could not be reasonably expected to have a Material Adverse Effect. Amounts available to be disbursed for such purposes pursuant to this Agreement may be considered as a source of capital for the purposes of this (S)8.9. (S)8.10 Restriction on Prepayment of Indebtedness. The Borrower will not, and will not permit its Subsidiaries to, (a) prepay, redeem, defease, purchase or otherwise retire the principal amount, in whole or in part, of any Indebtedness other than the Obligations and the Hedge Obligations after the occurrence of any Event of Default, or (b) modify any document evidencing any Indebtedness (other than the Obligations) to accelerate the maturity date of such Indebtedness; provided, that this (S)8.10 shall not prohibit (x) the prepayment of Indebtedness which is financed solely from the proceeds of a new loan which would otherwise be permitted by the terms of (S)8.1; (y) the prepayment of Indebtedness secured by Real Estate which is satisfied solely from the proceeds of a sale of the Real Estate securing such Indebtedness; and (z) the prepayment of the Indebtedness (not exceeding $4,500,000.00 in principal amount) with respect to the Real Estate commonly known as Brown Deer in connection with the redevelopment of such property. (S)8.11 Zoning and Contract Changes and Compliance. Neither the Borrower nor any Guarantor shall initiate or consent to any zoning reclassification of any of its Mortgaged Property or seek any variance under any existing zoning ordinance or use or permit the use of any Mortgaged Property in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation. Neither the Borrower nor any Guarantor shall initiate any change in any laws, requirements of governmental authorities or obligations created by private contracts and Leases which now or hereafter may materially adversely affect the ownership, occupancy, use or operation of any Mortgaged Property. (S)8.12 Derivative Obligations. Neither the Borrower nor any of its Subsidiaries shall contract, create, incur, assume or suffer to exist any Derivative Obligations except the Interest Rate Contracts permitted pursuant to (S)8.1. 81 (S)8.13 Bankruptcy Remote Subsidiaries. Without the consent of the Agent, neither the Borrower nor any of its Subsidiaries shall create any new single purpose, special purpose or other so-called bankruptcy remote subsidiaries (such as an entity to be a borrower in a REMIC), as determined by the Agent in its reasonable discretion. (S)9. FINANCIAL COVENANTS. The Borrower covenants and agrees that, so long as any Loan, Note or Letter of Credit is outstanding or any Lender has any obligation to make any Loans or issue any Letter of Credit: (S)9.1 Borrowing Base. The Borrower shall not permit the outstanding principal balance of the Loans and the Letters of Credit Outstanding to be greater than the Borrowing Base. (S)9.2 Fixed Charge Coverage. Borrower will not permit the Adjusted Consolidated EBITDA of the Borrower and its Subsidiaries for any period of two consecutive fiscal quarters (treated as a single accounting) (the "Test Period") to be less than 1.60 times the Consolidated Fixed Charges of the Borrower and its Subsidiaries for the Test Period. (S)9.3 Secured Debt Ratio. Borrower will not permit the ratio of the Total Secured Debt of the Borrower and its Subsidiaries to the Consolidated Total Assets of the Borrower and its Subsidiaries to exceed .40 to 1. Upon the delivery by Borrower to the Agent of evidence reasonably satisfactory to the Agent of the repayment of the Unsecured Notes and a Compliance Certificate demonstrating compliance with the covenants referred to therein, this covenant shall terminate. (S)9.4 Maximum Land Assets. The Borrower shall not permit the ratio of the value, determined in accordance with GAAP, of its direct and indirect interests in Land Assets to the Consolidated Total Assets of the Borrower and its Subsidiaries to exceed 0.05 to 1. (S)9.5 Net Worth. The Consolidated Tangible Net Worth of the Borrower will not at any time be less than Minimum Consolidated Tangible Net Worth. (S)9.6 Liabilities to Assets Ratio. The ratio of Consolidated Total Liabilities of Borrower and its Subsidiaries to Consolidated Total Assets of Borrower and its Subsidiaries at the end of any fiscal quarter shall not exceed 0.60 to 1. (S)9.7 EBITDA Coverage. The Consolidated EBITDA of Borrower and its Subsidiaries for the Test Period shall not be less than 2.00 times the Consolidated Interest Expense of Borrower and its Subsidiaries for such period. (S)9.8 Borrowing Base Assets. The Mortgaged Properties must satisfy all of the following conditions: 82 (a) as of the end of each fiscal quarter, at least eighty-five percent (85%) of the total Net Rentable Area of the Mortgaged Properties within the Borrowing Base (on a portfolio basis) shall be subject to arms-length written Leases requiring current rental payments which are in full force and effect and pursuant to which the tenants are paying rent; (b) as of the end of each fiscal quarter, at least eighty-five percent (85%) of the total Net Rentable Area of the Mortgaged Properties within the Borrowing Base (on a portfolio basis) shall be physically occupied by tenants under arms-length written Leases which are in full force and effect; (c) no more than twenty percent (20%) of the Borrowing Base (based upon the Borrowing Base value thereof) shall be located in any State; provided, however, that no more than forty percent (40%) of the Borrowing Base (based upon the Borrowing Base value thereof) shall be located in Georgia; (d) no one tenant shall comprise more than seven and one-half percent (7.5%) (twenty percent (20%) if the tenant is Wal-Mart Stores, Inc., Lowe's Companies, Inc. or Lowe's Home Centers, Inc. and has a Rating of BBB- or better from S&P or Baa3 or better from Moody's, and ten percent (10%) for any other tenant that has a Rating of BBB- or better from S&P or Baa3 or better from Moody's) of the Net Operating Income generated by the Mortgaged Properties within the Borrowing Base; (e) no Mortgaged Property (based upon the Borrowing Base value thereof) shall comprise more than fifteen percent (15%) of the Borrowing Base; and (f) the Mortgaged Property (based upon the Borrowing Base value thereof) owned by the Guarantors shall not exceed twenty percent (20%) of the Borrowing Base. In the event that the thresholds established in clauses (c), (d), (e) and (f) above shall be exceeded, the Borrowing Base shall exclude the excess above any such threshold but the remainder shall continue to be credited. (S)10. CLOSING CONDITIONS. The obligation of the Lenders to make the Loans or issue Letters of Credit shall be subject to the satisfaction of the following conditions precedent: (S)10.1 Loan Documents. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto and shall be in full force and effect. The Agent shall have received a fully executed counterpart of each such document, except that each Lender shall have received the fully executed original of its Note. The Agent is authorized by the Lenders to execute on behalf of the Lenders and Agent, as applicable, any amendments or ratifications to agreements securing or relating to the Original Revolving Credit Agreement or the Original Term Loan Agreement as Agent deems appropriate. 83 (S)10.2 Certified Copies of Organizational Documents. The Agent shall have received from the Borrower and each Guarantor a copy, certified as of a recent date by the appropriate officer of each State in which such Person is organized or in which the Mortgaged Properties are located and a duly authorized officer or partner of such Person, as applicable, to be true and complete, of the partnership agreement or corporate charter of the Borrower and such Guarantor, as applicable, or its qualification to do business, as applicable, as in effect on such date of certification. (S)10.3 Resolutions. All action on the part of the Borrower and each applicable Guarantor, as applicable, necessary for the valid execution, delivery and performance by such Person of this Agreement and the other Loan Documents to which such Person is or is to become a party shall have been duly and effectively taken, and evidence thereof reasonably satisfactory to the Agent shall have been provided to the Agent. (S)10.4 Incumbency Certificate; Authorized Signers. The Agent shall have received from Borrower and each applicable corporate Guarantor an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of such Person and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of such Person, each of the Loan Documents to which such Person is or is to become a party. The Agent shall have also received from each applicable partnership Guarantor a certificate, dated as of the Closing Date, signed by a duly authorized representative of such Person and giving the name and specimen signature of each individual who shall be authorized to make Loan Requests and to give notices and to take other action on behalf of the Borrower under the Loan Documents. (S)10.5 Opinion of Counsel. The Agent shall have received an opinion addressed to the Lenders and the Agent and dated as of the Closing Date from counsel to the Borrower and each Guarantor in form and substance reasonably satisfactory to the Agent. (S)10.6 Payment of Fees. The Borrower shall have paid to the Agent the fees payable pursuant to (S)4.2. (S)10.7 Insurance. The Agent shall have received duplicate originals or certified copies of all policies of insurance required by this Agreement. (S)10.8 Performance; No Default. Borrower and the applicable Guarantors shall have performed and complied with all terms and conditions herein required to be performed or complied with by it on or prior to the Closing Date, and on the Closing Date there shall exist no Default or Event of Default. (S)10.9 Representations and Warranties. The representations and warranties made by the Borrower and the Guarantors in the Loan Documents or otherwise made by or on behalf of the Borrower, the Guarantors and their respective Subsidiaries in connection therewith or after the date thereof shall have been true and correct in all material respects when made and shall also be true and correct in all material respects on the Closing Date. 84 (S)10.10 Proceedings and Documents. All proceedings in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory to the Agent and the Agent's counsel in form and substance, and the Agent shall have received all information and such counterpart originals or certified copies of such documents and such other certificates, opinions, assurances, consents, approvals or documents as the Agent and the Agent's counsel may reasonably require. (S)10.11 Eligible Real Estate Qualification Documents. The Eligible Real Estate Qualification Documents for each Mortgaged Property included in the Collateral as of the Closing Date shall have been delivered to the Agent at the Borrower's expense and shall be in form and substance satisfactory to the Agent. (S)10.12 Compliance Certificate. The Agent shall have received a Compliance Certificate dated as of the date of the Closing Date demonstrating compliance with each of the covenants calculated therein as of the most recent fiscal quarter for which Borrower has provided financial statements under (S)6.4 adjusted in the best good faith estimate of Borrower as of the Closing Date. (S)10.13 Assignment of Original Revolving Credit Agreement and Original Term Loan Agreement. Agent shall have received assignments from Wachovia and such other lenders a party thereto as Agent may require of their respective rights and interests under the Original Revolving Credit Agreement, the Original Term Loan Agreement, and such other documents or instruments evidencing, securing or relating to the indebtedness described therein as Agent may request, such assignment to be in form and substance reasonably satisfactory to Agent. (S)10.14 Endorsements to Title Policy. To the extent available under applicable law, the Agent shall have received a "date down" endorsement to each Title Policy indicating no change in the state of title and containing no survey exceptions not approved by the Agent, which endorsement shall bring forward the date of the Title Policy to the Closing Date and reflect the execution of this Agreement and the recording of amendments to the Security Documents described in the Title Policy. (S)10.15 Stockholder and Partner Consents. The Agent shall have received evidence reasonably satisfactory to the Agent that all necessary stockholder, partner, member or other consents required in connection with the consummation of the transactions contemplated by this Agreement and the other Loan Documents have been obtained. (S)10.16 Acquisition of Interest Rate Contract. The Borrower shall have acquired an Interest Rate Contract reasonably satisfactory to the Agent for the term of the Loan on a notional amount of $150,000,000.00. The term of the Interest Rate Contract shall not expire before the Maturity Date. The Interest Rate Contract shall be provided by any Lender or other financial institution that has unsecured, uninsured and unguaranteed long-term debt which is rated at least A-3 by Moody's or at least A- by S&P. 85 (S)10.17 Contribution Agreement. The Agent shall have received an executed counterpart of the Contribution Agreement. (S)10.18 Other. The Agent shall have reviewed such other documents, instruments, certificates, opinions, assurances, consents and approvals as the Agent or the Agent's Special Counsel may reasonably have requested. (S)11. CONDITIONS TO ALL BORROWINGS. The obligations of the Lenders to make any Loan or issue any Letter of Credit, whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent: (S)11.1 Prior Conditions Satisfied. All conditions set forth in (S)10 shall continue to be satisfied as of the date upon which any Loan is to be made or any Letter of Credit is to be issued. (S)11.2 Representations True; No Default. Each of the representations and warranties made by or on behalf of the Borrower, the Guarantors or any of their respective Subsidiaries contained in this Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true in all material respects both as of the date as of which they were made and shall also be true in all material respects as of the time of the making of such Loan or the issuance of such Letter of Credit, with the same effect as if made at and as of that time, except to the extent of changes resulting from transactions permitted by the Loan Documents (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date), and no Default or Event of Default shall have occurred and be continuing. (S)11.3 No Legal Impediment. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Lender would make it illegal for such Lender to make such Loan or issue such Letter of Credit. (S)11.4 Governmental Regulation. Each Lender shall have received such statements in substance and form reasonably satisfactory to such Lender as such Lender shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System. (S)11.5 Proceedings and Documents. All proceedings in connection with such Loan or Letter of Credit shall be reasonably satisfactory in substance and in form to the Agent, and the Agent's counsel in form and substance and the Agent shall have received all information and such counterpart originals or certified or other copies of such documents and such other certificates, opinions, assurances, consents, approvals or documents as the Agent and the Agent's counsel may reasonably require. 86 (S)11.6 Borrowing Documents. The Agent shall have received a fully completed Loan Request for such Loan and the other documents and information (including, without limitation, a Compliance Certificate) as required by (S)2.7, or a fully completed Letter of Credit Request required by (S)2.10 in the form of Exhibit I hereto fully completed, as applicable. (S)11.7 Endorsement to Title Policy. At such times as Agent shall determine in its discretion, to the extent available under applicable law, a "date down" endorsement to each Title Policy indicating no change in the state of title and containing no survey exceptions not approved by the Agent, which endorsement shall, expressly or by virtue of a proper "revolving credit" clause or endorsement in each Title Policy, increase the coverage of each Title Policy to the aggregate amount of all Loans advanced and outstanding and Letters of Credit issued and outstanding on or before the effective date of such endorsement (provided that the amount of coverage under an individual Title Policy for an individual Mortgaged Property need not equal the aggregate amount of all Loans), or if such endorsement is not available, such other evidence and assurances as the Agent may reasonably require (which evidence may include, without limitation, an affidavit from the Borrower stating that there have been no changes in title from the date of the last effective date of the Title Policy). (S)11.8 Future Advances Tax Payment. As a condition precedent to any Lender's obligations to make any Loans available to the Borrower hereunder, the Borrower will pay to the Agent any mortgage, recording, intangible, documentary stamp or other similar taxes and charges which the Agent reasonably determines to be payable as a result of such Loan to any state or any county or municipality thereof in which any of the Mortgaged Properties are located, and deliver to the Agent such affidavits or other information which the Agent reasonably determines to be necessary in connection with such payment in order to insure that the Mortgages on Mortgaged Property located in such state secure the Borrower's obligation with respect to the Loans then being requested by the Borrower. The provisions of this (S)11.8 shall not limit the Borrower's obligations under other provisions of the Loan Documents, including without limitation (S)15 hereof. (S)12. EVENTS OF DEFAULT; ACCELERATION; ETC. (S)12.1 Events of Default and Acceleration. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "Defaults") shall occur: (a) the Borrower shall fail to pay any principal of the Loans when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (b) the Borrower shall fail to pay any interest on the Loans, any reimbursement obligations with respect to the Letters of Credit or any other sums due hereunder or under any of the other Loan Documents when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; 87 (c) the Borrower shall fail to comply with the covenant contained in (S)9.1 and such failure shall continue to exist after written notice thereof shall have been given to the Borrower by the Agent and the cure period provided in (S)12.2 shall have ended; (d) the Borrower shall fail to comply with any covenant contained in (S)9.2, (S)9.3, (S)9.4, (S)9.5, (S)9.6, (S)9.7 or (S)9.8 and such failure shall continue for thirty (30) days after written notice thereof shall have been given to the Borrower by the Agent; (e) any of the Borrower, the Guarantors, or any of their respective Subsidiaries shall fail to perform any other term, covenant or agreement contained herein or in any of the other Loan Documents which they are required to perform (other than those specified in the other subclauses of this (S)12 or in the other Loan Documents); (f) any representation or warranty made by or on behalf of the Borrower, the Guarantors, or any of their respective Subsidiaries in this Agreement or any other Loan Document, or any report, certificate, financial statement, request for a Loan, Letter of Credit Request, or in any other document or instrument delivered pursuant to or in connection with this Agreement, any advance of a Loan, the issuance of any Letter of Credit or any of the other Loan Documents shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated; (g) any of the Borrower, the Guarantors, or any of their respective Subsidiaries (i) shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received or other Indebtedness, or (ii) shall fail to observe or perform any term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing any obligation for borrowed money or credit received or other Indebtedness for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; provided that the events described in this (S)12.1(g) shall not constitute an Event of Default unless such failure to perform, together with other failures to perform as described in this (S)12.1(g), involve singly or in the aggregate obligations for borrowed money or credit received totaling in excess of $5,000,000.00; (h) any of the Borrower, the Guarantors, or any of their respective Subsidiaries, (i) shall make an assignment for the benefit of creditors, or admit in writing its general inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver for it or any substantial part of its assets, (ii) shall commence any case or other proceeding relating to it under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or (iii) shall take any action to authorize or in furtherance of any of the foregoing; (i) a petition or application shall be filed for the appointment of a trustee or other custodian, liquidator or receiver of any of the Borrower, the Guarantors, 88 or any of their respective Subsidiaries or any substantial part of the assets of any thereof, or a case or other proceeding shall be commenced against any such Person under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, and any such Person shall indicate its approval thereof, consent thereto or acquiescence therein or such petition, application, case or proceeding shall not have been dismissed within sixty (60) days following the filing or commencement thereof; (j) a decree or order is entered appointing a trustee, custodian, liquidator or receiver for any of the Borrower, the Guarantors, or any of their respective Subsidiaries or adjudicating any such Person, bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any such Person in an involuntary case under federal bankruptcy laws as now or hereafter constituted; (k) there shall remain in force, undischarged, unsatisfied and unstayed, for more than sixty (60) days, whether or not consecutive, one or more uninsured or unbonded final judgments against any of the Borrower, the Guarantors, or any of their respective Subsidiaries that, either individually or in the aggregate, exceed $5,000,000; (l) any of the Loan Documents or the Contribution Agreement shall be canceled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or the express prior written agreement, consent or approval of the Lenders, or any action at law, suit in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents or the Contribution Agreement shall be commenced by or on behalf of any of the Borrower or the Guarantors, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination, or issue a judgment, order, decree or ruling, to the effect that any one or more of the Loan Documents or the Contribution Agreement is illegal, invalid or unenforceable in accordance with the terms thereof; (m) any dissolution, termination, partial or complete liquidation, merger or consolidation of any of the Borrower or any Guarantor shall occur or any sale, transfer or other disposition of the assets of any of the Borrower or any Guarantor shall occur other than as permitted under the terms of this Agreement or the other Loan Documents; (n) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Required Lenders shall have determined in their reasonable discretion that such event reasonably could be expected to result in liability of any of the Borrower, the Guarantors or any of their respective Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $2,000,000 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United 89 States District Court to administer such Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan; (o) any suit or proceeding shall be filed against or with respect to the Borrower, any Guarantor, any of their respective Subsidiaries or any Collateral which in the good faith business judgment of the Required Lenders after giving consideration to the likelihood of success of such suit or proceeding and the availability of insurance to cover any judgment with respect thereto and based on the information available to them if adversely determined, would have a materially adverse effect on the ability of the Borrower, any Guarantor or any of their respective Subsidiaries to perform each and every one of its obligations under and by virtue of the Loan Documents and such suit or proceeding shall not have been dismissed within sixty (60) days following the filing thereof; (p) the Borrower, any Guarantor or any of their respective Subsidiaries or any Person so connected with any of them shall be indicted for a federal crime, a punishment for which could include the forfeiture of (i) any assets of Borrower, any Guarantor or any of their respective Subsidiaries which in the good faith judgment of the Required Lenders could have a Material Adverse Effect, or (ii) the Collateral; (q) any Guarantor denies that it has any liability or obligation under the Guaranty or any other Loan Document, or shall notify the Agent or any of the Lenders of such Guarantor's intention to attempt to cancel or terminate the Guaranty or any other Loan Document, or shall fail to observe or comply with any term, covenant, condition or agreement under the Guaranty or any other Loan Document beyond any applicable cure period; (r) any Change of Control shall occur; or (s) an Event of Default under any of the other Loan Documents shall occur; then, and in any such event, the Agent may, and upon the request of the Required Lenders shall, by notice in writing to the Borrower declare all amounts owing with respect to this Agreement, the Notes, the Letters of Credit and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of any Event of Default specified in (S)12.1(h), (S)12.1(i) or (S)12.1(j), all such amounts shall become immediately due and payable automatically and without any requirement of presentment, demand, protest or other notice of any kind from any of the Lenders or the Agent. Upon demand by Agent or the Required Lenders in their absolute and sole discretion after the occurrence of an Event of Default, and regardless of whether the conditions precedent in this Agreement for a Revolving Credit Loan have been satisfied, the Revolving Credit Lenders will cause a Revolving Credit Loan to be made in the undrawn amount of all Letters of Credit. The proceeds of any such Revolving Credit Loan will be pledged to and held by Agent as security for any amounts that become payable under the Letters of 90 Credit and all other Obligations and Hedge Obligations. In the alternative, if demanded by Agent in its absolute and sole discretion after the occurrence of an Event of Default, Borrower will deposit with and pledge to Agent cash in an amount equal to the amount of all undrawn Letters of Credit. Such amounts will be pledged to and held by Agent for the benefit of the Lenders as security for any amounts that become payable under the Letters of Credit and all other Obligations and Hedge Obligations. Upon any draws under Letters of Credit, at Agent's sole discretion, Agent may apply any such amounts to the repayment of amounts drawn thereunder and upon the expiration of the Letters of Credit any remaining amounts will be applied to the payment of all other Obligations and Hedge Obligations or if there are no outstanding Obligations or Hedge Obligations and Lenders have no further obligation to make Revolving Credit Loans or issue Letters of Credit or if such excess no longer exists, such proceeds deposited by Borrower will be released to Borrower. If at any time the aggregate amount of funds pledged to Agent as collateral for such Letters of Credit shall exceed one hundred percent (100%) of the aggregate face amount of all amounts available to be drawn under such Letters of Credit (including any amounts that may be reinstated thereunder), Agent shall release the amount of such excess deposited by the Borrower to the Borrower. (S)12.2 Limitation of Cure Periods. (a) Notwithstanding anything contained in (S)12.1 to the contrary, (i) no Event of Default shall exist hereunder upon the occurrence of any failure described in (S)12.1(b) in the event that the Borrower cures such Default within five (5) days following receipt of written notice of such Default, provided, however, that Borrower shall not be entitled to receive more than two (2) notices in the aggregate pursuant to this clause (i) in any period of 365 days ending on the date of any such occurrence of Default, and provided further that no such cure period shall apply to any payments due upon the maturity of the Notes, and (ii) no Event of Default shall exist hereunder upon the occurrence of any failure described in (S)12.1(e) in the event that the Borrower cures such Default within thirty (30) days following receipt of written notice of such default, provided that the provisions of this clause (ii) shall not pertain to defaults consisting of a failure to provide insurance as required by (S)7.7(a), to any default consisting of a failure to comply with (S)7.4(c), (S)8.1, (S)8.2, (S)8.4, (S)8.7(b), (S)8.7(c) or to any Default excluded from any provision of cure of defaults contained in any other of the Loan Documents, and (iii) no Event of Default shall exist hereunder upon the occurrence of any failure described in (S)8.7(a) resulting from events occurring after the declaration of a Distribution and not reasonably anticipated by Borrower that cause Borrower's estimate of its Funds from Operations to be incorrect, in the event that the Borrower cures such Default on or before the end of the next fiscal quarter of Borrower occurring after such Default. (b) Notwithstanding the provisions of subsection (c) and (d) of (S)12.1, the cure period provided therein shall not be allowed and the occurrence of a Default thereunder immediately shall constitute an Event of Default for all purposes of this Agreement and the other Loan Documents if, within the period of twelve months immediately preceding the occurrence of such Default, there shall have occurred two periods of cure or portions thereof under any one or more than one of said subsections. 