DDR CORP filed this DEF 14A on 03/31/2016

DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  x                              Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨   Preliminary Proxy Statement
¨   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x   Definitive Proxy Statement
¨   Definitive Additional Materials
¨   Soliciting Material Pursuant to Rule 14a-12

DDR Corp.

(Name of Registrant as Specified in Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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LOGO              

Notice of Annual

Meeting of Shareholders and 2016 Proxy Statement

 

To the Holders of Common Shares of DDR Corp.:

The 2016 Annual Meeting of Shareholders of DDR Corp. will be held as follows:

 

WHEN:   

  9:00 a.m. local time, Tuesday, May 10, 2016.

WHERE:   

  Offices of DDR Corp.

3333 Richmond Road, Beachwood, Ohio 44122

ITEMS OF BUSINESS:   

  Election of nine Directors.

 

   Approval, on an advisory basis, of the compensation of the Company’s named executive officers.

 

   Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm.

 

   Transact such other business as may properly come before the Annual Meeting.

WHO CAN VOTE:   

  Shareholders of record at the close of business on March 15, 2016 will be entitled to notice of, and to vote at, the Annual Meeting or any adjournment of the Annual Meeting.

VOTING BY PROXY:   

  Shareholders may complete, date and sign the accompanying Proxy Card and return it in the enclosed envelope; or

 

  Vote their shares by telephone or over the Internet as described in the accompanying Proxy Statement.

INTERNET AVAILABILITY OF
PROXY MATERIALS:
  

  The Company’s 2016 Proxy Statement and 2015 Annual Report to Shareholders are available free of charge at www.proxydocs.com/ddr.

By order of the Board of Directors,

DAVID E. WEISS

Secretary

Dated: March 31, 2016

 

 

 

 

Important Notice Regarding the Availability of Proxy Materials

for the Shareholder Meeting to be held on May 10, 2016


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LOGO              

To Our

Shareholders

 

 

Dear Fellow Shareholders:

I am pleased to invite you to our Annual Meeting of Shareholders to be held on May 10, 2016 at our corporate offices in Beachwood, Ohio. As we have done in the past, in addition to considering the matters described in our 2016 Proxy Statement, we will present an update regarding the Company’s performance this past year as well as our outlook for the business in 2016 and beyond.

After my first year leading the organization, we are a much stronger company that has successfully navigated a portfolio evolution, effectuated a dramatic shift in our capital allocation strategy and embraced change in our management team and corporate culture. Our operating platform and the efforts of our entire DDR team to foster a culture of excellence continue to produce impressive results, and the many accomplishments we achieved in 2015 were representative of our desire to deliver shareholder value over both the short and long term.

Our high-quality portfolio enabled us to generate strong EBITDA and net asset value growth, and increase our dividend by over 11% compared to 2014. This increase represents the fifth consecutive year of annual dividend growth in excess of 10% while still maintaining a low payout ratio. Our operating platform and portfolio performed exceptionally well, highlighted by our portfolio leased rate of 96.0% at year-end and leasing volume of over 10 million square feet for the sixth consecutive year. We completed over $1.6 billion of acquisitions and dispositions, and focused on owning only the highest quality “dirt” that will continue to appreciate and attract best-in-class retailers. Additionally, we placed $158 million of redevelopments into service at a yield of approximately 10%, materially increasing asset quality and long-term growth expectations. Organic and external growth translated into a blended 4.1% increase in rent per square foot for the portfolio relative to 2014.

We are laser-focused on enhancing shareholder value and maintaining a strong portfolio performance that is sustainable in all economic cycles. I am proud of the successful execution of our strategic plan and I am confident that our continued focus on quality and performance will translate into superior net asset value creation over the long term. We appreciate your support and take very seriously our role as stewards of your capital.

I look forward to seeing you at the Annual Meeting.

Respectfully yours,

DAVID J. OAKES

President and Chief Executive Officer

 


Table of Contents

2016 Proxy Statement Table of Contents

 

 

1. Proxy Summary

    1   

2. Proposal One: Election of Directors

 

Proposal Summary and Board Recommendation

    2   

Nominees for Election at the Annual Meeting

    2   

Transactions with the Otto Family

    7   

Independent Directors

    7   

Director Qualifications and Review of Director Nominees

    7   

Majority Vote Standard

    8   

Cumulative Voting

    8   

3. Board Governance

 

Board Leadership

    9   

Meetings of Our Board

    9   

Meetings of Non-Management and Independent Directors

    9   

Committees of Our Board

    9   

Risk Oversight

    12   

Compensation of Directors

    12   

Director Stock Ownership Guidelines

    14   

Security Ownership of Directors and Management

    15   

4. Proposal Two: Shareholder Advisory Vote to Approve the Compensation of the Company’s Named Executive Officers

 

Proposal Summary and Board Recommendation

    16   

2015 Executive Compensation Program

    16   

Compensation Committee Report

    17   

Compensation Committee Interlocks and Insider Participation

    17   

5. Compensation Discussion and Analysis

 

Executive Summary

    18   

2015 Compensation Program Design

    21   

Analysis of 2015 Performance

    26   

2015 Compensation Earned

    27   

Stock Ownership Guidelines

    33   

Hedging and Pledging Policy

    34   

Tax and Accounting Implications

    34   

Compensation-Related Risk Analysis

    34   

 

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6. Executive Compensation Tables and Related Disclosure

 

2015 Summary Compensation Table

    35   

2015 Grants of Plan-Based Awards Table

    36   

Outstanding Equity Awards at 2015 Fiscal Year-End Table

    37   

2015 Option Exercises and Stock Vested Table

    38   

2015 Nonqualified Deferred Compensation Table

    38   

Potential Payments upon Termination or Change in Control

    39   

Employment Agreements

    43   

Change in Control Provisions

    44   

7. Proposal Three: Ratification of PricewaterhouseCoopers LLP as Our Independent Registered Public Accounting Firm

 

Proposal Summary and Board Recommendation

    46   

Fees Paid to PricewaterhouseCoopers LLP

    46   

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

    47   

Auditor Independence

    47   

Audit Committee Report

    47   

8. Corporate Governance and Other Matters

 

Codes of Ethics

    48   

Reporting and Non-Retaliation Policy

    49   

Policy Regarding Related-Party Transactions

    49   

Security Ownership of Certain Beneficial Owners

    50   

Section 16(a) Beneficial Ownership Reporting Compliance

    51   

Shareholder Proposals for 2017 Annual Meeting

    51   

Householding

    51   

Other Matters

    51   

9. Frequently Asked Questions

 

Why did you send me this Proxy Statement?

    52   

Who is soliciting my proxy?

    52   

How many votes do I have?

    52   

How do I vote by proxy?

    53   

May I revoke my proxy?

    53   

Can I receive this Proxy Statement by email in the future?

    53   

What constitutes a quorum?

    54   

What vote is required to approve each proposal assuming that a quorum is present at the Annual Meeting?

    54   

 

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1. Proxy Summary

 

This Proxy Summary contains highlights and information that can be found elsewhere in this Proxy Statement as indicated by the applicable page references. This summary does not contain all of the information that you should consider, and therefore you should read the entire Proxy Statement.

 

 

MEETING DATE, TIME AND LOCATION

 

 

TUESDAY, MAY 10, 2016 AT 9:00 A.M. LOCAL TIME

DDR Corp. Offices

3333 Richmond Road

Beachwood, Ohio 44122

 

 

 

PROPOSALS

 

 

 

Proposal  

Board

Recommendation

 

Page Reference for

More Information

 

1.

    

 

Election of nine Directors.

 

ü “For”

all nominees

 

 

2

 

2.

     Approval, on an advisory basis, of the compensation of the Company’s named executive officers.  

 

ü “For”

 

 

16

 

3.

     Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm.  

 

ü “For”

 

 

46

 

 

 

VOTING

 

 

You may vote if you were a shareholder of record at the close of business on March 15, 2016, the record date for the Annual Meeting. We will begin mailing this Proxy Statement, the Notice of Annual Meeting of Shareholders and letter from our President and Chief Executive Officer, along with the accompanying Proxy Card on or about March 31, 2016 to all shareholders entitled to vote.

You may vote your shares in person at the Annual Meeting or vote by proxy in any of the following ways:

 

By Internet     By Telephone     By Mail

LOGO

 

Go to:

www.investorvote.com/ddr

or the web address on

your Proxy Card

 

     

LOGO

 

Dial toll free:

1-800-652-8683

 

     

LOGO

 

 

Sign the enclosed Proxy Card

and return by

pre-paid postage envelope

 

 

DDR Corp.   ï  2016 Proxy Statement    1


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2. Proposal One: Election of Directors

 

Proposal Summary and Board Recommendation

At the Annual Meeting, unless you specify otherwise, the common shares represented by your proxy will be voted to elect the nine Director nominees of DDR Corp. (DDR or Company). If any of the nominees is not a candidate when the election occurs for any reason (which is not expected) and the size of the Board remains unchanged, then our Board of Directors (Board) intends that proxies will be voted for the election of a substitute nominee designated by our Board as recommended by the Nominating and Corporate Governance Committee.

 

 

BOARD RECOMMENDATION:

“For” All Nine Director Nominees

 

Nominees for Election at the Annual Meeting

Our Board has nominated and recommends that shareholders vote FOR the election of each of the following Director nominees, each to serve a one-year term until the next annual meeting of shareholders and until a successor has been duly elected and qualified.

 

 

 

 

LOGO

 

Director Since: 2000

 

Age: 60

 

Independent: Yes

 

Committees:

   Nominating and Corporate Governance Committee (Chair)

 

   Dividend Declaration Committee

 

   Pricing Committee

 

  

TERRANCE R. AHERN — Chairman of the Board, DDR Corp. and Chief Executive Officer, The Townsend Group (institutional real estate consulting)

 

Background: Mr. Ahern is Co-Founder, Principal and Chief Executive Officer of The Townsend Group, an institutional real estate advisory and investment management firm formed in 1986. Mr. Ahern also is a member of the firm’s Investment Committee. The Townsend Group serves as adviser to, or invests on behalf of, domestic and offshore public and private pension plans, endowments and foundations, and sovereign wealth funds. Mr. Ahern is a past member of the Young Presidents Organization, the Pension Real Estate Association (PREA), the National Association of Real Estate Investment Trusts (NAREIT), and the National Council of Real Estate Investment Fiduciaries. He is a former member of the Board of Directors of PREA and the Board of Editors of Institutional Real Estate Securities. Mr. Ahern has been a frequent speaker at industry conferences, including PREA, NAREIT and the National Association of Real Estate Investment Managers.

 

Qualifications: Mr. Ahern has over 25 years of real estate industry and institutional real estate consulting experience. This experience includes founding and managing a leading institutional real estate advisory and investment firm whose core skill is analyzing real estate firms and investment opportunities. This role and experience provides Mr. Ahern with unique insight into the structure and operations of both public and private real estate companies, and into the real estate environment and capital markets in which we operate. Through his experience, Mr. Ahern has gained an understanding and knowledge of the opportunities, challenges and risks that face real estate companies, as well as the functions of a board of directors.

 

 

 

 

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LOGO

 

Age: 67

 

Independent: Yes

  

THOMAS F. AUGUST — Lead Director, DCT Industrial Trust Inc. (industrial real estate investment trust)

 

Background: Mr. August is Lead Director of DCT Industrial Trust Inc. (DCT), an industrial real estate investment trust (REIT). DCT has announced that Mr. August has been designated to serve as Chairman of the Board following the DCT annual meeting of shareholders in May 2016. Mr. August retired from Equity Office Property Trust (EOP) as of December 31, 2015. He served as President and Chief Executive Officer of EOP from July 2010 and served from October 2009 to July 2010 as its Chairman. EOP is a REIT controlled by The Blackstone Group and is one of the largest owners and managers of office properties in the United States. He remains on the board of directors of EOP. Mr. August previously served as president, chief executive officer, and a trustee of Prentiss Properties Trust, an office REIT, from 1996 until its acquisition in 2006. Mr. August held other executive roles, including chief financial officer, at Prentiss since 1987. Mr. August also has served in various executive roles with Cadillac Fairview Urban Development, Inc., Oxford Properties, Inc., Behringer Harvard REIT I, Inc. and Citibank. Mr. August holds a bachelor’s degree from Brandeis University and an M.B.A. degree from Boston University.

 

Qualifications: Mr. August has more than 40 years of experience in the real estate industry, including prior experience as the chief executive officer of a publicly-traded REIT. We believe his industry experience provides him with valuable insight into key concerns of our board of directors and the issues and opportunities most relevant to public real estate companies.

 

 

 

 

LOGO

 

Director Since: 2009

 

Age: 57

 

Independent: No

(see page 7)

 

Committee:

   Dividend Declaration Committee

  

DR. THOMAS FINNE — Managing Director, KG CURA Vermögensverwaltung G.m.b.H. & Co. (commercial real estate company, Hamburg, Germany)

 

Background: Dr. Finne is the Managing Director of KG CURA Vermögensverwaltung G.m.b.H. & Co., a commercial real estate company located in Hamburg, Germany, that manages assets in North America and Europe. Prior to joining KG CURA Vermögensverwaltung G.m.b.H. & Co. in 1992, Dr. Finne was responsible for controlling, budgeting, accounting and finance for Bernhard Schulte KG, a ship owner and ship manager located in Hamburg, Germany. He is currently serving as a director of Sonae Sierra Brasil S.A., which owns and operates retail real estate assets in Brazil. Dr. Finne graduated with an undergraduate degree in business administration and received his doctorate from the International Tax Institute at the University of Hamburg.

 

Qualifications: Dr. Finne’s experience in international commercial real estate enables him to contribute an international perspective on the issues impacting a real estate company facing today’s challenges and opportunities. His current and past service on the board of directors of international real estate companies further provides him with business modeling experience and an appreciable awareness of the most effective and essential functions of a board of directors.

 

 

 

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LOGO

 

Director Since: 2000

 

Age: 64

 

Independent: Yes

 

Committees:

  Executive Compensation Committee (Chair)

 

  Audit Committee

  

ROBERT H. GIDEL — Managing Member, Liberty Partners, LLC (real estate investments)

 

Background: Mr. Gidel has been the Managing Member of Liberty Partners, LLC, a company that invests in both private and publicly traded real estate and finance focused operating companies, since 1998. Mr. Gidel has served on the Board of Directors of Nationstar Mortgage Holdings, Inc. since 2012 and was Chairman of Florida Polytechnic University’s Board of Trustees from 2012 to 2014. Mr. Gidel was President of Ginn Development Company, LLC, one of the largest privately-held developers of resort communities and private clubs in the Southeast, from July 2007 until April 2009. Mr. Gidel was Chairman of the Board of Directors of LNR Property Holdings, a private multi-asset real estate company, from 2005 until 2007. Until January 2007, he was a member of the Board of Directors and Lead Director of Global Signal Inc., a real estate investment trust. He was a Trustee of Fortress Registered Investment Trust and a Director of Fortress Investment Fund II, LLC from 1999 to 2012, both of which were registered investment companies. From 1998 until 2005, Mr. Gidel was the independent member of the investment committee of the Lone Star Funds I, II, III, IV and V. Mr. Gidel was also a member of the Board of Directors of U.S. Restaurant Properties, Inc. until 2005 and a member of the Board of Directors of American Industrial Properties REIT until 2001. Mr. Gidel was elected a NASD Fellow and is on the Board of Directors of University of Florida Investment Corporation.

 

Qualifications: Through his leadership of two public REITs and five private REITs, as well as his service on the board of directors of several public REITs, Mr. Gidel provides our Board with extensive knowledge of the real estate industry, the development and implementation of corporate strategies, risk assessment, corporate finance and governance matters. His experience as a senior manager of several real estate companies enables him to make significant contributions to our Board.

