SHAREHOLDER/GOVERNANCE FRIENDLY ASPECTS OF OUR CURRENT EXECUTIVE COMPENSATION PROGRAM
2018 SAY-ON-PAY VOTE
At our 2018 annual meeting of shareholders the percentage of shares voting that approved our advisory "Say-on-Pay" vote was approximately 96%.
The Committee believes that this support level demonstrates a strong alignment among our shareholders, the Company's performance, and our executive compensation program. Accordingly, the Committee did
not make any changes to the Company's executive compensation program in direct response to the 2018 "Say-on-Pay" vote.
24
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE COMPENSATION APPROACH AND PROCESS
ALIGNMENT OF PAY WITH PERFORMANCE
The Committee designs our executive compensation program to provide pay outcomes which are aligned with, and responsive to our operating,
financial and market performance in both good and challenging times. Further, we generally believe that a significant majority of the compensation of our CEO and other NEOs should be performance-based
in the form of variable pay (annual and long-term incentives) to emphasize our commitment to rewarding excellent performance and
penalizing
poor performance. We believe our compensation decisions in the past have been consistent with this belief. Looking back over the last five years, the average percentage of our CEO's
compensation that was performance-based, was 89.3% and the average percentage of our other NEOs' compensation that was performance-based, in the form of variable pay, was 82.7%. Our compensation
decisions in 2018 were consistent with this approach. The percentage of compensation that was performance-based in 2018 for our CEO and other NEOs, was 89.0% and 81.2%, respectively.
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
25
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
WHAT WE PAY AND WHY: PRINCIPAL ELEMENTS OF COMPENSATION
To accomplish our compensation objectives, we designed our executive compensation program with three major elementsBase Salary,
Annual Cash Incentive Compensation, and Performance-Based Long-Term Incentives.
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OBJECTIVES
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KEY FEATURES
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Base Salary
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Provide an appropriate
level of fixed compensation that will promote executive recruitment and retention.
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Fixed
compensation.
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Annual Cash Incentive Compensation
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Reward achievement of our
annual financial and operating goals based on the Committee's quantitative and qualitative assessment of the executive's contributions to that performance.
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Variable, short-term cash
compensation.
Funded upon
achievement of threshold FFO level.
Allocated based on objective and subjective evaluation of Company, business unit, and individual performance.
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2018 Performance-Based Long-Term Incentives
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Promote the creation of
long-term shareholder value.
Align the interests of our executives with the interests of our shareholders.
Promote the retention of our executives through a vesting requirement after any are earned.
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Variable, performance-based
long-term equity compensation.
Performance Metrics:
o
Funds From Operations (FFO) (weighted 60%).
o
TSR vs FTSE NAREIT Equity Retail Index (weighted 40%).
Award is composed of a tranche with a three-year performance
period and a tranche with a two-year performance period to provide for an equity earning opportunity each year because no grants were made in 2017.
The amount earned on an award will be determined on December 31,
2020.
Tranche with a
three-year performance period has an additional one year of vesting and tranche with a two-year performance period has an additional two years of vesting.
Any amounts earned will vest no later than January 1, 2022.
Maximum amount that may be
earned is 150% of the Target award.
Rigorous minimum thresholds to receive any payout.
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ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
The Committee has retained Semler Brossy as its independent consultant since 2011. The Consultant reports directly to the Committee and
performs no other work for the Company unless directed by the Committee. The Committee has analyzed whether the work of Semler Brossy as a compensation consultant has raised any conflict of interest,
taking into consideration the following factors:
-
i.
-
The
provision of other services to the Company by Semler Brossy;
-
ii.
-
The
amount of fees from the Company paid to Semler Brossy as a percentage of the firm's total revenue;
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iii.
-
Semler
Brossy's policies and procedures that are designed to prevent conflicts of interest;
-
iv.
-
Any
business or personal relationship of Semler Brossy or the individual compensation advisors employed by the firm with an executive officer of the Company;
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v.
-
Any
business or personal relationship of the individual compensation advisors with any member of the Committee; and
-
vi.
-
Any
stock of the Company owned by Semler Brossy or the individual compensation advisors employed by the firm.
The
Committee has determined, based on its analysis of the above factors, that the work of Semler Brossy and the individual compensation advisors employed by Semler Brossy as compensation consultants
to the Company has not created any conflict of interest.
ROLE OF MANAGEMENT IN COMPENSATION DECISIONS
Our CEO provides recommendations to the Committee on the compensation of each of the other NEOs. The CEO develops recommendations using peer
group data, assessments of individual performance and achievement of the Company's strategic and tactical plans, the state of the business environment, and input from our human resources department on
various factors (e.g., compensation history, tenure, responsibilities, market data for competitive positions and retention concerns). The Committee considers our CEO's recommendations together
with the input of our independent compensation consultant; however, all final compensation decisions affecting NEOs' pay are made by the Committee itself. Additionally, all aspects of the CEO's
compensation and resulting compensation decisions are determined by the Committee.
26
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
COMPANY PEER GROUP AND COMPENSATION ASSESSMENT
The Committee uses an industry peer group as a source of data for assessing and determining pay levels for our NEOs. The peer group is reviewed
annually, and recalibrated when appropriate, by the Committee's independent compensation consultant. Developing a relevant peer group is challenging because there are no Retail REITs of comparable
size, complexity and breadth. Non-Retail REITs are not always directly comparable to us because of the different underlying business fundamentals. Therefore, the Committee does not formulaically
derive target pay opportunities or actual pay levels from these other companies; rather, this peer group is intended to provide the Committee with insight into overall market pay levels, market
trends, commonly viewed "best" governance practices, and overall industry performance. The Committee also evaluated the appropriateness of this peer group by considering the methodology used by
Institutional Shareholder Services, or "ISS."
The
2018 peer group is comprised of the 16 largest companies in the real estate industry by market capitalization, with some restrictions to maintain a balanced mix. Specifically, the group
includes:
-
-
The six largest (by market capitalization) Retail REIT companies;
-
-
The six largest (by market capitalization) Non-Retail REIT companies (excluding all Retail REIT companies); and
-
-
The four largest companies from the broader real estate industry.
The
2018 peer group reflects changes in the market capitalization of certain participants in the real estate industry. Changes from the 2017 peer group include the removal of two companies (Equity
Residential and Brixmor Property Group, Inc.) and the addition of two companies (Equinix, Inc. and Regency Centers Corporation), in each case, due to the size consideration noted above.
2018 PEER GROUP
(In $MMs)
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PEER COMPANY
(1)
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MARKET
CAPITALIZATION
(12/31/18)
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ASSETS
(12/31/18)
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COMPANY TYPE
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American Tower Corp. (NYSE:AMT)
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$
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69,681
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$
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33,010
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Specialized REIT
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Crown Castle International Corp. (NYSE:CCI)
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$
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45,065
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$
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32,785
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Specialized REIT
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Prologis, Inc. (NYSE:PLD)
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$
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38,083
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$
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38,418
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Industrial REIT
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Public Storage (NYSE:PSA)
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$
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35,293
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$
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10,928
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Specialized REIT
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Equinix, Inc. (NasdaqGS:EQIX)
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$
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28,342
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$
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20,245
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Specialized REIT
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Welltower, Inc. (NYSE:WELL)
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$
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26,631
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$
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30,342
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Health Care REIT
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Realty Income Corporation (NYSE:O)
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$
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18,604
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$
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15,260
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Retail REIT
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CBRE Group, Inc. (NYSE:CBRE)
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$
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13,296
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$
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13,457
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Real Estate Services
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Regency Centers Corporation (NasdaqGS:REG)
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$
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9,943
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$
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10,945
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Retail REIT
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Federal Realty Investment Trust (NYSE:FRT)
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$
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8,719
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$
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6,290
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Retail REIT
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Macerich Company (NYSE:MAC)
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$
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6,568
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$
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9,027
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Retail REIT
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Kimco Realty Corp. (NYSE:KIM)
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$
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6,173
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$
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10,999
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Retail REIT
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Jones Lang LaSalle, Inc. (NYSE:JLL)
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$
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5,769
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$
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10,026
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Real Estate Services
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The Howard Hughes Corp. (NYSE:HHC)
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$
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4,201
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$
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7,356
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Real Estate Development
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Realogy Holdings Corp. (NYSE:RLGY)
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$
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1,735
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$
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7,290
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Real Estate Services
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GGP, Inc.
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Retail REIT
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Simon Property Group
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$
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59,855
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$
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30,686
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Retail REIT
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-
(1)
-
Although
GGP Inc. was part of the 2018 peer group, market capitalization and asset base information is not provided as of December 31, 2018, due to it
having been acquired by Brookfield Property Partners L.P. on August 28, 2018, and therefore not having any publicly available information on its market capitalization or asset base as of
December 31, 2018.
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
27
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION IN 2018
The Committee's meetings in 2018 were designed, among other things, to facilitate and encourage free and frank discussions among Committee
members, executive management, the Committee's compensation consultant and other Company personnel involved in executive compensation matters. The Committee made decisions impacting the type and
amount of compensation paid to our NEOs as reported in the 2018 Summary Compensation Table. These decisions related to: Base Salaries, Annual Cash Incentive Compensation for 2018 performance, and
Performance-Based Long-Term Incentive opportunities in the form of performance-based LTIP unit awards for our NEOs.
2018 BASE SALARIES
The Committee periodically reviews base salaries for the NEOs and makes adjustments to reflect market conditions, changes in responsibilities,
and merit increases. During 2018, we maintained Mr. David Simon's base salary at the same level it has been since 2011. The Committee increased certain of our NEOs' base salaries to reflect
promotions and expanded responsibilities. Specifically, in 2018 the Committee increased Mr. Fivel's salary in recognition of his successful transition from Assistant General Counsel to General
Counsel in 2017 and increased Mr. Rulli's salary in recognition of his contribution to the Company's successful implementation of the Workday HR management tool and the expansion of the
Company's Operational Intelligence Center.
2018 ANNUAL CASH INCENTIVE COMPENSATION
The Committee rewards executive officers with Annual Cash Incentive Compensation for achieving the Company's financial and operating plan
taking into account an assessment of each NEO's contributions to those achievements. Payouts under our Annual Cash Incentive Compensation program are the result of both the Company and the individuals
reaching established
performance
targets. The Committee follows a two-step process to determine what amounts will be paid under the Annual Cash Incentive Compensation program each year:
-
1.
-
The
Company must deliver certain FFO performance during the year before any payments may be made under the program. If threshold performance is not achieved, no
payments are made. For 2018, the Company generated FFO of $12.13 per share. Because this amount exceeded the threshold FFO performance of $11.79 per share, the Committee moved to step two in this
process. See "Where do I find reconciliation of non-GAAP terms to GAAP terms?" in the section of the Proxy Statement titled "Frequently Asked Questions and Answers" on page 57.
-
2.
-
Each
individual's performance is assessed by the CEO and the Committee against defined goals and objectives which are established at the beginning of each year. The
assessment delivers a total score for each individual. Each individual's total score then determines the portion of that NEO's target Annual Cash Incentive Compensation that has been earned.
2018 GOALS AND PERFORMANCE
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A summary of the NEOs' 2018 goals and performance along with their 2018 Annual Cash Incentive Compensation payments may be found in the table below. The Committee determined that 2018 FFO performance exceeded the
level required to authorize Target funding of the Company's 2018 Annual Cash Incentive Compensation program. Notwithstanding this, the Committee, acting on the recommendation of the CEO, elected to fund a lower amount than the amount allocated for
such a performance level under the
2018 Annual Cash Incentive program.
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NAMED EXECUTIVE
OFFICER
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2018 KEY INDIVIDUAL GOALS AND PERFORMANCE
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2018
ANNUAL CASH
INCENTIVE
COMPENSATION
AWARD
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2017
ANNUAL CASH
INCENTIVE
COMPENSATION
AWARD
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David Simon
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FFO increased 8.2% from
2017 to 2018
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$3,850,000
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$3,500,000
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Dividend growth exceeded
10% from 2017 to 2018
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Richard S. Sokolov
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Comparable Net Operating
Income grew 2.3% in 2018
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$1,500,000
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$1,500,000
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Leasing Spreads increased
by 14.3%
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Steven E. Fivel
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Company maintained an A-
ranking for CDP sustainability
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$900,000
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$750,000
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Several legal disputes were
brought to a successful conclusion
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John Rulli
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Material increase in the
number of successful leases to local tenants
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$900,000
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$750,000
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Achieved occupancy level of
95.9%
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Andrew A. Juster
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Successful amendment and
extension of $3.5 billion credit facility to 2022
|
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$700,000
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$700,000
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Successful completion of
property specific refinancings
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Brian J. McDade
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Successful amendment and extension of $3.5 billion credit facility to 2022
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$425,000
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$350,000
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Increased size of
commercial paper program to $2 billion
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28
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
We
pay Annual Cash Incentive Compensation to NEOs in the first calendar quarter of the following year so the Committee has sufficient time to assess our financial performance and the executives'
contributions for the preceding year.
Pursuant
to Mr. David Simon's employment agreement, his target Annual Cash Incentive Compensation is 200% of his base salary. However, the Committee determines his actual Annual Cash Incentive
Compensation, which may be more or less than target, based on his and the Company's performance.
PERFORMANCE-BASED LTIP AWARDS
For our executive compensation plans to be effective, it is necessary for NEO compensation to be competitive with other real estate companies
and also with other large public and private enterprises with which the Company competes for executive talent. In order to achieve this, the Committee must take into account whether long-term
incentives are reasonably obtainable or else face challenges retaining the Company's NEOs. Based on all of the foregoing, as well as current business conditions, working together with Semler Brossy,
the Committee established a redesigned LTIP Program in the first quarter of 2018.
The
Committee believes that as the responsibilities of our executives increase, the proportion of their total compensation that is at risk and dependent on performance should also increase. From
2010-2016, the Committee awarded performance-based LTIP units to the NEOs and certain other executives to achieve this objective. After suspending the award of LTIP units to NEOs in 2017, the
Committee reintroduced such awards in 2018.
LTIP
units are a type of limited partnership interest issued by the Operating Partnership. Under the performance-based LTIP Program, LTIP awards can be earned in whole or in part, depending on the
extent to which the performance targets set by the Committee for the relevant performance period are met. The Committee believes the performance-based LTIP Program design reflects the Company's
pay-for-performance philosophy and high expectations:
-
-
Performance requirements are designed to be rigorous and to promote long-term creation of shareholder value. The
challenging nature of these performance requirements can be seen based on no LTIP units having been earned under either the 2015-2017 LTIP Program or the 2016-2018 LTIP
Program.
-
-
The 2018 LTIP Program has both a financial metric and a relative TSR metric. It is distinct from the 2015-2017 LTIP Program and the 2016-2018
LTIP Program which only had a TSR performance metric and had both relative and absolute TSR components. A 2018 LTIP Program award is earned
based
on the FFO growth rate (weighted 60%) and the Company's TSR against the FTSE NAREIT Equity Retail Index (weighted 40%), in each case, during the performance periods described below. The
performance goals were designed to be challenging but achievable with strong management performance. For example, under the 2018 LTIP Program, performance that does not achieve the rate of return of
the FTSE NAREIT Equity Retail Index will not result in any LTIP units being earned based on relative TSR. The 2018 LTIP Program is composed of two tranches; one with a three-year performance period
followed by a one year vesting period; and one with a two-year performance period followed by a two year vesting period. This structure was established to provide an equity earning opportunity each
year because no LTIP grants were made in 2017.
-
-
The Committee is responsible for setting performance targets each year awards are made under the LTIP Program, and we expect to continue to
establish challenging targets that will include a requirement for strong long-term financial and operational performance.
LTIP
units are designed to qualify as "profits interests" in the Operating Partnership for federal income tax purposes. During the performance period, holders of LTIP units will be allocated taxable
profits and losses equal to one-tenth of the amounts allocated to an Operating Partnership unit and will receive distributions equal to one-tenth of the amount of regular quarterly distributions paid
on an Operating Partnership unit, and certain special distributions. As a general matter, the profits interest characteristics of the LTIP units mean that they will not be economically equivalent in
value at the time of award to the economic value of an Operating Partnership unit. The value of the LTIP units can increase over time until the value of the LTIP units is equivalent to the value of
the Operating Partnership units on a one-for-one basis.
After
the end of the performance period, to the extent that the required performance has been achieved, holders of earned LTIP units, both vested and unvested, will be entitled to receive
distributions in an amount per LTIP unit equal to the distributions, both regular and special, payable on a unit. Vested LTIP units are exchangeable for shares of the Company's common stock on a
one-for-one basis, or cash as selected by the Company.
The
number of performance-based LTIP units earned is determined by the Committee at the end of the performance period using the pre-established payout matrices (with linear interpolation between the
specified payout percentages).
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
29
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
|
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2016-2018 LTIP PAYOUT MATRICES
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RELATIVE TSR
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ABSOLUTE TSR
WEIGHT 20%
|
|
VS. MSCI REIT INDEX
WEIGHT 60%
|
|
VS. S&P 500 INDEX
WEIGHT 20%
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PERFORMANCE
|
|
PAYOUT % OF TARGET
|
|
PERFORMANCE
|
|
PAYOUT % OF TARGET
|
|
PERFORMANCE
|
|
PAYOUT % OF TARGET
|
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£
20%
|
|
0.0%
|
|
Index 1%
|
|
0.0%
|
|
Index 2%
|
|
0.0%
|
|
|
|
|
24%
|
|
33.3%
|
|
Index
|
|
33.3%
|
|
Index
|
|
33.3%
|
|
|
|
|
27%
|
|
50.0%
|
|
Index + 1%
|
|
50.0%
|
|
Index + 2%
|
|
100.0%
|
|
|
|
|
30%
|
|
66.7%
|
|
Index + 2%
|
|
66.7%
|
|
|
|
|
|
|
|
|
33%
|
|
83.3%
|
|
Index + 3%
|
|
100.0%
|
|
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|
³
36%
|
|
100.0%
|
|
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|
2016-2018 LTIP PROGRAM ACTUAL PERFORMANCE RESULTS
|
|
|
|
|
In February 2019, the Committee reviewed calculations that had been prepared by management and determined that the Company's
performance during the three-year performance period ending December 31, 2018, did not satisfy any of the performance criteria for the 2016-2018 LTIP Program, as reflected in the table below.
|
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|
COMPONENT
|
|
|
WEIGHTING
|
|
PERFORMANCE REQUIRED TO
EARN MINIMUM
|
|
ACTUAL
PERFORMANCE
|
|
|
% EARNED
|
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|
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|
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|
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|
|
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|
|
Absolute TSR
|
|
|
20%
|
|
> 20%
|
|
2.59%
|
|
|
0.0%
|
|
|
|
|
Relative TSR vs. MSCI U.S. REIT Index (RMS)
|
|
|
60%
|
|
> Index 1%
|
|
11.23% below the Index
|
|
|
0.0%
|
|
|
|
|
Relative TSR vs. S&P 500 Index
|
|
|
20%
|
|
> Index 2%
|
|
31.37% below the Index
|
|
|
0.0%
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
OTHER ELEMENTS OF COMPENSATION
Retirement and Health and Welfare Benefits.
