Exhibit 10.2

 

CERTIFICATE OF DESIGNATION
OF
SERIES 2014 INDUCEMENT LTIP UNITS
OF
WASHINGTON PRIME GROUP, L.P.

 

WHEREAS, Washington Prime Group, L.P. (the “Partnership”), is authorized to
issue LTIP Units to executives of Washington Prime Group Inc., the General
Partner of the Partnership (the “General Partner”), pursuant to
Section 9.3(a) of the Amended and Restated Limited Partnership Agreement of the
Partnership, dated as of May 28, 2014, as amended, restated and supplemented
from time to time hereafter (the “Partnership Agreement”).

 

WHEREAS, the General Partner has determined that it is in the best interests of
the Partnership to designate a series of LTIP Units that are subject to the
provisions of this Designation and the related Award Agreement (as defined
below); and

 

WHEREAS, Sections 7.3(a) and 9.3(d) of the Partnership Agreement authorize the
General Partner, without the approval of the Limited Partners, to set forth in
an LTIP Unit Designation (as defined in the Partnership Agreement) any
performance conditions and the economic rights, including distribution,
redemption and conversion rights of each class or series of LTIP Units.

 

NOW, THEREFORE, the General Partner hereby designates the powers, preferences,
economic rights and performance conditions of the Series 2014 Inducement LTIP
Units.

 

ARTICLE I
Definitions

 

1.1                               Definitions Applicable to LTIP Units.  Except
as otherwise expressly provided herein, each capitalized term shall have the
meaning ascribed to it in the Partnership Agreement.  In addition, as used
herein:

 

“Adjustment Events” has the meaning provided in Section 2.2 hereof.

 

“Award Agreement” means the Series 2014 Inducement LTIP Unit Award Agreement
approved by the Compensation Committee of the Board of Directors of the General
Partner and entered into with the LTIP Unitholder.

 

“Award Date” means June 25, 2014.

 

“Conversion Date” has the meaning provided in Section 4.3 hereof.

 

“Conversion Notice” has the meaning provided in Section 4.3 hereof.

 

“Economic Capital Account Balance” means, with respect to the LTIP Unitholder,
(i) his Capital Account balance, plus the amount of his share of any Partner
Minimum Gain or Partnership Minimum Gain, in either case to the extent
attributable to his ownership of LTIP Units, divided by (ii) the number of LTIP
Units held by the LTIP Unitholder.

 

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“Full Conversion Date” means with respect to the LTIP Unitholder, the date on
which the Economic Capital Account Balance of the holder’s LTIP Units first
equals or exceeds the Target Balance.

 

“General Partner” has the meaning provided in the Recitals.

 

“Liquidating Gain” means one hundred percent (100%) of the Profits of the
Partnership realized from a transaction or series of transactions that
constitute a sale of substantially all of the assets of the Partnership and one
hundred percent (100%) of the Profits realized from a restatement of the
Partnership’s Capital Accounts in accordance with Treas. Reg.
§1.704-1(b)(2)(iv)(f).

 

“LTIP Units” means the Series 2014 Inducement LTIP Units created by this
Designation.

 

“LTIP Unitholder” means the person who holds the LTIP Units and his permitted
transferee(s).

 

“Other LTIP Units” means “LTIP Units” (as defined in the Partnership Agreement)
other than the Series 2014 Inducement LTIP Units designated hereby.

 

“Partnership” has the meaning provided in the Recitals.

 

“Partnership Agreement” has the meaning provided in the Recitals.

 

“Partnership Unit Economic Balance” shall mean (i) the Capital Account balance
of the General Partner plus the amount of the General Partner’s share of any
Partner Minimum Gain or Partnership Minimum Gain, in each case to the extent
attributable to the General Partner’s Partnership Units divided by (ii) the
number of the General Partner’s Partnership Units.

 

“Partnership Units” or “Units” has the meaning set forth in the Partnership
Agreement.

 

“Special Distributions” means distributions designated as a capital gain
dividend within the meaning of Section 875(b)(3)(C) of the Code and any other
distribution that the General Partner determines is not made in the ordinary
course.

 

“Target Balance” means (i) $19.05, which is equal to the Partnership Unit
Economic Balance as of the Award Date as determined after Capital Accounts have
been adjusted in accordance with Treas. Reg. §1.704-1(b)(2)(iv)(f), reduced by
(ii) the amount of Special Distributions per Partnership Unit attributable to
the sale of assets subsequent to the Award Date, to the extent that such Special
Distributions are not made with respect to the LTIP Units.

 

“Unvested LTIP Units” means the number of LTIP Units issued on the Award Date
that have not become the Vested LTIP Units.