 

 

 

 

LOGO

 

Director Since: 2002

 

Age: 64

 

Independent: Yes

 

Committees:

  Executive Compensation Committee

 

  Nominating and Corporate Governance Committee

 

  

VICTOR B. MACFARLANE — Managing Principal, Chairman and Chief Executive Officer, MacFarlane Partners (real estate investments)

 

Background: Mr. MacFarlane is Managing Principal, Chairman and Chief Executive Officer of MacFarlane Partners, which he founded in 1987 to provide real estate investment management services to institutional investors. Mr. MacFarlane has more than 30 years of real estate experience. He sits on the Boards of Directors of the Robert Toigo Foundation and the Real Estate Executive Council. He also serves on the Board of Advisors for the UCLA School of Law and the board facilities committee of Stanford Hospital & Clinics. He is a member and former Trustee of the Urban Land Institute (ULI); a member and former Director of PREA; and a member of the International Council of Shopping Centers (ICSC), the Chief Executives Organization and the World Presidents’ Organization.

 

Qualifications: Mr. MacFarlane brings to our Board nearly three decades of experience as a chief executive officer of a real estate advisory firm and over 30 years of experience in the areas of real estate investment, corporate finance, portfolio management and risk management. His extensive managerial experience as well as his knowledge of the real estate and private capital industries provide our Board with an expansive view on issues impacting the Company and our corporate strategy.

 

 

 

 

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LOGO

 

Director Since: 2015

 

Age: 38

 

Independent: No

 

Committees:

   Dividend Declaration Committee (Chair)

 

   Pricing Committee (Chair)

  

DAVID J. OAKES — President and Chief Executive Officer, DDR Corp.

 

Background: Mr. Oakes is President and Chief Executive Officer of DDR, a position he assumed on February 10, 2015. He previously served as President and Chief Financial Officer since January 2013, prior to that as Senior Executive Vice President and Chief Financial Officer since February 2010, and prior to that as Chief Investment Officer since April 2007. During his tenure at DDR, Mr. Oakes has overseen the Company’s operations, capital markets, transactions, budgeting, tax, investor relations, funds management, accounting, corporate governance, and compensation and benefits functions. In addition to his other duties and responsibilities, Mr. Oakes chairs the Company’s executive compensation, enterprise risk management, real estate committee, and investment committee.

 

Prior to joining DDR, Mr. Oakes served as Senior Vice President and Portfolio Manager at Cohen & Steers Capital Management. In his role, he oversaw the firm’s global and international real estate securities portfolios for the oldest and largest dedicated real estate securities fund manager. Previously he worked as a Research Analyst in global investment research at Goldman Sachs, where he covered U.S. REITs.

 

Mr. Oakes earned his bachelor’s degree at Washington University and is a CFA charterholder. He is a member of NAREIT, ICSC, and the New York Society of Securities Analysts. Mr. Oakes is also a board member of The Gathering Place, a nonprofit dedicated to helping individuals and families affected by cancer.

 

Qualifications: During his years of service to the Company, Mr. Oakes has gained a comprehensive knowledge of the critical internal and external opportunities and challenges facing the Company and the real estate industry as a whole. His prior experience as a REIT analyst and as a member of the Company’s senior management, including his current role as Chief Executive Officer, make him an invaluable member of the Board of Directors.

 

 

 

 

LOGO

 

Director Since: 2015

 

Age: 48

 

Independent: No

(see page 7)

  

ALEXANDER OTTO — Chief Executive Officer, ECE Projektmanagement G.m.b.H. & Co. KG (commercial real estate company, Hamburg, Germany)

 

Background: Mr. Otto has served as the Chief Executive Officer of ECE Projektmanagement G.m.b.H. & Co. KG, a commercial real estate company based in Hamburg, Germany that manages assets in Europe, since 2000. Mr. Otto is a graduate of St. Clare’s, Oxford and studied at Harvard University and Harvard Business School.

 

Mr. Otto is a member of the boards of directors, or equivalent governing bodies, of publicly traded companies Deutsche EuroShop AG and Sonae Sierra Brasil S.A., as well as the privately held companies Otto Group and Peek & Cloppenburg KG. Additionally, Mr. Otto is the Chairman of Lebendige Stadt (“Vibrant City”) Foundation, HSV Campus gemeinnützige GmbH and the Alexander Otto Sportstiftung Foundation, is a member of the board of the Harvard Business School Foundation of Germany and, together with his wife, established the Dorit and Alexander Otto Foundation.

 

Qualifications: As chief executive officer of a major international commercial real estate developer and management company, Mr. Otto brings over 20 years of experience in the global retail real estate industry to our Board. Mr. Otto’s professional experience, including his leadership positions within the real estate and retail industries, enable him to contribute to our Board’s emphasis on corporate strategy, optimizing operations, enhancing tenant relationships and focus, and strengthening management.

 

 

 

 

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LOGO

 

Director Since: 2004

 

Age: 58

 

Independent: Yes

 

Committees:

   Audit  Committee (Chair)

 

   Pricing Committee

  

SCOTT D. ROULSTON — Managing Director, MAI Capital Management, LLC (investment advisor)

 

Background: Mr. Roulston is Managing Director of MAI Capital Management, LLC (MAI), a position which he has held since 2013. MAI is a registered investment advisor. He is a Trustee of the Ohio Police and Fire Pension Fund. He was Managing Director at Burdette Asset Management, a private equity fund manager, from 2011 to January 2013. From 1990 to 2010, he was Chief Executive Officer of Roulston & Company, a firm that provided investment research and management, and its successor firm, Fairport Asset Management. He is Director and Chairman of Bluecoats, Inc. and a Director of University Circle, Inc. He is a former Director of Defiance, Inc., where he served as Chair of the Compensation Committee and member of the Audit Committee. Mr. Roulston is a graduate of Dartmouth College.

 

Qualifications: In addition to his past experience on the board of directors of both public and private companies, including on the audit committee of a public company, Mr. Roulston contributes his insights as a leader of an asset management and private equity company, and a trustee of a major public pension fund. This experience has provided him with extensive knowledge of the issues involved with the review and analysis of financial statements, as well as capital markets and the development and implementation of corporate strategy.

 

 

 

 

LOGO

 

Director Since: 1998

 

Age: 60

 

Independent: Yes

 

Committee:

   Executive Compensation Committee

 

  

BARRY A. SHOLEM — Partner, MSD Capital, L.P. (family investment office)

 

Background: Mr. Sholem became a partner of MSD Capital, L.P., the family office of Michael and Susan Dell, and head of its real estate fund in July 2004. From 1995 until 2000, Mr. Sholem was Chairman of DLJ Real Estate Capital Partners, a $2 billion real estate fund that he co-founded and that invested in a broad range of real estate-related assets, and a Managing Director at Credit Suisse First Boston. Prior to forming DLJ Real Estate Capital Partners, Mr. Sholem spent ten years at Goldman Sachs in its New York and Los Angeles offices. Mr. Sholem is active in ULI (CRC Silver Council), ICSC, the University of California, Berkeley Real Estate Advisory Board and the Business Roundtable.

 

Qualifications: Years of experience leading the real estate groups of investment firms gives Mr. Sholem a unique perspective on the business and operations of the Company. In addition, he brings a broad understanding of the social and political issues facing the Company through his involvement with ULI and ICSC.

 

 

 

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Transactions with the Otto Family

In 2009, we entered into a stock purchase agreement with Mr. Alexander Otto. Pursuant to this agreement, Mr. Otto and certain members of his family, whom we collectively refer to as the Otto Family, purchased 40,000,000 common shares, which we refer to as the Purchased Shares. In connection with the sale of the Purchased Shares, we also entered into an investor rights agreement with Mr. Otto under which he has a right to nominate individuals for election to our Board depending on the Otto Family’s level of ownership in the Company. During such time as the Otto Family beneficially owns 17.5% or more of our outstanding common shares, our Board will nominate two persons recommended by the Otto Family who are suitable to us to become members of our Board at each annual election of directors, and during such time as the Otto Family beneficially owns less than 17.5% but more than 7.5% of our outstanding common shares, our Board will nominate one person recommended by the Otto Family who is suitable to us to become a member of our Board at each annual election of directors. In accordance with the investor rights agreement, Dr. Finne has been proposed by Mr. Otto and subsequently nominated and elected to our Board annually since 2009. Beginning in 2015, Mr. Otto has designated himself as the second person to be nominated by our Board pursuant to the investor rights agreement. Although pursuant to the investor rights agreement Mr. Otto was entitled to recommend one individual for nomination to the Board as of the record date, the Nominating and Corporate Governance Committee recommended, and the Board approved, nominating both Mr. Otto and Dr. Finne as Directors at the 2016 Annual Meeting.

In April 2014, we sold our 50% ownership interest in a joint venture which, directly or indirectly, owned certain assets in Brazil to Mr. Otto and his affiliates. Because Mr. Otto and Dr. Finne are employees or affiliates of either certain of the entities that purchased the Company’s joint venture interest or affiliates of such purchasing entities, Mr. Otto and Dr. Finne are not currently deemed independent under the Securities and Exchange Commission (SEC) and New York Stock Exchange (NYSE) rules.

Independent Directors

Our Board has affirmatively determined that all of the Directors who served during 2015, as well as all nominees for election at our Annual Meeting (except for Mr. Otto, Dr. Finne and Mr. Oakes), are independent within the meaning of the rules of the NYSE and, as applicable, the rules of the SEC, including with respect to service on the Executive Compensation Committee and the Audit Committee. Our Corporate Governance Guidelines provide that our Board will be comprised of a majority of independent directors and that only those directors or nominees who meet the listing standards of the NYSE will be considered independent. Our Board reviews annually the relationships that each Director or nominee has with us (either directly or indirectly), and only those Directors or nominees whom our Board affirmatively determines have no material relationship with us will be considered independent.

Director Qualifications and Review of Director Nominees

The Nominating and Corporate Governance Committee reviews annually with our Board the composition of our Board as a whole and recommends, if necessary, action to be taken so that our Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity required for our Board as a whole and contains at least the minimum number of independent directors required by applicable laws and regulations and our Corporate Governance Guidelines. The Nominating and Corporate Governance Committee is responsible for ensuring that the composition of our Board appropriately reflects the needs of our business and, in furtherance of this goal, proposing the addition of Directors and requesting the resignation of Directors for purposes of ensuring the requisite skill sets and commitment of the Directors to actively participate in Board and committee meetings. Directors should possess such attributes and experience as are necessary to provide a broad range of personal characteristics including diversity, management skills, and real estate and general business experience. Directors should commit the requisite time for preparation and attendance at regularly scheduled Board and committee meetings, as well as participate in other matters necessary to ensure we are well-positioned to engage in best corporate governance practices.

 

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In evaluating a director candidate, the Nominating and Corporate Governance Committee considers factors that are in the best interests of the Company and its shareholders, including the knowledge, experience, integrity and judgment of each candidate; the potential contribution of each candidate to the diversity of backgrounds, experience and competencies that our Board desires to have represented; each candidate’s ability to devote sufficient time and effort to his or her duties as a director; independence and willingness to consider all strategic proposals; any other criteria established by our Board and any core competencies or real estate expertise necessary to staff Board committees. In addition, the Nominating and Corporate Governance Committee will consider potential members’ qualifications to be independent under the NYSE listing standards in accordance with our Corporate Governance Guidelines, and will assess whether a candidate possesses the integrity, judgment, knowledge, experience, skills, and expertise that are likely to enhance our Board’s ability to oversee our affairs and business, including, when applicable, to enhance the ability of committees of our Board to fulfill their duties.

The Nominating and Corporate Governance Committee will consider suggestions forwarded by shareholders to our Secretary concerning qualified candidates for election as Directors. To recommend a prospective nominee for the Nominating and Corporate Governance Committee’s consideration, a shareholder may submit the candidate’s name and qualifications to our Secretary, David E. Weiss, at the following address: 3300 Enterprise Parkway, Beachwood, Ohio 44122. The Nominating and Corporate Governance Committee has not established specific minimum qualifications that a candidate must have to be recommended to our Board. However, in determining qualifications for new Directors, the Nominating and Corporate Governance Committee considers those guidelines described above. The Nominating and Corporate Governance Committee will consider a pool of potential Board candidates established from recommendations from shareholders and third parties, including management and current Directors, as well as pursuant to the investor rights agreement described above under the caption “Transactions with the Otto Family.” The Nominating and Corporate Governance Committee may, in its discretion, retain a search consultant to supplement the pool of potential Board candidates considered for nomination. In connection with the nomination of Mr. August, the Nominating and Corporate Governance Committee utilized the services of Ferguson Partners L.P., which recommended Mr. August for nomination.

Majority Vote Standard

Consistent with best corporate governance practices, the Company’s Articles of Incorporation provide for a majority vote standard in uncontested elections and a plurality vote standard in contested elections. An election is contested when the number of nominees for election as a Director exceeds the number of Directors to be elected. Under a majority vote standard, each vote is specifically counted “for” or “against” the Director’s election and an affirmative majority of the total number of votes cast “for” or “against” a Director nominee will be required for election. Shareholders are entitled to abstain with respect to the election of a Director. With respect to the election of Directors, broker non-votes and abstentions will not be considered votes cast at the Annual Meeting and will be excluded in determining the number of votes cast at the Annual Meeting.

Cumulative Voting

If written notice is given by any shareholder to our President, any Vice President or the Secretary at least 48 hours before the Annual Meeting that the shareholder desires that cumulative voting be used for the election of Directors, and if an announcement of the giving of that notice is made when the Annual Meeting is convened by the Chairman of the Board, the President or the Secretary, or by or on behalf of the shareholder giving that notice, then each shareholder will have the right to cumulate the voting power that the shareholder possesses in the election of Directors. This means that each shareholder will be able to give one candidate a number of votes equal to the number of Directors to be elected multiplied by the number of common shares owned by such shareholder, or to distribute the shareholder’s votes on the same principle among two or more candidates, as the shareholder may elect. If voting for the election of Directors is cumulative, the persons named in the accompanying Proxy Card will vote the common shares represented by proxies given to them in such manner so as to elect as many of the nominees as possible.

 

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3. Board Governance

 

Board Leadership

Mr. Ahern serves as Chairman of the Board. The position of Chairman of the Board is a non-executive officer position and is expected to be held by a non-employee, independent Director. The Chairman of the Board has the following responsibilities, among others as may be determined by our Board:

 

      Ensure that our Board fulfills its oversight and governance responsibilities;

       Consult and advise on any operational matters as requested by our Chief Executive Officer;

       Coordinate the Board’s self-assessment and evaluation process;

       Serve as liaison between the Company’s management and the non-management Directors;

       Coordinate the Board’s annual review and input to the Company’s strategic plan;

       Assist the Nominating and Corporate Governance Committee on corporate governance matters such as the nomination of Board members, committee membership and rotation, and management succession planning;

       Preside over meetings of our shareholders; and

      Provide leadership to our Board, set the agenda for, and preside over, Board meetings and executive sessions of the independent and non-management Directors.

We believe that an independent Chairman of the Board, separate from our Chief Executive Officer, recognizes the time, effort and commitment that our Chief Executive Officer is required to devote to his position and to fulfill his responsibilities and the independent oversight required by our Chairman of the Board. This structure also enables our Board as a whole to fulfill its responsibility to oversee the risks presented by the Company’s long-term strategy, business plan and model.

Meetings of Our Board

During the fiscal year ended December 31, 2015, our Board held five meetings and undertook one written action. In 2015, all Directors attended 100% of the meetings of our Board with the exception of a Director who was absent for one meeting due to international travel. As stated in our Corporate Governance Guidelines, all Directors are expected to attend the Annual Meeting. All of our then current Directors nominated for election attended the Annual Meeting of Shareholders in May 2015. Our Board conducts and reviews its operations through a self-assessment process on an annual basis.

