Document:

EX-10.2

 

Exhibit 10.2

December 4, 2006

	 	 	 
	To:

	 	Developers Diversified Realty Corporation
	 

	 	3300 Enterprise Parkway
	 

	 	Beachwood, Ohio 44122
	 
	 	 
	From:

	 	Merrill Lynch International (“MLI”)
	 

	 	Merrill Lynch Financial Centre
	 

	 	2 King Edward Street
	 

	 	London EC1A 1HQ
	 

	 	England
	 
	 	 
	From:

	 	Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”)
	 

	 	Solely as Agent
	 

	 	tel: (212) 449-8675
	 

	 	fax: (917) 778-0835
	 

	 	Attention: Fran Jacobson

Dear Sirs,

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions
of the transaction entered into between us on the Trade Date specified below (the “Transaction”).
This Confirmation constitutes a “Confirmation” as referred to in the ISDA Master Agreement
specified below.

	1.	 	The definitions and provisions contained in the 2000 ISDA Definitions (the “2000
Definitions”) and the 2002 ISDA Equity Derivatives Definitions (the “2002 Definitions” and,
together with the 2000 Definitions, the “Definitions”), each as published by the International
Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the
event of any inconsistency between the 2002 Definitions and the 2000 Definitions, the 2002
Definitions will govern. In the event of any inconsistency between the Definitions and this
Confirmation, this Confirmation will govern.
	 
	 	 	This Confirmation evidences a complete and binding agreement between Party A and Party B as
to the terms of the Transaction to which this Confirmation relates. This Confirmation shall
supplement, form a part of, and be subject to an agreement in the form of the 2002 ISDA
Master Agreement (the “Agreement”) as if Party A and Party B had executed an agreement in
such form on the Trade Date (but without any Schedule except for the election of the laws of
the State of New York as the governing law). In the event of any inconsistency between
provisions of that Agreement and this Confirmation, this Confirmation will prevail for the
purpose of the Transaction to which this Confirmation relates. The parties hereby agree that
no Transaction other than the Transaction to which this Confirmation relates shall be
governed by the Agreement. For purposes of the 2002 Definitions, the Transaction is a Share
Forward Transaction.
	 
	 	 	Party A and Party B each represents to the other that it has entered into this Transaction
in reliance upon such tax, accounting, regulatory, legal, and financial advice as it deems
necessary and not upon any view expressed by the other.

 

 

	2.	 	The terms of the particular Transaction to which this Confirmation relates are as follows:

	 	 	 	 	 
	 
	 	General Terms:
	 	 

	 	 	 	 	 

	 	 	Party A:
	 	Merrill Lynch International

	 	 	 	 	 

	 	 	Party B:
	 	Developers Diversified Realty Corporation

	 	 	 	 	 

	 	 	Trade Date:
	 	December 4, 2006

	 	 	 	 	 

	 	 	Effective Date:
	 	December 8, 2006

	 	 	 	 	 

	 	 	Base Amount:
	 	Initially, 2,899,783 Shares. On each Settlement
Date, the Base Amount shall be reduced by the
number of Settlement Shares for such Settlement
Date.

	 	 	 	 	 

	 	 	Maturity Date:
	 	September 8, 2007 (or, if such date is not a
Scheduled Trading Day, the next following Scheduled
Trading Day).

	 	 	 	 	 

	 	 	
	 	Forward Price: On the Effective Date, the Initial Forward Price,
and on any other day, the Forward Price as of the
immediately preceding calendar day multiplied by
the sum of (i) 1 and (ii) the Daily Rate for such
day; provided that on each Forward Price Reduction
Date, the Forward Price in effect on such date
shall be the Forward Price otherwise in effect on
such date minus the Forward Price Reduction Amount
for such Forward Price Reduction Date.

	 	 	 	 	 

	 	 	Initial Forward Price:
	 	USD $64.66 per Share.

	 	 	 	 	 

	 	 	Daily Rate:
	 	For any day, (i)(A) USD-Federal Funds Rate for such
day minus (B) the Spread divided by (ii) 360.

	 	 	 	 	 

	 	 	USD-Federal Funds Rate
	 	For any day, the rate set forth for such day
opposite the caption “Federal funds”, as such rate
is displayed on the page “FedsOpen <Index>
<GO>” on the BLOOMBERG Professional Service,
or any successor page; provided that if no rate
appears for any day on such page, the rate for the
immediately preceding day for which a rate appears
shall be used for such day.

	 	 	 	 	 

	 	 	Spread:
	 	0.60%

	 	 	 	 	 

	 	 	Forward Price Reduction
Date:
	 	December 20, 2006, March 21, 2007 and June 18, 2007.

	 	 	 	 	 

	 	 	Forward Price Reduction
Amount:
	 	For each Forward Price Reduction Date, the Forward
Price Reduction Amount set forth opposite such date
on Schedule I.

	 	 	 	 	 

	 	 	Shares:
	 	Common shares, without par value, of Party B (also
referred to herein as the “Issuer”) (Exchange
identifier: “DDR”).

	 	 	 	 	 

	 	 	Exchange:
	 	The New York Stock Exchange.

	 	 	 	 	 

	 	 	Related Exchange(s):
	 	All Exchanges.

 

 

	 	 	 	 	 
	 	 	Clearance System:
	 	DTC.

	 	 	 	 	 

	 	 	Calculation Agent:
	 	MLI

	 	 	 	 	 

	 	 	Settlement Terms:
	 	 

	 	 	 	 	 

	 	 	Settlement Date:
	 	Any Scheduled Trading Day following the Effective
Date and up to and including the Maturity Date, as
designated by (a) Party A pursuant to “Termination
Settlement” below or (b) Party B in a written
notice (a “Settlement Notice”) that satisfies the
Settlement Notice Requirements and is delivered to
Party A at least (i) three Scheduled Trading Days
prior to such Settlement Date, which may be the
Maturity Date, if Physical Settlement applies, and
(ii) five Scheduled Trading Days prior to such
Settlement Date, which may be the Maturity Date, if
Cash Settlement applies; provided that (i) the
Maturity Date shall be a Settlement Date if on such
date the Base Amount is greater than zero and (ii)
if Cash Settlement applies and Party A shall have
fully unwound its hedge during an Unwind Period by
a date that is more than three Scheduled Trading
Days prior to a Settlement Date specified above,
Party A may, by written notice to Party B, specify
any Scheduled Trading Day prior to such originally
specified Settlement Date as the Settlement Date.

	 	 	 	 	 

	 	 	Settlement Shares:
	 	With respect to any Settlement Date, a number of
Shares, not to exceed the Base Amount, designated
as such by Party B in the related Settlement Notice
or by Party A pursuant to “Termination Settlement”
below; provided that on the Maturity Date the
number of Settlement Shares shall be equal to the
Base Amount on such date.

	 	 	 	 	 

	 	 	Settlement:
	 	Physical Settlement or Cash Settlement, at the
election of Party B as set forth in a Settlement
Notice that satisfies the Settlement Notice
Requirements; provided that Physical Settlement
shall apply (i) if no Settlement Method is validly
selected, (ii) with respect to any Settlement
Shares in respect of which Party A is unable, in
its judgment, to unwind its hedge by the end of the
Unwind Period in a manner that, in the judgment of
Party A, is consistent with the requirements for
qualifying for the safe harbor provided by Rule
10b-18 under the Exchange Act or due to the lack of
sufficient liquidity in the Shares on any Exchange
Business Day during the Unwind Period or (iii) to
any Termination Settlement Date (as defined below
under “Termination Settlement”).

	 	 	 	 	 

	 	 	Settlement Notice
Requirements:
	 	Notwithstanding any other provision hereof, a
Settlement Notice delivered by Party B that
specifies Cash Settlement will not be effective to
establish a Settlement Date or require Cash
Settlement unless Party B delivers to Party A with
such Settlement Notice a representation signed by
Party B substantially in the following form: “As of
the date of this Settlement Notice, Party B is not
aware of any material nonpublic information
concerning itself or the Shares, and is

 

 

	 	 	 	 	 
	 	 	 	 	designating the date contained herein as a Settlement Date in
good faith and not as part of a plan or scheme to
evade compliance with the federal securities laws.”

	 	 	 	 	 

	 	 	Unwind Period:
	 	Each Exchange Business Day that is not a Suspension
Day during the period from and including the first
Exchange Business Day following the date Party B
validly elects Cash Settlement in respect of a
Settlement Date through the third Scheduled Trading
Day preceding such Settlement Date (or the
immediately preceding Exchange Business Day if such
Scheduled Trading Day is not an Exchange Business
Day); subject to “Termination Settlement” below.
If any Exchange Business Day during an Unwind
Period is a Disrupted Day, the Calculation Agent
shall make commercially reasonable adjustments to
the terms of the Transaction (including, without
limitation, the Cash Settlement Amount and the
10b-18 VWAP) to account for the occurrence of such
Disrupted Day.

	 	 	 	 	 

	 	 	Suspension Day:
	 	Any Exchange Business Day on which Party A
determines based on the advice of counsel that Cash
Settlement may violate applicable securities laws.
Party A shall notify Party B if it receives such
advice from its counsel.

	 	 	 	 	 

	 	 	Exchange Act:
	 	The Securities Exchange Act of 1934, as amended
from time to time.

	 	 	 	 	 

	 	 	Physical Settlement:
	 	On any Settlement Date in respect of which Physical
Settlement applies, Party B shall deliver to Party
A through the Clearance System the Settlement
Shares for such Settlement Date, and Party A shall
deliver to Party B, by wire transfer of immediately
available funds to an account designated by Party
B, an amount in cash equal to the Physical
Settlement Amount for such Settlement Date, on a
delivery versus payment basis.

	 	 	 	 	 

	 	 	Physical Settlement
Amount:
	 	For any Settlement Date in respect of which
Physical Settlement applies, an amount in cash
equal to the product of (i) the Forward Price on
such Settlement Date and (ii) the number of
Settlement Shares for such Settlement Date.

	 	 	 	 	 

	 	 	Cash Settlement:
	 	On any Settlement Date in respect of which Cash
Settlement applies, if the Cash Settlement Amount
for such Settlement Date is a positive number,
Party A will pay such Cash Settlement Amount to
Party B. If the Cash Settlement Amount is a
negative number, Party B will pay the absolute
value of such Cash Settlement Amount to Party A.
Such amounts shall be paid on the Settlement Date.

	 	 	 	 	 

	 	 	Cash Settlement Amount:
	 	For any Settlement Date in respect of which Cash
Settlement applies, an amount determined by the
Calculation Agent equal to the difference between
(1) the product of (i) (A) the Forward Price on the
first day of the applicable Unwind Period minus (B)
the average of the 10b-18 VWAP prices per Share on
each Exchange Business Day during such Unwind
Period, multiplied by (ii) the number of Settlement
Shares for such Settlement Date, minus (2) the
product of (i) the Forward

 

 

	 	 	 	 	 
	 	 	 	 	Price Reduction Amount
for any Forward Price Reduction Date that occurs
during such Unwind Period multiplied by (ii) the
number of Settlement Shares with respect to which
Party A has not unwound its hedge as of such
Forward Price Reduction Date.

	 	 	 	 	 

	 	 	10b-18 VWAP:
	 	For any Exchange Business Day during the Unwind
Period which is not a Suspension Day, the
volume-weighted average price at which the Shares
trade as reported in the composite transactions for
the Exchange on such Exchange Business Day,
excluding (i) trades that do not settle regular
way, (ii) opening (regular way) reported trades on
the Exchange on such Exchange Business Day, (iii)
trades that occur in the last ten minutes before
the scheduled close of trading on the Exchange on
such Exchange Business Day and ten minutes before
the scheduled close of the primary trading session
in the market where the trade is effected, and (iv)
trades on such Exchange Business Day that do not
satisfy the requirements of Rule 10b-18(b)(3), as
determined in good faith by the Calculation Agent.
Party B acknowledges that Party A may refer to the
Bloomberg Page “DDR.N <Equity> AQR SEC” (or
any successor thereto), in its discretion, for such
Exchange Business Day to determine the 10b-18 VWAP.

