Document:

EX-10.45 Amended and Restated Employment Agreement

 

Exhibit 10.45

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated October 10, 2006 by and between, Jacuzzi Brands,
Inc., a Delaware corporation, with its principal office at Phillips Point — West Tower, 777 South
Flagler Drive, Suite 1108, West Palm Beach, Florida 33401 (the “Company”), and Alex P. Marini
(“Executive”).

W I T N E S S E T H

WHEREAS, the Company has employed Executive as President and Chief Executive Officer effective
September 1, 2006 (the “Commencement Date”); and

WHEREAS, the Company and the Executive previously entered into an employment agreement (the “Prior
Agreement”) on August 11, 2005; and

WHEREAS, the Company and Executive desire to amend the terms of the Prior Agreement by amending and
restating the Prior Agreement with this agreement (the “Agreement”), effective on the Commencement
Date.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for
other good and valuable consideration, the parties agree as follows:

 

 

     1. Term of Employment. Except for earlier termination as provided in Section 7
hereof, Executive’s employment under this Agreement shall be for a three-year term (the “Employment
Term”) commencing on the Commencement Date and ending three (3) years thereafter. Subject to
Section 7 hereof, the Employment Term shall be automatically extended for additional terms of
successive one (1) year periods unless the Company or Executive gives written notice to the other
at least ninety (90) days prior to the expiration of the then current Employment Term of the
termination of Executive’s employment hereunder at the end of such current Employment Term.

     2. Positions.

          (a) Executive shall serve as President and Chief Executive Officer of the Company and report
directly to the Board of Directors of the Company (the “Board”). Executive shall be elected to the
Board effective on the Commencement Date. If requested by the Board, Executive shall also serve as
an executive officer and director of subsidiaries and a director of associated companies of the
Company without additional compensation and subject to any policy of the Board or any compensation
committee of the Board with regard to retention or turnover of the director’s fees.

          (b) Executive shall have such duties and authority, consistent with his position as the Chief
Executive Officer as shall be assigned to him from time to time by the Board.

          (c) During the Employment Term, Executive shall devote all of his business time and efforts to
the performance of his duties hereunder; provided, however, that Executive shall be allowed, to the
extent that such activities do not materially interfere with the performance of his duties and
responsibilities hereunder, to manage his

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passive personal interests and to serve on civic or charitable boards or committees, and
subject to the next sentence, serve on corporate boards of directors. Executive may serve on
corporate boards of directors only if approved in advance by the Board (which approval may be
withdrawn at any time) and shall not serve on any corporate board of directors if such service
would be inconsistent with his fiduciary responsibilities to the Company.

     3. Base Salary. During the Employment Term, the Executive shall receive a base salary
at the annual rate of not less than $575,000. Base salary shall be payable in accordance with the
usual payroll practices of the Company. Executive’s base salary shall be subject to annual review
by the Board during the Employment Term and may be increased, but not decreased, from time to time
by the Board. The base salary as determined as aforesaid from time to time shall constitute “Base
Salary” for purposes of this Agreement.

     4. Incentive Compensation.

          (a) Bonus. For the fiscal years commencing on or about October 1, 2006 and thereafter
during the Employment Term, Executive shall be eligible to participate in an incentive bonus plan
of the Company in accordance with, and subject to, the terms of such plan, that provides an annual
cash target bonus opportunity equal to at least 100% of Base Salary (the “Target Bonus”), which
shall be converted into a like benefit if and when the Company implements its proposed value added
plan or such other program that the Company shall adopt. In addition, commencing on or about
October 1, 2006 and thereafter during the Employment Term, Executive shall be eligible to
participate in the Company’s long term incentive program which shall provide Executive

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with the opportunity to receive awards at a level equal to 150% of Base Salary, which shall be
converted into a like benefit if and when the Company implements its proposed value added plan or
such other program that the Company shall adopt. For the fiscal year ending September 30, 2006,
Executive shall be eligible to receive a bonus in accordance with the terms of Section 4(a) of the
Prior Agreement.

          (b) Other Compensation. The Company may award to Executive such other bonuses and
compensation as it deems appropriate and reasonable.

          (c) Restricted Stock. The Restricted Stock awarded pursuant to Section 4(b) of the
Prior Agreement shall continue to be governed by the vesting provisions of the Prior Agreement and
the retirement provisions of the Prior Agreement.

     5. Employee Benefits and Vacation.

          (a) During the Employment Term, Executive shall be entitled to participate in all pension,
long-term incentive compensation, retirement, savings, welfare and other employee benefit plans and
arrangements and fringe benefits and perquisites generally maintained by the Company from time to
time for the benefit of its senior executive officers, in each case in accordance with their
respective terms as in effect from time to time.

          (b) During the Employment Term, Executive shall be entitled to vacation each year in
accordance with the Company’s policies in effect from time to time, but in no event less than four
(4) weeks paid vacation per calendar year. Executive shall also be entitled to such periods of
paid sick leave as is customarily provided by the Company to its senior executive employees.