Meetings of Non-Management and Independent Directors

The non-management Directors meet in executive session in conjunction with each regularly scheduled Board meeting. These meetings are chaired by the Chairman of the Board. In addition, as required by our Corporate Governance Guidelines, the independent Directors meet at least once per year.

Committees of Our Board

During 2015 and during 2016 prior to our Annual Meeting, our Board established each of the committees described below. The information regarding our committees set forth below reflects the participation of (i) Mr. Craig Macnab and Ms. Rebecca L. Maccardini, who served on our Board during 2015 prior to the 2015 Annual Meeting but were not nominated for election to our Board at our 2015 Annual Meeting, (ii) Mr. Oakes, who was elected to our Board in February 2015, and (iii) Mr. James C. Boland, who currently serves as a Director, but was not nominated for election to our Board at the 2016 Annual Meeting. Our Board has approved the written charters of the Audit Committee, the Executive Compensation Committee and the Nominating and

 

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Corporate Governance Committee, which, along with our Corporate Governance Guidelines, are posted on our website at www.ddr.com, under “Governance” in the “Investors” section. Each of the Audit Committee, Executive Compensation Committee and Nominating and Corporate Governance Committee conducts a self-evaluation and review of its charter annually and reports the results of these evaluations and reviews to our Board. The information contained on or accessible through our website is not incorporated by reference into this Proxy Statement, and you should not consider such information to be part of this Proxy Statement.

 

    

 

AUDIT COMMITTEE

  

 

Members:

 

   Mr. Roulston (Chair)

 

    Mr. Boland

 

   Mr. Gidel     (commencing     May 12, 2015)

 

   Ms. Maccardini     (prior to     May 12, 2015)

  

Responsibilities: The Audit Committee assists our Board in overseeing: the integrity of our financial statements; compliance with legal and regulatory requirements; our independent registered public accounting firm’s qualifications and independence; the performance of our internal audit function and our independent registered public accounting firm; our enterprise risk management policies and procedures; and prepares the Audit Committee Report included in our annual proxy statement.

 

Independence: All of the members of the Audit Committee are independent as independence is defined in the rules and regulations of the SEC and the NYSE listing standards in accordance with our Corporate Governance Guidelines. Our Board has determined that each member of the Audit Committee is an “audit committee financial expert” within the meaning of Item 407 of Regulation S-K under the federal securities laws.

 

Meetings: The Audit Committee held ten meetings in 2015. All members attended 100% of the meetings.

 

    

 

EXECUTIVE COMPENSATION COMMITTEE

  

 

Members:

 

   Mr. Gidel (Chair)

 

    Mr. Boland

 

   Mr. MacFarlane

 

    Mr. Sholem

  

Responsibilities: Among other responsibilities, the Executive Compensation Committee reviews and approves compensation for our executive officers; reviews and recommends to our Board compensation for Directors; oversees the Company’s compensation and executive benefit plans, including those under which such executive officers and Directors receive benefits; reviews and discusses with management the Compensation Discussion and Analysis and produces the Compensation Committee Report in our annual proxy statement. The Executive Compensation Committee engages a compensation consultant to assist in the design of the compensation program and the review of its effectiveness, as further described below under the caption “Compensation Discussion and Analysis.” The Chief Executive Officer provides to the Executive Compensation Committee recommendations regarding compensation for executive officers other than himself for approval by the committee, and the Executive Compensation Committee delegates to senior management the authority to administer certain aspects of the compensation program for non-executive officers. In addition, the Executive Compensation Committee may form subcommittees of at least two members for any purpose it deems appropriate and may delegate to the subcommittees any of its power and authority that the Executive Compensation Committee deems appropriate.

 

Independence: All of the members of the Executive Compensation Committee are independent as independence is defined in rules and regulations of the SEC and the NYSE listing standards, including with respect to service on the Executive Compensation Committee, in accordance with our Corporate Governance Guidelines.

 

Meetings: The Executive Compensation Committee held two meetings in 2015. All members attended 100% of the meetings.

 

 

 

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NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

  

 

Members:

 

   Mr. Ahern (Chair)     (commencing     May 12, 2015)

 

   Mr. MacFarlane

 

    Mr. Macnab     (prior to     May 12, 2015)

  

Responsibilities: The Nominating and Corporate Governance Committee identifies individuals qualified to become members of our Board and recommends to our Board the persons to be nominated as Directors at each annual meeting of shareholders; recommends to our Board qualified individuals to fill vacancies on our Board; reviews and recommends to our Board qualifications for committee membership and committee structure and operations; recommends Directors to serve on each committee; develops and recommends to our Board corporate governance policies and procedures in compliance with the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act and other rules and regulations relating to our corporate governance; oversees compliance with, and reviews and makes recommendations regarding any waivers under, our Code of Business Conduct and Ethics with respect to officers and Directors; and leads our Board in its annual review of the performance of our Board.

 

Independence: All of the members of the Nominating and Corporate Governance Committee are independent as independence is defined in the NYSE listing standards and in accordance with our Corporate Governance Guidelines.

 

Meetings: The Nominating and Corporate Governance Committee held five meetings in 2015. All members attended 100% of the meetings.

 

    

 

DIVIDEND DECLARATION COMMITTEE

  

 

Members:

 

   Mr. Oakes (Chair)     (commencing     February 10, 2015)

 

   Mr. Ahern     (commencing     May 12, 2015)

 

   Dr. Finne

 

    Mr. Macnab     (prior to     May 12, 2015)

 

  

Responsibilities: As may be authorized by the Board, the Dividend Declaration Committee determines if and when we should declare dividends on our capital shares and the amount thereof, consistent with the dividend policy adopted by our Board.

 

Meetings: The Dividend Declaration Committee held one meeting in 2015 and all members attended this meeting. The Dividend Declaration Committee also took written action on four occasions in 2015.

 

    

 

PRICING COMMITTEE

  

 

Members:

 

   Mr. Oakes (Chair)     (commencing     February 10, 2015)

 

   Mr. Ahern

 

    Mr. Roulston

 

  

Responsibilities: The Pricing Committee (or duly appointed subcommittee thereof) is authorized to approve the timing, amount, price and terms of offerings of our debt and equity securities.

 

Meetings: The Pricing Committee (or duly appointed subcommittee thereof) took written action on two occasions in 2015.

 

 

 

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Risk Oversight

With a Board comprised of management, independent Directors and non-independent Directors, members of our Board bring a variety of perspectives to address risks faced by our Company. Our Board’s role in enterprise risk management (ERM) includes receiving regular reports from members of senior management on areas of material risk to the Company, including operational, financial, strategic and compliance risks. The Company has an ERM Committee, comprised of senior management and chaired by the Chief Executive Officer, which meets regularly to address risk and risk mitigation strategies. The Chair of the Audit Committee is invited to attend and participate in ERM Committee meetings. The Audit Committee assists our Board in its oversight responsibilities by, among other matters, reviewing reports prepared by the ERM Committee, reviewing our policies and procedures with respect to risk assessment, risk management, risk monitoring and risk mitigation and working with the other committees of our Board to identify additional risks related to the committees’ respective areas of expertise. The Chair of the relevant committee consults with the Audit Committee regarding the committee’s findings regarding the identified risks and the committee’s proposals to address such risks. The Audit Committee then reports, on at least an annual basis, to our full Board on the Company’s ERM program. This enables our Board and its committees to coordinate their risk oversight role, particularly with respect to interrelated risks. More information concerning the Company’s ERM program can be found on our website at www.ddr.com, under “Enterprise Risk Management” in the “About Us” section under “News.”

Compensation of Directors

Director Compensation Program

During 2015, the non-employee Directors were compensated in the form of an annual cash retainer and an annual stock retainer, as shown below, in order to better align the interests of our Directors and our shareholders.

 

Component    Annual Amount    Payable

 

Annual Stock Retainer

  

 

Grant of 8,000 common shares

   Upon election at the
annual meeting of shareholders

 

Annual Cash Retainer

  

 

$50,000

   Quarterly in cash or common shares, at the director’s election

Non-employee Directors are paid fees for service on certain committees as set forth below and for service as the Chairman of the Board. The Director who serves as the Chairman of the Board receives an annual fee of $100,000 in addition to the fees paid to all non-employee Directors. Fees are paid to committee members, the respective committee chairs and the Chairman of the Board in quarterly installments in the form of cash or common shares, at a Director’s election. Each Director is also reimbursed for expenses incurred in attending meetings because we view meeting attendance as integrally and directly related to the performance of the Directors’ duties.

 

        Annual Fee               
Committee      Chair ($)                   Member ($)             
Audit Committee        40,000                      25,000              
Executive Compensation Committee        40,000                      25,000              
Nominating and Corporate Governance Committee        30,000                      20,000              
Dividend Declaration Committee        —                      —              
Pricing Committee        —                      —              

 

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2015 Director Compensation

In accordance with the compensation program described above, the non-employee Directors received the following compensation during 2015:

 

Name    Fees Earned or
Paid in Cash ($)(1)
   Stock Awards ($)(1)(2)        Total ($)  
Terrance R. Ahern    175,023          141,200            316,223   
James C. Boland    100,000          141,200             241,200   
Thomas Finne      50,000          141,200            191,200   
Robert H. Gidel    102,500          141,200             243,700   
Volker Kraft(3)      25,000          —             25,000   
Rebecca L. Maccardini(3)      37,500          —             37,500   
Victor B. MacFarlane      95,020          141,200            236,220   
Craig Macnab(3)      40,027          —             40,027   
Alexander Otto      25,000          141,200            166,200   
Scott D. Roulston      90,000          141,200             231,200   
Barry A. Sholem      75,000          141,200            216,200   

 

(1) All of the fees or stock awards listed for Messrs. Ahern, MacFarlane and Macnab were deferred into the Directors’ Deferred Compensation Plan and converted into units that are the economic equivalent of common shares, as further described below.

 

(2) The amounts reported in this column reflect the aggregate grant date fair value, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC Topic 718), for stock awards granted to the non-employee Directors in 2015, based upon the closing price of our common shares on May 15, 2015.

 

(3) Dr. Kraft, Ms. Maccardini, and Mr. Macnab served on the Board prior to May 12, 2015, but were not nominated for election at our 2015 Annual Meeting.

Directors’ Deferred Compensation Plan

Non-employee Directors have the right to defer the receipt of all or a portion of their fees pursuant to our Directors’ Deferred Compensation Plan. Our Directors’ Deferred Compensation Plan is an unsecured, general obligation of the Company. Participants’ contributions are converted to units, based on the market value of our common shares, so that each unit is the economic equivalent of one common share but without voting rights. Settlement of units is made in cash, common shares or a combination of both (as permitted by the plan administrators) at a date determined by the participant at the time a deferral election is made. Prior to settlement, each unit earns dividend equivalents in an amount equal to any dividends paid on our common shares during the deferral period. We have established a “rabbi” trust, which holds our common shares, to satisfy our payment obligations under the plan. Common shares equal to the number of units credited to participants’ accounts under the plan are contributed to the rabbi trust. In the event of our insolvency, the assets of the rabbi trust are available to general creditors of the Company. During their terms as Directors, Messrs. Ahern, Boland, MacFarlane, and Roulston have deferred compensation represented by the following number of units as of December 31, 2015:

 

Name  

        Number of Units under the        

        Directors’ Deferred Compensation Plan         

  Value of Units  ($)(1)    
Terrance R. Ahern   204,284       3,440,146      
James C. Boland     22,378          376,852      
Victor B. MacFarlane   140,420       2,364,681      
Scott D. Roulston     26,375          444,160      

 

(1) Based on the closing price of our common shares on December 31, 2015.

 

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Equity Deferred Compensation Plan

During their terms as Directors prior to 2006, Messrs. Ahern and MacFarlane also had the right to defer the vesting of restricted shares pursuant to the Company’s Equity Deferred Compensation Plan. Vested deferred stock units under the Equity Deferred Compensation Plan will not be distributed to participants until the end of the deferral period selected by each participant. Both Messrs. Ahern and MacFarlane had 1,029 units deferred under this plan valued at $17,328 based on the closing price of our common shares on December 31, 2015.

Director Stock Ownership Guidelines

Each non-employee Director must own common shares or common share equivalents with an aggregate market value of no less than five times the cash portion of the annual retainer fee paid to a Director. This ownership requirement must be met no later than the fifth anniversary of the June 1st following the date restricted shares or common shares comprising a component of the Director’s compensation are first granted to the Director, or, if the Director is elected or appointed to our Board other than at an annual meeting, the date such Director has received compensation for five years of service, and on each June 1st thereafter. Our Board established this particular level of stock ownership for our non-employee Directors because we want to have the interests of our non-employee Directors aligned with the investment interests of our shareholders. To this end, and unless otherwise approved by the Nominating and Corporate Governance Committee, each non-employee Director is required to own one-fifth, two-fifths, three-fifths, and four-fifths of the requisite value of common shares and common share equivalents on the date such Director has received compensation for one, two, three, and four years of service as a Director, respectively. Unvested restricted shares and common shares units deferred by Directors into our deferred compensation plans constitute common share equivalents and count toward satisfying the stock ownership guidelines. All Directors were in compliance with the Director stock ownership guidelines as of December 31, 2015.

 

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Security Ownership of Directors and Management

The following table sets forth certain information regarding the beneficial ownership of our common shares as of March 7, 2016, except as otherwise disclosed in the notes below, by (1) our Directors, (2) our Director nominees, (3) our named executive officers, and (4) our current executive officers, Directors, and Director Nominees as a group. Except as otherwise described in the following notes, the following beneficial owners have sole voting power and sole investment power with respect to all common shares set forth opposite their respective names.

 

Directors, Director Nominees and Management  

Amount and Nature of

Beneficial Ownership of Common Shares  

      Percentage  
   Ownership (%)  
David J. Oakes   620,698(1)(2)(3)   *
Terrance R. Ahern   187,031(1)(4)   *
Thomas F. August   10,000   *
James C. Boland   45,611(4)   *
Thomas Finne   38,423   *
Paul W. Freddo   361,301(3)(5)   *
Robert H. Gidel   59,954(6)   *
Victor B. MacFarlane   9,728(1)(4)   *
Alexander Otto   57,425,241(7)   15.7
Luke J. Petherbridge   85,343(3)(8)   *
Scott D. Roulston   5,111(4)   *
Barry A. Sholem   114,950   *

Christa A. Vesy

  145,870(3)(9)   *

All Executive Officers, Directors and Director Nominees as a Group (13 persons)

  59,109,261   16.2

 

* Less than 1%

 

(1) Does not include 356,418; 1,029 and 1,029 stock units credited to the accounts of Messrs. Oakes, Ahern, and MacFarlane, respectively, with respect to restricted common shares that would have vested pursuant to their terms but were deferred to the Company’s Equity Deferred Compensation Plan. The stock units represent the right to receive common shares at the end of the deferral period, but do not confer current dispositive or voting control of any common shares.

 

(2) Includes 424,813 common shares subject to options exercisable on or prior to May 6, 2016.

 

(3) Does not include 24,908; 13,008 and 13,516 restricted stock units (RSUs) credited to the accounts of Messrs. Oakes, Freddo and Petherbridge, respectively, and 4,588 RSUs credited to the account of Ms. Vesy, which RSUs will vest in future periods pursuant to their terms. These RSUs were granted in 2016 for the 2015 performance year. Each unit is the economic equivalent of, and settled with, one common share, but does not confer current dispositive or voting control of any common shares.

 

(4) Does not include 190,680; 22,611; 143,381 and 26,650 stock units credited to the accounts of Messrs. Ahern, Boland, MacFarlane, and Roulston, respectively, pursuant to our Directors’ Deferred Compensation Plan. Each unit is the economic equivalent of one common share, but does not confer current dispositive or voting control of any common shares.

