<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 28, 1998
DEVELOPERS DIVERSIFIED REALTY CORPORATION
-------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 1-11690 34-1723097
- --------------------------------------------------------------------------------
(State or other Jurisdiction (Commission (IRS Employer
or incorporation) File Number) Identification Number)
34555 Chagrin Boulevard, Moreland Hills, Ohio 44022
-------------------------------------------------------------
Registrant's telephone number, including area code (440) 247-4700
---------------
N/A
-------------------------------------------------------------
(Former name of former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS
During the period April 23, 1998 (the date of the most recent current report on
Form 8-K disclosing the Company's acquisitions as of that date) through June
19, 1998, as a result of individual transactions with Continental Real Estate
Companies of Columbus, Ohio, the Company completed the acquisition, or
investment therein, of three shopping centers, two of which were acquired
through the purchase of joint venture interests. Combined, these shopping
centers will have approximately 1.0 million square feet of total gross leasable
area. The Company's proportionate share of the investment cost will be
approximately $93.4 million upon completion of approximately 345,000 square
feet of gross leasable area which is currently under construction. The portion
under construction has an estimated cost of approximately $42.4 million and the
Company is scheduled to close on this investment periodically throughout 1998.
In addition, the Company also acquired the remaining interest in a 584,000
square foot shopping center and an adjacent pad site in Princeton, New Jersey.
The total cost of this property aggregated approximately $37.3 million of which
$29.5 million was funded in April 1998. These four properties are referred to
herein as the "Acquired Properties".
The Company has entered into an agreement with Hermes Associates, LTD. ("Hermes"
or "The Family Center Properties"), to acquire nine shopping centers, an office
building and nine additional expansion, development or redevelopment projects
located in the Western United States as well as the Hermes operating/management
company. Combined, these shopping centers will have approximately 2.8 million
square feet of total gross leasable area and an estimated purchase price of
approximately $310 million. The Hermes operating company has no third party
revenue producing contracts but rather supports the management of The Family
Center Properties. The Company has also entered into an agreement with the
Sansone Company ("Sansone" or "The Sansone Properties") to (i) acquire fifteen
shopping centers, aggregating approximately 1.6 million square feet of gross
leasable area, (ii) form a joint venture, in which the Company will own a 50%
interest, to pursue projects in the Sansone development pipeline and to create
new development opportunities throughout the central Midwest, and (iii) acquire
a 50% interest in the Sansone's operating/management company. The Company's
estimated net investment in this transaction is approximately $172 million. In
addition, the Company has entered into an agreement with an affiliate of OPUS
Corporation to acquire the Phase II development of a 156,000 square foot
shopping center in Tanasbourne, Oregon at an estimated purchase price of
approximately $22.1 million. These properties are referred to herein as the
"Probable Acquisition Properties." Although the Company believes it is probable
that these acquisitions will occur, there can be no assurance that the purchase
transactions will be consummated. Information regarding the Acquired Properties
and the Probable Acquisition Properties is attached as SCHEDULE A.
The acquisition of, or investment in, the Acquired Properties were, or with
respect to the Probable Acquisition Properties will be, pursuant to agreements
for the sale and purchase of each property or interests therein between each
selling entity and the Company. The factors considered by the Company in
determining the price to be paid for the properties and related operating
companies included their historical and/or expected cash flow, nature of the
tenants and terms of leases in place, occupancy rates, opportunities for
alternative and/or new tenancies, current operating costs and taxes on the
properties and anticipated changes therein under Company ownership, the outlots
and expansion areas available, the physical condition and locations of the
properties, the anticipated effect on the Company's financial results (including
particularly Funds From Operations) and the ability to sustain and potentially
increase its distributions to Company shareholders, and other factors. The
Company took into consideration capitalization rates at which it believes other
shopping centers have recently sold, but determined the price it was willing to
pay primarily on the factors discussed above related to the properties
themselves and their fit with the Company's operations. Separate independent
appraisals were not obtained in
<PAGE> 3
connection with the acquisition of the properties by the Company. The Company,
after investigation of the properties, is not aware of any material factors,
other than those enumerated above, that would cause the financial information
reported, where available, to not be necessarily indicative of future operating
results.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
FINANCIAL STATEMENTS
The statements of revenue and certain expenses included in this report encompass
the following:
- - An audited statement of revenue and certain expenses for the year ended
December 31, 1997, and the three month periods ended March 31, 1998 and
1997 (unaudited) for the following shopping center portfolios:
- The Family Center Properties (Probable Acquisition Properties)
- The Sansone Properties (Probable Acquisition Properties)
- - Statements of revenue and certain expenses for the three month period
ended March 31, 1998 (unaudited) for the following operating shopping
centers:
- Dublin Village Square (Acquired Property)
- Washington Park Plaza (Acquired Property)
As noted below, financial statements (audited) for the year ended
December 31, 1997 for these properties were presented in the Company's
Form 8-K/A dated February 25, 1998. A statement of revenue and certain
expenses for the three month period ended March 31 1998 (unaudited) is
not presented for Easton Market (Acquired Property) because the
property is under development and, accordingly, the related operating
information would not be meaningful.
- - A statement of revenue and certain expenses for the three month period
ended March 31 1998 (unaudited) is not presented for Tanasbourne,
Oregon (Probable Acquisition Property) because the property is in the
final development stage, and accordingly, the related historical
operating information would not be meaningful.
Audited statements of revenue and certain expenses for the year ended December
31, 1997 for the properties acquired from Continental Real Estate Companies of
Columbus, Ohio were filed (prior to acquisition) in the Company's current report
on Form 8-K/A dated February 25, 1998. A statement of revenue and certain
expenses was not presented for Easton Market in the February 25, 1998 Form 8-K/A
because the property was under development and, accordingly, the related
operating information would not be meaningful.
Financial information for the shopping center acquired in Princeton, New Jersey
is not presented as it is not considered material.
<PAGE> 4
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Unaudited pro forma financial information for the Company is presented as
follows:
- - Pro forma condensed consolidated balance sheet as of March 31, 1998.
- - Pro forma condensed consolidated statement of operations for the three
month period ended March 31, 1998 and the year ended December 31, 1997.
- - Estimated twelve-month pro forma statement of taxable net operating
income and operating funds available.
EXHIBITS
- --------
3.1 Amendments to Amended and Restated Articles of Incorporation
of the Company
10.1 1998 Developers Diversified Realty Corporation Equity-Based
Award Plan
(23) Consent of Independent Accountants
<PAGE> 5
SCHEDULE A
DEVELOPERS DIVERSIFIED REALTY CORPORATION
<TABLE>
<CAPTION>
Company
Date of Owned Percent Year
Shopping Center Acquisition Square Feet Occupied Completed Principal Tenants
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Washington Plaza
Dayton, Ohio (1) 04/28/98 169,816 100.0% 1990 PharMor and Books a Million
Dublin Village Center AMC Theater, PharMor, Michael's and
Columbus, Ohio (2) 04/28/98 327,264 92.2% 1987 Designer Shoe Warehouse
Easton Market Galyan's, Kittler Furniture, Bed Bath &
Columbus, Ohio 04/28/98 508,334 94.5% 1998 Beyond, TJ Maxx and PETsMART
Tanasbourne Town Center Probable Office Depot, Haggan
Portland, OR Acquisition 155,892 96.0% 1995 Supermarket, Barnes & Noble,
Mervyn's
Nassau Park Border's Books, Best Buy, Linens & Things,
Princeton, NJ 04/28/98 202,121 100.0% 1995 Petsmart, Walmart, Sam's
(1) Property owned through a joint venture in which the Company owns a 50%
interest.
(2) Property owned through a joint venture in which the Company owns
approximately an 80% interest.
</TABLE>
<PAGE> 6
SCHEDULE A (Continued)
<TABLE>
<CAPTION>
Developers Diversified Realty Corporation
Family Center Properties Portfolio
Company
Date of Owned Percent Year
Shopping Center Acquisition Square Feet Occupied Completed* Principal Tenants
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cineplex Odeon, Future Shop, Gart Sports, Shopko,
Family Center at Midvalley Probable Bently Square, Circuit City, Media Play, Office Max,
Taylorsville, UT Acquisition 848,043 98.87% 1982 Petsmart, Bed Bath & Beyond, Barnes&Noble, TJ Maxx
Family Center at Fort Union Probable Smith's, Mervyn's, Office Max, Deseret Book,
Midvale, UT Acquisition 657,077 90.49% 1973 Babies R Us, Walmart, Future Shop,Media Play
Family Center at Riverdale Probable Walmart, Gart Sports, Office Max, Circuit City,
Riverdale, UT Acquisition 772,227 98.76% 1991 Media Play, Target, Babies R Us
Hermes Building Probable
Salt Lake City, UT Acquisition 53,749 100.00% 1986
Family Center at Orem Probable
Orem, UT Acquisition 161,503 100.00% 1992 Kids R Us, Media Play, Office Depot
Family Center at Ogden Probable
Ogden, UT Acquisition 170,219 93.19% 1977 Harmon's Supermarket
Family Center at 33rd Street Probable
Salt Lake City, UT Acquisition 39,090 100.00% 1978
Family Place at Logan Probable
Logan, UT Acquisition 19,200 100.00% 1973
Family Center at Las Vegas Probable
Las Vegas, NV Acquisition 61,615 94.32% 1973
Family Center at Rapid City Probable
Rapid City, UT Acquisition 35,544 84.70% 1978
</TABLE>
*Represents year in which initial building was completed
Several expansions may have occurred subsequent to this date.
<PAGE> 7
SCHEDULE A (Continued)
Developers Diversified Realty Corporation
Sansone Properties Portfolio
<TABLE>
<CAPTION>
Company
Date of Owned Percent Year
Shopping Center Acquisition Square Feet Occupied Completed Principal Tenants
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Plaza at Sunset Hill Probable Homeplace, Marshall's, Home Depot, and
St. Louis, MO Acquisition 328,850 95% 1997 Petsmart
Shoppes at Sunset Hill Probable
St. Louis, MO Acquisition 97,678 94% 1998 Comp USA, Toys R Us, and Cost Plus
Promenade at Brentwood Probable Target, Sports Authority, and
St. Louis, MO Acquisition 299,205 100% 1998 Petsmart
Northland Square Probable
Cedar Rapids, IA Acquisition 187,068 100% 1994 TJ Maxx, Office Max, Barnes &Noble, and Kohl's
Olympic Oaks Village Probable
St. Louis, MO Acquisition 92,399 95% 1985 TJ Maxx
Gravois Village Probable
St. Louis, MO Acquisition 110,992 97% 1983 KMart
Morris Corners Probable
Springfield, MO Acquisition 56,033 100% 1989 Toys R Us
Keller Plaza Probable
St. Louis, MO Acquisition 52,842 100% 1988 Wehrenberg Theatres, and County Government
Southtowne Probable
St. Louis, MO Acquisition 144,808 100% 1995 Home Quarters Warehouse
Home Quarters Probable
St. Louis, MO Acquisition 100,911 100% 1992 Home Quarters
American Plaza Probable Home Depot, Sears Roebuck & Co, Sweet
St. Louis, MO Acquisition 17,500 100% 1998 Traditions, and American
Walgreen Probable
St. Louis, MO Acquisition 25,855 54% 1998 Walgreen
Walgreen Probable
Brentwood, MO Acquisition 17,504 100% 1988 Walgreen
Walgreen Plaza Probable
St. Louis, MO Acquisition 15,437 100% 1988 Walgreen
Walgreen Probable
Springfield, MO Acquisition 13,905 100% 1998 Walgreen
</TABLE>
<PAGE> 8
DEVELOPERS DIVERSIFIED REALTY CORPORATION
INDEX TO FINANCIAL STATEMENTS
MARCH 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FAMILY CENTER PROPERTIES
Report of Independent Accountants ...................................... F-2
Combined Statement of Revenue and Certain Expenses for the year ended
December 31, 1997 and (unaudited) three month periods ended
March 31, 1998 and 1997 ............................................. F-3
Notes to Combined Statement of Revenue and Certain Expenses ............ F-4
THE SANSONE PROPERTIES
Report of Independent Accountants ...................................... F-6
Combined Statement of Revenue and Certain Expenses for the year ended
December 31, 1997 and (unaudited) three month periods ended March 31,
1998 and 1997 ....................................................... F-7
Notes to Combined Statement of Revenue and Certain Expenses ............ F-8
DUBLIN VILLAGE CENTER
Statement of Revenue and Certain Expenses for the three month period
ended March 31, 1998 (unaudited) ................................. F-11
Notes to Statement of Revenue and Certain Expenses .................. F-12
WASHINGTON PARK PLAZA
Statement of Revenue and Certain Expenses for the three month period
ended March 31, 1998 (unaudited) ................................ F-14
Notes to Statement of Revenue and Certain Expenses .................... F-15
DEVELOPERS DIVERSIFIED REALTY CORPORATION
(PRO FORMA - UNAUDITED):
Condensed Consolidated Balance Sheet as of March 31, 1998 ............. F-17
Condensed Consolidated Statement of Operations for the three month
period ended March 31, 1998 and for the year ended December 31, 1997 F-21
Estimated Twelve Month Pro Forma Statement of Taxable Net Operating
Income and Operating Funds Available ............................... F-32
</TABLE>
F-1
<PAGE> 9
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Developers Diversified Realty Corporation
We have audited the accompanying combined statement of revenue
and certain expenses of The Family Center Properties, described in Note 1, for
the year ended December 31, 1997. This historical statement is the
responsibility of management. Our responsibility is to express an opinion on
this historical statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the historical statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical statement. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
historical statement. We believe that our audit provides a reasonable basis for
our opinion.
The accompanying combined historical statement is prepared on the
basis described in Note 2, for the purpose of complying with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission (for inclusion in Form
8-K of Developers Diversified Realty Corporation) and is not intended to be a
complete presentation of the combined revenues and expenses of The Family Center
Properties.
