UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
April 11, 2011
DEVELOPERS DIVERSIFIED REALTY CORPORATION
(Exact Name of Registrant as Specified in Charter)
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Ohio
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1-11690
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34-1723097
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(State or Other Jurisdiction
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(Commission
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(IRS Employer
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of Incorporation)
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File Number)
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Identification No.)
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3300 Enterprise Parkway, Beachwood, Ohio
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44122
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrants telephone number, including area code:
(216) 755-5500
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (
see
General Instruction
A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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TABLE OF CONTENTS
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers.
Wolstein Departure
Effective April 11, 2011, Scott A. Wolstein resigned from the Board of Directors (the
Board
)
of Developers Diversified Realty Corporation (the
Company
) and will no longer serve as Executive
Chairman of the Board. Mr. Wolstein will remain employed by the Company through July 1, 2011.
Mr. Wolstein will receive certain payments and other benefits from the Company in connection
with his termination of employment without cause pursuant to his Employment Agreement, dated as of
July 29, 2009, with the Company (the
Employment Agreement
). Mr. Wolstein is also entitled to
certain benefits pursuant to the Companys current equity and other benefit/retirement plans. These
payments and benefits include: $7,871,719 as a contractual severance payment; one year of health
benefits; the vesting of 94,387 Company shares previously earned and granted to Mr. Wolstein in
accordance with the Companys current equity plan; a cash payment in lieu of Company shares
previously earned and granted to Mr. Wolstein in an amount equal to his statutory minimum
termination withholding tax obligations for his equity awards; $160,000 in connection with his
waiver to stand for re-election to the Board at the Companys 2011 Annual Meeting; $300,000 in
satisfaction of the Companys obligation to provide continuing office support; and $30,000 for the
fees of legal and other advisors.
Amended and Restated Employment Agreements with Messrs. Oakes, Freddo and Kokinchak
On April 12, 2011, the Company entered into an amended and restated employment agreement with
each of Mr. David J. Oakes, the Companys Senior Executive Vice President and Chief Financial
Officer, Mr. Paul W. Freddo, the Companys Senior Executive Vice President of Leasing & Development,
and Mr. John S. Kokinchak, the Companys Senior Executive Vice President & Chief Administrative
Officer (the
New Agreements
). The New Agreements supersede in their entirety the prior employment
agreements, dated as of December 29, 2008 (collectively, the
Old Employment Agreements
) between
the Company and each of Messrs. Oakes, Freddo and Kokinchak (the
Executives
).
The primary material changes in the New Agreements as compared to the Old Employment
Agreements are the following, consistent with current best pay practices:
Fixed Term
. The term of each New Agreement is a set period that runs from April 12, 2011
through December 31, 2012 (the
Contract Period
), which change eliminates the evergreen
automatic renewal feature contained in the Old Employment Agreements.
Elimination of Excise Tax Gross-Ups
. The New Agreements eliminate all excise tax gross-up
provisions in the Old Employment Agreements and the Executives prior change in control agreements
as described below.
Increase in Threshold for Change in Control
. The New Agreements incorporate the change in
control provisions previously contained in a separate agreement with each of the Executives (as
referenced below) and increase the threshold required to constitute a change in control from an
acquisition of 20% of the voting power of the Companys securities to 30% of the voting power of
the Companys securities without the prior consent of the Board.
Reduction in Severance Payment Upon a Change in Control
. The New Agreements reduce the
severance payable to an Executive upon a Triggering Event following a Change in Control
(as such terms are defined in the New Agreements) from two times annual base salary and two times
annual bonus at the
maximum
level to two times annual base salary and two times annual bonus at the
target
level.
Except as otherwise noted below, the remaining material terms of the New Agreements are
substantially similar to the Old Employment Agreements and/or reflect existing Company practices
under the Old Employment Agreements, as follows:
Base Compensation and Benefits
. The New Agreements provide for minimum base salaries, subject
to increases approved by the Executive Compensation Committee of the Board (the
Committee
), of
$475,000 for Mr. Oakes, $400,000 for Mr. Freddo and $310,000 for Mr. Kokinchak. The Executives are
entitled to participate in the Companys broad-based retirement, health and other benefit plans and
equity plans and programs generally available to the Companys senior executive officers. Each of
the Executives is entitled to payment by the Company for regular membership fees, assessments and
dues for a local country club and to be reimbursed by the Company for reasonable business expenses
incurred at the country club or for other business activities.