We have never had a traditional defined benefit pension plan. We maintain a 401(k) retirement plan in which all salaried
employees can participate on the same terms. During 2018, our basic contribution to the 401(k) retirement plan was equal to 1.0% of the participant's base salary and Annual Cash Incentive Compensation
which vests 20% after the completion of two years and an additional 20% after each additional year of service until fully vested after six years. We match 100% of the first 3% of the participant's
contribution and 50% of the next 2% of the participant's contribution. Our matching contributions are vested when made. Our basic and matching contributions are subject to applicable IRS limits and
regulations. The limit for Company contributions for any participant in 2018 was $13,750. The contributions we made to the 401(k) accounts of the NEOs are shown in the "All Other Compensation" column
of the 2018 Summary Compensation Table on page 32. NEOs also participate in health and welfare benefit plans on the same terms as other salaried employees.
No Gross-Up for Excess Parachute Payments.
Mr. David Simon has an employment agreement. No other NEOs currently have employment agreements. There are no
arrangements requiring us to gross-up compensation to cover taxes owed by the NEOs, including excise taxes payable by the NEOs in connection with a change in control.
If
Mr. David Simon would become subject to the excise tax on certain "excess parachute payments" pursuant to Section 4999
of
the Internal Revenue Code, his employment agreement provides that payments which would be subject to the excise tax will be reduced if he retains a greater after-tax amount after such reduction;
otherwise, no reduction will be made. His employment agreement does not contain a gross-up for this excise tax.
Deferred Compensation Plan.
We maintain a nonqualified deferred compensation plan that has permitted senior executives, key employees and non-employee directors to
defer all or part of their compensation, including awards under the 1998 Plan and, subject to approval by our shareholders at the 2019 Annual Meeting, under the 2019 Plan. There is an account for the
executives and employees and a separate account for the non-employee directors. Although we have the discretion to contribute a matching amount or make additional incentive contributions, we have
never done either. As a result, the amounts disclosed in the "Nonqualified Deferred Compensation In 2018" table on page 35 consist entirely of compensation earned by, but not yet paid to, the NEOs and
any earnings on such deferred compensation. A participant's deferrals are fully vested, except for restricted stock awards that still have vesting requirements. Upon death or disability of the
participant, our insolvency, or a change in control affecting us, a participant becomes 100% vested in his account.
No Stock Option Grants.
The Committee has not granted any stock options to executives or other employees since 2001.
30
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
OTHER POLICIES
EQUITY AWARD GRANT PRACTICES
In the ordinary course of our compensation cycle for our NEOs we make LTIP awards in the first calendar quarter after financial results for the
preceding year have been released.
EXECUTIVE EQUITY OWNERSHIP GUIDELINES
We believe the financial interests of our executives should be aligned with the long-term interests of our shareholders. We also believe that
requiring our executives to own a significant number of shares of our common stock, combined with our rigorous stock retention policy, serves as a strong motivator for our executives to be prudent in
their operation of the Company. Therefore, in addition to long-term incentives, our Board has established equity ownership guidelines for key executives, including the NEOs.
The
current ownership guidelines require the executives to maintain ownership of our stock or any class of our equity securities or units of the Operating Partnership having a value expressed as a
multiple of their base salary for as long as they remain our employees. Our current guidelines for the CEO and other executive officers are set forth below.
|
|
|
|
|
POSITION
|
|
VALUE AS A MULTIPLE OF BASE SALARY
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
6.0x
|
|
Executive Officers
|
|
|
3.0x
|
|
Certain Executive Vice Presidents
|
|
|
3.0x
|
|
|
|
|
|
|
In
addition, these executives are required to retain ownership of a sufficient number of shares received in the form of restricted stock awards representing at least 50% of the after-tax value of
their awards or 25% of the pre-tax value of such awards. These shares are to be retained by the executive until he or she retires, dies, becomes disabled, or is no longer our employee.
Ownership
of any class of our equity securities or units of the Operating Partnership counts toward fulfillment of these guidelines, including securities held directly, securities held indirectly by
or for the benefit of immediate family members, shares of restricted stock that have been earned, even if not vested, and shares held following the exercise of stock options. Unexercised stock options
do not count toward these goals. Each of our NEOs currently meets or exceeds these guidelines.
CLAWBACKS OF INCENTIVE COMPENSATION
Our annual and long-term incentive plans contain a clawback provision that applies to all of our current and former NEOs in the event of any
material restatement of the Company's financial statements whether or not fraud or misconduct is involved. The clawback policy applies to cash amounts received through annual or long-term incentive
plans, where payouts were based upon the financial results that were restated.
In
addition, Mr. David Simon's employment agreement and the post-2010 LTIP Program award agreements for all NEOs,
including
our CEO, provide that in the event of a financial restatement, the Company may recoup the employee's Annual Cash Incentive Compensation and other equity and non-equity compensation tied to
the achievement of earnings targets if the compensation would not have been earned as a result of the financial restatement. These provisions will be superseded by any broader recoupment policy that
the Company adopts pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Awards under the 2019 Plan are expected to include provisions expressly acknowledging the applicability of
any such recoupment policy to the award.
HEDGING POLICY AND PLEDGING RESTRICTIONS
Our insider trading policy prohibits employees and directors from hedging the ownership of Company securities. In addition, we do not permit
our executive officers to pledge shares.
COMPENSATION DECISIONS FOR 2019
In February 2019, the Committee met to make decisions related to our NEOs' base salaries and long-term incentive opportunities and approve the
funding goals for 2019 under our Annual Cash Incentive Compensation program.
2019 BASE SALARIES
In 2019, Mr. David Simon did not receive an increase in his base salary; however, we gave certain of our NEOs increases in base salary
to reflect promotions and expanded responsibilities.
2019 ANNUAL CASH INCENTIVE COMPENSATION PROGRAM
The 2019 Annual Cash Incentive Compensation program approved by the Committee is substantially similar to the 2018 Annual Cash Incentive
Compensation program described on page 28.
The
2019 Annual Cash Incentive Compensation program FFO goals were approved early in 2019 and will be disclosed in our 2020 Proxy Statement.
2019 LTIP PROGRAM
In the first quarter of 2019, the Committee established and made awards under a modified LTIP Program (the "2019 LTIP Program"), subject to
approval of the 2019 Plan by our shareholders at the 2019 Annual Meeting. The 2019 LTIP Program has a three-year performance period and is subject to an additional one-year vesting period. The
Committee believes that the 2019 LTIP Program is structured to, and is designed to, drive strong performance from our NEOs through the use of rigorous performance metrics. The 2019 LTIP Program has an
FFO component and a relative TSR component using the FTSE NAREIT Equity Retail Index as the comparator against which the Company's absolute TSR is compared. The Committee has also included a component
that measures performance based on the achievement of strategic objective performance criteria.
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
31
Table of Contents
EXECUTIVE COMPENSATION TABLES
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
NAME
(A)
|
|
YEAR
(B)
|
|
SALARY
(C)
|
|
BONUS
(1)
(D)
|
|
STOCK
AWARDS
(2)
(E)
|
|
ALL OTHER
COMPENSATION
(3)
(F)
|
|
TOTAL
(G)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Simon
|
|
2018
|
|
$1,250,000
|
|
$3,850,000
|
|
$6,321,027
|
|
$15,891
|
|
$11,436,918
|
Chairman, CEO and President
|
|
2017
|
|
$1,250,000
|
|
$3,500,000
|
|
$0
|
|
$15,657
|
|
$4,765,657
|
|
|
2016
|
|
$1,250,000
|
|
$2,500,000
|
|
$9,472,676
|
|
$15,398
|
|
$13,238,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard S. Sokolov
|
|
2018
|
|
$800,000
|
|
$1,500,000
|
|
$2,328,799
|
|
$347,321
|
|
$4,976,120
|
Vice Chairman
|
|
2017
|
|
$800,000
|
|
$1,500,000
|
|
$0
|
|
$338,494
|
|
$2,638,494
|
|
|
2016
|
|
$800,000
|
|
$1,125,000
|
|
$2,991,372
|
|
$258,191
|
|
$5,174,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven E. Fivel
|
|
2018
|
|
$538,462
|
|
$900,000
|
|
$1,996,114
|
|
$14,701
|
|
$3,449,277
|
General Counsel and Secretary
|
|
2017
|
|
$475,000
|
|
$750,000
|
|
$0
|
|
$14,514
|
|
$1,239,514
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Rulli
|
|
2018
|
|
$536,692
|
|
$900,000
|
|
$1,996,114
|
|
$16,640
|
|
$3,449,446
|
President of MallsChief Administrative Officer
|
|
2017
|
|
$463,500
|
|
$750,000
|
|
$0
|
|
$16,404
|
|
$1,229,904
|
|
|
2016
|
|
$463,500
|
|
$450,000
|
|
$2,243,529
|
|
$16,146
|
|
$3,173,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew A. Juster
(4)
|
|
2018
|
|
$500,000
|
|
$700,000
|
|
$0
|
|
$127,636
|
|
$1,327,636
|
Former Executive Vice President, Chief Financial Officer
|
|
2017
|
|
$500,000
|
|
$700,000
|
|
$0
|
|
$16,801
|
|
$1,216,801
|
|
|
2016
|
|
$500,000
|
|
$585,000
|
|
$2,492,809
|
|
$16,542
|
|
$3,594,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian J. McDade
(5)
|
|
2018
|
|
$367,692
|
|
$425,000
|
|
$1,065,371
|
(6)
|
$27,471
|
|
$1,885,534
|
Executive Vice President, Chief Financial Officer and Treasurer
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Bonuses
earned with respect to the indicated year were paid in the following year under our Annual Cash Incentive Compensation program. See the "2018 Annual Cash
Incentive Compensation" section in the Compensation Discussion and Analysis for information about how we determined the payments for 2018.
-
(2)
-
Represents
the total grant date fair value of all equity-based awards made during 2018 and 2016 determined in accordance with ASC 718. For 2018, represents the grant
date fair value of the awards under the 2018 LTIP Program assuming the Company satisfies the Target performance levels established even though half of those LTIP units remain subject to a two-year
performance period with a further two-year vesting requirement and half of those LTIP units remain subject to a three-year performance period with a further one-year vesting requirement. There were no
LTIP awards made during 2017.
As
explained in the Compensation Discussion and Analysis section included in this Proxy Statement, the Committee determined that our performance for the three-year period ended December 31,
2018, resulted in no payout of the 2016-2018 LTIP Program.
We
engaged Deloitte, who is not our independent registered public accounting firm, to develop the grant date fair value of the TSR portion of the 2018 LTIP Program using a Monte Carlo simulation. A
simulation was conducted using assumptions regarding the total stock return on the Company's common stock and the relative total return of the FTSE NAREIT Equity Retail Index, as well as expected
volatility, risk-free investment rates, correlation coefficients, dividend reinvestment, and other factors. The grant date fair value of the FFO portion was calculated by multiplying $153.51, the
closing price of our common stock as reports by the NYSE for February 28, 2018, by the number of LTIP units assuming the Company satisfies the Target performance levels established. The grant
date fair values of the awards in the 2018 LTIP Program, as of February 28, 2018, were as follows (net of the purchase price of $0.25 per unit paid by the participant):
|
|
|
|
|
NAME
|
|
NUMBER OF TARGET AWARD
UNITS FOR 2018 LTIP PROGRAM
|
|
GRANT DATE TARGET FAIR VALUE
OF 2018 LTIP PROGRAM
|
|
|
|
|
|
David Simon
|
|
49,227
|
|
$6,321,027
|
Richard S. Sokolov
|
|
18,136
|
|
$2,328,799
|
Steven E. Fivel
|
|
15,545
|
|
$1,996,114
|
John Rulli
|
|
15,545
|
|
$1,996,114
|
Andrew A. Juster
|
|
0
|
|
$0
|
Brian J. McDade
|
|
5,182
|
|
$665,371
|
|
|
|
|
|
The
number of LTIP units awarded under the 2018 LTIP Program that may be earned in the future will depend upon the extent to which we achieve the performance measures during the two-year and
three-year performance periods that end on December 31, 2019 and 2020, respectively. If our performance for those periods results in a payout of less than Target, the number of LTIP units
earned would be less than the number shown. Under the 2018 LTIP Program, if the Company's performance level exceeds the Target performance level, the NEOs may earn a number of LTIP units greater than
the Target number set forth above. At a Maximum performance level, the number of award LTIP units, and corresponding grant date fair value would be 73,840 LTIP units and $9,481,540 for
Mr. David Simon, 27,204 LTIP units and $3,493,199 for Mr. Sokolov, 23,318 LTIP units and $2,994,171 for Mr. Fivel, 23,318 LTIP units and $2,994,171 for Mr. Rulli, and 7,773
LTIP units and $998,057 for Mr. McDade.
If
any LTIP units are earned for the performance period ending December 31, 2019, one half of such earned LTIP units will vest on January 1, 2021, and one half of such earned LTIP units
will vest on January 1, 2022. If any LTIP units are earned for the performance period ending December 31, 2020, one hundred percent of such earned LTIP units will vest on
January 1, 2022. The recipient must maintain continuous service through each vesting date, except for termination of service resulting from death or disability or, in the Committee's sole
discretion, upon retirement. The grant date Target fair value of the LTIP units are reported in column (E) net of the purchase price of $0.25 per unit.
-
(3)
-
Amounts
reported in 2018 include the following:
-
-
ALL OTHER COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
NAME
|
|
EMPLOYEE LIFE
INSURANCE PREMIUMS
|
|
USE OF
CHARTER AIRCRAFT
|
|
401(K)
CONTRIBUTION
|
|
RESTRICTED
STOCK DIVIDENDS
|
|
RETIREMENT
PAYMENT
|
|
|
|
|
|
|
|
|
|
|
|
David Simon
|
|
$2,141
|
|
0
|
|
$13,750
|
|
$0
|
|
$0
|
Richard S. Sokolov
|
|
$3,369
|
|
$330,202
|
|
$13,750
|
|
$0
|
|
$0
|
Steven E. Fivel
|
|
$951
|
|
0
|
|
$13,750
|
|
$0
|
|
$0
|
John Rulli
|
|
$2,890
|
|
0
|
|
$13,750
|
|
$0
|
|
$0
|
Andrew A. Juster
|
|
$3,286
|
|
0
|
|
$13,750
|
|
$0
|
|
$110,600
|
Brian J. McDade
|
|
$951
|
|
0
|
|
$13,750
|
|
$12,770
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
32
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
EXECUTIVE COMPENSATION TABLES
-
(4)
-
On September 30, 2018, Mr. Juster retired from his position as Executive Vice President and Chief Financial
Officer. For more information regarding Mr. Juster's retirement, please see the Form 8-K we filed with the SEC on March 22, 2018 and the Form 8-K we filed with the SEC on
June 21, 2018. The amounts shown for Mr. Juster in 2018 reflect his compensation in respect of his service as an executive officer through September 30, 2018 and his service as a
non-executive employee through the remainder of the year. The amount set forth in "All Other Compensation" includes $110,600 that the Company paid to Mr. Juster pursuant to his retirement
agreement in consideration of his invaluable assistance with the transition of Chief Financial Officer responsibilities to Mr. McDade, among other things.
-
(5)
-
On
October 1, 2018, Mr. McDade became our Executive Vice President and Chief Financial Officer while continuing to maintain his position as Treasurer.
For more information regarding Mr. McDade's appointment, please see the Form 8-K we filed with the SEC on June 21, 2018. The amounts shown for Mr. McDade in 2018 reflect
his compensation as a non-NEO from January 1, 2018 through September 30, 2018 and his compensation as a NEO from October 1, 2018 through December 31, 2018.
-
(6)
-
Prior
to being appointed Executive Vice President and Chief Financial Officer, Mr. McDade was selected to participate in the Company's 2018 Corporate
Incentive Compensation Plan ("Corporate ICP"), an equity incentive compensation plan in which approximately 30 senior employees participated in 2018. Mr. McDade was granted an award opportunity
of $400,000. This amount is reflected in the amount of his 2018 Stock Awards in column (E). Awards under the Corporate ICP are earned based on two performance metrics, FFO (weighted 60%) and the
Company's TSR against the FTSE NAREIT Equity Retail Index (weighted 40%). The dollar amount earned will be converted into a number of shares of restricted stock with an equivalent value. The number of
shares of restricted stock will be determined by dividing the earned amount of the award by the average closing price of the Company's common stock on the ten (10) consecutive trading days
immediately preceding, but not including April 1, 2019. These shares of restricted stock will be subject to an additional three-years of vesting, with one third of the shares of restricted
stock vesting each year.
GRANTS OF PLAN-BASED AWARDS IN 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
NAME
|
|
GRANT
DATE
(1)
(H)
|
|
TYPE OF
AWARD
|
|
THRESHOLD
NUMBER
OF UNITS
|
|
MAXIMUM
NUMBER
OF UNITS
|
|
ESTIMATED FUTURE PAYOUTS
UNDER EQUITY INCENTIVE
PLAN AWARDS TARGET
(2)
(#)
(I)
|
|
GRANT DATE FAIR
VALUE OF STOCK AND
OPTION AWARDS
(3)
($)
(J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Simon
|
|
2/28/18
|
|
LTIP Units
|
|
24,613
|
|
73,840
|
|
49,227
|
|
$6,321,027
|
Richard S. Sokolov
|
|
2/28/18
|
|
LTIP Units
|
|
9,068
|
|
27,204
|
|
18,136
|
|
$2,328,799
|
Steven E. Fivel
|
|
2/28/18
|
|
LTIP Units
|
|
7,773
|
|
23,318
|
|
15,545
|
|
$1,996,114
|
John Rulli
|
|
2/28/18
|
|
LTIP Units
|
|
7,773
|
|
23,318
|
|
15,545
|
|
$1,996,114
|
Andrew A. Juster
|
|
2/28/18
|
|
LTIP Units
|
|
0
|
|
0
|
|
0
|
|
$0
|
Brian J. McDade
|
|
2/28/18
|
|
LTIP Units
|
|
2,591
|
|
7,773
|
|
5,182
|
|
$665,371
|
|
|
2/28/18
|
|
Restricted Stock
|
(4)
|
|
|
|
|
|
|
$400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Represents
the date that the award was made.
-
(2)
-
Column
(I) represents the number of LTIP units the NEO would earn if our performance for the two-year period ended December 31, 2019 and the three-year
period ended December 31, 2020 would result in a payout at the Target performance level under the 2018 LTIP Program. If any LTIP units are earned for the performance period ending
December 31, 2019, one half of such earned LTIP units will vest on January 1, 2021, and one half of such earned LTIP units will vest on January 1, 2022. If any LTIP units are
earned for the performance period ending December 31, 2020, one hundred percent of such earned LTIP units will vest on January 1, 2022. The recipient must maintain continuous service
through each vesting date, except for termination of service resulting from death or disability or, in the Committee's sole discretion, upon retirement.
-
(3)
-
The
grant date fair values of the 2018 LTIP Program awards are shown here net of the $0.25 per unit purchase price.
-
(4)
-
As
described in footnote (6) to the Summary Compensation Table, Mr. McDade participated in the Corporate ICP in 2018. He was granted an award
opportunity of $400,000. The dollar amount earned will be converted into a number of shares of restricted stock with an equivalent value, such number determined by dividing the earned amount of the
award by the average closing price of the Company's common stock on the ten (10) consecutive trading days immediately preceding, but not including April 1, 2019; therefore, the number of
restricted shares cannot be calculated as of the date hereof.
