<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 1997.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------
DEVELOPERS DIVERSIFIED REALTY CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 34-1723097
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
34555 Chagrin Blvd., Moreland Hills, Ohio 44022
(Address of Principal Executive Offices) (Zip Code)
----------
DEVELOPERS DIVERSIFIED REALTY CORPORATION
1992 EMPLOYEES' SHARE OPTION PLAN
DEVELOPERS DIVERSIFIED REALTY CORPORATION
EQUITY-BASED AWARD PLAN
(Full title of the plans)
----------
SCOTT A. WOLSTEIN, PRESIDENT
Developers Diversified Realty Corporation
34555 Chagrin Blvd.
Moreland Hills, Ohio 44022
(Name and address of agent for service)
(216) 247-4700
(Telephone number, including area code, of agent for service)
----------
<TABLE>
CALCULATION OF REGISTRATION FEE
================================================================================================
Title of Proposed maximum Proposed maximum
securities Amount offering aggregate Amount of
to be to be price per offering registration
registered registered share(1) price(1) fee(1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares,
without par
value 2,136,000 Shares $39.376 $84,107,136 $25,487.01
================================================================================================
<FN>
(1) The registration fee has been calculated pursuant to Rule 457(c) and (h) based on the
average of the high and low sale prices on August 11, 1997 of the Registrant's Common Shares
as reported on the New York Stock Exchange.
</TABLE>
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The documents listed in (a) through (c) below are incorporated by
reference in this Registration Statement. All documents filed by the Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), subsequent to the date of the filing
of this Registration Statement and prior to the filing of a post-effective
amendment that indicates that all securities registered hereunder have been
sold, or that deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this Registration Statement and to be a part
hereof from the date of the filing of such documents.
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996;
(b) The Company's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1997 and June 30, 1997;
(c) The Company's Current Reports on Form 8-K dated January
13, 1997, June 16, 1997 and June 18, 1997; and
(d) The description of the Company's Common Shares contained
in the Company's Registration Statement on Form 8-A dated January 26,
1993.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The legality of the Common Shares offered hereby has been passed upon
for the Company by Baker & Hostetler LLP, Cleveland, Ohio. Albert T. Adams, a
director of the Company, is a partner of Baker & Hostetler LLP.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Ohio Revised Code (the "Ohio Code") authorizes Ohio corporations to
indemnify officers and directors from liability if the officer or director acted
in good faith and in a manner reasonably believed by the officer or director to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal actions, if the officer or director had no reason to believe his
action was unlawful. In the case of an action by or on behalf of a corporation,
indemnification may not be made (i) if the person seeking indemnification is
adjudged liable for negligence or misconduct, unless the court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnification, or (ii) if liability asserted against such person concerns
certain unlawful distributions. The indemnification provisions of the Ohio Code
require indemnification if a director or officer has been successful on the
merits or otherwise in defense of any action, suit or proceeding that he or she
was a party to by reason of the fact that he or she is or was a director or
officer of the corporation. Unless the only liability asserted against a
director is for certain unlawful distributions, the indemnification provisions
of the Ohio Code provide for the advancement of expenses incurred in connection
with the defense of any action, suit or proceeding that he or she was a party to
by reason of the fact that he or she is or was a director of the Registrant upon
the receipt of an undertaking to reasonably cooperate with the corporation
concerning the action, suit or proceeding and to repay such amount if it is
proved that his or her action or failure to act was with deliberate intent to
cause injury to the corporation or with reckless disregard for the best
interests of the corporation. The indemnification authorized under Ohio law is
not exclusive and is in addition to any other rights granted to officers and
directors under the articles of incorporation or code of regulations of the
corporation or any agreement between officers and directors and the corporation.
A corporation may purchase and maintain insurance or furnish similar protection
on behalf of any officer or director against any liability asserted against him
and incurred by him in his capacity, or arising out of his status, as an officer
or director, whether or not the corporation would have the power to indemnify
him against such liability under the Ohio Code.
<PAGE> 3
The Registrant's Code of Regulations provides for the indemnification
of directors and officers of the Registrant to the maximum extent permitted by
Ohio law as authorized by the Board of Directors of the Registrant (the
"Board"). The Board may authorize the advancement of expenses incurred in
connection with the defense of any action, suit or proceeding that a director or
officer was a party to by reason of the fact that he or she is or was a director
or officer of the Registrant upon the receipt of an undertaking to repay such
amount, unless it is ultimately determined that the director or officer is
entitled to indemnification.
The Registrant maintains a directors' and officers' insurance policy
which insures the officers and directors of the Registrant against any claim
arising out of an alleged wrongful act by such persons in their respective
capacities as officers and directors of the Registrant.
The Registrant has entered into indemnification agreements with its
officers and directors which provide for indemnification to the fullest extent
permitted under Ohio law.
ITEM 8. EXHIBITS.
