Document:

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                                                                   Exhibit 10.31
                                                                   -------------

                              EMPLOYMENT AGREEMENT
                              --------------------

         THIS EMPLOYMENT AGREEMENT is entered into as of the 1st day of March,
2000, between Developers Diversified Realty Corporation, an Ohio corporation
(the "Company"), and William H. Schafer (the "Executive").

                              W I T N E S S E T H:

         WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein;

         NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:

         1. Employment.
            ----------

             (a) The Company hereby employs the Executive as its Vice President
and Chief Financial Officer and the Executive hereby accepts such employment, on
the terms and subject to the conditions hereinafter set forth.

             (b) During the term of this Employment Agreement and any renewal
hereof (all references herein to the terms of this Employment Agreement shall
include references to the period of renewal hereof, if any), the Executive shall
be and have the titles of Vice President and Chief Financial Officer and shall
devote all of his business time and all reasonable efforts to his employment and
perform diligently such duties as are customarily performed by Vice Presidents
and Chief Financial Officers of companies similar in size to the Company,
together with such other duties as may be reasonably requested from time to time
by the President of the Company or the Board of Directors of the Company (the
"Board"), which duties shall be consistent with his positions as set forth above
and as provided in Paragraph 2.

         2. Term and Positions.
            ------------------

             (a) Subject to the provisions for termination hereinafter provided,
(i) the term of this Employment Agreement shall begin on the date hereof and
shall continue for the current "fiscal year" (as hereinafter defined) and for
the immediately succeeding fiscal year and (ii) as of December 31, 2001, such
term automatically shall be extended for the fiscal year commencing January 1,
2002 and for each fiscal year thereafter. This Employment Agreement may be
terminated by the Company with "cause" (as hereinafter defined) at any time, or
without cause upon not less than ninety days prior written notice. The term
"fiscal year" means the period beginning on the day after the Saturday closest
to January 1, in one year and ending on the Saturday closest to December 31 in
the next year.

             (b) The Executive shall be entitled to serve as a Vice President
and Chief Financial Officer of the Company. For service as an officer and
employee of the Company, the Executive shall be entitled to the full protection
of the applicable indemnification provisions of the articles of incorporation
and code of regulations of the Company, as the same may be amended from time to
time.

<PAGE>   2

         3. Compensation.
            ------------

             During the term of this Employment Agreement, the Company shall pay
or provide, as the case may be, to the Executive the compensation and other
benefits and rights set forth in this Paragraph 3.

             (a) The Company shall pay to the Executive a base salary payable in
accordance with the Company's usual pay practices (and in any event no less
frequently than monthly) of Two Hundred Thousand Dollars ($200,000) per annum.

             (b) The Company shall pay to the Executive bonus compensation for
each fiscal year of the Company, not later than 90 days following the end of
each fiscal year or the termination of the employment, as the case may be,
prorated on a per diem basis for partial fiscal years, determined and calculated
in a manner set forth on Exhibit A attached hereto.

             (c) The Company shall provide to the Executive such life, medical,
hospitalization and dental insurance for himself, his spouse and eligible family
members as may be determined by the Board to be consistent with industry
standards.

             (d) The Executive shall participate in all retirement and other
benefit plans of the Company generally available from time to time to employees
of the Company and for which the Executive qualifies under the terms thereof
(and nothing in this Agreement shall or shall be deemed to in any way effect the
Executive's rights and benefits thereunder except as expressly provided herein).

             (e) The Executive shall be entitled to such periods of vacation and
sick leave allowance each year as are determined by the President of the Company
in his reasonable and good faith discretion, which in any event shall be not
less than as provided under the Company's vacation and sick leave policy for
executive officers.

             (f) The Executive shall be entitled to participate in any equity or
other employee benefit plan that is generally available to senior executive
officers, as distinguished from general management, of the Company. The
Executive's participation in and benefits under any such plan shall be on the
terms and subject to the conditions specified in the governing document of the
particular plan.

         4. Payment in the Event of Death or Permanent Disability.
            -----------------------------------------------------

             (a) In the event of the Executive's death or "permanent disability"
(as hereinafter defined) during the term of this Employment Agreement, the
Company shall pay to the Executive (or his successors and assigns in the event
of his death) an amount equal to one (1) time the Executive's then effective per
annum rate of salary, as determined under Paragraph 3(a), plus a pro rata
portion of the bonus applicable to the fiscal year in which such death or
permanent disability occurs, as such bonus is determined under Paragraph 3(b).