	 	 	 	 	 

	 	 	Settlement Currency:
	 	USD.

	 	 	 	 	 

	 	 	Failure to Deliver:
	 	Inapplicable.

	 	 	 	 	 

	 	 	Adjustments:
	 	 

	 	 	 	 	 

	 	 	Method of Adjustment:
	 	Calculation Agent Adjustment; notwithstanding
anything in the 2002 Definitions to the contrary,
the Calculation Agent may make an adjustment
pursuant to Calculation Agent Adjustment to any one
or more of the Base Amount, the Forward Price and
any other variable relevant to the settlement or
payment terms of the Transaction.

	 	 	 	 	 

	 	 	Additional Adjustment:
	 	If, in Party A’s sole judgment, the actual cost to
Party A, over any one month period, of borrowing a
number of Shares equal to the Base Amount to hedge
its exposure to the Transaction exceeds a weighted
average rate equal to 60 basis points per annum,
the Calculation Agent shall reduce the Forward
Price in order to compensate Party A for the amount
by which such cost exceeded a weighted average rate
equal to 60 basis points per annum during such
period. The Calculation Agent shall notify Party B
prior to making any such adjustment to the Forward
Price and, upon the request of Party B, Party A
shall provide an itemized list of its stock loan
costs for the applicable one month period.

 

 

	 	 	 	 	 
	 	 	Account Details:
	 	 

	 	 	 	 	 

	 	 	Payments to Party A:
	 	To be advised under separate cover or telephone
confirmed prior to each Settlement Date.

	 	 	 	 	 

	 	 	Payments to Party B:
	 	To be advised under separate cover or telephone
confirmed prior to each Settlement Date.

	 	 	 	 	 

	 	 	Delivery of Shares to
Party A:
	 	To be advised.

	 	 	 	 	 

	 	 	Delivery of Shares to
Party B:
	 	To be advised.

	3.	 	Other Provisions:
	 
	 	 	Conditions to Effectiveness:

The effectiveness of this Confirmation on the Effective Date shall be subject to (i)
the condition that the representations and warranties of Party B contained in the
Underwriting Agreement dated the date hereof among Party B and Goldman, Sachs & Co.,
as Underwriter, Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Forward Sellers, and Deutsche
Bank AG London, JPMorgan Chase Bank, National Association and Merrill Lynch
International, as Forward Counterparties (the “Underwriting Agreement”) and any
certificate delivered pursuant thereto by Party B are true and correct on the
Effective Date as if made as of the Effective Date, (ii) the condition that Party B
have performed all of the obligations required to be performed by it under the
Underwriting Agreement on or prior to the Effective Date, (iii) the condition that
Party B have delivered to Party A opinion of counsel dated as of the Trade Date with
respect to matters set forth in Section 3(a) of the Agreement, (iv) the satisfaction
of all of the conditions set forth in Section 7 of the Underwriting Agreement and
(v) the condition that neither of the following has occurred (A) Party A is unable
to borrow and deliver for sale a number of Shares equal to the Base Amount, or (B)
in Party A’s sole judgment either it is impracticable to do so or Party A would
incur a stock loan cost of more than a rate equal to 60 basis points per annum to do
so (in which event this Confirmation shall be effective but the Base Amount for this
Transaction shall be the number of Shares an affiliate of Party A is required to
deliver in accordance with Section 3(a)(i) of the Underwriting Agreement).

	 	 	Representations and Agreements of Party B:

Party B (i) has such knowledge and experience in financial and business affairs as
to be capable of evaluating the merits and risks of entering into this Transaction;
(ii) has consulted with its own legal, financial, accounting and tax advisors in
connection with this Transaction; and (iii) is entering into this Transaction for a
bona fide business purpose.

Party B is not and has not been the subject of any civil proceeding of a judicial or
administrative body of competent jurisdiction that could reasonably be expected to
impair materially Party B’s ability to perform its obligations hereunder.

Party B will by the next succeeding New York Business Day notify Party A upon
obtaining knowledge of the occurrence of any event that would constitute an Event of
Default, a Potential Event of Default or a Potential Adjustment Event.

 

 

Additional Representations, Warranties and Agreements of Party B: Party B
hereby represents and warrants to, and agrees with, Party A as of the date hereof that:

	 	(a)	 	Any Shares, when issued and delivered in accordance with the
terms of the Transaction, will be duly authorized and validly issued, fully
paid and nonassessable, and the issuance thereof will not be subject to any
preemptive or similar rights.
	 
	 	(b)	 	Party B has reserved and will keep available at all times, free
from preemptive rights, out of its authorized but unissued Shares, solely for
the purpose of issuance upon settlement of the Transaction as herein provided,
the full number of Shares as shall be issuable at such time upon settlement of
the Transaction. All Shares so issuable shall, upon such issuance, be accepted
for listing or quotation on the Exchange.
	 
	 	(c)	 	Party B agrees to provide Party A at least 10 Exchange Business
Days’ written notice (an “Issuer Repurchase Notice”) prior to executing any
repurchase of Shares by Party B or any of its subsidiaries (or entering into
any contract that would require, or give the option to, Party B or any of its
subsidiaries, to purchase or repurchase Shares), whether out of profits or
capital or whether the consideration for such repurchase is cash, securities or
otherwise (an “Issuer Repurchase”), that alone or in the aggregate would result
in the Base Amount Percentage (as defined below) being (i) equal to or greater
than 3.0% of the outstanding Shares and (ii) greater by 0.5% or more than the
Base Amount Percentage at the time of the immediately preceding Issuer
Repurchase Notice (or in the case of the first such Issuer Repurchase Notice,
greater than the Base Amount Percentage as of the later of the date hereof or
the immediately preceding Settlement Date, if any). The “Base Amount
Percentage” as of any day is the fraction (1) the numerator of which is the
Base Amount and (2) the denominator of which is the number of Shares
outstanding on such day.
	 
	 	(d)	 	No filing with, or approval, authorization, consent, license
registration, qualification, order or decree of, any court or governmental
authority or agency, domestic or foreign, is necessary or required for the
execution, delivery and performance by Party B of this Confirmation and the
consummation of the Transaction (including, without limitation, the issuance
and delivery of Shares on any Settlement Date) except (i) such as have been
obtained under the Securities Act of 1933, as amended (the “Securities Act”),
and (ii) as may be required to be obtained under state securities laws.
	 
	 	(e)	 	Party B agrees not to make any Issuer Repurchase if,
immediately following such Issuer Repurchase, the Base Amount Percentage would
be equal to or greater than 3.4%.
	 
	 	(f)	 	Party B is not insolvent, nor will Party B be rendered
insolvent as a result of this Transaction.
	 
	 	(g)	 	Neither Party B nor any of its affiliates shall take or refrain
from taking any action (including, without limitation, any direct purchases by
Party B or any of its affiliates or any purchases by a party to a derivative
transaction with Party B or any of its affiliates), either under this
Confirmation, under an agreement with another party or otherwise, that might
cause any purchases of Shares by Party A or any of its affiliates in connection
with any Cash Settlement of this Transaction not to meet the requirements of
the safe harbor provided by Rule 10b-18 under the Exchange Act if such
purchases were made by Party B.
	 
	 	(h)	 	Party B will not engage in any “distribution” (as defined in
Regulation M under the Exchange Act (“Regulation M”)) that would cause a
“restricted period” (as defined in Regulation M) to occur during any Unwind
Period.
	 
	 	(i)	 	Party B is an “eligible contract participant” (as such term is
defined in Section 1a(12) of the Commodity Exchange Act, as amended).

 

 

	 	(j)	 	In addition to any other requirements set forth herein, Party B
agrees not to elect Cash Settlement if, in the reasonable judgment of either
Party A or Party B, such settlement or Party A’s related market activity would
result in a violation of the U.S. federal securities laws or any other federal
or state law or regulation applicable to Party B.
	 
	 	(k)	 	Party B agrees it will not treat ownership positions held by
Party A or any of its affiliates solely in its (or their) capacity as a nominee
or fiduciary as constituting Beneficial Ownership or Constructive Ownership (as
such terms are defined in Party B’s Amended and Restated Articles of
Incorporation, as amended from time to time (the “Charter”)) by Party A unless
Party B determines it is required by law to do so based upon an opinion of
counsel.

Covenant of Party B:

The parties acknowledge and agree that any Shares delivered by Party B to Party A on
any Settlement Date when delivered by Party A (or an affiliate of Party A) to
securities lenders from whom Party A (or an affiliate of Party A) borrowed Shares in
connection with hedging its exposure to the Transaction will be freely saleable
without further registration or other restrictions under the Securities Act, in the
hands of those securities lenders, irrespective of whether such stock loan is
effected by Party A or an affiliate of Party A. Accordingly, Party B agrees that
the Shares that it delivers to Party A on each Settlement Date will not bear a
restrictive legend and that such Shares will be deposited in, and the delivery
thereof shall be effected through the facilities of, the Clearance System.

Covenants of Party A:

	 	(a)	 	Unless the provisions set forth below under “Private Placement
Procedures” shall be applicable, Party A shall use any Shares delivered by
Party B to Party A on any Settlement Date to return to securities lenders to
close out open Share loans created by Party A or an affiliate of Party A in the
course of Party A’s or such affiliate’s hedging activities related to Party A’s
exposure under this Confirmation.
	 
	 	(b)	 	In connection with bids and purchases of Shares in connection
with any Cash Settlement of this Transaction, Party A shall use its
commercially reasonable efforts to conduct its activities, or cause its
affiliates to conduct their activities, in a manner consistent with the
requirements of the safe harbor provided by Rule 10b-18 under the Exchange Act,
as if such provisions were applicable to such purchases.

Insolvency Filing:

Notwithstanding anything to the contrary herein, in the Agreement or in the
Definitions, upon any Insolvency Filing in respect of the Issuer, the Transaction
shall automatically terminate on the date thereof without further liability of
either party to this Confirmation to the other party (except for any liability in
respect of any breach of representation or covenant by a party under this
Confirmation prior to the date of such Insolvency Filing).

Extraordinary Dividends:

If an ex-dividend date for an Extraordinary Dividend occurs on or after the Trade
Date and on or prior to the Maturity Date, Party B shall pay an amount, as
determined by the Calculation Agent, in cash equal to the product of such
Extraordinary Dividend and the Base Amount to Party A on the earlier of (i) the date
on which such Extraordinary Dividend is paid by the Issuer to holders of record of
the Shares or (ii) the Maturity Date. “Extraordinary Dividend” means the per Share
amount of any cash dividend or distribution declared by the Issuer with respect to
the Shares that is specified by the board of directors of the Issuer as an
“extraordinary” dividend.