Exhibit Number Description of Exhibit
- -------------- ----------------------
4.01 Amended and Restated Articles of Incorporation of Developers
Diversified Realty Corporation(1)
4.02 Code of Regulations of Developers Diversified Realty
Corporation(2)
4.03 Amendment to Code of Regulations of Developers Diversified
Realty Corporation(3)
5.01 Opinion of Baker & Hostetler LLP as to legality of the Common
Shares being registered
23.01 Consent of Price Waterhouse LLP
23.02 Consent of Baker & Hostetler LLP (included in Exhibit 5.01
hereto)
24.01 Powers of Attorney (included at page II-4)
99.01 Developers Diversified Realty Corporation 1992 Employees'
Share Option Plan, as amended
99.02 Developers Diversified Realty Corporation Equity-Based Award
Plan(4)
- ----------
(1) Incorporated by reference from the Registrant's Current Report on Form
8-K dated June 16, 1997.
(2) Incorporated by reference from Registration Statement on Form S-11 (No.
33-54930) declared effective February 1, 1993.
(3) Incorporated by reference from the Registrant's Annual Report on Form
10-K filed on March 31, 1996 for the fiscal year ended December 31,
1995.
(4) Incorporated by reference from the Registrant's Current Report on Form
8-K dated January 13, 1997.
II-2
<PAGE> 4
ITEM 9. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement: (i) to include any prospectus
required by Section 10(a)(3) of the Securities Act of
1933 (the "Securities Act"); (ii) to reflect in the
prospectus any facts or events arising after the
effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the Registration Statement; notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement; (iii) to include any material information
with respect to the plan of distribution not
previously disclosed in the Registration Statement or
any material change to such information in the
Registration Statement; provided, however, that
clauses (i) and (ii) do not apply if the information
required to be included in a post-effective amendment
by those clauses is contained in periodic reports
filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are
incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
The undersigned Registrant further undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 6 above or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 5
SIGNATURES
The Registrant
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cleveland, State of Ohio, on this 13th day of August,
1997.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
-----------------------------------------
(Registrant)
By /s/ SCOTT A. WOLSTEIN
------------------------------------------------
Scott A. Wolstein, Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Scott A. Wolstein, James A.
Schoff and Albert T. Adams, or any one of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all pre- and post-effective amendments to this
Registration Statement, and to file the same, with all exhibits hereto, and
other documents in connection herewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES ON
THIS 13TH DAY OF AUGUST, 1997.
/s/ SCOTT A. WOLSTEIN Chairman of the Board, Chief Executive Officer
- ------------------------- and Director (Principal Executive Officer)
Scott A. Wolstein
/s/ JAMES A. SCHOFF Executive Vice President, Chief Operating Officer
- ------------------------- and and Director
James A. Schoff
/s/ WILLIAM H. SCHAFER Vice President and Chief Financial Officer
- ------------------------- (Principal Financial Officer and Principal
William H. Schafer Accounting Officer)
/s/ WALTER H. TENINGA Director
- -------------------------
Walter H. Teninga
/s/ WILLIAM N. HULETT III Director
- -------------------------
William N. Hulett III
/s/ ETHAN PENNER Director
- -------------------------
Ethan Penner
/s/ ALBERT T. ADAMS Director
- -------------------------
Albert T. Adams
/s/ DEAN S. ADLER Director
- -------------------------
Dean S. Adler
II-4
<PAGE> 6
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
4.01 Amended and Restated Articles of Incorporation of Developers
Diversified Realty Corporation(1)
4.02 Code of Regulations of Developers Diversified Realty
Corporation(2)
4.03 Amendment to Code of Regulations of Developers Diversified Realty
Corporation(3)
5.01 Opinion of Baker & Hostetler LLP as to legality of the Common
Shares being registered
23.01 Consent of Price Waterhouse LLP
23.02 Consent of Baker & Hostetler LLP (included in Exhibit 5.01 hereto)
24.01 Powers of Attorney (included at page II-4)
99.01 Developers Diversified Realty Corporation 1992 Employees' Share
Option Plan, as amended
99.02 Developers Diversified Realty Corporation Equity-Based Award
Plan(4)
- ----------
(1) Incorporated by reference from the Registrant's Current Report on Form 8-K
dated June 16, 1997.
(2) Incorporated by reference from Registration Statement on Form S-11 (No.
33-54930) declared effective February 1, 1993.
(3) Incorporated by reference from the Registrant's Annual Report on Form 10-K
filed on March 31, 1996 for the fiscal year ended December 31, 1995.
(4) Incorporated by reference from the Registrant's Current Report on Form 8-K
dated January 13, 1997.
II-5
<PAGE> 1
Exhibit 5.01
August 15, 1997
Developers Diversified Realty Corporation
34555 Chagrin Boulevard
Moreland Hills, Ohio 44022
Re: DEVELOPERS DIVERSIFIED REALTY CORPORATION
1992 EMPLOYEES' SHARE OPTION PLAN
EQUITY-BASED AWARD PLAN
-----------------------
Ladies and Gentlemen:
We have acted as counsel to Developers Diversified Realty
Corporation, an Ohio corporation (the "Company"), in connection with the
Company's Registration Statement on Form S-8 (the "Registration Statement")
being filed under the Securities Act of 1933, as amended (the "Act"), relating
to the offering of up to 2,136,000 Common Shares, without par value (the "Common
Shares"), of the Company pursuant to the Developers Diversified Realty
Corporation 1992 Employees' Share Option Plan and the Developers Diversified
Realty Corporation Equity-Based Award Plan (collectively, the "Plans").