 

“Vested LTIP Units” means Unvested LTIP Units that have satisfied the vesting
requirements of the Award Agreement.

 

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1.2                               Definitions Applicable to Other LTIP Units. 
In determining the rights of the LTIP Unitholder vis-à-vis the holders of Other
LTIP Units, the foregoing definitions shall apply to the Other LTIP Units except
as expressly provided otherwise in a Certificate of Designation applicable to
such Other LTIP Units.

 

ARTICLE II
Economic Terms and Voting Rights

 

2.1                               Designation and Issuance.  The General Partner
hereby designates a series of LTIP Units entitled the Series 2014 Inducement
LTIP Units.  The number of Series 2014 Inducement LTIP Units that may be issued
pursuant to this Designation is 153,610.  The Unvested LTIP Units shall be
treated as having been issued on the Award Date, and the holder of Unvested LTIP
Units shall be deemed admitted as a Limited Partner of the Partnership on the
Award Date.

 

2.2                               Unit Equivalence.  Except as otherwise
provided in this Designation, the Partnership shall maintain, at all times, a
one-to-one correspondence between the LTIP Units and Partnership Units, for
conversion, distribution and other purposes, including without limitation by
complying with the following procedures.  If an Adjustment Event (as defined
below) occurs, then the General Partner shall make a corresponding adjustment to
the LTIP Units to maintain a one-to-one conversion and economic equivalence
ratio between the LTIP Units and the Partnership Units.  The following shall be
“Adjustment Events”:  (A) the Partnership makes a distribution of Partnership
Units or other equity interests in the Partnership to the extent that the LTIP
Unitholder did not participate in such distribution, (B) the Partnership
subdivides the outstanding Partnership Units into a greater number of units or
combines the outstanding Partnership Units into a smaller number of units, or
(C) the Partnership issues any Partnership Units or other equity interests in
the Partnership in exchange for its outstanding Partnership Units by way of a
reclassification or recapitalization of its Partnership Units.  If more than one
Adjustment Event occurs, the adjustment to the LTIP Units need be made only once
using a single formula that takes into account each and every Adjustment Event
as if all Adjustment Events occurred simultaneously.  For the avoidance of
doubt, the following shall not be Adjustment Events:  (x) the issuance of
Partnership Units from the Partnership’s sale of securities or in a financing,
reorganization, acquisition or other business transaction, (y) the issuance of
Partnership Units or Other LTIP Units pursuant to any employee benefit or
compensation plan or distribution reinvestment plan, or (z) the issuance of any
Partnership Units to the General Partner in respect of a capital contribution to
the Partnership of proceeds from the sale of securities by the General Partner. 
If the Partnership takes an action affecting the Partnership Units or the LTIP
Units other than actions specifically described above as constituting Adjustment
Events and, in the opinion of the General Partner, such action would require an
adjustment to the LTIP Units to maintain the one-to-one correspondence described
above, the General Partner shall have the right to make such adjustment to the
LTIP Units, to the extent permitted by law, in such manner and at such time as
the General Partner, in its sole discretion, may determine to be appropriate
under the circumstances.  If an adjustment is made to the LTIP Units as hereby
provided, the Partnership shall promptly file in the books and records of the
Partnership a certificate setting forth such adjustment and a brief statement of
facts requiring such adjustment, which certificate shall be conclusive evidence
of the correctness of such adjustment absent manifest error.  Promptly after
filing such certificate, the Partnership

 

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shall deliver a notice to the LTIP Unitholder setting forth the adjustment to
the holder’s LTIP Units and the effective date of such adjustment.

 

2.3                               Distributions of Net Operating Cash Flow and
Special Distributions.  The LTIP Units will be entitled to the same rights to
receive distributions as Partnership Units under the Partnership Agreement at
the time that such distributions are made with respect to Partnership Units
under the Partnership Agreement; provided, however, that until the Economic
Capital Account Balance of the LTIP Units is equal to the Target Balance, the
LTIP Units shall be entitled to Special Distributions attributable to the sale
of an asset of the Partnership only to the extent that the Partnership
determines that such asset has appreciated in value subsequent to the Award
Date.  Distributions with respect to an LTIP Unit issued during a fiscal quarter
shall be prorated as provided in Section 6.2(c)(ii) of the Partnership
Agreement.

 

2.4                               Liquidating Distributions.  In the event of
the dissolution, liquidation and winding up of the Partnership, distributions to
the LTIP Unitholder shall be made in accordance with Section 8.2(d) of the
Partnership Agreement.

 

2.5                               Forfeiture.  Any Unvested LTIP Units that are
forfeited pursuant to the terms of the Award Agreement shall immediately be null
and void and shall cease to be outstanding or to have any rights except as
otherwise provided in the Award Agreement.