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          (c) If Executive’s employment with the Company terminates due to his retirement from the
Company no earlier than age 62 and so long as such retirement is not in connection with a
termination pursuant to Section 7(d) hereof, Executive shall be provided with a minimum monthly
retirement benefit (“Minimum Pension”) payable in the form of a joint and survivor annuity for the
benefit of Executive and Executive’s spouse. During Executive’s life, the amount of the Minimum
Pension shall be equal to $20,000 per month beginning at such actual retirement date consisting of
the sum of any monthly benefits accrued or payable under any qualified or non-qualified pension
plans covering the Executive during his employment with the Company and/or Zurn Industries, Inc., a
Pennsylvania corporation, (including, without limitation, the Jacuzzi Brands Inc. Supplemental
Executive Retirement Plan (the “Jacuzzi SERP”) and the Zurn Supplemental Pension Plan (the “Zurn
SUPP”)) and/or the actuarial equivalent of such benefits, in the form of a joint and survivor
annuity for the benefit of Executive and Executive’s spouse, if the benefits are not paid monthly,
(collectively, the “Executive’s Retirement Plans”) plus such additional monthly amounts as may be
necessary to provide for the Minimum Pension. The survivor annuity benefit shall be 60% of the
Minimum Pension. However, if Executive or his spouse is entitled to a greater benefit under the
terms of the Executive Retirement Plans (actuarially calculated using the actuarial factors then
applying in the Company’s defined benefit plan), then Executive or his spouse shall receive the
benefits payable under the Executive Retirement Plans in lieu of the Minimum Pension. The benefit
paid under the Jacuzzi SERP shall be paid in the form of a joint and survivor annuity for the
benefit of Executive and Executive’s spouse, with the

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spouse receiving a 60% survivor benefit. Anything contained herein to the contrary
notwithstanding, if the Executive’s spouse at the time of his death is more than five (5) years
younger than his current spouse on the date hereof, the aforesaid survivor annuity benefit shall be
actuarially adjusted to reflect the age of his then spouse as compared to the age of his spouse on
the date hereof. In the event that Executive voluntarily terminates his employment with the
Company for any reason other than Termination for Good Reason, death or Disability, the Executive
shall only be entitled to receive his benefits under this Section 5(c) if the Executive gives the
Company at least six months prior written notice of such termination. In the event that Executive
does not give the Company such written notice, the Executive shall be obligated to pay the Company
an amount equal to the then current annual Base Salary, which shall be withheld from all other
amounts due and owing to the Executive from the Company or shall be paid in full by the Executive,
in his sole discretion.

          (d) If Executive’s employment with the Company terminates due to his retirement from the
Company no earlier than age 62 and so long as such retirement is not in connection with a
termination pursuant to Section 7(d) hereof, Executive and his spouse shall be receive retiree
medical benefits pursuant to the terms of the Company’s retiree medical plan covering the senior
executives of the Company at the time of such termination, provided however, if such retiree
medical benefits, or related terms, are modified or terminated for retired participants in such
plan, (or its successor or replacement plan), such modification or termination shall also apply to
Executive.

     6. Business Expenses. The Company shall reimburse Executive for the travel,
entertainment and other business expenses incurred by Executive in the

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performance of his duties hereunder, in accordance with the Company’s policies as in effect
from time to time.

     7. Termination.

          (a) The employment of Executive and the Employment Term shall terminate as provided in Section
1 hereof or, if earlier, upon the earliest to occur of any of the following events:

               (i) the death of Executive;

               (ii) the termination of Executive’s Employment by the Company due to Executive’s
Disability (as defined in Exhibit A) pursuant to Section 7(b) hereof;

               (iii) the termination of Executive’s Employment by the Executive for Good Reason (as
defined in Exhibit A) pursuant to Section 7(c) hereof;

               (iv) the termination of Executive’s employment by the Company without Cause (as
defined in Exhibit A) pursuant to Section 7(e) hereof;

               (v) the termination of employment by Executive without Good Reason upon sixty (60)
days prior written notice pursuant to Section 7(e) hereof; or

               (vi) the termination of Executive’s employment by the Company for Cause pursuant to
Section 7(d) hereof.

          (b) Disability. If Executive incurs a Disability, the Company may terminate
Executive’s employment for Disability, upon thirty (30) days written notice by a Notice of
Disability Termination, at any time thereafter during such twelve (12) month

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period while Executive is unable to carry out his duties as a result of the same or related
physical or mental illness or incapacity. Such termination shall not be effective if Executive
returns to the full time performance of his material duties within such thirty (30) day period.

          (c) Termination for Good Reason. A Termination for Good Reason means a termination by
Executive by written notice given within ninety (90) days after the occurrence of the Good Reason
event, unless such circumstances are fully corrected prior to the date of termination specified in
the Notice of Termination for Good Reason. A Notice of Termination for Good Reason shall mean a
notice that shall indicate the specific Good Reason event relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for Termination for Good
Reason. The failure by Executive to set forth in the Notice of Termination for Good Reason any
facts or circumstances which contribute to the showing of Good Reason shall not waive any right of
Executive hereunder or preclude Executive from asserting such fact or circumstance in enforcing his
rights hereunder. The Notice of Termination for Good Reason shall provide for a date of
termination not less than ten (10) nor more than sixty (60) days after the date such Notice of
Termination for Good Reason is given.

          (d) Cause. Subject to the notification provisions of this Section 7(d), Executive’s
employment hereunder may be terminated by the Board, or an authorized committee thereof for, Cause.
A Notice of Termination for Cause shall mean a notice that shall indicate the specific termination
provision in Section (a) of Exhibit A relied upon and shall set forth in reasonable detail the
facts and circumstances which provide for a basis for Termination for Cause. The date of
termination for a Termination for

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Cause shall be the date indicated in the Notice of Termination for Cause. Any purported
Termination for Cause which is held by a court not to have been based on the grounds set forth in
this Agreement or not to have followed the procedures set forth in this Agreement shall be deemed a
termination by the Company without Cause.

          (e) Other Terminations. The Executive’s employment by the Company shall be at will.
Accordingly, the Company may terminate the Executive at any time (with or without notice), for
reasons other than Cause or for no reason. Subject to Section 5(c) above, the Executive may
terminate his employment with the Company at any time upon sixty (60) days prior written notice.

