8-KLeadership ChangesExhibits & Filings

SIMON PROPERTY GROUP INC. 8-K Report, Executive Changes (Jan 2, 2014)

Filed January 2, 2014For Securities:SPGSPG-PJ

Summary

Simon Property Group, Inc. (SPG) filed an 8-K on January 2, 2014, reporting an amendment and restatement of the Long-Term Incentive Performance Unit (LTIP) award to its Chief Executive Officer, David Simon. This modification, effective December 31, 2013, significantly shifts the award structure from being primarily service-based to performance-based, linked to the company's Funds from Operations (FFO) per share growth over several years. The company states this change aims to further align executive compensation with shareholder value creation and potentially moot ongoing litigation. The amendment involves restructuring the original 1,000,000 LTIP Units. A portion has been cancelled and replaced with new "A Units," "B Units," and "C Units," with vesting contingent upon achieving specific FFO per share targets for 2015, 2016, and 2017, respectively. The document also details performance criteria, including minimum FFO per share thresholds for earning portions of the award and a "catch-up feature" for unearned units in subsequent years. Vesting dates have also been adjusted, and the change of control provision has been modified to a double-trigger mechanism.

Key Highlights

  • 1Amendment and restatement of CEO David Simon's LTIP award, effective December 31, 2013.
  • 2Shift from service-based vesting to performance-based vesting tied to FFO per share growth.
  • 3Specific FFO per share targets set for 2015 (A Units), 2016 (B Units), and 2017 (C Units) to earn portions of the award.
  • 4Introduction of a 'catch-up feature' allowing unearned units to be earned in subsequent performance periods.
  • 5Modification of the change of control provision to a 'double-trigger' mechanism.
  • 6The company believes the modified award may moot pending litigation regarding the original award.
  • 7Vesting dates for earned LTIP Units have been set for 2018, 2019, and mid-2019, subject to continued service or specific termination conditions.

Frequently Asked Questions

The main purpose of this 8-K filing is to report the amendment and restatement of the Long-Term Incentive Performance Unit (LTIP) award granted to CEO David Simon. The key change is shifting the award from primarily service-based to performance-based, linked to the company's future FFO per share performance.

The original award was primarily service-based, meaning it would vest over time as long as the CEO remained employed. The amended award is now performance-based, with vesting contingent on Simon Property Group achieving specific FFO per share targets for 2015, 2016, and 2017. A portion of the award may be forfeited if these performance criteria are not met.

The key performance metric is Funds from Operations (FFO) per share. Specific targets are set for three tranches of LTIP Units (A Units, B Units, and C Units) for the years 2015, 2016, and 2017, respectively. For example, to earn 100% of the A Units, the company must achieve an FFO per share of $8.86 in 2015, with 50% earned at $8.07 and interpolation between these values. Similar tiered targets are set for B Units in 2016 and C Units in 2017.

Under the modified award, the LTIP units will not automatically vest in full upon a change of control event (e.g., acquisition of the company). Instead, it requires a 'double trigger': first, a change of control must occur, and second, David Simon must be terminated by the company without Cause or resign for Good Reason within a specified period around the change of control for the unvested units to vest.