91 (c) In the event that there shall occur any Default under (S)12.1(c), then within five (5) Business Days after receipt of notice of such Default from the Agent or the Required Lenders the Borrower may elect to cure such Default by providing additional Collateral consisting of Potential Collateral, and/or to reduce the outstanding Loans to it, in which event such actions shall be completed within such five (5) Business Day period (or within thirty (30) days following the expiration of the initial five (5) Business Day period in the event that the Borrower intends to provide additional Mortgaged Property). The Borrower's notice of its election pursuant to the preceding sentence shall be delivered to the Agent within the period of five (5) Business Days provided above, and if not so delivered Borrower's cure period shall immediately terminate and such Default shall become an Event of Default. In the event that Borrower elects to add additional Mortgaged Property and fails within the time provided herein, the cure period shall terminate and such Default immediately shall constitute an Event of Default. In the event that the Borrower shall elect under (S)12.2(c) to provide additional Collateral consisting of Potential Collateral, the Real Estate to be added to the Collateral shall be Eligible Real Estate and on or prior to the expiration of the thirty (30) day period referred to above each of the Eligible Real Estate Qualification Documents shall have been completed at the Borrower's expense and provided to the Agent for the benefit of the Lenders and all other conditions to the acceptance of such Real Estate as a Mortgaged Property shall have been satisfied. (d) In the event that there shall occur any Default that affects only certain Mortgaged Property or the owner(s) thereof (if such owner is a Guarantor), then within five (5) Business Days after receipt of notice of such Default from the Agent or the Required Lenders the Borrower may elect to cure such Default by electing to remove such Mortgaged Property from the Borrowing Base and by reducing the outstanding Loans by the amount of the Borrowing Base attributable to such Mortgaged Property, or by substituting for such Mortgaged Property additional Collateral consisting of Potential Collateral for the Collateral to which such Default relates, in which event such actions shall be completed within five (5) Business Days following the expiration of the initial five (5) Business Day period (or within thirty (30) days following the expiration of the initial five (5) Business Day period in the event that the Borrower intends to provide additional Mortgaged Property). The Borrower's notice of its election pursuant to the preceding sentence shall be delivered to the Agent within the period of five (5) Business Days provided above, and if not so delivered Borrower's cure period shall immediately terminate and such Default shall become an Event of Default. In the event that Borrower elects to add additional Mortgaged Property and fails within the time provided herein, the cure period shall terminate and such Default immediately shall constitute an Event of Default. In the event that the Borrower shall elect under (S)12.1(d) to provide additional Collateral consisting of Potential Collateral, the Real Estate to be added to the Collateral shall be Eligible Real Estate and on or prior to the expiration of the thirty (30) day period referred to above each of the Eligible Real Estate Qualification Documents shall have been completed at the Borrower's expense and provided to the Agent for the benefit of the Lenders and all other conditions to the acceptance of such Real Estate as a Mortgaged Property shall have been satisfied. 92 (S)12.3 Termination of Commitments. If any one or more Events of Default specified in (S)12.1(h), (S)12.1(i) or (S)12.1(j) shall occur, then immediately and without any action on the part of the Agent or any Lender any unused portion of the credit hereunder shall terminate and the Lenders shall be relieved of all obligations to make Loans or issue Letters of Credit to the Borrower. If any other Event of Default shall have occurred, the Agent, upon the election of the Required Lenders, shall by notice to the Borrower terminate the obligation to make Loans and issue Letters of Credit to the Borrower. No termination under this (S)12.3 shall relieve the Borrower of its obligations to the Lenders arising under this Agreement or the other Loan Documents. (S)12.4 Remedies. In case any one or more Events of Default shall have occurred and be continuing, and whether or not the Lenders shall have accelerated the maturity of the Loans pursuant to (S)12.1, the Agent on behalf of the Lenders may, with the consent of the Required Lenders but not otherwise, proceed to protect and enforce their rights and remedies under this Agreement, the Notes and/or any of the other Loan Documents by suit in equity, action at law or other appropriate proceeding, including to the full extent permitted by applicable law the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents, the obtaining of the ex parte appointment of a receiver, and, if any amount shall have become due, by declaration or otherwise, the enforcement of the payment thereof. No remedy herein conferred upon the Agent or the holder of any Note is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. If Borrower or any Guarantor fails to perform any agreement or covenant contained in this Agreement or any of the other Loan Documents beyond any applicable period for notice and cure, Agent may itself perform, or cause to be performed, any agreement or covenant of such Person contained in this Agreement or any of the other Loan Documents which such Person shall fail to perform, and the out-of-pocket costs of such performance, together with any reasonable expenses, including reasonable attorneys' fees actually incurred (including attorneys' fees incurred in any appeal) by Agent in connection therewith, shall be payable by Borrower upon demand and shall constitute a part of the Obligations and shall if not paid within five (5) days after demand bear interest at the rate for overdue amounts as set forth in this Agreement. In the event that all or any portion of the Obligations is collected by or through an attorney-at-law, the Borrower shall pay all costs of collection including, but not limited to, reasonable attorney's fees. (S)12.5 Distribution of Collateral Proceeds. In the event that, following the occurrence and during the continuance of any Event of Default, any monies are received in connection with the enforcement of any of the Security Documents, or otherwise with respect to the realization upon any of the Collateral or other assets of Borrower or the Guarantors, such monies shall be distributed for application as follows: (a) First, to the payment of, or (as the case may be) the reimbursement of the Agent for or in respect of, all reasonable costs, expenses, disbursements and losses which shall have been paid, incurred or sustained by the Agent to protect or preserve the Collateral or in connection with the collection of such monies by the Agent, for the 93 exercise, protection or enforcement by the Agent of all or any of the rights, remedies, powers and privileges of the Agent or the Lenders under this Agreement or any of the other Loan Documents or in respect of the Collateral or in support of any provision of adequate indemnity to the Agent against any taxes or liens which by law shall have, or may have, priority over the rights of the Agent or the Lenders to such monies; (b) Second, to all other Obligations (including any interest, expenses or other obligations incurred after the commencement of a bankruptcy) in such order or preference as the Required Lenders shall determine; provided, that (i) Swing Loans shall be repaid first, (ii) distributions in respect of such other Obligations shall include, on a pari passu basis, the Agent's fee payable pursuant to (S)4.3; (iii) in the event that any Lender shall have wrongfully failed or refused to make an advance under (S)2.5(d), (S)2.7 or (S)2.10(f) and such failure or refusal shall be continuing, advances made by other Lenders during the pendency of such failure or refusal shall be entitled to be repaid as to principal and accrued interest in priority to the other Obligations described in this subsection (b), and (iv) except as otherwise provided in clause (ii), Obligations owing to the Lenders with respect to each type of Obligation such as interest, principal, fees and expenses (but excluding the Swing Loans) shall be made among the Lenders pro rata; and provided, further that the Required Lenders may in their discretion make proper allowance to take into account any Obligations not then due and payable; and (c) Third, to termination payments due with respect to the Hedge Obligations; and (d) Fourth, the excess, if any, shall be returned to the Borrower or to such other Persons as are entitled thereto. (S)13. SETOFF. Regardless of the adequacy of any Collateral, during the continuance of any Event of Default, any deposits (general or specific, time or demand, provisional or final, regardless of currency, maturity, or the branch where such deposits are held) or other sums credited by or due from any Lender to the Borrower or the Guarantors and any securities or other property of the Borrower or the Guarantors in the possession of such Lender may be applied to or set off against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrower or the Guarantors to such Lender. Each of the Lenders agrees with each other Lender that if such Lender shall receive from the Borrower or the Guarantors, whether by voluntary payment, exercise of the right of setoff, or otherwise, and shall retain and apply to the payment of the Note or Notes held by such Lender (but excluding the Swing Loan Note) any amount in excess of its ratable portion of the payments received by all of the Lenders with respect to the Notes held by all of the Lenders, such Lender will make such disposition and arrangements with the other Lenders with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Lender receiving in respect of the Notes held by it its proportionate payment as contemplated by this Agreement; provided that if all or any part of such excess payment is thereafter recovered 94 from such Lender, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. (S)14. THE AGENT. (S)14.1 Authorization. The Agent is authorized to take such action on behalf of each of the Lenders and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Agent. The obligations of the Agent hereunder are primarily administrative in nature, and nothing contained in this Agreement or any of the other Loan Documents shall be construed to constitute the Agent as a trustee for any Lender or to create an agency or fiduciary relationship. The Borrower and any other Person shall be entitled to conclusively rely on a statement from the Agent that it has the authority to act for and bind the Lenders pursuant to this Agreement and the other Loan Documents. (S)14.2 Employees and Agents. The Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Agreement and the other Loan Documents. The Agent may utilize the services of such Persons as the Agent may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrower. (S)14.3 No Liability. Neither the Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent, or employee thereof, shall be liable to any of the Lenders for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agent or such other Person, as the case may be, shall be liable for losses due to its willful misconduct or gross negligence. (S)14.4 No Representations. The Agent shall not be responsible for the execution or validity or enforceability of this Agreement, the Notes, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrower, the Guarantors or any of their respective Subsidiaries, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any of the other Loan Documents. The Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Borrower, the Guarantors or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agent has not made nor does it now make any representations or warranties, express or implied, nor does it 95 assume any liability to the Lenders, with respect to the creditworthiness or financial condition of the Borrower, the Guarantors, or any of their respective Subsidiaries, or the value of the Collateral or any other assets of the Borrower or the Guarantors. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender, based upon such information and documents as it deems appropriate at the time, continue to make its own credit analysis and decisions in taking or not taking action under this Agreement and the other Loan Documents. (S)14.5 Payments. (a) A payment by the Borrower or any Guarantor to the Agent hereunder or under any of the other Loan Documents for the account of any Lender shall constitute a payment to such Lender. The Agent agrees to distribute to each Lender not later than one Business Day after the Agent's receipt of good funds, determined in accordance with the Agent's customary practices, such Lender's pro rata share of payments received by the Agent for the account of the Lenders except as otherwise expressly provided herein or in any of the other Loan Documents. In the event that the Agent fails to distribute such amounts within one Business Day as provided above, the Agent shall pay interest on such amount at a rate per annum equal to the Federal Funds Effective Rate from time to time in effect. (b) If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. In the event that the Agent shall refrain from making any distribution of any amount received by it as provided in this (S)14.5(b), the Agent shall endeavor to hold such amounts in an interest bearing account and at such time as such amounts may be distributed to the Lenders, the Agent shall distribute to each Lender, based on their respective Commitment Percentages, its pro rata share of the interest or other earnings from such deposited amount. (c) Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Lender that fails (i) to make available to the Agent its pro rata share of any Loan or (ii) to comply with the provisions of (S)13 with respect to making dispositions and arrangements with the other Lenders, where such Lender's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Lenders, in each case as, when and to the full extent required by the provisions of this Agreement, shall be deemed delinquent (a "Delinquent Lender") and shall be deemed a Delinquent 96 Lender until such time as such delinquency is satisfied. A Delinquent Lender shall be deemed to have assigned any and all payments due to it from the Borrower or the Guarantors, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining nondelinquent Lenders for application to, and reduction of, their respective pro rata shares of all outstanding Loans. The Delinquent Lender hereby authorizes the Agent to distribute such payments to the nondelinquent Lenders in proportion to their respective pro rata shares of all outstanding Loans. A Delinquent Lender shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans of the nondelinquent Lenders or as a result of other payments by the Delinquent Lenders to the nondelinquent Lenders, the Lenders' respective pro rata shares of all outstanding Loans have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. (S)14.6 Holders of Notes. Subject to the terms of (S)18, the Agent may deem and treat the payee of any Note as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee. (S)14.7 Indemnity. The Lenders ratably agree hereby to indemnify and hold harmless the Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Agent has not been reimbursed by the Borrower as required by (S)15), and liabilities of every nature and character arising out of or related to this Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Agent's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Agent's willful misconduct or gross negligence. (S)14.8 Agent as Lender. In its individual capacity, Fleet shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes as it would have were it not also the Agent. (S)14.9 Resignation; Removal. The Agent may resign at any time by giving 60 days' prior written notice thereof to the Lenders and the Borrower. The Required Lenders may remove the Agent from its capacity as Agent for failure to perform its material obligations under this Agreement provided that the Required Lenders shall have given prior written notice to the Agent of its failure to perform any of its material obligations under this Agreement and such failure shall not have been cured within thirty (30) calendar days after receipt of notice of such failure (or such failure cannot reasonably be cured within such thirty (30) day period, then within such longer period of time as may be necessary to complete such cure so long as Agent commences such cure within such thirty (30) day period and thereafter diligently pursues such cure to completion). Upon any such resignation or removal, the Required Lenders shall have the right to appoint as a successor Agent any Lender or any financial institution whose senior debt obligations are rated not less than "A2" or its equivalent by Moody's or not less than "A2" or its equivalent by S&P and which has a net worth of not less than $500,000,000. Unless a Default or Event of Default shall have occurred and be continuing, such successor Agent shall be reasonably acceptable to the Borrower. If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation or its removal, then the retiring or removed Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be any Lender or any financial institution whose senior debt obligations are rated not less than "A2" or its 97 equivalent by Moody's or not less than "A" or its equivalent by S&P and which has a net worth of not less than $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent, and the retiring or removed Agent shall be discharged from its duties and obligations hereunder as Agent thereafter arising. After any retiring or removed Agent's resignation or removal, the provisions of this Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. (S)14.10 Duties in the Case of Enforcement. In case one or more Events of Default have occurred and shall be continuing, and whether or not acceleration of the Obligations shall have occurred, the Agent shall, if (a) so requested by the Required Lenders and (b) the Lenders have provided to the Agent such additional indemnities and assurances against expenses and liabilities as the Agent may reasonably request, proceed to enforce the provisions of the Security Documents authorizing the sale or other disposition of all or any part of the Collateral and exercise all or any such other legal and equitable and other rights or remedies as it may have in respect of such Collateral. The Required Lenders may direct, subject to the terms of any intercreditor agreement among the Agent and the Lenders, the Agent in writing as to the method and the extent of any such sale or other disposition, the Lenders hereby agreeing to indemnify and hold the Agent harmless from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, provided that the Agent need not comply with any such direction to the extent that the Agent reasonably believes that the Agent's compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction. (S)14.11 Request for Agent Action. Agent and the Lenders acknowledge that in the ordinary course of business of the Borrower, (a) Borrower and Guarantors will enter into leases or rental agreements covering Mortgaged Properties that may require the execution of a Subordination, Attornment and Non-Disturbance Agreement in favor of the tenant thereunder, (b) a Mortgaged Property may be subject to a Taking, (c) Borrower or a Guarantor may desire to enter into easements or other agreements affecting the Mortgaged Properties, or take other actions or enter into other agreements in the ordinary course of business which similarly require the consent, approval or agreement of the Agent. In connection with the foregoing, the Lenders hereby expressly authorize the Agent to (w) execute and deliver to the Borrower and the Guarantors Subordination, Attornment and Non-Disturbance Agreements with any tenant under a Lease upon such terms as Agent in its good faith judgment determines are appropriate (Agent in the exercise of its good faith judgment may agree to allow some or all of the casualty, condemnation, restoration or other provisions of the applicable Lease to control over the 98 applicable provisions of the Loan Documents), (x) execute releases of liens in connection with any Taking, (y) execute consents or subordinations in form and substance satisfactory to Agent in connection with any easements or agreements affecting the Mortgaged Property, or (z) execute consents, approvals, or other agreements in form and substance satisfactory to the Agent in connection with such other actions or agreements as may be necessary in the ordinary course of Borrower's business. (S)14.12 Reliance on Hedge Provider. For purposes of applying payments received in accordance with (S)12.5, the Agent shall be entitled to rely upon the trustee, paying agent or other similar representative (each, a "Representative") or, in the absence of such a Representative, upon the holder of the Hedge Obligations for a determination (which each holder of the Hedge Obligations agrees (or shall agree) to provide upon request of the Agent) of the outstanding Hedge Obligations owed to the holder thereof. Unless it has actual knowledge (including by way of written notice from such holder) to the contrary, the Agent, in acting hereunder, shall be entitled to assume that no Hedge Obligations are outstanding. (S)15. EXPENSES. The Borrower agrees to pay (a) the reasonable costs of producing and reproducing this Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in respect thereto) payable by the Agent or any of the Lenders (other than taxes based upon the Agent's or any Lender's gross or net income, except that the Agent and the Lenders shall be entitled to indemnification for any and all amounts paid by them in respect of taxes based on income or other taxes assessed by any State in which Mortgaged Property or other Collateral is located, such indemnification to be limited to taxes due solely on account of the granting of Collateral under the Security Documents and to be net of any credit allowed to the indemnified party from any other State on account of the payment or incurrence of such tax by such indemnified party), including any recording, mortgage, documentary or intangibles taxes in connection with the Mortgages and other Loan Documents, or other taxes payable on or with respect to the transactions contemplated by this Agreement, including any such taxes payable by the Agent or any of the Lenders after the Closing Date (the Borrower hereby agreeing to indemnify the Agent and each Lender with respect thereto), (c) all title insurance premiums, engineer's fees, environmental reviews and the reasonable fees, expenses and disbursements of the counsel to the Agent and any local counsel to the Agent incurred in connection with the preparation, administration, syndication or interpretation of the Loan Documents and other instruments mentioned herein (excluding, however, the preparation of agreements evidencing participations granted under (S)18.4), and amendments, modifications, approvals, consents or waivers hereto or hereunder, (d) all other reasonable out of pocket fees, expenses and disbursements of the Agent actually incurred by the Agent in connection with the preparation or interpretation of the Loan Documents and other instruments mentioned herein, the addition or substitution of additional Mortgaged Properties or other Collateral, the review of leases and Subordination, Attornment and Non-Disturbance Agreements, the making of each advance hereunder, the issuance of Letters of Credit, and the syndication of the Commitments pursuant to (S)18 (without 99 duplication of those items addressed in subparagraph (c), above), (e) all reasonable internal charges of the Agent (determined in good faith and in accordance with the Agent's internal policies applicable generally to its customers) for commercial finance exams, (f) all reasonable out-of-pocket expenses (including reasonable attorneys' fees and costs, and the fees and costs of appraisers, engineers, investment bankers or other experts retained by any Lender or the Agent) actually incurred by any Lender or the Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or the Guarantors or the administration thereof after the occurrence of a Default or Event of Default and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to the Agent's or any of the Lenders' relationship with the Borrower or the Guarantors, (g) all reasonable fees, expenses and disbursements of the Agent incurred in connection with UCC searches, UCC filings, title rundowns, title searches or mortgage recordings, and (h) all reasonable fees, expenses and disbursements (including reasonable attorneys' fees and costs) which may be incurred by Fleet in connection with the execution and delivery of this Agreement and the other Loan Documents (without duplication of any of the items listed above). The covenants of this (S)15 shall survive the repayment of the Loans and the termination of the obligations of the Lenders hereunder. (S)16. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the Agent and the Lenders and each director, officer, employee, agent and Person who controls the Agent or any Lender from and against any and all claims, actions and suits, whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of or relating to this Agreement or any of the other Loan Documents or the transactions contemplated hereby and thereby including, without limitation, (a) any and all claims for brokerage, leasing, finders or similar fees which may be made relating to the Mortgaged Properties or the Loans, (b) any condition of the Mortgaged Properties, (c) any actual or proposed use by the Borrower of the proceeds of any of the Loans or Letters of Credit, (d) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Borrower, the Guarantors, or any of their respective Subsidiaries comprised in the Collateral, (e) the Borrower and the Guarantors entering into or performing this Agreement or any of the other Loan Documents, (f) any actual or alleged violation of any law, ordinance, code, order, rule, regulation, approval, consent, permit or license relating to the Mortgaged Property, or (g) with respect to the Borrower, the Guarantors and their respective Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the Release or threatened Release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to, claims with respect to wrongful death, personal injury, nuisance or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding; provided, however, that the Borrower shall not be obligated under this (S)16 to indemnify any Person for liabilities arising from such Person's own gross negligence or willful misconduct. In litigation, or the preparation therefor, the Lenders and the Agent shall be entitled to select a single law firm as their own counsel and, in 100 addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrower under this (S)16 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The provisions of this (S)16 shall survive the repayment of the Loans and the termination of the obligations of the Lenders hereunder. (S)17. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower or the Guarantors or any of their respective Subsidiaries pursuant hereto or thereto shall be deemed to have been relied upon by the Lenders and the Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Lenders of any of the Loans, as herein contemplated, and shall continue in full force and effect so long as any amount due under this Agreement or the Notes or any of the other Loan Documents remains outstanding or any Letters of Credit remain outstanding or any Lender has any obligation to make any Loans or issue any Letters of Credit. The indemnification obligations of the Borrower provided herein and in the other Loan Documents shall survive the full repayment of amounts due and the termination of the obligations of the Lenders hereunder and thereunder to the extent provided herein and therein. All statements contained in any certificate delivered to any Lender or the Agent at any time by or on behalf of the Borrower or the Guarantors or any of their respective Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by such Person hereunder. (S)18. ASSIGNMENT AND PARTICIPATION. (S)18.1 Conditions to Assignment by Lenders. Except as provided herein, each Lender may assign to one or more banks or other entities all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment Percentage and Commitment and the same portion of the Loans at the time owing to it and the Notes held by it); provided that (a) the Agent and, so long as no Default or Event of Default exists hereunder, the Borrower shall have each given its prior written consent to such assignment, which consent shall not be unreasonably withheld or delayed (provided that (i) such consent shall not be required for any assignment to another Lender, to a lender which is and remains under common control with the assigning Lender or to a wholly-owned Subsidiary of such Lender, provided that such assignee shall remain a wholly-owned Subsidiary of such Lender, and (ii) the consent of Agent shall not be required if an Event of Default exists and is continuing so long as the assignee is an institutional lender), (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender's rights and obligations under this Agreement, (c) the parties to such assignment shall execute and deliver to the Agent, for recording in the Register (as hereinafter defined) an Assignment and Acceptance Agreement in the form of Exhibit L annexed hereto, together with any Notes subject to such assignment, (d) in no event shall any voting, consent or approval rights of a Lender 101 be assigned to any Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by, the Borrower or any Guarantor, which rights shall instead be allocated pro rata among the other remaining Lenders, (e) if such assignee is to become a Revolving Credit Lender, such assignee shall have a net worth or unfunded commitments as of the date of such assignment of not less than $200,000,000, unless waived by the Agent and the Borrower, (f) such assignee shall acquire an interest in the Loans of not less than $5,000,000 (or if less, the remaining Loans of the assignor), unless waived by the Agent, and so long as no Default or Event of Default exists hereunder, the Borrower, and (g) such assignee shall be subject to the terms of any intercreditor agreement among the Lenders and the Agent. Upon execution, delivery, acceptance and recording of such Assignment and Acceptance Agreement, (i) the assignee thereunder shall be a party hereto and all other Loan Documents executed by the Lenders and have the rights and obligations of a Lender hereunder, (ii) the assigning Lender shall, upon payment to the Agent of the registration fee referred to in (S)18.2, be released from its obligations under this Agreement arising after the effective date of such assignment with respect to the assigned portion of its interests, rights and obligations under this Agreement, and (iii) the Agent may unilaterally amend Schedule 1 to reflect such assignment. In connection with each assignment, the assignee shall represent and warrant to the Agent, the assignor and each other Lender as to whether such assignee is controlling, controlled by, under common control with or is not otherwise free from influence or control by, the Borrower. Notwithstanding anything herein to the contrary, in the event that Agent shall at any time hold a Commitment less than $40,000,000.00, then such Agent shall promptly provide written notice thereof to the Lenders and the Required Lenders shall have the right, to be exercised within fifteen (15) days of delivery of such notice by such Agent, to elect to remove such Agent as Agent and replace such Agent as Agent under the Loan Documents, subject to the terms of (S)14.9. (S)18.2 Register. The Agent shall maintain on behalf of the Borrower a copy of each assignment delivered to it and a register or similar list (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment Percentages of and principal amount of the Loans owing to the Lenders from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Guarantors, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and the Lenders at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Lender agrees to pay to the Agent a registration fee in the sum of $3,500 (provided that with respect to any assignment by a Lender to a Subsidiary as provided herein, the assigning Lender shall pay to Agent its reasonable expenses incurred in connection with such assignment in lieu of such registration fee). (S)18.3 New Notes. Upon its receipt of an Assignment and Acceptance Agreement executed by the parties to such assignment, together with each Note subject to such assignment, the Agent shall record the information contained therein in the Register. Within five (5) Business Days after receipt of notice of such assignment from Agent, the Borrower, at its own expense, shall execute and deliver to the Agent, in exchange for each surrendered Note, a new Note to the order of such assignee in an amount equal to 102 the amount assigned to such assignee pursuant to such Assignment and Acceptance Agreement and, if the assigning Lender has retained some portion of its obligations hereunder, a new Note to the order of the assigning Lender in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such Assignment and Acceptance Agreement and shall otherwise be in substantially the form of the assigned Notes. The surrendered Notes shall be canceled and returned to the Borrower. (S)18.4 Participations. Each Lender may sell participations to one or more Lenders or other entities in all or a portion of such Lender's rights and obligations under this Agreement and the other Loan Documents; provided that (a) any such sale or participation shall not affect the rights and duties of the selling Lender hereunder, (b) such participation shall not entitle such participant to any rights or privileges under this Agreement or any Loan Documents, including without limitation, rights granted to the Lenders under (S)4.8, (S)4.9 and (S)4.10, (c) such participation shall not entitle the participant to the right to approve waivers, amendments or modifications, (d) such participant shall have no direct rights against the Borrower, (e) such sale is effected in accordance with all applicable laws, and (f) such participant shall not be a Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by any of the Borrower or any Guarantor. Any Lender which sells a participation shall promptly notify the Agent of such sale and the identity of the purchaser of such interest. (S)18.5 Pledge by Lender. Any Lender may at any time pledge all or any portion of its interest and rights under this Agreement (including all or any portion of its Note) to any of the twelve Federal Reserve Banks organized under (S)4 of the Federal Reserve Act, 12 U.S.C. (S)341 or to such other Person as the Agent may approve to secure obligations of such lenders. No such pledge or the enforcement thereof shall release the pledgor Lender from its obligations hereunder or under any of the other Loan Documents. (S)18.6 No Assignment by Borrower. The Borrower shall not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each of the Lenders. (S)18.7 Disclosure. Borrower agrees to promptly cooperate with any Lender in connection with any proposed assignment or participation of all or any portion of its Commitment. Each of the Lenders and the Agent acknowledges and agrees for itself that certain written information provided and to be provided by the Borrower contains confidential non-public information related to Borrower and JDN DCI and agrees to keep any information delivered or made available by the Borrower to it confidential from anyone other than its employees, officers, attorneys and other advisors who are or are expected to become engaged in evaluating, administering or syndicating the Loan or rendering advice in connection therewith, and each of Agent and the Lenders agrees not to trade in the Borrower's securities in violation of Section 10(b) of the Securities Exchange Act of 1934, as amended, or Rule 10b-5 thereunder, provided that nothing herein shall prevent any of the foregoing Persons from disclosing such information (a) to 103 any potential assignees or participants who have agreed to maintain the confidentiality of such information in the manner and to the extent provided in this (S)18.7, (b) upon the order of any court or administrative agency or upon the request of any administrative agency or authority having jurisdiction over any of the foregoing Persons or such potential assignees or participants, (c) upon the request or demand of any regulatory agency or authority, (d) to the extent that such information has been publicly disclosed other than as a result of a disclosure by the foregoing Persons, (e) otherwise as required by law or (f) to the extent necessary to enforce the Loan Documents. In addition, the Lenders may make disclosure of such information to any contractual counterparty in swap agreements or such contractual counterparty's professional advisors (so long as such contractual counterparty or professional advisors to such contractual counterparty agree to be bound by the provisions of this (S)18.7). (S)18.8 Amendments to Mortgages. Upon any such assignment or participation, the Borrower and the Guarantors shall, upon the request of the Agent, enter into such documents as may be reasonably required by the Agent to modify the Loan Documents to reflect such assignment or participation. (S)18.9 Co-Agents. Neither the Documentation Agent, the Syndication Agent or any Arranger or Co-Arranger shall have any additional rights or obligations under the Loan Documents, except for those rights, if any, as a Lender. (S)19. NOTICES. Each notice, demand, election or request provided for or permitted to be given pursuant to this Agreement (hereinafter in this (S)19 referred to as "Notice"), but specifically excluding to the maximum extent permitted by law any notices of the institution or commencement of foreclosure proceedings, must be in writing and shall be deemed to have been properly given or served by personal delivery or by sending same by overnight courier or by depositing same in the United States Mail, postpaid and registered or certified, return receipt requested, or as expressly permitted herein, by telegraph, telecopy, telefax or telex, and addressed as follows: If to the Agent or Fleet: Fleet National Bank 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division With a copy to: Fleet National Bank 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Dan Stegemoeller Telecopy No.: (770) 390-8434 104 If to the Borrower: JDN Realty Corporation 359 E. Paces Ferry Road Suite 400 Atlanta, Georgia 30305 Attn: Chief Financial Officer Telecopy No.: (404) 364-6446 to any other Lender which is a party hereto, at the address for such Lender set forth on its signature page hereto, and to any Lender which may hereafter become a party to this Agreement, at such address as may be designated by such Lender. Each Notice shall be effective upon being personally delivered or upon being sent by overnight courier or upon being deposited in the United States Mail as aforesaid, or if transmitted by telegraph, telecopy, telefax or telex is permitted, upon being sent and confirmation of receipt. The time period in which a response to such Notice must be given or any action taken with respect thereto (if any), however, shall commence to run from the date of receipt if personally delivered or sent by overnight courier, or if so deposited in the United States Mail, the earlier of three (3) Business Days following such deposit or the date of receipt as disclosed on the return receipt. Rejection or other refusal to accept or the inability to deliver because of changed address for which no notice was given shall be deemed to be receipt of the Notice sent. By giving at least fifteen (15) days prior Notice thereof, the Borrower, a Lender or Agent shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America. (S)20. RELATIONSHIP. Neither the Agent nor any Lender has any fiduciary relationship with or fiduciary duty to the Borrower, the Guarantors or their respective Subsidiaries arising out of or in connection with this Agreement or the other Loan Documents or the transactions contemplated hereunder and thereunder, and the relationship between each Lender and Agent, and the Borrower is solely that of a lender and borrower, and nothing contained herein or in any of the other Loan Documents shall in any manner be construed as making the parties hereto partners, joint venturers or any other relationship other than lender and borrower. (S)21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN OR THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SUCH COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER 105 AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN (S)19. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. (S)22. HEADINGS. The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. (S)23. COUNTERPARTS. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. (S)24. ENTIRE AGREEMENT, ETC. The Loan Documents express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in (S)27. (S)25. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS. EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER OR THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR THE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE AGENT AND 106 THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN THIS (S)25. THE BORROWER ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO REVIEW THIS (S)25 WITH LEGAL COUNSEL AND THAT THE BORROWER AGREES TO THE FOREGOING AS ITS FREE, KNOWING AND VOLUNTARY ACT. (S)26. DEALINGS WITH THE BORROWER. The Lenders and their Affiliates may accept deposits from, extend credit to and generally engage in any kind of banking, trust or other business with the Borrower, the Guarantors and their respective Subsidiaries or any of their Affiliates regardless of the capacity of the Lender hereunder. (S)27. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise expressly provided in this Agreement, any consent or approval required or permitted by this Agreement may be given, and any term of this Agreement or of any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower or the Guarantors of any terms of this Agreement or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Majority Lenders. Notwithstanding the foregoing, there shall be no modification or waiver of any of the covenants set forth in (S)8.7, (S)8.9 or in (S)9 without the written consent of the Required Lenders. Notwithstanding the foregoing, none of the following may occur without the written consent of each Lender: a reduction in the rate of interest on the Notes; an increase in the amount of the Commitments of the Lenders (except as provided in (S)18.1); a forgiveness, reduction or waiver of the principal of any unpaid Loan or any interest thereon or fee payable under the Loan Documents; a change in the amount of any fee payable to a Lender hereunder; the postponement of any date fixed for any payment of principal of or interest on the Loan; an extension of the Maturity Date; a change in the manner of distribution of any payments to the Lenders or the Agent; the release of the Borrower or any Guarantor or any Collateral except as otherwise provided in (S)5.4, (S)5.6, (S)5.7 or (S)14.11; an amendment of the definition of Majority Lenders or Required Lenders or of any requirement for consent by all of the Lenders; any modification to require a Lender to fund a pro rata share of a request for an advance of the Loan made by the Borrower other than based on its Commitment Percentage; an amendment to this (S)27; an increase in the advance rate within the Borrowing Base; a modification or waiver of (S)9.6 or (S)9.8; an amendment of any of the definitions used within (S)9.6 or (S)9.8, or of the definition of Borrowing Base or any definitions used within such definition; a waiver of any indemnity of a Lender; or an amendment of any provision of this Agreement or the Loan Documents which requires the approval of all of the Lenders or the Required Lenders to require a lesser number of Lenders to approve such action. The provisions of (S)14 may not be amended without the written consent of the Agent. There shall be no amendment, modification or waiver of any provision in the Loan Documents with respect to 107 Swing Loans without the consent of the Swing Loan Lender, nor any amendment, modification or waiver of any provision in the Loan Documents with respect to Letters of Credit without the consent of the Issuing Lender. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Agent or any Lender in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon any of the Borrower or the Guarantors shall entitle the Borrower or any Guarantor to other or further notice or demand in similar or other circumstances. (S)28. SEVERABILITY. The provisions of this Agreement are severable, and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. (S)29. TIME OF THE ESSENCE. Time is of the essence with respect to each and every covenant, agreement and obligation of the Borrower and the Guarantors under this Agreement and the other Loan Documents. (S)30. NO UNWRITTEN AGREEMENTS. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. ANY ADDITIONAL TERMS OF THE AGREEMENT BETWEEN THE PARTIES ARE SET FORTH BELOW. (S)31. REPLACEMENT NOTES. Upon receipt of evidence reasonably satisfactory to Borrower of the loss, theft, destruction or mutilation of any Note, and in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory to Borrower or, in the case of any such mutilation, upon surrender and cancellation of the applicable Note, Borrower will execute and deliver, in lieu thereof, a replacement Note, identical in form and substance to the applicable Note and dated as of the date of the applicable Note and upon such execution and delivery all references in the Loan Documents to such Note shall be deemed to refer to such replacement Note. (S)32. NO THIRD PARTIES BENEFITTED. This Agreement and the other Loan Documents are made and entered into for the sole protection and legal benefit of the Borrower, the Lenders, the Agent and the holders 108 of the Hedge Obligations, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. [SIGNATURES BEGIN ON FOLLOWING PAGE] 109 IN WITNESS WHEREOF, each of the undersigned have caused this Agreement to be executed by its duly authorized representatives as of the date first set forth above. BORROWER: JDN REALTY CORPORATION, a Maryland corporation By: /s/ John D. Harris, Jr. ---------------------------------- Name: John D. Harris, Jr. Title: Chief Financial Officer (CORPORATE SEAL) FLEET NATIONAL BANK, individually and as Agent By: /s/ Daniel L. Silbert ---------------------------------- Name: Daniel L. Silbert Title: Vice President 110 BANKERS TRUST COMPANY, individually and as Syndication Agent By: /s/ Steven P. Lyph ---------------------------------- Name: Steven P. Lyph Title: Director Address: Bankers Trust Company 130 Liberty Street, 25th Floor New York, New York 10017 Attention: Mr. Jeffrey Baevsky Telecopier number: 212-669-0764 111 COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, individually and as Documentation Agent By: /s/ E. Marcus Perry ----------------------------------- Name: E. Marcus Perry Title: Assistant Vice President By: /s/ David Buettner ----------------------------------- Name: David Buettner Title: Assistant Vice President Address: Commerzbank AG, New York and Grand Cayman Branches 2 World Financial Center New York, New York 10281 Attention: Mr. Marcus Perry Telecopier number: 212-266-7565 112 WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ C. Jackson Hoover ------------------------------- Name: C. Jackson Hoover Title: Vice President Address: Wells Fargo Bank, National Association Real Estate Group 2859 Paces Ferry Road, Suite 1805 Atlanta, Georgia 30339 Attention: Loan Administration Manager Telecopier number: 770-435-2262 113 FIRSTAR BANK, NATIONAL ASSOCIATION By: /s/ Maureen A. Dunne --------------------------------- Name: Maureen A. Dunne Title: Senior Vice President Address: Firstar Bank, National Association Commercial Real Estate Department 10th Floor 425 Walnut Street CN-WN-10CR Cincinnati, Ohio 45202 Attention: Ms. Maureen A. Dunne Telecopier number: (513) 632-5590 114 KEYBANK NATIONAL ASSOCIATION By: /s/ Daniel R. Heberle ------------------------------ Name: Daniel R. Heberle Title: Vice President Address: KeyBank National Association 129 Public Square Cleveland, Ohio 44114-1306 Attention: Mr. Daniel R. Heberle Telecopier number: 216-689-4997 115 PNC BANK, NATIONAL ASSOCIATION By: /s/ Brendon B. McCarthy ---------------------------------- Name: Brendon B. McCarthy Title: Assistant Vice President Address: PNC Bank, National Association 249 Fifth Avenue One PNC Plaza Mail Stop P1-POPP-19-2 Pittsburgh, Pennsylvania 15222 Attention: Wayne Robertson Telecopier number: 412-762-6500 116 SOUTHTRUST BANK, NATIONAL ASSOCIATION By: /s/ Sidney Clapp ------------------------------------ Name: Sidney Clapp Title: Loan Officer Address: Southtrust Bank, National Association Institutional Real Estate Group 420 North 20th Street, Suite 1100 Birmingham, Alabama 35203 Attention: Ms. Lynn W. Feuerlein Telecopier number: 205-254-8270 117 FIRST TENNESSEE BANK NATIONAL ASSOCIATION By: /s/ Timothy L. Collins --------------------------------- Name: Timothy L. Collins Title: Vice President Address: First Tennessee Bank National Association 701 Market Street Chattanooga, Tennessee 37402 Attention: Mr. Timothy L. Collins Telecopier number: 423-757-4040 118 EXHIBIT A FORM OF AMENDED AND RESTATED TERM LOAN NOTE $______________ ________________________, 2001 FOR VALUE RECEIVED, the undersigned, JDN REALTY CORPORATION, a Maryland corporation ("Maker"), hereby promises to pay to ______________________, ("Payee"), or order, in accordance with the terms of that certain Third Amended, Restated and Consolidated Master Credit Agreement, dated as of March 29, 2001, as from time to time in effect, among Maker, Fleet National Bank, for itself and as Agent, and such other Lenders as may be from time to time named therein (the "Credit Agreement"), to the extent not sooner paid, on or before the Maturity Date, the principal sum of _________________ ($__________), with daily interest from the date thereof, computed as provided in the Credit Agreement, on the principal amount of Term Loans hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Credit Agreement, and with interest on overdue principal and, to the extent permitted by applicable law, on overdue installments of interest and late charges at the rates provided in the Credit Agreement. Interest shall be payable on the dates specified in the Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement. Payments hereunder shall be made to the Agent for the Payee at 100 Federal Street, Boston, Massachusetts 02110. This Note is one of one or more Term Loan Notes evidencing borrowings under and is entitled to the benefits and subject to the provisions of the Credit Agreement. The principal of this Note may be due and payable in whole or in part prior to the Maturity Date and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement. Notwithstanding anything in this Note to the contrary, all agreements between the undersigned Maker and the Lenders and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Lenders exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Lenders in excess of the maximum lawful amount, the interest payable to the Lenders shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Lenders shall ever receive anything of 1 value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations of the undersigned Maker and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations of the undersigned Maker, such excess shall be refunded to the undersigned Maker. All interest paid or agreed to be paid to the Lenders shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations of the undersigned Maker (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the undersigned Maker and the Lenders and the Agent. In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Credit Agreement. This Note shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts (without giving effect to the conflict of laws rules of any jurisdiction). The undersigned Maker and all guarantors and endorsers hereby waive presentment, demand, notice, protest, notice of intention to accelerate the indebtedness evidenced hereby, notice of acceleration of the indebtedness evidenced hereby and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment or forbearance or other indulgence without notice. This Note is delivered in amendment and restatement of certain of the "Notes" delivered pursuant to the Original Term Loan Agreement, as provided in the Credit Agreement. IN WITNESS WHEREOF, the undersigned has duly executed this Note on the day and year first above written. JDN REALTY CORPORATION, a Maryland corporation By:_______________________________________ Name: Title: (CORPORATE SEAL) 2 EXHIBIT B FORM OF AMENDED AND RESTATED REVOLVING CREDIT NOTE $______________ _________________________, 2001 FOR VALUE RECEIVED, the undersigned, JDN REALTY CORPORATION, a Maryland corporation ("Maker"), hereby promises to pay to ________________ __________________, ("Payee"), or order, in accordance with the terms of that certain Third Amended, Restated and Consolidated Master Credit Agreement, dated as of March 29, 2001, as from time to time in effect, among Maker, Fleet National Bank, for itself and as Agent, and such other Lenders as may be from time to time named therein (the "Credit Agreement"), to the extent not sooner paid, on or before the Maturity Date, the principal sum of _________________ ($__________), or such amount as may be advanced by the Payee under the Credit Agreement as a Revolving Credit Loan with daily interest from the date thereof, computed as provided in the Credit Agreement, on the principal amount hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Credit Agreement, and with interest on overdue principal and, to the extent permitted by applicable law, on overdue installments of interest and late charges at the rates provided in the Credit Agreement. Interest shall be payable on the dates specified in the Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement. Payments hereunder shall be made to the Agent for the Payee at 100 Federal Street, Boston, Massachusetts 02110. This Note is one of one or more Revolving Credit Notes evidencing borrowings under and is entitled to the benefits and subject to the provisions of the Credit Agreement. The principal of this Note may be due and payable in whole or in part prior to the Maturity Date and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement. Notwithstanding anything in this Note to the contrary, all agreements between the undersigned Maker and the Lenders and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Lenders exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Lenders in excess of the maximum lawful amount, the interest payable to the Lenders shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Lenders shall ever receive anything of 1 value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations of the undersigned Maker and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations of the undersigned Maker, such excess shall be refunded to the undersigned Maker. All interest paid or agreed to be paid to the Lenders shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations of the undersigned Maker (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the undersigned Maker and the Lenders and the Agent. In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Credit Agreement. This Note shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts (without giving effect to the conflict of laws rules of any jurisdiction). The undersigned Maker and all guarantors and endorsers hereby waive presentment, demand, notice, protest, notice of intention to accelerate the indebtedness evidenced hereby, notice of acceleration of the indebtedness evidenced hereby and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment or forbearance or other indulgence without notice. This Note is delivered in amendment and restatement of certain of the "Notes" delivered pursuant to the Original Revolving Credit Agreement, as provided in the Credit Agreement. IN WITNESS WHEREOF, the undersigned has duly executed this Note on the day and year first above written. JDN REALTY CORPORATION, a Maryland corporation By:_______________________________________ Name: Title: (CORPORATE SEAL) 2 EXHIBIT C FORM OF SWING LOAN NOTE $______________ _______________________, 2001 FOR VALUE RECEIVED, the undersigned, JDN REALTY CORPORATION, a Maryland corporation ("Maker"), hereby promises to pay to ________________ __________________, ("Payee"), or order, in accordance with the terms of that certain Third Amended, Restated and Consolidated Master Credit Agreement, dated as of March 29, 2001, as from time to time in effect, among Maker, Fleet National Bank, for itself and as Agent, and such other Lenders as may be from time to time named therein (the "Credit Agreement"), to the extent not sooner paid, on or before the Maturity Date, the principal sum of _________________ ($__________), or such amount as may be advanced by the Payee under the Credit Agreement as a Swing Loan with daily interest from the date thereof, computed as provided in the Credit Agreement, on the principal amount hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Credit Agreement, and with interest on overdue principal and, to the extent permitted by applicable law, on overdue installments of interest and late charges at the rates provided in the Credit Agreement. Interest shall be payable on the dates specified in the Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement. Payments hereunder shall be made to the Agent for the Payee at 100 Federal Street, Boston, Massachusetts 02110. This Note is one of one or more Swing Loan Notes evidencing borrowings under and is entitled to the benefits and subject to the provisions of the Credit Agreement. The principal of this Note may be due and payable in whole or in part prior to the Maturity Date and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement. Notwithstanding anything in this Note to the contrary, all agreements between the undersigned Maker and the Lenders and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Lenders exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Lenders in excess of the maximum lawful amount, the interest payable to the Lenders shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Lenders shall ever receive anything of 1 value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations of the undersigned Maker and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations of the undersigned Maker, such excess shall be refunded to the undersigned Maker. All interest paid or agreed to be paid to the Lenders shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations of the undersigned Maker (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the undersigned Maker and the Lenders and the Agent. In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Credit Agreement. This Note shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts (without giving effect to the conflict of laws rules of any jurisdiction). The undersigned Maker and all guarantors and endorsers hereby waive presentment, demand, notice, protest, notice of intention to accelerate the indebtedness evidenced hereby, notice of acceleration of the indebtedness evidenced hereby and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment or forbearance or other indulgence without notice. IN WITNESS WHEREOF, the undersigned has duly executed this Note on the day and year first above written. JDN REALTY CORPORATION, a Maryland corporation By:_______________________________________ Name: Title: (CORPORATE SEAL) 2 EXHIBIT D FORM OF ASSIGNMENT OF LEASES AND RENTS 1 EXHIBIT E FORM OF UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE 1 EXHIBIT F FORM OF INDEMNITY AGREEMENT REGARDING HAZARDOUS MATERIALS 1 EXHIBIT G FORM OF MORTGAGE 1 EXHIBIT H FORM OF REQUEST FOR REVOLVING CREDIT LOAN Fleet National Bank, as Agent 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Dan Stegemoeller Ladies and Gentlemen: Pursuant to the provisions of (S)2.7 of the Third Amended, Restated and Consolidated Master Revolving Credit Agreement dated as of March 29, 2001 (as the same may hereafter be amended, the "Credit Agreement"), among JDN Realty Corporation (the "Borrower"), Fleet National Bank for itself and as Agent, and the other Lenders from time to time party thereto, the undersigned Borrower hereby requests and certifies as follows: 1. Revolving Credit Loan. The undersigned Borrower hereby requests a [Revolving Credit Loan under (S)2.2] [Swing Loan under (S)2.5] of the Credit Agreement: Principal Amount: $ Type (LIBOR Rate, Base Rate): Drawdown Date: Interest Period for LIBOR Rate Loans: by credit to the general account of the Borrower with the Agent at the Agent's Head Office. [If the requested Loan is a Swing Loan and the Borrower desires for such Loan to be a LIBOR Rate Loan following its conversion as provided in (S)2.5(d), specify the Interest Period following conversion:_________________] 2. Use of Proceeds. Such Loan shall be used for the following purposes permitted by (S)2.9 of the Credit Agreement: [Describe] 3. No Default. The undersigned chief financial officer or chief accounting officer of Borrower certifies that the Borrower and the Guarantors are and will be in compliance with all covenants under the Loan Documents after giving effect to the making of the Loan requested hereby. No condemnation proceedings are pending or, to the undersigned knowledge, threatened against any Mortgaged Property. 4. Representations True. Each of the representations and warranties made by or on behalf of the Borrower, the Guarantors or their respective Subsidiaries, contained in 1 the Credit Agreement, in the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Credit Agreement was true in all material respects as of the date on which it was made and at and as of the Drawdown Date for the Loan requested hereby, with the same effect as if made at and as of such Drawdown Date, except to the extent of changes resulting from transactions permitted by the Loan Documents (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct only as of such specified date), and no Default or Event of Default has occurred and is continuing. 5. Other Conditions. All other conditions to the making of the Loan requested hereby set forth in the Credit Agreement have been satisfied. 