We have examined the Plans and such documents, records and
matters of law as we have deemed necessary for purposes of this opinion and,
based solely thereon, we are of the opinion that the Common Shares available for
issuance under the Plans, when issued, delivered and paid for pursuant to the
Plans, will be duly authorized, validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5
to the Registration Statement and to the reference of our firm in Item 5 of Part
II to the Registration Statement. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission.
Very truly yours,
/s/ Baker & Hostetler LLP
Baker & Hostetler LLP
<PAGE> 1
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of our report dated February 21,1997 appearing on page
F-2 of Developers Diversified Realty Corporation's Annual Report on Form 10-K
for the year ended December 31, 1996. We also consent to the incorporation by
reference of our report dated January 15, 1997, which appears on page F-2 of
the Current Report on Form 8-K dated June 16, 1997.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Cleveland, Ohio
August 15, 1997
<PAGE> 1
Exhibit 99.01
DEVELOPERS DIVERSIFIED REALTY CORPORATION
1992 EMPLOYEES' SHARE OPTION PLAN
1. GENERAL. This Employees' Share Option Plan (the "Plan")
provides eligible key employees ("Eligible Persons") of Developers Diversified
Realty Corporation, an Ohio corporation (the "Company"), and its subsidiaries
with the opportunity to acquire an equity interest in the Company by making
available for purchase Common Shares, without par value, of the Company ("Common
Shares"), through the granting of nontransferable options to purchase Common
Shares ("Stock Options"). An individual grant of Stock Options shall be
individually referred to herein as a "Grant".
It is intended that Eligible Persons may be granted,
simultaneously or from time to time, Stock Options that qualify as incentive
stock options ("Incentive Stock Options") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or Stock Options that do not so
qualify ("Non-qualified Stock Options"). No provision of the Plan is intended or
shall be construed to grant employees alternative rights in any Incentive Stock
Option granted under the Plan so as to prevent such option from qualifying under
Section 422 of the Code.
The Plan is intended to conform to the extent necessary with
all provisions of the Securities Act of 1933, as amended (the "Securities Act"),
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, including, without limitation, Rule 16b-3 under the
Exchange Act. Notwithstanding anything herein to the contrary, the Plan shall be
administered, and Stock Options shall be granted and may be exercised, only in
such a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and Stock Options granted hereunder shall
be deemed amended to the extent necessary to conform to such laws, rules and
regulations.
2. PURPOSE OF THE PLAN. The purpose of the Plan is to provide
continuing incentives to key employees of the Company and of any subsidiary
corporation of the Company, by encouraging such key employees to acquire new or
additional share ownership in the Company, thereby increasing their proprietary
interest in the Company's business and enhancing their personal interest in the
Company's success.
For purposes of the Plan, a "subsidiary corporation" is any
corporation fifty percent (50%) of the outstanding stock of which is directly or
indirectly owned or controlled by the Company.
<PAGE> 2
3. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective
upon its adoption by the Board of Directors, subject to approval by the
holder(s) of a majority of the outstanding shares of voting capital stock of the
Company. If the Plan is not so approved within twelve (12) months after the date
the Plan is adopted by the Board of Directors, the Plan and any Grants made
hereunder shall be null and void. However, if the Plan is so approved, no
further shareholder approval shall be required with respect to the making of
Grants pursuant to the Plan, except as provided in Section 12 hereof.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered
by a committee selected by the Board of Directors of the Company (the "Board")
by majority vote and composed of no fewer than two (2) members of the Board
(such committee, the "Administrator"). No person shall be appointed to the
Administrator who, during the one-year period immediately preceding such
person's appointment to the Administrator, has received any Grants under the
Plan or any similar stock option or stock incentive plan, other than a
formula-based plan, maintained by the Company or any subsidiary corporation. A
member of the Administrator shall not be eligible to participate in the Plan
while serving on the Administrator.
A majority of the members of the Administrator shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present (or acts unanimously approved in writing by
the members of the Administrator) shall constitute binding acts of the
Administrator.
Subject to the terms and conditions of the Plan, the
Administrator shall be authorized and empowered:
(a) To select Eligible Persons to whom Grants may be
made;
(b) To determine the number of Common Shares to be
covered by any Grant;
(c) To prescribe the terms and conditions of any
Grants made under the Plan, and the form(s) and
agreement(s) used in connection with such Grants;
(d) To determine the time or times when Stock Options
will be granted and when they will terminate in
whole or in part;
(e) To determine the time or times when Stock Options
that are granted may be exercised;
(f) To determine, at the time a Stock Option is
-2-
<PAGE> 3
granted under the Plan to an Eligible Person, whether
such Stock Option is an Incentive Stock option
entitled to the benefits of Section 422 of the Code;
and
(g) To establish any other Stock Option agreement
provisions not inconsistent with the terms and
conditions of the Plan and, where the Stock Option is
an Incentive Stock Option, with the terms and
conditions of Section 422 of the Code.