             (b) The pro rata portion of the bonus described in Paragraph 4(a)
shall be paid when and as provided in Paragraph 3(b). The remainder of the
benefit to be paid pursuant to Paragraph 4(a) shall be paid within ninety (90)
days after the date of death or permanent disability, as the case may be.

             (c) Except as otherwise provided in Paragraphs 3(d) and 4(a), in
the event of the Executive's death or permanent disability the Executive shall
be entitled to no further compensation or other benefits under this Employment
Agreement, except as to that portion of any unpaid salary and

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other benefits accrued and earned by him hereunder up to and including the date
of such death or permanent disability, as the case may be.

             (d) For purposes of this Employment Agreement, the Executive's
"permanent disability" shall be deemed to have occurred after one hundred twenty
(120) days in the aggregate during any consecutive twelve (12) month period, or
after ninety (90) consecutive days, during which one hundred twenty (120) or
ninety (90) days, as the case may, the Executive, by reason of his physical or
mental disability or illness, shall have been unable to discharge his duties
under this Employment Agreement. The date of permanent disability shall be such
one hundred twentieth (120th) or ninetieth (90th) day, as the case may be. In
the event either the Company or the Executive, after receipt of notice of the
Executive's permanent disability from the other, dispute that the Executive's
permanent disability shall have occurred, the Executive shall promptly submit to
a physical examination by the chief of medicine of any major accredited hospital
in the Cleveland, Ohio, area and, unless such physician shall issue his written
statement to the effect that in his opinion, based on his diagnosis, the
Executive is capable of resuming his employment and devoting his full time and
energy to discharging his duties within thirty (30) days after the date of such
statement, such permanent disability shall be deemed to have occurred.

         5. Termination.
            -----------

             (a) The employment of the Executive under this Employment
Agreement, and the terms hereof, may be terminated by the Company:

                  (i) on the death or permanent disability (as previously
         defined) of the Executive;

                  (ii) for cause (as hereinafter defined) at any time by action
         of the Board; or

                  (iii) without cause pursuant to written notice provided to the
         Executive not less than ninety (90) days in advance of such termination
         date.

The exercise by the Company of its rights of termination under this Paragraph 5
shall be the Company's sole remedy in the event of the occurrence of the event
as a result of which such right to terminate arises. Upon any termination of
this Employment Agreement, the Executive shall be deemed to have resigned from
all offices and directorships held by the Executive in the Company.

             (b) For purposes of this Agreement, the term "cause" shall mean:

                  (i) The Executive's fraud, commission of a felony or of an act
         or series of acts which result in material injury to the business
         reputation of the Company, commission of an act or series of repeated
         acts of dishonesty which are materially inimical to the best interests
         of the Company, or the Executive's willful and repeated failure to
         perform his duties under this Employment Agreement, which failure has
         not been cured within fifteen (15) days after the Company gives notice
         thereof to the Executive; or

                  (ii) The Executive's material breach of any material provision
         of this Employment Agreement, which breach has not been cured in all
         substantial respects within ten (10) days after the Company gives
         notice thereof to the Executive.

             (c) In the event of a termination claim by the Company to be for
"cause" pursuant to Paragraph 5(a)(ii), the Executive shall have the right to
have the justification for said termination determined by arbitration in
Cleveland, Ohio. In order to exercise such right, the Executive

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shall serve on the Company within thirty (30) days after termination a written
request for arbitration. The Company immediately shall request the appointment
of an arbitrator by the American Arbitration Association and thereafter the
question of "cause" shall be determined under the rules of the American
Arbitration Association, and the decision of the arbitrator shall be final and
binding upon both parties. The parties shall use all reasonable efforts to
facilitate and expedite the arbitration and shall act to cause the arbitration
to be completed as promptly as possible. During the pendency of the arbitration,
the Executive shall continue to receive all compensation and benefits to which
he is entitled hereunder, and if at any time during the pendency of such
arbitration the Company fails to pay and provide all compensation and benefits
to the Executive in a timely manner the Company shall be deemed to have
automatically waived whatever rights it then may have had to terminate the
Executive's employment for cause. Expenses of the arbitration shall be borne
equally by the parties.