 

2.6                               Voting Rights.  Except as otherwise provided
in Section 2.8 hereof, Unvested LTIP Units shall not be entitled to vote on any
matter submitted to the Limited Partners for their approval unless and until
such units constitute Vested LTIP Units.  Vested LTIP Units will be entitled to
be voted on an equal basis with the Partnership Units.

 

2.7                               Other LTIP Units.  The Partnership shall not,
without the prior written consent of the LTIP Unitholder, hereafter designate
any series of Other LTIP Units which has rights regarding liquidation,
conversion, voting, redemption or distributions that are materially superior to
the comparable rights of the LTIP Units.

 

2.8                               Amendment of Partnership Agreement.  No
amendment shall be made to the Partnership Agreement or this Certificate of
Designation without the prior written consent of the LTIP Unitholder if such
amendment would adversely and disproportionately affect the rights of the LTIP
Unitholder vis-à-vis the rights of the holders of the Partnership Units.

 

ARTICLE III
Tax Provisions

 

3.1                               Special Allocations of Profits. Liquidating
Gain shall be allocated as follows:  (a) first, to the holders of Preferred
Units as provided in the Partnership Agreement, (b) second, if applicable, to
the holders of Partnership Units as provided in the Partnership Agreement until
the Partnership Unit Economic Balance is equal to the Target Balance and
(c) third, to (i) the LTIP Unitholder until such holder’s Economic Capital
Account Balance is equal to the Target Balance and (ii) the holders of Other
LTIP Units until their economic capital account balances are equal to their
target balances.  If an allocation of Liquidating Gain is not sufficient to
achieve the objectives of the foregoing sentence in full, Liquidating Gain,
after giving effect to clauses (a) and (b) in such sentence, shall be allocated
first, to the LTIP Unitholder with respect to his

 

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Vested LTIP Units and to the holders of vested Other LTIP Units and, second, to
the LTIP Unitholder with respect to his Unvested LTIP Units and to the holders
of non-vested Other LTIP Units, in each case, in proportion to the amounts
necessary for such units to achieve the objectives of the foregoing sentence;
provided, that the holders of Other LTIP Units shall not receive an allocation
of Liquidating Gain that they are not entitled to receive under the applicable
certificate of designation.  A certificate of designation for Other LTIP Units
may provide for a different allocation among such Other LTIP Units, but such
different allocation shall not affect the amount allocated to the LTIP Units
vis-à-vis the Other LTIP Units.  Notwithstanding the foregoing, Liquidating Gain
shall not be allocated to the LTIP Units to the extent such allocation would
cause the LTIP Units to fail to qualify as a “profits interest” when granted. 
Once the Economic Capital Account Balance has been increased to the Target
Balance, no further allocations shall be made pursuant to this Section 3.1. 
Thereafter, LTIP Units shall be treated as Partnership Units with respect to the
allocation of Profits and Losses pursuant to Section 3.2 hereof.

 

If any Unvested LTIP Units to which gain has been previously allocated under
this Section are forfeited, the Capital Account associated with the forfeited
Unvested LTIP Units will be reallocated to the remaining LTIP Units at the time
of forfeiture to the extent necessary to cause the Economic Capital Account
Balance of such remaining LTIP Units to equal the Target Balance.  To the extent
any gain is not reallocated in accordance with the foregoing sentence, such gain
shall be forfeited.

 

3.2                               Allocations with Respect to LTIP Units.  LTIP
Units shall be treated as Partnership Units with respect to the allocation of
Profits and Losses; provided, that Profits from the sale of assets shall be
allocated to the LTIP Unitholder as provided in Section 3.1 hereof until the
LTIP Unitholder’s Economic Capital Account Balance has been increased to the
Target Balance.

 

3.3                               Safe Harbor Election.  To the extent provided
for in Regulations, revenue rulings, revenue procedures and/or other IRS
guidance issued after the date of this Designation, the Partnership is hereby
authorized to, and at the direction of the General Partner shall, elect a safe
harbor under which the fair market value of any LTIP Units issued after the
effective date of such Regulations (or other guidance) will be treated as equal
to the liquidation value of such LTIP Units (i.e., a value equal to the total
amount that would be distributed with respect to such interests if the
Partnership sold all of its assets for the fair market value immediately after
the issuance of such LTIP Units, satisfied its liabilities (excluding any
non-recourse liabilities to the extent the balance of such liabilities exceed
the fair market value of the assets that secure them) and distributed the net
proceeds to the LTIP Unitholder under the terms of this Agreement).  In the
event that the Partnership makes a safe harbor election as described in the
preceding sentence, the LTIP Unitholder hereby agrees to comply with all safe
harbor requirements with respect to transfers of such LTIP Units while the safe
harbor election remains effective.  In addition, upon a forfeiture of any LTIP
Units by the LTIP Unitholder, gross items of income, gain, loss or deduction
shall be allocated to the LTIP Unitholder if and to the extent required by final
Regulations promulgated after the effective date of this Designation to ensure
that allocations made with respect to all Unvested LTIP Units are recognized
under Code Section 704(b).