 

(5) Includes 169,688 common shares subject to options exercisable on or prior to May 6, 2016.

 

(6) Includes 59,954 common shares owned by a limited liability company in which Mr. Gidel and his wife each has a one-half interest.

 

(7) For Information regarding Mr. Otto’s beneficial ownership, see “Security Ownership of Certain Beneficial Owners.”

 

(8) Includes 28,117 common shares subject to options exercisable on or prior to May 6, 2016.

 

(9) Includes 55,952 common shares subject to options exercisable on or prior to May 6, 2016.

 

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4. Proposal Two: Shareholder Advisory Vote to Approve the Compensation of the Company’s Named Executive Officers

 

Proposal Summary and Board Recommendation

As required under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Securities Exchange Act of 1934, we are asking you to cast an advisory (non-binding) vote on the following resolution at the Annual Meeting:

RESOLVED, that, on an advisory basis, the compensation of our named executive officers, as disclosed in the Compensation Discussion and Analysis, compensation tables and related narratives and descriptions of our Proxy Statement for the 2016 Annual Meeting, is hereby APPROVED.

This advisory vote, commonly known as a “Say-on-Pay” vote, gives you the opportunity to express your views about the compensation we pay to our named executive officers, as described in this Proxy Statement. The Board believes that our executive compensation program is designed appropriately and working effectively to ensure that we compensate our named executive officers for the achievement of annual and long-term performance goals which will enhance shareholder value. Before you vote, please review the sections captioned “Compensation Discussion and Analysis” and “Executive Compensation Tables and Related Disclosure” below. These sections describe our named executive officer pay programs and the rationale behind the decisions made by our Executive Compensation Committee.

You may vote “FOR” or “AGAINST” the resolution or abstain from voting on the resolution. The result of the Say-on-Pay vote will not be binding on us or our Board; however, the Board values the views of our shareholders. The Board and Executive Compensation Committee will review the results of the vote and expect to take them into consideration in addressing future compensation policies and decisions.

This non-binding advisory vote is scheduled to be conducted every year. The next Say-on-Pay vote is expected to take place at our 2017 Annual Meeting of Shareholders.

 

 

BOARD RECOMMENDATION:

“For” the Approval, on an Advisory Basis, of the Compensation of Our Named Executive Officers

 

2015 Executive Compensation Program

We believe you should vote “FOR” the approval of our named executive officer compensation, which, as described more fully under the section captioned “Compensation Discussion and Analysis,” we have designed to help us:

 

    

Pay-for-performance, by providing incentives to our named executive officers to deliver a superior total return to shareholders in the form of share price appreciation and dividend policy as a result of superior operational performance and execution; and

    

Attract and retain leading industry talent, who will be able to deliver superior returns by adopting and executing a strategy that provides opportunity to retailers, complements our core competencies and enables us to take advantage of new business opportunities.

 

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For 2015, as further described under the section captioned “Compensation Discussion and Analysis,” we made executive compensation decisions to help us reward the achievement of our financial and strategic objectives by linking these decisions to our key performance metrics of:

 

    

Same Store EBITDA Growth;

    

Relative and Absolute Total Shareholder Return; and

    

Achievement of individual performance objectives.

We believe you should vote “FOR” the compensation of our named executive officers because the compensation actually earned by our named executive officers for 2015 performance, as described in this Proxy Statement, was aligned with both our pay-for-performance philosophy and our actual 2015 performance.

Compensation Committee Report

The Executive Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Executive Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and the Proxy Statement for the 2016 Annual Meeting of Shareholders for filing with the SEC.

Executive Compensation Committee

Robert H. Gidel, Chair

James C. Boland

Victor B. MacFarlane

Barry A. Sholem

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves or has served on the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board or Executive Compensation Committee.

 

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5. Compensation Discussion and Analysis

 

Executive Summary

In this section of the Proxy Statement, we explain and discuss our 2015 executive compensation program that applied to our named executive officers. We also describe the principles underlying our named executive officer compensation policies and practices. In addition, we outline our named executive officer compensation decisions for 2015 in light of the performance of the Company and our executive management team. In summary, we explain and demonstrate our pay-for-performance compensation philosophy.

Continued Execution of Our Prime Business Strategy in 2015

Management’s core business strategy in 2015, with the support of the Company’s Board, continued to be based upon a comprehensive strategic plan that places emphasis on consistency in operational excellence and capital allocation, with a focus on creating long-term shareholder value and growing net asset value. We are committed to this strategic plan, which we have described as our “prime” business strategy. Pursuant to our prime business strategy, we are focused on the following three key objectives:

 

Strategy   Objective
Prime Portfolio   Operate a prime portfolio, which means focusing on “prime properties,” which are market-dominant shopping centers populated by moderate- to budget-priced retailers with strong credit profiles and growing market shares.
Prime Operating Platform   Maintain a prime operating platform, which means improving property operating fundamentals, such as increasing the cash flow from our properties, and fostering talent within the organization.
Prime Balance Sheet   Establish and maintain a prime balance sheet, which means reducing risk, extending debt duration, and strengthening our credit metrics.

Compensation Program Complements Business Strategy

Our compensation program complements our strategy through a combination of (1) an annual operating performance metric (Same Store EBITDA Growth), annual absolute and relative total shareholder return (TSR) metrics and individual objectives, and (2) long-term metrics tied to DDR’s absolute and relative share price performance. The program provides significant upside potential for the Company’s management team as well as downside risk (for example, no annual incentive award is paid if performance is below the “threshold” level). At the same time, both the annual and long-term compensation programs encourage the development and execution of a sustainable long-term value-adding business plan without undue risk-taking.

 

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Annual Incentive Compensation

During 2015, our annual performance-based incentive compensation program was based upon the following four metrics, which are described in further detail below:

 

Annual Incentive Compensation Metrics
Metric   Description

 

Same Store EBITDA Growth

  Year-over-year growth rate of EBITDA(1) generated from assets owned, in whole or in part, for at least two consecutive fiscal years.
Relative TSR   Total annual shareholder return relative to a defined peer group of retail REITs.

 

Absolute TSR

  Total annual shareholder return as compared to a defined targeted performance level.

 

Individual Performance

  Evaluation of the executive’s achievement of individual performance objectives.

 

(1) EBITDA means Earnings Before Interest, Taxes, Depreciation and Amortization.

Based on a review of our performance as measured by these metrics, we paid 2015 performance-based incentive compensation to each of the following individuals (who are our named executive officers for 2015) for performance at the following achievement levels (as further discussed below):

 

Named Executive Officer    Title    Overall Achievement Level

 

David J. Oakes

   Chief Executive Officer (effective February 2015) and President   

 

Between Threshold and Threshold+

 

Luke J. Petherbridge

   Chief Financial Officer (effective March 2015) and Treasurer   

 

Between Threshold+ and Target

 

Paul W. Freddo

   Senior Executive Vice President of Leasing and Development   

 

Between Threshold+ and Target

 

Christa A. Vesy

   Executive Vice President and Chief Accounting Officer   

 

Between Target and Target+

Long-Term Incentive Program

Consistent with the Company’s long-term incentive program philosophy, the Executive Compensation Committee (Committee) recommended, and the Board adopted, the 2013 Value Sharing Equity Program (2013 VSEP), which commenced on January 1, 2013 and ended on December 31, 2015, as our performance-based, long-term equity incentive program. This program replaced the predecessor Value Sharing Equity Program, which ended on December 31, 2012 (which program, along with the 2013 VSEP, is referred to herein as the VSEP). The 2013 VSEP consisted of two components, an “absolute performance” metric (to which one-third of the potential program payouts were subject) as well as a “relative performance” metric (to which two-thirds of the potential program payouts were subject). The 2013 VSEP is further described below under the section entitled “2013 Value Sharing Equity Program.” For information regarding the new Value Sharing Equity Program implemented for the 2016-2018 performance period, see the section entitled “2016 Value Sharing Equity Program” below.

Consideration of 2015 Say-on-Pay Voting Results

At our 2015 Annual Meeting, we received nearly 99% approval, based on the total votes cast, for our annual advisory Say-on-Pay vote to approve the compensation of our named executive officers. Our Board and Committee considered these voting results in connection with their review of the Company’s compensation program during 2015. The Committee and Gressle & McGinley LLC (Gressle & McGinley), the Committee’s compensation consultant, specifically discussed the voting results when reviewing and considering any potential changes to our named executive officer compensation program for 2015. The Committee believes these voting results demonstrate significant, continuing support for our named executive officer pay program, and chose to not make any substantial

 

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changes to the existing program for 2015 specifically in response to the 2015 Say-on-Pay voting results. The Committee will, however, continue to explore from time to time various executive pay and corporate governance changes with Gressle & McGinley to the extent appropriate to keep our executive compensation program aligned with best practices in our competitive market. Based on its prior recommendation, our Board will continue to hold annual Say-on-Pay votes at our annual meeting of shareholders.

Total Direct Compensation for 2015

Based upon the performance of the Company during 2015, the named executive officers for 2015 were awarded “total direct compensation” as presented in the following table. Total direct compensation includes amounts for base salary, long-term incentive compensation and promotional awards (if applicable) in the form of restricted stock, and annual performance-based incentive compensation in the form of cash, RSUs (which are settled in common shares) and options awarded for 2015, the year to which the performance relates. This table does not include all of the items required by the rules of the SEC to be reported in the 2015 Summary Compensation Table, and does not report compensation elements or amounts in the same manner as required under the rules of the SEC. Therefore, this table should not be viewed as a replacement or substitute for the 2015 Summary Compensation Table or other compensation tables set forth under the section entitled “Executive Compensation Tables and Related Disclosure.”

 

Total Direct Compensation for 2015(1)  
Named Executive Officer   Base Salary
($)
    Annual
Cash
Incentive
($)(2)
    Annual
RSU
Incentive
($)(3)
    Annual
Stock
Option
Incentive
($)(4)
   

VSEP
Award

($)(5)

   

Promotional

Award

($)(6)

   

TOTAL

($)

 
David J. Oakes     591,875        676,400        541,126        135,284               500,009        2,444,694   
Luke J. Petherbridge     362,503        347,750        278,261        69,555               378,800        1,436,869   
Paul W. Freddo     440,000        334,694        267,802        66,941                      1,109,437   
Christa A. Vesy     298,541        131,382        94,455        23,610                      547,988   

 

(1) Total direct compensation consists solely of (a) the actual base salary paid for 2015, (b) the annual cash incentive compensation earned for 2015 performance, (c) the annual RSU awards and stock options earned based on 2015 performance, (d) the 2013 VSEP awards issued during 2015, and (e) any promotional award, in each case if applicable.

 

(2) Annual cash incentive compensation earned for 2015 was paid in March 2016.

 

(3) The annual RSU incentive value reflects RSUs awarded for 2015 performance and is shown based on the grant date fair value as of March 3, 2016 for Mr. Oakes and February 23, 2016 for the other named executive officers. The award is subject to service-based vesting in 20% increments with 20% settled in common shares on the date of grant and the remaining RSUs vesting on the four following anniversaries of the grant date. The amount shown does not include restricted stock granted in prior years that vested during 2015.

 

(4) The annual stock option incentive value reflects stock options awarded for 2015 performance and is shown based on the grant date fair value (determined by a Black-Scholes valuation), as of March 3, 2016 for Mr. Oakes and February 23, 2016 for the other named executive officers. These stock options may have future value or no value based on DDR’s stock price being above or below the strike price ($17.38 in the case of Mr. Oakes and $16.47 for the other named executive officers) for the stock options. The stock options are subject to service-based vesting in one-third increments over three years beginning on the first anniversary of the grant date. This amount does not include stock options granted in prior years that vested during 2015.

 

(5) This column reflects the fact that no 2013 VSEP awards of restricted stock were earned during 2015 under the terms of the 2013 VSEP.

 

(6) An equity award of 25,589 restricted shares was granted to Mr. Oakes on February 10, 2015 in connection with his promotion to Chief Executive Officer with a grant date fair value of $19.54 per share, which shares vested in full on April 1, 2015. An equity award of 20,000 restricted shares was granted to Mr. Petherbridge in connection with his promotion to Chief Financial Officer on March 1, 2015 with a grant date fair value of $18.94 per share, which shares vest in 20% increments beginning on the date of grant and continuing on the four following anniversaries of the grant date.

 

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2015 Compensation Program Design

Compensation Philosophy and Objectives

The Committee believes that our compensation packages should provide an incentive to our named executive officers to deliver a superior return to shareholders. Our compensation program rewards management for not only delivering these superior returns but also for reducing the risk profile of the Company, as well as for achieving financial and non-financial measures of performance that enhance long-term shareholder value. Management and the Board have consciously eschewed short-term decisions that may have resulted in inflated short-term shareholder returns in favor of longer term strategies that provide sustainable growth opportunities and enhanced net asset value.

Key Annual Performance-Based Incentive Compensation Metrics

Same Store EBITDA Growth Metric. We continue to use Same Store EBITDA Growth as our key operational performance metric for our 2015 annual incentive compensation program. We believe Same Store EBITDA Growth is an effective way to measure our performance both externally for the investment community and internally for all of our employees. EBITDA includes all overhead and administrative costs, but excludes interest expense, interest income and other non-operating items, such as the gain or loss on the sale of properties and asset impairments. Same Store EBITDA is further defined as EBITDA from wholly-owned and joint venture properties and other investments that we have owned for at least two consecutive fiscal years. Same Store EBITDA Growth is important to our investors and us because it captures key property value drivers, such as occupancy rates, rental rates, and property expenses, and it also includes fee income, and general and administrative expenses. At the same time, Same Store EBITDA is not impacted by financing decisions or current year acquisitions or dispositions, and is a performance measure less prone to influence by financial and other strategies that rely on short-term debt and increased risk. Use of this performance metric fits well with our compensation philosophy described above. Of further importance, every incentive-eligible employee can contribute to, and is significantly focused on, Same Store EBITDA Growth through our annual performance-based incentive compensation program.

Similar to prior years beginning in 2010, the Committee adopted a target annual growth rate for Same Store EBITDA for 2015 as set forth below. It is the Committee’s view that if management’s objective is to grow Same Store EBITDA year-over-year, it can produce strong annual performance while making decisions that are in the best long-term interest of the Company and its shareholders.

Achievement of our Same Store EBITDA Growth goal was measured on a scale from a “none” level (i.e., no award) for performance that is “below expectations” to a “maximum” level for “superior” performance. The achievement opportunities with respect to the Same Store EBITDA Growth metric are set forth in the following table:

 

Performance Level     Same Store EBITDA Growth YoY (%)(1)        Award Level
Superior   3.500      Maximum
Target+   2.875      Target+
Target   2.250      Target
Threshold+   1.625      Threshold+
Threshold   1.000      Threshold
Below Expectations   <1.000        None
(1) Growth in Same Store EBITDA between these levels is interpolated when calculating incentive compensation based on the Same Store EBITDA Growth metric. (For this table, “YoY” means year-over-year.)

For 2015, the Committee also retained the discretion to adjust the Same Store EBITDA Growth award level based on the Company achieving an Operating Funds from Operations (OFFO) performance level. In particular, the Committee set $1.22 per share of OFFO as the Company’s target performance level. The Committee retained the right to reduce the Same Store EBITDA Growth award level if the Company’s OFFO performance level was

 

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below the Same Store EBITDA Growth performance level. Because the Company generated OFFO for 2015 that exceeded the Company’s target performance level, the Committee made no adjustment to the Same Store EBITDA Growth award level.