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
33
Table of Contents
EXECUTIVE COMPENSATION TABLES
OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCK AWARDS
|
|
|
|
NUMBER OF SHARES OR
UNITS EARNED THAT
HAVE NOT VESTED
(1)
(K)
|
|
MARKET VALUE OF SHARES
OR UNITS THAT HAVE NOT
VESTED
(2)
(L)
|
|
EQUITY INCENTIVE PLAN
AWARDS: NUMBER OF UNEARNED
SHARES, UNITS OR OTHER RIGHTS
THAT HAVE NOT VESTED ASSUMING
PERFORMANCE AT MAXIMUM
(3)
(M)
|
|
EQUITY INCENTIVE PLAN AWARDS:
MARKET OR PAYOUT VALUE OF
UNEARNED SHARES, UNITS OR OTHER
RIGHTS THAT HAVE NOT VESTED
ASSUMING PERFORMANCE AT MAXIMUM
(4)
(N)
|
|
|
|
|
|
|
|
|
|
|
|
David Simon
|
|
661,875
|
|
|
$
|
111,022,913
|
|
73,840
|
|
|
$
|
12,385,922
|
|
Richard S. Sokolov
|
|
12,031
|
|
|
$
|
2,018,080
|
|
27,204
|
|
|
$
|
4,563,199
|
|
Steven E. Fivel
|
|
4,375
|
|
|
$
|
733,863
|
|
23,318
|
|
|
$
|
3,911,361
|
|
John Rulli
|
|
4,922
|
|
|
$
|
825,616
|
|
23,318
|
|
|
$
|
3,911,361
|
|
Andrew A. Juster
|
|
4,922
|
|
|
$
|
825,616
|
|
0
|
|
|
$
|
0
|
|
Brian J. McDade
|
|
1,553
|
|
|
$
|
260,889
|
|
7,773
|
|
|
$
|
1,303,843
|
|
|
|
|
|
|
$
|
364,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Column
(K) consists of the following LTIP units and shares of restricted stock that have been earned but not vested as of December 31, 2018:
|
|
|
|
|
|
|
|
|
TYPE OF AWARD
|
|
NUMBER OF SHARES OR UNITS
|
|
|
|
|
|
|
|
David Simon
|
|
2014-2016 LTIP Units
|
|
21,875
|
|
|
|
Class B Units-2011 CEO Retention Agreement LTIP Units
|
|
360,000
|
|
|
|
Class C Units-2011 CEO Retention Agreement LTIP Units
|
|
280,000
|
|
|
|
|
|
|
|
Richard S. Sokolov
|
|
2014-2016 LTIP Units
|
|
12,031
|
|
|
|
|
|
|
|
Steven E. Fivel
|
|
2014-2016 LTIP Units
|
|
4,375
|
|
|
|
|
|
|
|
John Rulli
|
|
2014-2016 LTIP Units
|
|
4,922
|
|
|
|
|
|
|
|
Andrew A. Juster
|
|
2014-2016 LTIP Units
|
|
4,922
|
|
|
|
|
|
|
|
Brian J. McDade
|
|
Restricted Stock
|
|
1,553
|
|
|
|
Restricted Stock
|
|
$364,000
|
|
|
|
|
|
|
-
-
One-half
of the earned 2014-2016 LTIP units vested on January 1, 2018 and one-half vested on January 1, 2019. Additionally, for
Mr. David Simon, the 360,000 Class B LTIP units awarded January 1, 2014 were earned during 2016 and vested on January 1, 2019. The 280,000 Class C LTIP units awarded
January 1, 2015 were earned during 2017 and will vest on June 30, 2019, subject to Mr. David Simon's continued service through such date. See a description of the 2011 CEO
Retention Agreement on pages 38-39 for a description of vesting upon certain terminations of employment. Additionally, for Mr. David Simon, column (K) does not include 114,423 shares of
common stock that were acquired by reinvesting a portion of the funds from cash distributions on his unvested 2011 CEO Retention Agreement LTIP units in accordance with the terms of the award.
-
-
In
2018 Mr. McDade earned $364,000 under the Corporate ICP based on the Company's performance in 2018. As described in footnote (6) to the
Summary Compensation Table, the number of shares of restricted stock that will be awarded cannot be determined as of the date hereof.
-
(2)
-
The
amounts shown in Column (L) are calculated by multiplying $167.99, the closing price of our common stock as reported by the NYSE for December 31,
2018, by the applicable number of shares or LTIP units, net of the $0.25 per unit purchase price.
-
(3)
-
Column
(M) represents LTIP units the NEO would earn based on our FFO and TSR performance for the two-year period ending December 31, 2019, and the
three-year period ending December 31, 2020, with up to 77,727 LTIP units eligible for vesting for the two-year performance period ending December 31, 2019. If any LTIP units are earned
for the performance period ending December 31, 2019, one half of such earned LTIP units will vest on January 1, 2021, and one half of such earned LTIP units will vest on
January 1, 2022. If any LTIP units are earned for the performance period ending December 31, 2020, one hundred percent of such earned LTIP units will vest on January 1, 2022. The
amounts reported are based on the Company achieving the maximum performance goals under the 2018 LTIP Program.
-
(4)
-
The
amounts shown in Column (N) are calculated by multiplying $167.99, the closing price of our common stock as reported by the NYSE for December 31,
2018, by the applicable number of shares of restricted stock or number of LTIP units, net of the $0.25 per unit purchase price.
34
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
EXECUTIVE COMPENSATION TABLES
OPTION EXERCISES AND STOCK VESTED IN 2018
(1)
|
|
|
|
|
|
|
|
|
|
|
|
STOCK AWARDS
(2)
|
|
NAME
(A)
|
|
NUMBER OF SHARES
ACQUIRED ON VESTING
(D)
|
|
VALUE REALIZED
ON VESTING
(E)
|
|
|
|
|
|
|
|
David Simon
|
|
|
0
|
|
|
$
|
0
|
|
Richard S. Sokolov
|
|
|
0
|
|
|
$
|
0
|
|
Steven E. Fivel
|
|
|
0
|
|
|
$
|
0
|
|
John Rulli
|
|
|
0
|
|
|
$
|
0
|
|
Andrew A. Juster
|
|
|
0
|
|
|
$
|
0
|
|
Brian J. McDade
|
|
|
646
|
(3)
|
|
$
|
99,710
|
(4)
|
|
|
|
|
|
|
-
(1)
-
Our
NEOs did not hold any stock options at any time during 2018.
-
(2)
-
Includes
awards of restricted stock.
-
(3)
-
907
shares of restricted stock earned by Mr. McDade under the Corporate ICP in 2014, 2015, and 2016 vested on April 1, 2018; however, Mr. McDade
surrendered 261 shares of restricted stock to the Company to satisfy his tax obligations.
-
(4)
-
The
value realized upon vesting of Mr. McDade's 646 shares of restricted stock, earned under the Corporate ICP in 2014, 2015, and 2016, is calculated by
multiplying $154.35, the closing price of our common stock as reported by the NYSE for March 29, 2018, by the number of shares of restricted stock that vested on April 1, 2018.
NONQUALIFIED DEFERRED COMPENSATION IN 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAME
(A)
|
|
EXECUTIVE
CONTRIBUTIONS
IN LAST FY
(B)
|
|
REGISTRANT
CONTRIBUTIONS
IN LAST FY
(C)
|
|
AGGREGATE
EARNINGS
(LOSSES)
IN LAST FY
(1)
(D)
|
|
AGGREGATE
WITHDRAWALS/
DISTRIBUTIONS
(E)
|
|
AGGREGATE
BALANCE
AT LAST FYE
(2)
(F)
|
|
|
|
|
|
|
|
|
|
|
|
David Simon
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
198,232
|
|
|
$
|
2,002,074
|
|
|
$
|
4,202,907
|
Richard S. Sokolov
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
Steven E. Fivel
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
John Rulli
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
184,564
|
|
|
$
|
2,113,872
|
|
|
$
|
6,028,323
|
Andrew A. Juster
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
Brian J. McDade
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Aggregate
earnings include dividends paid on, and appreciation of, shares of our common stock held in the plan.
-
(2)
-
Of
the amounts in this column, the following amounts are or were previously reported in the Summary Compensation Table: Mr. David
Simon$9,282,181; Mr. Sokolov$0; Mr. Fivel$0; Mr. Rulli$0; Mr. Juster$0; and
Mr. McDade$0.
The
assets of our deferred compensation plan are held in what is commonly referred to as a "rabbi trust" arrangement. This means the assets of the plan are subject to the claims of our general
creditors in the event of our insolvency. The plan assets are invested by the trustee in its sole discretion. Payments of a participant's elective deferrals are made as elected by the participant.
These amounts would be paid earlier in the event of termination of employment or death of the participant, an unforeseen emergency affecting the participant as determined by the Committee or a change
in control of the Company.
We
have not made any contributions to the executive account of our deferred compensation plan since its inception in 1995. As a result, the contributions and aggregate balances shown in the table
above are composed entirely of contributions made by the executives from their salary, bonus or restricted stock awards for prior years and earnings on those amounts. The earnings do not represent
above-market or preferential rates. The executives may vote and are entitled to receive dividends on their restricted stock awards in the plan.
Deferral
elections are made by eligible executives each year for amounts to be earned or granted in the following year. An executive may defer all or a portion of salary, Annual Cash Incentive
Compensation or awards under the 1998 Plan.
The
investment options available to an executive under the deferral program vary depending upon the type of compensation being deferred.
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
35
Table of Contents
EXECUTIVE COMPENSATION TABLES
ESTIMATED POST-EMPLOYMENT PAYMENTS UNDER ALTERNATIVE TERMINATION SCENARIOS
The following table sets forth the value of the benefits that would have been payable to each of the NEOs, assuming that the following events
occurred on December 31, 2018. We do not disclose payments or other benefits under our 401(k) retirement plan and health and welfare plans because all salaried employees are entitled to the
same benefits under those plans. Also, we do not include distributions from our deferred compensation plan because the amounts in that plan consist entirely of contributions made by the executives and
earnings on those contributions. The amounts shown are only estimates of the amounts that would be payable to the executives upon termination of employment and do not reflect tax positions we may take
or the accounting treatment of such payments. Actual amounts to be paid can only be determined at the time of separation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VOLUNTARY
RESIGNATION OR
RETIREMENT
|
|
TERMINATION BY THE
COMPANY WITHOUT
CAUSE OR RESIGNATION
WITH GOOD REASON
|
|
DEATH OR
DISABILITY
|
|
CHANGE OF
CONTROL
|
|
TERMINATION BY THE
COMPANY WITHOUT
CAUSE OR RESIGNATION
WITH GOOD REASON
FOLLOWING CHANGE IN
CONTROL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Simon
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Payment
(2)
|
|
|
$
|
0
|
|
|
|
$
|
7,500,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
7,500,000
|
|
|
Benefit Continuation
|
|
|
$
|
0
|
|
|
|
$
|
56,815
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
56,815
|
|
|
Restricted Stock
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
Annual LTIP
(3)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
64,411,656
|
|
|
$
|
66,808,158
|
|
|
|
$
|
66,808,158
|
|
|
Retention LTIP
(4)
|
|
|
$
|
0
|
|
|
|
$
|
99,525,733
|
|
|
$
|
107,353,600
|
|
|
$
|
0
|
|
|
|
$
|
107,353,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
$
|
0
|
|
|
|
$
|
107,082,548
|
|
|
$
|
171,765,256
|
|
|
$
|
66,808,158
|
|
|
|
$
|
181,718,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard S. Sokolov
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Payment
(5)
|
|
|
$
|
0
|
|
|
|
$
|
246,154
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
246,154
|
|
|
Restricted Stock
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
Annual LTIP
(3)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
2,149,215
|
|
|
$
|
3,032,124
|
|
|
|
$
|
3,032,124
|
|
|
2018 Annual Cash Incentive Compensation
(6)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
1,500,000
|
|
|
$
|
0
|
|
|
|
$
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
$
|
0
|
|
|
|
$
|
246,154
|
|
|
$
|
3,649,215
|
|
|
$
|
3,032,124
|
|
|
|
$
|
4,778,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven E. Fivel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Payment
(5)
|
|
|
$
|
0
|
|
|
|
$
|
84,615
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
84,615
|
|
|
Restricted Stock
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
Annual LTIP
(3)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
846,263
|
|
|
$
|
1,603,035
|
|
|
|
$
|
1,603,035
|
|
|
2018 Annual Cash Incentive Compensation
(6)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
900,000
|
|
|
$
|
0
|
|
|
|
$
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
$
|
0
|
|
|
|
$
|
84,615
|
|
|
$
|
1,746,263
|
|
|
$
|
1,603,035
|
|
|
|
$
|
2,587,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Rulli
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Payment
(5)
|
|
|
$
|
0
|
|
|
|
$
|
169,231
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
169,231
|
|
|
Restricted Stock
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
Annual LTIP
(3)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
938,017
|
|
|
$
|
1,694,789
|
|
|
|
$
|
1,694,789
|
|
|
2018 Annual Cash Incentive Compensation
(6)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
900,000
|
|
|
$
|
0
|
|
|
|
$
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
$
|
0
|
|
|
|
$
|
169,231
|
|
|
$
|
1,838,017
|
|
|
$
|
1,694,789
|
|
|
|
$
|
2,764,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew A. Juster
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Payment
(5)
|
|
|
$
|
0
|
|
|
|
$
|
153,846
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
153,846
|
|
|
Restricted Stock
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
Annual LTIP
(3)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
825,616
|
|
|
$
|
825,616
|
|
|
|
$
|
825,616
|
|
|
2018 Annual Cash Incentive Compensation
(6)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
700,000
|
|
|
$
|
0
|
|
|
|
$
|
700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
$
|
0
|
|
|
|
$
|
153,846
|
|
|
$
|
1,525,616
|
|
|
$
|
825,616
|
|
|
|
$
|
1,679,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian J. McDade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Payment
(5)
|
|
|
$
|
0
|
|
|
|
$
|
107,692
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
107,692
|
|
|
Restricted Stock
(7)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
624,888
|
|
|
$
|
624,888
|
|
|
|
$
|
624,888
|
|
|
Annual LTIP
(3)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
37,469
|
|
|
$
|
289,743
|
|
|
|
$
|
289,743
|
|
|
2018 Annual Cash Incentive Compensation
(6)
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
$
|
425,000
|
|
|
$
|
0
|
|
|
|
$
|
425,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
$
|
0
|
|
|
|
$
|
107,692
|
|
|
$
|
1,087,357
|
|
|
$
|
914,631
|
|
|
|
$
|
1,447,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
terms of the employment agreement with Mr. David Simon are described in the "Termination-Related Provisions of Employment Agreement with David Simon,"
below. This table describes termination scenarios as of December 31, 2018, and the terms of his employment agreement as of that date.
-
(2)
-
Paid
in equal installments over two years and subject to confidentiality and one or two-year non-competition provisions in Mr. David Simon's employment
agreement.
36
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
EXECUTIVE COMPENSATION TABLES
-
(3)
-
The
value of unearned LTIP units under the 2018 LTIP Program reflects payout at the Target performance level.
Death
or Disability
With
respect to death or disability, the amount represents the value of Annual LTIP units held by the executive that would be deemed fully vested at the time of the future Valuation Date. Value is
based on a stock price of $167.99, the closing price of our common stock as reported by the NYSE for December 31, 2018, net of the purchase price of $0.25 per unit. The award agreements or, in
the case of Mr. David Simon, his employment agreement, provide the following benefits if the executive's employment terminates due to death or disability prior to the applicable Valuation Date:
(a) the calculation of whether any Annual LTIP units have been earned will be deferred until the Valuation Date; (b) the number of Annual LTIP units that would have been earned shall be
adjusted on a pro rata basis to reflect the number of days such executive worked over the total days in the performance period; and (c) such earned Annual LTIP units shall immediately be fully
vested. If death or disability occurs after the applicable Valuation Date, any Annual LTIP units that have been earned but not yet vested shall immediately become fully vested.
Change
of Control
With
respect to a change of control prior to the Valuation Date, the amount represents the value of Annual LTIP units held by the executive that would become earned as a result of the change of
control event. Value is based on a stock price of $167.99, the closing price of our common stock as reported by the NYSE for December 31, 2018, net of the purchase price of $0.25 per unit. The
calculation of whether any Annual LTIP units have been earned will take place at the time of the change of control and will take into account the truncated performance period. If the executive has any
earned Annual LTIP units prior to any change of control, the vesting schedule for such earned Annual LTIP units shall not accelerate but instead remain subject to the vesting period that would
otherwise be applicable after any Annual LTIP units became earned in the ordinary course.
Termination
without Cause or Due to Good Reason after a Change of Control
The
award agreements or, in the case of Mr. David Simon, his employment agreement, provide the following benefits with respect to the Annual LTIP units if, prior to the Valuation Date, there is
a change of control of the Company and the executive is terminated without cause, he resigns his employment for good reason, or the award is not continued, assumed or replaced: (a) the
calculation of whether any Annual LTIP units have been earned will take place at the time of the change of control and will take into account the truncated performance period; and (b) any
Annual LTIP units earned in connection with the change of control shall immediately become fully vested. If the executive has any earned Annual LTIP units prior to any change of control, the vesting
schedule for such earned Annual LTIP units shall not accelerate unless the executive is terminated without cause, he resigns his employment for good reason, or the award is not continued, assumed or
replaced, in each case, at such time all of the executive's earned Annual LTIP units shall immediately become fully vested.
-
(4)
-
Pursuant
to the 2011 CEO Retention Agreement, (i) if we terminated Mr. David Simon's employment without cause, or if he resigned his employment for
good reason, in each case on December 31, 2018, then subject to the achievement of the required Termination FFO, the number of Unvested LTIP units which would vest is equal to 593,333, which is
100% of the unvested units prorated based on the number of months from July 11, 2011 to December 31, 2018 (and 106,080 shares in escrow would vest); (ii) if Mr. David
Simon's employment was terminated as a result of death or disability, or if both a change in control occurred and we terminated his employment without cause or he resigned for good reason, in each
case on December 31, 2018, then 100% of the unvested LTIP Units (640,000) would vest and 100% of the shares in the escrow (114,423) would vest. Value is based on a stock price of $167.99, the
closing price of our common stock as reported by the NYSE for December 31, 2018, net of the purchase price of $0.25 per unit (with no net reduction for the escrowed shares).
-
(5)
-
Determined
by our current severance policy under which we pay severance to full-time employees whose employment is involuntarily terminated in the event of certain
reductions in force, mergers or outsourcings. The amount of the severance is one week of pay for every year of service up to a maximum of sixteen weeks of pay.
-
(6)
-
We
paid our 2018 bonuses in 2019. Our Annual Cash Incentive Compensation program does not expressly address the consequences of a termination of employment prior to
payment of the bonus. However, for the purposes of this table, we have assumed the Committee would approve paying the earned bonus to an executive who, as of the end of the year, died or became
disabled or whose employment was terminated without cause or good reason following a change in control, other than Mr. David Simon, whose employment agreement contains provisions regarding the
payment of bonuses.