     8. Consequences of Termination of Employment.

          (a) Death, Disability, Voluntary Resignation without Good Reason, for Cause, Nonextension
of the Employment Term by Executive. If Executive’s employment and the Employment Term are
terminated by reason of (i) Executive’s death or Disability, (ii) by Executive without Good Reason,
or as a result of a notice of nonextension of the Employment Term by Executive or (iii) by the
Company for Cause or pursuant to Section 7(a)(vi) hereof, the Employment Term under this Agreement
shall terminate without further obligations to Executive or Executive’s legal representatives under
this Agreement except for: (i) any Base Salary earned but unpaid through the date of termination,
any earned but unpaid bonus, any accrued but unused vacation pay payable pursuant to the Company’s
policies, and any unreimbursed business expenses payable pursuant to Section 6 (collectively
“Accrued Amounts”) (which, amounts shall, in the event of Executive’s death, be promptly paid in a
lump sum to Executive’s estate) and (ii) any other amounts or benefits owing to Executive under the
then applicable

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employee benefit plans, long-term incentive plans or equity plans and programs of the Company
which shall be paid in accordance with such plans and programs, including, if applicable, the
Minimum Pension in Section 5(c) above (provided proper written notice is given by Executive in
accordance with Section 5(c) above).

          (b) Termination by Executive for Good Reason, or Termination by the Company without
Cause. If Executive’s employment and the Employment Term are terminated (i) by the Executive
for Good Reason, or (ii) by the Company without Cause (and other than for Disability or pursuant to
Section 7(a)(vi)), Executive shall be entitled to receive the Accrued Amounts, and shall, subject
to Sections 9(b), 9(c) and 10 hereof, be entitled to receive:

	(A)	 	(1) Equal monthly payments in an amount equal to his then monthly rate of Base Salary
(minimum $575,000), for a period of twenty four (24) months;
	 
	 	 	(2) Notwithstanding the preceding paragraph 8(b)(A)(1), if such termination occurs within
two (2) years after a Change in Control, in lieu of the foregoing, Executive shall receive
in a lump sum within five (5) days after compliance with such Section 9(b) the amount equal
to the product of Executive’s Base Salary at the time of the Change in Control (minimum
$575,000) plus the greater of (i) Executive’s Target Bonus for the fiscal year in which the
termination occurs, or (ii) the Executive’s Target Bonus in the fiscal year immediately
preceding the date in which the Change in Control occurs, multiplied by two (2);
	 
	(B)	 	Any other amounts or benefits owing to Executive under the then applicable employee benefit,
long term incentive or equity plans and programs of the Company which shall be paid in
accordance with such plans and programs;

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	 	 	provided that, if such termination occurs within two (2) years after a Change in Control,
Executive will also be entitled to accelerated vesting of all equity compensation under any
equity-based compensation plans, programs or policies of the Company;

	(C)	 	If such termination is within two (2) years after a Change in Control, two (2) years of
additional service and compensation credit (at the compensation level in the fiscal year
ending immediately prior to the Change in Control) for pension purposes under any defined
benefit type qualified or nonqualified pension plan or arrangement of the Company, which
payment shall be made through and in accordance with the terms of the nonqualified defined
benefit pension arrangement if any then exists, or, if not, in an actuarially equivalent lump
sum (using the actuarial factors then applying in the Company’s defined benefit plan covering
Executive);
	 
	(D)	 	If such termination is within two (2) years after a Change in Control, an amount equal to two
(2) years of the maximum Company contribution (assuming Executive deferred the maximum amount
and continued to earn his then current salary) under any type of qualified or nonqualified
401(k) plan, which payments shall be made in lump sum;
	 
	(E)	 	If such termination is within two (2) years after a Change in Control, payment of Executive’s
and his dependents’ premiums for health and medical insurance coverage, which provides
substantially similar benefits as was being provided to Executive on the day prior to
Executive’s termination of employment, for two (2) years following Executive’s date of
termination; and

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	(F)	 	If such termination is effective at or after age 62, the Minimum Pension.

          (c) Other. If (A) Executive’s employment with the Company is terminated by the
Executive for Good Reason or the Company without Cause, and (B) if such termination is made without
a good faith determination made by the Board that the Executive has not been successfully
performing and completing his duties as assigned to him by the Board, then the Executive shall
receive a bonus in the amount determined by multiplying the amount of the bonus Executive would
have been entitled to receive had he remained in the Company’s employment for the remainder of the
period with respect to which the bonus is granted (“Bonus Period”), by the ratio determined by
dividing X , the amount of days in the Bonus Period that Executive is employed with the Company, by
Y, the total amount of days in the Bonus Period, payable at the time the bonus would have otherwise
been paid if Executive’s employment had not been terminated. The decision by the Board to make or
not to make the determination referred to in the previous sentence shall be final, conclusive and
binding.

     Notwithstanding any provision to the contrary, if Executive’s death should occur while
Executive is receiving payments or entitlements pursuant to this Section 8, Executive’s spouse (or
estate) will continue to be provided with such payments and benefits for the remainder of the two
(2) year period.

     9. (a) No Mitigation; No Set-Off. In the event of any termination of employment under
Section 8, Executive shall be under no obligation to seek other employment and there shall be no
offset against any amounts due Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that Executive may obtain. Any amounts due under Section
8 are in the nature of

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severance payments and are not in the nature of a penalty. Such amounts are inclusive, and in
lieu of any, amounts payable under any other salary continuation or cash severance arrangement of
the Company and to the extent paid or provided under any other such arrangement shall be offset
from the amount due hereunder.