 

 

Acceleration Events:

The following events shall each constitute an “Acceleration Event”:

	 	(a)	 	Stock Borrow Events. In the judgment of Party A, Party
A is unable to hedge Party A’s exposure to the Transaction because (i) of the
lack of sufficient Shares being made available for Share borrowing by lenders,
or (ii) it is otherwise commercially impracticable (each of (i) and (ii) a
“Stock Borrow Event”); provided that (x) prior to the effective of the
designation of Stock Borrow Event under this Paragraph (a), Party B may refer
Party A to a lending party reasonably acceptable to Party A that will lend
Party A Shares within such three Scheduled Trading Days on terms reasonably
acceptable to Party A and at a stock loan cost of no more than 60 basis points
per annum and (y) the number of Settlement Shares for any Settlement Date so
designated by Party A shall not exceed the number of Shares as to which such
inability, or cost limitation with respect to, borrow exists;
	 
	 	(b)	 	Dividends and Other Distributions. On any day
occurring after the Trade Date Party B declares a distribution, issue or
dividend to existing holders of the Shares of (i) any cash dividend (other than
an Extraordinary Dividend) to the extent all cash dividends having an
ex-dividend date during the period from and including any Forward Price
Reduction Date (with each of the Trade Date and the Maturity Date being a
Forward Price Reduction Date for purposes of this clause (b) only) to but
excluding the next subsequent Forward Price Reduction Date exceeds, on a per
Share basis, the Forward Price Reduction Amount set forth opposite the first
date of any such period on Schedule I or (ii) share capital or securities of
another issuer acquired or owned (directly or indirectly) by Party B as a
result of a spin-off or other similar transaction or (iii) any other type of
securities (other than Shares), rights or warrants or other assets, for payment
(cash or other consideration) at less than the prevailing market price as
determined by Party A;
	 
	 	(c)	 	ISDA Early Termination Date. Either Party A or Party B
has the right to designate an Early Termination Date pursuant to Section 6 of
the Agreement;
	 
	 	(d)	 	Other ISDA Events. The announcement of any event that
if consummated, would result in an Extraordinary Event or the occurrence of any
Change in Law or a Delisting; provided that in case of a Delisting, in addition
to the provisions of Section 12.6(a)(iii) of the 2002 Definitions, it will also
constitute a Delisting if the Exchange is located in the United States and the
Shares are not immediately re-listed, re-traded or re-quoted on any of the New
York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select
Market or the NASDAQ Global Market (or their respective successors).

Termination Settlement:

Upon the occurrence of any Acceleration Event, Party A shall have the right to
designate, upon at least one Scheduled Trading Day’s notice, any Scheduled Trading
Day following such occurrence to be a Settlement Date hereunder (a “Termination
Settlement Date”) to which Physical Settlement shall apply, and to select the number
of Settlement Shares relating to such Termination Settlement Date; provided that in
the case of an Acceleration Event arising out of a Stock Borrow Event the number of
Settlement Shares so designated by Party A shall not exceed the number of Shares as
to which such Stock Borrow Event exists. If, upon designation of a Termination
Settlement Date by Party A pursuant to the preceding sentence, Party B fails to
deliver the Settlement Shares relating to such Termination Settlement Date when due
or otherwise fails to perform obligations within its control in respect of this
Transaction, it shall be an Event of Default with respect to Party B and Section 6
of the Agreement shall apply. If an Acceleration Event occurs during an Unwind
Period relating to a number of Settlement Shares to which Cash Settlement applies,
then on the Termination Settlement Date relating to such Acceleration Event,
notwithstanding any election to the contrary by Party B, Cash Settlement shall apply
to the portion of the Settlement Shares relating to such Unwind Period as to which
Party A has unwound its hedge and Physical

 

 

Settlement shall apply in respect of (x) the remainder (if any) of such Settlement
Shares and (y) the Settlement Shares designated by Party A in respect of such
Termination Settlement Date.

Private Placement Procedures

If Party B is unable to comply with the provisions of “Covenant of Party B” above
because of a change in law or a change in the policy of the Securities and Exchange
Commission or its staff, or Party A otherwise determines that in its reasonable
opinion any Settlement Shares to be delivered to Party A by Party B may not be
freely returned by Party A or its affiliates to securities lenders as described
under “Covenant of Party B” above, then delivery of any such Settlement Shares (the
“Restricted Shares”) shall be effected pursuant to Annex A hereto, unless waived by
Party A.

Rule 10b5-1:

It is the intent of Party A and Party B that following any election of Cash
Settlement by Party B, the purchase of Shares by Party A during any Unwind Period
comply with the requirements of Rule 10b5-1(c)(1)(i)(B) of the Exchange Act and that
this Confirmation shall be interpreted to comply with the requirements of Rule
10b5-1(c).

Party B acknowledges that (i) during any Unwind Period Party B does not have, and
shall not attempt to exercise, any influence over how, when or whether to effect
purchases of Shares by Party A (or its agent or affiliate) in connection with this
Confirmation and (ii) Party B is entering into the Agreement and this Confirmation
in good faith and not as part of a plan or scheme to evade compliance with federal
securities laws including, without limitation, Rule 10b-5 promulgated under the
Exchange Act.

Party B hereby agrees with Party A that during any Unwind Period Party B shall not
communicate, directly or indirectly, any Material Non-Public Information (as defined
herein) to any Trading Personnel (as defined below). For purposes of this
Transaction, “Material Non-Public Information” means information relating to Party B
or the Shares that (a) has not been widely disseminated by wire service, in one or
more newspapers of general circulation, by communication from Party B to its
shareholders or in a press release, or contained in a public filing made by Party B
with the Securities and Exchange Commission and (b) a reasonable investor might
consider to be of importance in making an investment decision to buy, sell or hold
Shares. For the avoidance of doubt and solely by way of illustration, information
should be presumed “material” if it relates to such matters as dividend increases or
decreases, earnings estimates, changes in previously released earnings estimates,
significant expansion or curtailment of operations, a significant increase or
decline of orders, significant merger or acquisition proposals or agreements,
significant new products or discoveries, extraordinary borrowing, major litigation,
liquidity problems, extraordinary management developments, purchase or sale of
substantial assets, or other similar information For purposes of this Transaction,
“Trading Personnel” means any employee on the trading side of the Equity-Linked
Capital Markets Group of MLPF&S and does not include any other person or persons
designated from time to time by the Compliance Group of Party A.

Maximum Share Delivery:

Notwithstanding any other provision of this Confirmation, in no event will Party B
be required to deliver to Party A on any Settlement Date, whether pursuant to
Physical Settlement, Termination Settlement or any Private Placement Settlement, a
number of Shares greater than ten times the Base Amount as of the Trade Date.

 

 

Assignment:

Party A may assign or transfer any of its rights or delegate any of its duties
hereunder to any affiliate of Party A or any entity organized or sponsored by Party
A without the prior written consent of Party B. Notwithstanding any other provision
of this Confirmation to the contrary requiring or allowing Party A to purchase or
receive any Shares from Party B, Party A may designate any of its affiliates to
purchase or receive such Shares or otherwise to perform Party A’s obligations in
respect of this Transaction and any such designee may assume such obligations, and
Party A shall be discharged of its obligations to Party B to the extent of any such
performance.

Matters Relating to Agent:

Each party agrees and acknowledges that (i) J.P. Morgan Securities Inc., as agent,
(the “Agent”) acts solely as agent on a disclosed basis with respect to the
transactions contemplated hereunder, and (ii) the Agent has no obligation, by
guaranty, endorsement or otherwise, with respect to the obligations of either Party
B or Party A hereunder, either with respect to the delivery of cash or Shares,
either at the beginning or the end of the transactions contemplated hereby. In this
regard, each of Party A and Party B acknowledges and agrees to look solely to the
other for performance hereunder, and not to the Agent.

Indemnity:

Party B agrees to indemnify Party A and its affiliates and their respective
directors, officers, agents and controlling parties (Party A and each such affiliate
or person being an “Indemnified Party”) from and against any and all losses, claims,
damages and liabilities, joint and several, incurred by or asserted against such
Indemnified Party arising out of, in connection with, or relating to, the execution
or delivery of this Confirmation, the performance by the parties hereto of their
respective obligations under the Transaction, any breach of any covenant or
representation made by Party B in this Confirmation or the Agreement or the
consummation of the transactions contemplated hereby and will reimburse any
Indemnified Party for all reasonable expenses (including reasonable legal fees and
expenses) as they are incurred in connection with the investigation of, preparation
for, or defense of any pending or threatened claim or any action or proceeding
arising therefrom, whether or not such Indemnified Party is a party thereto. Party B
will not be liable under this Indemnity paragraph to the extent that any loss,
claim, damage, liability or expense is found in a final and nonappealable judgment
by a court to have resulted from Party A’s gross negligence, bad faith, fraud and/or
willful misconduct or breach of any representation or covenant of Party A contained
herein or violation of the Ownership Limits imposed by the Charter (described
herein), unless such violation is a result of an Issuer Repurchase for which Party B
failed to provide an Issuer Repurchase Notice as required herein or a determination
by Party B that it will treat ownership positions held by Party A or any of its
affiliates solely in its (or their) capacity as a nominee or fiduciary as
constituting Beneficial Ownership or Constructive Ownership (as such terms are
defined in the Charter) by Party A.

Notice:

	 	 	 	 	 
	 

	 	Non-Reliance:
	 	Applicable
	 
	 	 	 	 
	 

	 	Additional Acknowledgments:
	 	Applicable
	 
	 	 	 	 
	 

	 	Agreements and Acknowledgments

Regarding Hedging Activities:
	 	Applicable

 

 

	4.	 	The Agreement is further supplemented by the following provisions:

No Collateral or Setoff:

Notwithstanding Section 6(f) or any other provision of the Agreement or any other
agreement between the parties to the contrary, the obligations of Party B hereunder
are not secured by any collateral. Obligations under this Transaction shall not be
set off against any other obligations of the parties, whether arising under the
Agreement, this Confirmation, under any other agreement between the parties hereto,
by operation of law or otherwise, and no other obligations of the parties shall be
set off against obligations under this Transaction, whether arising under the
Agreement, this Confirmation, under any other agreement between the parties hereto,
by operation of law or otherwise, and each party hereby waives any such right of
setoff. In calculating any amounts under Section 6(e) of the Agreement,
notwithstanding anything to the contrary in the Agreement, (a) separate amounts
shall be calculated as set forth in such Section 6(e) with respect to (i) this
Transaction and (ii) all other Transactions, and (b) such separate amounts shall be
payable pursuant to Section 6(d)(ii) of the Agreement.

Status of Claims in Bankruptcy:

Party A acknowledges and agrees that this Confirmation is not intended to convey to
Party A rights with respect to the transactions contemplated hereby that are senior
to the claims of common shareholders in any U.S. bankruptcy proceedings of Party B;
provided, however, that nothing herein shall limit or shall be deemed to limit Party
A’s right to pursue remedies in the event of a breach by Party B of its obligations
and agreements with respect to this Confirmation and the Agreement; and provided
further, that nothing herein shall limit or shall be deemed to limit Party A’s
rights in respect of any transaction other than the Transaction.

Limit on Beneficial Ownership:

Notwithstanding any other provisions hereof, Party A shall not be entitled to
receive Shares hereunder (whether in connection with the purchase of Shares on any
Settlement Date or any Termination Settlement Date, any Private Placement
Settlement, any Acceleration Event, or otherwise) to the extent (but only to the
extent) that after such receipt Party A’s ultimate parent entity would,
directly or indirectly, beneficially own (as such term is defined for purposes of
Section 13(d) of the Exchange Act) in excess of 8.0% of the outstanding Shares. Any
purported delivery of Shares by Party B hereunder shall be void and have no effect
to the extent (but only to the extent) that, after receipt of such Shares by Party
A, Party A’s ultimate parent entity would, directly or indirectly, individually or
in the aggregate, so beneficially own in excess of 8.0% of the outstanding Shares.
If, on any day, any delivery of Shares by Party B is not effected, in whole or in
part, as a result of this provision, Party B’s obligation to make such delivery
shall not be extinguished, and Party B shall make such delivery as promptly as
practicable after, but in no event within one Exchange Business Day after, Party A
gives notice to Party B that after receipt of such delivery, Party A’s ultimate
parent entity would not, directly or indirectly, individually or in the aggregate,
beneficially own in excess of 8.0% of the outstanding Shares.