In our opinion, the combined historical statement referred to
above presents fairly, in all material respects, the combined revenue and
certain expenses of The Family Center Properties, on the basis described in Note
2, for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
PRICE WATERHOUSE LLP
Cleveland, Ohio
June 16, 1998
F-2
<PAGE> 10
DEVELOPERS DIVERSIFIED REALTY CORPORATION
THE FAMILY CENTER PROPERTIES
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Month Period Ended Year Ended
------------------------------- December 31,
March 31, 1998 March 31, 1997 1997
--------------- -------------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenue:
Minimum rents ..................... $ 4,628,337 $ 4,615,650 $18,176,955
Percentage and overage rents ...... 108,489 105,762 425,449
Recoveries from tenants ........... 737,404 748,011 3,444,742
Other income ...................... 3,353 7,016 20,525
----------- ----------- -----------
5,477,583 5,476,439 22,067,671
----------- ----------- -----------
Certain expenses:
Operating and maintenance ........ 558,251 439,299 2,843,614
Real estate taxes ................ 522,033 553,405 1,811,990
General and administrative ....... 280,141 259,137 1,117,795
----------- ----------- -----------
1,360,425 1,251,841 5,773,399
----------- ----------- -----------
Revenue in excess of certain expenses
$ 4,117,158 $ 4,224,598 $16,294,272
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this combined statement of
revenue and certain expenses.
F-3
<PAGE> 11
DEVELOPERS DIVERSIFIED REALTY CORPORATION
THE FAMILY CENTER PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
1. OPERATIONS
For purposes of the accompanying combined statement of revenue
and certain expenses, The Family Center Properties represent certain shopping
center properties and one office property ("Properties"), and their management
operations which Developers Diversified Realty Corporation (the "Company")
intends to acquire in 1998. A summary of the Properties is as follows:
<TABLE>
<CAPTION>
NAME OF PROPERTY LOCATION YEAR BUILT
--------------------------------------- ---------------- -------
<S> <C> <C>
Family Center at Midvalley, South Phase Taylorsville, UT 1982
Family Center at Midvalley, North Phase Taylorsville, UT 1992
Family Center at Fort Union, Phases I&II Midvale, UT 1973
Family Center at Fort Union, Phases III Midvale, UT 1995
Family Center at Riverdale, North Phase Riverdale, UT 1991
Family Center at Riverdale, South Phase Riverdale, UT 1995
Hermes Building Office Complex Salt Lake City, UT 1986
Family Center at Orem Orem, UT 1992
Family Center at Ogden 5-Points Ogden, UT 1977
Family Center at 33rd South Salt Lake City, UT 1978
Family Place at Logan Logan, UT 1973
Family Center at Las Vegas Las Vegas, NV 1973
Family Center at Rapid City Rapid City, UT 1978
</TABLE>
A combined statement of revenue and certain expenses has been
presented because the Properties have varying ownership interests in common, are
under common control and management and will be purchased through a single
transaction.
The operating results of three shopping centers under development
and six shopping center expansions at the above listed properties, although
forming part of the same transaction with the Company, are not reflected in the
accompanying combined statement of revenue and certain expenses as no
historical financial information exists.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
BASIS OF PRESENTATION
The accompanying combined statement of revenue and certain
expenses has been prepared on the accrual basis of accounting.
F-4
<PAGE> 12
DEVELOPERS DIVERSIFIED REALTY CORPORATION
THE FAMILY CENTER PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
- ------------------------------------------------------------------------------
The accompanying combined financial statement is not representative of the
actual operations for the periods presented, as certain revenues and expenses,
which may not be comparable to the revenues and expenses expected to be earned
or incurred by the Company in the future operations of the Properties, have
been excluded. Revenues excluded consist of interest, gain on sales of assets
and other revenues unrelated to the continuing operations of the Properties.
Expenses excluded consist of depreciation on the building and improvements, and
amortization of intangible assets, interest expense and certain professional
fees and administrative costs not directly related to the future operations of
the Properties, primarily payroll associated with the former principals of the
Properties.
INCOME RECOGNITION
Rental income is recorded on the straight line basis.
CONCENTRATION OF RISK
The Family Center Properties' tenant base includes primarily
national and regional retail chains and local retailers, consequently, the
Properties' credit risk is concentrated in the retail industry. There were no
tenants which individually represented greater than 10% of combined revenues.
Revenues derived from the Properties' four largest tenants totaled 27% of total
combined minimum rents for the year ended December 31, 1997.
GENERAL AND ADMINISTRATIVE EXPENSES
Included in general and administrative expenses are costs associated with the
property management operations.
INTERIM STATEMENTS
The interim financial data for the three months ended March 31,
1998 and 1997 is unaudited; however, in the opinion of the Company, the interim
data includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim periods. The
results for the periods presented are not necessarily indicative of the results
for the full year.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
F-5
<PAGE> 13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Developers Diversified Realty Corporation
We have audited the accompanying combined statement of revenue
and certain expenses for The Sansone Properties, described in Note 1, for the
year ended December 31, 1997. This historical statement is the responsibility of
management. Our responsibility is to express an opinion on this historical
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the historical statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical statement. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
historical statement. We believe that our audit provides a reasonable basis for
our opinion.
The accompanying combined historical statement was prepared on
the basis described in Note 2, for the purpose of complying with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission (for inclusion in Form
8-K of Developers Diversified Realty Corporation) and is not intended to be a
complete presentation of the combined revenues and expenses of The Sansone
Properties.
In our opinion, the combined historical statement referred to
above presents fairly, in all material respects, the combined revenue and
certain expenses of The Sansone Properties, on the basis described in Note 2,
for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
PRICE WATERHOUSE LLP
Cleveland, Ohio
June 16, 1998
F-6
<PAGE> 14
DEVELOPERS DIVERSIFIED REALTY CORPORATION
THE SANSONE PROPERTIES
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Month Period Ended Year Ended
---------------------------------- December 31,
March 31, 1998 March 31, 1997 1997
-------------- --------------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenue:
Minimum rents $ 2,563,564 $ 2,276,337 $ 9,245,612
Percentage and overage rents 20,692 -- 19,330
Recoveries from tenants 537,424 533,638 2,191,093
Other income 70,940 70,817 180,484
----------- ----------- -----------
3,192,620 2,880,792 11,636,519
----------- ----------- -----------
Certain expenses:
Operating and maintenance 369,351 424,188 1,295,430
Real estate taxes 409,017 374,388 1,521,879
----------- ----------- -----------
778,368 798,576 2,817,309
----------- ----------- -----------
Revenue in excess of certain expenses $ 2,414,252 $ 2,082,216 $ 8,819,210
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this combined statement of
revenue and certain expenses.
F-7
<PAGE> 15
DEVELOPERS DIVERSIFIED REALTY CORPORATION
THE SANSONE PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
- -------------------------------------------------------------------------------
1. OPERATION OF PROPERTIES
For purposes of the accompanying combined statement of revenue
and certain expenses, The Sansone Properties (the "Properties") represent
certain shopping center properties which Developers Diversified Realty
Corporation (the "Company") intends to acquire in 1998. A summary of the
Properties is as follows:
<TABLE>
<CAPTION>
CENTER NAME LOCATION YEAR BUILT
---------------------------------- ---------------------------- ---------
<S> <C> <C> <C>
Plaza at Sunset Hill St. Louis, MO 1997
Northland Square Cedar Rapids, IA 1994
Olympic Oaks Village St. Louis, MO 1985
Gravois Village St. Louis, MO 1983
Morris Corners Springfield, MO 1989
Keller Plaza St. Louis, MO 1988
Southtowne St. Louis, MO 1995
Home Quarters St. Louis, MO 1992
Walgreen Brentwood, MO 1988
Walgreen Plaza St. Louis, MO 1988
</TABLE>
A combined statement of revenue and certain expenses has been
presented because the Properties have varying ownership interests in common, are
under common control and management and will be purchased through a single
transaction.
During the period 1995-1997, Plaza at Sunset Hill was
redeveloped and expanded. The combined statement of revenue and certain expenses
includes the results of Plaza at Sunset Hill for the year ended December 31,
1997 which reflects the operating results of an expansion for only a portion of
the year. The expansion, representing approximately 30% of the GLA, was
completed in 1997.
F-8
<PAGE> 16
DEVELOPERS DIVERSIFIED REALTY CORPORATION
THE SANSONE PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
- -------------------------------------------------------------------------------
The following shopping centers, which the Company also intends to
acquire pursuant to the same purchase agreement, are not reflected in the
accompanying combined statement of revenue and certain expenses since these
centers were either under development or in the lease-up phase during the
periods presented:
<TABLE>
<CAPTION>
Center Name Location Year Built
----------- -------- ----------
<S> <C> <C>
Shoppes at Sunset Hill St. Louis, MO 1998
Promenade at Brentwood St. Louis, MO 1998
American Plaza St. Louis, MO 1998
Walgreens St. Louis, MO 1998
Walgreens Springfield, MO 1998
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
BASIS OF PRESENTATION
The accompanying combined statement of revenue and certain
expenses has been prepared on the accrual basis of accounting.
The accompanying combined financial statement is not
representative of the actual operations for the periods presented, as certain
revenues and expenses, which may not be comparable to the revenues and expenses
expected to be earned or incurred by the Company in the future operations of the
Properties, have been excluded. Revenues excluded consist of interest and other
revenues unrelated to the continuing operations of the Properties. Expenses
excluded consist of depreciation on the buildings and improvements and
amortization of organization costs and other intangible assets, interest
expense, professional fees, charitable contributions, leasing commissions and
other general and administrative costs not directly related to the future
operations of the Properties.
INCOME RECOGNITION
Rental income is recorded on the straight line basis.
F-9
<PAGE> 17
DEVELOPERS DIVERSIFIED REALTY CORPORATION
THE SANSONE PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
- -------------------------------------------------------------------------------
CONCENTRATION OF RISK
The Sansone Properties' tenant base includes primarily national
and regional retail chains and local retailers, consequently, the Properties'
credit risk is concentrated in the retail industry. For the year ended December
31, 1997, revenues derived from the Properties largest tenants, HomeQuarters
Warehouse and the next four largest tenants, aggregated 11.7% and 27.0%,
respectively, of total combined minimum rental revenues.
INTERIM STATEMENTS
The interim financial data for the three months ended March 31,
1998 and 1997 is unaudited; however, in the opinion of the Company, the interim
data includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim periods. The
results for the periods presented are not necessarily indicative of the results
for the full year.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
3. RELATED PARTY TRANSACTION
-------------------------
The Sansone Group, a property management Company controlled by the principals
of The Sansone Properties, provided services to the Properties for all periods
presented. The management fee is determined on a property by property basis
pursuant to property management contracts which generally provide for a
management fee calculated as 5% of rental revenue. The Company expects to
acquire a 50% interest in The Sansone Group and plans to retain the management
services provided to the Properties. Such management fees are included in
operating and maintenance expenses in the accompanying combined statement of
revenues and certain expenses and aggregated approximately $410,000 for the
year ended December 31, 1997.
4. COMMITMENTS
-----------
The Morris Corners Property is subject to a ground lease requiring payments of
$19,978 per month through December 31, 2015. Included in operating and
maintenance expense for the year ended December 31, 1997 is $239,736 of expense
associated with this ground lease.
F-10
<PAGE> 18
DEVELOPERS DIVERSIFIED REALTY CORPORATION
DUBLIN VILLAGE CENTER
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE THREE MONTHS ENDED MARCH 31, 1998
- -------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Revenue:
<S> <C>
Minimum rents $ 904,543
Percentage and overage rents 2,841
Recoveries from tenants 193,673
Other income 9,214
----------
1,110,271
----------
Certain expenses:
Operating and maintenance 81,246
Real estate taxes 135,577
----------
216,823
----------
Revenue in excess of certain expenses $ 893,448
==========
</TABLE>
The accompanying notes are an integral part of this statement of revenue and
certain expenses.
F-11
<PAGE> 19
DEVELOPERS DIVERSIFIED REALTY CORPORATION
DUBLIN VILLAGE CENTER
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE THREE MONTHS ENDED MARCH 31, 1998
- -------------------------------------------------------------------------------
(Unaudited)
1. OPERATION OF PROPERTY
---------------------
The accompanying statement of revenue and certain expenses,
relates to the operations of Dublin Village Center (the "Property") located in
Columbus, Ohio. The shopping center was built in 1987. Developers Diversified
Realty Corporation (the "Company") acquired an equity interest of approximately
80% in the Property on April 28, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
BASIS OF PRESENTATION
The accompanying statement of revenue and certain expenses has
been prepared on the accrual basis of accounting.
The accompanying financial statement is not representative of the
actual operations for the period presented, as certain revenues and expenses,
which may not be comparable to the revenues and expenses expected to be earned
or incurred by the Company in the future operations of the Property, have been
excluded. Revenues excluded consist of interest and other revenues unrelated to
the continuing operations of the Property. Expenses excluded consist of
depreciation on the building and improvements and amortization of organization
costs and other intangible assets, interest expense, professional fees,
charitable contributions, and other general and administrative costs not
directly related to the future operations of the Property.
INCOME RECOGNITION
Rental income is recorded on the straight line basis.
F-12
<PAGE> 20
DEVELOPERS DIVERSIFIED REALTY CORPORATION
DUBLIN VILLAGE CENTER
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE THREE MONTHS ENDED MARCH 31, 1998
- -------------------------------------------------------------------------------
(Unaudited)
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
CONCENTRATION OF RISK
Dublin Village Center's tenant base includes primarily national
and regional retail chains and local retailers, consequently, the Property's
credit risk is concentrated in the retail industry. Revenues derived from the
Property's largest tenants, AMC Theaters and Phar Mor, aggregated 25.3% and
7.3%, respectively, of total minimum base rental revenues for the period ended
March 31, 1998.
INTERIM STATEMENTS
The interim financial data for the three months ended March 31,
1998 is unaudited; however, in the opinion of the Company, the interim data
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim period. The
results for the period presented are not necessarily indicative of the results
for the full year.
F-13
<PAGE> 21
DEVELOPERS DIVERSIFIED REALTY CORPORATION
WASHINGTON PARK PLAZA
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE THREE MONTHS ENDED MARCH 31, 1998
- ------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Revenue:
<S> <C>
Minimum rents $485,725
Recoveries from tenants 155,509
Other income 16,795
--------
658,029
--------
Certain expenses:
Operating and maintenance 88,433
Real estate taxes 78,000
--------
166,433
--------
Revenue in excess of certain expenses $491,596
========
</TABLE>
The accompanying notes are an integral part of this statement of revenue and
certain expenses.
F-14
<PAGE> 22
DEVELOPERS DIVERSIFIED REALTY CORPORATION
WASHINGTON PARK PLAZA
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE THREE MONTHS ENDED MARCH 31, 1998
- -------------------------------------------------------------------------------
(Unaudited)
1. OPERATION OF PROPERTY
The accompanying statement of revenue and certain
expenses relates to the operations of Washington Park Plaza (the "Property"),
located in Dayton, Ohio. The shopping center was built in 1990. Developers
Diversified Realty Corporation (the "Company") acquired a 50% equity interest in
the Property on April 28, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying statement of revenue and certain expenses has
been prepared on the accrual basis of accounting.