          (b) Executive agrees that, as a condition to receiving the payments and benefits provided
under Section 8(b) hereunder he will execute, deliver and not revoke (within the time period
permitted by applicable law) a release of all claims of any kind whatsoever against the Company,
its affiliates, officers, directors, employees, agents and shareholders in the then standard form
being used by the Company for senior executives (but without release of the right of
indemnification hereunder or under the Company’s By-laws or rights under benefit or equity plans
that by their terms are intended to survive termination of his employment).

          (c) Upon any termination of employment, Executive hereby resigns as an officer and director of
the Company, any subsidiary and any affiliate and as a fiduciary of any benefit plan of any of the
foregoing. Executive shall promptly execute any further documentation thereof as requested by the
Company and, if the Executive is to receive any payments from the Company, execution of such
further documentation shall be a condition thereof.

10. Covenants Against Disclosure, Solicitation and Competition.

          (a) Executive acknowledges that as a result of his employment by the Company, Executive will
obtain secret and confidential information as to the Company and its affiliates and create
relationships with customers, suppliers and other persons dealing with the Company and its
affiliates and the Company and its affiliates will suffer

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substantial damage, which would be difficult to ascertain, if Executive should use such
confidential information or take advantage of such relationship and that because of the nature of
the information that will be known to Executive and the relationships created it is necessary for
the Company and its affiliates to be protected by the Confidentiality restrictions set forth
herein. Executive acknowledges that the provisions of this Agreement are reasonable and necessary
for the protection of the businesses of the Company and its affiliates and that part of the
compensation paid under this Agreement and the agreement to pay severance in certain instances is
in consideration for the agreements in this Section 10.

          (b) Executive acknowledges that the retention of nonclerical employees employed by the Company
and its affiliates in which the Company and its affiliates have invested training and depends on
for the operation of their businesses is important to the businesses of the Company and its
affiliates, that Executive will obtain unique information as to such employees as an executive of
the Company and will develop a unique relationship with such persons as a result of being an
executive of the Company and, therefore, it is necessary for the Company and its affiliates to be
protected from Executive’s Solicitation of such employees as set forth below.

          (c) Executive acknowledges that the provisions of this Agreement are reasonable and necessary
for the protection of the businesses of the Company and its affiliates and that part of the
compensation paid under this Agreement and the agreement to pay severance in certain instances is
in consideration for the agreements in this Section.

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          (d) “Competition” means participating, directly or indirectly, as an individual proprietor,
partner, stockholder, officer, employee, director, joint venturer, investor, lender, consultant or
in any capacity whatsoever (within the United States of America, or in any country where the
Company or its affiliates do business) in a business in meaningful competition with the Company’s
businesses, provided, however, that such participation shall not include (i) the mere ownership of
not more than one percent (1%) of the total outstanding stock of a publicly held company; or (ii)
any activity engaged in with the prior written approval of the Board.

          (e) “Solicitation” means recruiting, soliciting or inducing, of any nonclerical employee or
employees of the Company or its affiliates to terminate their employment with, or otherwise cease
their relationship with, the Company or its affiliates or hiring or assisting another person or
entity to hire any nonclerical employee of the Company or its affiliates or any person who within
six (6) months before had been a nonclerical employee of the Company or its affiliates and were
recruited or solicited for such employment or other retention while an employee of the Company,
provided, however, that solicitation shall not include any of the foregoing activities engaged in
with the prior written approval of the Board.

          (f) If any restriction set forth with regard to Competition or Solicitation is found by any
court of competent jurisdiction, or an arbitrator, to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a geographic area, it
shall be interpreted to extend over the maximum period of time, range of activities or geographic
area as to which it may be enforceable. If any provision of this Section shall be declared to be
invalid or

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unenforceable, in whole or in part, as a result of the foregoing, as a result of public policy
or for any other reason, such invalidity shall not affect the remaining provisions of this Section
which shall remain in full force and effect.

          (g) During and after the Employment Term, Executive shall hold in a fiduciary capacity for the
benefit of the Company and its affiliates all secret or confidential information, knowledge or data
relating to the Company and its affiliates, and their respective businesses, including any
confidential information as to customers of the Company and its affiliates, (i) obtained by
Executive during his employment by the Company and its affiliates and (ii) not otherwise public
knowledge or known within the applicable industry. Executive shall not, without prior written
consent of the Company, unless compelled pursuant to the order of a court or other governmental or
legal body having jurisdiction over such matter, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it. In the event
Executive is compelled by order of a court or other governmental or legal body to communicate or
divulge any such information, knowledge or data to anyone other than the foregoing, he shall
promptly notify the Company of any such order and he shall cooperate fully with the Company in
protecting such information to the extent possible under applicable law.

          (h) Upon termination of his employment with the Company and its affiliates, or at any time as
the Company may request, Executive shall promptly deliver to the Company, as requested, all
documents (whether prepared by the Company, an affiliate, Executive or a third party) relating to
the Company, an affiliate or any of their businesses or property which he may possess or have under
his direction or control other

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than documents provided to Executive in his capacity as a participant in any employee benefit
plan, policy or program of the Company or any agreement by and between Executive and the Company
with regard to Executive’s employment or severance.

          (i) During the period the Executive is employed by the Company and for two (2) years following
a termination of Executive’s employment for any reason whatsoever, Executive shall not engage in
Solicitation, and shall not enter into Competition with the Company or its affiliates.