Relative TSR Metric. In addition to Same Store EBITDA Growth, the Committee also placed continued emphasis on delivering TSR relative to an identified group of peers (TSR peer group) as measured through Relative TSR. Relative TSR is expressed as a percentage return on an investment in our common shares compared to TSR on an investment in the common shares of each company in our TSR peer group assuming a one-year hypothetical investment and assuming the reinvestment of all dividends.

For 2015, the Committee utilized a TSR peer group as set forth below and also included the FTSE NAREIT Equity REITs Index of the FTSE International Limited NAREIT U.S. Real Estate Index Series (FTSE NAREIT Equity REIT Index). The particular companies in the TSR peer group were chosen because these retail REITs generally have business models similar to ours and are the companies we compete with for tenants, assets, capital and talent. We believe that over time, superior execution should lead to superior Relative TSR. We do not use the TSR peer group for determining the other elements or levels of compensation opportunities provided to our named executive officers.

The one-year TSR performance of the TSR peer group (including the Company) as of December 31, 2015 is as follows:

 

DDR Peer Group Relative Total Shareholder Return
 Rank   

Award

Level

  Peer Group  

2015 Total

Shareholder Return

1

 

 

Maximum

 

 

Federal Realty Investment Trust

 

 

  12.3%

 

2

 

 

Target+

 

 

Regency Centers Corporation

 

 

  10.0%

 

3

 

   

Kimco Realty Corporation

 

 

  9.4%

 

4

 

 

Target

 

 

Brixmor Property Group Inc.

 

 

  7.8%

 

5

 

   

FTSE NAREIT Equity REIT Index

 

 

  3.2%

 

6

 

 

Threshold+

 

 

Weingarten Realty Investors

 

 

  3.2%

 

7

 

 

Threshold   

 

 

DDR Corp.

 

 

(4.4)%

 

8

 

 

None

 

 

Retail Properties of America, Inc.

 

 

(7.4)%

 

Absolute TSR Metric. The Committee also relied on the measurement of Absolute TSR as an annual performance metric. This Absolute TSR metric measures the annual return on an investment in our common shares made at the beginning of the calendar year, assuming the reinvestment of dividends, as compared to the value of that investment at the end of the year.

Achievement of our Absolute TSR growth award level was measured on a scale from a “none” level (i.e., no award) for performance that is “below expectations” to a “maximum” level for “superior” performance. The achievement opportunities with respect to the Absolute TSR metric are set forth in the following chart:

 

Performance Level   Absolute TSR Growth (%)      Award Level
Superior   13      Maximum
Target+   11      Target+
Target   9      Target
Threshold+   8      Threshold+
Threshold   7      Threshold
Below Expectations   <7        None

 

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Individual Performance Objectives Metric. At the beginning of 2015, qualitative individual performance objectives were set for all named executive officers. The Committee set qualitative individual performance objectives for Mr. Oakes, which carry a one-third weighting as indicated in the 2015 Metric Weightings table below. For Mr. Oakes, the individual performance objectives consisted of:

 

    

Strategic planning and execution

 

      Leadership

    

Board relations

 

       Management of human resources

    

Management of external constituencies

 

      Management of capital resources

At the end of 2015, the Board subjectively considered Mr. Oakes’s performance. The Board’s consideration yielded an assessment of “threshold+” for Mr. Oakes for annual performance-based incentive purposes (on a performance level scale of “below expectations,” “threshold,” “threshold+,” “target,” “target+” and “superior” achievement levels).

Mr. Oakes set the qualitative individual performance objectives for the other named executive officers at the beginning of 2015, and the Board evaluated their achievement of those performance objectives at the end of the year on the same scale ranging from “below expectations” to “superior” achievement levels. This evaluation took place as part of our year-end performance appraisal process. The individual performance objectives for the named executive officers were weighted as indicated in the 2015 Metric Weightings table below. The qualitative individual performance objectives set by Mr. Oakes for the other named executive officers consisted of the following:

 

Named Executive Officer       Individual Performance Objectives
Luke J. Petherbridge   Achieving specified transactional objectives that lead to improvement in the Company’s portfolio, balance sheet, financial covenants and debt maturity schedule, enhanced investor relations efforts, communications with rating agencies with the goal of further Company upgrades, and additional operational leadership responsibilities.
Paul W. Freddo   Achieving strong performance in same store net operating income and other property operating metrics, execution of the Company’s property redevelopment goals, and monetizing non-income producing land through development or sales.
Christa A. Vesy   Maintaining the Company’s transparency in financial reporting, continued reductions in tenant accounts receivable balances and other operational goals, implementation of automated system applications to improve efficiency, and an expanded leadership role for various organizational, accounting, and financial objectives.

Annual Performance-Based Incentive Compensation Metric Scoring and Weightings

The four metrics of Same Store EBITDA Growth, Relative TSR, Absolute TSR and individual performance goals are each measured on a scale which includes “below expectations,” “threshold,” “threshold+,” “target,” “target+” and “superior” achievement levels. Based upon the combined and weighted scoring of each of these metrics and subject to the discretionary authority of the Committee to implement the compensation program, annual performance-based incentive compensation is awarded at a level commensurate with overall performance. These incentive compensation metrics were linked to achievement of specific financial, strategic and operational

 

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metrics, and those metrics were applied and weighted for the executives based upon their roles and employment agreement terms. The metrics and the applicable weightings for each executive were as follows:

 

     2015 Metric Weightings  
Named Executive Officer   Same Store   
EBITDA   
Growth(%)   
 

Relative
TSR

(%)

   

Absolute
TSR

(%)

   

Individual    

Performance    

Objectives    

(%)    

 

Total

(%)

 
David J. Oakes   33 1/3     23 1/3        10      33 1/3     100   
Luke J. Petherbridge   33 1/3     23 1/3        10      33 1/3     100   
Paul W. Freddo   33 1/3     23 1/3        10      33 1/3     100   
Christa A. Vesy   33 1/3     23 1/3        10      33 1/3     100   

Role of the Committee and Management in Executive Compensation

The Committee has overall responsibility for the compensation programs provided to our named executive officers. Pursuant to the Committee’s Charter, the Committee has the authority to review and approve the compensation for executive officers, including the review and approval of the design and implementation of any incentive arrangements, equity compensation, and supplemental retirement programs. Consistent with this authority, the Committee establishes financial performance metrics and targets used for annual performance-based incentives, conducts an in-depth review of performance against these objectives, reviews from time to time market pay practices as they relate to both cash-based and equity-based award programs primarily to remain informed about general compensation trends in the market, designs and adopts our long-term equity incentive compensation programs and specifically approves compensation arrangements for our Chief Executive Officer, who was Mr. Oakes during 2015. For the named executive officers other than Mr. Oakes during 2015, Mr. Oakes set the annual performance-based objectives and evaluated performance against such objectives. Mr. Oakes makes recommendations to the Committee based on those outcomes, which recommendations are reviewed and subject to revision and approval of the Committee.

Compensation Consultant

For 2015, the Committee retained Gressle & McGinley as its independent compensation consultant. Gressle & McGinley was selected as the advisor to the Committee based on its extensive knowledge of the REIT sector, especially retail REITs, and its deep knowledge and experience in designing executive compensation programs over the past 30 years across multiple sectors of the economy. The Committee has assessed the independence of Gressle & McGinley, as required under NYSE listing rules. The Committee has also considered and assessed all relevant factors, including but not limited to those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Securities Exchange Act of 1934, that could give rise to a potential conflict of interest with respect to Gressle & McGinley. Based on this review, the Committee is not aware of any conflict of interest that has been raised by the work performed by Gressle & McGinley. Among other matters, Gressle & McGinley assisted the Committee in 2015 with:

 

    

Its 2015 year-end performance review of Mr. Oakes and the other named executive officers;

    

Verifying the calculation of the Same Store EBITDA Growth metric targets and related results for 2015;

    

Confirming the results of both our Relative TSR and Absolute TSR performance metrics for 2015;

    

Providing analysis of appropriate peer samples and market data to assist the Committee in determining Mr. Oakes’ 2016 base salary and other compensation arrangements;

    

Reviewing and verifying the equity awards under the 2013 VSEP;

    

Assisting in the design and development of the 2016 Value Sharing Equity Program (2016 VSEP); and

    

Providing best practice information to, and consulting with, the Company regarding potential risks, if any, that may have a material adverse impact on the Company as a result of the Company’s compensation policies and practices.

 

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Principal Elements of the 2015 Compensation Program

The following table summarizes the key elements of our named executive officer compensation program for 2015:

 

Type        Element        Form        Objectives        Characteristics
               
Fixed     Base Salary     Cash    

Competitive annual cash

compensation to help

retain executive talent

   

Competitive compensation

based on comparative

market analysis and

contractual commitments

               
               
                   
                             
               

At Risk /

Performance-

Based

Incentive

     

Annual

Performance-

Based Incentive

Compensation

     

Cash,

RSUs and

Stock Options

     

Incentivizes executives to

achieve individual and

Company objectives and

aligns executives’ compensation interests with

shareholders’ investment

interests

     

Payouts earned based on

metrics of Same Store

EBITDA Growth, Relative TSR,

Absolute TSR and individual

performance and subject to

additional time-based vesting

                       
                       
                       
                     
                   
                   
                 
               
     

Long-Term

Incentive

Compensation

 

     

Restricted

Shares

   

Motivates and rewards

executives for achieving

long-term share-price

appreciation and total

shareholder return, helps

retain executives, and aligns

executives’ compensation

interests with shareholders’

investment interests

   

Restricted shares earned

                    based on absolute increases
                    in adjusted market
                  capitalization and relative
                performance over an
                established initial base point;
                shares are subject to
               

additional time-based vesting

               

over four years, and subject

               

to accelerated or continued

               

vesting in certain instances

                             
               
Other      

Retirement

Benefits

     

Plan

Contributions

     

Provides benefits that are

competitive with industry

practices

   

Standard tax-qualified

defined contribution

(401(k)) plan that provides

a tax efficient vehicle

to accumulate retirement

savings, subject to limits on

compensation under the

Internal Revenue Code

 

                     
                     
                 
               
               
               
               
               
               

Nonqualified cash and equity deferred compensation plans

that permit contributions in excess of Internal Revenue Code limits for qualified plans

 

               
               
    Health and Other Welfare Benefits    

Benefit

Coverage

    Provides benefits that are competitive with industry practices    

Broad-based employee

benefits program, including health, life, disability and other insurance, and customary fringe benefits providing for basic health and welfare needs

 

               
               
               
               
               
               
               
    Perquisites    

Expense

Reimbursement

   

Encourages executives to build community and business relationships, and helps attract and retain executives

 

    Country club expense
reimbursement provided to a limited number of executives
               
               
               
               
                             

 

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Analysis of 2015 Performance

We believe our operating strategy will generate long-term shareholder value, and during 2015 we continued to make great strides in the successful execution of our prime business strategy. The following discussion highlights our 2015 accomplishments and the ways in which we are achieving our long-term strategic objectives.

Operating a Prime Portfolio

During 2015, we completed approximately $1.6 billion of capital transactions and made the following progress with regard to increasing our ownership and operation of prime properties and improving the overall quality of the portfolio to contribute to long-term value creation and earnings growth as well as reducing the Company’s risk profile:

 

     Acquired 10 prime plus and prime shopping centers and outparcels valued at $326 million at DDR’s share (resulting in a cumulative 200 assets acquired since 2010);
     Disposed of 66 non-prime assets and eight non-operating assets for $569 million at DDR’s share (resulting in a cumulative 359 assets sold since 2010);
     Placed approximately $158 million of redevelopments into service at a yield of approximately 10%; and
     Company portfolio is now comprised of 367 assets with 75% of the value concentrated in wholly-owned, prime plus and prime assets that are primarily located in the top 50 metropolitan statistical areas (MSAs) with strong tenant credit quality and attractive net operating income (NOI) growth profiles.

Maintaining a Prime Operating Platform

In 2015, we also achieved the following operational accomplishments and platform improvements:

 

     Generated material OFFO growth as compared to 2014;
     Leased approximately 10.9 million square feet of gross leasable area, which includes 8.1 million square feet of renewals;
     Signed over 1,300 leases and renewals;
     Maintained a portfolio leased rate at 96% on a prorata basis;
     Achieved blended leasing spreads of 9.4% at DDR’s share;
     Increased the annualized base rent per square foot by 4.1% relative to year-end 2014;
     Reduced general & administrative expenses by over 10% in 2015 as compared to 2014; and
     Dedicated significant resources to further leverage technology related to optimizing our property level capital spending as well as enhancing our tenant’s online experience with DDR.

 

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Maintaining a Prime Balance Sheet

In 2015, we completed approximately $2.1 billion of financing activities to further strengthen our balance sheet, improve our credit metrics and reduce financial risk. Our accomplishments included the following:

 

     Financed the acquisition of prime shopping centers with the proceeds generated from the disposition of non-prime assets;
     Improved our pro rata debt-to-EBITDA ratio to 7.4x from 7.7x at year-end 2014;
     Extended our debt duration to 4.8 years from 3.9 years at year-end 2014;
     Maintained a balanced debt maturity profile;
     Issued $900 million aggregate principal amount of senior unsecured notes;
     Amended our $800 million unsecured revolving credit facilities and entered into a new $400 million unsecured term loan;
     Unencumbered nine assets and increased the estimated value of our unencumbered asset pool to over $7 billion from approximately $6 billion at year-end 2014;
     Preserved significant liquidity with substantial borrowing capacity available under the Company’s $800 million unsecured revolving credit facilities;
     Maintained debt covenant metrics well above minimum requirements; and
     Paid an annual cash dividend of $0.69 per common share, an increase of 11.3% from 2014 and the fifth consecutive year of dividend growth in excess of 10%.

2015 Compensation Earned

Base Salary Levels

We pay salaries to our named executive officers to provide them with a base level of income for services rendered. During 2015, each of the named executive officers was a party to an employment agreement with us that provided for a minimum base salary amount, which may be adjusted higher from time to time during the term of the contract upon approval of the Committee. These minimum base salaries were originally established based on an analysis of the salaries paid to executives in comparable positions within our industry provided by Gressle & McGinley. The base salaries for 2015 for the named executive officers were determined in accordance with these contractual obligations. Messrs. Oakes and Petherbridge were awarded a base salary increase in 2015 in recognition of their promotions to Chief Executive Officer and Chief Financial Officer, respectively. Mr. Freddo’s base salary remained unchanged from 2014. Ms. Vesy was awarded a base salary increase in recognition of her individual 2014 performance.

The following table summarizes our named executive officers’ annualized base salary rates for 2014 and 2015, and the year-over-year percentage change in their base salary rates:

 

Named Executive Officer  

2014

        Base Salary        

($)

 

2015

              Base Salary               

($)

 

              Change              

(%)

David J. Oakes   525,000   600,000   14.3
Luke J. Petherbridge   300,020   375,000   25.0
Paul W. Freddo   440,000   440,000  
Christa A. Vesy   290,080   300,233   3.5

 

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Annual Incentive Compensation Metric Achievement for 2015

The following table summarizes the achievement levels for each of the annual performance-based incentive compensation metrics and the overall performance level based on the weighted metrics for each of the named executive officers.

 

Named Executive Officer   Same Store
EBITDA
Growth(1)
  Relative
TSR
  Absolute
TSR
 

Individual  

Performance  

Objectives(2)   

   Overall Performance

David J. Oakes

  Between Threshold+ and Target   Threshold   Below
Threshold
  Threshold+    Between Threshold and Threshold+

Luke J. Petherbridge

  Between Threshold+ and Target   Threshold   Below
Threshold
  Maximum    Between Threshold+ and Target

Paul W. Freddo

  Between Threshold+ and Target   Threshold   Below
Threshold
  Target    Between Threshold+ and Target

Christa A. Vesy

  Between Threshold+ and Target   Threshold   Below
Threshold
  Maximum   

Between Target and

Target+

 

(1) The Company achieved year-over-year growth of 2.08% in Same Store EBITDA for 2015.