The accompanying financial statement is not representative of the
actual operations for the period presented, as certain revenues and expenses,
which may not be comparable to the revenues and expenses expected to be earned
or incurred by the Company in the future operation of the Property, have been
excluded. Revenues excluded consist of interest and other revenues unrelated to
the continuing operations of the Property. Expenses excluded consist of
depreciation on the building and improvements and amortization of organization
costs and other intangible assets, interest expense, professional fees,
charitable contributions, and other general and administrative costs not
directly related to the future operation of the Property.
INCOME RECOGNITION
Rental income is recorded on the straight line basis.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
F-15
<PAGE> 23
DEVELOPERS DIVERSIFIED REALTY CORPORATION
WASHINGTON PARK PLAZA
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE THREE MONTHS ENDED MARCH 31, 1998
- --------------------------------------------------------------------------------
(Unaudited)
CONCENTRATION OF RISK
- ---------------------
Washington Park Plaza's tenant base includes primarily national and
regional retail chains and local retailers, consequently, the Property's credit
risk is concentrated in the retail industry. Revenues derived from the
Property's largest tenants, Pharmor and CVC International, aggregated 19.1% and
12.5%, respectively, of total minimum base rental revenues for the period ended
March 31, 1998.
INTERIM STATEMENTS
- ------------------
The interim financial data for the three months ended March 31, 1998 is
unaudited; however, in the opinion of the Company, the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results for the interim period. The results for the period
presented are not necessarily indicative of the results for the full year.
F-16
<PAGE> 24
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
- --------------------------------------------------------------------------------
(Unaudited)
The following unaudited pro forma condensed consolidated balance sheet is
presented as if the following had occurred on March 31, 1998: (i) the Company's
acquisition of four shopping centers or interests therein which occurred
subsequent to March 31, 1998 ("Acquired Properties"); (ii) the proposed
acquisition of The Family Center Properties; (iii) the proposed acquisition of
The Sansone Properties; (iv) the proposed acquisition of Phase II of a shopping
center in Tanasbourne, Oregon and (v) the sale by the Company of 669,639 common
shares completed in April 1998. This pro forma condensed consolidated balance
sheet should be read in conjunction with the pro forma condensed consolidated
statement of operations of the Company presented herein and the historical
financial statements and notes thereto of the Company included in the
Developers Diversified Realty Corporation's Forms 10-Q and 10-K for the three
month period ended March 31, 1998 and the year ended December 31, 1997,
respectively.
The unaudited pro forma condensed consolidated balance sheet does not purport to
represent what the actual financial position of the Company would have been at
March 31, 1998, nor does it purport to represent the future financial position
of the Company.
F-17
<PAGE> 25
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
- --------------------------------------------------------------------------------
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
(Unaudited)
---------------------------------
(a) (b) (c)
The Family The
Company Acquired Center Sansone
Historical Properties Properties Properties
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets:
Real estate, net $ 1,265,710 $ 54,363 $ 310,000 $ 152,000
Other real estate
investments 7,760 (7,760)
Cash and cash
equivalents 14,101 (14,101)
Other assets 32,704
Investment in and
advances to
joint ventures 162,977 8,351 20,000
----------- ----------- ----------- -----------
Total Assets $ 1,483,252 $ 40,853 $ 310,000 $ 172,000
=========== =========== =========== ===========
Liabilities:
Indebtedness:
Fixed rate senior
notes $ 492,036 $ - $ - $ -
Subordinated
convertible debentures 44,142
Revolving credit
agreements and other
unsecured debt 95,000 8,946 195,700(f) 142,100(f)
Mortgages payable 136,927 27,780 31,300 29,900
----------- ----------- ----------- -----------
Total indebtedness 768,105 36,726 227,000 172,000
Other liabilities 43,375
----------- ----------- ----------- -----------
Total liabilities 811,480 36,726 227,000 172,000
Operating partnership
minority interests 3,151 4,127 83,000
Shareholders' equity:
Class A Preferred
Shares 105,375
Class B Preferred
Shares 44,375
Common shares 2,782
Paid-in-capital 584,648
Accumulated dividends
in excess of net income (68,098)
----------- ----------- ----------- -----------
669,082 - - -
Less: Unearned
compensation
restricted stock (461)
----------- ----------- ----------- -----------
668,621 - -
----------- ----------- ----------- -----------
Total Liabilities and
Shareholders'
Equity $ 1,483,252 $ 40,853 $ 310,000 $ 172,000
=========== =========== =========== ===========
<CAPTION>
Pro Forma Adjustments
(Unaudited)
-----------------------------
(d) (e)
Tanasbourne,
Oregon Common Company Pro
Shopping Stock Forma
Center Offering (Unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
Real estate, net $ 22,100 $ - $ 1,804,173
Other real estate
investments -
Cash and cash equivalents -
Other assets 32,704
Investment in and
advances to
joint ventures 191,328
----------- ----------- -----------
Total Assets $ 22,100 $ - $ 2,028,205
=========== =========== ===========
Liabilities:
Indebtedness:
Fixed rate senior
notes $ - $ - $ 492,036
Subordinated
convertible debentures 44,142
Revolving credit
agreements and other
unsecured debt 22,100(f) (25,260) 438,586(f)
Mortgages payable 225,907
----------- ----------- -----------
Total indebtedness 22,100 (25,260) 1,200,671
Other liabilities 43,375
----------- ----------- -----------
Total liabilities 22,100 (25,260) 1,244,046
----------- ----------- -----------
Operating partnership
minority interests 90,278
Shareholders' equity:
Class A Preferred
Shares 105,375
Class B Preferred
Shares 44,375
Common shares 67 2,849
Paid-in-capital 25,193 609,841
Accumulated dividends
in excess of net income (68,098)
----------- ----------- -----------
- 25,260 694,342
Less: Unearned
compensation
restricted stock (461)
----------- ----------- -----------
- 25,260 693,881
----------- ----------- -----------
Total Liabilities and
Shareholders'
Equity $ 22,100 $ - $ 2,028,205
=========== =========== ===========
</TABLE>
F-18
<PAGE> 26
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
- -------------------------------------------------------------------------------
(Unaudited)
(a) Represents the purchase of, or investment in, the four Acquired Properties.
The initial purchase price, before any contingent consideration that may be
payable to the sellers, is as follows (in thousands):
<TABLE>
<CAPTION>
Easton Nassau Washington Dublin
Market Park Park Plaza Village Total
------ ---- ---------- ------- -----
<S> <C> <C> <C> <C> <C>
Purchase Price or Investment:
Real estate, net $17,025 $29,578 $ -- $ -- $46,603(i)
Investment in and advance
to joint venture
properties -- -- 1,370 6,981 8,351
------- ------- ------- ------- -------
$17,025 $29,578 $ 1,370 $ 6,981 $54,954
======= ======= ======= ======= =======
Purchase price consideration provided by:
Cash
Revolving credit facility $14,101 $ -- $ -- $ -- $14,101
2,924 -- -- 6,022 8,946
Mortgages assumed -- 27,780 -- -- 27,780
Issuances of operating
partnership units -- 1,798 1,370 959 4,127(ii)
------- ------- ------- ------- -------
$17,025 $29,578 $ 1,370 $ 6,981 $54,954
======= ======= ======= ======= =======
</TABLE>
(i) Balance sheet adjustment also reflects reclassification of $7,760 from
other real estate investments which represents the Company's initial
equity interest in the Nassau Park shopping center purchased prior to
December 31, 1997.
(ii) Represents the issuance of an aggregate of 105,546 operating
partnership units as a portion of the consideration relating to the
acquisition of certain shopping centers. These units are, in certain
circumstances, and at the option of the Company, exchangeable into the
Company's common shares on a one for one basis.
(b) Represents the purchase of The Family Center Properties, which are
considered by the Company to be probable acquisitions as of June 19, 1998,
although there is no assurance that the transaction will be consummated.
The initial purchase price, before any contingent consideration that may be
payable to the sellers, is summarized as follows (in thousands):
<TABLE>
<S> <C>
Approximate purchase price - Real estate, net $310,000
========
Assumed purchase price consideration to be provided by:
Revolving credit agreements and other unsecured debt $195,700
Mortgages assumed 31,300
Issuance of operating partnership units 83,000(i)
--------
$310,000
========
</TABLE>
(i) Operating partnership units are, in certain circumstances and, at the
option of the Company, exchangeable on a one-for-one basis into common
shares of the Company. Assumes approximately 1,815,000 of operating
partnership units are issued. In addition, the Company has guaranteed
the value of the operating partnership units for the period two years
from the date of issue. The guarantee is determined with reference to
the common shares of the Company. The final number of operating
partnership units will not be known until the date the transaction is
consummated and after expiration of the guarantee period.
F-19
<PAGE> 27
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
- ------------------------------------------------------------------------------
(Unaudited)
(c) Represents the purchase of The Sansone Properties and the purchase of a
50% interest in a development joint venture and the operating and
management company which are considered by the Company to be probable
acquisitions as of June 19, 1998, although there is no assurance that
these transactions will be consummated. The initial purchase price, before
any contingent consideration that may be payable to the sellers, is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Approximate purchase price:
<S> <C>
Real estate, net $ 152,000
Investment in and advances to joint ventures 20,000(i)
-----------
$ 172,000
===========
Assumed purchase price consideration to be provided by:
Revolving credit agreements and other unsecured debt $ 142,100
Mortgages assumed 29,900
-----------
$ 172,000
===========
</TABLE>
(i) Investments in and advances to joint ventures include the Company's
50% joint venture interest in certain rights to future development
projects and the Company's 50% joint venture interest in the Sansone
management/operating company.
(d) Represents the purchase of a 156,000 square foot Phase II of a shopping
center in Tanasbourne, Oregon for total consideration of $22.1 million
funded by proceeds received from revolving credit agreements and other
unsecured debt. There can be no assurance that the transaction will be
consumated.
(e) Represents the sale by the Company of 669,639 common shares completed in
April 1998 and the use of proceeds thereof. The net proceeds to the
Company, after underwriting discounts and offering costs, were
approximately $25.3 million and were used to repay borrowings under the
revolving credit facilities.
(f) For purposes of presenting pro forma information, the Company's anticipated
cash requirements associated with the funding of acquisitions is assumed to
be provided from the use of revolving credit facilities and other unsecured
debt sources. Actual financings may differ from those assumed above.
F-20
<PAGE> 28
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THREE MONTH PERIOD ENDED MARCH 31, 1998
AND FOR THE YEAR ENDED DECEMBER 31, 1997
- -------------------------------------------------------------------------------
(Unaudited)
The unaudited pro forma condensed statement of operations for the three month
period ended March 31, 1998 is presented as if each of the following
transactions had occurred on January 1, 1997; (i) the acquisition by the
Company of those Acquired Properties which had an operating history, purchased
from January 1, 1998 through June 19, 1998; (ii) the acquisition of The Family
Center Properties and The Sansone Properties (Probable Acquisition Properties),
which had an operating history and the purchase of a 50% interest in the
Sansone's operating/management company; (iii) the sale by the Company of $100
million of Medium Term Notes in January 1998; (iv) the purchase by the Company
of a partner's minority interest in one shopping center and (v) the sale by the
Company of 669,639 common shares in April 1998.
The unaudited pro forma condensed statement of operations for the year ended
December 31, 1997 is presented as if each of the following transactions had
occurred on January 1, 1997; (i) the acquisition by the Company of those
Acquired Properties which had an operating history, purchased from January 1,
1997 through June 19, 1998; (ii) the acquisition of The Family Center
Properties and The Sansone Properties (Probable Acquisition Properties), which
had an operating history and the purchase of a 50% interest in the Sansone's
operating/management company; (iii) the sale by the Company of 3,350,000 common
shares in January 1997; (iv) the sale by the Company of $75 million of 7.125%
Pass-through Asset Trust Securities in March 1997; (v) the sale by the Company
of 1,300,000 common shares in June 1997; (vi) the sale by the Company of an
aggregate of $202 million of Medium Term Notes in 1997 and 1998; (vii) the sale
by the Company of 507,960 common shares in September 1997; (viii) the sale by
the Company of 316,800 common shares in December 1997; (ix) the purchase by the
Company of a partner's minority interest in one shopping center and (x) the
sale by the Company of 669,639 common shares in April 1998.
The following pro forma information is based upon the historical consolidated
results of operations of the Company for the three month period ended March 31,
1998 and the year ended December 31, 1997, giving effect to the transactions
described above. The pro forma condensed consolidated statement of operations
should be read in conjunction with the pro forma condensed consolidated balance
sheet of the Company presented herein and the historical financial statements
and notes thereto of the Company included in the Developers Diversified Realty
Corporation's Forms 10-Q and 10-K for the three month period ended March 31,
1998 and the year ended December 31, 1997, respectively.
The unaudited pro forma condensed consolidated statements of operations are not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the transactions had been completed as set forth above,
nor do they purport to represent the Company's results of operations for future
periods.