6. Definitions. Terms defined in the Credit Agreement are used herein with the meanings so defined. IN WITNESS WHEREOF, the undersigned has duly executed this request this _____ day of _______________, 2001. JDN REALTY CORPORATION, a Maryland corporation By:_______________________________________ Name: Title: (CORPORATE SEAL) 2 EXHIBIT I FORM OF LETTER OF CREDIT REQUEST 1 EXHIBIT J FORM OF BORROWING BASE CERTIFICATE 1 EXHIBIT K FORM OF COMPLIANCE CERTIFICATE Fleet National Bank, as Agent 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Dan Stegemoeller Ladies and Gentlemen: Reference is made to the Third Amended, Restated and Consolidated Master Revolving Credit Agreement dated as of March 29, 2001 (as the same may hereafter be amended, the "Credit Agreement") by and among JDN Realty Corporation (the "Borrower"), Fleet National Bank for itself and as Agent, and the other Lenders from time to time party thereto. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement. Pursuant to the Credit Agreement, Borrower is furnishing to you herewith (or have most recently furnished to you) the consolidated financial statement of Borrower for the fiscal period ended _______________ (the "Balance Sheet Date"). Such financial statement has been prepared in accordance with GAAP and presents fairly the consolidated financial position of Borrower covered thereby at the date thereof and the results of its operations for the periods covered thereby, subject in the case of interim statements only to normal year-end audit adjustments. This certificate is submitted in compliance with requirements of (S)5.4(b), (S)7.4(c), (S)7.5(e), (S)8.8, (S)9.3 or (S)10.12 of the Credit Agreement. If this certificate is provided under a provision other than (S)7.4(c), the calculations provided below are made using the consolidated financial statement of Borrower as of the Balance Sheet Date adjusted in the best good faith estimate of Borrower to give effect to the making of a Loan, acquisition or disposition of property or other event that occasions the preparation of this certificate; and the nature of such event and the estimate of Borrower of its effects are set forth in reasonable detail in an attachment hereto. The undersigned officer is the chief financial officer or chief accounting officer of Borrower. The undersigned representatives have caused the provisions of the Loan Documents to be reviewed and have no knowledge of any Default or Event of Default. (Note: If the signer does have knowledge of any Default or Event of Default, the form of certificate should be revised to specify the Default or Event of Default, the nature thereof and the actions taken, being taken or proposed to be taken by the Borrower with respect thereto.) Borrower is providing the attached information to demonstrate compliance as of the date hereof with the covenants described in the attachment hereto. 1 IN WITNESS WHEREOF, the undersigned have duly executed this Compliance Certificate this _____ day of ______________, 200__. JDN REALTY CORPORATION, a Maryland corporation By:_______________________________________ Name: Title: (CORPORATE SEAL) 2 EXHIBIT L FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT 1 EX-10.35 4 0004.txt EMPLOYMENT AGREEMENT EXHIBIT 10.35 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this 17th day of November, 2000 (the "Execution Date") by and among JDN REALTY CORPORATION, a Maryland corporation (hereinafter, the "Company") and CRAIG MACNAB (hereinafter, "Executive"), to be effective as of the Effective Date, as defined in Section 1. BACKGROUND ---------- WHEREAS, Executive currently serves as the Chief Executive Officer of the Company, and has served in this capacity since April 2, 2000; and WHEREAS, the Executive desires to continue to be employed by the Company, and the Company desires to continue to employ the Executive, pursuant to the terms, conditions and covenants hereinafter set forth in this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. The effective date of this Agreement (the "Effective -------------- Date") will be April 2, 2000. 2. Employment. Executive is employed effective as of the Effective Date ---------- as the Chief Executive Officer of the Company. In his capacity as Chief Executive Officer of the Company, Executive shall have the responsibilities outlined in the Company's Bylaws and such other responsibilities commensurate with such position as shall be assigned to him by the Board of Directors of the Company, which shall be consistent with the responsibilities of similarly situated executives of comparable companies in similar lines of business. In his capacity as Chief Executive Officer of the Company, Executive will report directly to the Board of Directors. 3. Employment Period. Unless earlier terminated in accordance with ----------------- Section 7 hereof, Executive's employment shall be for a two (2) year term (the "Employment Period"), beginning on the Effective Date. 4. Extent of Service. During the Employment Period, and excluding any ----------------- periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder; provided, however, that it -------- ------- shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities and, with the approval of the Company, industry or professional activities, and/or (ii) manage personal business interests and investments, so long as such activities do not materially interfere with the performance of Executive's responsibilities under this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by Executive prior to the date of this Agreement (as to which activities Executive has given written notice to the Company prior to execution of this Agreement), the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of Executive's responsibilities hereunder. 5. Compensation and Benefits. ------------------------- (a) Base Salary. During the Employment Period, the Company will ----------- pay to Executive a base salary of $384,000 for the period April 2, 2000 through April 1, 2001 ("Base Salary"), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time. Prior to April 1, 2001, the Compensation Committee of the Board of Directors of the Company shall review Executive's Base Salary and in its sole discretion, subject to approval of the Board of Directors of the Company, may increase Executive's Base Salary for the period April 1, 2001 through April 1, 2002. The annual review of Executive's salary by the Board will consider, among other things, Executive's own performance and the Company's performance. (b) Incentive, Savings and Retirement Plans. During the Employment --------------------------------------- Period, Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to senior executive officers of the Company. Without limiting the foregoing, the following shall apply: (i) Bonuses. During the Employment Period, Executive will be ------- entitled to an annual bonus of up to 100% of his Base Salary for such year, based on performance criteria established by the Compensation Committee of the Board of Directors of the Company, which criteria shall not be changed after established by the Committee and agreed to by the Executive. (ii) Stock Options. On the Execution Date of this Agreement, ------------- Executive will be granted options to acquire 150,000 shares of the common stock of the Company (the "Options"), at a per-share exercise price of $_______, the closing price of the stock on the Execution Date. Options for 43,750 shares will vest and be immediately exercisable on the Execution Date, and options for the remaining 106,250 shares will vest and become exercisable in equal monthly installments over the remainder of the Employment Period. Any unexercised options shall expire ten years from the Execution Date. (iii) Restricted Stock. On the Execution Date of this ---------------- Agreement, the Executive shall be awarded a total of 115,000 shares of restricted common stock of the Company (the "Restricted Shares"), 33,542 of which will be vested as of the Execution Date, but shall not be transferable until January 1, 2001, and the remaining 81,458 of which will vest and become transferable in equal monthly installments over the remainder 2 of the Employment Period. Executive shall receive dividends on such restricted shares regardless of vesting. (iv) Upon the occurrence of (i) a Change in Control; (ii) a Termination Other Than for Cause; (iii) the Executive's death; or (iv) the Executive's disability as defined by Section 7(c), any unvested Options and Restricted Shares shall immediately become fully vested, and any restrictions on the transferability of the Restricted Shares shall lapse. (v) The Company will amend the Plans for the non-qualified stock options and restricted stock in Sections (ii) and (iii) above to eliminate the current limitation under the Plan on the Executive's ability to sell or otherwise dispose of such securities for six (6) months from the Date of Grant. The Company will take all steps reasonable and necessary to effectuate the foregoing. (c) Welfare Benefit Plans. During the Employment Period, Executive --------------------- and Executive's eligible dependents shall be eligible for participation in, and shall receive all benefits under, the welfare benefit plans, practices, policies and programs provided by Company (including, without limitation, medical, prescription, dental, disability, Executive life, group life, accidental death and travel accident insurance plans and programs) ("Welfare Plans") to the extent applicable generally to other similarly situated executives of Company. (d) Expenses. During the Employment Period, Executive shall be -------- entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of Company. In addition, the Executive shall be entitled to receive reimbursement for up to $10,000 in legal expenses incurred in connection with the negotiation and execution of this Agreement. (e) Vacation. During the Employment Period, Executive will be -------- entitled to three weeks' paid vacation each twelve months. (f) Offices. During the Employment Period, Executive shall have a ------- private office, secretarial assistance and such other facilities and services as are suitable to his position and appropriate for the performance of his duties. (g) Automobile. The Company shall provide the Executive with an ---------- automobile suitable to his position and appropriate for the performance of his duties. The Company shall pay the operating expenses of such automobile for the sole use of the Executive. (h) Air Travel. The Company's business requires the Executive to ---------- commute between Nashville, Tennessee, and Atlanta, Georgia. The Company shall reimburse the Executive for all air travel during the Employment Period between Nashville and Atlanta, at applicable coach fares so long as Executive maintains his primary residence in Nashville, Tennessee. The Executive shall use his reasonable best 3 efforts to arrange for advance booking for all such air travel and to take advantage of any reduced fares available for additional nights' stay-overs to the extent his duties on behalf of the Company permit; provided, however, that the Company shall reimburse the Executive for business fares to the extent no coach fare seat is available at a time when the Executive is required to travel between Atlanta and Nashville on behalf of the Company. (i) Apartment. The Company shall provide the Executive with a --------- furnished apartment in Atlanta, Georgia, for his use during the term of his employment hereunder. The Company shall pay rent (in an amount not to exceed $2,500.00 per month), renter's insurance, utilities, and any security deposit for such apartment, which shall be selected by the Executive. At the Executive's request, the Company shall lease the apartment and make it available to the Executive, or the Company shall guarantee the lease without recourse (by contribution, subrogation, or otherwise) to the Executive. 6. Change in Control. For the purposes of this Agreement, a "Change ----------------- in Control" shall mean the earlier of (i) the date on which individuals who constitute the Board as of the Execution Date (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, (ii) the effective date of a sale of all or substantially all the Company's assets, other than to a wholly-owned subsidiary of the Company, (iii) the effective date of a merger or consolidation of the Company into or with any other entity other than a wholly-owned subsidiary, in which the Company is not the surviving entity; or (iv) the effective date of a statutory share exchange of the outstanding shares of the Company's stock. Any person becoming a director after the Effective Date and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director, and no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest (as described in Rule 14a-11 under the 1934 Act) ("Election Contest") or other actual or threatened solicitation of proxies or consents by or on behalf of any "person" (as such term is defined in Section 3(a)(9) of the 1934 Act and as used in Section 13(d)(3) and 14(d)(2) of the 1934 Act) other than the Board ("Proxy Contest"), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director. 7. Termination of Employment. ------------------------- (a) Termination for Cause. "Termination For Cause," as hereinafter --------------------- defined, may be effected by the Company at any time during the Employment Period by written notification to the Executive. Upon Termination For Cause, the Executive shall immediately be paid all accrued salary, bonus compensation for the prior year to the extent earned and remaining unpaid, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of the Company in which the Executive is a 4 participant to the full extent of the Executive's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Executive in connection with his duties hereunder, all to the date of termination. Executive shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation. "Termination for Cause" shall mean termination by the Company of the Executive's employment by the Company by reason of the Executive's willful dishonesty towards, fraud upon, or deliberate injury or attempted injury to the Company or by reason of the Executive's willful material breach of this Agreement which has resulted in material injury to the Company. (b) Termination Other than for Cause. Notwithstanding any other -------------------------------- provisions of this Agreement, the Company may effect a "Termination Other than for Cause," as hereinafter defined, at any time upon giving written notice to the Executive of such termination. Upon any Termination Other than for Cause, the Executive shall immediately be paid (i) all accrued salary, bonus compensation for the prior year to the extent earned and remaining unpaid, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of the Company in which the Executive is a participant to the full extent of the Executive's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Executive in connection with his duties hereunder, all to the date of termination; (ii) any earned bonus for the year of termination, to be determined and computed in accordance with the performance criteria established by the Compensation Committee pursuant to paragraph 5(b)(i), prorated for Executive's days of service during the year of termination; and (iii) all severance compensation provided in Section 8(a). "Termination Other than for Cause" shall mean termination by the Company of the Executive's employment by the Company other than a termination pursuant to Section 7(a), (c), (d), (e), or (f) herein. (c) Termination by Reason of Disability. If, during the Employment ----------------------------------- Period, the Executive, in the reasonable judgment of the Board of Directors, has failed to perform the essential functions of his regular duties under this Agreement on account of illness or physical or mental incapacity, and such illness or incapacity continues for a period of more than twelve (12) consecutive months, the Company shall have the right to terminate the Executive's employment hereunder by written notification to the Executive and payment to the Executive of (i) all accrued salary, bonus compensation for the prior year to the extent earned and remaining unpaid, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plans), any benefits under any plans of the Company in which the Executive is a participant to the full extent of the Executive's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Executive in connection with his duties hereunder, all to the date of termination, with the exception of medical and dental benefits which shall continue through the expiration of the Employment Period; and (ii) any earned bonus for the year of such termination, to be determined and computed in accordance with the performance criteria established by the Compensation Committee pursuant to paragraph 5(b)(i), prorated for the Executive's days of service during the year of the termination. The Executive shall not be paid any other 5 compensation or reimbursement of any kind, including without limitation, severance compensation. (d) Death. In the event of the Executive's death during the term of this ----- Agreement, the Executive's employment shall be deemed to have terminated as of the last day of the month during which his death occurs and the Company shall pay to his estate or such beneficiaries as the Executive may from time to time designate (i) all accrued salary, bonus compensation for the prior year to the extent earned and remaining unpaid, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of the Company in which the Executive is a participant to the full extent of Executive's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Executive in connection with his duties hereunder, all to the date of termination; and (ii) any earned bonus for the year of the termination, to be determined and computed in accordance with the performance criteria established by the Compensation Committee pursuant to (S)5(b)(i), prorated for days of service during the year of the termination. The Executive's estate shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation. (e) Voluntary Termination. In the event of a "Voluntary Termination," --------------------- as hereinafter defined, the Company shall immediately pay (i) all accrued salary, bonus compensation for the prior year to the extent earned and remaining unpaid, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plans), any benefits under any plans of the Company in which the Executive is a participant to the full extent of the Executive's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Executive in connection with his duties hereunder, all to the date of termination; and (ii) any earned bonus for the year of termination, to be determined and computed in accordance with the performance criteria established by the Compensation Committee pursuant to paragraph 5(b)(i), prorated for the days of the Executive's service during the year of termination. Executive shall not be paid any other compensation or reimbursement of any kind, including without, limitation, severance compensation. "Voluntary Termination" shall mean termination of Executive's employment by Executive's voluntary resignation from the Company, excluding any Termination Upon Change in Control. (f) Termination Upon a Change in Control. In the event of a "Termination ------------------------------------ Upon a Change in Control," as hereinafter defined, the Executive shall immediately be paid (i) all accrued salary, bonus compensation for the prior year to the extent earned and remaining unpaid, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plans), any benefits under any plans of the Company in which Executive is a participant to the full extent of the Executive's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Executive in connection with his duties hereunder, all to the date of termination, (ii) any earned bonus for the year of termination, to be determined and computed in accordance with the performance criteria established by the Compensation Committee pursuant to paragraph 5(b)(i), prorated for the days of 6 Executive's service during the year of termination; and (iii) all severance compensation provided in Section 8(a). "Termination Upon a Change in Control" shall mean (i) a termination by the Executive or the Company (excluding a Termination For Cause) of the Executive's employment with the Company following a "Change in Control," as herein defined, or (ii) a Termination Other Than For Cause by the Company which occurs (a) at any time during which the Company is in active negotiations with respect to a transaction which constitutes a Change in Control and which closes during the Employment Period, or (b) within 120 days prior to a Change in Control. (g) Notice of Termination. The Company or the Executive may effect a --------------------- termination of the Executive's employment pursuant to the provisions of this section 7 upon giving thirty (30) days' written notice to the other party of such termination. 8. Obligations of the Company Upon Termination. ------------------------------------------- (a) Termination Upon Change in Control or Termination Other than for ---------------------------------------------------------------- Cause. In the event the Executive's employment is terminated in a Termination - ----- Upon Change in Control or a Termination Other than for Cause, the Executive shall be paid the following as severance compensation: (i) If there is a Termination upon Change in Control on or prior to December 31, 2000, the Company shall pay the Executive an amount equal to one and one-half times the amount of one year's salary, computed at the rate of the Base Salary applicable under (S)5(a) as of the effective date of the termination. Such amount shall be payable within thirty days after the effective date of the Termination upon Change in Control. (ii) If there is a Termination upon Change in Control after December 31, 2000, the Company shall pay to Executive an amount equal to the sum of (i) one year's salary computed at the rate of the Base Salary applicable under (S)5(a) as of the effective date of the termination, plus (ii) the amount equal to the bonus earned by the Executive in the year immediately preceding the date of such termination, which bonus shall be annualized for 2000 if such termination occurs in 2001, and the actual bonus earned for 2001, if such termination occurs in 2002. Such amount shall be payable within thirty days after the effective date of the Termination upon Change in Control. (iii) If there is a Termination Other Than for Cause prior to the expiration of the Employment Period, the Company shall pay the Executive an amount equal to his Base Salary for the period beginning at the time of such termination and ending on the second anniversary of the Effective Date. This amount shall be paid within thirty (30) days after termination. (b) Termination Upon Any Other Event. In the event of a Voluntary -------------------------------- Termination, Termination For Cause, termination by reason of the Executive's disability pursuant to Section 7(c) or termination by reason of the Executive's death pursuant to Section 7(d), the Executive or his estate shall not be paid any severance compensation. 7 9. Certain Additional Payments by the Company. ------------------------------------------ (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it is determined that any payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's regular independent accounting firm or such other certified public accounting firm reasonably acceptable to Executive as may be designated by the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive promptly after the receipt of notice that a Payment is due to be made. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to Executive promptly following the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment (or an additional Gross-Up Payment). Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it 8 gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after- tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest (to the extent applicable to the Excise Tax and the Gross-Up Payment) and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that -------- ------- if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest- free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 9 (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 9(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Representations and Warranties. Executive hereby represents and ------------------------------ warrants to the Company that Executive is not a party to, or otherwise subject to, any covenant not to compete with any person or entity, and Executive's execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity. 11. Restrictions on Conduct of Executive. ------------------------------------ (a) General. Executive and the Company understand and agree that the ------- purpose of the provisions of this Section is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Executive's post-employment competition with the Company per se, nor is it intended to impair or infringe upon Executive's right to work, earn a living, or acquire and possess property from the fruits of his labor. Executive hereby acknowledges that the post-employment restrictions set forth in this Section are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law, Executive shall be subject to the restrictions set forth in this Section. (b) Definitions. The following capitalized terms used in this Section ----------- shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Competitive Services" means the business of owning, developing, leasing, or managing shopping center properties. "Confidential Information" means all information regarding the Company, its activities, business or clients that is the subject of reasonable efforts by the Company to maintain its confidentiality and that is not generally disclosed by practice or authority to persons not employed by the Company, but that does not rise to the level of a Trade Secret. "Confidential Information" shall include, but is not limited to, the following information concerning the Company, its activities, business, or clients: financial plans and data; management planning information; business plans; operational 10 methods; market studies; marketing plans or strategies; product development techniques or plans; customer lists; details of customer contracts; current and anticipated customer requirements; past, current and planned research and development; business acquisition plans; and new personnel acquisition plans. "Confidential Information" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company, or which is obtained from any person who has the right to disclose such information without violating any right or privilege of the Company. This definition shall not limit any definition of "confidential information" or any equivalent term under state or federal law. "Determination Date" means the date of termination of Executive's employment with the Company for any reason whatsoever or any earlier date (during the Employment Period) of an alleged breach of the Restrictive Covenants by Executive. "Person" means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise. "Principal or Representative" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, Executive, agent, representative or consultant. "Protected Customer" means each customer listed on Exhibit A hereto. --------- "Protected Employees" means all employees (other than administrative personnel) of the Company or its subsidiaries or affiliates who were employed by the Company or its subsidiaries or affiliates at any time within six (6) months prior to the Determination Date. "Restricted Period" means the Employment Period and a period extending one (1) year from the termination of Executive's employment with the Company. "Restrictive Covenants" means the restrictive covenants contained in Section 11(c) hereof. "Trade Secret" means all information, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, distribution lists or a list of actual or potential customers, advertisers or suppliers which is not commonly known by or available to the public and which information: (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Without limiting the foregoing, Trade Secret means any item of confidential information that 11 constitutes a "trade secret(s)" under the common law or statutory law of the State of Georgia. (c) Restrictive Covenants. --------------------- (i) Restriction on Disclosure and Use of Confidential Information ------------------------------------------------------------- and Trade Secrets. Executive understands and agrees that the Confidential - ----------------- Information and Trade Secrets constitute valuable assets of the Company and its affiliated entities, and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that Executive shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Executive shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that of the Company. Throughout the term of this Agreement and at all times after the date that this Agreement terminates for any reason, Executive shall not directly or indirectly transmit or disclose any Trade Secret of the Company to any Person, and shall not make use of any such Trade Secret, directly or indirectly, for himself or for others, without the prior written consent of the Company. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company's rights or Executive's obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing or using Confidential Information that is required to be disclosed by law, court order or other legal process; provided, however, -------- ------- that in the event disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. (ii) Nonsolicitation of Protected Executives. Executive understands --------------------------------------- and agrees that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not directly or indirectly on Executive's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or his employment relationship with the Company or to enter into employment with any other Person. (iii) Restriction on Relationships with Protected Customers. ----------------------------------------------------- Executive understands and agrees that the relationship between the Company and each of its Protected Customers constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that, during the Restricted Period, Executive shall not, without the prior written consent of the Company, directly or indirectly, on Executive's own behalf or as a Principal or Representative of any Person, solicit, divert, take away or attempt to solicit, divert or take away a Protected Customer for the purpose of offering or providing Competitive Services; provided, 12 however, that this section shall not apply to Executive in the event of a Termination other than for Cause or a Termination Upon Change in Control. (d) Enforcement of Restrictive Covenants. ------------------------------------ (i) Rights and Remedies Upon Breach. In the event Executive ------------------------------- breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: (A) the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company; and (B) the right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Executive acknowledges and agrees ------------------------- that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void or unenforceable in any court of competent jurisdiction, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement. If any portion of the foregoing provisions is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, the territory, the definition of activities or the definition of information covered is considered to be invalid or unreasonable in scope, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and Executive in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws. (iii) Reformation. The parties hereunder agree that it is their ----------- intention that the Restrictive Covenants be enforced in accordance with their terms to the maximum extent possible under applicable law. The parties further agree that, in the event any court of competent jurisdiction shall find that any provision hereof is not enforceable in accordance with its terms, the court shall reform the Restrictive Covenants such that they shall be enforceable to the maximum extent permissible at law. (iv) Elective Right of the Company. In the event that Executive ----------------------------- challenges the enforceability of the Restrictive Covenants (or asserts an affirmative 13 defense to an action seeking to enforce the Restrictive Covenants) based on an argument that the Restrictive Covenants are (x) not enforceable as a matter of law, (y) unreasonable in geographical scope or duration or (z) void as against public policy, the Company shall have the right to cease making the payments required under Section 8(a) above and, upon demand, to have Executive repay, within 10 business days of any such demand, any such payments already made. Any right afforded to, or exercised by, the Company hereunder shall in no way affect the enforceability of the Restrictive Covenants or any other right of the Company hereunder. Nothing in this Section 11 (d)(iv) shall be construed to preclude a challenge by Executive (or a defense against) the application of the Restrictive Covenants as to a particular set of facts and circumstances (as opposed to the arguments enumerated above). 12. Arbitration. Any claim or dispute arising under this Agreement shall ----------- be subject to binding arbitration before a single arbitrator in Atlanta, Georgia, and shall be conducted in accordance with the rules of the American Arbitration Association. The arbitrator shall be authorized to award both liquidated and actual damages, in addition to injunctive relief, but no punitive damages. Each party shall have the right to have the award made the judgment of a court of competent jurisdiction. 13. Indemnification. The Company shall indemnify Executive in accordance --------------- with the Company's Articles and Bylaws and an Indemnity Agreement by and between Executive and the Company substantially in the form of Exhibit A hereto. 14. Assignment and Successors. ------------------------- (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 15. Miscellaneous. ------------- (a) Waiver. Failure of either party to insist, in one or more ------ instances, on performance by the other in strict accordance with the terms and conditions of this 14 Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part thereof, ------------ of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. (c) Other Agents. Nothing in this Agreement is to be interpreted as ------------ limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement ---------------- contains the entire agreement between the Company and Executive with respect to the subject matter hereof and, from and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof, including without limitation, the Prior Agreement. (e) Governing Law. Except to the extent preempted by federal law, and ------------- without regard to conflict of laws principles, the laws of the State of Georgia shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other communications ------- required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company: JDN REALTY CORPORATION 359 East Paces Ferry Road, Suite 400 Atlanta, GA 30305 ATTN: Chief Financial Officer With copies to: John L. Latham, Esq. Alston & Bird LLP One Atlantic Center 1201 W. Peachtree St. Atlanta, GA 30309-3424 and E. Marlee Mitchell, Esq. Waller Lansden Dortch & Davis, PLLC 511 Union Street Nashville, TN 37219-8966 15 To Executive: CRAIG MACNAB 428 Westview Avenue Nashville, TN 37205 With a copy to: C. Christopher Trower, Esq. electriclaw.com 3159 Rilman Road, N.W. Atlanta, GA 30327-1503 Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. (g) Amendments and Modifications. This Agreement may be amended or ---------------------------- modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement. (h) Construction. Each party and his or its counsel have reviewed ------------ this Agreement and have been provided the opportunity to revise this Agreement and accordingly, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. Instead, the language of all parts of this Agreement shall be construed as a whole, and according to its fair meaning, and not strictly for or against either party. [SIGNATURES ON FOLLOWING PAGE] 16 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the date first above written. JDN REALTY CORPORATION By: /s/ John D. Harris, Jr. ----------------------------- John D. Harris, Jr. Title: CFO EXECUTIVE: /s/ Craig Macnab ---------------- CRAIG MACNAB 17 EXHIBIT "A" Wal-Mart Stores, Inc, and its affiliates, including but not limited to Wal-Mart Stores, Inc. and Wal-Mart Real Estate Business Trust Lowe's Companies, Inc., and its affiliates, including but not limited to Lowe's Companies, Inc. and Lowe's Home Centers, Inc. EX-10.36 5 0005.txt EMPLOYMENT AGREEMENT EXHIBIT 10.36 JDN DEVELOPMENT COMPANY, INC. EMPLOYMENT AGREEMENT THIS AGREEMENT, made and entered into this 13th day of February, 2001, (the "Execution Date"), to be effective as of November 27, 2000 (the "Effective Date"), is by and between LEE S. WIELANSKY (the "Employee") and JDN DEVELOPMENT COMPANY, INC., a Delaware corporation (the "Company"). WITNESSETH: WHEREAS, the Employee desires to be employed by the Company, and the Company desires to employ the Employee, on the terms, covenants and conditions hereinafter set forth in this Agreement. NOW, THEREFORE, for the reasons set forth above, and in consideration of the mutual promises and agreements herein set forth, the Company and the Employee agree as follows: 1. Employment. Subject to the terms and conditions set forth in this ---------- Agreement, on and as of the Effective Date the Company hereby employs and engages the Employee to hold the titles of President and Chief Executive Officer of the Company and perform such duties and responsibilities as may be assigned or delegated by the Board of Directors of the Company, provided such duties are commensurate with the position in which he serves. The duties and responsibilities the Employee is to perform hereunder shall be conducted primarily from the Atlanta, Georgia metropolitan area, where the principal offices of the Company are located. The Employee may also conduct his duties and responsibilities from the office described in Section 4.5 hereof. The Employee may be required from time to time to perform his duties hereunder on an occasional basis at such other places as the Board of Directors shall reasonably designate or as the interests or business opportunities of the Company may reasonably require; provided, however, that without the Employee's consent, the Employee shall not be required to relocate his residence from the St. Louis, Missouri metropolitan area. The Employee hereby accepts such employment and agrees to serve the Company as an officer for the term of this Agreement. 2. Term of Employment. Except as otherwise provided herein, the initial ------------------ term of this Agreement shall be for one (1) year commencing on the Effective Date and ending on the first anniversary of the Effective Date (the "Employment Term"). The Employment Term may be extended by mutual written agreement of the Employee and the Company upon such terms, provisions and conditions which are mutually acceptable to the Employee and the Company. 3. Devotion to Duties. The Employee agrees that during the Employment ------------------ Term he will devote substantially all of his business time, attention, skill and energy to the business and affairs of the Company as shall be necessary to perform the duties of his position. The Employee will use his best efforts to promote the success of the Company's business, will cooperate fully with the Board of Directors in the advancement of the best interests of the Company, and, except as provided below, will not enter into any other business affiliations or arrangements without the prior written consent of the Company. Nothing in this Agreement, however, is intended to prevent the Employee from engaging in additional activities in connection with personal investments (including but not limited to personal investments set forth on Schedule 3 ---------- hereto and such other real estate investments which are not, in the reasonable discretion of the Company, competitive with the Company and which do not, in the reasonable discretion of the Company, usurp a business opportunity of the Company) and community or professional affairs that are not inconsistent with the Employee's duties and obligations under this Agreement, including without limitation Section 10 hereof. If the Employee is elected as a director of the Employer or as a director or officer of any of its affiliates, the Employee will fulfill the Employee's duties as such director or officer without additional compensation. 4. Compensation of Employee. ------------------------ 4.1. Base Salary. During the term of this Agreement, the Company ----------- shall pay to the Employee as compensation for the services to be performed by the Employee a base salary of Three Hundred Seventy-Five Thousand Dollars ($375,000) per year (the "Base Salary"). The Base Salary shall be payable in installments in accordance with the Company's normal payroll practice and shall be subject to such withholdings and other ordinary employee withholdings as may be required by law. 4.2. Bonuses; Incentive Payments. In addition to the compensation set --------------------------- forth elsewhere in this section 4, for each year or portion thereof during the Employment Term and any extensions thereof, the Employee shall be entitled to receive a bonus in an amount to be determined by the Board of Directors in its discretion, based on certain targeted goals set by the Board, based upon its evaluation of the Employee's performance during such year or portion thereof. The Employee shall also be eligible to receive such other bonuses or incentive payments as may be approved by the Board of Directors. Without limiting and in addition to the foregoing, on each of the following dates, the Employee shall be entitled to receive a cash bonus in the amount of $25,000 if the period of actual employment under this Agreement continues to the applicable date: January 1, 2001, April 1, 2001, July 1, 2001 and October 1, 2001; provided, however, that in the event of a "Termination Upon a Change in Control" or a "Termination Other Than for Cause," both as hereinafter defined, the Employee shall be paid all of such remaining unpaid bonus payments. 4.3. Benefits. The Employee shall be entitled to participate, during -------- the period of actual employment, in all regular employee benefit and deferred compensation plans established by each of JDN Realty Corporation ("JDN Realty") (to the extent such participation is not restricted by the Internal Revenue Code of 1986 (the "Code")) and the Company, including, without limitation, any savings and profit sharing plan, incentive stock plan, dental and medical plans, life insurance, and personal catastrophe and disability insurance, such participation to be as provided in said employee benefit plans. The Employee shall also be entitled during the period of actual employment to such paid vacation as is provided in the policy adopted by the Company. For purposes of this Agreement, the term "period of actual employment" means the portion of the Employment Term during which the Employee is employed, but not the portion following the termination of Employee's employment. 4.4. Office and Secretary. The Employee will have a private office, -------------------- secretarial assistance, administrative support, and such other facilities and services as the Company deems necessary or appropriate for the performance of the Employee's duties under this Agreement. 4.5. Reimbursement of Expenses. The Company will provide for the ------------------------- payment or reimbursement of all reasonable and necessary expenses incurred by the Employee in connection with the performance of his duties under this Agreement in accordance with the Company's expense reimbursement policy, as such may change from time to time. Without limiting the foregoing, the Company will reimburse the Employee for air travel between St. Louis, Missouri and Atlanta, Georgia at applicable coach fares and rent for the Employee's existing office (or a comparable office at an equal or lesser rental amount than the existing office) in St. Louis, Missouri during the 2 period of actual employment under this Agreement. In addition, the Employee shall be entitled to receive reimbursement for up to $5,000 in legal expenses incurred in connection with the negotiation and execution of this Agreement. 4.6. Apartment. The Company will provide the Employee with a --------- furnished apartment in Atlanta, Georgia for the Employee's use during the Employment Term to the extent he is required to be in Atlanta to conduct Company business. The Company will pay the rent and any security deposits (excluding pet deposits and any damages in excess of any security deposits) in connection with the apartment, which will be selected by the Employee and agreed upon by the Company prior to the Employee signing a lease agreement; provided, however, the Company's liability for such rent and any security deposits shall not exceed $2,000 per month. At the Employee's request, the Company shall sign the lease agreement in lieu of the Employee signing the same and/or the Company shall guarantee the same without recourse (by contribution, subrogation or otherwise) to the Employee. 4.7 Stock Options. Effective as of November 28, 2000, the Employee ------------- was granted options to acquire 200,000 shares of the common stock of JDN Realty at a per-share exercise price of $10.50, all of which will vest and become exercisable on November 27, 2001 (i.e., before the expiration of the one-year Employment Term). Any unexercised options shall expire ten years from the Effective Date. 4.8 Restricted Stock. On the Execution Date of this Agreement, the ---------------- Employee has been granted 25,000 shares of restricted common stock of JDN Realty. The shares of restricted stock will vest and become transferable, subject to applicable federal and state securities laws, rules and regulations, 20% on each anniversary of the Execution Date of this Agreement; provided, however, that if the Employment Term is not extended beyond November 27, 2001 as provided in Section 2, 100% of such shares of restricted stock shall vest and become transferable, subject to applicable federal and state securities laws, rules and regulations, on November 27, 2001. 5. Termination of Employment. ------------------------- 5.1. Termination for Cause. "Termination for Cause", as hereinafter --------------------- defined, may be effected by the Company at any time during the term of this Agreement by written notification to the Employee. Upon Termination for Cause, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the terms of the applicable plan), any benefits under any plans of the Company in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee reimbursable by the Company in connection with his duties hereunder, all to the date of termination, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation. In the event of a "Termination for Cause," the Employee will have thirty (30) days to vacate the apartment provided pursuant to Section 4.6; the Company will be responsible for paying or reimbursing the Employee for all expenses payable by the Company under Section 4.6 related to the same during such 30-day period. "Termination for Cause" shall mean termination by the Company of the Employee's employment by the Company by reason of the Employee's (a) failure to adhere to any written policy of the Company applicable generally to employees of the Company after notice and a reasonable opportunity to cure such failure and which failure is reasonably determined by the Company to have a material adverse effect on the Company, or (b) appropriation (or attempted appropriation) of a material business opportunity of the Company, including attempting to secure or securing 3 any personal profit or benefit (other than as a result of compensation and other benefits hereunder or as a result of employment with the Company) in connection with any transaction entered into on behalf of the Company, or (c) misappropriation (or attempted misappropriation) of any of the Company's funds or property, or (d) the conviction of, the indictment (or its procedural equivalent) for or the entry of a guilty plea or a plea of no contest with respect to, a felony, the equivalent thereof, or any other crime with respect to which imprisonment is a possible punishment, or (e) the good faith determination of the Company's Board of Directors (after giving the Employee notice and a reasonable opportunity to cure) that the Employee materially breached this Agreement or has failed to perform the Employee's duties to the Company in a satisfactory manner. 5.2. Termination Other Than for Cause. Notwithstanding any other -------------------------------- provisions of this Agreement, the Company may effect a "Termination Other Than For Cause", as hereinafter defined, at any time upon giving written notice to the Employee of such termination. Upon any Termination Other Than for Cause, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of the Company in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in subsection 6.2. In addition, upon such termination of employment, all stock options granted to the Employee shall, subject to applicable federal and state securities laws, become fully vested and exercisable and all restricted common stock granted to the Employee shall fully vest and become transferable. "Termination Other Than for Cause" shall mean termination by the Company of the Employee's employment with the Company other than a termination pursuant to subsection 5.1, 5.3, 5.4, 5.5 or 5.6, or termination by the Employee of the Employee's employment with the Company by reason of (i) the Company's material breach of this Agreement, (ii) the assignment of the Employee without his consent to a position, responsibilities or duties of a materially lesser status or degree of responsibility than his position, responsibilities or duties as of the Effective Date, (iii) the relocation of the Company's principal executive office outside the metropolitan Atlanta, Georgia area, without the Employee's consent, or (iv) the requirement by the Company, subject to the provision in Section 1 hereof that the Employee shall not be required to relocate his residence from the St. Louis metropolitan area, that the Employee be based anywhere other than the Company's principal executive offices, without the Employee's consent. 5.3. Termination by Reason of Disability. If, during the term of ----------------------------------- this Agreement, the Employee, in the reasonable judgment of the Board of Directors, has failed to perform his duties under this Agreement on account of illness or physical or mental incapacity, and such illness or incapacity continues for a period of more than 120 consecutive days, or 180 days during any twelve-month period, the Company shall have the right to terminate the Employee's employment hereunder by written notification to the Employee and payment to the Employee of all accrued salary, bonus compensation to the extent earned, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plans), any benefits under any plans of the Company in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation. 5.4. Death. In the event of the Employee's death during the term of ----- this Agreement, the Employee's employment shall be deemed to have terminated as of the last 4 day of the month during which his death occurs and the Company shall pay to his estate or such beneficiaries as the Employee may from time to time designate all accrued salary, bonus compensation to the extent earned, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of the Company in which the Employee is a participant to the full extent of Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee's estate shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation. 5.5. Voluntary Termination. In the event of a "Voluntary --------------------- Termination," as hereinafter defined, the Company shall immediately pay all accrued salary, bonus compensation to the extent earned, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plans), any benefits under any plans of the Company in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation. "Voluntary Termination" shall mean termination by the Employee of Employee's employment other than (i) constructive termination as described in paragraphs (i) through (iv) of subsection 5.2, (ii) termination by reason of the Employee's disability as described in subsection 5.3, (iii) termination by reason of the Employee's death as described in subsection 5.4, and (iv) Termination Upon a Change in Control as described in subsection 5.6. 5.6. Termination Upon a Change in Control. In the event of a ------------------------------------ "Termination Upon a Change in Control," as hereinafter defined, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plans), any benefits under any plans of the Company in which Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in subsection 6.1. "Termination Upon a Change in Control" shall mean a termination by the Company (other than a Termination for Cause) or by the Employee (other than under threat of an imminent Termination for Cause) , in either case within one year following a "Change in Control" as hereinafter defined. "Change in Control" shall mean the date on which the Company first determines that any of the following has occurred: (a) any individual, entity or group (a "Person"), other than one or more of the Company's shareholders on the Effective Date of this Agreement or any entity that either one of them controls, becomes the beneficial owner of 50% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors of the Company (the "Company Outstanding Voting Securities"); provided, however, that any acquisition directly from or by the Company or any acquisition by any Person from W. Fred Williams of his shares of the Company Outstanding Voting Securities on or before April 30, 2001 which acquisition has been approved by the Company's Board of Directors (or, in the absence of any members on the Company's Board of Directors, by all of the Company's non-transferring voting security holders) shall be excluded from this paragraph (a); 5 (b) any Person becomes the beneficial owner of 50% or more of the combined voting power of the then outstanding voting securities of JDN Realty entitled to vote generally in the election of directors of JDN Realty ("Realty Outstanding Voting Securities"); provided, however, that any acquisition directly or indirectly by JDN Realty or any acquisition by a company pursuant to a transaction which complies with subparagraphs (i), (ii) and (iii) in paragraph (c) below shall be excluded from this paragraph (b); (c) consummation of a reorganization, merger or consolidation (a "Business Combination") of JDN Realty, unless, in each case, following such Business Combination (i) all or substantially all of the Persons who were the beneficial owners, respectively, of the Realty Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than a majority of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the company resulting from such Business Combination, (ii) no Person (excluding any company resulting from such Business Combination) beneficially owns, directly or indirectly, 50% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the company resulting from such Business Combination except to the extent such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the Board of Directors of the company resulting from the Business Combination are Continuing Directors (as hereinafter defined) at the time of the execution of the definitive agreement, or the action of the Board, providing for such Business Combination; (d) consummation of a reorganization, merger or consolidation of the Company unless, following such reorganization, merger or consolidation, the Company is controlled by JDN Realty; (e) consummation of the sale, other than in the ordinary course of business, of more than 50% of the combined assets of JDN Realty and the Company in a transaction or series of related transactions during the course of any twelve-month period; (f) consummation of the divestiture of control of the Company by JDN Realty in the event that JDN Realty obtains control of the Company; and (g) the date on which Continuing Directors (as hereinafter defined) cease for any reason to constitute at least a majority of the Board of Directors of JDN Realty. As used in this Section 5.6, the definitions of the terms "beneficial owner" and "group" shall have the meanings ascribed to those terms in Rule 13(d)(3) under the Securities Exchange Act of 1934. As used in this Section 5.6, the term "Continuing Directors" shall mean, as of any date of determination, (i) any member of the Board of Directors on the Effective Date of this Agreement, (ii) any person who has been a member of the Board of Directors for the two years immediately preceding such date of determination, or (iii) any person who was nominated for election or elected to the Board of Directors with the affirmative vote of the greater of (A) a majority of the Continuing Directors who were members of the Board of Directors at the time of such nomination or election or (B) at least four Continuing Directors but excluding, for purposes of this clause (iii), any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board of Directors of JDN Realty. "Control" means the direct or indirect 6 ownership of voting securities constituting more than fifty percent (50%) of the issued voting securities of a corporation. 5.7. Notice of Termination. The Company or the Employee may effect a --------------------- termination of the Employee's employment by the Company pursuant to the provisions of this section 5 upon giving thirty (30) days' written notice to the other party of such termination. 6. Severance Compensation ---------------------- 6.1. Termination Upon Change in Control. In the event the Employee's ---------------------------------- employment is terminated in a Termination Upon a Change in Control, the Employee shall be paid the following as severance compensation: (a) For one (1) year following such termination of employment, an amount (payable on the dates specified in subsection 4.1 except as otherwise provided herein) equal to the Base Salary at the rate payable at the time of such termination. Notwithstanding any provision in this paragraph (a) to the contrary, the Employee may, in the Employee's sole discretion, by delivery of a notice to the Company within thirty (30) days following a Termination Upon a Change in Control, elect to receive from the Company a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this paragraph (a). Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to LIBOR plus 2.25%, as reported in the Wall Street Journal, or similar publication, on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, the Company shall make such payment to the Employee within thirty (30) days following the date on which the Employee notifies the Company of the Employee's election. (b) In the event that the Employee is not otherwise entitled to fully exercise all awards granted to him under the Company's Incentive Stock Plan, and the Incentive Stock Plan does not otherwise provide for acceleration of exerciseability upon the occurrence of the Change in Control described herein, such awards shall become immediately exercisable upon a Change in Control. (c) All restricted stock granted to the Employee will, subject to applicable federal and state securities laws, vest and become transferable. (d) The Employee shall continue to accrue retirement benefits and shall continue to enjoy any benefits under any plans of the Company in which the Employee is a participant to the full extent of the Employee's rights under such plans, including any perquisites provided under this Agreement, through the remainder of the Employment Term; provided, however, that the benefits under any such plans of the Company in which the Employee is a participant, including any such perquisites, shall cease upon the Employee's obtaining other employment. If necessary to provide such benefits to the Employee, the Company shall, at its election, either: (i) amend its employee benefit plans to provide the benefits described in this paragraph (c), to the extent that such is permissible under the nondiscrimination requirements and other provisions of the Internal Revenue Code of 1986 (the "Code") and the provisions of the Employee Retirement Income Security Act of 1974, or (ii) provide separate benefit arrangements or cash payments so that the Employee receives amounts equivalent thereto, net of tax consequences. 7 6.2. Termination Other Than for Cause. In the event the Employee's -------------------------------- employment is terminated in a Termination Other Than for Cause, the Employee shall be paid as severance compensation his Base Salary, at the rate payable at the time of such termination, through the twelve-month period commencing on the effective date of such termination. Notwithstanding any provision in this subsection 6.2 to the contrary, the Company may, in the Company's sole discretion, by delivery of a notice to the Employee within thirty (30) days following a Termination Other Than for Cause, elect to remit to the Employee a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this subsection 6.2. Such present value shall be determined as of the date of delivery of the notice of election by the Company and shall be based on a discount rate equal to LIBOR plus 2.25%, as reported in The Wall Street Journal, or similar publication, on the date of delivery of the election notice. If the Company elects to remit a lump sum severance payment, the Company shall make such payment to the Employee within thirty (30) days following the date on which the Company notifies the Employee of its election. In the event that the Employee is not otherwise entitled to fully exercise all awards granted to him under the Company's Incentive Stock Plan, and the Incentive Stock Plan does not otherwise provide for acceleration of exerciseability upon the occurrence of a Termination Other Than for Cause described herein, such awards shall become immediately exercisable upon a Termination Other Than for Cause. 