-
(7)
-
Restricted
Stock for Mr. McDade includes the unvested shares of restricted stock he earned under the Corporate ICP in 2015, 2016 and 2017. The value is based
on a stock price of $167.99, the closing price of our common stock as reported by the NYSE on December 31, 2018. Also included is the $364,000 Mr. McDade earned under the 2018 Corporate
ICP although the number of shares of restricted stock that amount will be converted into will not be determined until April 1, 2019.
EMPLOYMENT AGREEMENT WITH DAVID SIMON
On July 6, 2011, the Committee unanimously approved entering into a new long-term employment agreement with Mr. David Simon,
commencing on July 6, 2011 and ending on July 5, 2019. Pursuant to the employment agreement, Mr. David Simon serves as the Company's CEO, a member of the Board and, except under
certain circumstances described in the employment agreement, Chairman of the Board. The employment agreement provides Mr. David Simon with an annual base salary of $1,250,000, subject to annual
review and increase, but not decrease, by the Committee. The agreement also provides that he is eligible to receive an annual target cash bonus of 200% of his base salary, based on the degree to which
reasonably attainable performance goals are achieved.
Termination-related provisions of employment agreement with Mr. David Simon.
If Mr. David Simon is terminated by us without "Cause" or by him for
"Good Reason," (each as defined in Mr. David Simon's Employment Agreement) subject to his execution of a release of claims against us, he will receive severance in an amount equal to two times
the sum of his annual base salary and his target Annual Cash Incentive Compensation paid in equal installments over a two-year period.
In
addition, also subject to his execution of a release of claims against us, a portion of the remaining unvested LTIP units granted under the 2011 CEO Retention Agreement will become vested LTIP
units upon Mr. David Simon's termination if the Termination FFO equals or exceeds a specified FFO amount. For details regarding the Termination FFO, the Specified FFO and the portion that can
be earned upon various terminations please see pages 36-37 of this Proxy Statement.
If
Mr. David Simon is terminated due to disability or if he dies, he would be entitled to receive (A) the payments described in footnotes (2), (3), and (4) in the Estimated
Post-Employment Payments Under Alternative Termination Scenarios table above, (B) pursuant to the terms of his annual performance-based LTIP Program award agreements, a number of LTIP units
under the annual LTIP Program determined at the end of the applicable performance period based on actual performance for that period and then prorated by a partial service factor based on the number
of days during the performance period prior to his death or disability, (C) pursuant to the terms of his restricted stock award agreements, full vesting (in the event of death) or continued
vesting over the four year schedule (in the event of disability) of his restricted shares, and (D) full vesting of his 2011 CEO Retention Agreement (as defined below).
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
37
Table of Contents
EXECUTIVE COMPENSATION TABLES
If
Mr. David Simon is terminated by us without "cause" or by him for "good reason" following a change in control, he would be entitled to receive (A) the payments described in
footnotes (2), (3), and (4) in the Estimated Post-Employment Payments Under Alternative Termination Scenarios table above, (B) all of the unvested LTIP units under the 2011 CEO
Retention Agreement fully vest (these also vest if such termination is during the six month period prior to a change in control if such change in control occurs), (C) pursuant to the terms of
his annual performance-based LTIP unit awards, any unearned LTIP units multiplied by a partial service factor based on the number of days during the performance period to the date of the change in
control, and (D) pursuant to the terms of his restricted stock award agreements, full vesting of his restricted stock. If there is a change in control, but Mr. David Simon is not
terminated, he is entitled to the payments described in subsection (C), and (D) of this paragraph.
Amendments to the 2011 CEO Retention Agreement.
Effective as of December 31, 2013 Mr. David Simon, the Operating Partnership and the Company amended
and restated the Series CEO LTIP Unit Award Agreement dated as of July 6, 2011, as amended on December 22, 2011, March 29, 2013 as further amended and restated effective as of
December 31, 2013 (as amended and restated, the "2011 CEO Retention Agreement").
The
2011 CEO Retention Agreement, which was previously entirely service-based, will now become eligible to vest based on the attainment of Company based performance goals, in addition to a
service-based vesting requirement. The 2011 CEO Retention Agreement provides that if the relevant performance criteria are not achieved, Mr. David Simon will forfeit all or a portion of such
award. The performance criteria in the 2011 CEO Retention Agreement are designed to incentivize Mr. David Simon to continue upon the Company's outstanding performance achieved under his
leadership, and in the interest of aligning the 2011 CEO Retention Agreement with the Company's pay-for-performance philosophy, which has been instrumental in the creation of exceptional long-term
shareholder value.
Prior
to the December 31, 2013 amendment and restatement, Mr. David Simon's 1,000,000 CEO LTIP Units originally granted under the Series CEO LTIP Unit Award Agreement dated as of
July 6, 2011 vested over an eight year period, with one third vesting in 2017, one third vesting in 2018 and one third vesting in 2019. Pursuant to the 2011 CEO Retention Agreement, effective
December 31, 2013, 720,000 of such CEO LTIP Units were cancelled and in respect thereof 360,000 CEO LTIP Units were granted to Mr. David Simon on December 31, 2013 (the "A Units")
and 360,000 CEO LTIP Units were granted to Mr. David Simon on January 1, 2014 (the "B Units"). 280,000 of the CEO LTIP Units granted on July 6, 2011 were cancelled on
January 1, 2015 and in respect thereof 280,000 CEO LTIP Units were granted on January 1, 2015 (the "C Units"). The A Units,
B Units
and C Units may only be earned if and to the extent the applicable performance criteria and vesting requirements are met, as set forth below.
Because
the Company achieved FFO per share in excess of $8.86 in 2015, Mr. David Simon earned 100% of the A Units. If the Company had not achieved FFO per share of at least $8.07 for 2015, then
the 360,000 A Units would not have been earned. If the Company had achieved FFO per share of $8.07 for 2015, then 50% of such A Units would have been earned, subject to fulfillment of additional
service-based vesting requirements. If the Company had achieved FFO per share of greater than $8.07 but less than $8.86 for 2015, then the number of A Units that would have been earned would have been
between 50% and 100% based on linear interpolation, subject to fulfillment of additional service-based vesting requirements.
Because
the Company achieved FFO per share in excess of $9.40 in 2016, Mr. David Simon earned 100% of the B Units. If the Company did not achieve FFO per share of at least $8.43 for 2016, then
the 360,000 B Units would not have been earned. If the Company achieved FFO per share of $8.43 for 2016, then 50% of such B Units would have been earned, subject to fulfillment of additional
service-based vesting requirements. If the Company had achieved FFO per share of greater than $8.43 but less than $9.40 for 2016, then the number of B Units that would have been earned would have been
between 50% and 100% based on linear interpolation, subject to fulfillment of additional service-based vesting requirements.
Because
the Company achieved FFO per share in excess of $9.80 in 2017, Mr. David Simon earned 100% of the C Units. If the Company did not achieve FFO per share of at least $8.62 for 2017, then
the 280,000 C Units would not have been earned. If the Company achieved FFO per share of $8.62 for 2017, then 50% of such C Units would have been earned, subject to fulfillment of additional
service-based vesting requirements. If the Company had achieved FFO per share of greater than $8.62 but less than $9.80 for 2017, then the number of C Units that would have been earned would have been
between 50% and 100% based on linear interpolation, subject to fulfillment of additional service-based vesting requirements.
The
earned A Units vested on January 1, 2018. The earned B Units vested on January 1, 2019, and the earned C Units shall vest on June 30, 2019, in each case
subject to Mr. David Simon's continued employment or service with the Company through such applicable date, provided that the C Units may become vested earlier upon certain terminations of
employment or service, as set forth below.
The
2011 CEO Retention Agreement contains a double trigger change in control provision which requires Mr. David Simon to
38
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
EXECUTIVE COMPENSATION TABLES
be
terminated by us without Cause or to resign for Good Reason, in each case during the period commencing six months prior to and ending eighteen months after the change in control, in order for the
CEO LTIP Units to vest in connection with a change in control.
The
2011 CEO Retention Agreement provides that if Mr. David Simon dies or his employment or service is terminated by us due to Disability, then all unvested CEO LTIP Units will automatically
vest. If Mr. David Simon's employment or service is terminated by us without Cause or by Mr. David Simon for Good Reason, then the unearned CEO LTIP Units will not automatically vest,
but will be eligible to vest as follows: (i) if such termination occurs after June 30, 2015 and on or prior to December 31, 2017, a portion of the remaining Unvested CEO LTIP
Units will be earned equal to the product of (A) 100% of the unearned CEO LTIP Units that will vest if and to the extent that the Termination FFO per share is equal to or greater than FFO B per
share (as defined below) for the year of termination and between 50% to 100% if such Termination FFO is equal to or greater than FFO A per share (as defined below) but less than FFO B per share (the
exact percentage to be based on linear interpolation) multiplied by (B) a quantity equal to (1) the number of completed calendar months that Mr. David Simon completed from
July 6, 2011 through the date of the such termination, divided by (2) 96 (the number of calendar months in his employment agreement term) and (ii) if such termination occurs after
December 31, 2017, a portion of the remaining Unvested CEO LTIP Units shall become Vested CEO LTIP Units with such portion equal to the product of (A) the number of Unvested CEO LTIP
Units (after taking into account the number of Unvested CEO LTIP Units if any that shall be forfeited after calendar year 2017 to the extent the performance goals were not achieved), multiplied by
(B) (1) the number of completed calendar months from July 6, 2011 through the date of the such termination, divided by (2) 96.
"Termination
FFO" per share means the FFO per share for the most recent calendar quarter multiplied by four (resulting in an annualized FFO per share number). "FFO A" means for 2015, 2016 and 2017,
respectively: (i) for 2015: $8.07 multiplied by a percentage equal to (A) one hundred percent minus (B) the CAGR for the five year period preceding 2015; (ii) for 2016:
$8.43
multiplied by a percentage equal to (A) one hundred percent minus (B) the CAGR for the five year period preceding 2016 and (iii) for 2017: $8.62 multiplied by a percentage
equal to (A) one hundred percent minus (B) the CAGR for the five year period preceding 2017. "FFO B" means for 2015, 2016 and 2017, respectively: (i) for 2015: $8.86 multiplied by
a percentage equal to (A) one hundred percent minus (B) the CAGR for the five year period preceding 2015; (ii) for 2016: $9.40 multiplied by a percentage equal to (A) one
hundred percent minus (B) the CAGR for the five year period preceding 2016 and (iii) for 2017: $9.80 multiplied by a percentage equal to (A) one hundred percent minus
(B) the CAGR for the five year period preceding 2017.
Pursuant
to the 2011 CEO Retention Agreement, FFO shall be increased or decreased to give effect to (i) extraordinary, unusual or nonrecurring items, including without limitation a spin-off, or
as a result of dispositions not made in the ordinary course, (ii) litigation or claim judgments or settlements; (iii) changes in tax laws, accounting principles, or other laws or
regulatory rules affecting reported results (iv) other specific unusual or nonrecurring events, or objectively determinable category thereof; (v) nonrecurring charges; and (vi) a
change in the Company's fiscal year. Each such adjustment, if any, shall be made by the Committee in order to prevent the undue dilution of Mr. David Simon's rights.
Under
the 2011 CEO Retention Agreement, the after-tax portion of distributions paid on Mr. David Simon's unvested CEO LTIP units are used to buy shares of the Company's common stock, which are
placed in escrow. As of December 31, 2018, there were 114,423 shares in escrow. In modifying the 2011 CEO Retention Agreement, the Committee and Mr. David Simon agreed that the escrowed
shares (and any shares purchased with distributions in respect of the remaining 280,000 CEO LTIP units under the 2011 CEO Retention Agreement prior to such units' cancellation on January 1,
2015) will be released to Mr. David Simon on a pro rata basis based upon the satisfaction of performance-based and service-based criteria. Based on the foregoing, in connection with
Mr. David Simon's B Units vesting on January 1, 2019, 64,362 shares that had been purchased with distributions on the units were released from escrow.
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
39
Table of Contents
ASSESSMENT OF COMPENSATION-RELATED RISKS
Our
senior management team conducts an ongoing assessment of the risks related to our compensation policies and practices. This team reviews and discusses the various design features and
characteristics of our Company-wide compensation policies and programs. The team also considers the elements of our compensation program for our senior executives including the performance measures
used for the Annual Cash Incentive Compensation program and our long-term incentive programs. Senior management obtains and evaluates data from a REIT peer group reflecting a comparison of
compensation practices and pay levels for comparable positions within that group to assess the competitiveness of our compensation levels.
The
Committee is responsible for overseeing the risks relating to compensation policies and practices affecting senior management on an ongoing basis. In performing this responsibility, the Committee
utilizes the services of its independent compensation consultant to obtain advice and assistance in the design and implementation of incentive compensation programs for our executives. The consultant
does no work for management, unless requested by the Chairman of the Committee. In reviewing whether our compensation policies and practices encourage excessive risk-taking, the Committee also
considers senior management's assessment described above. We believe the following factors reduce the likelihood that our compensation policies and practices would encourage excessive
risk-taking:
-
-
Our compensation mix is generally designed in large part to reward long-term performance
and is
balanced among (i) fixed cash components, (ii) incentives that reward improvements in total Company performance and business unit performance, (iii) components measured by
individual performance, and (iv) performance-based incentive opportunities that may be realized in the future.
-
-
Our policies and programs are intended to encourage retention
of our executives so that they can
focus on achieving long-term objectives.
-
-
Our overall compensation is maintained at levels that are competitive
with the market.
-
-
Our Annual Cash Incentive Compensation is weighted
based on the achievement of several different
financial and operational performance measures; the Committee has
ultimate
oversight in determining the Annual Cash Incentive Compensation allocation, thereby mitigating the risk that any one measure can dominate the payouts based on any formula.
-
-
Our NEO 2018 Performance-Based LTIP Program is composed of two tranches; one with a two-year performance period and one
with a three-year performance period; the program uses both a relative TSR performance measure and achievement of an objective financial metric growth rate for each
tranche.
-
-
Our NEO 2018 Performance-Based LTIP Program includes a two-year vesting requirement
after the
conclusion of the two-year performance period and a one-year vesting requirement after the conclusion of the three-year performance period.
-
-
Awards under Mr. David Simon's 2011 CEO Retention Agreement are subject to performance conditions and post-earning
vesting requirements.
The awards were only earned if performance measures were achieved.
-
-
Executive officers are subject to minimum stock ownership guidelines
, equity award multi-year
vesting requirements and limitations on trading our securities, including prohibitions on hedging our securities, under our Insider Trading Policy.
-
-
The Committee has discretion to decrease incentive performance targets and payouts
when it
determines that such adjustments would be in the best interests of the Company and our shareholders.
-
-
All LTIP unit awards contain "double trigger" change of control provisions.
-
-
All award agreements we have entered into with executive officers contain clawback provisions permitting the Company to
recoup compensation tied to the achievement of financial targets
if the compensation would not have been earned based on restated financial results.
Based
on the foregoing, the Committee believes that our compensation policies and programs are not reasonably likely to have a material adverse effect on the Company.
40
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
2018 PAY RATIO DISCLOSURE
As
required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and in accordance with the rules of the SEC adopted thereunder, we are providing the following
disclosure about the relationship of the annual total compensation of our employees to the annual total compensation of Mr. David Simon, our Chief Executive Officer. To understand this
disclosure, we think it is important to give context to our operations. Our corporate headquarters are in Indianapolis, Indiana. We own, develop and manage premier shopping, dining, entertainment and
mixed-use destinations. As of December 31, 2018, we owned or held an interest in 206 income-producing properties in 37 states and Puerto Rico. Internationally, as of December 31, 2018,
we had ownership interests in 15 properties in Asia, five properties in Canada and Mexico and eight properties in Europe, of which six properties are consolidated. Notwithstanding our international
properties, fewer than 5% of our employees are located outside of the United States. We strive to create a global compensation program, which is competitive in terms of both the position and the
geographic location in which the employee is located. Accordingly, our pay structures vary amongst employees based on position and geographic location.
IDENTIFICATION OF MEDIAN EMPLOYEE
There have not been any material changes to the Company's employee population or compensation arrangements during 2018 that we believe would
significantly impact this year's pay ratio disclosure. Accordingly, as permitted by SEC executive compensation disclosure rules, we are electing to use the same median employee as was used for
purposes of our 2017 pay ratio disclosure.
In
calculating the Company's 2017 pay ratio we selected October 1, 2017, as the date on which to determine our median employee. As of that date, we had approximately 3,500 employees, of which
30 were located outside of the U.S. To determine our median employee, we considered employees who were employed by the Company or any of its wholly owned or consolidated subsidiaries on
October 1, 2017, whether the employees were full-time, part-time, seasonal, or temporary. Because fewer than 5% of our employees were international employees as of October 1, 2017, we
excluded our international workforce, which at that time consisted of 24 employees in Canada, four employees in Luxembourg, one employee in France, and one employee in Hong Kong.
For
purposes of calculating the compensation of our employees to determine the median employee we measured compensation using the 12-month period ending December 31, 2017, and used a
consistently applied compensation measure that consists of the elements described below:
-
-
Salary: Including base salary, pay for time worked, premium pay (e.g. overtime), and differentials (e.g. holiday worked).
-
-
Bonus: Including variable pay such as annual bonuses, spot bonuses, and commissions.
In
determining the annual total compensation of the median employee, we calculated such employee's compensation in accordance with Item 402(c)(2)(x) of Regulation S-K as required
pursuant to SEC executive compensation disclosure rules. This calculation is the same calculation used to determine total compensation for purposes of the 2018 Summary Compensation Table with respect
to each of the named executive officers.
2018 PAY RATIO
The Company has made the following calculations in accordance with the rules of the SEC:
-
-
The median of the annual total compensation of all of our employees, other than our CEO, was $66,910.
-
-
Our CEO's annual total compensation, as reported in the "Total" column of the 2018 Summary Compensation Table, was $11,436,918.
-
-
Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees
is estimated to be 171 to 1.
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
41
Table of Contents
PROPOSAL 3:
Ratification of Independent Registered Public Accounting Firm
The
Audit Committee has selected Ernst & Young LLP ("EY"), as our independent registered public accounting firm for 2019. Shareholders have the opportunity to ratify that selection in an
advisory vote.
The
Report of the Audit Committee, which follows this proposal, contains information on the amount of fees paid to EY during 2018 and 2017. Representatives of EY will be present at the 2019 Annual
Meeting, will have an opportunity to make a statement if they desire to do so and will be available to respond to questions.
If
the holders of a majority of voting shares voting on this matter do not approve the proposal, the Audit Committee will take into consideration the views of the shareholders and may, but will not be
required to, appoint a different independent registered public accounting firm.
|
|
|
|
|
THE AUDIT COMMITTEE AND THE BOARD RECOMMEND THAT SHAREHOLDERS VOTE "
FOR
" RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
2019.
|
THE BOARD'S STATEMENT IN OPPOSITION TO PROPOSAL 5
The Company's Code of Business Conduct and Ethics provides that "No director or employee should make, authorize or permit any unlawful
contributions, expenditure or use of the Company's funds or property for political purposes." We are committed to the highest ethical standards, and we have procedures in place to ensure that our
extremely limited political contributions are subject to appropriate oversight and in the best interest of our shareholders.
The
Company did not make any political contributions in 2018. If the Company were ever to make any such contributions, such information would be publicly available from several sources.