F-21
<PAGE> 29
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE UNITS AND PER SHARE DATA)
- -------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
(Unaudited)
-----------------------------------
The
Family
Company Acquired Center
Historical Properties Properties
---------- ---------- ----------
<S> <C> <C> <C>
Revenues from rental
properties $46,273 $ 2,363(a) $5,478(e)
Management fees and other income 3,226
------- ------- ------
49,499 2,363 5,478
------- ------- ------
Operating and maintenance 4,054 299(a) 558(e)
Real estate taxes 5,959 189(a) 522(e)
Depreciation and amortization 9,136 462(a) 1,206(e)
General and
administrative expenses 2,932 250(d) 280(e)
Interest expense 11,453 1,333(a) 2,048(e)
330(b)
190(c)
------- ------- ------
33,534 3,053 4,614
------- ------- ------
Income (loss) before equity in net
income of joint ventures, gain on sale
of land, allocation to
minority interest and
extraordinary item 15,965 (690) 864
Equity in net income (loss) of
joint ventures 2,238 395(b)
Minority equity interest (189) (41)(a) (1,189)(e)
(38)(b)
179(c)
------- ------- ------
Income (loss) before
extraordinary item 18,014 $ (195) $ (325)
======= ==========
Less: preferred dividends 3,550
-------
Income before extraordinary item
applicable to common shareholders $14,464
=======
Per share data:
Earnings per common share before
extraordinary item:
Basic $ 0.52
=======
Diluted $ 0.50
=======
Weighted average number of
common shares (in thousands):
Basic 27,750
=======
Diluted 28,366
=======
<CAPTION>
Pro Forma Adjustments
(Unaudited)
--------------------------------------------
Tanasbourne, Common
The Oregon Share and Company
Sansone Shopping Debt Pro Forma
Properties Center (g) Offerings (Unaudited)
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues from rental
properties $3,193(f) $ - $ - $57,307
Management fees and other income 3,226
------ ----------- ----------- ------------
3,193 60,533
------ ----------- ----------- ------------
Operating and maintenance 369(f) 5,280
Real estate taxes 7,079
409(f)
Depreciation and amortization 699(f) 11,503
General and
administrative expenses 3,462
Interest expense 1,698(f) (434)(i) 16,618
- (h)
------ ----------- ----------- ------------
3,175 (434) 43,942
------ ----------- ----------- ------------
Income (loss) before equity in net
income of joint ventures, gain on sale
of land, allocation to
minority interest and
extraordinary item 18 434 16,591
Equity in net income (loss) of
joint ventures (19)(f) 2,614
Minority equity interest (1,278)
------ ----------- ----------- ------------
Income (loss) before
extraordinary item $ (1) $ -- $ 434 17,927
====== ========== ==========
Less: preferred share dividends 3,550
------------
Income before extraordinary item
applicable to common shareholders $ 14,377
============
Per share data:
Earnings per common share before
extraordinary item:
Basic $ 0.50(j)
============
Diluted $ 0.49(j)
============
Weighted average number of
common shares (in
thousands):
Basic 28,420
============
Diluted 29,036
============
</TABLE>
F-22
<PAGE> 30
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE UNITS AND PER SHARE DATA)
- -------------------------------------------------------------------------------
(Unaudited)
(a) Reflects revenues and expenses for the three month period ended March 31,
1998 of the properties acquired during 1998 through the date of
acquisition as follows:
<TABLE>
<CAPTION>
Effective Real
Date of Estate Operating & Minority
Shopping Center Acquisition Revenues Taxes Maintenance Depreciation(1) Interest (1) Interest
--------------- ----------- -------- ----- ----------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Country Club Mall 02/25/98 $ 131 $ 19 $ 17 $ 25 $ 65 $ --
Belair Centre 03/10/98 875 65 162 159 445 --
The Columbus
Properties (2) 03/23/98 1,357 105 120 278 823 41
------ ------ ------ --------- ------ ------
$2,363 $ 189 $ 299 $ 462 $1,333 $ 41
====== ====== ====== ========= ====== ======
</TABLE>
(1) Determined depreciation utilizing a 31.5 year life for building based
on the preliminary purchase price allocation and calculated interest
at the Company's estimated interest rate under its lines of credit
and/or the effective interest rate associated with the mortgage debt
assumed.
(2) No revenues or expenses have been included in the pro forma statement
of operations for Easton Market, one of The Columbus Properties,
since the center was either under development or in lease-up prior
to acquisition.
(b) Reflects revenues and expenses for four joint ventures acquired in 1998 for
the three month period ended March 31, 1998 through the earlier of the date
of acquisition or March 31, 1998 as follows:
<TABLE>
<CAPTION>
Lennox Town Washington Dublin Village
Center Sun Center Park Plaza Center
Columbus, OH Columbus, OH Dayton, OH Columbus, OH Total
------------ ------------ ---------- ------------ -----
<S> <C> <C> <C> <C> <C>
Revenues $ 717 $ 889 $ 658 $1,110 $3,374
------ ------ ------ ------ ------
Operating and
maintenance 49 48 88 81 266
Real estate taxes 96 76 78 136 386
Depreciation (1) 179 189 111 194 673
Interest (1) 380 442 265 420 1,507
------ ------ ------ ------ ------
704 755 542 831 2,832
------ ------ ------ ------ ------
Net Income 13 134 116 279 $ 542
======
Ownership interest 50% 79.45% 50% 80%
------ ------ ------ ------
Equity in net income
of joint venture $ 7 $ 106 $ 58 $ 224 $ 395
====== ====== ====== ====== ======
</TABLE>
(1) Based on the preliminary purchase price, determined depreciation
utilizing a 31.5 year life for building and calculated interest
at the effective interest rate associated with the mortgage debt
assumed.
An aggregate interest cost of $330 associated with the purchase of the
Company's equity interest in the properties is calculated at the
Company's estimated interest rate under its lines of credit.
In addition to cash, the Company's purchase price was funded through
the issuance of approximately 60,000 operating partnership units (OP
Units). The minority interest expense associated with the OP Units is
estimated to be $38 for the three month period ended March 31, 1998.
F-23
<PAGE> 31
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE UNITS AND PER SHARE DATA)
- --------------------------------------------------------------------------------
(c) Represents the elimination of the minority interest expense due to the
purchase by the Company of the minority interest in a shopping center
located in North Olmsted, Ohio in March 1998.
(d) The general and administrative expenses of the Company have been adjusted
by $250 to reflect the estimated increased expenses expected to be incurred
associated with additional operating personnel and related costs
attributable to the increase in the Company's portfolio of properties
resulting from acquisitions and development activities.
(e) Reflects revenues and expenses of The Family Center Properties
contemplated as of June 19, 1998 for the period January 1, 1998 through
March 31, 1998.
Based on a preliminary purchase price allocation, determined depreciation
utilizing a 31.5 year life for buildings with an operating history and
calculated interest related to the assumed purchase of the operating
properties with an estimated value of approximately $190 million. Interest
was determined utilizing the Company's estimated interest rate under its
lines of credit and/or the effective interest rate associated with the
mortgage debt assumed. No interest expense was presented relating to
shopping centers under development and expansion as related interest costs
either would not have been incurred or would have been capitalized.
General and administrative expenses reflect the operating expenses of the
Hermes Associates, LTD. management/operating company which is expected to
be acquired.
Minority interest equity expense reflects the estimated expense relating
to the operating partnership units expected to be issued in partial
consideration for the purchase of The Family Centers Properties. The final
number of operating partnership units to be issued will not be known until
the transaction is consummated and the guarantee period has expired. (See
note b(i) of the pro forma condensed balance sheet).
There can be no assurance that the Company will acquire an ownership
interest in the The Family Center Properties.
(f) Reflects revenues and expenses of The Sansone Properties contemplated as of
June 19, 1998 for the period January 1, 1998 through March 31, 1998.
Based on a preliminary purchase price allocation, determined depreciation
utilizing a 31.5 year life for buildings with an operating history and
calculated interest related to the assumed purchase of the operating
properties with an estimated value of approximately $97 million. Interest
was determined utilizing the Company's estimated interest rate under its
lines of credit and/or effective interest rate associated with the
mortgage debt assumed. No interest expense was presented relating to
shopping centers under development and expansion as related interest costs
either would not have been incurred or would have been capitalized.
Equity in net income (loss) in joint ventures represents the Company's
equity in net loss relating to its 50% joint venture interest in the
operating/management company.
There can be no assurance that the Company will acquire an ownership
interest in The Sansone Properties.
(g) Operating results for the Tanasbourne, Oregon shopping center are not
presented as this shopping center was under development during the period
presented.
(h) An interest expense adjustment relating to the issuance of $100 million
Medium Term Notes completed in January 1998 is not reflected herein as the
net interest adjustment is considered insignificant.
(i) Reflects the reduction of interest costs relating to variable rate
indebtedness effectively repaid with the proceeds from the sale of 669,639
common shares completed in April 1998.
F-24
<PAGE> 32
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE UNITS AND PER SHARE DATA)
- -------------------------------------------------------------------------------
(j) Pro forma income per common share is based upon the weighted average number
of common shares assumed to be outstanding for the three month period ended
March 31, 1998.
In accordance with the SFAS 128, earnings per share before extraordinary
item is calculated as follows:
<TABLE>
<S> <C>
Income before extraordinary item $ 17,927
Less: Preferred stock dividend (3,550)
--------
Basic EPS - Income before extraordinary item applicable to common
shareholders 14,377
Joint venture partnership (180)
--------
Diluted EPS - Income before extraordinary item applicable to common
shareholders plus assumed conversions $ 14,197
========
NUMBER OF SHARES:
Basic - average shares outstanding 28,420
Effect of dilutive securities:
Stock options 449
Joint venture partnership 164
Restricted stock 3
--------
Diluted Shares 29,036
========
PER SHARE AMOUNT:
Income before extraordinary item
Basic $ 0.50
========
Diluted $ 0.49
========
</TABLE>
F-25
<PAGE> 33
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE UNITS AND PER SHARE DATA)
- -------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments (Unaudited)
-------------------------------------------------------
The Family The
Company Acquired Center Sansone
Historical Properties Properties Properties
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenues from rental
properties $158,718 $ 3,073(a) $22,068(f) $11,637(g)
11,680(b)
Management fees and
other income 10,322
-------- -------- ------- -------
169,040 14,753 22,068 11,637
-------- -------- ------- -------
Operating and
maintenance 15,961 549(a) 2,844(f) 1,295(g)
1,525(b)
Real estate taxes 20,001 203(a) 1,812(f) 1,522(g)
950(b)
Depreciation and amortization 32,313 568(a) 4,749(f) 2,695(g)
2,271(b)
General and
administrative 11,055 750(e) 1,118(f)
expenses
Interest expense 35,558 1,516(a) 7,980(f) 6,510(g)
6,574(b)
1,212(c)
1,103(d)
-------- -------- ------- -------
114,888 17,221 18,503 12,022
-------- -------- ------- -------
Income (loss) before
equity in net income of joint
ventures, gain on sale and
allocation to minority
interest 54,152 (2,468) 3,565 (385)
Equity in net income of
joint ventures 10,893 1,654 (c) 630(g)
Minority equity interest (1,049) (14)(a) (4,575)(f)
(176)(b)
(147)(c)
1,038 (d)
Gain on sales of land 3,526
-------- -------- ------- -------
Income before
extraordinary item 67,522 $ (113) $(1,010) $ 245
======== ======= =======
Less: preferred share
dividends (14,200)
--------
Income before extra
ordinary item
applicable to common
shareholders $ 53,322
========
Per share data:
Earnings per common
share:
Basic $2.06
========
Diluted $2.05
========
Weighted average
number of common
shares(in thousands):
Basic 25,880
========
Diluted 26,062
========
<CAPTION>
Pro Forma Adjustments (Unaudited)
------------------------------
Tanasbourne, Common
Oregon Share and Company
Shopping Debt Pro Forma
Center(h) Offerings (Unaudited)
----------- ----------- --------
<S> <C> <C> <C>
Revenues from rental
properties $ - $ - $207,176
Management fees and
other income 10,322
----------- ----------- --------
- - 217,498
----------- ----------- --------
Operating and
maintenance 22,174
Real estate taxes 24,488
Depreciation and amortization 42,596
General and
administrative 12,923
expenses
Interest expense (316)(i) 56,781
66(j)
(1,771)(k)
- (l)
(903)(m)
(748)(n)
- (o)
----------- ----------- --------
- (3,672) 158,962
----------- ----------- --------
Income (loss) before
equity in net income of joint
ventures, gain on sale and
allocation to minority
interest - 3,672 58,536
Equity in net income of
joint ventures 13,177
Minority equity interest (4,923)
Gain on sales of land 3,526
----------- ----------- --------
Income before extraordinary item - $ 3,672 70,316
=========== ============
Less: preferred
dividends (14,200)
--------
Income before extra
ordinary item
applicable to common
shareholders $56,116
========
Per share data:
Earnings per common
share:
Basic $2.06(p)
========
Diluted $2.04(p)
========
Weighted average
number of common
shares(in thousands):
Basic 27,296
========
Diluted 27,475
========
</TABLE>
F-26
<PAGE> 34
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
- -------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(Unaudited)
(a) Reflects revenues and expenses for the properties acquired during 1997, for
the period January 1, 1997 through the earlier of the date of acquisition,
or December 31, 1997 as follows:
<TABLE>
<CAPTION>
Effective Real
Date of Estate Operating & Minority
Shopping Center Acquisition Revenues Taxes Maintenance Depreciation(4) Interest(4) Interest
--------------- ----------- -------- ----- ----------- ----------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Great Northern Shopping
Center-North,
Cleveland, (North
Olmsted), OH (1) 01/01/97 $ -- $ -- $ -- $ -- $ -- $ --
Great Northern Shopping
Center-South,
Cleveland, (North
Olmsted) OH (1) 01/01/97 -- -- -- -- -- --
Plaza Del Norte, San
Antonio, TX (2),(3) 01/23/97 -- -- -- -- -- --
Foothills Towne Center
Awatukee, AZ (2) 02/21/97 -- -- -- -- -- --
Eagan Promenade
Minneapolis, MN (2) 07/01/97 -- -- -- -- -- --
Midway Marketplace
St. Paul, MN (2) 07/11/97 -- -- -- -- -- --
Cooks Corner
Brunswick, ME 08/14/97 1,907 154 404 300 806 14
Centennial Promenade
Denver, CO (2) 10/02/97 -- -- -- -- -- --
Spring Creek Centre
Fayetteville, AR 11/20/97 1,166 49 145 268 710 --
------ ------ ------ ------ ------ ------
$3,073 $ 203 $ 549 $ 568 $1,516 $ 14
====== ====== ====== ====== ====== ======
</TABLE>
(1) Included in historical statement of operations for the year ended
December 31, 1997.
(2) No revenues or expenses have been included in the pro forma statement
of operations since the center was either under development or in the
lease-up phase during 1997.
(3) Property acquired through a joint venture in which the Company owns a
35% interest.
(4) Determined depreciation utilizing a 31.5 year life for buildings based
on the preliminary purchase price allocation and calculated interest
at the Company's estimated interest rate under its lines of credit.
F-27
<PAGE> 35
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE UNITS AND PER SHARE DATA)
- -------------------------------------------------------------------------------
(Unaudited)
(b) Reflects revenues and expenses for the year ended December 31, 1997 of
the properties acquired from January 1, 1998 to June 19, 1998 as
follows:
<TABLE>
<CAPTION>
Effective Real
Date of Estate Operating & Minority
Shopping Center Acquisition Revenues Taxes Maintenance Depreciation(1) Interest(1) Interest
--------------- ----------- -------- ----- ----------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Country Club Mall 02/25/98 $ 871 $ 127 $ 115 $ 165 $ 441 $ --
Belair Centre 03/10/98 4,696 350 868 856 2,401 --
The Columbus
Properties (2) 03/23/98 6,113 473 542 1,250 3,732 176
------- ------- ------- ------- ------- -------
$11,680 $ 950 $ 1,525 $ 2,271 $ 6,574 $ 176
======= ======= ======= ======= ======= =======
</TABLE>
(1) Determined depreciation utilizing a 31.5 year life for building based
on the preliminary purchase price allocation and calculated interest
at the Company's estimated interest rate under its lines of credit
and/or the effective interest rate associated with the mortgage debt
assumed.