 

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3.4                               Revaluation of Capital Accounts.  The
Partnership shall adjust Capital Accounts in accordance with Treas. Reg.
§ 1.704-1(b)(2)(iv)(f) upon each subsequent issuance of Other LTIP Units to the
extent the Partnership determines it is permitted to do so under such
Regulation.

 

ARTICLE IV
Conversion

 

4.1                               Conversion Right.  On and after the Full
Conversion Date, the LTIP Unitholder shall have the right to convert Vested LTIP
Units to Partnership Units on a one-to-one basis by giving notice to the
Partnership as provided in Section 4.3 hereof.  Prior to the Full Conversion
Date, the conversion of Vested LTIP Units shall be subject to the limitation set
forth in Section 4.2 hereof.

 

4.2                               Limitation on Conversion Rights Until the Full
Conversion Date.  The maximum number of Vested LTIP Units that may be converted
prior to the Full Conversion Date is equal to the product of (a) the result
obtained by dividing (1) the Economic Capital Account Balance of the Vested LTIP
Units by (2) the Target Balance of the Vested LTIP Units, in each case
determined as of the effective date of the conversion and (b) the number of
Vested LTIP Units.  Immediately after each conversion of Vested LTIP Units, the
aggregate Economic Capital Account Balance of the remaining Vested LTIP Units
shall be equal to (a) the aggregate Economic Capital Account Balance of all of
the holder’s Vested LTIP Units immediately prior to conversion, minus (b) the
aggregate Economic Capital Account Balance immediately prior to conversion of
the number of the LTIP Unitholder’s Vested LTIP Units that were converted.

 

4.3                               Exercise of Conversion Right.  In order to
exercise the right to convert a Vested LTIP Unit, the LTIP Unitholder shall give
notice (a “Conversion Notice”) in the form attached hereto as Exhibit A to the
General Partner not less than sixty (60) days prior to the date specified in the
Conversion Notice as the effective date of the conversion (the “Conversion
Date”).  The conversion shall be effective as of 12:01 a.m. on the Conversion
Date without any action on the part of the holder or the Partnership.  The LTIP
Unitholder may give a Conversion Notice with respect to Unvested LTIP Units,
provided that such Unvested LTIP Units become Vested LTIP Units on or prior to
the Conversion Date.

 

4.4                               Exchange for Shares.  The LTIP Unitholder may
also exercise his right to exchange the Partnership Units to be received
pursuant to the Conversion Notice to Shares or cash, as selected by the General
Partner, in accordance with Article XI of the Partnership Agreement; provided,
however, such right shall be subject to the terms and conditions of Article II
of the Partnership Agreement and may not be effective until six (6) months from
the date the Vested LTIP Units that were converted into Partnership Units became
fully vested.

 

4.5                               Forced Conversion.  In addition, the General
Partner may, upon not less than ten (10) days’ written notice to the LTIP
Unitholder, require any holder of Vested LTIP Units to convert them into Units
subject to the limitation set forth in Section 4.2 hereof, and only if, at the
time the General Partner acts, there is a one-to-one conversion right between
the LTIP Units and Partnership Units for conversion, distribution and all other
purposes.  The conversion shall be effective as of 12:01 a.m. on the date
specified in the notice from the General Partner.

 

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4.6                               Notices.  Notices pursuant to this
Article shall be given in the same manner as notices given pursuant to the
Partnership Agreement.

 

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EXHIBIT A

 

Conversion Notice

 

The undersigned hereby gives notice pursuant to Section 4.3 of the Certificate
of Designation of Series 2014 Inducement LTIP Units of Washington Prime Group,
L.P. (the “Designation”) that he elects to convert                             
Vested LTIP Units (as defined in the Designation) into an equivalent number of
Partnership Units (as defined in the Amended and Restated Limited Partnership
Agreement of Washington Prime Group, L.P. (the “Partnership Agreement”)).  The
conversion is to be effective on                             , 20      .

 

IN WITNESS WHEREOF, this Conversion Notice is given this          day of
                            , 20      , to Washington Prime Group Inc. in
accordance with Section 12.2 of the Partnership Agreement.

 

 

 

 

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