DIRECTOR INDEMNIFICATION
AGREEMENT
This Director
Indemnification Agreement, dated as of _________, 20___ (this
“ Agreement ”), is made by and between
Developers Diversified Realty Corporation, an Ohio corporation (the
“ Company ”), and _______________
(“ Indemnitee ”).
A. Section 1701.59
of the ORC provides that the business and affairs of a corporation
shall be managed by or under the direction of its board of
directors.
B. By virtue
of the managerial prerogatives vested in the directors of an Ohio
corporation, directors act as fiduciaries of the corporation and
its shareholders.
C. Thus, it
is critically important to the Company and its shareholders that
the Company be able to attract and retain the most capable persons
reasonably available to serve as directors of the
Company.
D. In
recognition of the need for corporations to be able to induce
capable and responsible persons to accept positions in corporate
management, Ohio law authorizes (and in some instances requires)
corporations to indemnify their directors and officers, and further
authorizes corporations to purchase and maintain insurance for the
benefit of their directors and officers.
E. Indemnification
by a corporation serves the dual policies of (1) allowing
corporate officials to resist unjustified lawsuits, secure in the
knowledge that, if vindicated, the corporation will bear the
expense of litigation and (2) encouraging capable women and
men to serve as corporate directors and officers, secure in the
knowledge that the corporation will absorb the costs of defending
their honesty and integrity.
F. Lawsuits
challenging the judgment and actions of directors of corporations
are frequent, and the high costs of defending those lawsuits, and
the related threat to directors’ personal assets have made
individuals less willing to undertake the responsibilities imposed
on corporate directors.
G. Recent
federal legislation and rules adopted by the Securities and
Exchange Commission and the national securities exchanges have
imposed additional disclosure and corporate governance obligations
on directors of public companies and have exposed such directors to
new and substantially broadened civil liabilities.
H. These
legislative and regulatory initiatives have also exposed directors
of public companies to a significantly greater risk of criminal
proceedings, with attendant defense costs and potential criminal
fines and penalties.
I. Under Ohio
law, a director’s right to be reimbursed for the costs of
defense of criminal actions does not depend upon the merits of the
claims asserted against the director and
indemnification
of the director against criminal fines is permitted if the director
satisfies the applicable standard of conduct.
J. Indemnitee
is a director of the Company and Indemnitee’s willingness to
serve in such capacity is predicated, in substantial part, upon the
Company’s willingness to indemnify Indemnitee in accordance
with the principles reflected above, to the fullest extent
permitted by the laws of the state of Ohio, and upon the other
undertakings set forth in this Agreement.
K. Therefore,
in recognition of the need to provide Indemnitee with substantial
protection against personal liability, in order to procure
Indemnitee’s continued service as a director of the Company
and to enhance Indemnitee’s ability to serve the Company in
an effective manner, and in order to provide such protection
pursuant to express contract rights (intended to be enforceable
irrespective of, among other things, any amendment to any
provisions relating to indemnification included in the Constituent
Documents, any change in the composition of the Board or any
change-in-control or business combination transaction relating to
the Company), the Company wishes to provide in this Agreement for
the indemnification of and the advancement of Expenses to
Indemnitee as set forth in this Agreement and for the continued
coverage of Indemnitee under the Company’s directors’
and officers’ liability insurance policies.
L. In light
of the considerations referred to in the preceding recitals, it is
the Company’s intention and desire that the provisions of
this Agreement be construed liberally, subject to their express
terms, to maximize the protections to be provided to Indemnitee
hereunder.
NOW, THEREFORE,
the parties hereby agree as follows:
1. Certain Definitions . In addition to terms defined
elsewhere herein, including Section 22, the following terms
have the following meanings when used in this Agreement:
(a) “
Board ” means the Board of Directors of the
Company.