(2) No revenues or expenses have been included in the pro forma statement
of operations for Easton Market, one of The Columbus Properties; since
the center was either under development or in lease-up during 1997.
(c) Reflects revenues and expenses of the four joint venture properties for the
year ended December 31, 1997 in which an equity interest was acquired as
follows:
<TABLE>
<CAPTION>
Lennox Washington Dublin Village
Town Center Sun Center Park Plaza Center
Columbus, OH(1) Columbus, OH Dayton, OH Columbus, OH Total
--------------- ----------- ---------- ------------ -----
<S> <C> <C> <C> <C> <C>
Revenues $ 2,390 $ 4,008 $ 2,474 $ 4,888 $13,760
------- ------- ------- ------- -------
Operating and
maintenance 165 217 294 608 1,284
Real estate taxes 319 344 298 557 1,518
Depreciation (2) 604 851 452 787 2,694
Interest (2) 1,283 1,993 1,073 1,703 6,052
------- ------- ------- ------- -------
2,371 3,405 2,117 3,655 11,548
------- ------- ------- ------- -------
NET INCOME 19 603 357 1,233 $ 2,212
=======
Ownership interest 50% 79.45% 50% 80%
------- ------- ------- -------
Equity in net income of
joint ventures $ 9 $ 480 $ 179 $ 986 $ 1,654
======= ======= ======= ======= =======
</TABLE>
(1) Revenues and expenses prior to April 1, 1997 are not included in the
pro forma statement of operations since the center was in the lease up
phase.
(2) Determined depreciation utilizing a 31.5 year life for building based
on the preliminary purchase price allocation and calculated interest
at the effective interest rate associated with the mortgage debt
assumed.
An aggregate interest cost of $1,212 associated with the purchase of
the Company's equity interest in these properties is calculated at the
Company's estimated interest rate under its lines of credit.
In addition to cash, the Company's purchase price was funded through the
issuance of approximately 58,000 operating partnership units (OP Units). The
minority interest expense associated with the OP Units is estimated to be $147
for the year ended December 31, 1997.
F-28
<PAGE> 36
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE UNITS AND PER SHARE DATA)
- -------------------------------------------------------------------------------
(d) Represents the elimination of the minority interest expense due to the
purchase by the Company of the minority interest in a shopping center
located in North Olmsted, Ohio in March 1998.
(e) The general and administrative expenses of the Company have been adjusted
by $750 to reflect the estimated increased expenses expected to be incurred
associated with additional operating personnel and related costs
attributable to the increase in the Company's portfolio of properties
resulting from acquisitions and development activities.
(f) Reflects revenues and expenses of The Family Center Properties
contemplated as of June 19, 1998 for the year ended December 31, 1997.
Based on the preliminary purchase price allocation, determined
depreciation utilizing a 31.5 year life for buildings and calculated
interest related to the assumed purchase of the operating properties with
an estimated value of approximately $187 million. Interest was determined
utilizing the Company's estimated interest rate under its lines of credit
and/or the effective interest rate associated with the mortgage debt
assumed. No interest expense was presented relating to shopping centers
under development and expansion as such interest costs would have been
capitalized.
General and administrative expenses reflect the operating expenses of the
Hermes Associates, LTD. management/operating company which is expected to
be acquired.
Minority equity interest expense reflects the estimated expense relating to
the operating partnership units expected to be issued in partial
consideration for the purchase of The Family Center Properties. The final
number of operating partnership units to be issued will not be known until
the transaction is consummated and the guarantee period has expired
(See note b(1) of the pro forma condensed balance sheet).
There can be no assurance that the Company will acquire an ownership
interest in The Family Center Properties.
(g) Reflects revenues and expenses of The Sansone Properties contemplated as of
June 19, 1998 for the year ended December 31, 1997.
Based on the preliminary purchase price allocation, determined depreciation
utilizing a 31.5 year life for buildings with an operating history and
calculated interest related to the assumed purchase of the operating
properties with an estimated value of approximately $93 million. Interest
was determined at the Company's estimated interest rate under its lines of
credit and/or the effective interest rate associated with the mortgage debt
assumed. No interest expense was presented relating to shopping centers
under development and expansion as related interest costs would have been
capitalized.
Equity in net income (loss) of joint ventures represents the Company's
equity in net income (loss) relating to its 50% joint venture interest in
the operating/management company.
There can be no assurance that the Company will acquire an ownership
interest in The Sansone Properties.
(h) Operating results for the Tanasbourne, Oregon shopping center are not
presented as this shopping center was under development during the year.
F-29
<PAGE> 37
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE UNITS AND PER SHARE DATA)
- --------------------------------------------------------------------------------
(i) Reflects the reduction of interest costs relating to variable rate
indebtedness effectively repaid with the proceeds from the sale of
3,350,000 common shares completed in January 1997.
(j) Reflects the net increase in interest cost of $66 relating to variable rate
indebtedness repaid with the proceeds from the sale of $75 million 7.125%
Pass-through Assets Trust Securities completed in March 1997. Pro forma
interest is estimated at $1,103 and interest savings on the variable rate
indebtedness repaid is estimated at $1,037.
(k) Reflects the reduction of interest costs relating to variable rate
indebtedness effectively repaid with the proceeds from the sale of
1,300,000 common shares completed in June 1997.
(l) The interest expense adjustment relating to the issuance of $202 million
Medium Term Notes completed in 1997 and 1998 is not reflected herein as the
net interest adjustment is considered insignificant.
(m) Reflects the reduction of interest costs relating to variable rate
indebtedness effectively repaid with the proceeds from the sale of 507,960
common shares completed in September 1997.
(n) Reflects the reduction of interest costs relating to variable rate
indebtedness effectively repaid with the proceeds form the sale of 316,800
common shares completed in December 1997.
(o) The issuance of 669,639 common shares completed in April 1998, or
utilization of the proceeds derived from the sale thereof, are not
reflected herein prior to their issuance as the proceeds were considered to
be used to acquire shopping centers with no previous operating history
and/or for properties under development. Accordingly, the Company would not
have issued these securities until the earlier of the date of issuance or
the date the centers were acquired.
(p) Pro forma income per common share is based upon the weighted average number
of common shares assumed to be outstanding during 1997 and includes all
shares issued in conjunction with the common share offerings in 1997. The
669,639 shares issued in April 1998 were not reflected either in the pro
forma statement of operations or in the earnings per share calculation
prior to their issuance as the proceeds were not considered to be received
until the date the developed shopping centers were acquired in 1998, since
such centers had no operating history.
F-30
<PAGE> 38
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE UNITS AND PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
In accordance with the SFAS 128, earnings per share before extraordinary
item is calculated as follows (in thousands):
<S> <C>
Income before extraordinary item $ 70,316
Less: Preferred stock dividend (14,200)
--------
Basic EPS - Income before extraordinary item applicable to common
shareholders $ 56,116
========
Diluted EPS - Income before extraordinary item applicable to common
shareholders plus assumed conversions $ 56,116
========
NUMBER OF SHARES:
Basic - average shares outstanding 27,296
Effect of dilutive securities:
Stock options 176
Restricted stock 3
--------
Diluted Shares 27,475
========
PER SHARE AMOUNT:
Income before extraordinary item
Basic $ 2.06
========
Diluted $ 2.04
========
</TABLE>
F-31
<PAGE> 39
DEVELOPERS DIVERSIFIED REALTY CORPORATION
ESTIMATED TWELVE MONTH PRO FORMA STATEMENT OF
TAXABLE NET OPERATING INCOME AND OPERATING FUNDS AVAILABLE
- --------------------------------------------------------------------------------
(Unaudited)
The following unaudited statement is a pro forma estimate of taxable income and
operating funds available for the year ended December 31, 1997. The pro forma
statement is based on the Company's historical operating results for the
twelve-month period ended December 31, 1997 adjusted for the effect of (i)
historical operations of the Acquired Properties and the Probable Acquisition
Properties, (ii) Medium Term Notes offerings completed in 1997 and 1998, (iii)
3,500,000 common share offering completed in January 1997, (iv) Pass-through
Asset Trust Securities issued in March 1997, (v) 1,300,000 common share
offering completed in June 1997, (vi) 509,760 common share offering completed
in September 1997, (vii) 316,800 common share offering completed in December
1997, (viii) the purchase by the Company of a partner's minority interest in
one shopping center, (ix) 669,639 common share offering completed in April 1998
and certain other items related to operations which can be factually supported.
This statement does not purport to forecast actual operating results for any
period in the future.
This statement should be read in conjunction with (i) the historical financial
statements included in the Company's Forms 10-K and 10-Q for the year ended
December 31, 1997 and the three months ended March 31, 1998 and (ii) the pro
forma condensed financial statements of the Company included elsewhere herein.
<TABLE>
<CAPTION>
ESTIMATE OF TAXABLE NET OPERATING INCOME (IN THOUSANDS):
<S> <C>
DDRC historical income before extraordinary item, exclusive of property depreciation and amortization
(Note 1) .......................................................................................... $ 99,835
Acquired Properties - historical earnings from operations, as adjusted, exclusive
of depreciation and amortization (Note 2) ........................................................ 2,791
Probable Acquisition Properties - historical earnings from operations, as adjusted, exclusive of
depreciation and amortization (Note 2) ........................................................... 6,679
Pro forma adjustments reflecting the purchase of minority interests ................................. (65)
Pro forma adjustments arising from the utilization of the proceeds from the issuance of Medium
Term Notes to repay variable rate indebtedness ................................................... --
Pro forma adjustments reflecting the decrease in interest expense arising from the utilization of
the proceeds from the 3,350,000 common share offering ............................................ 316
Pro forma adjustments arising reflecting the increase in interest expense from the utilization of the
proceeds from the issuance of Pass-through Asset Trust Securities to repay variable rate
indebtedness ..................................................................................... (66)
Pro forma adjustments arising from the utilization of the proceeds from the 1,300,000 common
share offering ................................................................................... 1,771
Pro forma adjustments arising from the utilization of the proceeds from the 507,960 common
share offering ................................................................................... 903
Pro forma adjustments arising from the utilization of the proceeds from the 316,800 common
share offering ................................................................................... 748
Pro forma adjustments arising from the utilization of the proceeds form the 669,639 common
share offering ................................................................................... --
Estimated tax depreciation and amortization (Note 3):
Estimated 1997 tax depreciation and amortization .................................................... (25,088)
Pro forma tax depreciation for Properties acquired during 1997 ...................................... (527)
Pro forma tax depreciation for Properties acquired during 1998 ...................................... (1,789)
Pro forma tax depreciation for Probable Acquisition Properties ...................................... (5,600)
---------
Pro forma taxable income before dividends deduction ................................................. 79,908
Estimated dividends deduction (Note 4) .......................................................... (82,986)
--------
$ (3,078)
=========
Pro forma taxable net operating income .............................................................. $ --
=========
</TABLE>
F-32
<PAGE> 40
DEVELOPERS DIVERSIFIED REALTY CORPORATION
ESTIMATED TWELVE MONTH PRO FORMA STATEMENT OF
TAXABLE NET OPERATING INCOME AND OPERATING FUNDS AVAILABLE
- -------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
ESTIMATE OF OPERATING FUNDS AVAILABLE (IN THOUSANDS):
<S> <C>
Pro forma taxable operating income before dividend deduction ...................$ 79,908
Add pro forma depreciation ................................................. 33,004
------------
Estimated pro forma operating funds available (Note 5) ......................... $ 112,912
============
</TABLE>
Note 1 - The historical earnings from operations represents the Company's
earnings from operations for the twelve months ended December 31,
1997 as reflected in the Company's historical financial
statements.
Note 2 - The historical earnings from operations for the properties
acquired during 1997 represent the revenues and certain expenses
as referred to in the pro forma condensed consolidated statement
of operations for the year ended December 31, 1997 included
elsewhere herein.
Note 3 - Tax depreciation for the Company is based upon the Company's tax
basis in the properties which exceeds the historical cost basis,
as reflected in the Company's financial statements in accordance
with generally accepted accounting principles, by approximately
$18 million before accumulated depreciation. The costs are
generally depreciated on a straight-line method over a 40-year
life for tax purposes.
<TABLE>
<CAPTION>
Note 4 - Estimated dividends deduction is calculated as follows:
<S> <C>
Common share dividend (27,296,000 shares x $2.52 per share) $ 68,786
Class A Preferred Shares 10,011
Class B Preferred Shares 4,189
--------
$ 82,986
========
</TABLE>
Note 5 - Operating funds available does not represent cash generated from
operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash
available to fund cash needs.
F-33
<PAGE> 41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION
Date June 23, 1998 /s/ William H. Schafer
------------------------------ ------------------------------
William H. Schafer
Vice President and Chief
Financial Officer
<PAGE> 1
EXHIBIT 3.1
RESOLVED, that the first paragraph of Article FOURTH of the Company's
Amended and Restated Articles of Incorporation be, and the same hereby is,
deleted and there is substituted therefor the following:
FOURTH: The authorized number of shares of the Corporation is
109,000,000, consisting of 100,000,000 Common Shares, without par value
(hereinafter called "Common Shares"), 1,500,000 Class A Cumulative Preferred
Shares, without par value (hereinafter called "Class A Shares"), 1,500,000 Class
B Cumulative Preferred Shares, without par value (hereinafter called "Class B
Shares"), 1,500,000 Class C Cumulative Preferred Shares, without par value
(hereinafter called "Class C Shares"), 1,500,000 Class D Cumulative Preferred
Shares, without par value (hereinafter called "Class D Shares"), 1,500,000 Class
E Cumulative Preferred Shares, without par value (hereinafter called "Class E
Shares"), and 1,500,000 Noncumulative Preferred Shares, without par value
(hereinafter called "Noncumulative Shares").
<PAGE> 1
EXHIBIT 10.1
1998 DEVELOPERS DIVERSIFIED REALTY CORPORATION
EQUITY-BASED AWARD PLAN
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the 1998 Developers Diversified Realty Corporation
Equity-Based Award Plan (the "Plan") is to enable Developers Diversified Realty
Corporation (the "Company") and its Subsidiaries (as defined below) to attract,
retain and reward employees of the Company and its Subsidiaries and strengthen
the mutuality of interests between those employees and the Company's
shareholders by offering the employees equity or equity-based incentives thereby
increasing their proprietary interest in the Company's business and enhancing
their personal interest in the Company's success.