             (d) In the event of termination for any of the reasons set forth in
subparagraph (a)(i) or (a)(ii) of this Paragraph 5, except as otherwise provided
in Paragraphs 3(d) and 4(a), the Executive shall be entitled to no further
compensation or other benefits under this Employment Agreement, except as to
that portion of any unpaid salary and other benefits accrued and earned by him
hereunder up to and including the effective date of such termination. If the
Executive's employment is terminated pursuant to subparagraph (a)(iii) of this
Paragraph 5 (other than as described in Paragraph 5(e) hereof), all of the
Executive's rights and all of the Company's obligations hereunder shall
immediately terminate. Notwithstanding the foregoing, if the Executive's
employment is terminated pursuant to subparagraph (a)(iii) of this Paragraph 5
(other than as described in Paragraph 5(e)), the Company shall continue to pay
the Executive an amount equal to the Executive's then effective per annum rate
of salary, as determined under Paragraph 3(a), for twelve (12) months following
the Executive's termination date.

             (e) Notwithstanding anything in this Agreement to the contrary, if
there shall occur (i) a "Change in Control" and a "Triggering Event" or (ii) a
"Spin-Off") (as those terms are defined in the Change in Control Agreement,
dated March 24, 1999, between the Company and the Executive (the "Change in
Control Agreement")), then the Company or the Executive shall have the right to
terminate the employment of the Executive with the Company and, in the event of
such termination, the payments to be made to the Executive in connection
therewith shall be governed by the Change of Control Agreement and the Executive
shall be entitled to no further compensation or other benefits under this
Employment Agreement, except as to that portion of any unpaid salary and other
benefits accrued and earned by him hereunder up to and including the effective
date of such termination.

         6. Covenants and Confidential Information.
            ---------------------------------------

             (a) The Executive acknowledges the Company's reliance and
expectation of the Executive's continued commitment to performance of his duties
and responsibilities during the term of this Employment Agreement. In light of
such reliance and expectation on the part of the Company, during the term of
this Employment Agreement and for a period of one (1) year thereafter (and, as
to clause (ii) of this subparagraph (a), at any time during and after the term
of this Employment Agreement), the Executive shall not, directly or indirectly,
do or suffer either of the following:

                  (i) Own, manage, control or participate in the ownership,
         management or control, or be employed or engaged by or otherwise
         affiliated or associated as a consultant, independent contractor or
         otherwise with, any other corporation, partnership, proprietorship,
         firm, association or other business entity engaged in the business of,
         or otherwise engage in the business of, acquiring, owning, developing
         or managing commercial shopping centers; provided, however, that the
         ownership of not more than one percent (1%) of any class of publicly
         traded securities of any entity shall not be deemed a violation of this
         covenant; or

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                  (ii) Disclose, divulge, discuss, copy or otherwise use or
         suffer to be used in any manner, in competition with, or contrary to
         the interests of, the Company, any confidential information relating to
         the Company's operations, properties or otherwise to its particular
         business or other trade secrets of the Company, it being acknowledged
         by the Executive that all such information regarding the business of
         the Company compiled or obtained by, or furnished to, the Executive
         while the Executive shall have been employed by or associated with the
         Company is confidential information and the Company's exclusive
         property; provided, however, that the foregoing restrictions shall not
         apply to the extent that such information (A) is clearly obtainable in
         the public domain, (B) becomes obtainable in the public domain, except
         by reason of the breach by the Executive of the terms hereof, (C) was
         not acquired by the Executive in connection with his employment or
         affiliation with the Company, (D) was not acquired by the Executive
         from the Company or its representatives or (E) is required to be
         disclosed by rule of law or by order of a court or governmental body or
         agency.

             (b) The Executive agrees and understands that the remedy at law for
any breach by him of this Paragraph 6 will be inadequate and that the damages
following from such breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that, upon adequate proof of the
Executive's violation of any legally enforceable provision of this Paragraph 6,
the Company shall be entitled to immediate injunctive relief and may obtain a
temporary order restraining any threatened or further breach. Nothing in this
Paragraph 6 shall be deemed to limit the Company's remedies at law or in equity
for any breach by the Executive of any of the provisions of this Paragraph 6
which may be pursued or availed of by the Company.

             (c) The Executive has carefully considered the nature and extent of
the restrictions upon him and the rights and remedies conferred upon the Company
under this Paragraph 6, and hereby acknowledges and agrees that the same are
reasonable in time and territory, are designed to eliminate competition which
otherwise would be unfair to the Company, do not stifle the inherent skill and
experience of the Executive, would not operate as a bar to the Executive's sole
means of support, are fully required to protect the legitimate interests of the
Company and do not confer a benefit upon the Company disproportionate to the
detriment to the Executive.