As
a general matter, the Company does not make contributions to political candidates or organizations, nor employ its resources for the purpose of helping to elect candidates to public office, even
where permitted by law. Nor does the Company have a political action committee. In very limited situations, and where permitted by law, the Company may make contributions with respect to state and
local ballot questions and referenda that have a direct impact on the Company's business. Information with respect to any such contributions made in connection with ballot questions and referenda is
publicly available through local boards of election.
We
do belong to a limited number of trade associations which may advocate on behalf of policy issues that are important to members' interests, including the Company's business. While we do not always
share or agree with all of the views espoused by such trade associations, we believe they may be helpful for advocating in favor of the common interests of their members. We regularly review the costs
and benefits of our memberships in trade associations. In addition, trade associations are subject to public disclosure obligations with respect to their lobbying and political contributions and
expenditures. We do not believe that the information requested by the proposal will add value for shareholders and that it could result in competitive harm to the Company. Disclosure regarding our
trade association membership dues may misrepresent our public policy agenda, as trade associations operate on an independent basis and we do not always agree with all positions taken by them. We
believe that any additional political contribution reporting requirements that go beyond those required under existing law should be applicable to all participants engaged in the political process,
rather than to us alone, as the proposal requests.
In
the Board's view, to produce the detailed report requested by the proposal would require the Company to incur undue cost and administrative burden, without commensurate benefit to our shareholders.
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THE BOARD RECOMMENDS A VOTE "
AGAINST
" THIS PROPOSAL BASED ON THE REASONS DISCUSSED ABOVE. PROXIES SOLICITED BY THE BOARD WILL BE VOTED "
AGAINST
" THIS PROPOSAL UNLESS A SHAREHOLDER
INDICATES OTHERWISE IN VOTING THE PROXY.
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52
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
SUSTAINABILITY
Simon
has a long-standing commitment to our shareholders and communities to conduct our business in an environmentally and socially responsible manner. Our corporate
sustainability
vision is
to be recognized as a leader in sustainable development and operations of retail properties
in the U.S.
We
incorporate sustainable thinking into various areas of our business; from how we plan, develop, and operate our properties, to how we do business with our customers, engage with our communities,
and create a productive and positive work environment for our employees. Our
sustainability
framework focuses on four
key areas: Properties, Customers, Communities, and Employees. We have acted on each of these areas by setting specific goals and measuring progress to ensure accountability of our commitments.
We
leverage
sustainability
initiatives to achieve cost efficiencies in our operations. By implementing a range of
energy management practices and continuous energy monitoring and reporting, we have reduced our energy consumption at comparable properties every year since 2003. As a result, excluding new
developments, we have reduced the electricity usage over which we have direct control by 363 million kWh since 2003. This represents a 37% reduction in electricity usage across a portfolio of
comparable properties.
Our
reduction in greenhouse gas emissions resulting from our energy management efforts in the same time period is 261,169 metric tons of CO
2
e. This figure includes emission streams that
have been consistently tracked since 2003 including scope 1, scope 2, and for scope 3 only employee commuting and business travel. Additional emission streams, such as emissions generated from solid
waste management, use of refrigerants and tenants' plug-load consumptions, have been included in Simon's
sustainability
disclosure since 2013 and are reported in Simon's annual
sustainability
report published in accordance with the guidelines of the Global Reporting Initiatives (GRI), the most
widely used international standard for
sustainability
reporting.
Third
party international organizations regularly recognize Simon's
sustainability
performance. Again in 2018, Simon
was awarded a score of A- by CDP in the climate change questionnaire, which identifies the company as a
sustainability
leader for driving significant reduction in emissions, implementing
strategies to manage climate
related risks and opportunities, as well as setting company-wide
sustainability
goals. Simon was also awarded a Green
Star ratingthe designation awarded for leadership in
sustainability
performance by the Global Real Estate
Sustainability
Benchmark (GRESB).
SIMON SUSTAINABILITY FRAMEWORK
FOR ADDITIONAL INFORMATION, PLEASE READ OUR SUSTAINABILITY REPORT AVAILABLE AT SUSTAINABILITY.SIMON.COM.
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
53
Table of Contents
ADDITIONAL INFORMATION
ANNUAL REPORT
Our Annual Report, including financial statements audited by EY, our independent registered public accounting firm, and EY's report thereon, is
available to our shareholders on the Internet as described in the Notice. In addition, a copy of our
Annual Report will be sent to any shareholder without charge (except for exhibits, if requested, for which a reasonable fee will be charged), upon written request to: Investor Relations, Simon
Property Group, Inc., 225 West Washington Street, Indianapolis, Indiana 46204. Our Annual Report is also available and may be accessed free of charge at
annualreports.simon.com
.
SHAREHOLDER PROPOSALS AT OUR 2020 ANNUAL MEETING
RULE 14a-8 SHAREHOLDER PROPOSALS
To be considered for inclusion in the proxy materials for the 2020 annual meeting of shareholders pursuant to Rule 14a-8 of the Exchange
Act, a shareholder proposal made pursuant to such rule must be received by the General Counsel and Secretary of the Company, Steven E. Fivel, at 225 West Washington Street, Indianapolis, Indiana
46204, by the close of business on November 28, 2019. For any such proposal to be considered for inclusion, it should be delivered by U.S. Postal Service-Priority Mail Express with proof of
delivery or an internationally recognized overnight carrier (providing proof of delivery). If the date of such meeting is changed by more than 30 days from May 8, 2020, the proposal must
be received by the Company at a reasonable time before the Company begins to print and send its proxy materials. In addition, shareholder proposals must otherwise comply with the requirements of
Rule 14a-8 promulgated under the Exchange Act and any other applicable laws and regulations.
SHAREHOLDER PROPOSALS OR OTHER BUSINESS OUTSIDE OF THE RULE 14a-8 PROCESS
The Company's By-Laws also establish an advance notice procedure for shareholders who wish to present a proposal of business or nominate a
director before an annual meeting of shareholders but do not intend for the proposal to be included in the Company's Proxy Statement pursuant to Rule 14a-8. Pursuant to the Company's By-Laws,
such a proposal of business or nomination of a director may be brought before the meeting by a shareholder who is entitled to vote at such meeting and who gives timely notice of such proposal or
nomination and otherwise satisfies the applicable requirements. To be timely for the 2020 annual meeting of shareholders, such notice should be delivered by U.S. Postal Service-Priority Mail Express
with proof of delivery or an internationally recognized overnight carrier (providing proof of delivery), and must be received by the General Counsel and Secretary of the Company, Steven E. Fivel, at
225 West Washington Street, Indianapolis, Indiana 46204 by the close of business on January 8, 2020. If the date of the 2020 annual meeting of
shareholders
is changed by more than 30 days from May 8, 2020, the proposal must be received by the Company not later than the close of business on the later of 120 calendar days in
advance of the 2020 annual meeting of shareholders or 10 calendar days following the date upon which public announcement of the date of the meeting is first made.
PROXY ACCESS NOMINATIONS
The Company's By-Laws also establish a proxy access provision for shareholders who wish to include director nominees in the Company's proxy
statement. Such nomination of a director may be submitted by a shareholder if the shareholder nominee, nominating shareholder and nomination process meet certain requirements outlined in our By-Laws,
including that timely notice of such director nomination is provided. To be timely for the 2020 annual meeting of shareholders, such notice should be delivered by U.S. Postal Service-Priority Mail
Express with proof of delivery or an internationally recognized overnight carrier (providing proof of delivery), and must be received by the General Counsel and Secretary of the Company, Steven E.
Fivel, at 225 West Washington Street, Indianapolis, Indiana 46204 not later than November 28, 2019 nor earlier than October 29, 2019. If the date of the 2020 annual meeting of
shareholders is changed more than 30 days from May 8, 2020, the notice must be received no later than the close of business on the 10
th
day following the day on
which public announcement of the date of the annual meeting is first made. For more information on our proxy access provision, see the section of this Proxy Statement titled "Corporate Governance of
the CompanyPolicies on Corporate Governance."
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act and thus file periodic reports and other information with the SEC. These
reports and the other information we file with the SEC can be read and copied at the public reference room facilities maintained by the SEC in Washington, DC at 100 F Street, N.E., Washington,
DC 20549. The SEC's telephone number to obtain information on the operation of the public reference room is (800) SEC-0330. These reports and other information are also filed by us
electronically with the SEC and are available at its website,
www.sec.gov
.
INCORPORATION BY REFERENCE
To the extent this Proxy Statement has been or will be specifically incorporated by reference into any filing under the Securities Act of 1933,
as amended, or the Exchange Act, the sections of this Proxy Statement, titled, "Compensation
Committee Report" and "Report of the Audit Committee" should not be deemed to be so incorporated unless specifically otherwise provided in any such filing.
54
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
FREQUENTLY ASKED QUESTIONS AND ANSWERS
WHAT IS A PROXY?
A proxy is your legal designation of another person to vote on your behalf. By completing and returning the enclosed proxy card, you are giving
the persons named in the proxy card, Mr. David Simon and Mr. Larry C. Glasscock, the authority to vote your shares in the manner you indicate on your proxy card.
WHO IS ELIGIBLE TO VOTE?
You are eligible to vote on all matters presented to the shareholders at the meeting if you own shares of our common stock, par value $.0001
per share at the close of business on the Record Date.
All
of the Class B common stock is subject to voting trusts as to which Mr. David Simon and Mr. Herbert Simon are the voting trustees. The Board is not soliciting proxies in
respect of the Class B common stock.
HOW MANY SHARES MAY VOTE AT THE MEETING?
On the Record Date, there were outstanding 308,985,608 shares of common stock and 8,000 shares of Class B common stock. As a result, a
total of 308,993,608 shares are entitled to vote (which we refer to in this Proxy Statement as the "voting shares") on all matters presented to shareholders at the meeting.
HOW MANY SHARES MUST BE PRESENT TO HOLD THE MEETING?
The presence at the meeting in person or by proxy of holders of shares representing a majority of all the votes entitled to be cast at the
meeting, or 154,496,805 voting shares, will constitute a quorum for the transaction of business.
WHAT IS THE DIFFERENCE BETWEEN A "SHAREHOLDER OF RECORD" AND A "STREET NAME" HOLDER?
These terms describe how your shares are held. If your shares are registered directly in your name with Computershare Shareowner Services, our
transfer agent, you are a "shareholder of record." If your shares are held in the name of a brokerage, bank, trust or other nominee as a custodian, you are a "street name" holder.
HOW DO I VOTE MY SHARES?
If you are a
"shareholder of record,"
you have several choices. You can vote your shares by
proxy:
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Via the Internet by visiting
www.proxyvote.com
;
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By telephone by dialing toll-free 1-800-690-6903;
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By mailing your proxy card. Please refer to the specific instructions set forth on the Notice or printed proxy materials. For security reasons,
our electronic voting system has been designed to authenticate your identity as a shareholder; or
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By voting in person at Simon Property Group Headquarters, 225 W. Washington Street, Indianapolis, Indiana 46204 on May 8, 2019 at
8:30 a.m. EDT.
If
you are a "street name" holder, you can vote your shares by following the instructions on the voting instructions or your broker/bank/trustee/nominee will provide you with materials and
instructions for voting your shares.
CAN I VOTE MY SHARES IN PERSON AT THE MEETING?
If you are a
"shareholder of record,"
you may vote your shares in person at the meeting. If you
hold your shares in
"street name,"
you must obtain a proxy from your broker, bank, trustee or nominee, giving you the right to vote the shares at the
meeting.
HOW DO I SIGNUP FOR ELECTRONIC DELIVERY OF PROXY MATERIALS?
On the Internet visit
www.proxyvote.com
with your proxy card
in hand with your control number, and follow the instructions to indicate that you agree to receive or access proxy materials electronically in future years. The Company will make a $1.00 charitable
contribution to the
Simon Youth Foundation
(
www.syf.org
) on behalf of each shareholder who signs up for electronic delivery.
ADMISSION REQUIREMENTSWHAT DO I NEED TO DO TO ATTEND THE MEETING IN PERSON?
Proof of stock ownership and some form of government-issued photo identification (such as a valid driver's license or passport) will be
required for admission to the meeting. Only shareholders who owned Company common stock as of the close of business on the Record Date are entitled to attend the meeting.
If
your shares are registered in your name and you owned Company common stock as of the close of business on the Record Date, you only need to provide some form of government issued photo
identification for admission. If your shares are held in a bank or brokerage account, contact your bank or broker to obtain a written legal proxy in order to vote your shares at the meeting. If you do
not obtain a legal proxy from your bank or broker, you will not be entitled to vote your shares, but you can still attend the meeting if you bring a recent bank or brokerage statement showing that you
owned shares of common stock on the Record Date, and provide some form of government-issued photo identification.
WHAT ARE THE BOARD'S RECOMMENDATIONS ON HOW I SHOULD VOTE MY SHARES?
The Board recommends that you vote your shares as follows:
-
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Proposal 1:
FOR
the election of all ten (10) independent director nominees named in this
Proxy Statement.
-
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Proposal 2:
FOR
the advisory vote to approve the compensation of our Named Executive Officers.
-
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Proposal 3:
FOR
the ratification of the appointment of Ernst & Young LLP as our
independent registered public accounting firm for 2019.
-
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Proposal 4:
FOR
the approval of the 2019 Stock Incentive Plan.
-
-
Proposal 5:
AGAINST
the Shareholder Proposal.
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
55
Table of Contents
FREQUENTLY ASKED QUESTIONS AND ANSWERS
HOW WOULD MY SHARES BE VOTED IF I DO NOT SPECIFY HOW THEY SHOULD BE VOTED?
If you sign and return a proxy card without indicating how you want your shares to be voted, the persons named as proxies will vote your shares
as follows:
-
-
Proposal 1:
FOR
the election of all ten (10) independent director nominees named in this
Proxy Statement.
-
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Proposal 2:
FOR
the advisory vote to approve the compensation of our Named Executive Officers.
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Proposal 3:
FOR
the ratification of the appointment of Ernst & Young LLP as our
independent registered public accounting firm for 2019.
-
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Proposal 4:
FOR
the approval of the 2019 Stock Incentive Plan.
-
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Proposal 5:
AGAINST
the Shareholder Proposal.
HOW WILL ABSTENTIONS BE TREATED?
For the 2019 Annual Meeting, abstentions will have no effect on the outcome of Proposal 1: Election of Directors, Proposal 2: Advisory Vote to
Approve the Compensation of our NEOs, Proposal 3: Ratification of Independent Registered Public Accounting Firm, and Proposal 5: A Shareholder Proposal because abstentions do not count as votes cast
under the majority
of votes cast standard. Abstentions will have the same effect as votes against Proposal 4: Approval of the 2019 Stock Incentive Plan because votes cast FOR Proposal 4 must
represent
more than 50% of votes cast plus abstentions.
However,
abstentions will be considered present and entitled to vote at the 2019 Annual Meeting and will be counted towards determining whether or not a quorum is present.
WHAT ARE BROKER NON-VOTES AND HOW WILL BROKER NON-VOTES BE TREATED?
A broker non-vote occurs when a nominee, such as a broker, holding shares for a beneficial owner does not vote on a particular proposal because
the nominee does not have discretionary authority to vote for that particular proposal and has not received instructions from the beneficial owner as to how to vote its shares. Proposals 1, 2, 4 and 5
fall into this category. If you do not provide your broker with voting instructions, any of your shares held by the broker will not be counted as having been voted on any of these proposals. We do not
expect there to be any broker non-votes with respect to Proposal 3, as brokers are entitled to vote on the ratification of independent registered accounting firms. "Broker non-votes" will be
considered present at the 2019 Annual Meeting and will be counted towards determining whether or not a quorum is present.
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
All voting shares are entitled to one vote per share. To approve each of the proposals, the following votes are required from the holders of
voting shares.
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PROPOSAL
NUMBER
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SUBJECT
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VOTE REQUIRED
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IMPACT OF ABSTENTIONS AND BROKER NON-VOTES, IF ANY
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1
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Elect the ten (10) independent director nominees named in this Proxy Statement
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More votes FOR than AGAINST. Under our By-Laws, for purposes of this proposal, a "majority of votes cast" means more votes cast FOR than AGAINST.
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Abstentions and broker non-votes will not impact the outcome of this proposal, as they are not considered votes cast under the majority of votes cast standard.
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2
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Advisory vote to approve the compensation of our Named Executive Officers
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Majority of votes cast.
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Abstentions and broker non-votes will not impact the outcome of this proposal, as they are not considered votes cast under the majority of votes cast standard.
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3
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Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2018
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Majority of votes cast.
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Abstentions will not impact the outcome of this proposal, as they are not considered votes cast under the majority of votes cast standard. We do not expect there to be any broker non-votes with respect to this proposal, as brokers are entitled to
vote on the ratification of independent registered accounting firms.
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4
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Vote to approve the 2019 Stock Incentive Plan
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Majority of votes cast.
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Abstentions will count as votes AGAINST the proposal. Broker non-votes will not impact the outcome of this proposal, as they are not considered votes cast under the majority of votes standard.
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5
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Shareholder Proposal
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Majority of votes cast.
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Abstentions and broker non-votes will not impact the outcome of this proposal, as they are not considered votes cast under the majority of votes cast standard.
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The
voting trustees who vote the Class B common stock have advised us that they intend to vote all shares of the Class B common stock FOR the election of all nominees, FOR
Proposals 2, 3 and 4 being submitted by the Board and AGAINST Proposal 5.
WHY DID I RECEIVE MORE THAN ONE NOTICE OR PROXY CARD?
You will receive multiple Notices or cards if you hold your shares in different ways (e.g., joint tenancy, trusts, custodial accounts)
or in multiple accounts. If your shares are held by a broker (i.e., in "street name"), you will receive your proxy card or other voting information from your broker, and you will
56
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
FREQUENTLY ASKED QUESTIONS AND ANSWERS
return
your proxy card(s) to your broker. You should vote on and sign each proxy card you receive.
CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY PROXY CARD?
You may revoke your proxy by doing one of the following:
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By sending a written notice of revocation to our Secretary at 225 West Washington Street, Indianapolis, Indiana 46204 that is received prior to
the 2019 Annual Meeting, stating that you revoke your proxy;
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By signing a later-dated proxy card and submitting it so that it is received prior to the 2019 Annual Meeting in accordance with the
instructions included in the proxy card(s); or
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By attending the 2019 Annual Meeting and voting your shares in person.
WHAT HAPPENS IF ADDITIONAL MATTERS ARE PRESENTED AT THE ANNUAL MEETING?
We know of no other matters other than the items of business described in this Proxy Statement that can be considered at the 2019 Annual
Meeting. If other matters requiring a vote do arise, the persons named as proxies will have the discretion to vote on those matters for you.
WHO WILL COUNT THE VOTES?
Broadridge Financial Solutions, Inc. will count the votes and will facilitate the engagement of an independent inspector of election.
The inspector will be present at the 2019 Annual Meeting.
WILL THE MEETING BE ACCESSIBLE TO DISABLED PERSONS?
Our corporate headquarters is accessible to disabled persons. Please call us at least five days in advance at 317-685-7330 if you require any
special accommodations.
HOW CAN I REVIEW THE LIST OF SHAREHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING?