(b) “
Change in Control ” means the occurrence of any
of the following:
(i) the
Board or shareholders of the Company approve a consolidation or
merger in which the Company is not the surviving corporation, the
sale of substantially all of the assets of the Company, or the
liquidation or dissolution of the Company;
(ii) any
person or other entity (other than the Company or a Subsidiary or
any Company employee benefit plan (including any trustee of any
such plan acting in its capacity as trustee)) purchases any Shares
(or securities convertible into Shares) pursuant to a tender or
exchange offer without the prior consent of the Board, or becomes
the beneficial owner of securities of the Company representing 20%
or more of the voting power of the Company’s outstanding
securities without the prior consent of the Board;
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(iii) during
any two-year period, individuals who at the beginning of such
period constitute the entire Board cease to constitute a majority
of the Board, unless the election or the nomination for election of
each new director is approved by at least two-thirds of the
directors then still in office who were directors at the beginning
of that period; or
(iv) a
record date is established for determining shareholders of the
Company entitled to vote upon (A) a merger or consolidation of
the Company with another real estate investment trust, partnership,
corporation or other entity in which the Company is not the
surviving or continuing entity or in which all or a substantial
part of the outstanding shares are to be converted into or
exchanged for cash, securities or other property, (B) a sale
or other disposition of all or substantially all of the assets of
the Company or (C) the dissolution of the Company.
(c) “ Claim ” means (i) any
threatened, asserted, pending or completed claim, demand, action,
suit or proceeding, whether civil, criminal, administrative,
arbitrative, investigative or other, and whether made pursuant to
federal, state or other law; and (ii) any threatened, pending
or completed inquiry or investigation, whether made, instituted or
conducted by the Company or any other person, including any
federal, state or other governmental entity, that Indemnitee
determines might lead to the institution of any such claim, demand,
action, suit or proceeding.
(d) “
Constituent Documents ” means the
Company’s articles of incorporation and code of
regulations.
(e) “
Controlled Affiliate ” means any corporation,
limited liability company, partnership, joint venture, trust or
other entity or enterprise, whether or not for profit, that is
directly or indirectly controlled by the Company. For purposes of
this definition, “ control ” means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of an entity or
enterprise, whether through the ownership of voting securities,
through other voting rights, by contract or otherwise;
provided that direct or indirect beneficial ownership of
capital stock or other interests in an entity or enterprise
entitling the holder to cast 20% or more of the total number of
votes generally entitled to be cast in the election of directors
(or persons performing comparable functions) of such entity or
enterprise shall be deemed to constitute “control” for
purposes of this definition.
(f) “
Disinterested Director ” means a director of
the Company who is not and was not a party to or threatened with
the Claim in respect of which indemnification is sought by
Indemnitee.
(g) “
Exchange Act ” shall mean the Securities
Exchange Act of 1934, as amended.
(h) “
Expenses ” means attorneys’ and
experts’ fees and expenses and all other costs and expenses
paid or payable in connection with investigating, defending, being
a witness in or participating in (including on appeal), or
preparing to investigate, defend, be a witness in or participate in
(including on appeal), any Claim.
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(i) “
Incumbent Directors ” means the individuals
who, as of the date hereof, are directors of the Company and any
individual becoming a director subsequent to the date hereof whose
election, nomination for election by the Company’s
shareholders, or appointment, was approved by a vote of at least
two-thirds of the then Incumbent Directors (either by a specific
vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without objection
to such nomination); provided , however , that an
individual shall not be an Incumbent Director if such
individual’s election or appointment to the Board occurs as a
result of an actual or threatened election contest (as described in
Rule 14a-12(c) of the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person
other than the Board.
(j) “
Indemnifiable Claim ” means any Claim based
upon, arising out of or resulting from (i) any actual, alleged
or suspected act or failure to act by Indemnitee in his or her
capacity as a director, officer, employee or agent of the Company
or as a director, officer, employee, member, manager, trustee or
agent of any other corporation, limited liability company,
partnership, joint venture, trust or other entity or enterprise,
whether or not for profit, as to which Indemnitee is or was serving
at the request of the Company as a director, officer, employee,
member, manager, trustee or agent, (ii) any actual, alleged or
suspected act or failure to act by Indemnitee in respect of any
business, transaction, communication, filing, disclosure or other
activity of the Company or any other entity or enterprise referred
to in clause (i) of this sentence, or (iii) Indemnitee’s
status as a current or former director, officer, employee or agent
of the Company or as a current or former director, officer,
employee, member, manager, trustee or agent of the Company or any
other entity or enterprise referred to in clause (i) of this
sentence or any actual, alleged or suspected act or failure to act
by Indemnitee in connection with any obligation or restriction
imposed upon Indemnitee by reason of such status. In addition to
any service at the actual request of the Company, for purposes of
this Agreement, Indemnitee shall be deemed to be serving or to have
served at the request of the Company as a director, officer,
employee, member, manager, trustee or agent of another entity or
enterprise if Indemnitee is or was serving as a director, officer,
employee, member, manager, trustee or agent of such entity or
enterprise and (i) such entity or enterprise is or at the time of
such service was a Controlled Affiliate, (ii) such entity or
enterprise is or at the time of such service was an employee
benefit plan (or related trust) sponsored or maintained by the
Company or a Controlled Affiliate, or (iii) the Company or a
Controlled Affiliate directly or indirectly caused or authorized
Indemnitee to be nominated, elected, appointed, designated,
employed, engaged or selected to serve in such capacity.