For purposes of the Plan, the following terms are defined as follows:
(a) "Affiliate" means any entity (other than the Company and any
Subsidiary) that is designated by the Board as a participating
employer under the Plan.
(b) "Award" means any award of Stock Options, Share Appreciation
Rights, Restricted Shares, Deferred Shares, Share Purchase Rights or
Other Share-Based Awards under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" has the meaning set forth in Section 11(b).
(e) "Change in Control Price" has the meaning set forth in Section
11(d).
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(g) "Committee" means the Granting Committee of the Board of the
Company.
(h) "Company" means Developers Diversified Realty Corporation, an
Ohio corporation, or any successor corporation.
(i) "Deferred Shares" means an Award of the right to receive Shares
at the end of a specified deferral period granted pursuant to Section
8.
(j) "Disability" means a permanent and total disability as defined in
Section 22(e)(3) of the Code.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" means, as of a given date, (in order of
applicability): (i) the closing price of a Common Share on the
principal exchange on which the Common Shares are then trading, if
any, on the day immediately prior to such date, or if Common Shares
were not traded on the day previous to such date, then on the next
preceding trading day during which a sale occurred; or (ii) if Common
Shares are not traded on an exchange but are quoted on NASDAQ or a
successor quotation
<PAGE> 2
system, (A) the last sale price (if Common Shares are then listed as a
National Market Issue under the NASD National Market System) or (B) if
Common Shares are not then so listed, the mean between the closing
representative bid and asked prices for Common Shares on the day
previous to such date as reported by NASDAQ or such successor
quotation system; or (iii) if Common Shares are not publicly traded on
an exchange and not quoted on NASDAQ or a successor quotation system,
the mean between the closing bid and asked prices for Common Shares,
on the day previous to such date, as determined in good faith by the
Committee; or (iv) if Common Shares are not publicly traded, the fair
market value established by the Committee acting in good faith.
(m) "Incentive Stock Option" means any Stock Option intended to be
and designated as, and that otherwise qualifies as, an "Incentive
Stock Option" within the meaning of Section 422 of the Code or any
successor section thereto.
(n) "Non-Qualified Stock Option" means any Stock Option that is not
an Incentive Stock Option.
(o) "Other Share-Based Awards" means an Award granted pursuant to
Section 10 that is valued, in whole or in part, by reference to, or is
otherwise based on, Shares.
(p) "Outside Director" has the meaning set forth in Section 162(m) of
the Code and the regulations promulgated thereunder.
(q) "Plan" means the 1998 Developers Diversified Realty Corporation
Equity-Based Award Plan, as amended from time to time.
(r) "Potential Change in Control" has the meaning set forth in
Section 11(c).
(s) "Restricted Shares" means an Award of Shares that is granted
pursuant to Section 7 and is subject to restrictions.
(t) "Section 16 Participant" means a participant under the Plan who
is subject to Section 16 of the Exchange Act.
(u) "Share Appreciation Right" means an Award of a right to receive
an amount from the Company that is granted pursuant to Section 6.
(v) "Shares" means the Common Shares, without par value, of the
Company.
(w) "Stock Option" or "Option" means any option to purchase Shares
(including Restricted Shares and Deferred Shares, if the Committee so
determines) that is granted pursuant to Section 5.
(x) "Share Purchase Right" means an Award of the right to purchase
Shares that is granted pursuant to Section 9.
(y) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of
the corporations (other than the last corporation in the unbroken
chain) owns stock
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possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in that chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall
consist of not less than three directors of the Company, all of whom shall be
Outside Directors. Those directors shall be appointed by the Board and shall
serve as the Committee at the pleasure of the Board. The functions of the
Committee specified in the Plan shall be exercised by the Board if and to the
extent that no Committee exists that has the authority to so administer the
Plan.
The Committee shall have full power to interpret and administer the
Plan and full authority to select the individuals to whom Awards will be granted
and to determine the type and amount of any Award to be granted to each
participant, the consideration, if any, to be paid for any Award, the timing of
each Award, the terms and conditions of any Award granted under the Plan, and
the terms and conditions of the related agreements that will be entered into
with participants. As to the selection of and grant of Awards to participants
who are not executive officers of the Company or any Subsidiary or Affiliate, or
Section 16 Participants, the Committee may delegate its responsibilities to
members of the Company's management in any manner consistent with applicable
law.
The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
Award issued under the Plan (and any agreement relating thereto); to direct
employees of the Company or other advisors to prepare such materials or perform
such analyses as the Committee deems necessary or appropriate; and otherwise to
supervise the administration of the Plan.
Any interpretation or administration of the Plan by the Committee, and
all actions and determinations of the Committee, shall be final, binding and
conclusive on the Company, its shareholders, Subsidiaries, Affiliates, all
participants in the Plan, their respective legal representatives, successors and
assigns, and all persons claiming under or through any of them. No member of the
Board or of the Committee shall incur any liability for any action taken or
omitted, or any determination made, in good faith in connection with the Plan.
SECTION 3. SHARES SUBJECT TO THE PLAN.
(a) Aggregate Shares Subject to the Plan. Subject to adjustment as
provided in Section 3(c), the total number of Shares reserved and
available for Awards under the Plan is 1,000,000. Any Shares issued
hereunder may consist, in whole or in part, of authorized and unissued
shares or treasury shares.
(b) Forfeiture or Termination of Awards of Shares. If any Shares
subject to any Award granted hereunder are forfeited or an Award
otherwise terminates or expires without the issuance of Shares, the
Shares subject to that Award shall again be available for distribution
in connection with future Awards under the Plan as set forth in
Section 3(a), unless the participant who had been awarded those
forfeited Shares or the expired or terminated Award has theretofore
received dividends or other benefits of ownership with respect to
those Shares. For purposes hereof, a participant shall not be deemed
to have received a benefit of ownership with respect to those Shares
by the exercise of voting rights, or by the
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accumulation of dividends that are not realized because of the
forfeiture of those Shares or the expiration or termination of the
related Award without issuance of those Shares.
(c) Adjustment. In the event of any merger, reorganization,
consolidation, recapitalization, share dividend, share split,
combination of shares or other change in corporate structure of the
Company affecting the Shares, such substitution or adjustment shall be
made in the aggregate number of Shares reserved for issuance under the
Plan, in the number and option price of Shares subject to outstanding
options granted under the Plan, in the number and purchase price of
Shares subject to outstanding Share Purchase Rights granted under the
Plan, in the number of Share Appreciation Rights granted under the
Plan and in the number of Shares subject to Restricted Share Awards,
Deferred Share Awards and any other outstanding Awards granted under
the Plan as may be approved by the Committee, in its sole discretion,
but the number of Shares subject to any Award shall always be a whole
number. Any fractional Shares shall be eliminated.
(d) Annual Award Limit. No participant may be granted Stock Options
or other Awards under the Plan with respect to an aggregate of more
than 500,000 Shares (subject to adjustment as provided in Section
3(c) hereof) during any calendar year.
SECTION 4. ELIGIBILITY.
Grants may be made from time to time to those officers and employees
of the Company who are designated by the Committee in its sole and exclusive
discretion. Eligible persons may include, but shall not necessarily be limited
to, officers of the Company and any Subsidiary, excluding members of the
Committee; however, Stock Options intended to qualify as Incentive Stock
Options shall be granted only to eligible persons while actually employed by
the Company or a Subsidiary. The Committee may grant more than one Award to the
same eligible person. No Award shall be granted to any eligible person during
any period of time when such eligible person is on a leave of absence.
SECTION 5. STOCK OPTIONS.
(a) Grant. Stock Options may be granted alone, in addition to or in
tandem with other Awards granted under the Plan or cash awards made
outside the Plan. The Committee shall determine the individuals to
whom, and the time or times at which, grants of Stock Options will be
made, the number of Shares purchasable under each Stock Option, and
the other terms and conditions of the Stock Options in addition to
those set forth in Sections 5(b) and 5(c). Any Stock Option granted
under the Plan shall be in such form as the Committee may from time
to time approve.
Stock Options granted under the Plan may be of two types which shall
be indicated on their face: (i) Incentive Stock Options and (ii)
Non-Qualified Stock Options. Subject to Section 5(c), the Committee
shall have the authority to grant to any participant Incentive Stock
Options, Non-Qualified Stock Options or both types of Stock Options.
(b) Terms and Conditions. Options granted under the Plan shall be
evidenced by an agreement ("Option Agreements"), shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:
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(1) Option Price. The option price per share of
Shares purchasable under a Non-Qualified Stock Option or an
Incentive Stock Option shall be determined by the Committee at
the time of grant and shall be not less than 100% of the Fair
Market Value of the Shares at the date of grant (or, with
respect to an Incentive Stock Option, 110% of the Fair Market
Value of the Shares at the date of grant in the case of a
participant who at the date of grant owns Shares possessing
more than 10% of the total combined voting power of all
classes of stock of the Company or its parent or Subsidiary
corporations (as determined under Sections 424(d), (e) and (f)
of the Code)).
(2) Option Term. The term of each Stock Option shall
be determined by the Committee and may not exceed ten years
from the date the Option is granted (or, with respect to an
Incentive Stock Option, five years in the case of a
participant who at the date of grant owns Shares possessing
more than 10% of the total combined voting power of all
classes of stock of the Company or its parent or Subsidiary
corporations (as determined under Sections 424(d), (e) and (f)
of the Code)).
(3) Exercise. Stock Options shall be exercisable at
such time or times and shall be subject to such terms and
conditions as shall be determined by the Committee at or after
grant; but, except as provided in Section 5(b)(6) and Section
11, unless otherwise determined by the Committee at or after
grant, no Stock Option shall be exercisable prior to six
months and one day following the date of grant. If any Stock
Option is exercisable only in installments or only after
specified exercise dates, the Committee may waive, in whole or
in part, such installment exercise provisions, and may
accelerate any exercise date or dates, at any time at or after
grant, based on such factors as the Committee shall determine
in its sole discretion.
(4) Method of Exercise. Subject to any installment
exercise provisions that apply with respect to any Stock
Option, and the six month and one day holding period set forth
in Section 5(b)(3), that Stock Option may be exercised in
whole or in part, at any time during the Option period, by the
holder thereof giving to the Company written notice of
exercise specifying the number of Shares to be purchased.
That notice shall be accompanied by payment in full
of the Option price of the Shares for which the Option is
exercised, in cash or Shares or by check or such other
instrument as the Committee may accept. The value of each such
Share surrendered or withheld shall be 100% of the Fair Market
Value of the Shares on the date the option is exercised.
No Shares shall be issued on an exercise of an Option
until full payment has been made. A participant shall not have
rights to dividends or any other rights of a shareholder with
respect to any Shares subject to an Option unless and until
the participant has given written notice of exercise, has paid
in full for those Shares, has given, if requested, the
representation described in Section 14(a), and those Shares
have been issued to him.
(5) Non-Transferability of Options. No Stock Option
shall be transferable by any participant other than by will or
by the laws of descent and distribution or pursuant to a
qualified domestic relations order (as defined in the Code or
the Employment Retirement Income Security Act of 1974, as
amended) except that, if so provided in the Option Agreement,
the participant may transfer the Option, other than an
Incentive Stock Option, during his lifetime to one or more
members of his family, to one or more trusts for the benefit
of one or more of his family, or to a partnership or
partnerships of members of his family, provided that no
consideration is paid for the transfer and that the transfer
would not result in
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the loss of any exemption under Rule 16b-3 of the Exchange
Act with respect to any Option. The transferee of an Option
will be subject to all restrictions, terms and conditions
applicable to the Option prior to its transfer, except that
the Option will not be further transferable by the
transferee other than by will or by the laws of descent and
distribution.
(6) Termination of Employment
(i) Termination by Death. Subject to Section 5(c), if
any participant's employment with the Company or any
Subsidiary or Affiliate terminates by reason of death, any
Stock Option held by that participant shall become
immediately and automatically vested and exercisable. If
termination of a participant's employment is due to death,
then any Stock Option held by that participant may
thereafter be exercised for a period of one year (or such
other period as the Committee may specify at or after
grant) from the date of death. Notwithstanding the
foregoing, in no event will any Stock Option be exercisable
after the expiration of the option period of such Option.
The balance of the Stock Option shall be forfeited if not
exercised within one year.
(ii) Termination by Reason of Disability. Subject to
Sections 5(b)(3) and 5(c), if a participant's employment
with the Company or any Subsidiary or Affiliate terminates
by reason of Disability, any Stock Option held by that
participant shall become immediately and automatically
vested and exercisable. If termination of a participant's
employment is due to Disability, then any Stock Option held
by that participant may thereafter be exercised by the
participant or by the participant's duly authorized legal
representative if the participant is unable to exercise the
Option as a result of the participant's Disability, for a
period of one year (or such other period as the Committee
may specify at or after grant) from the date of such
termination of employment, but in no event may any such
Option be exercised prior to six months and one day from
the date of grant; and if the participant dies within that
one-year period (or such other period as the Committee may
specify at or after grant), any unexercised Stock Option
held by that participant shall thereafter be exercisable by
the estate of the participant (acting through its
fiduciary) for a period of one year from the date of that
termination of employment. Notwithstanding the foregoing,
in no event will any Stock Option be exercisable after the
expiration of the option period of such Option. The balance
of the Stock Option shall be forfeited if not exercised
within one year.
(iii) Termination by Retirement. Unless otherwise
determined by the Committee at or after the time of
granting any Stock Option, if a participant terminates
employment with the Company or any Subsidiary or Affiliate
because of normal or early retirement, all Stock Options
held by that participant shall terminate one year after the
date of retirement. Notwithstanding the foregoing, in no
event will any Stock Option be exercisable after the
expiration of the option period of such Option. The balance
of the Stock Option shall be forfeited if not exercised
within one year.
(iv) Other Termination. Unless otherwise determined
by the Committee at or after the time of granting any Stock
Option, if a participant's employment with the Company or
any Subsidiary or Affiliate terminates for any reason other
than death, Disability or retirement, all Stock Options
held by that participant shall terminate 30 days after the
date employment terminates.
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Notwithstanding the foregoing, in no event will any Stock Option
be exercisable after the expiration of the option period of such
Option. The balance of the Stock Option shall be forfeited.
In the event a participant is granted a leave of absence by
the Company or any Subsidiary or Affiliate to enter military
service or because of sickness, his employment with the Company
or such Subsidiary or Affiliate will not be considered
terminated, and he shall be deemed an employee of the Company or
such Subsidiary or Affiliate during such leave of absence or any
extension thereof granted by the Company or such Subsidiary or
Affiliate.