6.3. Termination Upon Any Other Event. In the event of a Voluntary -------------------------------- Termination, Termination For Cause, termination by reason of the Employee's disability pursuant to subsection 5.5 or termination by reason of the Employee's death pursuant to subsection 5.6, the Employee or his estate shall not be paid any severance compensation. 6.4. Parachute Payment Reduction. Notwithstanding any other --------------------------- provisions of this Agreement, any amounts payable under this Agreement (including but not limited to severance payments) shall be limited to the maximum amount that may be paid so that no such payment will, when combined with all other amounts to be received by the Employee upon a change in control (described in Section 280G(b)(2)(A) of the Code), constitute a "parachute payment" (defined in Section 280G(b)(2) of the Code) and so that no "excess parachute payments" (defined in Section 280G(b)(1) of the Code) made to the Employee are taxable to the Employee pursuant to Section 4999 of the Code. The parties intend that the Employee shall receive the maximum payments permissible that are not subject to the taxes described in Sections 280G and 4999 of the Code and shall interpret this provision in accordance with such intention. In further accord with such intention, nothing herein shall be construed to limit the Employee's right to receive payments that do not exceed reasonable compensation for services or to receive payments that are otherwise not taken into account in calculating "parachute payments" under Section 280G of the Code. 7. Obligations Contingent on Performance. The obligations of the Company ------------------------------------- under this Agreement, including its obligation to pay the compensation provided for herein, shall be contingent upon the Employee's performance of his obligations under this Agreement. In the event the Company intends to assert that the Employee is not performing his obligations under this Agreement, the Company shall first give notice to the Employee describing such non-performance and shall give Employee a reasonable opportunity (of not less than 30 days) to cure such non-performance prior to being relieved of the Company's obligations. 8. Confidentiality. The Employee agrees to hold in strict confidence all --------------- information concerning any matters affecting or relating to the business of the Company, including without limiting the generality of the foregoing its manner of operation, plans, protocols, processes, computer programs, tenant lists, client lists, marketing information and analyses, or other data, without regard to whether all of the foregoing matters will be deemed 8 confidential or material. The Employee agrees that he will not, directly or indirectly, use any such information for the benefit of others than the Company or disclose or communicate any of such information in any manner whatsoever other than to the directors, officers, employees, agents and representatives of the Company who need to know such information, who shall be informed by the Employee of the confidential nature of such information and directed by the Employee to treat such information confidentially, or to the Company's vendors, suppliers, customers or others contacted by the Employee in the course of performing his duties as President of the Company who need to know such information, who shall be informed by the Employee of the confidential nature of such information and who shall expressly agree to maintain the confidentiality of such information. Upon the Company's request, the Employee shall return all information furnished to him related to the business of the Company. The above limitations on use and disclosure shall not apply to information which the Employee can demonstrate: (a) was known to the Employee before receipt thereof from the Company; (b) is learned by the Employee from a third party entitled to disclose it; or (c) becomes known publicly other than through the Employee. The parties hereto stipulate that all such information is material and confidential and gravely affects the effective and successful conduct of the business of the Company and the Company's goodwill, and that any breach of the terms of this section 8 shall be a material breach of this Agreement. The terms of this section 8 shall remain in effect following the termination of this Agreement. 9. Use of Proprietary Information. The Employee recognizes that the ------------------------------ Company possesses a proprietary interest in all of the information described in section 8 and has the exclusive right and privilege to use, protect by copyright, patent or trademark, manufacture or otherwise exploit the processes, ideas and concepts described therein to the exclusion of the Employee, except as otherwise agreed between the Company and the Employee in writing. The Employee expressly agrees that any products, inventions, discoveries or improvements made by the Employee, his agents or affiliates, during the term of this Agreement, based on or arising out of the information described in section 8 shall be the property of and inure to the exclusive benefit of the Company. The Employee further agrees that any and all products, inventions, discoveries or improvements developed by the Employee (whether or not able to be protected by copyright, patent or trademark) in the scope of his employment, or involving the use of the Company's time, materials or other resources, shall be promptly disclosed to the Company and shall become the exclusive property of the Company. 10. Non-Competition Agreement. ------------------------- 10.1. Non-Competition. The Employee agrees that, during the period --------------- of actual employment, the Employee shall not, without the prior written consent of the Company, directly or indirectly, own, manage, operate, control, be connected with as an officer, employee, partner, consultant or otherwise, or otherwise engage or participate in, except as an employee of the Company, or any corporation directly or indirectly controlled by it or under common control with it, any corporation or other business entity engaged in any activity competitive with the Company, including the business of owning, developing, leasing or managing shopping center properties; provided, however, the Employee may continue to be an investor and manage investments set forth on Schedule 3 hereto and such other ---------- personal investments to the extent such activities are not, in the reasonable discretion of the Company, competitive with the Company and which do not, in the reasonable discretion of the Company, usurp a business opportunity of the Company. Further, the Employee may continue to be a member of the Board of Directors of Acadia Realty Trust. Notwithstanding the foregoing, the ownership by the Employee of less than 5% of any class of the outstanding capital stock of any corporation conducting such a competitive business which is regularly traded on a national securities exchange or in the over-the-counter market shall not be a violation of the foregoing covenant. 9 10.2. Non-Solicitation. During the period of actual employment and, ---------------- in addition, the period, if any, during which the Employee shall be entitled to severance compensation pursuant to section 6 (notwithstanding an election by the Employee to receive a lump sum severance payment for such period), the Employee shall not, except on behalf of or with the prior written consent of the Company, (a) contact or solicit, directly or indirectly, any customer, client, tenant or account whose identity the Employee obtained through association with the Company, regardless of the geographical location of such customer, client, tenant or account, or (b) directly or indirectly, entice or induce, or attempt to entice or induce, any employee of the Company to leave such employ, or employ any such person in any business similar to or in competition with that of the Company. The Employee hereby acknowledges and agrees that the provisions set forth in this subsection 10.2 constitute a reasonable restriction on his ability to compete with the Company. 10.3. Saving Provision. The parties hereto agree that, in the event ---------------- a court of competent jurisdiction shall determine that the geographical or durational elements of this covenant are unenforceable, such determination shall not render the entire covenant unenforceable. Rather, the excessive aspects of the covenant shall be reduced to the threshold which is enforceable, and the remaining aspects shall not be affected thereby. 10.4. Equitable Relief. The Employee acknowledges that the extent of ---------------- damages to the Company from a breach of sections 8, 9 and 10 of this Agreement would not be readily quantifiable or ascertainable, that monetary damages would be inadequate to make the Company whole in case of such a breach, and that there is not and would not be an adequate remedy at law for such a breach. Therefore, the Employee specifically agrees that the Company is entitled to injunctive or other equitable relief from a breach of sections 8, 9 and 10 of this Agreement, and hereby waives and covenants not to assert against a prayer for such relief that there exists an adequate remedy at law, in monetary damages or otherwise. 11. Indemnification. --------------- 11.1. Right to Indemnification. The Company shall indemnify the ------------------------ Employee to the full extent permitted by the General Corporation Law of the State of Delaware and the Company's Certificate of Incorporation. 11.2. Non-Exclusivity of Rights. The indemnification and advancement ------------------------- of expenses provided by, or granted pursuant to, this section 11 shall not be deemed exclusive of any other rights to which the Employee may be entitled by law, the Company's Articles of Incorporation or Bylaws, an agreement with the Company, or a resolution of the Board of Directors or of the Company's shareholders. Any repeal or modification of the provisions of this section 11 shall be prospective only and shall not adversely affect any right or protection set forth herein in favor of the Employee at the time of such repeal or modification. 11.3. Insurance. The Company may, to the fullest extent permitted by --------- law, purchase and maintain insurance, at its expense, to protect itself and the Employee against any liability asserted against the Employee and incurred by the Employee in any such capacity, or arising out of the Employee's duties hereunder, whether or not the Company would have the power to indemnify the Employee against such liability under the provisions of this section 11, the General Corporation Law of the State of Delaware or otherwise. 10 11.4. Saving Provision. If this section 11 or any portion thereof ---------------- shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify the Employee as to expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in settlement with respect to any actual or threatened action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise, to the fullest extent permitted by any applicable portion of this section 11 which shall not have been invalidated, by the General Corporation Law of the State of Delaware or by any other applicable law. 12. Assignment. The Employee and the Company acknowledge that certain ----------- changes dictated by the Ticket to Work and Work Incentives Improvement Act of 1999 (the "Act"), to be effective January 1, 2001, will trigger a restructuring and/or change of ownership of the Company. It is the intent of the parties to this Agreement that, despite any conversion of the Company into, or combination of the Company or its business with, a taxable REIT subsidiary of JDN Realty, the Employee will continue to be employed under the terms of this Agreement. The Employee hereby agrees to an assignment of this Agreement by the Company to a taxable REIT subsidiary of JDN Realty solely for the purpose of effecting changes in the Company's business to comply with the Act. Following or in anticipation of an assignment, without the Employee's consent, however, the duties and responsibilities of the Employee performed for the assignee shall not be materially increased, altered or diminished in a manner inconsistent with the Employee's duties and responsibilities hereunder for the Company, nor shall there be a reduction in the Employee's title. Except as provided in this Section 12, this Agreement may not be assigned by either party without the written consent of the other party. 13. Entire Agreement. This Agreement and any agreements entered into ---------------- under any of the Company's benefit plans as described in subsection 4 contain the complete agreement concerning the employment arrangement between the parties and shall, as of the Effective Date, supersede all other agreements or arrangements between the parties with regard to the subject matter hereof. 14. Binding Agreement. This Agreement shall be binding upon and inure to ----------------- the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. The obligations of the Company under this Agreement shall not be terminated by reason of any liquidation, dissolution, bankruptcy, cessation of business or similar event relating to the Company. This Agreement shall not be terminated by reason of any merger, consolidation or reorganization of the Company, but shall be binding upon and inure to the benefit of the surviving or resulting entity. 15. Modification. No waiver or modification of this Agreement or of any ------------ covenant, condition, or limitation herein contained shall be valid unless in writing and duly executed by the party to be charged therewith and no evidence of any waiver or modification shall be offered or received in evidence of any proceeding, arbitration, or litigation between the parties hereto arising out of or affecting this Agreement, or the rights or obligations of the parties thereunder, unless such waiver or modification is in writing, duly executed as aforesaid. 16. Severability. All agreements and covenants contained herein are ------------ severable, and in the event any of them shall be held to be invalid or unenforceable by any court of competent jurisdiction, this Agreement shall be interpreted as if such invalid agreements or covenants were not contained herein. 17. Manner of Giving Notice. All notices, requests and demands to or upon ----------------------- the respective parties hereto shall be sent by hand, certified mail, overnight air courier service, or telecopier (if within a reasonable time a permanent copy is given by any of the other methods described above), in each case with all applicable charges paid or otherwise provided for, 11 addressed as follows, or to such other address as may hereafter be designated in writing by the respective parties hereto: To Company: ---------- JDN Development Company, Inc. 359 East Paces Ferry Road Suite 400 Atlanta, Georgia 30305 Telephone: (404) 262-3252 Facsimile: (404) 364-6446 Attention: John D. Harris, Jr., Vice President To Employee: ----------- Mr. Lee S. Wielansky 912 Town & Country Estates Court St. Louis, Missouri 63141 Telephone: (314) 569-4144 With a copy to: Joseph D. Lehrer, Esq. Greensfelder Hemker & Gale, P.C. 2000 Equitable Building 10 South Broadway St. Louis, MO 63102 Telephone: (314) 241-9090 Facsimile: (314) 241-8624 Such notices, requests and demands shall be deemed to have been given or made on the date of delivery if delivered by hand or by telecopy and on the next following date if sent by mail or by air courier service. 18. Remedies. In the event of a breach of this Agreement, the non- -------- breaching party shall be entitled to such legal and equitable relief as may be provided by law, and shall further be entitled to recover all costs and expenses, including reasonable attorneys' fees, incurred in enforcing the non- breaching party's rights hereunder. 19. Headings. The headings have been inserted for convenience only and -------- shall not be deemed to limit or otherwise affect any of the provisions of this Agreement. 20. Choice of Law. It is the intention of the parties hereto that this ------------- Agreement and the performance hereunder be construed in accordance with, under and pursuant to the laws of the State of Delaware without regard to the jurisdiction in which any action or special proceeding may be instituted. [Next page is signature page.] 12 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first stated above. JDN Development Company, Inc. By: /s/ Craig Macnab ---------------- Title: EVP /s/ Lee S. Wielansky -------------------- Lee S. Wielansky JDN Realty Corporation joins in the foregoing Employment Agreement solely to guarantee the Company's performance of its obligations under Sections 4.7 and 4.8 thereof: By: /s/ Craig Macnab ---------------- Title: CEO 13 EX-10.37 6 0006.txt TERMINATION OF EMPLOYMENT AGREEMENT EXHIBIT 10.37 W. Fred Williams 105 Ashlawn Court Franklin, TN 37064 (615) 794-6361 fred.williams@home.com ---------------------- September 5, 2000 Hand Delivered - -------------- Mr. Craig Macnab Chief Executive Officer JDN Realty Corporation 359 East Paces Ferry Road, N. E. Suite 400 Atlanta, GA 30305 Hand Delivered - -------------- Mr. John D. Harris Vice President JDN Development Company, Inc. 359 East Paces Ferry Road, N. E. Suite 400 Atlanta, GA 30305 Re: Termination of Employment Dear Craig and Jay: This letter constitutes notification of the resignation of the undersigned as President and Director of JDN Development Company, Inc. effective October 5, 2000. In accordance with my previous conversations with Craig, I will work toward a smooth transition of my responsibilities to those individuals that will undertake the duties of the President and Director of JDN Development Company, Inc. Please advise me as to what actions you desire me to take to effectuate this transition. Sincerely, /s/ W. Fred Williams W. Fred Williams 105 Ashlawn Court Franklin, TN 37064 (615) 794-6361 (615) 794-2060 (Fax) fred.williams@home.com ---------------------- October 2, 2000 Mr. Craig Macnab Chief Executive Officer 359 East Paces Ferry Road, NE Atlanta, GA 30305 Re: W. Fred Williams Consulting Agreement Dear Craig: Based upon our conversations over the past few days, the following is my understanding of the basic terms and conditions of the consulting arrangement with JDN Development Company, Inc. ("JDN") and the W. Fred Williams ("Williams"): 1. Williams will consult with JDN on certain projects assigned to and accepted by Williams from JDN for the period beginning October 1, 2000 and ending December 31, 2000. 2. As consideration for the consulting services performed by Williams hereunder, JDN will pay Williams the sum of $25,000 per month on or before the last day of each month. To the extent required by the Tax Code, JDN will withhold taxes on said amount. 3. JDN will pay Williams the bonus earned by Williams for the period of employment from March 7, 2000 until September 30, 2000 in the amount of $175,000 net of the required withholding on or about October 14, 2000. In addition to the compensation described in paragraph 2, commencing on October 1, 2000 and ending on December 31, 2000, JDN will also pay Williams as a bonus an additional $24,000 for each month or partial month Williams consults with JDN. 4. JDN, at its expense, will provide Williams with a company vehicle through December 31, 2000. 5. JDN will reimburse Williams for all business expenses incurred in connection with the performance of consulting services to JDN performed in accordance herewith. 6. On or before December 31, 2000, Williams will sell his stock in JDN to Craig Macnab for an amount to be determined. 7. Williams will relinquish the restricted stock in JDN Realty Corporation awarded to him but will receive the dividend for the third quarter of 2000. 8. JDN hereby agrees that the Non-Competition Agreement made by Williams as set forth in that certain Employment Agreement between JDN and Williams dated March 7, 2000 (the "Employment Agreement") is hereby terminated and Williams shall have the right to compete with JDN. 9. JDN hereby agrees to indemnify Williams while acting as a consultant to JDN to the same extent that JDN indemnified Williams while acting as an officer and employee of JDN. The indemnity provisions contained in Section 11 of the Employment Agreement shall apply to Williams while acting as a consultant hereunder. For the purpose of this letter, the indemnity provisions contained in Section 11 of the Employment Agreement are modified from and after September 30, 2000 by substituting "consultant" for "employee" where applicable in order to provide Williams indemnification from JDN while acting as a consultant on its behalf in accordance herewith. 10. In the event Williams is required to participate in any administrative or judicial proceeding involving JDN, JDN agrees to pay Williams for the time required for preparation and participation in such proceeding and any expenses, including attorney fees, incurred in connection with such participation. 11. JDN and Williams will negotiate in good faith to enter into an agreement whereby Williams will perform certain specific project related assignments for JDN for a fee based upon the performance of the assignment, e.g. the sale or joint venture of Hamilton, NJ. In the event an agreement is not reached by December 31, 2000, neither JDN nor Williams shall be obligated to further negotiate such an agreement. 12. Williams will elect Craig Macnab as a director of JDN. 13. JDN acknowledges that Williams will not be required to work full time or be located in JDN's Atlanta office in order to perform the consulting services described herein. JDN further acknowledges that Williams will be on vacation from October 13, 2000 to October 23, 2000, and the Thanksgiving and Christmas holidays. If the above summary of the terms and conditions of the agreement between Williams and JDN for consulting services correctly states your understanding of our agreement, please indicate your agreement by signing on the line provided below and returning one fully executed original to Williams. Sincerely, /s/ W. Fred Williams The above summary of the terms and conditions of the agreement between Williams and JDN for consulting services is agreed to and approved. JDN Development Company, Inc. By: /s/ Craig Macnab ----------------- Title: Director EX-10.38 7 0007.txt AMENDMENT #3 TO 1993 NON-EMPLOYEE DIRECTOR PLAN EXHIBIT 10.38 AMENDMENT NO. 3 TO JDN REALTY CORPORATION 1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN THIS AMENDMENT NO. 3 TO JDN REALTY CORPORATION 1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN (the "Amendment") is made and entered into as of the 13/th/ day of February, 2001, by JDN Realty Corporation, a Maryland corporation (the "Company"). WHEREAS, effective December 17, 1993, the Company established the JDN Realty Corporation Non-Employee Director Stock Option Plan (the "Plan"); WHEREAS, the Plan was amended and restated effective January 1, 1999 and was further amended effective October 1, 1999 and August 29, 2000; and WHEREAS, the Company desires to amend the Plan in accordance with Section 9.5 of the Plan as set forth herein. NOW, THEREFORE, the Company hereby amends the Plan, effective as of the date first written above, as follows: 1. Amendment to Plan. The following shall be added as Section 4.4: ----------------- 4.4. Special Award of Options. Notwithstanding anything herein to ------------------------ the contrary, Awards of Options for up to 30,000 shares of Stock may be granted to each Participant under the Plan on a one-time basis in calendar year 2001 pursuant to the terms of an Agreement between each Participant and the Company and subject to the terms of the Plan. The provisions of Sections 4.1 and 4.2(b) - 4.2(f) shall apply to Awards made under this Section 4.4; provided, however, with respect to Awards made under this Section 4.4, the term "Grant Date" shall refer to the date of the Agreement pursuant to which the Award is made to the Participant. 2. Definitions. Unless otherwise defined herein, terms used herein ----------- shall have the meanings ascribed to them in the Plan. 3. Governing Law. The Amendment shall be construed in accordance ------------- with, and governed by, the laws of the State of Maryland. 4. Other Provisions. Except as amended hereby, the Plan shall ---------------- remain unmodified and in full force and effect. IN WITNESS WHEREOF, the undersigned has hereunto signed this Amendment No. 3 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan effective as of the day and year first above written. JDN REALTY CORPORATION By: /s/ John D. Harris, Jr. Title: Chief Financial Officer EX-10.39 8 0008.txt AMENDMENT #1 TO 1993 INCENTIVE STOCK PLAN EXHIBIT 10.39 AMENDMENT NO. 1 TO JDN REALTY CORPORATION 1993 INCENTIVE STOCK PLAN THIS AMENDMENT NO. 1 TO JDN REALTY CORPORATION 1993 INCENTIVE STOCK PLAN (the "Amendment") is adopted effective as of the 8th day of November, 2000, by JDN Realty Corporation, a Maryland corporation (the "Company"). WHEREAS, effective December 17, 1993, as amended and restated effective May 19, 1999, the Company established the JDN Realty Corporation Incentive Stock Plan (the "Plan"); and WHEREAS, the Company desires to amend the Plan in accordance with Section 10.6 of the Plan as set forth herein. NOW, THEREFORE, the Company hereby amends the Plan, effective as of the date first written above, as follows: 1. Amendment to Plan. The first sentence of section 6.2 of the Plan ----------------- is deleted in its entirety and replaced with the following: 6.2 An Award shall be exercisable on the date of grant or on any other date established by the Committee or provided for in an Agreement; provided, however, that unless otherwise provided in an Agreement, Awards granted to officers or directors subject to Section 16 of the Exchange Act shall not be exercisable, and restrictions on Restricted Stock shall not lapse, until at least six months after the Award is granted. 2. Definitions. Unless otherwise defined herein, terms shall have ----------- the meanings ascribed to them in the Plan. 3. Governing Law. The Amendment shall be construed in accordance ------------- with, and governed by, the laws of the State of Maryland. 4. Other Provisions. Except as amended hereby, the Plan shall ---------------- remain unmodified and in full force and effect. IN WITNESS WHEREOF, the undersigned has adopted this Amendment No. 1 to JDN Realty Corporation 1993 Incentive Stock Plan on the day and year first above written. JDN REALTY CORPORATION By: /s/ Craig Macnab Title: Chief Executive Officer EX-12 9 0009.txt RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12 RATIO OF EARNINGS TO FIXED CHARGES
Years Ended December 31, 2000 1999 1998 1997 1996 --------- --------- --------- --------- --------- Fixed Charges: Interest Expense (including amortization of deferred debt cost) $ 39,429 $ 29,188 $ 18,026 $ 9,525 $ 9,414 Interest Capitalized 9,444 7,565 6,401 4,650 1,993 --------- --------- --------- --------- --------- Total Fixed Charges $ 48,873 $ 36,753 $ 24,427 $ 14,175 $ 11,407 ========= ========= ========= ========= ========= Earnings: Net income before net gain (loss) on real estate sales and extraordinary items $ 8,785 $ 34,424 $ 40,301 $ 25,841 $ 16,245 Fixed Charges 48,873 36,753 24,427 14,175 11,407 Capitalized Interest (9,444) (7,565) (6,401) (4,650) (1,993) --------- --------- --------- --------- --------- Total Earnings $ 48,214 $ 63,612 $ 58,327 $ 35,366 $ 25,659 ========= ========= ========= ========= ========= Ratio of Earnings to Fixed Charges 0.99 1.73 2.39 2.49 2.25