          (j) In the event of a breach or potential breach of this Section 10, Executive acknowledges
that the Company and its affiliates will be caused irreparable injury and that money damages may
not be an adequate remedy and agree that the Company and its affiliates shall be entitled to
injunctive relief (in addition to its other remedies at law) to have the provisions of this Section
10 enforced. It is hereby acknowledged that the provisions of this Section 10 are for the benefit
of the Company and all of the affiliates of the Company and each such entity may enforce the
provisions of this Section 10 and only the applicable entity can waive the rights hereunder with
respect to its confidential information and employees.

          (k) In the event of breach, as adjudicated by a court of competent jurisdiction, of this
Section 10 by Executive, while Executive is receiving amounts under this Agreement, (i) Executive
shall not be entitled to receive any future amounts pursuant to this Agreement, and (ii) Executive
shall be obligated to return to the Company, within 10 days of such adjudication, all amounts paid
by the Company pursuant to this Agreement on or after the date of the breach.

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          (l) Executive specifically agrees that the restrictive covenants and other provisions of this
Section 10 shall be enforceable by the Company’s successors and/or assigns.

          (m) Furthermore, in the event of breach of this Section 10 by Executive, while he is receiving
amounts under Section 8(b) hereof, Executive shall not be entitled to receive any future amounts
pursuant to Section 8(b) hereof.

     11. Indemnification. The Company shall indemnify and hold harmless Executive to the
extent provided in the Certificate of Incorporation and By-Laws of the Company for any action or
inaction of Executive while serving as an officer and director of the Company or as an officer or
director of any other subsidiary or affiliate of the Company or as a fiduciary of any benefit plan.
The Company shall cover Executive under directors and officers liability insurance both during
and, while potential liability exists, after the Employment Term in the same amount and to the same
extent as the Company covers its other officers and directors.

     12. Special Tax Provision.

          (a) Anything in this Agreement to the contrary notwithstanding, in the event that any amount
or benefit paid, payable, or to be paid, or distributed, distributable, or to be distributed to or
with respect to Executive by the Company (whether pursuant to the terms of this Agreement or any
other plan; arrangement or agreement with the Company, any person whose actions result in a change
of ownership covered by Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
“Code”) or any person affiliated with the Company or such person) as a result of a change in
ownership of the Company or a direct or indirect parent thereof (collectively, the “Covered

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Payments”) is or becomes subject to the excise tax imposed by or under Section 4999 of the
Code (or any similar tax that may hereafter be imposed), and/or any interest or penalties with
respect to such excise tax (such excise tax, together with such interest and penalties, is
hereinafter collectively referred to as the “Excise Tax”), the Company shall pay to Executive an
additional amount (the “Tax Reimbursement Payment”) such that after payment by Executive of all
taxes (including, without limitation, any interest or penalties and any Excise Tax imposed on or
attributable to the Tax Reimbursement Payment itself), Executive retains an amount of the Tax
Reimbursement Payment equal to the sum of (i) the amount of the Excise Tax imposed upon the Covered
Payments, and (ii) without duplication, an amount equal to the product of (A) any deductions
disallowed for federal, state or local income or payroll tax purposes because of the inclusion of
the Tax Reimbursement Payment in Executive’s adjusted gross income, and (B) the highest applicable
marginal rate of federal, state or local income taxation, respectively, for the calendar year in
which the Tax Reimbursement Payment is made or is to be made. The intent of this Section 12 is that
(a) the Executive, after paying his Federal, state and local income tax and any payroll taxes on
Executive, will be in the same position as if he was not subject to the Excise Tax under Section
4999 of the Code and did not receive the extra payments pursuant to this Section 12 and (b) that
Executive should never be “out-of-pocket” with respect to any tax or other amount subject to this
Section 12, whether payable to any taxing authority or repayable to the Company, and this Section
12 shall be interpreted accordingly.

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          (b) Except as otherwise provided in Section 12(a), for purposes of determining whether any of
the Covered Payments will be subject to the Excise Tax and the amount of such Excise Tax,

               (i) such Covered Payments will be treated as “parachute payments” (within the meaning
of Section 280G(b)(2) of the Code) and such payments in excess of the Code Section
280G(b)(3) “base amount” shall be treated as subject to the Excise Tax, unless, and except
to the extent that, the Company’s independent certified public accountants appointed prior
to the change in ownership covered by Code Section 280G(b)(2) or legal counsel (reasonably
acceptable to Executive) appointed by such public accountants (or, if the public
accountants decline such appointment and decline appointing such legal counsel, such
independent certified public accountants as promptly mutually agreed on in good faith by
the Company and the Executive) (the “Accountant”), deliver a written opinion to Executive,
reasonably satisfactory to Executive’s legal counsel, that Executive has a reasonable basis
to claim that the Covered Payments (in whole or in part) (A) do not constitute “parachute
payments”, (B) represent reasonable compensation for services actually rendered (within the
meaning of Section 280G(b)(4) of the Code) in excess of the “base amount” allocable to such
reasonable compensation, or (C) such “parachute payments” are otherwise not subject to such
Excise Tax (with appropriate legal authority, detailed analysis and explanation provided
therein by the Accountants); and

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               (ii) the value of any Covered Payments which are non-cash benefits or deferred
payments or benefits shall be determined by the Accountant in accordance with the
principles of Section 280G of the Code.

          (c) For purposes of determining the amount of the Tax Reimbursement Payment, Executive shall
be deemed:

               (i) to pay federal, state, local income and/or payroll taxes at the highest applicable
marginal rate of income taxation for the calendar year in which the Tax Reimbursement
Payment is made or is to be made, and

               (ii) to have otherwise allowable deductions for federal, state and local income and
payroll tax purposes at least equal to those disallowed due to the inclusion of the Tax
Reimbursement Payment in Executive’s adjusted gross income.

