Exhibit 10.9
OUTPERFORMANCE LONG-TERM INCENTIVE PLAN AGREEMENT
          This Outperformance Long-Term Incentive Plan Agreement (this
“Agreement”) is effective as of January 1, 2005, by and between Developers
Diversified Realty Corporation, an Ohio corporation (the “Company”), and Richard
E. Brown (the “Grantee”).
          WHEREAS, the Company desires to incentivize the Grantee to assist in
causing the Company to achieve superior financial performance, and the Grantee
desires to be so incentivized;
          NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
          1. Background; Purpose. The Company maintains the Developers
Diversified Realty Corporation Equity-Based Award Plan (as amended, modified or
supplemented from time to time, the “Plan”). Among the forms of compensation
contemplated by the Plan are grants of common shares and performance awards.
This Agreement is adopted in furtherance of the authority to make such grants
and provides for grants of common shares (each, an “Award”) to certain senior
executives of the Company based on the achievement of certain goals over a
specified period of time. The Award shall be subject to the terms and conditions
set forth herein and in the Plan and shall be evidenced by this Agreement.
          2. Administration. This Agreement and the Award shall be administered
by the Executive Compensation Committee (the “Committee”) of the Board of
Directors of the Company in accordance with the Plan. In the event of any
merger, acquisition, consolidation, reorganization, combination, strategic
redirection or other corporate or capitalization change; any material changes in
accounting practices, in tax law or interpretation or other applicable law or
regulation; or any extraordinary losses, gains or other similar events, the
Committee shall make such substitutions or adjustments, if any, as are deemed
necessary or equitable in its sole discretion to preserve the intent of the Plan
and to avoid any unintended windfalls or hardships with respect to the number or
valuation of Award Shares (as hereinafter defined). Without limiting the
generality of the foregoing, if no Metric is achieved in total during the
Measurement Period, but after the Measurement Date the Committee determines in
its sole discretion that any or all of the Metrics have been substantially
achieved during the Measurement Period, then the Committee shall have the
discretion to award to the Grantee an Award (in such form as the Committee in
its sole discretion shall determine) equal to 25% of the Award Value that would
have been awarded had all Metrics been achieved in total.
          3. Definitions. Capitalized terms used herein without definitions
shall have the meanings given to those terms in the Plan. In addition, as used
herein:
          “Award Shares” shall mean the Common Shares issued by the Company in
payment of the Award.

 

--------------------------------------------------------------------------------

 

          “Award Value” shall mean the sum of (i) the FFO Award Value and
(ii) the value, calculated as of the Valuation Date, of the TRS Shares.
          “Cause” shall mean (i) the Grantee’s fraud, commission of a felony or
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 Grantee’s willful and repeated failure to perform his duties as an
employee of the Company, which failure has not been cured within fifteen
(15) days after the Company gives notice thereof to the Grantee; or (ii) the
Grantee’s material breach of any provision of this Agreement, which breach has
not been cured in all substantial respects within ten (10) days after the
Company gives notice thereof to the Grantee.
          “Change in Control” shall mean the occurrence of any of the following:
(i) the business day immediately preceding the day on which 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 is scheduled to occur; provided, however, that prior
to such business day (A) the shareholders of the Company shall have approved
such consolidation, merger, sale, liquidation or dissolution and (B) there shall
not exist on such business day any fact or circumstance that shall make it
reasonably unlikely that such closing shall not occur as scheduled; or (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)) becomes the beneficial owner of securities of the Company
representing 51% or more of the voting power of the Company’s outstanding
securities; or (iii) during any two-year period, individuals who at the
beginning of such period constitute the entire Board 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.
          “Code” shall mean the Internal Revenue Code of 1986, as amended.
          “Common Share” shall mean a common share, without par value, of the
Company.
          “Disabled” shall be the Grantee’s permanent disability and 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 be,
the Grantee, by reason of his physical or mental disability or illness, shall
have been unable to discharge his duties as an employee of the Company. The date
of 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 Grantee, after
receipt of notice of the Grantee’s disability from the other, dispute that the
Grantee’s permanent disability shall have occurred, the Grantee 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 Grantee 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.
          “Effective Date” shall mean January 1, 2005.
          “Equivalent Amount of Cash” shall mean an amount of cash equal to the
Award Value.
          “FFO Award Percentage” shall mean (i) if the FFO Metric is achieved by
the Company, 100%, and (ii) if the FFO Metric is not achieved by the Company,
0%.
          “FFO Award Value” shall mean the FFO Outperformance Amount multiplied
by the FFO Award Percentage.
          “FFO Growth” shall mean the growth in the Company’s funds from
operations per Common Share during the Measurement Period. FFO Growth shall be
measured by assuming that (a) the Company’s funds from operations per Common
Share on the Effective Date equaled the Company’s funds from operations per
Share for the fiscal year ended December 31, 2004 and (b) the Company’s funds
from operations per Common Share on the Valuation Date equaled the Company’s
funds from operations per Common Share for the fiscal year ended December 31,
2009; provided, however, that if the Valuation Date shall be the date on which a
Change in Control occurs, then the Company’s funds from operations per Common
Share on such Valuation Date shall equal the higher of (i) the Company’s funds
from operations for the immediately preceding fiscal year or (ii) the Company’s
funds from operations budgeted for the fiscal year in which such Change in
Control occurs.
          “FFO Metric” shall mean the performance criteria designated as such
set forth on Schedule A attached hereto.
          “FFO Outperformance Amount” shall mean $417,000.
          “Measurement Date” shall mean December 31, 2009.
          “Measurement Period” shall mean the period commencing on the Effective
Date and ending on the Valuation Date.
          “Metrics” shall mean the FFO Metric and the TRS Metrics.
          “Peer Group” shall mean the companies listed in Schedule B.
          “Share Price” shall mean the greater of (i) the average closing price
of a Common Share as reported on the New York Stock Exchange over the 20 trading
days ending on the Valuation Date and (ii) the closing price of a Common Share
as reported on the New York Stock Exchange on the trading day immediately
preceding the Valuation Date.
          “Total Return to Shareholders” shall mean the total annual return to
the holders of Common Shares during the Measurement Period. Total Return to
Shareholders shall be