(k) “
Indemnifiable Losses ” means any and all Losses
relating to, arising out of or resulting from any Indemnifiable
Claim.
(l) “
Independent Counsel ” means a law firm, or a
member of a law firm, that is experienced in matters of corporation
law and neither presently is, nor in the past five years has been,
retained to represent: (i) the Company (or any subsidiary) or
Indemnitee in any matter material to either such party (other than
with respect to matters concerning Indemnitee under this Agreement,
or of other indemnitees under similar indemnification agreements),
or (ii) any other named (or, as to a threatened matter,
reasonably likely to be named) party to the Indemnifiable Claim
giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term “Independent
Counsel” shall not include any person who, under the
applicable standards of
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professional
conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to
determine Indemnitee’s rights under this
Agreement.
(m) “
Losses ” means any and all Expenses, damages,
losses, liabilities, judgments, fines, penalties (whether civil,
criminal or other) and amounts paid in settlement, including all
interest, assessments and other charges paid or payable in
connection with or in respect of any of the foregoing.
(n) “
Notification Date ” means the date of receipt
by the Company of written notice from Indemnitee advising the
Company of the final disposition of the applicable Indemnifiable
Claim or portion thereof to which such Indemnifiable Losses are
related, out of which such Indemnifiable Losses arose or from which
such Indemnifiable Losses resulted.
(o) “
ORC ” means the Ohio Revised Code.
(p) “
Other Indemnity Provisions ” means,
collectively, (i) the Constituent Documents, (ii) the
substantive laws of Ohio, and (iii) any other contract to
which both Indemnitee and the Company (or a Subsidiary of the
Company) are a party.
(q) “
Shares ” means the Common Shares, par value
$0.10 per share, of the Company.
(r) “
Standard of Conduct Determination ” means a
determination of whether Indemnitee has satisfied any applicable
standard of conduct under Ohio law that is a legally required
condition precedent to indemnification of Indemnitee under this
Agreement against Indemnifiable Losses relating to, arising out of
or resulting from an Indemnifiable Claim.
(s) “
Subsidiary ” means any corporation (other than
the Company) in an unbroken chain of corporations beginning with
the Company if each of the corporations (other than the last
corporation in the unbroken chain) owns stock possessing 50% or
more of the total combined voting power of all classes of stock in
one of the other corporations in that chain.
(t) “
Undertaking ” means a sworn request for
advancement of Expenses substantially in the form of
Exhibit A attached hereto, with the blanks therein
appropriately completed and the proper selection made for the
execution of Part A and Part B therein as set forth in
Section 3(b) .
2. Indemnification Obligation . Subject to
Section 7 , the Company shall indemnify, defend and
hold harmless Indemnitee, to the fullest extent permitted or
required by the laws of the State of Ohio in effect on the date
hereof or as such laws may from time to time hereafter be amended
to increase the scope of such permitted indemnification, against
any and all Indemnifiable Claims and Indemnifiable Losses;
provided , however , that, except as provided in
Section 4 and Section 21 , Indemnitee shall
not be entitled to indemnification pursuant to this Agreement in
connection with any Claim (i) initiated by Indemnitee against
the Company or any director or officer of the Company unless the
Company has joined in or consented to the initiation of such Claim
or (ii) in which judgment is rendered against Indemnitee for
an accounting of profits made from the purchase or sale of
securities of the Company pursuant to the provisions of Section
16(b) of the Exchange Act.