         7. Miscellaneous.
            -------------

             (a) The Executive represents and warrants that he is not a party to
any agreement, contract or understanding, whether employment or otherwise, which
would restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Employment Agreement.

             (b) The provisions of this Employment Agreement are severable and
if any one or more provision may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provision and any partially
unenforceable provision to the extent enforceable in any jurisdiction
nevertheless shall be binding and enforceable.

             (c) The rights and obligations of the Company under this Employment
Agreement shall inure to the benefit of, and shall be binding on, the Company
and its successors and assigns, and the rights and obligations (other than
obligations to perform services) of the Executive under this Employment
Agreement shall inure to the benefit of, and shall be binding upon, the
Executive and his heirs, personal representatives and assigns.

             (d) Any controversy or claim arising out of or relating to this
Employment Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association then
pertaining in the City of Cleveland, Ohio, and judgment upon the

                                      -5-
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award rendered by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof. The arbitrator or arbitrators shall be deemed to
possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration; provided, however, that nothing in this
Paragraph 8(d) shall be construed so as to deny the Company the right and power
to seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by the Executive of any of his covenants contained in
Paragraph 6 hereof.

             (e) Any notice to be given under this Employment Agreement shall be
personally delivered in writing or shall have been deemed duly given when
received after it is posted in the United States mail, postage prepaid,
registered or certified, return receipt requested, and if mailed to the Company,
shall be addressed to its principal place of business, attention: General
Counsel, and if mailed to the Executive, shall be addressed to him at his home
address last known on the records of the Company, or at such other address or
addresses as either the Company or the Executive may hereafter designate in
writing to the other.

             (f) The failure of either party to enforce any provision or
provisions of this Employment Agreement shall not in any way be construed as a
waiver of any such provision or provisions as to any future violations thereof,
nor prevent that party thereafter from enforcing each and every other provision
of this Employment Agreement. The rights granted the parties herein are
cumulative and the waiver of any single remedy shall not constitute a waiver of
such party's right to assert all other legal remedies available to it under the
circumstances.

             (g) This Employment Agreement supersedes all prior agreements and
understandings between the parties and may not be modified or terminated orally.
No modification, termination or attempted waiver shall be valid unless in
writing and signed by the party against whom the same is sought to be enforced.

             (h) This Employment Agreement shall be governed by and construed
according to the laws of the State of Ohio.

             (i) Captions and paragraph headings used herein are for convenience
and are not a part of this Employment Agreement and shall not be used in
construing it.

             (j) Where necessary or appropriate to the meaning hereof, the
singular and plural shall be deemed to include each other, and the masculine,
feminine and neuter shall be deemed to include each other.

         IN WITNESS WHEREOF, the parties have executed this Employment Agreement
on the day and year first set forth herein.

                                   DEVELOPERS DIVERSIFIED REALTY
                                    CORPORATION

                                            /s/ David M. Jacobstein
                                   By:      ----------------------------
                                            Authorized Officer

                                            /s/ William H. Schafer
                                            ----------------------------
                                            William H. Schafer

                                      -6-
<PAGE>   7

                                    EXHIBIT A
                                    ---------

I.       INCENTIVE OPPORTUNITY

                                        BONUS AS
                                       % OF SALARY
                                       -----------

                   THRESHOLD            TARGET           MAXIMUM
                   ---------            ------           -------

                      15%                 25%              50%

                                      -7-<PAGE>   1
                                                                     Exhibit 4.4

                               AMENDMENT NO. 12 TO
                           LOAN AND SECURITY AGREEMENT

            This Amendment No. 12 ("Amendment") to Loan and Security Agreement
is made as of March 14, 2001, between Rainbow Rentals, Inc. (formerly known as
Rainbow Home Rentals, Inc.) ("Borrower") and Bank of America, N.A. (formerly
known as Bank of America National Trust and Savings Association, formerly known
as Bank of America Illinois, formerly known as Continental Bank N.A.)
("Lender").

            Reference is made to that certain Loan and Security Agreement
between Borrower and Lender dated October 5, 1992 (as amended, the "Loan
Agreement").

            Borrower has requested that the Loan Agreement be amended in certain
respects.

            1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the Loan
Agreement.