 

--------------------------------------------------------------------------------

 

measured by assuming a hypothetical investment of $100 in Common Shares on the
first day of the Measurement Period (the “Initial Investment”) and calculating
the value of such investment as of the Valuation Date, assuming all dividends
paid on the Common Shares are reinvested into additional Common Shares (the
“Total Return”). The difference between the Total Return and the Initial
Investment will be divided by the Initial Investment and the resulting number
further divided by the number of years in the Measurement Period to determine
the Annualized Total Shareholder Return. For example, if the Total Return is
$170 and the Measurement Period ends on the Measurement Date, the Annualized
Total Shareholder Return is:
(170-100)/100=70%
                70/5=14%
          “TRS Metrics” shall mean the performance criteria designated as such
set forth on Schedule A attached hereto.
          “TRS Shares” shall mean (i) if both of the TRS Metrics are achieved by
the Company, 12,850 Common Shares, (ii) if one of the TRS Metrics is achieved by
the Company, 8,000 Common Shares, and (iii) if none of the TRS Metrics is
achieved by the Company, no Common Shares; provided, however, that if the number
of TRS Shares shall be determined pursuant to clause (i) and the value,
calculated as of the Valuation Date, of the Common Shares to be awarded shall be
greater than $1,028,000, then the number of such Common Shares shall be equal to
$1,028,000 divided by the Share Price with fractional Common Shares rounded up
to the nearest whole number of Common Shares; and provided further, that if the
number of TRS Shares shall be determined pursuant to clause (ii) and the value,
calculated as of the Valuation Date, of the Common Shares to be awarded shall be
greater than $640,000, then the number of such Common Shares shall be equal to
$640,000 divided by the Share Price with fractional Common Shares rounded up to
the nearest whole number of Common Shares.
          “Valuation Date” shall mean, with respect to the Grantee, the earlier
of (i) the Measurement Date and (ii) the date on which a Change in Control
occurs.
          “Vesting Date” shall mean (i) if the Valuation Date shall be the
Measurement Date, March 1, 2010, and (ii) if the Valuation Date shall be the
date on which a Change in Control occurs, the Valuation Date.
          4. Award Grant. The Grantee is hereby granted an Award consisting of a
number of Common Shares, calculated and valued as of the Valuation Date, equal
to the sum of (i) the FFO Award Value divided by the Share Price with fractional
Common Shares rounded up to the nearest whole number of Common Shares and
(ii) the number of TRS Shares; provided, however, that if during the Measurement
Period the Grantee shall die or become Disabled, or the employment of the
Grantee shall be terminated by the Company without Cause, then the Award shall
consist of a number of Common Shares, calculated and valued as of the Valuation
Date, equal to the product of (a) the sum of (i) the FFO Award Value divided by
the Share Price with fractional Common Shares rounded up to the nearest whole
number of Common Shares plus (ii) the number of TRS Shares, multiplied by (b) a
fraction, the numerator of which shall be the number of days in the Measurement
Period occurring before the date of such death, Disability or