Annual Performance-Based Cash Bonus
.
Consistent with the Old Employment Agreements,
the New Agreements
provide that
the Executives are entitled to
annual performance-based cash bonuses equal to a percentage of their year-end base salaries as
determined by the Committee. The respective threshold, target and maximum annual cash bonus
opportunities, as a percentage of year-end base salary, for the Executives are: Mr. Oakes, 50%, 75%
and 150%; Mr. Freddo, 50%, 75% and 125%; and Mr. Kokinchak, 50%, 75% and 125%. The Committee will,
from time to time, establish the performance factors and criteria relevant for determination of
such annual cash bonuses. There are no guaranteed annual cash bonuses under the New Agreements.
Annual Equity Award
. Consistent with past Company practices under the Old Employment
Agreements, the New Agreements also provide that if the Executives earn an annual cash bonus for an
applicable year, the Executives will also receive an annual equity award for the year. The annual
equity award will be in an amount equal to a percentage of the Executives year-end base salaries
plus annual cash bonus as determined by the Committee. The respective threshold, target and maximum
annual equity award opportunities, as a percentage of year-end base salary plus annual cash bonus,
for the Executives are: Mr. Oakes, 50%, 75% and 150%; Mr. Freddo, 25%, 50% and 100%; and Mr.
Kokinchak, 25%, 50% and 100%. The performance factors and criteria relevant for determination of
such annual equity awards will be the same as those established for the annual cash bonus for the
relevant year. There are no guaranteed annual equity awards under the New Agreements.
Employment Termination
. Each New Agreement may be terminated under a variety of
circumstances, including the Executives total disability or death, for cause (as defined in the
New Agreements) by the Board if the Executive engages in certain specified conduct, without cause
by the Board or for good reason (as defined in the New Agreements) by the Executive, or without
good reason by the Executive.
Termination Payments
. If an Executive is terminated by the Board without cause or the
Executive terminates his employment for good reason during the Contract Period (and the termination
is not in connection with a Change in Control (as defined in the New Agreements)), he is entitled
to receive: (1) accrued but unpaid base salary and his prior years annual cash bonus to the extent
not paid; (2) a lump sum severance amount equal to one times the Executives base salary as of the
termination date plus one times his target annual cash bonus opportunity for the year in which the
termination date occurs (and eliminating the pro rata bonus calculation under the Old Employment
Agreements); and (3) one year of continued health, dental and vision coverage. The New Agreements
also provide for one year of reasonable outplacement services as compared to the Old Employment
Agreements. The severance payment is subject to the Executives execution of a release of claims in
favor of the Company.
If an Executive is terminated by reason of his death or disability during the Contract Period,
he is or his estate or beneficiaries are, as applicable, entitled to receive: (1) accrued but
unpaid base salary and his prior years annual cash bonus to the extent not paid; (2) a lump sum
severance amount equal to one times the Executives base salary as of the termination date plus one
times his target annual cash bonus opportunity for the year in which the termination date occurs;
and (3) one year of continued health, dental and vision coverage. The severance payment is subject
to the execution of a release of claims in favor of the Company in the event of an Executives
death.
Under the New Agreements, the following payments and benefits are payable by the Company to
the Executive if a Triggering Event occurs within two years following a Change in Control while the
Executive is employed by the Company: (1) accrued but unpaid base salary and his prior years
annual cash bonus to the extent not paid; (2) a lump sum severance amount equal to two times the
Executives base salary as of the termination date plus two times his target annual cash bonus
opportunity for the year in which the termination date occurs; (3) 18 months of continued health,
dental and vision coverage (as compared to two years of coverage under the prior change in control
agreements); and (4) one year of reasonable outplacement services.
Other Terms and Provisions
. The New Agreements also contain customary confidentiality,
non-solicitation and noncompetition covenants.
Prior Change in Control Agreements with Messrs. Oakes, Freddo and Kokinchak
The
New Agreements supersede and terminate in their entirety the
Executives prior change in control
agreements, dated as of December 29, 2008, with the Company.
Indemnification Agreements with Executive Officers
On April 12, 2011, the Companys current executive officers executed the Companys standard
form of indemnification agreement, a description of which is included in the Companys
Current Report on Form 8-K filed with the Securities and Exchange Commission on
April 7, 2009.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
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By:
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/s/ David J. Oakes
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David J. Oakes
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Senior Executive Vice President and Chief
Financial Officer
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Date: April 15, 2011