5. PERSONS ELIGIBLE FOR GRANTS. Grants may be made from time
to time to those Eligible Persons who are designated by the Administrator in its
sole and exclusive discretion. Eligible Persons may include, but shall not
necessarily be limited to, officers of the Company and any subsidiary
corporation, excluding members of the Administrator; however, Stock Options
intended to qualify as Incentive Stock Options shall only be granted to Eligible
Persons while actually employed by the Company or a subsidiary corporation. The
Administrator may grant more than one Stock Option to the same Eligible Person.
No Stock Option shall be granted to any Eligible Person during any period of
time when such Eligible Person is on a leave of absence.
6. SHARES SUBJECT TO THE PLAN. The shares to be issued
pursuant to any Grant made under the Plan shall be Common Shares. Either Common
Shares held as treasury stock or authorized and unissued Common Shares, or both,
may be so issued, in such amount or amounts within the maximum limits of the
Plan as the Administrator shall from time to time determine.
Subject to the provisions of the next succeeding paragraph of
this Section 6 and the provisions of Section 7(h), the aggregate number of
Common Shares that can be actually issued under the Plan shall be 2,056,903.
If, at any time subsequent to the date of adoption of the Plan
by the Board of Directors, the number of Common Shares are increased or
decreased, or changed into or exchanged for a different number or kind of shares
of stock or other securities of the Company or of another corporation (whether
as a result of a stock split, stock dividend, combination or exchange of shares,
exchange for other securities, reclassification, reorganization, redesignation,
merger, consolidation, recapitalization or otherwise): (i) there shall
automatically be substituted for each Common Share subject to an unexercised
Stock Option (in whole or in part) granted under the Plan, the number and kind
of shares of stock or other securities into which each outstanding Common Share
shall be changed or for which each such Common Share shall be exchanged; and
(ii) the option price per Common Share or unit of securities shall be increased
or decreased proportionately so that the aggregate purchase price for the
-3-
<PAGE> 4
securities subject to a Stock Option shall remain the same as immediately prior
to such event. In addition to the foregoing, the Administrator shall be entitled
in the event of any such increase, decrease or exchange of Common Shares to make
other adjustments to the securities subject to a Stock Option, to the provisions
of the Plan, and to any related Stock Option agreements (including adjustments
which may provide for the elimination of fractional shares), where necessary
(under Section 422(a)(2) of the Code or otherwise) to preserve the terms and
conditions of any Grants hereunder.
7. STOCK OPTION PROVISIONS.
(a) GENERAL. The Administrator may grant to Eligible Persons
(also referred to as "optionees") nontransferable Stock Options that either
qualify as Incentive Stock Options under Section 422 of the Code or do not so
qualify. However, any Stock Option which is an Incentive Stock Option shall only
be granted within 10 years from the earlier of (i) the date this Plan is adopted
by the Board of Directors of the Company and (ii) the date this Plan is approved
by the shareholders) of the Company.
(b) STOCK OPTION PRICE. The option price per Common Share
which may be purchased under an Incentive Stock Option granted under the Plan
shall be determined by the Administrator at the time of Grant, but shall not be
less than one hundred percent (100%) of the Fair Market Value (as defined below)
of a Common Share, determined as of the date such Option is granted; however, if
an Eligible Person to whom an Incentive Stock Option is granted is, at the time
of the grant of such Option, an "owner" as defined in Section 422(b)(6) of the
Code (modified as provided in Section 424(d) of the Code) of more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any subsidiary corporation (a "Substantial Shareholder"), the price
per Common Share of such Option, as determined by the Administrator, shall not
be less than one hundred ten percent (110%) of the Fair Market Value of a Common
Share on the date such option is granted. The option price per Common Share
under each Stock option granted pursuant to the Plan which is a Non-qualified
Stock Option shall be determined by the Administrator at the time of Grant, but
shall not be less than one hundred percent (100%) of the Fair Market Value of a
Common Share, determined as of the date such Option is granted. The day on which
the Administrator approves the granting of a Stock Option shall be considered
the date on which such Option is granted. Notwithstanding the foregoing
provisions of this Section 7(b), with respect to Grants made within one year
following the date on which Common Shares are sold pursuant to the Company's
first effective registration statement for such Common Shares filed under the
Securities Act of 1933, as amended (the "IPO"), in no event shall the option
price per Common Share
-4-
<PAGE> 5
be less than the price at which Common Shares are sold to the public in the IPO
(subject to equitable adjustment for stock splits, combinations, stock dividends
and recapitalizations).