A list of shareholders entitled to vote at the meeting will be available at the 2019 Annual Meeting and for ten days prior to the 2019 Annual
Meeting, between the hours of 9:00 a.m. and 5:00 p.m. (EDT), at our offices at 225 West Washington Street, Indianapolis, Indiana 46204. If you were a shareholder on the Record Date, and
would like to view the shareholder list, please contact our Secretary to schedule an appointment.
WHO PAYS THE COST OF THIS PROXY SOLICITATION?
The Company will pay the cost of soliciting proxies in connection with this Proxy Statement, including the cost of preparing, assembling and
mailing the proxy materials. We will also request banks, brokers and other holders of record to send the proxy materials to, and obtain proxies from, beneficial owners and will reimburse them for
their reasonable expenses in doing so. In addition, we have hired Georgeson LLC to assist in the solicitation of proxies. We will pay Georgeson LLC a base fee of $25,000 for its proxy
solicitation services.
IS THIS PROXY STATEMENT THE ONLY WAY THAT PROXIES ARE BEING SOLICITED?
Certain employees or other representatives of the Company may also solicit proxies by telephone, facsimile, e-mail or personal contact. They
will not be specifically compensated for doing so.
HAS THE COMPANY ADOPTED A MAJORITY VOTING STANDARD?
Yes. Under our By-Laws, in an uncontested election a nominee will be elected only if the number of votes cast FOR a director's election exceeds
the number of votes cast AGAINST that director's election. A nominee who receives more AGAINST votes than FOR votes will be required to tender his or her resignation, subject to acceptance by the
Board. For more information, see the section of this Proxy Statement titled "Corporate Governance MattersMajority Vote Standard for Election of Directors."
WHERE DO I FIND RECONCILIATION OF NON-GAAP TERMS TO GAAP TERMS?
FFO is a non-GAAP financial measure that we believe provides useful information to investors. Please refer to Management's Discussion and
Analysis of Financial Condition and Results of Operations on pages 69-72 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, for a definition and
reconciliation of FFO to consolidated net income and FFO per share to net income per share.
NOI
is a non-GAAP financial measure that we believe provides useful information to investors. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations on
pages 69-72 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, for a definition and reconciliation of NOI to consolidated net income and set forth the
computations of portfolio NOI and comparable property NOI.
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
57
Table of Contents
FREQUENTLY ASKED QUESTIONS AND ANSWERS
ATTEND OUR ANNUAL MEETING
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Date and Time:
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May 8, 2019 at 8:30 a.m. EDT
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Location:
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Simon Property Group Headquarters
225 W. Washington Street
Indianapolis, Indiana 46204
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Record Date:
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March 15, 2019
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58
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
Table of Contents
Appendix A
SIMON PROPERTY GROUP, L.P.
2019 STOCK INCENTIVE PLAN
Table of Contents
SIMON PROPERTY GROUP, L.P.
2019 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
A-i
Table of Contents
SIMON PROPERTY GROUP, L.P.
2019 STOCK INCENTIVE PLAN
ARTICLE 1
GENERAL
1.1
Purpose
.
The purpose of this 2019 Stock Incentive Plan
(the "Plan") is to provide for certain key personnel (as defined in Section 1.3) of Simon Property Group, L.P. (the "Partnership") and certain of its Affiliates (as defined in
Section 1.6) an equity-based incentive to maintain and enhance the performance and profitability of the Partnership and Simon Property Group, Inc. (the "Company").
1.2
Administration.
(a) The
Partnership, acting through the Company as its general partner (the "General Partner"), hereby appoints the Compensation Committee of the Board of Directors of the Company (the
"Committee") as administrator of the Plan. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present or acts
approved in writing by all members of the Committee without a meeting, shall be acts of the Committee. The members of the Committee shall be appointed by and may be changed at any time and from time
to time in the discretion of, the Partnership, by action of its General Partner.
(b) The
Committee shall have the authority (i) to exercise all of the powers granted to it under the Plan, (ii) to construe, interpret and implement the Plan and any Plan
agreements executed pursuant to the Plan, (iii) to prescribe, amend and rescind rules relating to the Plan, (iv) to make any determination necessary or advisable in administering the
Plan, and (v) to correct any defect, supply any omission and reconcile any inconsistency in the Plan.
(c) The
determination of the Committee on all matters relating to the Plan or any Plan agreement shall be conclusive and binding on all recipients of awards made under this Plan.
(d) The
Committee may delegate some or all of its power and authority hereunder to the Board or, subject to applicable law, to a subcommittee of the Board, a member of the Board, the
Chief Executive Officer or another executive officer of the Company, in each case, as the Committee deems appropriate;
provided
,
however
, that the
Committee may not delegate its power and authority to a member of the Board, the Chief Executive Officer or another executive officer of
the Company with regard to (i) the selection for participation in this Plan of an officer, director or other person subject to Section 16 of the Exchange Act or (ii) decisions
concerning the timing, pricing or amount of an award to such an officer, director or other person.
(e) No
member of the Board or Committee, and neither the Chief Executive Officer nor any other executive officer to whom the Committee delegates any of its power and authority hereunder,
shall be liable for any action or determination made in good faith with respect to the Plan or any award hereunder.
1.3
Persons Eligible for Awards.
Awards
under Articles 2 and 3 of the Plan may be made to such officers, employee-directors, Eligible Directors (as defined in Section 1.6), executive, managerial, professional or other
employees, advisors and consultants ("key personnel") of the Partnership or its Affiliates, other than Herbert Simon, as the Committee shall from time to time in its sole discretion select. Eligible
Directors may also receive awards as provided in Article 4 of the Plan.
1.4
Types of Awards Under Plan.
(a) Awards
may be made under the Plan in the form of (i) stock options ("options"), (ii) stock appreciation rights related to an option ("related stock appreciation
rights"), (iii) stock appreciation rights not related to any option ("unrelated stock appreciation rights"), (iv) restricted stock awards, (v) restricted stock units,
(vi) common stock awards and (vii) performance awards, including LTIP Units (as defined in Section 1.6), all as more fully set forth herein.
(b) Options
granted under the Plan may be either (i) "nonqualified" stock options subject to the provisions of section 83 of the Internal Revenue Code of 1986, as amended
(the "Code") or (ii) options intended to qualify for incentive stock option treatment described in Code section 422.
(c) All
options when granted are intended to be nonqualified stock options, unless the applicable Plan agreement explicitly states that the option is intended to be an incentive stock
option. If an option is intended to be an incentive stock option, and if for any reason such option (or any portion thereof) shall not qualify as an incentive stock option, then, to the extent of such
nonqualification, such option (or portion) shall be regarded as a nonqualified stock option appropriately granted under the Plan provided that such option (or portion) otherwise meets the Plan's
requirements relating to nonqualified stock options.
1.5
Shares Available for Awards.
(a) Maximum
Shares Available. Subject to Section 1.5(b) and Section 5.5 (relating to adjustments upon changes in capitalization), the aggregate number of shares of Common
Stock (as defined in Section 1.6) which may be delivered under the Plan pursuant to awards
SIMON PROPERTY GROUP
2019 PROXY STATEMENT
A-1
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hereunder
shall not exceed 8,000,000 shares. In determining the number of shares of Common Stock to be counted against this share reserve in connection with any award, the following rules shall apply:
(1) Where
the number of shares subject to an award is variable on the date of grant, the number of shares to be counted against the share reserve prior to the settlement of the award
shall be the maximum number of shares that could be received under that particular award.
(2) Where
two or more types of awards are granted to a grantee in tandem with each other, such that the exercise of one type of award with respect to a number of shares cancels at least
an equal number of shares of the other, the number of shares to be counted against the share reserve shall be the largest number that would be counted against the share reserve under either of the
awards.
(3) Substitute
Awards shall not be counted against the share reserve, nor shall they reduce the shares authorized for grant to a Participant in any calendar year.
(4) For
purposes of these rules, with respect to awards that are made in the form of Units (as defined in Section 1.6) or that are convertible into Units, each Unit subject to such
award shall be treated as one share of Common Stock.
(b) Effect
of Forfeiture and Other Actions. Any shares of Common Stock or Units subject to an award granted under this Plan or the Prior Plan that is forfeited or expires or is settled
for cash shall, to the extent of such forfeiture, expiration or cash settlement, again become available for awards under this Plan, and correspondingly increase the total number of shares of Common
Stock available for grant and issuance under Section 1.5(a). The following shares of Common Stock or Units shall not, however, again become available for awards or increase the number of shares
available for grant under Section 1.5(a): (i) shares of Common Stock tendered by the grantee or withheld in payment of the purchase price of a stock option issued under this Plan or the
Prior Plan, (ii) shares of Common Stock or Units tendered by the grantee or withheld to satisfy any tax withholding obligation with respect to an award under this Plan or the Prior Plan,
(iii) shares of Common Stock repurchased by the Company with proceeds received from the exercise of an option issued under this Plan or the Prior Plan, and (iv) shares of Common Stock
subject to a stock appreciation right issued under this Plan or the Prior Plan that are not issued in connection with the stock settlement of that stock appreciation right upon its exercise.
(c) Source
of Shares. Shares of Common Stock that shall be subject to issuance pursuant to the Plan shall be authorized and unissued or treasury shares of Common Stock.
(d) Effect
of Plans Operated by Acquired Companies. If a company acquired by the Partnership or any Affiliate or with which the Partnership or any Affiliate combines has shares available
under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan
(as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to
the holders of common stock of the entities party to such acquisition or combination) may be used for awards under the Plan and shall not reduce the shares of Common Stock authorized for grant under
the Plan. Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and
shall only be made to eligible award recipients who were not employees of the Partnership or any Affiliate or Eligible Directors prior to such acquisition or combination.
1.6
Definitions of Certain Terms.
(a) "Affiliate"
means any entity which, at the time of reference, directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with,
the Partnership, as determined by the Committee in its sole and absolute discretion; provided, however, that the Company and Affiliates of the Company shall be considered Affiliates of the
Partnership.
(b) "Board"
means the Board of Directors of the Company.
(c) "Change
of Control" shall have the meaning set forth in Section 5.11(d).
(d) "Common
Stock" means the shares of common stock, par value $0.0001 per share, of the Company as constituted on the effective date of this Plan, all rights which may hereafter trade
with such shares of common stock, and any other shares into which such common stock shall thereafter be changed by reason of a recapitalization, merger, consolidation, split-up, combination, exchange
of shares or the like.
(e) "Eligible
Director" means a director of the Company who is not an employee of the Partnership or any of its Affiliates.
(f) "Exchange
Act" means the Securities Exchange Act of 1934, as amended.
(g) "Fair
market value" of a share of Common Stock or a Unit as of any date shall be the closing price of a share of Common Stock as reported on the New York Stock Exchange for the date
of grant if shares of Common Stock are then trading upon such exchange, or if no sale of Common Stock occurred on that date, on the next preceding date on which a sale occurred, or if the Common Stock
is not trading on the New York Stock Exchange, then the closing price of a share of Common Stock as reported by such other stock exchange on which shares of the Common Stock are principally trading,
on such date. In no event shall the fair market value of any share be less than its par value.
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(h) "LTIP
Units" mean long-term incentive plan interests in the Partnership created under the Partnership Agreement which, under certain conditions, are convertible into Units.
(i) "Partnership
Agreement" means the Eighth Amended and Restated Agreement of Limited Partnership Agreement of the Partnership, as amended or restated from time to time hereafter,
including any certificates of designation establishing the powers, preferences, economic rights and conditions to vesting of a series of LTIP Units.
(j) "Performance
Cycle" means the period of time established by the Committee in its sole and absolute discretion within which Performance Goals are required to be attained or satisfied.
(k) "Performance
Goals" mean the performance goals established by the Committee with respect to the Company, the Partnership or any Affiliates, in the Committee's sole and absolute
discretion. Without limiting the foregoing, (i) the Performance Goals may be based on any one or any combination of specified business criteria including, but not limited to:
(A) earnings per share; (B) return on equity; (C) return on assets; (D) market value per share; (E) funds from operations; (F) return to stockholders
(including dividends); (G) revenues; (H) cash flow; (I) cost reduction goals; (J) implementation or completion of critical activities, including achieving goals set for
development, leasing and marketing activities; (K) return on capital deployed; (L) debt, credit or other leverage measures or ratios; (M) improvement in cash flow; (N) net
operating income; and (O) such other criteria as may be determined by the Committee in its sole and absolute discretion; and (ii) the Performance Goals with respect to those business
criteria may be determined on a corporate, regional, departmental or divisional basis and may be expressed in absolute terms or by reference to an identified variable standard or by reference to
comparative performance of an identified group of businesses.
(l) "Prior
Plan" means the Simon Property Group, L.P. Amended and Restated 1998 Stock Incentive Plan.
(m) "Substitute
Award" means an award granted under this Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in
connection with a corporate transaction, including a merger, combination, consolidation or acquisition of property or stock.
(n) "Units"
means units of limited partnership interests of the Partnership as defined in the Partnership Agreement which are exchangeable for shares of Common Stock on a one-for-one
basis or cash as selected by the General Partner.
1.7
Agreements Evidencing Awards.
(a) Awards
granted under the Plan shall be evidenced by written or electronic agreements. Any such agreements shall (i) contain such provisions not inconsistent with the terms of
the Plan as the Committee may in its sole and absolute discretion deem necessary or desirable and (ii) be referred to herein as "Plan agreements."
(b) Each
Plan agreement shall set forth the number of shares of Common Stock, LTIP Units or Units subject to the award granted thereby.
(c) Each
Plan agreement with respect to the granting of a related stock appreciation right shall set forth the number of shares of Common Stock subject to the related option which shall
also be subject to the related stock appreciation right granted thereby.
(d) Each
Plan agreement with respect to the granting of an option shall set forth the amount (the "option exercise price") payable by the grantee in connection with the exercise of the
option evidenced thereby. Except with regard to Substitute Awards, the option exercise price per share shall not be less than the fair market value of a share of Common Stock on the date the option is
granted.
(e) Each
Plan agreement with respect to a stock appreciation right award shall set forth the amount (the "appreciation base") over which appreciation will be measured upon exercise of the
stock appreciation right evidenced thereby. The appreciation base per share of Common Stock subject to a stock appreciation right that is not a Substitute Award shall not be less than (i) in
the case of an unrelated stock appreciation right, the fair market value of a share of Common Stock on the date the stock appreciation right is granted, or (ii) in the case of a related stock
appreciation right, the higher of the fair market value of a share of Common Stock on the date the stock appreciation right is granted or the option exercise price per share of Common Stock subject to
the related option.
(f) Each
Plan agreement with respect to a performance award, including an LTIP Unit award, shall set forth the maximum number of shares of Common Stock, cash or Units to which a grantee
may be entitled upon fulfillment of all applicable conditions and the terms, if any, on which the award may be converted into or exchanged for shares of Common Stock or Units.
1.8
Awards to Foreign Service Providers.
The
Committee may, in its sole and absolute discretion, grant awards to service providers who are foreign nationals, who are located outside of the United States or who are not compensated from a
payroll maintained in the United States, or who are otherwise subject to (or could cause the Partnership or the Company to be subject to) legal or regulatory requirements of countries outside of the
United States, on such terms and conditions different from those specified in this Plan as may, in the judgment of the Committee, be necessary or desirable to comply with applicable foreign laws and
regulatory requirements to promote achievement of the purposes of the Plan. In connection therewith, the Committee may, in its sole and absolute discretion, establish such subplans and modify exercise
procedures and other Plan rules and procedures to the extent such actions are deemed necessary or desirable, and may take any other such action that it deems advisable to obtain local regulatory
approvals or to comply with any necessary local governmental regulatory exemptions.
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ARTICLE 2
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1
Grants of Stock Options.
The
Committee may, in its sole and absolute discretion, grant options to purchase shares of Common Stock in such amounts and subject to such terms and conditions as the Committee shall from time to
time in its sole and absolute discretion determine, subject to the terms of the Plan; provided, however, that, other than with respect to Substitute Awards, the exercise price of any options shall not
be less than fair market value of a share of Common Stock on the date of grant.
2.2
Reserved.
2.3
Grants of Stock Appreciation Rights.
(a) Related
Stock Appreciation Rights. The Committee may, in its sole and absolute discretion, grant a related stock appreciation right in connection with all or any part of an option
granted under the Plan, either at the time the related option is granted or any time thereafter prior to the exercise, termination or cancellation of such option, and subject to such terms and
conditions as the Committee shall from time to time in its sole and absolute discretion determine, subject to the terms of the Plan. The grantee of a related stock appreciation right shall, subject to
the terms of the Plan and the applicable Plan agreement, have the right to surrender to the Partnership for cancellation all or a portion of the related option granted under the Plan, but only to the
extent that such option is then exercisable, and to be paid therefor an amount equal to the excess (if any) of (i) the aggregate fair market value of the shares of Common Stock subject to such
option or portion thereof (determined as of the date of exercise of such stock appreciation right), over (ii) the aggregate appreciation base (determined pursuant to Section 1.7(e)) of
the shares of Common Stock subject to such stock appreciation right or portion thereof.
(b) Unrelated
Stock Appreciation Rights. The Committee may, in its sole and absolute discretion, grant an unrelated stock appreciation right in such amount and subject to such terms and
conditions, as the Committee shall from time to time in its sole and absolute discretion determine, subject to the terms of the Plan. The grantee of an unrelated stock appreciation right shall,
subject to the terms of the Plan and the applicable Plan agreement, have the right to surrender to the Partnership for cancellation all or a portion of such stock appreciation right, but only to the
extent that such stock appreciation right is then exercisable, and to be paid therefor an amount equal to the excess (if any) of (i) the aggregate fair market value of the shares of Common
Stock subject to such stock appreciation right or portion thereof (determined as of the date of exercise of such stock appreciation right), over (ii) the aggregate appreciation base (determined
pursuant to Section 1.7(e)) of the shares of Common Stock subject to such stock appreciation right or portion thereof.
(c) Payment.
Payment due to the grantee upon exercise of a stock appreciation right shall be made in cash and/or in Common Stock (valued at the fair market value thereof as of the date of
exercise) as determined by the Committee in its sole and absolute discretion and set forth in the underlying Plan agreement.
2.4
Exercise of Related Stock Appreciation Right Reduces Shares Subject to
Option.
Upon
any exercise of a related stock appreciation right or any portion thereof, the number of shares of Common Stock subject to the related option shall be reduced by the number of shares of Common
Stock in respect of which such stock appreciation right shall have been exercised.
2.5
Exercisability of Options and Stock Appreciation Rights.
(a) Exercisability.
Each Plan agreement shall set forth the period during which and the conditions subject to which the option or stock appreciation right evidenced thereby shall be
exercisable, as determined by the Committee in its sole and absolute discretion; provided, however, that (i) subject to Section 5.16, no option or stock appreciation right shall be
exercisable prior to the first anniversary of the date of grant and (ii) subject to Section 2.8, (x) no option or unrelated stock appreciation right shall be exercised later than
ten years after its date of grant and (y) no related stock appreciation right shall be exercised later than the expiration, cancellation, forfeiture or other termination of the related option.
(b) Exercise
of Related Stock Appreciation Right. Unless the applicable Plan agreement otherwise provides, a related stock appreciation right shall be exercisable at any time during the
period that the related option may be exercised.
(c) Partial
Exercise Permitted. Unless the applicable Plan agreement otherwise provides, an option or stock appreciation right granted under the Plan may be exercised from time to time as
to all or part of the full number of shares as to which such option or stock appreciation right shall then be exercisable.