EX-21 10 0010.txt SUBSIDIARIES OF THE REGISTRANT Exhibit 21 SUBSIDIARIES OF THE REGISTRANT A. JDN Realty Corporation Subsidiaries State of Incorporation or Organization Black Cherry Limited Liability Company Colorado JDN Realty AL, Inc. Alabama JDN Realty Corporation, GP, Inc. Delaware Georgia Finance Corporation Delaware JDN West Allis Associates Limited Partnership Georgia JDN Realty LP, Inc. Delaware JDN Realty Holdings, L.P. Georgia Canal Street Partners, LLC Michigan Chesterfield Exchange, LLC Georgia Fayetteville Exchange, LLC Georgia JDN Development Company, Inc. Delaware B. Related Entities (1) JDN Development Company Subsidiaries ------------------------------------ Fayetteville Black Investment, Inc. Georgia Duck Creek, LLC Georgia Pecan Park, LLC Mississippi Mitchell Bridge Associates, Inc. Georgia JDN of Alabama Realty Corporation Alabama JDN Intermountain Development Corp. Delaware Metro Station Development Company LLC Mississippi WHF, Inc. Georgia JDN Development Investment, L.P. Georgia JDN Development LP Inc. Delaware Hickory Hollow Exchange, LLC Georgia (2) Entities in which JDN Development Investment, L.P. is the General ----------------------------------------------------------------- Partner and JDN Realty Holdings, L.P. is the Limited Partner ------------------------------------------------------------ JDN Real Estate - Gulf Breeze II, L.P. Georgia JDN Real Estate - Asheville, L.P. Georgia JDN Real Estate - Hamilton, L.P. Georgia JDN Real Estate - McDonough, II, L.P. Georgia JDN Real Estate - Mesquite, L.P. Georgia JDN Real Estate - Overland Park, L.P. Georgia JDN Real Estate - Lakeland, L.P. Georgia JDN Real Estate - Fayetteville, L.P. Georgia JDN Real Estate - Sacramento, L.P. Georgia JDN Real Estate - Stone Mountain, L.P. Georgia JDN Real Estate - Norwood, LP Georgia JDN Real Estate - McKinney, L.P. Georgia JDN Real Estate - Frisco, L.P. Georgia JDN Real Estate - Pooler, L.P. Georgia JDN Real Estate - Erie, L.P. Georgia JDN Real Estate - West Lansing, L.P. Georgia JDN Real Estate - Hickory Creek, L.P. Georgia JDN Real Estate - Parker Pavilions, L.P. Georgia JDN Real Estate - Turner Hill, L.P. Georgia JDN Real Estate - Cumming, L.P. Georgia JDN Real Estate - Bridgewood Fort Worth, L.P. Georgia JDN Real Estate - West Lafayette, L.P. Georgia JDN Real Estate - Conyers, L.P. Georgia JDN Real Estate - Pioneer Hills, L.P. Georgia JDN Real Estate - Pensacola, L.P. Georgia JDN Real Estate - Florence, L.P. Georgia JDN Real Estate - Pioneer Hills II, L.P. Georgia (3) Entities in which JDN Realty Holdings, L.P. is the General Partner and ---------------------------------------------------------------------- JDN Development Investment, L.P. is the Limited Partner - ------------------------------------------------------- JDN Real Estate - McDonough, L.P. Georgia (4) Other Related Entities ---------------------- Pepperell Corners, L.P.1 Alabama Goldberg Property Associates, Inc.2 Colorado JDN - Zaremba Venture, LLC3 Delaware JDN Intermountain Development, Parker Pavilion, LLC4 Georgia JDN Intermountain Development, Pioneer Hills, LLC5 Georgia Ft. Collins Partners, LLC6 Colorado ____________________________ 1 JDN of Alabama Realty Corporation owns a 1% general partnership interest and a 10.64% limited partnership interest in this entity. 2 This entity is a subsidiary of JDN Intermountain Development Corp. 3 JDN Real Estate - Pooler, L.P. owns a 50% interest in this entity and is the Managing Member. Zaremba Foxfield Pooler, LP owns the remaining 50% interest in this entity. 4 JDN Real Estate - Parker Pavilions, L.P. owns a 100% interest in this entity. 5 JDN Real Estate - Pioneer Hills, L.P. owns a 100% interest in this entity. 6 Goldberg Property Associates owns 100% interest in this entity. EX-99.1 11 0011.txt FEDERAL INCOME TAX CONSIDERATIONS Exhibit 99.1 Federal Income Tax Considerations The following discussion addresses the material federal income tax considerations relevant to the taxation of the Company and summarizes the material federal income tax consequences relevant to certain shareholders. This discussion is for general information only, is not exhaustive of all possible tax considerations and is not intended as and should not be construed as tax advise. The actual tax consequences of holding particular securities being issued by the Company may vary in light of a prospective holder's particular facts and circumstances. Certain holders, such as tax-exempt entities, insurance companies and financial institutions, are generally subject to special rules which are not addressed fully herein. In addition, the following discussion does not discuss issues under any foreign, state or local tax laws except as expressly stated. The tax treatment of a holder of any of the securities offered by the Company will vary depending upon the terms of the particular securities acquired by such holder, as well as his particular situation, and this discussion does not attempt to address aspects of federal income taxation relating to holders of particular securities. Any additional federal income tax considerations relevant to holders of particular securities will be provided in the applicable Prospectus and/or Prospectus Supplement relating thereto. The following general summary of the federal income tax rules governing a REIT and its shareholders is based on the Internal Revenue Code ("Code"), Treasury Regulations, generally available judicial decisions, rulings and other administrative interpretations, all of which are subject to change, and possibly retroactively. Accordingly, no assurance can be given that future legislation, administrative regulations, rulings, or interpretations or court decisions will not alter significantly the tax consequences described below or that such changes or decisions will not be retroactive. The Company has not requested, nor does it presently intend to request, a ruling from the Internal Revenue Service ("IRS") with respect to any of the matters discussed below. Because the provisions governing REITs are highly technical and complex, no attempt is made in the following discussion to discuss in detail all of the possible tax consequences applicable to the Company or its shareholders. It is also important to note that the application of federal income tax laws and applicable regulations may be subject to varying interpretations and could result in a charge to the Company at a later date upon final determination by taxing authorities. ACCORDINGLY, THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING AND EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT THE APPLICABLE PROSPECTUS AND/OR PROSPECTUS SUPPLEMENT, AS WELL AS WITH HIS OWN TAX ADVISOR, REGARDING THE TAX CONSEQUENCES TO HIM OF THE ACQUISITION, OWNERSHIP AND SALE OF THE COMPANY'S SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS. TAXATION OF THE COMPANY The Company elected to be taxed as a REIT for federal income tax purposes commencing with the taxable year ending December 31, 1994. The Company has continued its REIT election since that time and intends to continue such election. The Company believes that it is organized and has operated in a manner so as to qualify for taxation as a REIT, and the Company intends to continue to operate in such a manner. Qualification and taxation as a REIT depends upon the Company's ability to meet on a continuing basis, through actual annual operating results, the various requirements under the Code with regard to, among other things, the source of its gross income, the composition of its assets, distribution levels and diversity of stock ownership. While the Company intends to operate so that it qualifies as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations and the possibility of future changes in circumstances of the Company, no assurance can be given that the Company has operated in a manner so as to qualify for taxation as a REIT or that it will continue to operate in such a manner. Generally, if the Company continues to qualify for taxation as a REIT, it will not be subject to federal corporate income tax on its net income that it distributes in a timely manner to shareholders. However, notwithstanding the Company's qualification as a REIT, the Company will be subject to federal income tax as follows: First, the Company will be taxed at regular corporate rates on any undistributed "real estate investment trust taxable income," including undistributed net capital gains. Second, under certain circumstances, the Company may be subject to the "alternative minimum tax" on its items of tax preference, if any. Third, if the Company has (i) net income from the sale or other disposition of "foreclosure property" that is held primarily for sale to customers in the ordinary course of business, or (ii) other nonqualifying income from foreclosure property, it will be subject to tax on such income at the highest corporate rate. Fourth, any net income that the Company has from prohibited transactions (which are, in general, certain sales or other dispositions of property, other than certain foreclosure property, held primarily for sale to customers in the ordinary course of business) will be subject to a 100% tax. Fifth, if the Company should fail to satisfy either the 75% or 95% gross income tests (as discussed below), and has nonetheless maintained its qualification as a REIT because certain other requirements have been met, it will be subject to a 100% tax on an amount equal to (i) the gross income attributable to the greater of the amount by which the Company fails the 75% or 2 95% gross income tests multiplied by (ii) a fraction intended to reflect the Company's profitability. Sixth, if the Company fails to distribute during each calendar year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income for such year (other than certain long-term capital gain net income which the Company elects to retain and pay tax on), and (iii) any undistributed taxable income from preceding periods, then the Company will be subject to a 4% federal excise tax on the excess of such required distribution over the amounts actually distributed. Seventh, to the extent that the Company recognizes gain from the disposition of an asset with respect to which there existed "built-in gain" as of January 1, 1994 and such disposition occurs within a 10-year recognition period beginning January 1, 1994, the Company will be subject to federal income tax at the highest regular corporate rate on the amount of its "net recognized built-in gain." The Company estimates that on January 1, 1994, the aggregate "built-in gain" was approximately $12.1 million. The Company may offset any net recognized built-in gain by available net operating loss carryforwards. On January 1, 1994, the Company had approximately $2.7 million in net operating loss carryforwards which expire at various dates through 2007. Management of the Company will consider this tax effect when determining whether it is in the best interest of the Company to sell a specific piece of real property. Eighth, if the Company acquires any asset from a taxable "C" corporation in a transaction in which the adjusted tax basis of the asset in the Company's hands is determined by reference to the adjusted tax basis of the asset in the hands of the taxable "C" corporation, and the Company recognizes gain on the disposition of such asset during the ten-year period beginning on the date on which the Company acquired such asset, then the Company will be subject to a tax imposed at the highest corporate rate on the amount of gain equal to the excess of (i) the fair market value of such property at the beginning of such ten-year period over (ii) the Company's adjusted tax basis in such property at the beginning of such ten-year period. Ninth, the Company will be subject to a 100% tax on any excess amounts received through arrangements between the Company, its tenants and a taxable REIT subsidiary of the Company that are not at arm's length. In addition, the Company could be subject to tax in certain situations and on certain transactions not presently contemplated. REQUIREMENTS FOR QUALIFICATION AS A REIT To qualify as a REIT for a taxable year under the Code, the Company must have no earnings and profits accumulated in any non-REIT year. The Company also must have in effect an election to be taxed as a REIT and must meet other requirements, some of which are summarized below, including percentage tests relating to the sources of its gross income, the nature of the Company's assets and the distribution of its income to shareholders. Such election, if properly made and assuming continuing compliance with the qualification tests described herein, will continue in effect for subsequent years. 3 If the Company ceases to qualify as a REIT in any taxable year, and the relief provisions do not apply, the Company's income that is distributed to shareholders would be subject to the "double taxation" on earnings (once at the corporate level and again at the shareholder level) that generally results from investment in a corporation. Failure to maintain qualification as a REIT would force the Company to reduce significantly its distributions and possibly incur substantial indebtedness or liquidate substantial investments in order to pay the resulting corporate taxes. In addition, the Company, once having obtained REIT status and having lost such status, would not be eligible to elect REIT status for the four subsequent taxable years, unless its failure to maintain its qualification was due to reasonable cause and not willful neglect, and certain other requirements were satisfied. In order to elect to again be taxed as a REIT, just as with the original election, the Company would be required to distribute all of its earnings and profits accumulated in any non-REIT taxable year. ORGANIZATIONAL REQUIREMENTS AND SHARE OWNERSHIP TESTS The Code defines a REIT as a corporation, trust or association (1) which is managed by one or more trustees or directors; (2) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest; (3) which would be taxable, but for the special Code provisions applicable to REITs, as a domestic corporation; (4) which is neither a financial institution nor an insurance company, subject to certain provisions of the Code; (5) the beneficial ownership of which is held by 100 or more persons, determined without reference to any rules of attribution (the "share ownership test"); (6) that during the last half of each taxable year not more than 50% in value of the outstanding stock of which is owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) (the "five or fewer test"); and (7) which meets certain other tests, described below, regarding the nature of its income and assets. The Code provides that conditions (1) through (4), inclusive, must be met during the entire taxable year, and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of fewer than 12 months. The five or fewer test and the share ownership test do not apply to the first taxable year for which an election is made to be treated as a REIT. The Company has issued sufficient shares to a sufficient number of people pursuant to its initial public offering to allow it to satisfy the share ownership test and the five or fewer test. In addition, to assist in complying with the five or fewer test on an ongoing basis, the Company's Charter contains certain restrictions on the transfer of the Company's common and preferred stock to prevent concentration of stock ownership. For purposes of determining whether the five or fewer test (but not the share ownership test) is met, any stock held by a qualified trust (generally pension plans, profit-sharing plans and other employee retirement trusts) generally 4 is treated as held directly by the trust's beneficiaries in proportion to their actuarial interests in the trust, and not held by the trust. To monitor the Company's compliance with the share ownership requirements imposed on REITs, the Company is required to maintain records of the actual and constructive beneficial ownership of its shares. If the Company timely mails demand letters to certain shareholders requesting stock ownership information be provided to the Company or the IRS, unless the Company knows, or exercising reasonable due diligence would have known, that the five or fewer test has in fact not been satisfied, the Company shall be deemed to have satisfied the five or fewer test. If the Company fails to comply with the Treasury Regulations to ascertain its ownership it will be subject to a penalty for failing to do so and will void the possible application of the deemed satisfaction of the five or fewer test. The penalty is $25,000 ($50,000 for intentional violations) for any year in which the Company does not comply with the ownership Treasury Regulations. The Company will also be required, when requested by the IRS, to send curative demand letters. In accordance with the Treasury Regulations, the Company must and will demand from certain shareholders written statements concerning the actual and constructive beneficial ownership of shares. The Company's Bylaws require such record holders to respond to such requests for information. Any shareholder who does not provide the Company with requested information concerning share ownership will be required to include certain information relating thereto with his income tax return. A list of shareholders failing to fully comply with the demand for the written statements shall be maintained as part of the Company's records required under the Code. TAXABLE REIT SUBSIDIARIES A taxable REIT subsidiary is a corporation, other than a REIT, in which a REIT directly or indirectly holds stock and that has made a joint election with the REIT to be treated as a taxable REIT subsidiary. A taxable REIT subsidiary also includes any corporation, other than a REIT, with respect to which a taxable REIT subsidiary owns securities possessing more than 35% of the total voting power or value of the outstanding securities of such corporation. A taxable REIT subsidiary is subject to regular federal income tax, and state and local income tax where applicable, as a regular "C" corporation. The value of the securities of all taxable REIT subsidiaries cannot exceed 20% of the total value of the REIT's assets. In addition, interest paid by a taxable REIT subsidiary to the related REIT is subject to the earnings stripping rules contained in Section 163(j) of the Code and, therefore, the taxable REIT subsidiary cannot deduct interest in any year that would exceed 50% of the subsidiary's adjusted gross income. If any amount of interest, rent, or other deductions of the taxable REIT subsidiary to be paid to the REIT is determined not to be at arm's length, an excise tax of 100% is imposed on the portion that is determined to be 5 excessive. However, rent received by a REIT will not fail to qualify as rents from real property by reason of the fact that all or any portion of such rent is redetermined for purposes of the 100% excise tax. The Company and JDN Development have jointly elected to treat JDN Development as a taxable REIT subsidiary effective January 1, 2001. In addition, effective January 1, 2001, the Company acquired the remaining voting stock in JDN Development and, therefore, owns 100% of the capital stock of JDN Development. The Company will consolidate JDN Development's operations in its financial statements effective with the first reporting period in 2001. QUALIFIED REIT SUBSIDIARIES Generally, a qualified REIT subsidiary is a corporation, other than a taxable REIT subsidiary, all of the capital stock of which is owned by the REIT. The Company may own 100% of the stock of a corporation if such corporation is a "qualified REIT subsidiary." If the Company owns a corporate subsidiary that is a "qualified REIT subsidiary," the separate existence of that subsidiary will be disregarded for federal income tax purposes and the assets, liabilities, income, deductions and other attributes will be treated as being owned or generated directly by the Company. If the Company acquires 100% of an existing corporation, the acquired corporation will be deemed to liquidate and all of its built-in gain will be taxable. In addition, the Company would have to make distributions sufficient to eliminate any "C" corporation earnings and profits as well as sufficient distributions to meet the distribution requirements described below. A qualified REIT subsidiary of the Company will not be subject to federal corporate income taxation, although it may be subject to state and local taxation in some states. The Company currently has four qualified REIT subsidiaries. INCOME TESTS In order to maintain qualification as a REIT, there are two gross income requirements that must be satisfied annually by the Company. First, at least 75% of the Company's gross income (other than from certain "prohibited transactions") in each taxable year must consist of certain types of income identified in the Code, including qualifying "rents from real property"; qualifying interest on obligations secured by mortgages on real property or interests in real property; gain from the sale or other disposition of real property (including interests in real property and mortgages on real property) held for investment and not primarily for sale to customers in the ordinary course of business; income and gain from certain properties acquired by the Company through foreclosure; and income earned from certain types of qualifying temporary investments. When the Company receives new capital in exchange for its shares (other than dividend reinvestment amounts) or in a public offering of debt instruments with maturities of five years or longer, income attributable to the temporary investment of such new capital, if received or accrued 6 within one year of the Company's receipt of the new capital, is qualified temporary investment income under the 75% gross income test. Second, at least 95% of the Company's gross income (other than from certain "prohibited transactions") in each taxable year must consist of income which qualifies under the 75% gross income test as well as dividends and interest from any other source, gain from the sale or other disposition of shares and other securities which are not dealer property, any payment to the Company under an interest rate swap or cap agreement entered into as a hedge against variable rate indebtedness incurred to acquire or carry real estate assets, and any gain from the disposition of such an agreement. In order for rents received by the Company to qualify as "rents from real property" in satisfying the gross income requirements for a REIT described above, several conditions must be met related to the identity of the tenant, the computation of the rent payable, and the nature of the property leased. First, the amount of rent must not be based in whole or in part on the income or profits of any person. However, an amount received or accrued generally will not be excluded from the term "rents from real property" solely by reason of being based on a fixed percentage or percentages of receipts or sales. Second, rents received from a "related party tenant" will not qualify as rents from real property in satisfying the gross income tests unless (1) the tenant is a taxable REIT subsidiary, (2) at least 90% of the property is leased to unrelated tenants and (3) the rent paid by the taxable REIT subsidiary is substantially comparable to the rent paid by the unrelated tenants for comparable space. A tenant is a related party tenant if the REIT, or an actual or constructive owner of 10% or more of the REIT, actually or constructively owns 10% or more of the tenant. Third, if rent attributable to personal property, leased in connection with a lease of real property, is greater than 15% of the total rent received under the lease, then the portion of rent attributable to the personal property will not qualify as rents from real property. Generally, for rents to qualify as "rents from real property" for the purposes of the gross income tests, the Company is allowed only to provide services that are both "usually or customarily rendered" in connection with the rental of real property and not otherwise considered "rendered to the occupant." The Company self-manages the properties, but does not provide services to tenants which it believes are outside this exception. Income received from any other services will be treated as "impermissible tenant service income" unless the services are provided through an independent contractor that bears the expenses of providing the services and from whom the Company derives no revenue or through a taxable REIT subsidiary, subject to specified limitations. The amount of impermissible tenant service income is deemed to be the greater of the amount actually received by the REIT or 150% of the Company's direct cost of providing the service. If the impermissible tenant service income exceeds 1% of the Company's total income from 7 a property, then all of the income from that property will fail to qualify as "rents from real property." If the total amount of impermissible tenant service income from a property does not exceed 1% of the Company's total income from that property, the income will not cause the rent paid by tenants of that property to fail to qualify as "rents from real property," but the impermissible tenant service income itself will not qualify as "rents from real property." The Company is and expects to continue performing third-party management services. Such income does not qualify for the 95% or 75% gross income test and the Company will continue to monitor the volume of such income to avoid violating the 95% and 75% gross income tests. The Company may, if necessary, provide such services through a taxable REIT subsidiary to avoid failing to satisfy either the 95% or 75% gross income test. The Company may receive certain other types of income with respect to the properties it owns that will not qualify for the 75% or 95% gross income test. In addition, dividends on the Company's stock in any non-controlled subsidiaries or taxable REIT subsidiaries will not qualify under the 75% gross income test. The Company believes, however, that the aggregate amount of such non-qualifying income in any taxable year will not cause the Company to exceed the limits on non-qualifying income under the 75% and 95% gross income tests. If rent attributable to personal property leased in connection with a lease of real property is greater than 15% of the total rent received under the lease, then the portion of rent attributable to such personal property will not qualify as "rents from real property." Generally, this 15% test is applied separately to each lease. Effective January 1, 2001, the portion of rental income treated as attributable to personal property is determined according to the ratio of the fair market value of the personal property to the total fair market value of the property which is rented. The determination of what fixtures and other property constitute personal property for federal tax purposes is difficult and imprecise. Based upon allocations of value as found in the purchase agreements and/or upon review by employees of the Company, the Company believes that it currently does not have and does not believe that is likely in the future to have 15% in value of any significant portion of its real properties classified as personalty. If, however, rent payments do not qualify, for reasons discussed above, as "rents from real property," it will be more difficult for the Company to meet the 95% or 75% gross income tests and continue to qualify as a REIT. The Company may temporarily invest its working capital in short-term investments, including shares in other REITs or interests in REMICs. Although the Company will use its best efforts to ensure that its income generated by these investments will be of a type which satisfies the 75% and 95% gross income tests, there can be no assurance in this regard. The Company has analyzed its gross income through December 31, 2000 and has determined that it has met and expects in the future to meet the 75% and 95% gross income tests. 8 If the Company fails to meet the requirements of either or both the 75% or 95% gross income tests for any taxable year, it may nevertheless qualify as a REIT for such year if it is entitled to relief under certain provisions of the Code. These relief provisions will be generally available if the Company's failure to meet such tests was due to reasonable cause and not to willful neglect, the Company attaches a schedule of the sources of its income to its return, and any incorrect information on the schedule was not due to fraud with intent to evade tax. It is not possible, however, to know whether the Company would be entitled to the benefit of these relief provisions as the application of the relief provisions is dependent on future facts and circumstances. If these relief provisions apply, a special tax generally equal to 100% is imposed upon the net income attributable to the greater of the amount by which the Company failed the 75% or 95% gross income tests. ASSET TESTS At the close of each quarter of the Company's taxable year, the Company must satisfy certain tests relating to the nature of its assets. First, at least 75% of the value of the Company's total assets must consist of "real estate assets" (including interests in real property, interests in mortgages on real property, shares in other qualified REITs, and certain temporary investments), cash, cash items and government securities. Second, not more than 25% of the Company's total assets may be represented, in whole or in part, by securities other than those includable in the 75% asset class. Third, except for investments in REITs, qualified REIT subsidiaries and taxable REIT subsidiaries, the value of any one issuer's securities owned by the Company may not exceed 5% of the value of the Company's total assets. Fourth, except for investments in REITs, qualified REIT subsidiaries and taxable REIT subsidiaries, the Company may not own more than 10% of any one issuer's outstanding voting securities, nor more than 10% of the total value of the outstanding securities of any one issuer. Fifth, not more than 20% of the value of the Company's total assets may be represented by the securities of one or more taxable REIT subsidiaries. Securities for purposes of the asset tests may include debt securities. However, debt of an issuer will not count as a security for purposes of the 10% value test if the debt securities meet the straight debt safe harbor and (1) the issuer is an individual, (2) the only securities of the issuer that the REIT holds are straight debt or (3) if the issuer is a partnership, the REIT holds at least a 20% profits interest in the partnership. If the Company meets the above asset tests at the close of any quarter, it will not lose its status as a REIT because of the change in value of its assets during a subsequent quarter unless the discrepancy exists immediately after the acquisition of any security or other property which is wholly or partly the result of such acquisition. Where a failure to satisfy the above requirements results from an acquisition of securities or other property during a quarter, the failure can be cured 9 by disposition of sufficient nonqualifying assets within 30 days after the close of such quarter. While the Company intends to meet the requirements of the asset tests described above, no assurance can be given that the Company will be able to do so. If the Company were to fail to cure noncompliance with the asset tests within the required time period, the Company would cease to qualify as a REIT. DISTRIBUTION REQUIREMENTS In order to qualify as a REIT, the Company is required to distribute dividends (other than capital gain dividends) to its shareholders in an amount at least equal to (A) the sum of (i) 90% of the Company's "REIT taxable income," computed without regard to the dividends paid deduction and the Company's net capital gain ("net investment income") and (ii) 90% of the net income, if any, (after tax) from foreclosure property, minus (B) the sum of certain non-cash income (from certain imputed rental income and income from transactions inadvertently failing to qualify as like-kind exchanges). Such distributions generally must be paid in the taxable year to which they relate. Dividends may be paid in the following year in two circumstances. First, dividends may be paid in the following year if the dividends are declared before the Company timely files its tax return for the year and if made before the first regular dividend payment made after such declaration. Second, if the Company declares a dividend in October, November, or December of any year with a record date in one of these months and pays the dividend on or before January 31 of the following year, the Company will be treated as having paid the dividend on December 31 of the year in which the dividend was declared. Unlike net investment income, the Company's net capital gain need not be distributed in order for the Company to maintain its status under the Code as a REIT; however, the Company will be taxed on any net capital gain which it fails to distribute in a timely manner. A REIT may elect to retain and pay income tax on net long-term capital gains that it receives during a taxable year. If the Company makes this election, shareholders are required to include in their income as long-term capital gain their proportionate share of the undistributed long-term capital gains so designated by the Company. A shareholder will be treated as having paid his or her share of the tax paid by the Company in respect of long-term capital gains so designated by the Company, for which the shareholder will be entitled to a credit or refund. In addition, the shareholder's basis in his or her Company shares will be increased by the amount of the Company's designated undistributed long-term capital gains that are included in the shareholder's long-term capital gains, reduced by the shareholder's proportionate share of tax paid by the Company on those gains that the shareholder is treated as having paid. The earnings and profits of the Company will be reduced, and the earnings and profits of any corporate shareholder of the Company will be increased, to take into account amounts designated by the Company pursuant to this rule. The Company must pay its tax on its 10 designated long-term capital gains within 30 days of the close of any taxable year in which it designates long-term capital gains pursuant to this rule, and it must mail a written notice of its designation to its shareholders within 60 days of the close of the taxable year. Should the Company distribute a capital gain dividend while preferred shares are outstanding, it will be required to designate a portion of dividends entitled to be received by holders of the preferred shares as capital gain dividends, thereby reducing the portion of total distributions paid to holders of the Company's common shares which would otherwise be characterized as capital gains dividends. To the extent the Company does not distribute all of its net capital gain or distribute at least 90%, but less than 100%, of its "REIT taxable income," as adjusted, the Company will be subject to tax thereon at the capital gains or ordinary corporate tax rates, as the case may be. Furthermore, if the Company should fail to distribute during each calendar year at least the sum of (i) 85% of its ordinary income for such year, (ii) 95% of its capital gain income for such year (other than certain long-term capital gains income which the Company elects to retain and pay tax on), and (iii) undistributable tax income from prior periods, the Company would be subject to a 4% federal excise tax on the excess of such required distribution over the amounts actually distributed. The Company intends to make distributions to shareholders so that it will not incur this tax but, as noted below, various situations could make it impractical to meet the prescribed distribution schedule. It is possible that the Company, from time to time, may not have sufficient cash or other liquid assets to meet the 90% distribution requirements due to timing differences between actual receipt of income and actual payment of deductible expenses or dividends on the one hand and the inclusion of such income and deduction of such expenses or dividends in arriving at "real estate investment trust taxable income" of the Company on the other hand. The problem of inadequate cash to make required distributions could also occur as a result of the repayment in cash of principal amounts due on the Company's outstanding debt, particularly in the case of "balloon" repayments or as a result of capital losses on short-term investments of working capital. Therefore, the Company might find it necessary to arrange for short-term, or possibly long-term borrowing, or new equity financing, or to pay distributions in the form of taxable distributions of property. If the Company were unable to arrange such borrowing or financing as might be necessary to provide funds for required distributions, its REIT status could be jeopardized. Under certain circumstances, the Company may be able to rectify a failure to meet the distribution requirement for a year by paying "deficiency dividends" to shareholders in a later year, which may be included in the Company's deduction for dividends paid for the earlier year. The Company may be able to avoid being taxed on amounts distributed as deficiency dividends; however, the Company may in certain circumstances remain liable for the 4% federal excise tax described above. 