Ownership Limits Imposed by Charter:

Notwithstanding any other provisions hereof, Party A shall not have the right to
receive Settlement Shares (whether in connection with the purchase of Shares on any
Settlement Date or any Termination Settlement Date, any Private Placement
Settlement, or otherwise) to the extent (but only to the extent) that the number of
Settlement Shares, when aggregated with the total number of Shares otherwise
Beneficially Owned or Constructively Owned by Party A or its Affiliates, would cause
Party A or any Affiliate, directly or indirectly, individually or in the aggregate,
to Beneficially Own in excess of 5% (or such greater percentage up to 15% as
permitted by the Board of Directors of Party B pursuant to Article Fourth, Division
B, Section 4(l) of the Charter) of the outstanding Shares or Constructively Own in
excess of 9.8% of the outstanding Shares

 

 

(collectively, the “Ownership Limits”). For purposes of this paragraph, “Affiliate”
shall mean: (i) any person, other than an individual, treated as owning stock of
Party A, and (ii) any person, other than an individual, in which Party A is treated
as owning stock, in either case pursuant to Code Section 544, as modified by Code
Section 856(h)(1)(B). Notwithstanding any other provisions hereof, Party A shall be
subject to the transfer restrictions imposed by Article Fourth, Division B, Section
4 of the Charter, including but not limited to the purchase right in Excess Shares
under Section 4(d) thereof. For purposes of this paragraph, “Person,” “Beneficially
Own,” “Constructively Own,” and “Excess Shares” shall have the meanings ascribed to
them in the Charter.

In the event that Party B elects Physical Settlement, but all or some portion of
Settlement Shares cannot be delivered to Party A because of the of the Ownership
Limitations, Party B may elect to deliver to Party A the maximum number of Shares
allowable for Party A and its Affiliates to be in compliance with the Ownership
Limits and deliver the remaining Shares subject to the Physical Settlement, on one
or more days, as promptly as practicable after, but in no event within one Exchange
Business Day after, Party A gives notice to Party B that with respect to any such
delivery, the number of Shares to be received when aggregated with the total number
of Shares otherwise Beneficially Owned or Constructively Owned by Party A or its
Affiliates, would not cause Party A or any Affiliate, directly or indirectly,
individually or in the aggregate, to violate the Ownership Limitations.

Miscellaneous:

	 	(a)	 	Addresses for Notices. For the purpose of Section 12(a) of the
Agreement:

Address for notices or communications to Party A:

	 	 	 	 	 
	 

	 	Address:
	 	c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated

Four World Financial Center

North Tower, 17th Floor

New York, NY 10080
	 

	 	Attention:
	 	Fran Jacobson
	 

	 	Telephone No.:
	 	(212) 449-6763
	 

	 	Facsimile No.:
	 	(917) 778-0835

Address for notices or communications to Party B:

	 	 	 	 	 
	 

	 	Address:
	 	Developers Diversified Realty Corporation

3300 Enterprise Parkway

Beachwood, Ohio 44122
	 

	 	Attention:
	 	General Counsel

	 	(b)	 	Waiver of Right to Trial by Jury. Each party waives, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any suit, action or proceeding relating to this
Confirmation. Each party (i) certifies that no representative, agent or
attorney of the other party has represented, expressly or otherwise, that such
other party would not, in the event of such a suit action or proceeding, seek
to enforce the foregoing waiver and (ii) acknowledges that it and the other
party have been induced to enter into this Confirmation by, among other things,
the mutual waivers and certifications herein.
	 
	 	(c)	 	London Branch. Party A is entering into this Confirmation and
the Agreement through its London branch. Notwithstanding the foregoing, Party
A represents to Party B that the obligations of Party A are the same as if it
had entered into this Confirmation and the Agreement through its head or home
office in New York.

 

 

Acknowledgements:

The parties hereto intend for:

	 	(a)	 	this Transaction to be a “securities contract” as defined in
Section 741(7) of Title 11 of the United States Code (the “Bankruptcy Code”),
qualifying for the protections under Section 555 of the Bankruptcy Code;
	 
	 	(b)	 	a party’s right to liquidate this Transaction and to exercise
any other remedies upon the occurrence of any Event of Default under the
Agreement with respect to the other party to constitute a “contractual right”
as defined in the Bankruptcy Code;
	 
	 	(c)	 	Party A to be a “financial institution” within the meaning of
Section 101(22) of the Bankruptcy Code; and
	 
	 	(d)	 	all payments for, under or in connection with this Transaction,
all payments for the Shares and the transfer of such Shares to constitute
“settlement payments” as defined in the Bankruptcy Code.

Other Forward:

Party A acknowledges that Party B has entered into substantially identical forward
transactions for its Shares on the date hereof (the “Other Forwards”) with
affiliates of each of Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc.
Party A and Party B agree that if Party B designates a Settlement Date with respect
to one or both of the Other Forwards and for which Cash Settlement is applicable,
and the resulting Unwind Period for such Other Forward (or Other Forwards, as the
case may be) coincides for any period of time with an Unwind Period for the
Transaction (the “Overlap Unwind Period”), Party B shall notify Party A prior to the
commencement of such Overlap Unwind Period, and Party A shall only be permitted to
purchase Shares to unwind its hedge in respect of the Transaction on every other
Exchange Business Day that is not a Suspension Day during such Overlap Unwind Period
(if the Overlap Unwind Period is with respect to one Other Forward) or on every
third Exchange Business Day that is not a Suspension Day during such Overlap Unwind
Period (if the Overlap Unwind Period is with respect to both Other Forwards). Party
B shall specify in any Settlement Notice that triggers an Overlap Unwind Period with
respect to one Other Forward or with respect to both Other Forwards, as the case may
be, which forward counterparty will be permitted to purchase Shares to unwind its
hedge in respect of its Transaction first and second or first, second and third, as
the case may be.

Severability:

If any term, provision, covenant or condition of this Confirmation, or the
application thereof to any party or circumstance, shall be held to be invalid or
unenforceable in whole or in part for any reason, the remaining terms, provisions,
covenants, and conditions hereof shall continue in full force and effect as if this
Confirmation had been executed with the invalid or unenforceable provision
eliminated, so long as this Confirmation as so modified continues to express,
without material change, the original intentions of the parties as to the subject
matter of this Confirmation and the deletion of such portion of this Confirmation
will not substantially impair the respective benefits or expectations of parties to
this Agreement; provided, however, that this severability provision shall not be
applicable if any provision of Section 2, 5, 6 or 13 of the Agreement (or any
definition or provision in Section 14 to the extent that it relates to, or is used
in or in connection with any such Section) shall be so held to be invalid or
unenforceable.

 

 

Please confirm that the foregoing correctly sets forth the terms of our agreement by signing and
returning this Confirmation.

	 	 	 	 	 
	 	Yours faithfully,

MERRILL LYNCH INTERNATIONAL

 	 
	 	By:  	/s/ Michael Hammond
 	 
	 	 	Name:  	Michael Hammond 	 
	 	 	Title:  	Authorized Person 	 
	 

	 	 	 	 	 
	Confirmed as of the date first written above:

DEVELOPERS DIVERSIFIED REALTY CORPORATION
 	 	 
	 
	 	 	 	 
	By:  	/s/ William H. Schafer
 	 	 
	 	Name:  	William H. Schafer 	 	 
	 	Title:  	Executive Vice President and Chief Financial Officer 	 	 
	 

 

 

SCHEDULE I

	 	 	 	 	 
	Forward Price Reduction Date	 	Forward Price Reduction Amount
	 
	 	 	 	 
	Trade Date
	 	$	0.00	 
	 
	 	 	 	 
	December 20, 2006
	 	$	0.59	 
	 
	 	 	 	 
	March 21, 2007
	 	$	0.66	 
	 
	 	 	 	 
	June 18, 2007
	 	$	0.66	 
	 
	 	 	 	 
	Thereafter
	 	$	0.00	 

 

 

ANNEX A

PRIVATE PLACEMENT PROCEDURES

	(i)	 	If Party B delivers the Restricted Shares pursuant to this clause (i) (a “Private Placement
Settlement”), then delivery of Restricted Shares by Party B shall be effected in customary
private placement procedures with respect to such Restricted Shares reasonably acceptable to
Party A; provided that if, on or before the date that a Private Placement Settlement would
occur, Party B has taken, or caused to be taken, any action that would make unavailable either
the exemption pursuant to Section 4(2) of the Securities Act for the sale by Party B to Party
A (or any affiliate designated by Party A) of the Restricted Shares or the exemption pursuant
to Section 4(1) or Section 4(3) of the Securities Act for resales of the Restricted Shares by
Party A (or any such affiliate of Party A) or Party B fails to deliver the Restricted Shares
when due or otherwise fails to perform obligations within its control in respect of a Private
Placement Settlement, it shall be an Event of Default with respect to Party B and Section 6 of
the Agreement shall apply. The Private Placement Settlement of such Restricted Shares shall
include customary representations, covenants, blue sky and other governmental filings and/or
registrations, indemnities to Party A, due diligence rights (for Party A or any designated
buyer of the Restricted Shares by Party A), opinions and certificates, and such other
documentation as is customary for private placement agreements, all reasonably acceptable to
Party A. In the case of a Private Placement Settlement, Party A shall, in its good faith
discretion, adjust the amount of Restricted Shares to be delivered to Party A hereunder in a
commercially reasonable manner to reflect the fact that such Restricted Shares may not be
freely returned to securities lenders by Party A and may only be saleable by Party A at a
discount to reflect the lack of liquidity in Restricted Shares. Notwithstanding the Agreement
or this Confirmation, the date of delivery of such Restricted Shares shall be the Clearance
System Business Day following notice by Party A to Party B of the number of Restricted Shares
to be delivered pursuant to this clause (i). For the avoidance of doubt, delivery of
Restricted Shares shall be due as set forth in the previous sentence and not be due on the
Settlement Date or Termination Settlement Date that would otherwise be applicable.
	 
	(ii)	 	If Party B delivers any Restricted Shares in respect of the Transaction, Party B agrees that
(i) such Shares may be transferred by and among Party A and its affiliates and (ii) after the
minimum “holding period” within the meaning of Rule 144(d) under the Securities Act has
elapsed after the applicable Settlement Date, Party B shall promptly remove, or cause the
transfer agent for the Shares to remove, any legends referring to any transfer restrictions
from such Shares upon delivery by Party A (or such affiliate of Party A) to Party B or such
transfer agent of seller’s and broker’s representation letters customarily delivered by Party
A or its affiliates in connection with resales of restricted securities pursuant to Rule 144
under the Securities Act, each without any further requirement for the delivery of any
certificate, consent, agreement, opinion of counsel, notice or any other document, any
transfer tax stamps or payment of any other amount or any other action by Party A (or such
affiliate of Party A).

A-1EX-10.3

 

Exhibit 10.3

December 4, 2006

	 	 	 
	To:

	 	Developers Diversified Realty Corporation
	 

	 	3300 Enterprise Parkway

Beachwood, Ohio 44122
	 
	 	 
	From:

	 	JPMorgan Chase Bank, National Association
	 

	 	125 London Wall
	 

	 	London EC2Y 5AJ
	 

	 	England
	 
	 	 
	From:

	 	J.P. Morgan Securities Inc.,
	 

	 	Solely as Agent
	 

	 	tel: (212) 622-5270
	 

	 	fax: (212) 622-0105

Dear Sirs,

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions
of the transaction entered into between us on the Trade Date specified below (the “Transaction”).
This Confirmation constitutes a “Confirmation” as referred to in the ISDA Master Agreement
specified below.