(d) Notice
of Exercise; Exercise Date.
(1) An
option or stock appreciation right shall be exercisable by the filing of a written notice of exercise with the Partnership, on such form and in such manner as the Committee shall
in its sole and absolute discretion prescribe, and by payment in accordance with Section 2.6.
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(2) Unless
the applicable Plan agreement otherwise provides or the Committee in its sole and absolute discretion otherwise determines, the date of exercise of an unrelated stock
appreciation right shall be the date the Partnership receives such written notice of exercise.
(3) For
purposes of the Plan, the "option exercise date" shall be the date specified in the applicable Plan agreement.
2.6
Payment of Option Price.
(a) Tender
Due Upon Notice of Exercise. Any written notice of exercise of an option shall be accompanied by payment of the full purchase price for the shares being purchased, and the
grantee shall have no right to receive shares of Common Stock with respect to an option exercise unless payment of the option exercise price is made.
(b) Manner
of Payment. Payment of the option exercise price shall be made in any combination of the following:
(1) by
certified or official bank check payable to the Company (or the equivalent thereof acceptable to the Committee in its sole and absolute discretion);
(2) with
the consent of the Committee in its sole and absolute discretion, by personal check (subject to collection), which may in the Committee's sole and absolute discretion be deemed
conditional;
(3) if
and to the extent provided in the applicable Plan agreement, by delivery of previously acquired shares of Common Stock having a fair market value (determined as of the option
exercise date) equal to the portion of the option exercise price being paid thereby, provided that the Committee may, in its sole and absolute discretion, require the grantee to furnish an opinion of
counsel acceptable to the Committee to the effect that such delivery would not result in the grantee incurring any liability under Section 16(b) of the Exchange Act and does not require any
Consent (as defined in Section 5.2);
(4) with
the consent of the Committee in its sole and absolute discretion, by the promissory note and agreement of the grantee providing for payment with interest on the unpaid balance
accruing at a rate not less than that needed to avoid the imputation of income under Code section 7872 and upon such terms and conditions (including the security, if any, therefor) as the
Committee may determine in its sole and absolute discretion; provided, however, no grantee who is subject to Section 402 of the Sarbanes-Oxley Act of 2002 (the "S-O Act"), or any successor
provision thereto, may pay pursuant to this clause (iv);
(5) by
withholding of any portion of the shares of Common Stock that would otherwise be delivered upon exercise of the option;
(6) unless
otherwise determined by the Committee in its sole and absolute discretion, by delivery to the Company of an assignment of a sufficient amount of the proceeds from the sale of
Common Stock acquired upon exercise to pay for all of the Common Stock acquired upon exercise and an authorization to the broker or selling agent to pay that amount to the Company, which sale shall be
made at the grantee's direction at the time of exercise; or
(7) by
any other means which the Committee, in its sole and absolute discretion, determines to be consistent with the purposes of the Plan.
(c) Issuance
of Shares. As soon as practicable after receipt of full payment, the Company shall, subject to the provisions of Section 5.2, deliver to the grantee one or more
certificates for, or cause the records of the Company to reflect, the shares of Common Stock so purchased, which certificates or notation in the records of the Company may bear such legends as the
Company may deem appropriate concerning restrictions on the disposition of the shares in accordance with applicable securities laws, rules and regulations or otherwise.
2.7
Termination of Service.
For
purposes of the Plan, "termination of service" means, in the case of an employee, the termination of the employment relationship between the employee and the Partnership and all Affiliates; and in
the case of an individual who is not an employee, the termination of the service relationship between the individual and the Partnership and all Affiliates. Subject to the other provisions of the Plan
and unless the applicable Plan agreement otherwise provides:
(a) General
Rule. All options and stock appreciation rights granted to a grantee shall terminate upon his termination of service for any reason (including death) except to the extent
post-service exercise of the vested portion of an option or stock appreciation right is permitted in accordance with this Section 2.7 or the underlying Plan agreement. The "vested portion" of
any option or stock appreciation right shall mean the portion thereof which is exercisable immediately prior to the grantee's termination of service for any reason.
(b) Improper
Activity. All options and stock appreciation rights granted to a grantee shall terminate and expire as of the grantee's termination of service for "cause" (as such term may
be defined in the applicable Plan agreement), whether or not the grantee is a party to a written service contract.
(c) Regular
Termination; Leaves of Absence. If the grantee's service terminates for reasons other than as provided in subsection (b) or (d) of this Section 2.7, the
portion of options and stock appreciation rights granted to such grantee which were exercisable immediately prior to such termination of service may be exercised until the earlier of
(i) 30 days after his termination of service or (ii) the date on which such options and stock appreciation rights terminate or expire in accordance with the provisions of the Plan
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(other
than this Section 2.7) and the Plan agreement; provided, that the Committee may in its sole discretion determine such other period for exercise in the case of an individual whose service
terminates solely because the employer ceases to be an Affiliate or the grantee transfers employment with the Partnership's consent to a purchaser of a business disposed of by the Partnership. The
Committee may in its sole discretion determine (i) whether any leave of absence (including short-term or long-term disability or medical leave) shall constitute a termination of service for
purposes of the Plan, and (ii) the impact, if any, of any such leave on outstanding awards under the Plan. The Committee shall not, however, have the discretion to grant any extension of an
exercise or expiration period that would subject the grantee to gross income inclusion, interest, or additional tax pursuant to Code section 409A.
(d) Death;
Disability; Retirement. If a grantee's service terminates by reason of death, disability, or retirement at or after age 65, the portion of options and stock appreciation rights
granted to such grantee which were exercisable immediately prior to such termination of service may be exercised until the earlier of (i) one year after his termination of service in the case
of death or disability or three years after his termination of service by reason of retirement, or (ii) the date on which such options and stock appreciation rights terminate or expire in
accordance with the Plan agreement. For purposes of this Section 2.7, the term "disability" shall mean, with respect to any grantee, a "permanent and total disability" as defined in
section 22(e)(3) of the Code.
2.8
Special ISO Requirements.
In
order for a grantee to receive special tax treatment with respect to stock acquired under an option intended to be an incentive stock option, the grantee of such option must be, at all times during
the period beginning on the date of grant and ending on the day three months before the date of exercise of such option, an employee of the Company or any of the Company's parent or subsidiary
corporations (within the meaning of Code section 424), or of a corporation or a parent or subsidiary corporation of such corporation issuing or assuming a stock option in a transaction to which
Code section 424(a) applies. The aggregate fair market value, determined as of the date an option is granted, of the Common Stock for which any grantee may be awarded incentive stock options
which are first exercisable by the grantee during any calendar year under the Plan (and any other stock option plan to be taken into account under Code section 422(d)) shall not exceed
$100,000. If an option granted under the Plan is intended to be an incentive stock option, and if the grantee, at the time of grant, owns stock possessing 10% or more of the total combined voting
power of all classes of stock of the grantee's employer corporation or of its parent or subsidiary corporation, then (i) the option exercise price per share shall in no event be less than 110%
of the fair market value of the Common Stock on the date of such grant and (ii) such option shall not be exercisable after the expiration of five years after the date such option is granted.
The total number of shares of Common Stock that may be issued under the Plan upon the exercise of incentive stock options shall not exceed 3,000,000 shares.
ARTICLE 3
AWARDS OTHER THAN STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
3.1
Restricted Stock and Restricted Stock Unit Awards.
(a) Grant
of Awards. The Committee may, in its sole and absolute discretion, grant restricted stock or restricted stock unit awards, alone or in tandem with other awards, under the Plan
in such amounts and subject to such terms and conditions as the Committee shall from time to time in its sole and absolute discretion determine. The vesting of a restricted stock or restricted stock
unit award granted under the Plan may be conditioned upon the completion of a specified period of service with the Partnership or any Affiliate, upon the attainment of specified Performance Goals
within specified Performance Cycles, and/or upon such other criteria as the Committee may determine in its sole and absolute discretion; provided, however; that subject to Section 5.16, every
award of restricted stock or restricted stock units must have a minimum period of service of twelve consecutive months.
(b) Payment.
Each Plan agreement with respect to a restricted stock award shall set forth the amount (if any) to be paid by the grantee with respect to such award. If a grantee makes any
payment for an award of restricted stock or restricted stock units which does not vest, appropriate payment may be made to the grantee following the forfeiture of such award on such terms and
conditions as the Committee may determine in its sole and absolute discretion.
(c) Forfeiture
Upon Termination of Service. Unless the applicable Plan agreement otherwise provides or the Committee otherwise determines in its sole and absolute discretion,
(i) if a grantee's service terminates for any reason before all of his restricted stock or restricted stock unit awards have vested, such unvested awards shall terminate and expire upon such
termination of service, and (ii) in the event any condition to the vesting of restricted stock or restricted stock unit awards is not satisfied within the period of time permitted therefor, the
shares subject to such awards shall be returned to the Partnership. If a grantee's service terminates by reason of death or disability any unvested portion of a restricted stock or restricted stock
unit award which has been earned as a result of the attainment of applicable Performance Goals shall be fully vested and earned as determined in accordance with the applicable award agreement upon the
awardee's date of death or disability.
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(d) Issuance
of Shares of Restricted Stock. The Committee may, in its sole and absolute discretion, provide that one or more certificates representing restricted stock awards shall be
registered in the grantee's name (or otherwise reflected in the records of the Company) and bear an appropriate legend specifying that such shares are not transferable and are subject to the terms and
conditions of the Plan and the applicable Plan agreement, or that such certificate or certificates shall be held in escrow by the Partnership on behalf of the grantee until such shares vest or are
forfeited, all on such terms and conditions as the Committee may determine in its sole and absolute discretion. Unless the applicable Plan agreement otherwise provides, no share of restricted stock
may be assigned, transferred, otherwise encumbered or disposed of by the grantee until such share has vested in accordance with the terms of such award. Subject to the provisions of
Section 5.3, as soon as practicable after any restricted stock award shall vest, the Partnership shall issue or reissue to the grantee (or to his designated beneficiary in the event of the
grantee's death) one or more certificates for the Common Stock represented by such restricted stock award (or otherwise cause such Common Stock to be reflected in the records of the Company) without
such restricted legend.
(e) Grantees'
Rights Regarding Restricted Stock. Unless the applicable Plan agreement otherwise provides, (i) a grantee may vote and receive dividends on restricted stock awarded
under the Plan, and (ii) any stock received as a dividend on, or in connection with a stock split of, a restricted stock award shall be subject to the same restrictions as such restricted
stock.
(f) Settlement
of Vested Restricted Stock Unit Awards. The Plan agreement relating to an award of restricted stock units shall specify (i) whether such award may be settled in
shares of Common Stock or cash or a combination thereof and (ii) whether the holder thereof shall be entitled to receive, on a current or deferred basis, dividend equivalents, and, if
determined by the Committee in its sole and absolute discretion, interest on, or the deemed reinvestment of, any deferred dividend equivalents, with respect to the number of shares of Common Stock
subject to such award. Prior to the settlement of an award of restricted stock units, the holder of such award shall have no rights as a stockholder of the Company with respect to the shares of Common
Stock subject to such award, excluding the right to receive any dividend equivalents granted pursuant to this Section 3.2(f).
3.2
Common Stock Awards.
Subject
to the limitation set forth in Section 5.16, the Committee may, in its sole and absolute discretion, issue awards under the Plan, payable in Common Stock, including, but not limited to
awards of Common Stock equal to dividends declared on Common Stock, alone or in tandem with other awards, in such amounts and subject to such terms and conditions as the Committee shall from time to
time in its sole and absolute discretion determine. Such Common Stock awards under the Plan shall relate to a specified maximum number of shares granted as, or in payment of, a bonus, or to provide
incentives or recognize special achievements or contributions.
3.3
Performance Awards.
(a) Grant
of Performance Award. The Committee may, in its sole and absolute discretion, grant performance awards under the Plan that include the right to acquire shares of Common Stock,
cash or Units exchangeable for Common Stock, along with the right to receive current or on a deferred or contingent basis dividends from the Company or distributions from the Partnership, in such
amounts and subject to such terms and conditions as the Committee shall from time to time in its sole and absolute discretion determine, subject to the terms of the Plan and the Partnership Agreement.
Subject to Section 5.16, any performance award which is based in whole or in part on the achievement of specified Performance Goals must relate to a Performance Cycle of not less than twelve
consecutive months.
(b) Terms.
Each performance award under the Plan shall relate to a specified maximum number of shares of Common Stock or Units and shall be exchangeable, in whole or in part, for shares
of Common Stock on a one-for-one basis, or cash, as selected by the General Partner (or such other form of consideration as may be determined by the Committee in its sole and absolute discretion
equivalent in value thereto) at the end of a specified Performance Cycle on such terms as may be established by the Committee in it sole and absolute discretion. The number of such shares of Common
Stock or Units or cash which may be deliverable pursuant to such performance award shall be based upon the degree of attainment of Performance Goals over a Performance Cycle as may be established by
the Committee in its sole and absolute discretion. The Committee may, in its sole and absolute discretion, provide for full or partial credit, prior to completion of such Performance Cycle or
achievement of the degree of attainment of the Performance Goals specified in connection with such performance award, in the event of the participant's death, disability, or such other circumstances,
if applicable, as the Committee may determine in its sole and absolute discretion to be fair and equitable to the participant or in the interest of the Partnership and its Affiliates.
ARTICLE 4
GRANTS OF RESTRICTED STOCK TO ELIGIBLE DIRECTORS
4.1
Grants to Eligible Directors.
Subject
to Section 3.4, the Committee may, in its sole and absolute discretion, grant Eligible Directors of the Company awards under the Plan in accordance with this Article 4. Grants
under this Article 4 may be made on a discretionary basis from time to time or on a continuing basis upon the election or appointment of an Eligible Director as determined by the Committee in
its sole and absolute discretion.
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4.2
Amount of Awards.
The
Committee shall, in its sole and absolute discretion, determine the amount of each award, which may be made by a reference to the number of shares of Common Stock, a dollar amount to be divided by
the fair market value of the Common Stock on the date of grant, a dollar amount to be divided by the average fair market value of the Common Stock over a period of time specified by the Committee or a
dollar value. The Committee may, in its sole and absolute discretion, grant additional awards to Eligible Directors serving on specified committees of the Board, acting as chairs of any such committee
or acting as lead director or any other capacity relating to the Board. The aggregate grant date fair market value of equity awards that may be granted during any fiscal year of the Company to any
Eligible Director shall not exceed $750,000.
4.3
Terms of Awards.
(a) Vesting.
Except as expressly provided otherwise in the Plan agreement, each award under this Article 4 shall fully vest on the first anniversary of the date of grant of such
award. Except as provided in Section 4.4, as provided otherwise in the Plan agreement or as otherwise determined by the Committee, if an Eligible Director's service as a director terminates
before all of his or her awards have vested, any unvested portion of an award shall terminate and expire upon such termination of service. If an Eligible Director's service terminates by reason of
death or disability or after an Eligible Director has served a minimum of five annual terms as director of the Company, its predecessors or successors, any unvested portion of an award, may, upon
determination of the Committee or the Board of Directors of the Company, become fully vested without completion of the minimum period of service requirement.
(b) Grantee's
Rights. A grantee may vote and receive dividends on restricted stock awards granted hereunder. Any stock or other property paid as a dividend on, or in connection with a
stock split of, a restricted stock award, shall be subject to the same restrictions that apply to such restricted stock award.
(c) Issuance
of Shares. The transfer agent of the Common Stock shall create book entries evidencing the restricted stock awards established in the Eligible Director's name which shall be
subject to restrictions on transfer and the terms and conditions of the Plan. No shares of Common Stock subject to an award granted under this Article 4 may be assigned, transferred, otherwise
encumbered or disposed of by the grantee until such award has vested and only after the underlying shares of Common Stock have been released pursuant to Section 4.5 hereof.
4.4
Change of Control.
The
Plan agreement for an award under this Article 4 may provide that, in the event of a Change of Control prior to the date the award fully vests, the unvested portion of the award not
previously vested shall become immediately vested and deferred pursuant to Section 4.5.
4.5
Deferred Delivery; Reinvestment of Dividends.
Except
as expressly provided otherwise in the Plan agreement, upon vesting, the delivery of the shares of Common Stock underlying any awards shall be deferred in accordance with the terms of the
Director Deferred Compensation Plan until an Eligible Director's service as a director of the Company terminates. During the deferral period, all cash dividends payable with respect to such shares of
Common Stock shall be reinvested in shares of Common Stock pursuant to terms of the Company's dividend reinvestment plan as in effect from time to time and delivery of any such shares shall also be
deferred pursuant to the Director Deferred Compensation Plan.
ARTICLE 5
MISCELLANEOUS
5.1
Amendment of the Plan; Modification of Awards.
(a) Plan
Amendments. The Partnership, by action of its General Partner, may, without approval of other partners in the Partnership, at any time and from time to time suspend, terminate or
amend the Plan in any respect whatsoever, except that no such amendment shall materially impair any rights under any award theretofore made under the Plan without the consent of the grantee of such
award. Furthermore, the General Partner shall submit for stockholder approval any amendment (other than an amendment pursuant to the adjustment provisions of Section 5.6) required to be
submitted for stockholder approval by law, regulation or applicable stock exchange requirements or that otherwise would: (i) increase the maximum number of shares of Common Stock that may be
awarded in Section 1.5(a); (ii) extend the Termination Date (as defined in Section 5.13) of this Plan; (iii) change the class of persons eligible to be participants or
(iv) modify the Eligible Director compensation limit set forth in Section 4.2. Any Plan amendment shall be obtained in such a manner and to such a degree as is required by applicable law
or regulation.
(b) Award
Modifications. Subject to the consent of the grantee and the terms and conditions of the Plan (including Section 5.1(a)), the Committee may, in its sole and absolute
discretion, amend outstanding Plan agreements with such grantee, including, without limitation, any amendment which would (i) accelerate the time or times at which an award may vest or become
exercisable and/or (ii) extend the scheduled termination or expiration date of the award; provided, however, that the Committee shall not enter into any amendments of outstanding agreements
that would subject the grantee to gross income inclusion, interest, or additional tax pursuant to Code section 409A.
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5.2
Restrictions.
(a) Consent
Requirements. If the Committee shall at any time determine in its sole and absolute discretion that any Consent (as hereinafter defined) is necessary or desirable as a
condition of, or in connection with, the granting of any award under the Plan, the acquisition, issuance or purchase of shares or other rights hereunder or the taking of any other action hereunder
(each such action being hereinafter referred to as a "Plan Action"), then such Plan Action shall not be taken, in whole or in part, unless and until such Consent shall have been effected or obtained
to the full satisfaction of the Committee. Without limiting the generality of the foregoing, if (i) the Committee may make any payment under the Plan in cash, Common Stock or both, and
(ii) the Committee determines that Consent is necessary or desirable as a condition of, or in connection with, payment in any one or more of such forms, then the Committee shall be entitled to
determine not to make any payment whatsoever until such Consent has been obtained.