 

--------------------------------------------------------------------------------

 

termination of employment without Cause and the denominator of which shall equal
the total number of days in the Measurement Period.
          5. Vesting. The Award shall vest on the Vesting Date, provided that
the Grantee remains in continuous employment with the Company through the
Vesting Date other than by reason of death, Disability or termination of
employment without Cause.
          6. Effect of Certain Events During the Measurement Period. In the
event the Grantee’s employment with the Company is terminated for Cause during
the Measurement Period or in the event the Grantee voluntarily terminates his or
her employment with the Company for any reason during the Measurement Period,
the Grantee will immediately forfeit the Award, and any rights the Grantee had
in Award Shares will terminate without further action.
          7. Transferability. This Agreement, the Award and the Award Shares
will not be assignable or transferable by the Grantee; provided, however, that
no provision in this Agreement will prevent the transfer of the Award or the
Award Shares underlying such awards by will or the laws of descent and
distribution in the event of the death of the Grantee.
          8. Payment.
          (a) The Company will issue to the Grantee (or to the estate, guardian
or beneficiary of the Grantee, as the case may be) the Award Shares underlying
the Award or the Equivalent Amount of Cash, at the Company’s option, as soon as
reasonably practicable following the Vesting Date.
          (b) Except to the extent provided by Section 409A of the Code and
permitted by the Company, no Common Shares may be issued to the Grantee at a
time earlier than otherwise expressly provided in this Agreement.
          (c) The Company’s obligations to the Grantee with respect to the Award
will be satisfied in full upon the issuance of the Award Shares or the
Equivalent Amount of Cash corresponding to the Award.
          9. Shareholder Rights and Restrictions.
          (a) The Grantee shall have no rights as a shareholder of the Company
(including, without limitation, the right to receive dividends or voting rights)
with respect to the Award or the Award Shares until the date on which a stock
certificate (or certificates) representing Award Shares shall be issued.
          (b) The obligations of the Company under this Agreement will be merely
that of an unfunded and unsecured promise of the Company to deliver Award Shares
(or cash) in the future, and the rights of the Grantee will be no greater than
that of an unsecured general creditor. No assets of the Company will be held or
set aside as security for the obligations of the Company under this Agreement.

 

--------------------------------------------------------------------------------

 

          10. American Jobs Creation Act. It is intended that this Agreement
comply with the provisions of Section 409A of the Code. The Agreement will be
administered in a manner that is intended to comply with Section 409A of the
Code. Any provisions in this Agreement or in the Plan that would cause the
Agreement to fail to satisfy Section 409A of the Code shall have no force and
effect until amended to comply with Section 409A of the Code (which amendment
may be retroactive to the extent permitted by Section 409A of the Code and may
be made by the Company without the consent of the Grantee). The Company is
authorized to adopt rules or regulations deemed necessary or appropriate in
connection therewith to anticipate and/or comply with the requirements thereof.
          11. Interpretation. Any reference in this Agreement to Section 409A of
the Code will also include any proposed, temporary or final regulations, or any
other guidance, promulgated with respect to such Section by the U.S. Department
of Treasury or the Internal Revenue Service.
          12. No Employment Rights. This award will not confer upon the Grantee
any right with respect to continuance of employment by the Company.
          13. Severability. In the event that one or more of the provisions of
this Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
          14. Subject to Plan. This award is subject to the terms of the Plan,
and the Grantee is being delivered a copy of the Plan with this Agreement. To
the extent any provision of this Agreement violates or is inconsistent with an
express provisions of the Plan, the Plan provision will govern and any
inconsistent provision in this Agreement will have no force or effect.
          15. Taxes. No later than the date as of which an amount first becomes
includable in the gross income of the Grantee for federal income tax purposes
with respect to the Award or the issuance of Award Shares pursuant to the Award,
the Grantee shall pay to the Company, or make arrangements satisfactory to the
Committee regarding the payment of, any federal, state or local taxes or other
items of any kind required by law to be withheld with respect to that amount.
Subject to the following sentence, unless otherwise determined by the Committee,
withholding obligations may be settled with Award Shares. Notwithstanding the
foregoing, any election by a Grantee subject to Section 16 of the Securities Act
of 1934, as amended, to settle any tax withholding obligation with Award Shares
shall be subject to approval by the Committee in its sole discretion. The
obligations of the Company with respect to the Award shall be conditional on
those payments or arrangements and the Company shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise payable to the Grantee.
          16. Governing Law. The laws of the State of Ohio will govern this
award and all matters related hereto. If either party institutes a suit or other
legal proceedings, whether in law or equity, the Company and the Grantee hereby
irrevocably consent to the jurisdiction of the