	1.	 	The definitions and provisions contained in the 2000 ISDA Definitions (the “2000
Definitions”) and the 2002 ISDA Equity Derivatives Definitions (the “2002 Definitions” and,
together with the 2000 Definitions, the “Definitions”), each as published by the International
Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the
event of any inconsistency between the 2002 Definitions and the 2000 Definitions, the 2002
Definitions will govern. In the event of any inconsistency between the Definitions and this
Confirmation, this Confirmation will govern.
	 
	 	 	This Confirmation evidences a complete and binding agreement between Party A and Party B as
to the terms of the Transaction to which this Confirmation relates. This Confirmation shall
supplement, form a part of, and be subject to an agreement in the form of the 2002 ISDA
Master Agreement (the “Agreement”) as if Party A and Party B had executed an agreement in
such form on the Trade Date (but without any Schedule except for the election of the laws of
the State of New York as the governing law). In the event of any inconsistency between
provisions of that Agreement and this Confirmation, this Confirmation will prevail for the
purpose of the Transaction to which this Confirmation relates. The parties hereby agree that
no Transaction other than the Transaction to which this Confirmation relates shall be
governed by the Agreement. For purposes of the 2002 Definitions, the Transaction is a Share
Forward Transaction.
	 
	 	 	Party A and Party B each represents to the other that it has entered into this Transaction
in reliance upon such tax, accounting, regulatory, legal, and financial advice as it deems
necessary and not upon any view expressed by the other.

JPMorgan Chase Bank, National Association

Organized under the laws of the United States as a National Banking Association.

Main Office 1111 Polaris Parkway, Columbus, Ohio 43271

Registered as a branch in England & Wales branch No. BR000746.

Registered Branch Office 125 London Wall, London EC2Y 5AJ

Authorized and regulated by the Financial Services Authority

 

 

	2.	 	The terms of the particular Transaction to which this Confirmation relates are as follows:

	 	 	 	 	 
	 	 	General Terms:
	 	 

	 	 	 	 	 

	 
	 	Party A:
	 	JPMorgan Chase National Bank, National Association, 

London Branch

	 	 	 	 	 

	 	 	Party B:
	 	Developers Diversified Realty Corporation

	 	 	 	 	 

	 	 	Trade Date:
	 	December 4, 2006

	 	 	 	 	 

	 	 	Effective Date:
	 	December 8, 2006

	 	 	 	 	 

	 	 	Base Amount:
	 	Initially, 2,899,783 Shares. On each Settlement
Date, the Base Amount shall be reduced by the
number of Settlement Shares for such Settlement
Date.

	 	 	 	 	 

	 	 	Maturity Date:
	 	September 8, 2007 (or, if such date is not a
Scheduled Trading Day, the next following Scheduled
Trading Day).

	 	 	 	 	 

	 	 	 	 	Forward Price: On the Effective Date, the Initial Forward Price,
and on any other day, the Forward Price as of the
immediately preceding calendar day multiplied by
the sum of (i) 1 and (ii) the Daily Rate for such
day; provided that on each Forward Price Reduction
Date, the Forward Price in effect on such date
shall be the Forward Price otherwise in effect on
such date minus the Forward Price Reduction Amount
for such Forward Price Reduction Date.

	 	 	 	 	 

	 	 	Initial Forward Price:
	 	USD $64.66 per Share.

	 	 	 	 	 

	 	 	Daily Rate:
	 	For any day, (i)(A) USD-Federal Funds Rate for such
day minus (B) the Spread divided by (ii) 360.

	 	 	 	 	 

	 	 	USD-Federal Funds Rate
	 	For any day, the rate set forth for such day
opposite the caption “Federal funds”, as such rate
is displayed on the page “FedsOpen <Index>
<GO>” on the BLOOMBERG Professional Service,
or any successor page; provided that if no rate
appears for any day on such page, the rate for the
immediately preceding day for which a rate appears
shall be used for such day.

	 	 	 	 	 

	 	 	Spread:
	 	0.60%

	 	 	 	 	 

	 	 	Forward Price Reduction Date:
	 	December 20, 2006, March 21, 2007 and June 18, 2007.

	 	 	 	 	 

	 	 	Forward Price Reduction Amount:
	 	For each Forward Price Reduction Date, the Forward
Price Reduction Amount set forth opposite such date
on Schedule I.

	 	 	 	 	 

	 	 	Shares:
	 	Common shares, without par value, of Party B (also
referred to herein as the “Issuer”) (Exchange
identifier: “DDR”).

	 	 	 	 	 

	 	 	Exchange:
	 	The New York Stock Exchange.

 

 

	 	 	 	 	 
	 	 	Related Exchange(s):
	 	All Exchanges.

	 	 	 	 	 

	 	 	Clearance System:
	 	DTC.

	 	 	 	 	 

	 	 	Calculation Agent:
	 	Party A

	 	 	 	 	 

	 	 	Settlement Terms:
	 	 

	 	 	 	 	 

	 	 	Settlement Date:
	 	Any Scheduled Trading Day
following the Effective Date
and up to and including the
Maturity Date, as designated by
(a) Party A pursuant to
“Termination Settlement” below
or (b) Party B in a written
notice (a “Settlement Notice”)
that satisfies the Settlement
Notice Requirements and is
delivered to Party A at least
(i) three Scheduled Trading
Days prior to such Settlement
Date, which may be the Maturity
Date, if Physical Settlement
applies, and (ii) five
Scheduled Trading Days prior to
such Settlement Date, which may
be the Maturity Date, if Cash
Settlement applies; provided
that (i) the Maturity Date
shall be a Settlement Date if
on such date the Base Amount is
greater than zero and (ii) if
Cash Settlement applies and
Party A shall have fully
unwound its hedge during an
Unwind Period by a date that is
more than three Scheduled
Trading Days prior to a
Settlement Date specified
above, Party A may, by written
notice to Party B, specify any
Scheduled Trading Day prior to
such originally specified
Settlement Date as the
Settlement Date.

	 	 	 	 	 

	 	 	Settlement Shares:
	 	With respect to any Settlement
Date, a number of Shares, not
to exceed the Base Amount,
designated as such by Party B
in the related Settlement
Notice or by Party A pursuant
to “Termination Settlement”
below; provided that on the
Maturity Date the number of
Settlement Shares shall be
equal to the Base Amount on
such date.

	 	 	 	 	 

	 	 	Settlement:
	 	Physical Settlement or Cash
Settlement, at the election of
Party B as set forth in a
Settlement Notice that
satisfies the Settlement Notice
Requirements; provided that
Physical Settlement shall apply
(i) if no Settlement Method is
validly selected, (ii) with
respect to any Settlement
Shares in respect of which
Party A is unable, in its
judgment, to unwind its hedge
by the end of the Unwind Period
in a manner that, in the
judgment of Party A, is
consistent with the
requirements for qualifying for
the safe harbor provided by
Rule 10b-18 under the Exchange
Act or due to the lack of
sufficient liquidity in the
Shares on any Exchange Business
Day during the Unwind Period or
(iii) to any Termination
Settlement Date (as defined
below under “Termination
Settlement”).

	 	 	 	 	 

	 	 	Settlement Notice Requirements:
	 	Notwithstanding any other
provision hereof, a Settlement
Notice delivered by Party B
that specifies Cash Settlement
will not be effective to
establish a Settlement Date or
require Cash Settlement unless
Party B delivers to Party A
with such Settlement Notice a
representation signed by Party
B substantially in the
following form: “As of the date
of this Settlement Notice,
Party B is not aware of any
material

 

 

	 	 	 	 	 
	 	 	 	 	nonpublic information
concerning itself or the
Shares, and is designating the
date contained herein as a
Settlement Date in good faith
and not as part of a plan or
scheme to evade compliance with
the federal securities laws.”

	 	 	 	 	 

	 	 	Unwind Period:
	 	Each Exchange Business Day that
is not a Suspension Day during
the period from and including
the first Exchange Business Day
following the date Party B
validly elects Cash Settlement
in respect of a Settlement Date
through the third Scheduled
Trading Day preceding such
Settlement Date (or the
immediately preceding Exchange
Business Day if such Scheduled
Trading Day is not an Exchange
Business Day); subject to
“Termination Settlement” below.
If any Exchange Business Day
during an Unwind Period is a
Disrupted Day, the Calculation
Agent shall make commercially
reasonable adjustments to the
terms of the Transaction
(including, without limitation,
the Cash Settlement Amount and
the 10b-18 VWAP) to account for
the occurrence of such
Disrupted Day.

	 	 	 	 	 

	 	 	Suspension Day:
	 	Any Exchange Business Day on
which Party A determines based
on the advice of counsel that
Cash Settlement may violate
applicable securities laws.
Party A shall notify Party B if
it receives such advice from
its counsel.

	 	 	 	 	 

	 	 	Exchange Act:
	 	The Securities Exchange Act of
1934, as amended from time to
time.

	 	 	 	 	 

	 	 	Physical Settlement:
	 	On any Settlement Date in
respect of which Physical
Settlement applies, Party B
shall deliver to Party A
through the Clearance System
the Settlement Shares for such
Settlement Date, and Party A
shall deliver to Party B, by
wire transfer of immediately
available funds to an account
designated by Party B, an
amount in cash equal to the
Physical Settlement Amount for
such Settlement Date, on a
delivery versus payment basis.

	 	 	 	 	 

	 	 	Physical Settlement Amount:
	 	For any Settlement Date in
respect of which Physical
Settlement applies, an amount
in cash equal to the product of
(i) the Forward Price on such
Settlement Date and (ii) the
number of Settlement Shares for
such Settlement Date.

	 	 	 	 	 

	 	 	Cash Settlement:
	 	On any Settlement Date in
respect of which Cash
Settlement applies, if the Cash
Settlement Amount for such
Settlement Date is a positive
number, Party A will pay such
Cash Settlement Amount to Party
B. If the Cash Settlement
Amount is a negative number,
Party B will pay the absolute
value of such Cash Settlement
Amount to Party A. Such
amounts shall be paid on the
Settlement Date.

	 	 	 	 	 

	 	 	Cash Settlement Amount:
	 	For any Settlement Date in
respect of which Cash
Settlement applies, an amount
determined by the Calculation
Agent equal to the difference
between (1) the product of (i)
(A) the Forward Price on the
first day of the applicable
Unwind Period minus (B) the
average of the 10b-18 VWAP
prices per Share on each
Exchange Business Day during
such Unwind Period, multiplied
by (ii) the number of
Settlement Shares for

 

 

	 	 	 	 	 
	 	 	 	 	such
Settlement Date, minus (2) the
product of (i) the Forward
Price Reduction Amount for any
Forward Price Reduction Date
that occurs during such Unwind
Period multiplied by (ii) the
number of Settlement Shares
with respect to which Party A
has not unwound its hedge as of
such Forward Price Reduction
Date.

	 	 	 	 	 

	 	 	10b-18 VWAP:
	 	For any Exchange Business Day
during the Unwind Period which
is not a Suspension Day, the
volume-weighted average price
at which the Shares trade as
reported in the composite
transactions for the Exchange
on such Exchange Business Day,
excluding (i) trades that do
not settle regular way, (ii)
opening (regular way) reported
trades on the Exchange on such
Exchange Business Day, (iii)
trades that occur in the last
ten minutes before the
scheduled close of trading on
the Exchange on such Exchange
Business Day and ten minutes
before the scheduled close of
the primary trading session in
the market where the trade is
effected, and (iv) trades on
such Exchange Business Day that
do not satisfy the requirements
of Rule 10b-18(b)(3), as
determined in good faith by the
Calculation Agent. Party B
acknowledges that Party A may
refer to the Bloomberg Page
“DDR.N <Equity> AQR SEC”
(or any successor thereto), in
its discretion, for such
Exchange Business Day to
determine the 10b-18 VWAP.

	 	 	 	 	 

	 	 	Settlement Currency:
	 	USD.

	 	 	 	 	 

	 	 	Failure to Deliver:
	 	Inapplicable.