            2. AMENDMENT TO LOAN AGREEMENT. Section 4.3 of Supplement A to the
Loan Agreement is hereby amended effective as of September 29, 2000, as follows:

            4.3 MAXIMUM FUNDED DEBT TO EARNINGS RATIO. Not permit, for the
      period ending on the last day of each calendar quarter ending during any
      period (inclusive) set forth below, the ratio of (a) Borrower's
      Indebtedness for interest bearing borrowed money on the last day of each
      such calendar quarter during such period set forth below PLUS the product
      of rental expenses for the twelve month period ending on the last day of
      such calendar quarter multiplied by a factor of 4 to (b) the product of
      (i) the Annualizing Factor multiplied by (ii) Borrower's consolidated net
      earnings before interest expense, provision for Taxes, depreciation and
      amortization for such twelve month period PLUS rental expenses MINUS the
      sum of inventory purchases and Capital Expenditures for such period, to be
      greater than the ratio set forth below opposite such period:
<TABLE>
<CAPTION>

                                      Period                                         Maximum Ratio
                                      ------                                         -------------

<S>                                                                                 <C>
         Calendar quarter ending June 30, 1999                                        3.25 : 1.00

         Six month period ending September 30, 1999                                   3.25 : 1.00

         Nine month period ending December 31, 1999                                   3.25 : 1.00

         Twelve month period ending March 31, 2000 and June 30, 2000                  3.00 : 1.00

         Twelve month period ending September 30, 2000 and December 31,               3.15 : 1.00
         2000

         Twelve month period ending March 31, 2001 and the twelve month               2.75 : 1.00
         period ending on the last day of each calendar quarter thereafter
</TABLE>

         For purposes of this SECTION 4.3 and SECTION 4.4, (i) consolidated net
         earnings shall not include any gains on the sale or other disposition
         of Investments of fixed assets and any extraordinary or nonrecurring
         items of income to the extent that the aggregate of all such gains and
         extraordinary or nonrecurring items of income exceeds the aggregate of
         losses on such sale or other disposition and extraordinary or
         nonrecurring charges, and (ii) interest expense shall include, without
         limitation, implicit interest expense on Capitalized Leases, and shall
         exclude the amortization of the closing fee, the modification fee, or
         any other fee paid to Lender in connection with the Loans. The
         Annualizing Factor means a factor of 4.0 for the period ending June 30,
         1999, a factor of 2.0 for

                                       1

<PAGE>   2

         the period ending September 30, 1999, a factor of 1.33 for the
         period ending December 31, 1999 and a factor of 1.0 for each period
         ending on or after March 31, 2000.

            3. CONDITION PRECEDENT. The amendment to the Loan Agreement set
forth in this Amendment shall become effective as of the date of this Amendment
upon the satisfaction of the following condition precedent:

            (a) EXECUTION. The delivery of an executed copy of this Amendment to
Lender.

            4. MISCELLANEOUS.

            (a) EXPENSES. Borrower agrees to pay on demand all costs and
expenses of Lender (including the reasonable fees and expenses of outside
counsel for Lender) in connection with the preparation, negotiation, execution,
delivery and administration of this Amendment and all other instruments or
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith. In addition, Borrower agrees to pay, and save Lender
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of this Amendment, the borrowings
under the Loan Agreement, as amended hereby, and the execution and delivery of
any instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided in this SECTION
4(a) shall survive any termination of this Amendment or the Loan Agreement as
amended hereby.

            (b) GOVERNING LAW. This Amendment shall be a contract made under and
governed by the internal laws of the State of Illinois.

            (c) COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Amendment.

            (d) REFERENCE TO LOAN AGREEMENT. Except as herein amended, the Loan
Agreement shall remain in full force and effect and is hereby ratified in all
respects. On and after the effectiveness of the amendments to the Loan Agreement
accomplished hereby, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
the Loan Agreement in any note and in any Related Agreements, or other
agreements, documents or other instruments executed and delivered pursuant to
the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Amendment.

            (e) SUCCESSORS. This Amendment shall be binding upon Borrower,
Lender and their respective successors and assigns, and shall inure to the
benefit of Borrower, Lender and the successors and assigns of Borrower and
Lender.

            IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized and delivered
at Chicago, Illinois as of the date first above written.

                                         RAINBOW RENTALS, INC.

                                         By  /e/ MICHAEL A. PECCHIA
                                             ----------------------
                                         Its  Chief Financial Officer
                                             ------------------------
                                         BANK OF AMERICA, N.A.

                                         By  /e/ PETER J. GATES, JR.
                                             -----------------------
                                         Its  Senior Vice President
                                             -----------------------

                                       2

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