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3. Advancement of Expenses Incurred with Respect to
Indemnifiable Claims .
(a) Indemnitee
shall have the right to advancement by the Company prior to the
final disposition of any Indemnifiable Claim of any and all
Expenses relating to, arising out of or resulting from any
Indemnifiable Claim paid or incurred by Indemnitee or which
Indemnitee determines are reasonably likely to be paid or incurred
by Indemnitee. Subject to Section 3(b) , Indemnitee’s
right to such advancement is not subject to the satisfaction of any
standard of conduct. Without limiting the generality or effect of
the foregoing, within five business days after any request by
Indemnitee, the Company shall, in accordance with such request (but
without duplication), (i) pay such Expenses on behalf of
Indemnitee, (ii) advance to Indemnitee funds in an amount
sufficient to pay such Expenses, or (iii) reimburse Indemnitee
for such Expenses; provided that Indemnitee shall repay,
without interest any amounts actually advanced to Indemnitee that,
at the final disposition of the Indemnifiable Claim to which the
advance related, were in excess of amounts paid or payable by
Indemnitee in respect of Expenses relating to, arising out of or
resulting from such Indemnifiable Claim. For purposes of this
Section 3 , the determination of when a “final
disposition” of any Indemnifiable Claim will be deemed to
occur or have occurred shall be made by the person or entity that
has or will make any required Standard of Conduct Determination
with respect to such Indemnifiable Claim pursuant to
Section 7(b) or Section 7(c) .
(b) For
purposes of obtaining payments of Expenses in advance of final
disposition of any Indemnifiable Claim, Indemnitee shall submit to
the Company an Undertaking averring that Indemnitee has reasonably
incurred or will reasonably incur actual Expenses in defending an
Indemnifiable Claim. The Undertaking need not be secured and the
Company must accept the Undertaking without reference to
Indemnitee’s ability to repay the Expenses. Unless at the
time of Indemnitee’s act or omission at issue, the
Constituent Documents prohibit such advances by specific reference
to ORC Section l701.13(E)(5)(a) or unless the only liability
asserted against Indemnitee in the subject action, suit or
proceeding is pursuant to ORC Section 1701.95, Indemnitee
shall be eligible to execute Part A of the Undertaking by
which Indemnitee undertakes to: (i) repay such amount if it is
proved by clear and convincing evidence in a court of competent
jurisdiction that Indemnitee’s action or failure to act
involved an act or omission undertaken with deliberate intent to
cause injury to the Company or undertaken with reckless disregard
for the best interests of the Company; and (ii) reasonably
cooperate with the Company concerning the action, suit, proceeding
or claim. In all cases, Indemnitee shall be eligible to execute
Part B of the Undertaking by which Indemnitee undertakes to
repay such amount if it ultimately is determined that Indemnitee is
not entitled to be indemnified by the Company under this Agreement
or otherwise. In the event that Indemnitee is eligible to and does
execute both Part A and Part B of the Undertaking, the
Expenses which are paid by the Company pursuant thereto shall be
required to be repaid by Indemnitee only if Indemnitee is required
to do so under the terms of both Part A and Part B of the
Undertaking. In no event shall Indemnitee’s right to the
payment, advancement or reimbursement of Expenses pursuant to this
Section 3 be conditioned upon any undertaking that is
less favorable to Indemnitee than, or that is in addition to, the
undertakings set forth in Exhibit A .
4. Indemnification for Expenses Incurred with Respect to
Certain Claims Made by Indemnitee . Without limiting the
generality or effect of the foregoing, the Company shall indemnify
and hold harmless Indemnitee against and, if requested by
Indemnitee, shall reimburse
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Indemnitee for,
or advance to Indemnitee, within five business days of such
request, any and all Expenses paid or incurred by Indemnitee or
which Indemnitee determines are reasonably likely to be paid or
incurred by Indemnitee in connection with any Claim made,
instituted or conducted by Indemnitee for (a) indemnification
or payment, advancement or reimbursement of Expenses by the Company
under any provision of this Agreement, or under any other
agree
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