	 	 	 	 	 

	 	 	Adjustments:
	 	 

	 	 	 	 	 

	 	 	Method of Adjustment:
	 	Calculation Agent Adjustment;
notwithstanding anything in the
2002 Definitions to the
contrary, the Calculation Agent
may make an adjustment pursuant
to Calculation Agent Adjustment
to any one or more of the Base
Amount, the Forward Price and
any other variable relevant to
the settlement or payment terms
of the Transaction.

	 	 	 	 	 

	 	 	Additional Adjustment:
	 	If, in Party A’s sole judgment,
the actual cost to Party A,
over any one month period, of
borrowing a number of Shares
equal to the Base Amount to
hedge its exposure to the
Transaction exceeds a weighted
average rate equal to 60 basis
points per annum, the
Calculation Agent shall reduce
the Forward Price in order to
compensate Party A for the
amount by which such cost
exceeded a weighted average
rate equal to 60 basis points
per annum during such period.
The Calculation Agent shall
notify Party B prior to making
any such adjustment to the
Forward Price and, upon the
request of Party B, Party A
shall provide an itemized list
of its stock loan costs for the
applicable one month period.

 

 

	 	 	 	 	 
	 	 	Account Details:
	 	 

	 	 	 	 	 

	 	 	Payments to Party A:
	 	To be advised under separate
cover or telephone confirmed
prior to each Settlement Date.

	 	 	 	 	 

	 	 	Payments to Party B:
	 	To be advised under separate
cover or telephone confirmed
prior to each Settlement Date.

	 	 	 	 	 

	 	 	Delivery of Shares to Party A:
	 	To be advised.

	 	 	 	 	 

	 	 	Delivery of Shares to Party B:
	 	To be advised.

	3.	 	Other Provisions:

     Conditions to Effectiveness:

	 	 	The effectiveness of this Confirmation on the Effective Date shall be subject to (i)
the condition that the representations and warranties of Party B contained in the
Underwriting Agreement dated the date hereof among Party B and Goldman, Sachs & Co.,
as Underwriter, Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Forward Sellers, and Deutsche
Bank AG London, JPMorgan Chase Bank, National Association and Merrill Lynch
International, as Forward Counterparties (the “Underwriting Agreement”) and any
certificate delivered pursuant thereto by Party B are true and correct on the
Effective Date as if made as of the Effective Date, (ii) the condition that Party B
have performed all of the obligations required to be performed by it under the
Underwriting Agreement on or prior to the Effective Date, (iii) the condition that
Party B have delivered to Party A opinion of counsel dated as of the Trade Date with
respect to matters set forth in Section 3(a) of the Agreement, (iv) the satisfaction
of all of the conditions set forth in Section 7 of the Underwriting Agreement and
(v) the condition that neither of the following has occurred (A) Party A is unable
to borrow and deliver for sale a number of Shares equal to the Base Amount, or (B)
in Party A’s sole judgment either it is impracticable to do so or Party A would
incur a stock loan cost of more than a rate equal to 60 basis points per annum to do
so (in which event this Confirmation shall be effective but the Base Amount for this
Transaction shall be the number of Shares an affiliate of Party A is required to
deliver in accordance with Section 3(a)(i) of the Underwriting Agreement).

     Representations and Agreements of Party B:

	 	 	Party B (i) has such knowledge and experience in financial and business affairs as
to be capable of evaluating the merits and risks of entering into this Transaction;
(ii) has consulted with its own legal, financial, accounting and tax advisors in
connection with this Transaction; and (iii) is entering into this Transaction for a
bona fide business purpose.
	 
	 	 	Party B is not and has not been the subject of any civil proceeding of a judicial or
administrative body of competent jurisdiction that could reasonably be expected to
impair materially Party B’s ability to perform its obligations hereunder.
	 
	 	 	Party B will by the next succeeding New York Business Day notify Party A upon
obtaining knowledge of the occurrence of any event that would constitute an Event of
Default, a Potential Event of Default or a Potential Adjustment Event.

 

 

Additional Representations, Warranties and Agreements of Party B: Party B
hereby represents and warrants to, and agrees with, Party A as of the date hereof that:

	 	(a)	 	Any Shares, when issued and delivered in accordance with the
terms of the Transaction, will be duly authorized and validly issued, fully
paid and nonassessable, and the issuance thereof will not be subject to any
preemptive or similar rights.
	 
	 	(b)	 	Party B has reserved and will keep available at all times, free
from preemptive rights, out of its authorized but unissued Shares, solely for
the purpose of issuance upon settlement of the Transaction as herein provided,
the full number of Shares as shall be issuable at such time upon settlement of
the Transaction. All Shares so issuable shall, upon such issuance, be accepted
for listing or quotation on the Exchange.
	 
	 	(c)	 	Party B agrees to provide Party A at least 10 Exchange Business
Days’ written notice (an “Issuer Repurchase Notice”) prior to executing any
repurchase of Shares by Party B or any of its subsidiaries (or entering into
any contract that would require, or give the option to, Party B or any of its
subsidiaries, to purchase or repurchase Shares), whether out of profits or
capital or whether the consideration for such repurchase is cash, securities or
otherwise (an “Issuer Repurchase”), that alone or in the aggregate would result
in the Base Amount Percentage (as defined below) being (i) equal to or greater
than 3.0% of the outstanding Shares and (ii) greater by 0.5% or more than the
Base Amount Percentage at the time of the immediately preceding Issuer
Repurchase Notice (or in the case of the first such Issuer Repurchase Notice,
greater than the Base Amount Percentage as of the later of the date hereof or
the immediately preceding Settlement Date, if any). The “Base Amount
Percentage” as of any day is the fraction (1) the numerator of which is the
Base Amount and (2) the denominator of which is the number of Shares
outstanding on such day.
	 
	 	(d)	 	No filing with, or approval, authorization, consent, license
registration, qualification, order or decree of, any court or governmental
authority or agency, domestic or foreign, is necessary or required for the
execution, delivery and performance by Party B of this Confirmation and the
consummation of the Transaction (including, without limitation, the issuance
and delivery of Shares on any Settlement Date) except (i) such as have been
obtained under the Securities Act of 1933, as amended (the “Securities Act”),
and (ii) as may be required to be obtained under state securities laws.
	 
	 	(e)	 	Party B agrees not to make any Issuer Repurchase if,
immediately following such Issuer Repurchase, the Base Amount Percentage would
be equal to or greater than 3.4%.
	 
	 	(f)	 	Party B is not insolvent, nor will Party B be rendered
insolvent as a result of this Transaction.
	 
	 	(g)	 	Neither Party B nor any of its affiliates shall take or refrain
from taking any action (including, without limitation, any direct purchases by
Party B or any of its affiliates or any purchases by a party to a derivative
transaction with Party B or any of its affiliates), either under this
Confirmation, under an agreement with another party or otherwise, that might
cause any purchases of Shares by Party A or any of its affiliates in connection
with any Cash Settlement of this Transaction not to meet the requirements of
the safe harbor provided by Rule 10b-18 under the Exchange Act if such
purchases were made by Party B.
	 
	 	(h)	 	Party B will not engage in any “distribution” (as defined in
Regulation M under the Exchange Act (“Regulation M”)) that would cause a
“restricted period” (as defined in Regulation M) to occur during any Unwind
Period.
	 
	 	(i)	 	Party B is an “eligible contract participant” (as such term is
defined in Section 1a(12) of the Commodity Exchange Act, as amended).

 

 

	 	(j)	 	In addition to any other requirements set forth herein, Party B
agrees not to elect Cash Settlement if, in the reasonable judgment of either
Party A or Party B, such settlement or Party A’s related market activity would
result in a violation of the U.S. federal securities laws or any other federal
or state law or regulation applicable to Party B.
	 
	 	(k)	 	Party B agrees it will not treat ownership positions held by
Party A or any of its affiliates solely in its (or their) capacity as a nominee
or fiduciary as constituting Beneficial Ownership or Constructive Ownership (as
such terms are defined in Party B’s Amended and Restated Articles of
Incorporation, as amended from time to time (the “Charter”)) by Party A unless
Party B determines it is required by law to do so based upon an opinion of
counsel.

     Covenant of Party B:

The parties acknowledge and agree that any Shares delivered by Party B to Party A on
any Settlement Date when delivered by Party A (or an affiliate of Party A) to
securities lenders from whom Party A (or an affiliate of Party A) borrowed Shares in
connection with hedging its exposure to the Transaction will be freely saleable
without further registration or other restrictions under the Securities Act, in the
hands of those securities lenders, irrespective of whether such stock loan is
effected by Party A or an affiliate of Party A. Accordingly, Party B agrees that
the Shares that it delivers to Party A on each Settlement Date will not bear a
restrictive legend and that such Shares will be deposited in, and the delivery
thereof shall be effected through the facilities of, the Clearance System.

     Covenants of Party A:

	 	(a)	 	Unless the provisions set forth below under “Private Placement
Procedures” shall be applicable, Party A shall use any Shares delivered by
Party B to Party A on any Settlement Date to return to securities lenders to
close out open Share loans created by Party A or an affiliate of Party A in the
course of Party A’s or such affiliate’s hedging activities related to Party A’s
exposure under this Confirmation.
	 
	 	(b)	 	In connection with bids and purchases of Shares in connection
with any Cash Settlement of this Transaction, Party A shall use its
commercially reasonable efforts to conduct its activities, or cause its
affiliates to conduct their activities, in a manner consistent with the
requirements of the safe harbor provided by Rule 10b-18 under the Exchange Act,
as if such provisions were applicable to such purchases.

     Insolvency Filing:

Notwithstanding anything to the contrary herein, in the Agreement or in the
Definitions, upon any Insolvency Filing in respect of the Issuer, the Transaction
shall automatically terminate on the date thereof without further liability of
either party to this Confirmation to the other party (except for any liability in
respect of any breach of representation or covenant by a party under this
Confirmation prior to the date of such Insolvency Filing).

     Extraordinary Dividends:

If an ex-dividend date for an Extraordinary Dividend occurs on or after the Trade
Date and on or prior to the Maturity Date, Party B shall pay an amount, as
determined by the Calculation Agent, in cash equal to the product of such
Extraordinary Dividend and the Base Amount to Party A on the earlier of (i) the date
on which such Extraordinary Dividend is paid by the Issuer to holders of record of
the Shares or (ii) the Maturity Date. “Extraordinary Dividend” means the per Share
amount of any cash dividend or distribution declared by the Issuer with respect to
the Shares that is specified by the board of directors of the Issuer as an
“extraordinary” dividend.