(c) Incentive Stock Options. Notwithstanding Sections 5(b)(6) and
(7), an Incentive Stock Option shall be exercisable by (i) a
participant's authorized legal representative (if the participant is
unable to exercise the Incentive Stock Option as a result of the
participant's Disability) only if, and to the extent, permitted by
Section 422 of the Code and (ii) by the participant's estate, in the
case of death, or authorized legal representative, in the case of
Disability, no later than 10 years from the date the Incentive Stock
Option was granted (in addition to any other restrictions or
limitations that may apply). Anything in the Plan to the contrary
notwithstanding, no term or provision of the Plan relating to
Incentive Stock Options shall be interpreted, amended or altered, nor
shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the
Code, or, without the consent of the participants affected, to
disqualify any Incentive Stock Option under that Section 422 or any
successor Section thereto.
(d) Buyout Provisions. The Committee may at any time buy out for a
payment in cash, Shares, Deferred Shares or Restricted Shares an
Option previously granted, based on such terms and conditions as the
Committee shall establish and agree upon with the participant, but no
such transaction involving a Section 16 Participant shall be
structured or effected in a manner that would result in any liability
on the part of the participant under Section 16(b) of the Exchange
Act or the rules and regulations promulgated thereunder.
(e) Certain Reissuance of Stock Options. To the extent Common Shares
are surrendered by a participant in connection with the exercise of a
Stock Option in accordance with Section 5(b), the Committee may, in
its sole discretion, grant new Stock Options to such participant (to
the extent Common Shares remain available for Awards), subject to the
following terms and conditions:
(1) The number of Common Shares shall be equal to the number of
Common Shares being surrendered by the participant;
(2) The option price per Common Share shall be equal to the Fair
Market Value of Common Shares, determined on the date of exercise of
the Stock Options whose exercise caused such Award; and
(3) The terms and conditions of such Stock Options shall in all
other respects replicate such terms and conditions of the Stock
Options whose exercise caused such Award, except to the extent such
terms and conditions are determined to not be wholly consistent with
the general provisions of this Section 5, or in conflict with the
remaining provisions of this Plan.
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SECTION 6. SHARE APPRECIATION RIGHTS.
(a) Grant. Share Appreciation Rights may be granted in
connection with all or any part of an Option, either
concurrently with the grant of the Option or, if the Option is a
Non-Qualified Stock Option, by an amendment to the Option at any
time thereafter during the term of the Option. Share
Appreciation Rights may be exercised in whole or in part at such
times under such conditions as may be specified by the Committee
in the participant's Option Agreement.
(b) Terms and Conditions. The following terms and conditions
will apply to all Share Appreciation Rights that are granted in
connection with Options:
(1) Rights. Share Appreciation Rights shall entitle the
participant, upon exercise of all or any part of the Share
Appreciation Rights, to surrender to the Company, unexercised,
that portion of the underlying Option relating to the same
number of Shares as is covered by the Share Appreciation Rights
(or the portion of the Share Appreciation Rights so exercised)
and to receive in exchange from the Company an amount equal to
the excess of (x) the Fair Market Value, on the date of
exercise, of the Shares covered by the surrendered portion of
the underlying Option over (y) the exercise price of the Shares
covered by the surrendered portion of the underlying Option. The
Committee may limit the amount that the participant will be
entitled to receive upon exercise of the Share Appreciation
Right.
(2) Surrender of Option. Upon the exercise of the Share
Appreciation Right and surrender of the related portion of the
underlying Option, the Option, to the extent surrendered, will
not thereafter be exercisable. The underlying Option may provide
that such Share Appreciation Rights will be payable solely in
cash. The terms of the underlying Option shall provide a method
by which an alternative fair market value of the Shares on the
date of exercise shall be calculated based on one of the
following: (x) the closing price of the Shares on the national
exchange on which they are then traded on the business day
immediately preceding the day of exercise; (y) the highest
closing price of the Shares on the national exchange on which
they have been traded during the 90 days immediately preceding
the Change in Control; or (z) the greater of (x) and (y).
(3) Exercise. In addition to any further conditions upon
exercise that may be imposed by the Committee, the Share
Appreciation Rights shall be exercisable only to the extent that
the related Option is exercisable, except that in no event will
a Share Appreciation Right held by a Section 16 Participant be
exercisable within the first six months after it is awarded even
though the related Option is or becomes exercisable, and each
Share Appreciation Right will expire no later than the date on
which the related Option expires. A Share Appreciation Right may
be exercised only at a time when the Fair Market Value of the
Shares covered by the Share Appreciation Right exceeds the
exercise price of the Shares covered by the underlying Option.
No Share Appreciation Right held by a Section 16 Participant
shall be exercisable by its terms within the first six months
after it is granted, and a Section 16 Participant may exercise a
Share Appreciation Right only during a period beginning on the
third business day and ending on the twelfth business day
following the release for publication of quarterly or annual
summary statements of the Company's sales and earnings.
(4) Method of Exercise. Share Appreciation Rights may be
exercised by the participant giving written notice of the
exercise to the Company, stating the number of Share
Appreciation Rights the participant has elected to exercise and
surrendering the portion of the
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underlying Option relating to the same number of Shares as the
number of Share Appreciation Rights elected to be exercised.
(5) Payment. The manner in which the Company's obligation
arising upon the exercise of the Share Appreciation Right will
be paid will be determined by the Committee and shall be set
forth in the participant's Option Agreement. The Committee may
provide for payment in Shares or cash, or a fixed combination of
Shares or cash, or the Committee may reserve the right to
determine the manner of payment at the time the Share
Appreciation Right is exercised. Shares issued upon the exercise
of a Share Appreciation Right will be valued at their Fair
Market Value on the date of exercise.
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SECTION 7. RESTRICTED SHARES.
(a) Grant. Restricted Shares may be issued alone, in addition
to or in tandem with other Awards under the Plan or cash
awards made outside the Plan. The Committee shall determine
the individuals to whom, and the time or times at which,
grants of Restricted Shares will be made, the number of
Restricted Shares to be awarded to each participant, the
price (if any) to be paid by the participant (subject to
Section 7(b)), the date or dates upon which Restricted Share
Awards will vest, the period or periods within which those
Restricted Share Awards may be subject to forfeiture, and the
other terms and conditions of those Awards in addition to
those set forth in Section 7(b).
The Committee may condition the grant of Restricted
Shares upon the attainment of specified performance goals or
such other factors as the Committee may determine in its sole
discretion.
(b) Terms and Conditions. Restricted Shares awarded under the
Plan shall be subject to the following terms and conditions
and such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall deem
desirable. A participant who receives a Restricted Share Award
shall not have any rights with respect to that Award, unless
and until the participant has executed an agreement evidencing
the Award in the form approved from time to time by the
Committee, has delivered a fully executed copy thereof to the
Company, and has otherwise complied with the applicable terms
and conditions of that Award.
(1) The purchase price (if any) for Restricted Shares
shall be determined by the Committee at the time of grant.
(2) Awards of Restricted Shares must be accepted by
executing a Restricted Share Award agreement and paying the
price (if any) that is required under Section 7(b)(1).
(3) Each participant receiving a Restricted Share
Award shall be issued a stock certificate in respect of those
Restricted Shares. The certificate shall be registered in the
name of the participant and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable
to the Award.
(4) The Committee shall require that the stock
certificates evidencing the Restricted Shares be held in
custody by the Company until the restrictions thereon shall
have lapsed, and that, as a condition of any Restricted Shares
Award, the participant shall have delivered to the Company a
stock power, endorsed in blank, relating to the Shares covered
by that Award.
(5) Subject to the provisions of this Plan and the
Restricted Share Award agreement, during a period set by the
Committee commencing with the date of any Award (the
"Restriction Period"), the participant shall not be permitted
to sell, transfer, pledge, assign or otherwise encumber the
Restricted Shares covered by that Award. The Restriction
Period shall not be less than three years in duration
("Minimum Restriction Period") unless otherwise determined by
the Committee at the time of grant. Subject to these
limitations and the Minimum Restriction Period requirement,
the Committee, in its sole discretion, may provide for the
lapse of restrictions in installments and may accelerate or
waive restrictions, in whole or in part, based on service,
performance or such other factors and criteria as the
Committee may determine in its sole discretion.
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(6) Except as provided in this Section 7(b)(6) and
Section 7(b)(5) and Section 7(b)(7), the participant shall
have, with respect to the Restricted Shares awarded, all of
the rights of a shareholder of the Company, including the
right to vote the Shares and the right to receive any
dividends. The Committee, in its sole discretion, as
determined at the time of Award, may permit or require the
payment of cash dividends to be deferred and subject to
forfeiture and, if the Committee so determines, reinvested,
subject to Section 14(f), in additional Restricted Shares to
the extent Shares are available under Section 3, or otherwise
reinvested. Unless the Committee or Board determines
otherwise, Share dividends issued with respect to Restricted
Shares shall be treated as additional Restricted Shares that
are subject to the same restrictions and other terms and
conditions that apply to the Shares with respect to which such
dividends are issued.
(7) No Restricted Shares shall be transferable by a
participant other than by will or by the laws of descent and
distribution.
(8) If a participant's employment with the Company or
any Subsidiary or Affiliate terminates by reason of death, any
Restricted Shares held by that participant shall thereafter
vest and any restriction shall lapse to the extent such
Restricted Shares would have become vested or no longer
subject to restriction within one year from the time of death
had the participant continued to fulfill all of the conditions
of the Restricted Share Award during that period (or on such
accelerated basis as the Committee may determine at or after
grant). The balance of the Restricted Shares shall be
forfeited.
(9) If a participant's employment with the Company or
any Subsidiary or Affiliate terminates by reason of
Disability, any Restricted Shares held by that participant
shall thereafter vest and any restriction shall lapse to the
extent such Restricted Shares would have become vested or no
longer subject to restriction within one year from the time of
termination had the participant continued to fulfill all of
the conditions of the Restricted Share Award during that
period (or on such accelerated basis as the Committee may
determine at or after grant), subject in all cases to the
Minimum Restriction Period requirement. The balance of the
Restricted Shares shall be forfeited.
(10) Unless otherwise determined by the Committee at
or after the time of granting any Restricted Shares, if a
participant's employment with the Company or any Subsidiary or
Affiliate terminates for any reason other than death or
Disability, the Restricted Shares held by that participant
that are unvested or subject to restriction at the time of
termination shall thereupon be forfeited.
(c) Minimum Value. In order to better ensure that Award
payments actually reflect the performance of the Company and
service of the participant, the Committee may provide, in its
sole discretion, for a tandem performance-based or other award
designed to guarantee a minimum value, payable in cash or
Shares, to the recipient of a Restricted Share Award, subject
to such performance, future service, deferral and other terms
and conditions as may be specified by the Committee.
SECTION 8. DEFERRED SHARES.
(a) Grant. Deferred Shares may be awarded alone, in addition
to or in tandem with other Awards granted under the Plan or
cash awards made outside the Plan. The Committee shall
determine the individuals to whom, and the time or times at
which, Deferred Shares shall be
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awarded, the number of Deferred Shares to be awarded to any
participant, the duration of the period (the "Deferral
Period") during which, and the conditions under which,
receipt of the Shares will be deferred, and the other terms
and conditions of the Award in addition to those set forth in
Section 8(b).
The Committee may condition the grant of Deferred Shares upon
the attainment of specified performance goals or such other
factors as the Committee shall determine in its sole
discretion.
(b) Terms and Conditions. Deferred Share Awards shall be
subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent
with the terms of the Plan, as the Committee shall deem
desirable:
(1) The purchase price for Deferred Shares shall be
determined at the time of grant by the Committee. Subject to
the provisions of the Plan and the Award agreement referred to
in Section 8(b)(9), Deferred Share Awards may not be sold,
assigned, transferred, pledged or otherwise encumbered during
the Deferral Period. At the expiration of the Deferral Period
(or the Elective Deferral Period referred to in Section
8(b)(8), where applicable), stock certificates shall be
delivered to the participant, or the participant's legal
representative, for the Shares covered by the Deferred Share
Award. The Deferral Period applicable to any Deferred Share
Award shall not be less than six months and one day ("Minimum
Deferral Period").
(2) Unless otherwise determined by the Committee at
grant, amounts equal to any dividends declared during the
Deferral Period with respect to the number of Shares covered
by a Deferred Share Award will be paid to the participant
currently, or deferred and deemed to be reinvested in
additional Deferred Shares, or otherwise reinvested, all as
determined by the Committee, in its sole discretion, at or
after the time of the Award.
(3) No Deferred Shares shall be transferable by a
participant other than by will or by the laws of descent and
distribution.
(4) If a participant's employment by the Company or
any Subsidiary or Affiliate terminates by reason of death, any
Deferred Shares held by such participant shall thereafter vest
or any restriction shall lapse to the extent such Deferred
Shares would have become vested or no longer subject to
restriction within one year from the time of death had the
participant continued to fulfill all of the conditions of the
Deferred Share Award during that period (or on such
accelerated basis as the Committee may determine at or after
grant). The balance of the Deferred Shares shall be forfeited.
(5) If a participant's employment by the Company or
any Subsidiary or Affiliate terminates by reason of
Disability, any Deferred Shares held by such participant shall
thereafter vest or any restriction lapse to the extent such
Deferred Shares would have become vested or no longer subject
to restriction within one year from the time of termination
had the participant continued to fulfill all of the conditions
of the Deferred Shares Award during that period (or on such
accelerated basis as the Committee may determine at or after
grant), subject in all cases to the Minimum Deferral Period
requirement. The balance of the Deferred Shares shall be
forfeited.
(6) Unless otherwise determined by the Committee at
or after the time of granting any Deferred Share Award, if a
participant's employment by the Company or any
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Subsidiary or Affiliate terminates for any reason other than
death or Disability, all Deferred Shares held by such
participant which are unvested or subject to restriction
shall thereupon be forfeited.
(7) Based on service, performance or such other
factors or criteria as the Committee may determine, the
Committee may, at or after grant, accelerate the vesting of
all or any part of any Deferred Share Award or waive a portion
of the Deferral Period for all or any part of such Award,
subject in all cases to the Minimum Deferral Period
requirement.
(8) A participant may elect to further defer receipt
of a Deferred Share Award (or an installment of an Award) for
a specified period or until a specified event (the "Elective
Deferral Period"), subject in each case to the Committee's
approval and the terms of this Section 8 and such other terms
as are determined by the Committee, all in its sole
discretion. Subject to any exceptions approved by the
Committee, such election must be made at least 12 months prior
to completion of the Deferral Period for such Deferred Share
Award (or such installment).