(c) FAIR MARKET VALUE. The "Fair Market Value" of a Common
Share as of a given date shall be (in order of applicability): (i) the closing
price of a Common Share on the principal exchange on which the Common Shares are
then trading, if any, on the day immediately prior to such date, or if Common
Shares were not traded on the day previous to such date, then on the next
preceding trading day during which a sale occurred; or (ii) if Common Shares are
not traded on an exchange but are quoted on NASDAQ or a successor quotation
system, (A) the last sale price (if Common Shares are then listed as a National
Market Issue under the NASD National Market System) or (B) if Common Shares are
not then so listed, the mean between the closing representative bid and asked
prices for Common Shares on the day previous to such date as reported by NASDAQ
or such successor quotation system; or (iii) if Common Shares are not publicly
traded on an exchange and not quoted on NASDAQ or a successor quotation system,
the mean between the closing bid and asked prices for Common Shares, on the day
previous to such date, as determined in good faith by the Administrator; or (iv)
if Common Shares are not publicly traded, the fair market value established by
the Administrator acting in good faith.
(d) PERIOD OF STOCK OPTION; VESTING. The Administrator shall
determine when each Stock Option is to expire. However, no Incentive Stock
Option shall be exercisable after the expiration of ten (10) years from the date
on which such Option is granted. Further, no Incentive Stock Option granted to
an Eligible Person who is a Substantial Shareholder at the time of the grant of
such Option shall be exercisable after the expiration of five (5) years from the
date of grant of such Option. All Stock Options granted hereunder shall vest
one-third per year on each anniversary of the date of grant, over a three-year
period, and the Eligible Person shall be entitled to exercise Stock Options only
with respect to the portion thereof which is vested. Subject to Section 9
hereof, in the event of (i) the death, retirement or permanent and total
disability of an Eligible Person, or (ii) a Change in Control (as defined in
Section), the Stock Options held by such Eligible Person shall be automatically
and immediately vested and exercisable. Notwithstanding any other provision
hereof to the contrary, no Stock Option may be exercised until there has been
filed with the Securities and Exchange Commission an effective registration
statement on Form S-8 (or such other form as the Company shall deem necessary)
with respect to the Common Shares receivable upon exercise of such Stock
Options.
(e) LIMITATION ON EXERCISE AND TRANSFER OF STOCK OPTIONS. Only
the Eligible Person to whom a Stock Option is
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<PAGE> 6
granted may exercise such Option, except where a guardian or other legal
representative has been duly appointed for such Eligible Person, and except as
otherwise provided in the case of such Eligible Person's death. No Stock option
granted hereunder shall be transferable by an optionee other than by will or the
laws of descent and distribution. No Stock Option granted hereunder may be
pledged or hypothecated, nor shall any such Option be subject to execution,
attachment or similar process.
(f) EMPLOYMENT, HOLDING PERIOD REQUIREMENTS FOR CERTAIN
OPTIONS. The Administrator may condition any Stock Option granted hereunder to
an Eligible Person who is an employee upon the continued employment of the
optionee by the Company or by a subsidiary corporation. However, the
Administrator will require that, from and after the date of grant of any
Incentive Stock Option granted hereunder until the day three (3) months prior to
the date such Option is exercised, such optionee must be an employee of the
Company or of a subsidiary corporation, but always subject to the right of the
Company or any such subsidiary corporation to terminate such optionee's
employment during such period (except if the optionee's employment is terminated
due to death or permanent and total disability, in which event such period shall
be one year). Each Stock Option shall be subject to such additional restrictions
as to the time and method of exercise as shall be prescribed by the
Administrator. Upon compliance with any condition or requirement imposed by the
Administrator pursuant to the foregoing, a Stock Option or the appropriate
portion thereof may be exercised in whole or in part from time to time during
the option period; however, such exercise right(s) shall be limited to whole
shares.
(g) PAYMENT OF STOCK OPTION PRICE; CASHLESS EXERCISE.
(i) A Stock Option may be exercised by an optionee
giving written notice to the Company of his intention to exercise the same,
accompanied by full payment of the purchase price in cash or by check, or, with
the consent of the Administrator, in whole or in part with a surrender of
previously acquired Common Shares having a Fair Market Value on the date of
exercise equal to that portion of the purchase price for which payment in cash
or check is not made. The date on which payment is received by the Company shall
be the date of exercise of the Stock Option.
(ii) A Stock Option may be exercised by an optionee
giving written notice to the Company of his intention to exercise the same,
provided that within five business days of the delivery of such notice the funds
to pay for exercise of the Stock Option are delivered to the Company by a broker
acting on behalf of the optionee either in connection with the sale of the
shares underlying the Stock Option or in connection with the making of a margin
loan to the optionee to enable payment of the
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<PAGE> 7
exercise price of the Stock Option. The latter of the dates on which such notice
and payment are received by the Company shall be the date of exercise of the
Stock Option. In connection with any such exercise, the Company will provide a
copy of the notice of exercise of the Stock option to the aforesaid broker upon
receipt by the Company of such notice and will deliver to such broker, within
five business days of the delivery of such notice to the Company, a certificate
or certificates (as requested by the broker) representing the number of Common
Shares underlying the Stock Option that have been sold by such broker for the
optionee.