 

--------------------------------------------------------------------------------

 

Common Pleas Court of the State of Ohio (Cuyahoga County) or the United States
District Court for the Northern District of Ohio.
          17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be an original but all of which together will
represent one and the same agreement.
          18. Amendments/Entire Agreement. Any amendment to the Plan will be
deemed to be an amendment to this Agreement. Except as provided in this
Agreement, no amendment will reduce the FFO Outperformance Amount or adversely
affect the number or value of the Grantee’s Award Shares or the Grantee’s rights
with respect to vesting without the Grantee’s written consent. This Agreement
cannot be changed or terminated orally. The Agreement and the Plan contain the
entire agreement between the parties relating to the subject matter hereof.
          19. Notices. Notices, required or permitted to be made under this
Agreement shall be sufficiently made if (a) sent by (i) registered or certified
mail, (ii) a nationally recognized courier service or (iii) facsimile, and
(b) addressed (x) to the Grantee at his or her address as set forth in the books
and records of the Company or (y) to the Company or the Committee at the
principal office of the Company. The Grantee is required to notify the Company
promptly of any change of address.
          20. Binding on Successors. The terms and provisions of the Plan and
this Agreement will be binding on any successor in interest to the Grantee,
whether such successor attains such status through inheritance, the laws of
descent or otherwise.

            DEVELOPERS DIVERSIFIED REALTY
CORPORATION
  DATE OF AWARD: February 23, 2006         By:   /s/ Nan Zieleniec        
Senior Vice President             

 

--------------------------------------------------------------------------------

 

ACCEPTANCE OF AGREEMENT
          The Grantee hereby: (a) acknowledges that he or she has received a
copy of the Plan and a copy of the Company’s most recent Annual Report and other
communications routinely distributed to the Company’s shareholders; (b) accepts
this Agreement and the Award granted under this Agreement, subject to all
provisions of the Plan and this Agreement; (c) represents and warrants to the
Company that he or she is accruing the Award and the underlying Award Shares for
his or her own account, for investment, and not with a view to or any present
intention of selling or distributing the Award or the Award Shares either now or
at any specific or determinable future time or period or upon the occurrence or
nonoccurrence of any predetermined or reasonably foreseeable event; and
(d) agrees that no transfer of the Award or Common Shares acquired upon vesting
of the Award will be made unless the Award Shares have been duly registered
under all applicable Federal and State securities laws pursuant to a
then-effective registration which contemplates the proposed transfer or unless
the Company has received a written opinion or other evidence satisfactory to its
legal counsel that the proposed transfer is exempt form such registration.

          Date: February 23, 2006     /s/ Richard E. Brown       Name of
Grantee: Richard E. Brown           

 

--------------------------------------------------------------------------------

 

SCHEDULE A
          “FFO Metric” shall mean FFO Growth during the Measurement Period equal
to or exceeding 8% per annum, calculated on a cumulative, compounded basis.
          “TRS Metrics” shall mean (a) a Total Return to Shareholders during the
Measurement Period equal to or exceeding 17% per annum and (b) Total Return to
Shareholders during the Measurement Period equal to or exceeding the Total
Return to Shareholders during the Measurement Period (calculated in the same
manner as the Company’s Total Return to Shareholders) of not less than 75% of
the companies in the Peer Group.

 

--------------------------------------------------------------------------------

 

SCHEDULE B
Peer Group
Federal Realty Investment Trust
Heritage Property Investment Trust, Inc.
Kimco Realty Corporation
New Plan Excel Realty Trust
Regency Centers Corporation
Weingarten Realty Investors
Pan Pacific Retail Properties
Macerich
Taubman Centers, Inc.
PREIT
Mills
Simon Properties Group
CBL & Associates Properties, Inc.
General Growth Properties, Inc.
Glimcher Realty Trust