 

(2) The achievement level was based on the Board’s assessment of each named executive officer’s achievement of his or her qualitative individual performance objectives established for 2015.

Calculation of Annual Performance-Based Incentive Compensation

Based on the overall performance of the Company and the named executive officers as set forth above, payment of annual performance-based incentive compensation was delivered to the named executive officers in the form of cash and equity awards. For Messrs. Oakes, Petherbridge and Freddo, fifty percent of their annual performance-based incentive compensation was paid in cash (see “Cash Performance-Based Incentive Compensation” below) and fifty percent was paid in the form of equity awards (see “Equity Performance-Based Incentive Compensation” below). For Ms. Vesy, payment of annual performance-based incentive compensation was allocated between cash and equity awards based on the percentage incentive opportunities set forth in the tables in the following sections.

Cash Performance-Based Incentive Compensation

Below is a summary of the annual cash performance-based incentive compensation opportunities that were available to each named executive officer for 2015, which opportunities were established pursuant to each named executive officer’s employment agreement in effect for 2015. This table also sets forth the actual cash incentive amounts earned for 2015.

 

    

Annual Cash Performance-Based

Incentive Opportunity

(% of Base Salary)

 

Annual Cash Performance-Based

Incentive Opportunity ($)

    Cash
Value ($)
 
Named Executive Officer   Threshold      Target     Maximum   Threshold     Target     Maximum     Actual  
David J. Oakes   100   150   200     600,000        900,000        1,200,000        676,400   
Luke J. Petherbridge     50   100   150     187,500        375,000        562,500        347,750   
Paul W. Freddo     50   100   150     220,000        440,000        660,000        334,694   
Christa A. Vesy     20     40     80     60,047        120,093        240,186        131,382   

 

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Equity Performance-Based Incentive Compensation

Below is a summary of the annual equity performance-based incentive compensation opportunities that were available to each named executive officer for 2015, which opportunities were established pursuant to each named executive officer’s employment agreement in effect for 2015. The table below also summarizes the actual equity incentive compensation paid to each of the named executive officers:

 

    

Annual Equity
Performance-Based Award

Incentive Opportunity (%)(1)

 

Annual Equity
Performance-Based Award

Incentive Opportunity ($)

   

Equity

Award
Value ($)

 
Named Executive Officer   Threshold    Target    Maximum    Threshold     Target     Maximum     Actual  
David J. Oakes   100   150   200     600,000        900,000        1,200,000        676,410   
Luke J. Petherbridge     50   100   150     187,500        375,000        562,500        347,816   
Paul W. Freddo     50   100   150     220,000        440,000        660,000        334,743   
Christa A. Vesy   12.5     25     50     45,035        105,082        270,210        118,065   

 

(1) This percentage is multiplied by the base salary for Messrs. Oakes, Petherbridge and Freddo and multiplied by the base salary and annual cash performance-based incentive compensation for Ms. Vesy.

For the annual equity performance-based incentive compensation, 80% of the value of this annual equity incentive compensation was paid in the form of RSUs and 20% of the value was paid in the form of stock options. The number of RSUs was calculated based on the value of our common shares as of the grant date. The first 20% of the RSU award was settled in the form of common shares which immediately vested at grant and the remainder of the RSU award vests in equal annual installments over the next four years. The number of stock options was calculated based upon the value of an option utilizing the Black-Scholes valuation model. The stock options are granted with an exercise price equal to the closing price of our common shares on the date of grant and vest in three equal annual installments beginning one year after the grant date.

The following table sets forth the actual number of RSUs and stock options granted to each of Messrs. Oakes, Petherbridge and Freddo and Ms. Vesy:

 

Form of Award(1)        Oakes          Petherbridge     Freddo     Vesy  
Stock Options (#)   82,095     43,191        41,568        14,661   
RSUs (#)   31,135     16,895        16,260        5,735   

 

(1) The equity performance-based incentive awards were granted to Mr. Oakes on March 3, 2016 and to the other named executive officers on February 23, 2016. The stock options have a strike price of $17.38 for Mr. Oakes and $16.47 for the other named executive officers.

We believe that time-based vesting RSUs generally provide significant retention incentives for our executive officers as they directly align the compensation interests of our executive officers with the investment interests of our shareholders. The holder of RSUs has no voting rights but has the right to receive dividend equivalents prior to the settlement of RSUs in common shares upon vesting. We also believe that time-based vesting stock options are a valuable motivating tool and provide a long-term incentive to the executive officers because these officers will realize gain on their stock options only if our shareholders also recognize gain on their holdings of our shares. Prior to the exercise of an option, the holder has no rights as a shareholder with respect to the shares subject to such option, including voting rights and the right to receive dividends. We have never repriced any stock options or issued options with “reload” provisions.

 

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2013 Value Sharing Equity Program

On December 31, 2012, the Company adopted the 2013 VSEP and granted share-based awards to certain officers of the Company on January 1, 2013, which awards represented the opportunity to earn restricted stock payouts. The 2013 VSEP operated from January 1, 2013 until December 31, 2015. The 2013 VSEP and the restricted shares that could be earned under this program are subject to the terms of our 2012 Equity and Incentive Compensation Plan. If earned, the 2013 VSEP awards resulted in the granting of common shares of the Company to participants on measurement dates over the three-year term, subject generally to an additional service-based vesting schedule. As a result, in general, the total compensation available to participants under the 2013 VSEP was designed to be fully earned and vested only after seven years (the three-year performance period and the final four-year service-based vesting period).

The 2013 VSEP was designed to allow DDR to reward participants for superior financial performance and allow them to share in “Value Created” (as defined below), based upon (1) increases in DDR’s adjusted market capitalization over pre-established periods of time, and (2) increases in relative total shareholder return of DDR as compared to the performance of the FTSE NAREIT Equity REIT Index. Under the 2013 VSEP, participants could have earned two types of performance-based awards – an “absolute performance award” and a “relative performance award” – that, if earned, would be settled with DDR common shares and subject to additional service-based vesting requirements for a period of four years.

Absolute Performance Awards. Under the absolute performance awards, on five specified measurement dates (occurring on December 31, 2013 and every six months thereafter through December 31, 2015), DDR measured the Value Created during the period between the start of the 2013 VSEP and the applicable measurement date. Value Created was measured for each period for the absolute performance awards as the increase in DDR’s market capitalization (determined as the product of DDR’s five-day trailing average share price as of each measurement date (price-only appreciation, not total shareholder return) and the number of shares outstanding as of the measurement date), as adjusted for equity issuances and/or equity repurchases, between the start of the 2013 VSEP and the applicable measurement date. The share price used for purposes of determining Value Created for the absolute performance awards was capped based on an 8.0% compound annual growth rate for DDR shares from the start of the 2013 VSEP through the end of 2015 (Maximum Ending Share Price), which cap applied to each measurement period. The following chart shows the measurement dates and vesting period for absolute performance awards during the term of the 2013 VSEP:

 

LOGO

    (1)   Payouts, if earned, vest in 20% increments on the issuance date and each of the four anniversaries following the issuance date.

Each participant was assigned a “percentage share” of the Value Created for the absolute performance awards, but the total share of Value Created for all participants for the absolute performance awards was capped at $18.0 million (the aggregate percentage share for all participants for the absolute performance awards was 1.4133%). As a result, each participant’s total share of Value Created for the absolute performance awards was capped at an individual maximum limit. Assuming an award was earned, after the first measurement date, each participant

 

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would have earned DDR common shares with an aggregate value equal to two-sixths of the participant’s percentage share of the Value Created for this award. After each of the next three measurement dates, each participant would have earned DDR common shares with an aggregate value equal to three-sixths, then four-sixths, and then five-sixths, respectively, of the participant’s percentage share of the Value Created for this award. After the final measurement date, each participant would have earned DDR common shares with an aggregate value equal to the participant’s full percentage share of the Value Created. In addition, for each measurement date, the number of DDR common shares earned by a participant was reduced by the number of DDR common shares previously earned by the participant for prior measurement periods. The percentage shares of the Value Created for the named executive officers for the absolute performance awards are as follows:

 

Named Executive Officer    Value Sharing Opportunity for    
Absolute Performance Awards (%)    
  Maximum Award ($)  
David J. Oakes    0.1180     1,500,000   
Luke J. Petherbridge    0.0442     562,500   
Paul W. Freddo    0.0885     1,125,000   
Christa A. Vesy    0.0442     562,500   

Based upon the Company’s five-day trailing average stock price as of the fourth measurement date on June 30, 2015 and final measurement date on December 31, 2015, no absolute performance awards were earned in 2015.

 

Named Executive Officer            2015 Earned Restricted Shares (#)
David J. Oakes   0
Luke J. Petherbridge   0
Paul W. Freddo   0
Christa A. Vesy   0

Relative Performance Awards. Under the relative performance awards, on December 31, 2015, DDR compared its dividend-adjusted share price performance during the period between the start of the 2013 VSEP and December 31, 2015, to the performance of a comparable hypothetical investment in the FTSE NAREIT Equity REIT Index (in each case as adjusted for equity issuances and/or equity repurchases during the same period). No relative performance awards were to be earned by participants unless and until the absolute performance awards were already earned by DDR achieving its Maximum Ending Share Price, and thus achieving maximum performance for the absolute performance awards.

If DDR’s relative performance exceeded the performance of the FTSE NAREIT Equity REIT Index, then the relative performance awards were to be earned provided certain conditions were met. First, DDR’s five-day trailing average share price as of December 31, 2015, must have been equal to or exceeded the Maximum Ending Share Price. Second, the participant had to be employed with DDR on the measurement date to be eligible to earn the relative performance awards. Because DDR’s five-day trailing average share price as of December 31, 2015 did not equal or exceed the Maximum Ending Share Price, no relative performance awards were earned.

If such conditions had been satisfied, and if DDR’s relative performance exceeded the FTSE NAREIT Equity REIT Index performance (subject to a not-less-than-minimum level of FTSE NAREIT Equity REIT Index performance), then each participant would have earned DDR common shares based on the participant’s full “percentage share” of the Value Created for the relative performance awards, which percentage share had been assigned by DDR. The total share of Value Created for all participants for the relative performance awards was capped at $36.0 million (the aggregate percentage share for all participants for the relative performance awards was 1.9337%), and, as a result, each participant’s total share of Value Created for the relative performance awards was capped

 

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at an individual maximum limit. In summary, the percentage shares of the Value Created and actual earned restricted shares for the named executive officers for the relative performance awards were as follows:

 

Named Executive Officer   Value Sharing Opportunity for  
Relative Performance Awards (%)  
  Maximum Award ($)    

Earned Restricted

Shares (#)

 
David J. Oakes   0.1614     3,000,000        0   
Luke J. Petherbridge   0.0605     1,125,000        0   
Paul W. Freddo   0.1210     2,250,000        0   
Christa A. Vesy   0.0605     1,125,000        0   

Vesting Period. Unless otherwise determined by the Committee, the DDR shares earned under the absolute performance awards and relative performance awards are generally subject to additional service-based restrictions and are expected to vest in 20% annual increments beginning on the date of issuance and continuing on each of the first four anniversaries of the date of issuance. The following chart shows the measurement date and vesting period for the relative performance awards that would have applied if such awards had been earned during the term of the 2013 VSEP:

 

LOGO

2016 Value Sharing Equity Program

In February 2016, the Company adopted the 2016 Value Sharing Equity Program (2016 VSEP) that commenced on February 9, 2016 as our new performance-based, long-term equity incentive program. As described above, the predecessor 2013 VSEP ended on December 31, 2015. The 2016 VSEP (which will be described and analyzed in more detail in next year’s proxy statement) is similar in substance to the absolute performance awards component of the 2013 VSEP, but excludes the relative performance award component of the 2013 VSEP. The 2016 VSEP has a starting stock price of $17.41, which represents the price at which the last award had been earned under the 2013 VSEP. As a result, this means that no award is earned under the 2016 VSEP until the Company’s stock price exceeds $17.41, and the 2016 VSEP is also subject to a stock price cap of $25.35. The 2016 VSEP is expected to operate from February 9, 2016 through December 31, 2018.

Other Benefits and Information

Perquisites and Fringe Benefits. Pursuant to their employment agreements, the named executive officers received certain additional benefits during 2015. The Committee believes that these benefits are reasonable and consistent with its overall compensation program and better enable us to attract and retain superior executive talent.

For 2015, Messrs. Oakes, Petherbridge and Freddo were entitled to the payment by us of their annual regular membership fees, assessments, and dues for a local country club, if they elected to join such a club. In addition, the employment agreements for each of our named executive officers provide for participation in health, life, disability and other insurance plans, sick leave, reasonable vacation time, and other customary fringe benefits.

Retirement Benefits. We have established a tax qualified 401(k) plan for our employees pursuant to which we, during 2015, made semi-monthly matching contributions equal to 50% of each participant’s contribution, up to 6% of the sum of his or her base salary plus annual cash performance-based incentive, not to exceed the sum of 3% of the participant’s base salary plus annual cash performance-based incentive, subject to Internal Revenue Code limits.

 

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Elective Deferred Compensation Plan. Our named executive officers are entitled to participate in our Elective Deferred Compensation Plan. Pursuant to the Elective Deferred Compensation Plan, executive officers can defer up to 100% of their base salaries and annual cash performance-based incentives, less applicable taxes and authorized benefits deductions. The Elective Deferred Compensation Plan is a nonqualified plan and is an unsecured, general obligation of the Company, and we have established and funded a “rabbi” trust to satisfy our payment obligations under this plan. The Company provides a matching contribution to any executive who defers compensation into the Elective Deferred Compensation Plan equal to the difference between (1) up to 3% of the sum of the executive’s base salary and annual cash performance-based incentive eligible for deferral under the 401(k) plan and the Elective Deferred Compensation Plan, combined, and (2) the actual employer matching contribution provided under the 401(k) plan. Earnings on a participant’s deferred account are based on the results of the investment options available in the plan that are selected by the participant. Settlement is generally made in cash at a date determined by the participant at the time a deferral election is made. Messrs. Oakes and Freddo elected to defer a portion of their 2015 total annual cash compensation pursuant to the Elective Deferred Compensation Plan. For information on the value of annual cash compensation deferred by the named executive officers in 2015, please refer to the 2015 Summary Compensation Table and the 2015 Nonqualified Deferred Compensation Table below.

Equity Deferred Compensation Plan. Pursuant to the Equity Deferred Compensation Plan, our executive officers, including the named executive officers, have the right to defer the receipt of restricted shares or RSUs earned under any equity compensation plan. The value of a participant’s deferrals is converted into units, based on the market value of our common shares at the time of the deferral, so that each unit is equivalent in value to one common share. We have established and funded a “rabbi” trust, which holds our common shares, to satisfy our payment obligations under this plan. Common shares equal to the number of units credited to the participants’ accounts under this plan are placed in the rabbi trust. In the event of our insolvency, the assets of the rabbi trust are available to general creditors. Settlement of units is generally made in our common shares at a date determined by the participant at the time a deferral election is made.

Employment Agreements. During 2015, the Company was a party to employment agreements with each of the named executive officers. More information concerning the terms of the employment agreements and the amounts payable pursuant to the employment agreements is provided under the section entitled “Employment Agreements” in the “Executive Compensation Tables and Related Disclosure” section of this Proxy Statement.

Stock Ownership Guidelines

Under the stock ownership guidelines, each named executive officer must own common shares or common share equivalents with an aggregate market value of no less than the applicable multiple of such officer’s annual base salary for the immediately preceding year. For the Chief Executive Officer, the multiple is five times his annual base salary and for all other named executive officers, the multiple is three times his/her annual base salary. Our Board established these particular levels of stock ownership for our named executive officers because we want to have the interests of our named executive officers aligned with the investment interests of our shareholders.