 

 

     Acceleration Events:

     The following events shall each constitute an “Acceleration Event”:

	 	(a)	 	Stock Borrow Events. In the judgment of Party A, Party
A is unable to hedge Party A’s exposure to the Transaction because (i) of the
lack of sufficient Shares being made available for Share borrowing by lenders,
or (ii) it is otherwise commercially impracticable (each of (i) and (ii) a
“Stock Borrow Event”); provided that (x) prior to the effective of the
designation of Stock Borrow Event under this Paragraph (a), Party B may refer
Party A to a lending party reasonably acceptable to Party A that will lend
Party A Shares within such three Scheduled Trading Days on terms reasonably
acceptable to Party A and at a stock loan cost of no more than 60 basis points
per annum and (y) the number of Settlement Shares for any Settlement Date so
designated by Party A shall not exceed the number of Shares as to which such
inability, or cost limitation with respect to, borrow exists;
	 
	 	(b)	 	Dividends and Other Distributions. On any day
occurring after the Trade Date Party B declares a distribution, issue or
dividend to existing holders of the Shares of (i) any cash dividend (other than
an Extraordinary Dividend) to the extent all cash dividends having an
ex-dividend date during the period from and including any Forward Price
Reduction Date (with each of the Trade Date and the Maturity Date being a
Forward Price Reduction Date for purposes of this clause (b) only) to but
excluding the next subsequent Forward Price Reduction Date exceeds, on a per
Share basis, the Forward Price Reduction Amount set forth opposite the first
date of any such period on Schedule I or (ii) share capital or securities of
another issuer acquired or owned (directly or indirectly) by Party B as a
result of a spin-off or other similar transaction or (iii) any other type of
securities (other than Shares), rights or warrants or other assets, for payment
(cash or other consideration) at less than the prevailing market price as
determined by Party A;
	 
	 	(c)	 	ISDA Early Termination Date. Either Party A or Party B
has the right to designate an Early Termination Date pursuant to Section 6 of
the Agreement;
	 
	 	(d)	 	Other ISDA Events. The announcement of any event that
if consummated, would result in an Extraordinary Event or the occurrence of any
Change in Law or a Delisting; provided that in case of a Delisting, in addition
to the provisions of Section 12.6(a)(iii) of the 2002 Definitions, it will also
constitute a Delisting if the Exchange is located in the United States and the
Shares are not immediately re-listed, re-traded or re-quoted on any of the New
York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select
Market or the NASDAQ Global Market (or their respective successors).

     Termination Settlement:

Upon the occurrence of any Acceleration Event, Party A shall have the right to
designate, upon at least one Scheduled Trading Day’s notice, any Scheduled Trading
Day following such occurrence to be a Settlement Date hereunder (a “Termination
Settlement Date”) to which Physical Settlement shall apply, and to select the number
of Settlement Shares relating to such Termination Settlement Date; provided that in
the case of an Acceleration Event arising out of a Stock Borrow Event the number of
Settlement Shares so designated by Party A shall not exceed the number of Shares as
to which such Stock Borrow Event exists. If, upon designation of a Termination
Settlement Date by Party A pursuant to the preceding sentence, Party B fails to deliver the Settlement
Shares relating to such Termination Settlement Date when due or otherwise fails to
perform obligations within its control in respect of this Transaction, it shall be
an Event of Default with respect to Party B and Section 6 of the Agreement shall
apply. If an Acceleration Event occurs during an Unwind Period relating to a number
of Settlement Shares to which Cash Settlement applies, then on the Termination
Settlement Date relating to such Acceleration Event, notwithstanding any election to
the contrary by Party B, Cash Settlement shall apply to the portion of the
Settlement Shares relating to such Unwind Period as to which Party A has unwound its
hedge and Physical

 

 

Settlement shall apply in respect of (x) the remainder (if any)
of such Settlement Shares and (y) the Settlement Shares designated by Party A in
respect of such Termination Settlement Date.

     Private Placement Procedures

If Party B is unable to comply with the provisions of “Covenant of Party B” above
because of a change in law or a change in the policy of the Securities and Exchange
Commission or its staff, or Party A otherwise determines that in its reasonable
opinion any Settlement Shares to be delivered to Party A by Party B may not be
freely returned by Party A or its affiliates to securities lenders as described
under “Covenant of Party B” above, then delivery of any such Settlement Shares (the
“Restricted Shares”) shall be effected pursuant to Annex A hereto, unless waived by
Party A.

     Rule 10b5-1:

It is the intent of Party A and Party B that following any election of Cash
Settlement by Party B, the purchase of Shares by Party A during any Unwind Period
comply with the requirements of Rule 10b5-1(c)(1)(i)(B) of the Exchange Act and that
this Confirmation shall be interpreted to comply with the requirements of Rule
10b5-1(c).

Party B acknowledges that (i) during any Unwind Period Party B does not have, and
shall not attempt to exercise, any influence over how, when or whether to effect
purchases of Shares by Party A (or its agent or affiliate) in connection with this
Confirmation and (ii) Party B is entering into the Agreement and this Confirmation
in good faith and not as part of a plan or scheme to evade compliance with federal
securities laws including, without limitation, Rule 10b-5 promulgated under the
Exchange Act.

Party B hereby agrees with Party A that during any Unwind Period Party B shall not
communicate, directly or indirectly, any Material Non-Public Information (as defined
herein) to any Trading Personnel (as defined below). For purposes of this
Transaction, “Material Non-Public Information” means information relating to Party B
or the Shares that (a) has not been widely disseminated by wire service, in one or
more newspapers of general circulation, by communication from Party B to its
shareholders or in a press release, or contained in a public filing made by Party B
with the Securities and Exchange Commission and (b) a reasonable investor might
consider to be of importance in making an investment decision to buy, sell or hold
Shares. For the avoidance of doubt and solely by way of illustration, information
should be presumed “material” if it relates to such matters as dividend increases or
decreases, earnings estimates, changes in previously released earnings estimates,
significant expansion or curtailment of operations, a significant increase or
decline of orders, significant merger or acquisition proposals or agreements,
significant new products or discoveries, extraordinary borrowing, major litigation,
liquidity problems, extraordinary management developments, purchase or sale of
substantial assets, or other similar information For purposes of this Transaction,
“Trading Personnel” means any employee on the trading side of the Equity Derivatives
Group of J.P. Morgan Securities Inc. and does not include Messrs. David Aidelson,
Santosh Nabar, James Rothschild, Elliot Chalom and Ms. Bernadette Barnard (or any
other person or persons designated from time to time by the Compliance Group of
Party A).

     Maximum Share Delivery:

Notwithstanding any other provision of this Confirmation, in no event will Party B
be required to deliver to Party A on any Settlement Date, whether pursuant to
Physical Settlement, Termination Settlement or any Private Placement Settlement, a
number of Shares greater than ten times the Base Amount as of the Trade Date.

 

 

     Assignment:

Party A may assign or transfer any of its rights or delegate any of its duties
hereunder to any affiliate of Party A or any entity organized or sponsored by Party
A without the prior written consent of Party B. Notwithstanding any other provision
of this Confirmation to the contrary requiring or allowing Party A to purchase or
receive any Shares from Party B, Party A may designate any of its affiliates to
purchase or receive such Shares or otherwise to perform Party A’s obligations in
respect of this Transaction and any such designee may assume such obligations, and
Party A shall be discharged of its obligations to Party B to the extent of any such
performance.

     Matters Relating to Agent:

Each party agrees and acknowledges that (i) J.P. Morgan Securities Inc., as agent,
(the “Agent”) acts solely as agent on a disclosed basis with respect to the
transactions contemplated hereunder, and (ii) the Agent has no obligation, by
guaranty, endorsement or otherwise, with respect to the obligations of either Party
B or Party A hereunder, either with respect to the delivery of cash or Shares,
either at the beginning or the end of the transactions contemplated hereby. In this
regard, each of Party A and Party B acknowledges and agrees to look solely to the
other for performance hereunder, and not to the Agent.

     Indemnity:

Party B agrees to indemnify Party A and its affiliates and their respective
directors, officers, agents and controlling parties (Party A and each such affiliate
or person being an “Indemnified Party”) from and against any and all losses, claims,
damages and liabilities, joint and several, incurred by or asserted against such
Indemnified Party arising out of, in connection with, or relating to, the execution
or delivery of this Confirmation, the performance by the parties hereto of their
respective obligations under the Transaction, any breach of any covenant or
representation made by Party B in this Confirmation or the Agreement or the
consummation of the transactions contemplated hereby and will reimburse any
Indemnified Party for all reasonable expenses (including reasonable legal fees and
expenses) as they are incurred in connection with the investigation of, preparation
for, or defense of any pending or threatened claim or any action or proceeding
arising therefrom, whether or not such Indemnified Party is a party thereto. Party B
will not be liable under this Indemnity paragraph to the extent that any loss,
claim, damage, liability or expense is found in a final and nonappealable judgment
by a court to have resulted from Party A’s gross negligence, bad faith, fraud and/or
willful misconduct or breach of any representation or covenant of Party A contained
herein or violation of the Ownership Limits imposed by the Charter (described
herein), unless such violation is a result of an Issuer Repurchase for which Party B
failed to provide an Issuer Repurchase Notice as required herein or a determination
by Party B that it will treat ownership positions held by Party A or any of its
affiliates solely in its (or their) capacity as a nominee or fiduciary as
constituting Beneficial Ownership or Constructive Ownership (as such terms are
defined in the Charter) by Party A.

     Notice:

	 	 	 
	Non-Reliance:

	 	Applicable
	 
	 	 
	Additional Acknowledgments:

	 	Applicable
	 
	 	 
	Agreements
and Acknowledgments 

Regarding Hedging Activities:

	 	Applicable

 

 

	4.	 	The Agreement is further supplemented by the following provisions:

     No Collateral or Setoff:

Notwithstanding Section 6(f) or any other provision of the Agreement or any other
agreement between the parties to the contrary, the obligations of Party B hereunder
are not secured by any collateral. Obligations under this Transaction shall not be
set off against any other obligations of the parties, whether arising under the
Agreement, this Confirmation, under any other agreement between the parties hereto,
by operation of law or otherwise, and no other obligations of the parties shall be
set off against obligations under this Transaction, whether arising under the
Agreement, this Confirmation, under any other agreement between the parties hereto,
by operation of law or otherwise, and each party hereby waives any such right of
setoff. In calculating any amounts under Section 6(e) of the Agreement,
notwithstanding anything to the contrary in the Agreement, (a) separate amounts
shall be calculated as set forth in such Section 6(e) with respect to (i) this
Transaction and (ii) all other Transactions, and (b) such separate amounts shall be
payable pursuant to Section 6(d)(ii) of the Agreement.

     Status of Claims in Bankruptcy:

Party A acknowledges and agrees that this Confirmation is not intended to convey to
Party A rights with respect to the transactions contemplated hereby that are senior
to the claims of common shareholders in any U.S. bankruptcy proceedings of Party B;
provided, however, that nothing herein shall limit or shall be deemed to limit Party
A’s right to pursue remedies in the event of a breach by Party B of its obligations
and agreements with respect to this Confirmation and the Agreement; and provided
further, that nothing herein shall limit or shall be deemed to limit Party A’s
rights in respect of any transaction other than the Transaction.

     Limit on Beneficial Ownership:

Notwithstanding any other provisions hereof, Party A shall not be entitled to
receive Shares hereunder (whether in connection with the purchase of Shares on any
Settlement Date or any Termination Settlement Date, any Private Placement
Settlement, any Acceleration Event, or otherwise) to the extent (but only to the
extent) that after such receipt Party A’s ultimate parent entity would,
directly or indirectly, beneficially own (as such term is defined for purposes of
Section 13(d) of the Exchange Act) in excess of 8.0% of the outstanding Shares. Any
purported delivery of Shares by Party B hereunder shall be void and have no effect
to the extent (but only to the extent) that, after receipt of such Shares by Party
A, Party A’s ultimate parent entity would, directly or indirectly, individually or
in the aggregate, so beneficially own in excess of 8.0% of the outstanding Shares.
If, on any day, any delivery of Shares by Party B is not effected, in whole or in
part, as a result of this provision, Party B’s obligation to make such delivery
shall not be extinguished, and Party B shall make such delivery as promptly as
practicable after, but in no event within one Exchange Business Day after, Party A
gives notice to Party B that after receipt of such delivery, Party A’s ultimate
parent entity would not, directly or indirectly, individually or in the aggregate,
beneficially own in excess of 8.0% of the outstanding Shares.