(iii) The Administrator may, in its sole
discretion, approve other methods of exercise for a Stock option or payment of
the option price, provided that no such method shall cause any Stock Option
granted under the Plan as an Incentive Stock Option to not qualify under Section
422 of the Code, or cause any Common Share issued in connection with the
exercise of a Stock option not to be a fully paid and non-assessable Common
Share.
(h) CERTAIN REISSUANCES OF STOCK OPTIONS. To the extent Common
Shares are surrendered by an optionee in connection with the exercise of a Stock
Option in accordance with Section 7(g), the Administrator may in its sole
discretion grant new Stock Options to such optionee (to the extent Common Shares
remain available for Grants), subject to the following terms and conditions:
(i) The number of Common Shares shall be equal to
the number of Common Shares being surrendered
by the optionee;
(ii) The option price per Common Share shall be
equal to the fair market value of Common
Shares, determined on the date of exercise
of the Stock Options whose exercise caused
such Grant; and
(iii) The terms and conditions of such Stock
Options shall in all other respects replicate
such terms and conditions of the Stock
Options whose exercise caused such Grant,
except to the extent such terms and
conditions are determined to not be wholly
consistent with the general provisions of
this Section 7, or in conflict with the
remaining provisions of this Plan.
(i) CANCELLATION AND REPLACEMENT OF STOCK OPTIONS AND RELATED
RIGHTS. The Administrator may at any time or from time to time permit the
voluntary surrender by an optionee who is the
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<PAGE> 8
holder of any outstanding Stock Options under the Plan, where such surrender is
conditioned upon the granting to such optionee of new Stock Options for such
number of shares as the Administrator shall determine, or may require such a
voluntary surrender as a condition precedent to the grant of new Stock Options.
The Administrator shall determine the terms and conditions of new Stock Options,
including the prices at and periods during which they may be exercised, in
accordance with the provisions of this Plan, all or any of which may differ from
the terms and conditions of the Stock options surrendered; provided, however,
that the exercise price of such new Stock Options may not be less than the
exercise price of those options which are surrendered in connection with the
granting of such new Stock Options (subject to equitable adjustment in the event
of stock splits, combinations, stock dividends and recapitalizations). Any such
new Stock Options shall be subject to all the relevant provisions of this Plan.
The Common Shares subject to any Stock Option so surrendered shall no longer be
charged against the limitation provided in Section 6 of this Plan and may again
become shares subject to the Plan. The granting of new Stock Options in
connection with the surrender of outstanding Stock Options under this Plan shall
be considered for the purposes of the Plan as the granting of new Stock Options
and not an alteration, amendment or modification of the Plan or of the Stock
Options being surrendered.
(j) WITHHOLDING OF TAXES. The Administrator may, in its sole
discretion, require, as a condition to any Grant or to the delivery of
certificates for shares issued hereunder, that the optionee pay to the Company,
in cash, any federal, state or local taxes of any kind required by law to be
withheld with respect to any Grant or any delivery of Common Shares upon
exercise thereof. The Administrator, in its sole discretion, may permit
optionees to pay such taxes through the withholding of Common Shares otherwise
deliverable to such optionee in connection with such Grant or the delivery to
the Company of Common Shares otherwise acquired by the optionee. The Fair Market
Value of Common Shares withheld by the Company or tendered to the Company for
the satisfaction of tax withholding obligations under this Section 7(j) shall be
determined on the date such Common Shares are withheld or tendered. The Company,
to the extent permitted or required by law, shall have the right to deduct from
any payment of any kind (including salary, bonus, severance or insurance
proceeds) otherwise due to an optionee any federal, state or local taxes of any
kind required by law to be withheld with respect to any Grant or to the delivery
of Common Shares under the Plan, or to retain or sell without notice a
sufficient number of Common Shares to be issued to such optionee to cover any
such taxes, provided that the Company shall not sell any such Common Shares if
such sale would be considered a sale by such optionee for purposes of Section 16
of the Exchange Act.
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<PAGE> 9
(k) LIMITATION ON EXERCISABLE INCENTIVE STOCK OPTIONS. The
aggregate fair market value of the Common Shares first becoming subject to
exercise as Incentive Stock Options by an optionee during any given calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). Such
aggregate fair market value shall be determined as of the date such Option is
granted, taking into account, in the order in which granted, any other incentive
stock options granted by the Company, or by a parent or subsidiary corporation
thereof.
8. TERMINATION OF EMPLOYMENT. If an Eligible Person ceases to
be an employee of the Company and every subsidiary corporation, for a reason
other than death, retirement, "permanent and total disability" (as defined
below) or termination "without cause" (as defined below), his Grants shall,
unless extended by the Administrator on or before his date of termination of
employment, terminate on the effective date of such termination of employment.
Neither the Eligible Person nor any other person shall have any right after such
date to exercise all or any part of his Stock Options.