          (d) (i) (A) In the event that prior to the time Executive has filed any of his tax returns for
the calendar year in which the change in ownership event covered by Code Section 280G(b)(2)
occurred, the Accountant determines, for any reason whatever, the correct amount of the Tax
Reimbursement Payment to be less than the amount determined at the time the Tax Reimbursement
Payment was made, the Executive shall repay to the Company, at the time that the amount of such
reduction in Tax Reimbursement Payment is determined by the Accountant, the portion of the prior
Tax Reimbursement Payment attributable to such reduction (including the portion of the Tax
Reimbursement Payment attributable to the Excise Tax and federal, state and local income and
payroll tax imposed on the portion of the Tax Reimbursement Payment being repaid by Executive,
using the assumptions and methodology utilized to calculate the Tax

21

 

Reimbursement Payment (unless manifestly erroneous)), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code.

	(B)	 	In the event that the determination set forth in (A) above is made by the Accountant after
the filing by Executive of any of his tax returns for the calendar year in which the change in
ownership event covered by Code Section 280G(b)(2) occurred but prior to one (1) year after
the occurrence of such change in ownership, Executive shall file at the request of the Company
an amended tax return in accordance with the Accountant’s determination, but no portion of the
Tax Reimbursement Payment shall be required to be refunded to the Company until actual refund
or credit of such portion has been made to Executive, and interest payable to the Company
shall not exceed the interest received or credited to Executive by such tax authority for the
period it held such portion (less any tax Executive must pay on such interest and which he is
unable to deduct as a result of payment of the refund).

	(C)	 	In the event Executive receives a refund pursuant to (B) above and repays such amount to the
Company, Executive shall thereafter file for refunds or credits by reason of the repayments to
the Company.

	(D)	 	Executive and the Company shall mutually agree upon the course of action, if any, to be
pursued (which shall be at the expense of the Company) if Executive’s claim for refund or
credit is denied.

               (ii) In the event that the Excise Tax is later determined by the Accountants or the
Internal Revenue Service to exceed the amount taken into account hereunder at the time the
Tax Reimbursement Payment is made

22

 

(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Tax Reimbursement Payment), the Company shall make an
additional Tax Reimbursement Payment in respect of such excess (plus any interest or
penalties payable with respect to such excess) once the amount of such excess is finally
determined.

               (iii) In the event of any controversy with the Internal Revenue Service (or other
taxing authority) under this Section 12, subject to subpart (i)(D) above, Executive shall
permit the Company to control issues related to this Section 12 (at its expense), provided
that such issues do not potentially materially adversely affect Executive, but Executive
shall control any other issues. In the event the issues are interrelated, Executive and
the Company shall in good faith cooperate so as not to jeopardize resolution of either
issue, but if the parties cannot agree Executive shall make the final determination with
regard to the issues. In the event of any conference with any taxing authority as to the
Excise Tax or associated income taxes, Executive shall permit the representative of the
Company to accompany him and Executive and his representative shall cooperate with the
Company and its representative.

               (iv) With regard to any initial filing for a refund or any other action required
pursuant to this Section 12 (other than by mutual agreement) or, if not required, agreed to
by the Company and Executive, the Executive shall cooperate fully with the Company,
provided that the foregoing shall not apply to actions that are provided herein to be at
the sole discretion of Executive.

23

 

          (a) The Tax Reimbursement Payment, or any portion thereof, payable by the Company shall be
paid not later than the fifth (5th) day following the determination by the Accountant and any
payment made after such fifth (5th) day shall bear interest at the rate provided in Code Section
1274(b)(2)(B). The Company shall use its best efforts to cause the Accountant, to promptly deliver
the initial determination required hereunder and, if not delivered, within ninety (90) days after
the change in ownership event covered by Section 280G(b)(2) of the Code, the Company shall pay
Executive the Tax Reimbursement Payment set forth in an opinion from counsel recognized as
knowledgeable in the relevant areas selected by Executive, and reasonably acceptable to the
Company, within five (5) days after delivery of such opinion. The amount of such payment shall be
subject to later adjustment in accordance with the determination of the Accountant as provided
herein.

          (b) The Company shall be responsible for all charges of the Accountant and if (e) is
applicable the reasonable charges for the opinion given by Executive’s counsel.

The Company and Executive shall mutually agree on and promulgate further guidelines in accordance
with this Section 12 to the extent, if any, necessary to effect the reversal of excessive or
shortfall Tax Reimbursement Payments. The foregoing shall not in any way be inconsistent with
Section l2(d)(i)(D) hereof.

     13. Legal and Other Fees and Expenses. In the event that a claim for payment or
benefits under this Agreement is disputed, the Company shall pay all reasonable attorney,
accountant and other professional fees and reasonable expenses incurred by

24

 

Executive in pursuing such claim, provided Executive is successful with regard to a material
portion of his claim.

     14. Miscellaneous.

          (a) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida without reference to principles of conflict of laws.

          (b) Entire Agreement/Amendments. This Agreement and the instruments contemplated
herein contain the entire understanding of the parties with respect to the employment of Executive
by the Company from and after the Commencement Date and supersedes any prior agreements between the
Company and Executive with respect thereto. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the subject matter herein
other than those expressly set forth herein and therein. This Agreement may not be altered,
modified, or amended except by written instrument signed by the parties hereto.

          (c) No Waiver. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive
such party of the right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any such waiver must be in writing and signed by Executive or an authorized
officer of the Company, as the case may be.