     Ownership Limits Imposed by Charter:

Notwithstanding any other provisions hereof, Party A shall not have the right to
receive Settlement Shares (whether in connection with the purchase of Shares on any
Settlement Date or any Termination Settlement Date, any Private Placement
Settlement, or otherwise) to the extent (but only to the extent) that the number of
Settlement Shares, when aggregated with the total number of Shares otherwise
Beneficially Owned or Constructively Owned by Party A or its Affiliates, would cause
Party A or any Affiliate, directly or indirectly, individually or in the aggregate,
to Beneficially Own in excess of 5% (or such greater percentage up to 15% as
permitted by the Board of Directors of Party B pursuant to Article Fourth, Division
B, Section 4(l) of the Charter) of the outstanding Shares or Constructively Own in
excess of 9.8% of the outstanding Shares

 

 

(collectively, the “Ownership Limits”). For purposes of this paragraph, “Affiliate”
shall mean: (i) any person, other than an individual, treated as owning stock of
Party A, and (ii) any person, other than an individual, in which Party A is treated
as owning stock, in either case pursuant to Code Section 544, as modified by Code
Section 856(h)(1)(B). Notwithstanding any other provisions hereof, Party A shall be
subject to the transfer restrictions imposed by Article Fourth, Division B, Section
4 of the Charter, including but not limited to the purchase right in Excess Shares
under Section 4(d) thereof. For purposes of this paragraph, “Person,” “Beneficially
Own,” “Constructively Own,” and “Excess Shares” shall have the meanings ascribed to
them in the Charter.

In the event that Party B elects Physical Settlement, but all or some portion of
Settlement Shares cannot be delivered to Party A because of the of the Ownership
Limitations, Party B may elect to deliver to Party A the maximum number of Shares
allowable for Party A and its Affiliates to be in compliance with the Ownership
Limits and deliver the remaining Shares subject to the Physical Settlement, on one
or more days, as promptly as practicable after, but in no event within one Exchange
Business Day after, Party A gives notice to Party B that with respect to any such
delivery, the number of Shares to be received when aggregated with the total number
of Shares otherwise Beneficially Owned or Constructively Owned by Party A or its
Affiliates, would not cause Party A or any Affiliate, directly or indirectly,
individually or in the aggregate, to violate the Ownership Limitations.

     Miscellaneous:

	 	(a)	 	Addresses for Notices. For the purpose of Section 12(a) of the
Agreement:
	 
	 	 	 	Address for notices or communications to Party A:

	 	 	 
	Address:

	 	JP Morgan Chase Bank, National Association
	 

	 	277 Park Avenue
	 

	 	9th Floor
	 

	 	New York, NY 10172
	Attention:

	 	Equity Derivatives Group
	Telephone No.:

	 	(212) 622-5270
	Facsimile No.:

	 	(212) 622-0105
	 
	 	 
	With a copy to:
	 	 
	 
	 	 
	Address:

	 	JP Morgan Chase Bank, National Association
	 

	 	277 Park Avenue
	 

	 	11th Floor
	 

	 	New York, NY 10172
	Attention:

	 	Equity Derivatives Group Marketing Support
	Telephone No.:

	 	(212) 622-6707
	Facsimile No.:

	 	(212) 622-8534

	 	 	 	Address for notices or communications to Party B:

	 	 	 
	Address:

	 	Developers Diversified Realty Corporation
	 

	 	3300 Enterprise Parkway
	 

	 	Beachwood, Ohio 44122
	 
	 	 
	Attention:

	 	General Counsel

	 	(b)	 	Waiver of Right to Trial by Jury. Each party waives, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any suit, action or proceeding relating to this
Confirmation. Each party (i) certifies that no representative, agent

 

 

	 	 	 	or attorney of the other party has represented, expressly or otherwise, that
such other party would not, in the event of such a suit action or proceeding,
seek to enforce the foregoing waiver and (ii) acknowledges that it and the other
party have been induced to enter into this Confirmation by, among other things,
the mutual waivers and certifications herein.
	 
	 	(c)	 	London Branch. Party A is entering into this Confirmation and
the Agreement through its London branch. Notwithstanding the foregoing, Party
A represents to Party B that the obligations of Party A are the same as if it
had entered into this Confirmation and the Agreement through its head or home
office in New York.

     Acknowledgements:

The parties hereto intend for:

	 	(a)	 	this Transaction to be a “securities contract” as defined in
Section 741(7) of Title 11 of the United States Code (the “Bankruptcy Code”),
qualifying for the protections under Section 555 of the Bankruptcy Code;
	 
	 	(b)	 	a party’s right to liquidate this Transaction and to exercise
any other remedies upon the occurrence of any Event of Default under the
Agreement with respect to the other party to constitute a “contractual right”
as defined in the Bankruptcy Code;
	 
	 	(c)	 	Party A to be a “financial institution” within the meaning of
Section 101(22) of the Bankruptcy Code; and
	 
	 	(d)	 	all payments for, under or in connection with this Transaction,
all payments for the Shares and the transfer of such Shares to constitute
“settlement payments” as defined in the Bankruptcy Code.

     Payment of Counsel Fees:

Party A covenants and agrees that it shall pay the fees of Davis Polk & Wardwell,
forward sale agreement counsel to Party A, promptly after the Effective Date. Davis
Polk & Wardwell shall be deemed a third party beneficiary with respect to the
foregoing sentence.

     Other Forward:

Party A acknowledges that Party B has entered into substantially identical forward
transactions for its Shares on the date hereof (the “Other Forwards”) with
affiliates of each of Deutsche Bank Securities Inc. and Merrill Lynch, Pierce Fenner
& Smith Incorporated. Party A and Party B agree that if Party B designates a
Settlement Date with respect to one or both of the Other Forwards and for which Cash
Settlement is applicable, and the resulting Unwind Period for such Other Forward (or
Other Forwards, as the case may be) coincides for any period of time with an Unwind
Period for the Transaction (the “Overlap Unwind Period”), Party B shall notify Party
A prior to the commencement of such Overlap Unwind Period, and Party A shall only be
permitted to purchase Shares to unwind its hedge in respect of the Transaction on
every other Exchange Business Day that is not a Suspension Day during such Overlap
Unwind Period (if the Overlap Unwind Period is with respect to one Other Forward) or
on every third Exchange Business Day that is not a Suspension Day during such
Overlap Unwind Period (if the Overlap Unwind Period is with respect to both Other
Forwards). Party B shall specify in any Settlement Notice that triggers an Overlap
Unwind Period with respect to one Other Forward or with respect to both Other
Forwards, as the case may be, which forward counterparty will be permitted to
purchase Shares to unwind its hedge in respect of its Transaction first and second
or first, second and third, as the case may be.

 

 

     Severability:

If any term, provision, covenant or condition of this Confirmation, or the
application thereof to any party or circumstance, shall be held to be invalid or
unenforceable in whole or in part for any reason, the remaining terms, provisions,
covenants, and conditions hereof shall continue in full force and effect as if this
Confirmation had been executed with the invalid or unenforceable provision
eliminated, so long as this Confirmation as so modified continues to express,
without material change, the original intentions of the parties as to the subject
matter of this Confirmation and the deletion of such portion of this Confirmation
will not substantially impair the respective benefits or expectations of parties to
this Agreement; provided, however, that this severability provision shall not be
applicable if any provision of Section 2, 5, 6 or 13 of the Agreement (or any
definition or provision in Section 14 to the extent that it relates to, or is used
in or in connection with any such Section) shall be so held to be invalid or
unenforceable.

[Remainder of page intentionally left blank]

 

 

     Please confirm that the foregoing correctly sets forth the terms of our agreement by signing and
returning this Confirmation.

	 	 	 	 	 
	 	Yours faithfully,

J.P MORGAN SECURITIES INC.,

as agent for JPMorgan Chase Bank, National Association

 	 
	 	By:  	/s/ Santosh Sreenivasan
 	 
	 	 	Name:  	Santosh Sreenivason 	 
	 	 	Title:  	Vice President 	 
	 

Confirmed as of the date first written above:

	 	 	 	 	 
	DEVELOPERS DIVERSIFIED REALTY CORPORATION

 	 	 
	By:  	/s/ William H. Schafer
 	 	 
	 	Name:  	William H. Schafer 	 	 
	 	Title:  	Executive Vice President and
 Chief Financial Officer 	 	 
	 

JPMorgan Chase Bank, National Association

Organized under the laws of the United States as a National Banking Association.

Main Office 1111 Polaris Parkway, Columbus, Ohio 43271

Registered as a branch in England & Wales branch No. BR000746.

Registered Branch Office 125 London Wall, London EC2Y 5AJ

Authorized and regulated by the Financial Services Authority

 

 

SCHEDULE I

	 	 	 	 	 
	Forward Price Reduction Date	 	Forward Price Reduction Amount
	 
	 	 	 	 
	Trade Date
	 	$	0.00	 
	 
	 	 	 	 
	December 20, 2006
	 	$	0.59	 
	 
	 	 	 	 
	March 21, 2007
	 	$	0.66	 
	 
	 	 	 	 
	June 18, 2007
	 	$	0.66	 
	 
	 	 	 	 
	Thereafter
	 	$	0.00	 

 

 

ANNEX A

PRIVATE PLACEMENT PROCEDURES

	(i)	 	If Party B delivers the Restricted Shares pursuant to this clause (i) (a “Private Placement
Settlement”), then delivery of Restricted Shares by Party B shall be effected in customary
private placement procedures with respect to such Restricted Shares reasonably acceptable to
Party A; provided that if, on or before the date that a Private Placement Settlement would
occur, Party B has taken, or caused to be taken, any action that would make unavailable either
the exemption pursuant to Section 4(2) of the Securities Act for the sale by Party B to Party
A (or any affiliate designated by Party A) of the Restricted Shares or the exemption pursuant
to Section 4(1) or Section 4(3) of the Securities Act for resales of the Restricted Shares by
Party A (or any such affiliate of Party A) or Party B fails to deliver the Restricted Shares
when due or otherwise fails to perform obligations within its control in respect of a Private
Placement Settlement, it shall be an Event of Default with respect to Party B and Section 6 of
the Agreement shall apply. The Private Placement Settlement of such Restricted Shares shall
include customary representations, covenants, blue sky and other governmental filings and/or
registrations, indemnities to Party A, due diligence rights (for Party A or any designated
buyer of the Restricted Shares by Party A), opinions and certificates, and such other
documentation as is customary for private placement agreements, all reasonably acceptable to
Party A. In the case of a Private Placement Settlement, Party A shall, in its good faith
discretion, adjust the amount of Restricted Shares to be delivered to Party A hereunder in a
commercially reasonable manner to reflect the fact that such Restricted Shares may not be
freely returned to securities lenders by Party A and may only be saleable by Party A at a
discount to reflect the lack of liquidity in Restricted Shares. Notwithstanding the Agreement
or this Confirmation, the date of delivery of such Restricted Shares shall be the Clearance
System Business Day following notice by Party A to Party B of the number of Restricted Shares
to be delivered pursuant to this clause (i). For the avoidance of doubt, delivery of
Restricted Shares shall be due as set forth in the previous sentence and not be due on the
Settlement Date or Termination Settlement Date that would otherwise be applicable.
	 
	(ii)	 	If Party B delivers any Restricted Shares in respect of the Transaction, Party B agrees that
(i) such Shares may be transferred by and among Party A and its affiliates and (ii) after the
minimum “holding period” within the meaning of Rule 144(d) under the Securities Act has
elapsed after the applicable Settlement Date, Party B shall promptly remove, or cause the
transfer agent for the Shares to remove, any legends referring to any transfer restrictions
from such Shares upon delivery by Party A (or such affiliate of Party A) to Party B or such
transfer agent of seller’s and broker’s representation letters customarily delivered by Party
A or its affiliates in connection with resales of restricted securities pursuant to Rule 144
under the Securities Act, each without any further requirement for the delivery of any
certificate, consent, agreement, opinion of counsel, notice or any other document, any
transfer tax stamps or payment of any other amount or any other action by Party A (or such
affiliate of Party A).

A-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00114-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00114-of-00352.parquet"}]]