If termination of employment is due to death or permanent and
total disability, all Stock Options held by such Eligible Person shall become
immediately and automatically vested and exercisable.
If termination of employment is due to death or permanent and
total disability or is without cause, then outstanding Stock Options (to the
extent, but only to the extent, that such Stock Options are vested on the date
of termination, or, in the case of death or permanent and total disability,
become immediately and automatically vested and exercisable pursuant to the
foregoing sentence) may be exercised within the one (1) year period ending on
the anniversary of such death, permanent and total disability or termination
without cause (except that, with respect to Incentive Stock Options held by an
Eligible Person whose employment is terminated without cause, such Options must
be exercised within three months of the date of such termination). In the case
of death, such outstanding Stock Options shall be exercised by such Eligible
Person's estate, or the person designated by such Eligible Person by will, or as
otherwise designated by the laws of descent and distribution. Notwithstanding
the foregoing, in no event shall any Stock Option be exercisable after the
expiration of the option period, and in the case of exercises made after an
Eligible Person's death, not to any greater extent than such Eligible Person
would have been entitled to exercise such Option at the time of his death.
Subject to the discretion of the Administrator, in the event
an Eligible Person terminates employment with the Company and all subsidiary
corporations because of normal or early retirement under any pension plan or
retirement plan hereafter
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<PAGE> 10
adopted by the Company, any then-outstanding Stock Options held by such Eligible
Person shall lapse at the end of the term of such Stock Option or within three
(3) months of the date of retirement, whichever first occurs.
For purposes hereof, "permanent and total disability" means a
permanent and total disability as defined in Section 22(e)(3) of the Code. For
purposes hereof, termination "without cause" means termination of the employee's
employment by the Company for reasons other than (i) conviction of the employee
for a felony or for any crime or offense lesser than a felony involving the
property of the Company or a subsidiary corporation or affiliate of the Company;
(ii) conduct by the employee that has caused demonstrable and serious injury to
the Company or a subsidiary, monetary or otherwise, as evidenced by a final
determination of a court or governmental agency of competent jurisdiction in
effect after exhaustion or lapse of all rights of appeal; or (iii) gross
dereliction of duty or other grave misconduct by the employee, as determined in
good faith by the Company.
In the event an Eligible Person is granted a leave of absence
by the Company or such subsidiary corporation to enter military service or
because of sickness, his employment with the Company or such subsidiary
corporation shall not be considered terminated, and he shall be deemed an
employee of the Company or such subsidiary corporation during such leave of
absence or any extension thereof granted by the Company or such subsidiary
corporation.
9. CHANGE OF CONTROL. Upon the occurrence of a Change of
Control (as defined below), notwithstanding any other provisions hereof or of
any agreement to the contrary, all Stock Options granted under this Plan shall
become immediately vested and exercisable in full.
For purposes of this Plan, a Change of Control shall be deemed
to have occurred if: (i) a tender offer shall be made and consummated for the
ownership of 25% or more of the outstanding voting securities of the Company;
(ii) the Company shall be merged or consolidated with another corporation and,
as a result of such merger or consolidation, less than 25% of the outstanding
voting securities of the surviving or resulting corporation shall be owned in
the aggregate by the former shareholders of the Company as the same shall have
existed immediately prior to such merger or consolidation; (iii) the Company
shall sell substantially all of its assets to another corporation which is not a
wholly owned subsidiary; or (iv) a person (except (A) Bert L. Wolstein, Scott A.
Wolstein or James A. Schoff; (B) their respective spouses and lineal
descendants; (C) any trust or other fiduciary solely for the benefit of any of
the persons described in clauses (A) and (B); or (D) any entity controlled,
directly or
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<PAGE> 11
indirectly, by any of the persons described in clauses (A) through (C)), within
the meaning of Section 3(a)(9) or Section 13(d)(3) (as in effect on the date
hereof) of the Exchange Act, shall acquire, other than by reason of inheritance,
twenty-five percent (25%) or more of the outstanding voting securities of the
Company (whether directly, indirectly, beneficially or of record). For purposes
of this Plan, ownership of voting securities shall take into account and shall
include ownership as determined by applying the provisions of Rule
13d-3(d)(1)(i) (as in effect on the date hereof) of the Exchange Act.
10. AMENDMENTS TO THE PLAN. The Administrator is authorized to
interpret this Plan and from time to time adopt any rules and regulations for
carrying out this Plan that it may deem advisable. Subject to the approval of
the Board of Directors of the Company, the Administrator may at any time amend,
modify, suspend or terminate this Plan. In no event, however, without the
approval of the shareholders, shall any action of the Administrator or the Board
of Directors result in:
(a) Materially amending, modifying or altering the
eligibility requirements provided in Section 5
hereof;
(b) Materially increasing, except as provided in Section
6 hereof, the maximum number of Common Shares that
may be made subject to Grants under the Plan;
(c) Materially increasing the benefits accruing to
participants under this Plan;
(d) reduce the minimum option price requirements of
Section 7(b); or
(e) modify the Plan in any manner requiring shareholder
approval under Rule 16b-3 under the Exchange Act, as
the Rule may be amended from time to time;
except to conform this Plan and any agreements made hereunder to changes
required by the Code or by governing law.