          (d) Assignment. This Agreement shall not be assignable by Executive. This Agreement
shall be assignable by the Company only to an entity which is owned, directly or indirectly, in
whole or in part by the Company or by any successor

25

 

to the Company or an acquirer of all or substantial all of the assets of the Company, provided
such entity or acquirer promptly assumes all of the obligations hereunder of the Company in a
writing delivered to Executive and otherwise complies with the provisions hereof with regard to
such assumption. Upon such assignment and assumption, all references to the Company herein shall
be to the assignee entity or acquirer, as the case may be.

          (e) Successors; Binding Agreement; Third Party Beneficiaries. This Agreement shall
inure to the benefit of and be binding upon the personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees legatees and permitted assignees of the
parties hereto. In the event of the Executive’s death while receiving amounts payable pursuant to
Section 8(b) hereof, any remaining amounts shall be paid to Executive’s estate.

          (f) Communications. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be deemed to have been
duly given (i) when faxed or delivered, or (ii) two (2) business days after being mailed by United
States registered or certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the final page of this Agreement, provided that all notices to
the Company shall be directed to the attention of the General Counsel, or to such other address as
any party may have furnished to the other in writing in accordance herewith. Notice of change of
address shall be effective only upon receipt.

          (g) Withholding Taxes. The Company may withhold from any and all amounts payable
under this Agreement such Federal, state and local taxes, and any other
withholdings, as may be required to be withheld pursuant to any applicable law or regulation.

26

 

          (h) Survivorship. The respective rights and obligations of the parties hereunder,
including without limitation Section 11 hereof, shall survive any termination of Executive’s
employment to the extent necessary to the agreed preservation of such rights and obligations.

          (i) Counterparts. This Agreement may be signed in counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.

          (j) Headings. The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or construction of any
provision of this Agreement.

          (k) Executive’s Representation. Executive represents and warrants to the Company that
there is no legal impediment to him entering into, or performing his obligations under this
Agreement and neither entering into this Agreement nor performing his service hereunder will
violate any agreement to which he is a party or any other legal restriction. Executive further
represents and warrants that in performing his duties hereunder he will not use or disclose any
confidential information of any prior employer or other person or entity.

27

 

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.

	 	 	 	 	 
	 	Jacuzzi Brands, Inc.

 	 
	 	By:  	Steven C. Barre
 	 
	 	 	 	 
	 	 	Senior Vice President and General
Counsel 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	                            Alex P. Marini
 	 
	 	 	Executive 	 
	 	 	 	 

28

 

	 	 	 	 	 

EXHIBIT A

	(a)	 	Cause. For purposes of this Agreement, the term “Cause” shall be
limited to an affirmative determination made by the Board of: (i) Executive’s refusal
or willful failure to perform his duties; (ii) Executive’s willful misconduct or gross
negligence with regard to the Company or its affiliates or their business, assets or
employees (including, without limitation, Executive’s fraud, embezzlement or other act
of dishonesty with regard to the Company or its affiliates); (iii) Executive’s willful
misconduct which has a material adverse impact on the Company or its affiliates,
whether economic, or reputation wise or otherwise, as determined by the Board; (iv)
Executive’s conviction of, or pleading nolo contendere to, a felony or any crime
involving fraud, dishonesty or moral turpitude; (v) Executive’s refusal or willful
failure to follow the lawful written direction of the Board; (vi) Executive’s breach
of a fiduciary duty owed to the Company or its affiliates, including but not limited
to Section 10 hereof; (vii) the representations or warranties in Section 14(k) hereof
prove false; or (vii) any other breach by Executive of this Agreement that remains
uncured for thirty (30) days after written notice thereof is given to Executive.

	(b)	 	Change in Control. For purposes of this Agreement, the term “Change
in Control” shall mean the occurrence of any of the following (i) any “person” as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934
(“Act”) (other than Jacuzzi Brands, Inc., the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of Jacuzzi Brands. Inc. or the
Company, or any company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of Common Stock of
the Company), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company representing fifty-one
percent (51%) or more of the combined voting power of the Company’s then outstanding
securities; (ii) if the Company is a public company, during any period of two (2)
consecutive years, individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction described in clause
(i), (iii), or (iv) of this paragraph) whose election by the Board or nomination for
election by the Company’s stockholders was approved by a vote of at least two-thirds
of the directors then still in office who either were directors at the beginning of
the two-year period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of the Board; (iii) a
merger or consolidation of the Company with any corporation not controlled by Jacuzzi
Brands, Inc., other than a merger or consolidation which would result in the voting
securities of the

28

 

	 	 	Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than twenty-five percent (25%) of the combined voting
power of the Company’s then outstanding securities shall not constitute a Change in
Control of the Company; or (iv) the complete liquidation of the Company or the
consummation of the sale or disposition by the Company of all or substantially all
of the Company’s other than (x) the sale or disposition of all or substantially all
of the assets of the Company to a person or persons who beneficially own, directly
or indirectly, at least fifty percent (50%) or more of the combined voting power of
the outstanding voting securities of the Company at the time of the sale or (y)
pursuant to a spinoff type transaction, directly or indirectly, of such assets to
the stockholders of the Company. Notwithstanding the foregoing, in no event shall
a Change in Control be deemed to have occurred, with respect to the Executive, if
the Executive is part of a purchasing group which consummates a transaction causing
a Change in Control. The Executive shall be deemed “part of a purchasing group”
for purposes of the preceding sentence if the Executive is or will be a direct or
indirect equity participant in the purchasing company or group.

	(c)	 	Disability. For purposes of this Agreement, “Disability” shall mean
by reason of the same or related physical or mental illness or incapacity, Executive
is unable to carry out his material duties pursuant to this Agreement for more than
six (6) months in any twelve (12) month period.