11 COMPANY'S OWNERSHIP OF PARTNERSHIP INTERESTS In the case of a REIT that is a partner in a partnership, the REIT is deemed to own its proportionate share of the partnership's assets and to earn its proportionate share of the partnership's income. In addition, the assets and gross income of the partnership retain the same character in the hands of the REIT for purposes of the gross income and asset tests applicable to REITs as described above. Thus, the Company's proportionate share of the assets, liabilities and items of income of the partnerships and limited liability companies in which it has ownership interests will be treated as assets, liabilities and items of income of the Company for purposes of applying the REIT requirements described herein. FEDERAL INCOME TAX TREATMENT OF LEASES The availability to the Company of, among other things, depreciation deductions with respect to the facilities owned and leased by the Company depends upon the treatment of the Company as the owner of the facilities and the classification of the leases of the facilities as true leases, rather than as sales or financing arrangements, for federal income tax purposes. The Company has not requested nor received an opinion that it will be treated as the owner of the portion of the facilities constituting real property and the leases will be treated as true leases of such real property for federal income tax purposes. Based on the conclusions of the Company and its senior management as to the values of personalty, the Company has met and plans to meet in the future its compliance with the 90% distribution requirement by making distributions on the assumption that it is not entitled to depreciation deductions for that portion of the leased facilities which it believes constitutes personal property, but to report the amount of income taxable to its shareholders by taking into account such depreciation. The value of real and personal property and whether certain fixtures are real or personal property are factual evaluations that cannot be determined with absolute certainty under current IRS regulations and therefore are somewhat uncertain. INCOME FROM PROHIBITED TRANSACTIONS A REIT is subject to a 100% tax on the net income derived from "prohibited transactions." A prohibited transaction is the sale or other disposition of property "held primarily for sale to customers in the ordinary course of business" which is not foreclosure property. The Company intends to hold its properties for investment with a view to long-term appreciation, to engage in the business of acquiring, developing, owning and operating its properties and to make occasional sales or exchanges of its properties as are consistent with the Company's investment objectives. Whether property is held primarily for sale to customers in the ordinary course of business is a question of fact that depends on all the facts and circumstances with respect to the particular transaction. 12 A safe harbor exception is provided for which certain sales of "real estate assets" will be deemed not to constitute a prohibited transaction. Generally, the following requirements must be met for the sale to fall within this safe harbor: o the REIT must have held the property for at least four years; o the total expenditures made by the REIT during the four-year period preceding the date of sale which are includable in the basis of the property must not exceed 30% of the net selling price of the property; o during the taxable year, (i) the REIT does not make more than seven sales of property (other than sales of foreclosure property or property that was involuntarily converted), or (ii) the total adjusted bases of property (other than sales of foreclosure property or property that was involuntarily converted) sold must not exceed 10% of the total bases of all of the assets of the REIT as of the beginning of the taxable year; o if the REIT makes more than seven sales of property (other than sales of foreclosure property or property that was involuntarily converted) during the taxable year, substantially all of the marketing and development expenditures with respect to the property must be made through an "independent contractor" from whom the REIT itself does not derive or receive any income; and o if the property consists of land or improvements, not acquired through foreclosure (or deed in lieu of foreclosure), or lease termination, the REIT must have held such property for at least four years for production of rental income. The Company may from time to time sell or exchange some of its properties for various reasons. If the above safe harbor is not met, the Company will consider all of the facts and circumstances of the particular transaction and the possible applicability of the 100% tax. The simultaneous exercise of options to acquire leased property that may be granted to certain lessees or other events could result in sales of properties by the Company that exceed the safe harbor. However, the Company believes that in such event, based on all of the facts and circumstances, it will not have held such properties primarily for sale to customers in the ordinary course of business. OTHER ISSUES With respect to property acquired from and leased back to the same or an affiliated party, the IRS could assert that the Company realized prepaid rental income in the year of purchase to the extent that the value of the leased property exceeds the purchase price paid by the Company for that property. In litigated cases 13 involving sale-leasebacks which have considered this issue, courts have concluded that buyers have realized prepaid rent where both parties acknowledged that the purported purchase price for the property was substantially less than fair market value and the purported rents were substantially less than the fair market rentals. Because of the lack of clear precedent and the inherently factual nature of the inquiry, complete assurance cannot be given that the IRS could not successfully assert the existence of prepaid rental income in such circumstances. The value of property and the fair market rent for properties involved in sale-leasebacks are inherently factual matters and always subject to challenge. Additionally, it should be noted that Section 467 of the Code (concerning leases with increasing rents) may apply to those leases of the Company which provide for rents that increase from one period to the next. Section 467 provides that in the case of a so-called "disqualified leaseback agreement," rental income must be accrued at a constant rate. If such constant rent accrual is required, the Company would recognize rental income in excess of cash rents and as a result, may fail to meet the 90% dividend distribution requirement. "Disqualified leaseback agreements" include leaseback transactions where a principal purpose of providing increasing rent under the agreement is the avoidance of federal income tax. The IRS has issued final regulations under Section 467 relating to the treatment of rent and interest provided for in certain leases. The regulations apply to rental agreements that provide for increasing or decreasing rent. A rental agreement has increasing or decreasing rent if it requires the payment of contingent rent, other than rent that is contingent due to (1) a provision computing rent based on a percentage of the lessee's gross or net receipts; (2) adjustments based on a reasonable price index; or (3) a provision requiring the lessee to pay third-party costs. Therefore, additional rent provisions of leases containing such clauses should not be "disqualified leaseback agreements." The regulations also provide that if the rent allocated to each calendar year does not vary from the average rent allocated to all calendar years by more than 10%, the lease will be deemed not motivated by tax avoidance and thus should not be a "disqualified leaseback agreement." It should be noted, however, that leases involved in sale-leaseback transactions are subject to special scrutiny under Section 467. The Company, based on its evaluation of the value of the property and the terms of the leases, does not believe it has or will have in the future rent subject to the provisions of Section 467. DEPRECIATION OF PROPERTIES For tax purposes, the Company's real property acquired subsequent to its initial public offering is being depreciated over 39 years utilizing the straight-line method of depreciation and personal property is being depreciated over 5 to 15 years in accordance with applicable laws and regulations relating to different classifications of personal property. FAILURE TO QUALIFY AS A REIT 14 If the Company fails to qualify for federal income tax purposes as a REIT in any taxable year, and the relief provisions do not apply, the Company will be subject to tax on its taxable income at regular corporate rates (plus any applicable alternative minimum tax). Distributions to shareholders in any year in which the Company fails to qualify will not be deductible by the Company nor will they be required to be made. In such event, to the extent of current or accumulated earnings and profits, all distributions to shareholders will be taxable as ordinary income and, subject to certain limitations in the Code, corporate distributees may be eligible for the dividends received deduction. Unless entitled to relief under specific statutory provisions, the Company will also be disqualified from taxation as a REIT for the following four taxable years. It is not possible to state whether in all circumstances the Company would be entitled to statutory relief from such disqualification. Failure to qualify for even one year could result in the Company's incurring substantial indebtedness (to the extent borrowings are feasible) or liquidating substantial investments in order to pay the resulting taxes. TAXATION OF TAXABLE U.S. SHAREHOLDERS As used in this discussion, the term "U.S. shareholder" means a beneficial owner of common shares of the Company that is, for U.S. federal income tax purposes: o an individual who is a citizen or resident of the United States; o a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision of the United States, other than a partnership treated as foreign under U.S. Treasury regulations; o an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or o a trust, in general, if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust. As long as the Company qualifies as a REIT, distributions made to the Company's taxable U.S. shareholders out of current or accumulated earnings and profits (and not designated as capital gain dividends or retained net long-term capital gains) will be taken into account by them as ordinary income and will not be eligible for the dividends received deduction for corporations. Distributions in excess of current and accumulated earnings and profits will not be taxable to a U.S. shareholder to the extent that they do not exceed the adjusted basis of the U.S. shareholder's shares in respect of which the distributions 15 were made, but rather will reduce the adjusted basis of such shares. To the extent that such distributions exceed the adjusted basis of a U.S. shareholder's shares in respect of which the distributions were made, they will be included in income as capital gain provided that the shares are a capital asset in the hands of the U.S. shareholder. Distributions that are designated as capital gain dividends will be taxed as long-term capital gains (to the extent that they do not exceed the Company's actual net capital gain for the taxable year) without regard to the period for which the U.S. shareholder has held his or her stock. If the Company elects to retain net long-term capital gains rather than distribute them, a U.S. shareholder will be deemed to receive a capital gain distribution equal to the amount of such retained net long-term capital gains. In that case, a U.S. shareholder (i) will be allowed a credit against its federal income tax liability for its proportionate share of tax paid by the Company on retained capital gains, and (ii) will receive an increase in the basis of its shares equal to the excess of such deemed capital gain distribution over the amount of such tax credit. Corporate U.S. shareholders may be required to treat up to 20% of certain capital gain dividends as ordinary income. Upon any taxable sale or other disposition of shares of the Company, a U.S. shareholder will recognize gain or loss for federal income tax purposes on the disposition in an amount equal to the difference between (a) the amount of cash and the fair market value of any property received on such disposition and (b) the shareholder's adjusted basis in the shares for tax purposes. Gain or loss will be capital gain or loss if the shares have been held by the U.S. shareholder as a capital asset. The applicable tax rate will depend on the U.S. shareholder's holding period in the asset (generally, if an asset has been held for more than one year, it will produce long-term capital gain) and the shareholder's tax bracket. The IRS has the authority to prescribe, but has not yet prescribed, regulations that would apply a capital gain tax rate of 25%, which is generally higher than the long-term capital gain tax rates for non-corporate shareholders, to a portion of capital gain realized by a non-corporate shareholder on the sale of REIT shares that would correspond to the REIT's "unrecaptured Section 1250 gain." U.S. shareholders are advised to consult with their own tax advisors with respect to their capital gain tax liability. Capital losses recognized by a U.S. shareholder upon the disposition of shares of the Company held for more than one year at the time of disposition will be a long-term capital loss. In addition, any loss upon a sale or exchange of shares of the Company by a U.S. shareholder who has held such shares for six months or less (after applying certain holding period rules) will be treated as a long-term capital loss to the extent of distributions from the Company required to be treated by such U.S. shareholder as long-term capital gain. All or a portion of any loss realized upon a taxable disposition of shares of the Company may be disallowed if other shares of the 16 Company are purchased (under a dividend reinvestment plan or otherwise) within 30 days before or after the disposition. The Company may be required to withhold and remit to the IRS 31% of the dividends paid to any U.S. shareholder who (a) fails to furnish the Company with a properly certified taxpayer identification number, (b) has under reported dividend or interest income to the IRS or (c) fails to certify to the Company that he or she is not subject to backup withholding. Any amount paid as backup withholding will be creditable against the U.S. shareholder's income tax liability. The Company will report to its U.S. shareholders and the IRS the amount of dividends paid during each calendar year and the amount of any tax withheld. TAXATION OF TAX-EXEMPT SHAREHOLDERS Tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts ("Exempt Organizations"), generally are exempt from federal income taxation. However, they are subject to taxation on their unrelated business taxable income ("UBTI"). While many investments in real estate generate UBTI, the IRS has ruled that dividend distributions from a REIT to an exempt employee pension trust do not constitute UBTI, provided that the shares of the REIT are not otherwise used in an unrelated trade or business of the exempt employee pension trust. Based on that ruling, amounts distributed by the Company to Exempt Organizations should generally not constitute UBTI. However, if an Exempt Organization finances its acquisition of its shares with debt, a portion of its income from the Company will constitute UBTI pursuant to the "debt-financed property" rules. In addition, in certain circumstances, a pension trust that owns more than 10% of the Company's stock is required to treat a percentage of the dividends from the Company as UBTI (the "UBTI Percentage"). The UBTI Percentage is the gross income derived by the Company from an unrelated trade or business (determined as if the Company were a pension trust) divided by the gross income of the Company for the year in which the dividends are paid. The UBTI rule applies to a pension trust holding more than 10% of the Company's stock only if (1) the UBTI Percentage is at least 5%, (2) the Company qualifies as a REIT only because the pension trust is not treated as a single issuer for purposes of the five or fewer rule, and (3) either (A) one pension trust owns more than 25% of the value of the Company's stock or (B) a group of pension trusts each individually holding more than 10% of the value of the Company's stock collectively owns more that 50% of the value of the Company's stock. The Company currently does not expect that this rule will apply. TAXATION OF NON-U.S. SHAREHOLDERS The rules governing U.S. federal income taxation of shareholders who are not U.S. shareholders ("non-U.S. shareholders") are complex and no attempt will be made herein to provide more than a summary of such rules. Non-U.S. shareholders 17 should consult with their own tax advisers to determine the impact of federal, state and local income tax laws with regard to an investment in shares of the Company, including any reporting requirements. Distributions that are not attributable to gain from sales or exchanges by the Company of "United States Real Property Interests" and not designated by the Company as capital gain dividends will be treated as dividends of ordinary income to the extent that they are made out of current or accumulated earnings and profits of the Company. Generally, such distributions will be subject to a U.S. withholding tax equal to 30% of the gross amount of the distribution unless an applicable tax treaty reduces or eliminates that tax. Under certain treaties, however, lower withholding rates generally applicable to dividends do not apply to dividends from REITs. Dividends that are effectively connected with a U.S. trade or business will be subject to tax on a net income basis at the regular graduated U.S. federal income tax rates in the same manner as if the non-U.S. shareholder were a resident of the United States, and are generally not subject to withholding. Applicable certification and disclosure requirements must be satisfied to be exempt from withholding under the effectively connected income exemption. Any dividends received by a corporate non-U.S. shareholder that is engaged in a U.S. trade or business also may be subject to an additional branch profits tax at a 30% rate, or lower applicable treaty rate. The Company expects to withhold U.S. income tax at the rate of 30% on any dividend distributions, not designated as (or deemed to be) capital gain dividends, made to a non-U.S. shareholder unless: (1) a lower treaty rate applies and the non-U.S. shareholder files an IRS Form W-8BEN evidencing eligibility for that reduced rate with the Company; or (2) the non-U.S. shareholder files an IRS Form W-8ECI with the Company claiming that the distribution is effectively connected income. Any distributions in excess of current and accumulated earnings and profits of the Company will not be taxable to a non-U.S. shareholder to the extent that they do not exceed the adjusted basis of the shareholder's shares, but rather will reduce the adjusted basis of such shares. To the extent that such distributions exceed the adjusted basis of a non-U.S. shareholder's shares in the Company, they will give rise to gain from the sale or exchange of the shareholder's shares. The tax treatment of this gain is described below. The Company may be required to withhold at least 10% of any distribution in excess of its current and accumulated earnings and profits, even if a lower treaty rate applies or the non-U.S. shareholder is not liable for tax on the receipt of that distribution. However, a non-U.S. shareholder may seek a refund of these amounts from the IRS if the non-U.S. shareholder's U.S. tax liability with respect to the distribution is less than the amount withheld. 18 Distributions to a non-U.S. shareholder that are designated by the Company at the time of the distribution as capital gain dividends, other than those arising from the disposition of a United States real property interest, generally should not be subject to U.S. federal income taxation unless: (1) the investment in the shares is effectively connected with the non-U.S. shareholder's U.S. trade or business, in which case the non-U.S. shareholder will be subject to the same treatment as U.S. shareholders with respect to any gain, except that a shareholder that is a foreign corporation also may be subject to the 30% branch profits tax, as discussed above, or (2) the non-U.S. shareholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and has a "tax home" in the United States, in which case the nonresident alien individual will be subject to a 30% tax on the individual's capital gains. For any year in which the Company qualifies as a REIT, distributions that are attributable to gain from sales or exchanges by the Company of "United States Real Property Interests" will be taxed to a non-U.S. shareholder under the provisions of the Foreign Investment in Real Property Tax Act of 1980, as amended ("FIRPTA"). Under FIRPTA, these distributions are taxed to a non-U.S. shareholder as if such gain were effectively connected with a U.S. trade or business. Non-U.S. shareholders would be subject to U.S. federal income tax at the rates applicable to U.S. individuals or corporations, without regard to whether such distribution is designated as a capital gain dividend. Also, distributions subject to FIRPTA may be subject to a 30% branch profits tax in the hands of a foreign corporate shareholder not entitled to treaty exemption. The Company is required to withhold 35% of any distribution that could be designated by the Company as a capital gain dividend to the extent that such capital gain dividends are attributable to the sale or exchange by the Company of "United States Real Property Interests." This amount is creditable against the non-U.S. shareholder's federal tax liability. Although the law is not entirely clear on the matter, it appears that amounts designated by the Company as undistributed capital gains would be treated with respect to non-U.S. shareholders in the manner outlined in the preceding paragraph for actual distributions by the Company of capital gain dividends. Under that approach, the non-U.S. shareholders would be able to offset as a credit against their U.S. federal income tax liability resulting therefrom their proportionate share of the tax paid by the Company on such undistributed capital gains (and to receive from the IRS a refund to the extent their proportionate share of such tax paid by the Company were to exceed their actual U.S. federal income tax liability). Gain recognized by a non-U.S. shareholder upon a sale of Company shares generally will not be taxed under FIRPTA if the Company is a "domestically controlled REIT," defined generally as a REIT in which, at all times during a 19 specified testing period, less than 50% in value of the shares were held directly or indirectly by non-U.S. persons. The Company believes that it is, and it expects to continue to be a domestically controlled REIT and, therefore, the sale of Company shares should not be subject to taxation under FIRPTA. Because the Company's stock is publicly traded, however, no assurance can be given that the Company will continue to be a domestically controlled REIT. If the Company does not constitute a domestically controlled REIT, a non- U.S. shareholder's sale of Company shares generally will still not be subject to tax under FIRPTA as a sale of U.S. Real Property Interests provided that (i) the stock is "regularly traded" (as defined by applicable Treasury Regulations) on an established securities market and (ii) the selling non-U.S. shareholder held 5% or less of the Company's outstanding stock at all times during a specified testing period. If gain on the sale of shares of the Company were subject to taxation under FIRPTA, the non-U.S. shareholder would be subject to the same treatment as a U.S. shareholder with respect to such gain (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals) and the purchaser of the stock could be required to withhold 10% of the purchase price and remit such amount to the IRS. Gain from the sale of Company shares that would not otherwise be subject to FIRPTA will nonetheless be taxable in the United States to a non-U.S. shareholder in two cases: (i) if the non-U.S. shareholder's investment in the Company's stock is effectively connected with a U.S. trade or business conducted by such non-U.S. shareholder, the non-U.S. shareholder will be subject to the same treatment as a U.S. stockholder with respect to such gain, or (ii) if the non-U.S. shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a "tax home" in the United States, the nonresident alien individual will be subject to a 30% tax on the individual's capital gain. The Company must report annually to the IRS and to each non-U.S. shareholder the amount of dividends paid to that shareholder and the tax withheld from those dividends. These reporting requirements apply regardless of whether withholding was reduced or eliminated by an applicable tax treaty. Copies of the information returns reporting those dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. shareholder is a resident under the provisions of an applicable income tax treaty or agreement. Under some circumstances, Treasury Regulations require additional information reporting and backup withholding at a rate of 31% on some payments on shares of the Company. The gross amount of dividends paid to a non-U.S. shareholder that fails to certify its non-U.S. shareholder status in accordance with 20 applicable Treasury Regulations generally will be reduced by backup withholding at a rate of 31%. The payment of the proceeds of the sale or other disposition of shares of the Company by a non-U.S. shareholder to or through the U.S. office of any broker, U.S. or non-U.S., generally will be reported to the IRS and reduced by backup withholding at a rate of 31%, unless the non-U.S. shareholder certifies its status as a non-U.S. shareholder under penalties of perjury or otherwise establishes an exemption. The payment of the proceeds of the sale or other disposition of shares of the Company by a non-U.S. shareholder to or through a non-U.S. office of a non-U.S. broker will not be reduced by backup withholding or reported to the IRS, unless the non-U.S. broker has certain enumerated connections with the United States. In general, the payment of proceeds from the sale or other disposition of shares of the Company by or through a non-U.S. office of a broker that is a U.S. person or has certain enumerated connections with the United States will be reported to the IRS and may be reduced by backup withholding at a rate of 31%, unless the non-U.S. shareholder certifies its status as a non-U.S. shareholder under penalties of perjury or otherwise establishes an exemption or the broker has documentary evidence in its files that the holder is a non-U.S. shareholder. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. shareholder can be refunded or credited against the non-U.S. shareholder's U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS in a timely manner. These backup withholding and information reporting rules are complex and non-U.S. shareholders are urged to consult their own tax advisors regarding the application of these rules to them. 21 -----END PRIVACY-ENHANCED MESSAGE-----