(b) Consent
Defined. The term "Consent" as used herein with respect to any Plan Action means (i) any and all listings, registrations or qualifications in respect thereof upon any
securities exchange or other self-regulatory organization or under any federal, state or local law, rule or regulation, (ii) the expiration, elimination or satisfaction of any prohibitions,
restrictions or limitations under any federal, state or local law, rule or regulation or the rules of any securities exchange or other self-regulatory organization, (iii) any and all written
agreements and representations by the grantee with respect to the disposition of shares, or with respect to any other matter, which the Committee shall deem necessary or desirable to comply with the
terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made, and (iv) any and all
consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory bodies or any parties to any loan agreements or other contractual obligations of the Partnership
or any Affiliate.
5.3
Nontransferability.
Except
as expressly authorized by the Committee in the Plan agreement, no award granted to any grantee under the Plan shall be assignable or transferable by the grantee other than by will or by the
laws of descent and distribution and during the lifetime of the grantee, all rights with respect to any option or stock appreciation right granted to the grantee under the Plan shall be exercisable
only by the grantee.
5.4
Withholding Taxes.
(a) Whenever
under the Plan shares of Common Stock are to be delivered pursuant to an award, the Committee may require as a condition of delivery that the grantee remit an amount
sufficient to satisfy all federal, state and other governmental withholding tax requirements related thereto. Shares of Common Stock to be delivered or withheld may not have an aggregate fair market
value in excess of the amount determined by applying the minimum statutory withholding rate (or, if permitted by the Committee, such other rate as will not cause adverse accounting consequences under
the accounting rules then in effect, and as is permitted under applicable Internal Revenue Service withholding rules). Whenever cash is to be paid under the Plan (whether upon the exercise of stock
appreciation right or otherwise), the Partnership may, as a condition of its payment, deduct therefrom, or from any salary or other payments due to the grantee, an amount sufficient to satisfy all
federal, state and other governmental withholding tax requirements related thereto or to the delivery of any shares of Common Stock under the Plan.
(b) Without
limiting the generality of the foregoing, a grantee may elect to satisfy all or part of the foregoing withholding requirements:
(1) by
certified or official bank check payable to the Company (or the equivalent thereof acceptable to the Committee in its sole and absolute discretion);
(2) with
the consent of the Committee in its sole and absolute discretion, by personal check (subject to collection), which may in the Committee's sole and absolute discretion be deemed
conditional;
(3) by
delivery of unrestricted shares of Common Stock owned by the grantee having a fair market value (determined as of the date of such delivery by the grantee) equal to all or part of
the amount to be so withheld, provided that (i) the Committee may require, as a condition of accepting any such delivery, the grantee to furnish an opinion of counsel acceptable to the
Committee to the effect that such delivery would not result in the grantee incurring any liability under Section 16(b) of the Exchange Act, and (ii) the Committee may permit any such
delivery to be made by withholding shares of Common Stock from the shares otherwise issuable pursuant to the award giving rise to the tax withholding obligation (in which event the date of delivery
shall be deemed the date such award was exercised) having a fair market value (determined as of the date of such exercise);
(4) with
the consent of the Committee in its sole and absolute discretion, by the promissory note and agreement of the grantee providing for payment with interest on the unpaid balance
accruing at a rate not less than that needed to avoid the imputation of income under Code section 7872 and upon such terms and conditions (including the security, if any, therefor) as the
Committee may determine in its sole and absolute discretion; provided, however, no grantee who is subject to Section 402 of the S-O Act, or any successor provision thereto, may pay pursuant to
this clause (4);
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(5) in
the case of an option, unless otherwise determined by the Committee in its sole and absolute discretion, by delivery to the Company of an assignment of a sufficient amount of the
proceeds from the sale of Common Stock acquired upon exercise to pay for all of the Common Stock acquired upon exercise and an authorization to the broker or selling agent to pay that amount to the
Company, which sale shall be made at the grantee's direction at the time of exercise; or
(6) by
any other means which the Committee, in its sole and absolute discretion, determines to be consistent with the purposes of the Plan.
5.5
Adjustments Upon Changes in Capitalization.
If
and to the extent specified by the Committee, (i) the number of shares of Common Stock which may be issued pursuant to awards under the Plan, (ii) the number of shares of Common Stock
subject to awards, (iii) the option exercise price and appreciation base of options and stock appreciation rights theretofore granted under the Plan, and (iv) the amount payable by a
grantee in respect of an award, in each case, shall be appropriately adjusted (as the Committee may determine in its sole and absolute discretion) for any change in (x) the number of issued
shares of Common Stock or outstanding Units resulting from the subdivision or combination of shares of Common Stock or Units or other capital adjustments, or (y) the payment of a stock dividend
or Partnership distribution in the form of additional Units after the effective date of the Plan, or (z) other change in such shares of Common Stock or Units effected without receipt of
consideration. Notwithstanding the foregoing, any awards covering fractional shares of Common Stock or Units resulting from any such adjustment shall be eliminated, and each incentive stock option
granted under the Plan shall not be adjusted in a manner that causes such option to fail to continue to qualify as an "incentive stock option" within the meaning of Code section 422.
Adjustments under this Section shall be made by the Committee, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive.
5.6
Right of Discharge Reserved.
Nothing
in the Plan or in any Plan agreement shall confer upon any person the right to continue in the service of the Partnership or any Affiliate or affect any right which the Partnership or any
Affiliate may have to terminate the service of such person.
5.7
No Rights as a Stockholder.
No
grantee or other person shall have any of the rights of a stockholder of the Company with respect to shares subject to an award until the issuance of a stock certificate to him (or a notation
relating to such issuance is otherwise made in the records of the Company) for such shares. Except as otherwise provided in Section 5.5, no adjustment shall be made for dividends, distributions
or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such stock certificate is issued. In the case of a
grantee of an award which has not yet vested, the grantee shall have the rights of a stockholder of the Company if and only to the extent provided in the applicable Plan agreement.
5.8
Nature of Payments.
(a) Any
and all awards or payments hereunder shall be granted, issued, delivered or paid, as the case may be, in consideration of services performed for the Partnership or its Affiliates
by the grantee.
(b) No
such awards and payments shall, unless otherwise determined by the Committee or set forth in the express terms of the applicable benefit plan or agreement, be taken into account in
computing the grantee's salary or compensation for the purposes of determining any benefits under (i) any pension, retirement, life insurance or other benefit plan of the Partnership or any
Affiliate or (ii) any agreement between the Partnership or any Affiliate and the grantee.
(c) By
accepting an award under the Plan, the grantee shall thereby waive any claim to continued exercise or vesting of an award or to damages or severance entitlement related to
non-continuation of the award beyond the period provided herein or in the applicable Plan agreement, notwithstanding any contrary provision in any written contract with the grantee, whether any such
contract is executed before or after the grant date of the award.
5.9
Non-Uniform Determinations.
The
Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or not such
persons are similarly situated). Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations, and to enter
into non-uniform and selective Plan agreements, as to (a) the persons to receive awards under the Plan, (b) the terms and provisions of awards under the Plan, (c) the exercise by
the Committee of its discretion in respect of the exercise of any awards pursuant to the terms of the Plan, and (d) the treatment of leaves of absence pursuant to Section 2.7(c).
5.10
Other Payments or Awards.
Nothing
contained in the Plan shall be deemed in any way to limit or restrict the Partnership, any Affiliate or the Committee from making any award or payment to any person under any other plan,
arrangement or understanding, whether now existing or hereafter in effect.
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5.11
Change of Control.
(a) Subject
to the terms of the applicable Plan agreement, in the event a Change of Control occurs and, within 24 months following the date of the Change of Control, (i) a
grantee experiences an involuntary termination of employment other than for "cause" (as such term may be defined in the applicable Plan agreement) such that he is no longer in the employ or service of
the Company or an Affiliate or (ii) a grantee who is an "executive officer" (within the meaning of Section 16 of the Exchange Act) voluntarily resigns from his employment with the
Company or an Affiliate for "good reason" or "constructive discharge" (or similar termination of employment, in each case as such term may be defined in the applicable Plan agreement) (each of the
events described in (i) and (ii), a "Termination of Service"):
(1) all
options and stock appreciation rights shall immediately vest and become exercisable on the date of such Termination of Service and shall remain exercisable in accordance with the
terms of the applicable Plan agreement until the earlier of (A) one year after such Termination of Service or (B) the expiration of the term of such option or stock appreciation right;
and
(2) the
restrictions and time-based vesting conditions with respect to all awards shall immediately expire or vest on the date of such Termination of Service and, in the case of
performance-based vesting conditions, the Performance Goals shall be deemed to have been achieved as provided in the applicable Plan agreement, but in no event at a level higher than (i) actual
achievement of Performance Goals during the applicable Performance Cycle, whether in full or on a prorated basis, or (ii) prorated "target" level achievement of Performance Goals, and such
awards shall in each case be settled pursuant to the terms of the applicable Plan agreement.
(b) Subject
to the terms of the applicable Plan agreement, in the event a Change of Control occurs and outstanding awards are (i) impaired in value or rights, as determined solely
in the discretionary judgment of the Committee (as constituted prior to the Change of Control), (ii) not continued or assumed by a successor entity or an affiliate thereof, or (iii) not
replaced with an award or grant that, solely in the discretionary judgment of the Committee (as constituted prior to the Change of Control), preserves the existing value of the outstanding awards at
the time of the Change of Control:
(1) all
options and stock appreciation rights shall immediately vest on the date of such Change of Control and become exercisable in accordance with the terms of the applicable Plan
agreement;
(2) the
restrictions and time-based vesting conditions with respect to all awards shall immediately expire or vest on the date of such Change of Control and, in the case of
performance-based vesting conditions, the Performance Goals shall be deemed to have been achieved as provided in the applicable Plan agreement, but in no event at a level higher than (i) actual
achievement of Performance Goals during the applicable Performance Cycle, whether in full or on a prorated basis, or (ii) prorated "target" level achievement of Performance Goals, and such
awards shall in each case be settled pursuant to the terms of the applicable Plan agreement; and
(3) the
Committee, as constituted prior to the Change of Control, may in its sole and absolute discretion require outstanding awards, in whole or in part, to be surrendered to the Company
by the holder, and to be immediately cancelled by the Company, and to provide for the holder to receive (i) a cash payment in an amount equal to (A) in the case of an option or a stock
appreciation right, the aggregate number of shares of Common Stock then subject to the portion of such option or stock appreciation right surrendered, whether or not vested or exercisable, multiplied
by the excess, if any, of the fair market value of a share of Common Stock as of the date of the Change of Control, over the purchase price or base price per share of Common Stock subject to such
option or stock appreciation right, and (B) in the case of any award other than a stock option or stock appreciation right, the number of shares of Common Stock then subject to the portion of
such award surrendered to the extent the Performance Goals applicable to such award have been satisfied or are deemed satisfied in accordance with Section 5.11(b)(2), whether or not vested,
multiplied by the fair market value of a share of Common Stock as of the date of the Change of Control; (ii) shares of capital stock of the corporation resulting from or succeeding to the
business of the Company pursuant to such Change of Control, or a parent corporation thereof, having a fair market value not less than the amount determined under clause (i) above; or
(iii) a combination of the payment of cash pursuant to clause (i) above and the issuance of shares pursuant to clause (ii) above.
(c) The
Committee (as constituted prior to the Change of Control) shall have the sole and absolute authority and discretion to decide any questions concerning the application,
interpretation or scope of any of the terms and conditions of any award or participation under the Plan in connection with a Change of Control, and their decisions shall be binding and conclusive upon
all interested parties.
(d) For
purposes of this Plan, a "Change of Control" means:
(1) Any
"person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any of its subsidiaries, or the estate of Melvin Simon, Herbert
Simon or David Simon (the "Simons"), or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its subsidiaries),
together with all "affiliates" and "associates" (as such terms are defined in Rule 12b-2 under the Exchange Act) of such person, shall become the "beneficial owner" (as such term is defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the Company's then outstanding voting securities entitled to vote generally in the election of directors; provided that for purposes of determining the "beneficial
ownership" (as such term is defined in Rule 13d-3 under the Exchange Act) of any "group" of which the Simons or any of their affiliates or associates is a
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member
(each such entity or individual, a "Related Party"), there shall not be attributed to the beneficial ownership of such group any shares beneficially owned by any Related Party;
(2) Individuals
who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board;
(3) The
consummation of a reorganization, merger or consolidation in which the Company and/or the Partnership is a party, or of the sale or other disposition of all or substantially all
of the assets of the Company and/or the Partnership (any such reorganization, merger, consolidation or sale or other disposition of assets being referred to as a "Business Combination"), in each case
unless, following such Business Combination, (A) more than 60% of the combined voting power of the then outstanding voting securities of the surviving or acquiring corporation resulting from
the Business Combination entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners of the Company's outstanding voting securities immediately prior to such Business Combination in substantially the same proportions as their beneficial ownership,
immediately prior to such Business Combination, of the Company's outstanding voting securities, (B) no person (excluding the Company, the Simons, any employee benefit plan or related trust of
the Company or such surviving or acquiring corporation resulting from the Business Combination and any person beneficially owning, immediately prior to such reorganization, merger or consolidation,
directly or indirectly, 25% or more of the Company's outstanding voting securities) beneficially owns, directly or indirectly, 25% or more of the combined voting power of the then outstanding voting
securities of the surviving or acquiring corporation resulting from the Business Combination entitled to vote generally in the election of directors and (C) at least a majority of the members
of the board of directors of the surviving or acquiring corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement
providing for such Business Combination; or
(4) Approval
by the stockholders of a complete liquidation or dissolution of the Company and/or the Partnership.
5.12
Section Headings.
The
section headings contained herein are for the purposes of convenience only and are not intended to define or limit the contents of said sections.
5.13
Effective Date and Duration of the Plan.
(a) The
Plan shall become effective as of May 8, 2019 (the date of the Company's annual stockholder meeting in 2019), except for provisions of the Plan which specifically refer to
later effective dates. At the time this Plan becomes effective, none of the shares of Common Stock available for future grant under the Prior Plan shall be available for grant under the Prior Plan or
this Plan.
(b) The
Plan shall remain in effect until all Shares subject to it shall be distributed, all awards have expired or terminated, the Plan is terminated pursuant to Section 5.1(a),
or the ten- year anniversary of the effective date, whichever occurs first (the "Termination Date"); provided, however, no incentive stock options may be granted after the ten-year anniversary of
Board approval of the Plan. Awards made before the Termination Date will continue to be outstanding in accordance with their terms unless limited in the applicable Plan agreement.
5.14
Governing Law.
THE
PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
5.15
Repricing of Options.
Except
in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding awards may not be amended without stockholder approval (i) to reduce the exercise price
of outstanding options or stock appreciation rights, (ii) to cancel outstanding options or stock appreciation rights in exchange for options or stock appreciation rights with an exercise price
or appreciation base that is less than the exercise price or appreciation base of the original options or stock appreciation rights or (iii) to cancel outstanding options or stock appreciation
rights in exchange for cash or other awards if the exercise price of such option or the appreciation base of such stock appreciation right exceeds the fair market value of a share of Common Stock on
the date of such cancellation.
5.16
Exception to Certain Limitations
Notwithstanding
the limitations contained in the proviso to the first sentence of Section 2.5(a), the second sentence of Section 3.1(a) and the last sentence of Section 3.3(a)
concerning minimum exercisability and vesting periods, minimum periods of service for vesting or minimum periods for Performance Cycles, (i) options, stock appreciation rights, restricted stock
awards, restricted stock unit awards and performance awards may be granted with vesting periods that are less than the periods specified in the provisions
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identified
above and (ii) awards of Common Stock may be granted pursuant to Section 3.2, as long as the aggregate number of shares subject to such awards described in clauses (i)
and (ii) does not exceed five percent of the maximum number of shares set forth in Section 1.5(a). This Section 5.16 shall not restrict the right of the Committee to accelerate or
continue the vesting or exercisability of any award pursuant to Section 5.1(b) upon a termination of employment or as otherwise determined by the Committee.
5.17
Code Section 409A.
(a) If
as of the date his employment terminates, a grantee is a "key employee" within the meaning of Code section 416(i), without regard to paragraph 416(i)(5) thereof, and
if the Company has stock that is publicly traded on an established securities market or otherwise, any deferred compensation payments otherwise payable under this Plan because of his termination of
service (for reasons other than death or disability) will be suspended until, and will be paid to the grantee on, the first day of the seventh month following the month in which the grantee's last day
of employment occurs. For purposes of this Plan, "deferred compensation" means compensation provided under a nonqualified deferred compensation plan as defined in, and subject to, Code
section 409A.
(b) The
Plan and any Plan agreements shall be interpreted and applied in a manner consistent with the applicable standards for nonqualified deferred compensation plans established by Code
section 409A and its interpretive regulations and other regulatory guidance. To the extent that any terms of the Plan or a Plan agreement would subject the grantee to gross income inclusion,
interest, or additional tax pursuant to Code section 409A, those terms are to that extent superseded by, and shall be adjusted to the minimum extent necessary to satisfy, the applicable Code
section 409A standards.
5.18
Rule 16b-3.
It
is intended that the Plan and all awards granted pursuant to it shall be administered by the Committee so as to permit the Plan and awards to comply with Rule 16b-3 promulgated under the
Exchange Act Rule. If any provision of the Plan or of any award would otherwise frustrate or conflict with the intent expressed in this Section 5.18, that provision to the extent possible shall
be interpreted and deemed amended in the manner determined by the Committee so as to avoid the conflict. To the extent of any remaining irreconcilable conflict with this intent, the provision shall be
deemed void as applied to grantees subject to Section 16 of the Exchange Act to the extent permitted by law and in the manner deemed advisable by the Committee.
5.19
Forfeiture and Compensation Recovery.
Awards
and any compensation associated therewith may be made subject to forfeiture, recovery by the Company or other action pursuant to the Company's Executive Compensation Clawback Policy, as in
effect on the date hereof and as may be amended, and any other compensation recovery policy adopted by the Board or the Committee at any time, including in response to the requirements of
Section 10D of the Exchange Act and any implementing rules and regulations thereunder, or as otherwise required by law. Any Plan agreement may be unilaterally amended by the Committee to comply
with any such compensation recovery policy required to be adopted to comply with applicable law or regulation.
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VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on May 7, 2019. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. SIMON PROPERTY GROUP, INC. 225 WEST WASHINGTON STREET INDIANAPOLIS, IN 46204 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on May 7, 2019. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E68806-P19603-Z74426 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. SIMON PROPERTY GROUP, INC. The Board of Directors recommends you vote FOR the following proposals: 1. Election of Directors Nominees: For Against Abstain ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 1a. Glyn F. Aeppel 1b. Larry C. Glasscock For Against Abstain ! ! ! ! ! ! 1c. Karen N. Horn, Ph.D. 3. Ratification of Ernst & Young LLP as our independent registered public accounting firm for 2019. Vote to approve the 2019 Stock Incentive Plan. 4. 1d. Allan Hubbard 1e. Reuben S. Leibowitz The Board of Directors recommends you vote AGAINST the following proposal: ! ! ! 5. Shareholder Proposal requesting disclosure of political contributions. 1f. Gary M. Rodkin 1g. Stefan M. Selig NOTE: Such other business as may properly come before the meeting or any adjournment thereof. 1h. Daniel C. Smith, Ph.D. 1i. J. Albert Smith, Jr. 1j. Marta R. Stewart 2. An advisory vote to approve the compensation of our Named Executive Officers. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date Sign up for E-Delivery and we will make a $1 donation to Simon Youth Foundation on your behalf.