(9) Each such Award shall be confirmed by, and
subject to the terms of, a Deferred Share Award agreement
evidencing the Award in the form approved from time to time by
the Committee.
(c) Minimum Value Provisions. In order to better ensure that
Award payments actually reflect the performance of the Company
and service of the participant, the Committee may provide, in
its sole discretion, for a tandem performance-based or other
Award designed to guarantee a minimum value, payable in cash
or Shares to the recipient of a Deferred Share Award, subject
to such performance, future service, deferral and other terms
and conditions as may be specified by the Committee.
SECTION 9. SHARE PURCHASE RIGHTS.
(a) Grant. Share Purchase Rights may be granted alone, in
addition to or in tandem with other Awards granted under the
Plan or cash awards made outside the Plan. The Committee shall
determine the individuals to whom, and the time or times at
which, grants of Share Purchase Rights will be made, the
number of Shares which may be purchased pursuant to the Share
Purchase Rights, and the other terms and conditions of the
Share Purchase Rights in addition to those set forth in
Section 9(b). The Shares subject to the Share Purchase Rights
may be purchased, as determined by the Committee at the time
of grant:
(1) at the Fair Market Value of such Shares on the
date of grant; or
(2) at 85% of the Fair Market Value of such Shares on
the date of grant if the grant of Share Purchase Rights is
made in lieu of cash compensation.
Subject to Section 9(b) hereof, the Committee may also impose
such deferral, forfeiture or other terms and conditions as it shall
determine, in its sole discretion, on such Share Purchase Rights or the
exercise thereof.
Each Share Purchase Right Award shall be confirmed by, and be
subject to the terms of, a Share Purchase Rights Agreement
which shall be in form approved by the Committee.
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(b) Terms and Conditions. Share Purchase Rights may contain
such additional terms and conditions not inconsistent with the
terms of the Plan as the Committee shall deem desirable, and
shall generally be exercisable for such period as shall be
determined by the Committee. However, Share Purchase Rights
granted to Section 16 Participants shall not become
exercisable earlier than six months and one day after the
grant date. Share Purchase Rights shall not be transferable by
a participant other than by will or by the laws of descent and
distribution.
SECTION 10. OTHER SHARE-BASED AWARDS.
(a) Grant. Other Awards of Shares and other Awards that are
valued, in whole or in part, by reference to, or are otherwise
based on, Shares, including, without limitation, performance
shares, convertible preferred shares, convertible debentures,
exchangeable securities and Share Awards or options valued by
reference to Book Value or Subsidiary performance, may be
granted alone, in addition to or in tandem with other Awards
granted under the Plan or cash awards made outside the Plan.
At the time the Shares or Other Share-Based Awards are
granted, the Committee shall determine the individuals to whom
and the time or times at which such Shares or Other
Share-Based Awards shall be awarded, the number of Shares to
be used in computing an Award or which are to be awarded
pursuant to such Awards, the consideration, if any, to be paid
for such Shares or Other Share-Based Awards, and all other
terms and conditions of the Awards in addition to those set
forth in Section 10(b).
The provisions of Other Share-Based Awards need not be the
same with respect to each participant.
(b) Terms and Conditions. Other Share-Based Awards shall be
subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent
with the terms of the Plan, as the Committee shall deem
desirable:
(1) Subject to the provisions of this Plan and the
Award agreement referred to in Section 10(b)(5) below, Shares
awarded or subject to Awards made under this Section 10 may
not be sold, assigned, transferred, pledged or otherwise
encumbered prior to the date on which the Shares are issued,
or, if later, the date on which any applicable restriction,
performance, holding or deferral period or requirement is
satisfied or lapses. All Shares or Other Share-Based Awards
granted under this Section 10 shall be subject to a minimum
holding period (including any applicable restriction,
performance and/or deferral periods) of six months and one day
("Minimum Holding Period").
(2) Subject to the provisions of this Plan and the
Award agreement and unless otherwise determined by the
Committee at the time of grant, the recipient of an Other
Share-Based Award shall be entitled to receive, currently or
on a deferred basis, interest or dividends or interest or
dividend equivalents with respect to the number of Shares
covered by the Award, as determined at the time of the Award
by the Committee, in its sole discretion, and the Committee
may provide that such amounts (if any) shall be deemed to have
been reinvested in additional Shares or otherwise reinvested.
(3) Subject to the Minimum Holding Period, any Other
Share-Based Award and any Shares covered by any such Award
shall vest or be forfeited to the extent, at the times
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and subject to the conditions, if any, provided in the Award
agreement, as determined by the Committee in its sole
discretion.
(4) In the event of the participant's Disability or
death, or in cases of special circumstances, the Committee
may, in its sole discretion, waive, in whole or in part, any
or all of the remaining limitations imposed hereunder or under
any related Award agreement (if any) with respect to any part
or all of any Award under this Section 10, provided that the
Minimum Holding Period requirement may not be waived, except
in case of a participant's death.
(5) Each Award shall be confirmed by, and subject to
the terms of, an agreement or other instrument evidencing the
Award in the form approved from time to time by the Committee,
the Company and the participant.
(6) Shares (including securities convertible into
Shares) issued on a bonus basis under this Section 10 shall be
issued for no cash consideration. Shares (including securities
convertible into Shares) purchased pursuant to a purchase
right awarded under this Section 10 shall bear a price of at
least 85% of the Fair Market Value of the Shares on the date
of grant. The purchase price of such Shares, and of any Other
Share-Based Award granted hereunder, or the formula by which
such price is to be determined, shall be fixed by the
Committee at the time of grant.
(7) In the event that any "derivative security," as
defined in Rule 16a-1(c) (or any successor thereto)
promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act, is awarded pursuant to this
Section 10 to any Section 16 Participant, such derivative
security shall not be transferrable other than by will or by
the laws of descent and distribution.
SECTION 11. CHANGE IN CONTROL PROVISION.
(a) Impact of Event. In the event of: (i) a "Change in
Control" as defined in Section 11(b) or (ii) a "Potential
Change in Control" as defined in Section 11(c), the following
acceleration and valuation provisions shall apply:
(1) Any Stock Options awarded under the Plan not
previously exercisable and vested shall become fully
exercisable and vested;
(2) Any Share Appreciation Rights shall become
immediately exercisable;
(3) The restrictions applicable to any Restricted
Share Awards, Deferred Shares, Share Purchase Rights and
Other Share-Based Awards shall lapse and such Shares and
Awards shall be deemed fully vested; and
(4) The value of all outstanding Awards, in each
case to the extent vested, shall, unless otherwise determined
by the Committee in its sole discretion at or after grant but
prior to any Change in Control or Potential Change in
Control, be cashed out on the basis of the "Change in Control
Price" as defined in Section 11(d) as of the date such Change
in Control or such Potential Change in Control is determined
to have occurred;
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but the provisions of Sections 11(a)(l) through (3) shall not apply with
respect to Awards granted to any Section 16 Participant which have been
held by such participant for less than six months and one day as of the
date that such Change in Control or Potential Change in Control is
determined to have occurred.
(b) Definition of Change in Control. For purposes of Section
11(a), a "Change in Control" means the occurrence of any of the
following: (i) the Board or shareholders of the Company approve a
consolidation or merger in which the Company is not the surviving
corporation, the sale of substantially all of the assets of the
Company, or the liquidation or dissolution of the Company; (ii)
any person or other entity (other than the Company or a
Subsidiary or any Company employee benefit plan (including any
trustee of any such plan acting in its capacity as trustee))
purchases any Shares (or securities convertible into Shares)
pursuant to a tender or exchange offer without the prior consent
of the Board of Directors, or becomes the beneficial owner of
securities of the Company representing 20% or more of the voting
power of the Company's outstanding securities; or (iii) during
any two-year period, individuals who at the beginning of such
period constitute the entire Board of Directors cease to
constitute a majority of the Board of Directors, unless the
election or the nomination for election of each new director is
approved by at least two-thirds of the directors then still in
office who were directors at the beginning of that period.
(c) Definition of Potential Change in Control. For purposes of
Section 11(a), a "Potential Change in Control" means the
happening of any one of the following:
(1) The approval by the shareholders of the Company
of an agreement by the Company, the consummation of which would
result in a Change in Control of the Company as defined in Section
11(b); or
(2) The acquisition of beneficial ownership, directly
or indirectly, by any entity, person or group (other than the
Company or a Subsidiary or any Company employee benefit plan
(including any trustee of any such plan acting in its capacity as
trustee)) of securities of the Company representing 5% or more of
the combined voting power of the Company's outstanding securities
and the adoption by the Board of a resolution to the effect that a
Potential Change in Control of the Company has occurred for
purposes of this Plan.
(d) Change in Control Price. For purposes of this Section 11,
"Change in Control Price" means the highest price per share paid
in any transaction reported on the New York Stock Exchange
Composite Index (or, if the Shares are not then traded on the New
York Stock Exchange, the highest price paid as reported for any
national exchange on which the Shares are then traded) or paid or
offered in any bona fide transaction related to a Change in
Control or Potential Change in Control of the Company, at any time
during the 60-day period immediately preceding the occurrence of
the Change in Control (or, when applicable, the occurrence of the
Potential Change in Control event), in each case as determined by
the Committee.
SECTION 12. AMENDMENTS AND TERMINATION.
The Board may at any time, in its sole discretion, amend, alter or
discontinue the Plan, but no such amendment, alteration or discontinuation
shall be made that would impair the rights of a participant under an Award
theretofore granted, without the participant's consent. The Company shall
submit to the shareholders of the Company, for their approval, any amendments
to the Plan required pursuant to Section
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162(m) of the Code or which would materially increase the benefits accruing to
participants under the Plan so long as such approval is required by law or
regulation.
The Committee may at any time, in its sole discretion, amend the
terms of any Award, but no such amendment shall be made that would impair the
rights of a participant under an Award theretofore granted, without the
participant's consent; nor shall any such amendment be made that would make the
applicable exemptions provided by Rule 16b-3 under the Exchange Act unavailable
to any Section 16 Participant holding the Award without the participant's
consent.
Subject to the above provisions, the Board shall have all
necessary authority to amend the Plan to take into account changes in
applicable securities and tax laws and accounting rules, as well as other
developments.
SECTION 13. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any payment not yet made
to a participant by the Company, nothing contained herein shall give that
participant any rights that are greater than those of a general creditor of the
Company.
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SECTION 14. GENERAL PROVISIONS.
(a) The Committee may require each participant acquiring Shares
pursuant to an Award under the Plan to represent to and agree with
the Company in writing that the participant is acquiring the
Shares without a view to distribution thereof. The certificates
for any such Shares may include any legend which the Committee
deems appropriate to reflect any restrictions on transfer.
All Shares or other securities delivered under the Plan shall be
subject to such stop-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations and
other requirements of the Securities and Exchange Commission, any
stock exchange upon which the Shares are then listed, and any
applicable federal or state securities laws, and the Committee may
cause a legend or legends to be put on any certificate for any
such Shares to make appropriate reference to those restrictions.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required, and such
arrangements may be either generally applicable or applicable only
in specific cases.
(c) Neither the adoption of the Plan, nor its operation, nor any
document describing, implementing or referring to the Plan, or any
part thereof, shall confer upon any participant under the Plan any
right to continue in the employ, or as a director, of the Company
or any Subsidiary or Affiliate, or shall in any way affect the
right and power of the Company or any Subsidiary or Affiliate to
terminate the employment, or service as a director, of any
participant under the Plan at any time with or without assigning a
reason therefor, to the same extent as the Company or any
Subsidiary or Affiliate might have done if the Plan had not been
adopted.
(d) For purposes of this Plan, a transfer of a participant between
the Company and any Subsidiary or Affiliate shall not be deemed a
termination of employment.
(e) No later than the date as of which an amount first becomes
includable in the gross income of the participant for federal
income tax purposes with respect to any Award under the Plan, the
participant shall pay to the Company, or make arrangements
satisfactory to the Committee regarding the payment of, any
federal, state or local taxes or other items of any kind required
by law to be withheld with respect to that amount. Subject to the
following sentence, unless otherwise determined by the Committee,
withholding obligations may be settled with Shares, including
unrestricted Shares previously owned by the participant or Shares
that are part of the Award that gives rise to the withholding
requirement. Notwithstanding the foregoing, any election by a
Section 16 Participant to settle any tax withholding obligation
with Shares that are part of an Award shall be subject to approval
by the Committee in its sole discretion. The obligations of the
Company under the Plan shall be conditional on those payments or
arrangements and the Company and its Subsidiaries and Affiliates
shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise payable to
the participant.
(f) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Shares (or in Deferred Shares
or other types of Awards) at the time of any dividend payment
shall be permissible only if sufficient Shares are available under
Section 3 for reinvestment (taking into account then outstanding
Stock Options).
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(g) The Plan, all Awards made and actions taken thereunder and any
agreements relating thereto shall be governed by and construed in
accordance with the laws of the State of Ohio.
(h) All agreements entered into with participants pursuant to the
Plan shall be subject to the Plan.
(i) The provisions of Awards need not be the same with respect to
each participant.
SECTION 15. SHAREHOLDER APPROVAL; EFFECTIVE DATE OF PLAN.
The Plan was adopted by the Board on March 2, 1998 and is subject
to approval by a majority of the holders of the Company's outstanding Shares,
in accordance with applicable law. If the Plan is not so approved within twelve
(12) months after the date the Plan is adopted by the Board of Directors, the
Plan and any Grants made hereunder shall be null and void. However, if the Plan
is so approved, no further shareholder approval shall be required with respect
to the granting of Awards pursuant to the Plan.
SECTION 16. TERM OF PLAN.
No Award shall be granted pursuant to the Plan on or after March
1, 2008, but Awards granted prior to that date may extend beyond that date.
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EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference (i) in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 333-37067 and
333-05565) and (ii) in the Registration Statements on Form S-8 (Nos. 333-33819,
33-84606 and 33-74562) of Developers Diversified Realty Corporation of our
report dated June 16, 1998 relating to the combined statement of revenue and
certain expenses of The Family Center Properties and our report dated June 16,
1998 relating to the combined statement of revenue and certain expenses of The
Sansone Properties, both of which appear in the Current Report on Form 8-K of
Developers Diversified Realty Corporation dated April 28, 1998.
PRICE WATERHOUSE LLP
Cleveland, Ohio
June 23, 1998