11. INVESTMENT REPRESENTATION, APPROVALS AND LISTING. The
Administrator may, if it deems appropriate, condition its grant of any Stock
Option hereunder upon receipt of the following investment representation from
the optionee:
"I agree that any Common Shares of Developers Diversified Realty
Corporation which I may acquire by virtue of this Stock Option shall be
acquired for investment purposes only and not with a view to
distribution or resale, and may not
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<PAGE> 12
be transferred, sold, assigned, pledged, hypothecated or otherwise
disposed of by me unless (i) a registration statement or post-effective
amendment to a registration statement under the Securities Act of 1933,
as amended, with respect to said Common Shares has become effective so
as to permit the sale or other disposition of said Common Shares by me;
or (ii) there is presented to Developers Diversified Realty Corporation
an opinion of counsel satisfactory to Developers Diversified Realty
Corporation to the effect that the sale or other proposed disposition
of said Common Shares by me may lawfully be made otherwise than
pursuant to an effective registration statement or post-effective
amendment to a registration statement relating to the said shares under
the Securities Act of 1933, as amended."
The Company shall not issue any certificate or certificates
for Common Shares upon the exercise of any Stock Option granted under this Plan
prior to (i) the obtaining of any approval from any governmental agency which
the Administrator shall, in its sole discretion, determine to be necessary or
advisable; (ii) the admission of such shares to listing on any national
securities exchange on which the Common Shares may be listed; (iii) the
completion of any registration or other qualifications of the Common Shares
under any state or federal law or ruling or regulations of any governmental body
which the Administrator shall, in its sole discretion, determine to be necessary
or advisable or the determination by the Administrator, in its sole discretion,
that any registration or other qualification of the Common Shares is not
necessary or advisable; or (iv) the obtaining of an investment representation
from the optionee in the form stated above or in such other form as the
Administrator, in its sole discretion, shall determine to be adequate.
12. GENERAL PROVISIONS. The form and substance of Stock Option
agreements made hereunder, whether granted at the same or different times, need
not be identical. Nothing in this Plan or in any Stock Option agreement shall
confer upon any Eligible Person any right to continue in the employ of the
Company or any of the Company's subsidiary corporations or affiliates or to
interfere with or limit the right of the Company or any subsidiary corporation
to terminate his employment at any time, with or without cause. Nothing
contained in this Plan or in any Stock Option agreement shall be construed as
entitling any optionee to any rights of a shareholder as a result of the grant
of a Stock option, until such time as Common Shares are actually issued to such
optionee pursuant to the exercise of such Option. This Plan may be assumed by
the successors and assigns of the Company. The liability of the Company under
this Plan and any sale made hereunder is limited to the obligations set forth
herein with respect to such sale and no term or provision of this Plan shall be
construed to impose any liability on the Company in
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<PAGE> 13
favor of any Eligible Person (or other party acting on his behalf or in his
stead) with respect to any loss, cost or expense which such person or party may
incur in connection with or arising out of any transaction in connection with
this Plan. The cash proceeds received by the Company from the issuance of Common
Shares pursuant to this Plan will be used for general corporate purposes. The
expense of administering this Plan shall be borne by the Company. The captions
and section numbers appearing in this Plan are inserted only as a matter of
convenience; they do not define, limit, construe or describe the scope or intent
of the provisions of this Plan.
13. PROVISIONS APPLICABLE SOLELY TO INSIDERS. The following
provisions shall apply only to persons who are subject to Section 16 of the
Exchange Act with respect to securities of the Company ("Insiders"), and shall
apply to Insiders notwithstanding any provision of the Plan to the contrary:
(a) No Insider shall be permitted to transfer any security of
the Company acquired by him, except to the extent permitted by 17 C.F.R.
ss.240.16a-2(d)(1), upon the exercise of any Stock Option, until at least six
months and one day after the later of (i) the day on which such security is
granted to the Insider or (ii) the day on which the exercise or conversion price
of such security is fixed.
(b) An Insider may elect to have shares withheld from a Grant
or tender shares to the Company in order to satisfy any applicable tax
withholding consequences of a Grant only during the period beginning on the
third business day following the date on which the Company releases the
financial information specified in 17 C.F.R. ss.240.16b-3(e)(1)(ii) and ending
on the twelfth business day following such date. Notwithstanding the foregoing,
an Insider may elect to have shares withheld from a Grant in order to satisfy
any applicable tax withholding consequences thereof by providing the Company
with a written election to so withhold at least six months in advance of the
withholding of shares otherwise issuable upon exercise of a Stock Option.
14. TERMINATION OF THE PLAN. The Plan shall terminate on
December 31, 2002. Thereafter, no Stock Options shall be granted hereunder. All
Stock Options outstanding at the time of termination of the Plan shall continue
in full force and effect according to their terms and the terms and conditions
of the Plan.
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