	(d)	 	Good Reason. For purposes of this Agreement, “Good Reason” shall
mean the occurrence, without Executive’s express written consent of any of the
following circumstances: (i) any material demotion of Executive on or after September
1, 2006 from his position as President and Chief Executive Officer (except in
connection with the termination of Executive’s employment for Cause or due to
Disability or as a result of Executive’s death, or temporarily as a result of
Executive’s illness or other absence); (ii) a failure by the Company to pay
Executive’s Base Salary or incentive compensation in accordance with Sections 3 and 4
hereof that remains uncured for thirty (30) days after written notice hereof is given
to the Company; (iii) a relocation of the Executive’s office location to a location
more than thirty-five (35) miles from Executive’s then current office location; (iv) a
breach by the Company of its obligations under this Agreement; or (v) a termination by
the Executive which occurs during the 13th month following a Change in
Control.

29EX-10.1

 

Exhibit 10.1

December 4, 2006

	 	 	 
	To:

	 	Developers Diversified Realty Corporation
	 

	 	3300 Enterprise Parkway
	 

	 	Beachwood, Ohio 44122
	 
	 	 
	From:

	 	Deutsche Bank AG London
	 

	 	Winchester house
	 

	 	1 Great Winchester St, London
	 

	 	EC2N 2DB
	 

	 	Telephone: 44 20 7545 8000
	 
	 	 
	 

	 	c/o Deutsche Bank Securities Inc.
	 

	 	60 Wall Street
	 

	 	New York, NY 10005
	 

	 	Telephone: 212-250-5977
	 

	 	Facsimile: 212-797-8826

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.

DEUTSCHE BANK AG IS NOT REGISTERED AS A BROKER DEALER UNDER THE U.S. SECURITIES EXCHANGE ACT
OF 1934. DEUTSCHE BANK SECURITIES INC. (“DBSI”) HAS ACTED SOLELY AS AGENT IN CONNECTION
WITH THIS TRANSACTION AND HAS NO OBLIGATION, BY WAY OF ISSUANCE, ENDORSEMENT, GUARANTEE OR
OTHERWISE WITH RESPECT TO THE PERFORMANCE OF EITHER PARTY UNDER THE TRANSACTION. DEUTSCHE
BANK AG, LONDON BRANCH IS NOT A MEMBER OF THE SECURITIES INVESTOR PROTECTION CORPORATION
(SIPC).

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

	 	 	 
	Chairman
of the Supervisory Board: Clemens Börsig

Board of Managing Directors: Hermann-Josef Lamberti,
Josef Ackermann, Tessen von Heydebreck, Dr. Hugo
Bänziger, Anthony Di Lorio

	 	Deutsche Bank AG is
regulated by the
FSA for the conduct
of designated
investment business
in the UK, is a
member of the
London Stock
Exchange and is a
limited liability
company
incorporated in the
Federal Republic of
Germany HRB No. 30
000 District Court
of Frankfurt am
Main; Branch
Registration No. in
England and Wales
BR000005,
Registered address:
	 

	 	Winchester House, 1
Great Winchester
Street, London EC2N
2DB.

 

 

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:
	 	Deutsche Bank AG, acting through its London branch

	 	 	 	 	 

	 	 	Party B:
	 	Developers Diversified Realty Corporation

	 	 	 	 	 

	 	 	Trade Date:
	 	December 4, 2006

	 	 	 	 	 

	 	 	Effective Date:
	 	December 8, 2006

	 	 	 	 	 

	 	 	Base Amount:
	 	Initially, 5,799,568 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 6.0% 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 6.8%.
	 
	 	(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 at Party A or DBSI and does not include Sunil Hariani or Matthew Frankle (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.

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 9% 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:

	 	 	 	 	 
	 

	 	To:
	 	Deutsche Bank Securities Inc.
	 

	 	Attention:
	 	Andrew Yaeger, Lee Frankenfield, Jonathan Miller and Richard
Kennedy
	 

	 	Telephone No.:
	 	(212) 250-2717; (212) 250-4980; (212) 250-4930 and
(212) 250-4173
	 

	 	E-mail:
	 	andrew.yaeger@db.com; lee.frankenfield@db.com; jonathan-
us.miller@db.com; and richard.kennedy@db.com

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.

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 J.P. Morgan 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,

	 	 	 	 	 	 	 	 	 	 	 
	DEUTSCHE BANK AG LONDON	 	 	 	REVIEWED BY:
	 
	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Sunil Hariani	 	 	 	By:	 	/s/ Jonathan Miller
	 	 	 	 	 	 	 	 	 
	 	 	Name: Sunil Hariani	 	 	 	 	 	 
	 	 	Title:   Attorney-in-Fact	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Jill Rathjen	 	 	 	By:	 	/s/ Sunil Hariani
	 	 	 	 	 	 	 	 	 
	 	 	Name: Jill Rathjen	 	 	 	 	 	 
	 	 	Title:   Attorney-in-Fact	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	DEUTSCHE BANK SECURITIES INC.,

acting solely as Agent in connection with the Transaction	 	 
	 
	 	 	 	 	 	 
	By:	 	/s/ Sunil Hariani	 	 
	 	 	 	 	 
	 	 	Name: Sunil Hariani	 	 
	 	 	Title:   Attorney-in-Fact	 	 
	 
	 	 	 	 	 	 
	By:	 	/s/ Jill Rathjen	 	 
	 	 	 	 	 
	 	 	Name: Jill Rathjen	 	 
	 	 	Title:	 	 

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-1

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