Such minimum share ownership requirement must be satisfied initially (1) by no later than the fifth anniversary of the first March 15th following the latest to occur of (A) the date such officer becomes a named executive officer, (B) the date such officer receives his or her first grant of common shares or common share equivalents, and (C) March 15, 2015 (we refer to the latest of these three dates as the Commencement Date), and then (2) on each anniversary of March 15th thereafter. To that end, and unless otherwise approved by the Nominating and Corporate Governance Committee, each named executive officer is required to own 20% of the requisite value of common shares and common share equivalents on the first March 15th following the Commencement Date, and an additional 20% on the anniversary of such date until the fifth anniversary when such requirement must be satisfied. Unvested restricted shares, RSUs and shares deferred into our Equity Deferred Compensation Plan constitute common share equivalents and count toward satisfying the stock ownership guidelines. All of our named executive officers were in compliance with the stock ownership guidelines as of March 15, 2016.

 

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Hedging and Pledging Policy

Our Board adopted a policy prohibiting our Directors and executive officers from (1) engaging in certain hedging transactions involving the Company’s stock, and (2) pledging Company stock as collateral for a loan because the Board determined that such a policy is in the best interests of the Company and our shareholders. Currently, all named executive officers, Directors and Mr. August are in compliance with the Company’s policy.

Tax and Accounting Implications

We have made an election to qualify as a REIT under the Internal Revenue Code, and as such generally will not be subject to federal income tax. Thus, the deduction limit for compensation paid to the chief executive officer and the three other most highly compensated executive officers, other than the chief financial officer, of a public company similar to us provided under Section 162(m) of the Internal Revenue Code was generally not material to the design and structure of our named executive officer compensation program for 2015.

Compensation-Related Risk Analysis

The senior management team, specifically through the Company’s internal management compensation committee, regularly reviews the risks related to our compensation policies and practices across the Company. This committee, chaired by Mr. Oakes during 2015, is regularly provided with information that enables the committee to review and discuss our policies and practices as they relate to Company-wide compensation programs and the identification of any risks that are likely to have a material adverse impact on the Company. The management compensation committee also reviews the specific performance measures relating to any of the Company’s annual performance-based incentive metrics and our long-term incentive programs to assess any potential risks. In the process of conducting this internal review, the management compensation committee also considers best practice information from our peer companies, as provided by our compensation and benefits department or, if necessary, by Gressle & McGinley.

The Executive Compensation Committee has overall responsibility for overseeing the risks relating to compensation policies and practices affecting senior management. The Committee uses its consultant, Gressle & McGinley, to independently consider and analyze the extent, if any, to which our compensation policies and practices might create risks for the Company, and this review also focused on variable and incentive compensation elements, as well as policies and practices that could mitigate or balance any such incentives.

After conducting these reviews, including most recently in early 2016, both the Committee and management compensation committee have determined that none of our compensation policies and practices create any risks that are reasonably likely to have a material adverse effect on the Company.

 

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6. Executive Compensation Tables and Related Disclosure

 

2015 Summary Compensation Table

 

(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)  
Name and Principal Position   Year     Salary
($)(1)
    Bonus
($)
    Stock
Awards
($)(2)
    Option
Awards
($)(3)
    Non-Equity
Incentive Plan
Compensation
($)(1)(4)
    All Other
Compensation
($)(5)
    Total
($)
 
David J. Oakes(6)     2015        591,875               1,159,568        219,850        676,400        47,714        2,695,407   
Chief Executive Officer and President     2014        525,000               633,007        210,991        879,375        44,165        2,292,538   
    2013        525,000               1,765,854        333,989        843,937        34,568        3,503,348   
Luke J. Petherbridge(6)     2015        362,503               498,694        39,965        347,750        21,773        1,270,685   
Chief Financial Officer and Treasurer     2014                                                    
    2013                                                    
Paul W. Freddo     2015        440,000               387,800        129,251        334,694        33,211        1,324,956   

Senior Executive Vice President

of Leasing and Development

    2014        440,000               365,503        121,828        517,000        32,282        1,476,613   
    2013        440,000               1,031,928        153,012        487,300        29,903        2,142,143   
Christa A. Vesy     2015        298,541               115,945        38,644        131,382        10,676        595,188   

Executive Vice President and

Chief Accounting Officer

    2014        288,400               155,303        51,749        159,444        10,453        665,349   
    2013        275,834               382,042        31,849        195,160        10,507        895,392   

 

(1) The amounts reported in columns (c) and (g) for 2015 include amounts deferred into our 401(k) plan (a qualified plan) and our elective deferred compensation plan (a nonqualified plan) by Messrs. Oakes, Petherbridge and Freddo and Ms. Vesy for the year ended December 31, 2015 as follows: Mr. Oakes, $68,000; Mr. Petherbridge, $18,000, Mr. Freddo, $60,000; and Ms. Vesy, $18,000. Under our elective deferred compensation plan, deferred amounts are payable to the named executive officer at a date and in a form specified by the named executive officer at the time of his or her deferral election in accordance with the provisions of the plan.

 

(2) The amounts reported in column (e) reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of stock awards granted during the reported years. Assumptions used in the calculation of these amounts for 2015 are included in footnote 15 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. The amounts reported in this column for 2015 include the grant date fair value of the respective annual performance-based equity incentive award granted in 2015 for the 2014 service period and for Messrs. Oakes and Petherbridge includes stock granted in accordance with their respective promotions in 2015. Annual performance-based stock incentive compensation awards related to performance in service year 2015 are granted in 2016 and not included in this column but are further described in “Compensation Discussion and Analysis” under the captions “Equity Performance-Based Incentive Compensation” and “Total Direct Compensation for 2015.” For information about the awards earned for 2015, see “Compensation Discussion and Analysis — 2015 Compensation Earned.”

 

(3) The amounts reported in column (f) reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of option awards granted during the reported years. Assumptions used in the calculation of these amounts for 2015 are included in footnote 15 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. The amounts reported in this column include the grant date fair value of the respective annual performance-based option incentive awards granted in 2015 for the 2014 service period. Annual performance-based option incentive compensation awards related to performance in service year 2015 are granted in 2016 and not included in this column but are further described in “Compensation Discussion and Analysis” under the captions “Equity Performance-Based Incentive Compensation” and “Total Direct Compensation for 2015.” For information about the awards earned for 2015, see “Compensation Discussion and Analysis — 2015 Compensation Earned.”

 

(4) The amounts reported in column (g) for 2015 reflect cash amounts earned by such executives as annual cash performance-based incentive compensation for 2015. For more information about the awards reported in this column for 2015, see “Compensation Discussion and Analysis — 2015 Compensation Earned” above.

 

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(5) The amounts shown in column (h) for the named executive officers for 2015 include:

 

     

for Mr. Oakes, matching contributions to the deferred compensation plan and 401(k) plan of $34,000, disability insurance premiums and country club expenses;

 

     

for Mr. Petherbridge, matching contributions to the 401(k) plan, disability insurance premiums and country club expenses;

 

     

for Mr. Freddo, matching contributions to the deferred compensation plan and 401(k) plan of $28,710 and disability insurance premiums; and

 

     

for Ms. Vesy, matching contributions to the deferred compensation plan and 401(k) plan and disability insurance premiums.

 

     None of the amounts reported for the named executive officers for 2015 in column (h), if not a perquisite or personal benefit, exceeds $10,000 or, if a perquisite or personal benefit, exceeds the greater of $25,000 or 10% of the total amount of perquisites and personal benefits, except as disclosed in this footnote.

 

(6) The amounts shown for Mr. Oakes include compensation earned prior to his appointment as Chief Executive Officer on February 10, 2015, and for Mr. Petherbridge, includes compensation earned prior to his appointment as Chief Financial Officer on March 1, 2015.

2015 Grants of Plan-Based Awards Table

 

Name  

Grant

Date

   

Estimated Possible Payouts

Under Non-Equity Incentive

Plan Awards(1)

   

Estimated Future Payouts

Under Equity Incentive

Plan Awards

   

All Other

Stock Awards:

Number of
Shares of
Stock or Units

(#)(2)

   

All Other

Option Awards:

Number of
Securities

Underlying

Options

(#)(3)

   

Exercise or
Base Price of

Option Awards

($/Sh)

   

Grant Date

Fair Value of
Stock and

Option Awards

($)(4)

 
             
    Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
($)
    Target
($)
    Maximum
($)
         
David J. Oakes                   900,000        1,200,000                                                    
    2/10/2015                                                  25,589                      500,009   
    2/22/2015                                                  34,245                      659,559   
      2/22/2015                                                         90,321      $ 19.26        219,850   
Luke J. Petherbridge                   375,000        562,500                                                    
    2/22/2015                                                  6,225                      119,894   
    2/22/2015                                                         16,419      $ 19.26        39,965   
      3/1/2015                                                  20,000                      378,800   
Paul W. Freddo                   440,000        660,000                                                    
    2/22/2015                                                  20,135                      387,800   
      2/22/2015                                                         53,100      $ 19.26        129,251   
Christa A. Vesy                   120,093        240,186                                                    
    2/22/2015                                                  6,020                      115,945   
      2/22/2015                                                         15,876      $ 19.26        38,644   

 

(1) Amounts for the named executive officers reflect the annual cash performance-based incentive compensation opportunities established for 2015 under their employment agreements at the “Target” and “Maximum” levels. The “Threshold” column shows dashes because the ultimate value of the annual cash performance-based incentive payouts could be reduced to zero. The amounts actually earned by the named executive officers for 2015 are included in the “Non-Equity Incentive Plan Compensation” column (column (g)) of the 2015 Summary Compensation Table above. See “Compensation Discussion and Analysis — 2015 Compensation Earned” and “— Cash Performance-Based Incentive Compensation” above for additional information about the annual cash performance-based incentive compensation awards.

 

(2) Amounts disclosed in this column for the named executive officers reflect annual equity awards of restricted shares issued in February 2015 related to the 2014 performance period. In addition, amounts for Messrs. Oakes and Petherbridge reflect awards granted in connection with their respective promotions in 2015. For information about the awards earned or granted for 2015, see “Compensation Discussion and Analysis — 2015 Compensation Earned” above.

 

(3) Amounts disclosed in this column for the named executive officers reflect annual equity awards of stock options issued in February 2015 related to the 2014 performance period. For information about the awards earned for 2015, see “Compensation Discussion and Analysis — 2015 Compensation Earned” above.

 

(4) Amounts disclosed in this column for equity awards are computed in accordance with FASB ASC Topic 718.

 

36    DDR Corp.  ï  2016 Proxy Statement


Table of Contents

Outstanding Equity Awards at 2015 Fiscal Year-End Table(1)

 

     Option Awards     Stock Awards  
Name   Grant Date     Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(2)
    Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
    Option
Exercise
Price ($)
    Option
Expiration
Date
    Number of
Shares or
Units of
Stock That
Have Not
Vested (#)(3)
    Market Value
of Shares or
Units of
Stock That
Have Not
Vested ($)(4)
   

Equity
Incentive

Plan Awards:

Number of
Unearned
Shares, Units
or Other Rights
That Have
Not Vested (#)

   

Equity
Incentive

Plan Awards:

Market or
Payout Value
of Unearned
Shares, Units
or Other Rights
That Have Not
Vested ($)

 
David J. Oakes     4/16/2007        100,000                      64.60        4/16/2017                               
    2/21/2008        45,438                      37.69        2/21/2018                               
    1/12/2009        120,645                      6.02        1/12/2019                               
    2/22/2010        21,300                      10.11        2/22/2020                               
    2/22/2011        22,566                      13.83        2/22/2021                               
    2/22/2012        24,723                      13.86        2/22/2022                               
    2/22/2013        21,330        10,665               16.92        2/22/2023                               
    2/22/2014        14,020        28,039               16.61        2/22/2024                               
    2/22/2015               90,321               19.26        2/22/2025                               
                                                86,989        1,464,895                 
Luke J. Petherbridge     4/1/2012        4,000                      14.60        4/1/2022                               
    2/22/2013        3,260        1,630               16.92        2/22/2023                               
    2/22/2014        6,877        13,754               16.61        2/22/2024                               
    2/22/2015               16,419               19.26        2/22/2025                               
                                                46,592        784,609                 
Paul W. Freddo     10/1/2008        25,000                      30.80        10/1/2018                               
    2/22/2010        14,529                      10.11        2/22/2020                               
    2/22/2011        20,718                      13.83        2/22/2021                               
    2/22/2012        30,045                      13.86        2/22/2022                               
    2/22/2013        19,544        9,772               16.92        2/22/2023                               
    2/22/2014        16,190        32,380               16.61        2/22/2024                               
    2/22/2015               53,100               19.26        2/22/2025                               
                                                85,376        1,437,732                 
Christa A. Vesy     1/3/2007        15,000                      63.25        1/3/2017                               
    2/21/2008        3,336                      37.69        2/21/2018                               
    2/22/2010        4,941                      10.11        2/22/2020                               
    2/22/2011        3,045                      13.83        2/22/2021                               
    2/22/2012        4,482                      13.86        2/22/2022                               
    2/22/2013        4,068        2,034               16.92        2/22/2023                               
    2/22/2014        6,877        13,754               16.61        2/22/2024                               
    2/22/2015               15,876               19.26        2/22/2025                               
                                                29,080        489,707                 

 

(1) Except as otherwise indicated, the information in the Outstanding Equity Awards at 2015 Fiscal Year-End Table is provided as of December 31, 2015.

 

(2) Unexercisable stock options vest in three equal annual installments beginning one year after the grant date.

 

(3) The figures in this column with respect to the following named executive officers reflect restricted shares that will vest as follows:

 

Mr. Oakes (#)     Mr. Petherbridge (#)     Mr. Freddo (#)     Ms. Vesy (#)     Vesting Dates
  4,759               4,759        1,464      January 31, 2016
  5,466               6,643        991      February 22, 2016
         3,000                    April 1, 2016
  3,926               7,852        2,416      July 31, 2016
  3,787               7,575        2,331      December 31, 2016
  11,844        1,810        10,852        2,260      February 22, 2016 and 2017
  11,433        11,610        13,203        5,610      February 22, 2016, 2017 and 2018
  6,132        4,599        9,198        4,599      June 30, 2016, 2017 and 2018
  12,246        4,593        9,186        4,593      December 31, 2016, 2017 and 2018
  27,396        4,980        16,108        4,816      February 22, 2016, 2017, 2018 and 2019
         16,000                    March 1, 2016, 2017, 2018 and 2019
  86,989        46,592        85,376        29,080      Total

 

(4) These amounts were calculated based upon the closing price of our common shares on December 31, 2015.

 

DDR Corp.   ï  2016 Proxy Statement    37


Table of Contents

2015 Option Exercises and Stock Vested Table

 

     Option Awards     Stock Awards  
Name   Number of Shares
Acquired on Exercise (#)
    Value Realized on
Exercise ($)
    Number of Shares 
Acquired on Vesting (#) 
  Value Realized on
Vesting ($)(1)
 
David J. Oakes                 90,583     1,679,304   
Luke J. Petherbridge                 16,084     297,047   
Paul W. Freddo                 66,678     1,200,938   
Christa A. Vesy                 19,770     351,480   

 

(1) Amounts reflect the number of shares acquired on vesting and valued at the closing price of our common shares on the date of vesting.

2015 Nonqualified Deferred Compensation Table(1)

 

Name   Executive
Contributions
in Last FY
($)(2)
    Registrant
Contributions
in Last FY
($)(3)
    Aggregate
Earnings
in Last FY
($)(4)
    Aggregate
Withdrawals/
Distributions
($)
   

Aggregate
Balance

at Last  FYE
($)(5)

 
Elective Deferred Compensation Plan:                                        

David J. Oakes

    50,000        26,313        376               407,954   

Luke J. Petherbridge

                                  

Paul W. Freddo

    36,000        20,760        3,003        (67,447     359,017   

Christa A. Vesy

                                  
Equity Deferred Compensation Plan:                                        

David J. Oakes

    491,347               (559,323            5,926,821   

Luke J. Petherbridge

                                  

Paul W. Freddo

                                  

Christa A. Vesy

                                  

 

(1) Our nonqualified deferred compensation plans, which consist of the Elective Deferred Compensation Plan and the Equity Deferred Compensation Plan, are described more fully in “Compensation Discussion and Analysis” under the caption “Other Benefits and Information” above.

 

(2) The amounts reported for our named executive officers in this column for the Elective Deferred Compensation Plan are reported under the “Salary” column of the 2015 Summary Compensation Table above. Amounts reported for the Equity Deferred Compensation Plan are derived from equity awards for which grant date fair values were previously disclosed in our Summary Compensation Tables included in prior years’ proxy statements.

 

(3) The amounts reported for our named executive officers in this column are fully reported for each named executive officer in the “All Other Compensation” column (column (h)) of the 2015 Summary Compensation Table above.

 

(4) None of the amounts reported for our named executive officers in this column are reported in the 2015 Summary Compensation Table.

 

(5) The amounts reported for our named executive officers in this column have been previously reported as deferred compensation in Summary Compensation Tables included in this and prior years’ proxy statements.

 

38    DDR Corp.  ï  2016 Proxy Statement


Table of Contents

Potential Payments upon Termination or Change in Control

We have entered into certain agreements and we maintain certain plans that will require us to provide certain compensation and other benefits to the named executive officers in the event of a termination of employment or a change in control of the Company. Based on a hypothetical termination and/or change in control occurring on December 31, 2015, the following tables describe the potential payments upon such termination or change in control for each named executive officer under his/her employment agreement in effect on December 31, 2015. The terms and conditions of the named executive officers’ employment agreements entered into following December 31, 2015, if any, will govern any potential payments for actual terminations or a change in control occurring after December 31, 2015.

David J. Oakes

 

Executive Benefits and

Payments upon Termination

 

Retirement 

or Other 

Voluntary 

Termination 

($) 

   

Involuntary
Not for

Cause or

Good
Reason
Termination

($)

   

For Cause 

Termination 

($) 

   

Involuntary
or Good
Reason
Termination
(Change in
Control)

($)

    Disability
($)
    Death
($)
 
Compensation:                                                

Cash Severance(1)

    0        2,400,000        0        4,800,000        2,400,000        2,400,000   

Long-Term Incentives:

           

Unvested Restricted Shares(2)

    0        0        0        945,381        945,381        945,381   

Unvested VSEP Awards(3)

    0        519,514        0        519,514        519,514        519,514   

Unvested Stock Options(4)

    0        0        0        6,449        6,449        6,449   
Benefits and Perquisites:                                                

Post-Termination Health and

Welfare Benefits(5)

    0        20,000        0        30,000        20,000        20,000   

Life Insurance Proceeds(6)

    0        0        0        0        0        400,000   

Disability Insurance Proceeds(7)

    0        0        0        0        3,856,630        0   

Outplacement Services(8)

    0        15,000        0        15,000        0        0   

Accrued Vacation(9)

    23,077        23,077        0        23,077        23,077        23,077   
Total:     23,077        2,977,591        0        6,339,421        7,771,051        4,314,421   

 

(1) Reported amounts calculated pursuant to the terms of Mr. Oakes’ Employment Agreement and consist of one times Mr. Oakes’ base salary on December 31, 2015 plus an amount equal in value to an annual bonus at the “target” level for 2015 (except in the case of termination in connection with a change in control, in which case the amount consists of two times Mr. Oakes’ base salary on December 31, 2015 plus two times an amount equal in value to Mr. Oakes’ “target” annual bonus for 2015), payable in a lump sum. Assumes any accrued base salary and bonus have been paid to Mr. Oakes.

 

(2) Reported amounts consist of Mr. Oakes’ 56,139 unvested annual equity award shares valued at our closing stock price on December 31, 2015 of $16.84 per share, which shares either accelerate and vest or continue to vest as a result of the triggering event.

 

(3) Reported amounts consist of Mr. Oakes’ 30,850 unvested restricted shares under the VSEP valued at our closing stock price on December 31, 2015 of $16.84 per share, which shares either accelerate and vest or continue to vest as a result of the triggering event.

 

(4) Reported amounts consist of Mr. Oakes’ 129,025 stock options with option exercise prices from $16.61 to $19.26 and the spread calculated based on our closing stock price on December 31, 2015 of $16.84 per share, which stock options accelerate as a result of the triggering event.

 

(5) Reported amounts consist of our estimate of one year of continued health and welfare benefits costs (except in the case of termination in connection with a change in control, in which case the amount is an eighteen month estimate).

 

(6) Reported amount consists of our estimate of the available life insurance death benefit.

 

(7) Reported amount consists of our estimate of payments for long-term disability using a present value calculation that takes into account (a) Mr. Oakes’ age and total payments over the benefit term assuming that the disability occurs on December 31, 2015, and (b) a discount rate based on the rate for the Treasury security with a similar term. In general, benefits are available until age 65.

 

(8) Reported amounts consist of our estimate of one year of outplacement service.

 

(9) Assumes two weeks of personal time off (“PTO”) is paid pursuant to our current PTO policy.

 

DDR Corp.   ï  2016 Proxy Statement    39


Table of Contents

Luke J. Petherbridge

 

Executive Benefits and

Payments upon Termination

 

Retirement 

or Other 

Voluntary 

Termination 

($) 

   

Involuntary
Not for

Cause or

Good
Reason
Termination

($)

   

For Cause 

Termination 

($) 

   

Involuntary
or Good
Reason
Termination
(Change in
Control)

($)

    Disability
($)
   

Death

($)

 
Compensation:                                                

Cash Severance(1)

    0        1,125,000        0        2,250,000        1,125,000        1,125,000   

Long-Term Incentives:

           

Unvested Restricted Shares(2)

    0        0        0        629,816        629,816        629,816   

Unvested VSEP Awards(3)

    0        154,793        0        154,793        154,793        154,793   

Unvested Stock Options(4)

    0        0        0        3,163        3,163        3,163   
Benefits and Perquisites:                                                

Post-Termination Health and

Welfare Benefits(5)

    0        20,000        0        30,000        20,000        20,000   

Life Insurance Proceeds(6)

    0        0        0        0        0        400,000   

Disability Insurance Proceeds(7)

    0        0        0        0        4,027,066        0   

Outplacement Services(8)

    0        15,000        0        15,000        0        0   

Accrued Vacation(9)

    14,423        14,423        0        14,423        14,423        14,423   
Total:     14,423        1,329,216        0        3,097,195        5,974,261        2,347,195   

 

(1) Reported amounts calculated pursuant to the terms of Mr. Petherbridge’s Employment Agreement and consist of one times Mr. Petherbridge’s base salary on December 31, 2015 plus an amount equal in value to an annual bonus at the “target” level for 2015 (except in the case of termination in connection with a change in control, in which case the amount consists of two times Mr. Petherbridge’s base salary on December 31, 2015 plus an amount equal in value to two times Mr. Petherbridge’s “target” annual bonus for 2015), payable in a lump sum. Assumes any accrued base salary and bonus have been paid to Mr. Petherbridge.

 

(2) Reported amounts consist of Mr. Petherbridge’s 3,000 unvested hire date shares, plus 16,000 unvested promotion grant shares, plus 18,400 unvested annual equity award shares valued at our closing stock price on December 31, 2015 of $16.84 per share, which shares either accelerate and vest or continue to vest as a result of the triggering event.

 

(3) Reported amounts consist of Mr. Petherbridge’s 9,192 unvested restricted shares under the VSEP valued at our closing stock price on December 31, 2015 of $16.84 per share, which shares either accelerate and vest or continue to vest as a result of the triggering event.

 

(4) Reported amounts consist of Mr. Petherbridge’s 31,803 stock options with option exercise prices from $16.61 to $19.26 and the spread calculated based on our closing stock price on December 31, 2015 of $16.84 per share, which stock options accelerate as a result of the triggering event.

 

(5) Reported amounts consist of our estimate of one year of continued health and welfare benefits costs (except in the case of termination in connection with a change in control, in which case the amount is an eighteen month estimate).

 

(6) Reported amount consists of our estimate of the available life insurance death benefit.

 

(7) Reported amount consists of our estimate of payments for long-term disability using a present value calculation that takes into account (a) Mr. Petherbridge’s age and total payments over the benefit term assuming that the disability occurs on December 31, 2015, and (b) a discount rate based on the rate for the Treasury security with a similar term. In general, benefits are available until age 65.

 

(8) Reported amounts consist of our estimate of one year of outplacement service.

 

(9) Assumes two weeks of personal time off (“PTO”) is paid pursuant to our current PTO policy.

 

40    DDR Corp.  ï  2016 Proxy Statement


Table of Contents

Paul W. Freddo

 

Executive Benefits and

Payments upon Termination

  Retirement 
or Other 
Voluntary 
Termination 
($) 
    Involuntary
Not for
Cause  or
Good
Reason
Termination
($)
    For Cause 
Termination 
($) 
   

Involuntary
or Good
Reason
Termination
(Change in
Control)

($)

    Disability
($)
   

Death

($)

 
Compensation:                                                

Cash Severance(1)

    0        1,320,000        0        2,640,000        1,320,000        1,320,000   

Long-Term Incentives:

           

Unvested Restricted Shares(2)

    0        0        0        788,213        788,213        788,213   

Unvested VSEP Awards(3)

    0        649,519        0        649,519        649,519        649,519   

Unvested Stock Options(4)

    0        0        0        7,447        7,447        7,447   
Benefits and Perquisites:                                                

Post-Termination Health and

Welfare Benefits(5)

    0        20,000        0        30,000        20,000        20,000   

Life Insurance Proceeds(6)

    0        0        0        0        0        400,000   

Disability Insurance Proceeds(7)

    0        0        0        0        1,155,085        0   

Outplacement Services(8)

    0        15,000        0        15,000        0        0   

Accrued Vacation(9)

    16,923        16,923        0        16,923        16,923        16,923   
Total:     16,923        2,021,442        0        4,147,102        3,957,187        3,202,102   

 

(1) Reported amounts calculated pursuant to the terms of Mr. Freddo’s Employment Agreement and consist of one times Mr. Freddo’s base salary on December 31, 2015 plus an amount equal in value to an annual bonus for 2015 at the “target” level (except in the case of termination in connection with a change in control, in which case the amount consists of two times Mr. Freddo’s base salary on December 31, 2015 plus an amount equal in value to two times Mr. Freddo’s “target” annual bonus for 2015), payable in a lump sum. Assumes any accrued base salary and bonus have been paid to Mr. Freddo.

 

(2) Reported amounts consist of Mr. Freddo’s 46,806 unvested annual equity award shares valued at our closing stock price on December 31, 2015 of $16.84 per share, which shares either accelerate and vest or continue to vest as a result of the triggering event.

 

(3) Reported amounts consist of Mr. Freddo’s 38,570 unvested restricted shares under the VSEP valued at our closing stock price on December 31, 2015 of $16.84 per share, which shares either accelerate and vest or continue to vest as a result of the triggering event.

 

(4) Reported amounts consist of Mr. Freddo’s 95,252 stock options with option exercise prices from $16.61 to $19.26 and the spread calculated based on our closing stock price on December 31, 2015 of $16.84 per share, which stock options accelerate as a result of the triggering event.

 

(5) Reported amounts consist of our estimate of one year of continued health and welfare benefits costs (except in the case of termination in connection with a change in control, in which case the amount is an eighteen month estimate).

 

(6) Reported amount consists of our estimate of the available life insurance death benefit.

 

(7) Reported amount consists of our estimate of payments for long-term disability using a present value calculation that takes into account (a) Mr. Freddo’s age and total payments over the benefit term assuming that the disability occurs on December 31, 2015, and (b) a discount rate based on the rate for the Treasury security with a similar term. In general, benefits are available until age 65.

 

(8) Reported amounts consist of our estimate of one year of outplacement service.

 

(9) Assumes two weeks of personal time off (“PTO”) is paid pursuant to our current PTO policy.

 

DDR Corp.   ï  2016 Proxy Statement    41


Table of Contents

Christa A. Vesy

 

Executive Benefits and

Payments upon Termination

  Retirement 
or Other 
Voluntary 
Termination 
($) 
    Involuntary
Not for
Cause or
Good
Reason
Termination
($)
    For Cause 
Termination 
($)
   

Involuntary
or Good
Reason
Termination
(Change in
Control)

($)

    Disability
($)
   

Death

($)

 
Compensation:                                                

Cash Severance(1)

    0        420,326        0        840,652        420,326        420,326   

Long-Term Incentives:

           

Unvested Restricted Shares(2)

    0        0        0        230,321        230,321        230,321   

Unvested VSEP Awards(3)

    0        259,386        0        259,386        259,386        259,286   

Unvested Stock Options(4)

    0        0        0        3,163        3,163        3,163   
Benefits and Perquisites:                                                

Post-Termination Health and

Welfare Benefits(5)

    0        20,000        0        30,000        20,000        20,000   

Life Insurance Proceeds(6)

    0        0        0        0        0        400,000   

Disability Insurance Proceeds(7)

    0        0        0        0        3,081,392        0   

Outplacement Services(8)

    0        15,000        0        15,000        0        0   

Accrued Vacation(9)

    11,547        11,547        0        11,547        11,547        11,547   
Total:     11,547        726,259        0        1,390,069        4,026,135        1,344,643   

 

(1) Reported amounts calculated pursuant to the terms of Ms. Vesy’s Employment Agreement and consist of one times Ms. Vesy’s base salary on December 31, 2015 plus an amount equal in value to an annual bonus for 2015 at the “target” level (except in the case of termination in connection with a change in control, in which case the amount consists of two times Ms. Vesy’s base salary on December 31, 2015 plus an amount equal in value to two times Ms. Vesy’s “target” annual bonus for 2015), payable in a lump sum. Assumes any accrued base salary and bonus have been paid to Ms. Vesy.

 

(2) Reported amounts consist of Ms. Vesy’s 13,677 unvested annual equity award shares valued at our closing stock price on December 31, 2015 of $16.84 per share, which shares either accelerate and vest or continue to vest as a result of the triggering event.

 

(3) Reported amounts consist of Ms. Vesy’s 15,403 unvested restricted shares under the VSEP valued at our closing stock price on December 31, 2015 of $16.84 per share, which shares either accelerate and vest or continue to vest as a result of the triggering event.

 

(4) Reported amounts consist of Ms. Vesy’s 31,664 stock options with option exercise prices from $16.61 to $19.26 and the spread calculated based on our closing stock price on December 31, 2015 of $16.84 per share, which stock options accelerate as a result of the triggering event.

 

(5) Reported amounts consist of our estimate of one year of continued health and welfare benefits costs (except in the case of termination in connection with a change in control, in which case the amount is an eighteen month estimate).

 

(6) Reported amount consists of our estimate of the available life insurance death benefit.

 

(7) Reported amount consists of our estimate of payments for long-term disability using a present value calculation that takes into account (a) Ms. Vesy’s age and total payments over the benefit term assuming that the disability occurs on December 31, 2015, and (b) a discount rate based on the rate for the Treasury security with a similar term. In general, benefits are available until age 65.

 

(8) Reported amounts consist of our estimate of one year of outplacement service.

 

(9) Assumes two weeks of personal time off (“PTO”) is paid pursuant to our current PTO policy.

 

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